Notice2024-13541
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
June 21, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 89, Number 120 (Friday, June 21, 2024)]
[Notices]
[Pages 52141-52147]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-13541]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100338; File No. SR-PEARL-2024-26]
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
June 14, 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 June 7, 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
[[Page 52142]]
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) increase
the fee associated with Liquidity Indicator Code ``Rp'' and deactivate
the Remove Volume Tiers table \3\ and corresponding fee; \4\ and (2)
establish a new volume calculation method for Equity Members \5\ to
achieve enhanced rebates pursuant to the NBBO Setter Plus Program
(referred to in this filing as the ``NBBO Program'').\6\ The Exchange
originally filed this proposed fee change on May 31, 2024 (SR-PEARL-
2024-24). On June 7, 2024, the Exchange withdrew SR-PEARL-2024-24 and
refiled this proposal.
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\3\ See Fee Schedule, Section 1)d). The Exchange proposes to
insert ``Reserved'' for Section 1)d) following the change to
deactivate the Remove Volume Tiers table so as to keep the remainder
of the Fee Schedule as currently formatted.
\4\ See Fee Schedule, Section 1)d).
\5\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
\6\ See, generally, Fee Schedule, Section 1)c).
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Background of Remove Volume Tiers and Liquidity Indicator Code ``Rp''
The Exchange currently charges a standard fee of $0.00295 per share
for executions of orders in securities priced at or above $1.00 per
share that remove liquidity from the Exchange in all Tapes.\7\ On
January 1, 2022, the Exchange established Section 1)d) of the Fee
Schedule, Remove Volume Tiers, which provided reduced standard fees for
executions of orders in securities priced at or above $1.00 per share
that removed liquidity from the Exchange for Equity Members that met
specified volume thresholds on the Exchange.\8\ The Remove Volume Tiers
table was subsequently amended and currently provides only one tier
with a reduced fee $0.00290 per share for executions of orders in
securities priced at or above $1.00 per share that remove liquidity
from the Exchange for Equity Members that meet the specified volume
threshold on the Exchange.\9\ On December 1, 2022, the Exchange
established a reduced fee of $0.00265 per share for executions of
Midpoint Peg Orders \10\ in securities priced at or above $1.00 that
execute at the midpoint of the NBBO \11\ and remove liquidity from the
Exchange in all Tapes.\12\
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\7\ See Fee Schedule, Section 1)a).
\8\ See Securities Exchange Act Release Nos. 93979 (January 14,
2022), 87 FR 3151 (January 20, 2022) (SR-PEARL-2022-01)
(establishing two Remove Volume Tiers of reduced fees for removing
liquidity in securities priced at or above $1.00 per share); 97124
(March 13, 2023), 88 FR 16504 (March 17, 2023) (SR-PEARL-2023-10)
(amending the rates for the Remove Volume Tiers) and 97964 (July 24,
2023), 88 FR 48937 (July 28, 2023) (SR-PEARL-2023-31) (amending the
rates for the Remove Volume Tiers).
\9\ See Securities Exchange Act Release No. 99175 (December 14,
2023), 88 FR 88186 (December 20, 2023) (SR-PEARL-2023-69).
\10\ 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 to the midpoint of the PBBO.
See Exchange Rule 2614(a)(3).
\11\ 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.
\12\ See Securities Exchange Act Release No. 96472 (December 9,
2022), 87 FR 76645 (December 15, 2022) (SR-PEARL-2022-53)
(establishing new Liquidity Indicator Code ``Rp'').
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Proposal To Amend Remove Volume Tiers Table and Liquidity Indicator
Code ``Rp''
The Exchange proposes to amend the fee associated with Liquidity
Indicator Code ``Rp'' from $0.00265 to now be $0.00295 per share and
deactivate the Remove Volume Tiers table and corresponding fee such
that all executions of orders in securities priced at or above $1.00
per share that remove liquidity from the Exchange will be assessed the
standard fee of $0.00295 per share. The Exchange does not propose to
amend the fee for executions of Midpoint Peg Orders in securities
priced below $1.00 per share that execute at the midpoint of the NBBO
and remove liquidity from the Exchange in all Tapes, which is currently
set at 0.25% of the total dollar value of the transaction.\13\
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\13\ See Fee Schedule, Section 1)b), Liquidity Indicator Codes
and Associated Fees, Liquidity Indicator Code ``Rp''.
