[Federal Register Volume 87, Number 74 (Monday, April 18, 2022)]
[Notices]
[Pages 22987-22993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-08172]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94696; File No. SR-PEARL-2022-09]


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 To Remove Certain Credits and Increase 
Trading Permit Fees

April 12, 2022.
    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 March 30, 2022, 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 MIAX PEARL Fee 
Schedule (the ``Fee Schedule'') to remove certain credits and amend the 
monthly Trading Permit \3\ fees for Members.\4\
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    \3\ The term ``Trading Permit'' means a permit issued by the 
Exchange that confers the ability to transact on the Exchange. See 
Exchange Rule 100.
    \4\ 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 Exchange Rule 100 and the 
Definitions Section of the Fee Schedule.
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    The text of the proposed rule change is available on the Exchange's 
website at https://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 the Fee Schedule to remove certain 
credits and amend the monthly Trading Permit fees for Members. The 
Exchange notes that its Trading Permit fees are comparable to 
membership or other access type fees charged by other exchanges.
    The Exchange initially filed this proposal on July 1, 2021 with the 
proposed fee changes being immediately effective (``First Proposed Rule 
Change'').\5\ The First Proposed Rule Change was published for comment 
in the Federal Register on July 15, 2021.\6\ The Commission received 
one comment letter on the First Proposed Rule Change \7\ and 
subsequently suspended the First Proposed Rule Change on August 27, 
2021.\8\ The Exchange withdrew the First Proposed Rule Change on 
October 12, 2021 and re-submitted the proposal on October 29, 2021, 
with the proposed fee changes being effective beginning November 1, 
2021 (``Second Proposed Rule Change'').\9\ The Second Proposed Rule 
Change addressed points raised in the SIG Letter and was published for 
comment in the Federal Register on November 17, 2021.\10\ The 
Commission received no comment letters on the Second Proposed Rule 
Change. The

[[Page 22988]]

