Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Both an Early and Late Trading Session on its Equity Trading Platform

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on October 3, 2024, MIAX PEARL, LLC (“MIAX Pearl” or “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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to adopt both an early and late trading session on its equity trading platform (referred to herein as “MIAX Pearl Equities”).

The text of the proposed rule change is available on the Exchange's website at https://www.miaxglobal.com/markets/us-equities/pearl-equities/rule-filings, 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 currently operates one trading session which operates during Regular Trading Hours, i.e., 9:30 a.m. until 4:00 p.m. Eastern Time. Exchange Rule 2600(a) provides that Equity Members may enter orders 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). Exchange Rule 2600(a) further provides that orders entered between 7:30 a.m. and 9:30 a.m. Eastern Time are not eligible for execution until the start of Regular Trading Hours.

The Exchange now proposes to expand its hours of operations by adopting both an Early and Late Trading Session. The proposed Early Trading Session would operate from 4:00 a.m. until 9:30 a.m. Eastern Time. Then the existing Regular Trading Hours would follow, which currently operates from 9:30 a.m. until 4:00 p.m. Eastern Time. Within Regular Trading Hours, the Exchange also operates the existing Regular Trading Session, which operates from the completion of the Exchange's Opening Process described in Exchange Rule 2615 until 4:00 p.m. Eastern Time. The proposed Late Trading Session would follow and operate from 4:00 p.m. until 8:00 p.m. Eastern Time.

From the Equity Members' operational perspective, the Exchange's goal is to permit trading for those that choose to trade, without imposing burdens on those that do not. Thus, for example, the Exchange will not require any Equity Member to participate in the Early or Late Trading Sessions, including not requiring Equities Market Makers to make two-sided markets outside of Regular Trading Hours. The Exchange will minimize Equity Members' preparation efforts to the greatest extent possible by allowing Equity Members to trade during the Early and Late Trading Sessions with the same equipment, connectivity, order types, and data feeds they currently use from 9:30 a.m. Eastern Time onwards.

The Exchange will route orders to away markets during the Early and Late Trading Sessions, just as it does today during the Regular Trading Session. All routing strategies set forth in Exchange Rule 2617(b) will remain otherwise unchanged, performing the same instructions they do during Regular Trading Hours today. Order processing will operate beginning at 4:00 a.m. just as it does today beginning at 9:30 a.m. There will be no changes to the ranking, display, and execution processes or rules. Trades executed outside of Regular Trading Hours will be reported to the appropriate network processor with the “.T” modifier, just like other exchanges report trades during the same timeframes. The Exchange's commitment to high-quality regulation at all times will extend to the Early and Late Trading Sessions. The Exchange will offer all surveillance coverage currently performed by the Exchange's surveillance systems, which will launch by the time trading starts at 4:00 a.m.

To accommodate the proposed Early and Late Trading Sessions, the Exchange proposes to amend its rules to define the Early and Late Trading Sessions, adopt new Time-in-Force (“TIF”) instructions, and modify the operation of its Opening Process. Specifically, the Exchange proposes to amend Exchange Rules 1901, Definitions, 2600, Hours of Trading and Trading Days, 2614, Orders and Order Instructions, 2615, Opening Process for Equity Securities, 2617, Order Execution and Routing, 2618, Risk Settings and Trading Risk Metrics, 2621, Clearly Erroneous Executions, and 2900, Unlisted Trading Privileges. The Exchange also proposes to adopt new Exchange Rule 2120, Customer Disclosures, regarding trading during the Early and Late Trading Sessions. Each change is based on the rules of other national equity exchanges and, therefore, do not present any new or novel issues not already considered by the Commission.

