Document ID: SEC-2019-1466-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2019-10-09T04:00Z

[Federal Register Volume 84, Number 196 (Wednesday, October 9, 2019)]
[Notices]
[Pages 54205-54210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22010]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87209; File No. SR-PEARL-2019-26]

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

October 3, 2019.
    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 20, 2019, 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 establish Application Programming 
Interface (``API'') Testing and Certification fees.
    The Exchange previously filed to establish API Testing and 
Certification fees on June 28, 2019 (SR-PEARL-2019-22).\3\ That filing 
was withdrawn on August 27, 2019. It is replaced with the current 
filing (SR-PEARL-2019-26).
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    \3\ See Securities Exchange Act Release No. 86363 (July 12, 
2019), 84 FR 34445 (July 18, 2019) (SR-PEARL-2019-22) (the ``Second 
Proposed Rule Change'').
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    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL's principal office, and at the Commission's Public Reference 
Room.

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

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

[[Page 54206]]

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 establish API 
Testing and Certification fees for Members \4\ and non-Members. MIAX 
PEARL commenced operations as a national securities exchange registered 
under Section 6 of the Act \5\ on February 6, 2017.\6\ The Exchange 
adopted its transaction fees and certain of its non-transaction fees in 
its filing SR-PEARL-2017-10.\7\ In that filing, the Exchange expressly 
waived API Testing and Certification fees for Members and non-Members 
to provide an incentive to prospective Members and non-Members to 
engage in early API testing and certification to be able to utilize the 
services of MIAX PEARL as soon as possible. At that time, the Exchange 
waived API Testing and Certification fees for the Waiver Period \8\ and 
stated that it would provide notice to market participants when the 
Exchange intended to terminate the Waiver Period.
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    \4\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of the 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.
    \5\ 15 U.S.C. 78f.
    \6\ See Securities Exchange Act Release No. 79543 (December 13, 
2016), 81 FR 92901 (December 20, 2016) (File No. 10-227) (order 
approving application of MIAX PEARL, LLC for registration as a 
national securities exchange).
    \7\ See Securities Exchange Act Release No. 80061 (February 17, 
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10).
    \8\ ``Waiver Period'' means, for each applicable fee, the period 
of time from the initial effective date of the MIAX PEARL Fee 
Schedule until such time that the Exchange has an effective fee 
filing establishing the applicable fee. The Exchange will issue a 
Regulatory Circular announcing the establishment of an applicable 
fee that was subject to a Waiver Period at least fifteen (15) days 
prior to the termination of the Waiver Period and effective date of 
any such applicable fee. See the Definitions Section of the Fee 
Schedule.
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    On March 14, 2019, the Exchange issued a Regulatory Circular which 
announced that the Exchange would terminate the Waiver Period for API 
Testing and Certification fees, among other non-transaction fees, 
beginning on April 1, 2019.\9\ The Exchange initially filed the 
proposal to adopt API Testing and Certification fees, certain other 
non-transaction fees, and to terminate the three-month New Member Non-
Transaction Fee Waiver \10\ on March 27, 2019, designating the proposed 
fees effective April 1, 2019.\11\ The First Proposed Rule Change was 
published for comment in the Federal Register on April 12, 2019.\12\ 
The proposed fees remained in effect until the Exchange withdrew the 
First Proposed Rule Change on May 20, 2019.\13\
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    \9\ See MIAX PEARL Regulatory Circular 2019-09 available at 
https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_PEARL_RC_2019_09.pdf.
    \10\ ``New Member Non-Transaction Fee Waiver'' means the waiver 
of certain non-transaction fees, as explicitly set forth in specific 
sections of the Fee Schedule, for a new Member of the Exchange, for 
the waiver period. For purposes of this definition, the waiver 
period consists of the calendar month the new Member is credentialed 
to use the System in the production environment following approval 
as a new Member of the Exchange and the two (2) subsequent calendar 
months thereafter. For purposes of this definition, a new Member 
shall mean any Member who has not previously been approved as a 
Member of the Exchange. See the Definitions Section of the Fee 
Schedule.
    \11\ See Securities Exchange Act Release No. 85541 (April 8, 
2019), 84 FR 14983 (April 12, 2019) (SR-PEARL-2019-12) (the ``First 
Proposed Rule Change'').
    \12\ See id.
    \13\ See Letter from Gregory P. Ziegler, AVP and Senior 
Associate Counsel, MIAX PEARL, LLC, to Vanessa Countryman, Acting 
Secretary, Commission, dated May 17, 2019.
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    The Exchange refiled the proposal on June 28, 2019, designating the 
proposed fees effective July 1, 2019.\14\ The Second Proposed Rule 
Change was published for comment in the Federal Register on July 18, 
2019.\15\ The proposed fee changes remained in effect until the 
Exchange withdrew the Second Proposed Rule Change on August 27, 
2019.\16\
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    \14\ See supra note 3.
    \15\ See id.
    \16\ See Letter from Joseph Ferraro, SVP and Deputy General 
Counsel, MIAX PEARL, LLC, to Vanessa Countryman, Acting Secretary, 
Commission, dated August 26, 2019.
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    The Exchange is now re-filing the proposal to establish API Testing 
and Certification fees for Members and non-Members. The Exchange will 
file separate proposals to establish certain other non-transaction fees 
and to terminate the New Member Non-Transaction Fee Waiver and remove 
the definitions for the Waiver Period and New Member Non-Transaction 
Fee Waiver from the Fee Schedule.
API Testing and Certification Fees for Members
    The Exchange proposes to adopt an API Testing and Certification fee 
for Members. An API makes it possible for Member software to 
communicate with MIAX PEARL software applications, and is subject to 
Member testing with, and certification by, MIAX PEARL. API testing and 
certification includes, for Electronic Exchange Members \17\ 
(``EEMs''), testing all available order types, new order entry, order 
management, order throughput and mass order cancellation. For Market 
Makers,\18\ API testing and certification also includes testing of all 
available quote types, quote throughput, quote management and 
cancellation, Aggregate Risk Manager settings and triggers, and 
confirmation of quotes within the trading engines.
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    \17\ ``Electronic Exchange Member'' or ``EEM'' means the holder 
of a Trading Permit who is a Member representing as agent Public 
Customer Orders or Non-Customer Orders on the Exchange and those 
non-Market Maker Members conducting proprietary trading. Electronic 
Exchange Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100. See the Definitions Section of the Fee Schedule.
    \18\ ``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 
Exchange Rule 100. See the Definitions Section of the Fee Schedule.
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    The API Testing and Certification fees for Members are based upon 
the type of interface that the Member has been credentialed to use. The 
Exchange proposes to adopt an API testing and certification fee for 
Members (i) initially per API for FIX,\19\ MEO,\20\ FXD \21\ and CTD 
\22\ in the month the Member has been credentialed to use one or more 
ports in the production environment for the tested API, and (ii) each 
time a Member initiates a change to its system that requires testing 
and certification. The Exchange also proposes that API Testing and 
Certification fees will not be assessed in situations where the

