83 FR 40101 - Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 156 (August 13, 2018)

[Federal Register Volume 83, Number 156 (Monday, August 13, 2018)]
[Notices]
[Pages 40101-40103]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-17251]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83785; File No. SR-PEARL-2018-16]


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

August 7, 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 July 31, 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 modify certain of the Exchange's 
system connectivity fees.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL's principal office, and at the Commission's Public Reference 
Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule regarding 
connectivity to the Exchange. Specifically, the Exchange proposes to 
amend Sections 5(a) and (b) of the Fee Schedule to increase the network 
connectivity fees for the 1 Gigabit (``Gb'') fiber connection, the 10Gb 
fiber connection, and the 10Gb ultra-low latency (``ULL'') fiber 
connection, which are charged to both Members \3\ and non-Members of 
the Exchange for connectivity to the Exchange's primary/secondary 
facility. The Exchange also proposes to increase the network 
connectivity fees for the 1Gb and 10Gb fiber connections for 
connectivity to the Exchange's disaster recovery facility.
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    \3\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of the 
Exchange's 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.

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[[Page 40102]]

    The Exchange currently offers various bandwidth alternatives for 
connectivity to the Exchange, consisting of a 1Gb fiber connection, a 
10Gb fiber connection, and a 10Gb ULL fiber connection. The 10Gb ULL 
offering uses an ultra-low latency switch, which provides faster 
processing of messages sent to it in comparison to the switch used for 
the other types of connectivity. The Exchange currently assesses the 
following monthly network connectivity fees to both Members and non-
Members for connectivity to the Exchange's primary/secondary facility: 
(a) $1,100 for the 1Gb connection; (b) $5,500 for the 10Gb connection; 
and (c) $8,500.00 for the 10Gb ULL connection. The Exchange also 
assesses to both Members and non-Members a monthly per connection 
network connectivity fee of $500 for each 1Gb connection to the 
disaster recovery facility and a monthly per connection network 
connectivity fee of $2,500 for each 10Gb connection to the disaster 
recovery facility.
    The Exchange's MIAX Express Network Interconnect (``MENI'') can be 
configured to provide Members and non-Members of the Exchange network 
connectivity to the trading platforms, market data systems, test 
systems, and disaster recovery facilities of both the Exchange and its 
affiliate, Miami International Securities Exchange (``MIAX Options''), 
via a single, shared connection. Members and non-Members utilizing the 
MENI to connect to the trading platforms, market data systems, test 
systems and disaster recovery facilities of the Exchange and MIAX 
Options via a single, shared connection are assessed only one monthly 
network connectivity fee per connection, regardless of the trading 
platforms, market data systems, test systems, and disaster recovery 
facilities accessed via such connection.
    The Exchange proposes to increase the monthly network connectivity 
fees for such connections for both Members and non-Members. The network 
connectivity fees for connectivity to the Exchange's primary/secondary 
facility will be increased as follows: (a) From $1,100 to $1,400 for 
the 1Gb connection; (b) From $5,500 to $6,100 for the 10Gb connection; 
and (c) from $8,500 to $9,300 for the 10Gb ULL connection. The network 
connectivity fees for connectivity to the Exchange's disaster recovery 
facility will be increased as follows: (a) From $500 to $550 for the 
1Gb connection; and (b) from $2,500 to $2,750 for the 10Gb connection.
    The Exchange believes that the increase in the pricing of the 
Exchange's connectivity is reflective of the continued value that it 
provides and the increasing costs to the Exchange for providing and 
maintaining the necessary hardware and other infrastructure to support 
this technology. The Exchange notes that other exchanges have similar 
connectivity alternatives for their participants, including similar 
low-latency connectivity. For example, Nasdaq PHLX LLC (``Phlx''), NYSE 
Arca, Inc. (``Arca''), NYSE American LLC (``NYSE American'') and Nasdaq 
ISE, LLC (``ISE'') all offer a 1Gb, 10Gb and 10Gb low latency ethernet 
connectivity alternatives to each of their participants.\4\ The 
Exchange further notes that Phlx, ISE, Arca and NYSE American each 
charge higher rates for such similar connectivity to primary and 
secondary facilities.\5\ Additionally, the Exchange's proposed 
connectivity fees to its disaster recovery facility are within the 
range of the fees charged by other exchanges for similar connectivity 
alternatives.\6\ The Exchange believes that it is appropriate to 
