[Federal Register Volume 88, Number 186 (Wednesday, September 27, 2023)]
[Notices]
[Pages 66533-66541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20960]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98472; File No. SR-PEARL-2023-45]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX 
Pearl Equities Fee Schedule To Adopt the NBBO Setter Plus Program and 
Eliminate Certain Other Rebates

September 21, 2023.
    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 September 11, 2023, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the fee schedule (the 
``Fee Schedule'') applicable to MIAX Pearl Equities, an equities 
trading facility of the Exchange.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-equities/pearl-equities/rule-filings, at MIAX Pearl's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to: (i) adopt a new 
incentive program called the ``NBBO Setter Plus Program'' (referred to 
in this filing as the ``NBBO Program'') that, in general, provides 
enhanced rebates for Equity Members' \3\ added 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), as well as an additive rebate 
applied to orders that set the NBBO \4\ upon entry; (ii) reduce the 
standard rebate for executions of orders in securities priced at or 
above $1.00 per share for Added Displayed Volume in all Tapes and make 
the corresponding changes to the Liquidity Indicator Codes and 
Associated Fees table \5\; (iii) eliminate the Add Volume Tiers table 
\6\ and associated rebates and make corresponding changes to rename 
Section 1)c) to now be titled ``NBBO Setter Plus Program''; (iv) 
eliminate the Market Quality Tiers table \7\ and associated rebates; 
(v) renumber Section 1)g), Step-Up Added Liquidity Rebate, to now be 
Section 1)f), Step-Up Added Liquidity Rebate; and (vi) amend the 
Definitions section to include a definition for the term ``NBBO Set 
Volume'' (described below). All of the proposed changes relate to the 
adoption of the proposed NBBO Program, which incorporates certain 
concepts from the current Add Volume Tiers and Market Quality Tiers 
programs.
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    \3\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
    \4\ 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.
    \5\ See Fee Schedule, Section 1)b), Liquidity Indicator Codes 
AA, AB and AC.
    \6\ See Fee Schedule, Section 1)c).
    \7\ See Fee Schedule, Section 1)f).
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    The Exchange originally filed this proposal on August 31, 2023 (SR-
PEARL-2023-42). On September 11, 2023, the Exchange withdrew SR-PEARL-
2023-42 and refiled this proposal.
Background of Current Rebate Programs Impacted by This Proposal
    Section 1)a) of the Fee Schedule sets forth the Exchange's standard 
rebates and fees for adding, removing or routing orders (displayed and 
non-displayed) in all Tapes. The Exchange provides different rebates 
and fees depending on whether (i) the execution is for an order where 
the securities are priced at or above $1.00 per share, or (ii) the 
execution is for an order where the securities are priced below $1.00 
per share. Relevant for the purposes of this proposal, the Exchange 
currently provides a standard rebate of ($0.0027) \8\ per share for 
executions of orders in securities priced at or above $1.00 per share 
for Added Displayed Volume across all Tapes.\9\
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    \8\ The Exchange indicates rebates in parentheses in the Fee 
Schedule. See the General Notes Section of the Fee Schedule.
    \9\ See Fee Schedule, Section 1)a). See also Fee Schedule, 
Section 1)b), Liquidity Indicator Codes AA, AB, and AC.
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    Section 1)b) of the Fee Schedules provides a list of the liquidity 
indicator codes and associated rebates or fees that are applied to a 
transaction so that each Equity Member that enters an order is able to 
understand the fee or rebate that is applied to the execution. Each 
side of a trade is assigned a liquidity indicator code in order to 
identify the scenario under which the trade occurred.
    Section 1)c) of the Fee Schedule provides a volume-based tier 
structure, referred to as the Add Volume Tiers, in

[[Page 66534]]

