Notice2023-15980
Self-Regulatory Organizations; MIAX Pearl LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 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
July 28, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 144 (Friday, July 28, 2023)</title>
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[Federal Register Volume 88, Number 144 (Friday, July 28, 2023)]
[Notices]
[Pages 48937-48941]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-15980]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97964; File No. SR-PEARL-2023-31]
Self-Regulatory Organizations; MIAX Pearl LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
Pearl Equities Fee Schedule
July 24, 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 July 11, 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 (``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="https://www.miaxglobal.com/markets/us-equities/pearl-equities/rule-filings">https://www.miaxglobal.com/markets/us-equities/pearl-equities/rule-filings</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: (1) reduce the
rebate for executions of orders in securities priced at or above $1.00
per share that add displayed liquidity to the Exchange (``Added
Displayed Volume''); (2) increase the fees applicable to the Remove
Volume Tiers \3\ for executions of orders in securities priced at or
above $1.00 per share that remove liquidity from the Exchange
(``Removed Volume''); and (3) adopt new Liquidity Indicator Codes and
for executions of orders in all securities that remove Retail Orders
\4\ from the Exchange (displayed and non-displayed liquidity).\5\ The
Exchange originally filed this proposal on June 30, 2023 (SR-PEARL-
2023-29). On July 11, 2023, the Exchange withdrew SR-PEARL-2023-29 and
refiled this proposal.
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\3\ See Fee Schedule, Section 1)d).
\4\ A ``Retail Order'' is an agency or riskless principal order
that meets the criteria of FINRA Rule 5320.03 that originates from a
natural person and is submitted to the Exchange by a Retail Member
Organization, provided that no change is made to the terms of the
order with respect to price or side of market and the order does not
originate from a trading algorithm or any other computerized
methodology. See Exchange Rule 2626(a)(2).
\5\ The Exchange notes that it is not adopting new fees for
these types of transactions. The Exchange proposes to adopt the new
Liquidity Indicator Codes, as described below, for purposes of
clarification in the Fee Schedule.
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Proposal To Reduce the Rebate for Added Displayed Volume in Securities
Priced at or Above $1.00 per Share
The Exchange proposes to reduce the standard rebate for executions
of orders in securities priced at or above $1.00 per share that add
displayed liquidity to the Exchange. Currently, the Exchange provides a
standard rebate of ($0.0029) \6\ per share for executions of Added
Displayed Volume in all Tapes. The Exchange now proposes to reduce the
standard rebate for executions of Added Displayed Volume in securities
priced at or above $1.00 per share from ($0.0029) to ($0.0027) per
share for all Tapes.\7\ Accordingly, the Exchange proposes to amend
Section 1)a), Standard Rates, to reflect this proposed change and amend
Section 1)b), Liquidity Indicator Codes and Associated Fees, to reflect
the corresponding changes to the applicable Liquidity Indicator Codes,
AA, AB and AC. The Exchange notes that executions of orders in
securities priced below $1.00 per share for Added Displayed Volume on
the Exchange will continue to receive the standard rebate applicable to
such executions (i.e., 0.15% of the total dollar value of the
transaction).
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\6\ Rebates are indicated by parentheses. See the General Notes
section of the Fee Schedule.
\7\ See Fee Schedule, Section 1)a), Standard Rates, for the
standard pricing for executions of Added Displayed Volume, among
other rates.
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The purpose of reducing the standard rebate for executions of Added
Displayed Volume is for business and competitive reasons in light of
recent volume growth on the Exchange. The Exchange notes that despite
the modest reduction proposed herein, the proposed standard rebate for
executions of Added Displayed Volume (i.e., ($0.0027) 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 to
those exchanges.\8\
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\8\ See e.g., NYSE Arca Equities Fee Schedule, 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> (providing standard rebates of
$0.0020 per share (Tapes A and C) and $0.0016 per share (Tape B) for
adding displayed liquidity in securities priced at or above $1.00
per share); see also Cboe BZX Equities Fee Schedule, 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>
(providing a standard rebate of $0.0016 per share for adding
displayed liquidity in securities priced at or above $1.00 per
share).
