Notice2022-20952
Self-Regulatory Organizations: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the MIAX Pearl Options Fee Schedule
Primary source
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Published
September 28, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 187 (Wednesday, September 28, 2022)</title>
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[Federal Register Volume 87, Number 187 (Wednesday, September 28, 2022)]
[Notices]
[Pages 58843-58848]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-20952]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95886; File No. SR-PEARL-2022-40]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the
MIAX Pearl Options Fee Schedule
September 22, 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 September 14, 2022, MIAX PEARL, LLC (``MIAX
Pearl'' or ``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 proposal to amend the MIAX Pearl Options
Fee Schedule (the ``Fee Schedule'').
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
[[Page 58844]]
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 Exchange proposes to amend the Add/Remove Tiered Rebates/Fees
set forth in Section 1(a) of the Fee Schedule to: (1) modify the Maker
rebates (defined below) in all Tiers for transactions in Penny Classes
(defined below) for MIAX Pearl Market Makers,\3\ Non-Priority
Customers, Firms, Broker-Dealers and Non-MIAX Pearl Market Makers; and
(2) provide for additional, separate Maker rebates for Market Makers
and Electronic Exchange Member (``EEM'') \4\ Professional origins
(defined below) for certain transactions in Non-Penny Classes (defined
below). The Exchange originally filed this proposal on September 1,
2022 (SR-PEARL-2022-38). On September 14, 2022, the Exchange withdrew
SR-PEARL-2022-38 and resubmitted this proposal.
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\3\ ``Market Maker'' means a Member registered with the Exchange
for the purpose of making markets in options contracts traded on the
Exchange and that is vested with the rights and responsibilities
specified in Chapter VI of Exchange Rules. See the Definitions
Section of the Fee Schedule and Exchange Rule 100.
\4\ ``Electronic Exchange Member'' or ``EEM'' means the holder
of a Trading Permit who is a Member representing as agent Public
Customer Orders or Non-Customer Orders on the Exchange and those
non-Market Maker Members conducting proprietary trading. Electronic
Exchange Members are deemed ``members'' under the Exchange Act. See
the Definitions Section of the Fee Schedule and Exchange Rule 100.
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Background
The Exchange currently assesses transaction rebates and fees to all
market participants which are based upon the total monthly volume
executed by the Member \5\ on MIAX Pearl in the relevant, respective
origin type (not including Excluded Contracts) \6\ (as the numerator)
expressed as a percentage of (divided by) TCV \7\ (as the denominator).
In addition, the per contract transaction rebates and fees are applied
retroactively to all eligible volume for that origin type once the
respective threshold tier (``Tier'') has been reached by the Member.
The Exchange aggregates the volume of Members and their Affiliates.\8\
Members that place resting liquidity, i.e., orders resting on the book
of the MIAX Pearl System,\9\ are paid the specified ``maker'' rebate
(each a ``Maker''), and Members that execute against resting liquidity
are assessed the specified ``taker'' fee (each a ``Taker''). For
opening transactions and ABBO \10\ uncrossing transactions, per
contract transaction rebates and fees are waived for all market
participants. Finally, Members are assessed lower transaction fees and
receive lower rebates for order executions in standard option classes
in the Penny Interval Program \11\ (``Penny Classes'') than for order
executions in standard option classes which are not in the Penny
Interval Program (``Non-Penny Classes''), where Members are assessed
higher transaction fees and receive higher rebates.
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\5\ ``Member'' means an individual or organization that is
registered with the Exchange pursuant to Chapter II of Exchange
Rules for purposes of trading on the Exchange as an ``Electronic
Exchange Member'' or ``Market Maker.'' Members are deemed
``members'' under the Exchange Act. See the Definitions Section of
the Fee Schedule and Exchange Rule 100.
