Notice2022-28083
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule To Establish a Monthly Membership Fee
Primary source
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Published
December 27, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 247 (Tuesday, December 27, 2022)</title>
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[Federal Register Volume 87, Number 247 (Tuesday, December 27, 2022)]
[Notices]
[Pages 79376-79378]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-28083]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96546; File No. SR-PEARL-2022-59]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule To Establish a Monthly Membership Fee
December 20, 2022.
Pursuant to 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 December 9, 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 to amend the fee schedule (the ``Fee
Schedule'') applicable to MIAX Pearl Equities, an equities trading
facility of the Exchange.
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 Exchange proposes to establish a $200 monthly Membership Fee
for Equity Members of the Exchange. The Exchange proposes to assess the
monthly Membership Fee to each active Equity Member at the close of
business on the first day of each month. The Exchange proposes to
specify within the Fee Schedule that an active membership means any
month the Equity Member is certified in the membership system and the
Equity Member is credentialed to use one or more ports in the
production environment. For example, the monthly Membership Fee for
January 2023 will be assessed to all active Equity Members at the close
of business on January 2, 2023, the first business day of the month.
This filing and the proposed fee amount ($200 per month per Equity
Member) are identical to a recent monthly Membership fee adopted by
MEMX, LLC (``MEMX''). The Exchange is not proposing anything different
than what was adopted in the MEMX filing.
The Exchange also proposes that if an Equity Member is pending a
voluntary termination of rights as a Member pursuant to Exchange Rule
206 prior to
[[Page 79377]]
the time any monthly Membership Fee will be assessed (i.e., the close
of business on January 2, 2023), and the Equity Member does not utilize
the facilities of the Exchange while such voluntary termination of
rights is pending, then the Equity Member will not be obligated to pay
the monthly Membership Fee, as such Member will not be considered to
have an ``active'' membership. The Exchange believes this to be
appropriate because there are several pre-conditions before a voluntary
resignation shall take effect pursuant to Exchange Rule 206. This is
also similar to the MEMX filing to adopt the MEMX monthly Membership
fee.
As proposed, the monthly Membership Fee for an Equity Member will
not be pro-rated, which the Exchange believes is reasonable based on
the frequency that the proposed fee would be assessed (i.e., monthly
instead of applying to a longer period) and the relatively low proposed
fee amount of $200 for the monthly Membership Fee. This is also similar
to the MEMX filing to adopt the MEMX monthly Membership fee. The
Exchange does not presently contemplate proposing any application fees,
trading rights or trading permit fees, market participant identifier
(``MPID'') fees or so-called ``headcount'' fees. The Exchange further
notes that it is separately filing a proposal to amend fees for
physical connectivity and ports (with the same implementation date as
the proposed changes in this filing).
The Exchange proposes to establish the monthly Membership fee as
Section 4), Membership Fees, and move current Section 4), Additional
Fees, to new Section 5 in the Fee Schedule.
Implementation Date
The Exchange proposes to implement the proposed Membership Fee
beginning January 1, 2023.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of 6 of the Act,\3\ in general, and with s 6(b)(4)
and 6(b)(5) of the Act,\4\ in particular, in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
its Equity Members and other persons using its facilities and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\3\ 15 U.S.C. 78f.
\4\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that there is value in becoming an Equity
Member of the Exchange and that the proposed monthly Membership Fee is
reasonable. The proposed monthly Membership Fee is identical in amount
and the way the Exchange proposes to assess it as the monthly
Membership fee recently adopted by MEMX.\5\ The proposed monthly
Membership fee is also lower than or comparable to the membership fees
imposed by several other national securities exchanges that charge such
fees.\6\ Moreover, insofar as the Exchange does not charge--nor does it
presently contemplate charging--application fees, trading rights fees,
trading permit fees, or fees for multiple MPIDs, the comparative price
of membership is less or significantly less than comparative prices at
other exchanges. The Exchange also does not charge--nor does it
presently contemplate charging--so-called ``headcount fees,'' e.g.,
fees charged for each Form U-4 filed for registration of a
representative or a principal or the transfer or re-licensing of such
personnel,\7\ further highlighting the reasonableness of the proposed
monthly Membership Fee.