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Proposal To Increase the Fees for the Remove Volume Tiers
Next, the Exchange proposes to amend Section 1)d) of the Fee
Schedule to increase the fees applicable to executions of orders in
securities priced at or above $1.00 per share that qualify for the
reduced fees of the Exchange's Remove Volume Tiers. Currently, Section
1)d) of the Fee Schedule provides reduced fees for executions of
[[Page 48938]]
orders in securities priced at or above $1.00 per share that remove
liquidity from the Exchange if Equity Members meet certain criteria.
Equity Members that qualify for the Remove Volume Tiers are charged a
lower fee of $0.00285 per share in Tier 1 for executions of Removed
Volume in securities priced at or above $1.00 per share and a lower fee
of $0.00275 per share in Tier 2 for executions of Removed Volume in
securities priced at or above $1.00 per share. To achieve the reduced
fees of the Remove Volume Tiers, Equity Members must, (i) for Tier 1,
achieve an average daily volume (``ADV'') \9\ that is equal to or
greater than 0.10% of the total consolidated volume (``TCV'') \10\ and
execute at least 1,000 shares of added liquidity during the month; and
(ii) for Tier 2, achieve an ADV that is equal to or greater than 0.15%
of TCV and execute at least 1,000 shares of added liquidity during the
month. Equity Members that qualify for the discounted rates of the
Remove Volume Tiers in a particular month will be charged the lower fee
according to the threshold tier achieved instead of the standard Remove
Volume fee of $0.00295 per share for executions of orders in securities
priced at or above $1.00 per share in that particular month.
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\9\ ``ADV'' means average daily volume calculated as the number
of shares added or removed, combined, per day. ADV is calculated on
a monthly basis. See the Definitions Section of the Fee Schedule.
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). Routed shares are also not included in the ADV calculation.
See id.
\10\ ``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 Fee Schedule.
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The Exchange now proposes to increase the fees applicable to the
Remove Volume Tiers. In particular, the Exchange proposes that the fee
applicable to Tier 1 of the Remove Volume Tiers will be increased from
$0.00285 to $0.00290 per share and the fee applicable to Tier 2 of the
Remove Volume Tiers will be increased from $0.00275 to $0.00285 per
share. The Exchange does not propose to amend the calculation or
criteria for achieving the reduced rates of the Remove Volume Tiers.
The purpose of this change is for business and competitive reasons. The
Exchange notes that despite the modest increases proposed herein, the
Exchange's fees for its Remove Volume Tiers remain competitive with the
fees to remove liquidity in securities priced at or above $1.00 per
share charged by other equity exchanges, including other equity
exchanges that also have reduced fees for meeting certain criteria for
removing liquidity.\11\ The Exchange charges Equity Members a fee of
0.25% of the total dollar value of the transaction for executions of
orders that remove liquidity from the Exchange in securities priced
below $1.00 per share, which the Exchange does not propose to change in
this proposal.
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\11\ See MEMX LLC (``MEMX'') Fee Schedule, available at <a href="https://info.memxtrading.com/fee-schedule/">https://info.memxtrading.com/fee-schedule/</a>(providing standard remove volume
fee of $0.0030 per share and reduced remove Liquidity Removal Tier
fee of $0.00295 per share); see also Cboe EDGX Equities Fee
Schedule, 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> (providing a standard fee of $0.0030 per share to
remove liquidity in securities priced at or above $1.00 per share,
Remove Volume Tier 1 fee of $0.00285 per share and Remove Volume
Tier 2 fee of $0.00275 per share to remove liquidity in securities
priced at or above $1.00 per share); and Cboe BZX Equities Fee
Schedule, 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> (providing a fee of $0.0030 per share to remove
liquidity in securities priced at or above $1.00 per share).
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Proposal To Adopt New Liquidity Indicator Codes for Removing Retail
Order Liquidity
Next, the Exchange proposes to adopt new Liquidity Indicator Codes
for executions of orders in all securities that remove Retail Order
liquidity \12\ from the Exchange (displayed and non-displayed
liquidity). The current fees for orders that remove liquidity (other
than Retail Orders that remove liquidity) will continue to apply to the
proposed Liquidity Indicator Codes for executions of orders in all
securities that remove Retail Orders from the Exchange (displayed and
non-displayed).\13\ The purpose of this change is to provide additional
clarity in the Fee Schedule regarding these particular types of
transactions.
