[Federal Register Volume 89, Number 187 (Thursday, September 26, 2024)]
[Notices]
[Pages 78920-78926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22025]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101122; File No. SR-PEARL-2024-44]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX 
Pearl Options Fee Schedule

September 20, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 11, 2024, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``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 Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Pearl Options 
Fee Schedule (``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-options/pearl-options/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 Section (1)(a) of the Fee Schedule, 
Exchange Rebates/Fees--Add/Remove Tiered Rebates/Fees, to: (1) amend 
the Priority Customer \3\ origin table to increase certain Maker 
rebates in Penny Classes (defined below); (2) establish a new ``Step-Up 
Maker Rebate'' (described below) for the MIAX Pearl \4\ Market Maker 
\5\ origin in Non-Penny Classes; and (3) remove certain alternative 
volume criteria and corresponding footnotes applicable to executions of 
orders for the Market Maker origin and non-Priority Customer, firm, 
broker-dealer (``BD''), and non-MIAX Pearl Market Maker origin 
(collectively referred to herein as ``Professional Members''). The 
Exchange initially filed this proposal on August 30, 2024 (SR-PEARL-
2024-39). On September 11, 2024, the Exchange withdrew SR-PEARL-2024-39 
and refiled this proposal.
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    \3\ The term ``Priority Customer'' means a person or entity that 
(i) is not a broker or dealer in securities, and (ii) does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial accounts(s). The number of 
orders shall be counted in accordance with Interpretation and Policy 
.01 of Exchange Rule 100. See the Definitions section of the Fee 
Schedule and Exchange Rule 100, including Interpretation and Policy 
.01.
    \4\ All references in this filing to ``MIAX Pearl'' are to the 
options trading facility of MIAX PEARL, LLC. Any references to the 
equities trading facility of MIAX PEARL, LLC would be to ``MIAX 
Pearl Equities.'' See Exchange Rule 1901.
    \5\ The term ``Market Maker'' 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 Exchange Rules. See the 
Definitions section of the Fee Schedule and Exchange Rule 100.
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Background
    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon the total monthly volume 
executed by the Member \6\ on MIAX Pearl in the relevant, respective 
origin type (not including Excluded Contracts) \7\ (as the numerator) 
expressed as a percentage of (divided by) TCV \8\ (as the denominator). 
In addition, the per contract transaction rebates and fees are applied 
retroactively to all eligible volume for that origin type once the 
respective threshold tier has been reached by the Member. The Exchange 
aggregates the volume of Members and their Affiliates.\9\ Members that 
place resting

[[Page 78921]]