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The purpose of these proposed changes is for business and
competitive reasons. The Exchange notes that despite the changes
proposed herein, the Exchange's proposed standard fee of $0.00295 per
share for executions of all orders in securities priced at or above
$1.00 per share and remove liquidity from the Exchange remains
competitive with the standard fee to remove liquidity in securities
priced at or above $1.00 per share charged by other equity
exchanges.\14\
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\14\ See e.g., MEMX LLC (``MEMX'') Equities Fee Schedule,
Transaction Fees, Fee Code ``R'' (providing standard remove volume
fee of $0.0030 per share for executions of orders in securities
priced at or above $1.00 per share); and Cboe BZX Exchange, Inc.
(``BZX''), Equities Fee Schedule, Standard Rates (providing standard
remove volume fee of $0.0030 per share for executions of orders in
securities priced at or above $1.00 per share).
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Background of the NBBO Program
The NBBO Program was implemented beginning September 1, 2023 and
subsequently amended several times.\15\ 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). The NBBO Program
provides the following additional incentives: (1) an NBBO Setter
Additive Rebate \16\ applied to executions of orders in securities
priced at or above $1.00 per share that set the NBB or NBO upon entry;
(2) an NBBO First Joiner Additive Rebate \17\ applied to executions of
orders in securities priced at or above $1.00 per share that bring MIAX
Pearl Equities to the established NBB or NBO; and (3) a Step-Up Rebate
\18\ for Equity Members that satisfy the (i) minimum displayed
[[Page 52143]]
ADAV \19\ as a percentage of TCV \20\ of 0.35% and (ii) an increase in
the percentage of displayed ADAV as a percentage of TCV of at least
0.05% as compared to the Equity Member's February 2024 displayed ADAV
percentage.
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\15\ See, e.g., Securities Exchange Act Release Nos. 98472
(September 21, 2023), 88 FR 66533 (September 27, 2023) (SR-PEARL-
2023-45); 99318 (January 11, 2024), 89 FR 3488 (January 18, 2024)
(SR-PEARL-2023-73); and 99695 (March 8, 2024), 89 FR 18694 (March
14, 2024) (SR-PEARL-2024-11).
\16\ The Exchange does not propose to amend the NBBO Setter
Additive Rebate, which is an additive rebate of ($0.0004) 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). The Exchange
notes that rebates are indicated by parentheses in the Fee Schedule.
See the General Notes section of the Fee Schedule.
\17\ The Exchange does not propose to amend the NBBO First
Joiner Additive Rebate, which is an additive rebate of ($0.0002) per
share for executions of orders in securities priced at or above
$1.00 per share that bring MIAX Pearl Equities to the established
NBB or NBO with a minimum size of a round lot. See Fee Schedule,
Section 1)c).
\18\ The Exchange does not propose to amend the Step-Up Rebate,
which is an additive rebate of ($0.0001) per share for executions of
orders in securities priced at or above $1.00 per share for Equity
Members that satisfy two volume-based requirements. See id.
\19\ ``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. See the
Definitions section of the Fee Schedule.
\20\ ``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. See id.
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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, NBBO Set Volume, or ADV, each as a
percent of industry TCV as the denominator.
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 0.20% 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 0.20% 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 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 Setter Plus Table as ``Level A'') and two columns of enhanced
rebates (referred to in the NBBO Setter Plus Table as ``Level B'' and
``Level C''),\21\ depending on the Equity Member's Percent Time at
[[Page 52144]]
NBBO \22\ on MIAX Pearl Equities in a certain amount of specified
securities (``Market Quality Securities'' or ``MQ Securities'').\23\
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.\24\
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\21\ For the purpose of determining qualification for the
rebates described in all Levels of the Market Quality Tier columns
in the NBBO Setter Plus Table, 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 General Notes section of the Fee
Schedule.
\22\ ``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.
\23\ ``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.
\24\ See e.g, MIAX Pearl Equities Exchange--Market Quality
Securities (MQ Securities) List, effective May 1 through May 31,
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 May 30, 2024).
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The base rebates (``Level A'') are as follows: ($0.00220) 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; ($0.00335) per share in Tier 5; and
($0.00340) 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: ($0.00225) 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; ($0.00340) per share in Tier 5; and
($0.00345) 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: ($0.00230) 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;
($0.00345) per share in Tier 5; \25\ and ($0.00350) per share in Tier
6.
