Document ID: SEC-2022-0288-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2022-03-02T05:00Z

[Federal Register Volume 87, Number 41 (Wednesday, March 2, 2022)]
[Notices]
[Pages 11739-11748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04211]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94301; File No. SR-PEARL-2022-06]

Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 
2617(b) To Adopt Two New Routing Options, and To Make Related Changes 
and Clarifications to Rules 2614(a)(2)(B) and 2617(b)(2)

February 23, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 11740]]

notice is hereby given that on February 15, 2022, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposed rule change to amend Exchange 
Rule 2617(b), Routing to Away Trading Centers, to: (i) Adopt two new 
routing options called Route to Primary Auction (``PAC'') and Price 
Improvement (``PI''); and (ii) make related changes and clarifications 
to Exchange Rules 2614(a)(2)(B) and 2617(b)(2).
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl, at MIAX 
PEARL's principal office, and at the Commission's Public Reference 
Room.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to amend Exchange Rule 
2617(b), Routing to Away Trading Centers, to adopt two new routing 
options called PAC and PI that would be available to orders in equity 
securities traded on the Exchange's equity trading platform (referred 
to herein as ``MIAX Pearl Equities''). Both of the proposed routing 
options are based on similar functionality offered at other equity 
exchanges.\3\ The Exchange also proposes to make related changes and 
clarifications to Exchange Rules 2614(a)(2)(B) and 2617(b)(2).
---------------------------------------------------------------------------

    \3\ The PAC routing option is based on Cboe BZX Exchange, Inc. 
(``BZX'') Rule 11.13(b)(3)(N) (describing the ROOC routing option), 
Cboe EDGX Exchange, Inc. (``EDGX'') Rule 11.11(g)(8) (describing the 
ROOC routing option), and The Nasdaq Stock Market LLC (``Nasdaq'') 
Rule 4758(a)(1)(A)(x) (describing the LIST routing option). The PI 
routing option is based on BZX Rule 11.13(b)(3)(G) (describing the 
Route To Improve (``RTI'') routing option) and EDGX Rule 
11.11(g)(12) (describing the RTI routing option).
---------------------------------------------------------------------------

    The Exchange offers its Equity Members \4\ optional routing 
functionality that allows them to use the Exchange to access liquidity 
on other trading centers. The functionality includes routing algorithms 
that determine the destination or pattern of routing. Exchange Rule 
2617(b)(5) sets forth that there is a particular pattern of routing to 
other trading centers, known as the ``System routing table'', as well 
as setting forth the Exchange's available routing option. All routing 
is designed to be conducted in a manner consistent with Regulation NMS.
---------------------------------------------------------------------------

    \4\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
---------------------------------------------------------------------------

PAC Routing Option
    In sum, the PAC routing option would enable an Equity Member to 
designate that their order be routed to the primary listing market to 
participate in the primary listing market's opening, re-opening or 
closing process. Proposed Exchange Rule 2617(b)(5)(B) would describe 
PAC as a routing option for Market Orders \5\ and displayed Limit 
Orders \6\ designated with a time-in-force of Regular Hours Only 
(``RHO'') \7\ that the entering firm wishes to designate for 
participation in the opening, re-opening (following a regulatory halt, 
suspension, or pause), or closing process \8\ of a primary listing 
market (BZX, the New York Stock Exchange LLC (``NYSE''), Nasdaq, NYSE 
American LLC (``NYSE American''), or NYSE Arca, Inc. (``NYSE Arca'')) 
if received before the opening, re-opening, or closing process of such 
market.\9\
---------------------------------------------------------------------------

    \5\ See Exchange Rule 2614(a)(2).
    \6\ See Exchange Rule 2614(a)(1).
    \7\ Exchange Rule 2614(b)(2) defines ``Regular Hours Only'' or 
``RHO'' as ``[a]n order that is designated for execution only during 
Regular Trading Hours, which includes the Opening Process for equity 
securities. An order with a time-in-force of RHO entered into the 
System before the opening of business on the Exchange as determined 
pursuant to Exchange Rule 2600 will be accepted but not eligible for 
execution until the start of Regular Trading Hours.''
    \8\ As described further below, the Exchange does not propose to 
route Market Orders to the primary listing market's closing process.
    \9\ The Exchange notes that proposed Exchange Rule 2617(b)(5)(B) 
differs from BZX Rule 11.13(b)(3)(N) and EDGX Rule 11.11(g)(8) in 
three primary ways. First, proposed Exchange Rule 2617(b)(5)(B) 
would specify that the PAC routing option is limited to Market 
Orders and displayed Limit Orders while both BZX and EDGX rules do 
not include that level of specificity. However, the Exchange 
believes this is consistent with BZX and EDGX functionality. Second, 
proposed Exchange Rule 2617(b)(5)(B) would specify that an order 
coupled with the PAC routing option would only route to the re-
opening following a regulatory halt, while BZX and EDGX refer to 
halts generally. Third, both BZX and EDGX require that an order be 
received before the primary listing market's opening, re-opening, or 
closing time, but do not specify whether that order must be received 
prior to the primary listing market's order entry cut-off time or 
how and when orders are routed to the primary listing market to 
participate in their opening, re-opening, or closing process. 
Proposed Exchange Rule 2617(b)(5)(B) would provide additional 
specificity as to when an order coupled with the PAC routing option 
would be routed to participate in the primary listing market's 
opening, re-opening, or closing process. The Exchange will continue 
to route such orders to participate in the primary listing market's 
opening, re-opening, or closing process after their order entry cut-
off time to increase the order's chances of participating in the 
opening, re-opening, or closing process while also accounting for 
the order entry cut-off time being changed/extended or where the 
primary listing market continues to accept orders after their 
established order entry cut-off time in accordance with their rules. 
See infra note 22. If the primary listing market rejects or cancels 
the order coupled with the PAC routing option for any reason, the 
Exchange will pass any rejection or cancellation along to the Equity 
Member that entered the order.
---------------------------------------------------------------------------

    The following summarizes the operation of the PAC routing option 
based on the order type and time-in-force selected. A more detailed 
description of the operation of the proposed PAC routing option is 
provided below.
     Only Market Orders and displayed Limit Orders designated 
as RHO would be eligible for routing pursuant to the PAC routing 
option.\10\
---------------------------------------------------------------------------

