Document ID: SEC-2019-0334-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2019-03-26T04:00Z

[Federal Register Volume 84, Number 58 (Tuesday, March 26, 2019)]
[Notices]
[Pages 11359-11362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05705]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85376; File No. SR-PEARL-2019-09]

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

March 20, 2019.
    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 March 8, 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'').
    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 Exchange proposes to (i) make a number of non-substantive, 
technical corrections to its routing fee table set forth in Section 
1(b) of the Fee Schedule to reflect the recent addition of a new 
national securities exchange, MIAX Emerald, LLC (``MIAX Emerald''),\3\ 
to be listed in the routing fee table; (ii) change the exchange 
groupings of options exchanges within the routing fee table and to 
adjust the fee for certain groupings, to reflect the associated fee for 
customer orders that are routed to those options exchanges for 
execution; and (iii) make a non-substantive, technical formatting 
correction.
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    \3\ See Securities Exchange Act Release No. 84891 (December 20, 
2018), 83 FR 67421 (December 28, 2018) (File No. 10-233) (order 
approving application of MIAX Emerald, LLC for registration as a 
national securities exchange).
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Addition of MIAX Emerald
    MIAX Emerald commenced operations as a national securities exchange 
registered under Section 6 of the Act \4\ on March 1, 2019. The names 
of all options exchanges are set forth in the Exchange's routing fee 
table set forth in Section 1(b) of the Fee Schedule, which sets forth 
the fees for customer orders that are routed to those options exchanges 
for execution. Accordingly, the Exchange proposes to update its routing 
fee table set forth in Section 1(b) of the Fee Schedule to reflect the 
addition of MIAX Emerald as a national securities exchange. The amount 
of the applicable fee is determined based upon (i) the origin type of 
the order, (ii) whether or not it is an order for an option in a Penny 
or Non-Penny class (or other explicitly identified classes) and (iii) 
to which away market it is being routed.\5\ The Exchange proposes to 
add MIAX Emerald to the second ``Routed, Priority Customer,\6\ Penny 
Pilot'' exchange grouping, the second ``Routed, Priority Customer, Non-
Penny Pilot'' exchange grouping, the ``Routed, Public Customer that is 
not a Priority Customer, Penny Pilot'' exchange grouping, and the 
second ``Routed, Public Customer that is not a Priority Customer, Non-
Penny Pilot'' exchange grouping. In determining its Routing Fees, the 
Exchange takes into account transaction fees and rebates assessed by 
the away markets to which the Exchange routes orders, as well as the

[[Page 11360]]

