Document ID: SEC-2022-1191-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX Pearl, LLC
Posted Date: 2022-09-12T04:00Z

[Federal Register Volume 87, Number 175 (Monday, September 12, 2022)]
[Notices]
[Pages 55866-55872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19581]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95679; File No. SR-PEARL-2022-34]

Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange 
Rule 2614, Orders and Order Instructions, To Adopt the Primary Peg 
Order Type

September 6, 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 August 26, 2022 MIAX PEARL, LLC (``MIAX Pearl'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change as described in Items I and II 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 proposed rule change to amend Exchange 
Rule 2614, Orders and Order Instructions, to adopt the Primary Peg 
Order Type.
    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 currently offers one type of pegging order on its 
equity trading platform (``MIAX Pearl Equities''), the Midpoint Peg 
Order, which is automatically re-priced in response to changes in the 
Protected Best Bid or Offer (``PBBO'').\3\ Exchange Rule 2614(a)(3) 
sets forth the operation of the Midpoint Peg Order and, in sum, defines 
it as a ``non-displayed Limit Order that is assigned a working price 
pegged to the midpoint of the PBBO.''
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    \3\ See Exchange Rule 1901 (stating ``the term `Protected NBB' 
or `PBB' shall mean the national best bid that is a Protected 
Quotation, the term `Protected NBO' or `PBO' shall mean the national 
best offer that is a Protected Quotation, and the term `Protected 
NBBO' or `PBBO' shall mean the national best bid and offer that is a 
Protected Quotation.'').
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    The Exchange now proposes to adopt a second type of pegging order, 
the Primary Peg Order. In sum, a Primary Peg Order would be a Limit 
Order \4\ that is assigned a working price pegged to the Protected Best 
Bid (``PBB''),\5\ for a buy order, or the Protected Best Offer 
(``PBO''),\6\ for a sell order. The proposed operation of the Primary 
Peg Order is well established in the equity markets and is based on 
similar functionality offered at other exchanges.\7\
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    \4\ See Exchange Rule 2614(a)(1) (describing the operation of a 
Limit Order).
    \5\ See Exchange Rule 1901, supra note 3.
    \6\ Id.
    \7\ See, e.g., Cboe BYX Exchange, Inc. (``BYX'') and Cboe BZX 
Exchange, Inc. (``BZX'') Rules 11.9(c)(8)(a), Cboe EDGA Exchange, 
Inc. (``EDGA'') and Cboe EDGX Exchange, Inc. (``EDGX'', collectively 
with BYX, BZX, and EDGA, the ``Cboe Equity Exchanges'') Rules 
11.6(j)(2), New York Stock Exchange LLC (``NYSE'') Rule 7.31(h), 
NYSE Arca, Inc. (``NYSE Arca'') Rule 7.31-E(h)(1), Investors 
Exchange, Inc. (``IEX'') Rule 11.190(a)(3), The NASDAQ Stock Market 
LLC (``NASDAQ'') Rule 4703(d), and MEMX LLC (``MEMX'') Rule 11.6(h).
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    Some characteristics of the Primary Peg Order would be identical to 
the Midpoint Peg Order, such as its operation during a locked or 
crossed market, and each of these identical characteristics are 
described below. Rather than describe identical behavior separately 
under different rules, and to ensure its rules are concise, thorough, 
and easy to understand, the Exchange proposes to amend Exchange Rule 
2614(a)(3) to describe ``Pegged Orders'' generally as a standalone 
order type category and describe the operation of the existing Midpoint 
Peg Order and proposed Primary Peg Order. The Exchange proposes to 
amend certain provisions of Exchange Rule 2614(a)(3) to cover identical 
characteristics shared by both Primary Peg and Midpoint Peg Orders.\8\
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    \8\ The Exchange notes that other exchanges have described 
pegged order functionality similarly within their rules and have 
combined the description of the various pegged order types they 
offer under the same rule. See, e.g., IEX Rule 11.190(a)(3), and 
NASDAQ Rule 4703(d). The Exchange also proposes to renumber certain 
provisions in Exchange Rule 2614(a)(3) as a result of this change.
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    Exchange Rule 2614(a)(3) would define a Pegged Order as ``an order 
that is automatically re-priced in response to changes in the PBBO.'' 
\9\ Both the existing Midpoint Peg Order and proposed Primary Peg Order 
would be described under Exchange Rule 2614(a)(3)(A), which would be 
titled ``Types of Pegged Orders''. The description of the Midpoint Peg 
Order under current Exchange Rule 2614(a)(3) would now be under 
Exchange Rule 2614(a)(3)(A)(i) with one change. Exchange Rule 
2614(a)(3) currently provides that ``[a] Midpoint Peg Order receives a 
new timestamp each time its working price changes in response to 
changes to the midpoint of the PBBO.'' A Primary Peg Order would also 
receive a new timestamp each time its working price changes in response 
to changes in the PBBO. Therefore, the Exchange proposes to replace 
this provision with a general provision under Exchange Rule 2614(a)(3) 
that would cover all Pegged Orders and would state, ``[a] Pegged Order 
receives a new timestamp each time its working price changes in 
response to changes in the PBBO.'' \10\
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    \9\ This is consistent with similar provisions in other 
exchanges' rules regarding pegged orders. See, e.g., MEMX Rule 
11.6(h), EDGA and EGDX Rules 11.6(j).
    \10\ This is consistent with similar provisions in other 
exchanges' rules regarding pegged orders. See, e.g., NASDAQ Rule 
4703(d), and EDGA and EGDX Rules 11.6(j).

