Document ID: SEC-2021-0557-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2021-04-22T04:00Z

[Federal Register Volume 86, Number 76 (Thursday, April 22, 2021)]
[Notices]
[Pages 21405-21410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08310]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91605; File No. SR-PEARL-2021-16]

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 16, 2021.
    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 8, 2021, 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'') for the Exchange's options market.
    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 make several amendments to the tables for 
the Add/Remove Tiered Rebates/Fees set forth in Section (1)(a) of the 
Fee Schedule that apply to the Priority Customer \3\ Origin, MIAX Pearl 
Market Maker \4\ Origin, and Non-Priority Customer, Firm, BD, and Non-
MIAX Pearl Market Maker Origin (collectively, ``Professional 
Members''). As described more fully below, the Exchange proposes to: 
(i) Modify the volume

[[Page 21406]]

thresholds for standard volume criteria in all Tiers (defined below) 
for all Origin types; (ii) decrease the Maker (defined below) rebate in 
Tier 4 for options transactions in Penny Classes (defined below) for 
the Priority Customer Origin; (iii) modify the volume threshold for the 
alternative volume criteria in Tiers 3 and 4 for the Market Maker 
Origin; and (iv) modify the volume thresholds for the alternative 
volume criteria for certain Maker rebates and Taker fees for 
Professional Members.
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    \3\ ``Priority Customer'' means a person or entity that (i) is 
not a broker or dealer in securities, and (ii) does not place more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial accounts(s). The number of 
orders shall be counted in accordance with Interpretation and Policy 
.01 of Exchange Rule 100. See the Definitions Section of the Fee 
Schedule and Exchange Rule 100, including Interpretation and Policy 
.01.
    \4\ ``Market Maker'' means a Member registered with the Exchange 
for the purpose of making markets in options contracts traded on the 
Exchange and that is vested with the rights and responsibilities 
specified in Chapter VI of Exchange Rules. See the Definitions 
Section of the Fee Schedule.
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Background
    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon the total monthly volume 
executed by the Member \5\ on MIAX Pearl in the relevant, respective 
origin type (not including Excluded Contracts) \6\ (as the numerator) 
expressed as a percentage of (divided by) TCV \7\ (as the denominator). 
In addition, the per contract transaction rebates and fees are applied 
retroactively to all eligible volume for that origin type once the 
respective threshold tier (``Tier'') has been reached by the Member. 
The Exchange aggregates the volume of Members and their Affiliates.\8\ 
Members that place resting liquidity, i.e., orders resting on the book 
of the MIAX Pearl System,\9\ are paid the specified ``maker'' rebate 
(each a ``Maker''), and Members that execute against resting liquidity 
are assessed the specified ``taker'' fee (each a ``Taker''). For 
opening transactions and ABBO \10\ uncrossing transactions, per 
contract transaction rebates and fees are waived for all market 
participants. Finally, Members are assessed lower transaction fees and 
receive lower rebates for order executions in standard option classes 
in the Penny Interval Program \11\ (``Penny Classes'') than for order 
executions in standard option classes that are not in the Penny 
Interval Program (``Non-Penny Classes''), where Members are assessed 
higher transaction fees and receive higher rebates.
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    \5\ ``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 the Definitions Section of 
the Fee Schedule and Exchange Rule 100.