which the Exchange provides enhanced rebates for executions of orders 
in securities priced at or above $1.00 per share for Added Displayed 
Volume for Equity Members that meet specified volume thresholds on the 
Exchange. In particular, an Equity Member that qualifies for Add Volume 
Tier 1 will receive an enhanced rebate of ($0.0032) per share 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 \10\ 
of at least 0.07% of TCV.\11\ An Equity Member that qualifies for Add 
Volume Tier 2 will receive an enhanced rebate of ($0.0035) per share 
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 0.10% of TCV. An Equity Member that qualifies for Add 
Volume Tier 3 will receive an enhanced rebate of ($0.0036) per share 
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 0.30% of TCV. The enhanced rebates provided by the Add 
Volume Tiers are provided instead of the standard rebate of ($0.0027) 
per share applicable to executions of orders in securities priced at or 
above $1.00 per share for Added Displayed Volume across all Tapes.
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    \10\ The term ``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. The Exchange excludes from its calculation of ADAV and ADV 
shares added or removed on any day that the Exchange's system 
experiences a disruptions that lasts for more than 60 minutes during 
regular trading hours (``Exchange System Disruption''), on any day 
with a scheduled early market close, and on the ``Russell 
Reconstitution Day'' (typically the last Friday in June). Routed 
shares are not included in the ADAV or ADV calculation. See the 
Definitions Section of the Fee Schedule.
    \11\ The term ``TCV'' means total consolidated volume calculated 
as the volume in shares reported by all exchanges and reporting 
facilities to a consolidated transaction reporting plan for the 
month for which the fees apply. The Exchange excludes from its 
calculation of TCV volume on any given day that the Exchange's 
system experiences a disruption that lasts for more than 60 minutes 
during Regular Trading Hours. On any day with a scheduled early 
market close, and on the ``Russell Reconstitution Day'' (typically 
the last Friday in June). See the Definitions Section of the Fee 
Schedule.
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    Section 1)f) of the Fee Schedule sets forth a separate tiered 
pricing incentive structure, referred to as the Market Quality Tiers, 
which provides enhanced rebates for executions of orders in securities 
priced at or above $1.00 per share for Added Displayed Volume for 
Equity Members that meet certain minimum quoting requirements across a 
specified number of securities. In particular, the Exchange provides an 
enhanced rebate of ($0.0032) per share in Market Quality Tier 1 for 
executions of orders in securities priced at or above $1.00 per share 
for Added Displayed Volume if the Equity Member's Percent Time at NBBO 
\12\ is at least 25% in an average of at least 250 securities, at least 
50 of which must be Market Quality Securities,\13\ per trading day 
during the month. The Exchange also provides an enhanced rebate of 
($0.0035) per share in Market Quality Tier 2 for executions of orders 
in securities priced at or above $1.00 per share for Added Displayed 
Volume if the Equity Member's Percent Time at NBBO is at least 25% in 
an average of at least 1,000 securities, at least 100 of which must be 
MQ Securities, per trading day during the month. The list of MQ 
Securities is published on the Exchange's website.\14\
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    \12\ The term ``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 the national best offer (``NBO''). See the 
Definitions Section of the Fee Schedule.
    \13\ Pursuant to this proposal, and as described further below, 
the Exchange proposes to slightly amend the term ``Market Quality 
Securities'' or ``MQ Securities'' as currently defined in the Fee 
Schedule in order to account for the changes to the Market Quality 
Tiers program and newly proposed NBBO Setter Plus Program. 
Currently, the term ``Market Quality Securities'' or ``MQ 
Securities'' means a list of securities designated as such, that are 
used for the purposes of qualifying for the Market Quality Tiers. 
The universe of these securities will be determined by the Exchange 
and published on the Exchange's website. See the Definitions Section 
of the Fee Schedule. The proposed changes are described below.
    \14\ See https://www.miaxglobal.com/markets/us-equities/pearl-equities/fees (last visited August 21, 2023).
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Proposal To Adopt the NBBO Setter Plus Program
    The Exchange proposes to adopt a new incentive program called the 
``NBBO Setter Plus Program'' (referred to in this filing as the ``NBBO 
Program''), which is designed to incentivize market quality and quoting 
on the Exchange. Certain elements of the NBBO Program will be similar 
to the incentives and volume calculations for the current Add Volume 
Tiers and Market Quality Tiers programs. In connection with the 
establishment of the NBBO Program, the Exchange proposes to remove the 
Add Volume Tiers and Market Quality Tiers sections from the Fee 
Schedule (described further below), with Section 1)c) being re-titled 
``NBBO Setter Plus Program.''
    The Exchange proposes to add a new table in Section 1)c) of the Fee 
Schedule titled ``NBBO Setter Plus Table.'' The NBBO Setter Plus Table 
will provide enhanced rebates for executions of orders in securities 
priced at or above $1.00 per share for Added Displayed Volume across 
all Tapes (applicable to Liquidity Indicator Codes AA, AB and AC). 
Conceptually, the NBBO Program provides four volume tiers enhanced by 
three market quality levels to provide increasing rebates in this 
segment. The four volume tiers are achievable by greater volume from 
the best of three alternative methods. The three market quality levels 
are achievable by greater NBBO participation in a minimum number of 
specific securities. Additionally, there is an additive rebate for 
trades the set the NBBO, described further below.
    First, MIAX Pearl Equities will determine the applicable 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 will be calculated in parallel in each month, and each Equity 
Member will receive the highest tier achieved from any of the three 
methods each month. All three volume calculation methods will be based 
on an Equity Member's respective ADAV or NBBO Set Volume or ADV as a 
percent of industry TCV as the denominator.
    Under volume calculation Method 1, the Exchange proposes to provide 
tiered rebates based on an Equity Member's ADAV as a percentage of TCV. 
In particular, 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 0.08% of TCV. An Equity Member 
will qualify for the enhanced rebates in Tier 2 for executions of 
orders in securities priced at or above $1.00 per share for Added 
Displayed Volume across all Tapes by achieving an ADAV of at least 
0.08% and less than 0.25% of TCV. An Equity Member will qualify for the 
enhanced rebates in Tier 3 for executions of orders in securities 
priced at or above $1.00 per share for Added Displayed Volume across 
all Tapes by achieving an ADAV of at least 0.25% and less than 0.40% of 
TCV. Finally, 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 0.40% of TCV.
    Under volume calculation Method 2, the Exchange proposes to provide 
tiered rebates based on an Equity Member's NBBO Set Volume as a 
percentage of TCV. In connection with this proposed

[[Page 66535]]