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[[Page 55867]]

    The operation of the Primary Peg Order would be described under 
Exchange Rule 2614(a)(3)(A)(ii) and provide that a Primary Peg Order 
would be a Limit Order and include a limit price. In this case, the 
limit price would function like a cap on the price at which the Primary 
Peg Order may be pegged or executed. Exchange Rule 2614(a)(3)(A)(ii) 
would define a Primary Peg Order as ``[a] Limit Order to buy (sell) 
that is assigned a working price pegged to the PBB (PBO), subject to 
its limit price.'' The Exchange proposes to not allow the working price 
of a Primary Peg Order to buy (sell) to be pegged to a displayed 
Primary Peg Order to buy (sell) resting on the MIAX Pearl Equities 
Book.\11\ Therefore, Exchange Rule 2614(a)(3)(A)(ii) would further 
provide that for purposes of determining the working price of a Primary 
Peg Order to buy (sell), the Exchange will not take into account a 
displayed Primary Peg Order to buy (sell) resting on the MIAX Pearl 
Equities Book.
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    \11\ This is similar to the treatment of Pegged Orders, 
including Primary Peg Orders, on EDGA and EDGX. See EDGA and EDGX 
Rules 11.6(j)(2) (providing that ``[f]or purposes of the Pegged 
instruction, the System's calculation of the NBBO does not take into 
account any orders with Pegged instructions that are resting on the 
EDGX Book'').
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    Exchange Rule 2614(a)(3)(A)(ii)(a) and (b) would further describe 
the operation of a Primary Peg Order's limit price. Exchange Rule 
2614(a)(3)(A)(ii)(a) would provide that a Primary Peg Order to buy 
(sell) with a limit price that is equal to or higher (lower) than its 
pegged price will be assigned a working price equal to its pegged price 
and may execute up (down) to and including its pegged price subject to 
its limit price. Exchange Rule 2614(a)(3)(A)(ii)(a) would further 
provide that a Primary Peg Order to buy (sell) with a limit price that 
is lower (higher) than its pegged price will be assigned a working 
price equal to its limit price and may execute up (down) to its limit 
price.
    Exchange Rule 2614(a)(3)(A)(ii)(b) would provide that an Aggressing 
Primary Peg Order \12\ to buy (sell) will trade with resting orders to 
sell (buy) with a working price at or below (above) its working price. 
A resting Primary Peg Order to buy (sell) will trade at its working 
price against all Aggressing Orders to sell (buy) priced at or below 
(above) its working price.
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    \12\ See Exchange Rule 1901 (stating that ``[a]n `Aggressing 
Order' is an order to buy (sell) that is or becomes marketable 
against sell (buy) interest on the MIAX Pearl Equities Book. A 
resting order may become an Aggressing Order if its working price 
changes, if the PBBO or NBBO is updated, because of changes to other 
orders on the MIAX Pearl Equities Book, or when processing inbound 
messages'').
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    Primary Peg Orders may be displayed or non-displayed on the MIAX 
Pearl Equities Book. The Exchange proposes to allow Primary Peg Orders 
to include an offset, which would allow a Primary Peg Order to be 
pegged to a price that is away from the PBB or PBO that it is pegged 
to. Exchange Rule 2614(a)(3)(A)(ii)(c) would provide that a User \13\ 
may, but is not required to, select an offset equal to or greater than 
one minimum price variation (``MPV'') for the security, as defined in 
Exchange Rule 2612.\14\ The offset would be referred to as the Primary 
Offset Amount.\15\
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    \13\ See Exchange Rule 1901 (stating the ``term `User' shall 
mean any Member or Sponsored Participant who is authorized to obtain 
access to the System pursuant to Exchange Rule 2602'').
    \14\ Exchange Rule 2612 provides that ``(a) [b]ids, offers, 
orders or indications of interests in securities traded on the 
Exchange shall not be made in an increment smaller than: (1) $0.01 
if those bids, offers or indications of interests are priced equal 
to or greater than $1.00 per share; or (2) $0.0001 if those bids, 
offers or indications of interests are priced less than $1.00 per 
share and the security is an NMS stock pursuant to Rule 600(b)(48) 
of Regulation NMS and is trading on the Exchange; or (3) Any other 
increment established by the Commission for any security which has 
been granted an exemption from the minimum price increments 