\6\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\7\ ``TCV'' means total consolidated volume calculated as the
total national volume in those classes listed on MIAX PEARL for the
month for which the fees apply, excluding consolidated volume
executed during the period time in which the Exchange experiences an
``Exchange System Disruption'' (solely in the option classes of the
affected Matching Engine (as defined below)). The term Exchange
System Disruption, which is defined in the Definitions section of
the Fee Schedule, means an outage of a Matching Engine or collective
Matching Engines for a period of two consecutive hours or more,
during trading hours. The term Matching Engine, which is also
defined in the Definitions section of the Fee Schedule, is a part of
the MIAX PEARL electronic system that processes options orders and
trades on a symbol-by-symbol basis. Some Matching Engines will
process option classes with multiple root symbols, and other
Matching Engines may be dedicated to one single option root symbol
(for example, options on SPY may be processed by one single Matching
Engine that is dedicated only to SPY). A particular root symbol may
only be assigned to a single designated Matching Engine. A
particular root symbol may not be assigned to multiple Matching
Engines. The Exchange believes that it is reasonable and appropriate
to select two consecutive hours as the amount of time necessary to
constitute an Exchange System Disruption, as two hours equates to
approximately 1.4% of available trading time per month. The Exchange
notes that the term ``Exchange System Disruption'' and its meaning
have no applicability outside of the Fee Schedule, as it is used
solely for purposes of calculating volume for the threshold tiers in
the Fee Schedule. See the Definitions Section of the Fee Schedule.
\8\ ``Affiliate'' means (i) an affiliate of a Member of at least
75% common ownership between the firms as reflected on each firm's
Form BD, Schedule A, or (ii) the Appointed Market Maker of an
Appointed EEM (or, conversely, the Appointed EEM of an Appointed
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market
Maker (who does not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has been appointed by an EEM
and an ``Appointed EEM'' is an EEM (who does not otherwise have a
corporate affiliation based upon common ownership with a MIAX PEARL
Market Maker) that has been appointed by a MIAX PEARL Market Maker,
pursuant to the following process. A MIAX PEARL Market Maker
appoints an EEM and an EEM appoints a MIAX PEARL Market Maker, for
the purposes of the Fee Schedule, by each completing and sending an
executed Volume Aggregation Request Form by email to
<a href="/cdn-cgi/l/email-protection#7f121a121d1a0d0c17160f3f12161e07100f0b1610110c511c1012"><span class="__cf_email__" data-cfemail="3c5159515e594e4f54554c7c51555d44534c485553524f125f5351">[email protected]</span></a> no later than 2 business days prior to
the first business day of the month in which the designation is to
become effective. Transmittal of a validly completed and executed
form to the Exchange along with the Exchange's acknowledgement of
the effective designation to each of the Market Maker and EEM will
be viewed as acceptance of the appointment. The Exchange will only
recognize one designation per Member. A Member may make a
designation not more than once every 12 months (from the date of its
most recent designation), which designation shall remain in effect
unless or until the Exchange receives written notice submitted 2
business days prior to the first business day of the month from
either Member indicating that the appointment has been terminated.
Designations will become operative on the first business day of the
effective month and may not be terminated prior to the end of the
month. Execution data and reports will be provided to both parties.
See the Definitions Section of the Fee Schedule.
\9\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\10\ ``ABBO'' means the best bid(s) or offer(s) disseminated by
other Eligible Exchanges (defined in Exchange Rule 1400(g)) and
calculated by the Exchange based on market information received by
the Exchange from OPRA. See the Definitions Section of the Fee
Schedule and Exchange Rule 100.
\11\ See Securities Exchange Act Release No. 88992 (June 2,
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
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Proposal To Modify the Maker Rebates in All Tiers for Transactions in
Penny Classes for Market Makers and Non-Priority Customer, Firm, BD and
Non-MIAX Pearl Market Maker Origins
The Exchange proposes to amend the Fee Schedule for the Exchange's
options market to modify the Maker rebates in all Tiers for options
transactions in Penny Classes for Market Makers and Non-Priority
Customer, Firm, BD and Non-MIAX Pearl Market Maker origins' respective
rate tables. Currently, the Exchange provides different Maker rebates
for options transactions in Penny Classes for Market Makers and Non-
Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker origins
depending on whether the Member is trading against the Priority
Customer \12\ origin or another origin type. In particular, the
Exchange provides the following Maker rebates for Market Makers for
options transactions in Penny Classes when trading against the Priority
Customer origin: ($0.23) in Tier 1, ($0.38) in Tier 2, ($0.38) in Tier
3, ($0.45) in Tier 4, ($0.46) in Tier 5, and
[[Page 58845]]
($0.47) in Tier 6. The Exchange provides the following Maker rebates
for Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker
origins for options transactions in Penny Classes when trading against
the Priority Customer origin: ($0.23) in Tier 1, ($0.38) in Tier 2,
($0.38) in Tier 3, ($0.45) in Tier 4, ($0.46) in Tier 5, and ($0.46) in
Tier 6.