volume calculation method, the Exchange proposes to adopt a definition 
for the term ``NBBO Set Volume,'' which will be included in the 
Definitions section of the Fee Schedule. The Exchange proposes that the 
term NBBO Set Volume means the ADAV in all securities of an Equity 
Member that sets the NBB or NBO on MIAX Pearl Equities. Pursuant to 
proposed Method 2, 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 NBBO Set Volume of at least 0.00% and less than 0.02% of 
TCV. An Equity Member will qualify for the enhanced rebates in Tier 2 
for executions of orders in securities priced at or above $1.00 per 
share for Added Displayed Volume across all Tapes by achieving an NBBO 
Set Volume of at least 0.02% and less than 0.03% of TCV. An Equity 
Member will qualify for the enhanced rebates in Tier 3 for executions 
of orders in securities priced at or above $1.00 per share for Added 
Displayed Volume across all Tapes by achieving an NBBO Set Volume of at 
least 0.03% and less than 0.08% of TCV. An Equity Member will qualify 
for the enhanced rebates in Tier 4 for executions of orders in 
securities priced at or above $1.00 per share for Added Displayed 
Volume across all Tapes by achieving an NBBO Set Volume of at least 
0.08% of TCV.
    Under volume calculation Method 3, the Exchange proposes to provide 
tiered rebates based on an Equity Member's ADV as a percentage of TCV. 
In particular, 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 
ADV of at least 0.00% and less than 0.20% of TCV. An Equity Member will 
qualify for the enhanced rebates in Tier 2 for executions of orders in 
securities priced at or above $1.00 per share for Added Displayed 
Volume across all Tapes by achieving an ADV of at least 0.20% and less 
than 0.60% of TCV. An Equity Member will qualify for the enhanced 
rebates in Tier 3 for executions of orders in securities priced at or 
above $1.00 per share for Added Displayed Volume across all Tapes by 
achieving an ADV of at least 0.60% and less than 1.00% of TCV. An 
Equity Member will qualify for the enhanced rebates in Tier 4 for 
executions of orders in securities priced at or above $1.00 per share 
for Added Displayed Volume across all Tapes by achieving an ADV of at 
least 1.00% of TCV.
    After the volume calculation is performed to determine highest tier 
achieved by the Equity Member, the applicable rebate will be 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 proposes to provide 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''), depending on the Equity Member's Percent Time at 
NBBO on MIAX Pearl Equities in a certain amount of specified securities 
(``Market Quality Securities'' or ``MQ Securities,'' defined below). 
The Fee Schedule will specify the percentage of time that the Equity 
Member must be at the NBBO on MIAX Pearl Equities in at least 200 
symbols out of the full list of 1,000 MQ Securities (which may vary 
from time to time based on market conditions). The list of MQ 
Securities will be generally based on the top multi-listed 1,000 
symbols by ADV across all U.S. securities exchanges. The list of MQ 
Securities will be updated monthly by the Exchange and published on the 
Exchange's website. The Exchange notes that at least one other 
competing exchange provides enhanced rebates for executions of orders 
in certain securities priced at or above $1.00 per share submitted by 
members that set or join the NBBO on that exchange.\15\
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    \15\ See Cboe BZX Equities Fee Schedule, NBBO Setter section and 
Add/Remove Volume Tiers section, available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/ (providing an additional 
rebate of ($0.0007) per share to the top displayed liquidity tier 
rebate of ($0.0031) per share for executions of added displayed 
volume in securities priced at or above $1.00 per share that 
establish a new Setter NBBO in NBBO Setter Securities on Cboe BZX). 
For purposes of the Cboe BZX Fee Schedule, the term ``Setter NBBO'' 
means a quotation of at least 100 shares that is better than the 
NBBO or a quotation of a notional size of at least $10,000.00 that 
is better than the NBBO. Further, the term ``NBBO Setter 
Securities'' means a list of securities included in the Cboe BZX 
NBBO Setter Program, the universe of which will be determined by 
Cboe BZX and published in a notice distributed to Cboe BZX members 
and on the Cboe BZX website. See id.
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    The Exchange proposes that, for the purpose of determining 
qualification for the rebates described in Level B and Level C of 
Market Quality Tier columns in the NBBO Setter Plus Program, the 
Exchange will exclude from its calculation: (1) any trading day that 
the Exchange's system experiences a disruption that lasts for more than 
60 minutes during regular trading hours; (2) any day with a scheduled 
early market close; and (3) the ``Russell Reconstitution Day'' 
(typically the last Friday in June). The Exchange proposes to describe 
this exclusion in the General Notes section of the Fee Schedule. The 
Exchange believes that these types of Exchange system disruptions could 
preclude Equity Members from participating on the Exchange to the 
extent that they might have otherwise participated on such days, and 
thus, the Exchange believes it is appropriate to exclude such days when 
determining whether an Equity Member meets the applicable Percent Time 
at NBBO during a month to avoid penalizing Equity Members that might 
otherwise have met such requirements.
    Additionally, the Exchange believes that scheduled early market 
closures, which typically are the day before, or the day after, a 
holiday, may preclude some Equity Members from participating on the 
Exchange at the same level that they might otherwise. For similar 
reasons, the Exchange believes it is appropriate to exclude the Russell 
Reconstitution Day in the same manner, as the Exchange believes that 
the Russell Reconstitution Day typically has extraordinarily high, and 
abnormally distributed, trading volumes and the Exchange believes this 
change to normal activity may affect an Equity Member's ability to meet 
the quoting requirement across various MQ Securities on that day. The 
Exchange notes that the exclusion of any day during which the 
Exchange's system experiences a disruption that lasts for more than 60 
minutes during Regular Trading Hours, any day with a scheduled early 
market close, and the Russell Reconstitution Day is consistent with the 
methodologies used by other exchanges when calculating certain member 
trading and other volume metrics for purposes of determining whether 
those members qualify for certain pricing incentives, and the Exchange 
believes application of this methodology is similarly appropriate for 
the proposed Percent Time at NBBO requirements under the proposed NBBO 
Program.\16\
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    \16\ See e.g., Cboe BZX Equities Fee Schedule, available at 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/; Cboe 
EDGX Exchange, Inc. (``Cboe EDGX'') Equities Fee Schedule, available 
at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/; 
and MEMX, LLC (``MEMX'') Fee Schedule, available at https://info.memxtrading.com/fee-schedule/.
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    The Exchange proposes that the base rebates (``Level A'') will be 
as follows: ($0.00240) per share in Tier 1; ($0.00310) per share in 
Tier 2; ($0.00345) per share in Tier 3; and ($0.00350) per share in 
Tier 4.\17\
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    \17\ The Exchange notes that the proposed ($0.00240) per share 
will be the base standard rebate for executions of orders in 
securities priced at or above $1.00 per share for Added Displayed 
Volume across all Tapes, which is a decrease from the current 
standard rebate of ($0.0027) per share, listed in Section 1)a) of 
the Fee Schedule and attributable to Liquidity Indicator Codes AA, 
AB and AC. The purpose and rationale for the proposed decrease in 
the standard rebate for executions of orders in securities priced at 
or above $1.00 per share for Added Displayed Volume across all Tapes 
is discussed below.

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[[Page 66536]]