Exchange Rule 1901, Definitions

Exchange Rule 1901, Definitions, would be amended to include definitions of the terms “Early Trading Session” and “Late Trading Session”. Exchange Rule 1901 would define the “Early Trading Session” as “the time between 4:00 a.m. and 9:30 a.m. Eastern Time.” Exchange Rule 1901 would also define the “Late Trading Session” as “the time between 4:00 p.m. and 8:00 p.m. Eastern Time.” The Exchange also proposes to amend the definition of the “Regular Trading Session” to account for the proposed re-adoption of the Contingent Open under Exchange Rule 2615 and described in more detail below. The amended definition of the term “Regular Trading Session” would be “the time between the completion of the Opening Process or Contingent Open as defined in Exchange Rule 2615 and 4:00 p.m. Eastern Time.” The change is described below under the section entitled, Exchange Rule 2615, Opening Process for Equity Securities.

Exchange Rules 2600, Hours of Trading

Exchange Rule 2600 sets forth when orders may be entered into the System and during which timeframes orders are eligible for execution. Exchange Rule 2600 currently provides that orders 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). Today, the Exchange begins to accept orders at 7:30 a.m. Eastern Time and Exchange Rule 2600 provides that orders entered between 7:30 a.m. and 9:30 a.m. Eastern Time are not eligible for execution until the start of Regular Trading Hours.

The Exchange proposes to amend Exchange Rule 2600 to account for the addition of the Early and Late Trading Sessions. First, the Exchange proposes to begin to accept orders at 3:30 a.m. Eastern Time. The Exchange, therefore, proposes to amend Exchange Rule 2600 to expand the timeframe during which orders may be entered into the System from 7:30 a.m. until 4:00 p.m. Eastern time to 3:30 a.m. until 8:00 p.m. Eastern Time (or such earlier time as may be designated by the Exchange on a day when MIAX Pearl Equities closes early).

Amended Exchange Rule 2600 would also provide that orders entered between 3:30 a.m. and 4:00 a.m. Eastern Time would not be eligible for execution until the start of the Early Trading Session or Regular Trading Session, depending on the TIF selected by the User. Exchange Rule 2600(a) would also provide that at the commencement of the Early Trading Session, orders entered between 3:30 a.m. and 4:00 a.m. Eastern Time will become eligible for execution and will be handled in time sequence, beginning with the order with the oldest time stamp, and placed on the MIAX Pearl Equities Book, routed, cancelled, or executed in accordance with the terms of the order. Lastly, Exchange Rule 2600(a) provides that the Exchange will not accept Intermarket Sweep Orders (“ISOs”), and all orders with a TIF of Immediate-or-Cancel (“IOC”) prior to 9:30 a.m. Eastern Time. The Exchange proposes to amend this provision in Exchange Rule 2600(a) to account for the Early Trading Session and to include additional order types and modifiers. Therefore, as amended, Exchange Rule 2600(a) would provide that the Exchange would not accept all orders with a TIF instruction of Fill-or-Kill (“FOK”), in addition to ISOs and orders with a TIF instruction of IOC, prior to 4:00 a.m. Eastern Time. The Exchange also proposes to amend Exchange Rule 2600(a) to specify that it would not accept Market Orders (other than Market Orders that include a TIF of RHO that are to be routed to the primary listing exchange's opening process pursuant to the PAC routing option under Rule 2617(b)(5)(ii)) prior to 9:30 a.m. Eastern Time. This is because Market Orders would only be eligible to participate in the Regular Trading Session and the Exchange does not think it is appropriate to accept and hold Market Orders prior to the commencement of the Regular Trading Session due to the nature of the orders type— i.e., it seeks an immediate execution at the then available PBBO or better. During the Early Trading Session, the Exchange would continue to accept Market Orders that include a TIF of RHO that are to be routed to the primary listing exchange's opening process pursuant to the PAC routing option under Rule 2617(b)(5)(ii). This is consistent with current functionality where such Market Orders are routed to the primary listing market's opening process upon receipt and are not eligible for execution because the Exchange currently does not offer pre-market trading. Adding this provision regarding Market Orders that are coupled with both a TIF of RHO and the PAC routing option adds clarity to the Exchange's Rules and would avoid any potential confusion by market participants.

