Document ID: SEC-2020-0545-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2020-04-09T04:00Z

[Federal Register Volume 85, Number 69 (Thursday, April 9, 2020)]
[Notices]
[Pages 19996-20002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07439]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88554; File No. SR-PEARL-2020-05]

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

April 3, 2020.
    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 31, 2020, 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

[[Page 19997]]

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 amend the Add/Remove Tiered Rebates/Fees 
set forth in Section (1)(a) of the Fee Schedule to: (i) Increase Taker 
(as defined below) fees in certain Tiers for options transactions in 
Penny classes (including SPY, QQQ, and IWM options classes) and non-
Penny classes (as defined below) for Priority Customers; \3\ (ii) 
increase Taker fees in certain Tiers for options transactions in Penny 
and non-Penny classes for MIAX PEARL Market Makers; \4\ and (iii) 
increase Taker fees in certain Tiers for options transactions in Penny 
and non-Penny classes for Non-Priority Customers, Firms, Broker-Dealers 
and Non-MIAX PEARL Market Makers (collectively herein ``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 account(s). See 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. See the Definitions Section of the Fee Schedule and 
Exchange Rule 100.
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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\ expressed as a 
percentage of TCV.\7\ 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 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 Pilot Program \10\ (``Penny 
classes'') than for order executions in standard option classes which 
are not in the Penny Pilot 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\ See Securities Exchange Act Release No. 84865 (December 19, 
2018), 83 FR 66813 (December 27, 2018) (SR-PEARL-2018-26).
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    Transaction rebates and fees in Section (1)(a) of the Fee Schedule 
are currently assessed according to the following tables:

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                                                                                            Per contract rebates/fees for penny     Per contract rebates/
                                                                                                          classes                    fees for non-penny
                   Origin                       Tier            Volume criteria        --------------------------------------------        classes
                                                                                                                          QQQ, IWM ---------------------
                                                                                          Maker     Taker *   SPY taker    taker      Maker      Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
Priority Customer..........................          1  0.00%-0.10%...................    ($0.25)      $0.48      $0.43      $0.44    ($0.85)      $0.84
                                                     2  Above 0.10%-0.35%.............     (0.40)       0.48       0.43       0.44     (0.95)       0.84
                                                     3  Above 0.35%-0.50%.............     (0.45)       0.46       0.42       0.44     (1.00)       0.84
                                                     4  Above 0.50%-0.75%.............     (0.51)       0.45       0.41       0.43     (1.03)       0.84
                                                     5  Above 0.75%-1.25%.............     (0.52)       0.44       0.40       0.42     (1.04)       0.84
                                                     6  Above 1.25%...................     (0.52)       0.43       0.38       0.40     (1.04)       0.84
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* For all Penny Classes other than SPY, QQQ, and IWM.

[[Page 19998]]