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\12\ The term ``Priority Customer'' means a person or entity
that (i) is not a broker or dealer in securities, and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial accounts(s). The
number of orders shall be counted in accordance with Interpretation
and Policy .01 of Exchange Rule 100. See the Definitions Section of
the Fee Schedule and Exchange Rule 100, including Interpretation and
Policy .01.
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The Exchange now proposes to lower the Maker rebates by $0.01 in
all Tiers for options transactions in Penny Classes for Market Makers
and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker
origins, respectively, when trading against the Priority Customer
origin. Accordingly, with the proposed changes, the Exchange will
provide the following Maker rebates for Market Makers for options
transactions in Penny Classes when trading against the Priority
Customer origin: ($0.22) in Tier 1, ($0.37) in Tier 2, ($0.37) in Tier
3, ($0.44) in Tier 4, ($0.45) in Tier 5, and ($0.46) in Tier 6. The
Exchange will provide the following Maker rebates for Non-Priority
Customer, Firm, BD and Non-MIAX Pearl Market Maker origins for options
transactions in Penny Classes when trading against the Priority
Customer origin: ($0.22) in Tier 1, ($0.37) in Tier 2, ($0.37) in Tier
3, ($0.44) in Tier 4, ($0.45) in Tier 5, and ($0.45) in Tier 6.
The purpose of adjusting the specified Maker rebates is for
business and competitive reasons. In order to attract order flow, the
Exchange initially set its Maker rebates so that they were higher than
other options exchanges that operate comparable maker/taker pricing
models.\13\ The Exchange believes that it is appropriate to adjust
these specified Maker rebates so that they are more in line with other
exchanges, but will remain highly competitive such that they should
enable the Exchange to continue to attract order flow and maintain
market share.\14\
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\13\ See Securities Exchange Act Release Nos. 80061 (February
17, 2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10)
(establishing the Exchange's fee schedule with Market Maker and
Professional Member Maker Penny Class rebates ranging from ($0.25)
in Tier 1 to ($0.48) in Tier 4, the highest Tier at that time).
\14\ See, generally, The Nasdaq Stock Market, Options 7 Pricing
Schedule, Section 2 (Market Maker and Professional Member rebates
ranging from $0.20 in Tier 1 to $0.48 in Tier 6); Box Options Fee
Schedule, Section IV. Electronic Transaction Fees, Section A (Market
Maker rebate of $0.50 when trading contra to a BOX Public Customer
for options transactions in Penny Classes); Cboe BZX Options Fee
Schedule, Standard Rates (Market Maker rebates for Penny Class
securities ranging from $0.29 to $0.46 for adding liquidity;
Professional rebates for Penny Class securities ranging from $0.25
to $0.48 for adding liquidity; and Firm, Broker-Dealer, Joint Back
Office rebates for Penny Class securities ranging from $0.25 to
$0.46 for adding liquidity).
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Proposal To Adopt Additional, Separate Maker Rebates for Market Makers
and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker
Origins for Certain Transactions in Non-Penny Classes
The Exchange proposes to amend the Fee Schedule for the Exchange's
options market to adopt additional separate Maker rebates for Market
Makers and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market
Maker origins for options transactions in Non-Penny Classes in Tiers 1
through 4. Currently, the Exchange provides the following Maker rebates
for Market Makers and Non-Priority Customer, Firm, BD and Non-MIAX
Pearl Market Maker origins for options transactions in Non-Penny
Classes: ($0.30) in Tier 1, ($0.30) in Tier 2, ($0.60) in Tier 3,
($0.65) in Tier 4, ($0.70) in Tier 5, and ($0.85) in Tier 6.\15\
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\15\ The Exchange notes that the current Maker rebates for
Market Makers and Non-Priority Customer, Firm, BD and Non-MIAX Pearl
Market Maker origins for options transactions in Non-Penny Classes
are similar to non-penny class maker rebates for similar origins at
competing options exchanges. See, e.g., NYSE Arca Options Fee
Schedule, Non-Customer, Non-Penny Posting Credit Tiers, Page 8
(providing base non-customer, non-penny maker rebates ranging from
($0.32) to ($0.82)); Cboe BZX Options Fee Schedule, Standard Rates
(providing firm, broker dealer and joint back office non-penny
program securities maker rebates ranging from ($0.30) to ($0.82) and
market maker non-penny program securities maker rebates ranging from
($0.40) to ($0.88)).