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\25\ The Exchange provides an alternative method for Equity
Members to qualify for the enhanced rebate of Tier 5, Level C by
satisfying the following three requirements in the relevant month:
(1) Midpoint ADAV of at least 2,500,000 shares; (2) displayed ADAV
of at least 10,000,000 shares; and (3) Percent Time at the NBBO of
at least 50% in 200 or more symbols from the list of MQ Securities.
See Fee Schedule, Section 1)c), note 3. The Exchange does not
propose to amend these alternative requirements pursuant to this
proposal.
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Proposal To Amend the NBBO Program To Establish a New Volume
Calculation Method
The Exchange proposes to amend the NBBO Setter Plus Table in
Section 1)c) of the Fee Schedule to establish new volume calculation
Method 4, which will be provide another volume calculation method for
Equity Members to qualify for the enhanced rebates of the NBBO
Program.\26\ Proposed volume calculation Method 4 will be represented
with a new column in the NBBO Setter Plus Table immediately following
the column for volume calculation Method 3. Under proposed volume
calculation Method 4, the Exchange will provide tiered rebates based on
an Equity Member's ADAV as a percentage of TCV exclusive of executions
of orders in securities priced below $1.00 per share across all Tapes.
The Exchange proposes to establish new footnote #6 to the NBBO Setter
Plus Table, which will state that ``[f]or volume calculation Method 4,
when calculating both the numerator (ADAV) and the denominator (TCV),
executions of orders in securities priced below $1.00 per share across
all Tapes will be excluded.''
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\26\ The Exchange proposes to make minor updates to the
introductory paragraph above the NBBO Setter Plus Table and footnote
#1 of the NBBO Setter Plus Table in Section 1)c) of the Fee Schedule
to change all references to ``three'' volume calculation methods to
now be ``four'' volume calculation methods.
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Under proposed volume calculation Method 4, an Equity Member will
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, exclusive of executions of orders in securities
priced below $1.00 per share across all Tapes. 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 ADAV of at least 0.035% and
less than 0.05% of TCV, exclusive of executions of orders in securities
priced below $1.00 per share across all Tapes. 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, exclusive of executions of orders in securities
priced below $1.00 per share across all Tapes. 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 0.20% of TCV, exclusive of executions of orders in securities
priced below $1.00 per share across all Tapes. 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 0.20% and less
than 0.40% of TCV, exclusive of executions of orders in securities
priced below $1.00 per share across all Tapes. 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, exclusive of executions of orders in securities priced
below $1.00 per share across all Tapes.
MIAX Pearl Equities will continue to first determine the applicable
NBBO Program tier based on the four different volume calculation
methods. The Exchange will continue to calculate the four volume-based
methods to determine the Equity Member's tier for purposes of the NBBO
Program in parallel in each month, and each Equity Member will receive
the highest tier achieved from any of the four methods each month. The
Exchange does not propose any other changes to the NBBO Program tiers,
rebates or additional incentives.
The purpose of establishing proposed volume calculation Method 4,
which excludes volume in sub-dollar securities from the calculation, is
for business and competitive reasons. Generally, the ratio of
consolidated volumes in securities priced at or above $1.00 per share
relative to consolidated volumes inclusive of securities priced below
$1.00 per share is usually stable from month to month, such that TCV
has been a reasonable baseline for determining tiered incentives for
Equity Members that execute order in securities priced at or above
$1.00 per share on the Exchange. However, there have been recent months
where volumes in securities priced below $1.00 per share
[[Page 52145]]
(``sub-dollar volume'') have been elevated, thereby impacting the ratio
mentioned above.
Anomalous rises in sub-dollar volume may have a material adverse
impact on Equity Members' qualifications for the pricing tiers and
enhanced rebates in the NBBO Program because such qualifications depend
upon Equity Members achieving threshold percentages of volumes as a
percentage of TCV, and an extraordinary rise in sub-dollar volume may
significantly elevate TCV. As a result, Equity Members may find it more
difficult to qualify for or to continue to qualify for their existing
incentives during months where there are such rises in sub-dollar
volumes, even if their volume of executions of orders in securities
priced at or above $1.00 per share have not diminished relative to
prior months. The Exchange believes that it would be unfair for its
Equity Members that execute significant volumes in securities priced at
or above $1.00 per share on the Exchange to fail to achieve or to lose
their existing incentives for such volumes due to anomalous behavior
that is extraneous to them. Therefore, the Exchange proposes to amend
the NBBO Program to establish new volume calculation Method 4 to
provide an alternative option when extraordinary spikes in sub-dollar
volumes from adversely affecting an Equity Member's qualification of
incentives for their executions of orders in securities priced at or
above $1.00 per share.
