83 FR 22300 - Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 93 (May 14, 2018)

[Federal Register Volume 83, Number 93 (Monday, May 14, 2018)]
[Notices]
[Pages 22300-22302]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-10141]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83188; File No. SR-PEARL-2018-12]


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

May 8, 2018.
    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 April 27, 2018, MIAX PEARL, LLC (``MIAX PEARL'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX PEARL Fee 
Schedule (the ``Fee Schedule'') to establish a monthly Trading Permit 
Fee assessable to Members that solely clear transactions on 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 establish a monthly 
Trading Permit Fee assessable to Members \3\ that solely clear 
transactions on the Exchange. For clarity, the Exchange also proposes 
to adopt a related definition of ``EEM Clearing Firm'' (the type of 
Member to which this monthly Trading Permit Fee shall apply) in the 
``Definitions'' section of the Fee Schedule. The Exchange notes that it 
recently adopted certain monthly Trading Permit Fees applicable to its 
Members (other than Members that solely clear transactions on the 
Exchange).\4\
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    \3\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of the Exchange 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See Exchange Rule 100.
    \4\ See Securities Exchange Act Release No. 82867 (March 13, 
2018), 83 FR 12044 (March 19, 2018) (SR-PEARL-2018-07).
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Definitions
    The Exchange proposes to amend the ``Definitions'' section of the 
Fee Schedule to add the new definition of ``EEM Clearing Firm.'' The 
term ``EEM Clearing Firm'' shall mean an EEM \5\ that solely clears 
transactions on the Exchange and does not connect to the Exchange via 
either the FIX Interface \6\ or MEO Interface.\7\
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    \5\ ``EEM'' or ``Electronic Exchange Member'' means the holder 
of a Trading Permit who is a Member representing as agent Public 
Customer Orders or Non-Customer Orders on the Exchange and those 
non-Market Maker Members conducting proprietary trading. Electronic 
Exchange Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \6\ ``FIX Interface'' means the Financial Information Exchange 
interface for certain order types as set forth in Exchange Rule 516. 
See Exchange Rule 100. See the Definitions Section of the Fee 
Schedule.
    \7\ ``MEO Interface'' means a binary order interface for certain 
order types as set forth in Rule 516 into the MIAX PEARL System. See 
Exchange Rule 100. See the Definitions Section of the Fee Schedule.
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Monthly EEM Clearing Firm Trading Permit Fees
    The Exchange recently adopted fees applicable to Trading Permits 
which are issued to Members who are either EEMs or Market Makers.\8\ 
The Exchange

[[Page 22301]]