    Under Level B, the Exchange proposes to provide enhanced rebates 
for executions of orders in securities priced at or above $1.00 per 
share for Added Displayed Volume across all Tapes if the Equity 
Member's Percent Time at NBBO is at least 25% and less than 50% in at 
least 200 MQ Securities per trading day during the month. The Exchange 
proposes that the Level B rebates will be as follows: ($0.00250) per 
share in Tier 1; ($0.00315) per share in Tier 2; ($0.00350) per share 
in Tier 3; and ($0.00355) per share in Tier 4.
    Under Level C, the Exchange proposes to provide enhanced rebates 
for executions of orders in securities priced at or above $1.00 per 
share for Added Displayed Volume across all Tapes if the Equity 
Member's Percent Time at NBBO is at least 50% in at least 200 MQ 
Securities per trading day during the month. The Exchange proposes that 
the Level C rebates will be as follows: ($0.00260) per share in Tier 1; 
($0.00320) per share in Tier 2; ($0.00355) per share in Tier 3; and 
($0.00360) per share in Tier 4.
    The Exchange notes that the introduction of the NBBO Setter Plus 
Program will be available to all Equity Members and will provide Equity 
Members several different opportunities to receive enhanced rebates 
utilizing three different volume calculation methodologies and 
different participation levels at the NBBO. The proposed changes are 
designed to encourage Equity Members that provide Added Displayed 
Volume in securities priced at or above $1.00 per share across all 
Tapes to the Exchange to increase such order flow, which would benefit 
all Equity Members by providing greater execution opportunities on the 
Exchange and contribute to a deeper, more liquid market, to the benefit 
of all investors and market participants.
NBBO Setter Additive Rebate
    The Exchange proposes to provide an additional rebate as part of 
the NBBO Program, which will be included as a line item at the bottom 
of the NBBO Setter Plus table. In particular, the Exchange proposes to 
provide an ``NBBO Setter Additive Rebate'' of ($0.0003) per share, 
which will be applicable only to executions of orders in securities 
priced at or above $1.00 per share for Added Displayed Volume (other 
than Retail Orders \18\) that set the NBB or NBO on MIAX Pearl Equities 
with a minimum size of a round lot. The purpose of the proposed NBBO 
Setter Additive Rebate is to provide an additional incentive for Equity 
Members to contribute Added Displayed Volume in securities priced at or 
above $1.00 per share that sets the NBBO on MIAX Pearl Equities, which 
should benefit all Equity Members by providing greater execution 
opportunities on the Exchange and contribute to a deeper, more liquid 
market, to the benefit of all investors and market participants. 
Additionally, other U.S. equity exchanges have adopted similar pricing 
incentives applicable to executions of orders that establish the NBBO, 
with the Exchange's proposed top tier rebate, coupled with the NBBO 
Setter Additive Rebate, being higher than competing exchanges' top 
rebates for similar executions (providing additive rebate of ($0.0003) 
per share to the top displayed liquidity tier rebate of ($0.0036) per 
share for executions of added displayed volume (other than retail 
orders) in securities priced at or above $1.00 per share that establish 
the NBBO on the Exchange, for a total ``enhanced'' rebate of ($0.0039) 
per share).\19\
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    \18\ A ``Retail Order'' is an agency or riskless principal order 
that meets the criteria of FINRA Rule 5320.03 that originates from a 
natural person and is submitted to the Exchange by a Retail Member 
Organization, provided that no change is made to the terms of the 
order with respect to price or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology. See Exchange Rule 2626(a)(2).
    \19\ See MEMX Fee Schedule, NBBO Setter/Joiner Tiers Section 
(providing additional rebate of ($0.0004) per share to the top 
displayed liquidity tier rebate of ($0.0033) per share for 
executions of added displayed volume (other than retail orders) in 
securities priced at or above $1.00 per share that establish the 
NBBO or establish a new BBO on MEMX that matches the NBBO first 
established on an away market, for a total ``enhanced'' rebate of 
($0.0037) per share); and Cboe BZX Fee Schedule, NBBO Setter section 
and Add/Remove Volume Tiers section (providing additional rebate of 
($0.0007) per share to the top displayed liquidity tier rebate of 
($0.0031) per share for executions of added displayed volume in 
securities priced at or above $1.00 per share that establish a new 
Setter NBBO in NBBO Setter Securities on Cboe BZX, for a total 
``enhanced'' rebate of ($0.0038) per share).
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Corresponding Changes to the Fee Schedule
Proposal To Reduce the Standard Rebate for Executions of Orders in 
Securities Priced at or Above $1.00 per Share for Added Displayed 
Volume (All Tapes) and Corresponding Changes to Liquidity Indicator 
Codes
    In connection with the proposed NBBO Setter Plus Program, the 
Exchange proposes to reduce the standard rebate for executions of 
orders in securities priced at or above $1.00 per share that add 
displayed liquidity to the Exchange across all Tapes (as mentioned 
above). Currently, the Exchange provides a standard rebate of ($0.0027) 
per share for executions of orders in securities priced at or above 
$1.00 per share for Added Displayed Volume in all Tapes. The Exchange 
now proposes to reduce the standard rebate from ($0.0027) to ($0.0024) 
per share for executions of orders in securities priced at or above 
$1.00 per share for Added Displayed Volume across all Tapes. 
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.
    The purpose of reducing the standard rebate for executions of 
orders in securities priced at or above $1.00 per share for Added 
Displayed Volume across all Tapes is due to the Exchange's proposal to 
adopt the NBBO Program, which provides multiple volume calculation 
methods for Equity Members to receive enhanced rebates compared to the 
standard rate. The Exchange notes that despite the modest reduction 
proposed herein, the proposed standard rebate of ($0.0024) per share 
for executions of orders in securities priced at or above $1.00 per 
share for Added Displayed Volume across all Tapes remains competitive 
with, and higher than, the standard rebates provided by other exchanges 
for similar executions.\20\
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    \20\ See e.g., NYSE Arca Equities Fee Schedule, available at 
https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (providing standard rebates of 
$0.0020 per share (Tapes A and C) and $0.0016 per share (Tape B) for 
adding displayed liquidity in securities priced at or above $1.00 
per share); see also Cboe BZX Equities Fee Schedule, available at 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/ 
(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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Proposal To Eliminate the Add Volume Tiers Table and Associated Rebates
    In connection with the NBBO Setter Plus Program, the Exchange 
proposes to eliminate the Add Volume Tiers table and associated rebates 
in Section 1)c) of the Fee Schedule and rename Section 1)c) as the NBBO 
Setter Plus Program. As mentioned above, the Add Volume Tiers provided 
enhanced rebates for executions of orders in securities priced at or 
above $1.00 per share for Added Displayed Volume so long as the Equity 
Member met specified ADAV thresholds on the Exchange. The Exchange 
adopted

