Document ID: SEC-2022-1523-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2022-11-23T05:00Z

[Federal Register Volume 87, Number 225 (Wednesday, November 23, 2022)]
[Notices]
[Pages 71704-71712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25471]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96338; File No. SR-PEARL-2022-51]

Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Trading 
Permit Fees for Market Makers in the MIAX PEARL Options Fee Schedule

November 17, 2022.
    Pursuant to 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 November 15, 2022, 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 Options 
Fee Schedule (the ``Fee Schedule'') to amend its monthly Trading Permit 
\3\ fees for Market Makers.\4\
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    \3\ The term ``Trading Permit'' means a permit issued by the 
Exchange that confers the ability to transact on the Exchange. See 
Exchange Rule 100.
    \4\ The term ``Market Maker'' or ``MM'' 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 the Exchange 
Rules. See the Definitions Section of the Fee Schedule and Exchange 
Rule 100.
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    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 amend the Fee Schedule to amend the amount 
and calculation of the monthly Trading Permit fees for Market Makers. 
Currently, the Exchange assesses Trading Permit fees based upon the 
monthly total volume executed by the Member \5\ and its Affiliates \6\ 
on the Exchange across all origin types, not including Excluded 
Contracts,\7\ as compared to the Total Consolidated Volume (``TCV'') 
\8\ in all MIAX Pearl-listed options. This Trading Permit fee structure 
has been in place since 2018.\9\ The Exchange adopted a tier-based fee 
structure based upon the volume-based tiers detailed in the definition 
of ``Non-Transaction Fees Volume-Based Tiers'' \10\ in the Definitions 
section of the Fee Schedule. The Exchange also assesses Trading Permit 
fees based upon the type of interface used by the Member to connect to 
the Exchange--the FIX Interface \11\ and/or the MEO Interface.\12\
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    \5\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of 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 Exchange Rule 100 and the 
Definitions Section of the Fee Schedule.
    \6\ ``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 following process. A MIAX Pearl Market Maker 
appoints an EEM and an EEM appoints a MIAX Pearl Market Maker, for 
the purposes of the Fee Schedule, by each completing and sending an 
executed Volume Aggregation Request Form by email to 
[email protected] no later than 2 business days prior to 
the first business day of the month in which the designation is to 
become effective. Transmittal of a validly completed and executed 
form to the Exchange along with the Exchange's acknowledgement of 
the effective designation to each of the Market Maker and EEM will 
be viewed as acceptance of the appointment. The Exchange will only 
recognize one designation per Member. A Member may make a 
designation not more than once every 12 months (from the date of its 
most recent designation), which designation shall remain in effect 
unless or until the Exchange receives written notice submitted 2 
business days prior to the first business day of the month from 
either Member indicating that the appointment has been terminated. 
Designations will become operative on the first business day of the 
effective month and may not be terminated prior to the end of the 
month. Execution data and reports will be provided to both parties. 
See the Definitions Section of the Fee Schedule.
    \7\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \8\ ``TCV'' means total consolidated volume calculated as the 
total national volume in those classes listed on MIAX Pearl for the 
month for which the fees apply, excluding consolidated volume 
executed during the period of time in which the Exchange experiences 
an Exchange System Disruption (solely in the option classes of the 
affected Matching Engine). See the Definitions Section of the Fee 
Schedule.
    \9\ See Securities Exchange Act Release No. 82867 (March 13, 
2018), 83 FR 12044 (March 19, 2018) (SR-PEARL-2018-07).
    \10\ See the Definitions Section of the Fee Schedule for the 
monthly volume thresholds associated with each Tier.
    \11\ ``FIX Interface'' means the Financial Information Exchange 
interface for certain order types as set forth in Exchange Rule 516. 
See the Definitions Section of the Fee Schedule and Exchange Rule 
100.
    \12\ ``MEO Interface'' or ``MEO'' means a binary order interface 
for certain order types as set forth in Rule 516 into the MIAX Pearl 
System. See the Definitions Section of the Fee Schedule and Exchange 
Rule 100.
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    The Exchange now proposes to amend the calculation and amount of 
Trading Permit fees for Market Makers by moving away from the above-
described volume tier-based fee structure to harmonize the Trading 
Permit fee structure for Market Makers with that of the Exchange's 
affiliates, Miami International Securities Exchange, LLC (``MIAX'') and 
MIAX Emerald, LLC (``MIAX Emerald'').\13\ The Exchange also notes that 
this proposal is substantially

[[Page 71705]]

