[Federal Register Volume 87, Number 224 (Tuesday, November 22, 2022)]
[Notices]
[Pages 71375-71378]
[FR Doc No: 2022-25356]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96332; File No. SR-PEARL-2022-50]

Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 2617
Order Execution and Routing

November 16, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 7, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the 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 the Route to
Primary Auction (``PAC'') routing option under Exchange Rule
2617(b)(5)(B).
    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 PAC routing
option under Exchange Rule 2617(b)(5)(B) that is available to orders in
equity securities traded on the Exchange's equity trading platform
(referred to herein as ``MIAX Pearl Equities'').\3\ Specifically, the
Exchange proposes to amend Exchange Rule 2617(b)(5)(B)(1)(i) to
harmonize the timeline by which displayed Limit Orders \4\ and Market
Orders \5\ with a time-in-force of Regular Hours Only (``RHO'') \6\ are
routed to participate in the primary listing market's opening process
with the timeline by which the Exchange currently routes displayed
Limit Orders to participate in the primary listing market's closing
process.
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    \3\ The Exchange notes that provisions of Exchange Rule
2617(b)(5) that are not subject to this proposed rule change were
amended in a separate filing, but those amendments have not yet been
implemented. See Securities Exchange Act Release No. 95298 (July 15,
2022), 87 FR 43579 (July 21, 2022) (SR-PEARL-2022-29).
    \4\ See Exchange Rule 2614(a)(1).
    \5\ See Exchange Rule 2614(a)(2).
    \6\ Exchange Rule 2614(b)(2) defines ``Regular Hours Only'' or
``RHO'' as ``[a]n order that is designated for execution only during
Regular Trading Hours, which includes the Opening Process for equity
securities. An order with a time-in-force of RHO entered into the
System before the opening of business on the Exchange as determined
pursuant to Exchange Rule 2600 will be accepted but not eligible for
execution until the start of Regular Trading Hours.''
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    The Exchange offers its Equity Members \7\ optional routing
functionality that allows them to use the Exchange to access liquidity
on other trading centers. The functionality

includes routing algorithms that determine the destination or pattern
of routing. Exchange Rule 2617(b)(5) sets forth that there is a
particular pattern of routing to other trading centers, known as the
``System routing table'', as well as sets forth the Exchange's
available routing options. All routing is designed to be conducted in a
manner consistent with Regulation NMS.
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    \7\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
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    The Exchange recently launched the PAC routing option,\8\ which
enables an Equity Member to designate that their order be routed to
participate in the primary listing market's opening, re-opening, or
closing process. In sum, Exchange Rule 2617(b)(5)(B) describes PAC as a
routing option for Market Orders and displayed Limit Orders designated
as RHO that the entering firm wishes to designate for participation in
the opening, re-opening (following a regulatory halt, suspension, or
pause), or closing process of a primary listing market (Cboe BZX
Exchange, Inc. (``BZX''), the New York Stock Exchange LLC (``NYSE''),
The Nasdaq Stock Market LLC (``Nasdaq''), NYSE American LLC (``NYSE
American''), or NYSE Arca, Inc. (``NYSE Arca'')) if received before the
opening, re-opening, or closing process of such market.
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    \8\ See Securities Exchange Act Release No. 94301 (February 23,
2022), 87 FR 11739 (March 2, 2002) (SR-PEARL-2022-06). See also MIAX
Pearl Equities--Expansion of Functionality Through New Route to
Primary Auction (PAC) Strategy--Rollout Postponed until June 27,
2022, dated June 8, 2022, available at https://www.miaxoptions.com/alerts/2022/06/08/miax-pearl-equities-expansion-functionality-through-new-route-primary-auction-pac (last visited June 28, 2022).
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    According to Exchange Rule 2617(b)(5)(B)(1)(i), the Exchange routes
upon receipt displayed Limit Orders and Market Orders designated as RHO
coupled with the PAC routing option to participate in the primary
listing market's opening process that are received before the security
has opened on the primary listing market. Meanwhile, the Exchange
handles displayed Limit Orders designated as RHO coupled with the PAC
routing option that are to be routed to the primary listing market's
closing process differently. In sum, the Exchange accepts displayed
Limit Orders that include a time-in-force of RHO and designated to be
routed to the primary listing market's closing process throughout the
trading day \9\ and, pursuant to Exchange Rule 2617(b)(5)(B)(1)(ii)(a),
routes those orders to participate in the primary listing market's
closing process prior to the primary listing market's order entry cut-
off time. The Exchange currently routes such orders at 3:49:59 p.m.
