Notice2022-15544
Self-Regulatory Organizations: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the Route to Primary Auction Routing Option Under Exchange Rule 2617(b)(5)(B)
Primary source
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Published
July 21, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 139 (Thursday, July 21, 2022)</title>
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[Federal Register Volume 87, Number 139 (Thursday, July 21, 2022)]
[Notices]
[Pages 43579-43581]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15544]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95298; File No. SR-PEARL-2022-29]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the
Route to Primary Auction Routing Option Under Exchange Rule
2617(b)(5)(B)
July 15, 2022.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on July 13, 2022 MIAX PEARL, LLC (``MIAX Pearl''
or the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposed rule change to amend the Route to
Primary Auction (``PAC'') routing option under Exchange Rule
2617(b)(5)(B).
The text of the proposed rule change is available on the Exchange's
website at <a href="http://www.miaxoptions.com/rule-filings/pearl">http://www.miaxoptions.com/rule-filings/pearl</a> at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the PAC routing
option under Exchange Rule 2617(b)(5)(B) that is available to orders in
equity securities traded on the Exchange's equity trading platform
(referred to herein as ``MIAX Pearl Equities''). Specifically, the
Exchange proposes to amend subparagraph (b)(5)(B)(1)(ii)(b) to provide
for the routing of Market Orders \3\ entered at or after 3:50 p.m.
Eastern Time to the primary listing market's closing process in the
event the primary listing market declared a regulatory halt and is to
conduct its closing process. The Exchange also proposes to make a
clarifying change to Exchange Rule 2617(b)(5)(B) to replace two
references to ``primary listing exchange'' with the term ``primary
listing market'' to ensure consistent terms are used within the Rule.
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\3\ See Exchange Rule 2614(a)(2).
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The Exchange offers its Equity Members \4\ optional routing
functionality that allows them to use the Exchange to access liquidity
on other trading centers. The functionality includes routing algorithms
that determine the destination or pattern of routing. Exchange Rule
2617(b)(5) sets forth that there is a particular pattern of routing to
other trading centers, known as the ``System routing table'', as well
as sets forth the Exchange's available routing options. All routing is
designed to be conducted in a manner consistent with Regulation NMS.
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\4\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
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The Exchange recently launched the PAC routing option,\5\ which
enables an Equity Member to designate that their order be routed to the
primary listing market to participate in the primary listing market's
opening, re-opening or closing process. In sum, Exchange Rule
2617(b)(5)(B) describes PAC as a routing option for Market Orders and
displayed Limit Orders \6\ designated with a time-in-force of Regular
Hours Only (``RHO'') \7\ that the entering firm wishes to designate for
participation in the opening, re-opening (following a regulatory halt,
suspension, or pause), or closing process of a primary listing market
(BZX, the New York Stock Exchange LLC (``NYSE''), Nasdaq, NYSE American
LLC (``NYSE American''), or NYSE Arca, Inc. (``NYSE Arca'')) if
received before the opening, re-opening, or closing process of such
market.
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\5\ See Securities Exchange Act Release No. 94301 (February 23,
2022), 87 FR 11739 (March 2, 2002) (SR-PEARL-2022-06). See also MIAX
Pearl Equities--Expansion of Functionality Through New Route to
Primary Auction (PAC) Strategy--Rollout Postponed until June 27,
2022, dated June 8, 2022, available at <a href="https://www.miaxoptions.com/alerts/2022/06/08/miax-pearl-equities-expansion-functionality-through-new-route-primary-auction-pac">https://www.miaxoptions.com/alerts/2022/06/08/miax-pearl-equities-expansion-functionality-through-new-route-primary-auction-pac</a> (last visited June 28, 2022).
\6\ See Exchange Rule 2614(a)(1).
\7\ Exchange Rule 2614(b)(2) defines ``Regular Hours Only'' or
``RHO'' as ``[a]n order that is designated for execution only during
Regular Trading Hours, which includes the Opening Process for equity
securities. An order with a time-in-force of RHO entered into the
System before the opening of business on the Exchange as determined
pursuant to Exchange Rule 2600 will be accepted but not eligible for
execution until the start of Regular Trading Hours.''
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Market Orders and Closing Process
Market Orders coupled with the PAC routing option are currently not
eligible for routing to the primary listing market's closing process.
Accordingly, Exchange Rule 2617(b)(5)(B)(1)(ii)(b) provides that a
Market Order designated as RHO is not eligible to be routed to
participate in the primary listing market's closing process.\8\
Exchange Rule 2617(b)(5)(B)(1)(ii)(b) further provides that a Market
Order designated as RHO received at or after the time the Exchange
begins to route existing orders to participate in the primary listing
market's closing process, but before market close, will be cancelled.