based on the recent filing by BOX Exchange LLC (``BOX'') to adopt 
monthly Electronic Market Maker Trading Permit Fees based on options 
classes assigned, which filing has since passed the 60-day suspension 
deadline.\14\
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    \13\ See MIAX Fee Schedule, Section 3)b) and MIAX Emerald Fee 
Schedule, Section 3)b).
    \14\ See Securities Exchange Act Release No. 94894 (May 11, 
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17); see also BOX 
Exchange LLC (``BOX'') Fee Schedule, Section I.C.
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    The Exchange proposes that the amount of the monthly Trading Permit 
fees for Market Makers would be based on the lesser of either the per 
class traded or percentage of total national average daily volume 
(``ADV'') measurement based on classes traded by volume. The amount of 
monthly Market Maker Trading Permit fee would be based upon the number 
of classes in which the Market Maker was registered to quote on any 
given day within the calendar month, or upon the class volume 
percentages.
    Specifically, the Exchange proposes to adopt the following Trading 
Permit fees for Market Makers: (i) $3,000 for Market Maker 
registrations in up to 10 option classes or up to 20% of option classes 
by national ADV; (ii) $5,000 for Market Maker registrations in up to 40 
option classes or up to 35% of option classes by ADV; (iii) $7,000 for 
Market Maker registrations in up to 100 option classes or up to 50% of 
option classes by ADV; and (iv) $9,000 for Market Maker registrations 
in over 100 option classes or over 50% of option classes by ADV up to 
all option classes listed on MIAX Pearl. For example, if Market Maker 1 
elects to quote the top 40 option classes which consist of 58% of the 
total national average daily volume in the prior calendar quarter, the 
Exchange would assess $5,000 to Market Maker 1 for the month which is 
the lesser of `up to 40 classes' and `over 50% of classes by volume up 
to all classes listed on MIAX Pearl'. If Market Maker 2 elects to quote 
the bottom 1000 option classes which consist of 10% of the total 
national average daily volume in the prior quarter, the Exchange would 
assess $3,000 to Market Maker 2 for the month which is the lesser of 
`over 100 classes' and `up to 20% of classes by volume.' The Exchange 
notes that the proposed tiers (ranging from $3,000 to $9,000) are lower 
than the tiers recently approved by the Commission in BOX's filing to 
adopt market maker trading permit fees (ranging from $4,000 to $10,000) 
for similar per class tier thresholds.\15\
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    \15\ Id.
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    With the proposed changes, a Market Maker would be determined to be 
registered in a class if that Market Maker has been registered in one 
or more series in that class.\16\ The Exchange will assess MIAX Pearl 
Market Makers the monthly Market Maker Trading Permit fee based on the 
greatest number of classes listed on MIAX Pearl that the MIAX Pearl 
Market Maker registered to quote in on any given day within a calendar 
month. Therefore, with the proposed changes to the calculation of 
Market Maker Trading Permit fees, the Exchange's Market Makers would be 
encouraged to quote in more series in each class they are registered in 
because each additional series in that class would not count against 
their total classes for purposes of the Trading Permit fee tiers. The 
class volume percentage is based on the total national ADV in classes 
listed on MIAX Pearl in the prior calendar quarter. Newly listed option 
classes are excluded from the calculation of the monthly Market Maker 
Trading Permit fee until the calendar quarter following their listing, 
at which time the newly listed option classes will be included in both 
the per class count and the percentage of total national ADV.
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    \16\ Pursuant to Exchange Rule 602(a), a Member that has 
qualified as a Market Maker may register to make markets in 
individual series of options.
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    The Exchange also proposes to adopt an alternative lower Trading 
Permit fee for Market Makers who fall within the 2nd, 3rd and 4th 
levels of the Market Maker Trading Permit fee table: (i) Market Maker 
registrations in up to 40 option classes or up to 35% of option classes 
by volume; (ii) Market Maker registrations in up to 100 option classes 
or up to 50% of option classes by volume; and (iii) Market Maker 
registrations in over 100 option classes or over 50% of option classes 
by volume up to all option classes listed on MIAX Pearl. In particular, 
the Exchange proposes to adopt footnote ``**'' following the Market 
Maker Trading Permit fee table for these Monthly Trading Permit tier 
levels. New proposed footnote ``**'' will provide that if the Market 
Maker's total monthly executed volume during the relevant month is less 
than 0.040% of the total monthly TCV for MIAX Pearl-listed option 
classes for that month, then the fee will be $3,500 instead of the fee 
otherwise applicable to such level.
    The purpose of the alternative lower fee designated in proposed 
footnote ``**'' is to provide a lower fixed cost to those Market Makers 
who are willing to quote the entire Exchange market (or substantial 
amount of the Exchange market), as objectively measured by either 
number of classes assigned or national ADV, but who do not otherwise 
execute a significant amount of volume on the Exchange. The Exchange 
believes that, by offering lower fixed costs to Market Makers that 
execute less volume, the Exchange will retain and attract smaller-scale 
Market Makers, which are an integral component of the option 
marketplace, but have been decreasing in number in recent years, due to 
industry consolidation and lower market maker profitability. Since 
these smaller-scale Market Makers utilize less Exchange capacity due to 
lower overall volume executed, the Exchange believes it is reasonable 
and equitable to offer such Market Makers a lower fixed cost. The 
Exchange notes that the Exchange's affiliates, MIAX and MIAX Emerald, 
also provide lower Trading Permit fees for Market Makers who quote the 
entire MIAX and MIAX Emerald markets (or substantial amount of those 
markets), as objectively measured by either number of classes assigned 
or national ADV, but who do not otherwise execute a significant amount 
of volume on MIAX or MIAX Emerald.\17\ The Exchange also notes that 
other options exchanges assess certain of their membership fees at 
different rates, based upon a member's participation on that exchange 
(as described in the table below), and, as such, this concept is not 
new or novel. The proposed changes to the Trading Permit fees for 
Market Makers who fall within the 2nd, 3rd and 4th levels of the fee 
table are based upon a business determination of current Market Maker 
assignments and trading volume.
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    \17\ See MIAX Fee Schedule, Section 3)b) and MIAX Emerald Fee 
Schedule, Section 3)b).
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* * * * *
    As illustrated by the table below, the Exchange notes that the 
proposed Trading Permit fees for Market Makers are in line with, or 
cheaper than, the similar trading permit fees and membership fees 
charged by other options exchanges. The Exchange believes other 
exchanges' membership and trading permit fees are useful examples of 
alternative approaches to providing and charging for membership and 
provides the table for comparison purposes only to show how the 
Exchange's proposed fees compare to fees currently charged by other 
options exchanges for similar membership and trading permits.

[[Page 71706]]

