Document ID: SEC-2022-0519-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2022-04-14T04:00Z

[Federal Register Volume 87, Number 72 (Thursday, April 14, 2022)]
[Notices]
[Pages 22240-22245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07952]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94652; File No. SR-PEARL-2022-10]

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

April 8, 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 March 31, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 (i) adopt a new Liquidity Code and associated rebate to 
the Liquidity Indicator Codes and Associated Fees table; (ii) adopt new 
Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers to improve 
market quality on the Exchange by offering an enhanced rebate for 
executions that Add Liquidity at the Midpoint of the PBBO \3\ using a 
Midpoint Peg Order \4\ in securities priced at or above $1.00 per share 
that add liquidity and are pegged to the midpoint of the bid and ask; 
and (iii) amend section 1(d) Remove Volume Tiers table to increase the 
fee.
---------------------------------------------------------------------------

    \3\ The term ``PBBO'' means the best bid or offer on MIAX Pearl. 
See Exchange Rule 100.
    \4\ A Midpoint Peg Order is a non-displayed Limit Order that is 
assigned a working price pegged to the midpoint of the PBBO. A 
Midpoint Peg Order receives a new timestamp each time its working 
price changes in response to changes in the midpoint of the PBBO. 
See Exchange Rule 2614(a)(3).
---------------------------------------------------------------------------

    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, 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.\5\
---------------------------------------------------------------------------

    \5\ See MIAX's ``The Market at a Glance'', available at https://www.miaxoptions.com/ (last visited March 24, 2022).
---------------------------------------------------------------------------

    Additionally, in response to the competitive environment, the 
Exchange also offers tiered pricing, which provides Equity Members \6\ 
(``Members'') with opportunities to qualify for higher rebates or lower 
fees when certain volume criteria and thresholds are met. Tiered 
pricing provides an incremental incentive for Members to strive for 
higher tier levels, which provides increasingly higher benefits or 
discounts for satisfying increasingly more stringent criteria.
---------------------------------------------------------------------------

    \6\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
---------------------------------------------------------------------------

Adoption of Midpoint Peg Order Adding Liquidity at Midpoint Volume 
Tiers
    The Exchange is now proposing to introduce a new tiered pricing 
structure applicable to rebates provided for executions that add 
liquidity to the Exchange at the Midpoint of the PBBO using a Midpoint 
Peg Order (such orders, ``Midpoint Peg Add Orders executed at the 
Midpoint''). Specifically, the Exchange proposes to adopt new volume-
based tiers, referred to by the Exchange as, ``Midpoint Peg Order 
Adding Liquidity at Midpoint Volume Tiers,'' in which the Exchange will 
provide an enhanced rebate for executions of Midpoint Peg Add Orders 
executed at the Midpoint for Members that meet certain volume 
thresholds on the Exchange.
    The Exchange currently provides a standard rebate of $0.0021 per 
share for executions of Added Non-Displayed Liquidity.\7\ The Exchange 
now proposes to introduce a tiered pricing structure in which it will 
provide an enhanced, incremental rebate of $0.0004 per share for an 
effective total rebate of $0.0025

[[Page 22241]]

for executions of Midpoint Peg Add Orders executed at the Midpoint for 
Members that qualify for Tier 1 of the Midpoint Peg Order Adding 
Liquidity at Midpoint Volume Tiers by achieving a Midpoint ADAV \8\ 
equal to or greater than 500,000 shares. The Exchange also proposes to 
provide an enhanced, incremental rebate of $0.0006 per share for an 
effective total rebate of $0.0027 for executions of Midpoint Peg Add 
Orders executed at the Midpoint for Members that qualify for Tier 2 of 
the Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers by 
achieving a Midpoint ADAV equal to or greater than 1,000,000 shares. 
The rebates provided for by the Midpoint Peg Order Adding Liquidity at 
Midpoint Volume Tiers will be applicable to executions of orders that 
yield fee code ``Ap'' as described below and will be provided in place 
of the standard rebate of $0.0021 per share for executions of Added 
Non-Displayed Volume. The Exchange notes that the rebates described 
above will not apply to executions of orders in securities priced below 
$1.00 per share.
---------------------------------------------------------------------------