Exchange withdrew the Second Proposed Rule Change on December 20, 2021 
and submitted a revised proposal for immediate effectiveness (``Third 
Proposed Rule Change'').\11\ The Third Proposed Rule Change was 
published for comment in the Federal Register on January 10, 2022.\12\ 
The Commission received no comment letters on the Third Proposed Rule 
Change. The Exchange withdrew the Third Proposed Rule Change on 
February 15, 2022 and submitted a revised proposal for immediate 
effectiveness, which was suspended on February 18, 2022 (``Fourth 
Proposed Rule Change'').\13\ The Commission received one comment letter 
on the Fourth Proposed Rule Change.\14\ The Exchange withdrew the 
Fourth Proposed Rule Change on March 30, 2022 and submits this revised 
proposal for immediate effectiveness (``Fifth Proposed Rule Change''). 
This Fifth Proposed Rule Change provides a revised justification for 
the proposed fees, which is in line with the justification provided by 
another exchange in a similar filing to adopt fees for Members to be 
active on that exchange.\15\
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    \5\ See Securities Exchange Act Release No. 92366 (July 9, 
2021), 86 FR 37379 (SR-PEARL-2021-32).
    \6\ See id.
    \7\ See Letter from Richard J. McDonald, Susquehanna 
International Group, LLC (``SIG''), to Vanessa Countryman, 
Secretary, Commission, dated September 28, 2021 (``SIG Letter'').
    \8\ See Securities Exchange Act Release No. 92797 (August 27, 
2021), 86 FR 49399 (September 2, 2021).
    \9\ See Securities Exchange Act Release No. 93555 (November 10, 
2021), 86 FR 64254 (November 17, 2021) (SR-PEARL-2021-54).
    \10\ See id.
    \11\ Securities Exchange Act Release No. 93895 (January 4, 
2022), 87 FR 1217 (January 10, 2022) (SR-PEARL-2021-59).
    \12\ Id.
    \13\ Securities Exchange Act Release No. 94287 (February 18, 
2022), 87 FR 10837 (February 25, 2022) (SR-PEARL-2022-05).
    \14\ See Letter from Richard J. McDonald, SIG, to Vanessa 
Countryman, Secretary, Commission, dated March 15, 2022 (``SIG 
Letter 2'').
    \15\ See Securities Exchange Act Release No. 93927 (January 7, 
2022), 87 FR 2191 (January 13, 2022) (SR-MEMX-2021-19) (proposal to 
adopt monthly membership fees).
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Removal of the ``Monthly Volume Credit''
    The Exchange proposes to amend the Definitions section of the Fee 
Schedule to delete the definition and remove the credits applicable to 
the Monthly Volume Credit for Members. The Exchange established the 
Monthly Volume Credit in 2018 \16\ to encourage Members to send 
increased Priority Customer \17\ order flow to the Exchange, which the 
Exchange applied to the assessment of certain non-transaction fees for 
that Member. The Exchange applies a different Monthly Volume Credit 
depending on whether the Member connects to the Exchange via the FIX 
Interface \18\ or MEO Interface.\19\ Currently, the Exchange assesses 
the Monthly Volume Credit to each Member that has executed Priority 
Customer volume along with that of its affiliates,\20\ not including 
Excluded Contracts,\21\ of at least 0.30% of MIAX Pearl-listed Total 
Consolidated Volume (``TCV''),\22\ as set forth in the following table:
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    \16\ See Securities Exchange Act Release No. 82867 (March 13, 
2018), 83 FR 12044 (March 19, 2018) (SR-PEARL-2018-07).
    \17\ 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.
    \18\ The term ``FIX Interface'' means the Financial Information 
Exchange interface for certain order types as set forth in Exchange 
Rule 516. See the Definitions Section of the Fee Schedule and 
Exchange Rule 100.
    \19\ The term ``MEO Interface'' or ``MEO'' means a binary order 
interface for certain order types as set forth in Rule 516 into the 
MIAX Pearl System. See the Definitions Section of the Fee Schedule 
and Exchange Rule 100.
    \20\ ``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#a8c5cdc5cacddadbc0c1d8e8c5c1c9d0c7d8dcc1c7c6db86cbc7c5"><span class="__cf_email__" data-cfemail="8ee3ebe3ecebfcfde6e7fecee3e7eff6e1fefae7e1e0fda0ede1e3">[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.
    \21\ ``Excluded Contracts'' means any contracts routed to an 
away market for execution. See the Definitions Section of the Fee 
Schedule.
    \22\ ``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 of time in which the Exchange experiences 
an Exchange System Disruption (solely in the option classes of the 
affected Matching Engine). See the Definitions Section of the Fee 
Schedule.

------------------------------------------------------------------------
                                                                Monthly
                  Type of member connection                      volume
                                                                 credit
------------------------------------------------------------------------
Member that connects via the FIX Interface...................       $250
Member that connects via the MEO Interface...................      1,000
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    If a Member connects via both the MEO Interface and FIX Interface 
and qualifies for the Monthly Volume Credit based upon its Priority 
Customer volume, the greater Monthly Volume Credit shall apply to such 
Member. Prior to the First Proposed Rule Change, the Monthly Volume 
Credit was a single, once-per-month credit towards the aggregate 
monthly total of non-transaction fees assessable to a Member.
    Beginning with the First Proposed Rule Change, the Exchange's 
proposals included an amendment to the Definitions section of the Fee 
Schedule to delete the definition and remove the Monthly Volume Credit. 
The Exchange established the Monthly Volume Credit when it first 
launched operations to attract order flow by lowering the initial fixed 
cost for Members. The Monthly Volume Credit has achieved its purpose 
and the Exchange believes it is appropriate to remove this credit. The 
Exchange believes that the Exchange's existing Priority Customer 
rebates and fees will continue to allow the Exchange to remain highly 
competitive and continue to attract order flow and maintain market 
share.
Removal of the Trading Permit Fee Credit
    The Exchange proposes to amend Section 3)b) of the Fee Schedule to 
remove the Trading Permit fee credit that is denoted in footnote ``*'' 
below the Trading Permit fee table. Prior to the First Proposed Rule 
Change, the Trading Permit fee credit was applicable to Members that 
connect via both the MEO and FIX Interfaces. Members who connect via 
both the MEO and FIX Interfaces are assessed the rates for both types 
of Trading Permits, but these Members received a $100 monthly credit 
towards the Trading Permit fees applicable to the MEO Interface prior 
to the First Proposed Rule Change. The Exchange proposes to remove the 
Trading Permit fee credit and delete footnote ``*'' from Section 3)b) 
of the Fee Schedule.
    The Exchange established the Trading Permit fee credit when it 
first launched operations to attract order flow and increase membership 
by lowering the costs for Members that connect via both the MEO 
Interface and FIX Interface. The Trading Permit fee credit has achieved 
its purpose and the Exchange