liquidity, i.e., orders resting on the Book \10\ of the MIAX Pearl 
System,\11\ are paid the specified ``maker'' rebate (each a ``Maker''), 
and Members that execute against resting liquidity are assessed the 
specified ``taker'' fee (each a ``Taker''). For opening transactions 
and ABBO \12\ uncrossing transactions, per contract transaction rebates 
and fees are waived for all market participants. Finally, Members are 
assessed lower transaction fees and receive lower rebates for order 
executions in standard option classes in the Penny Interval Program 
\13\ (``Penny Classes'') than for order executions in standard option 
classes which are not in the Penny Interval Program (``Non-Penny 
Classes''), where Members are assessed higher transaction fees and 
receive higher rebates.
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    \6\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of Exchange 
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 the Definitions section of 
the Fee Schedule and Exchange Rule 100.
    \7\ The term ``Excluded Contracts'' means any contracts routed 
to an away market for execution. See the Definitions section of the 
Fee Schedule.
    \8\ The term ``TCV'' means total consolidated volume calculated 
as the total national volume in those classes listed on MIAX Pearl 
for the month for which the fees apply, excluding consolidated 
volume executed during the period time in which the Exchange 
experiences an ``Exchange System Disruption'' (solely in the option 
classes of the affected Matching Engine (as defined below)). See the 
Definitions section of the Fee Schedule. The term ``Exchange System 
Disruption'' means an outage of a Matching Engine or collective 
Matching Engines for a period of two consecutive hours or more, 
during trading hours. Id. A ``Matching Engine'' is a part of the 
MIAX Pearl electronic system that processes options orders and 
trades on a symbol-by-symbol basis. Some Matching Engines will 
process option classes with multiple root symbols, and other 
Matching Engines may be dedicated to one single option root symbol 
(for example, options on SPY may be processed by one single Matching 
Engine that is dedicated only to SPY). A particular root symbol may 
only be assigned to a single designated Matching Engine. A 
particular root symbol may not be assigned to multiple Matching 
Engines. Id. The Exchange believes that it is reasonable and 
appropriate to select two consecutive hours as the amount of time 
necessary to constitute an Exchange System Disruption, as two hours 
equates to approximately 1.4% of available trading time per month. 
The Exchange notes that the term ``Exchange System Disruption'' and 
its meaning have no applicability outside of the Fee Schedule, as it 
is used solely for purposes of calculating volume for the threshold 
tiers in the Fee Schedule.
    \9\ The term ``Affiliate'' means (i) an affiliate of a Member of 
at least 75% common ownership between the firms as reflected on each 
firm's Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX Pearl Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX Pearl 
Market Maker) that has been appointed by a MIAX Pearl Market Maker, 
pursuant to the following process. A MIAX Pearl Market Maker 
appoints an EEM and an EEM appoints a MIAX Pearl Market Maker, for 
the purposes of the Fee Schedule, by each completing and sending an 
executed Volume Aggregation Request Form by email to 
<a href="/cdn-cgi/l/email-protection#2e434b434c4b5c5d46475e6e43474f56415e5a4741405d004d4143"><span class="__cf_email__" data-cfemail="28454d454a4d5a5b404158684541495047585c4147465b064b4745">[email protected]</span></a> no later than 2 business days prior to 
the first business day of the month in which the designation is to 
become effective. Transmittal of a validly completed and executed 
form to the Exchange along with the Exchange's acknowledgement of 
the effective designation to each of the Market Maker and EEM will 
be viewed as acceptance of the appointment. The Exchange will only 
recognize one designation per Member. A Member may make a 
designation not more than once every 12 months (from the date of its 
most recent designation), which designation shall remain in effect 
unless or until the Exchange receives written notice submitted 2 
business days prior to the first business day of the month from 
either Member indicating that the appointment has been terminated. 
Designations will become operative on the first business day of the 
effective month and may not be terminated prior to the end of the 
month. Execution data and reports will be provided to both parties. 
See the Definitions section of the Fee Schedule.
    \10\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100.
    \11\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \12\ The term ``ABBO'' means the best bid(s) or offer(s) 
disseminated by other Eligible Exchanges (defined in Exchange Rule 
1400(g)) and calculated by the Exchange based on market information 
received by the Exchange from OPRA. See the Definitions section of 
the Fee Schedule and Exchange Rule 100.
    \13\ See Securities Exchange Act Release No. 88992 (June 2, 
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
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Proposal To Amend the Priority Customer Origin Table To Increase 
Certain Maker Rebates in Penny Classes
    First, the Exchange proposes to amend the Priority Customer origin 
table to increase the Maker rebates in tiers 1 and 2 for Priority 
Customer orders in Penny Classes that trade against all origins. 
Currently, the Priority Customer origin table provides certain volume 
criteria thresholds for all tiers that are based upon the total monthly 
volume executed in all option classes by a Priority Customer on MIAX 
Pearl as a percentage of TCV. Pursuant to the Priority Customer origin 
table, Priority Customers qualify for the following Maker rebates when 
Priority Customer orders in Penny Classes trade against all origins: 
(i) ($0.25) \14\ per contract in tiers 1 and 2 if the Priority Customer 
executes above 0.00% to at least 0.40% of TCV; (ii) ($0.45) per 
contract in tier 3 if the Priority Customer executes above 0.40% to at 
