Notice2024-00843
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 To Expand the NBBO Setter Plus Program and Remove the Step-Up Added Liquidity Rebate
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
January 18, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 89, Number 12 (Thursday, January 18, 2024)]
[Notices]
[Pages 3488-3493]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-00843]
[[Page 3488]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99318; File No. SR-PEARL-2023-73]
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 To Expand the NBBO Setter Plus Program and
Remove the Step-Up Added Liquidity Rebate
January 11, 2024.
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 December 29, 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="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: (i) adopt two
new tiers and corresponding rebates for the NBBO Setter Plus Program
(referred to in this filing as the ``NBBO Program''); (ii) remove the
Step-Up Added Liquidity Rebate table and associated rebate; \3\ and
(iii) make corresponding changes to the Definitions section and NBBO
Setter Plus Table to account for the removal of the Step-Up Added
Liquidity Rebate.
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\3\ See Fee Schedule, Section 1(f).
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Background--NBBO Program and Step-Up Added Liquidity Rebate
In general, the NBBO Program provides enhanced rebates for Equity
Members \4\ that add displayed liquidity (``Added Displayed Volume'')
in securities priced at or above $1.00 per share in all Tapes based on
increasing volume thresholds and increasing market quality levels
(described below), and provides an additive rebate \5\ applied to
orders that set the NBB or NBO \6\ upon entry.\7\ The NBBO Program was
implemented beginning September 1, 2023.\8\
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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\ The Exchange does not propose to amend the NBBO Setter
Additive Rebate, which is an additive rebate of ($0.0003) per share
for executions of orders in securities priced at or above $1.00 per
share that set the NBB or NBO on MIAX Pearl Equities with a minimum
size of a round lot. See Fee Schedule, Section 1(c).
\6\ With respect to the trading of equity securities, the term
``NBB'' shall mean the national best bid, the term ``NBO'' shall
mean the national best offer, and the term ``NBBO'' shall mean the
national best bid and offer. See Exchange Rule 1901.
\7\ See Fee Schedule, Section 1(c).
\8\ See Securities Exchange Act Release No. 98472 (September 21,
2023), 88 FR 66533 (September 27, 2023) (SR-PEARL-2023-45) (Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the MIAX Pearl Equities Fee Schedule To Adopt the NBBO Setter
Plus Program and Eliminate Certain Other Rebates).
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Pursuant to the NBBO Setter Plus Table in Section 1(c) of the Fee
Schedule, the NBBO Program provides four volume tiers enhanced by three
market quality levels to provide increasing rebates in this segment.
The four volume tiers are achievable by greater volume from the best of
three alternative methods. The three market quality levels are
achievable by greater NBBO participation in a minimum number of
specific securities.
MIAX Pearl Equities first determines the applicable NBBO Program
tier based on three different volume calculation methods. The three
volume-based methods to determine the Equity Member's tier for purposes
of the NBBO Program are calculated in parallel in each month, and each
Equity Member receives the highest tier achieved from any of the three
methods each month. All three volume calculation methods are based on
an Equity Member's respective ADAV \9\ or NBBO Set Volume or ADV, each
as a percent of industry TCV \10\ as the denominator.
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\9\ ``ADAV'' means average daily added volume calculated as the
number of shares added per day and ``ADV'' means average daily
volume calculated as the number of shares added or removed,
combined, per day. ADAV and ADV are calculated on a monthly basis.
``NBBO Set Volume'' means the ADAV in all securities of an Equity
Member that sets the NBB or NBO on MIAX Pearl Equities. The Exchange
excludes from its calculation of ADAV, ADV, and NBBO Set Volume
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 not included in the ADAV or ADV
calculation. See the Definitions section of the Fee Schedule.
\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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Under volume calculation Method 1, the Exchange provides tiered
rebates based on an Equity Member's ADAV as a percentage of TCV. An
Equity Member qualifies for the base rebates in Tier 1 for executions
of orders in securities priced at or above $1.00 per share for Added
Displayed Volume across all Tapes by achieving an ADAV of at least
0.00% and less than 0.08% of TCV. An Equity Member qualifies for the
enhanced rebates in Tier 2 for executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume across
all Tapes by achieving an ADAV of at least 0.08% and less than 0.25% of
TCV. An Equity Member qualifies for the enhanced rebates in Tier 3 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADAV of at
least 0.25% and less than 0.40% of TCV. Finally, an Equity Member
qualifies for the enhanced rebates in Tier 4 for executions of orders
in securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an ADAV of at least 0.40% of TCV.