[[Page 22989]]

now believes that it is appropriate to remove this credit in light of 
the current operating conditions and membership population on the 
Exchange.
Amendment of Trading Permit Fees
    The Exchange proposes to amend the Fee Schedule to amend the fees 
for Trading Permits. The Exchange issues Trading Permits to Members who 
are either Electronic Exchange Members \23\ (``EEMs'') or Market 
Makers.\24\ The Exchange assesses Trading Permit fees based upon the 
monthly total volume executed by the Member and its Affiliates on the 
Exchange across all origin types, not including Excluded Contracts, as 
compared to the total TCV in all MIAX Pearl-listed options. The 
Exchange adopted a tier-based fee structure based upon the volume-based 
tiers detailed in the definition of ``Non-Transaction Fees Volume-Based 
Tiers'' \25\ in the Definitions section of the Fee Schedule. The 
Exchange also assesses Trading Permit fees based upon the type of 
interface used by the Member to connect to the Exchange--the FIX 
Interface and/or the MEO Interface.
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    \23\ 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 the Definitions Section of the Fee Schedule.
    \24\ 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 these Rules. 
See the Definitions Section of the Fee Schedule.
    \25\ See the Definitions Section of the Fee Schedule for the 
monthly volume thresholds associated with each Tier.
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    Current Trading Permit Fees. Currently, each Member who connects to 
the System \26\ via the FIX Interface is assessed the following monthly 
Trading Permit fees:
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    \26\ 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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    (i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, or volume up to 0.30%, $250;
    (ii) if its volume falls within the parameters of Tier 2 of the 
Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% up to 
0.60%, $350; and
    (iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $450.
    Each Member who connects to the System via the MEO Interface is 
assessed the following monthly Trading Permit fees:
    (i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, or volume up to 0.30%, $300;
    (ii) if its volume falls within the parameters of Tier 2 of the 
Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% up to 
0.60%, $400; and
    (iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $500.
    Proposed Trading Permit Fees. The Exchange proposes to amend its 
Trading Permit fees as follows. Each Member who connects to the System 
via the FIX Interface will be assessed the following monthly Trading 
Permit fees:
    (i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, $500;
    (ii) if its volume falls within the parameters of Tier 2 of the 
Non-Transaction Fees Volume-Based Tiers, $1,000; and
    (iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, $1,500.
    Each Member who connects to the System via the MEO Interface will 
be assessed the following monthly Trading Permit fees:
    (i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, $2,500;
    (ii) if its volume falls within the parameters of Tier 2 of the 
Non-Transaction Fees Volume-Based Tiers, $4,000; and
    (iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, $6,000.
    Members who use the MEO Interface may also connect to the System 
through the FIX Interface as well, and vice versa. The Exchange notes 
that the Trading Permit fees for Members who connect through the MEO 
Interface are higher than the Trading Permit fees for Members who 
connect through the FIX Interface, since the FIX Interface utilizes 
less capacity and resources of the Exchange. The MEO Interface offers 
lower latency and higher throughput, which utilizes greater capacity 
and resources of the Exchange. The FIX Interface offers lower bandwidth 
requirements and an industry-wide uniform message format. Both EEMs and 
Market Makers may connect to the Exchange using either interface.
    Trading Permits, like membership fees, grant access and allow 
Members to be active on the Exchange, thus providing the ability to 
submit orders and trade on the Exchange, in the manner defined in the 
relevant Trading Permit. Without a Trading Permit, or ``membership'' on 
other exchanges, a Member cannot directly trade on the Exchange. 
Therefore, a Trading Permit is a means to directly access the Exchange 
(which offers meaningful value), and the Exchange proposes to increase 
its monthly fees since it had not done so since the fees were first 
adopted in 2018.\27\ The Exchange notes that the its affiliates, Miami 
International Securities Exchange, LLC (``MIAX'') and MIAX Emerald, LLC 
(``MIAX Emerald''), charge a similar, fixed trading permit fee in a 
similar range of trading permit fees to certain users, and a similar, 
varying trading permit fee in a similar range of trading permit fees to 
other users, based upon the number of assignments of option classes or 
the percentage of volume in option classes.\28\
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    \27\ See supra note 16.
    \28\ See the MIAX Fee Schedule, Section 3)b) and MIAX Emerald 
Fee Schedule, Section 3)b), available at https://www.miaxoptions.com/fees (last visited March 9, 2022).
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    As illustrated by the table below, the Exchange notes that the 
proposed fees for the Exchange's Trading Permits are in line with, or 
cheaper than, the similar trading permit and membership fees charged by 
other options exchanges. The below table also illustrates how the 
Exchange has historically undercharged for access via Trading Permits 
as compared to other options exchanges. The Exchange believes other 
exchanges' membership and trading permit fees are useful examples of 
alternative approaches to providing and charging for access and 
provides the below table for comparison purposes only to show how the 
Exchange's proposed fees compare to fees currently charged by other 
options exchanges for similar access.