    \10\ The Exchange believes this is consistent with operation of 
the ROOC routing option on BZX and EDGX and the LIST routing option 
on Nasdaq because none of those exchanges' rules state that any 
returned unexecuted shares of an order routed to participate in a 
primary listing market's opening, closing, or re-opening process may 
be cancelled upon receipt. The Exchange believes this implies that 
BZX, EDGX, and Nasdaq only route ROOC or LIST orders, respectively, 
with a time-in-force of RHO or its equivalent, and not as IOC. See 
BZX Rule 11.13(b)(3)(N) and EDGX Rule 11.11(g)(8) (stating ``[i]f 
shares remain unexecuted after attempting to execute in the opening, 
re-opening, or closing process, they are either posted to the BZX 
Book, executed, or routed to destinations on the System routing 
table''). See also Nasdaq Rule 4758(a)(1)(A)(x) (describing Nasdaq's 
LIST routing option and specifying that any returned shares are 
posted to the book, thereby implying that Nasdaq does not route LIST 
orders as IOC).
---------------------------------------------------------------------------

     Market Orders and displayed Limit Orders designated as 
Immediate-or-Cancel (``IOC'') \11\ would not be eligible for routing 
pursuant to the PAC routing option.
---------------------------------------------------------------------------

    \11\ See Exchange Rule 2614(b)(1).
---------------------------------------------------------------------------

     Market Orders coupled with the PAC routing option 
designated as IOC would be cancelled.\12\
---------------------------------------------------------------------------

    \12\ An order that is cancelled is first accepted by the System 
and then immediately cancelled back to the Member. An order that is 
rejected is not accepted by the System and immediately returned to 
the Member.

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

[[Page 11741]]

     Market Orders coupled with the PAC routing option 
designated as RHO would be eligible to be routed to participate in the 
primary listing market's opening and re-opening process.
     Market Orders coupled with the PAC routing option 
designated as RHO would not be eligible to be routed to participate in 
the primary listing market's closing process and would be cancelled.
     Limit Orders coupled with the PAC routing option 
designated as RHO would eligible to be routed to participate in the 
primary listing market's opening, re-opening, and closing process.
     Limit Orders coupled with the PAC routing option 
designated as IOC received before the security has opened on the 
primary listing market would be cancelled.
     Limit Orders coupled with the PAC routing option 
designated as IOC received during the time when the Exchange is routing 
orders to participate in the primary listing market's re-opening 
process would be rejected.
     Limit Orders coupled with the PAC routing option 
designated as IOC received during continuous trading or during the time 
when the Exchange is in the process of routing orders to participate in 
the primary listing market's closing process would be routed pursuant 
to the PI routing option, described below.
Time-in-Force Related Rule Changes
    The Exchange proposes certain changes to its time-in-force rules 
related to its proposal to only route Market Orders and displayed Limit 
Orders pursuant to the PAC routing option when such orders are 
designated as RHO. The Exchange currently offers two time-in-force 
instructions, IOC and RHO.
    Exchange Rule 2614(a)(2)(B) provides that ``[a] Market Order may 
only include a time-in-force of IOC.'' The Exchange proposes to amend 
Exchange Rule 2614(a)(2)(B) to provide that a Market Order may also 
include a time-in-force of RHO only when coupled with the PAC routing 
option. Exchange Rule 2614(a)(2)(B) would further be amended to specify 
that all other Market Orders that include a time-in-force of RHO will 
be rejected. The Exchange proposes to require that only incoming Market 
Orders and Limit Orders designated as RHO will be eligible to be routed 
pursuant to the PAC routing option.\13\
---------------------------------------------------------------------------

    \13\ See supra note 9. Related changes with regard to Limit 
Orders are not needed because Exchange Rule 2614(a)(1)(B) already 
provides that ``[a] Limit Order may include a time-in-force of IOC 
or RHO.''
---------------------------------------------------------------------------

    As described in detail below, a Market Order coupled with the 
proposed PAC routing option designated as RHO would be rejected if not 
received: (i) Before the security has opened on the primary listing 
market to be routed to participate in the primary listing market's 
opening process; and (ii) after the announcement of a regulatory halt, 
suspension, or pause to be routed to participate in the primary listing 
market's re-opening process. Otherwise, a Market Order coupled with the 
PAC routing option and designated as IOC would also be rejected. 
Amending Exchange Rule 2614(a)(2)(B) to provide that a Market Order 
coupled with the PAC routing option include a time-in-force of RHO is 
necessary to ensure such orders are accepted by the System prior to the 
opening. For example, the Exchange does not accept orders with a time-
in-force of IOC prior to 9:30 a.m. Eastern Time.\14\ Therefore, a 
Market Order that is entered prior to 9:30 a.m. Eastern Time would need 
to include a time-in-force of RHO to be accepted and eligible to be 
routed to the primary listing market's opening process.
---------------------------------------------------------------------------

    \14\ See Exchange Rule 2600(a).
---------------------------------------------------------------------------

    The Exchange currently designates all routable orders as IOC when 
routing such order to an away market, regardless of the time-in-force 
included with the order upon entry. Exchange Rule 2617(b)(4) describes 
this functionality and currently provides that the System will 
designate Market Orders and marketable Limit Orders that are fully or 
partially routed to an away Trading Center as IOC.\15\
---------------------------------------------------------------------------

    \15\ As described herein, the Exchange proposes to amend 
Exchange Rule 2614(a)(2)(B) to provide that a Market Order may also 
include a time-in-force of RHO only when coupled with the PAC 
routing option. See supra note 13 and accompanying paragraph.
---------------------------------------------------------------------------

    To ensure that orders coupled with the PAC routing option are 
eligible to participate in the primary listing market's opening, re-
opening, or closing process, the Exchange proposes to route Market 
Orders and displayed Limit Orders designated as RHO upon entry with a 
time-in-force accepted or required by the primary listing market.\16\ 
As such, the Exchange would convert an order's time-in-force to a time-
in-force accepted or required by the primary listing market when 
necessary only for purposes of routing that order to an away market. 
For example, an order in a Nasdaq listed security coupled with the PAC 
routing option that includes a time-in-force of RHO would be routed as 
IOC or ``On Close'' to participate in Nasdaq's closing process.\17\ The 
Exchange would not alter the time-in-force of an order coupled with the 
PAC routing option designated as RHO where the primary listing market 
accepts orders designated as RHO to participate in its opening, re-
opening, or closing process.
---------------------------------------------------------------------------

    \16\ See proposed Exchange Rule 26174(b)(5)(B).
    \17\ See, e.g., Nasdaq Rules 4702(b)(9)(A) (providing that 
``[a]n LOO Order entered after 9:29:30 a.m. ET that is designated as 
an IOC will be rejected''), and 4702(b)(11)(B) (stating that ``a 
Participant may designate the Time-in-Force for an MOC Order either 
by designating a Time-in-Force of ``On Close'' or by entering a 
Time-in-Force of IOC and flagging the Order to participate in the 
Nasdaq Closing Cross'').
---------------------------------------------------------------------------