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\8\ Market Orders coupled with the PAC routing option designated
as Immediate-or-Cancel (``IOC'') will be cancelled. See Exchange
Rule 2617(b)(5)(B)(2)(iv).
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The Exchange initially understood that Equity Members did not plan
to utilize Market Orders to participate in the primary listing market's
closing process because they would prefer to enter Limit Orders \9\ for
purposes of participating in the price discovery process conducted by
the primary listing market's closing process.\10\ Therefore, the
Exchange initially proposed to not accept Market Orders for purposes of
routing them to a primary listing market's closing process. However,
Equity Members recently expressed interest in having the ability to
route Market Orders to participate in the primary listing market's
closing process where the primary listing market declares a regulatory
halt that extends past 3:50 p.m. Eastern Time. In such case, there is
no risk that such
[[Page 43580]]
order would be executed during continuous trading because continuous
trading concluded and the primary listing market is to proceed directly
to conducting its closing process in accordance with its rules.\11\ The
Exchange understands Equity Members would welcome the flexibility to
route their Market Orders to participate in the primary listing
market's closing process in this case.
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\9\ See Exchange Rule 2614(b).
\10\ The Exchange previously represented that it would submit a
proposed rule change to route Market Orders to participate in the
primary listing market's closing process should Equity Members
request such a change. See Securities Exchange Act Release No. 94301
at note 23 (February 23, 2022), 87 FR 11739 (March 2, 2002) (SR-
PEARL-2022-06)
\11\ See, e.g., NYSE Rule 7.35(d), Openings and Reopenings in
Last Ten Minutes of Trading; BZX Rule 11.23(d)(2)(c), Incremental
Quote Period Extensions for Halt Auctions Following a Regulatory
Halt; and Nasdaq Rules 1420(a)(12)(H), Re-opening of Trading
Following a Trading Pause, and 4754(b)(6), LULD Closing Cross
Following Limit-Up-Limit-Down Trading Pause.
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The Exchange, therefore, proposes to amend Exchange Rule
2617(b)(5)(B)(1)(ii)(b) to provide that a Market Order designated as
RHO would continue to not be eligible to be routed to participate in
the primary listing market's closing process, unless such Market Order
is: (i) entered at or after 3:50 p.m. Eastern Time, but before market
close, (ii) the primary listing market has declared a regulatory halt;
and (iii) the primary listing market is to conduct its closing process
according to its applicable rules.\12\ Exchange Rule
2617(b)(5)(B)(1)(ii)(b) would continue to provide that all other Market
Orders designated as RHO received at or after the time the Exchange
begins to route existing orders to participate in the primary listing
market's closing process, but before market close, will be cancelled.
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\12\ The Exchange notes that any shares that remain unexecuted
after routing will be cancelled in accordance with the Market
Order's RHO time-in-force instruction.
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Clarifying Change
The Exchange notes that Exchange Rule 2617(b)(5)(B) used the term
``primary listing market'' through most of Exchange Rule 2617(b)(5)(B).
Exchange Rule 2617(b)(5)(B) only uses the term ``primary listing
exchange'' in two areas, subparagraphs (b)(5)(B)(1)(ii)(a) and (b). The
Exchange proposes to make a clarifying change to Exchange Rule
2617(b)(5)(B) to replace these two references to ``primary listing
exchange'' with ``primary listing market'' to ensure consistent terms
are used within the Rule. These change would not amend the meaning of
Exchange Rule 2617(b)(5)(B)(1)(ii)(a) and (b). They are simply intended
to ensure consistent terminology is used throughout the description of
the PAC routing option in Exchange Rule 2617(b)(5)(B) and avoid
potential confusion.
