Notice2023-10904
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the MIAX Pearl Equities Fee Schedule
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Published
May 23, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 99 (Tuesday, May 23, 2023)</title>
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[Federal Register Volume 88, Number 99 (Tuesday, May 23, 2023)]
[Notices]
[Pages 33181-33184]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-10904]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97519; File No. SR-PEARL-2023-22]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL,
LLC To Amend the MIAX Pearl Equities Fee Schedule
May 17, 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 May 9, 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 Exchange proposes to amend the Fee Schedule to: (i) reduce the
fees for orders in securities priced at or above $1.00 per share that
are routed to the primary listing market's opening or re-opening
process pursuant to the Route to Primary Auction (``PAC'') routing
option; \3\ and (ii) reduce the fees for orders in securities priced
below $1.00 per share that are routed to the primary listing market's
opening or re-opening process pursuant to the PAC routing option. The
Exchange initially filed this proposal on April 28, 2023, with the
proposed fee changes effective beginning May 1, 2023 (SR-PEARL-2023-
20). On May 9, 2023, the Exchange withdrew SR-PEARL-2023-20 and refiled
this proposal as SR-PEARL-2023-22.
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\3\ See Exchange Rule 2617(b)(5)(B).
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Background
The PAC routing option enables an Equity Member \4\ to designate
that their order be routed to the primary listing market to participate
in the primary listing market's opening, re-opening or closing
process.\5\ Exchange Rule 2617(b)(5)(B) provides that PAC is a routing
option for Market Orders \6\ and displayed Limit Orders \7\ designated
with a time-in-force of Regular Hours Only (``RHO'') \8\ that the
entering firm wishes to designate for participation in the opening, re-
opening (following a regulatory halt, suspension, or pause), or closing
process \9\ of a primary listing market (Cboe BZX Exchange, Inc.
(``Cboe BZX''), the New York Stock Exchange LLC (``NYSE''), The Nasdaq
Stock Market LLC (``Nasdaq''), NYSE American LLC (``NYSE American''),
or NYSE Arca, Inc. (``NYSE Arca'')), if received before the opening,
re-opening, or closing process of such market. For displayed Limit
Orders designated with the PAC routing option, any shares that remain
unexecuted after attempting to execute in the primary listing market's
opening or re-opening process will either be posted to the MIAX Pearl
Equities Book, executed, or routed pursuant to the Price Improvement
(``PI'') routing option.\10\
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\4\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
\5\ See Exchange Rule 2617(b)(5)(B).
\6\ See Exchange Rule 2614(a)(2).
\7\ See Exchange Rule 2614(a)(1).
\8\ Exchange Rule 2614(b)(2) defines ``Regular Hours Only'' or
``RHO'' as ``[a]n order that is designated for execution only during
Regular Trading Hours, which includes the Opening Process for equity
securities. An order with a time-in-force of RHO entered into the
System before the opening of business on the Exchange as determined
pursuant to Exchange Rule 2600 will be accepted but not eligible for
execution until the start of Regular Trading Hours.''
\9\ The Exchange notes that it will route Market Orders to the
primary listing market's closing process in certain limited
circumstances. See Exchange Rule 2617(b)(5)(B)(1)(ii)(b).
\10\ See Exchange Rule 2617(b)(5)(B)(1)(i)(a).
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The Exchange adopted the standard liquidity indicator code of ``X''
in its Fee Schedule for routed liquidity. This code applies to an order
that is routed to and executed on an away market. Additionally, this
code is used to identify orders that were routed to an away market
(including orders that were routed using the PAC routing strategy) and
executed as ``Taker.''
On July 5, 2022, the Exchange filed its proposal to, among other
things, adopt new liquidity indicator codes and associated fees and
rebates for orders that the Exchange routes pursuant to the PAC routing
option.\11\ In particular, the Exchange adopted the following liquidity
indicator codes and associated fees for orders that the Exchange routes
to the primary listing market's opening
[[Page 33182]]
or re-opening process pursuant to the PAC routing option: \12\
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\11\ See Securities Exchange Act Release No. 95210 (July 7,
2022), 87 FR 41750 (July 13, 2022) (SR-PEARL-2022-26).
\12\ The Exchange notes that the proposed changes in this filing
will not amend the fees or rebates for the following liquidity
indicator codes that also correspond to orders routed away from the
Exchange pursuant to the PAC routing option: XA, XB, XD, XE, XG, XH,
XJ, XK, XM, XN, XP, XQ. See Fee Schedule, section (1)(b).
