[Federal Register Volume 83, Number 160 (Friday, August 17, 2018)]
[Notices]
[Pages 41126-41128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17740]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83835; File No. SR-PEARL-2018-15]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change to the Exchange 
Rule 514 Priority on the Exchange

August 13, 2018.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on August 1, 2018, 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 Exchange Rule 514, 
Priority on the Exchange.
    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 Exchange proposes to amend Exchange Rule 514, Priority on the 
Exchange. Specifically, the Exchange proposes to amend subsection (c), 
Self-Trade Protection, to broaden the protection afforded under the 
current rule by giving Members \3\ the option to have this protection 
apply at the market participant identifier (``MPID'') \4\ level (i.e., 
currently existing functionality), or at the firm level. The Exchange 
believes that this enhancement will provide helpful flexibility for 
market making firms that wish to prevent trading against all orders 
entered by their firm under any MPID, instead of just those entered 
under the same MPID.
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    \3\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of MIAX PEARL 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See Exchange Rule 100.
    \4\ The term ``MPID'' means unique market participant 
identifier. See Exchange Rule 100.
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    Currently, the rule prevents orders entered by a Market Maker \5\ 
via the MEO Interface \6\ or the FIX Interface \7\ using the same MPID 
from executing against orders entered on the opposite side of the 
market by the same Market Maker using the same MPID via the MEO 
Interface or the FIX Interface.\8\ In such a case, the System \9\ will 
cancel the oldest of the orders back to the entering party prior to 
execution.
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    \5\ The term ``Market Maker'' or ``MM'' means a Member 
registered with the Exchange for the purpose of making markets in 
options contracts traded on the Exchange and that is vested with the 
rights and responsibilities specified in Chapter VI of the MIAX 
PEARL Rules. See Exchange Rule 100.
    \6\ The term ``MEO Interface'' means a binary order interface 
used for submitting certain order types (as set forth in Rule 516) 
to the MIAX PEARL System. See Exchange Rule 100.
    \7\ The term ``FIX Interface'' means the Financial Information 
Exchange interface used for submitting certain order types (as set 
forth in Rule 516) to the MIAX PEARL System. See Exchange Rule 100.
    \8\ See Exchange Rule 514(c)(1).
    \9\ 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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    Members of the Exchange may either be Market Makers or Electronic 
Exchange Members.\10\ Each Market Maker and Electronic Exchange Member 
is assigned an MPID by the Exchange for identification purposes. A 
Member may have multiple Market Maker MPIDs on the Exchange, therefore 
the possibility exists that a Member may cross its own Market Maker's 
orders.\11\
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    \10\ The term ``Electronic Exchange Member'' or ``EEM'' means 
the holder of a Trading Permit who is a Member representing as agent 
Public Customer Orders or Non-Customer Orders on the Exchange and 
those non-Market Maker Members conducting proprietary trading. 
Electronic Exchange Members are deemed ``members'' under the 
Exchange Act. See Exchange Rule 100.
    \11\ The Exchange notes that if requested by an EEM, orders 
entered by an EEM via the MEO Interface using the same MPID will not 
be executed against orders entered on the opposite side of the 
market by the same EEM using the same MPID via the MEO Interface. In 
such a case, the System will cancel the oldest of the orders back to 
the entering party prior to execution. See Exchange Rule 514(c)(2).
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    The Exchange now proposes to allow members to choose to have this 
protection applied at either the MPID level, as currently implemented, 
or at the member firm level. If members choose to have this protection 
applied at the member firm level, the System will prohibit orders 
entered from different MPIDs within the Member's firm from trading 
against one another. The Exchange believes that the proposed 
enhancement will provide Members with more tailored self-trade 
functionality that will allow Members to manage their trading as 
appropriate based on the Member's business needs. While the Exchange 
believes that some firms will want to restrict trading interest from 
the same MPID, (as currently implemented), the Exchange believes that 
other firms will find it helpful to apply self-trade protection across 
all MPIDs of the same firm.
    The Exchange note that similar functionality also exists on the 
Nasdaq Stock Market (``NASDAQ'') which prevents self-trades by MPID, or 
alternatively, if selected by the member, self-trade protection for all 
MPIDs of the firm.\12\ Cboe BZX Exchange (``CboeBZX'') also has a 
similar rule in place which provides members the ability to apply Match 
Trade Prevention (``MTP'') modifiers (CboeBZX's version