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                                                                                  Per contract rebates/fees for penny classes       Per contract rebates/
                                                                           --------------------------------------------------------  fees for non-penny
                                                                                Maker         Maker         Taker         Taker            classes
                Origin                    Tier         Volume criteria         (contra       (contra       (contra       (contra   ---------------------
                                                                             origins ex     priority     origins ex     priority
                                                                              priority      customer      priority      customer     Maker **   Taker **
                                                                              customer)      origin)      customer)      origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MIAX PEARL Market Makers.........          1  0.00%-0.15%.............       ($0.25)       ($0.23)         $0.50         $0.50    ($0.30)      $1.10
                                               2  Above 0.15%-0.40% or            (0.40)        (0.38)          0.50          0.50     (0.30)       1.10
                                                   Above 0.45% in SPY/QQQ/
                                                   IWM.
                                               3  Above 0.40%-0.65%.......        (0.40)        (0.38)          0.49          0.50     (0.60)       1.09
                                               4  Above 0.65%-1.00% or            (0.47)        (0.45)          0.48          0.49     (0.65)       1.08
                                                   Above 2.25% in SPY.
                                               5  Above 1.00%-1.40%.......        (0.48)        (0.46)          0.46          0.47     (0.70)       1.07
                                               6  Above 1.40%.............        (0.48)        (0.47)          0.45          0.46     (0.85)       1.06
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                                                                               Per contract rebates/fees for penny classes        Per contract rebates/
                                                                        --------------------------------------------------------    fees for non-penny
                                                                             Maker         Maker     Taker [diam]                        classes
                                                                          [supcaret]    [supcaret]      (contra        Taker    ------------------------
               Origin                    Tier        Volume criteria        (contra       (contra     origins ex      (contra
                                                                          origins ex     priority      priority      priority        Maker
                                                                           priority      customer      customer)     customer    **[supcaret]   Taker **
                                                                           customer)      origin)                     origin)
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Non-Priority Customer, Firm, BD, and          1  0.00%-0.15%...........       ($0.25)       ($0.23)         $0.50         $0.50      ($0.30)       $1.10
 Non-MIAX PEARL Market Makers.                2  Above 0.15%-0.40%.....        (0.40)        (0.38)          0.50          0.50       (0.30)        1.10
                                              3  Above 0.40%-0.65%.....        (0.40)        (0.38)          0.49          0.50       (0.60)        1.10
                                              4  Above 0.65%-1.00%.....        (0.47)        (0.45)          0.49          0.50       (0.65)        1.09
                                              5  Above 1.00%-1.40%.....        (0.48)        (0.46)          0.48          0.50       (0.70)        1.08
                                              6  Above 1.40%...........        (0.48)        (0.46)          0.48          0.50       (0.85)        1.07
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** Members may qualify for the Maker Rebate and the Taker Fee associated with the highest Tier for transactions in Non-Penny classes if the Member
  executes more than 0.30% volume in Non-Penny classes, not including Excluded Contracts, as compared to the TCV in all MIAX PEARL listed option
  classes. For purposes of qualifying for such rates, the Exchange will aggregate the volume transacted by Members and their Affiliates in the following
  Origin types in Non-Penny classes: MIAX PEARL Market Makers, and Non-Priority Customer, Firm, BD, and Non-MIAX PEARL Market Makers.
[supcaret] 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.
[diam] 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.
Except as otherwise set forth herein, the Volume Criteria is calculated based on the total monthly volume executed by the Member in all options classes
  on MIAX PEARL in the relevant Origin type, not including Excluded Contracts, (as the numerator) expressed as a percentage of (divided by) TCV (as the
  denominator).
In Tier 2 for MIAX PEARL Market Makers, the alternative Volume Criteria (above 0.45% in SPY/QQQ/IWM) is calculated based on the total monthly volume
  executed by the Market Maker collectively in SPY, QQQ, and IWM options on MIAX PEARL in the relevant Origin type, not including Excluded Contracts,
  (as the numerator) expressed as a percentage of (divided by) SPY/QQQ/IWM TCV (as the denominator). 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). The per contract transaction rebates and fees shall be applied retroactively to all eligible volume once the threshold has been reached
  by Member. The Exchange aggregates the volume of Members and their Affiliates in the Add/Remove Tiered Fees. The per contract transaction rebates and
  fees shall be waived for transactions executed during the opening and for transactions that uncross the ABBO.