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<bullet> Liquidity indicator code XC, Routed to NYSE, Opening/Re-
Opening Auction. Orders that yield liquidity indicator code XC are
charged a fee $0.00105 per share in securities priced at or above $1.00
and 0.30% of the transaction's dollar value in securities priced below
$1.00.
<bullet> Liquidity indicator code XF, Routed to NYSE Arca, Opening/
Re-Opening Auction. Orders that yield liquidity indicator code XF are
charged a fee of $0.00155 per share in securities priced at or above
$1.00 and 0.105% of the transaction's dollar value in securities priced
below $1.00.
<bullet> Liquidity indicator code XI, Routed to NYSE American,
Opening/Re-Opening Auction. Orders that yield liquidity indicator code
XI are charged a fee of $0.00055 per share in securities priced at or
above $1.00 and 0.055% of the transaction's dollar value in securities
priced below $1.00.
<bullet> Liquidity indicator code XL, Routed to Cboe BZX, Opening/
Re-Opening Auction. Orders that yield liquidity indicator code XL are
charged a fee of $0.0008 per share in securities priced at or above
$1.00 and 0.08% of the transaction's dollar value in securities priced
below $1.00.
<bullet> Liquidity indicator code XO, Routed to Nasdaq, Opening/Re-
Opening Auction. Orders that yield liquidity indicator code XO are
charged a fee of $0.00155 per share in securities priced at or above
$1.00 and 0.30% of the transaction's dollar value in securities priced
below $1.00.
Proposal To Reduce Fees for Orders in Securities Priced at or Above
$1.00 per Share
The Exchange now proposes to amend section (1)(b) of the Fee
Schedule to reduce the fees for orders in securities priced at or above
$1.00 per share that are routed to the primary listing market's opening
or re-opening process pursuant to the PAC routing option. Specifically,
the Exchange proposes to amend the fees for Liquidity Indicator Codes
XC, XF, XI, XL and XO for securities priced at or above $1.00 per share
from the current rates (described above) to now be $0.00005 per share.
With the proposed changes, for securities priced at or above $1.00 per
share: (i) the fee for Liquidity Indicator Code XC will be reduced from
$0.00105 to $0.00005 per share; (ii) the fee for Liquidity Indicator
Code XF will be reduced from $0.00155 to $0.00005 per share; (iii) the
fee for Liquidity Indicator Code XI will be reduced from $0.00055 to
$0.00005 per share; (iv) the fee for Liquidity Indicator Code XL will
be reduced from $0.0008 to $0.00005 per share; and (v) the fee for
Liquidity Indicator Code XO will be reduced from $0.00155 to $0.00005
per share.
Proposal To Reduce Fees for Orders in Securities Priced Below $1.00 per
Share
The Exchange also proposes to amend section (1)(b) of the Fee
Schedule to reduce the fees for orders in securities priced below $1.00
per share that are routed to the primary listing market's opening or
re-opening process pursuant to the PAC routing option. Specifically,
the Exchange proposes to amend the fees for Liquidity Indicator Codes
XC, XF, XI, XL and XO for securities priced below $1.00 per share from
the current rates (described above) to now be 0.00% of the total dollar
value of the transaction. With the proposed changes, for securities
priced below $1.00 per share: (i) the fee for Liquidity Indicator Code
XC will be reduced from 0.30% to 0.00% of the total dollar value of the
transaction; (ii) the fee for Liquidity Indicator Code XF will be
reduced from 0.105% to 0.00% of the total dollar value of the
transaction; (iii) the fee for Liquidity Indicator Code XI will be
reduced from 0.055% to 0.00% of the total dollar value of the
transaction; (iv) the fee for Liquidity Indicator Code XL will be
reduced from 0.08% to 0.00% of the total dollar value of the
transaction; and (v) the fee for Liquidity Indicator Code XO will be
reduced from 0.30% to 0.00% of the total dollar value of the
transaction.
The purpose of the proposed changes to reduce the fees for all
orders that are routed to the primary listing market's opening or re-
opening process pursuant to the PAC routing option is for business and
competitive reasons. The Exchange initially set such fees higher than,
or similar to, the fees charged by competing equities exchanges for
routing orders to the primary listing market's opening or re-opening
process.\13\ The Exchange believes its proposal to reduce fees for all
orders routed to the primary listing market's opening or re-opening
process pursuant to the PAC routing option will encourage additional
orders to be submitted to the Exchange with such designation, which
should, in turn improve the Exchange's market quality. The Exchange
believes that this will benefit all Equity Members by enhancing the
attractiveness of the Exchange as a trading venue.