The Exchange notes that at least one other competing equities
exchange calculates their members' volume for purposes of pricing tiers
and incentives by excluding sub-dollar volumes from one calculation and
utilizing the most advantageous volume calculation for such pricing
tiers and incentives.\27\ Accordingly, this proposal is not new or
novel.
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\27\ See the Nasdaq Stock Market LLC (``Nasdaq'') Rules, Equity
7: Pricing Schedule, Section 114. Market Quality Incentive Programs,
Section (h)(5) (``For purposes of calculating a member's
qualifications for Tiers 1 and 2 of the QMM Program credits . . .
the Exchange will calculate a member's volume and total Consolidated
Volume twice. First, the Exchange will calculate a member's volume
and total Consolidated Volume inclusive of volume that consists of
executions in securities priced less than $1. Second, the Exchange
will calculate a member's volume and total Consolidated Volume
exclusive of volume that consists of executions in securities priced
less than $1, while also applying distinct qualifying volume
thresholds to each Tier. . . . The Exchange will then assess which
of these two calculations would qualify the member for the most
advantageous credits for the month and then it will apply those
credits to the member.''). See also Securities Exchange Act Release
No. 99535 (February 14, 2024), 89 FR 13125 (February 21, 2024) (SR-
NASDAQ-2024-005).
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Implementation
The proposed fee 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 \28\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \29\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among its Equity Members and issuers and other
persons using its facilities. The Exchange also believes that the
proposed rule change is consistent with the objectives of Section
6(b)(5) \30\ requirements that the rules of an exchange be designed to
prevent fraudulent and manipulative acts and practices, and to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest, and, particularly, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(4).
\30\ 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. For the month of May 2024, based on publicly available
information, no single registered equities exchange had more than
approximately 14-15% of the total market share of executed volume of
equities trading.\31\ Thus, in such a low-concentrated and highly
competitive market, no single equities exchange possesses significant
pricing power in the execution of order flow. For the month of May
2024, the Exchange represented 1.68% of the total market share of
executed volume of equities trading.\32\ 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.'' \33\
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\31\ See the ``Market Share'' section of the Exchange's website,
available at <a href="https://www.miaxglobal.com/">https://www.miaxglobal.com/</a>.
\32\ Id.
\33\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37499 (June 29, 2005).
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue to reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, and market participants
can readily trade on competing venues if they deem pricing levels at
those other venues to be more favorable. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to continue to incentivize market participants to direct their
order flow to the Exchange, which the Exchange believes would continue
to enhance liquidity and market quality to the benefit of all Equity
Members and market participants.
Proposal To Amend Remove Volume Tiers Table and Liquidity Indicator
Code ``Rp''
The Exchange believes the proposed changes to amend the fee
associated with Liquidity Indicator Code ``Rp'' and deactivate the
Remove Volume Tiers table and corresponding fee such that all
executions of orders in securities priced at or above $1.00 per share
that remove liquidity from the Exchange will now be assessed the
standard fee of $0.00295 per share are reasonable. This is because the
Exchange's standard fee for removing liquidity in securities priced at
or above $1.00 per share, as noted above, remains lower than, and
competitive with, the standard fee charged by competing exchanges to
remove liquidity in securities priced at or above $1.00 per share.\34\
The Exchange further believes that the proposed changes are equitably
allocated and not unfairly discriminatory because the standard fee
[[Page 52146]]
of $0.00295 per share for executions of all orders in securities priced
at or above $1.00 per share and remove liquidity from the Exchange will
apply equally to all Equity Members that remove liquidity.
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\34\ See supra note 14.
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Proposal To Amend the NBBO Program To Establish a New Volume
Calculation Method
The Exchange believes its proposal to amend the NBBO Setter Plus
Table to establish new volume calculation Method 4 is reasonable and
equitable because, in its absence, Equity Members may experience
material adverse impacts on their ability to qualify for the enhanced
rebates of the NBBO Program during a month with an anomalous rise in
sub-dollar volumes. The Exchange believes it is reasonable and
equitable to not inadvertently penalize Equity Members that execute
significant volumes on the Exchange due to anomalous and extraneous
trading activities in sub-dollar securities. The proposed new volume
calculation Method 4 would provide a means for Equity Members that add
displayed liquidity an alternative method by determining whether
calculating volume (e.g., ADAV, NBBO Set Volume, or ADV) as a
percentage of TCV to include or exclude sub-dollar volume would result
in Equity Members qualifying for the most advantageous rebates. The
Exchange would then be able to apply the most advantageous volume
calculation that would result in the highest tier achieved for enhanced
rebates of the NBBO Program for each Equity Member. The Exchange
believes that the proposed rule change is equitable and not unfairly
discriminatory because the Exchange does not intend for the proposal to
advantage any particular Equity Member. The Exchange will continue to
calculate all four volume calculation methods in parallel each month to
ensure that each Equity Member receives the most advantageous volume
calculation for purposes of determining tiers for the NBBO Program.