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\5\ See supra note 4 [sic].
\6\ See, e.g., the New York Stock Exchange LLC (``NYSE'') annual
trading license fee for member organizations ranges from
approximately $2,080 per month to $4,165 per month based on the type
of member organization and number of trading licenses. See NYSE
Price List 2022, Trading Licenses, page 23, available at: <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf</a> (last
visited December 6, 2022). The Nasdaq Stock Market LLC (``Nasdaq'')
annual membership fee is $3,000 plus a monthly $1,250 trading rights
fee (together with the annual membership fee, totaling $18,000 per
year). See ``NASDAQ Membership Fees,'' Nasdaq Price List, available
at: <a href="http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#membership">http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#membership</a> (last visited December
6, 2022). See also Securities Exchange Act Release No. 81133 (July
12, 2017), 82 FR 32904 (July 18, 2017) (SR-NASDAQ-2017-065)
(discussing the reasonableness of Nasdaq's fees). Finally, Cboe BZX
Exchange, Inc. (``Cboe BZX'') charges an annual membership fee of
$2,500 plus an additional fee of $350 per month for each additional
MPID a member maintains other than their first (i.e., an annual fee
of $4,200 per additional MPID). See ``Membership Fees'' and ``Market
Participant Identifier (`MPID') Fees'' sections of the Cboe BZX Fee
Schedule, available at: Cboe BZX Fee Schedule (last visited December
6, 2022).
\7\ See, e.g., ``NASDAQ Membership Fees,'' supra note 11 [sic]
($55 for each Form U-4 filed for the registration of a
Representative or Principal, and $55 for each Form U-4 filed for the
transfer or re-licensing of a Representative or Principal).
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The Exchange believes that the proposed monthly Membership Fee is
not unfairly discriminatory because it would be assessed equally across
all Equity Members or firms that seek to become Equity Members. The
Exchange believes that the proposed monthly Membership Fee is not
unfairly discriminatory because no broker-dealer is required to become
a member of the Exchange. Instead, many market participants awaited the
Exchange growing to a certain percentage of market share before they
would join as an Equity Member of the Exchange. In addition, many
market participants still have not joined the Exchange despite the
Exchange's growth in one year to more than 1% of the overall equities
market share. To illustrate, the Exchange currently has 49 Equity
Members.\8\ However, based on publicly available information regarding
a sample of the Exchange's competitors, MEMX has 66 members, NYSE has
142 members, Cboe BZX has 140 members, and Investors Exchange LLC
(``IEX'') has 133 members.\9\
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\8\ See MIAX Pearl Equities Exchange Member Directory, available
at <a href="https://www.miaxoptions.com/sites/default/files/page-files/MIAX_Pearl_Equities_Exchange_Members_11012022.pdf">https://www.miaxoptions.com/sites/default/files/page-files/MIAX_Pearl_Equities_Exchange_Members_11012022.pdf</a> (last visited
December 6, 2022).
\9\ See supra note 4 [sic]; see also NYSE Membership Directory,
available at: <a href="https://www.nyse.com/markets/nyse/membership">https://www.nyse.com/markets/nyse/membership</a>; Cboe BZX
Form 1 filed November 19, 2021, available at: <a href="https://www.sec.gov/Archives/edgar/vprr/2100/21009368.pdf">https://www.sec.gov/Archives/edgar/vprr/2100/21009368.pdf</a>; IEX Current Members list,
available at: <a href="https://exchange.iex.io/resources/trading/current-">https://exchange.iex.io/resources/trading/current-</a>
membership/.
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Accordingly, the vigorous competition among national securities
exchanges provides many alternatives for firms to voluntarily decide
whether membership to the Exchange is appropriate and worthwhile, and
no broker-dealer is required to become a member of the Exchange.