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\12\ The Exchange notes that the proposed description in the Fee
Schedule capitalizes the word ``Liquidity'' in the proposed new
Liquidity Indicator Codes; however, the Exchange notes that this is
solely for purposes of uniformity throughout the Liquidity Indicator
Codes and Associated Fees table and is not meant to be a newly
defined term.
\13\ See Fee Schedule, Section 1)a). Currently, displayed and
non-displayed orders that remove liquidity (other than Retail Orders
that remove liquidity) in securities at or above $1.00 per share are
charged $0.00295 per share (Liquidity Indicator Codes RA, RB, RC,
Ra, Rb and Rc).
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The Exchange proposes to amend the Liquidity Indicator Codes and
Associated Fees table in Section 1)b) of the Fee Schedule to adopt
Retail Order liquidity indicator codes ``RT'' and ``Rt,'' as follows:
<bullet> Add new liquidity indicator code RT, Removes Retail Order
Liquidity, Displayed Order (All Tapes). The Liquidity Indicator Codes
and Associated Fees table would specify that orders that yield
liquidity indicator code RT would be subject to a fee $0.00295 per
share in securities priced at or above $1.00 and 0.25% of the
transaction's dollar value in securities priced below $1.00.
<bullet> Add new liquidity indicator code Rt, Removes Retail Order
Liquidity, Non-Displayed Order (All Tapes). The Liquidity Indicator
Codes and Associated Fees table would specify that orders that yield
liquidity indicator code Rt would be subject to a fee of $0.00295 per
share in securities priced at or above $1.00 and 0.25% of the
transaction's dollar value in securities priced below $1.00.
The Exchange also proposes to add the new Liquidity Indicator Codes
to the Standard Rates table in Section 1)a) of the Fee Schedule.
Specifically, Liquidity indicator codes RT and Rt would be added to the
``Removing Liquidity'' column of the Standard Rates table. The Exchange
also proposes to add the new Liquidity Indicator Codes RT and Rt to the
Liquidity Indicator Codes applicable to the Remove Volume Tiers in
Section 1)d) of the Fee Schedule.
The purpose of these changes is to provide greater clarity in the
Fee Schedule. The Exchange believes that adding the new proposed
Liquidity Indicator Codes RT and Rt to the Liquidity Indicator Codes
and Associated Fees table will provide greater clarity in the Fee
Schedule regarding the fees for these types of transactions, which
benefits all market participants. The Exchange notes that the proposed
fees for Liquidity Indicator Codes RT and Rt are the same as the
current rates for removing liquidity in other types of orders that are
not Retail Orders, i.e., $0.00295 per share in securities priced at or
above $1.00 per share and 0.25% of the transaction's total dollar value
in securities priced below $1.00 per share. The Exchange notes that the
use of Liquidity Indicator Codes is not unique to the Exchange and are
currently utilized and described in the fee schedules of other equity
exchanges.\14\
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\14\ See, e.g., Investors Exchange LLC (``IEX'') Fee Schedule,
available at <a href="https://iextrading.com/trading/fees/">https://iextrading.com/trading/fees/</a> and MEMX Fee
Schedule, supra note 11.
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[[Page 48939]]
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 \15\ in general, and
furthers the objectives of section 6(b)(4) of the Act \16\ 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 and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\15\ 15 U.S.C. 78f(b).
\16\ 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. As of June 23, 2023, based on publicly available information, no
single registered equities exchange has more than approximately 14-17%
of the total market share of executed volume of equities trading for
the month of June 2023.\17\ 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 1.90% of the overall market share as of June
23, 2023 for the month of June 2023.\18\ 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.'' \19\
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\17\ 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 June 23,
2023).
\18\ See id.
\19\ 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 or 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 additional orders
that add liquidity to the Exchange, which the Exchange believes would
deepen liquidity and promote market quality on the Exchange to the
benefit of all market participants.