[[Page 54207]]

Exchange initiates a mandatory change to the Exchange's System \23\ 
that requires testing and certification.
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    \19\ ``FIX Interface'' means the Financial Information Exchange 
interface for certain order types as set forth in Exchange Rule 516. 
See Exchange Rule 100. See the Definitions Section of the Fee 
Schedule.
    \20\ ``MEO Interface'' means a binary order interface for 
certain order types as set forth in Rule 516 into the MIAX PEARL 
System. See Exchange Rule 100. See the Definitions Section of the 
Fee Schedule.
    \21\ ``FXD Interface'' or ``FIX Drop Copy Port'' means a 
messaging interface that provides a copy of real-time trade 
execution, trade correction and trade cancellation information to 
FIX Drop Copy Port users who subscribe to the service. FXD Port 
users are those users who are designated by an EEM to receive the 
information and the information is restricted for use by the EEM 
only. See the Definitions Section of the Fee Schedule.
    \22\ ``CTD Port'' or ``Clearing Trade Drop Port'' provides an 
Exchange Member with a real-time clearing trade updates. The updates 
include the Member's clearing trade messages on a low latency, real-
time basis. The trade messages are routed to a Member's connection 
containing certain information. The information includes, among 
other things, the following: (i) Trade date and time; (ii) symbol 
information; (iii) trade price/size information; (iv) Member type 
(for example, and without limitation, Market Maker, Electronic 
Exchange Member, Broker-Dealer); and (v) Exchange MPID for each side 
of the transaction, including Clearing Member MPID. See the 
Definitions Section of the Fee Schedule.
    \23\ 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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    Any Member can select any type of interface (FIX Interface, MEO 
Interface, FXD Interface, and/or the CTD Port) to test and certify. The 
Exchange proposes the following fees: Each Member who uses the FIX 
Interface to connect to the System will be assessed an API Testing and 
Certification fee of $1,000; each Member who uses the MEO Interface to 
connect to the System will be assessed an API Testing and Certification 
fee of $1,500; each Member who uses the FXD Interface to connect to the 
system will be assessed an API Testing and Certification fee of $500; 
and each Member who uses the CTD Port to connect to the system will be 
assessed an API Testing and Certification fee of $500.
    Below is the proposed fee table for API Testing and Certification 
fees for Members:

------------------------------------------------------------------------
                                                            API testing
                                                                and
                    Type of interface                      certification
                                                                fee
------------------------------------------------------------------------
FIX.....................................................       $1,000.00
MEO.....................................................        1,500.00
FXD.....................................................          500.00
CTD.....................................................          500.00
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    API Testing and Certification Fees will be assessed (i) initially 
per API for FIX, MEO, FXD and CTD in the month the Member has been 
credentialed to use one or more ports in the production environment for 
the tested API, and (ii) each time a Member initiates a change to its 
system that requires testing and certification. API Testing and 
Certification Fees will not be assessed in situations where the 
Exchange initiates a mandatory change to the Exchange's system that 
requires testing and certification.
API Testing and Certification Fee for Non-Members
    The Exchange proposes to adopt an API Testing and Certification fee 
for Third Party Vendors,\24\ Service Bureaus \25\ and other non-Members 
(such as clearing firms) (i) initially per API for FIX, MEO, FXD, and 
CTD in the month the non-Member has been credentialed to use one or 
more ports in the production environment for the tested API, and (ii) 
each time a Third Party Vendor, Service Bureau, or other non-Member 
initiates a change to its system that requires testing and 
certification. The Exchange also proposes that API Testing and 
Certification fees will not be assessed to non-Members in situations 
where the Exchange initiates a mandatory change to the Exchange's 
System that requires testing and certification.
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    \24\ Third party vendors are subscribers of MIAX PEARL's market 
and other data feeds, which they in turn use for redistribution 
purposes. Third party vendors do not provide connectivity and 
therefore are not subject to Network testing and certification. See 
the Definitions Section of the Fee Schedule.
    \25\ ``Service Bureau'' means a technology provider that offers 
and supplies technology and technology services to a trading firm 
that does not have its own proprietary system. See the Definitions 
Section of the Fee Schedule.
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    The Exchange proposes to adopt API Testing and Certification fees 
for non-Members based upon the type of interface used by the non-Member 
to connect to the Exchange--the FIX Interface, the MEO Interface, the 
FXD Interface, and/or the CTD Port. Any non-Member can select any type 
of interface (FIX Interface, MEO Interface, FXD Interface, and/or the 
CTD Port) to test and certify. As with Members, an API makes it 
possible for Third Party Vendors' and Service Bureaus' software to 
communicate with MIAX PEARL's software applications, and is subject to 
testing with, and certification by, MIAX PEARL. The higher proposed fee 
charged to non-Members reflects the greater amount of time spent by 
MIAX PEARL employees testing and certifying non-Members. It has been 
MIAX PEARL's experience that Member testing takes less time than non-
Member testing because Members have more experience testing these 
systems with exchanges, resulting in generally fewer questions and 
issues arising during the testing and certification process. Also, 
because Third Party Vendors and Service Bureaus are redistributing data 
and reselling services to other Members and market participants, the 
number and types of scenarios that need to be tested are more numerous 
and complex than those tested and certified for a single Member.
    The Exchange proposes the following fees: each non-Member who uses 
the FIX Interface to connect to the System will be assessed an API 
Testing and Certification fee of $1,200; each non-Member who uses the 
MEO Interface to connect to the System will be assessed an API Testing 
and Certification fee of $2,000; each non-Member who uses the FXD 
Interface to connect to the system will be assessed an API Testing and 
Certification fee of $600; and each non-Member who uses the CTD Port to 
connect to the system will be assessed an API Testing and Certification 
fee of $600.
    Below is the proposed fee table for API Testing and Certification 
fees for non-Members:

------------------------------------------------------------------------
                                                            API testing
                                                                and
                   Type of  interface                      certification
                                                                fee
------------------------------------------------------------------------
FIX.....................................................       $1,200.00
MEO.....................................................        2,000.00
FXD.....................................................          600.00
CTD.....................................................          600.00
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    API Testing and Certification Fees for Third Party Vendors, Service 
Bureaus and other non-Members will be assessed (i) initially per API 
for FIX, MEO, FXD, and CTD in the month the non-Member has been 
credentialed to use one or more ports in the production environment for 
the tested API, and (ii) each time a Third Party Vendor, Service 
Bureau, or other non-Member initiates a change to its system that 
requires testing and certification. API Testing and Certification Fees 
will not be assessed in situations where the Exchange initiates a 
mandatory change to the Exchange's system that requires testing and 
certification.
    The Exchange believes it is necessary to charge an API Testing and 
Certification fee to Members and non-Members because of the time and 
resources spent to ensure that Member and non-Member APIs function 
correctly to prevent any System malfunction. Further, the Exchange 
believes the price differential in API Testing and Certification fees 
for Members and non-Members is not unfairly discriminatory because, in 
the Exchange's experience, Member testing takes less time than non-
Member testing as Members have more experience testing these systems 
with exchanges, resulting generally in fewer questions and issues 
arising during the testing and certification process.
    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.'' \26\
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    \26\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more

[[Page 54208]]

than approximately 16% market share.\27\ Therefore, no exchange 
possesses significant pricing power. More specifically, as of September 
9, 2019, the Exchange had an approximately 5.30% market share of 
executed volume of multiply-listed equity and exchange traded fund 
(``ETF'') options.\28\ 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, or shift order flow, in response to non-transaction and 
transaction fee changes. For example, on September 28, 2018, the 
Exchange filed with the Commission a proposal to decrease a transaction 
fee for certain types of orders (which fee was to be effective October 
1, 2018).\29\ The Exchange experienced an increase in total market 
share in the month of October 2018, after the proposal went into 
effect. Accordingly, the Exchange believes that the October 1, 2018 fee 
change, decreasing a transaction fee, may have contributed to the 
increase in the Exchange's market share and, as such, the Exchange 
believes competitive forces constrain MIAX PEARL's, and other options 
exchanges, ability to set non-transaction and transaction fees and 
market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \27\ The Options Clearing Corporation (``OCC'') publishes 
options and futures volume in a variety of formats, including daily 
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
    \28\ See id.
    \29\ See Securities Exchange Act Release No. 84387 (October 9, 
2018), 83 FR 52039 (October 15, 2018) (SR-PEARL-2018-21).
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    Further, as there are currently 16 registered options exchanges 
competing for order flow with no single exchange accounting for more 
than approximately 16% of market share,\30\ the Exchange cannot predict 
with certainty whether any market participant is planning to utilize 
any of the services of the Exchange such that API testing and 
certification would be required, in which the Member or non-Member 
would be subject to the proposed API Testing and Certification fees 
established herein.
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    \30\ See supra note 27.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \31\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \32\ 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 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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    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes its proposal to adopt API Testing and 
Certification fees provides for the equitable allocation of reasonable 
dues and fees and is not unfairly discriminatory for the following 
reasons. First, the Exchange operates in a highly competitive market. 
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.'' \33\ There are currently 16 registered options 
exchanges competing for order flow. Based on publicly-available 
information, and excluding index-based options, no single exchange has 
more than approximately 16% of the market share of executed volume of 
multiply-listed equity and ETF options.\34\ Therefore, no exchange 
possesses significant pricing power. More specifically, as of September 
9, 2019, the Exchange had approximately a 5.30% market share of 
executed volume of multiply-listed equity and ETF options.\35\
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    \33\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \34\ The Options Clearing Corporation (``OCC'') publishes 
options and futures volume in a variety of formats, including daily 
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
    \35\ See id.
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    The Exchange also 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, or shift order flow, in response to non-transaction and 
transaction fee changes. For example, on September 28, 2018, the 
Exchange filed with the Commission a proposal to decrease a transaction 
fee for certain types of orders (which fee was to be effective October 
1, 2018).\36\ The Exchange experienced an increase in total market 
share in the month of October 2018, after the proposal went into 
effect. Accordingly, the Exchange believes that the October 1, 2018 fee 
change, decreasing a transaction fee, may have contributed to the 
increase in the Exchange's market share and, as such, the Exchange 
believes competitive forces constrain MIAX PEARL's, and other options 
exchanges, ability to set non-transaction and transaction fees and 
market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \36\ See Securities Exchange Act Release No. 84387 (October 9, 
2018), 83 FR 52039 (October 15, 2018) (SR-PEARL-2018-21).
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    Second, the Exchange believes its proposal to adopt API Testing and 
Certification fees for Member and non-Members is an equitable 
allocation of reasonable dues and fees pursuant to Section 6(b)(4) of 
the Act \37\ because of the time and resources spent to ensure that 
Member and non-Member APIs function correctly to prevent any System 
malfunction. Further, the Exchange believes the price differential in 
API Testing and Certification fees for Members and non-Members is not 
unfairly discriminatory because, in the Exchange's experience, Member 
testing utilizes less Exchange resources and employee time than non-
Member testing as Members have more experience testing these systems 
with exchanges, resulting generally in fewer questions and issues 
arising during the testing and certification process. Also, with 
respect to API testing and certification, because Third Party Vendors 
and Service Bureaus are redistributing data and reselling services to 
other Members and market participants the number and types of scenarios 
that need to be tested are more numerous and complex than those tested 
and certified for Members.
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    \37\ 15 U.S.C. 78f(b)(4).
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    Accordingly, the Exchange no longer believes it is necessary to 
waive API Testing and Certification fees to attract market participants 
to the MIAX PEARL market since this market is now established and MIAX 
PEARL no longer needs to rely on such waivers to attract market 
participants. The Exchange believes its proposed API Testing and 
Certification fees are reasonable and well within the range of non-
transaction fees assessed among other exchanges, including the 
Exchange's affiliate, Miami International Securities Exchange, LLC 
(``MIAX).\38\
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    \38\ See the MIAX Options Fee Schedule, Section (4)a and (4)b.