Under volume calculation Method 2, the Exchange provides tiered
rebates
[[Page 3489]]
based on an Equity Member's NBBO Set Volume as a percentage of TCV.
Under volume calculation Method 2, an Equity Member qualifies for the
base rebates in Tier 1 for executions of orders in securities priced at
or above $1.00 per share for Added Displayed Volume across all Tapes by
achieving an NBBO Set Volume of at least 0.00% and less than 0.02% of
TCV. An Equity Member qualifies for the enhanced rebates in Tier 2 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an NBBO Set
Volume of at least 0.02% and less than 0.03% of TCV. An Equity Member
qualifies for the enhanced rebates in Tier 3 for executions of orders
in securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an NBBO Set Volume of at least
0.03% and less than 0.08% of TCV. An Equity Member qualifies for the
enhanced rebates in Tier 4 for executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume across
all Tapes by achieving an NBBO Set Volume of at least 0.08% of TCV.
Under volume calculation Method 3, the Exchange provides tiered
rebates based on an Equity Member's ADV as a percentage of TCV. An
Equity Member qualifies for the base rebates in Tier 1 for executions
of orders in securities priced at or above $1.00 per share for Added
Displayed Volume across all Tapes by achieving an ADV of at least 0.00%
and less than 0.20% of TCV. An Equity Member qualifies for the enhanced
rebates in Tier 2 for executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume across all Tapes by
achieving an ADV of at least 0.20% and less than 0.60% of TCV. An
Equity Member qualifies for the enhanced rebates in Tier 3 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADV of at
least 0.60% and less than 1.00% of TCV. An Equity Member qualifies for
the enhanced rebates in Tier 4 for executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume across
all Tapes by achieving an ADV of at least 1.00% of TCV.
After the volume calculation is performed to determine highest tier
achieved by the Equity Member, the applicable rebate is calculated
based on two different measurements based on the Equity Member's
participation at the NBBO on the Exchange in certain securities
(referenced below).
The Exchange provides one column of base rebates (referred to in
the NBBO Program table as ``Level A'') and two columns of enhanced
rebates (referred to in the NBBO Program table as ``Level B'' and
``Level C''),\11\ depending on the Equity Member's Percent Time at NBBO
\12\ on MIAX Pearl Equities in a certain amount of specified securities
(``Market Quality Securities'' or ``MQ Securities'').\13\ The NBBO
Setter Plus Table specifies the percentage of time that the Equity
Member must be at the NBBO on MIAX Pearl Equities in at least 200
symbols out of the full list of 1,000 MQ Securities (which symbols may
vary from time to time based on market conditions). The list of MQ
Securities is generally based on the top multi-listed 1,000 symbols by
ADV across all U.S. securities exchanges. The list of MQ Securities is
updated monthly by the Exchange and published on the Exchange's
website.\14\
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\11\ For the purpose of determining qualification for the
rebates described in Level B and Level C of the Market Quality Tier
columns in the NBBO Setter Plus Program, the Exchange will exclude
from its calculation: (1) any trading day that the Exchange's system
experiences a disruption that lasts for more than 60 minutes during
regular trading hours; (2) any day with a scheduled early market
close; and (3) the ``Russell Reconstitution Day'' (typically the
last Friday in June). See the Definitions section of the Fee
Schedule.
\12\ ``Percent Time at NBBO'' means the aggregate of the
percentage of time during regular trading hours where a Member has a
displayed order of at least one round lot at the national best bid
(``NBB'') or national best offer (``NBO''). See the Definitions
section of the Fee Schedule.
\13\ ``Market Quality Securities'' or ``MQ Securities'' shall
mean a list of securities designated as such, that are used for the
purposes of qualifying for the rebates described in Level B and
Level C of the Market Quality Tier columns in the NBBO Setter Plus
Program. The universe of these securities will be determined by the
Exchange and published on the Exchange's website. See the
Definitions section of the Fee Schedule.