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The Exchange now proposes to adopt additional, separate Maker
rebates for Market Makers for options transactions in Non-Penny Classes
in Tiers 1 through 4. In particular, the Exchange proposes that Market
Makers may qualify for additional, separate rebates for options
transactions in Non-Penny classes in Tiers 1 through 4 if the Market
Maker increases their Non-Penny Class Maker TCV by 100% or more as
compared to that Market Maker's Non-Penny Class TCV for the month of
July 2022,\16\ which will be the Market Maker's baseline Non-Penny
Class Maker TCV. Market Makers that qualify for the additional Non-
Penny Class Maker rebate will receive the following additional,
separate rebates: ($0.40) in Tier 1; ($0.40) in Tier 2; ($0.10) in Tier
3; and ($0.05) in Tier 4. Market Makers with no volume in the Non-Penny
Class Maker segment for the month of July 2022 will have any new volume
considered as added volume. Stated another way, the Exchange proposes
that Market Makers who did not have any volume in the Non-Penny Class
Maker segment for the month of July 2022, will receive the proposed
additional separate Maker rebates for any new Non-Penny Class Maker
volume in each subsequent month. The Exchange proposes to denote the
additional Maker rebates in Non-Penny Classes for Market Makers by
adopting new footnote ``[squf]'' following the tables of fees and
rebates in Section 1)a) of the Fee Schedule. For example, if a Market
Maker has specific Non-Penny Class Maker volume of 0.050% TCV for the
month of July 2022, then that Market Maker would need Non-Penny Class
Maker volume equal to or greater than 0.100% TCV in the relevant month
to receive the additional proposed rebates. The purpose of this change
is for business and competitive reasons in order to attract additional
Non-Penny Class volume from Market Makers, which should benefit all
Exchange participants by providing more trading opportunities and
tighter spreads.\17\
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\16\ The Exchange determined to use the month of July 2022 as
the baseline month because, at the time of the original filing (SR-
PEARL-2022-38), July was the most recent previous full month of
trading. For purposes of consistency with the original filing, the
Exchange proposes to continue to use the month of July 2022 as the
baseline month.
\17\ See supra note 15. The Exchange notes that NYSE American,
LLC has a similar ``step-up'' incentive for its Professional
Customer, Broker Dealer, Non-NYSE American Options Market Maker and
Firm ranges, whereby those market participants are able to decrease
their fees for transactions in non-penny classes by increasing their
volume by specified percentages of TCADV over their August 2019
volume. See NYSE American Options Fee Schedule, Section I.A. and
Section I.H. (charging an $0.85 fee to Professional Customer, Broker
Dealer, Non-NYSE American Options Market Maker and Firm ranges for
transactions in non-penny classes and decreased fees of either $0.65
or $0.55 for transactions in on-penny classes depending on the
amount of increased volume by specified percentages of TCADV over
their August 2019 volume). See id., Key Terms and Definitions
Section for definitions of Professional Customer, Broker Dealer,
Non-NYSE American Options Market Maker, Firm and TCADV.
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The Exchange also proposes to adopt an additional, separate Maker
rebate for EEM Professional origins (which includes, collectively, Non-
Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker origins),
for options transactions in Non-Penny Classes in Tiers 1 through 4. In
particular, the Exchange proposes that EEMs may qualify for additional
separate rebates for options transactions in Non-Penny classes in Tiers
1 through 4 if the EEM increases their Professional origin Non-Penny
Class Maker TCV by 100% or more as compared to that EEM's Professional
origin Non-Penny Class TCV for the month of July 2022,\18\ which will
be EEM's Professional origin baseline Non-Penny Class Maker TCV. EEMs
that qualify for the additional Non-Penny Class Maker rebate will
[[Page 58846]]
receive the following additional, separate rebates: ($0.40) in Tier 1;
($0.40) in Tier 2; ($0.10) in Tier 3; and ($0.05) in Tier 4.\19\ EEMs
with no Professional origin volume in the Non-Penny Class Maker segment
for the month of July 2022 will have any new volume considered as added
volume. Stated another way, the Exchange proposes that EEM Professional
origins that did not have any volume in the Non-Penny Class Maker
segment for the month of July 2022, will receive the proposed
additional separate Maker rebates for any new Non-Penny Class Maker
volume in each subsequent month. The Exchange proposes to denote the
additional Maker rebates in Non-Penny Classes for EEMs by adopting new
footnote ``[square]'' following the tables of fees and rebates in
Section 1)a) of the Fee Schedule. For example, if an EEM has specific
Professional origin Non-Penny Class Maker volume of 0.050% TCV for the
month of July 2022, then that EEM would need Professional origin Non-
Penny Class Maker volume equal to or greater than 0.100% TCV in the
relevant month to receive the additional proposed rebates. The purpose
of this change is for business and competitive reasons in order to
attract additional Non-Penny Class volume from EEMs, which should
benefit all Exchange participants by providing more trading
opportunities and tighter spreads.\20\
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\18\ See supra note 16.