requirements of Rule 612(a) or 612(b) of Regulation NMS.''
    \15\ This is consistent with similar provisions in other 
exchanges' rules regarding Primary Peg Orders. See, e.g., EDGA and 
EDGX Rules 11.6(j)(2).
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    Non-displayed would be the default behavior for a Primary Peg 
Order.\16\ Therefore, Exchange Rule 2614(a)(3)(A)(ii)(d) would provide 
that ``[a] Primary Peg Order will be non-displayed on the MIAX Pearl 
Equities Book, unless the User elects that the order be displayed.'' 
Exchange Rule 2614(a)(3)(A)(ii)(d) would further provide that ``[a] 
displayed Primary Peg Order may be designated as Attributable.'' In 
such case, the Exchange would include the User's Market Participant 
Identifier (``MPID'') with the displayed Primary Peg Order or identify 
such order as Retail on an Exchange proprietary data feed.\17\
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    \16\ This is consistent with similar provisions in other 
exchanges' rules regarding Primary Peg Orders. See, e.g., IEX Rule 
11.190(a)(3).
    \17\ See Exchange Rule 2614(c)(5) (describing the term 
``Attributable'' as ``[a]n instruction to include the User's MPID 
with an order that is designated for display (price and size) on an 
Exchange proprietary data feed''). See also Exchange Rule 2626(f) 
(providing, in sum, that ``[a] Retail Member Organization may 
designate a Retail Order to be identified as Retail on the 
Exchange's proprietary data feeds . . .'').
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    The direction of the Primary Offset Amount would depend on whether 
the Primary Peg Order was displayed or non-displayed. Exchange Rule 
2614(a)(3)(A)(ii)(c) would, therefore, describe the Primary Offset 
Amount behavior for non-displayed Primary Peg Orders and provide that 
the Primary Offset Amount for a non-displayed Primary Peg Order may be 
above or below the PBB or PBO that the order is pegged to. Exchange 
Rule 2614(a)(3)(A)(ii)(c) would also describe the Primary Offset Amount 
behavior for displayed Primary Peg Orders and further provide that the 
Primary Offset Amount for a displayed Primary Peg Order to buy (sell) 
must result in the working price of such order being inferior to or 
equal to the PBB (PBO).\18\ Conversely, the Primary Offset Amount for a 
non-displayed order will have no such requirement and may result in the 
working price of a Primary Peg Order to buy (sell) being superior or 
better than the PBB (PBO). Lastly with regard to Primary Offset 
Amounts, the Exchange proposes to engage in standard rounding where the 
Primary Offset Amounts are not in an applicable MPV. Therefore, 
Exchange Rule 2614(a)(3)(A)(ii)(c) would provide that the Primary 
Offset Amount for an order to buy (sell) that is not in the applicable 
MPV for the security will be rounded down (up) to the nearest price at 
the applicable MPV.\19\
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    \18\ This is consistent with similar provisions in other 
exchange's rules regarding Primary Peg Orders. See, e.g., BYX and 
BYX Rules 11.9(c)(8)(a), and EDGA and EDGX Rules 11.6(j)(2).
    \19\ This is consistent with similar provisions in the 
Exchange's Rules regarding rounding. See Exchange Rules 
2614(a)(1)(I)(iv) (providing that ``Limit Order Price Protection 
thresholds for an order to buy (sell) that is not in the minimum 
price variation (`MPV') for the security, as defined in Exchange 
Rule 2616, will be rounded down (up) to the nearest price at the 
applicable MPV''); and 2618(b)(1)(C) (providing that ``[t]he Trading 
Collar Price for an order to buy (sell) that is not in the minimum 
price variation (`MPV') for the security, as defined in Exchange 
Rule 2612, will be rounded down (up) to the nearest price at the 
applicable MPV''). The Exchange notes that for securities priced at 
or above $1.00, a Primary Offset Amount that is not in the 
applicable MPV for the security could result in the Primary Offset 
Amount being rounded to zero when zero is the nearest price at the 
applicable MPV.
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Re-Pricing for Regulatory Compliance
    As stated above, a Primary Peg Order would be a Limit Order. 
Therefore, Primary Peg Orders would be subject to the same existing re-
pricing processes that apply to Limit Orders to comply with certain 
regulatory requirements, such as Rule 610 of Regulation NMS's 
prohibition on locked or crossed markets, Rule 201 of Regulation SHO's 
price requirements, and the Limit-Up Limit-Down Plan.\20\ The Exchange