    \7\ The Exchange notes that the standard rebate of $0.0021 per 
share for executions of Added Non-Displayed Liquidity in securities 
priced at or above $1.00 is not changing under this proposal.
    \8\ For this program, Midpoint ADAV will refer to the average 
daily added volume consisting of Midpoint Peg Add Orders executed at 
the Midpoint (as described herein) for the current month calculated 
similarly to ADAV. ``ADAV'' means average daily added volume 
calculated as the number of shares added per day and ``ADV'' means 
average daily volume calculated as the number of shares added or 
removed, combined, per day. ADAV and ADV are calculated on a monthly 
basis. The Exchange excludes from its calculation of ADAV and ADV 
shares added or removed on any day that the Exchange's system 
experiences a disruption that lasts for more than 60 minutes during 
regular trading hours (``Exchange System Disruption''), on any day 
with a scheduled early market close, and on the ``Russell 
Reconstitution Day'' (typically the last Friday in June). Routed 
shares are not included in the ADAV or ADV calculation. With prior 
notice to the Exchange, an Equity Member may aggregate ADAV or ADV 
with other Equity Members that control, are controlled by, or are 
under common control with such Equity Member (as evidenced on such 
Equity Member's Form BD). See MIAX Pearl Equities Fee Schedule, 
``Definitions,'' available at (https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_01032022.pdf).
---------------------------------------------------------------------------

    The purpose of the proposed enhanced rebate for executions of 
Midpoint Peg Add Orders executed at the Midpoint is to encourage 
Members that provide liquidity through non-displayed orders to strive 
for a higher Midpoint ADAV on the Exchange in order to qualify for the 
enhanced rebates for executions of Midpoint Peg Add Orders executed at 
the Midpoint, and as such, encourages Members to maintain or increase 
their order flow (particularly in the form of liquidity adding non-
displayed Midpoint Peg Orders that execute at the Midpoint) to the 
Exchange, thereby contributing to a deeper and more liquid market to 
the benefit of all market participants.
    The Exchange's pricing structure is generally designed to encourage 
the provision of liquidity, thus the proposed enhanced rebates for 
executions of Midpoint Peg Add Orders executed at the Midpoint is 
designed to encourage Members that use non-displayed orders to provide 
additional non-displayed liquidity through the use of orders that are 
designed to execute at the midpoint of the PBBO. The Exchange believes 
that providing enhanced rebates for executions of Midpoint Peg Add 
Orders executed at the Midpoint is a reasonable means to incentivize 
Members to provide additional liquidity at the midpoint of the PBBO, 
which in turn would increase the attractiveness of the Exchange as a 
destination venue, as Members seeking price improvement would be more 
motivated to direct their orders to the Exchange because they would 
have a heightened expectation of the availability of liquidity at the 
midpoint of the PBBO. The Exchange notes that the proposed enhanced 
rebate is comparable to, and competitive with, the rebate provided by 
at least one other exchange for executions of non-displayed orders in 
securities priced at or above $1.00 per share that are pegged to the 
midpoint.\9\
---------------------------------------------------------------------------

    \9\ See MEMX trading fee schedule on its public website 
(available at https://info.memxtrading.com/fee-schedule/) which 
reflects a rebate of $0.0028 per share for added non-displayed 
liquidity under Tier 1 of its Non-Display Add Tiers; and a rebate of 
$0.0024 per share for added non-displayed liquidity under Tier 2 of 
its Non-Display Add Tiers.
---------------------------------------------------------------------------

New Liquidity Indicator Code
    In conjunction with the Exchange's proposal to (i) provide an 
enhanced, incremental rebate of $0.0004 per share for Midpoint Peg 
Orders that Add Liquidity and meet the Tier 1 requirements of the 
Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers; and (ii) 
provide an enhanced, incremental rebate of $0.0006 per share for 
Midpoint Peg Orders that Add Liquidity and meet the Tier 2 requirements 
of the Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers, 
the Exchange proposes to update the Liquidity Indicator Code and 
Associated Fees Table as follows:
     Add new liquidity indicator code Ap, Adds Liquidity and 
Executes at the Midpoint, Non-Displayed Midpoint Peg Order (All Tapes). 
The Liquidity Indicator Code and Associated Fees table would specify 
that orders that yield liquidity indicator code Ap would receive a 
rebate of $0.0021 per share in securities priced at or above $1.00 and 
0.05% of the transaction's dollar value in securities priced below 
$1.00.
    The Exchange also proposes to add the above liquidity indicator 
code to the Standard Rates table. Specifically, liquidity indicator 
code Ap would be added to the ``Added Liquidity Non-Displayed Order'' 
column.
Increase Fee for Remove Volume Tiers
    Currently, the Exchange charges a standard fee of $0.0029 for all 
executions of Removed Volume.\10\ The Exchange also offers a two-tiered 
pricing structure for fees charged for executions of Removed Volume on 
the Exchange for Members that meet certain thresholds. Members that 
qualify for Tier 1 by achieving an ADV \11\ that is equal to or greater 
than 0.10% of TCV \12\ are charged $0.0027 per share for executions of 
Removed Volume. Members that qualify for Tier 2 by achieving an ADV 
that is equal to or greater than 0.15% of TCV are charged a fee of 
$0.00265 per share for Executions of Removed Volume.
---------------------------------------------------------------------------