Routing to Primary Listing Market's Opening, Re-Opening, or Closing 
Process
    Proposed Exchange Rule 2617(b)(5)(B)(1) would describe how an order 
coupled with the PAC routing option operates when being routed to 
participate in the primary listing market's opening, re-opening, or 
closing process.
    Proposed Exchange Rule 2617(b)(5)(B)(1)(i) would describe when an 
order designated as RHO and coupled with the PAC routing option may be 
routed to participate in the primary listing market's opening and re-
opening processes. Specifically, proposed Exchange Rule 
2617(b)(5)(B)(1)(i) would provide that a displayed Limit Order or 
Market Order designated as RHO received before the security has opened 
on the primary listing market will be routed to participate in the 
primary listing market's opening process upon receipt.\18\ Proposed 
Exchange Rule 2617(b)(5)(B)(1)(i) would further provide that a 
displayed Limit Order designated as RHO will be routed to participate 
in a primary listing market re-opening process upon the announcement of 
a regulatory halt, suspension, or pause. A displayed Limit Order or 
Market Order designated as RHO received after the announcement of a 
regulatory halt, suspension, or pause, but before the time of a primary 
listing market re-opening process would be routed to participate in a 
primary listing market re-opening process upon receipt. Lastly, 
proposed Exchange Rule 2617(b)(5)(B)(1)(i) would provide that a Market 
Order designated as RHO not

[[Page 11742]]

received during times set forth above will be cancelled.
---------------------------------------------------------------------------

    \18\ Like current functionality, an order coupled with the PAC 
routing option that is also designated as IOC would be rejected if 
entered before 9:30 a.m. Eastern Time because the Exchange does not 
accept orders with a time-in-force of IOC prior to 9:30 a.m. Eastern 
Time. See Exchange Rule 2600(a).
---------------------------------------------------------------------------

    Proposed Exchange Rule 2617(b)(5)(B)(1)(i)(a) would describe how 
the Exchange would handle the returned unexecuted quantity of a Limit 
Order designated as RHO routed pursuant to the PAC routing option to 
participate in the primary listing market's opening or re-opening 
process. Specifically, proposed Exchange Rule 2617(b)(5)(B)(1)(i)(a) 
would provide that any shares that remain unexecuted after attempting 
to execute in the primary listing market's opening or re-opening 
process will either be posted to the MIAX Pearl Equities Book, 
executed, or routed pursuant to the PI routing option described 
below.\19\ Because Limit Orders must be designated as RHO upon entry to 
be routed pursuant to the PAC routing option, an Equity Member that 
wants any returned unexecuted quantity of such order to be immediately 
returned to them would need to submit an instruction to cancel any 
unexecuted shares upon their return to the Exchange.
---------------------------------------------------------------------------

    \19\ This is consistent with the ROOC routing option available 
on BZX and EDGX which provides that ``[i]f shares remain unexecuted 
after attempting to execute in the opening, re-opening, or closing 
process, they are either posted to the BZX Book, executed, or routed 
to destinations on the System routing table.'' See BZX Rule 
11.13(b)(3)(N) and EDGX Rule 11.11(g)(8).
---------------------------------------------------------------------------

    Proposed Exchange Rule 2617(b)(5)(B)(1)(i)(b) would describe how 
the Exchange would handle the returned unexecuted quantity of any 
Market Order designated as RHO routed pursuant to the PAC routing 
option to participate in the primary listing market's opening or re-
opening process. Today, the Exchange cancels the returned unexecuted 
quantity of routed Market Orders pursuant to Exchange Rule 2614(a)(2). 
The same would be true for a Market Order designated as RHO that is 
routed away pursuant to the PAC routing option. Proposed Exchange Rule 
2617(b)(5)(B)(1)(i)(b) provides that any shares of a Market Order that 
remain unexecuted after attempting to execute in the primary listing 
market's opening or re-opening process will be cancelled.
    Proposed Exchange Rule 2617(b)(5)(B)(1)(ii) would describe when an 
order coupled with the PAC routing option would be routed to 
participate in the primary listing market's closing process. The 
Exchange only proposes to route Limit Orders coupled with the PAC 
routing option and designated as RHO to participate in the primary 
listing market's closing process. Market Orders would not be eligible 
to be routed pursuant to the PAC routing option to participate in the 
primary listing market's closing process, as discussed more below. 
Proposed Exchange Rule 2617(b)(5)(B)(1)(ii)(a) would provide that Limit 
Orders designated as RHO will be routed pursuant to the PAC routing 
option to participate in the primary listing market's closing process 
prior to the primary listing market's order entry cut-off time.\20\
---------------------------------------------------------------------------

    \20\ The Exchange will publicly announce the initial time at 
which it would route Limit Orders to participate in the primary 
listing market's closing process and any updates via a regulatory 
circular or alert. Unexecuted shares of a Limit Order that are 
routed to participate in the primary listing market's closing 
process will be cancelled.
---------------------------------------------------------------------------

    Proposed Exchange Rule 2617(b)(5)(B)(1)(ii)(a) does not provide a 
deadline for order entry because the Exchange will continue to route 
Limit Orders designated as RHO to participate in the primary listing 
market's opening, re-opening, or closing process after their order 
entry cut-off time. In addition, proposed Exchange Rule 
2617(b)(5)(B)(1)(ii)(a) would provide that if a Limit Order designated 
as RHO is received at or after the time the Exchange begins to route 
orders to participate in the primary listing market's closing process, 
but before market close, the Exchange will check the System for 
available shares and then route the remaining shares to participate in 
the primary listing market's closing process.\21\ This is intended to 
provide Equity Members with increased opportunities to participate in 
the primary listing market's closing process while also accounting for 
whether the order entry cut-off time is changed/extended or should the 
primary listing market continue to accept orders after their 
established order entry cut-off time in accordance with their 
rules.\22\ If the primary listing market rejects or cancels the Limit 
Order routed pursuant to the PAC routing option for any reason, the 
Exchange will pass any rejection or cancellation along to the Equity 
Member that entered the order. Equity Members that seek greater 
certainty that their Limit Orders coupled with the PAC routing option 
would participate in the closing process at the primary listing market 
may enter their orders prior to the primary listing market's order 
entry cut-off time.
---------------------------------------------------------------------------

    \21\ The Exchange notes that the portion of a Limit Order 
designated as RHO not executed in the primary listing market's 
closing process will be cancelled because the Exchange does not 
currently provide an afterhours trading session or time-in-force 
instruction that extends past Regular Trading Hours.
    \22\ See, e.g., NYSE Rule 7.35B(f)(1)(B) (providing for the 
entry of orders after the order entry cut-of time in the event a 
Regulatory Closing Imbalance is published). See, e.g., BZX Rules 
11.23(b)(1)(A) (providing for the entry of Late Limit On Open Orders 
until 9:30 a.m.), (c)(1)(A) (providing for the entry of Late Limit 
On Close orders up until 4:00 p.m.); and (d)(1)(C) (Incremental 
Quote Period Extensions For Halt Auctions Following a Regulatory 
Halt). The Exchange notes that this differs from BZX Rule 
11.13(b)(3)(N) and EDGX Rule 11.11(g)(8). See supra note 9. This 
behavior is also similar to Nasdaq's LIST routing option that will 
continue to route orders to participate in the primary listing 
market's closing process after its order entry cut-off time. See 
Nasdaq Rule 4758(a)(1)(A)(x) (stating that ``[i]f a LIST order is 
received at or after a time that is two minutes before market close 
but before market close, Nasdaq will check the System for available 
shares and simultaneously route the remaining shares to destinations 
on the System routing table; remaining shares will be routed to the 
security's primary listing market to participate in its closing 
process.'').
---------------------------------------------------------------------------