[[Page 55868]]

proposes to set forth these requirements under Exchange Rule 
2614(a)(3)(A)(ii)(e) through (h) for clarity and to ensure the 
Exchange's Rules fully describe the operation of Primary Peg Orders.
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    \20\ This is consistent with similar provisions in other 
exchanges' rules regarding Primary Peg Orders. See, e.g., NASDAQ's 
Price to Comply Order, Price To Display Order, Non-Displayed Order, 
and Post Only Order under NASDAQ Rule 4702, all of which may include 
a Primary Pegging instruction and require that the order be re-
priced in compliance with Rule 610 of Regulation NMS or to avoid a 
non-displayed internally crossed book. See also NASDAQ Rule 4702 
(providing that ``[a]ll Orders are also subject to cancellation and/
or repricing and reentry onto the NASDAQ Book in the circumstances 
described in Rule 4120(a)(12) (providing for compliance with Plan to 
Address Extraordinary Market Volatility) and Rule 4763 (providing 
for compliance with Regulation SHO)''). See, e.g., EDGA and EDGX 
Rules 11.6(j)(2) (providing that when their book ``is crossed by 
another market, an order with a Primary Peg instruction will be 
automatically adjusted to the current NBO (for bids) or the current 
NBB (for offers)'').
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    Proposed Exchange Rule 2614(a)(3)(A)(ii)(e) would link the re-
pricing of Primary Peg Orders to avoid a locked and crossed market in 
compliance with Rule 610 of Regulation NMS to the Exchange's Displayed 
Price Sliding Process described under Exchange Rule 2614(g)(1). One 
example of when a Primary Peg Order would be re-priced pursuant to the 
Exchange's Displayed Price Sliding Process is when the market is locked 
upon entry or becomes locked when the Primary Peg Order is resting on 
the MIAX Pearl Equities Book, the Exchange is not displaying an order 
to buy (sell) at the PBB (PBO), and the Primary Peg Order is eligible 
for execution during a locked market. In this scenario, a Primary Peg 
Order to buy (sell) would normally be pegged to the PBB (PBO) of an 
away market that is displaying an order at the locking price. However, 
the Exchange would not peg the Primary Peg Order to its pegged price as 
that would result in the Primary Peg Order joining the locked market. 
The order would instead be re-priced pursuant to the Exchange's 
Displayed Price Sliding Process.
    The re-pricing would be identical to that for Limit Orders with two 
differences.\21\ Exchange Rule 2614(g)(1)(A) provides that ``[t]he 
working and displayed prices of an order subject to the Display Price 
Sliding Process may be adjusted once or multiple times depending upon 
the instructions of a User and changes to the prevailing PBBO.'' 
Primary Peg Orders that are re-priced pursuant to the Display Price 
Sliding Process would have their working and displayed prices adjusted 
multiple times in response to changes to the PBBO. The Exchange 
believes this behavior is appropriate given that Primary Peg Orders by 
their nature are to be re-priced multiple times. Specifically, a 
Primary Peg Order to buy (sell) would have its working price adjusted 
each time there is a change to the PBB (PBO) when not being re-priced 
pursuant to the Display Price Sliding Process. Unlike for Limit Orders, 
the Exchange does not propose to allow Users to instruct the Exchange 
to cancel their orders if the order is to be re-priced pursuant to the 
Displayed Price Sliding Process because such orders are not eligible 
for execution when the market is crossed and, when elected by the User, 
not eligible for execution when the market is locked. A User may cancel 
their order at any time, including when the market is locked or 
crossed. The Exchange also believes these differences are consistent 
with Equity Members' \22\ expectations and with the operation of 
Primary Peg Orders that are to be continuously re-priced in response to 
changes in the PBBO. The Exchange also understands Equity Members are 
likely not to elect automatic cancellation. These differences are also 
consistent with the treatment of Primary Peg Orders on other equity 
exchanges.\23\ To codify this behavior, proposed Exchange Rule 
2614(a)(3)(A)(ii)(e) would provide that ``[a] Primary Peg Order to buy 
(sell) that, if displayed at its pegged price on the MIAX Pearl 
Equities Book, would lock or cross the PBO (PBB) of an away Trading 
Center will be re-priced multiple times pursuant to the Display Price 