------------------------------------------------------------------------
                                      Monthly membership/trading permit
             Exchange                                fee
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MIAX Pearl Options (as proposed)..  Market Maker Trading Permit fees:
                                    --Tier 1: $3,000 for Market Maker
                                     Assignments in up to 10 option
                                     classes or up to 20% of option
                                     classes by national ADV.
                                    --Tier 2: $5,000 for Market Maker
                                     Assignments in up to 40 option
                                     classes or up to 35% of option
                                     classes by ADV.
                                    --Tier 3: $7,000 for Market Maker
                                     Assignments in up to 100 option
                                     classes or up to 50% of option
                                     classes by ADV.
                                    --Tier 4: $9,000 for Market Maker
                                     Assignments in over 100 option
                                     classes or over 50% of option
                                     classes by ADV up to all option
                                     classes listed on MIAX Pearl.
                                    *Discounted rate of $3,500 for
                                     Market Makers in Tiers 2, 3 and 4
                                     if the Market Maker's total monthly
                                     executed volume during the relevant
                                     month is less than 0.040% of the
                                     total monthly TCV for MIAX Pearl-
                                     listed option classes for that
                                     month.
BOX Options Exchange LLC (``BOX'')  Electronic Market Maker Trading
 \18\.                               Permit Fees:
                                    Tier 1 (up to and including 10
                                     classes): $4,000.
                                    Tier 2 (up to and including 40
                                     classes): $6,000.
                                    Tier 3 (up to and including 100
                                     classes): $8,000.
                                    Tier 4 (over 100 classes): $10,000.
NYSE Arca, Inc. (``NYSE Arca'')     Options Trading Permits:
 \19\.                              Market Makers: 1st OTP--$8,000 for
                                     up to 60 plus the bottom 45% of
                                     option issues.
                                    2nd OTP--Additional $6,000 for up to
                                     150 plus the bottom 45% of option
                                     issues.
                                    3rd OTP--Additional $5,000 for up to
                                     500 plus the bottom 45% of option
                                     issues.
                                    4th OTP--Additional $4,000 for up to
                                     1,100 plus the bottom 45% of option
                                     issues.
                                    5th OTP--Additional $3,000 for all
                                     option issues.
                                    6th--9th OTP--Additional $2,000.
                                    10th or more OTPs--$500 for all
                                     options issues.
NYSE American, LLC (``NYSE          ATP Trading Permits:
 American'') \20\.                  Market Makers: $8,000 for up to 60
                                     plus the bottom 45% of option
                                     issues.
                                    Additional $6,000 for up to 150 plus
                                     the bottom 45% of option issues.
                                    Additional $5,000 for up to 500 plus
                                     the bottom 45% of option issues.
                                    Additional $4,000 for up to 1,100
                                     plus the bottom 45% of option
                                     issues.
                                    Additional $3,000 for all option
                                     issues.
                                    Additional $2,000 for 6th to 9th
                                     ATPs (plus additional fee for
                                     premium products).
                                    Additional $500 for the 10th or more
                                     ATPs.
Nasdaq PHLX LLC (``Nasdaq PHLX'')   Streaming Quote Trader (``SQT'')
 \21\.                               permit fees:
                                    Tier 1 (up to 200 option classes):
                                     $0.00.
                                    Tier 2 (up to 400 option classes):
                                     $2,200.
                                    Tier 3 (up to 600 option classes):
                                     $3,200.
                                    Tier 4 (up to 800 option classes):
                                     $4,200.
                                    Tier 5 (up to 1,000 option classes):
                                     $5,200.
                                    Tier 6 (up to 1,200 option classes):
                                     $6,200.
                                    Tier 7 (all option classes): $7,200.
                                    Remote Market Maker Organization
                                     (``RMMO'') permit fees:
                                    Tier 1 (less than 100 option
                                     classes): $5,000.
                                    Tier 2 (more than 100 and less than
                                     999 option classes): $8,000.
                                    Tier 3 (1,000 or more option
                                     classes): $11,000.
Nasdaq ISE LLC (``Nasdaq ISE'')     Access Fees:
 \22\.                              Primary Market Maker: $5,000 per
                                     membership.
                                    Competitive Market Maker: $2,500 per
                                     membership.
Cboe Exchange, Inc. (``Cboe'')      Electronic Trading Permit Fees:
 \23\.                              Market Maker: $5,000.
                                    Electronic Access Permit: $3,000.
Cboe C2 Exchange, Inc. (``Cboe      Access Permit Fees for Market
 C2'') \24\.                         Makers: $5,000.
Cboe BZX Exchange, Inc. (``Cboe     $500 where member has an ADV <5,000
 BZX Options'') \25\.                contracts traded.
                                    $1,000 where member has an ADV
                                     >=5,000 contracts traded.
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Clarifying Change
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    \18\ See BOX fee schedule, Section 1.C., available at https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-October-28-2022.pdf 
(last visited November 15, 2022). BOX had an average daily market 
share of 6.62% for the month of October 2022. See Market at a 
Glance, available at https://www.miaxoptions.com/ (last visited 
November 15, 2022).
    \19\ See NYSE Arca Options Fees and Charges, OTP Trading 
Participant Rights, p.1, available at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (last visited November 15, 2022). 
NYSE Arca recently increased this Options Trading Permit Fees 
approximately 45%. See Securities Exchange Act Release No. 95142 
(June 23, 2022), 87 FR 38786 (June 29, 2022) (SR-NYSEArca-2022-36). 
Under the new fee structure, it effectively costs a Market Maker 
$26,000 per month to trade all options issues on NYSE Arca.
    \20\ See NYSE American Options Fee Schedule, Section III, 
Monthly Trading Permit, Rights, Floor Access and Premium Product 
Fees, p. 23-24, available at https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf 
(last visited November 15, 2022). Under this fee structure, it 
effectively costs a Market Maker $26,000 per month to trade all 
options issues on NYSE American. NYSE American had an average daily 
market share of 7.20% for the month of October 2022. See Market at a 
Glance, available at https://www.miaxoptions.com/ (last visited 
November 15, 2022).
    \21\ See Nasdaq PHLX Options 7 Pricing Schedule, Section 8. 
Membership Fees, available at https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207 (last visited November 15, 
2022).
    \22\ See Nasdaq ISE Options 7 Pricing Schedule, Section 8.A. 
Access Services, available at https://listingcenter.nasdaq.com/rulebook/ise/rules/ISE%20Options%207 (last visited November 15, 
2022). Nasdaq ISE had an average daily market share of 6.41% for the 
month of October 2022. See Market at a Glance, available at https://www.miaxoptions.com/ (last visited November 15, 2022).
    \23\ See Cboe Fee Schedule, Electronic Trading Permit Fees, 
available at https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (last visited November 15, 2022).
    \24\ See Cboe C2 Fee Schedule, Access Fees, available at https://www.cboe.com/us/options/membership/fee_schedule/ctwo/ (last visited 
November 15, 2022). Cboe C2 had an average daily market share of 
4.77% for the month of October 2022. See Market at a Glance, 
available at https://www.miaxoptions.com/ (last visited November 15, 
2022).
    \25\ See ``Membership Fees'' section of the Cboe BZX Options Fee 
Schedule, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx (last visited November 15, 2022). The Exchange 
understands Cboe BZX Options charges the same Membership Fee to all 
of its Options Members.
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    The Exchange also proposes to amend the first table of Trading 
Permit fees in Section 3)b) of the Fee Schedule to provide additional 
clarity. The Exchange has two categories of Members, Market Makers and 
Electronic Exchange Members \26\ (``EEMs''). The

