Document ID: SEC-2022-0914-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2022-07-13T04:00Z

[Federal Register Volume 87, Number 133 (Wednesday, July 13, 2022)]
[Notices]
[Pages 41750-41755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14886]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95210; File No. SR-PEARL-2022-26

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

July 7, 2022.
    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 July 5, 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 fee schedule (the 
``Fee Schedule'') applicable to MIAX Pearl Equities, an equities 
trading facility of the Exchange.
    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 purpose of the proposed rule change is to amend the Exchange's 
Fee Schedule to adopt new liquidity indicator codes and associated fees 
and rebates to the Liquidity Indicator Codes and Associated Fees table. 
The Exchange originally filed this proposal on June 23, 2022, (SR-
PEARL-2022-24). On July 5, 2022, the Exchange withdrew SR-PEARL-2022-24 
and resubmitted this proposal.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues,

[[Page 41751]]

to which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 17% of the total market share of 
executed volume of equities trading, and the Exchange currently 
represents approximately 1% of the overall market share.\3\
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    \3\ See MIAX's ``The market at a glance, MTD Average'', 
available at https://www.miaxoptions.com/, (last visited June 30, 
2022).
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Background
    The Exchange filed a proposal \4\ to adopt a new routing option 
called Route to Primary Auction (``PAC'') that would be available to 
orders in equity securities traded on the Exchange's equity trading 
platform. The PAC routing option would enable an Equity Member \5\ 
(``Member'') to designate that their order be routed to the primary 
listing market to participate in the primary listing market's opening, 
re-opening or closing process.\6\ Exchange Rule 2617(b)(5)(B) provides 
that PAC is a routing option for Market Orders \7\ and displayed Limit 
Orders \8\ designated with a time-in-force of Regular Hours Only 
(``RHO'') \9\ that the entering firm wishes to designate for 
participation in the opening, re-opening (following a regulatory halt, 
suspension, or pause), or closing process \10\ of a primary listing 
market (Cboe BZX Exchange, Inc. (``BZX''), the New York Stock Exchange 
LLC (``NYSE''), The Nasdaq Stock Market LLC (``Nasdaq''), NYSE American 
LLC (``NYSE American''), or NYSE Arca, Inc. (``NYSE Arca'')) if 
received before the opening, re-opening, or closing process of such 
market.
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    \4\ See Securities Exchange Act Release No. 94301 (February 23, 
2022), 87 FR 11739 (March 2, 2022) (SR-PEARL-2022-06).
    \5\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
    \6\ See Exchange Rule 2617(b)(5)(B).
    \7\ See Exchange Rule 2614(a)(2).
    \8\ See Exchange Rule 2614(a)(1).
    \9\ Exchange Rule 2614(b)(2) defines ``Regular Hours Only'' or 
``RHO'' as ``[a]n order that is designated for execution only during 
Regular Trading Hours, which includes the Opening Process for equity 
securities. An order with a time-in-force of RHO entered into the 
System before the opening of business on the Exchange as determined 
pursuant to Exchange Rule 2600 will be accepted but not eligible for 
execution until the start of Regular Trading Hours.''
    \10\ The Exchange notes that it will not route Market Orders to 
the primary listing market's closing process.
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    The Exchange currently has a liquidity indicator code of ``X'' for 
routed liquidity. This code will continue to be applied to an order 
that is routed to and executed on an away market. Additionally, this 
code will be used to identify orders that were routed to an away market 
(including orders that were routed using the PAC routing strategy) and 
executed as ``Taker.'' The proposed liquidity indicator codes described 
below are specifically related to the PAC routing strategy.
New Liquidity Indicator Codes
    In conjunction with the Exchange's proposal to provide a PAC 
routing option as described above, the Exchange now proposes to amend 
the Liquidity Indicator Codes and Associated Fees Table to adopt new 
routing fees and rebates as follows:
     Add new liquidity indicator code XA, Re-routed by Primary 
Listing Exchange. The Liquidity Indicator Codes and Associated Fees 
table would specify that orders that yield liquidity indicator code XA 
would be charged a fee $0.003 per share in securities priced at or 
above $1.00 and 0.3% of the transaction's dollar value in securities 
priced below $1.00.
     Add new liquidity indicator code XB, Routed Primary 
Listing Exchange Execution (Other). The Liquidity Indicator Codes and 
Associated Fees table would specify that orders that yield liquidity 
indicator code XB would be charged a fee $0.003 per share in securities 
priced at or above $1.00 and 0.3% of the transaction's dollar value in 
securities priced below $1.00.
     Add new liquidity indicator code XC, Routed to NYSE, 
Opening/Re-Opening Auction. The Liquidity Indicator Codes and 
Associated Fees table would specify that orders that yield liquidity 
indicator code XC would be charged a fee $0.00105 per share in 
securities priced at or above $1.00 and 0.3% of the transaction's 
dollar value in securities priced below $1.00.
     Add new liquidity indicator code XD, Routed to NYSE, 
Closing Auction. The Liquidity Indicator Codes and Associated Fees 
table would specify that orders that yield liquidity indicator code XD 
would be charged a fee $0.00085 per share in securities priced at or 
above $1.00 and 0.3% of the transaction's dollar value in securities 
priced below $1.00.
     Add new liquidity indicator code XE, Routed to NYSE, Adds 
Displayed Liquidity. The Liquidity Indicator Codes and Associated Fees 
table would specify that orders that yield liquidity indicator code XE 
would receive a rebate of $0.0015 per share in securities priced at or 
above $1.00 and would be charged a fee of 0.01% of the transaction's 
dollar value in securities priced below $1.00.
     Add new liquidity indicator code XF, Routed to NYSE Arca, 
Opening/Re-Opening Auction. The Liquidity Indicator Codes and 
Associated Fees table would specify that orders that yield liquidity 
indicator code XF would be charged a fee of $0.00155 per share in 
securities priced at or above $1.00 and 0.105% of the transaction's 
dollar value in securities priced below $1.00.
     Add new liquidity indicator code XG, Routed to NYSE Arca, 
Closing Auction. The Liquidity Indicator Codes and Associated Fees 
table would specify that orders that yield liquidity indicator code XG 
would be charged a fee of $0.00105 per share in securities priced at or 
above $1.00 and a fee of 0.105% of the transaction's dollar value in 
securities priced below $1.00.
     Add new liquidity indicator code XH, Routed to NYSE Arca, 
Adds Displayed Liquidity. The Liquidity Indicator Codes and Associated 
Fees table would specify that orders that yield liquidity indicator 
code XH would receive a rebate of $0.0015 per share in securities 
priced at or above $1.00 and would be charged a fee of 0.01% of the 
transaction's dollar value in securities priced below $1.00.
     Add new liquidity indicator code XI, Routed to NYSE 
American, Opening/Re-Opening Auction. The Liquidity Indicator Codes and 
Associated Fees table would specify that orders that yield liquidity 
indicator code XI would be charged a fee of $0.00055 per share in 
securities priced at or above $1.00 and 0.055% of the transaction's 
dollar value in securities priced below $1.00.
     Add new liquidity indicator code XJ, Routed to NYSE 
American, Closing Auction. The Liquidity Indicator Codes and Associated 
Fees table would specify that orders that yield liquidity indicator 
code XJ would be charged a fee of $0.00055 per share in securities 
priced at or above $1.00 and 0.055% of the transaction's dollar value 
in securities priced below $1.00.
     Add new liquidity indicator code XK, Routed to NYSE 
American, Adds Displayed Liquidity. The Liquidity Indicator Codes and 
Associated Fees table would specify that orders that yield liquidity 
indicator code XK would receive a rebate of $0.001 per share in 
securities priced at or above $1.00 and would be charged a fee of 0.01% 
of the transaction's dollar value in securities priced below $1.00.
     Add new liquidity indicator code XL, Routed to Cboe BZX, 
Opening/Re-Opening Auction. The Liquidity Indicator Codes and 
Associated Fees table would specify that orders that yield liquidity 
indicator code XL would be charged a fee of $0.0008 per share in 
securities priced at or above $1.00 and