Sliding Process.''
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    \21\ See Exchange Rule 2614(a)(1)(E).
    \22\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
    \23\ See, e.g., EDGX Rule 11.6(j)(2) (providing for re-pricing 
each time the price of the Primary Peg Order locks or crosses an 
away market and not including a provision allowing for the automatic 
cancellation of a Primary Peg Order when it is to be re-priced). 
This is consistent with similar provisions in other exchanges' rules 
regarding Primary Peg Orders. See also, e.g., NASDAQ's Price to 
Comply Order which may include a Primary Pegging instruction under 
NASDAQ Rule 4702(b)(1)(B) (providing that ``[i]f the entered limit 
price of the Price to Comply Order locked or crossed a Protected 
Quotation and the NBBO changes, the displayed and non-displayed 
price of the Price to Comply Order will be adjusted repeatedly in 
accordance with changes to the NBBO'').
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    Next, proposed Exchange Rule 2614(a)(3)(A)(ii)(f) would link the 
re-pricing of Primary Peg Orders to the Exchange's Short Sale Price 
Sliding Process designed to comply with Rule 201 of Regulation SHO 
described under Exchange Rule 2614(g)(3) during a time when a short 
sale price test restriction under Rule 201 of Regulation SHO is in 
effect (``Short Sale Period''). An example of when a displayed Primary 
Peg Order would be re-priced pursuant to the Exchange's Short Sale 
Price Sliding Process upon entry \24\ is when the market is locked and 
the Primary Peg Order is eligible for execution during a locked market 
and its pegged price would result in its being executed or displayed at 
a price equal to the PBB. Another example of when a Primary Peg Order 
would be re-priced pursuant to the Exchange's Short Sale Price Sliding 
Process when resting on the MIAX Pearl Equities Book is when the 
Primary Peg Order to sell is non-displayed and includes a Primary 
Offset Amount that would result in its being executable at a price 
equal to or below the PBB. The re-pricing would be identical to that 
for Limit Orders with one difference.\25\ Unlike for Limit Orders, the 
Exchange does not propose to allow Users to instruct the Exchange to 
cancel their orders if the order is to be re-priced pursuant to the 
Short Sale Price Sliding Process. The Exchange believes this difference 
is consistent with Equity Members' expectations and with the operation 
of Primary Peg Orders that are to be continuously re-priced in response 
to changes in the PBBO. The Exchange also understands Equity Members 
are likely not to elect automatic cancellation. It is also consistent 
with the proposed treatment of Primary Peg Orders that are to be re-
priced pursuant to the Displayed Price Sliding Process described above. 
The Exchange notes that a User may cancel their order at any time, 
including during a Short Sale Period. Proposed Exchange Rule 
2614(a)(3)(A)(ii)(f) would provide that ``[d]uring a Short Sale Period, 
as defined in Exchange Rule 2614(g)(3)(A), a Primary Peg Order to sell 
that is designated as short and cannot be executed or displayed on the 
MIAX Pearl Equities Book at its pegged price pursuant to Rule 201 of 
Regulation SHO will be re-priced multiple times to a Permitted Price, 
as defined in Exchange Rule 2614(g)(3)(A), pursuant to the Short Sale 
Price Sliding Process.''
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    \24\ A displayed Primary Peg Order resting on the MIAX Pearl 
Equities Book would stand its ground and not be re-priced pursuant 
to the Exchange's Short Sale Price Sliding Process if the PBB 
changes so that it would be priced below the PBB. See Exchange Rule 
2614(g)(3)(C) (providing that ``[d]uring a Short Sale Period, a 
short sale order will be executed and displayed without regard to 
price if, at the time of initial display of the short sale order, 
the order was at a price above the then current National Best 
Bid'').
    \25\ See Exchange Rule 2614(a)(1)(F).
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    Next, proposed Exchange Rule 2614(a)(3)(A)(ii)(g) would link the 
re-pricing of non-displayed Primary Peg Orders to the Exchange's Non-
Displayed Price Sliding Process described under Exchange Rule 
2614(g)(2). An example of when a Primary Peg Order would be re-priced 
pursuant to the Exchange's Non-Displayed Price Sliding Process is when 
a non-displayed Primary Peg

