Notice2024-05362
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Equities Fee Schedule Regarding the NBBO Setter Plus Program
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 14, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 51 (Thursday, March 14, 2024)</title>
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[Federal Register Volume 89, Number 51 (Thursday, March 14, 2024)]
[Notices]
[Pages 18694-18699]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05362]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99695; File No. SR-PEARL-2024-11]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend Its
Equities Fee Schedule Regarding the NBBO Setter Plus Program
March 8, 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 February 29, 2024, 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
[[Page 18695]]
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 adopt an
alternative method for Equity Members \3\ to achieve an enhanced rebate
pursuant to the NBBO Setter Plus Program (referred to in this filing as
the ``NBBO Program'').\4\
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\3\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
\4\ See, generally, Fee Schedule, Section 1)c).
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Background of the NBBO Program
In general, the NBBO Program provides enhanced rebates for Equity
Members 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 and subsequently amended when
the Exchange adopted two additional tiers of rebates, effective January
1, 2024.\8\
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\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 supra note 4.
\8\ See Securities Exchange Act Release Nos. 98472 (September
21, 2023), 88 FR 66533 (September 27, 2023) (SR-PEARL-2023-45) and
99318 (January 11, 2024), 89 FR 3488 (January 18, 2024) (SR-PEARL-
2023-73).
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Pursuant to the NBBO Setter Plus Table in Section 1)c) of the Fee
Schedule, the NBBO Program provides six volume tiers enhanced by three
market quality levels to provide increasing rebates in this segment.
The six 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 (described below).
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\ 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 id.
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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 0.035% 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 0.035% and less than 0.05%
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 0.05% 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 ADAV of at least 0.08% and less
than 0.25% of TCV. An Equity Member qualifies 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 qualifies 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.
Under volume calculation Method 2, the Exchange provides tiered
rebates 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 0.01% 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 0.01% and less than 0.015% 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 0.015% and less than 0.02% 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
0.02% and less than 0.03% of TCV. An Equity Member qualifies 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 qualifies 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.
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 0.15% of TCV. An Equity Member qualifies for the
[[Page 18696]]
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 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 0.18% and less than 0.20% 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 0.20% and less than 0.60% of
TCV. An Equity Member qualifies 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
qualifies 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.
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 NBB or NBO 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 id.
\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 id.
\14\ See e.g, MIAX Pearl Equities Exchange--Market Quality
Securities (MQ Securities) List, effective February 1 through
February 29, 2024, 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 February 26, 2024).
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The base rebates (``Level A'') are as follows: ($0.00240) \15\ 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
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; ($0.00295) 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 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; ($0.00300) 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.
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\15\ Rebates are indicated by parentheses. See the General Notes
section of the Fee Schedule.
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Proposal To Adopt Alternative Method To Achieve Tier 5, Level C Rebate
for the NBBO Program
The Exchange proposes to amend the NBBO Setter Plus Table in
Section 1)c) of the Fee Schedule to adopt an alternative method for
Equity Members to qualify for the Tier 5, Level C rebate of ($0.00355)
per share for the NBBO Program. In particular, the Exchange proposes to
adopt new footnote 4 below the NBBO Setter Plus table, which will
provide that an Equity Member may qualify for the enhanced rebate of
Tier 5, Level C via an alternative method by satisfying the following
three requirements in the relevant month: (1) Midpoint ADAV \16\ of at
least 2,500,000 shares; (2) Displayed ADAV of at least 10,000,000
shares; and (3) Percent Time at the NBB or NBO of at least 50% in 200
or more symbols from the list of MQ Securities. The volume calculation
tier thresholds and rebate levels will remain unchanged.