\19\ With the proposed additional rebates, the Exchange's Non-
Penny Class Maker rebates in Tiers 1 through 4 for Market Makers and
EEM Professional origins will be in line with, or higher than (for
lower tiers), similar rebates from competing options exchanges
depending on the tier achieved by the particular member. See supra
note 15.
\20\ See supra notes 15 and 17.
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Implementation
The proposed changes are immediately effective.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \21\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\22\ in that it
is an equitable allocation of reasonable dues, fees and other charges
among Exchange members and issuers and other persons using its
facilities, and 6(b)(5) of the Act,\23\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4).
\23\ 15 U.S.C. 78f(b)(1) and (b)(5).
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The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \24\
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\24\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, as of September 13, 2022, no single exchange has
more than approximately 11-13% equity options market share for the
month of September 2022.\25\ Therefore, no exchange possesses
significant pricing power. More specifically, as of September 13, 2022,
the Exchange has a market share of approximately 4.34% of executed
volume of multiply-listed equity options for the month of September
2022.\26\
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\25\ See ``The market at a glance,'' (last visited September 13,
2022), available at <a href="https://www.miaxoptions.com/">https://www.miaxoptions.com/</a>.
\26\ See id.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
discontinue or reduce use of certain categories of products and
services, terminate an existing membership or determine to not become a
new member, and/or shift order flow, in response to transaction fee
changes. For example, on February 28, 2019, the Exchange filed with the
Commission a proposal to increase Taker fees in certain Tiers for
options transactions in certain Penny classes for Priority Customers
and decrease Maker rebates in certain Tiers for options transactions in
Penny classes for Priority Customers (which fee was to be effective
March 1, 2019).\27\ The Exchange experienced a decrease in total market
share for the month of March 2019, after the proposal went into effect.
Accordingly, the Exchange believes that its March 1, 2019, fee change,
to increase certain transaction fees and decrease certain transaction
rebates, may have contributed to the decrease in MIAX Pearl's market
share and, as such, the Exchange believes competitive forces constrain
the Exchange's, and other options exchanges, ability to set transaction
fees and market participants can shift order flow based on fee changes
instituted by the exchanges.
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\27\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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The Exchange believes its proposal to modify the Maker rebates in
all Tiers for options transactions in Penny classes for Market Makers
and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker
origins when trading against Priority Customer origin is reasonable,
equitable and not unfairly discriminatory because all similarly
situated market participants in the same origin type are subject to the
same tiered Maker rebates and access to the Exchange is offered on
terms that are not unfairly discriminatory. For competitive and
business reasons, the Exchange initially set its Maker rebates for such
orders generally higher than certain other options exchanges that
operate comparable maker/taker pricing models. The Exchange now
believes that it is appropriate to modify those specified Maker rebates
so that they are more in line with other exchanges, and will remain
highly competitive such that they should enable the Exchange to
continue to attract order flow and maintain market share.\28\
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\28\ See supra note 14.
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The Exchange believes its proposal is not unfairly discriminatory
because, with the proposed changes, the Maker rebates for Market Makers
and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker
origins will be nearly the same as the Maker rebates for all other
origin types except for Priority Customer origin orders. The Exchange
believes that it is equitable and not unfairly discriminatory to assess
lower Maker rebates to Market Makers and EEM Professional origins than
to Priority Customer origin orders. A Priority Customer is by
definition not a broker or dealer in securities, and does not place
more than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s).\29\ This limitation
does not apply to participants on the Exchange whose behavior is
substantially similar to that of market professionals, including non-
Priority Customers, Non-MIAX Pearl Market Makers, Firms, and Broker-
Dealers, who will generally submit a higher number of orders (many
[[Page 58847]]
of which do not result in executions) than Priority Customers.