[[Page 41752]]

0.08% of the transaction's dollar value in securities priced below 
$1.00.
     Add new liquidity indicator code XM, Routed to Cboe BZX, 
Closing Auction. The Liquidity Indicator Codes and Associated Fees 
table would specify that orders that yield liquidity indicator code XM 
would be charged a fee of $0.00105 per share in securities priced at or 
above $1.00 and 0.105% of the transaction's dollar value in securities 
priced below $1.00.
     Add new liquidity indicator code XN, Routed to Cboe BZX, 
Adds Displayed Liquidity. The Liquidity Indicator Codes and Associated 
Fees table would specify that orders that yield liquidity indicator 
code XN would receive a rebate of $0.0015 per share in securities 
priced at or above $1.00 and be charged a fee of 0.01% of the 
transaction's dollar value in securities priced below $1.00.
     Add new liquidity indicator code XO, Routed to Nasdaq, 
Opening/Re-Opening Auction. The Liquidity Indicator Codes and 
Associated Fees table would specify that orders that yield liquidity 
indicator code XO would be charged a fee of $0.00155 per share in 
securities priced at or above $1.00 and 0.30% of the transaction's 
dollar value in securities priced below $1.00.
     Add new liquidity indicator code XP, Routed to Nasdaq, 
Closing Auction. The Liquidity Indicator Codes and Associated Fees 
table would specify that orders that yield liquidity indicator code XP 
would be charged a fee of $0.00085 per share in securities priced at or 
above $1.00 and 0.09% of the transaction's dollar value in securities 
priced below $1.00.
     Add new liquidity indicator code XQ, Routed to Nasdaq, 
Adds Displayed Liquidity. The Liquidity Indicator Codes and Associated 
Fees table would specify that orders that yield liquidity indicator 
code XQ would receive a rebate of $0.0015 per share in securities 
priced at or above $1.00 and be charged a fee of 0.01% of the 
transaction's dollar value in securities priced below $1.00.
    As part of the PAC order routing strategy the Exchange will route a 
limit order to participate in the primary listing market's closing 
process prior to the primary listing market's order entry cut-off 
time.\11\ These orders may rest on the primary listing market's book 
until such time as the closing auction commences. During this period 
these orders are subject to standard order handling and may be executed 
or routed by the primary listing market depending upon market 
conditions. Therefore the Exchange is proposing to adopt liquidity 
indicator codes to reflect the disposition of the order (i.e., an order 
routed to NYSE that rests on the book and is executed prior to the 
closing auction would receive liquidity indicator code XE; an order 
routed to NYSE Arca that rests on the book and is executed prior to the 
closing auction would receive liquidity indicator code XH; an order 
routed to NYSE American that rests on the book and is executed prior to 
the closing auction would receive liquidity indicator code XK; an order 
routed to Cboe BZX that rests on the book and is executed prior to the 
closing auction would receive liquidity indicator code XN; and an order 
routed to Nasdaq that rests on the book and is executed prior to the 
closing auction would receive liquidity indicator code XQ; further an 
order routed to a primary listing market that is subsequently routed by 
the primary listing market prior to the start of the closing auction 
would receive liquidity indicator code XA).
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    \11\ See Exchange Rule 2617(b)(5)(B)(1)(ii)(a).
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Implementation
    The proposed changes are immediately effective.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among its Members and issuers and other persons using 
its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \14\ that 
the rules of an exchange be designed to prevent fraudulent and 
manipulative acts and practices, and to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange operates in a highly fragmented and competitive market 
in which market participants can readily direct their order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of sixteen registered equities exchanges, and 
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order 
flow. Based on publicly available information, no single registered 
equities exchange currently has more than approximately 17% of the 
total market share of executed volume of equities trading.\15\ Thus, in 
such a low-concentrated and highly competitive market, no single 
equities exchange possesses significant pricing power in the execution 
of order flow, and the Exchange currently represents less than 1% of 
the overall market share. The Commission and the courts have repeatedly 
expressed their 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.'' \16\
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    \15\ See supra note 3.
    \16\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37499 (June 29, 2005).
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal will further remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and will 
introduce the PAC routing strategy on the Exchange which will provide 
Members with greater flexibility in routing orders to other exchanges.
New Liquidity Indicator Codes
    The Exchange believes that its proposal to adopt liquidity 
indicator codes is reasonable, consistent with an equitable allocation 
of fees, and not unfairly discriminatory. The use of liquidity 
indicator codes is not unique