Exchange Rule 2614, Orders and Order Instructions

The Exchange proposes to amend Exchange Rule 2614 to account for the addition of the proposed Early and Late Trading Sessions, adopt new TIF instructions, and to describe which TIF instructions are available with each order type.

Time-in-Force Instructions

The Exchange currently offers two TIF instructions, IOC and RHO, the operation of each are described under Exchange Rule 2614(b)(1) and (2), respectively. Equity Members entering orders into the System may designate such orders to remain in effect and available for display and/or potential execution for varying periods of time. Unless cancelled earlier, once these time periods expire, the order (or unexecuted portion thereof) is cancelled. In sum, IOC is a TIF instruction that provides for the order to be executed in whole or in part as soon as such order is received. The portion not executed immediately on the Exchange or another Trading Center is treated as cancelled and is not posted to the MIAX Pearl Equities Book. RHO is a TIF instruction that designates the order for execution only during Regular Trading Hours, which includes the Opening Process for equity securities.

The Exchange now proposes to add the following four additional TIF instructions under Exchange Rule 2614(b), Time-in-Force Instructions, to account for the addition of the Early and Late Trading Sessions: Day, FOK, Good-`til Time (“GTT”), and Good-`til Extended Day (“GTX”). Each of these proposed TIF instructions are described as follows:

• Day. Exchange Rule 2614(b)(3) would describe the Day TIF as an instruction the User may attach to an order stating that an order to buy or sell which, if not executed, expires at the end of Regular Trading Hours. Exchange Rule 2614(b)(3) would further provide that any Day order entered into the System before the opening for business on the Exchange as determined pursuant to Exchange Rule 2600, or after the closing of Regular Trading Hours, will be rejected.
• FOK. Exchange Rule 2614(b)(4) would describe the FOK TIF as an instruction the User may attach to an order stating that the order is to be executed in its entirety as soon as it is received and, if not so executed, cancelled. Exchange Rule 2614(b)(4) would further provide that an order with a FOK instruction is not eligible for routing away pursuant to Exchange Rule 2617(b).
• GTT. Exchange Rule 2614(b)(5) would describe the GTT TIF as an instruction the User may attach to an order specifying the time of day at which the order expires. Exchange Rule 2614(b)(5) would further provide that any unexecuted portion of an order with a TIF instruction of GTT will be cancelled at the expiration of the User's specified time, which can be no later than the close of the Late Trading Session.
• GTX. Exchange Rule 2614(b)(5) would describe the GTX TIF as an instruction the User may attach to an order to buy or sell which, if not executed, will be cancelled by the close of the Late Trading Session.

Order Types and New Time-in-Force Instructions

The Exchange currently offers the following order types, Limit Orders, Market Orders, and Pegged Orders. Pegged Orders consist of Primary Peg Orders and Midpoint Peg Orders. Under the description of each order type in Exchange Rule 2614(a), the Exchange enumerates which TIF instructions that order type may be combined with. The Exchange proposes to amend these provisions in the description of each order type under Exchange Rule 2614(a) to account for the proposed TIF instructions described above as follows:

• Limit Orders. Exchange Rule 2614(a)(1)(ii) currently provides that a Limit Order may include a TIF of IOC or RHO. As amended, Exchange Rule 2614(a)(1)(ii) would also provide that a Limit Order may include a TIF of FOK, Day, GTT, or GTX. Exchange Rule 2614(a)(1)(ii) also currently provides that a Limit Order is eligible to participate in the Regular Trading Session. The Exchange proposes to amend this sentence of Exchange Rule 2614(a)(1)(ii) to specify that a Limit Order would also be eligible to participate in the Early and Late Trading Sessions.