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\29\ See supra note 12.
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The Exchange believes its proposal to adopt additional, separate
Maker rebates for options transactions in Non-Penny Classes in Tiers 1
through 4 for Market Makers and EEM Professional origins is reasonable,
equitable and not unfairly discriminatory because all similarly
situated market participants in the same origin type are subject to the
same tiered Maker rebates and access to the Exchange is offered on
terms that are not unfairly discriminatory. The Exchange believes its
proposal to offer an additional Non-Penny Class Maker rebates in Tiers
1 through 4 for Market Makers and EEM Professional origins will
incentivize Market Makers and EEMs to improve their posted liquidity to
the benefit of the entire market, which will increase order flow sent
to the Exchange, benefiting all market participants through increased
liquidity, tighter markets and order interaction. The Exchange believes
it is reasonable and not unfairly discriminatory to offer higher
additional Non-Penny Class Maker rebates for Tiers 1 and 2, as compared
to Tiers 3 and 4, because the Exchange believes that the prospect of
obtaining the higher rebates for Tiers 1 and 2 will attract Non-Penny
Class Maker volume from new market participants. This anticipated new
Non-Penny Class Maker volume should benefit all Exchange participants
by providing more trading opportunities and tighter spreads. Further,
with the proposed additional rebates, the Exchange's Non-Penny Class
Maker rebates in Tiers 1 through 4 for Market Makers and EEM
Professional origins will be in line with, or higher than (for Tiers 1
and 2) similar rebates from competing options exchanges.\30\
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\30\ See supra note 15.
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The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to consider any new Non-Penny Class Maker volume as
added volume for Market Makers with no volume in the Non-Penny Class
Maker segment for the month of July 2022 in order for those Market
Makers to receive the proposed additional rebate because this should
attract additional Non-Penny Class Maker volume from Market Makers. In
turn, this additional volume should benefit all Exchange participants
by providing more trading opportunities and tighter spreads. Similarly,
the Exchange believes it is reasonable, equitable and not unfairly
discriminatory to consider any new Non-Penny Class Maker volume as
added volume for EEMs with no Professional origin volume in the Non-
Penny Class Maker segment for the month of July 2022 in order for those
EEMs to receive the proposed additional rebate because this should
attract additional Non-Penny Class volume from EEMs, which should
benefit all Exchange participants by providing more trading
opportunities and tighter spreads.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed changes in the Maker rebates for the applicable market
participants should continue to encourage the provision of liquidity
that enhances the quality of the Exchange's market and increases the
number of trading opportunities on the Exchange for all participants
who will be able to compete for such opportunities. The proposed rule
changes should enable the Exchange to continue to attract and compete
for order flow with other exchanges. However, this competition does not
create an undue burden on competition but rather offers all market
participants the opportunity to receive the benefit of competitive
pricing.
The proposed Maker rebate adjustments are intended to keep the
Exchange's rebates highly competitive with those of other exchanges,
and to encourage liquidity and should enable the Exchange to continue
to attract and compete for order flow with other exchanges. The
Exchange notes that it operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive. In such an environment,
the Exchange must continually adjust its rebates and fees to remain
competitive with other exchanges and to attract order flow. The
Exchange believes that the proposed rule changes reflect this
competitive environment because the proposal modifies the Exchange's
fees in a manner that encourages market participants to continue to
provide liquidity and to send order flow to the Exchange.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\31\ and Rule 19b-4(f)(2) \32\ thereunder.
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.
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\31\ 15 U.S.C. 78s(b)(3)(A)(ii).
\32\ 17 CFR 240.19b-4(f)(2).
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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#0d7f786168206e6260606863797e4d7e686e236a627b"><span class="__cf_email__" data-cfemail="c0b2b5aca5eda3afadada5aeb4b380b3a5a3eea7afb6">[email protected]</span></a>. Please include
File SR-PEARL-2022-40 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-2022-40. 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
[[Page 58848]]
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
such 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-2022-40 and should be submitted on or before October 19, 2022.
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\33\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20952 Filed 9-27-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on September 28, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.