[[Page 22990]]



------------------------------------------------------------------------
                                      Monthly membership/trading permit
             Exchange                                fee
------------------------------------------------------------------------
MIAX Pearl Options (as proposed)..  Trading Permit access via FIX
                                     Interface:
                                       Tier 1: $500.
                                       Tier 2: $1,000.
                                       Tier 3: $1,500.
                                    Trading Permit access via MEO
                                     Interface:
                                       Tier 1: $2,500.
                                       Tier 2: $4,000.
                                       Tier 3: $6,000.
New York Stock Exchange LLC         Annual trading license fee for
 (``NYSE'') \29\.                    member organizations ranges from
                                     approximately $25,000 to $50,000
                                     based on the type of member
                                     organization and number of trading
                                     licenses.
NYSE Arca, Inc. (``NYSE Arca'')     Options Trading Permits:
 \30\.
                                       $6,000 for up to 175 option
                                        issues.
                                       Additional $5,000 for up to 350
                                        option issues.
                                       Additional $4,000 for up to 1,000
                                        option issues.
                                       Additional $3,000 for all option
                                        issues.
                                       Additional $1,000 for the 5th OTP
                                        and each OTP thereafter.
NYSE American, LLC (``NYSE          ATP Trading Permits:
 American'') \31\.
                                       $8,000 for up to 60 plus the
                                        bottom 45% of option issues.
                                       Additional $6,000 for up to 150
                                        plus the bottom 45% of option
                                        issues.
                                       Additional $5,000 for up to 500
                                        plus the bottom 45% of option
                                        issues.
                                       Additional $4,000 for up to 1,100
                                        plus the bottom 45% of option
                                        issues.
                                       Additional $3,000 for all option
                                        issues.
                                       Additional $2,000 for 6th to 9th
                                        ATPs (plus additional fee for
                                        premium products).
Nasdaq PHLX LLC (``Nasdaq PHLX'')   Streaming Quote Trader permit fees:
 \32\.
                                       Tier 1 (up to 200 option
                                        classes): $0.00.
                                       Tier 2 (up to 400 option
                                        classes): $2,200.
                                       Tier 3 (up to 600 option
                                        classes): $3,200.
                                       Tier 4 (up to 800 option
                                        classes): $4,200.
                                       Tier 5 (up to 1,000 option
                                        classes): $5,200
                                       Tier 6 (up to 1,200 option
                                        classes): $6,200.
                                       Tier 7 (all option classes):
                                        $7,200.
                                    Remote Market Maker Organization
                                     permit fees:
                                       Tier 1 (less than 100 option
                                        classes): $5,500.
                                       Tier 2 (more than 100 and less
                                        than 999 option classes):
                                        $8,000.
                                       Tier 3 (1,000 or more option
                                        classes): $11,000.
Nasdaq ISE LLC (``Nasdaq ISE'')     Access Fees:
 \33\.
                                       Primary Market Maker: $5,000 per
                                        membership.
                                       Competitive Market Maker: $2,500
                                        per membership.
Nasdaq Stock Market LLC             Annual membership fee is $3,000 plus
 (``Nasdaq'') \34\.                  a monthly $1,250 trading rights fee
                                     (together with the annual
                                     membership fee, totaling $18,000
                                     per year).
Cboe Exchange, Inc. (``Cboe'')      Electronic Trading Permit Fees:
 \35\.
                                       Market Maker: $5,000.
                                       Electronic Access Permit: $3,000.
                                       Clearing TPH Permit: $2,000.
Cboe C2 Exchange, Inc. (``Cboe      Access Permit Fees for Market
 C2'') \36\.                         Makers: $5,000.
                                    Electronic Access Permits: $1,000.
Cboe BZX Exchange, Inc. (``Cboe     Annual membership fee of $2,500 plus
 BZX'') \37\.                        an additional fee of $350 per month
                                     for each additional MPID a member
                                     maintains other than their first
                                     (i.e., an annual fee of $4,200 per
                                     additional MPID).
------------------------------------------------------------------------