Priority Customer Taker Fees
    The Exchange proposes to increase Taker fees in certain Tiers for 
options transactions in Penny classes (including SPY, QQQ, and IWM 
options classes) and non-Penny classes for Priority Customers. 
Specifically, the Exchange proposes to increase the Taker fees for 
Priority Customer orders in options in certain Penny classes (excluding 
SPY, QQQ, and IWM) in Tier 1 from $0.48 to $0.50, in Tier 2 from $0.48 
to $0.50, in Tier 3 from $0.46 to $0.48, in Tier 4 from $0.45 to $0.47, 
in Tier 5 from $0.44 to $0.46, and in Tier 6 from $0.43 to $0.45. The 
Exchange next proposes to increase the Taker fees for Priority Customer 
orders for SPY options in Tier 1 from $0.43 to $0.46, in Tier 2 from 
$0.43 to $0.46, in Tier 3 from $0.42 to $0.45, in Tier 4 from $0.41 to 
$0.44, in Tier 5 from $0.40 to $0.43, and in Tier 6 from $0.38 to 
$0.42. The Exchange next proposes to increase the Taker fees for 
Priority Customer orders for QQQ and IWM options in Tier 1 from $0.44 
to $0.50, in Tier 2 from $0.44 to $0.50, in Tier 3 from $0.44 to $0.48, 
in Tier 4 from $0.43 to $0.47, in Tier 5 from $0.42

[[Page 19999]]

to $0.46, and in Tier 6 from $0.40 to $0.45. The Exchange next proposes 
to increase the Taker fees for Priority Customer orders in options in 
non-Penny classes in Tiers 1-6 from $0.84 to $0.85.
Market Maker Taker Fees
    Next, the Exchange proposes to increase Taker fees in certain Tiers 
for options transactions in Penny and non-Penny classes for Market 
Makers. Specifically, the Exchange proposes to increase the Taker fees 
for Market Makers for orders contra Origins ex Priority Customer in 
Penny classes in Tier 3 from $0.49 to $0.50, in Tier 4 from $0.48 to 
$0.49, in Tier 5 from $0.46 to $0.47, and in Tier 6 from $0.45 to 
$0.46. The Exchange next proposes to increase the Taker fees for Market 
Makers for orders contra Priority Customer in Penny classes in Tier 4 
from $0.49 to $0.50, in Tier 5 from $0.47 to $0.48, and in Tier 6 from 
$0.46 to $0.47. The Exchange next proposes to increase the Taker fees 
for Market Maker orders in options in non-Penny classes in Tier 3 from 
$1.09 to $1.10, in Tier 4 from $1.08 to $1.09, in Tier 5 from $1.07 to 
$1.08, and in Tier 6 from $1.06 to $1.07.
Professional Customer Taker Fees
    Next, the Exchange proposes to increase Taker fees in certain Tiers 
for options transactions in Penny and non-Penny classes for 
Professional Members. Specifically, the Exchange proposes to increase 
the Taker fees for Professional Members for orders contra Origins ex 
Priority Customer in Penny classes in Tier 3 from $0.49 to $0.50, in 
Tier 4 from $0.49 to $0.50, in Tier 5 from $0.48 to $0.49, and in Tier 
6 from $0.48 to $0.49. The Exchange next proposes to increase the Taker 
fees for Professional Member orders in options in non-Penny classes in 
Tier 4 from $1.09 to $1.10, in Tier 5 from $1.08 to $1.09, and in Tier 
6 from $1.07 to $1.09.
    The purpose of the proposed changes to adjust the specified Taker 
fees is for business and competitive reasons. In order to attract order 
flow, the Exchange initially set its Taker fees so that they were 
meaningfully lower than other options exchanges that operate comparable 
maker/taker pricing models.\11\ The Exchange now believes that it is 
appropriate to further adjust these specified Taker fees so that they 
are more in line with other exchanges, but will still remain highly 
competitive such that they should enable the Exchange to continue to 
attract order flow and maintain market share.\12\
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    \11\ See Securities Exchange Act Release Nos. 80915 (June 13, 
2017), 82 FR 27912 (June 19, 2017) (SR-PEARL-2017-29); 80914 (June 
13, 2017), 82 FR 27910 (June 19, 2017) (SR-PEARL-2017-30).
    \12\ See Cboe BZX Options Exchange Fee Schedule, under 
``Transaction Fees.''
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    With all proposed changes, Section (1)(a) of the Fee Schedule shall 
be the following:

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                                                                                            Per contract rebates/fees for penny     Per contract rebates/
                                                                                                          classes                    fees for non-penny
                   Origin                       Tier            Volume criteria        --------------------------------------------        classes
                                                                                                                          QQQ, IWM ---------------------
                                                                                          Maker     Taker *   SPY taker    taker      Maker      Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
Priority Customer..........................          1  0.00%-0.10%...................    ($0.25)      $0.50      $0.46      $0.50    ($0.85)      $0.85
                                                     2  Above 0.10%-0.35%.............     (0.40)       0.50       0.46       0.50     (0.95)       0.85
                                                     3  Above 0.35%-0.50%.............     (0.45)       0.48       0.45       0.48     (1.00)       0.85
                                                     4  Above 0.50%-0.75%.............     (0.51)       0.47       0.44       0.47     (1.03)       0.85
                                                     5  Above 0.75%-1.25%.............     (0.52)       0.46       0.43       0.46     (1.04)       0.85
                                                     6  Above 1.25%...................     (0.52)       0.45       0.42       0.45     (1.04)       0.85
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* For all Penny Classes other than SPY, QQQ, and IWM.

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                                                                                  Per contract rebates/fees for penny classes       Per contract rebates/
                                                                           --------------------------------------------------------  fees for non-penny
                                                                                Maker         Maker         Taker         Taker            classes
                Origin                    Tier         Volume criteria         (contra       (contra       (contra       (contra   ---------------------
                                                                             origins ex     priority     origins ex     priority
                                                                              priority      customer      priority      customer     Maker **   Taker **
                                                                              customer)      origin)      customer)      origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MIAX PEARL Market Makers.........          1  0.00%-0.15%.............       ($0.25)       ($0.23)         $0.50         $0.50    ($0.30)      $1.10
                                               2  Above 0.15%-0.40% or            (0.40)        (0.38)          0.50          0.50     (0.30)       1.10
                                                   Above 0.45% in SPY/QQQ/
                                                   IWM.
                                               3  Above 0.40%-0.65%.......        (0.40)        (0.38)          0.50          0.50     (0.60)       1.10
                                               4  Above 0.65%-1.00% or            (0.47)        (0.45)          0.49          0.50     (0.65)       1.09
                                                   Above 2.25% in SPY.
                                               5  Above 1.00%-1.40%.......        (0.48)        (0.46)          0.47          0.48     (0.70)       1.08
                                               6  Above 1.40%.............        (0.48)        (0.47)          0.46          0.47     (0.85)       1.07
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[[Page 20000]]