[[Page 66537]]

the Add Volume Tiers rebates for the purpose of encouraging Equity 
Members to increase their orders that add liquidity on the Exchange, 
thereby improving its market quality with respect to such securities 
and contributing to a more robust and well-balanced market ecosystem on 
the Exchange to the benefit of all Equity Members.\21\ The Exchange now 
proposes to eliminate the Add Volume Tiers table and associated rebates 
as the NBBO Program incorporates similar aspects and rebate amounts, 
including, under volume calculation Method 1, tiered rebates based on 
an Equity Member's ADAV as a percentage of TCV. The Exchange notes that 
the NBBO Program does have slightly lower rebates for the corresponding 
Add Volume Tier thresholds; however, the Exchange believes that the 
benefits of the NBBO Program--three volume calculation methods and two 
market quality levels based on participation at the NBBO in order to 
obtain enhanced rebates--provides more opportunities for Equity Members 
to achieve higher rebates and will encourage the submission of 
increased order flow. The Exchange believes this will, in turn benefit 
all Equity Members by providing greater execution opportunities on the 
Exchange and contribute to a deeper, more liquid market, to the benefit 
of all investors and market participants.
---------------------------------------------------------------------------

    \21\ See Securities Exchange Act Release No. 93979 (January 14, 
2022), 87 FR 3151 (January 20, 2022) (SR-PEARL-2022-01).
---------------------------------------------------------------------------

Proposal To Eliminate the Market Quality Tiers Table and Associated 
Rebates
    In connection with the NBBO Setter Plus Program, the Exchange 
proposes to eliminate the Market Quality Tiers table and associated 
rebate in Section 1)f) of the Fee Schedule. As mentioned above, the 
Market Quality Tiers provided enhanced rebates for Equity Members that 
met certain minimum quoting requirements across a specified number of 
securities. The Exchange adopted the Market Quality Tiers for the 
purpose of encouraging executions of Added Displayed Volume for 
qualifying Equity Members as a means of recognizing the value of market 
participants that consistently quote at the NBBO in a large number of 
securities generally, and in the specified MQ Securities, in 
particular.\22\ The Exchange now proposes to eliminate the Market 
Quality Tiers table and associated rebates as the NBBO Program 
incorporates similar aspects, rebate amounts, and calculation 
methodologies based on an Equity Member's Percent Time at NBBO in 
certain MQ Securities under Level B and Level C.
---------------------------------------------------------------------------

    \22\ See Securities Exchange Act Release No. 94929 (May 17, 
2022), 87 FR 31269 (May 23, 2022) (SR-PEARL-2022-21).
---------------------------------------------------------------------------

Proposal To Renumber Fee Schedule Section 1)g), Step-Up Added Liquidity 
Rebate, as Section 1)f)
    As described above, the Exchange proposes to eliminate the Market 
Quality Tiers table and associated rebates currently described in 
Section 1)f) of the Fee Schedule. Accordingly, the Exchange proposes to 
renumber Section 1)g), Step-Up Added Liquidity Rebate, as Section 1)f). 
The purpose of this change is to provide consistency and clarity in the 
Fee Schedule.
Proposed Changes to the Definitions and General Notes Sections of the 
Fee Schedule
    As mentioned above, with the adoption of the NBBO Program, the 
Exchange proposes to make several corresponding changes to the 
Definitions and General Notes sections of the Fee Schedule. First, the 
Exchange proposes to amend the paragraphs describing ``ADAV'' in the 
Definition section to include the definition of ``NBBO Set Volume.'' In 
particular, the term ``NBBO Set Volume'' will mean the ADAV in all 
securities of an Equity Member that sets the NBB or NBO on MIAX Pearl 
Equities. Further, the Exchange proposes that an Equity Member's NBBO 
Set Volume will be excluded from the calculation of the NBBO Program in 
certain instances. The Exchange proposes to amend the second paragraph 
related to ADAV in the Definitions section to include NBBO Set Volume 
as excluded volume. With the proposed changes, the paragraphs 
describing ADAV in the Definitions section will read as follows:

    ``ADAV'' means average daily added volume calculated as the 
number of shares added per day and ``ADV'' means average daily 
volume calculated as the number of shares added or removed, 
combined, per day. ADAV and ADV are calculated on a monthly basis. 
NBBO Set Volume means the ADAV in all securities of an Equity Member 
that sets the NBB or NBO on MIAX Pearl Equities.
    The Exchange excludes from its calculation of ADAV, ADV, and 
NBBO Set Volume shares added or removed on any day that the 
Exchange's system experiences a disruption that lasts for more than 
60 minutes during regular trading hours, on any day with a scheduled 
early market close, and on the ``Russell Reconstitution Day'' 
(typically the last Friday in June).

    Next, the Exchange proposes to amend the definition for ``Market 
Quality Securities'' or ``MQ Securities.'' Since the Exchange proposes 
to eliminate the Market Quality Tiers and associated rebates, which are 
based on an Equity Member's participation at the NBBO in the currently-
defined MQ Securities, the Exchange will amend this definition to fit 
within the NBBO Program. As described above, Level B and Level C 
enhanced rebates in the NBBO Program will be partly based on an Equity 
Member's Percent Time at NBBO on MIAX Pearl Equities in a certain 
amount of MQ Securities. The Exchange proposes to amend the definition 
of MQ Securities to reflect the elimination of the Market Quality Tiers 
and adoption of the NBBO Program. Accordingly, with the proposed 
changes, the definition for Market Quality Securities will be as 
follows:

    ``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.

    In connection with the proposed revised definition for MQ 
Securities, the Exchange also proposes to amend the corresponding 
paragraph in the General Notes section regarding when the Exchange 
excludes certain Market Quality security volume. With the proposed 
changes, the exclusion paragraph will read as follows:

    For the purpose of determining qualification for the rebates 
described in Level B and Level C of Market Quality Tier columns in 
the NBBO Setter Plus Program, the Exchange will exclude from its 
calculation: (1) any trading day that the Exchange's system 
experiences a disruption that lasts for more than 60 minutes during 
regular trading hours; (2) any day with a scheduled early market 
close; and (3) the ``Russell Reconstitution Day'' (typically the 
last Friday in June).

