Notice2023-04686
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Pearl Options Fee Schedule
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Published
March 8, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 45 (Wednesday, March 8, 2023)</title>
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[Federal Register Volume 88, Number 45 (Wednesday, March 8, 2023)]
[Notices]
[Pages 14402-14405]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-04686]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97025; File No. SR-PEARL-2023-07]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
Pearl Options Fee Schedule
March 2, 2023.
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 February 24, 2023, 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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[[Page 14403]]
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'') to adopt fees for a new data
product known as the Liquidity Taker Event Report--Resting Simple
Orders.\3\
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\3\ See, generally, Exchange Rule 531(c).
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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 recently adopted a new data product known as the
Liquidity Taker Event Report--Resting Simple Orders (the ``Report''),
which will be available for purchase to Exchange Members \4\ on a
voluntary basis. The Exchange now proposes to adopt fees for the
Report. The proposal to adopt the Report was recently published by the
Securities and Exchange Commission (``Commission'') and is described
under Exchange Rule 531(c).\5\ The Report is an optional product
available to Members.
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\4\ The term ``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.
\5\ See Securities Exchange Act Release No. 96837 (February 8,
2023) (SR-PEARL-2023-01) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Amend Exchange Rule 531,
Reports and Market Data Products, to Provide for the New ``Liquidity
Taker Event Report--Resting Simple Orders'').
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By way of background, the Report is a daily report that provides a
Member (``Recipient Member'') with its liquidity response time details
for executions of an order resting on the Book \6\ for the Exchange's
options market. The Report focuses on executions and contra-side
responses that occurred after 200 microseconds of the time the resting
order was received by the Exchange and within 200 microseconds of
receipt of the first attempt to execute against the resting order after
the initial 200 microsecond time period has expired.
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\6\ The term ``Book'' means ``the electronic book of buy and
sell orders and quotes maintained by the System.'' See Exchange Rule
100. The term ``System'' means the automated trading system used by
the Exchange for the trading of securities. See id.
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The following information is included in the Report regarding the
resting order: (A) the time the resting order was received by the
Exchange; (B) symbol; (C) order reference number, which is a unique
reference number assigned to a new order at the time of receipt; (D)
whether the Recipient Member is an Affiliate \7\ of the Member that
entered the resting order; \8\ (E) origin type (e.g., Priority
Customer,\9\ Market Maker \10\); (F) side (buy or sell); and (G)
displayed price and size of the resting order.
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\7\ The term ``affiliate'' of or person ``affiliated with''
another person means a person who, directly, or indirectly,
controls, is controlled by, or is under common control with, such
other person. See Exchange Rule 100.
\8\ The Report will simply indicate whether the Recipient Member
is Affiliate of the Member that entered the resting order and not
include any other information that may indicate the identity of the
Member that entered the resting order.
\9\ 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 account(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.
\10\ The term ``Market Maker'' or ``MM'' 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 these Rules.
See Exchange Rule 100.
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The following information is included in the Report regarding the
execution of the resting order: (A) the PBBO \11\ at the time of
execution; \12\ (B) the ABBO \13\ at the time of execution; \14\ (C)
the time first response that executes against the resting order was
received by the Exchange and the size of the execution and type of the
response; \15\ and (D) whether the response was entered by the
Recipient Member.
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\11\ The term ``PBBO'' means the best bid or offer on MIAX
Pearl. See Exchange Rule 100.
\12\ Exchange Rule 531(c)(1)(ii)(A) provides that if the resting
order executes against multiple contra-side responses, only the PBBO
at the time of the execution against the first response will be
included.
\13\ The term ``ABBO'' or ``Away Best Bid or Offer'' 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
Exchange Rule 100.
\14\ Exchange Rule 531(c)(1)(ii)(B) further provides that if the
resting order executes against multiple contra-side responses, only
the ABBO at the time of the execution against the first response
will be included.
\15\ The time the Exchange received the response order would be
in nanoseconds and would be the time the response was received by
the Exchange's network, which is before the time the response would
be received by the System.
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The following information is included in the Report regarding
response(s) sent by the Recipient Member: (A) Recipient Member
identifier; (B) the time difference between the time the first response
that executes against the resting order was received by the Exchange
and the time of each response sent by the Recipient Member, regardless
of whether it executed or not; \16\ (C) size and type of each response
submitted by Recipient Member; and (D) response reference number, which
is a unique reference number attached to the response by the Recipient
Member.
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\16\ For purposes of calculating this duration of time, the
Exchange will use the time the resting order and the Recipient
Member's response(s) is received by the Exchange's network, both of
which would be before the order and response(s) would be received by
the System. This time difference would be provided in nanoseconds.