    \6\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \7\ ``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 
``Exchange System Disruption'' (solely in the option classes of the 
affected Matching Engine (as defined below)). The term Exchange 
System Disruption, which is defined in the Definitions section of 
the Fee Schedule, means an outage of a Matching Engine or collective 
Matching Engines for a period of two consecutive hours or more, 
during trading hours. The term Matching Engine, which is also 
defined in the Definitions section of the Fee Schedule, is a part of 
the MIAX Pearl electronic system that processes options orders and 
trades on a symbol-by-symbol basis. Some Matching Engines will 
process option classes with multiple root symbols, and other 
Matching Engines may be dedicated to one single option root symbol 
(for example, options on SPY may be processed by one single Matching 
Engine that is dedicated only to SPY). A particular root symbol may 
only be assigned to a single designated Matching Engine. A 
particular root symbol may not be assigned to multiple Matching 
Engines. The Exchange believes that it is reasonable and appropriate 
to select two consecutive hours as the amount of time necessary to 
constitute an Exchange System Disruption, as two hours equates to 
approximately 1.4% of available trading time per month. The Exchange 
notes that the term ``Exchange System Disruption'' and its meaning 
have no applicability outside of the Fee Schedule, as it is used 
solely for purposes of calculating volume for the threshold tiers in 
the Fee Schedule. See the Definitions Section of the Fee Schedule.
    \8\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX Pearl Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX Pearl 
Market Maker) that has been appointed by a MIAX Pearl Market Maker, 
pursuant to the process described in the Fee Schedule. See the 
Definitions Section of the Fee Schedule.
    \9\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \10\ ``ABBO'' means the best bid(s) or offer(s) disseminated by 
other Eligible Exchanges (defined in Exchange Rule 1400(g) and 
calculated by the Exchange based on market information received by 
the Exchange from OPRA. See the Definitions Section of the Fee 
Schedule and Exchange Rule 100.
    \11\ See Securities Exchange Act Release No. 88992 (June 2, 
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
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Modifications to Standard Volume Criteria Percentage Thresholds in all 
Tiers for all Origins
    The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees 
set forth in Section (1)(a) of the Fee Schedule to modify the volume 
thresholds for standard volume criteria in all Tiers for all Origins. 
In particular, for the Priority Customer Origin, the Exchange proposes 
to amend the volume criteria percentage thresholds in each Tier, as 
follows: (i) Tier 1 will be amended from 0.00%-0.10% to now be 0.00%-
0.15%; (ii) Tier 2 will be amended from above 0.10%-0.35% to now be 
above 0.15%-0.40%; (iii) Tier 3 will be amended from above 0.35%-0.50% 
to now be above 0.40%-0.85%; (iv) Tier 4 will be amended from above 
0.50%-0.75% to now be above 0.85%-1.25%; (v) Tier 5 will be amended 
from above 0.75%-1.25% to now be above 1.25%-2.25%; and (vi) Tier 6 
will be amended from above 1.25% to now be above 2.25%.
    Next, the Exchange proposes to modify the volume thresholds for 
standard volume criteria in all Tiers for the MIAX Pearl Market Maker 
Origin.\12\ For the MIAX Pearl Market Maker Origin, the Exchange 
proposes to amend the standard volume criteria percentage thresholds in 
each Tier, as follows: (i) Tier 1 will be amended from 0.00%-0.15% to 
now be 0.00%-0.20%; (ii) Tier 2 will be amended from above 0.15%-0.40% 
to now be above 0.20%-0.50%; (iii) Tier 3 will be amended from above 
0.40%-0.65% to now be above 0.50%-0.85%; (iv) Tier 4 will be amended 
from above 0.65%-1.00% to now be above 0.85%-1.25%; (v) Tier 5 will be 
amended from above 1.00%-1.40% to now be above 1.25%-1.50%; and (vi) 
Tier 6 will be amended from above 1.40% to now be above 1.50%.
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    \12\ The Exchange notes that it also proposes to amend the 
alternative volume criteria in Tiers 3 and 4 for the Market Maker 
Origin, described below. The Exchange does not propose to amend the 
alternative volume criteria in Tier 2 for the Market Maker Origin at 
this time.
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    Next, the Exchange proposes to modify the volume thresholds for 
volume criteria in all Tiers for the Professional Members Origin. For 
the Professional Members Origin, the Exchange proposes to amend the 
volume criteria percentage thresholds in each Tier, as follows: (i) 
Tier 1 will be amended from 0.00%-0.15% to now be 0.00%-0.20%; (ii) 
Tier 2 will be amended from above 0.15%-0.40% to now be above 0.20%-
0.50%; (iii) Tier 3 will be amended from above 0.40%-0.65% to now be 
above 0.50%-0.85%; (iv) Tier 4 will be amended from above 0.65%-1.00% 
to now be above 0.85%-1.25%; (v) Tier 5 will be amended from above 
1.00%-1.40% to now be above 1.25%-1.50%; and (vi) Tier 6 will be 
amended from above 1.40% to now be above 1.50%.