• Market Orders. Exchange Rule 2614(a)(2)(ii) currently provides that a Market Order may include a TIF of IOC. A Market Order may only include a TIF of RHO when it is to be routed pursuant to the PAC routing option under Rule 2617(b)(5)(ii). As amended, Exchange Rule 2614(a)(2)(ii) would also provide that a Market Order may include a TIF of FOK. Market Orders would not be able to include a TIF of Day, GTT, or GTX. Exchange Rule 2614(b)(5)(ii) also currently provides that a Market Order is eligible to participate in the Regular Trading Session. Market Orders would not be eligible to participate in the Early and Late Trading Sessions. Therefore, the Exchange proposes to amend this sentence of Exchange Rule 2614(b)(5)(ii) to specify that a Market Order is only eligible to participate in the Regular Trading Session.

• Pegged Orders. Exchange Rule 2614(a)(3)(iii) currently provides that a Pegged Order may include a TIF of IOC or RHO. As amended, Exchange Rule 2614(a)(3)(iii) would also provide that a Pegged Order would also be able to include a TIF of FOK, Day, GTT, or GTX. Exchange Rule 2614(a)(3)(iii) also currently provides that a Pegged Order is eligible to participate in the Regular Trading Session. The Exchange proposes to amend this sentence of Exchange Rule 2614(a)(3)(iii) to specify that a Pegged Order would also be eligible to participate in the Early and Late Trading Sessions.

Primary Peg Orders During Early and Late Trading Session

The Exchange proposes to amend Exchange Rule 2614(a)(3)(iii) to restrict the TIF instruction that a displayed Primary Pegged Order with a Primary Offset Amount may have to RHO, or if entered during Regular Trading Hours, a TIF instruction of RHO or the proposed TIF instruction of Day. Exchange Rule 2614(a)(3)(i)(B) describes a Pegged Order as a Limit Order to buy (sell) that is assigned a working price pegged to the Protected Best Bid (Protected Best Offer), subject to its limit price. Exchange Rule 2614(a)(3)(i)(B)3. states that a User may, but is not required to, select an offset equal to or greater than one minimum price variation (“MPV”) for the security, as defined in Exchange Rule 2612 (“Primary Offset Amount”). The Primary Offset Amount for a displayed Primary Pegged Order to buy (sell) must result in the working price of such order being inferior to or equal to the PBB (PBO), i.e., result in the price of such order being inferior to or equal to the inside quote on the same side of the market.

Other exchanges have observed that displayed Primary Pegged Orders with non-aggressive Primary Offset Amounts that remain active after the end of Regular Trading Hours may be pegged to and repriced off of each other during extended hours trading when no other reference price is available due to orders expiring or being cancelled at 4:00 p.m. Eastern Time. To prevent this from occurring, the Exchange proposes to restrict the TIF instruction that a displayed Primary Pegged Order with a Primary Offset Amount may have to RHO, or, if entered during Regular Trading Hours, a TIF instruction of Day or RHO. Doing so would cause displayed Primary Pegged Orders resting on the MIAX Pearl Equities Book to be eligible for execution from 9:30 a.m. to 4:00 p.m. Eastern Time. Limiting the TIF instructions to RHO and Day only for displayed Primary Pegged Orders with Primary Offset Amounts would ensure that these orders are eligible for execution during Regular Trading Hours, which is the most liquid portion of the trading day, thereby significantly decreasing the possibility that such orders may re-price off similar orders entered on away exchanges in the absence of additional liquidity at the NBB or NBO. The proposed rule change would cause displayed Primary Pegged Orders with Primary Offset Amounts to expire at the end of Regular Trading Hours when a vast majority of orders expire and do not participate in extended hours trading. As amended, Exchange Rule 2614(a)(3)(iii) would be amended to state that a displayed Primary Pegged Order with a Primary Offset Amount shall only include a TIF of RHO or, if entered during Regular Trading Hours, a TIF instruction of Day or RHO. Users may enter displayed Primary Pegged Orders with Primary Offset Amounts and TIF instructions of RHO beginning at 3:30 a.m. Eastern Time. However, those orders would not be eligible for execution until 9:30 a.m. Eastern Time, the start of Regular Trading Hours. Displayed Primary Peg orders with Primary Offset Amounts and a TIF of Day will be rejected if entered prior to 9:30 a.m. Eastern Time, the start of Regular Trading Hours. Primary Pegged orders that do not include a Primary Offset Amount or that are not displayed on the MIAX Pearl Equities Book would have no restrictions on the TIF instructions that may be attached to the order.