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\16\ Midpoint ADAV means the ADAV for the current month
consisting of Midpoint Peg Orders in securities priced at or above
$1.00 per share that execute at the midpoint of the Protected NBBO
and add liquidity to the Exchange. A Midpoint Peg Order is a non-
displayed Limit Order that is assigned a working price pegged to the
midpoint of the PBBO. A Midpoint Peg Order receives a new timestamp
each time its working price changes in response to changes in the
midpoint of the PBBO. See Exchange Rule 2614(a)(3). With respect to
the trading of equity securities, the term ``Protected NBB'' or
``PBB'' shall mean the national best bid that is a Protected
Quotation, the term ``Protected NBO'' or ``PBO'' shall mean the
national best offer that is a Protected Quotation, and the term
``Protected NBBO'' or ``PBBO'' shall mean the national best bid and
offer that is a Protected Quotation. See Exchange Rule 1901.
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[[Page 18697]]
The purpose of adding an alternative method for Equity Members to
achieve the enhanced Tier 5, Level C rebate is for business and
competitive reasons in light of recent volume growth on the Exchange.
The Exchange believes the proposed alternative method for Equity
Members to achieve the enhanced rebate of Tier 5, Level C of the NBBO
Program is a reasonable means to incentivize additional liquidity at
the midpoint of the Protected NBBO and Added Displayed Volume, which in
turn should increase the attractiveness of the Exchange as a
destination venue as Equity Members seeking price improvement would be
more motivated to direct their orders to the Exchange because they
would have a heightened expectation of the availability of liquidity at
the midpoint of the Protected NBBO.
The Exchange notes that 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.\17\
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\17\ See Cboe BZX Equities Fee Schedule, 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 an enhanced rebate in Tier 4 of
($0.0028) 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, including minimum NBBO Time and
NBBO Size requirements from a list of specified securities); 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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Implementation
The proposed changes are effective beginning March 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 \18\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \19\ 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) \20\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers or dealers.
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4).
\20\ 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
January 2024.\21\ 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 1.90% of the overall market share for the
month of January 2024. 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.'' \22\
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\21\ 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 February 26,
2024).
\22\ 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.
The Exchange believes that the proposal to add an alternative
method for Equity Members to achieve the enhanced rebate in Tier 5,
Level C of the NBBO Program 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
(including Midpoint Peg Orders) 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 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 the proposal is reasonable because it is
designed to incentivize market participants to direct additional order
flow to the Exchange, which should enhance the Exchange's market
quality and provide price improvement through the use of orders that
are designed to execute at the midpoint of the Protected NBBO as part
of the alternative method requirements to achieve the enhanced rebate
of Tier 5, Level C of the NBBO Program.\23\ The Exchange believes its
proposal will promote price improvement and increased liquidity on the
Exchange, which will benefit all market participants.
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\23\ The Exchange notes that Equity Members that do not satisfy
the higher Midpoint ADAV requirement of the proposed alternative
method (i.e., Midpoint ADAV of at least 2,500,000 shares) for the
enhanced rebate in Tier 5, Level C of the NBBO Program may still
qualify for other enhanced rebates applicable to Equity Members that
satisfy lower Midpoint ADAV requirements of the Midpoint Peg Order
Adding Liquidity at Midpoint Volume Tiers table. See Fee Schedule,
Section 1)e).
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The Exchange believes that its proposal is reasonable and not
unfairly discriminatory because the base rebates,
[[Page 18698]]
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 17.
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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
alternative method for Equity Members to achieve the enhanced rebate of
Tier 5, Level C of 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 rebate via
the proposed alternative method. 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.
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 January 2024.\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 21.
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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 self-regulatory organization (``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 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' . .
.''.\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 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#86f4f3eae3abe5e9ebebe3e8f2f5c6f5e3e5a8e1e9f0"><span class="__cf_email__" data-cfemail="1163647d743c727e7c7c747f6562516274723f767e67">[email protected]</span></a>. Please include
File Number SR-PEARL-2024-11 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-2024-11. 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
[[Page 18699]]
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-2024-11 and should be submitted on
or before April 4, 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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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-05362 Filed 3-13-24; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 14, 2024.
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