    The purpose of adjusting the percentage thresholds for standard 
volume criteria in all Tiers for all Origins is for business and 
competitive reasons. In order to attract order flow, the Exchange 
initially set its volume thresholds so that they were meaningfully 
lower than other options exchanges that operate comparable maker/taker 
pricing models. The Exchange now believes that it is appropriate to 
adjust the volume

[[Page 21407]]

thresholds so that they are more in line with other exchanges, but will 
still remain highly competitive such that it should enable the Exchange 
to continue to attract order flow and maintain market share.
Decrease to Priority Customer Origin Tier 4 Rebate
    The Exchange proposes to amend the Maker rebate in Tier 4 for 
options transactions in Penny Classes for the Priority Customer Origin. 
Currently, the Exchange offers a Maker rebate of ($0.51) in Tier 4 for 
options transactions in Penny Classes for the Priority Customer Origin. 
The Exchange now proposes to decrease the Maker rebate in Tier 4 for 
options transactions in Penny Classes for the Priority Customer Origin 
from ($0.51) to ($0.49).
    The purpose of adjusting the specified Maker rebate is for business 
and competitive reasons. In order to attract order flow, the Exchange 
initially set its Maker rebates and Taker fees so that they were 
meaningfully higher/lower than other options exchanges that operate 
comparable maker/taker pricing models. The Exchange now believes that 
it is appropriate to further adjust this specified Maker rebate so that 
it is more in line with other exchanges, but will still remain highly 
competitive such that it should enable the Exchange to continue to 
attract order flow and maintain market share.
Modification to Alternative Volume Criteria for Market Maker Origin 
Tier 3
    The Market Maker Origin set forth in Section (1)(a) of the Fee 
Schedule currently provides an alternative volume criteria in Tier 
3.\13\ The alternative volume criteria in Tier 3 is based upon the 
total monthly volume executed in SPY options on MIAX Pearl by a MIAX 
Pearl Market Maker when adding liquidity. Pursuant to this alternative 
volume criteria, Market Makers qualify for: (i) Maker rebates of 
($0.44) in SPY, QQQ and IWM options for their Market Maker Origin when 
trading against Origins not Priority Customer, and (ii) Maker rebates 
of ($0.42) in SPY, QQQ and IWM options for their Market Maker Origin 
when trading against Priority Customer Origins, if the Market Maker 
executes at least 1.10% in SPY options when adding liquidity. The Tier 
3 alternative Volume Criteria (above 1.10% in SPY when Adding 
Liquidity) is calculated based on the total monthly volume that added 
liquidity executed by the Market Maker solely in SPY options on MIAX 
Pearl, not including Excluded Contracts, (as the numerator) expressed 
as a percentage of (divided by) SPY TCV \14\ (as the denominator). The 
Exchange notes that Market Makers that achieve the standard Tier 3 
volume percentage but do not qualify for the proposed alternative 
Volume Criteria in that Tier, receive the Tier 3 rates in the Market 
Maker Origin table in Penny Classes and Non-Penny Classes. Members 
receive the highest tier based on the thresholds achieved. Other Penny 
classes and Non-Penny classes receive the Tier 3 rates in the Market 
Maker Origin table.
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    \13\ See Securities Exchange Act Release No. 90906 (January 12, 
2021), 86 FR 5296 (January 19, 2021) (SR-PEARL-2020-38).