The Exchange believes that the proposal to establish volume
calculation Method 4 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 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 notes that at least one other competing equities
exchange calculates their members' volume for purposes of pricing tiers
and incentives by excluding sub-dollar volumes from one calculation and
utilizing the most advantageous volume calculation for such pricing
tiers and incentives.\35\
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\35\ See supra note 27.
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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 does not believe that the proposed changes will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition
The Exchange believes that the proposed changes to make the fee of
$0.00295 per share for all executions of orders in securities priced at
or above $1.00 per share that remove liquidity from the Exchange will
not impose any burden on intramarket competition because it represents
a modest increase from the current Remove Volume Tier fee and fee for
executions of Midpoint Peg Orders in securities priced at or above
$1.00 per share that remove liquidity from the Exchange. The Exchange
believes the proposed changes to increase the fee associated with
Liquidity Indicator Code ``Rp'' from $0.00265 per share to $0.00295 per
share and to deactivate the Remove Volume Tiers table and corresponding
fee do not impose any burden on intramarket competition because, with
the proposed changes, all executions of orders in securities priced at
or above $1.00 per share that remove liquidity from the Exchange will
now be assessed the standard fee of $0.00295 per share. Accordingly,
the standard fee for executions of orders in securities priced at or
above $1.00 per share that remove liquidity from the Exchange will
apply equally to all Equity Members.
The Exchange intends for its proposal to establish new volume
calculation Method 4 to provide an alternative option for Equity
Members to achieve the enhanced rebates of the NBBO Program due to
anomalous spikes in sub-dollar volumes and is not intended to provide a
competitive advantage to any particular Equity Member. Proposed volume
calculation Method 4 will be eligible to all Equity Members equally in
that the Exchange will calculate all four volume calculation methods in
parallel each month and apply the most advantageous calculation to each
Equity Member's volume to qualify for the enhanced rebates of the NBBO
Program. 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.
For the foregoing reasons, the Exchange believes the proposed
changes would not impose any burden on intramarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
Intermarket Competition
The Exchange believes its proposal will benefit competition as the
[[Page 52147]]
Exchange operates in a highly competitive market. Equity Members have
numerous alternative venues they may participate on and direct their
order flow to, including fifteen other equities exchanges and numerous
alternative trading systems and other off-exchange venues. As noted
above, no single registered equities exchange currently has more than
approximately 14-15% 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 executions of all orders in securities priced at or above
$1.00 per share that remove liquidity from the Exchange, 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. As described above, the proposed changes are
competitive proposals and the standard fee of $0.00295 per share for
removing liquidity in securities priced at or above $1.00 per share
remains lower than, or similar to, the standard fee to remove liquidity
in securities priced at or above $1.00 per share charged by competing
equities exchanges.\36\ Further, the standard removal fee will apply to
all Equity Members equally. In addition, the Exchange notes that at
least one other competing equities exchange calculates their members'
volume for purposes of pricing tiers and incentives by excluding sub-
dollar volumes from one calculation and utilizing the most advantageous
volume calculation for such pricing tiers and incentives.\37\
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\36\ See supra note 14.
\37\ See supra note 27.
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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.'' \38\ 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' . . . .'' \39\ 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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\38\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\39\ 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,\40\ and Rule 19b-4(f)(2) \41\ 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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\40\ 15 U.S.C. 78s(b)(3)(A)(ii).
\41\ 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#1260677e773f717d7f7f777c6661526177713c757d64"><span class="__cf_email__" data-cfemail="7705021b125a14181a1a121903043704121459101801">[email protected]</span></a>. Please include
file number SR-PEARL-2024-26 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-2024-26. 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-2024-26 and should be
submitted on or before July 12, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
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\42\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13541 Filed 6-20-24; 8:45 am]
BILLING CODE 8011-01-P
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