[[Page 55869]]

Order to buy (sell) contains a Primary Offset Amount that would result 
in the Primary Peg Order crossing a displayed sell (buy) order of an 
away market. In such case, the Primary Peg Order would be re-priced to 
the locking price. The re-pricing would be identical to that for non-
displayed Limit Orders with no differences.\26\ Proposed Exchange Rule 
2614(a)(3)(A)(ii)(g) would provide that ``[a] non-displayed Primary Peg 
Order to buy (sell) that, if posted to the MIAX Pearl Equities Book, 
would cross the PBO (PBB) of an away Trading Center will be re-priced 
pursuant to the Non-Displayed Order Price Sliding Process.''
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    \26\ See Exchange Rule 2614(a)(1)(G). The Exchange notes that 
Exchange Rule 2614(a)(1)(G) does not provide that the User may 
affirmatively elect to cancel their order where it is to be re-
priced pursuant to the Non-Displayed Price Sliding Process.
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    Lastly with regard to re-pricing, proposed Exchange Rule 
2614(a)(3)(A)(ii)(h) would link the re-pricing of Primary Peg Orders to 
the Exchange's re-pricing to comply with the Limit-Up Limit-Down Plan 
described under Exchange Rule 2622(h). The re-pricing would be 
identical to that for Limit Orders with one difference.\27\ Unlike for 
Limit Orders, the Exchange does not propose to allow Users to instruct 
the Exchange to cancel their orders if the order is to be re-priced 
pursuant to Exchange Rule 2622(h). The Exchange believes this 
difference is consistent with Equity Members' expectations and with the 
operation of Primary Peg Orders that are to be continuously re-priced 
in response to changes in the PBBO. The Exchange also understands 
Equity Members are likely not to elect automatic cancellation. It is 
also consistent with the proposed treatment of Primary Peg Orders that 
are to be re-priced pursuant to the Displayed Price Sliding and Short 
Sale Price Sliding Processes described above. The Exchange notes that a 
User may cancel their order at any time, including when the order is 
re-priced pursuant to Exchange Rule 2622(h). Proposed Exchange Rule 
2614(a)(3)(A)(ii)(h) would provide that ``[a] Primary Peg Order to buy 
(sell) that is priced above (below) the Upper (Lower) Price Band shall 
be re-priced pursuant to Exchange Rule 2622(h).''
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    \27\ See Exchange Rule 2614(a)(1)(H).
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Other Proposed Changes to Exchange Rules 2614(a)(3)
    The Exchange also proposes a series of changes to Exchange Rules 
2614(a)(3)(C) through (F) that apply to Midpoint Peg Orders to include 
proposed behavior for Primary Peg Orders that would be similar or 
identical to that of Midpoint Peg Orders and, where appropriate, to 
apply to Pegged Orders generally. The Exchange also proposes to 
renumber these paragraphs due to the proposal to describe both Primary 
Peg Orders and Midpoint Peg Orders under the same rule.
    Exchange Rule 2614(a)(3)(C) currently discusses the handling of 
Midpoint Peg Orders when the PBB and/or PBO is unavailable and when the 
PBBO is locked or crossed. Primary Peg Orders would be treated 
similarly when the PBB and/or PBO is unavailable and when the PBBO is 
locked or crossed. Therefore, the Exchange proposes to amend Exchange 
Rule 2614(a)(3)(C) to also cover Primary Peg Orders as follows. First, 
Exchange Rule 2614(a)(3)(C) currently provides that a Midpoint Peg 
Order will be accepted but will not be eligible for execution when the 
PBB and/or PBO is not available.\28\ Similarly, the Exchange proposes 
to amend Exchange Rule 2614(a)(3)(C) to further provide that a Primary 
Peg Order will be accepted but will not be eligible for execution when 
the PBB or PBO it is pegged to is not available.\29\
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    \28\ A Primary Peg Order to buy (sell) with a time-in-force of 
IOC will be cancelled if received during a time when the PBB (PBO) 
is not available.
    \29\ This is consistent with similar provisions in other 
exchanges' rules regarding Primary Peg Orders. See, e.g., EDGA and 
EDGX Rules 11.6(j)(2).
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    Next, Exchange Rule 2614(a)(3)(C) currently provides that a 
Midpoint Peg Order will be accepted but will not be eligible for 
execution when the PBBO is crossed and, if instructed by the User, when 
the PBBO is locked. This would also be true for Primary Peg Orders. 
Therefore, the Exchange proposes to amend this portion of Exchange Rule 
2614(a)(3)(C) to apply to Pegged Orders generally, which would include 
both Midpoint Peg and Primary Peg Orders, and provide that all Pegged 
Orders will be accepted but will not be eligible for execution when the 
PBBO is crossed, and, if instructed by the User, when the PBBO is 
locked.
    Next, Exchange Rule 2614(a)(3)(C) currently provides a Midpoint Peg 
Order that is eligible for execution when the PBBO is locked will be 
executable at the locking price. This would also be true for Primary 
Peg Orders that are eligible for execution during a locked market. 
Therefore, the Exchange proposes to amend this portion of Exchange Rule 
2614(a)(3)(C) to apply to Pegged Orders generally by replacing 
``Midpoint Peg Orders'' with ``Pegged Orders.''
    Next, Exchange Rule 2614(a)(3)(C) currently provides a Midpoint Peg 
Order will become eligible for execution and receive a new timestamp 
when the PBB and/or PBO both become available, or the PBBO unlocks \30\ 
or uncrosses and a new midpoint of the PBBO is established. This would 
also be true for Primary Peg Orders, other than the requirement that a 
new midpoint of the PBBO be established following when the market 
unlocks or uncrosses because this requirement is unique to the 
operation of Midpoint Peg Orders whose working price is pegged to the 
midpoint of the PBBO. Therefore, the Exchange proposes to amend this 
portion of Exchange Rule 2614(a)(3)(C) to apply to Pegged Orders 
generally by replacing ``Midpoint Peg Orders'' with ``Pegged Orders'' 
and retain the requirement for Midpoint Peg Orders to provide that a 
Pegged Order will become eligible for execution and receive a new 
timestamp when the PBBO or [sic] uncrosses and to further specify when 
a Pegged Order would receive a new timestamp. Exchange Rule 
2614(a)(3)(C) would specify that a Pegged Order that was not eligible 
for execution during a locked market will become eligible for execution 
and receive a new timestamp when the PBBO unlocks.\31\ Exchange Rule 
2614(a)(3)(C) would further specify that a Primary Peg Order will 
become eligible for execution and receive a new timestamp when the PBB 
or PBO it is pegged to becomes available and that a Midpoint Peg Order 
will become eligible for execution and receive a new timestamp when a 
new midpoint of the PBBO is established.
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    \30\ This would apply to a Midpoint Peg Order and Primary Peg 
Order that the User elects not be eligible for execution when the 
PBBO is locked.
    \31\ The Exchange notes that a Primary Peg Order that is 
eligible for execution when the PBBO is locked will not receive a 
new timestamp.
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    Lastly, Exchange Rule 2614(a)(3)(C) further provides that in such 
case, pursuant to Exchange Rule 2616, all such Midpoint Peg Orders will 
retain their priority as compared to each other based upon the time 
priority of such orders immediately prior to being deemed not eligible 
for execution as set forth in this subparagraph (C). Again, the same 
would be true for Primary Peg Orders. Therefore, the Exchange proposes 
to amend this portion of Exchange Rule 2614(a)(3)(C) to apply to Pegged 
Orders generally by replacing ``Midpoint Peg Orders'' with ``Pegged 
Orders'' and to specify that this provision would apply to each of the 
scenarios set forth in the preceding paragraph. The Exchange also 
proposes to renumber Exchange Rule 2614(a)(3)(C) as Exchange Rule 
2614(a)(3)(B) and update a cross-reference within this paragraph.