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    The Exchange now proposes to amend the Tier 3 alternative volume 
criteria percentage threshold from above 1.10% to now be above 1.20% in 
SPY when adding liquidity. With the proposed change, Market Makers will 
qualify for: (i) Maker rebates of ($0.44) in SPY, QQQ and IWM options 
for their Market Maker Origin when trading against Origins not Priority 
Customer, and (ii) Maker rebates of ($0.42) in SPY, QQQ and IWM options 
for their Market Maker Origin when trading against Priority Customer 
Origins, if the Market Maker executes at least 1.20% in SPY options 
when adding liquidity. Other Penny Classes and Non-Penny Classes 
receive the Tier 3 rates in the Market Maker Origin table. The Exchange 
does not propose to modify the calculation method for a Market Maker to 
reach the alternative Volume Criteria in Tier 3, only the threshold 
percentage. The Exchange proposes to make the corresponding changes to 
the volume threshold percentages described in the explanatory paragraph 
in footnote ``[lozf]'' for the alternative volume criteria for Tier 3 
that is below the fee/rebate tables in Section 1)a) of the Fee 
Schedule. The purpose of this proposed change is for business and 
competitive reasons.
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    \14\ ``SPY TCV'' means total consolidated volume in SPY 
calculated as the total national volume in SPY for the month for 
which the fees apply, excluding consolidated volume executed during 
the period of time in which the Exchange experiences an Exchange 
System Disruption (solely in SPY options). See the Definitions 
Section of the Fee Schedule.
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Alternative Volume Criteria for Market Maker Origin Tier 4
    The Market Maker Origin set forth in Section 1)a) of the Fee 
Schedule currently provides alternative volume criteria in Tier 4.\15\ 
In Tier 4 for MIAX Pearl Market Makers, the alternative volume criteria 
(above 2.25% in SPY) is calculated based on the total monthly volume 
executed by the Market Maker solely in SPY options on MIAX Pearl in the 
relevant Origin type, not including Excluded Contracts, (as the 
numerator) expressed as a percentage of (divided by) SPY TCV (as the 
denominator). Pursuant to this alternative volume criteria, a Market 
Maker could currently reach the Tier 4 threshold if the Market Maker's 
total executed monthly volume in SPY options on MIAX Pearl is above 
2.25% of total consolidated national monthly volume in SPY options.
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    \15\ See Securities Exchange Act Release no. 83419 (June 12, 
2018), 83 FR 28285 (June 18, 2018) (SR-PEARL-2018-13).
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    The Exchange proposes to amend the threshold percentage for the 
alternative volume criteria such that a Market Maker can reach the Tier 
4 threshold if the Market Maker's total executed monthly volume in SPY 
options on MIAX Pearl is above 2.50% of the total consolidated national 
monthly volume in SPY options. The alternative volume criteria 
threshold in Tier 4 for Market Makers in SPY options is also discussed 
in the note beneath the transaction fee tables, which provides more 
explanation on the alternative threshold. Accordingly, the Exchange 
also proposes to change the threshold amount (increasing it from 2.25% 
to 2.50%) in that note beneath the tables.
    The Exchange notes that it does not propose to amend the volume 
threshold for the alternative criteria in Tier 2 for the Market Maker 
Origin (above 0.75% in SPY/QQQ/IWM) for business reasons.
    The Exchange notes that it does not propose to amend the volume 
threshold for the alternative criteria in Tier 2 for the Market Maker 
Origin (above 0.75% in SPY/QQQ/IWM) for business reasons.
Modification to Volume Thresholds for Alternative Volume Criteria for 
Certain Maker Rebates and Taker Fees for Professional Members
    The Exchange also proposes to amend footnote ``[caret]'' below the 
tables in the Add/Remove Tiered Rebates/Fees set forth in Section 
(1)(a) of the Fee Schedule to increase the Priority Customer threshold 
in which Members may qualify for alternative Maker rebates for options 
transactions in all classes for Professional Members, provided that the 
Member meets certain volume criteria. Currently, Members may qualify 
for Maker rebates equal to the greater of: (A) ($0.40) for Penny 
Classes and ($0.65) for Non-Penny Classes, or (B) the amount set forth 
in the applicable Tier reached by the Member in the relevant Origin, if 
the Member and their Affiliates execute at least 2.00% volume in the 
relevant month, in Priority Customer Origin type, in all options 
classes, not including Excluded Contracts, as compared to the TCV in 
all MIAX Pearl listed option classes.