Implementation
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    \29\ See ``Trading Licenses,'' NYSE Price List 2021 (last 
updated December 1, 2021), available at: https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
    \30\ See NYSE Arca Options Fees and Charges, OTP Trading 
Participant Rights, p.1, available at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (last visited March 9, 2022).
    \31\ See NYSE American Options Fee Schedule, Section III, 
Monthly Trading Permit, Rights, Floor Access and Premium Product 
Fees, p. 23-24, available at https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf 
(last visited March 9, 2022).
    \32\ See Nasdaq PHLX Options 7 Pricing Schedule, Section 8. 
Membership Fees, available at https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207 (last visited March 9, 2022).
    \33\ See Nasdaq ISE Options 7 Pricing Schedule, Section 8.A. 
Access Services, available at https://listingcenter.nasdaq.com/rulebook/ise/rules/ISE%20Options%207 (last visited March 9, 2022).
    \34\ See ``NASDAQ Membership Fees,'' Nasdaq Price List, 
available at: http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#membership. See also Securities 
Exchange Act Release No. 34-81133 (July 12, 2017), 82 FR 32904 (July 
18, 2017) (SR-NASDAQ-2017-065) (discussing the reasonableness of 
Nasdaq's fees).
    \35\ See Cboe Fee Schedule, Electronic Trading Permit Fees, 
available at https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (last visited March 9, 2022).
    \36\ See Cboe C2 Fee Schedule, Access Fees, available at https://www.cboe.com/us/options/membership/fee_schedule/ctwo/ (last visited 
March 9, 2022).
    \37\ See ``Membership Fees'' and ``Market Participant Identifier 
(`MPID') Fees'' sections of the Cboe BZX Fee Schedule, available at 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    The proposed fee changes are effective April 1, 2022.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \38\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \39\ in 
particular, in that it is an equitable allocation of reasonable dues, 
fees and other charges among its members and issuers and other persons 
using its facilities. The Exchange also believes the proposal furthers 
the objectives of Section 6(b)(5) of the Act in that it is designed to 
promote just and equitable