least 0.85% of TCV; (iii) ($0.49) per contract in tier 4 if the 
Priority Customer executes above 0.85% to at least 1.25% of TCV; and 
(iv) ($0.52) per contract in tiers 5 and 6 if the Priority Customer 
executes above 1.25% of TCV.
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    \14\ Rebates are denoted in parentheses in the Fee Schedule.
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    The Exchange now proposes to amend the Priority Customer origin 
table to increase the Maker rebates in tiers 1 and 2 from ($0.25) to 
($0.31) per contract for Priority Customer orders in Penny Classes that 
trade against all origins. The Exchange does not propose to amend any 
of the volume threshold criteria or the Maker rebates or Taker fees in 
any other tier for Priority Customer orders. The purpose of this 
proposed change is for business and competitive reasons in order to 
attract additional Penny Class volume from Members by increasing the 
Maker rebates for options transactions in Penny Classes in tiers 1 and 
2 for Priority Customer orders. The Exchange believes that this may, in 
turn, encourage Members to submit more Priority Customer orders, 
leading to increased liquidity on the Exchange to the benefit of all 
market participants by providing more trading opportunities and tighter 
spreads.
Proposal To Establish the Step-Up Maker Rebate for Market Maker Orders 
in Non-Penny Classes
    Next, the Exchange proposes to amend the Market Maker origin table 
to establish a new ``Step-Up Maker Rebate,'' which will be noted as 
footnote ``(i)'' following the table of transaction rebates and fees 
for the Market Maker origin in Section (1)(a) of the Fee Schedule. 
Currently, pursuant to the Market Maker origin table, Market Makers 
qualify for the following Maker rebates when Market Maker orders in 
Non-Penny Classes trade against all origins: (i) ($0.30) per contract 
in tier 1 if the Market Maker executes above 0.00% to at least 0.20% of 
TCV; (ii) ($0.30) per contract in tier 2 if the Market Maker executes 
above 0.20% to at least 0.50% of TCV, or satisfies one of the three 
alternative volume criteria of tier 2; \15\ (iii) ($0.60) per contract 
in tier 3 if the Market Maker executes above 0.50% to at least 0.85% of 
TCV, or satisfies the alternative volume criteria of tier 3; \16\ (iv) 
($0.65) per contract in tier 4 if the Market Maker executes above 0.85% 
to at least 1.25% of TCV, or satisfies the alternative volume criteria 
of tier 4; \17\ (v) ($0.70) per contract in tier 5 if the Market Maker 
executes above 1.25% to at least 1.40% of TCV; and (vi) ($0.85) per 
contract in tier 6 if the Market Maker executes above 1.40% of TCV.
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    \15\ A Market Maker need only to satisfy one of the following 
three alternative volume criteria in order to receive the rebates or 
fees associated with tier 2 of the Market Maker origin table: (i) 
the total monthly volume executed by the Market Maker collectively 
in SPY/QQQ/IWM options on MIAX Pearl, not including Excluded 
Contracts, is above 0.55% of SPY/QQQ/IWM TCV; or (ii) the Market 
Maker adds liquidity collectively in SPY/QQQ/IWM options on MIAX 
Pearl, not including Excluded Contracts, above 0.30% of SPY/QQQ/IWM 
TCV; or (iii) the Market Maker satisfies the requirements of tier 2 
of both the NBBO Setter Plus Program and tier 2 of the Midpoint Peg 
Order Adding Liquidity at the Midpoint Volume Tiers table (referred 
to herein as the ``Midpoint Volume Tiers'') in the MIAX Pearl 
Equities Fee Schedule. MIAX Pearl Equities Fee Schedule, Sections 
(1)(c) and (1)(e) for a complete description of the volume 
requirements for tier 2 of the NBBO Setter Plus Program and tier 2 
of the Midpoint Volume Tiers table. See also Securities Exchange Act 
Release No. 98956 (November 15, 2023), 88 FR 81125 (November 21, 
2023) (SR-PEARL-2023-63) (providing more background and explanation 
of both programs for MIAX Pearl Equities); see also Fee Schedule, 
Section (1)(a), Market Maker origin table. The term ``SPY/QQQ/IWM 
TCV'' means total consolidated volume in SPY, QQQ, and IWM 
calculated as the total national volume in SPY, QQQ, and IWM for the 
month for which the fees apply, excluding consolidated volume 
executed during the period of time in which the Exchange experiences 
an Exchange System Disruption (solely in SPY, QQQ, or IWM options). 
See the Definitions section of the Fee Schedule.
    \16\ Market Makers satisfy the alternative volume criteria of 
tier 3 by adding liquidity in SPY options on MIAX Pearl, not 
including Excluded Contracts, above 1.10% of SPY TCV. The term ``SPY 
TCV'' means total consolidated volume in SPY calculated as the total 
national volume in SPY for the month for which the fees apply, 
excluding consolidated volume executed during the period of time in 
which the Exchange experiences an Exchange System Disruption (solely 
in SPY options). See the Definitions section of the Fee Schedule. 
Further, Market Makers qualify for: (i) Maker rebates of ($0.44) per 
contract in SPY, QQQ and IWM options for their Market Maker origin 
when trading against origins other than Priority Customer, and (ii) 
Maker rebates of ($0.42) per contract in SPY, QQQ and IWM options 
for their Market Maker origin when trading against Priority Customer 
origins, if the Market Maker satisfies the alternative volume 
criteria of tier 3, described above, of at least 1.10% in SPY when 
adding liquidity. See Fee Schedule, Section (1)(a), note 
``[diams]''.
    \17\ Market Makers satisfy the alternative volume criteria of 
tier 4 if the Market Maker's executions solely in SPY options on 
MIAX Pearl, not including Excluded Contracts, is above 2.50% of SPY 
TCV.
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    The Exchange now proposes that a Market Maker may qualify for a 
Step-Up Maker Rebate of ($0.86) per contract for Market Maker orders in 
Non-Penny Classes, instead of the otherwise applicable tiered Maker 
rebate described above for tiers 1 through 6. In order to receive the 
proposed Step-Up Maker Rebate, a Market Maker must have an increase in 
the percentage of their added liquidity in Non-Penny Classes, 
represented as a percentage of TCV, of at least 0.12% as compared to 
the