Exchange's clearing costs,\7\ administrative, regulatory, and technical 
costs associated with routing orders to an away market. The Exchange 
uses unaffiliated routing brokers to route orders to the away markets; 
the costs associated with the use of these services are included in the 
Routing Fees specified in the Fee Schedule. Based on its analysis, the 
Exchange determined that the exchange groupings discussed above were 
the similar grouping within which to include MIAX Emerald.
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    \4\ 15 U.S.C. 78f.
    \5\ This is similar to the methodologies utilized by BATS in 
assessing Routing Fees. See Cboe BZX Options Fee Schedule under 
``Fee Codes and Associated Fees.''
    \6\ ``Priority Customer'' means a person or entity that (i) is 
not a broker or dealer in securities, and (ii) does not place more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Exchange Rule 
100, including Interpretations and Policies .01.
    \7\ The OCC amended its clearing fee from $0.01 per contract 
side to $0.02 per contract side. See Securities Exchange Act Release 
No. 71769 (March 21, 2014), 79 FR 17214 (March 27, 2014) (SR-OCC-
2014-05).
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Updated Grouping of Certain Options Exchanges and Fees
    The Exchange proposes to change the exchange groupings of options 
exchanges within the routing fee table and to adjust the fee for 
certain groupings, to better reflect the associated costs of routing 
customer orders to those options exchanges for execution. As noted 
above, the Exchange assesses the applicable routing fee based upon (i) 
the origin type of the order, (ii) whether or not it is an order for an 
option in a Penny or Non-Penny class (or other explicitly identified 
classes) and (iii) to which away market it is being routed.\8\ In 
determining which category to group an exchange into, the Exchange 
primarily takes into account the amount of the transaction fees and 
rebates assessed by the away markets to which the Exchange routes 
orders, as well as the Exchange's clearing costs, administrative costs, 
regulatory, and technical costs associated with routing orders to an 
away market. The Exchange uses unaffiliated routing brokers to route 
orders to the away markets; the costs associated with the use of these 
services are included in the Routing Fees specified in the Fee 
Schedule.
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    \8\ See supra note 5.
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    Cboe BZX Options Exchange (``BZX Options'') has exchange groupings 
in its fee schedule, similar to those of MIAX PEARL, whereby several 
exchanges are grouped into the same category, dependent on the order's 
origin type and whether it is a Penny or Non-Penny Pilot class.\9\ The 
Exchange believes having these types of exchange groupings allows it 
greater precision in covering its costs associated with routing orders 
to away markets. The per-contract transaction fee amount associated 
with each grouping approximates the Exchange's all-in cost (plus an 
additional, non-material amount) to execute that corresponding contract 
at that corresponding exchange.
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    \9\ See supra note 5.
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    As a result of conducting a periodic review of the current 
transaction fees and rebates charged by away markets, the Exchange has 
determined to change the exchange grouping of options exchanges within 
the routing fee table and to adjust the fee for certain groupings, to 
better reflect the associated costs of routing customer orders to those 
options exchanges for execution. First, the Exchange proposes to add 
MIAX Options, Cboe, Nasdaq PHLX, Nasdaq ISE, and Cboe EDGX Options to 
the first ``Routed, Public Customer that is not a Priority Customer, 
Non-Penny Pilot'' exchange grouping, and to increase the fee for this 
exchange grouping from $0.65 to $1.00. Next, the Exchange proposes to 
add NOM and BOX to the second ``Routed, Public Customer that is not a 
Priority Customer, Non-Penny Pilot'' exchange grouping, and to decrease 
the fee for this exchange grouping from $1.20 to $1.15. The Exchange 
also proposes to remove NYSE Arca Options, Cboe BZX Options, and Nasdaq 
GEMX from this exchange grouping. Next, the Exchange proposes to add 
Cboe BZX Options, NYSE Arca Options, and Nasdaq GEMX to the third 
``Routed, Public Customer that is not a Priority Customer, Non-Penny 
Pilot'' exchange grouping, and to increase the fee for this exchange 
grouping from $0.97 to $1.25. The Exchange also proposes to remove BOX, 
Cboe, Cboe EDGX Options, Nasdaq ISE, MIAX Options, NOM and Nasdaq PHLX 
from this exchange grouping. The Exchange notes that no options 
exchanges were removed from the routing fee table entirely, and were 
only categorized within a different exchange grouping. Finally, the 
Exchange proposes to increase the fee for the second ``Routed, Priority 
Customer, Non-Penny Pilot'' exchange grouping from $0.97 to $1.00. The 
Exchange does not propose to adjust the fee it charges for the first or 
second ``Routed, Priority Customer, Penny Pilot'' exchange groupings; 
the first ``Routed, Priority Customer, Non-Penny Pilot'' exchange 
grouping; and the ``Routed, Public Customer that is not a Priority 
Customer, Penny Pilot'' exchange grouping. All of the foregoing changes 
to the groupings and the amounts are based on corresponding changes to 
the fee amounts assessed by the away exchanges since the last time the 
Exchange changed its Routing Fees.
Formatting Corrections
    The Exchange also proposes to make a number of non-substantive, 
technical formatting corrections. Specifically, the Exchange notes that 
the current routing fee table incorrectly lists MIAX Options with all 
capitalized letters. The Exchange proposes to correct ``MIAX OPTIONS'' 
as currently written in the first ``Routed, Priority Customer, Penny 
Pilot'' exchange grouping, the first ``Routed, Priority Customer, Non-
Penny Pilot'' exchange grouping, and the ``Routed, Public Customer that 
is not a Priority Customer, Penny Pilot'' exchange grouping to now be 
written as ``MIAX Options,'' with the word ``options'' only having the 
first letter capitalized. The Exchange notes that the word ``Options'' 
was inadvertently capitalized and believes that correcting the 
formatting of the word would make the routing table clearer, and would 
align the formatting with the rest of the Fee Schedule. The Exchange 
also proposes to make a correction in the third ``Routed, Public 
Customer that is not a Priority Customer, Non-Penny Pilot'' exchange 
grouping. Specifically, the Exchange proposes to remove the parenthesis 
around the words ``Public Customer that is not a Priority Customer.'' 
The Exchange notes that the parenthesis were inadvertently added and 
believes that removing the parenthesis would make the routing fee table 
clearer, as it would align the formatting with the other exchange 
groupings in the table. Lastly, the Exchange proposes to amend the 
title of Section 1(b) of the Fee Schedule to remove the words ``and 
Rebate'' from the title. The Exchange notes that the title of the 
Section currently reads ``Fees and Rebates for Customer Orders Routed 
to Another Options Exchange.'' The routing fee table does not currently 
contain any rebates, therefore, as amended, the Exchange proposes for 
the title of the Section to now read ``Fees for Customer Orders Routed 
to Another Options Exchange.'' The Exchange believes this will add 
clarity and precision with respect to the structure of its Fee 
Schedule. The Exchange notes that none of the proposed technical 
corrections change the application of routing fee table in any way.
    Accordingly, as amended, the routing fee table shall be as follows:
(b) Fees for Customer Orders Routed to Another Options Exchange
    MIAX PEARL will assess a Routing Fee to market participants on all 
orders routed to and executed on an away market as set forth in the 
table below.