[[Page 21408]]

    The Exchange proposes to increase the Priority Customer threshold 
percentage amount in footnote ``[caret]'' from at least 2.00% to at 
least 2.25% of volume in the relevant month, in Priority Customer 
Origin type, in all options classes, not including Excluded Contracts, 
as compared to the TCV in all MIAX Pearl listed option classes, in 
order to qualify for the alternative Maker rebates. For purposes of 
qualifying for such rates, the Exchange will continue to aggregate the 
Priority Customer volume transacted by Members and their Affiliates. As 
the amount and type of volume that is executed on the Exchange has 
shifted since it first established the alternative Maker rebates for 
options transactions in all classes for Professional Members, provided 
that the Member meets certain volume criteria,\16\ the Exchange has 
determined to level-set this threshold amount so that it is more 
reflective of the current operating conditions and the current type and 
amount of volume executed on the Exchange.
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    \16\ See Securities Exchange Act Release Nos. 83419 (June 12, 
2018), 83 FR 28285 (June 18, 2018) (SR-PEARL-2018-13); 85608 (April 
11, 2019), 84 FR 16073 (April 17, 2019) (SR-PEARL-2019-13).
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    The Exchange also proposes to amend footnote ``[loz]'' below the 
tables in the Add/Remove Tiered Rebates/Fees set forth in Section 
(1)(a) of the Fee Schedule to increase the Priority Customer threshold 
in which Members may qualify for alternative Taker fees for options 
transactions in Penny Classes for Professional Members, provided that 
the Member meets certain volume criteria. Currently, Members may 
qualify for Taker fees of $0.48 for Penny Classes for their Firm Origin 
when trading against Origins not Priority Customer if the Member and 
their Affiliates execute at least 2.00% of TCV in the relevant month in 
the Priority Customer Origin type, in all options classes, not 
including Excluded Contracts, as compared to TCV in all MIAX Pearl 
listed option classes.
    The Exchange proposes to increase the Priority Customer threshold 
percentage amount in footnote ``[loz]'' from at least 2.00% to at least 
2.25% of volume in the relevant month, in Priority Customer Origin 
type, in all options classes, not including Excluded Contracts, as 
compared to the TCV in all MIAX Pearl listed option classes, in order 
to qualify for the alternative Taker fees. For purposes of qualifying 
for such rates, the Exchange will continue to aggregate the Priority 
Customer volume transacted by Members and their Affiliates. As the 
amount and type of volume that is executed on the Exchange has shifted 
since it first established the alternative Taker fees for options 
transactions in all classes for Professional Members, provided that the 
Member meets certain volume criteria,\17\ the Exchange has determined 
to level-set this threshold amount so that it is more reflective of the 
current operating conditions and the current type and amount of volume 
executed on the Exchange.
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    \17\ See Securities Exchange Act Release Nos. 85608 (April 11, 
2019), 84 FR 16073 (April 17, 2019) (SR-PEARL-2019-13); 85807 (May 
8, 2019), 84 FR 21368 (May 14, 2019) (SR-PEARL-2019-15).
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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 \18\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\19\ 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,\20\ 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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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4).
    \20\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Exchange believes its proposal provides for the equitable 
allocation of reasonable dues and fees and is not unfairly 
discriminatory for the following reasons. The Exchange operates in a 
highly competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \21\ There are currently 
16 registered options exchanges competing for order flow. Based on 
publicly-available information, and excluding index-based options, no 
single exchange has more than approximately 14-15% of the market share 
of executed volume of multiply-listed equity and ETF options trades as 
of March 25, 2021, for the month of March 2021.\22\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
as of March 25, 2021, the Exchange had a market share of approximately 
5.87% of executed volume of multiply-listed equity and ETF options for 
the month of March 2021.\23\
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    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \22\ See https://www.cboe.com/us/options/market_statistics/.