[[Page 78922]]

Market Maker's July 2024 \18\ added liquidity in Non-Penny Classes.
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    \18\ The Exchange will use a baseline for added liquidity in 
Non-Penny Classes of 0.00% of TCV for market participants that 
become Market Makers of the Exchange after July 2024 for the purpose 
of the Step-Up Maker Rebate calculation.
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    The Exchange proposes that the Step-Up Maker Rebate will expire no 
later than January 31, 2025 (referred to herein as the ``sunset 
period''),\19\ which will be stated in the same proposed footnote 
``(i)'' in the Fee Schedule. The Exchange will issue an alert to market 
participants should the Exchange determine that the Step-Up Maker 
Rebate will expire earlier than January 31, 2025 or if the Exchange 
determines to amend the criteria or rate applicable to the Step-Up 
Maker Rebate prior to the end of the sunset period, and file a 
corresponding rule filing pursuant to Rule 19b-4 of the Exchange Act 
with the Commission.
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    \19\ The Exchange notes that at the end of the sunset period, 
the Step-Up Maker Rebate will no longer apply unless the Exchange 
files a rule filing pursuant to Rule 19b-4 of the Exchange Act with 
the Commission to amend the criteria terms or update the baseline 
month to a more recent month.
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    The proposed Step-Up Maker Rebate of ($0.86) per contract is the 
same or within the range of similar rebates offered by competing 
options exchanges for transactions by market makers in Non-Penny 
Classes.\20\ The Exchange notes at least two competing options 
exchanges provide similar calculations for enhanced rebates or reduced 
fees for certain types of market participant orders by utilizing a 
volume comparison of the current month to a prior baseline month.\21\ 
Accordingly, the proposed calculation for the Step-Up Maker Rebate is 
not a new or novel concept for the method in which to provide an 
enhanced rebate to market participants.
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    \20\ See The Nasdaq Stock Market LLC (``Nasdaq''), Options 7 
Pricing Schedule, Section 2, Nasdaq Options Market--Fees and 
Rebates, note 6, available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Options%207 (last visited August 21, 
2024) (providing $0.86 per contract rebate to market makers that add 
liquidity in non-penny classes for market makers that qualify for 
tier 6 for adding liquidity in penny classes); see also Cboe BZX 
Exchange, Inc. (``BZX'') Options Fee Schedule, Transaction Fees, 
Standard Rates table, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx/ (last visited August 21, 2024) 
(providing tiered rebates ranging from $0.40 to $0.88 per contract 
for market makers that add liquidity in non-penny classes).
    \21\ See, e.g., Cboe EDGX Exchange, Inc. (``EDGX'') Options Fee 
Schedule, Footnotes, Market Maker Volume Tiers, Tier 2, available at 
https://www.cboe.com/us/options/membership/fee_schedule/edgx/ (last 
visited August 21, 2024) (providing a reduced fee for a market maker 
that meets certain volume criteria, including a requirement that the 
marker maker's step up average daily added volume in market maker 
orders from July 2019 is greater than or equal to 0.10% of their OCC 
customer volume); see also NYSE Arca, Inc. (``Arca'') Options Fees 
and Charges, Trade-Related Charges for Standard Options, Customer 
Penny Posting Credit Tiers table, available at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (last visited August 21, 2024) 
(in general, providing enhanced rebate for a firm that has an 
increase of at least 0.15% of TCADV in added liquidity over the 
firm's March 2020 level of added liquidity).
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    The purpose of this proposed change is to provide an incentive for 
Market Makers to provide liquidity in Non-Penny Classes in order to 
receive the enhanced Step-Up Maker Rebate of ($0.86) per contract 
instead of the tiered rebate that would otherwise be applicable for 
such transactions. The Exchange believes that the proposed Step-Up 
Maker Rebate will encourage Market Makers to add more liquidity in Non-
Penny Classes, thereby promoting price discovery and contributing to a 
deeper and more liquid market, which benefits all market participants 