Eastern Time.\10\ Such orders received after 3:49:59 p.m. Eastern Time,
but before the primary listing market performs its closing process are,
however, routed upon receipt after first checking the System for
available shares pursuant to Exchange Rule 2617(b)(5)(B)(1)(ii)(a).\11\
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    \9\ See Exchange Rule 2600(a) (providing that ``[o]rders may be
entered into the System from 7:30 a.m. until 4:00 p.m. Eastern Time
(or such earlier time as may be designated by the Exchange on a day
when MIAX Pearl Equities closes early)'').
    \10\ See MIAX Pearl Equities Exchange Regulatory Circular 2022-
09, September 28, 2022, available at https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Pearl_Equities_RC_2022-09.pdf. The Exchange publicly announces any updates to the time at
which it would route Limit Orders to participate in the primary
listing market's closing process via a regulatory circular or alert.
See Securities Exchange Act Release No. 94301 (February 23, 2022),
87 FR 11739, 11742, n. 20 (March 2, 2022) (SR-PEARL-2022-06).
    \11\ Today Market Orders are generally ineligible to be routed
to participate in primary listing market's closing process. At a
future date, the Exchange will begin to route Market Orders
designated as RHO to participate in the primary listing market's
closing process where that order is received after 3:50:00 p.m.
Eastern Time and the primary listing market declared a regulatory
halt. See supra note 3. Amended Exchange Rule
2617(b)(5)(B)(1)(ii)(b) provides that the Exchange will only route a
Market Order designated as RHO to participate in the primary listing
market's closing process when that Market Order is: (i) entered at
or after 3:50 p.m. Eastern Time, but before market close, (ii) the
primary listing market has declared a regulatory halt; and (iii) the
primary listing market is to conduct its closing process according
to their applicable rules. All other Market Orders designated as RHO
received at or after the time the Exchange begins to route existing
orders to participate in the primary listing market's closing
process, but before market close, will be cancelled.
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    The Exchange proposes to route displayed Limit Orders and Market
Orders designated as RHO coupled with the PAC routing option to the
primary listing market's opening process in a similar fashion as Limit
Orders that are to be routed to the primary listing market's closing
process. As it does for displayed Limit Orders routed to the primary
listing market's closing process, the Exchange proposes to route
displayed Limit Orders and Market Orders designated as RHO and coupled
with the PAC routing option to participate in the primary listing
market's opening process prior to the primary listing market's order
entry cut-off time. Displayed Limit Orders and Market Orders designated
as RHO that are to be routed to participate in the primary listing
market's opening process may continue to be entered as early as 7:30
a.m. Eastern Time and, pursuant to this change, the Exchange would
route those orders at a set time prior to the primary listing market's
order entry cut-off time. The Exchange initially intends to route
orders pursuant to the PAC routing option to participate in the primary
listing market's opening process at 8:00:00 a.m. Eastern Time.\12\ Any
order received at or between 7:30:00 a.m. and 8:00:00 a.m. Eastern Time
would be routed to participate in the primary listing market's opening
process at 8:00:00 a.m. Eastern Time. Orders routed at 8:00:00 a.m.
Eastern Time are prioritized among each other based on the time of
receipt. Any orders entered after 8:00:00 a.m. Eastern Time, but before
the primary listing market conducts its opening auction, would be
routed upon receipt, as is the case today.
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    \12\ The Exchange will publicly announce this initial time at
which it would route orders to participate in the primary listing
market's opening process and any updates to that time via a
regulatory circular or alert.
