[Federal Register Volume 86, Number 10 (Friday, January 15, 2021)]
[Notices]
[Pages 4139-4142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00811]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90894; File No. SR-PEARL-2020-37]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee 
Schedule Regarding Tape B Securities

January 11, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 31, 2020, MIAX PEARL, LLC (``MIAX PEARL'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the 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 the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to amend the fee schedule 
applicable for MIAX PEARL Equities, an equities trading facility of the 
Exchange (the ``Fee Schedule'').\3\ The proposed changes will become 
effective January 1, 2021.
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    \3\ See Exchange Rule 1901.
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    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl 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 purpose of the proposed rule change is to amend the MIAX PEARL 
Equities Fee Schedule to increase the rebate for displayed orders \4\ 
that add liquidity in Tape B securities priced at or above $1.00 to the 
MIAX PEARL Equities Book \5\ from $0.0032 to $0.0035 per share. The 
Exchange also proposes to decrease the fee for orders that remove 
liquidity in Tape B Securities priced at or above $1.00 from the MIAX 
PEARL Equities Book from $0.0028 to $0.0027 per share.
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    \4\ See Exchange Rule 2614(c)(3).
    \5\ The term ``MIAX PEARL Equities Book'' means the electronic 
book of orders in equity securities maintained by the System. See 
Exchange Rule 1901. The term ``System'' means the automated trading 
system used by the Exchange for the trading of securities. See 
Exchange Rule 100.
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    The Exchange does not propose to amend the rates to add or remove 
liquidity in Tapes A and C securities. The rebate provided to displayed 
orders that add liquidity in Tapes A and C securities priced at or 
above $1.00 will remain $0.0032 per share and the fee to remove 
liquidity in Tape A and C securities priced at or above $1.00 will 
remain $0.0028 per share. Lastly, the Exchange proposes to amend the 
Fee Schedule to delineate the rates applicable to displayed orders that 
add liquidity and orders that remove liquidity in Tapes A, B, and C 
securities priced at or above $1.00.
    The Exchange operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
if they deem fee levels at a particular venue to be excessive or 
rebates/incentives to be insufficient. More specifically, the Exchange 
is only one of several equities venues (including both registered 
exchanges and various alternative trading systems) to which market 
participants may direct their order flow and execute their trades. 
Indeed, equity trading is currently dispersed across 16 exchanges,\6\ 
31 alternative trading systems,\7\ and numerous broker-dealer 
internalizers and wholesalers, all competing for order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 20% of total market share.\8\ 
Thus, in such a low-concentrated and highly competitive market, no 
single equities trading venue possesses significant pricing power in 
the execution of trades, and, the Exchange currently represents a very 
small percentage of the overall market.
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    \6\ See Cboe Global Markets, U.S Equities Market Volume Summary, 
available at https://markets.cboe.com/us/equities/market_share/.
    \7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \8\ See supra note 6.
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    The purpose of this proposed change is for business and competitive 
reasons. As a new entrant into the equities market, the Exchange 
initially adopted a rebate of $0.0028 per share for displayed orders 
that add liquidity and fee of $0.0028 per share for orders that remove 
liquidity in securities priced at or above $1.00.\9\ The Exchange later 
increased the rebate for displayed orders that add liquidity in 
securities priced at or above $1.00 to $0.0032 per share to further 
encourage market participants to submit displayed orders to the 
Exchange.\10\ The fee to remove liquidity in securities priced at or 
above $1.00 has been unchanged since its adoption.
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    \9\ See Securities Exchange Act Release No. 90102 (October 6, 
2020), 85 FR 64559 (October 13, 2020) (SR-PEARL-2020-17).
    \10\ See Securities Exchange Act Release No. 90400 (November 12, 
2020), 85 FR 73550 (November 18, 2020) (SR-PEARL-2020-24).
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    The Exchange now believes that it is appropriate to increase the 
rebate to $0.0035 per share for displayed orders that add liquidity in 
Tape B securities priced at or above $1.00. The Exchange believes that 
this proposed increased rebate will result in encouraging market 
participants to submit more displayed orders to the Exchange, thereby 
increasing displayed order liquidity on the MIAX PEARL Equities Book, 
which should benefit all Exchange participants by providing more 
trading opportunities and tighter spreads. The Exchange also believes a 
corresponding change to decrease the fee to $0.0027 per share for 
orders that remove liquidity in Tape B securities priced at or above 
$1.00 is similarly appropriate. The Exchange believes the decreased fee 
would