and enhances the attractiveness of the Exchange as a trading venue. The 
purpose of including the proposed sunset period in the Fee Schedule is 
to provide clarity to Market Makers that, unless the Exchange 
determines to amend or otherwise modify the Step-Up Maker Rebate, the 
Step-Up Maker Rebate will expire at the end of the sunset period.
Proposal To Remove Certain Alternative Volume Criteria and 
Corresponding Footnotes
    Next, the Exchange proposes to amend Section (1)(a) of the Fee 
Schedule to remove certain alternative volume criteria and 
corresponding footnotes applicable to executions of orders for the 
Market Maker and Professional Member origins.
    The Exchange proposes to remove footnote ``#'' following the Marker 
Maker origin table in Section (1)(a) of the Fee Schedule and the 
corresponding alternative volume criteria in tier 2 of the Market Maker 
origin table. As described above, the Exchange provides four 
alternative volume calculation methods pursuant to which a Market Maker 
may obtain the fees and rebates in tier 2 of the Market Maker origin 
table.\22\ The fourth volume calculation method in tier 2 of the Market 
Maker origin table is the cross-asset volume based requirement, denoted 
by footnote ``#'' following the Marker Maker origin table, which 
requires Market Makers to satisfy the requirements of tier 2 of both 
the NBBO Setter Plus Program and tier 2 of the Midpoint Volume Tiers in 
the MIAX Pearl Equities Fee Schedule.\23\ The Exchange now proposes to 
remove the cross-asset volume calculation method and corresponding 
footnote ``#'' such that there will no longer be a cross-asset volume 
requirement for Market Makers to satisfy in order to reach the tier 2 
rebates and fees of the Market Maker origin table. The Exchange does 
not propose to amend the other three alternative volume calculation 
methods that Market Makers can satisfy in order to reach the tier 2 
rebates and fees of the Market Maker origin table.
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    \22\ See, generally, Fee Schedule, Section (1)(a), Market Maker 
origin table. See also supra note 15.
    \23\ See MIAX Pearl Equities Fee Schedule, Sections (1)(c) and 
(1)(e) for a complete description of the volume requirements for 
tier 2 of the NBBO Setter Plus Program and tier 2 of the Midpoint 
Volume Tiers table. See also Securities Exchange Act Release No. 
98956 (November 15, 2023), 88 FR 81125 (November 21, 2023) (SR-
PEARL-2023-63) (providing more background and explanation of both 
programs for MIAX Pearl Equities).
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    The Exchange also proposes to remove footnote ``**'' and the 
corresponding alternative volume criteria following the table of fees 
and rebates for Market Maker orders and Professional Member orders in 
Section (1)(a) of the Fee Schedule. Footnote ``**'' provides that 
Market Makers and Professional Members may qualify for the Maker rebate 
and the Taker fee associated with the highest tier for transactions in 
Non-Penny Classes if the Market Maker or Professional Member executes 
more than 0.30% volume in Non-Penny Classes, not including Excluded 
Contracts, as compared to the TCV in all MIAX Pearl-listed option 
classes, in the respective origin (i.e., either Market Maker origin or 
Professional Member origin). For purposes of qualifying for such rates, 
the Exchange aggregates the volume transacted by Members and their 
Affiliates in the following origin types in Non-Penny Classes: (1) MIAX 
Pearl Market Makers, and (2) non-Priority Customer, Firm, BD, and non-
MIAX Pearl Market Makers, i.e., Professional Members. The Exchange now 
proposes to remove footnote ``**'' and the corresponding alternative 
volume calculation method from the Fee Schedule.
    The Exchange also proposes to remove footnote ``[supcaret]'' and 
the corresponding alternative volume criteria following the table of 
fees and rebates for Professional Members in Section (1)(a) of the Fee 
Schedule. Footnote ``[supcaret]'' provides that Professional Members 
may qualify for Maker rebates equal to the greater of: (A) ($0.37) for 
Penny Classes and ($0.65) for Non-Penny Classes, or (B) the amount set 
forth in the applicable tier reached by the Professional Member in the 
relevant origin, if the Member and their Affiliates execute at least 
1.25% volume in the relevant month, in Priority Customer origin type, 
in all options classes, not