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    Accordingly, the Exchange proposes to amend Exchange Rule
2617(b)(5)(B)(1)(i) to provide that ``[a] displayed Limit Order or
Market Order designated as RHO received before the security has opened
on the primary listing market will be routed to participate in the
primary listing market's opening process prior to the primary listing
market's order entry cut-off time.'' Amended Exchange Rule
2617(b)(5)(B)(1)(i) would further provide that ``[i]f a displayed Limit
Order or Market Order designated as RHO is received at or after the
time the Exchange begins to route existing orders to participate in the
primary listing exchange's opening process, but before market open, the
Exchange will route such orders to participate in the primary listing
market's opening process upon receipt.'' These provisions are based on
Exchange Rule 2617(b)(5)(B)(1)(ii)(a), which describes the timeline by
which displayed Limit Orders designated as RHO are routed to
participate in the primary listing market's closing process pursuant to
the PAC routing option.\13\
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    \13\ Unlike when routing orders pursuant to the PAC routing
option to participate in the primary listing market's closing
process, the Exchange does not first check the System for available
shares prior to routing orders pursuant to the PAC routing option to
participate in the primary listing market's opening process because
the Exchange does not offer an pre-market trading session at this
time.
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    Like Exchange Rule 2617(b)(5)(B)(1)(ii)(a), amended Exchange Rule
2617(b)(5)(B)(1)(i) would not provide a deadline for order entry
because the Exchange will continue to route displayed Limit Orders and
Market Orders designated as RHO to participate in the primary listing
market's opening process after their order entry cut-off time. This is
intended to provide Equity Members with increased opportunities to
participate in the primary listing

market's opening process while also accounting for whether the order
entry cut-off time is changed/extended or should the primary listing
market continue to accept orders after their established order entry
cut-off time in accordance with their rules.\14\ If the primary listing
market rejects or cancels the order for any reason, the Exchange will
pass that rejection or cancellation along to the Equity Member that
entered the order. Like for the closing process, Equity Members that
seek greater certainty that their orders coupled with the PAC routing
option would participate in the opening process at the primary listing
market may enter their orders prior to the primary listing market's
order entry cut-off time.
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    \14\ See, e.g., NYSE Rule 7.35A(a) (providing that ``[i]t is the
responsibility of each DMM to ensure that registered securities open
as close to the beginning of Core Trading Hours as possible'') and
NYSE Rule 7.35A(a)(4)(A) (allowing for a delayed opening). See,
e.g., BZX Rule 11.23(b)(1)(A) (providing for the entry of Late Limit
On Open Orders between 9:28 a.m. and 9:30 a.m.). This behavior is
also similar to Nasdaq's LIST routing option that will continue to
route orders to participate in the primary listing market's opening
process after its order entry cut-off time. See Nasdaq Rule
4758(a)(1)(A)(x) (stating that ``[a] LIST order received before the
security has opened on its primary listing market will be routed to
the primary listing market for participation in that market's
opening process. . . . If a LIST order has been designated to
participate in the opening only and is entered after the security
has opened, the order will nevertheless be routed to the primary
listing market; based on its designation as opening only, such an
order would be expected to be rejected by the destination market,
and would also be cancelled by Nasdaq if returned by the destination
market.'').
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    Pursuant to Exchange Rule 2617(b)(5)(B)(1)(i)(a), any shares of a
Limit Order that remain unexecuted after attempting to execute in the
primary listing market's opening process will continue to be posted to
the MIAX Pearl Equities Book, executed, or routed pursuant to the Price
Improvement routing option.\15\ Because displayed Limit Orders must be
designated as RHO upon entry to be routed pursuant to the PAC routing
option, an Equity Member that wants any returned unexecuted quantity of
such order to be immediately returned to them would continue to need to
submit an instruction to cancel any unexecuted shares upon their return
to the Exchange. Any shares of a Market Order that remain unexecuted
after attempting to execute in the primary listing market's opening
process will continue to be cancelled pursuant to Exchange Rule
2617(b)(5)(B)(1)(i)(b).
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    \15\ See Exchange Rule 2617(b)(5)(C) for a description of the
Price Improvement routing option.