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                                                                               Per contract rebates/fees for penny classes        Per contract rebates/
                                                                        --------------------------------------------------------    fees for non-penny
                                                                             Maker         Maker     Taker [diam]                        classes
                                                                          [supcaret]    [supcaret]      (contra        Taker    ------------------------
               Origin                    Tier        Volume criteria        (contra       (contra     origins ex      (contra
                                                                          origins ex     priority      priority      priority        Maker
                                                                           priority      customer      customer)     customer    **[supcaret]   Taker **
                                                                           customer)      origin)                     origin)
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Non-Priority Customer, Firm, BD, and          1  0.00%-0.15%...........       ($0.25)       ($0.23)         $0.50         $0.50      ($0.30)       $1.10
 Non-MIAX PEARL Market Makers.                2  Above 0.15%-0.40%.....        (0.40)        (0.38)          0.50          0.50       (0.30)        1.10
                                              3  Above 0.40%-0.65%.....        (0.40)        (0.38)          0.50          0.50       (0.60)        1.10
                                              4  Above 0.65%-1.00%.....        (0.47)        (0.45)          0.50          0.50       (0.65)        1.10
                                              5  Above 1.00%-1.40%.....        (0.48)        (0.46)          0.49          0.50       (0.70)        1.09
                                              6  Above 1.40%...........        (0.48)        (0.46)          0.49          0.50       (0.85)        1.09
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** Members may qualify for the Maker Rebate and the Taker Fee associated with the highest Tier for transactions in Non-Penny classes if the Member
  executes more than 0.30% volume in Non-Penny classes, not including Excluded Contracts, as compared to the TCV in all MIAX PEARL listed option
  classes. For purposes of qualifying for such rates, the Exchange will aggregate the volume transacted by Members and their Affiliates in the following
  Origin types in Non-Penny classes: MIAX PEARL Market Makers, and Non-Priority Customer, Firm, BD, and Non-MIAX PEARL Market Makers.
[supcaret] 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.
[diam] 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.
Except as otherwise set forth herein, the Volume Criteria is calculated based on the total monthly volume executed by the Member in all options classes
  on MIAX PEARL in the relevant Origin type, not including Excluded Contracts, (as the numerator) expressed as a percentage of (divided by) TCV (as the
  denominator).
In Tier 2 for MIAX PEARL Market Makers, the alternative Volume Criteria (above 0.45% in SPY/QQQ/IWM) is calculated based on the total monthly volume
  executed by the Market Maker collectively in SPY, QQQ, and IWM options on MIAX PEARL in the relevant Origin type, not including Excluded Contracts,
  (as the numerator) expressed as a percentage of (divided by) SPY/QQQ/IWM TCV (as the denominator). 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). The per contract transaction rebates and fees shall be applied retroactively to all eligible volume once the threshold has been reached
  by Member. The Exchange aggregates the volume of Members and their Affiliates in the Add/Remove Tiered Fees. The per contract transaction rebates and
  fees shall be waived for transactions executed during the opening and for transactions that uncross the ABBO.

    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.'' \13\
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------

    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 15% 
market share.\14\ Therefore, no exchange possesses significant pricing 
power. More specifically, as of March 24, 2020, the Exchange had an 
approximately 4.03% market share of executed volume of multiply-listed 
equity and exchange traded fund (``ETF'') options for the month of 
March 2020.\15\ The Exchange believes that the ever-shifting market 
share among the exchanges from month to month demonstrates that market 
participants can discontinue or reduce use of certain categories of 
products and services, terminate an existing membership or determine to 
not become a new member, and/or shift order flow, in response to 
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).\16\ The Exchange experienced a 
decrease in total market share for the month of March 2019, after the 
proposal went into effect. Accordingly, the Exchange believes that the 
March 1, 2019 fee change, to increase certain transaction fees and 
decrease certain transaction rebates, may have contributed to the 
decrease in the Exchange's market share and, as such, the Exchange 
believes competitive forces constrain MIAX PEARL's, and other options 
exchanges, ability to set transaction fees and market participants can 
shift order flow based on fee changes instituted by the exchanges.
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    \14\ The Options Clearing Corporation (``OCC'') publishes 
options and futures volume in a variety of formats, including daily 
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
    \15\ See id.
    \16\ 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 proposed changes are scheduled to become operative April 1, 
2020.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \17\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\18\ 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,\19\ in that it is designed to 
prevent fraudulent and manipulative

[[Page 20001]]