    Market Orders coupled with the PAC routing option would not be 
eligible for routing to the primary listing market's closing process. 
Proposed Exchange Rule 2617(b)(5)(B)(1)(ii)(b) would, therefore, 
provide that a Market Order designated as RHO would not be eligible to 
be routed to participate in the primary listing market's closing 
process. Proposed Exchange Rule 2617(b)(5)(B)(1)(ii)(b) would further 
provide that a Market Order designated as RHO received at or after the 
time the Exchange begins to route existing orders to participate in the 
primary listing market's closing process, but before market close, will 
be cancelled.
    The Exchange understands that Equity Members do not plan to utilize 
Market Orders to participate in the primary listing market's closing 
process because they would prefer to enter Limit Orders for purposes of 
participating in the price discovery process conducted by the primary 
listing market's closing process.\23\ Therefore, the Exchange does not 
propose to accept Market Orders for purposes of routing them to a 
primary listing market's closing process. The Exchange seeks to make 
clear in its proposed rules how a Market Order coupled with the PAC 
routing option would be handled should an Equity Member mistakenly 
enter such an order when the Exchange is in the process of routing 
orders to participate in the primary listing market's closing process.
---------------------------------------------------------------------------

    \23\ The Exchange would submit a proposed rule change to route 
Market Orders to participate in the primary listing market's closing 
process should Equity Members request such a change.
---------------------------------------------------------------------------

Continuous Trading
    Proposed Exchange Rule 2617(b)(5)(B)(2) would describe how an order 
coupled with the PAC routing option would operate during continuous 
trading when the Exchange is not in the process of routing orders 
pursuant to the PAC routing option to participate in the primary 
listing market's re-opening or closing process.

[[Page 11743]]

    Specifically, proposed Exchange Rule 2617(b)(5)(B)(2)(i) would 
describe the handling of Limit Orders coupled with the PAC routing 
option designated as RHO during continuous trading and provide that if 
the order is entered after the security has opened on the primary 
listing market, before being routed to the primary listing market's re-
opening or closing process pursuant to proposed Exchange Rule 
2617(b)(5)(B)(1)(i) described above, the Exchange will check the System 
\24\ for available shares and then route the remaining shares pursuant 
to the PI routing option,\25\ described below.\26\ As a result, a Limit 
Order coupled with the PAC routing option that is designated as RHO 
would be treated how a re-routable Limit Order is treated today during 
continuous trading; i.e., it would be eligible: (i) First for execution 
locally on the MIAX Pearl Equities Book; and then (ii) any remaining 
share would be routed away to better priced away interest pursuant to 
the proposed PI routing option described below.
---------------------------------------------------------------------------

    \24\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \25\ A Limit Order coupled with the PAC routing option would 
only be defaulted to the proposed PI routing option and will not be 
eligible to be coupled with any other routing option.
    \26\ Proposed Exchange Rule 2617(b)(5)(B)(2) is based on Nasdaq 
Rule 4758(a)(1)(A)(x), which describes how their LIST routing option 
operates during continuous trading. See Nasdaq Rule 4758(a)(1)(A)(x) 
(providing that ``if a LIST order is entered after the security has 
opened on the primary listing market (but before a time that is two 
minutes before market close) and the order has not been designated 
to participate in the opening only, Nasdaq will check the System for 
available shares and simultaneously route the remaining shares to 
destinations on the System routing table . . .'').
---------------------------------------------------------------------------

    Proposed Exchange Rule 2617(b)(5)(B)(2)(i)(a) would describe how 
any unexecuted portion of a Limit Order designated as RHO and coupled 
with the PAC routing option that is routed pursuant to the PI routing 
option during continuous trading would be handled. Specifically, 
proposed Exchange Rule 2617(b)(5)(B)(2)(i)(a) would provide that any 
shares that remain unexecuted after routing will be either posted to 
the MIAX Pearl Equities Book, executed, or routed pursuant to the PI 
routing option, described below.\27\
---------------------------------------------------------------------------

    \27\ Proposed Exchange Rule 2617(b)(5)(B)(2)(i) is based on BZX 
Rule 11.13(b)(3)(N) and EDGX Rule 11.11(g)(8).
---------------------------------------------------------------------------

