Notice2024-26870
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
November 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 89, Number 223 (Tuesday, November 19, 2024)]
[Notices]
[Pages 91455-91460]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-26870]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101611; File No. SR-PEARL-2024-50]
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
November 13, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 31, 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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[[Page 91456]]
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 decrease the
rebates for executions of orders in securities priced at or above $1.00
per share that add displayed liquidity (``Added Displayed Volume'') to
the Exchange across all Tapes.
Background
Currently, the Exchange offers a standard rebate of ($0.0022) \3\
per share for executions of orders in securities priced at or above
$1.00 per share for Added Displayed Volume across all Tapes.\4\ The
Exchange also offers enhanced rebates pursuant to the NBBO Setter Plus
Program (referred to in this filing as the ``NBBO Program'') \5\ for
Equity Members \6\ that add displayed liquidity 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 was implemented beginning September 1, 2023 and
subsequently amended several times.\7\
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\3\ Rebates are indicated by parentheses. See the General Notes
section of the Fee Schedule.
\4\ See Fee Schedule, Section 1)a); see also Fee Schedule,
Section 1)b), Liquidity Indicator Codes ``AA'', ``AB'', and ``AC''.
\5\ See, generally, Fee Schedule, Section 1)c).
\6\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
\7\ 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); 99695 (March 8, 2024), 89 FR 18694 (March, 14,
2024) (SR-PEARL-2024-11).
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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
four 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 four different volume calculation methods. The four
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 four
methods each month. All four volume calculation methods are based on an
Equity Member's respective ADAV,\8\ NBBO Set Volume, or ADV, each as a
percent of industry TCV \9\ as the denominator.
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\8\ ``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. The Exchange excludes from
its calculation of ADAV, ADV, and TCV, and for the purpose of
determining qualification for the rebates described in all Levels of
the Market Quality Tier columns in the NBBO Setter Plus Program: (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; (3) the ``Russell
Reconstitution Day'' (typically the last Friday in June); (4) any
day that the MSCI Equities Indexes are rebalanced (i.e., on a
quarterly basis); and (5) any day that the S&P 400, S&P 500, and S&P
600 Indexes are rebalanced (i.e., on a quarterly basis). See the
General Notes section of the Fee Schedule.
\9\ ``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 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 0.035% 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
[[Page 91457]]
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.
Under volume calculation Method 4, the Exchange provides tiered
rebates based on an Equity Member's ADAV as a percentage of TCV,
excluding executions of orders in securities priced below $1.00 per
share across all Tapes from the calculation of both the numerator
(ADAV) and denominator (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,
exclusive of executions of orders in securities priced below $1.00 per
share across all Tapes. 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,
exclusive of executions of orders in securities priced below $1.00 per
share across all Tapes. 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,
exclusive of executions of orders in securities priced below $1.00 per
share across all Tapes. 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,
exclusive of executions of orders in securities priced below $1.00 per
share across all Tapes. 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,
exclusive of executions of orders in securities priced below $1.00 per
share across all Tapes. 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, exclusive of
executions of orders in securities priced below $1.00 per share across
all Tapes.
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''),\10\ depending on the Equity Member's Percent Time at NBBO
\11\ on MIAX Pearl Equities in a certain amount of specified securities
(``Market Quality Securities'' or ``MQ Securities'').\12\ 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.\13\
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\10\ The Exchange excludes from its calculation of ADAV, ADV,
and TCV, and for the purpose of determining qualification for the
rebates described in all Levels of the Market Quality Tier columns
in the NBBO Setter Plus Program: (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; (3) the ``Russell Reconstitution Day''
(typically the last Friday in June); (4) any day that the MSCI
Equities Indexes are rebalanced (i.e., on a quarterly basis); and
(5) any day that the S&P 400, S&P 500, and S&P 600 Indexes are
rebalanced (i.e., on a quarterly basis). See the General Notes
section of the Fee Schedule.
\11\ ``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.
\12\ ``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.
\13\ See e.g., MIAX Pearl Equities Exchange--Market Quality
Securities (MQ Securities) List, effective October 1 through October
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 October 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
[[Page 91458]]
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; \14\ and ($0.00350) per share in Tier 6.
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\14\ Equity Members may also qualify for the Tier 5, Level C
enhanced rebate via an alternative method 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 NBB or NBO of at
least 50% in 200 or more symbols from the list of MQ Securities. See
Fee Schedule, Section 1)c), Notes to NBBO Setter Plus Table, note 3.