    \10\ The Exchange notes that the standard fee of $0.0029 for 
orders removing liquidity in securities priced at or above $1.00 is 
not changing under this proposal.
    \11\ See supra note 8.
    \12\ ``TCV'' means total consolidated volume calculated as the 
volume in shares reported by all exchanges and reporting facilities 
to a consolidated transaction reporting plan for the month for which 
the fees apply. The Exchange excludes from this calculation of TCV 
volume on any given day that the Exchange's system experiences a 
disruption that lasts for more than 60 minutes during Regular 
Trading Hours, on any day with a scheduled early market close, and 
on the ``Russell Reconstitution Day'' (typically the last Friday in 
June). See MIAX Pearl Equities Fee Schedule, ``Definitions,'' 
available at https://www.miaxoptions.com/fees/pearl-equities).
---------------------------------------------------------------------------

    The Exchange now proposes to increase the fees charged for Removed 
Volume in Tier 1 and Tier 2 to $0.0028 and $0.0027 respectively, an 
increase of $0.0001 and $0.00005 respectively. The purpose of 
increasing the fee for executions of Removed Volume is for business and 
competitive reasons. The requirements necessary to qualify for Tier 1 
and Tier 2 will remain unchanged under this proposal. The Exchange 
notes that despite the proposed increase the proposed fee changes for 
Removed Volume Tiers remain comparable to, and competitive with, the 
fees charged for executions of liquidity-removing orders charged by 
other exchanges under similar volume-based tiers.\13\

[[Page 22242]]

Additionally, the Exchange notes that the Remove Volume Tiers, as 
modified, would continue to be available to all Members.
---------------------------------------------------------------------------

    \13\ See the Cboe EDGX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/) which reflects fees charged under 
``Remove Volume Tiers''--tiers based on a member achieving certain 
step-up ADAV and ADV volume thresholds of $0.00275 per share for 
removing volume from the Cboe EDGX exchange; See also MEMX fee 
schedule on its public website (available at https://info.memxtrading.com/fee-schedule/) which reflects a fee per share 
charge of $0.00285 under ``Liquidity Removal Tier'' for a Member 
that has (1) an ADAV [gteqt]0.30% of the TCV; or (2) an ADV 
[gteqt]0.60% of the TCV.
---------------------------------------------------------------------------

Implementation
    The Exchange proposes to implement the changes to the Fee Schedule 
pursuant to this proposal on April 1, 2022.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \14\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \15\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among its Equity 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) \16\ requirements 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C 78f(b)(5).
---------------------------------------------------------------------------

    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.\17\ 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.'' \18\
---------------------------------------------------------------------------

    \17\ See supra note 5.
    \18\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37499 (June 29, 2005).
---------------------------------------------------------------------------

    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 reflects a reasonable and competitive pricing structure 
designed to incentivize market participants to direct their order flow 
to the Exchange, which the Exchange believes would enhance liquidity 
and market quality to the benefit of all Members and market 
participants.
Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers
    The Exchange believes that the proposed Midpoint Peg Order Adding 
Liquidity at Midpoint Volume Tiers are reasonable because they would 
provide Members with an additional incentive to achieve certain volume 
thresholds on the Exchange. The Exchange notes that volume-based 
incentives and discounts have been widely adopted by exchanges,\19\ and 
are reasonable, equitable, and not unfairly discriminatory because they 
are open to all Members on an equal basis and provide additional 
benefits or discounts that are reasonably related to the value to an 
exchange's market quality associated with higher levels of market 
activity, such as higher levels of liquidity provision and the 
introduction of higher volumes of orders into the price and volume 
discovery processes. The Exchange believes that the proposal reflects a 
reasonable and competitive pricing structure designed to incentivize 
market participants to direct their order flow to the Exchange, to 
enhance market quality and to provide price improvement through the use 
of orders that are designed to execute at the midpoint of the PBBO 
through the provision of enhanced rebates for executions of Midpoint 
Peg Add Orders executed at the Midpoint for Members that qualify for 
one of the Midpoint Peg Order Adding Liquidity at Midpoint Volume 
Tiers.\20\ The Exchange believes its proposal will promote price 
improvement and increased liquidity on the Exchange which will benefit 
all market participants.
---------------------------------------------------------------------------