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\13\ See, e.g., Cboe BZX U.S. Equities Exchange Fee Schedule,
Fees Codes and Associated Fees, 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> (Cboe BZX fee of $0.0015 to
route orders to a listing market's opening or re-opening cross);
NYSE Arca Equities Exchange Fee Schedule, Section V., Standard
Rates-Routing, 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> (NYSE Arca fee of
$0.001 to route orders to NYSE Auctions; NYSE Arca fee of $0.003 to
route orders to Cboe BZX opening/re-opening auction; NYSE Arca fee
of $0.003 to route orders to Nasdaq auctions).
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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 \14\ in general, and
furthers the objectives of section 6(b)(4) of the Act \15\ 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.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4).
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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 15-16% of the
total market share of executed volume of equities trading.\16\ 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 represents approximately 1.64% of the
overall market share as of April 27, 2023, for the month of April 2023.
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
[[Page 33183]]
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.'' \17\
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\16\ See the ``Market Share'' Section of the Exchange's website,
available at <a href="https://www.miaxglobal.com/">https://www.miaxglobal.com/</a> (last visited April 27,
2023).
\17\ See 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 that its proposal to reduce the fees for all
orders that are routed to the primary listing market's opening or re-
opening process pursuant to the PAC routing option is reasonable,
equitable, and not unfairly discriminatory. The Exchange initially set
such fees higher than, or similar to, the fees charged by competing
equities exchanges for routing orders to the primary listing market's
opening or re-opening process.\18\ The Exchange believes that its
proposal to reduce such fees will encourage additional orders
designated with the PAC routing option to be submitted to the Exchange,
which should, in turn improve the Exchange's market quality. The
Exchange believes that this will benefit all Equity Members by
enhancing the attractiveness of the Exchange as a trading venue.
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\18\ See supra note 13.
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The Exchange also believes that the proposed changes are equitable
and not unfairly discriminatory as the lower fees would apply to all
Equity Members that submit orders designated with the PAC routing
option that route to the primary listing market's opening or re-opening
process. Further, routing through the Exchange is voluntary and the
Exchange notes that it operates in a highly competitive market in which
market participants can readily direct order flow to competing venues
or providers of routing services if they deem fee levels to be
excessive.
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 that the proposed
fees are competitive in that they provide lower fees for routing orders
pursuant to the PAC routing option to a primary listing market's
opening or re-opening process as compared to competing exchanges. The
Exchange notes that Equity Members may opt not to select the PAC
routing option on orders submitted to the Exchange and accordingly will
not incur the associated routing fees proposed herein.
Intramarket Competition
The Exchange does not believe that the proposal will impose any
burden on intramarket competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed fees are available
to all similarly situated market participants, and, as such the
proposed change would not impose a disparate burden on competition
among market participants on the Exchange. Specifically, all Equity
Members that use the PAC routing option will be subject to the same
fees and rebates. As such the Exchange does not believe the proposed
changes would impose any burden on intramarket competition that is not
necessary or appropriate in furtherance of the purpose of the Act.
Intermarket Competition
The Exchange believes its proposal will benefit competition, and
the Exchange notes that it operates in a highly competitive market.
Equity 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 approximately 15-16% of the total market share
of executed volume of equities trading.\19\ 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, the
Exchange believes its proposal would not burden, but rather promote,
intermarket competition by enabling it to better compete by providing
lower fees than competing exchanges that offer similar routing
strategies.
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\19\ See supra note 16.
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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,\20\ and Rule 19b-4(f)(2) \21\ 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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\20\ 15 U.S.C. 78s(b)(3)(A)(ii).
\21\ 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#483a3d242d652b2725252d263c3b083b2d2b662f273e"><span class="__cf_email__" data-cfemail="582a2d343d753b3735353d362c2b182b3d3b763f372e">[email protected]</span></a>. Please include
File Number SR-PEARL-2023-22 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-2023-22. 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
[[Page 33184]]
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. Do not include personal identifiable
information in submissions. You should submit only information that you
wish to make available publicly. The Commission may redact in part or
withhold entirely from publication submitted material that is obscene
or subject to copyright protection. All submissions should refer to
File Number SR-PEARL-2023-22, and should be submitted on or before June
13, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10904 Filed 5-22-23; 8:45 am]
BILLING CODE 8011-01-P
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