[[Page 22991]]

principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in general 
to protect investors and the public interest and is not designed to 
permit unfair discrimination between customers, issuers, brokers and 
dealers.
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    \38\ 15 U.S.C. 78f(b).
    \39\ 15 U.S.C. 78f(b)(4) and (5).
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Removal of Monthly Volume Credit and Trading Permit Fee Credit
    The Exchange believes its proposal to remove the Monthly Volume 
Credit is reasonable, equitable and not unfairly discriminatory because 
all market participants will no longer be offered the ability to 
achieve the extra credits associated with the Monthly Volume Credit for 
submitting Priority Customer volume to the Exchange and access to the 
Exchange is offered on terms that are not unfairly discriminatory. The 
Exchange believes it is equitable and not unfairly discriminatory to 
remove the Monthly Volume Credit from the Fee Schedule for business and 
competitive reasons because, in order to attract order flow when the 
Exchange first launched operations, the Exchange established the 
Monthly Volume Credit to lower the initial fixed cost for Members. The 
Exchange now believes that it is appropriate to remove this credit in 
light of the current operating conditions and the current type and 
amount of Priority Customer volume executed on the Exchange. The 
Exchange believes that the Exchange's Priority Customer rebates and 
fees will still allow the Exchange to remain highly competitive such 
that the Exchange should continue to attract order flow and maintain 
market share.
    The Exchange believes its proposal to remove the Trading Permit fee 
credit for Members that connect via both the MEO Interface and FIX 
Interface is reasonable, equitable and not unfairly discriminatory 
because all market participants will no longer be offered the ability 
to receive the credit and access to the Exchange is offered on terms 
that are not unfairly discriminatory. The Exchange believes it is 
equitable and not unfairly discriminatory to remove the Trading Permit 
fee credit for business and competitive reasons because, in order to 
attract order flow and membership after the Exchange first launched 
operations, the Exchange established the Trading Permit fee credit to 
lower the costs for Members that connect via both the MEO Interface and 
FIX Interface. The Exchange now believes that it is appropriate to 
remove this credit in light of the current operating conditions and 
membership on the Exchange.
Trading Permit Fee Increase
    The Exchange believes that there is value in being a Member of the 
Exchange, retaining that Membership as the Exchange's market share has 
grown, and that the proposed Trading Permit fees are reasonable because 
they are in the range of similar types of membership fees charged by 
other exchanges with similar market share. The proposed monthly Trading 
Permit fees are lower than or comparable to the membership and trading 
permit fees imposed by several other national securities exchanges that 
charge such fees.\40\
---------------------------------------------------------------------------

    \40\ See supra notes 29-37.
---------------------------------------------------------------------------