[[Page 71707]]

Exchange, therefore, proposes to replace the word ``Member'' with 
``EEM'' under the heading ``Type of Trading Permit'' in the table of 
Trading Permit fees that are based on type of interface used, FIX or 
MEO. The purpose of this change is to clarify that the first table of 
Trading Permit fees will now be applicable only to EEMs since the 
Exchange proposes herein to provide a separate table describing the new 
calculation and amount of Trading Permit fees for Market Makers.
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    \26\ The term ``Electronic Exchange Member'' or ``EEM'' means 
the holder of a Trading Permit who is a Member representing as agent 
Public Customer Orders or Non-Customer Orders on the Exchange and 
those non-Market Maker Members conducting proprietary trading. 
Electronic Exchange Members are deemed ``members'' under the 
Exchange Act. See the Definitions Section of the Fee Schedule and 
Exchange Rule 100.
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History and Implementation
    The Exchange notes that it previously filed similar proposals to 
amend the amount and calculation of Trading Permit fees for Market 
Makers, which filings contained other changes to the Exchange's Trading 
Permit fees for EEMs. The Exchange has withdrawn those filings and 
replaced them with the current filing.\27\ The Exchange previously 
filed this proposal on November 7, 2022.\28\ On November 15, 2022, the 
Exchange withdrew SR-PEARL-2022-49 and replaced it with this filing.
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    \27\ See SR-PEARL-2022-37 (withdrawn without being noticed by 
the Commission) and Securities Exchange Act Release No. 95780 
(September 15, 2022), 87 FR 57732 (September 21, 2022) (SR-PEARL-
2022-39) (withdrawn on November 7, 2022).
    \28\ See SR-PEARL-2022-49 (withdrawn without being noticed by 
the Commission).
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    The proposed rule change is immediately effective.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act, in general, and Section 
6(b)(4) and 6(b)(5) of the Act,\29\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among Exchange Members and other persons using its facilities 
and does not unfairly discriminate between customers, issuers, brokers 
or dealers.
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    \29\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange commenced operations in February 2017 \30\ and adopted 
its initial fee schedule that waived fees for Trading Permits to trade 
on the Exchange.\31\ Although trading permit fees were waived, an 
initial fee structure was put in place to communicate the Exchange's 
intent to charge trading permit fees in the future. As a new exchange 
entrant, the Exchange chose to offer Trading Permits free of charge to 
encourage market participants to trade on the Exchange and experience, 
among things, the quality of the Exchange's technology and trading 
functionality. This practice is not uncommon. New exchanges often do 
not charge fees or charge lower fees for certain services such as 
memberships/trading permits to attract order flow to an exchange, and 
later amend their fees to reflect the true value of those services, 
absorbing all costs to provide those services in the meantime. Allowing 
new exchange entrants time to build and sustain market share through 
various pricing incentives before increasing non-transaction fees 
encourages market entry and promotes competition. It also enables new 
exchanges to mature their markets and allow market participants to 
trade on the new exchanges without fees serving as a potential barrier 
to attracting memberships and order flow.\32\
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    \30\ See MIAX PEARL Successfully Launches Trading Operations, 
dated February 6, 2017, available at https://www.miaxoptions.com/sites/default/files/alert-files/MIAX_Press_Release_02062017.pdf.
    \31\ See Securities Exchange Act Release No. 80061 (February 17, 
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10).
    \32\ See Securities Exchange Act Release No. 94894 (May 11, 
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17) (stating, ``[t]he 
Exchange established this lower (when compared to other options 
exchanges in the industry) Participant Fee in order to encourage 
market participants to become Participants of BOX. . .''). See also 
Securities Exchange Act Release No. 90076 (October 2, 2020), 85 FR 
63620 (October 8, 2020) (SR-MEMX-2020-10) (``MEMX Membership Fee 
Proposal'') (proposing to adopt the initial fee schedule and stating 
that ``[u]nder the initial proposed Fee Schedule, the Exchange 
proposes to make clear that it does not charge any fees for 
membership, market data products, physical connectivity or 
application sessions.''). MEMX has seen its market share increase 
and recently proposed to adopt a membership fee and fees for 
connectivity. See Securities Exchange Act Release Nos. 93927 
(January 7, 2022), 87 FR 2191 (January 13, 2022) (SR-MEMX-2021-19) 
(proposing to adopt membership fees); and 95299 (July 15, 2022), 87 
FR 43563 (July 21, 2022) (SR-MEMX-2022-17) (proposing to adopt fees 
for connectivity). See also, e.g., Securities Exchange Act Release 
No. 88211 (February 14, 2020), 85 FR 9847 (February 20, 2020) (SR-
NYSENAT-2020-05), available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf (initiating market data fees for the NYSE National exchange 
after initially setting such fees at zero).
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    Later in 2018, as the Exchange's market share increased,\33\ the 
Exchange adopted nominal fees for Trading Permits along with a tiered-
volume based fee credit, known as the Trading Permit Fee Credit, and a 
Monthly Volume Credit.\34\ At that time, the Exchange chose to adopt a 
volume tier-based fee for Trading Permits along with the type of 
interface used--FIX or MEO--as a way to provide different choices 
regarding how potential Members could access the Exchange's System. 
This was for business and competitive reasons and to provide choice 
regarding Trading Permits and membership that had not previously 
existed. The Exchange now proposes to move away from the above 
described volume tier-based Trading Permit fee structure and align its 
Market Maker Trading Permit fees with the Trading Permit fee structure 
of the Exchange's affiliates, MIAX and MIAX Emerald, as well as other 
options exchanges by assessing Market Makers Trading Permit fees based 
on options classes assigned or percentage of national ADV.
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    \33\ The Exchange experienced a monthly average trading volume 
of 3.94% for the month of March 2018. See Market at a Glance, 
available at www.miaxoptions.com (last visited (November 15, 2022).
    \34\ See supra note 9. The Exchange notes that it has since 
filed to remove these credits. See Securities Exchange Act Release 
Nos. 96249 (November 7, 2022), 87 FR 68217 (November 14, 2022) (SR-
PEARL-2022-47) and 96250 (November 7, 2022), 87 FR 68214 (November 
14, 2022) (SR-PEARL-2022-46).
---------------------------------------------------------------------------