[[Page 4140]]

similarly encourage market participants to enter liquidity removing 
orders on the Exchange, thereby increasing the execution opportunities 
for the displayed orders resting on the MIAX PEARL Equities Book.
    The proposed changes will become effective on January 1, 2021. The 
Exchange does not propose any other changes to the MIAX PEARL Equities 
Fee Schedule.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \12\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among its members and issuers and other persons using 
its facilities. As discussed above, the Exchange operates in a highly 
fragmented and competitive market. The Commission has repeatedly 
expressed its preference for competition over regulatory intervention 
in determining prices, products, and services in the securities 
markets. Market participants can readily direct order flow to competing 
venues if they deem fee levels at a particular venue to be excessive or 
rebates/incentives to be insufficient. The Exchange believes that the 
amended Fee Schedule reflects a simple and competitive pricing 
structure, which is designed to incentivize market participants to add 
aggressively priced displayed liquidity and direct their order flow to 
the Exchange. The proposed changes are not unfairly discriminatory 
because they will apply equally to all Equity Members.\13\
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5) [sic].
    \13\ The term ``Equity Member'' means a Member authorized by the 
Exchange to transact business on MIAX PEARL Equities. See Exchange 
Rule 1901.
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    The Exchange believes the proposed increased rebate for displayed 
orders that add liquidity in Tape B securities priced at or above $1.00 
will continue to promote price discovery and price formation and deepen 
liquidity, thereby enhancing market quality to the benefit of all 
Equity Members and investors. The Exchange further believes the 
proposed increased rebate is reasonable because it would uniformly 
provide a rebate of $0.0035 per share to displayed orders in Tape B 
securities priced at or above $1.00 traded on the Exchange. The 
proposed rebate is also comparable to that provided by other 
exchanges.\14\ However, those exchanges provide a tiered pricing 
structure that provides a comparable rebate for orders that add 
liquidity in Tape B securities only when certain volume thresholds are 
met.\15\
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    \14\ See the NYSE Arca, Inc. (``NYSE Arca'') fee schedule 
available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (providing a rebate as high as 
$0.0034 per share for Tape B securities under Step Up Tier 4). See 
also footnotes 1, 12, and 13 of the Cboe BZX Exchange, Inc. 
(``BZX'') fee schedule available at https://www.cboe.com/us/equities/membership/fee_schedule/ (providing cumulative rebate as 
high as $0.0034 per share for Tape B Securities).
    \15\ Id.
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    The Exchange believes its proposed decreased fee of $0.0027 per 
share for orders that remove liquidity in Tape B securities priced at 
or above $1.00 is reasonable, equitable and not unfairly discriminatory 
because it will apply to all orders in Tape B securities from all 
market participants and regardless of whether they are displayed or 
non-displayed. The proposed decreased fee should encourage market 
participants to enter liquidity removing orders on the Exchange, 
thereby increasing the execution opportunities for the displayed orders 
resting on the MIAX PEARL Equities Book. Therefore, coupled with the 
proposed increased rebate, the decreased fee should improve liquidity 
and price discovery in Tape B securities on the MIAX PEARL Equities 
Book. Lastly, the Exchange notes that the proposed decreased fee is 
also comparable to or lower than the standard fee to remove liquidity 
charged by other exchanges.\16\
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    \16\ See the Cboe EDGX Exchange, Inc. (``EDGX'') available at 
https://www.cboe.com/us/equities/membership/fee_schedule/edgx/ 
(providing a standard fee of $0.0027 per share to orders that remove 
liquidity). See also the New York Stock Exchange LLC (``NYSE'') fee 
schedule available at https://www.nyse.com/markets/nyse/trading-info/fees (providing fees to ``take'' liquidity ranging from 
$0.0024--$0.00275 depending on the type of market participant, 
order, and execution).
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    Providing separate rates for orders in Tape A, B, and C securities 
is also equitable and reasonable because it is similar to pricing 
structures offered by other national securities exchanges that the 
Exchange directly competes with.\17\ Further, the Exchange believes the 
proposed changes will encourage additional order flow on the Exchange 
resulting in greater liquidity to the benefit of all market 
participants on the Exchange by providing more trading opportunities in 
Tape B securities. The Exchange also continues to believe that it is 
reasonable, equitable and not unfairly discriminatory to provide a 
higher rebate to displayed orders that add liquidity than to non-
displayed orders as this rebate structure is designed to incentivize 
Equity Members to send the Exchange displayed orders, thereby 
contributing to price discovery and price formation, consistent with 
the overall goal of enhancing market quality.
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    \17\ See the NYSE Arca fee schedule available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (providing separate varying fees and 
rebates for Tape A, B, and C securities with a rebate as high as 
$0.0034 per share for Tape B securities under Step Up Tier 4). See 
also footnotes 1, 12, and 13 of the BZX fee schedule available at 
https://www.cboe.com/us/equities/membership/fee_schedule/ (providing 
tier rebates only for Tape B Securities).
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    Further, 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, while adopting a series of steps to improve the 
current market model, 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.'' \18\
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    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005) (File No. S7-10-04) (``Regulation 
NMS'').
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\19\ Indeed, equity trading is currently dispersed across 16 
exchanges,\20\ 31 alternative trading systems,\21\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange currently 
has more than 20% market share (whether including or excluding auction 
volume).\22\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, the Exchange 
only recently launched trading operations on September 25, 2020, and 
thus has a market share of approximately less than 1% of executed 
volume of equities trading.
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    \19\ See Securities Exchange Act Release No. 82873 (March 14, 
2018), 83 FR 13008 (March 26, 2018) (File No. S7-05-18) (Transaction 
Fee Pilot for NMS Stocks).
    \20\ See supra note 6.
    \21\ See supra note 7.
    \22\ See supra note 6.
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    The Exchange has designed its proposed changes to continue to 
balance the need to attract order flow as a new exchange entrant with 
the desire to continue to provide a simple fee structure to market 
participants. The Exchange believes its proposed changes will enable it 
to continue to compete for order flow, particularly in Tape B 
securities. The Exchange believes that the ever-shifting market share 
among