    The Exchange believes that the proposed monthly Trading Permit fees 
are not unfairly discriminatory because they would be assessed equally 
across all Members or firms that seek to become Members. The Exchange 
believes that the proposed monthly Trading Permit fees are not unfairly 
discriminatory because no broker-dealer is required to become a member 
of the Exchange. Instead, many market participants awaited the Exchange 
growing to a certain percentage of market share before they would join 
as a Member of the Exchange. In addition, many market participants 
still have not joined the Exchange despite the Exchange's growth in 
recent years to consistently be approximately 4-5% of the overall 
equity options market share. To illustrate, the Exchange currently has 
41 Members.\41\ However, based on publicly available information 
regarding a sample of the Exchange's competitors, NYSE American Options 
has 75 members, NYSE Arca Options has 71 members, and Cboe has 233 
members.\42\ Accordingly, the vigorous competition among national 
securities exchanges provides many alternatives for firms to 
voluntarily decide whether membership to the Exchange is appropriate 
and worthwhile, and no broker-dealer is required to become a member of 
the Exchange. Specifically, neither the trade-through requirements 
under Regulation NMS nor broker-dealers' best execution obligations 
require a broker-dealer to become a member of every exchange.
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    \41\ See MIAX Pearl Options Exchange Member Directory, available 
at https://www.miaxoptions.com/exchange-members/pearl.
    \42\ See NYSE American Options Membership Directory, available 
at https://www.nyse.com/markets/american-options/membership (last 
visited March 9, 2022); NYSE Arca Options Membership Directory, 
available at https://www.nyse.com/markets/arca-options/membership 
(last visited March 9, 2022); Cboe Members and Sponsored 
Participants, Form 1 Amendment dated February 17, 2022, Exhibit M, 
available at https://www.sec.gov/Archives/edgar/vprr/2200/22000797.pdf (last visited March 9, 2022).
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    The Exchange acknowledges that competitive forces may require 
certain broker-dealers to be members of all equity options exchanges. 
However, the Exchange believes that the proposed fees are reasonable, 
equitably allocated and not unfairly discriminatory, even for a broker-
dealer that deems it necessary to join the Exchange for business 
purposes, as those business reasons should presumably result in revenue 
capable of covering the proposed fees.
    The Exchange further believes that the proposed fees would be an 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities, and are 
not unfairly discriminatory. As the Commission noted in its Concept 
Release Concerning Self-Regulation, the Commission to date has not 
issued detailed rules specifying proper funding levels of self-
regulatory organization (``SRO'') regulatory programs, or how costs 
should be allocated among the various SRO constituencies. Rather, the 
Commission has examined the SROs to determine whether they are 
complying with their statutory responsibilities. This approach was 
developed in response to the diverse characteristics and roles of the 
various SROs and the markets they operate. The mechanics of SRO 
funding, including the amount of revenue that is spent on regulation 
and how that amount is allocated among various regulatory operations, 
is related to the type of market that an SRO is operating. Thus, each 
SRO and its financial structure is, to a certain extent, unique. While 
this uniqueness can result in different levels of SRO funding across 
markets, it also is a reflection of one of the primary underpinnings of 
the National Market System. Specifically, by fostering an environment 
in which diverse markets with diverse business models compete within a 
unified National Market System, investors and market participants 
benefit.\43\
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    \43\ See Securities Exchange Act Release No. 34-50700 (November 
22, 2004), 69 FR 71255, 71267-68 (December 8, 2004) (File No. S7-40-
04).
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    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of 
the Act \44\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities and is not designed to unfairly 
discriminate between customers, issuers, brokers, or

[[Page 22992]]

dealers. Effective regulation is central to the proper functioning of 
the securities markets. Recognizing the importance of such efforts, 
Congress decided to require national securities exchanges to register 
with the Commission as self-regulatory organizations to carry out the 
purposes of the Act. The Exchange therefore believes that it is 
critical to ensure that regulation is appropriately funded. The monthly 
Trading Permit fees are expected to provide a source of funding towards 
the Exchange's costs related to onboarding Members and providing 
ongoing support.
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    \44\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\45\ the Exchange 
believes that the proposed rule change would not impose any burden on 
intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
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    \45\ 15 U.S.C. 78f(8).
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Intra-Market Competition
    The Exchange believes the removal of the Monthly Volume Credit and 
Trading Permit fee credit will not place certain market participants at 
a relative disadvantage to other market participants because, in order 
to attract order flow when the Exchange first launched operations, the 
Exchange established these credits to lower the initial fixed cost for 
Members. The Exchange now believes that it is appropriate to remove 
this credit in light of the current operating conditions, including the 
Exchange's overall membership and the current type and amount of volume 
executed on the Exchange. The Exchange believes that the Exchange's 
rebates and fees will still allow the Exchange to remain highly 
competitive such that the Exchange should continue to attract order 
flow and maintain market share. The Exchange's proposed Trading Permit 
fees will be lower than or similar to the cost of membership and 
trading permits on other exchanges,\46\ and therefore, may stimulate 
intramarket competition by attracting additional firms to become 
Members on the Exchange or at least should not deter interested 
participants from joining the Exchange. In addition, membership and 
trading permit fees are subject to competition from other exchanges. 
Accordingly, if the changes proposed herein are unattractive to market 
participants, it is likely the Exchange will see a decline in 
membership as a result.
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    \46\ See supra note 40.
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Inter-Market Competition
    The Exchange operates in a highly competitive market in which 
market participants can readily favor one of the 15 competing options 
venues if they deem fee levels at a particular venue to be excessive. 
Based on publicly-available information, and excluding index-based 
options, no single exchange has more than approximately 16% market 
share. Therefore, no exchange possesses significant pricing power in 
the execution of multiply-listed equity and ETF options order flow. 
Over the course of 2021, the Exchange's market share has fluctuated 
between approximately 3-6% of the U.S. equity options industry.\47\ The 
Exchange is not aware of any evidence that a market share of 
approximately 3-6% provides the Exchange with anti-competitive pricing 
power. The Exchange believes that the ever-shifting market share among 
exchanges from month to month demonstrates that market participants can 
discontinue or reduce use of certain categories of products, or shift 
order flow, in response to fee changes. In such an environment, the 
Exchange must continually adjust its fees to remain competitive with 
other exchanges and to attract order flow to the Exchange.
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    \47\ See ``The market at a glance,'' available at https://www.miaxoptions.com/ (last visited December 20, 2021).
---------------------------------------------------------------------------