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 ``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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The Exchange offers an NBBO Setter Additive Rebate,\15\ 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
\16\ upon entry on MIAX Pearl Equities with a minimum size of a round
lot.\17\ The Exchange also offers an NBBO First Joiner 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.\18\
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\15\ See Fee Schedule, Section 1)c), NBBO Setter Additive
Rebate.
\16\ 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.
\17\ See Fee Schedule, Section 1)c).
\18\ See Fee Schedule, Section 1)c), NBBO First Joiner Additive
Rebate.
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Proposal
The Exchange proposes to reduce the standard rebate for executions
of orders in securities priced at or above $1.00 per share for Added
Displayed Volume across all Tapes. Currently, the Exchange provides a
standard rebate of ($0.0022) per share for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes. The Exchange now proposes to reduce the
standard rebate for executions of Added Displayed Volume in securities
priced at or above $1.00 per share from ($0.0022) to ($0.0021) per
share for all Tapes.\19\ Accordingly, the Exchange proposes to amend
Section 1)a), Standard Rates, to reflect this proposed change and amend
Section 1)b), Liquidity Indicator Codes and Associated Fees, to reflect
the corresponding changes to the applicable Liquidity Indicator Codes,
AA, AB and AC.
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\19\ See Fee Schedule, Section 1)a), Standard Rates, for the
standard pricing for executions of Added Displayed Volume, among
other rates.
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Next, the Exchange proposes to amend the NBBO Setter Plus Table in
Section 1)c) of the Fee Schedule to decrease the rebates for all tiers
by ($0.0001) per share for all rebate levels of the NBBO Program. With
the proposed changes, the Level A rebates will be as follows:
($0.00210) per share in Tier 1; ($0.00280) per share in Tier 2;
($0.00290) per share in Tier 3; ($0.00300) per share in Tier 4;
($0.00325) per share in Tier 5; and ($0.00330) per share in Tier 6. The
Level B rebates will be as follows: ($0.00215) per share in Tier 1;
($0.00285) per share in Tier 2; ($0.00295) per share in Tier 3;
($0.00305) per share in Tier 4; ($0.00330) per share in Tier 5; and
($0.00335) per share in Tier 6. The Level C rebates will be 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.
The Exchange does not propose to amend any of volume calculation
methods used to determine the Equity Member's tier for purposes of the
NBBO Program, which will continue to be calculated in parallel in each
month, and each Equity Member will continue to receive the highest tier
achieved from any of the four methods each month.\20\ The Exchange also
does not propose to amend the different measurements to calculate an
Equity Member's participation at the NBBO on the Exchange in Market
Quality Securities under the NBBO Program.
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\20\ The Exchange does not propose to amend the alternative
volume calculation method for Equity Members to quality for the Tier
5, Level C enhanced rebate, as proposed to be reduced.
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The purpose of reducing the standard rebate for executions of Added
Displayed Volume is for business and competitive reasons in light of
recent volume growth on the Exchange. The Exchange notes that despite
the modest reduction proposed herein, the proposed standard rebate for
executions of Added Displayed Volume (i.e., ($0.0021) per share)
remains higher than, and competitive with, the standard rebates
provided by other exchanges for executions of orders in securities
priced at or above $1.00 per share that add displayed liquidity to
those exchanges.\21\
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\21\ See e.g., MEMX LLC Equities Fee Schedule, Transaction fees
(last visited October 22, 2024), available at <a href="https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/">https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/</a> (providing standard rebate of ($0.0015) per share for
executions of orders in securities priced at or above $1.00 per
share across all tapes); see also Cboe BZX Equities Fee Schedule,
available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a> (providing a standard rebate of ($0.0016) per
share for adding displayed liquidity in securities priced at or
above $1.00 per share).
