Document ID: SEC-2020-2008-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2020-12-17T05:00Z

[Federal Register Volume 85, Number 243 (Thursday, December 17, 2020)]
[Notices]
[Pages 82008-82010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27721]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90640; File No. SR-PEARL-2020-31]

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

December 11, 2020.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on December 1, 2020, MIAX PEARL, LLC (``MIAX 
PEARL'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX PEARL Fee 
Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL's principal office, and at the Commission's Public Reference 
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set 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 for the Exchange's 
options market to amend the exchange groupings of options exchanges 
within the routing fee table in Section 1)b) of the Fee Schedule.
    Currently, the Exchange assesses routing fees based upon (i) the 
origin type of the order, (ii) whether or not it is an order for 
standard option classes in the Penny Interval Program \3\ (``Penny 
classes'') or an order for standard option classes which are not in the 
Penny Interval Program (``Non-Penny classes'') (or other explicitly 
identified classes), and (iii) to which away market it is being routed. 
This assessment practice is identical to the routing fees assessment 
practice currently utilized by the Exchange's affiliates, Miami 
International Securities Exchange, LLC

[[Page 82009]]

(``MIAX'') and MIAX Emerald, LLC (``MIAX Emerald''). This is also 
similar to the methodologies utilized by other competing options 
exchanges, such as the Cboe BZX Exchange, Inc. (``Cboe BZX''), in 
assessing routing fees. Cboe BZX has exchange groupings in its fee 
schedule, similar to those of the Exchange, whereby several exchanges 
are grouped into the same category, dependent on the order's origin 
type and whether it is a Penny or Non-Penny class.\4\
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    \3\ See Securities Exchange Act Release No. 88992 (June 2, 
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Exchange Rule 404, Series of Option Contracts Open for 
Trading, and Rule 510, Minimum Price Variations and Minimum Trading 
Increments, To Conform the Rules to Section 3.1 of the Plan for the 
Purpose of Developing and Implementing Procedures Designed To 
Facilitate the Listing and Trading of Standardized Options).
    \4\ See Cboe BZX Fee Schedule under ``Fee Codes and Associated 
Fees.''
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    As a result of conducting a periodic review of the current 
transaction fees and rebates charged by away markets, the Exchange has 
determined to amend the exchange groupings of options exchanges within 
the routing fee table to better reflect the associated costs of routing 
customer orders to those options exchanges for execution. In 
particular, the Exchange proposes to amend the seventh ``Routed, Public 
Customer that is not a Priority Customer, Non-Penny Program'' exchange 
grouping to move Nasdaq MRX from the seventh exchange grouping into the 
eighth ``Routed, Public Customer that is not a Priority Customer, Non-
Penny Program'' exchange grouping. The impact of this proposed change 
will be that the routing fee for Public Customer orders that are not 
Priority Customer orders in the Penny Program, that are routed to 
Nasdaq MRX, LLC (``Nasdaq MRX''), will increase from $1.15 to $1.25. 
The Exchange notes that no options exchanges were removed from the 
routing fee table entirely, with the only change being the change in 
categorization for Nasdaq MRX. The purpose of the proposed rule change 
is to adjust the routing fee for certain orders routed to Nasdaq MRX to 
reflect the associated costs for that routed execution.
    Accordingly, with the proposed change, the routing fee table will 
be as follows:

------------------------------------------------------------------------
                         Description                              Fees
------------------------------------------------------------------------
Routed, Priority Customer, Penny Program, to: NYSE American,       $0.15
 BOX, Cboe, Cboe EDGX Options, Nasdaq MRX, MIAX, Nasdaq PHLX
 (except SPY), Nasdaq BX Options.............................
Routed, Priority Customer, Penny Program, to: NYSE Arca             0.65
 Options, Cboe BZX Options, Cboe C2, Nasdaq GEMX, Nasdaq ISE,
 NOM, Nasdaq PHLX (SPY only), MIAX Emerald...................
Routed, Priority Customer, Non-Penny Program, to: NYSE              0.15
 American, BOX, Cboe, Cboe EDGX Options, Nasdaq ISE, Nasdaq
 MRX, MIAX, Nasdaq PHLX, Nasdaq BX Options...................
Routed, Priority Customer, Non-Penny Program, to: NYSE Arca         1.00
 Options, Cboe BZX Options, Cboe C2, Nasdaq GEMX, NOM, MIAX
 Emerald.....................................................
Routed, Public Customer that is not a Priority Customer,            0.65
 Penny Program, to: NYSE American, NYSE Arca Options, Cboe
 BZX Options, BOX, Cboe, Cboe C2, Cboe EDGX Options, Nasdaq
 GEMX, Nasdaq ISE, Nasdaq MRX, MIAX Emerald, MIAX, NOM,
 Nasdaq PHLX, Nasdaq BX Options..............................
Routed, Public Customer that is not a Priority Customer, Non-       1.00
 Penny Program, to: NYSE American, MIAX, Cboe, Nasdaq PHLX,
 Nasdaq ISE, Cboe EDGX Options...............................
Routed, Public Customer that is not a Priority Customer, Non-       1.15
 Penny Program, to: Cboe C2, NOM, BOX, Nasdaq BX Options,
 MIAX Emerald................................................
Routed, Public Customer that is not a Priority Customer, Non-       1.25
 Penny Program, to: Cboe BZX Options, NYSE Arca Options,
 Nasdaq GEMX, Nasdaq MRX.....................................
------------------------------------------------------------------------