[[Page 78923]]

including Excluded Contracts, as compared to the TCV in all MIAX Pearl 
listed option classes.
    The purpose of these changes is for business and competitive 
reasons as well as to reduce complexity and provide clarity within the 
Fee Schedule. The Exchange initially established each of the above-
described alternative volume calculations in order to attract Market 
Maker and/or Professional Member order flow. The Exchange recently 
conducted an internal review and analysis of fees and rebates and 
determined that it was appropriate to remove the alternative volume 
calculations described above. The Exchange's standard volume 
calculation methods (and the two alternative volume calculation methods 
for tier 2 of the Marker Maker origin) remain highly competitive such 
that they should enable the Exchange to continue to attract Market 
Maker and Professional Member order flow and maintain market share. The 
Exchange also notes that no Member has recently achieved any of the 
three alternative volume calculation methods that the Exchange proposes 
to remove from the Fee Schedule; accordingly, the Exchange believes it 
will reduce complexity within the Fee Schedule and provide greater 
clarity to remove the alternative volume calculation methods that are 
not utilized.
Implementation
    The proposed changes are immediately effective.
2. Statutory Basis
    The Exchange believes that its proposal to amend the Fee Schedule 
is consistent with Section 6(b) of the Act \24\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\25\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange Members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\26\ 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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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(4).
    \26\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \27\
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    \27\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    There are currently 17 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange had more than approximately 14-
15% of the multiply-listed equity options market share for the month of 
July 2024.\28\ Therefore, no exchange possesses significant pricing 
power. More specifically, the Exchange had a market share of 
approximately 3.45% of executed volume of multiply-listed equity 
options for the month of July 2024.\29\
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    \28\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/ (last visited August 22, 
2024).
    \29\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
discontinue or reduce use of certain categories of products and 
services, terminate an existing membership or determine to not become a 
new member, and/or shift order flow, in response to transaction fee 
changes. For example, on February 28, 2019, the Exchange filed with the 
Commission a proposal to increase Taker fees in certain tiers for 
options transactions in certain Penny Classes for Priority Customers 
and decrease Maker rebates in certain tiers for options transactions in 
Penny Classes for Priority Customers (which fee was to be effective 
March 1, 2019).\30\ The Exchange experienced a decrease in total market 
share for the month of March 2019, after the proposal went into effect. 
Accordingly, the Exchange believes that its March 1, 2019, fee change, 
to increase certain transaction fees and decrease certain transaction 
rebates, may have contributed to the decrease in MIAX Pearl's market 
share and, as such, the Exchange believes competitive forces constrain 
the Exchange's, and other options exchanges, ability to set transaction 
fees and market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \30\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
---------------------------------------------------------------------------

Proposal To Amend the Priority Customer Origin Table To Increase 
Certain Maker Rebates in Penny Classes
    The Exchange believes its proposal to amend the Priority Customer 
origin to increase the Maker rebates in tiers 1 and 2 from ($0.25) to 
($0.31) per contract for Priority Customer orders in Penny Classes that 
trade against all origins is reasonable, equitable and not unfairly 
discriminatory because it would further incentivize Priority Customer 
orders to the Exchange. The Exchange believes that this may, in turn, 
encourage Members to submit more Priority Customer orders, leading to 
increased liquidity on the Exchange to the benefit of all market 
participants by providing more trading opportunities and tighter 
spreads. The Exchange believes the proposed increased Maker rebates in 
tiers 1 and 2 for Priority Customer orders in Penny Classes is 
equitable and not unfairly discriminatory because it will apply equally 
to all market participants who provide Priority Customer orders in 
Penny Classes.
Proposal To Establish the Step-Up Maker Rebate for Market Maker Orders 
in Non-Penny Classes
    The Exchange believes its proposal to establish the Step-Up Maker 
Rebate is reasonable, equitably allocated and not unfairly 
discriminatory because it provides Market Makers with an additional 
incentive to achieve a certain volume threshold on the Exchange in Non-
Penny Classes. The Exchange believes that the proposed Step-Up Maker 
Rebate is reasonable because it may encourage Market Makers to add more 
liquidity in Non-Penny Classes, thereby promoting price discovery and 
contributing to a deeper and more liquid market, which benefits all 
market participants and enhances the attractiveness of the Exchange as 
a trading venue.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to provide the Step-Up Maker Rebate only to Market Maker 
orders because Market Makers have market-making obligations and 
regulatory requirements, which normally do not apply to other types of 
market participants, such as Professional Members.\31\ Market Makers 
additionally have obligations to make continuous markets, engage in a 
course of dealings reasonably calculated to

[[Page 78924]]

contribute to the maintenance of a fair and orderly market, and not 
make bids or offers or enter into transactions that are inconsistent 
with a course of dealings. The Exchange believes the proposed Step-Up 
Maker Rebate is equitable and not unfairly discriminatory because it 
will be available equally to all Market Makers and will be provided in 
an equal manner to all Market Makers that satisfy the volume threshold 
requirements of the Step-Up Maker Rebate.
---------------------------------------------------------------------------

    \31\ See, generally, Chapter VI of the Exchange's Rules.
---------------------------------------------------------------------------