\14\ See MIAX Pearl Equities Exchange--Market Quality Securities
(MQ Securities) List, effective December 1 through December 29,
2023, available at <a href="https://www.miaxglobal.com/markets/us-equities/pearl-equities/fees">https://www.miaxglobal.com/markets/us-equities/pearl-equities/fees</a> (last visited December 21, 2023).
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The base rebates (``Level A'') are as follows: ($0.00240) per share
in Tier 1; ($0.00310) per share in Tier 2; ($0.00345) per share in Tier
3; and ($0.00350) per share in Tier 4. Under Level B, the Exchange
provides enhanced rebates for executions of orders in securities priced
at or above $1.00 per share for Added Displayed Volume across all Tapes
if the Equity Member's Percent Time at NBBO is at least 25% and less
than 50% in at least 200 MQ Securities per trading day during the
month. The Level B rebates are as follows: ($0.00250) per share in Tier
1; ($0.00315) per share in Tier 2; ($0.00350) per share in Tier 3; and
($0.00355) per share in Tier 4. Under Level C, the Exchange provides
enhanced rebates for executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume across all Tapes if
the Equity Member's Percent Time at NBBO is at least 50% in at least
200 MQ Securities per trading day during the month. The Level C rebates
are as follows: ($0.00260) per share in Tier 1; ($0.00320) per share in
Tier 2; ($0.00355) per share in Tier 3; and ($0.00360) per share in
Tier 4.
The Exchange also provides a volume-based pricing incentive,
referred to as the ``Step-Up Added Liquidity Rebate'' that is separate
from the NBBO Program, in which qualifying Equity Members receive an
enhanced rebate of ($0.0031) per share for executions of orders in
securities priced at or above $1.00 per share that add displayed
liquidity to the Exchange.\15\ Equity Members qualify for the Step-Up
Added Liquidity Rebate by achieving a ``Step-Up ADAV as a % of TCV''
\16\ of at least 0.03% over the baseline month of May 2023. The Step-Up
Added Liquidity Rebate is currently set to expire on December 31,
2023.\17\
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\15\ See Securities Exchange Act Release No. 95614 (August 26,
2022), 87 FR 53813 (September 1, 2022) (SR-PEARL-2022-33). The
enhanced rebate provided by the Step-Up Added Liquidity Rebate
applies to Liquidity Indicator Codes AA (adds liquidity, displayed
order, Tape A), AB (adds liquidity, displayed order, Tape B) and AC
(adds liquidity, displayed order, Tape C). See Fee Schedule, Section
1(f), Step-Up Added Liquidity Rebate, and Section 1(b), Liquidity
Indicator Codes and Associated Fees.
\16\ The term ``Step-Up ADAV as a % of TCV'' means ADAV as a
percent of TCV in the relevant baseline month subtracted from the
current month's ADAV as a percent of TCV. See the Definitions
Section of the Fee Schedule.
\17\ See Fee Schedule, Section 1(f).
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Proposal To Adopt Two New Tiers and Corresponding Rebates for the NBBO
Program
The Exchange proposes to amend the NBBO Setter Plus Table in
Section 1(c) of the Fee Schedule to adopt two new tiers and
corresponding rebates for the NBBO Program. The two new tiers will
result in the NBBO Program now offering six different tiers pursuant to
which Equity Members are able to achieve higher rebates based on the
three different volume calculation methods.
The Exchange proposes that under volume calculation Method 1, an
Equity Member will now qualify for the base rebates in Tier 1 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADAV of at
least 0.00% and less than 0.035% of TCV. An Equity Member will qualify
for the enhanced rebates in Tier 2 for
[[Page 3490]]
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADAV of at
least 0.035% and less than 0.05% of TCV. An Equity Member will qualify
for the enhanced rebates in Tier 3 for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an ADAV of at least 0.05% and less
than 0.08% of TCV. An Equity Member will qualify for the enhanced
rebates in Tier 4 for executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume across all Tapes by
achieving an ADAV of at least 0.08% and less than 0.25% of TCV. An
Equity Member will qualify for the enhanced rebates in Tier 5 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADAV of at
least 0.25% and less than 0.40% of TCV. Finally, an Equity Member will
qualify for the enhanced rebates in Tier 6 for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an ADAV of at least 0.40% of TCV.