[[Page 11361]]

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                           Description                             Fees
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Routed, Priority Customer, Penny Pilot, to: NYSE American, BOX,    $0.15
 Cboe, Cboe EDGX Options, Nasdaq MRX, MIAX Options, Nasdaq PHLX
 (except SPY), Nasdaq BX Options................................
Routed, Priority Customer, Penny Pilot, to: NYSE Arca Options,      0.65
 Cboe BZX Options, Cboe C2, Nasdaq GEMX, Nasdaq ISE, NOM, Nasdaq
 PHLX (SPY only), MIAX Emerald..................................
Routed, Priority Customer, Non-Penny Pilot, to: NYSE American,      0.15
 BOX, Cboe, Cboe EDGX Options, Nasdaq ISE, Nasdaq MRX, MIAX
 Options, Nasdaq PHLX, Nasdaq BX Options........................
Routed, Priority Customer, Non-Penny Pilot, to: NYSE Arca           1.00
 Options, Cboe BZX Options, Cboe C2, Nasdaq GEMX, NOM, MIAX
 Emerald........................................................
Routed, Public Customer that is not a Priority Customer, Penny      0.65
 Pilot, to: NYSE American, NYSE Arca Options, Cboe BZX Options,
 BOX, Cboe, Cboe C2, Cboe EDGX Options, Nasdaq GEMX, Nasdaq ISE,
 Nasdaq MRX, MIAX Emerald, MIAX Options, NOM, Nasdaq PHLX,
 Nasdaq BX Options..............................................
Routed, Public Customer that is not a Priority Customer, Non-       1.00
 Penny Pilot, to: NYSE American, MIAX Options, Cboe, Nasdaq
 PHLX, Nasdaq ISE, Cboe EDGX Options............................
Routed, Public Customer that is not a Priority Customer, Non-       1.15
 Penny Pilot, to: Cboe C2, NOM, BOX, Nasdaq MRX, Nasdaq BX
 Options, MIAX Emerald..........................................
Routed Public Customer that is not a Priority Customer, Non-        1.25
 Penny Pilot, to: Cboe BZX Options, NYSE Arca Options, Nasdaq
 GEMX...........................................................
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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 \10\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\11\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\12\ in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Exchange believes the proposed changes to update its routing 
fee table set forth in Section 1(b) of the Fee Schedule to reflect the 
addition of MIAX Emerald as a national securities exchange furthers the 
objectives of Section 6(b)(4) of the Act and are equitable and 
reasonably and not unfairly discriminatory because the addition of MIAX 
Emerald to the routing fee table would apply in the same manner to all 
Members that are subject to the Routing Fee. The Exchange believes the 
proposed changes are equitable and reasonable since they make non-
substantive, technical corrections and updates to the Exchange's Fee 
Schedule. The addition of MIAX Emerald to the routing fee table does 
not alter the application of any Routing Fees, but instead adds MIAX 
Emerald to the appropriate exchange groupings in the routing fee table 
to reflect that MIAX Emerald has been added as a national securities 
exchange. The Exchange believes that the proposed changes to update its 
routing fee table to reflect the addition of MIAX Emerald as a national 
securities exchange furthers the objectives of Section 6(b)(5) of the 
Act and promote just and equitable principles of trade and remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the proposed changes will provide 
greater clarity to Members and the public regarding the Exchange's 
Rules. It is in the public interest for rules to be accurate and 
concise so as to eliminate the potential for confusion.
    The Exchange believes the proposed change to the exchange groupings 
of options exchanges within the routing fee table and to adjustments to 
the fee for certain groupings, to reflect the associated fee for 
customer orders that are routed to those options exchanges for 
execution further the objectives of Section 6(b)(4) of the Act and are 
reasonable, equitable and not unfairly discriminatory because they will 
continue to apply in the same manner to all Members that are subject to 
Routing Fees. The Exchange believes the proposed changes to the routing 
fee table exchange grouping and fees also further the objectives of 
Section 6(b)(5) of the Act and are designed to promote just and 
equitable principles of trade and are not unfairly discriminatory 
because they seek to recoup costs that are incurred by the Exchange 
when routing customer orders to away markets on behalf of Members and 
in the same manner to all Members that are subject to the Routing Fee. 
The costs to the Exchange to route orders to away markets for execution 
primarily includes transaction fees and rebates assessed by the away 
markets to which the Exchange routes orders, in addition to the 
Exchange's clearing costs, administrative, regulatory and technical 
costs. The Exchange believes that the proposed re-categorization of 
certain exchange groupings and adjustments to fees would enable the 
Exchange to recover the costs it incurs to route orders to away 
markets. The per-contract transaction fee amount associated with each 
grouping approximates the Exchange's all-in cost (plus an additional, 
non-material amount) to execute the corresponding contract at the 
corresponding exchange. The Exchange believes it is reasonable, 
equitable and not unfairly discriminatory to re-categorize certain 
exchange groupings and make adjustments to the associated fees because 
all such changes are based on corresponding changes to the fee amounts 
assessed by the away exchanges since the last time the Exchange changed 
its Routing Fees.
    In addition, the Exchange believes that it is equitable and not 
unfairly discriminatory to assess lower routing fees to Priority 
Customer orders than to Public Customer orders. A Priority Customer is 
by definition not a broker or dealer in securities, and does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). Further, the routing 
fees for Priority Customer orders are based on the fees charged by the 
away market for the execution of such orders, therefore it is 
reasonable and appropriate for the routing fees to be lower than the 
routing fees for Public Customer orders, as this is the fee construct 
at the away markets.
    Lastly, the Exchange believes that the proposed non-substantive, 
technical formatting corrections further the objectives of Section 
6(b)(4) of the Act and 6(b)(5) of the Act in that the changes are 
equitable and reasonable and not unfairly discriminatory because this 
proposal is intended only as a technical correction to the formatting 
of certain names within the routing fee