Specifically, neither the trade-through requirements under Regulation
NMS nor broker-dealers' best execution obligations require a broker-
dealer to become a member of every exchange. The Exchange acknowledges
that competitive forces may require certain broker-dealers to be
members of all equities exchanges. However, the Exchange believes that
the proposed fee of $200 as a monthly Membership Fee is reasonable,
equitably allocated and not unfairly discriminatory, even for a broker-
dealer that deemed it necessary to join the Exchange for business
purposes, as those business reasons should presumably result in revenue
capable of covering the proposed fee.
The Exchange further believes that the proposed fee would be an
equitable allocation of reasonable dues, fees, and other charges among
its Equity Members and issuers and other persons using its facilities,
and are not unfairly discriminatory. As the Commission noted in its
Concept Release Concerning Self-Regulation:
The Commission to date has not issued detailed rules specifying
proper funding levels of [self-regulatory organization (``SRO'')]
regulatory programs, or how costs should be allocated among the
various SRO constituencies. Rather, the Commission has
[[Page 79378]]
examined the SROs to determine whether they are complying with their
statutory responsibilities. This approach was developed in response
to the diverse characteristics and roles of the various SROs and the
markets they operate. The mechanics of SRO funding, including the
amount of revenue that is spent on regulation and how that amount is
allocated among various regulatory operations, is related to the
type of market that an SRO is operating. Thus, each SRO and its
financial structure is, to a certain extent, unique. While this
uniqueness can result in different levels of SRO funding across
markets, it also is a reflection of one of the primary underpinnings
of the National Market System. Specifically, by fostering an
environment in which diverse markets with diverse business models
compete within a unified National Market System, investors and
market participants benefit.\10\
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\10\ See Securities Exchange Act Release No. 50700 (November 22,
2004), 69 FR 71255, 71267-68 (December 8, 2004) (File No. S7-40-04).
For the reasons discussed above, the Exchange submits that the
proposal satisfies the requirements of s 6(b)(4) and 6(b)(5) of the Act
\11\ in that it provides for the equitable allocation of reasonable
dues, fees and other charges among its Equity Members and other persons
using its facilities and is not designed to unfairly discriminate
between customers, issuers, brokers, or dealers. Effective regulation
is central to the proper functioning of the securities markets.
Recognizing the importance of such efforts, Congress decided to require
national securities exchanges to register with the Commission as self-
regulatory organizations to carry out the purposes of the Act. The
Exchange therefore believes that it is critical to ensure that
regulation is appropriately funded. The monthly Membership Fee is
expected to provide a source of funding towards the Exchange's costs
related to onboarding Equity Members and providing ongoing support.
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\11\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with 6(b)(8) of the Act,\12\ the Exchange believes
that the proposed rule change would not impose any burden on
intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange's
proposed Membership Fee will be lower than the cost of membership on
other exchanges,\13\ and therefore, may stimulate intramarket [sic]
competition by attracting additional firms to become Equity Members on
the Exchange or at least should not deter interested participants from
joining the Exchange. In addition, membership fees are subject to
competition from other exchanges. Accordingly, if the changes proposed
herein are unattractive to market participants, it is likely the
Exchange will see a decline in membership as a result.
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\12\ 15 U.S.C. 78f(b)(8).
\13\ See supra note 11 [sic].
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The Exchange believes that the proposed fee change will not impact
intermarket [sic] competition because it will apply to all Equity
Members equally. The Exchange operates in a highly competitive market
in which market participants can determine whether or not to join the
Exchange based on the value received compared to the cost of joining
and maintaining membership on the Exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to
19(b)(3)(A)(ii) of the Act,\14\ and Rule 19b-4(f)(2) \15\ 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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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
\15\ 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#493b3c252c642a2624242c273d3a093a2c2a672e263f"><span class="__cf_email__" data-cfemail="2052554c450d434f4d4d454e5453605345430e474f56">[email protected]</span></a>. Please include
File Number SR-PEARL-2022-59 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-2022-59. 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-2022-59 and
should be submitted on or before January 17, 2023. For the Commission,
by the Division of Trading and Markets, pursuant to delegated
authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28083 Filed 12-23-22; 8:45 am]
BILLING CODE 8011-01-P
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