Notice2023-05443
Self-Regulatory Organizations: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the MIAX Pearl Equities Fee Schedule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 17, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 52 (Friday, March 17, 2023)</title>
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[Federal Register Volume 88, Number 52 (Friday, March 17, 2023)]
[Notices]
[Pages 16504-16509]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-05443]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97124; File No. SR-PEARL-2023-10]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the
MIAX Pearl Equities Fee Schedule
March 13, 2023.
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 February 28, 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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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 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 purpose of the proposed rule change is to amend the Exchange's
Fee Schedule to: (i) reduce the Adding Liquidity Non-Displayed Order
rebate in Section 1(a); (ii) increase the Removing Liquidity fee in
Section 1(a); (iii) make conforming reductions to certain associated
rebates and increases in certain associated fees in the Liquidity
Indicator Codes and Associated Fees Table in Section 1(b); and (iv)
amend the Remove Volume Tiers for executions of orders in securities
priced at or above $1.00 in Section 1(d).
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues, to
which market participants may direct their order flow. Based on
publicly available information, no single registered equities exchange
currently has more than approximately 18% of the total market share of
executed volume of equities trading.\3\
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\3\ Market share percentage calculated as of February 27, 2023.
The Exchange receives and processes data made available through
consolidated data feeds.
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Reduced Standard Rebate for Added Liquidity Non-Displayed Volume
The Exchange proposes to reduce the standard rebate for executions
of Added Non-Displayed Volume. Currently, the Exchange provides a
standard rebate of ($0.0021) per share for executions of Added Non-
Displayed Volume for securities priced at or above $1.00. The Exchange
now proposes to reduce the standard rebate for executions of Added Non-
Displayed Volume to ($0.00205) per share.\4\ The Exchange notes that
executions of orders in securities priced below $1.00 per share that
add non-displayed liquidity to the Exchange will continue to receive
the standard rebate
[[Page 16505]]
applicable to such executions (i.e., 0.10% of the total dollar value of
the transaction).
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\4\ The standard pricing for executions of Added Non-Displayed
Volume is referred to by the Exchange on its Fee Schedule in section
1(a) Standard Rates.
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The purpose of reducing the standard rebate for executions of Added
Non-Displayed Volume is for business and competitive reasons. The
Exchange notes that despite the modest reduction proposed herein, the
proposed standard rebate for execution of Added Non-Displayed Volume
(i.e., $0.00205 per share) remains higher than, and competitive with,
the standard rebates provided by other exchanges for executions of
orders in securities priced at or above $1.00 per share that add
displayed liquidity.\5\
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\5\ See e.g., the Nasdaq PSX equities trading fee schedule on
its public website (available at <a href="http://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing">http://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing</a>), which reflects a standard rebate of
$0.00050 per share to add non-displayed liquidity in securities
priced at or above $1.00 per share; see also the Cboe BZX equities
trading fee schedule on its public website (available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a>), which
reflects a standard rebate of $0.0010 per share to add non-displayed
liquidity in securities priced at or above $1.00 per share; see also
the NYSE equities trading fee schedule on its public website
(available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf</a>), which reflects a standard
rebate of $0.00000 per share to add non-displayed liquidity in
securities priced at or above $1.00 per share.
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Increase Standard Fee for Removed Volume
The Exchange also proposes to increase the standard fee charged for
executions of Removed Volume. Currently, the Exchange charges a
standard fee of $0.0029 per share for executions of Removed Volume in
securities priced at or above $1.00. The Exchange now proposes to
increase the standard fee charged for executions of Removed Volume to
$0.00295 per share.\6\ The fee charged for Removed Volume in securities
priced below $1.00 will remain unchanged.
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\6\ The proposed pricing is referred to by the Exchange on the
Fee Schedule under the existing description ``Removing Liquidity''
in Section 1(a) Standard Rates.
