FR 2021-00811

MIAX PEARL, LLC, a trading exchange, submitted a proposal to the Securities and Exchange Commission (SEC) intending to amend its fee schedule related to trading equities, particularly focusing on Tape B securities. Effective January 1, 2021, the proposal seeks to increase the rebate for orders that add liquidity and decrease the fees for those that remove liquidity within this specific category. The aim is to incentivize more trading by offering better financial advantages compared to competing venues, thus encouraging increased participation on their platform.

General Summary of the Document

The document outlines the proposed changes to MIAX PEARL's fee structure, specifically targeting Tape B securities. It suggests a higher rebate for displayed orders that add liquidity, rising from $0.0032 to $0.0035 per share. Simultaneously, there is a proposal to reduce fees for removing liquidity in these securities from $0.0028 to $0.0027 per share. The overarching goal of these adjustments is to compel more market participants to use MIAX PEARL for their trading activities by making their offerings more competitive.

Significant Issues or Concerns

Certain complexities within the document might present challenges for the general public seeking clarity on these changes. The detailed financial terminology, along with specific legal and regulatory citations, requires a level of expertise in securities regulation that not all readers may possess. Furthermore, the document emphasizes the changes on Tape B securities without providing sufficient rationale for excluding Tapes A and C. This lack of clarity could leave stakeholders uncertain about the broader impact on these other categories.

Impact on the Public

While the changes are designed to benefit the wider market by improving liquidity and potentially tightening trade spreads, the document does not discuss how these benefits might translate differently for various segments, such as individual versus institutional investors. The general public may not readily see the direct impact of such fee adjustments unless they significantly alter overall market performance or result in price changes for traded securities.

Effects on Specific Stakeholders

For firms and individuals actively engaging in trading Tape B securities, these fee adjustments could offer noticeable financial benefits by reducing the costs associated with trading, thereby potentially increasing profitability. Institutional investors might find the incentives more appealing and thus reallocate their trading activities towards MIAX PEARL, potentially impacting trading volumes and market behavior on other exchanges. Conversely, competitors may need to reevaluate their own fee structures to remain attractive, prompting possible changes across the broader marketplace.

In conclusion, MIAX PEARL's proposed amendments to its fee schedule reflect an effort to bolster competitiveness within the trading landscape. While the intended outcomes aim to enhance participation and market efficiency, the document's technical nature and limited scope on certain impacts suggest a need for broader analysis and understanding.

The document primarily focuses on changes to the fee schedule for MIAX PEARL, LLC, specifically regarding trading in certain securities, known as Tape B securities. These changes involve adjustments to rebates and fees that directly impact how trades are conducted and priced on the exchange.

In terms of financial allocations, the document outlines a proposed rule change to increase the rebate given to market participants who place displayed orders that add liquidity to Tape B securities at or above $1.00. This rebate is being raised from $0.0032 to $0.0035 per share. The intention behind this increase is to encourage more trading activity in this category of securities by incentivizing participants with better financial compensation for bringing liquidity to the trading venue.

Conversely, for orders that remove liquidity from Tape B securities, the fee is set to decrease from $0.0028 to $0.0027 per share. This reduction aims to encourage traders to engage in removing liquidity from the market, potentially balancing the inflow of orders and supporting the dynamic nature of stock trading.

These changes in financial references relate closely to identified issues within the document. One such issue is the complexity and specificity of financial terminology, which may not be easily understood by those unfamiliar with securities regulation. Terms like "rebate" and "liquidity" are central to this discussion, yet they require clarification for the general public. Essentially, a rebate here is a small financial return given to participants for engaging in order types that benefit the exchange's operations by increasing market activity or liquidity.

Another issue pertains to the focus on Tape B securities without indicating why Tapes A and C are not similarly affected by new fee proposals. The document highlights that rebates and fees for Tapes A and C will remain unchanged at $0.0032 and $0.0028 per share respectively. This choice underscores the Exchange's targeted strategy to boost transactions in Tape B specifically, possibly reflecting strategic or competitive factors invisible to an audience not acquainted with market structures.

Furthermore, financial references are made to justify the equitable nature of fee changes. The document claims that these amendments are not unfairly discriminatory since they apply uniformly across all participants, supporting the principles of fairness in competitive financial markets. However, there is a lack of detailed examination regarding the potential impact on individual versus institutional investors, a point which could aid in understanding the broader implications of these financial adjustments.

Overall, while the financial references within the document propose calculated changes aimed at enhancing trading activity, they simultaneously spotlight areas needing further elucidation for widespread comprehension and informed scrutiny.