charges its Members Trading Permit fees which are based upon the 
monthly total volume executed by the Member and its Affiliates \9\ on 
the Exchange across all origin types, not including Excluded 
Contracts,\10\ as compared to the TCV \11\ in all MIAX PEARL-listed 
options. The Exchange adopted a tier-based fee structure that is 
volume-based.
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    \8\ ``Market Maker'' means a Member registered with the Exchange 
for the purpose of making markets in options contracts traded on the 
Exchange. See Exchange Rule 100.
    \9\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX PEARL 
Market Maker) that has been appointed by a MIAX PEARL Market Maker, 
pursuant to the process described in the Fee Schedule. See the 
Definitions Section of the Fee Schedule.
    \10\ ``Excluded Contracts'' means any contracts routed to an 
away market for execution. See the Definitions Section of the Fee 
Schedule.
    \11\ ``TCV'' means total consolidated volume calculated as the 
total national volume in those classes listed on MIAX PEARL for the 
month for which the fees apply, excluding consolidated volume 
executed during the period time in which the Exchange experiences an 
``Exchange System Disruption'' (solely in the option classes of the 
affected Matching Engine (as defined below)). The term Exchange 
System Disruption, which is defined in the Definitions section of 
the Fee Schedule, means an outage of a Matching Engine or collective 
Matching Engines for a period of two consecutive hours or more, 
during trading hours. The term Matching Engine, which is also 
defined in the Definitions section of the Fee Schedule, is a part of 
the MIAX PEARL electronic system that processes options orders and 
trades on a symbol-by-symbol basis. Some Matching Engines will 
process option classes with multiple root symbols, and other 
Matching Engines may be dedicated to one single option root symbol 
(for example, options on SPY may be processed by one single Matching 
Engine that is dedicated only to SPY). A particular root symbol may 
only be assigned to a single designated Matching Engine. A 
particular root symbol may not be assigned to multiple Matching 
Engines. The Exchange notes that the term ``Exchange System 
Disruption'' and its meaning have no applicability outside of the 
Fee Schedule, as it is used solely for purposes of calculating 
volume for the threshold tiers in the Fee Schedule. See the 
Definitions Section of the Fee Schedule.
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    The Exchange also charges such Trading Permit Fees based upon the 
type of interface used by the Member to connect to the Exchange--either 
the FIX Interface and/or the MEO Interface. Any Member (whether EEM or 
Market Maker) can select either type of interface (either FIX Interface 
and/or MEO Interface). Each Member who uses the FIX Interface to 
connect to the System \12\ is assessed the following Trading Permit 
Fees each month: (i) If its volume falls within the parameters of Tier 
1 of the Non-Transaction Fees Volume-Based Tiers, or volume up to 
0.30%, $250, (ii) if its volume falls within the parameters of Tier 2 
of the Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% 
up to 0.60%, $350, and (iii) if its volume falls with the parameters of 
Tier 3 of the Non-Transaction Fees Volume-Based Tiers, or volume above 
0.60%, $450.
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    \12\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
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    Each Member who uses the MEO Interface to connect to the System is 
assessed the following Trading Permit Fees each month: (i) If its 
volume falls within the parameters of Tier 1 of the Non-Transaction 
Fees Volume-Based Tiers, or volume up to 0.30%, $300, (ii) if its 
volume falls within the parameters of Tier 2 of the Non-Transaction 
Fees Volume-Based Tiers, or volume above 0.30% up to 0.60%, $400, and 
(iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $500. 
Members who use the MEO Interface may also connect to the System 
through the FIX Interface as well, and vice versa. Members who use the 
MEO Interface and who also use the FIX Interface are assessed the rates 
for both types of Trading Permits set forth above and receive a $100 
monthly credit towards the Trading Permit Fees applicable to such 
Member for MEO Interface use.
    Members that solely clear transactions on the Exchange do not 
connect to the Exchange, as such a connection is not required to 
perform that clearing-only activity. Therefore, at present, Members 
that are EEM Clearing Firms are not assessed a monthly Trading Permit 
Fee. However, those Members are still utilizing the services of the 
Exchange, by performing that clearing-only activity. Accordingly, the 
Exchange is proposing to adopt a monthly Trading Permit Fee applicable 
to those types of Members, which the Exchange is proposing to define 
each as an ``EEM Clearing Firm.'' In particular, the Exchange proposes 
to assess a monthly Trading Permit Fee of $250 to such EEM Clearing 
Firms, in order to cover the operational and administrative costs of 
such EEMs using the Exchange's System to perform clearing-only 
services. Such monthly Trading Permit Fees will be assessed with 
respect to EEM Clearing Firms in any month the EEM Clearing Firm is 
certified in the membership system to clear transactions on the 
Exchange.
    The Exchange's affiliate, Miami International Securities Exchange, 
LLC (``MIAX Options''), also assesses a monthly trading permit fee, in 
the amount of $1,500 per month, to its members who are clearing firms 
\13\ that are performing the same activity.
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    \13\ See MIAX Options Fee Schedule Section 3(b). The Commission 
notes that members on MIAX Options who perform clearing-only 
services are assessed a monthly trading permit fee of $1,500.
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    The proposed rule changes will become operative May 1, 2018.
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 dues, 
fees and other charges among its members and issuers and other persons 
using its facilities. The Exchange also believes the proposal furthers 
the objectives of Section 6(b)(5) of the Act in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
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Definition
    The Exchange believes that the proposed new definition ``EEM 
Clearing Firm'' is consistent with Section 6(b)(4) of the Act in that 
it is fair, equitable and not unreasonably discriminatory and should 
improve market quality for the Exchange's market participants. The 
definition applies equally to all EEMs who perform clearing-only 
services on the Exchange and is intended to add transparency to the 
Exchange's marketplace by clarifying how the Exchange determines these 
EEMs from other Members in order to assess the applicable fee.
    The Exchange believes that the proposed new definition ``EEM 
Clearing Firm'' is consistent with Section 6(5) of the Act in that it 
promotes just and equitable principles of trade for all market 
participants. The Exchange believes that by defining EEM Clearing Firms 
the Exchange is able to assess such firms a Trading Permit Fee since 
they use the Exchange's System to perform clearing-only services.
Monthly EEM Clearing Firm Trading Permit Fee
    The Exchange believes that the assessment of a Trading Permit Fee 
to EEM Clearing Firms is reasonable, equitable, and not unfairly 
discriminatory. The assessment of

[[Page 22302]]

Trading Permit Fees to Clearing Firms is done by the Exchange's 
affiliate, MIAX Options, as described in the Purpose section above. The 
Exchange also believes that the proposed fee is fair and equitable and 
not unreasonably discriminatory because all similarly situated EEM 
Clearing Firms are subject to the same fee, and access to the Exchange 
is offered on terms that are not unfairly discriminatory.
    The Exchange believes that the proposed EEM Clearing Firm Trading 
Permit Fee is consistent with Section 6(b)(5) of the Act in that it 
promotes equitable principles of trade for all market participants. The 
Exchange believes that assessing such firms a Trading Permit Fee is 
reasonable since such firms are utilizing the Exchange's System to 
perform clearing-only services. Furthermore, assessing EEM Clearing 
Firms a Trading Permit Fee is fair and equitable since it permits the 
Exchange to recoup the operational and administrative costs that the 
Exchange does incur as a result of such firms utilizing the Exchange's 
System.

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

    MIAX PEARL does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
assessment by the Exchange of Trading Permit Fees to EEM Clearing Firms 
using its facilities will not have an impact on competition. As a more 
recent entrant in the already highly competitive environment for equity 
options trading, MIAX PEARL does not have the market power necessary to 
set prices for services that are unreasonable or unfairly 
discriminatory in violation of the Act. The Exchange believes that the 
proposed EEM Clearing Firm Trading Permit Fee would increase both 
intermarket and intramarket competition by encouraging clearing firms 
to provide clearing services to Members of the Exchange. MIAX PEARL's 
proposed EEM Clearing Firm Trading Permit Fee is similar to the fee 
assessed by its affiliate, MIAX Options, to its Clearing Firms but is 
much lower than that assessed by MIAX Options.

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,\16\ and Rule 19b-4(f)(2) \17\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2018-12 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-2018-12. 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-2018-12 and should be submitted on 
or before June 4, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10141 Filed 5-11-18; 8:45 am]
 BILLING CODE 8011-01-P