[[Page 41753]]

to the Exchange as liquidity indicator codes are currently utilized and 
described in the fee schedules of other equity exchanges.\17\ 
Additionally, the Exchange believes its fee changes proposed for each 
liquidity indicator code are reasonable because competing exchanges 
that offer similar functionality charge similar fees as those proposed 
herein.\18\
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    \17\ See NYSE Arca Equities Exchange Fee Schedule, Section V., 
Standard Rates-Routing, on its public website (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf); see also Cboe BZX U.S. Equities 
Exchange Fee Schedule, Fees Codes and Associated Fees, on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/); see also Cboe EDGX U.S. Equities Exchange Fee 
Schedule, Fee Codes and Associate Fees, on its public website 
(available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
    \18\ See NYSE Arca Equities Exchange Fee Schedule, Section V., 
Standard Rates-Routing, on its public website (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf); see also Cboe BZX U.S. Equities 
Exchange Fee Schedule, Fees Codes and Associated Fees, on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/); see also Cboe EDGX U.S. Equities Exchange Fee 
Schedule, Fee Codes and Associate Fees, on its public website 
(available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
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    Specifically, the proposed fee of $0.003 for liquidity indicator 
code XA, Re-routed by Primary Listing Exchange and the proposed fee of 
$0.003 for liquidity indicator code XB, Routed Primary Listing Exchange 
Execution (Other) are equal to the current fee charged for liquidity 
indicator code X, Routed, on the Exchange. The proposed fee of $0.00105 
for liquidity indicator code XC, Routed to NYSE Opening/Re-Opening 
Auction, is comparable to the fee charged by NYSE Arca of $0.001 to 
route orders to NYSE Auctions.\19\ Similarly, the proposed fee of 
$0.00085 for liquidity indicator code XD, Closing Auction, is 
comparable to the fee charged by NYSE Arca of $0.001 to route orders to 
NYSE Auctions.\20\ The proposed fee of $0.00055 for liquidity indicator 
code XI, Routed to NYSE American Opening/Re-Opening Auction, is 
comparable to the fee charged by NYSE Arca of $0.0005 to route orders 
to NYSE American Auctions.\21\ Similarly, the proposed fee of $0.00055 
for liquidity indicator code XJ, Routed to NYSE American, Closing 
Auction, is comparable to the fee charged by NYSE Arca of $0.0005 to 
route orders to NYSE American Auctions.\22\ The proposed fee of $0.0008 
for liquidity indicator code XL, Routed to Cboe BZX, Opening/Re-Opening 
Auction, is comparable to the fee charged by NYSE Arca of $0.003 for 
routing orders to Cboe BZX auctions.\23\ Similarly, the proposed fee of 
$0.00105 for liquidity indicator code XM, Routed to Cboe BZX, Closing 
Auction, is less than the fee charged by NYSE Arca of $0.003 to route 
orders to Cboe BZX auctions.\24\ The proposed fee of $0.00155 for 
liquidity indicator code XO, Routed to Nasdaq, Opening/Re-Opening 
Auction, is less than the fee charged by NYSE Arca of $0.003 for 
routing orders to Nasdaq auctions.\25\ Similarly, the proposed fee of 
$0.00085 for liquidity indicator code XP, Routed to Nasdaq, Closing 
Auction, is comparable to the fee charged by NYSE Arca of $0.003 to 
route orders to Nasdaq auctions.\26\ The proposed fee of $0.00155 for 
liquidity indicator code XF, Routed to NYSE Arca, Opening/Re-Opening 
Auction, is comparable to the fee charged by Cboe BZX of $0.0015 for 
routing orders to a listing market's opening or re-opening cross.\27\ 
Similarly, the proposed fee of $0.00105 for liquidity indicator code 
XG, Routed to NYSE Arca, Closing Auction, is comparable to the fee 
charged by Cboe BZX of $0.001 to route orders to a listing market's 
closing process.\28\ The proposed fee of $0.00085 for liquidity 