[[Page 55870]]

    Exchange Rule 2614(a)(3)(D) sets forth which time-in-force 
instructions may be included for a Midpoint Peg Order. Specifically, 
Exchange Rule 2614(a)(3)(D) provides that Midpoint Peg Order may 
include a time-in-force of Immediate-or-Cancel (``IOC'') \32\ or 
Regular Hours Only (``RHO'') \33\ and that a Midpoint Peg Order with a 
time-in-force of RHO is eligible to participate in the Opening Process 
under Exchange Rule 2615. Exchange Rule 2614(a)(3)(D) further provides 
that a Midpoint Peg Order is eligible to participate in the Regular 
Trading Session. Each of these above provisions would be true for 
Primary Peg Orders.\34\ Therefore, the Exchange proposes to amend 
Exchange Rule 2614(a)(3)(D) to apply to Pegged Orders generally by 
replacing ``Midpoint Peg Orders'' with ``Pegged Orders.'' The Exchange 
also proposes to renumber Exchange Rule 2614(a)(3)(D) as Exchange Rule 
2614(a)(3)(C).
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    \32\ See Exchange Rule 2614(b)(1) (describing IOC as ``[a]n 
order that is to be executed in whole or in part as soon as such 
order is received. The portion not executed immediately on the 
Exchange or another Trading Center is treated as cancelled and is 
not posted to the MIAX Pearl Equities Book'').
    \33\ See Exchange Rule 2614(b)(2) (describing RHO as ``[a]n 
order that is designated for execution only during Regular Trading 
Hours, which includes the Opening Process for equity securities'').
    \34\ A Primary Peg Order would be treated like a Limit Order 
during the Opening Process and would be executable at the midpoint 
of the PBBO subject to its limit price. Primary Peg Orders with a 
time-in-force of RHO and a Post Only or Minimum Execution Quantity 
instruction would not be eligible to participate in the Opening 
Process. See Exchange Rule 2615(a)(1).
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    Exchange Rule 2614(a)(3)(E) provides that a Midpoint Peg Order may 
be entered as an odd lot, round lot, or mixed lot. Again, the same 
would be true for Primary Peg Orders. Therefore, the Exchange proposes 
to amend this portion of Exchange Rule 2614(a)(3)(E) to apply to Pegged 
Orders generally by replacing ``Midpoint Peg Orders'' with ``Pegged 
Orders.'' Exchange Rule 2614(a)(3)(E) further provides that a Midpoint 
Peg Order may include a Minimum Execution Quantity \35\ instruction. 
Midpoint Peg Orders are non-displayed and the Minimum Execution 
Quantity instruction is only available to non-displayed orders. The 
Minimum Execution Quantity instruction would, likewise, be available to 
a non-displayed Primary Peg Order. Therefore, the Exchange proposes to 
amend this portion of Exchange Rule 2614(a)(3)(E) to apply to non-
displayed Pegged Orders generally by replacing ``Midpoint Peg Orders'' 
with ``non-displayed Pegged Orders'', which would include both Midpoint 
Peg and non-displayed Primary Peg Orders. The Exchange also proposes to 
renumber Exchange Rule 2614(a)(3)(E) as Exchange Rule 2614(a)(3)(D).
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    \35\ See Exchange Rule 2614(c)(11) (describing Minimum Execution 
Quantity as ``[a]n instruction a User may attach to a non-displayed 
order requiring the System to execute the order only to the extent 
that a minimum quantity can be satisfied'').
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    Finally, Exchange Rule 2614(a)(3)(F) provides that Midpoint Peg 
Orders are not eligible for routing pursuant to Exchange Rule 2617(b) 
and Midpoint Peg Orders may be designated as Post Only. Again, both 
would be true for Primary Peg Orders. Therefore, the Exchange proposes 
to amend Exchange Rule 2614(a)(3)(F) to apply to Pegged Orders 
generally by replacing ``Midpoint Peg Orders'' with ``Pegged Orders.'' 
The Exchange also proposes to renumber Exchange Rule 2614(a)(3)(F) as 
Exchange Rule 2614(a)(3)(E).
Priority
    MIAX Pearl Equities provides a price/time priority execution model 
under which all non-marketable orders resting on the MIAX Pearl 
Equities Book are ranked and maintained based in following manner: (1) 
price; (2) priority category; (3) time; and (4) ranking restrictions 
applicable to an order or modifier condition. As such, trading interest 
within a priority category is executed in price/time priority, meaning 
all trading interest at the best price level within a priority category 
is executed in time sequence before executing trading interest within 
the next priority category. The Exchange maintains two priority 
categories, displayed and non-displayed orders, where a displayed Limit 
Order at its displayed price has priority over a non-displayed Limit 
Order at that same price. As discussed above, Primary Peg Orders would 
be Limit Orders and, therefore, subject to the same priority treatment. 
A displayed Primary Peg Order would be provided displayed priority 
pursuant to Exchange Rule 2616(a)(2)(A)(i) and a non-displayed Primary 
Peg Order would be provided non-displayed priority pursuant to Exchange 
Rule 2616(a)(2)(A)(ii). The Exchange does not propose to make any 
changes to Exchange Rule 2616 regarding the priority of displayed and 
non-displayed orders and simply seeks to provide clarity in this 
proposal regarding the priority treatment of Primary Peg Orders.
Implementation
    Due to the technological changes associated with this proposed 
change, the Exchange will issue a trading alert publicly announcing the 
implementation date of this proposed rule change. The Exchange 
anticipates that the implementation date will be in either the fourth 
quarter of 2022 or first quarter of 2023.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\36\ in general, and furthers the objectives of Section 
6(b)(5),\37\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in 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. The proposed rule change 
would remove impediments to and promote just and equitable principles 
of trade because it would provide market participants with optional 
functionality that would provide them with better control over their 
orders. The proposed Primary Peg Order would allow Equity Members to 
rest passively on the MIAX Pearl Equities Book at or near the same-side 
of the PBBO and remain available to execute against an incoming order 
seeking to cross the spread and execute at prices equal to or more 
aggressive (from the taker's perspective) than such quote. The proposed 
Primary Peg Order would also provide price improvement opportunities to 
incoming orders where the Primary Peg Order is non-displayed and 
included a Primary Offset Amount superior to the PBB or PBO it is 
pegged to. The Exchange believes that adding a Primary Peg Order would 
incentivize Equity Members and their customers to post more passive 
resting liquidity on the Exchange that is priced to execute at or near 
the primary quote, and consequently may result in greater execution 
opportunities at the far side quote for Equity Members entering spread 
crossing orders. Therefore, the Exchange believes the proposal promotes 
just and equitable principles of trade, removes impediments to and 
perfect the mechanism of a free and open market and a national market 
system.
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    \36\ 15 U.S.C. 78f(b).
    \37\ 15 U.S.C. 78f(b)(5).
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    Because the Exchange does not have this functionality, the Exchange 
believes that market participants have avoided sending order flow to 
the Exchange in favor of other equity exchanges that provide Primary 
Peg Order functionality. In this regard, the