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The Exchange proposes to amend Section 7), Reports, of the Fee
Schedule, to add a new row for the Report, which will provide that
Members may purchase the Report on a monthly or annual (12-month)
basis. The Exchange proposes to assess a monthly fee of $2,000 per
month and a fee of $12,000 per year for a 12-month subscription for the
Report. Members may cancel their subscription at any time. The Exchange
also proposes to specify that for mid-month subscriptions, new
subscribers will be charged for the full calendar month for which they
subscribe and will be provided Report data for each trading day of the
calendar month prior to the day on which they subscribed.
The Exchange intends to begin to offer the Report and charge the
proposed fees on March 1, 2023.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\17\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\18\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and
[[Page 14404]]
open market and a national market system, and to protect investors and
the public interest, and that it is not designed to permit unfair
discrimination among customers, brokers, or dealers. The Exchange also
believes that its proposal to adopt fees for the Report is consistent
with Section 6(b) of the Act \19\ in general, and furthers the
objectives of Section 6(b)(4) of the Act \20\ in particular, in that it
is an equitable allocation of dues, fees and other charges among its
Members and other recipients of Exchange data.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data. The Exchange believes that the Report further
broadens the availability of U.S. option market data to investors
consistent with the principles of Regulation NMS. The Report also
promotes increased transparency through the dissemination of the
Report. Particularly, the Report will benefit investors by facilitating
their prompt access to the value added information that is included in
the Report. The Report will allow Members to access information
regarding their trading activity that they may utilize to evaluate
their own trading behavior and order interactions.
The Exchange operates in a highly competitive environment. Indeed,
there are currently 16 registered options exchanges that trade options.
Based on publicly available information, no single options exchange has
more than 13% of the equity options market share and currently the
Exchange represents only approximately 6.97% of the equity options
market share.\21\ The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Particularly,
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.'' \22\ Making
similar data products available to market participants fosters
competition in the marketplace, and constrains the ability of exchanges
to charge supra-competitive fees. In the event that a market
participant views one exchange's data product as more attractive than
the competition, that market participant can, and often does, switch
between similar products. The proposed fees are a result of the
competitive environment of the U.S. options industry as the Exchange
seeks to adopt fees to attract purchasers of the recently introduced
Report.
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\21\ See Market at a Glance, available at <a href="https://www.miaxoptions.com/">https://www.miaxoptions.com/</a> (last visited February 9, 2023).
\22\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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The Exchange believes the proposed fees are reasonable as the
proposed fees are both modest and lower than fees charged by the
Exchange for a similar data product.\23\ The proposed fees for this
Report are less expensive than the Exchange's existing report because
the Exchange believes that the information provided in the Report may
not be as valuable to market participants as the other information
contained in the Exchange's similar report, which measures the data in
the first 200 microseconds of the time the resting order was received
by the Exchange. While the Exchange believes that this Report is
useful, it may not be as helpful as the other report offered by the
Exchange. Indeed, if the Exchange proposed fees that market
participants viewed as excessively high, then the proposed fees would
simply serve to reduce demand for the Exchange's data product, which as
noted, is entirely optional. Other options exchanges are also free to
introduce their own comparable data products with lower prices to
better compete with the Exchange's offering.\24\ As such, the Exchange
believes that the proposed fees are reasonable and set at a level to
compete with other options exchanges that may choose to offer similar
reports. Moreover, if a market participant views another exchange's
potential report as more attractive, then such market participant can
merely choose not to purchase the Exchange's Report and instead
purchase another exchange's similar data product, which may offer
similar data points, albeit based on that other market's trading
activity.
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\23\ The Exchange offers another Liquidity Taker Event Reports
for Simple Orders that focuses on executions and contra-side
responses received within 200 microseconds of the time the resting
order was received by the Exchange. See Exchange Rule 531(a). The
Exchange charges a monthly fee of $4,000 and a discounted annual (12
month) fee of $24,000 for this report. See Fee Schedule, Section 7,
providing fees for the Liquidity Taker Event Report, available at
<a href="https://www.miaxoptions.com/fees/pearl">https://www.miaxoptions.com/fees/pearl</a>.
\24\ This is supported by the BOX Exchange LLC (``BOX'')
recently copying one similar report recently adopted by the
Exchange, the Liquidity Taker Event Report, described under Exchange
Rule 531(a). See Securities Exchange Act Release Nos. 94563 (March
31, 2022), 87 FR 19985 (April 6, 2022) (SR-BOX-2022-10).