indicator code XP, Routed to Nasdaq, Closing Auction, is comparable to 
the fee charged by Cboe EDGX of $0.001 for fee code ``CL'' to route 
orders to a listing market's closing process.\29\ The proposed credit 
of $0.0015 for liquidity indicator code XE, Routed to NYSE, Adds 
Displayed Liquidity, is comparable to the credit of $0.0015 provided by 
Cboe BZX for fee code ``F'', routed to NYSE, adds liquidity.\30\ The 
proposed credit of $0.0015 for liquidity indicator code XH, Routed to 
NYSE Arca, Adds Displayed Liquidity, is comparable to the credit of 
$0.0022 provided by Cboe BZX for fee code ``10'' routed to NYSE Arca, 
adds liquidity.\31\ The proposed credit of $0.001 for liquidity 
indicator code XK, Routed to NYSE American, Adds Displayed Liquidity, 
is comparable to the credit of $0.002 provided by NYSE American for 
Adding Displayed Liquidity.\32\ The proposed credit of $0.0015 for 
liquidity indicator code XN, Routed to Cboe BZX, Adds Displayed 
Liquidity, is comparable to the credit of $0.002 provided by Cboe EDGX 
for fee code ``RZ'' routed to Cboe BZX, adds liquidity.\33\ The 
proposed credit of $0.0015 for liquidity indicator code XQ, Routed to 
Nasdaq, Adds Displayed Liquidity is comparable to the credit provided 
by Cboe BZX of $0.0015 for fee code ``A'' routed to Nasdaq, adds 
liquidity.\34\
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    \19\ See NYSE Arca Equities Exchange Fee Schedule, Section V., 
Standard Rates-Routing, on its public website (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf).
    \20\ Id.
    \21\ See Id.
    \22\ See Id.
    \23\ See Id.
    \24\ See Id.
    \25\ See Id.
    \26\ See Id.
    \27\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Fees 
Codes and Associated Fees, on its public website (available at 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/).
    \28\ Id.
    \29\ See supra note 27.
    \30\ Id.
    \31\ See Id.
    \32\ See NYSE American Equities Price List on its public website 
(available at https://www.nyse.com/publicdocs/nyse/markets/nyse-american/NYSE_America_Equities_Price_List.pdf.)
    \33\ See Cboe EDGX U.S. Equities Exchange Fee Schedule, Fee 
Codes and Associated Fees, on its public website (available at 
https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
    \34\ See Id.
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    Regarding the proposed rates for securities priced below $1.00, the 
Exchange believes its rates are reasonable because, as indicated above, 
in order to operate in the highly competitive equities markets, the 
Exchange, and its competing exchanges, seek to offer similar pricing 
structures, including assessing comparable standard fees and rebates. 
The Exchange currently charges a fee of 0.30% of the total dollar value 
of the transaction for executions in securities priced below $1.00 that 
occur on away exchanges under liquidity indicator code ``X.'' Other 
competing exchanges charge similar fees, such as NYSE American, that 
assesses a fee of 0.30% of the total dollar value of the transaction 
for executions in securities priced below $1.00 occurring in an away 
market auction. The Exchange notes that none of its proposed fees for 
executions in securities priced below $1.00 exceed 0.30% and are thus 
reasonably priced and competitive with other competing equity 
exchanges.
    The Exchange further believes the proposed fees and rebates are 
equitable and reasonable and not unfairly discriminatory because they 
will apply equally to all Members of the Exchange that submit orders 
with the PAC routing option to the Exchange. Further, routing through 
the Exchange is voluntary and the Exchange notes that it operates in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues or providers of routing services 
if they deem fee levels to be excessive.
    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of Sections