The Exchange proposes that under volume calculation Method 2, an
Equity Member will now qualify for the base rebates in Tier 1 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an NBBO Set
Volume of at least 0.00% and less than 0.01% of TCV. An Equity Member
will qualify for the enhanced rebates in Tier 2 for executions of
orders in securities priced at or above $1.00 per share for Added
Displayed Volume across all Tapes by achieving an NBBO Set Volume of at
least 0.01% and less than 0.015% of TCV. An Equity Member will qualify
for the enhanced rebates in Tier 3 for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an NBBO Set Volume of at least
0.015% and less than 0.02% of TCV. An Equity Member will qualify for
the enhanced rebates in Tier 4 for executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume across
all Tapes by achieving an NBBO Set Volume of at least 0.02% and less
than 0.03% of TCV. An Equity Member will qualify for the enhanced
rebates in Tier 5 for executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume across all Tapes by
achieving an NBBO Set Volume of at least 0.03% and less than 0.08% of
TCV. Finally, an Equity Member will qualify for the enhanced rebates in
Tier 6 for executions of orders in securities priced at or above $1.00
per share for Added Displayed Volume across all Tapes by achieving an
NBBO Set Volume of at least 0.08% of TCV.
The Exchange proposes that under volume calculation Method 3, an
Equity Member will now qualify for the base rebates in Tier 1 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADV of at
least 0.00% and less than 0.15% of TCV. An Equity Member will qualify
for the enhanced rebates in Tier 2 for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an ADV of at least 0.15% and less
than 0.18% of TCV. An Equity Member will qualify for the enhanced
rebates in Tier 3 for executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume across all Tapes by
achieving an ADV of at least 0.18% and less than 0.20% of TCV. An
Equity Member will qualify for the enhanced rebates in Tier 4 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADV of at
least 0.20% and less than 0.60% of TCV. An Equity Member will qualify
for the enhanced rebates in Tier 5 for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an ADV of at least 0.60% and less
than 1.00% of TCV. Finally, an Equity Member will qualify for the
enhanced rebates in Tier 6 for executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume across
all Tapes by achieving an ADV of at least 1.00% of TCV.
With the addition of two tiers to the NBBO Program, the Exchange
proposes to amend the corresponding rebates for each tier, described
below. The Exchange proposes that the base rebates (``Level A'') will
now be as follows: ($0.00240) per share in Tier 1; ($0.00290) per share
in Tier 2; ($0.00300) per share in Tier 3; ($0.00310) per share in Tier
4; ($0.00345) per share in Tier 5; and ($0.00350) per share in Tier 6.
Under Level B, the Exchange will continue to provide enhanced
rebates for executions of orders in securities priced at or above $1.00
per share for Added Displayed Volume across all Tapes if the Equity
Member's Percent Time at NBBO is at least 25% and less than 50% in at
least 200 MQ Securities per trading day during the month. The Exchange
proposes that the Level B rebates will be as follows: ($0.00250) per
share in Tier 1; ($0.00295) per share in Tier 2; ($0.00305) per share
in Tier 3; ($0.00315) per share in Tier 4; ($0.00350) per share in Tier
5; and ($0.00355) per share in Tier 6.
Under Level C, the Exchange will continue to provide enhanced
rebates for executions of orders in securities priced at or above $1.00
per share for Added Displayed Volume across all Tapes if the Equity
Member's Percent Time at NBBO is at least 50% in at least 200 MQ
Securities per trading day during the month. The Exchange proposes that
the Level C rebates will be as follows: ($0.00260) per share in Tier 1;
($0.00300) per share in Tier 2; ($0.00310) per share in Tier 3;
($0.00320) per share in Tier 4; ($0.00355) per share in Tier 5; and
($0.00360) per share in Tier 6.