    \23\ See id.
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    The Exchange believes that the ever-shifting market shares among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue or reduce use of certain 
categories of products, in response to transaction and/or non-
transaction fee changes. For example, on February 28, 2019, the 
Exchange filed with the Commission a proposal to increase Taker fees in 
certain Tiers for options transactions in certain Penny classes for 
Priority Customers and decrease Maker rebates in certain Tiers for 
options transactions in Penny classes for Priority Customers (which fee 
was to be effective March 1, 2019).\24\ The Exchange experienced a 
decrease in total market share between the months of February and March 
of 2019, after the fees were in effect. Accordingly, the Exchange 
believes that the March 1, 2019 fee change may have contributed to the 
decrease in the Exchange's market share and, as such, the Exchange 
believes competitive forces constrain options exchange transaction fees 
and market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \24\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    The Exchange believes its proposal to modify the volume thresholds 
for standard volume criteria and certain alternative volume criteria is 
reasonable, equitably allocated and not unfairly discriminatory because 
these changes are for business and competitive reasons. In order to 
attract order flow, the Exchange initially set its volume thresholds 
for standard and alternative volume criteria at meaningful low levels. 
The Exchange now believes that it is appropriate to adjust these volume 
thresholds so that they are more reflective of the current operating 
conditions and the current type and amount of volume executed on the 
Exchange. The Exchange believes that the proposed volume thresholds 
will still allow the Exchange to remain

[[Page 21409]]

highly competitive such that the thresholds should enable the Exchange 
to continue to attract order flow and maintain market share.
    The Exchange also believes that its proposal is not unfairly 
discriminatory as all Market Makers can qualify for the alternative 
volume criteria in Tiers 3 and 4 of the MIAX Pearl Market Maker Origin 
by meeting the requirements that are designed to incentivize Market 
Makers to maintain quality markets. In addition, the Exchange continues 
to believe that it is not unfairly discriminatory to offer certain 
rebates pursuant to this proposal to only Market Makers because Market 
Makers add value by adding liquidity and are subject to additional 
requirements and obligations that other market participants are not.
    The Exchange believes its proposal to decrease the Maker rebate in 
Tier 4 for options transactions in Penny Classes for Priority Customers 
is reasonable, equitable and not unfairly discriminatory because all 
similarly situated market participants in the same Origin type are 
subject to the same tiered Maker rebates and Taker fees and access to 
the Exchange is offered on terms that are not unfairly discriminatory. 
The Exchange believes it is equitable and not unfairly discriminatory 
to reduce the Maker rebate to Priority Customer orders in Penny Classes 
for business and competitive reasons because the Exchange initially set 
its Maker rebates for such orders higher than certain other options 
exchanges that operate comparable maker/taker pricing models. The 
Exchange now believes that it is appropriate to further decrease the 
specified Maker rebate so that it is more in line with other 
exchanges,\25\ and will still remain highly competitive such that they 
should enable the Exchange to continue to attract order flow and 
maintain market share.
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    \25\ See Cboe BZX Exchange, Inc. Options Fee Schedule (standard 
Customer Add rates for Penny Program securities ranging from ($0.25) 
to ($0.53)); see also Nasdaq GEMX, LLC, Options 7, Pricing Schedule, 
Section 3 (Priority Customer Maker Rebates for Penny Symbol 
securities ranging from ($0.25) to ($0.53)).