    Proposed Exchange Rule 2617(b)(5)(B)(2)(ii) would describe the 
handling of Limit Orders coupled with the PAC routing option designated 
as IOC during continuous trading. As set forth above, a Limit Order 
coupled with the PAC routing option that is designated as IOC would not 
be eligible to be routed pursuant to the PAC routing option. However, 
such order would be eligible to be routed pursuant to the proposed PI 
routing option. This functionality would be described under proposed 
Exchange Rule 2617(b)(5)(B)(2)(ii), which would provide that if a Limit 
Order designated as IOC is entered after the security has opened on the 
primary listing market, the Exchange will check the System for 
available shares and then route the remaining shares pursuant to the PI 
routing option described below. Any shares that remain unexecuted after 
routing will be cancelled in accordance with the terms of the order.
    Proposed Exchange Rule 2617(b)(5)(B)(2)(ii)(a) would provide that a 
Limit Order coupled with the PAC routing option designated as IOC 
received during the time when the Exchange is in the process of routing 
orders to the primary listing market's re-opening process will be 
rejected. Such order would not be routed pursuant to the PI routing 
option because trading in the security would be halted pending the 
primary listing market conducting its re-opening process.
    Proposed Exchange Rule 2617(b)(5)(B)(2)(iii) would describe the 
handling of Market Orders designated as RHO that are coupled with the 
PAC routing option during continuous trading. Specifically, proposed 
Exchange Rule 2617(b)(5)(B)(2)(iii) would provide that a Market Order 
designated as RHO that is entered after the security has opened on the 
primary listing market would be routed to participate in the primary 
listing market's re-opening process pursuant to the PAC routing option 
in accordance with proposed Exchange Rule 2617(b)(5)(B)(1), which is 
described above. In sum, a Market Order designated as RHO received 
after the announcement of a regulatory halt, suspension, or pause, but 
before the time of a primary listing market re-opening process would be 
routed to participate in a primary listing market re-opening process 
upon receipt. A Market Order designated as RHO not received during 
times set forth above would be cancelled.
    Lastly, proposed Exchange Rule 2617(b)(5)(B)(2)(iv) would provide 
that a Market Order coupled with the PAC routing option that is 
designated as IOC entered after the security has opened on the primary 
listing market will be cancelled. As discussed above, the Exchange will 
only route Market Orders pursuant to the PAC routing option when 
designated as RHO. As such, a Market Order would not be eligible to be 
routed pursuant to the PAC routing option when designated as IOC. Nor 
does the Exchange propose that Market Orders be eligible for routing 
pursuant to the proposed PI routing option, discussed below. The 
proposed rule text is intended to provide completeness within the 
Exchange's rules regarding how Market Orders coupled with the PAC 
routing option would be handled when designated as IOC.
Routing During Short Sale Period
    The Exchange also proposes to make a related change to Exchange 
Rule 2617(b)(2) to describe the routing of orders coupled with the PAC 
routing option during a Short Sale Period, as defined in Exchange Rule 
2614(g)(3)(A).\28\ Exchange Rule 2617(b)(2) currently provides that an 
order marked ``short'' is not eligible for routing by the Exchange 
during a Short Sale Period. The Exchange proposes to amend Exchange 
Rule 2617(b)(2) to provide for the routing of an order marked ``short'' 
where that order is being routed to participate in the primary listing 
market's opening, re-opening, or closing process pursuant to the PAC 
routing option.\29\ Specifically, as amended, Exchange Rule 2617(b)(2) 
would provide that ``[u]nless an order is routed pursuant to the PAC 
routing option set forth under paragraph (b)(5) of this Rule, an order 
marked `short' is not eligible for routing by the Exchange during a 
Short Sale Period, as defined in Exchange Rule 2614(g)(3)(A).'' \30\ 
The Exchange notes that an order coupled with the PAC routing option 
that is also marked ``short'' would remain ineligible for routing 
during a Short Sale Period where that order would be routed

[[Page 11744]]

pursuant to the PI routing option, described below.
---------------------------------------------------------------------------

    \28\ Exchange Rule 2614(g)(3)(A) generally defines a Short Sale 
Period as the time during which a short sale price test restriction 
under Rule 201 of Regulation SHO is in effect.
    \29\ Rules 201(b)(1)(i) and (ii) of Regulation SHO generally 
require that trading centers such as the Exchange establish, 
maintain, and enforce written policies and procedures reasonably 
designed to: (i) Prevent the execution or display of a short sale 
order of a covered security at a price that is less than or equal to 
the current national best bid if the price of that covered security 
decreases by 10% or more from the covered security's closing price; 
and (ii) impose this price restriction for the remainder of the day 
and the following day. To maintain compliance with Rule 201 of 
Regulation SHO, an exchange may only execute short sale orders 
(i.e., those not marked short exempt) if the execution would take 
place at a permissible price pursuant to Regulation SHO. 
Specifically, if a security is in a Short Sale Period, an order 
marked short that is routed pursuant to the proposed PAC routing 
option may only trade in the opening, re-opening, or closing process 
if the process price is above the national best bid.
    \30\ The Exchange notes that proposed amended Exchange Rule 
2617(b)(2) is based on BZX Rule 11.13(b)(1) and EDGX Rule 11.11(a) 
with regard to their ROOC routing option.
---------------------------------------------------------------------------

    The Exchange further notes that Equity Members must continue to 
ensure that their orders are marked in accordance with the requirements 
of Regulation SHO and Exchange Rule 2623 \31\ and that it is the 
primary listing market's obligation to ensure that an order marked 
short that is routed by the Exchange to participate in its opening, re-
opening, or closing process is executed in accordance with the price 
restrictions of Regulation SHO.\32\
---------------------------------------------------------------------------

    \31\ Exchange Rule 2623 provides that ``[a]ll short sale orders 
shall be identified as `short' or `short exempt' when entered into 
the System. If marked `short exempt,' the Exchange shall execute, 
display and/or route a short sale order marked without regard to any 
short sale price test restriction in effect during a Short Sale 
Period, as defined in Exchange Rule 2614(g)(3)(A). The Exchange 
relies on the marking of an order as `short exempt,' when handling 
such order, and thus, it is the entering Equity Member's 
responsibility, not the Exchange's responsibility, to comply with 
the requirements of Regulation SHO relating to marking of orders as 
`short exempt,' ' Exchange Rule 2603 also requires that Equity 
Members input accurate information into the System.
    \32\ Any remaining unexecuted shares returned to the Exchange 
after routing will be handled and executed by the Exchange in 
accordance with the price restrictions of Regulation SHO.
---------------------------------------------------------------------------

PI Routing Option
    Proposed Exchange Rule 2617(b)(5)(C) would describe the PI routing 
option as a routing option that will route a Limit Order coupled with 
the PAC routing option to multiple destinations simultaneously at a 
single price level.\33\ Limit Orders routed pursuant to the PI routing 
option would be designated as IOC in accordance with current Exchange 
Rule 2617(b)(4)(B). Like the proposed PAC routing option, the PI 
routing option is based on the rules of other equity exchanges.\34\ 
Proposed Exchange Rule 2617(b)(5)(C) would further provide that PI 
would not be an independent routing option and may not be selected 
individually upon order entry. As discussed more fully below, the 
proposed PI routing option would only be available to displayed Limit 
Orders coupled with the PAC routing option. Such orders would be 
eligible to be routed pursuant to the proposed PI routing option when: 
(i) Designated as RHO and entered during continuous trading and when 
the Exchange is not in the process of routing orders pursuant to the 
PAC routing option; or (ii) designated as IOC and entered during 
continuous trading.\35\
---------------------------------------------------------------------------

    \33\ This differs from the Exchange's existing Order Protection 
routing option, which routes orders to multiple destinations at 
multiple price levels simultaneously. See Exchange Rule 
2617(b)(5)(A).
    \34\ The PI routing option is based on the Route to Improve 
(``RTI'') routing option available on EDGX which provides that ``RTI 
may route to multiple destinations at a single price level 
simultaneously . . .''. See EDGX Rule 11.11(g)(12). See also BZX 
Rule 11.13(b)(3)(G).
    \35\ The proposed PI routing option would not be available to a 
Market Order coupled with the PAC routing option that is designated 
as RHO because such order is not accepted during continuous trading, 
as described above.
---------------------------------------------------------------------------

    Proposed Exchange Rule 2617(b)(5)(C)(i) would provide that a 
displayed Limit Order designated as RHO and coupled with the PAC 
routing option would automatically be coupled by the System with the PI 
routing option.\36\ In other words, an Equity Member that elects the 
PAC routing option also elects that its displayed Limit Order 
designated as RHO be subject to the PI routing option during continuous 
trading when not being routed to participate in the primary listing 
market's re-opening or closing process.
---------------------------------------------------------------------------