[[Page 4141]]

the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue or decrease use of certain 
categories of products, in response to fee changes. With respect to 
non-marketable orders which provide liquidity on an exchange, Equity 
Members can choose from any one of the 16 currently operating 
registered exchanges to route such order flow. Accordingly, competitive 
forces reasonably constrain exchange transaction fees that relate to 
orders that would provide displayed liquidity on an exchange. Stated 
otherwise, changes to exchange transaction fees can have a direct 
effect on the ability of an exchange to compete for order flow. Given 
this competitive environment, the Exchange's proposed changes represent 
a reasonable attempt to attract order flow to a new exchange entrant.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed fee change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Rather, the Exchange believes 
that the proposed change would encourage the submission of additional 
order flow to a public exchange, thereby promoting market depth, 
execution incentives and enhanced execution opportunities, as well as 
price discovery and transparency for all Equity Members and non-Equity 
Members. As a result, the Exchange believes that the proposed change 
furthers the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.'' \23\
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    \23\ See supra note 18.
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    The Exchange does not believe that the proposed fee change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes that the proposed fee change will increase 
competition and is intended to draw volume to the Exchange. 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 decrease 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. As a new exchange, the 
Exchange faces intense competition from existing exchanges and other 
non-exchange venues that provide markets for equities trading. The 
proposed increased rebate and decreased fee for Tape B securities are 
intended to attract liquidity to the Exchange, much like the way other 
exchanges offer multiple incentives to their participants, including 
tiered pricing that provides higher rebates or discounted executions. 
These other exchanges will be able to modify such incentives to compete 
with the Exchange.
    Further, while pricing incentives do cause shifts of liquidity 
between trading centers, market participants make determinations on 
where to provide liquidity or route orders to take liquidity based on 
factors other than pricing, including technology, functionality, and 
other considerations. Consequently, the Exchange believes that the 
degree to which its proposed changes could impose any burden on 
competition is extremely limited, and does not believe that such 
increased rebate and decreased fee for Tape B securities would burden 
competition between Equity Members or competing venues in a manner that 
is not necessary or appropriate in furtherance of the purposes of the 
Act.
    The Exchange does not believe that the proposed increased rebate 
and decreased fee for Tape B securities will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed changes 
will apply equally to all Equity Members. The proposed increased rebate 
is intended to encourage market participants to add liquidity to the 
Exchange by providing a rebate that is comparable to those offered by 
other exchanges, which the Exchange believes will help to encourage 
Equity Members to send orders to the Exchange to the benefit of all 
Exchange participants. Meanwhile, the proposed decreased fee is 
similarly intended to encourage market participants to send liquidity 
removing orders to attempt to execute against the orders that add 
liquidity to the MIAX PEARL Equities Book. The proposed rates are 
equally applicable to all market participants and, therefore, the 
Exchange does not believe they will impose any inappropriate burden on 
intramarket competition.

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,\24\ and Rule 19b-4(f)(2) \25\ 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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    \24\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \25\ 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 (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3a484f565f17595557575f544e497a495f59145d554c"><span class="__cf_email__" data-cfemail="6a181f060f47090507070f041e192a190f09440d051c">[email protected]</span></a>. Please include 
File Number SR-PEARL-2020-37 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-2020-37. 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 (http://www.sec.gov/rules/sro.shtml). 
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

[[Page 4142]]

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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-PEARL-2020-37, and should be 
submitted on or before February 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-00811 Filed 1-14-21; 8:45 am]
BILLING CODE 8011-01-P


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