    The proposed Step-Up Maker Rebate promotes just and equitable 
principles of trade, fosters cooperation and coordination with persons 
engaged in facilitating transactions in securities, and protects 
investors and the public interest because the proposed Step-Up Maker 
Rebate may encourage Market Makers to send more orders to the Exchange 
in Non-Penny Classes, which are typically less liquid as compared to 
Penny Classes. To the extent that Market Maker order flow in Non-Penny 
classes is increased by the proposal, market participants may 
increasingly compete for the opportunity to trade on the Exchange, 
including sending more orders which will have the potential to be 
assessed lower fees and higher rebates. The resulting increased volume 
and liquidity in Non-Penny Classes may benefit all Exchange 
participants by providing more trading opportunities and tighter 
spreads in option classes that are typically less liquid.
    Additionally, the Exchange believes the proposed Step-Up Maker 
Rebate of ($0.86) per contract is reasonable because it is the same, or 
within the range, of similar rebates offered by competing options 
exchanges for transactions by market makers in Non-Penny Classes.\32\ 
Also, the proposed calculation of the Step-Up Maker Rebate is 
reasonable and not unfairly discriminatory because it is similar to the 
calculation method utilized by at least two competing options exchanges 
that provide enhanced rebates or reduced fees for certain types of 
market participant orders by taking a volume comparison of the current 
month to a prior baseline month.\33\ Accordingly, this approach to 
determining an enhanced rebate (or reduced fee) is not new or novel.
---------------------------------------------------------------------------

    \32\ See supra note 20.
    \33\ See supra note 21.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to include the sunset 
period in the Fee Schedule to provide clarity to all Market Makers 
that, unless the Exchange determines to amend or otherwise modify the 
Step-Up Maker Rebate, the Step-Up Maker Rebate will expire at the end 
of the sunset period.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to use a baseline for added liquidity in Non-Penny 
Classes of 0.00% of TCV for market participants that become Market 
Makers of the Exchange after July 2024 for the purpose of the Step-Up 
Maker Rebate calculation because it will provide an additional 
incentive for prospective firms to become Market Makers. The Exchange 
believes this will incentivize new Market Makers to trade on the 
Exchange, which will add to price discovery, enhance liquidity and 
market quality, and contribute to a more robust and well-balanced 
market ecosystem on the Exchange to the benefit of all Members and 
market participants. The Exchange notes that the proposed Step-Up Maker 
Rebate will not adversely impact any Market Maker's ability to qualify 
for reduced fees or enhanced rebates offered under other pricing tiers/
incentives on the Exchange. Should a Market Maker not meet the required 
criteria of the Step-Up Maker Rebate, the Market Maker will merely not 
receive the corresponding enhanced rebate.
Proposal To Remove Certain Alternative Volume Criteria and 
Corresponding Footnotes
    The Exchange believes its proposal to remove the alternative volume 
criteria and corresponding footnotes described above that are 
applicable to executions of orders for the Market Maker and 
Professional Member origins is reasonable, equitably allocated and not 
unfairly discriminatory. The Exchange initially established each of the 
above alternative volume criteria in order to attract Market Maker and 
Professional Member order flow. The Exchange recently conducted an 
internal review and analysis of fees and rebates and determined that it 
was reasonable, equitable and not unfairly discriminatory to remove the 
alternative volume calculations described above. The Exchange believes 
its standard volume calculation methods (and the two remaining 
alternative volume calculation methods for tier 2 of the Marker Maker 
origin) remain highly competitive such that they should enable the 
Exchange to continue to attract Market Maker and Professional Member 
order flow and maintain market share.
    The Exchange believes these proposed changes are equitable and not 
unfairly discriminatory because no Member has recently achieved any of 
the three alternative volume calculation methods that the Exchange 
proposes to remove from the Fee Schedule. As such, no Member will 
currently be impacted by the removal of these alternative volume 
calculation methods. The Exchange further believes that the removal of 
these alternative volume calculations will reduce complexity within the 
Fee Schedule and provide greater clarity to all Members, particularly 
since these methods are not utilized. Less complexity and greater 
clarity in the Fee Schedule helps promote just and equitable principles 
of trade and removes impediments to and perfects the mechanisms of a 
free and open market and a national market system.
    The Exchange also believes it is equitable and not unfairly 
discriminatory to remove the alternative volume criteria described 
above because with the proposed changes, the Exchange's standard volume 
criteria (and the two remaining alternative volume calculation methods 
for tier 2 of the Marker Maker origin) will continue to apply equally 
to all Market Maker and Professional Member order flow, in each origin 
respectively.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange does not believe that any of the proposed changes will 
impose any burden on intra-market competition.
Proposal To Amend the Priority Customer Origin Table To Increase 
Certain Maker Rebates in Penny Classes
    The Exchange believes its proposal to amend the Priority Customer 
origin to increase the Maker rebates in tiers 1 and 2 from ($0.25) to 
($0.31) per contract for Priority Customer orders in Penny Classes that 
trade against all origins will not impose any burden on intra-market 
competition. Instead, the Exchange believes this proposed change will 
promote competition because it will further incentivize Priority 
Customer orders to the Exchange. The Exchange believes that this may, 
in turn, encourage Members to submit more Priority Customer orders, 
leading to increased liquidity on the Exchange to the benefit of all 
market participants by providing more trading opportunities and tighter 
spreads.