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The purpose of increasing the standard fee for executions of
Removed Volume is for business and competitive reasons. The Exchange
notes that despite the modest increase proposed herein, the Exchange's
proposed standard fee for executions of Removed Volume $0.00295 remains
competitive with the standard fee to remove liquidity in securities
priced at or above $1.00 per share charged by other equity
exchanges.\7\
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\7\ See e.g., the Cboe BZX equities trading fee schedule on its
public website (available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a>) which reflects a standard fee of
$0.0030 per share to remove liquidity in securities priced at or
above $1.00 per share; see also the Cboe EDGX equities trading fee
schedule on its public website (available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edgx/">https://www.cboe.com/us/equities/membership/fee_schedule/edgx/</a>) which reflects a standard
fee of $0.0030 per share to remove liquidity in securities priced at
or above $1.00; see also MEMX equities trading fee schedule on its
public website (available at <a href="https://info.memxtrading.com/fee-schedule/">https://info.memxtrading.com/fee-schedule/</a>) which reflects a standard fee of $0.0030 per share to
remove liquidity in securities priced at or above $1.00 per share.
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Liquidity Indicator Codes and Associated Fees Table Conforming Changes
In conjunction with the Exchange's proposal to (i) reduce the
rebate for Non-Displayed Orders that Add Liquidity from ($0.0021) to
($0.00205), and (ii) increase the fee for Removing Liquidity from
$0.0029 to $0.00295, the Exchange now proposes to update the Liquidity
Indicator Codes and Associated Fees table to reflect the aforementioned
changes. Specifically, the Exchange proposes to reduce certain Adding
Liquidity Non-Displayed Order rebates in Section 1(b), and increase
certain Removing Liquidity fees in Section 1(b). The Exchange proposes
to update the liquidity indicator codes as follows:
<bullet> Liquidity indicator code Aa, Adds Liquidity, Non-Displayed
Order (Tape A). The Liquidity Indicator Code and Associated Fees table
would specify that orders that yield liquidity indicator code Aa would
receive a rebate of ($0.00205) per share in securities priced at or
above $1.00 and 0.10% of the transaction's dollar value in securities
priced below $1.00.
<bullet> Liquidity indicator code Ab, Adds Liquidity, Non-Displayed
Order (Tape B). The Liquidity Indicator Code and Associated Fees table
would specify that orders that yield liquidity indicator code Ab would
receive a rebate of ($0.00205) per share in securities priced at or
above $1.00 and 0.10% of the transaction's dollar value in securities
priced below $1.00.
<bullet> Liquidity indicator code Ac, Adds Liquidity, Non-Displayed
Order (Tape C). The Liquidity Indicator Code and Associated Fees table
would specify that orders that yield liquidity indicator code Ac would
receive a rebate of ($0.00205) per share in securities priced at or
above $1.00 and 0.10% of the transaction's dollar value in securities
priced below $1.00.
<bullet> Liquidity indicator code Ap, Adds Liquidity and Executes
at the Midpoint, Non-Displayed Midpoint Peg Order (All Tapes). The
Liquidity Indicator Code and Associated Fees table would specify that
orders that yield liquidity indicator code Ap would receive a rebate of
($0.00205) per share in securities priced at or above $1.00 or 0.10% of
the transaction's dollar value in securities priced below $1.00.
<bullet> Liquidity indicator code Ar, Retail Order, Adds Liquidity,
Non-Displayed Order (All Tapes). The Liquidity Indicator Code and
Associated Fees table would specify that orders that yield liquidity
indicator code Ar would receive a rebate of ($0.00205) per share in
securities priced at or above $1.00 and 0.10% of the transaction's
dollar value in securities priced below $1.00.
<bullet> Liquidity indicator code RA, Removes Liquidity, Displayed
Order (Tape A). The Liquidity Indicator Code and Associated Fees table
would specify that orders that yield liquidity indicator code RA would
be subject to a fee of $0.00295 per share in securities priced at or
above $1.00 and 0.20% of the transaction's dollar value in securities
priced below $1.00.