    \36\ This is consistent with the ROOC and RTI routing option 
available on EDGX which provides that ``[a] User may select either 
Route To Improve (`RTI') . . . for the following routing options: 
ROOC . . . .'' See id. The only difference between the Exchange's 
proposal and EDGX Rule 11.11(g)(12) is that on EDGX the coupling of 
the ROOC and RTI routing options is elective while the Exchange 
proposes to always include the PI routing option when the PAC 
routing is elected.
---------------------------------------------------------------------------

    The following example illustrates the operation of the PI routing 
option. Assume the Exchange receives a displayed Limit Order designated 
as RHO to buy 300 shares at $10.00 during continuous trading and the 
Equity Member selected the PAC routing option (``Order 1'') and there 
are no orders resting on the MIAX Pearl Equities Book. Exchange A's 
best displayed offer is $9.99 for 100 shares, Exchange B's best 
displayed offer is also $9.99 for 100 shares, and Exchange C's best 
displayed offer is $10.00 for 100 shares. During continuous trading, 
Order 1 is subject to the PI routing option and would be routed as 
follows: 100 shares are routed to Exchange A and 100 shares are routed 
to Exchange B at $9.99. Assume that Order 1 executes against Exchange A 
and B's best displayed offers at $9.99 exhausting that price level. 
Exchanges A and B update their best displayed offers to $10.01 for 100 
shares and $10.02 for 100 shares, respectively. Exchange C is now the 
best displayed offer at $10.00 for 100 shares. The remaining 100 shares 
of Order 1 would then be routed to Exchange C to execute 100 shares at 
$10.00.
    The proposed PI routing option would also be available to Limit 
Orders designated as IOC. However, because the PI routing option is not 
a standalone routing option, Equity Members would be required to couple 
such orders with the PAC routing option and enter them during 
continuous trading. This functionality would be described under 
proposed Exchange Rule 2617(b)(5)(C)(ii), which would provide that a 
Limit Order designated as IOC that is coupled with the PAC routing 
option received during continuous trading will automatically be 
defaulted by the System to the PI routing option. As stated above, only 
displayed Limit Orders designated as RHO would be eligible to be routed 
pursuant to the proposed PAC routing option. Proposed Exchange Rule 
2617(b)(5)(C)(ii) would, therefore, reiterate that Limit Orders 
designated as IOC are not eligible to be routed pursuant the PAC 
routing option. As a result, Limit Orders designated as IOC that are 
eligible to be routed pursuant to the PI routing option will be routed 
as such even during the time when the Exchange is in the process of 
routing orders pursuant to the PAC routing option to participate in the 
primary listing market's closing process.
    Equity Members that seek to utilize the PAC routing option, but not 
the PI routing option, may submit a displayed Limit Order designated as 
RHO coupled with the PAC routing option before the security opens on 
the primary listing market or during the time at which the Exchange is 
routing orders to participate in the primary listing market's re-
opening or closing processes and, in the case of an opening and re-
opening process, subsequently submit an instruction to cancel any 
unexecuted shares upon their return to the Exchange.\37\ Conversely, 
Equity Members that seek to utilize the PI routing option, but not the 
PAC routing option may (i) enter a Limit Order coupled with both the 
PAC routing option and time-in-force of IOC during continuous trading; 
or (ii) enter a Limit Order coupled with both the PAC routing option 
and time-in-force of RHO during continuous trading and cancel such 
order prior to the time when the Exchange begins to route such orders 
to participate in the primary listing market's re-opening or closing 
process.\38\
---------------------------------------------------------------------------

    \37\ See supra note 21. The unexecuted returned quantity of an 
order routed to participate in the primary listing exchange's 
closing process will be cancelled since the Exchange does not 
currently provide an after-hours trading session.
    \38\ The Exchange believes this is consistent with functionality 
on BZX and EDGX, which may allow for an order coupled with their RTI 
routing option to include a time-in-force of IOC. The Exchange 
believes this would allow such an order on BZX and EDGX to be routed 
pursuant to the RTI routing option during continuous trading with 
any returned shares being cancelled, thereby bypassing their ROOC 
routing option. See EDGX Rule 11.11(g)(12) and BZX Rule 
11.13(b)(3)(G) (not limiting the time-in-force instructions 
available to be coupled with the RTI routing option).

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

[[Page 11745]]

Clarification to Exchange Rule 2617(b)(2)
    The Exchange also proposes a minor clarification to Exchange Rule 
2617(b)(2). The second sentence of Exchange Rule 2617(b)(2) currently 
provides that, ``[a]n order that is ineligible for routing during a 
Short Sale Period that includes a time-in-force of IOC will be 
cancelled upon entry.'' In all cases, a non-routable order designated 
as IOC will first execute against contra-side interest on the MIAX 
Pearl Equities Book and then be cancelled because it is not eligible 
for routing and will never be posted to the MIAX Pearl Equities Book. 
The Exchange proposes to amend the second sentence of Exchange Rule 
2617(b)(2) to clarify that an order that is ineligible for routing 
during a Short Sale Period that includes a time-in-force of IOC will 
first execute against contra-side interest on the MIAX Pearl Equities 
Book and then be cancelled. This change to Exchange Rule 2617(b)(2) is 
designed to better align the rule with System functionality by 
specifying that the order is first eligible for execution against 
contra-side interest before being cancelled.
Implementation
    Due to the technological changes associated with this proposed 
change, the Exchange will issue a trading alert publicly announcing the 
implementation date of this proposed rule change to provide Equity 
Members with adequate time to prepare for the associated technological 
changes. The Exchange anticipates that the implementation date will be 
in either the first or second quarter of 2022.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\39\ in general, and furthers the objectives of Section 
6(b)(5),\40\ in particular, because 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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. The proposed rule change 
would remove impediments to a free and open market and promote just and 
equitable principles of trade because it would provide market 
participants, including institutional firms who ultimately represent 
individual retail investors in many cases, with optional functionality 
that would provide them with better control over their orders.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78f(b).
    \40\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed PAC routing option would promote just and equitable 
principles of trade, facilitate transactions in securities, and remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would provide market participants 
with additional optional access to the primary listing market's 
opening, re-opening, and closing process. As a result, Equity Members 
will have access to additional sources of liquidity, potentially 
benefiting from improved execution prices and a more efficient 
marketplace. Therefore, the Exchange believes the proposed rule change 
will provide Equity Members with greater control and flexibility over 
their routing of orders, thereby facilitating transactions in 
securities and perfecting the mechanism of the national market system. 
The Exchange also notes that use of its proposed routing options is 
completely voluntary and no Equity Member is required to route orders 
through the Exchange and may choose other methods to access liquidity 
on other trading centers.
    The proposed PAC routing option would not impede the national 
market system because it is not designed to disrupt the ability of the 
primary listing market to conduct their opening, re-opening, and 
closing processes. The proposed rule change is similar to existing 
routing options already provided by other equity exchanges,\41\ which 
the Exchange understands have not disrupted the primary listing 
market's ability to conduct their opening, re-opening, or closing 
processes. The proposed rule change would simply provide Equity Members 
with another means to participate in the primary listing market's 
opening, re-opening, and closing processes. The primary listing markets 
are free to reject or cancel such orders should they deem them to be 
inconsistent with their applicable rules.
---------------------------------------------------------------------------