    \19\ See Cboe EDGX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/); Cboe BZX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/); and MEMX equities trading fee 
schedule on its public website (available at https://info.memxtrading.com/fee-schedule/).
    \20\ The Exchange notes that Members that do not qualify for one 
of the Midpoint Peg Order Adding Liquidity at Midpoint Volume Tier 
will receive the standard rebate of $0.0021 for Non-Displayed 
Midpoint Peg Orders that Add Liquidity in securities priced at or 
above $1.00.
---------------------------------------------------------------------------

    Additionally, the Exchange believes that the proposed enhanced, 
incremental rebate for executions of Midpoint Peg Add Orders executed 
at the Midpoint under Midpoint Peg Order Adding Liquidity at Midpoint 
Volume Tier 1 (i.e., $0.0004 per share) is reasonable, in that it does 
not reflect a disproportionate increase above the standard rebate of 
$0.0021 per share provided to all Members with respect to Added Non-
Displayed Liquidity. Additionally, the Exchange believes that the 
proposed enhanced, incremental rebate for executions of Midpoint Peg 
Add Orders executed at the Midpoint under Midpoint Peg Order Adding 
Liquidity at Midpoint Volume Tier 2 (i.e., $0.0006 per share) is 
reasonable, in that it does not reflect a disproportionate increase 
above the enhanced rebate of $0.0004 per share provided to Members that 
satisfy the requirements of Midpoint Peg Order Adding Liquidity at 
Midpoint Volume Tier 1.
    The Exchange believes the proposed new criteria is equitable and 
non-discriminatory because all Members will continue to be eligible to 
qualify for Midpoint Peg Order Adding Liquidity at Midpoint Volume 
Tiers 1 and 2 and have the opportunity to receive the corresponding 
enhanced rebate if such criteria is achieved.

[[Page 22243]]

    The Exchange further believes that the proposed new criteria for 
Midpoint Peg Order Adding Liquidity at Midpoint Volume Tier 1, and 
Midpoint Peg Order Adding Liquidity at Midpoint Volume Tier 2, are 
reasonable, in that the proposed new criteria for Midpoint Peg Order 
Adding Liquidity at Midpoint Volume Tier 2 is incrementally more 
difficult to achieve than that of Midpoint Peg Order Adding Liquidity 
at Midpoint Volume Tier 1, thus, Midpoint Peg Order Adding Liquidity at 
Midpoint Volume Tier 2 appropriately offers a higher rebate 
commensurate with the corresponding higher Midpoint ADAV requirement. 
Therefore, the Exchange believes the Midpoint Peg Order Adding 
Liquidity at Midpoint Volume Tiers, as proposed, are consistent with an 
equitable allocation of fees and rebates, as the more stringent 
criteria correlates with the corresponding tier's higher rebate.
    The Exchange further believes that the enhanced rebates provided 
under the Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers, 
as proposed, (i.e., $0.0004 per share for Tier 1; and $0.0006 per share 
for Tier 2) are reasonable, consistent with an equitable allocation of 
fees, and that it is not unfairly discriminatory to pay such higher 
rebates for executions of Midpoint Peg Add Orders executed at the 
Midpoint to Members that qualify for either Tier 1 or Tier 2 under the 
Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers in 
comparison with the standard rebate in recognition of the benefits to 
the Exchange and market participants as described above, particularly 
as the magnitude of the enhanced rebate is not unreasonably high and is 
reasonably related to the enhanced market quality it is designed to 
achieve. Additionally, the Exchange believes that the proposed rebates 
are reasonable as such rebates are comparable to, and competitive with, 
the rebates for executions of liquidity-adding non-displayed orders 
provided by at least one other exchange under similar volume-based 
tiers.\21\
---------------------------------------------------------------------------

    \21\ See supra note 9.
---------------------------------------------------------------------------