ISOs and New Time-in-Force Instructions

ISO is an order instruction that may be attached to an incoming Limit Order. The operation of ISOs will be described in proposed Exchange Rule 2614(d) and is consistent with the description of the ISO exception in Rules 600(b)(30) and 611(b)(5) of Regulation NMS. Proposed Exchange Rule 2614(d) provides that the System will accept incoming ISOs (as such term is defined in Rule 600(b)(31) of Regulation NMS).

To be eligible for treatment as an ISO, the order must be: (A) a Limit Order; (B) marked “ISO”; and (C) the User entering the order must simultaneously route one or more additional Limit Orders marked “ISO,” as necessary, to away Trading Centers to execute against the full displayed size of any Protected Quotation for the security as set forth below. Such orders, if they meet the requirements of the foregoing sentence, may be immediately executed at one or multiple price levels in the System without regard to Protected Quotations at away Trading Centers consistent with Regulation NMS ( i.e., may trade through such quotations and will not be rejected or cancelled if it will lock, cross, or be marketable against an away Trading Center).

Exchange Rule 2614(d)(1) provides that an ISO may include a TIF of IOC or RHO and the operation of an ISO will differ depending on the TIF selected. An ISO that includes a TIF of IOC will immediately trade with contra-side interest on the MIAX Pearl Equities Book up to its full size and limit price and any unexecuted quantity will be immediately cancelled. An ISO that includes a TIF of RHO, if marketable on arrival, will also immediately trade with contra-side interest on the MIAX Pearl Equities Book up to its full size and limit price. However, any unexecuted quantity of a RHO ISO will be displayed at its limit price on the MIAX Pearl Equities Book and may lock or cross a Protected Quotation that was displayed at the time of arrival of the RHO ISO. The Exchange proposes to amend Exchange Rule 2614(d)(1) to provide that an ISO may include a TIF of RHO, Day, GTT, or GTX.

Exchange Rule 2614(d)(1) would also provide that incoming ISOs would not be able to include a TIF instruction of FOK. The Exchange also proposes to amend Exchange Rule 2614(d)(1) to provide that an incoming ISO with a Displayed, Post Only, and TIF instruction of RHO, Day, GTT, or GTX will be cancelled without execution if, when entered, it is immediately marketable against a displayed order resting on the MIAX Pearl Equities Book unless such order removes liquidity pursuant to Rule 2614(c)(2). This provision is consistent with current Exchange functionality that prevents a displayed locked or crossed market. This provision would provide additional specificity regarding the operation of incoming ISOs with a Displayed, Post Only, and TIF instruction of Day, GTT, or GTX that is also similar to other exchanges' rules.

Exchange Rule 2614(d)(1)(i) provides that a User entering an ISO with a TIF of IOC represents that such User has simultaneously routed one or more additional Limit Orders marked “ISO,” if necessary, to away Trading Centers to execute against the full displayed size of any Protected Quotation for the security with a price that is superior to the ISO's limit price. Exchange Rule 2614(d)(1)(ii) provides that a User entering an ISO with a TIF of RHO makes the same representation but further represents that it simultaneously routed one or more additional Limit Orders marked “ISO,” if necessary, to away Trading Centers to execute against the full displayed size of any Protected Quotation for the security with a price that is equal to its limit price. The Exchange proposes to amend Exchange Rule 2614(d)(1)(ii) to include ISOs with a TIF instruction of Day, GTT, or GTX. Orders with a TIF of Day or RHO both expire at the end of Regular Trading Hours. Because the Exchange did not initially offer a TIF of Day, it proposed to handle ISOs with a TIF of RHO the same as Day ISOs are handled on other equity exchanges. The Exchange now proposes to amend Exchange Rule 2614(d)(1)(ii) to include the TIF of Day.