    \41\ See supra notes 3 and 9.
---------------------------------------------------------------------------

    The Exchange further believes its proposal promotes just and 
equitable principles of trade because the proposed operation of the 
proposed routing options are well established in the equity markets and 
are based on similar functionality at other equity exchanges.\42\ This 
includes the Exchange's proposal to only route Market Orders and 
displayed Limit Orders designated as RHO pursuant to the PAC routing 
option because the Exchange believes this is consistent with operation 
of the ROOC routing option on BZX and EDGX, and the LIST routing option 
on Nasdaq.\43\
---------------------------------------------------------------------------

    \42\ Id.
    \43\ See supra note 9.
---------------------------------------------------------------------------

    While the proposed rule change does differ from similar 
functionality at other exchanges, the Exchange does not believe any of 
these differences are material. For example, the Exchange notes that 
the proposed PAC routing option under Exchange Rule 2617(b)(5)(B) would 
differ from BZX Rule 11.13(b)(3)(N) and EDGX Rule 11.11(g)(8) in three 
primary ways. First, proposed Exchange Rule 2617(b)(5)(B) would specify 
that the PAC routing option is limited to Market Orders and displayed 
Limit Orders designated as RHO while both BZX and EDGX rules do not 
include that level of specificity. However, the Exchange believes this 
is consistent with BZX and EDGX functionality based on industry 
feedback. The Exchange believes not allowing the PAC routing option to 
be coupled with non-displayed Limit Orders is reasonable and consistent 
with the use of the routing option. The Exchange understands that 
potential users of the PAC routing option seek to improve the 
likelihood of execution of their orders and better accomplish this goal 
if their Limit Orders are displayed on the MIAX Pearl Equities Book.
    Second, proposed Exchange Rule 2617(b)(5)(B) would specify that the 
PAC routing option would only route orders to the re-opening following 
a regulatory halt, while BZX and EDGX refer to halts generally. The 
Exchange believes this is not a material difference as most halts are 
regulatory halts and specifying regulatory halts within the rule 
provides additional specificity. The Exchange does not propose to route 
orders with a PAC routing option for other types of halts, such as an 
operational halt, because an operational halt indicates that the 
primary listing market that issued the halt has indicated that they may 
be experiencing a system issue across all or a subset of securities 
that inhibits their ability to operate normally. Additionally, some 
exchanges cancel all open orders as a result of an operational halt and 
do not accept new orders while the operational halt is in effect and/or 
do not conduct a re-opening process once the operational halt 
concludes.\44\
---------------------------------------------------------------------------

    \44\ See, e.g., BZX Rule 11.23(d) (providing that BZX will 
conduct a halt auction after a regulatory halt and not specifying an 
operational halt).

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

[[Page 11746]]

    Third, both BZX and EDGX require that an order be received before 
the primary listing market's opening, re-opening, or closing time, but 
do not specify whether that order must be received prior to the primary 
listing market's order entry cut-off time or how and when orders are 
routed to the primary listing market to participate in their opening, 
re-opening, or closing process. Proposed Exchange Rule 2617(b)(5)(B) 
would provide additional specificity as to when an order would be 
routed to participate in the primary listing market's opening, re-
opening, or closing process. The Exchange will continue to route orders 
to participate in the primary listing market's opening, re-opening, or 
(in the case of a displayed Limit Order) closing process after their 
order entry cut-off time to increase the order's chances of 
participating in the opening, re-opening, or closing process while also 
accounting for the order entry cut-off time being changed/extended or 
where the primary listing market continues to accept orders after their 
established order entry cut-off time in accordance with their 
rules.\45\ If the primary listing market rejects or cancels the order 
coupled with the PAC routing option for any reason, the Exchange will 
pass any rejection or cancellation along to the Equity Member that 
entered the order via existing protocols. This behavior is also similar 
to Nasdaq's LIST routing option that will continue to route orders to 
participate in the primary listing market's closing process after its 
order entry cut-off time.\46\ Equity Members that seek greater 
certainty that their orders coupled with the PAC routing option would 
participate in the opening, re-opening, or closing process at the 
primary listing market may enter their orders prior to the primary 
listing market's order entry cut-off time.
---------------------------------------------------------------------------

    \45\ See supra note 22.
    \46\ See Nasdaq Rule 4758(a)(1)(A)(x) (providing that ``[t]wo 
minutes before market close, all LIST orders on the book will begin 
routing to the security's primary listing market for participation 
in its closing process. If a LIST order is received at or after a 
time that is two minutes before market close but before market 
close, Nasdaq will check the System for available shares and 
simultaneously route the remaining shares to destinations on the 
System routing table; remaining shares will be routed to the 
security's primary listing market to participate in its closing 
process.'').
---------------------------------------------------------------------------