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[[Page 54209]]

    Finally, 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. In such an environment, the Exchange must continually adjust 
its fees for services and products, in addition to order flow, to 
remain competitive with other exchanges. The Exchange believes that the 
proposed changes reflect this competitive environment.

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

    MIAX PEARL does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange does not believe that the proposed rule change would 
place certain market participants at the Exchange at a relative 
disadvantage compared to other market participants or affect the 
ability of such market participants to compete. Unilateral action by 
MIAX PEARL in the assessment of certain non-transaction fees for 
services provided to its Members and others using its facilities will 
not have an impact on competition. As a more recent entrant in the 
already highly competitive environment for equity options trading, MIAX 
PEARL does not have the market power necessary to set prices for 
services that are unreasonable or unfairly discriminatory in violation 
of the Act. MIAX PEARL's proposed API Testing and Certification fee 
levels, as described herein, are comparable to fee levels charged by 
other options exchanges for the same or similar services, including 
those fees assessed by the Exchange's affiliate, MIAX.\39\
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    \39\ See the MIAX Options Fee Schedule.
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    The Exchange believes that the proposed API Testing and 
Certification fees do not place certain market participants at a 
relative disadvantage to other market participants because the fees do 
not apply unequally to different size market participants, but instead 
would allow the Exchange charge for the time and resource necessary for 
API testing and certification for Members and non-Members to ensure 
proper functioning of all available order types, new order entry, order 
management, order throughput and mass order cancellation (as well as, 
for Market Makers, all available quote types, quote throughput, quote 
management and cancellation, Aggregate Risk Manager settings and 
triggers, and confirmation of quotes within the trading engines). 
Accordingly, the proposed API Testing and Certification fees do not 
favor certain categories of market participants in a manner that would 
impose a burden on competition.
Inter-Market Competition
    The Exchange believes the proposed API Testing and Certification 
fees do not place an undue burden on competition on other SROs that is 
not necessary or appropriate. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 16 competing options venues if they deem fee levels at a 
particular venue to be excessive.\40\ Based on publicly-available 
information, and excluding index-based options, no single exchange has 
more than 16% market share. Therefore, no exchange possesses 
significant pricing power in the execution of multiply-listed equity 
and ETF options order flow. As of September 9, 2019, the Exchange had 
an approximately 5.30% market share \41\ and 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 and fee waivers to remain competitive with other exchanges and 
to attract order flow to the Exchange.
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    \40\ See supra note 34.
    \41\ Id.
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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,\42\ and Rule 19b-4(f)(2) \43\ 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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    \42\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \43\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-PEARL-2019-26 on the subject line.

Paper Comments

     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-2019-26. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the 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-2019-26 and should be submitted on 
or before October 30, 2019.

[[Page 54210]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\44\
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    \44\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22010 Filed 10-8-19; 8:45 am]
BILLING CODE 8011-01-P