Reduce Standard Rebate for Added Displayed Volume
The Exchange believes that the proposal to reduce the standard
rebate for executions of Added Displayed Volume ($0.0027) per share is
reasonable, equitably allocated and not unfairly discriminatory because
it represents a modest decrease from the current standard rebate for
executions of Added Displayed Volume and remains competitive with the
standard rebates provided by competing exchanges for orders in
securities priced at or above $1.00 per share that add liquidity.\20\
The Exchange believes its proposal to reduce the standard rebate for
executions of Added Displayed Volume is reasonable and not unfairly
discriminatory because this change is for business and competitive
reasons in light of recent volume growth on the Exchange. The Exchange
notes that despite the modest reduction proposed herein, the proposed
standard rebate for executions of Added Displayed Volume (i.e.,
($0.0027) 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 to those exchanges.\21\
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\20\ See supra note 8.
\21\ See id.
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The Exchange further believes that the proposed reduced standard
rebate for executions of Added Displayed Volume is equitably allocated
and not unfairly discriminatory because each will apply equally to all
Members who are similarly situated. The Exchange also believes its
proposal to amend Section 1)b), Liquidity Indicator Codes and
Associated Fees, to reflect the proposed decreased rebate for Added
Displayed Volume in the corresponding Liquidity Indicator Codes AA, AB
and AC is reasonable because it provides uniformity and clarity in the
Fee Schedule.
Increase Fees for the Remove Volume Tiers
The Exchange believes that its proposal to increase the fees
applicable to the Remove Volume Tiers is reasonable, equitably
allocated and not unfairly discriminatory because, even with the
proposed increase, the Remove Volume Tiers continue to provide
incentives for Equity Members to strive for higher ADV on the Exchange
in order to qualify for the lower fees for executions of Removed
Volume. As such, with the proposed increased fees, the Exchange
believes that the Remove Volume Tiers are designed to continue to
encourage Equity Members to maintain 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 Equity
Members that qualify for one of the Remove Volume Tiers (i.e., $0.00290
or $0.00285) is comparable to, and competitive with, the fees charged
for executions of liquidity-removing orders charged by competing
exchanges under similar volume-based tiers.\22\ The Exchange further
believes the proposed increased fees for the Remove Volume Tiers is
fair, equitable and not unfairly discriminatory because the Remove
Volume Tiers will continue to be available to all Equity Members that
meet the requisite criteria.
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\22\ See supra note 11.
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New Liquidity Codes for Executions of Orders That Remove Retail Order
Liquidity (Displayed and Non-Displayed)
The Exchange believes its proposal to adopt two new Liquidity
Indicator Codes for orders that remove Retail Order liquidity is
reasonable and not unfairly discriminatory as they will apply to all
Equity Members equally that submit orders to remove Retail Orders. The
Exchange notes that the current fees attributed to these types of
transactions is not changing with this proposal; \23\ rather, the
proposal
[[Page 48940]]
provides Liquidity Indicator Codes for certain types of transactions
thereby providing additional clarity in the Fee Schedule, which
benefits all market participants.
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\23\ See Securities Exchange Act Release Nos. 97124 (March 13,
2023), 88 FR 16504 (March 17, 2023) (SR-PEARL-2023-10); 97308 (April
13, 2023), 88 FR 24249 (April 19, 2023) (SR-PEARL-2023-16).
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The Exchange believes that adding the new proposed Liquidity
Indicator Codes of RT and Rt to the Liquidity Indicator Codes and
Associated Fees table will make the Fee Schedule clearer and eliminate
the potential for confusion in regard to fees charged and rebates
earned, thereby removing impediments to, and perfecting the mechanism
of a free and open market and a national market system, and, in
general, protecting investors and the public interest. Further, as
noted above, this practice is consistent with the pricing practices of
other exchanges.\24\
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\24\ See supra note 11.