    The purpose of all these changes is to provide consistency and 
clarity in the Fee Schedule in light of the proposed adoption of the 
NBBO Program and corresponding elimination of other rebate programs.
Implementation
    The proposed 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 \23\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \24\ in

[[Page 66538]]

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.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(4).
    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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. As of August 23, 2023, based on publicly available information, 
no single registered equities exchange currently has more than 
approximately 13-14% of the total market share of executed volume of 
equities trading for the month of August 2023.\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 currently represents approximately 1.86% of the overall 
market share. 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\
---------------------------------------------------------------------------

    \26\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/ (last visited August 23, 
2023).
    \27\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37499 (June 29, 2005).
---------------------------------------------------------------------------

    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 incentivize market participants to direct their order flow 
to the Exchange, which the Exchange believes would enhance liquidity 
and market quality in both a broad manner and in a targeted manner with 
respect to the MQ Securities and the NBBO Program.
NBBO Setter Plus Program
    The Exchange believes that the proposed NBBO Setter Plus Program, 
in general, is a reasonable means 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. As noted above, aspects of the proposed NBBO 
Program are comparable to other volume-based incentives currently in 
place at the Exchange and competing exchanges, which have been widely 
adopted.\28\ The Exchange believes the proposed NBBO Program is 
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 to 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 proposed NBBO 
Program is equitable and not unfairly discriminatory because it is 
designed to incentivize the entry of aggressively priced displayed 
liquidity that will create tighter spreads, thereby promoting price 
discovery and market quality on the Exchange to the benefit of all 
Equity Members and public investors.
---------------------------------------------------------------------------

    \28\ See, generally, Fee Schedule, Section 1)c) and Section 
1)f); see also Cboe BZX Equities Fee Schedule, NBBO Setter Section 
and Add/Remove Volume Tiers Section and MEMX Fee Schedule, NBBO 
Setter/Joiner Tiers Section.
---------------------------------------------------------------------------

    The Exchange believes the proposal to have three different volume 
calculation methods to determine the Equity Member's tier for purposes 
of the NBBO Program is reasonable, equitably allocated, and not 
unfairly discriminatory because the three methods will be calculated in 
parallel in each month, and each Equity Member will receive the tier 
associated with the highest tier achieved each month. This allows 
market participants with various trading strategies to participate in 
the NBBO Program, including, among others, Equity Members with 
liquidity providing strategies, aggressive order adding strategies that 
attempt to set the NBBO, as well as Equity Members acting as an agency 
for customers.
    The Exchange believes the proposed Market Quality Tiers applicable 
to the enhanced rebates in the NBBO Program, which are dependent upon 
the Equity Member's Percent Time at NBBO in MQ Securities, are 
reasonable, equitably allocated and not unfairly discriminatory. This 
is because the Market Quality Tiers of the NBBO Program are intended to 
encourage Equity Members to promote price discovery and market quality 
by quoting at the NBBO for a significant portion of each day in a large 
number of securities generally, and in MQ Securities in particular, 
thereby benefiting the Exchange and other investors by providing 
improved trading conditions for all market participants through 
narrower bid-ask spreads and increasing the depth of liquidity 
available at the NBBO in a broad base of highly liquid securities. As 
noted above, Cboe BZX provides an enhanced rebate based on increased 
member participation in a defined list of securities (called the NBBO 
Setter Securities on Cboe BZX) that set the NBBO on that exchange.\29\
---------------------------------------------------------------------------

    \29\ See supra note 15.
---------------------------------------------------------------------------

    The Exchange believes the proposed enhanced rebates in Level B \30\ 
and Level C \31\ of the Market Quality Tiers of the NBBO Program are 
reasonable in that they do not reflect disproportionate increases above 
the standard rebates of ($0.00250) per share for Level B and ($0.00260) 
per share for Level C, but reflect the value added value to the 
Exchange's market quality from Equity Members that meet the required 
Percent Time at NBBO in the minimum number of MQ Securities, which 
should incentivize the entry of aggressively priced displayed liquidity 
that will create tighter spreads, promote price discovery and market 
quality on the Exchange to the benefit of all Equity Members and public 
investors.
---------------------------------------------------------------------------

    \30\ Proposed tiered rebates ranging from ($0.00250) in Tier 1 
to ($0.00355) in Tier 4.
    \31\ Proposed tiered rebates ranging from ($0.00260) in Tier 1 
to ($0.00360) in Tier 4.
---------------------------------------------------------------------------

    The Exchange further believes that the proposed criteria to achieve 
the enhanced rebates provided in Level B and Level C of the Market 
Quality Tiers of the NBBO Program is reasonable and not unfairly 
discriminatory because the proposed criteria for Level C rebates is

[[Page 66539]]