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    The Exchange believes its proposal to increase the Priority 
Customer threshold for alternative Maker rebates for options 
transactions in all classes for Professional Members, provided that the 
Member meets certain volume criteria (the Member and their Affiliates 
execute at least 2.25% (instead of 2.00%) of volume in the relevant 
month, in Priority Customer Origin type, in all options classes, not 
including Excluded Contracts, as compared to the TCV in all MIAX Pearl 
listed option classes), is reasonable, equitable and not unfairly 
discriminatory because all similarly situated market participants are 
subject to the same tiered rebates and fees and access to the Exchange 
is offered on terms that are not unfairly discriminatory. The Exchange 
believes that providing alternative Maker rebates for options 
transactions in all classes for Professional Members (if the Member 
meets certain volume criteria relating to Priority Customer volume), 
and adjusting the threshold requirements so that they are reflective of 
current operating conditions and the current type and amount of volume 
executed on the Exchange, will encourage Members to execute additional 
Priority Customer and Professional Member volume on the Exchange. The 
Exchange believes that additional Priority Customer and Professional 
Member volume executed on the Exchange will attract further liquidity 
to the Exchange, which in turn will benefit all market participants.
    The Exchange believes its proposal to modify the volume thresholds 
for the alternative volume criteria for certain Taker fees for 
Professional Members is consistent with Section 6(b)(4) of the Act \26\ 
because the proposed change applies equally to all Members for their 
Firm Origin with similar order flow. The Exchange believes that the 
proposed alternative threshold by which any Member may qualify for the 
lower Taker fee of $0.48 for Penny Classes for their Firm Origin when 
trading against Origins other than Priority Customer instead of the 
Taker fee otherwise applicable to such orders is fair, equitable, and 
not unreasonably discriminatory because it will encourage Members to 
submit both Firm and Priority Customer orders, which will increase 
liquidity to the benefit all market participants by providing more 
trading opportunities and tighter spreads. The alternative Taker fee is 
reasonable because it will incentivize providers of Priority Customer 
order flow to send that Priority Customer order flow to the Exchange in 
order to obtain the highest volume threshold and receive a Taker fee in 
a manner that enables the Exchange to improve its overall 
competitiveness and strengthen its market quality for all market 
participants.
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    \26\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    The Exchange believes its proposal will not impose any burden on 
intra-market competition because the Exchange believes that its 
proposal will not place any category of Exchange market participant at 
a competitive disadvantage. The proposal to modify the volume 
thresholds for standard and alternative volume criteria is intended to 
improve market quality. The Exchange believes that its proposal will 
continue to encourage additional Priority Customer and Professional 
Member volume be executed on the Exchange, which will attract further 
liquidity to the Exchange and benefit all market participants. 
Accordingly, the Exchange believes that the proposed changes will 
continue to attract order flow to the Exchange, thereby encouraging 
additional volume and liquidity to the benefit of all market 
participants.
    The Exchange believes its proposal will not impose any burden on 
inter-market competition because the Exchange notes that it operates in 
a highly competitive market in which market participants can readily 
favor competing venues if they deem fee levels at a particular venue to 
be excessive, or rebate opportunities available at other venues to be 
more favorable. There are currently 16 registered options exchanges 
competing for order flow. Based on publicly-available information, and 
excluding index-based options, no single exchange has more than 
approximately 14-15% of the market share of executed volume of 
multiply-listed equity and ETF options trades as of March 25, 2021, for 
the month of March 2021.\27\ Therefore, no exchange possesses 
significant pricing power in the execution of multiply-listed equity 
and ETF options order flow. More specifically, as of March 25, 2021, 
the Exchange had a market share of approximately 5.87% of executed 
volume of multiply-listed equity and ETF options for the month of March 
2021.\28\ In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other options exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited. The 
Exchange believes that the proposed rule changes reflect this

[[Page 21410]]

competitive environment because they modify the Exchange's fees in a 
manner that encourages market participants to continue to provide 
liquidity and to send order flow to the Exchange.
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    \27\ See supra note 22.
    \28\ See id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\29\ and Rule 19b-4(f)(2) \30\ 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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    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \30\ 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-2021-16 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-2021-16. 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-2021-16, and should be submitted 
on or before May 13, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2021-08310 Filed 4-21-21; 8:45 am]
BILLING CODE 8011-01-P