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Implementation
    The Exchange will issue a trading alert publicly announcing the
implementation date of this proposed rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Act,\16\ in general, and furthers the objectives of Section
6(b)(5),\17\ in particular, because it is designed to promote just and
equitable principles of trade, 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 a free and open market and
promote just and equitable principles of trade because it would provide
for consistent order handling by harmonizing the timeline by which it
would route orders coupled with the PAC routing option to the primary
listing market's opening process with the timeline it currently routes
such displayed Limit Orders to participate in the primary listing
market's closing process.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    This proposed change is intended to provide Equity Members with
consistent treatment of their orders when being routed to participate
in the primary listing market's opening or closing process. Doing so
would provide Equity Members with consistent order handling in both
situations and remove any potential confusion with regard to how their
orders would be handled when being routed pursuant to the PAC routing
option. Retaining and queuing orders received prior to the primary
listing market's order entry cut off time simplifies the Exchange's
order handling processes because, for example, the Exchange is able to
retain those orders for a period of time and more easily process
potential order modification or cancellation requests. The Exchange
also notes that use of the PAC routing option remains completely
voluntary and no Equity Member is required to route orders through the
Exchange and may choose other methods to access liquidity on other
trading centers.
    The proposal would not impede the national market system because it
is not designed to disrupt the ability of the primary listing market to
conduct their opening processes. The proposed rule change is similar to
existing routing options already provided by other equity exchanges
\18\ that route orders to participate in the primary listing market's
opening process at varying times. The Exchange understands other
exchange's similar routing options have not disrupted the primary
listing market's ability to conduct their opening process. The primary
listing markets are free to reject or cancel such orders should they
deem them to be inconsistent with their applicable rules.
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    \18\ See BZX Rule 11.13(b)(3)(N), Cboe EDGX Exchange, Inc.
(``EDGX'') Rule 11.11(g)(8) and Nasdaq Rule 4758(a)(1)(A)(x).
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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 this particular proposed change to the PAC routing option
would have no effect on competition because it does not believe the
proposed changes would impact whether Equity Members chose to use the
PAC routing option. The proposal simply seeks to provide for consistent
order handling by harmonizing the timeline by which it would route
orders coupled with the PAC routing option to the primary listing
market's opening process with the timeline it currently routes such
displayed Limit Orders to participate in the primary listing market's
closing process. Also, any orders entered after the time the Exchange
begins to route orders to the primary listing market's opening process,
but before market open, would continue to be routed upon receipt.
Therefore, the Exchange believes this proposed rule change would not
burden competition in any manner.
    Use of the Exchange's PAC routing option is voluntary and Equity
Members have numerous alternative mechanisms for order routing, the
changes will not impair the ability of Equity Members to use other
means to access the primary listing market's opening process. The PAC
routing option, in general, improves inter-market competition because
it allows the Exchange to provide another means by which market
participants may route orders to participate in the primary listing
market's opening, re-opening, or closing processes that the Exchange
believes is similar to that currently provided by other exchanges.\19\
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    \19\ See BZX Rule 11.13(b)(3)(N) (describing the ROOC routing
option), EDGX Rule 11.11(g)(8) (describing the ROOC routing option),
and Nasdaq Rule 4758(a)(1)(A)(x) (describing the LIST routing
option). See also supra note 14.

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    The Exchange also believes that the proposal will not impose any
burden on intra-market competition because it would be available to all
Equity Members. Any Equity Member that seeks to have their order routed
to participate in the primary listing market's opening process is free
to select the PAC routing option or seek to access those markets
through other means.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or 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 if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) \21\ thereunder.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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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    A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange states that
waiver of the operative delay would be consistent with the protection
of investors and the public interest because it would enable the
Exchange to implement the proposed rule change as soon as possible. The
Exchange states that this would allow the Exchange to retain and queue
orders received prior to the primary listing market's order entry cut
off time during the operative delay period, which would simplify the
Exchange's order handling processes in the near term by, for example,
enabling the Exchange to retain those orders for a period of time and
more easily process potential order modification or cancellation
requests. The Exchange also states that waiver of the operative delay
would provide Equity Members with immediate consistent treatment of the
orders that are to be routed to participate in the primary listing
market's opening and closing process, thereby removing the potential
for investor confusion during the operative delay period. Further, the
proposed functionality is similar to existing routing options already
provided by other equity exchanges. For these reasons, and because the
proposed rule change does not raise any novel regulatory issues, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposal operative upon filing.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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-2022-50 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-2022-50. 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-2022-50 and should be submitted on
or before December 13, 2022.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25356 Filed 11-21-22; 8:45 am]
BILLING CODE 8011-01-P