[[Page 41127]]

of self-trade protection) based on MPID, Exchange Member, trading 
group, or Exchange Sponsored Participant identifiers.\13\
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    \12\ See Nasdaq Stock Market Rule, Chapter VI, Sec. 18(c)(1).
    \13\ See Cboe BZX Exchange Rule 11.9(f).
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    The Exchange will announce the implementation date of this 
functionality via a Regulatory Circular prior to the functionality 
being available on the Exchange.
2. Statutory Basis
    MIAX PEARL believes that its proposed rule changes are consistent 
with Section 6(b) of the Act \14\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \15\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanisms of a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed changes promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanism of a free and open market and a national market system by 
providing Market Makers with additional flexibility to configure self-
trade protections offered by the Exchange. Currently, all Market Makers 
are provided functionality that prevents orders entered by a Market 
Maker via the MEO Interface or the FIX Interface using the same MPID 
from executing against orders entered on the opposite side of the 
market by the same Market Maker using the same MPID via the MEO 
Interface or the FIX Interface. While this functionality is helpful, 
some members would prefer not to trade with orders entered under 
different MPIDs of the same firm. Therefore, the Exchange is proposing 
to provide Exchange Members flexibility with respect to how self-trade 
protections are implemented. Members may continue to use the current 
functionality, while members who prefer to prevent self-trades across 
different MPIDs within the same firm will now be provided with 
functionality that allows them to do so.
    Similar functionality exists on the Nasdaq Stock Market and CboeBZX 
\16\ and the Exchange believes that the flexibility to apply self-trade 
protection at either the MPID or firm level would be useful to Members 
of MIAX PEARL. The Exchange also believes that the proposed rule change 
is designed to promote just and equitable principles of trade and will 
remove impediments to and perfect the mechanisms of a free and open 
market as it will enhance self-trade protections provided to MIAX PEARL 
Market Makers similar to those protections provided on other markets.
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    \16\ See supra note 12 and 13.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    MIAX PEARL does not believe that the proposed rule change will 
impose any burden on intermarket or intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
proposed rule change is designed to enhance the Exchange's current 
self-trade protection, and will benefit members that wish to protect 
their orders from trading with orders from other Market Makers within 
the same firm, rather than the more limited MPID standard currently in 
use. The new functionality, which is similar to functionality already 
provided on CboeBZX, is also completely voluntary, and members that 
wish to use the current functionality may continue to do so. The 
Exchange does not believe that providing more flexibility to members 
will have any significant impact on competition. Conversely, the 
Exchange believes that the proposed rule change will foster competition 
as Market Makers may send more orders to the Exchange knowing that 
there is no chance that they will trade with their own orders on the 
other side of the market. This could result in more order flow and more 
liquidity on the Exchange.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intra-market competition as self-trade protection 
is available to all Market Makers on the Exchange. Further, the 
Exchange does not believe that the proposed rule change will impose any 
burden on inter-market competition, and rather could potentially 
promote inter-market competition and result in more competitive order 
flow to the Exchange by more widely preventing Market Makers from 
trading with their own orders.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) \18\ 
thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    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.

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#1e6c6b727b337d7173737b706a6d5e6d7b7d30797168"><span class="__cf_email__" data-cfemail="4634332a236b25292b2b232832350635232568212930">[email protected]</span></a>. Please include 
File Number SR-PEARL-2018-15 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-2018-15. 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

[[Page 41128]]

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 10:00 a.m. and 
3:00 p.m. Copies of the 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-2018-15 and should be submitted on 
or before September 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-17740 Filed 8-16-18; 8:45 am]
 BILLING CODE 8011-01-P


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