    The Exchange also believes that not: (i) Accepting Market Orders 
coupled with the PAC routing option during continuous trading; (ii) 
making Market Orders eligible for routing pursuant to the proposed PI 
routing option; and (iii) routing Market Orders coupled with the PAC 
routing option to the primary listing market's closing process promotes 
just and equitable principles of trade because the proposed treatment 
is consistent with the Exchange's understanding of how Equity Members 
would expect such orders to be handled. The treatment of Market Orders 
coupled with the PAC routing option is being proposed in response to 
industry feedback that Equity Members do not intend to enter Market 
Orders with the PAC routing option during continuous trading or for 
such orders to be routed to participate in a primary listing market's 
closing process. The Exchange understands that Equity Members would 
prefer to have such orders cancelled in the event they inadvertently 
entered such order. This proposed functionality promotes just and 
equitable principles of trade, and in general, protects investors and 
the public interest because it provides specificity within the 
Exchange's rules and aligns system functionality with how the Exchange 
understands Members would expect their Market Orders would be handled 
in such circumstances.
    Further, the Exchange proposes to require that Limit Orders coupled 
with the PAC routing option are also automatically coupled with the PI 
routing option. In other words, the PI routing option could not be 
elected individually and without also electing the PAC routing option. 
This is different than EDGX, which allows their ROOC routing option to 
be coupled with their RTI routing option but does not require it. The 
Exchange does not believe this is a material difference and does not 
propose to offer the optionality to couple the PAC and PI routing 
options at this time based on input from market participants. As stated 
above, the Exchange understands that potential users of the PAC routing 
option seek to improve the likelihood of execution of their Limit 
Orders and better accomplish this goal if their orders are eligible for 
routing pursuant to the PI routing option during continuous trading and 
when the Exchange is not in the process of routing orders away pursuant 
to the PAC routing option. Requiring that the PAC routing option be 
coupled with the PI routing option would provide Equity Members with 
increased price improvement opportunities during continuous trading 
because their Limit Order would be eligible for routing to multiple 
markets at the single best price level simultaneously. Equity Members 
that seek to utilize the PAC routing option, but not the PI routing 
option, may submit a Limit Order designated as RHO and coupled with the 
PAC routing option before the security has opened on the primary 
listing market or during the time at which the Exchange is routing 
orders pursuant to the PAC routing option to participate in the primary 
listing market's re-opening or closing process and, in the case of an 
opening and re-opening process, subsequently to cancel any unexecuted 
shares upon their return to the Exchange.\47\ Conversely, Equity 
Members that seek to utilize the PI routing option, but not the PAC 
routing option may (i) enter a Limit Order coupled with both the PAC 
routing option and time-in-force of IOC during continuous trading; or 
(ii) enter a Limit Order coupled with both the PAC routing option and 
time-in-force of RHO during continuous trading and cancel such order 
prior to the time when the Exchange begins to route such orders to 
participate in the primary listing market's re-opening or closing 
process.\48\ The Exchange believes providing a path for Members to 
utilize the PI routing option, but not the PAC routing option, removes 
impediments to a free and open market because it is consistent with 
similar functionality available on other equity exchanges \49\ and 
Members appreciate this consistency because it enables them to modify 
their systems in a singular manner that accommodates similar 
functionality across multiple exchanges.
---------------------------------------------------------------------------

    \47\ See supra note 21. The unexecuted returned quantity of an 
order routed to participate in the primary listing exchange's 
closing process will be cancelled since the Exchange does not 
currently provide an after-hours trading session.
    \48\ See supra note 38.
    \49\ See supra note 38.
---------------------------------------------------------------------------

    By routing to a single price level at a time, the PI routing option 
places more emphasis on maximizing price improvement for the order as 
opposed to speed of execution. Therefore, the proposed PI routing 
option promotes just and equitable principles of trade because it 
provides Equity Members with additional flexibility when deciding how 
their orders are to be routed by providing them the ability to seek out 
better prices over the speed of execution. The proposed PI routing 
option is also based on functionality offered by other equity 
exchanges.\50\
---------------------------------------------------------------------------

    \50\ See EDGX Rule 11.11(g)(12). See also BZX Rule 
11.13(b)(3)(G).
---------------------------------------------------------------------------

    The Exchange also believes its proposed related change to Exchange 
Rule 2617(b)(2) to allow for the routing of orders coupled with the PAC 
routing option during a Short Sale Period promotes just and equitable 
principles of trade because it would provide such orders with increased 
possibilities to participate in the primary listing

[[Page 11747]]

market's opening, re-opening, or closing process in the event of a 
prolonged Short Sale Period. Further, this proposed change to Exchange 
Rule 2617(b)(2) is not unique and is consistent with functionality 
offered by other equity exchanges.\51\ Finally, the proposed 
clarification to Exchange Rule 2617(b)(2) promotes just and equitable 
principles of trade and protects investors and the public interest 
because it better aligns the rule with System functionality by 
specifying that the order is first eligible for execution against 
contra-side interest before being cancelled.
---------------------------------------------------------------------------

    \51\ See BZX Rule 11.13(b)(1) and EDGX Rule 11.11(a) (regarding 
their ROOC routing option).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. In fact, the Exchange 
believes that the proposed PAC routing option and related changes may 
have a positive effect on competition because it will enable the 
Exchange to offer functionality substantially similar to that offered 
by BZX, EDGX, and Nasdaq.\52\ The same is true for the proposed PI 
routing option which is also similar to functionality offered by EDGX 
and BZX.\53\ The Exchange believes its lack of this functionality has 
put it at a competitive disadvantage as market participants that seek 
to have their orders eligible to be routed for improved price 
improvement opportunities or to the primary listing markets' opening, 
re-opening, or closing process have avoided sending orders to the 
Exchange in favor of other exchanges that offer such functionality. 
This proposal is designed to allow the Exchange to directly compete 
with other exchanges that offer similar routing functionality. The 
Exchange believes that its proposal promotes competition because it is 
designed to attract liquidity to the Exchange by providing market 
participants with additional routing functionality.
---------------------------------------------------------------------------

    \52\ See supra notes 3 and 9.
    \53\ See EDGX Rule 11.11(g)(12). See also BZX Rule 
11.13(b)(3)(G).
---------------------------------------------------------------------------

    The Exchange believes that the proposal will not impose any burden 
on inter-market competition, but rather promote competition by 
enhancing the value of the Exchange's available routing options. 
However, since the use of the Exchange's routing options is voluntary 
and Equity Members have numerous alternative mechanisms for order 
routing, the changes will not impair the ability of Equity Members to 
use other means to access competing trading venues. The proposed rule 
change would improve inter-market competition because it allows the 
Exchange to provide another means by which market participants would be 
able to participate in the primary listing market's opening, re-
opening, or closing processes that is similar to that currently 
provided by other exchanges.\54\
---------------------------------------------------------------------------

    \54\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the proposal will not impose any burden 
on intra-market competition because it would be available to all Equity 
Members. Any Equity Member that seeks to have their order routed to 
multiple markets at a single price level simultaneously or to 
participate in the primary listing market's opening, re-opening, or 
closing processes is free to select the PAC routing option or seek to 
access those markets through other means.
    In addition, the Exchange also believes its proposed related change 
to Exchange Rule 2617(b)(2) to allow for the routing of orders coupled 
with the PAC routing option during a Short Sale Period will not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because it is identical to 
functionality offered on BZX, EDGX, and Nasdaq, and, therefore, does 
not alone enhance the Exchange's competitive position.
    Finally, the proposed clarification to Exchange Rule 2617(b)(2) 
will not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because it also 
does not enhance the Exchange's competitive position. Rather, it is 
simply designed to better align the rule with System functionality by 
specifying that the order is first eligible for execution against 
contra-side interest before being cancelled.

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \55\ and Rule 19b-4(f)(6) \56\ 
thereunder.
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78s(b)(3)(A).
    \56\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2022-06 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-2022-06. 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

[[Page 11748]]

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-2022-06, and should be submitted on or before March 23, 2022.
---------------------------------------------------------------------------

    \57\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\57\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2022-04211 Filed 3-1-22; 8:45 am]
BILLING CODE 8011-01-P