    The Exchange recently reviewed its current Trading Permit fees. In 
its review, the Exchange determined that the calculation and amount of 
Trading Permit fees would need to be amended, and volume tier-based 
Trading Permit fees for all Member types is no longer appropriate. 
Specifically, the Exchange found that Market Makers were benefitting 
from lower Trading Permit fees while (1) consuming the most bandwidth 
and resources of the network; (2) transacting the vast majority of the 
volume on the Exchange; and (3) requiring the high touch network 
support services provided by the Exchange and its staff. The Exchange 
notes that Broker Dealers, Professional Customers, and Priority 
Customers \35\ take up significantly less Exchange resources and costs. 
Further, the Exchange notes that Market Makers account for greater than 
99% of message traffic over the network, while other non-Market Maker 
market participants account for less than 1% of message traffic over 
the network. Market Makers are the primary users of the Exchange's high 
performance MEO Interface. The Exchange's high performance MEO 
Interface (including employee support for such interface), utilized by 
Market

[[Page 71708]]

Makers, provides unparalleled system throughput and the capacity to 
handle 10.8 million quotes per second and average round trip latency 
rate of approximately 30.76 microseconds for a single quote. Over the 
period from March 2022 through May 2022, the Exchange processed 386.1 
billion messages (99.67% of total messages received) over the MEO 
Interface, almost entirely from Market Maker message traffic (which 
equals approximately 6 billion messages per day over that time period) 
(386.1 billion messages divided 64 trading days from March through May 
2022).
---------------------------------------------------------------------------

    \35\ The term ``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.
---------------------------------------------------------------------------

    The Exchange notes that while Market Makers continue to account for 
a vast majority of the increased costs and resources placed on the 
Exchange and its systems (as discussed herein), Market Makers continue 
to be valuable market participants on the exchanges as the options 
market is a quote driven industry. The Exchange recognizes the value 
that Market Makers bring to the Exchange. In fact, the Exchange 
provides Market Makers transactional volume-based discounts and rebates 
to incentivize Market Makers to direct order flow to the Exchange to 
obtain the benefit of the rebate, which will in turn benefit all market 
participants by increasing liquidity on the Exchange.\36\ The proposed 
Trading Permit fees discussed herein are meant to strike a balance 
between offsetting the costs to which Market Makers place on the 
Exchange and continuing to incentivize Market Makers to access and make 
markets on the Exchange.
---------------------------------------------------------------------------

    \36\ For example, Market Makers may qualify for higher Tier 3 
rebates as follows: (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 when adding liquidity. This is compared to a lower 
Professional Customer Tier 3 rebate of ($0.40) for options 
transactions in the same classes. See Fee Schedule, Section 1)a), 
footnote ``[lozf].''
---------------------------------------------------------------------------

    In its review of Trading Permit fees, the Exchange found that since 
2018, Market Makers were paying nearly the same Trading Permit fees as 
EEMs that used the MEO Interface despite Market Makers consuming the 
most resources on the Exchange's system and contributing to increased 
costs for the Exchange. As such, the Exchange proposes to establish 
higher, separate electronic Trading Permit fees for Market Makers that 
are more aligned with the costs and resources that Market Makers 
continue to place on the Exchange and its systems and will align the 
Trading Permit fees with those of the majority of other options 
exchanges at similar or lower rates.\37\
---------------------------------------------------------------------------

    \37\ See supra notes 18 to 25.
---------------------------------------------------------------------------

    Additionally, the Exchange believes that the proposed change will 
better align the Exchange's Trading Permit fees with rates charged by 
its affiliates and competing options exchanges in the industry for 
similar Trading Permits for such market participants. As such, the 
Exchange believes the proposed Market Maker Trading Permit fees are 
reasonable in that they are lower than comparable fees at other options 
exchanges.\38\ Further, the Exchange believes that the proposal is 
reasonably designed to continue to compete with other options exchanges 
by incentivizing market participants to register as Market Makers on 
the Exchange in a manner than enables the Exchange to improve its 
overall competitiveness and strengthen market quality for all market 
participants. As stated above, the Exchange believes the proposed 
Market Maker Trading Permit fees are an appropriate balance between 
offsetting the costs to which Market Makers cost the Exchange and 
continuing to incentivize Market Makers to access and make a market on 
the Exchange.
---------------------------------------------------------------------------

    \38\ See id.
---------------------------------------------------------------------------

    The proposed fees are equitable and not unfairly discriminatory as 
the fees apply equally to all Market Makers. As such, all similarly 
situated Market Makers, with the same number of appointments, will be 
subject to the same Market Maker Trading Permit fee. With the proposed 
changes, a Market Maker would be determined to be registered in a class 
if that Market Maker has been registered in one or more series in that 
class. Exchange Rule 602(a) provides that a Member that has qualified 
as a Market Maker may register to make markets in individual series of 
options. The proposed tiered structure is based on the number of 
options classes the Market Maker is registered in, not the number of 
series within the options class. The Exchange believes its proposal is 
fair and reasonable because the proposed tiered structure would 
encourage Market Makers to register in more series within each options 
class as each additional series in that class would not count towards 
the particular Market Maker's overall number of classes assigned, and 
cause them to qualify for a higher tier and higher fee.
    The Exchange also believes that assessing lower fees to Market 
Makers that quote in fewer classes is reasonable and appropriate as it 
will allow the Exchange to retain and attract smaller-scale Market 
Makers, which are an integral component of the options industry 
marketplace. Since these smaller Market Makers utilize less bandwidth 
and capacity on the Exchange network due to the lower number of quoted 
classes, the Exchange believes it is reasonable and appropriate to 
offer such Market Makers a lower fee. The Exchange also notes that 
other options exchanges assess permit fees at different rates, based 
upon a member's participation on that exchange,\39\ and, as such, this 
concept is not new or novel.
---------------------------------------------------------------------------

    \39\ See supra notes 18 to 25; see also MIAX Fee Schedule, 
Section 3)b) and MIAX Emerald Fee Schedule, Section 3)b).
---------------------------------------------------------------------------