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The Exchange also believes providing an annual subscription for an
overall lower fee than a monthly subscription is equitable and
reasonable because it would enable the Exchange to gauge long-term
interest in the Report. A lower annual subscription fee would also
incentivize Members to subscribe to the Report on a long-term basis,
thereby improving the efficiency by which the Exchange may deliver the
Report by doing so on a regular basis over a prolonged and set period
of time. The Exchange notes it provides an annual subscription for a
similar report.\25\
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\25\ See Fee Schedule, Section 7, providing an annual
subscription for the Liquidity Taker Event Report, available at
<a href="https://www.miaxoptions.com/fees/pearl">https://www.miaxoptions.com/fees/pearl</a>.
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The Exchange also believes the proposed fees are reasonable as they
would support the introduction of a new market data product to Members
that are interested in gaining insight into latency in connection with
orders that failed to execute against an order resting on the
Exchange's Book. The Report accomplishes this by providing those
Members data to analyze by how much time their order may have missed an
execution against a contra-side order resting on the Book. Members may
use this data to optimize their models and trading patterns in an
effort to yield better execution results by calculating by how much
time their order may have missed an execution.
Selling market data, such as the Report, is also a means by which
exchanges compete to attract business. To the extent that the Exchange
is successful in attracting subscribers for the Report, it may earn
trading revenues and further enhance the value of its data products. If
the market deems the proposed fees to be unfair or inequitable, firms
can diminish or discontinue their use of the data and/or avail
themselves of similar products that may be offered by other
exchanges.\26\ The Exchange, therefore, believes that the proposed fees
for the Report reflect the competitive environment and would be
properly assessed on Member users. The Exchange also believes the
proposed fees are equitable and not unfairly discriminatory as the fees
would apply equally to all users who choose to purchase such data. It
is a business decision of each Member that
[[Page 14405]]
chooses to purchase the Report. The Exchange's proposed fees would not
differentiate between subscribers that purchase the Report and are set
at a modest level that would allow any interested Member to purchase
such data based on their business needs.
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\26\ See supra note 24.
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The Exchange reiterates that the decision as to whether or not to
purchase the Report is entirely optional for all potential subscribers.
Indeed, no market participant is required to purchase the Report, and
the Exchange is not required to make the Report available to all
investors. It is entirely a business decision of each Member to
subscribe to the Report. The Exchange offers the Report as a
convenience to Members to provide them with additional information
regarding trading activity on the Exchange on a delayed basis after the
close of regular trading hours. A Member that chooses to subscribe to
the Report may discontinue receiving the Report at any time if that
Member determines that the information contained in the Report is no
longer useful.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
made the Report available in order to keep pace with changes in the
industry and evolving customer needs and demands, and believes the data
product will contribute to robust competition among national securities
exchanges. As a result, the Exchange believes this proposed rule change
permits fair competition among national securities exchanges.
The Exchange also does not believe the proposed fees would cause
any unnecessary or inappropriate burden on intermarket competition as
other exchanges are free to introduce their own comparable data product
with lower prices to better compete with the Exchange's offering. The
Exchange operates in a highly competitive environment, and its ability
to price the Report is constrained by competition among exchanges who
choose to adopt a similar product. The Exchange must consider this in
its pricing discipline in order to compete for the market data. For
example, proposing fees that are excessively higher than fees for
potentially similar data products would simply serve to reduce demand
for the Exchange's data product, which as discussed, market
participants are under no obligation to utilize. In this competitive
environment, potential purchasers are free to choose which, if any,
similar product to purchase to satisfy their need for market
information. As a result, the Exchange believes this proposed rule
change permits fair competition among national securities exchanges.
The Exchange does not believe the proposed rule change would cause
any unnecessary or inappropriate burden on intramarket competition.
Particularly, the proposed product and fees apply uniformly to any
purchaser in that the Exchange does not differentiate between
subscribers that purchase the Report. The proposed fees are set at a
modest level that would allow any interested Member to purchase such
data based on their business needs.
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,\27\ and Rule 19b-4(f)(2) \28\ 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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\27\ 15 U.S.C. 78s(b)(3)(A)(ii).
\28\ 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#b6c4c3dad39bd5d9dbdbd3d8c2c5f6c5d3d598d1d9c0"><span class="__cf_email__" data-cfemail="5d2f283138703e3230303833292e1d2e383e733a322b">[email protected]</span></a>. Please include
File Number SR-PEARL-2023-07 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-2023-07. 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-2023-07, and should be submitted
on or before March 29, 2023.
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\29\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04686 Filed 3-7-23; 8:45 am]
BILLING CODE 8011-01-P
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