    The Exchange believes that providing an enhanced rebate for 
Midpoint Peg Add Orders executed at the Midpoint that is higher than 
the standard rebate for executions of other non-displayed orders in 
securities priced at or above $1.00 per share that add liquidity to the 
Exchange is reasonable, as the Exchange believes this would encourage 
Members that provide liquidity through non-displayed orders to do so, 
to a greater extent, through orders designed to execute at the midpoint 
of the PBBO. Because such orders provide price improvement to the 
benefit of other market participants, the Exchange believes it is 
reasonable and consistent with an equitable allocation of fees to 
provide an enhanced rebate to encourage their use, while still 
maintaining an overall pricing structure that places greater emphasis 
on the value of liquidity in advancing transparency and price 
discovery.
New Liquidity Indicator Code
    The Exchange believes its proposal to add new liquidity indicator 
code ``Ap'' to the Liquidity Indicator Codes and Associated Fees table 
and to add liquidity indicator code ``Ap'' to the ``Adding Liquidity 
Non-Displayed Order'' column, is reasonable and equitable because it 
will apply equally to all Members of the Exchange that submit Midpoint 
Peg Orders. This liquidity indicator code would be returned on the 
real-time trade reports sent to the Member that submitted the order. 
The use of liquidity indicator codes is not unique to the Exchange as 
liquidity indicator codes are currently utilized and described in the 
fee schedules of other equity exchanges.\22\
---------------------------------------------------------------------------

    \22\ See the fee schedule of MEMX LLC (``MEMX'') available on 
their public website at https://info.memxtrading.com/fee-schedule/; 
and the fee schedule of the Investors Exchange LLC (``IEX'') 
available on their public website at https://exchange.iex.io/resources/trading/fee-schedule/.
---------------------------------------------------------------------------

Remove Volume Tier
    The Exchange believes that the proposed fee change to the Remove 
Volume Tiers is reasonable, consistent with an equitable allocation of 
fees, and not unfairly discriminatory to provide a discounted fee for 
executions of Remove Volume for Members that satisfy the requirements 
associated with Tier 1 and Tier 2. The Exchange believes the proposed 
fee changes are reasonable because the magnitude of the increase is not 
unreasonably high and is also reasonably related to the enhanced market 
quality it is designed to achieve.
    The Exchange believes the proposed increased fee for executions of 
Removed Volume for a qualifying Member (i.e., $0.0028 and $0.0027 for 
Tier 1 and Tier 2 respectively) is reasonable, as competing exchanges 
offer tiered pricing structures similar to the proposed Remove Volume 
Tier, including schedules of rebates and fees that apply based upon 
Members achieving certain volume thresholds, and the Exchange believes 
the proposed Remove Volume Tier's criteria are reasonable when compared 
to such tiers provided for by other exchanges. For example, Cboe EDGX 
charges lower fees for removing volume from Cboe EDGX under its 
``Remove Volume Tiers'' at $0.00275 per share, compared to its standard 
fee of $0.0030 per share, but requires different, but similar, criteria 
than the Exchange's proposed Remove Volume Tier, which are also based 
upon a Member's volume.\23\ MEMX also charges a lower fee for removing 
volume from MEMX under its ``Liquidity Removal Tier'' at $0.00285 per 
share, compared to its standard fee of $0.0030 per share, but requires 
different, but similar, criteria than the Exchange's Remove Volume 
Tier, which are also based upon a Member's volume.\24\
---------------------------------------------------------------------------

    \23\ See Cboe EDGX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
    \24\ See MEMX trading fee schedule on its public website 
(available at https://info.memxtrading.com/fee-schedule/).
---------------------------------------------------------------------------

    The Exchange further believes the proposed Remove Volume Tier fees 
are fair, equitable and not unfairly discriminatory because they are 
available to all Members. Further, the proposed Remove Volume Tier fee 
changes are comparable to the fees charged for executions of liquidity-
removing orders charged by Cboe EDGX and MEMX under similar volume 
based tiers.\25\
---------------------------------------------------------------------------

    \25\ See supra notes 23 and 24.
---------------------------------------------------------------------------

    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of Sections 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 the proposed change 
would encourage Members to maintain or increase their order flow to the 
Exchange, thereby contributing to a deeper and more liquid market to 
the benefit of all market participants and enhancing the attractiveness 
of the Exchange as a trading venue. As a

[[Page 22244]]

result, the Exchange believes the proposal would enhance its 
competitiveness as a market that attracts actionable orders, thereby 
making it a more desirable destination venue for its customers. For 
these reasons, the Exchange believes that the proposal furthers the 
Commission's goal in adopting Regulation NMS of fostering competition 
among orders, which promotes ``more efficient pricing of individual 
stocks for all types of orders, large and small.'' \26\
---------------------------------------------------------------------------

