Document ID: SEC-2017-0598-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2017-04-13T04:00Z

[Federal Register Volume 82, Number 70 (Thursday, April 13, 2017)]
[Notices]
[Pages 17927-17929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07458]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80401; File No. SR-PEARL-2017-17]

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

April 7, 2017.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on April 6, 2017, 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 waive transaction rebates/fees 
applicable to transactions executed during the opening and transactions 
that uncross the Away Best Bid or Offer (``ABBO'').
    The Exchange initially filed the proposal on March 29, 2017 (SR-
PEARL-2017-13). That filing has been withdrawn and replaced with the 
current filing (SR-PEARL-2017-17).
    The text of the proposed rule change is available on the Exchange's 
Web site 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 this proposed rule change is to waive transaction 
rebates/fees applicable to executions that occur as part of the 
Exchange's opening procedures as described in Rule 503 (``Openings on 
the Exchange'') or that uncross the ABBO,\3\ as described in Rule 515 
(``Execution of Orders'').
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    \3\ See MIAX PEARL Rule 100.
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    Under the Openings on the Exchange Rule, the Exchange will accept 
orders for queuing in a series of options prior to the opening of 
trading in that series of options. As such and as further described in 
Rule 503, executions might occur in a series as part of the Exchange 
Opening as the series is being opened for trading. Pursuant to Section 
1)a) of the Exchange's Fee Schedule, the Exchange currently assesses 
transaction rebates and fees for transactions that occur as part of the 
Exchange Opening. In order to determine the applicable transaction 
rebate and fee, the Exchange treats orders from Priority Customer \4\ 
origin type as a ``Maker,'' and treats orders from all origin types 
other than Priority Customer (i.e., MIAX PEARL Market Maker \5\ and 
Non-Priority Customer, Firm, BD and Non-MIAX PEARL Market Maker) \6\ as 
a ``Taker.'' The Exchange now proposes that, for executions occurring 
as part of the Exchange Opening, the Exchange will neither charge a fee 
nor provide a rebate, regardless of origin type.
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    \4\ The term ``Priority Customer'' is defined in Exchange Rule 
100 to mean a person or entity that (i) is not a broker or dealer in 
securities, and (ii) does not place more than 390 orders in listed 
options per day on average during a calendar month for its own 
beneficial accounts(s). The number of orders is counted in 
accordance with Rule 100 Interpretation and Policy .01.
    \5\ The term ``Market Maker'' is defined in Exchange Rule 100 to 
mean a Member registered with the Exchange for the purpose of making 
markets in options contracts traded on the Exchange and that is 
vested with the rights and responsibilities specified in Chapter VI 
of the Exchange's Rules.
    \6\ See MIAX PEARL Fee Schedule, Section 1(a).
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    Further, pursuant to Section 1)a) of the Exchange's Fee Schedule, 
the Exchange currently assesses transaction rebates and fees for 
transactions that uncross the ABBO. In order to

[[Page 17928]]

determine the applicable transaction rebate and fee, the Exchange 
treats orders from Priority Customer origin type as a ``Maker,'' and 
treats orders from all origin types other than Priority Customer as a 
``Taker.'' The Exchange now proposes that, for executions occurring in 
such scenario, the Exchange will neither charge a fee nor provide a 
rebate, regardless of origin type.
    The Exchange has determined to make these changes for competitive 
reasons in order to attract more order flow to the Exchange in these 
scenarios. The Exchange notes that other exchanges do not assess 
transaction rebates/fees in these scenarios, including Bats BZX 
Exchange.\7\ The Exchange notes that any contracts executed as a result 
of such transactions will continue to be counted for purposes of 
determining the volume criteria and TCV \8\ for purposes of calculating 
tiered rebates and fees.
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    \7\ See Securities Exchange Act Release No. 71746 (March 19, 
2014), 79 FR 16412 (March 25, 2014) (SR-BATS-2014-006).
    \8\ TCV means total consolidated volume calculated as the total 
national volume in those classes listed on MIAX PEARL for the month 
for which the fees apply, excluding consolidated volume executed 
during the period time in which the Exchange experiences an outage 
of a Matching Engine or collective Matching Engines for a period of 
two consecutive hours or more, during trading hours (solely in the 
option classes of the affected Matching Engine). See Fee Schedule 
Definitions.
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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 \9\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposal provides that executions that occur as part of the 
Exchange Opening will not incur any fees or receive any rebates, 
regardless of origin type. The Exchange believes that its proposal to 
waive transaction rebates/fees that occur as part of the Exchange 
Opening is reasonable, fair and equitable because it will incentivize 
Members \11\ to send greater order flow to the Exchange in this 
scenario, potentially providing greater liquidity on the Exchange. In 
addition, the Exchange believes that the foregoing is fair and 
equitable because it provides certainty for Members with respect to 
execution costs across all trades occurring as part of the Exchange 
Opening. Lastly, the Exchange also believes that the proposed pricing 
for executions occurring as part of the Opening on the Exchange is 
nondiscriminatory because it will apply equally to all Members, 
regardless of origin type.
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    \11\ ``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 MIAX PEARL Rule 100.
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    The proposal further provides that executions that uncross the ABBO 
will not be assessed any fees or receive any rebates, regardless of 
origin type. The Exchange believes that its proposal to waive 
transaction rebates/fees that uncross the ABBO is reasonable, fair and 
equitable because it will incentivize Members to send greater order 
flow to the Exchange in this scenario, potentially providing greater 
liquidity on the Exchange. In addition, the Exchange believes that the 
foregoing is fair and equitable because it provides certainty for 
Members with respect to execution costs across all trades which uncross 
the ABBO. Lastly, the Exchange also believes that the proposed pricing 
for executions occurring in this scenario is nondiscriminatory because 
it will apply equally to all Members, regardless of origin type.

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. To the contrary, the Exchange 
notes that this rule change is being proposed as a competitive offering 
at a time when other options exchanges are offering similar processes 
for opening their respective markets or managed interest processes. As 
a result of the competitive environment, Members will have various 
pricing and execution models to choose from in making determinations on 
where to enter orders prior to the opening of trading or which may 
potentially uncross the ABBO. The Exchange notes that it operates in a 
highly competitive market in which Members can readily direct order 
flow to competing venues if they deem fee levels to be excessive.

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,\12\ and Rule 19b-4(f)(2)\13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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-2017-17 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-PEARL-2017-17. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent

[[Page 17929]]

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 Web site 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 
such filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-PEARL-2017-17, and should be submitted on or before May 
4, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07458 Filed 4-12-17; 8:45 am]
 BILLING CODE 8011-01-P