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The Exchange believes its proposal provides for the equitable
allocation of reasonable dues and fees and is not unfairly
discriminatory. 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 Equity 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 believes that the proposed change will not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intramarket Competition
The Exchange believes that its proposal to reduce the standard
rebate for Added Displayed Volume for executions of orders in
securities priced at or above $1.00 per share will not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes its
proposal to reduce the standard rebate for executions of Added
Displayed Volume will not impose any burden on intramarket competition
that is not necessary or appropriate because this change is for
business and competitive reasons in light of recent volume growth on
the Exchange. The Exchange notes that despite the modest reduction
proposed herein, the proposed standard rebate for executions of Added
Displayed Volume (i.e., ($0.0027) 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 to those exchanges.\25\
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\25\ See supra note 8.
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The Exchange believes that, even with the proposed decrease to the
standard Added Displayed Volume rebate, the Exchange's standard rebate
for such orders will continue to 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. The
Exchange believes that this, in turn, will continue to encourage market
participants to direct additional Added Displayed Volume in securities
priced at or above $1.00 per share to the Exchange. Greater liquidity
benefits all Equity Members by providing more trading opportunities and
encourages Equity Members to send orders to the Exchange, thereby
contributing to robust levels of liquidity, which benefits all market
participants.
The Exchange believes that its proposal to increase the fees for
the Remove Volume Tiers will not impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The opportunity to qualify for the Remove Volume
Tiers, and thus receive the proposed lower fees for executions of
Removed Volume, will continue to be available to all Equity Members
that meet the associated requirements in any month. The Exchange
believes that meeting the volume requirements of the Remove Volume
Tiers will continue to be 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 are designed to promote. The Exchange notes that it does
not propose to change the volume requirements for the Remove Volume
Tiers pursuant to this proposal. Even with the modest increase proposed
herein, the Exchange's fees for its Remove Volume Tiers will remain
competitive with the fees to remove liquidity in securities priced at
or above $1.00 per share charged by other equity exchanges.\26\
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\26\ See supra note 11.
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The Exchange believes that the proposed change to adopt new
Liquidity Indicator Codes for executions of orders in all securities
that remove Retail Orders from the Exchange (displayed and non-
displayed liquidity) will not impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange believes that the new Liquidity
Indicator Codes RT and Rt will provide additional clarity in the Fee
Schedule, which benefits all market participants. The use of Liquidity
Indicator Codes is not new or novel as they are used on other equity
exchanges.\27\ Additionally, the proposed new Liquidity Indicator Codes
will be applied equally to all Equity Members that submit orders to
remove Retail Orders and the new Liquidity Indicator Codes of RT and Rt
will provide additional specificity in the Fee Schedule so that Equity
Members may connect an execution to the applicable fee. 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.
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\27\ See supra note 14.
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Intermarket Competition
The Exchange believes the proposed changes will benefit competition
as the Exchange operates in a highly competitive market. Equity Members
have numerous alternative venues that 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 14-17% of the total market share of executed
volume of equities trading. 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 Added Displayed Volume, orders to remove Retail Order
[[Page 48941]]
liquidity, and Removed Volume, as 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. As
described above, the proposed changes are competitive proposals through
which the Exchange is seeking to encourage certain order flow to the
Exchange and to promote market quality through pricing incentives that
are similar in structure and purpose to pricing programs at other
Exchanges.\28\ Accordingly, the Exchange believes the proposal would
not burden, but rather promote, intermarket competition by enabling it
to better compete with other exchanges that offer similar incentives to
market participants that enhance market quality.
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\28\ See supra notes 8 and 11.
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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.'' \29\ 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' . . .''.\30\ 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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\29\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\30\ See 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,\31\ and Rule 19b-4(f)(2) \32\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\31\ 15 U.S.C. 78s(b)(3)(A)(ii).
\32\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#592b2c353c743a3634343c372d2a192a3c3a773e362f"><span class="__cf_email__" data-cfemail="9ceee9f0f9b1fff3f1f1f9f2e8efdceff9ffb2fbf3ea">[email protected]</span></a>. Please include
file number SR-PEARL-2023-31 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-2023-31. 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 a.m. and 3 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. We 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-2023-31 and should be submitted on or
before August 18, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-15980 Filed 7-27-23; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on July 28, 2023.
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