incrementally more difficult to achieve than that of Level B, and thus 
Level C appropriately offers higher rebates commensurate with the 
corresponding higher Percent Time at NBBO by Equity Members in the 
minimum number of MQ Securities. Therefore, the Exchange believes that 
the Market Quality Tiers of the NBBO Program, as proposed, are 
consistent with an equitable allocation of fees and rebates, as the 
more stringent criteria correlates with the corresponding higher tiers' 
enhanced rebates.
    In addition, the Exchange believes that it is reasonable and 
consistent with an equitable allocation of fees to pay higher rebates 
for executions of orders in securities priced at or above $1.00 per 
share for Added Displayed Volume to Equity Members that qualify for one 
of the Market Quality Tiers of the NBBO Program because of the 
additional commitment to market quality reflected in the associated 
Percent Time at NBBO requirements. Such Equity Members benefit all 
investors by promoting price discovery and increasing the depth of 
liquidity available at the NBBO and benefit the Exchange itself by 
enhancing its competitiveness as a market center that attracts 
actionable orders. Further, the Exchange notes that the proposed Market 
Quality Tiers of the NBBO Program offer incentives on the Exchange that 
would apply uniformly to all Equity Members, and any Equity Member may 
choose to qualify for one of those tiers by meeting the associated 
requirements in any month. The Exchange believes that the requirements 
are attainable for many market participants who do actively quote on 
the Exchange and are reasonably related to the enhanced market quality 
that the NBBO Program is designed to promote.
    The Exchange also believes that including in the proposed Market 
Quality Tiers of the NBBO Program a quoting requirement for certain 
specified securities (i.e., the MQ Securities), is equitable and not 
unfairly discriminatory because the Exchange has identified the MQ 
Securities as securities in which it would like to inject additional 
quoting competition, which the Exchange believes will generally act to 
narrow spreads, increase size at the NBBO, and increase liquidity depth 
in such securities, thereby increasing the attractiveness of the 
Exchange as a destination venue with respect to such securities. 
Accordingly, the Exchange believes that this aspect of the proposal is 
reasonable, equitably allocated, and not unfairly discriminatory 
because it is consistent with the overall goals of enhancing market 
quality.
    As noted above, the proposed Market Quality Tiers of the NBBO 
Program are similar in structure and purpose to pricing programs in 
place on at least one other exchange that is designed to enhance market 
quality.\32\ Specifically, this program provides a higher rebate for 
executions of liquidity-adding displayed orders for members that 
achieve minimum quoting standards, including minimum quoting at the 
NBBO in a large number of securities generally, or certain designated 
securities in particular.\33\ The Exchange also notes that the proposed 
Market Quality Tiers of the NBBO Program are not dissimilar from 
volume-based rebates and fees which have been widely adopted by 
exchanges \34\ and are equitable and not unfairly discriminatory 
because they are generally open to all Equity Members on an equal basis 
and provide higher rebates that are reasonably related to the value of 
an exchange's market quality. Much like volume-based tiers are designed 
to incentivize higher levels of liquidity provision, the proposed 
Market Quality Tiers portion of the NBBO Program is designed to 
incentivize enhanced market quality on the Exchange through tighter 
spreads, greater size at the NBBO, and greater quoting depth in a large 
number of securities generally, and in MQ Securities specifically, 
through the provision of an enhanced rebate, where such rebate will in 
turn incentivize higher levels of displayed liquidity provision in a 
general manner. Accordingly, the Exchange believes that the proposed 
NBBO Program, in general, promotes the principles discussed in Sections 
6(b)(4) and 6(b)(5) of the Act.\35\
---------------------------------------------------------------------------

    \32\ See supra note 15.
    \33\ Id.
    \34\ Id.
    \35\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

NBBO Setter Additive Rebate
    The Exchange believes the proposed NBBO Setter Additive Rebate is 
reasonable, equitably allocated and not unfairly discriminatory because 
is available to all Equity Members and 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. As such, the Exchange believes the NBBO Setter Additive 
Rebate for executions of orders in securities priced at or above $1.00 
per share for Added Displayed Volume (other than Retail Orders) that 
sets the NBB or NBO on the Exchange is reasonably related to the market 
quality benefits that such additional enhanced rebate is designed to 
promote. Additionally, other U.S. equity exchanges have adopted similar 
pricing incentives applicable to executions of orders that establish 
the NBBO, with the Exchange's proposed top tier rebate, coupled with 
the NBBO Setter Additive Rebate, being higher than competing exchanges' 
top rebates for similar executions.\36\
---------------------------------------------------------------------------

    \36\ See MEMX Fee Schedule, NBBO Setter/Joiner Tiers Section 
(providing additional rebate of ($0.0004) per share to the top 
displayed liquidity tier rebate of ($0.0033) per share for 
executions of added displayed volume (other than retail orders) in 
securities priced at or above $1.00 per share that establish the 
NBBO or establish a new BBO on MEMX that matches the NBBO first 
established on an away market, for a total ``enhanced'' rebate of 
($0.0037) per share); and Cboe BZX Equities Fee Schedule, NBBO 
Setter section and Add/Remove Volume Tiers section (providing 
additional rebate of ($0.0007) per share to the top displayed 
liquidity tier rebate of ($0.0031) per share for executions of added 
displayed volume in securities priced at or above $1.00 per share 
that establish a new Setter NBBO in NBBO Setter Securities on Cboe 
BZX, for a total ``enhanced'' rebate of ($0.0038) per share).
---------------------------------------------------------------------------

Reduce Standard Rebate for Executions of Orders in Securities Priced at 
or Above $1.00 per Share for Added Displayed Volume (All Tapes) and 
Corresponding Changes to Liquidity Indicator Codes
    The Exchange believes that the proposal to reduce the standard 
rebate from ($0.0027) to ($0.0024) per share for executions of orders 
in securities priced at or above $1.00 per share for Added Displayed 
Volume is reasonable, equitably allocated and not unfairly 
discriminatory because it represents a modest decrease from the current 
standard rebate and competitive with, and higher than, the standard 
rebates provided by other exchanges for similar executions.\37\ The 
Exchange further believes that the proposed reduced standard rebate for 
executions of orders in securities priced at or above $1.00 per share 
for Added Displayed Volume is equitably allocated and not unfairly 
discriminatory because the standard rebate will apply equally to all 
Equity Members. The Exchange also believes its proposal to amend 
Section 1)b), Liquidity Indicator Codes and Associated Fees, to reflect 
the proposed decreased rebate for Added Displayed Volume in the 
corresponding Liquidity Indicator Codes AA, AB and AC is reasonable 
because it provides uniformity and clarity in the Fee Schedule.
---------------------------------------------------------------------------

    \37\ See supra note 20.

---------------------------------------------------------------------------

[[Page 66540]]