<bullet> Liquidity indicator code RB, Removes Liquidity, Displayed
Order (Tape B). The Liquidity Indicator Code and Associated Fees table
would specify that orders that yield liquidity indicator code RB would
be subject to a fee of $0.00295 per share in securities priced at or
above $1.00 and 0.20% of the transaction's dollar value in securities
priced below $1.00.
<bullet> Liquidity indicator code RC, Removes Liquidity, Displayed
Order (Tape C). The Liquidity Indicator Code and Associated Fees table
would specify that orders that yield liquidity indicator code RC would
be subject to a fee of $0.00295 per share in securities priced at or
above $1.00 and 0.20% of the transaction's dollar value in securities
priced below $1.00.
<bullet> Liquidity indicator code RR, Retail Order, Removes
Liquidity, Displayed Order (All Tapes). The Liquidity Indicator Code
and Associated Fees table would specify that orders that yield
liquidity indicator code RR would be subject to a fee of $0.00295 per
share in securities priced at or above $1.00 and 0.20% of the
transaction's dollar value in securities priced below $1.00.
<bullet> Liquidity indicator code Ra, Removes Liquidity, Non-
Displayed Order (Tape A). The Liquidity Indicator Code and Associated
Fees table would specify that orders that yield liquidity indicator
code Ra would be subject to a fee of $0.00295 per share in securities
priced at or above $1.00 and 0.20% of the transaction's dollar value in
securities priced below $1.00.
<bullet> Liquidity indicator code Rb, Removes Liquidity, Non-
Displayed Order (Tape B). The Liquidity Indicator Code and Associated
Fees table would specify that orders that yield liquidity indicator
code Rb would be subject to a
[[Page 16506]]
fee of $0.00295 per share in securities priced at or above $1.00 and
0.20% of the transaction's dollar value in securities priced below
$1.00.
<bullet> Liquidity indicator code Rc, Removes Liquidity, Non-
Displayed Order (Tape C). The Liquidity Indicator Code and Associated
Fees table would specify that orders that yield liquidity indicator
code Rc would be subject to a fee of $0.00295 per share in securities
priced at or above $1.00 and 0.20% of the transaction's dollar value in
securities priced below $1.00.
<bullet> Liquidity indicator code Rr, Retail Order, Removes
Liquidity, Non-Displayed Order (All Tapes). The Liquidity Indicator
Code and Associated Fees table would specify that orders that yield
liquidity indicator code Rr would be subject to a fee of $0.00295 per
share in securities priced at or above $1.00 and 0.20% of the
transaction's dollar value in securities priced below $1.00.
Increased Fee for Remove Volume Tiers
In conjunction with the Exchange's proposal to (i) reduce the
rebate for Non-Displayed Orders that Add Liquidity from ($0.0021) to
($0.00205), and (ii) increase the fee for Removing Liquidity from
$0.0029 to $0.00295, the Exchange also proposes to amend its volume-
based tiered pricing structure applicable to the fees charged for
executions of Removed Volume on the Exchange. Currently, the Exchange
charges either: a fee of $0.0028 per share for executions of Removed
Volume for Equity Members \8\ (``Members'') that qualify for Tier 1 by
achieving an ADV \9\ that is equal to or greater than 0.10% of TCV \10\
and equal to or greater than 1,000 shares of added liquidity; or a fee
of $0.0027 per share for Members that qualify for Tier 2 by achieving
an ADV that is equal to or greater than 0.15% of TCV and equal to or
greater than 1,000 shares of added liquidity. The Exchange now proposes
to increase the fee to $0.00285 per share for executions of Removed
Volume Members that qualify for Tier 1 and $0.00275 per share for
Members that qualify for Tier 2.
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\8\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
\9\ The ``ADV'' means average daily volume calculated as the
number of shares added or removed, combined, per day. ADV is
calculated on a monthly basis, and the Exchange excludes from its
calculation of ADV shares added or removed on any day that the
Exchange's system experiences a disruption that lasts for more than
60 minutes during regular trading hours, on any day with a scheduled
early market close, and on the ``Russell Reconstitution Day''
(typically the last Friday in June). See the Definitions Section of
the Exchange Fee Schedule.