The purpose of adding two new tiers and corresponding rebates to
the NBBO Program is for business and competitive reasons in light of
recent volume growth on the Exchange. The Exchange notes that with the
addition of two interim tiers to the NBBO Program, the base rebates,
enhanced rebates and volume requirements of the NBBO Program remain
competitive with, or better than, the rebates and volume requirements
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.\18\
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\18\ See Cboe BZX Equities Fee Schedule, NBBO Setter section and
Add/Remove Volume Tiers section, 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 base rebate of
($0.0016) per share and a top displayed liquidity tier rebate of
($0.0031) per share for executions of added displayed volume in
securities priced at or above $1.00 per share, so long as the member
meets all three volume requirements for the enhanced rebate); see
also 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).
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Proposal To Remove the Step-Up Added Liquidity Rebate
The Exchange proposes to remove the Step-Up Added Liquidity Rebate
table and associated rebate in Section 1(f) of the Fee Schedule. The
Step-Up Added Liquidity Rebate is currently set to expire on December
31, 2023, as set forth in the Fee Schedule. The Exchange has determined
to not extend or modify the Step-Up Added Liquidity Rebate.
Accordingly, the Exchange proposes to remove the Step-Up Added
Liquidity Rebate table and associated rebate from the Fee Schedule. The
purpose of this
[[Page 3491]]
change is to provide clarity within the Fee Schedule that the expiring
Step-Up Added Liquidity Rebate will no longer be available after
December 31, 2023. The Exchange believes that the benefits of the NBBO
Program--three volume calculation methods, higher base (Level A)
rebates, and two market quality levels based on participation at the
NBBO in order to obtain enhanced rebates--provide more opportunities
for Equity Members to achieve higher rebates and will encourage the
submission of increased order flow. The Exchange believes this will, in
turn, benefit all Equity Members by providing greater execution
opportunities on the Exchange and contribute to a deeper, more liquid
market, to the benefit of all investors and market participants.
Corresponding Changes to the Fee Schedule
As mentioned above, with the removal of Step-Up Added Liquidity
Rebate table and associated rebate, the Exchange proposes to amend the
Definitions section of the Fee Schedule to delete the defined term
``Step-Up ADAV as a % of TCV.'' The Exchange also proposes to amend the
NBBO Setter Plus Table in Section 1(c) of the Fee Schedule to delete
footnote #4, which refers to the Step-Up Added Liquidity Rebate. The
purpose of these changes is to provide consistency and clarity in the
Fee Schedule in light of the proposed removal of the Step-Up Added
Liquidity Rebate table and associated rebate.
Implementation
The proposed changes are effective beginning January 1, 2024.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \19\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \20\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among its Equity Members and
issuers and other persons using its facilities. Additionally, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \21\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers or dealers.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4).
\21\ 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 had more than approximately 15-16% of the total
market share of executed volume of equities trading for the month of
November 2023.\22\ 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
represented approximately 2.08% of the overall market share for the
month of November 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 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.'' \23\
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\22\ 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 December 21,
2023).
\23\ 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 their order flow
to the Exchange, which the Exchange believes would enhance liquidity
and market quality in both a broad manner and in a targeted manner with
respect to the MQ Securities and the modified NBBO Program.
Proposal To Adopt Two New Tiers and Corresponding Rebates for the NBBO
Program
The Exchange believes that the proposal to add two new tiers to the
NBBO Program, in general, provides a reasonable means to continue to
encourage Equity Members to not only increase their order flow to the
Exchange but also to contribute to price discovery and market quality
on the Exchange by submitting aggressively priced displayed liquidity
in securities priced at or above $1.00 per share. The Exchange believes
that the NBBO Program, as modified with this proposal, continues to be
equitable and not unfairly discriminatory because it is open to all
Equity Members on an equal basis and provides enhanced rebates that are
reasonably related to the value of the Exchange's market quality
associated with greater order flow by Equity Members that set the NBBO,
and the introduction of higher volumes of orders into the price and
volume discovery process. The Exchange believes the proposal to add two
new tiers to the NBBO Program is equitable and not unfairly
discriminatory because it is designed to incentivize the entry of
aggressively priced displayed liquidity that will create tighter
spreads, thereby promoting price discovery and market quality on the
Exchange to the benefit of all Equity Members and public investors.
The Exchange believes that its proposal to add two new tiers and
corresponding rebates to the NBBO Program is reasonable and not
unfairly discriminatory in light of recent volume growth on the
Exchange. The Exchange notes that with the addition of two interim
tiers to the NBBO Program, the base rebates, enhanced rebates and
volume requirements of the NBBO Program remain competitive with, or
better than, the rebates and volume requirements 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.\24\
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\24\ See supra note 18.