Proposal To Eliminate the Add Volume Tiers Table and Associated Rebates 
and the Market Quality Tiers Table and Associated Rebates
    The Exchange believes its proposal to eliminate the Add Volume 
Tiers table and associated rebates in Section 1)c) of the Fee Schedule 
and rename Section 1)c) as the NBBO Setter Plus Program in connection 
with the NBBO Program, is reasonable, equitably allocated and not 
unfairly discriminatory. The Exchange adopted the Add Volume Tiers 
rebates for the purpose of encouraging Equity Members to increase their 
orders that add liquidity on the Exchange, thereby improving its market 
quality with respect to such securities and contributing to a more 
robust and well-balanced market ecosystem on the Exchange to the 
benefit of all Equity Members. The Exchange's proposal to eliminate the 
Add Volume Tiers table and associated rebates is reasonable because the 
NBBO Program incorporates similar aspects and rebate amounts, 
including, under volume calculation Method 1, tiered rebates based on 
an Equity Member's ADAV as a percentage of TCV. The Exchange notes that 
the NBBO Program does have slightly lower rebates for the corresponding 
Add Volume Tier thresholds; however, the Exchange believes that the 
benefits of the NBBO Program, i.e., several volume calculation methods 
to obtain enhanced rebates, provides more opportunities for Equity 
Members to achieve higher rebates and will encourage the submission of 
increased order flow, which would benefit all Equity Members by 
providing greater execution opportunities on the Exchange and 
contribute to a deeper, more liquid market, to the benefit of all 
investors and market participants.
    Similarly, the Exchange believes its proposal to eliminate the 
Market Quality Tiers table and associated rebate in Section 1)f) of the 
Fee Schedule is reasonable, equitably allocated and not unfairly 
discriminatory. The Exchange adopted the Market Quality Tiers for the 
purpose of encouraging executions of Added Displayed Volume for 
qualifying Equity Members as a means of recognizing the value of market 
participants that consistently quote at the NBBO in a large number of 
securities generally, and in the specified MQ Securities, in 
particular. The Exchange's proposal to eliminate the Market Quality 
Tiers table and associated rebates is reasonable as the NBBO Program 
incorporates similar aspects, rebate amounts calculation methodologies 
based on an Equity Member's Percent Time at NBBO in certain MQ 
Securities under Level B and Level C, which should provide more 
opportunities for Equity Members to achieve higher rebates and will 
encourage the submission of increased order flow to the benefit of all 
Equity Members. This should provide greater execution opportunities on 
the Exchange and contribute to a more liquid market, to the benefit of 
all investors and market participants.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange believes the proposed rule change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
NBBO Program will be eligible to all Equity Members equally in that all 
Equity Members have the opportunity to participate and therefore 
qualify for the proposed enhanced rebates. Furthermore, the Exchange 
believes that the proposed NBBO Program will incentivize Equity Members 
to submit additional aggressively priced displayed liquidity to the 
Exchange, and to increase their order flow on the Exchange generally, 
thereby contributing to a deeper and more liquid market and promoting 
price discovery and market quality on the Exchange to the benefit of 
all market participants and enhancing the attractiveness of the 
Exchange as a trading venue. The Exchange believes that this, in turn, 
would continue to encourage market participants to direct additional 
order flow to the Exchange. Greater liquidity benefits all Equity 
Members by providing more trading opportunities and encourages Equity 
Members to send additional orders to the Exchange, thereby contributing 
to robust levels of liquidity, which benefits all market participants.
    The proposed decrease to the standard rebate for executions of 
orders in securities priced at or above $1.00 per share for Added 
Displayed Volume does not impose a burden on intramarket competition 
that is not in furtherance of the Act in that the proposed change 
applies to all Equity Members equally and the proposed reduced rate is 
still competitive with, or higher than, rebates offered by competing 
exchanges for similar executions.\38\
---------------------------------------------------------------------------

    \38\ See supra note 20.
---------------------------------------------------------------------------

    The proposed non-substantive changes to the Definitions section of 
the Fee Schedule are similarly non-burdensome as they are intended to 
provide clear descriptions of the terms applicable to the proposed NBBO 
Program.
    In general, the Exchange believes all of the proposed changes are 
intended to enhance market quality on the Exchange in a large number of 
securities generally, and in the MQ Securities specifically, and to 
encourage Equity Members to maintain or increase their order flow on 
the Exchange, thereby promoting price discovery and contributing to a 
deeper and more liquid market to the benefit of all market 
participants. As a result, the Exchange believes the proposal would 
enhance its competitiveness as a market that attracts actionable 
orders, thereby making it a more desirable destination venue for its 
customers. For these reasons, the Exchange believes that the proposal 
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.'' \39\
---------------------------------------------------------------------------

    \39\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 47396 (June 29, 2005).
---------------------------------------------------------------------------

Intermarket Competition
    The Exchange believes its proposal will benefit competition, and 
the Exchange notes that it operates in a highly competitive market. 
Equity Members have numerous alternative venues they may participate on 
and direct their order flow to, including fifteen other equities 
exchanges and numerous alternative trading systems and other off-
exchange venues. As noted above, no single registered equities exchange 
currently has more than 13-14% of the total market share of executed 
volume of equities trading.\40\ Thus, in such a low-concentrated and 
highly competitive market, no single equities exchange possesses 
significant pricing power in the execution of order flow. Moreover, the 
Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow in response to new or different pricing structures 
being introduced to the market. Accordingly, competitive forces 
constrain the Exchange's transaction fees and rebates generally, 
including with respect to executions of Added Displayed Volume, and 
market participants can readily choose to send their orders to other 
exchanges and off-exchange venues if they deem fee levels

[[Page 66541]]

at those other venues to be more favorable.
---------------------------------------------------------------------------

    \40\ See supra note 26.
---------------------------------------------------------------------------

    As described above, the proposal is designed to enhance market 
quality on the Exchange and to encourage additional order flow and 
quoting activity on the Exchange and to promote market quality through 
pricing incentives that are comparable to, and competitive with, 
pricing programs in place at other exchanges with respect to executions 
of Added Displayed Volume.\41\ Accordingly, the Exchange believes the 
proposal would not be a burden on, but rather promote, intermarket 
competition by enabling the Exchange to better compete with other 
exchanges that offer similar incentives to market participants that 
enhance market quality and/or achieve certain volume criteria and 
thresholds.
---------------------------------------------------------------------------

    \41\ See supra note 19.
---------------------------------------------------------------------------

    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.'' \42\ 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' . . .''.\43\ 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.
---------------------------------------------------------------------------

    \42\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \43\ 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)).
---------------------------------------------------------------------------

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,\44\ and Rule 19b-4(f)(2) \45\ 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.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \45\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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 (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#443631282169272b2929212a3037043721276a232b32"><span class="__cf_email__" data-cfemail="a4d6d1c8c189c7cbc9c9c1cad0d7e4d7c1c78ac3cbd2">[email protected]</span></a>. Please include 
file number SR-PEARL-2023-45 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
    All submissions should refer to file number SR-PEARL-2023-45. 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 (https://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 proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-PEARL-2023-45 and should be 
submitted on or before October 18, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\46\
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    \46\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20960 Filed 9-26-23; 8:45 am]
BILLING CODE 8011-01-P


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