[[Page 41754]]

6(b)(4) and 6(b)(5) of the Act in that it provides for the equitable 
allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities and is not designed to unfairly 
discriminate between customers, issuers, brokers, or dealers. As 
described more fully below in the Exchange's statement regarding the 
burden on competition, the Exchange believes that its transaction 
pricing is subject to significant competitive forces, and that the 
proposed fees and rebates described herein are appropriate to address 
such forces.

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

    The Exchange does not believe that the proposed change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The Exchange believes that the proposed 
fees are competitive in that they provide comparable fees and credits 
for routing orders as other exchanges. The Exchange notes that Members 
may opt not to select the PAC routing option on orders submitted to the 
Exchange and accordingly will not incur the associated routing fees 
proposed herein.
Intramarket Competition
    The Exchange does not believe that the proposal will impose any 
burden on intramarket competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed fees and rebates 
would be available to all similarly situated market participants, and, 
as such the proposed change would not impose a disparate burden on 
competition among market participants on the Exchange. Specifically, 
all Members that use the PAC routing option will be subject to the same 
fees and rebates. The Exchange does not believe its adoption of new 
liquidity indicator codes for orders that use the PAC routing option 
would impose any burden on intramarket competition as the use of 
liquidity indicator codes is not new or novel and liquidity indicator 
codes are used on other equity exchanges.\35\ The use of liquidity 
indicator codes provides additional specificity to the fee schedule so 
that Equity Members may connect an execution to the applicable fee or 
rebate. As such the Exchange does not believe the proposed changes 
would impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purpose of the Act.
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    \35\ See Cboe BZX U.S. Equities Fee Schedule (``CboeBZX'') 
available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/; and also MEMX LLC (``MEMX'') Fee Schedule 
available on their public website at https://info.memxtrading.com/fee-schedule/.
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Intermarket Competition
    The Exchange believes its proposal will benefit competition, and 
the Exchange notes that it operates in a highly competitive market. 
Members have numerous alternative venues they may participate on and 
direct their order flow to, including fifteen other equities exchanges 
and numerous alternative trading systems and other off-exchange venues. 
As noted above, no single registered equities exchange currently has 
more than 17% of the total market share of executed volume of equities 
trading.\36\ Thus, in such a low-concentrated and highly competitive 
market, no single equities exchange possesses significant pricing power 
in the execution of order flow. Moreover, the Exchange believes that 
the ever-shifting market share among the exchanges from month to month 
demonstrates that market participants can shift order flow in response 
to new or different pricing structures being introduced to the market. 
Accordingly, competitive forces constrain the Exchange's transaction 
fees and rebates generally, including with respect to executions of 
Removed Volume, and market participants can readily choose to send 
their orders to other exchanges and off-exchange venues if they deem 
fee levels at those other venues to be more favorable.
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    \36\ See supra note 3.
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    Accordingly, the Exchange believes its proposal would not burden, 
but rather promote, intermarket competition by enabling it to better 
compete with other exchanges that offer routing strategies.
    Additionally, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
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.'' \37\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. Securities and Exchange Commission, the D.C. 
circuit stated: ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their routing agents, have a wide range of choices of where to 
route orders for execution'; [and] `no exchange can afford to take its 
market share percentages for granted' because `no exchange possess a 
monopoly, regulatory or otherwise, in the execution of order flow from 
broker dealers' . . .''.\38\ Accordingly, the Exchange does not believe 
its proposed pricing changes impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.
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    \37\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \38\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\39\ and Rule 19b-4(f)(2) \40\ 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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    \39\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \40\ 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:

[[Page 41755]]

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-2022-26 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-2022-26. 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-2022-26 
and should be submitted on or before August 3, 2022.
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    \41\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14886 Filed 7-12-22; 8:45 am]
BILLING CODE 8011-01-P