\10\ The ``TCV'' means total consolidated volume calculated as
the volume in shares reported by all exchanges and reporting
facilities to a consolidated transaction reporting plan for the
month for which the fees apply. The Exchange excludes from its
calculation of TCV volume on any given day that the Exchange's
system experiences a disruption that lasts for more than 60 minutes
during Regular Trading Hours, on any day with a scheduled early
market close, and on the ``Russell Reconstitution Day'' (typically
the last Friday in June). See the Definitions Section of the
Exchange Fee Schedule.
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The Exchange believes that the proposed change to the Remove Volume
Tiers table provides an incentive for Members to strive for higher ADV
on the Exchange in order to qualify for the proposed lower fee for
executions of Removed Volume. As such, the Remove Volume Tiers is
designed to encourage Members to maintain or increase their order flow
directed to the Exchange, thereby contributing to a deeper and more
liquid market to the benefit of all market participants and enhancing
the attractiveness of the Exchange as a trading venue. The Exchange
notes that the proposed fees for executions of Remove Volume applicable
to Members that qualify for one of the Remove Volume Tiers (i.e.,
$0.00285 or $0.00275) is related to the proposed changes to increase
the fee for Removing Liquidity, discussed above.
Implementation
The Exchange proposes to implement the changes to the Fee Schedule
pursuant to this proposal on March 1, 2023.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \11\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \12\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among its Equity Members and issuers and other
persons using its facilities. The Exchange also believes that the
proposed rule change is consistent with the objectives of Section
6(b)(5) \13\ requirements that the rules of an exchange be designed to
prevent fraudulent and manipulative acts and practices, and to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to 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, and, particularly, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4).
\13\ 15 U.S.C. 78f(b)(5).
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The Exchange operates in a highly fragmented and competitive market
in which market participants can readily direct their order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of sixteen registered equities exchanges, and
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order
flow. Based on publicly available information, no single registered
equities exchange currently has more than approximately 18% of the
total market share of executed volume of equities trading.\14\ Thus, in
such a low-concentrated and highly competitive market, no single
equities exchange possesses significant pricing power in the execution
of order flow, and the Exchange currently represents less than 2% of
the overall market share.\15\ The Commission and the courts have
repeatedly expressed their 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.'' \16\
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\14\ See supra note 3.
\15\ Id.
\16\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37499 (June 29, 2005).
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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
shift order flow or discontinue to reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, and market participants
can readily trade on competing venues if they deem pricing levels at
those other venues to be more favorable. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to incentivize market participants to direct their order flow
to the Exchange, which the Exchange believes would enhance liquidity
and market quality to
[[Page 16507]]
the benefit of all Members and market participants.
Reduce Standard Rebate for Added Non-Displayed Volume
The Exchange believes that the proposed reduced standard rebate for
executions of Added Non-Displayed Volume ($0.00205 per share) is
reasonable and appropriate because it represents a modest decrease from
the current standard rebate for executions of Added Non-Displayed
Volume, and remains competitive with the standard rebates provided by
at least one other exchange for orders in securities priced at or above
$1.00 per share that add liquidity.\17\ The Exchange further believes
that the proposed reduced standard rebate for executions of Added Non-
Displayed Volume are equitably allocated and not unfairly
discriminatory because each will apply equally to all Members.
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\17\ See supra notes 5 and 7.
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Increased Standard Fee for Removed Volume
The Exchange believes the proposed increased standard fee for
executions of Removed Volume is reasonable and appropriate because it
represents a modest increase from the current standard fee and, as
noted above, remains lower than, and competitive with, the standard fee
charged by several other exchanges to remove liquidity in securities
priced at or above $1.00 per share.\18\ The Exchange further believes
that the proposed increased standard fee for executions of Removed
Volume is equitably allocated and not unfairly discriminatory because
it will apply to all Members.