[[Page 55871]]

Exchange notes that the proposed new optional Primary Peg Order may 
improve the Exchange's market by attracting more order flow. Such new 
order flow will further enhance the depth and liquidity on the 
Exchange, which supports just and equitable principles of trade and 
benefits all market participants. Furthermore, the proposed Primary Peg 
Order is consistent with providing market participants with greater 
flexibility over their orders so that they may achieve their trading 
goals and improve the quality of their executions.
    Lastly, the Exchange believes its proposal promotes just and 
equitable principles of trade because the proposed operation of the 
Primary Peg Order presents no new or novel issues because this order 
type is well established in the equity markets and its proposed 
operation is based on the same order type offered by other 
exchanges.\38\ The Exchange does not propose to include any unique 
functionality as part of its proposed Primary Peg Order. For example, 
the Exchange does not propose any unique priority treatment for Primary 
Peg Orders as they are considered Limit Orders and will be provided the 
same priority treatment under existing Exchange Rule 2616(a). As 
described throughout the proposal, all portions of the proposed rule 
text are based on existing Exchange Rules regarding Midpoint Peg Orders 
and the rules of other equity exchanges. To the extent the Exchange 
proposes to include a provision that is not included in another equity 
exchanges' rules, it proposes to do so simply to align the behavior 
with the existing Midpoint Peg Order handling or to provide additional 
transparency while not deviating from functionality offered by other 
equity exchanges, but perhaps not fully described in their rules. 
Therefore, the Exchange believes the proposed rule change is consistent 
with the Act.
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    \38\ See supra note 7.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. In fact, the Exchange 
believes that the proposal may have a positive effect on competition 
because it will enable the Exchange to offer functionality 
substantially similar to that offered by the Cboe Equity Exchanges, the 
NYSE Exchanges, NASDAQ, MEMX, and IEX.\39\ As noted above, the Exchange 
believes its lack of this functionality has put it at a competitive 
disadvantage as market participants have avoided sending passively 
priced resting orders to the Exchange. This proposal is designed to 
allow the Exchange to directly compete with other exchanges that offer 
similar Primary Peg Order functionality. The Exchange believes that its 
proposal promotes competition because it is designed to attract 
liquidity to the Exchange by incentivizing Equity Members and their 
customers to post more passive resting liquidity on the Exchange that 
is priced to execute at the primary quote, and consequently may result 
in greater execution opportunities at the far side quote for Equity 
Members entering spread crossing orders. The proposed Primary Peg Order 
would have no unfair impact on intra-market competition because it 
would be available to all Equity Members equally.
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    \39\ Id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \40\ and Rule 19b-4(f)(6) \41\ 
thereunder.
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    \40\ 15 U.S.C. 78s(b)(3)(A).
    \41\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    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.

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-2022-34 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-2022-34. 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-2022-34 and should be submitted on 
or before October 3, 2022.

[[Page 55872]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19581 Filed 9-9-22; 8:45 am]
BILLING CODE 8011-01-P