    \26\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 47396 (June 29, 2005).
---------------------------------------------------------------------------

Intramarket Competition
    The Exchange believes that the proposal would incentivize Members 
to maintain or increase their order flow, thereby contributing to a 
deeper and more liquid market to the benefit of all market participants 
and enhance the attractiveness of the Exchange as a trading venue, and 
to provide price improvement through the use of orders that are 
designed to execute at the midpoint of the PBBO, which the Exchange 
believes, in turn, would continue to encourage participants to direct 
order flow to the Exchange. Greater liquidity benefits all Members by 
providing more trading opportunities and encourages Members to send 
orders to the Exchange, thereby contributing to robust levels of 
liquidity, which benefits all market participants. The opportunity to 
qualify for enhanced, incremental rebates under the Midpoint Peg Order 
Adding Liquidity at Midpoint Volume Tiers would be available to all 
Members that meet the associated requirements in any month. The 
Exchange believes the requirements in the Midpoint Peg Order Adding 
Liquidity at Midpoint Volume Tiers are reasonably related to the 
enhanced market quality that the Midpoint Peg Order Adding Liquidity at 
Midpoint Volume Tiers are designed to promote. Similarly, the proposed 
enhanced rebate for executions of Midpoint Peg Orders would apply 
equally to all Members. As such, the Exchange believes the proposed 
changes would not impose any burden on intramarket competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.
    The opportunity to qualify for the Remove Volume Tier, and thus 
receive the proposed lower fee for executions of Removed Volume, would 
be available to all Members that meet the associated volume requirement 
in any month. The Exchange believes that meeting the volume requirement 
of the Remove Volume Tier is attainable for market participants, as the 
Exchange believes the thresholds are relatively low and reasonably 
related to the enhanced liquidity and market quality that the Remove 
Volume Tier is designed to promote. As such, the Exchange believes the 
proposed changes would not impose any burden on intramarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.
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.\27\ 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.
---------------------------------------------------------------------------

    \27\ See supra note 5.
---------------------------------------------------------------------------

    As described above, the proposal is designed to enhance market 
quality on the Exchange and to encourage more Members to maintain or 
increase their order flow, thereby contributing to a deeper and more 
liquid market to the benefit of all market participants and enhancing 
the attractiveness of the Exchange as a trading venue, and to encourage 
Members to provide price improvement through the use of orders that are 
designed to execute at the midpoint of the PBBO. In turn, the Exchange 
believes that the proposed enhanced rebates for executions of Midpoint 
Peg Add Orders executed at the Midpoint that qualify for an enhanced 
rebate under the Midpoint Peg Order Adding Liquidity at Midpoint Volume 
Tiers would encourage the submission of additional order flow to the 
Exchange, particularly in the form of Midpoint Peg Add Orders executed 
at the Midpoint, thereby promoting market depth, enhanced execution 
opportunities, price improvement, and price discovery to the benefit of 
all Members and market participants. The opportunity to qualify for 
discounted fees for Removed Volume under the Exchange's Remove Volume 
Tiers continues to be available to all Members that meet the associated 
volume criteria. The Exchange believes the discounted fees provided 
under the Remove Volume Tiers are reasonably related to the enhanced 
market quality that such tiers are designed to promote.
    As described above the Exchange's proposal is a competitive 
proposal designed to encourage additional order flow to the Exchange 
through a combination of volume based incentives and discounts, which 
have been widely adopted by exchanges, and standard pricing that is 
comparable to, and/or competitive with, pricing for similar executions 
in place at other exchanges.\28\
---------------------------------------------------------------------------

    \28\ See supra notes 9, 13, 19, 23 and 24.
---------------------------------------------------------------------------

    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 similar standard pricing for 
Added Midpoint Volume and Removed Volume, as well as similar pricing 
incentives and discounts to market participants that achieves certain 
volume criteria and thresholds.
    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.'' \29\ 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

[[Page 22245]]

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' . . .''.\30\ 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.
---------------------------------------------------------------------------

    \29\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \30\ 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)).
---------------------------------------------------------------------------

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,\31\ and Rule 19b-4(f)(2) \32\ 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.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \32\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2022-10 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PEARL-2022-10. 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-2022-10 and should be submitted on 
or before May 5, 2022.
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-07952 Filed 4-13-22; 8:45 am]
BILLING CODE 8011-01-P