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\18\ See the MEMX equities trading fee schedule on its public
website (available at <a href="https://info.memxtrading.com/fee-schedule/">https://info.memxtrading.com/fee-schedule/</a>)
which reflects a standard fee of $0.0029; Cboe EDGX equities trading
fee schedule on it its public website (available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edgx/">https://www.cboe.com/us/equities/membership/fee_schedule/edgx/</a>) which
reflects a standard fee of $0.0030; and Cboe BZX equities trading
fee schedule on its public website (available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a>) which
reflects a standard fee of $0.0030.
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Conforming Changes to Liquidity Indicator Codes
The Exchange believes its proposal to decrease the rebate provided
for Non-Displayed Orders that add liquidity in securities priced at or
above $1.00 from ($0.0021) to ($0.00205) per share is reasonable and
equitably allocated among all Members of the Exchange. Liquidity
indicator codes Aa, Ab, Ac, Ap, and Ar are appended to orders that add
non-displayed liquidity. The Exchange believes its proposal is
equitable and not unfairly discriminatory as it will apply to all
Members equally.
The Exchange believes its proposal to increase the fee applied for
orders that remove liquidity in securities priced at or above $1.00 per
share is reasonable and equitably allocated among all Members of the
Exchange. The Exchange believes its proposal to update the Liquidity
Indicator Codes and Associated Fees table to reflect the new rate of
$0.00295 per share for securities priced at or above $1.00 with
liquidity indicator codes RA, RB, RC, RR, Ra, Rb, Rc, and Rr is
equitable and reasonable because it will apply equally to all Members
of the Exchange. Additionally, the Exchange believes its proposed
change is reasonable as the Exchange is also proposing to amend the
Remove Volume Tiers by which a Member can achieve reduced fees of
$0.00285 or $0.0275 per share for securities priced at or above $1.00
upon satisfying certain criteria.
Increased Fee for Remove Volume Tiers
The Exchange believes that the proposed change to the Remove Volume
Tiers is reasonable because it would provide Members with an additional
incentive to achieve certain volume thresholds on the Exchange. The
modest increase in the fee to $0.00285 per share for executions of
Removed Volume Members that qualify for Tier 1 and $0.00275 per share
for Members that qualify for Tier 2 are reasonable, equitable, and not
unfairly discriminatory because they are open to all Members on an
equal basis and provide additional benefits or discounts that are
reasonably related to the value to an exchange's market quality
associated with higher levels of market activity, such as higher levels
of liquidity provision and the introduction of higher volumes of orders
into the price and volume discovery processes. The Exchange believes
the proposed change to the Remove Volume Tier is equitable and not
unfairly discriminatory for these same reasons, as it is open to all
Members and is designed to encourage Members to maintain or increase
their order flow directed to the Exchange, thereby contributing to a
deeper and more liquid market to the benefit of all market participants
and enhancing the attractiveness of the Exchange as a trading venue.
Moreover, the Exchange believes the proposed change to the Remove
Volume Tiers is a reasonable means to incentivize such increased
activity, as it provides two different thresholds that a Member may
achieve by increasing their ADV to an amount equal to or greater than
the specified TCV threshold.
For the reasons discussed above, the Exchange submits that the
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act in that it provides for the equitable allocation of reasonable
dues, fees and other charges among its Members and other persons using
its facilities and is not designed to unfairly discriminate between
customers, issuers, brokers, or dealers. As described more fully below
in the Exchange's statement regarding the burden on competition, the
Exchange believes that its transaction pricing is subject to
significant competitive forces, and that the proposed fees and rebates
described herein are appropriate to address such forces.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act. The Exchange believes the proposed change
would encourage Members to maintain or increase their order flow to the
Exchange, thereby contributing to a deeper and more liquid market to
the benefit of all market participants and enhancing the attractiveness
of the Exchange as a trading venue. As a result, the Exchange believes
the proposal would enhance its competitiveness as a market that
attracts actionable orders, thereby making it a more desirable
destination venue for its customers. For these reasons, the Exchange
believes that the proposal furthers the Commission's goal in adopting
Regulation NMS of fostering competition among orders, which promotes
``more efficient pricing of individual stocks for all types of orders,
large and small.'' \19\
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\19\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 47396 (June 29, 2005).