    Further, the Exchange believes the proposed tiered structure of the 
Market Maker Trading Permit fees is reasonable and appropriate. Under 
the proposal, Market Makers will be charged monthly fees based on the 
greatest number of classes quoted on any given trading day in a 
calendar month or upon certain class volume percentages of national 
ADV. Under the proposed fee structure, the fees increase as the number 
of classes quoted by a Market Maker increases. The Exchange believes 
this structure is reasonable and not unfairly discriminatory because 
the Exchange's system requires increased performance and capacity in 
order to provide the opportunity for Market Makers to quote in a higher 
number of options classes on the Exchange. Specifically, the more 
classes that are actively quoted on the Exchange by a Market Maker 
requires increased memory for record retention, increased bandwidth for 
optimized performance, increased functionalities on each application 
layer, and increased optimization with regard to surveillance and 
monitoring of such classes quoted. As such, basing the Market Maker 
Trading Permit fee on the greatest number of classes quoted in on any 
given day in a calendar month is reasonable and appropriate when taking 
into account how the increased number of quoted classes directly impact 
the costs and resources required for the Exchange. Further, the 
Exchange believes that the proposed structure is equitable and not 
unfairly discriminatory as all similarly situated Market Makers will be 
charged the same fee. The Exchange notes that options exchanges in the 
industry calculate Market Maker Permit Fees in the same manner.\40\
---------------------------------------------------------------------------

    \40\ See supra notes 18 to 25.
---------------------------------------------------------------------------

    There is no requirement, regulatory or otherwise, that any broker-
dealer connect to and access any (or all of) the available options 
exchanges. One other exchange recently noted in a proposal to amend 
their own trading permit fees

[[Page 71709]]

that of the 62 market making firms that are registered as Market Makers 
across Cboe, MIAX, and BOX, 42 firms access only one of the three 
exchanges.\41\ Further, the Exchange and its affiliates, MIAX and MIAX 
Emerald, have a total of 47 members. Of those 47 total members, 36 are 
members of all three exchanges, four (4) are members of only two (2) 
exchanges, and seven (7) are members of only one exchange. Of those 
that are currently Market Makers on the Exchange, two (2) are not 
registered as Market Makers on MIAX, four (4) are not registered as 
Market Makers on MIAX Emerald, and one (1) is not registered as a 
Market Maker on MIAX or MIAX Emerald. The above data evidences that a 
Market Maker need not be a Member of all options exchanges, let alone 
the Exchange and its two affiliates, and market makers elect to do so 
based on their own business decisions and need to directly access each 
exchange's liquidity pool. Not only is there not an actual regulatory 
requirement to connect to every options exchange, the Exchange believes 
there is also no ``de facto'' or practical requirement as well, as 
further evidenced by the market maker membership analysis of the 
options exchanges discussed above. Indeed, Market Makers choose if and 
how to access a particular exchange and because it is a choice, the 
Exchange must set reasonable pricing, otherwise prospective market 
makers would not connect and existing Market Makers would disconnect 
from the Exchange.
---------------------------------------------------------------------------

    \41\ See Securities Exchange Act Release No. 94894 (May 11, 
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17) (Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change to Amend the 
Fee Schedule on the BOX Options Market LLC Facility To Adopt 
Electronic Market Maker Trading Permit Fees). The Exchange believes 
that BOX's observation demonstrates that market making firms can, 
and do, select which exchanges they wish to access, and, 
accordingly, options exchanges must take competitive considerations 
into account when setting fees for such access.
---------------------------------------------------------------------------

    The Exchange believes that elasticity of demand for Exchange 
Membership exists when it comes to purchasing a Trading Permit and, as 
evidenced by the data provided below, prior fee proposals have resulted 
in Members terminating their memberships.\42\ For example, over the 
course of those prior filings, three Members terminated their 
memberships in the time since the proposed fee increase first went into 
effect.
---------------------------------------------------------------------------

    \42\ See Securities Exchange Act Release No. 95419 (August 4, 
2022), 87 FR 48702 (August 10, 2022) (SR-PEARL-2022-30).
---------------------------------------------------------------------------

    Further, other exchanges have also experienced termination of 
memberships if their members deem permit or membership fees to be 
unreasonable or excessive. For example, the Exchange notes that a BOX 
participant modified its access to BOX in connection with the 
implementation of a proposed change to BOX's permit fees.\43\ The 
absence of new memberships coupled with the termination of three 
memberships on the Exchange, as well as similar membership changes on 
another options exchange in relation to a trading permit fee increase, 
clearly shows that elasticity of demand exists.
---------------------------------------------------------------------------

    \43\ According to BOX, a Market Maker on BOX terminated its 
status as a Market Maker in response to BOX's proposed modification 
of Market Maker trading permit fees. See Securities Exchange Act 
Release No. 94894 (May 11, 2022), 87 FR 29987 (May 17, 2022) (SR-
BOX-2022-17). BOX noted, and the Exchange agrees, that this Market 
Maker's decision demonstrates that Market Makers can, and do, alter 
their membership status if they deem permit fees at an exchange to 
be unsuitable for their business needs, thus demonstrating the 
competitive environment for Market Maker permit fees and the 
constraints on options exchanges when setting Market Maker permit 
fees.
---------------------------------------------------------------------------