    The proposed fee change will not impact intermarket competition 
because it will apply to all Members equally. The Exchange operates in 
a highly competitive market in which market participants can determine 
whether or not to join the Exchange based on the value received 
compared to the cost of joining and maintaining membership on the 
Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    As described above, the Exchange received one comment letter on the 
First Proposed Rule Change.\48\ The Exchange responded to the comment 
letter in the Second Proposed Rule Change. No comment letters were 
received in response to the Second or Third Proposed Rule Changes. The 
Exchange received one comment letter on the Fourth Proposed Rule 
Change,\49\ which the Exchange responds to in this filing.
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    \48\ See supra note 7.
    \49\ See supra note 14.
---------------------------------------------------------------------------

    The First, Second, Third and Fourth Proposed Rule Changes all 
provided cost-based justifications to support the proposed fee changes. 
In this Fifth Proposed Rule Change, the Exchange determined to utilize 
a competition based approach to support the proposed fee changes. 
Because the SIG Letters are primarily focused on the Exchange's prior 
cost justifications in the First, Second, Third and Fourth Proposed 
Rule Changes, the Exchange believes the SIG's assertions are no longer 
germane to the current filing as the Exchange no longer utilizes a cost 
justification to support the proposed fees.
    Pursuant to the Guidance, Staff may consider whether a proposed fee 
is constrained by significant competitive forces in assessing the 
reasonableness of the proposed fee.\50\ This is in line with a recent 
filing by MEMX LLC (``MEMX''), in which MEMX argued its proposed 
monthly membership fee was reasonable because it was constrained by 
competitive forces.\51\ MEMX's monthly membership fee filing received 
no comment letters and remains in effect today, past the Commission's 
60-day suspension deadline. The Exchange's trading permit fees are the 
equivalent of MEMX's ``membership fee,'' BOX's ``participant fee'' and 
``market maker trading permit fee,'' and other exchanges' ``access'' 
fees: They are all fees to solely provide access and allow activity to 
the specific marketplace. These are all monthly fees assessed to 
members for trading on each particular exchange. The Exchange now 
argues that its proposed fees are constrained by competition in the 
same way MEMX's membership fees are constrained by competition.
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    \50\ See Staff Guidance on SRO Rule Filings Relating to Fees 
(May 21, 2019), at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees (the ``Guidance'').
    \51\ See supra note 15.
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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,\52\ and Rule 19b-4(f)(2) \53\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \52\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \53\ 17 CFR 240.19b-4(f)(2).

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[[Page 22993]]

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#4230372e276f212d2f2f272c3631023127216c252d34"><span class="__cf_email__" data-cfemail="2654534a430b45494b4b434852556655434508414950">[email protected]</span></a>. Please include 
File Number SR-PEARL-2022-09 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-2022-09. 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 
10:00 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-2022-09 and should be 
submitted on or before May 9, 2022.
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    \54\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\54\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-08172 Filed 4-15-22; 8:45 am]
BILLING CODE 8011-01-P


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