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Proposal To Remove the Step-Up Added Liquidity Rebate Table and
Associated Rebate
The Exchange believes its proposal to remove the Step-Up Added
Liquidity Rebate table and associated rebate in Section 1(f) of the Fee
Schedule is reasonable, equitably allocated and not unfairly
discriminatory. The Exchange adopted the Step-Up Added Liquidity Rebate
for the purpose of encouraging
[[Page 3492]]
Equity Members to increase their orders that add liquidity on the
Exchange, thereby improving its market quality with respect to such
securities and contributing to a more robust and well-balanced market
ecosystem on the Exchange to the benefit of all Equity Members.
Further, the Step-Up Added Liquidity Rebate is currently set to
expire on December 31, 2023, as set forth in the Fee Schedule. The
Exchange has determined to not extend or modify the Step-Up Added
Liquidity Rebate. Accordingly, the Exchange believes it is reasonable
and not unfairly discriminatory to remove the expiring rebate from the
Fee Schedule in order to provide clarity to Equity Members that this
rebate is no longer available.
Proposal To Make Corresponding Changes to the Fee Schedule
The Exchange believes its proposal to amend the Definitions section
of the Fee Schedule to delete the defined term ``Step-Up ADAV as a % of
TCV'' and footnote #4 from the NBBO Setter Plus Table is reasonable
because the Exchange will no longer offer the Step-Up Added Liquidity
Rebate after December 31, 2023. The Exchange believes it is reasonable
to provide clarity and consistency within the Fee Schedule by removing
references to the Step-Up Added Liquidity Rebate, which will no longer
be available.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange believes the proposed rule change does not impose any
burden on intra-market competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
new tiers to the NBBO Program will be eligible to all Equity Members
equally in that all Equity Members have the opportunity to participate
and therefore qualify for the proposed enhanced rebates. Furthermore,
the Exchange believes that the NBBO Program, as modified by this
proposal, will continue to incentivize Equity Members to submit
additional aggressively priced displayed liquidity to the Exchange, and
to increase their order flow on the Exchange generally, thereby
contributing to a deeper and more liquid market and promoting price
discovery and market quality on the Exchange 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, would
continue to encourage market participants to direct additional order
flow to the Exchange. Greater liquidity benefits all Equity Members by
providing more trading opportunities and encourages Equity Members to
send additional orders to the Exchange, thereby contributing to robust
levels of liquidity, which benefits all market participants.
The proposal to remove the Step-Up Added Liquidity Rebate table and
associated rebate from the Fee Schedule does not impose a burden on
intra-market competition that is not in furtherance of the Act in that
the proposed change applies to all Equity Members equally and Equity
Members may still compete for the enhanced rebates provided in the NBBO
Program under volume calculation Method 1, which is similar to the
expiring volume calculation provided for in the Step-Up Added Liquidity
Rebate table.
The proposed changes to the Definitions section and NBBO Setter
Plus table to remove references to the Step-Up Added Liquidity Rebate
are similarly non-burdensome as they are intended to provide
consistency and clarity within the Fee Schedule.
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 had more than 15-16% of the total market share of executed
volume of equities trading for the month of November 2023.\25\ 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
Added Displayed 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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\25\ See supra note 22.
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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.'' \26\ The fact
that this market is competitive has also long been recognized by the
courts. In NetCoalition v. Securities and Exchange Commission, the DC
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' . . .''.\27\ 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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\26\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\27\ 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,\28\ and Rule 19b-4(f)(2) \29\ 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
[[Page 3493]]
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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\28\ 15 U.S.C. 78s(b)(3)(A)(ii).
\29\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#255750494008464a4848404b5156655640460b424a53"><span class="__cf_email__" data-cfemail="7103041d145c121e1c1c141f0502310214125f161e07">[email protected]</span></a>. Please include
file number SR-PEARL-2023-73 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-2023-73. 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="https://www.sec.gov/rules/sro.shtml">https://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-2023-73 and should be
submitted on or before February 8, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00843 Filed 1-17-24; 8:45 am]
BILLING CODE 8011-01-P
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