    The Exchange notes that there are material costs associated with 
providing the infrastructure and headcount to fully-support access to 
the Exchange. The Exchange incurs technology expenses related to 
establishing and maintaining Information Security services, enhanced 
network monitoring and customer reporting associated with its network 
technology. While some of the expense is fixed, much of the expense is 
not fixed, and thus increases as the expenses associated with access 
services for Market Makers increases. For example, new Market Makers to 
the Exchange may require the purchase of additional hardware to support 
those Members as well as enhanced monitoring and reporting of customer 
performance that the Exchange provides. Further, as the total number of 
Market Makers increase, the Exchange may need to increase its data 
center footprint and consume more power, resulting in increased costs 
charged by their third-party data center provider. Accordingly, the 
cost to the Exchange to provide access to its Market Makers is not 
fixed. The Exchange believes the proposed Market Maker Trading Permit 
fees are reasonable in order to offset a portion of the costs to the 
Exchange associated with providing access to Market Makers to its quote 
and order infrastructure.
    The Exchange believes that charging higher fees to Market Makers, 
who connect solely through the MEO Interface, is not unfairly 
discriminatory because Market Makers continue to account for the vast 
majority of network capacity utilization and trading activity on the 
Exchange and the MEO Interface provides higher throughput and enhanced 
functionality compared to the FIX Interface, justifying the increased 
cost. MEO Interface users account for the majority of expenses placed 
on the Exchange's systems. The MEO Interface also provides additional 
functionality that Market Makers using the MEO Interface use to fulfill 
their market making obligations. The Exchange offers three time-in-
force modifiers: \44\ Day Limit (``Day''), Immediate-Or-Cancel 
(``IOC''), and Good `Til Cancelled (``GTC'').\45\ While all order types 
are available for use on either interface, only the time-in-force 
modifiers of IOC and Day are available on the MEO Interface.\46\ Market 
Makers utilize the time-in-force of Day on orders to be posted on the 
MIAX Pearl Options Book \47\ and to meet Market Makers' continuous 
quoting obligations under Exchange Rule 605(d).\48\ The MEO Interface 
allows the submission of Cancel-Replacement orders,\49\ which allow for 
the immediate cancellation of a previously received order and the 
replacement of that order with a new order with new terms and 
conditions.\50\ Cancel-Replacement orders are primarily used by Market 
Makers as part of their continuous quoting obligations. Market Makers 
use only the MEO Interface due to its lower latency, higher throughput, 
available time-in-force instructions and order types that assist them 
in satisfying their market making obligations. Market Makers do not use 
the FIX Interface due to the unavailability of the above functionality. 
The MEO Interface is the

[[Page 71710]]

more robust interface offering lower latency and higher throughput. 
Market Makers use only the MEO Interface.
---------------------------------------------------------------------------

    \44\ See MIAX Pearl Options Exchange User Manual, Section 6, 
Order Types, available at https://www.miaxoptions.com/exchange-functionality/pearl (last visited November 4, 2022).
    \45\ See, e.g., Exchange Rule 516.
    \46\ See preamble to Exchange Rule 516 (noting that not all 
order types and modifiers are available for use on each of the MEO 
Interface and the FIX Interface). See also Section 4.1.1.2 of the 
MEO Interface Specification, available at https://www.miaxoptions.com/sites/default/files/page-files/MIAX_Express_Orders_MEO_v2.0.pdf (indicating that the time-in-force 
instructions of IOC and Day are available on the MEO interface).
    \47\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100.
    \48\ Only the time-in-force modifiers of IOC and Day are 
available on the MEO Interface. See Exchange Rule 516 (noting that 
not all order types and modifiers are available for use on each of 
the MEO Interface and the FIX Interface). See also MIAX Pearl 
Options Exchange MEO Interface Specification, Section 4.1.1.2, 
available at https://www.miaxoptions.com/sites/default/files/page-files/MIAX_Express_Orders_MEO_v2.0.pdf (indicating that the time-in-
force instructions of IOC and Day are available on the MEO 
interface).
    \49\ See MIAX Pearl Options Exchange User Manual, Section 6, 
Interfaces and Liquidity Types, available at https://www.miaxoptions.com/exchange-functionality/pearl (last visited 
November 4, 2022).
    \50\ See Exchange Rule 516(d).
---------------------------------------------------------------------------

    The Exchange notes that while Market Makers continue to account for 
a vast majority of the increased System usage placed on the Exchange, 
Market Makers continue to be valuable market participants on the 
exchanges as the options market is a quote driven industry. The 
Exchange recognizes the value that Market Makers bring to the Exchange. 
The Exchange proposes higher, separate fees for Market Makers that are 
more aligned with the costs and resources that Market Makers continue 
to place on the Exchange and its systems.
    The Exchange believes that the proposed Market Maker Trading Permit 
fees are reasonable, equitable, and not unfairly discriminatory. The 
Exchange believes that the reasonableness of its proposed fees is 
demonstrated by the very fact that such fees are in line with, and in 
some cases lower than, the costs of similar access fees at other 
exchanges.\51\ The Exchange notes these fees were similarly filed with 
the Commission and neither suspended nor disapproved.\52\ The proposed 
fees are fair and equitable and not unfairly discriminatory because 
they apply equally to all Market Makers and access to the Exchange is 
offered on terms that are not unfairly discriminatory. The Exchange 
designed the fee rates in order to provide objective criteria for 
Market Makers of different sizes and business models that best matches 
their quoting activity on the Exchange. The Exchange believes that the 
proposed fee rates and criteria provide an objective and flexible 
framework that will encourage Market Makers to be appointed and quote 
in option classes while also equitably allocating the fees in a 
reasonable manner amongst Market Maker appointments to account for 
quoting and trading activity.
---------------------------------------------------------------------------

    \51\ See supra notes 18 to 25.
    \52\ The Exchange presumes that the fees of other exchanges are 
reasonable, as required by the Exchange Act in the absence of any 
suspension or disapproval order by the Commission providing 
otherwise.
---------------------------------------------------------------------------