    In determining to amend its Routing Fees, the Exchange took into 
account transaction fees and rebates assessed by the away markets to 
which the Exchange routes orders, as well as the Exchange's clearing 
costs,\5\ administrative, regulatory, and technical costs associated 
with routing orders to an away market. The Exchange uses unaffiliated 
routing brokers to route orders to the away markets; the costs 
associated with the use of these services are included in the routing 
fees specified in the Fee Schedule. This routing fees structure is not 
only similar to the Exchange's affiliates, MIAX and MIAX Emerald, but 
is also comparable to the structures in place at other competing 
options exchanges, such as Cboe BZX.\6\ The Exchange's routing fee 
structure approximates the Exchange's costs associated with routing 
orders to away markets. The per-contract transaction fee amount 
associated with each grouping closely approximates the Exchange's all-
in cost (plus an additional, non-material amount) to execute that 
corresponding contract at that corresponding exchange. The Exchange 
notes that in determining whether to adjust certain groupings of 
options exchanges in the routing fee table, the Exchange considered the 
transaction fees and rebates assessed by away markets, and determined 
to amend the grouping of exchanges that assess transaction fees for 
routed orders within a similar range. This same logic and structure 
applies to all of the groupings in the routing fees table. By utilizing 
the same structure that is utilized by the Exchange's affiliates, MIAX 
and MIAX Emerald, the Exchange's Members \7\ will be assessed routing 
fees in a similar manner. The Exchange believes that this structure 
will minimize any confusion as to the method of assessing routing fees 
between the three exchanges. The Exchange notes that its affiliates, 
MIAX and MIAX Emerald, will file to make the same proposed routing fee 
change for Nasdaq MRX.
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    \5\ The OCC amended its clearing fee from $0.01 per contract 
side to $0.02 per contract side. See Securities Exchange Act Release 
No. 71769 (March 21, 2014), 79 FR 17214 (March 27, 2014) (SR-OCC-
2014-05).
    \6\ See supra note 4. The Cboe BZX fee schedule has exchange 
groupings, whereby several exchanges are grouped into the same 
category, dependent on the order's Origin type and whether it is a 
Penny or Non-Penny class. For example, Cboe BZX fee code RR covers 
routed customer orders in Non-Penny classes to NYSE Arca, Cboe C2, 
Nasdaq ISE, Nasdaq Gemini, MIAX Emerald, MIAX PEARL, or NOM, with a 
single fee of $1.25 per contract. Id.
    \7\ 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 the Definitions section of 
the Fee Schedule and Exchange Rule 100.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \8\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \9\ in particular, in that 
it is an equitable allocation of reasonable dues, fees, and other 
charges among its members and issuers and other persons using its 
facilities. The Exchange also believes the proposal furthers the 
objectives of Section 6(b)(5) of the Act \10\ in that it is designed to

[[Page 82010]]

promote just and equitable principles of trade, 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 is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed change to the exchange groupings 
of options exchanges within the routing fee table furthers the 
objectives of Section 6(b)(4) of the Act and is reasonable, equitable 
and not unfairly discriminatory because the proposed change will 
continue to apply in the same manner to all Members that are subject to 
routing fees. The Exchange believes the proposed change to the routing 
fee table exchange groupings furthers the objectives of Section 6(b)(5) 
of the Act and is designed to promote just and equitable principles of 
trade and is not unfairly discriminatory because the proposed change 
seeks to recoup costs that are incurred by the Exchange when routing 
customer orders to away markets on behalf of Members and does so in the 
same manner to all Members that are subject to routing fees. The costs 
to the Exchange to route orders to away markets for execution primarily 
includes transaction fees and rebates assessed by the away markets to 
which the Exchange routes orders, in addition to the Exchange's 
clearing costs, administrative, regulatory and technical costs. The 
Exchange believes that the proposed re-categorization of certain 
exchange groupings would enable the Exchange to recover the costs it 
incurs to route orders to Nasdaq MRX. The per-contract transaction fee 
amount associated with each grouping approximates the Exchange's all-in 
cost (plus an additional, non-material amount) to execute the 
corresponding contract at the corresponding exchange.

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. The Exchange believes its 
proposed re-categorization of certain exchange groupings is intended to 
enable the Exchange to recover the costs it incurs to route orders to 
away markets, particularly Nasdaq MRX. The Exchange does not believe 
that this proposal imposes any unnecessary burden on competition 
because it seeks to recoup costs incurred by the Exchange when routing 
orders to away markets on behalf of Members and other exchanges have 
similar routing fee structures.\11\
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    \11\ See supra note 6.
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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,\12\ and Rule 19b-4(f)(2) \13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-PEARL-2020-31 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PEARL-2020-31. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-PEARL-2020-31, and should be submitted 
on or before January 7, 2021.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27721 Filed 12-16-20; 8:45 am]
BILLING CODE 8011-01-P