increase its fees charged for use of its connectivity to offset 
increasing costs associated with providing and maintaining the 
necessary hardware and other infrastructure to support this technology 
and also to more closely align its fees with the rates charged by 
competing options exchanges.
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    \4\ See Phlx and ISE Rules, General Equity and Options Rules, 
General 8, Section 1(b). Phlx and ISE each charge a monthly fee of 
$2,500 for each 1Gb connection, $10,000 for each 10Gb connection and 
$15,000 for each 10Gb Ultra connection, which the equivalent of the 
Exchange's 10Gb ULL connection. See also NYSE American Fee Schedule, 
Section V.B, and Arca Fees and Charges, Co-Location Fees. NYSE 
American and Arca each charge a monthly fee of $5,000 for each 1Gb 
circuit, $14,000 for each 10Gb circuit and $22,000 for each 10Gb LX 
circuit, which the equivalent of the Exchange's 10Gb ULL connection.
    \5\ Id.
    \6\ See Nasdaq ISE Schedule of Fees, IX(D) (charging $3,000 for 
disaster recovery testing & relocation services); see also Cboe 
Exchange, Inc. (``CBOE'') Fees Schedule, p. 14, Cboe Command 
Connectivity Charges (charging a monthly fee of $2,000 for a 1Gb 
disaster recovery network access port and a monthly fee of $6,000 
for a 10Gb disaster recovery network access port).
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    The Exchange proposes to implement the proposed changes to the Fee 
Schedule effective as of August 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 \7\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \8\ in particular, in that 
it provides for the equitable allocation of reasonable dues, fees and 
other charges among Exchange 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 \9\ 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 customer, issuers, brokers and dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal is consistent with Section 
6(b)(4) of the Act because the fees assessed for connectivity allow the 
Exchange to cover the costs associated with providing and maintaining 
the necessary hardware and other infrastructure to support this 
technology. The Exchange believes that the proposal to increase the 
fees for connectivity alternatives is fair, equitable and not 
unreasonably discriminatory because the increased fees are assessed 
equally among all users of the applicable connections.
    As discussed above, Phlx and ISE each offer different connections 
with respect to latency, and Arca and NYSE American both offer similar 
connectivity alternatives.\10\ Despite this, Phlx, ISE, Arca and NYSE 
American charge a higher fee than the Exchange currently charges for 
similar connections to primary and secondary facilities.\11\ 
Furthermore, the connectivity fees for the disaster recovery facilities 
of other exchanges are within the range of the proposed fees of the 
Exchange.\12\ For these reasons, the Exchange believes the proposed 
increase in the fees for the fiber connectivity to the Exchange is 
reasonable and not unfairly discriminatory.
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    \10\ See supra note 4.
    \11\ Id.
    \12\ See supra note 6.
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    The Exchange also believes that its proposal is consistent with 
Section 6(b)(5) of the Act \13\ because all MIAX PEARL participants 
have the opportunity to subscribe to the Exchange's connections. There 
is also no differentiation among MIAX PEARL participants with regard to 
the fees charged for these services.
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    \13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    MIAX PEARL does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. On the

[[Page 40103]]

contrary, the Exchange believes that the proposed changes should 
increase both intermarket and intramarket competition. Specifically, 
the Exchange believes that the changes will promote competition by 
increasing the connectivity fees to become more within the range of 
comparable fees assessed by other competing exchanges.\14\
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    \14\ See supra note 4.
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    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges. The Exchange believes that the 
proposed changes reflect this competitive environment. To the extent 
that this purpose is achieved, all the Exchange's market participants 
should benefit from the improved market liquidity.

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,\15\ and Rule 19b-4(f)(2) \16\ 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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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 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-2018-16 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-2018-16. 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-2018-16 and should be submitted on 
or before September 4, 2018.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17251 Filed 8-10-18; 8:45 am]
 BILLING CODE 8011-01-P