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The purpose of reducing the enhanced rebates for executions of
Added Displayed Volume for all tiers and market quality levels of the
NBBO Program is for business and competitive reasons in light of recent
volume growth on the Exchange. The Exchange notes that, even with the
proposed decrease in the NBBO Program rebates, the base rebates and
enhanced rebates of the NBBO Program remain competitive with, or higher
than, the rebates provided by other exchanges for executions of orders
in securities priced at or above $1.00 per share that add displayed
liquidity to those exchanges.\22\
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\22\ 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 rebates ranging from
($0.0020) to ($0.0032) per share for executions of added displayed
volume in securities priced at or above $1.00 per share, so long as
the member meets certain volume requirements, including, for tier 4,
minimum NBBO Time and NBBO Size requirements from a list of
specified securities and minimum requirement of ADAV as a percentage
of TCV); see also Cboe EDGX Equities Fee Schedule, Add/Remove Volume
Tiers section, available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edgx/">https://www.cboe.com/us/equities/membership/fee_schedule/edgx/</a> (providing an enhanced rebates ranging
from ($0.0020) to ($0.0034) per share for executions of added
displayed volume in securities priced at or above $1.00 per share,
so long as the member meets certain volume requirements).
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Implementation
The proposed changes are effective beginning November 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 \23\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \24\ in
[[Page 91459]]
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) \25\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers or dealers.
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(4).
\25\ 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
September 2024.\26\ 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 1.71% of the overall market share for the
month of September 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.'' \27\
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\26\ 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 October 25,
2024).
\27\ 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 NBBO Program, in particular, and Added Displayed Volume
in securities priced at or above $1.00 per share, in general.
The Exchange believes its proposal to reduce the rebates for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes is reasonable because the
Exchange's standard rebate and enhanced rebates will remain competitive
with, or higher than, the rebates provided by other exchanges for
executions of orders in securities priced at or above $1.00 per share
that add displayed liquidity to those exchanges.\28\ The Exchange
believes that the enhanced rebates under the NBBO Program, as modified
by this proposal, continue to be equitable and not unfairly
discriminatory because the NBBO Program 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 NBB or NBO, 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 the Exchange's pricing structure,
as modified by this proposal, continues to be designed to incentivize
the entry of aggressively priced displayed liquidity that may create
tighter spreads, thereby promoting price discovery and market quality
on the Exchange to the benefit of all Equity Members and public
investors.
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\28\ See supra notes 21 and 22.
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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 does not believe that the proposal will impose any
burden on intra-market competition not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange believes that its proposal to reduce the standard and
enhanced rebates provided for in the NBBO Program, for executions of
orders in securities priced at or above $1.00 per share for Added
Displayed Volume will not impose any burden on intramarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act because these changes are for business and competitive reasons
in light of recent volume growth on the Exchange. The Exchange notes
that despite the modest reduction proposed herein of ($0.0001) per
share for executions of orders in securities priced at or above $1.00
per share for Added Displayed Volume, the Exchange's standard and
enhanced rebates remain competitive with, or higher than, the standard
and enhanced rebates provided by other exchanges for executions of
orders in securities priced at or above $1.00 per share for Added
Displayed Volume on those exchanges.\29\
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\29\ See supra notes 21 and 22.
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The Exchange believes that, even with the proposed decrease to the
standard and enhanced Added Displayed Volume rebates, the Exchange's
rebate structure for such orders will continue to incentivize market
participants to direct order flow to the Exchange, thereby contributing
to a deeper and more liquid market to the benefit of all market
participants and enhancing the attractiveness of the Exchange as a
trading venue. The Exchange believes that this, in turn, will continue
to encourage market participants to direct additional orders in
securities priced at or above $1.00 per share to the Exchange. Greater
liquidity benefits all Equity Members by providing more trading
opportunities and encourages Equity Members to send orders to the
Exchange, thereby contributing to robust levels of liquidity, which
benefits all market participants.
Intermarket Competition
The Exchange believes the proposed changes 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
sixteen 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
[[Page 91460]]
the month of September 2024.\30\ Thus, in such a low-concentrated and
highly competitive market, no single equities exchange possesses
significant pricing power in the execution of order flow.
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\30\ See supra note 26.
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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 orders in
securities priced at or above $1.00 per share for 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.
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.'' \31\ 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' . .
.''.\32\ 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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\31\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\32\ 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,\33\ and Rule 19b-4(f)(2) \34\ 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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\33\ 15 U.S.C. 78s(b)(3)(A)(ii).
\34\ 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="344641585119575b5959515a4047744751571a535b42">[email protected]</span></a>. Please include
file number SR-PEARL-2024-50 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-2024-50. 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-2024-50 and should be
submitted on or before December 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26870 Filed 11-18-24; 8:45 am]
BILLING CODE 8011-01-P
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