[[Page 78925]]

Proposal To Establish the Step-Up Maker Rebate for Market Maker Orders 
in Non-Penny Classes
    The Exchange believes its proposal to establish the Step-Up Maker 
Rebate will not impose any burden on intra-market competition because 
it provides all Market Makers with an additional incentive to achieve a 
certain volume threshold on the Exchange in Non-Penny Classes. The 
Exchange believes that this may encourage Market Makers to add more 
liquidity in Non-Penny Classes, thereby promoting price discovery and 
contributing to a deeper and more liquid market, which benefits all 
market participants and enhances the attractiveness of the Exchange as 
a trading venue. Again, the Exchange believes that this proposed change 
promotes competition to the benefit of all market participants on the 
Exchange, particularly in Non-Penny Classes, which are traditionally 
less liquid. The resulting increased volume and liquidity in Non-Penny 
Classes may benefit all Exchange participants by providing more trading 
opportunities and tighter spreads in option classes that are typically 
less liquid.
    The Exchange also believes that using a baseline for added 
liquidity in Non-Penny Classes of 0.00% of TCV for market participants 
that become Market Makers of the Exchange after July 2024 for the 
purpose of the Step-Up Maker Rebate calculation will incentivize new 
market participants to trade on the Exchange and become Market Makers. 
In turn, this may add to price discovery, enhance liquidity and market 
quality, and contribute to a more robust and well-balanced market 
ecosystem on the Exchange to the benefit of all Members and market 
participants. Greater liquidity benefits all Members by providing more 
trading opportunities and encourages Members to send additional orders 
to the Exchange, thereby contributing to robust levels of liquidity, 
which benefits all market participants. As described above, the 
opportunity to qualify for the proposed new Step-Up Maker Rebate will 
continue to be available to all Market Makers that meet the associated 
volume requirement. As such the Exchange does not believe the proposed 
changes would impose any burden on intra-market competition that is not 
necessary or appropriate in furtherance of the purpose of the Act.
Proposal To Remove Certain Footnotes and Alternative Volume Criteria
    The Exchange believes its proposal to remove the alternative volume 
criteria and corresponding footnotes described above that are 
applicable to executions of orders for the Market Maker and 
Professional Member origins will not impose any burden on intra-market 
competition. Each of these alternative volume criteria were established 
in order to attract Market Maker and Professional Member order flow. 
Based on the Exchange's recent internal review and analysis of fees and 
rebates, the Exchange believes its standard volume calculation methods 
(and the two remaining alternative volume calculation methods for tier 
2 of the Marker Maker origin) remain highly competitive such that they 
should enable the Exchange to continue to attract Market Maker and 
Professional Member order flow.
    The Exchange believes these proposed changes do not impose any 
burden on intra-market competition because no Member has recently 
achieved any of the three alternative volume calculation methods that 
the Exchange proposes to remove from the Fee Schedule. As such, no 
Member will currently be impacted by the removal of these alternative 
volume calculation methods.
Inter-Market Competition
    The Exchange does not believe that the proposed changes will impose 
any burden on inter-market competition and the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. There are currently 18 registered 
options exchanges competing for order flow. Based on publicly-available 
information, and excluding index-based options, no single exchange had 
more than approximately 14-15% of the multiply-listed equity options 
market share for the month of July 2024.\34\ Therefore, no exchange 
possesses significant pricing power. More specifically, the Exchange 
had a market share of approximately 3.45% of executed volume of 
multiply-listed equity options for the month of July 2024.\35\
---------------------------------------------------------------------------

    \34\ See supra note 28.
    \35\ See id.
---------------------------------------------------------------------------

    In such an environment, the Exchange must continually adjust its 
rebates and tiers to remain competitive with other options exchanges. 
Because competitors are free to modify their own fees and tiers in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. The Exchange believes that the proposed rule changes 
reflect this competitive environment because they modify the Exchange's 
tiers and rebates in a manner that encourages market participants to 
continue to provide liquidity and to send order flow to the Exchange.

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,\36\ and Rule 19b-4(f)(2) \37\ 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.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \37\ 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#98eaedf4fdb5fbf7f5f5fdf6ecebd8ebfdfbb6fff7ee"><span class="__cf_email__" data-cfemail="d1a3a4bdb4fcb2bebcbcb4bfa5a291a2b4b2ffb6bea7">[email protected]</span></a>. Please include 
file number SR-PEARL-2024-44 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-PEARL-2024-44. 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

[[Page 78926]]

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-2024-44 and should be submitted on 
or before October 17, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
---------------------------------------------------------------------------

    \38\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-22025 Filed 9-25-24; 8:45 am]
BILLING CODE 8011-01-P


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