    The Exchange again notes that it operates in a highly competitive 
market in which market makers 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 fees for services 
and products, in addition to order flow, to remain competitive with 
other exchanges. The Exchange believes that the proposed changes 
reflect this competitive environment.
    The Exchange again notes it is not aware of any reason why Market 
Makers could not simply drop their access to an exchange (or not 
initially access an exchange) if an exchange were to establish prices 
for its non-transaction fees that, in the determination of such Market 
Maker, did not make business or economic sense for such Market Maker to 
access such exchange. The Exchange again notes that no market makers 
are required by rule, regulation, or competitive forces to be a Market 
Maker on the Exchange.
    In sum, the Exchange believes the proposed fees are reasonable and 
reflect a competitive environment, as the Exchange seeks to amend its 
Trading Permit fees for Market Makers, while still attracting Market 
Makers to continue to, or seek to, access the Exchange. The Exchange 
further believes the proposed Trading Permit fees discussed herein are 
an appropriate balance between offsetting the costs to which Market 
Makers cost the Exchange and continuing to incentivize Market Makers to 
access and make a market on the Exchange.
Clarifying Change
    The Exchange believes its proposal to change the word ``Member'' to 
``EEM'' under the heading ``Type of Trading Permit'' in the table of 
Trading Permit fees that are based on type of interface used, FIX or 
MEO, is reasonable because it will provide additional clarity within 
the Fee Schedule. As stated above, the Exchange has two categories of 
Members, Market Makers and EEMs. This proposed change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it specify that there are separate 
Trading Permit fee tables for EEMs and Market Makers, removing the 
potential investor confusion and clearly setting forth which fee is 
applicable to EEMs and which fee is applicable to Market Makers.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange believes that the proposed Market Maker Trading Permit 
fees do not place certain market participants at a relative 
disadvantage to other market participants because the proposed fees do 
not favor certain categories of market participants in a manner that 
would impose a burden on competition; rather, the fee rates are 
designed in order to provide objective criteria for Market Makers of 
different sizes and business models that best matches their quoting 
activity on the Exchange. Further, the Exchange believes that the 
proposed Market Maker Trading Permit fees will not impose a burden on 
intramarket competition because, when these fees are viewed in the 
context of the overall activity on the Exchange, Market Makers: (1) 
consume the most bandwidth and resources of the network; (2) transact 
the vast majority of the volume on the Exchange; and (3) require the 
high touch network support services provided by the Exchange and its 
staff, including more costly network monitoring, reporting and support 
services, resulting in a much higher cost to the Exchange. The Exchange 
notes that the majority of customer demand comes from Market Makers, 
whose transactions make up a majority of the volume on the Exchange. 
Further, as discussed herein, other Member types (Broker Dealers, 
Professional Customers, and Priority Customers) take up significantly 
less Exchange resources and costs. As such, the Exchange does not 
believe charging Market Makers higher Trading Permit fees than other 
Member types will impose a burden on intramarket competition.
    The Exchange believes that the tiered structure of the proposed 
Market Maker Trading Permit fees will not impose a burden on 
intramarket competition because the tiered structure takes into account 
the number of classes quoted by each individual Market Maker. As 
discussed herein, the Exchange's system requires increased performance 
and capacity in order to provide the opportunity for each Market Maker 
to quote in a higher number of options classes on the Exchange. 
Specifically, the more classes that are actively quoted on the Exchange 
by a Market Maker requires increased memory for record retention, 
increased bandwidth for optimized performance, increased 
functionalities on each application layer, and increased optimization 
with regard to surveillance and monitoring of such classes quoted. As 
such, basing the Market Maker Trading Permit fee on the greatest number 
of classes quoted in on any given day in a calendar month is reasonable 
and appropriate when taking into account how the increased number of 
quoted classes directly impact the costs and resources for the 
Exchange.
Inter-Market Competition
    The Exchange believes the proposed Market Maker Trading Permit fees 
do

[[Page 71711]]

not place an undue burden on competition on other self-regulatory 
organizations that is not necessary or appropriate. The proposed tiered 
structure is based on the number of options classes the Market Maker is 
registered in, not the number of series within the options class. The 
Exchange believes its proposal would promote intermarket competition 
because the proposed tiered structure would encourage Market Makers to 
register in more series within each options class as each additional 
series in that class would not count towards the particular Market 
Maker's overall number of classes assigned, and cause them to qualify 
for a higher tier and higher fee. This could improve the Exchange's 
market quality by encouraging Market Makers to quote more series within 
an options class without it impacting its Trading Permit fee.
    Market making firms are not forced to become market makers on all 
options exchanges. The Exchange notes that it has far less Market 
Makers as compared to the much greater number of market makers at other 
options exchanges. There are a number of large market makers that are 
participants of other options exchange but not Members of the Exchange. 
The Exchange is also unaware of any assertion that its existing fee 
levels or the proposed Market Maker Trading Permit fees would somehow 
unduly impair its competition with other options exchanges. To the 
contrary, if the fees charged are deemed too high by a market making 
firm, they can simply discontinue their membership with the Exchange.
    The Exchange operates in a highly competitive market in which 
market participants can readily favor one of the 15 competing options 
venues if they deem fee levels at a particular venue to be excessive. 
Based on publicly-available information, and excluding index-based 
options, no single exchange has more than 11-12% equity options market 
share.\53\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and exchange-traded fund 
(``ETF'') options order flow. For the month of October 2022, the 
Exchange had a market share of approximately 4.32% of executed 
multiply-listed equity options \54\ and the Exchange believes that the 
ever-shifting market share among exchanges from month to month 
demonstrates that market participants can discontinue or reduce use of 
certain categories of products, or shift order flow, in response to fee 
changes. In such an environment, the Exchange must continually adjust 
its fees and fee waivers to remain competitive with other exchanges and 
to attract order flow to the facility.
---------------------------------------------------------------------------

    \53\ See Market at a Glance, available at www.miaxoptions.com 
(last visited November 15, 2022).
    \54\ See id.
---------------------------------------------------------------------------

    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and credits to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment.
Clarifying Change
    The Exchange believes its proposal to change the word ``Member'' to 
``EEM'' under the heading ``Type of Trading Permit'' in the table of 
Trading Permit fees that are based on type of interface used, FIX or 
MEO, will not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
believes the proposed changes will not impose any burden on intra-
market competition because the change simply clarifies that the first 
table of Trading Permit fees applies only to EEMs. The Exchange 
believes the proposed change will have not impose any burden on intra-
market competition as the proposed change is not designed to address 
any competitive issue but rather is designed to provide clarity to the 
Fee Schedule. In addition, the Exchange does not believe the proposal 
will impose any burden on inter-market competition as the proposal does 
not address any competitive issues and is intended to protect investors 
by providing further transparency and precision for the Fee Schedule.

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,\55\ and Rule 19b-4(f)(2) \56\ 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.
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \56\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2022-51 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PEARL-2022-51. 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

[[Page 71712]]

comment submissions. You should submit only information that you wish 
to make available publicly. All submissions should refer to File Number 
SR-PEARL-2022-51 and should be submitted on or before December 14, 
2022.
---------------------------------------------------------------------------

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

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\57\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25471 Filed 11-22-22; 8:45 am]
BILLING CODE 8011-01-P