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Intramarket Competition
The Exchange believes that the proposed changes would incentivize
market participants to direct order flow to the Exchange, thereby
contributing to a deeper and more liquid market to the benefit of all
market participants and enhancing the attractiveness of the Exchange as
a trading venue, which the Exchange believes, in turn, would continue
to encourage market participants to direct additional order flow to the
Exchange. Greater liquidity benefits all Members by providing more
trading opportunities and encourages Members to send orders to the
[[Page 16508]]
Exchange, thereby contributing to robust levels of liquidity, which
benefits all Members.
The opportunity to qualify for the Remove Volume Tiers, and thus
receive the proposed lower fees for executions of Removed Volume, would
be available to all Members that meet the associated volume requirement
in any month. The Exchange believes that meeting the volume requirement
of the Remove Volume Tiers is attainable for market participants, as
the Exchange believes the thresholds are relatively low and reasonably
related to the enhanced liquidity and market quality that the Remove
Volume Tiers is designed to promote. Similarly, the proposed increased
standard fee for executions of Removed Volume would apply equally to
all Members. As such, the Exchange believes the proposed changes would
not impose any burden on intramarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act.
Intermarket Competition
The Exchange believes its proposal will benefit competition as the
Exchange operates in a highly competitive market. Members have numerous
alternative venues they may participate on and direct their order flow
to, including fifteen other equities exchanges and numerous alternative
trading systems and other off-exchange venues. As noted above, no
single registered equities exchange currently has more than 18% of the
total market share of executed volume of equities trading.\20\ Thus, in
such a low-concentrated and highly competitive market, no single
equities exchange possesses significant pricing power in the execution
of order flow. Moreover, the Exchange believes that the ever-shifting
market share among the exchanges from month to month demonstrates that
market participants can shift order flow in response to new or
different pricing structures being introduced to the market.
Accordingly, competitive forces constrain the Exchange's transaction
fees and rebates generally, including with respect to executions of
Removed Volume, and market participants can readily choose to send
their orders to other exchanges and off-exchange venues if they deem
fee levels at those other venues to be more favorable.
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\20\ See supra note 3.
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As described above, the proposed changes are competitive proposals
through which the Exchange is seeking to encourage additional order
flow to the Exchange. Such proposed changes to (i) reduce the Adding
Liquidity Non-Displayed Order rebate and (ii) increase the Removing
Liquidity fee are comparable to, and competitive with, rates charged by
other exchanges.\21\ The proposed change to (iii) update the Liquidity
Indicator Codes and Associated Fees table and (iv) increase the fee for
Remove Volume Tiers is in conjunction with the Exchange's
abovementioned proposed changes.
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\21\ See supra notes 5 and 7.
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Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
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\ The fact
that this market is competitive has also long been recognized by the
courts. In NetCoalition v. Securities and Exchange Commission, the D.C.
Circuit stated: ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their routing agents, have a wide range of choices of where to
route orders for execution'; [and] `no exchange can afford to take its
market share percentages for granted' because `no exchange possess a
monopoly, regulatory or otherwise, in the execution of order flow from
broker dealers' . . . .'' \23\ Accordingly, the Exchange does not
believe its proposed pricing changes impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
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\22\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\23\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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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,\24\ and Rule 19b-4(f)(2) \25\ 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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\24\ 15 U.S.C. 78s(b)(3)(A)(ii).
\25\ 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#0674736a632b65696b6b636872754675636528616970"><span class="__cf_email__" data-cfemail="592b2c353c743a3634343c372d2a192a3c3a773e362f">[email protected]</span></a>. Please include
File Number SR-PEARL-2023-10 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-2023-10. 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
[[Page 16509]]
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-2023-10, and should be
submitted on or before April 7, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05443 Filed 3-16-23; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 17, 2023.
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