[[Page 11362]]

table and to update to the title of Section 1(b) of the Fee Schedule to 
accurately reflect that this Section only includes fees, which does not 
have any substantive impact on the Routing Fees. The Exchange believes 
making these technical formatting corrections promotes just and 
equitable principles of trade, fosters cooperation and coordination 
with persons engaged in facilitating transactions in securities, and 
protects investors and the public interest, because it would eliminate 
any potential confusion as a result of incorrect formatting and 
wording. It is in the public interest for rules to be accurate and 
concise so as to eliminate the potential for confusion.

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. The proposed changes to update 
its routing fee table set forth in Section 1(b) of the Fee Schedule to 
reflect the addition of MIAX Emerald as a new national securities 
exchange will have no impact on competition as they are not designed to 
address any competitive issues but rather are designed to make non-
substantive technical corrections and update the Exchange's Fee 
Schedule by adding MIAX Emerald to the appropriate exchange groupings 
in the routing fee table to reflect that MIAX Emerald has been added as 
a national securities exchange. The Exchange's proposed re-
categorization of certain exchange groupings and adjustment of fees is 
intended to enable the Exchange to recover the costs it incurs to route 
orders to away markets. The Exchange does not believe that this 
proposal imposes any unnecessary burden on competition because it seeks 
to recoup costs incurred by the Exchange when routing orders to away 
markets on behalf of Members and other Exchange have similar Routing 
Fee structures.\13\ Further, the Exchange does not believe that the 
technical formatting corrections to the routing fee table will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act because the proposal is intended to 
eliminate any potential confusion as a result of incorrect formatting 
and wording. In doing so, the proposed rule change will also serve to 
promote clarity and consistency in the Exchange's Fee Schedule.
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    \13\ See supra note 5.
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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,\14\ and Rule 19b-4(f)(2) \15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 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-2019-09 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-2019-09. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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-2019-09 and should be submitted on 
or before April 16, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05705 Filed 3-25-19; 8:45 am]
 BILLING CODE 8011-01-P