Implementation
Due to the technological changes associated with this proposed
change, the Exchange will issue a trading alert publicly announcing the
implementation date of this proposed rule change to provide Equity
Members with adequate time to prepare for the associated technological
changes. The Exchange anticipates that the implementation date will be
in either the fourth quarter of 2022 or first quarter of 2023.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\13\ in general, and furthers the objectives of Section
6(b)(5),\14\ in particular, because it is designed to promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. The proposed
rule change would remove impediments to a free and open market and
promote just and equitable principles of trade because it would provide
market participants with the ability to route Market Orders to
participate directly in the primary listing market's closing process
opening up another source of liquidity to Market Orders entered on the
MIAX Pearl Equities. The Exchange only proposes to route Market Orders
to participate in the primary listing market's closing process that are
entered at or after 3:50 p.m. Eastern Time, but before market close,
and the primary listing market declared a regulatory halt and is to
conduct its closing process according to their applicable rules. The
Exchange proposes to only route Market Orders in this discrete scenario
because it is consistent with Equity Members' expectation that such
Market Orders participate directly in the primary market's closing
process only and not be subject to market risk because continuous
trading in the security would be halted.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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The proposed change to the PAC routing option would promote just
and equitable principles of trade and remove impediments to and perfect
the mechanism of a free and open market and a national market system
because it would provide Equity Members the option to route their
Market Orders to an additional source of liquidity, potentially
benefiting from improved execution prices and a more efficient
marketplace. Therefore, the Exchange believes the proposed rule change
would provide Equity Members with greater control and flexibility over
the routing of their Market Orders, thereby facilitating transactions
in securities and perfecting the mechanism of the national market
system. The Exchange also notes that use of the PAC routing option,
including routing Market Order to participate in the primary listing
market's closing process, is completely voluntary and no Equity Member
is required to route orders through the Exchange and may choose other
methods to access liquidity on other trading centers.
The proposal would not impede the national market system because it
is not designed to disrupt the ability of the primary listing market to
conduct their closing processes. The proposed rule change is similar to
existing routing options already provided by other equity
exchanges,\15\ which the Exchange understands have not disrupted the
primary listing market's ability to conduct their closing process. The
proposed rule change would simply provide Equity Members with another
means to route Market Orders to participate in the primary listing
market's closing process. The primary listing markets are free to
reject or cancel such orders should they deem them to be inconsistent
with their applicable rules.
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\15\ See Cboe BZX Exchange, Inc. (``BZX'') Rule 11.13(b)(3)(N)
(describing the ROOC routing option and not prohibiting market
orders from routing to the primary listing market's closing
process), Cboe EDGX Exchange, Inc. (``EDGX'') Rule 11.11(g)(8)
(describing the ROOC routing option and not prohibiting market
orders from routing to the primary listing market's closing
process), and The Nasdaq Stock Market LLC (``Nasdaq'') Rule
4758(a)(1)(A)(x) (describing the LIST routing option and not
prohibiting market orders from routing to the primary listing
market's closing process).
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Finally, the proposed clarification to Exchange Rule 2617(b)(5)(B)
to replace two references to ``primary listing exchange'' with the term
``primary listing market'' promotes just and equitable principles of
trade and protects investors and the public interest because it ensures
consistent terminology is used within the Exchange's Rules, thereby
avoiding potential investor confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. In fact, the Exchange
believes that expanding its PAC routing option to route Market Orders
entered at or after 3:50 p.m.
[[Page 43581]]
Eastern Time to participate in the primary listing market's closing
process where a regulatory halt is declared may have a positive effect
on competition because it would allow the Exchange to offer
functionality similar to that offered by BZX, EDGX, and Nasdaq.\16\ The
Exchange believes that its proposal promotes competition because it is
designed to attract liquidity to the Exchange by providing market
participants with additional routing functionality.
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\16\ Id.
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The Exchange believes that the proposal will not impose any burden
on inter-market competition, but rather promote competition by
enhancing the value of the Exchange's PAC routing option. However,
since the use of the Exchange's PAC routing option is voluntary and
Equity Members have numerous alternative mechanisms for order routing,
the changes will not impair the ability of Equity Members to use other
means to access the primary listing market's closing process. The
proposed rule change would improve inter-market competition because it
allows the Exchange to provide another means by which market
participants would be able route Market Orders to participate in the
primary listing market's closing processes that the Exchange believes
is similar to that currently provided by other exchanges.\17\
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\17\ Id.
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The Exchange also believes that the proposal will not impose any
burden on intra-market competition because it would be available to all
Equity Members. Any Equity Member that seeks to have their Market Order
routed to participate in the primary listing market's closing process
in the above proposed scenario is free to select the PAC routing option
or seek to access those markets through other means.
Finally, the proposed clarification to Exchange Rule 2617(b)(5(B)
will not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act because it also
does not enhance the Exchange's competitive position. Rather, it is
simply intended to ensure consistent terminology is used in the
Exchange's Rules.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \18\ and Rule 19-b4(f)(6) \19\
thereunder.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9ceee9f0f9b1fff3f1f1f9f2e8efdceff9ffb2fbf3ea"><span class="__cf_email__" data-cfemail="7604031a135b15191b1b131802053605131558111900">[email protected]</span></a>. Please include
File Number SR-PEARL-2022-29 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-PEARL-2022-29. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions.
You should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-PEARL-2022-29
and should be submitted on or before August 11, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-15544 Filed 7-20-22; 8:45 am]
BILLING CODE 8011-01-P
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