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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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4).
    \19\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Exchange believes its proposal to increase Taker fees in 
certain Tiers for options transactions in Penny classes (including SPY, 
QQQ, and IWM options classes) and non-Penny classes for Priority 
Customers, increase Taker fees in certain Tiers for options 
transactions in Penny and non-Penny classes for Market Makers, and 
increase Taker fees in certain Tiers for options transactions in Penny 
and non-Penny classes for Professional Members 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.'' \20\ 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 15% of the market share of 
executed volume of multiply-listed equity and ETF options trades as of 
March 24, 2020, for the month of March 2020.\21\ Therefore, no exchange 
possesses significant pricing power in the execution of multiply-listed 
equity and ETF options order flow. More specifically, as of March 24, 
2020, the Exchange had an approximately 4.03% market share of executed 
volume of multiply-listed equity and ETF options for the month of March 
2020.\22\
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    \20\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \21\ See supra note 15.
    \22\ 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).\23\ 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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    \23\ See supra note 16.
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    The Exchange believes that its proposal to increase Taker fees in 
certain Tiers for options transactions in Penny classes (including SPY, 
QQQ, and IWM options classes) and non-Penny classes for Priority 
Customers, increase Taker fees in certain Tiers for options 
transactions in Penny and non-Penny classes for Market Makers, and 
increase Taker fees in certain Tiers for options transactions in Penny 
and non-Penny classes for Professional Members is reasonable, equitably 
allocated and not unfairly discriminatory because these changes are for 
business and competitive reasons. The Exchange cannot predict with 
certainty the number of market participants that would qualify for the 
higher Taker fees for each of the proposed changes as Members may 
continually shift among the different Tiers from month to month. The 
Exchange further believes that it is appropriate to increase the Taker 
fees for Priority Customers in SPY, QQQ and IWM options classes because 
these select products are generally more liquid than other options 
classes.
    Further, the Exchange believes the proposed Taker fee adjustments 
in certain specified Tiers applicable to certain orders submitted by 
Priority Customers in Penny classes and non-Penny classes, Market 
Makers in Penny classes and non-Penny classes, and Professional Members 
in Penny classes and non-Penny classes are reasonable, equitable and 
not unfairly discriminatory because all similarly situated market 
participants in the same Origin type are subject to the same tiered 
Taker fees and access to the Exchange is offered on terms that are not 
unfairly discriminatory. For competitive and business reasons, the 
Exchange initially set its Taker fees for such orders generally lower 
than certain other options exchanges that operate comparable maker/
taker pricing models.\24\ The Exchange now believes that it is 
appropriate to further increase those specified Taker fees so that they 
are more in line with other exchanges, and will still remain highly 
competitive such that they should enable the Exchange to continue to 
attract order flow and maintain market share. The Exchange believes for 
these reasons that increasing certain Taker fees for transactions in 
the specified Tiers is equitable, reasonable and not unfairly 
discriminatory, and thus consistent with the Act.
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    \24\ See supra notes 11 and 12.
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    Furthermore, the proposed adjustments to the Taker fees 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 
even with the increases to Taker fees, the Exchange's proposed Taker 
fees for such orders still remain highly competitive with certain other 
options exchanges offering comparable pricing models, and should enable 
the Exchange to continue to attract order flow and maintain market 
share.\25\ The Exchange believes that the amount of such fees, as 
proposed to be adjusted, will continue to encourage those market 
participants to send orders to the Exchange.
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    \25\ See id.
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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 that the 
proposed changes in the specified Taker fees for the applicable market 
participants should continue to encourage the provision of liquidity 
that enhances the quality of the Exchange's market and increases the 
number of trading opportunities on the Exchange for all participants 
who will be able to compete for such opportunities. The proposed rule 
changes should enable the Exchange to continue to attract and compete 
for order flow with other exchanges. However, this competition does not 
create an undue burden on competition but rather offers all market

[[Page 20002]]

participants the opportunity to receive the benefit of competitive 
pricing.
    The proposed Taker fee adjustments are intended to keep the 
Exchange's fees highly competitive with those of other exchanges, and 
to encourage liquidity and should enable the Exchange to continue to 
attract and compete for order flow with other exchanges. The Exchange 
notes that it operates in a highly competitive market in which market 
participants can readily favor competing venues if they deem fee levels 
at a particular venue to be excessive. In such an environment, the 
Exchange must continually adjust its rebates and fees to remain 
competitive with other exchanges and to attract order flow. The 
Exchange believes that the proposed rule changes reflect this 
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.

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,\26\ and Rule 19b-4(f)(2) \27\ 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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    \26\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \27\ 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-2020-05 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-2020-05. 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-2020-05, and should be submitted 
on or before April 30, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07439 Filed 4-8-20; 8:45 am]
 BILLING CODE 8011-01-P