The Exchange also proposes to amend Exchange Rule 2614(d)(1)(ii) to include the TIF instructions of GTT or GTX. Each of these TIF instructions are similar to Day and RHO because they each allow an order to rest on the MIAX Pearl Equities Book for a period of time. While both Day and RHO expire at the end of Regular Trading Hours, GTX allows for the order to expire at the end of the Late Trading Session at 8:00 p.m. Eastern Time. Meanwhile, GTT allows for a User to select a time at which the order would expire, which may be before or after the end of Regular Trading Hours but must be during the same trading day. A User entering an ISO with a TIF of Day, RHO, GTT, or GTX would make the same representations, i.e., that it simultaneously routed one or more additional Limit Orders marked “ISO,” if necessary, to away Trading Centers to execute against the full displayed size of any Protected Quotation for the security with a price that is equal to its limit price. The portion of the ISO with a TIF of Day, GTT, or GTX that is not executed upon entry, would rest on the MIAX Pearl Equities Book like an ISO with a TIF of RHO may do so today (or an ISO with a TIF of Day does so on other equity exchanges).

Exchange Rule 2615, Opening Process for Equity Securities

The Exchange will not offer an opening process at 4:00 a.m. Eastern Time. Instead, at 4:00 a.m., the System will “wake up” by loading all open trading interest entered after 3:30 a.m. Eastern Time in time sequence, beginning with the order with the oldest timestamp onto the MIAX Pearl Equities Book. Such orders are then cancelled, executed, or routed to away Trading Centers in accordance with the terms of the order. Also at 4:00 a.m., the Exchange will open the execution system and accept new eligible orders. Equity Members will be permitted to enter orders beginning at 3:30 a.m. Eastern Time. Market Makers will be permitted, but not required, to open their quotes beginning at 4:00 a.m. Eastern Time in the same manner they open their quotes today beginning at 9:30 a.m. Eastern Time.

Exchange Rule 2615(b) provides that during the Opening Process, the Exchange attempts to match eligible buy and sell orders at the midpoint of the NBBO. All orders eligible to trade at the midpoint are processed in time sequence, beginning with the order with the oldest timestamp. The Opening Process concludes when no remaining orders, if any, can be matched at the midpoint of the NBBO. At the conclusion of the Opening Process, the unexecuted portion of orders that were eligible to participate in the Opening Process are placed on the MIAX Pearl Equities Book in time sequence, cancelled, executed, or routed to away Trading Centers in accordance with the terms of the order.

Pursuant to Exchange Rule 2615(c), the Exchange calculates the midpoint of the NBBO as follows. When the primary listing exchange is the New York Stock Exchange LLC (“NYSE”) or NYSE American LLC (“NYSE American”), the Opening Process is priced at the midpoint of the: (i) first NBBO subsequent to the first reported trade and first two-sided quotation on the primary listing exchange after 9:30:00 a.m. Eastern Time; or (ii) then prevailing NBBO when the first two-sided quotation is published by the primary listing exchange after 9:30:00 a.m. Eastern Time, but before 9:45:00 a.m. Eastern Time if no first trade is reported by the primary listing exchange within one second of publication of the first two-sided quotation by the primary listing exchange. For any other primary listing exchange, such as The Nasdaq Stock Market LLC (“Nasdaq”), NYSE Arca, LLC (“NYSE Arca”), and Cboe BZX, the Opening Process is priced at the midpoint of the first NBBO subsequent to the first two-sided quotation published by the primary listing exchange after 9:30:00 a.m. Eastern Time.

Where a security has not begun to trade on the primary listing market, a Contingent Open serves an important purpose of prescribing an end to the early trading session and beginning of the regular trading session on that non-primary listing exchange. A Contingent Open allows a non-primary listing exchange that provides an early trading session to transition to a regular trading session in a timely manner where a security has not opened for trading on the primary listing market.

Now that the Exchange proposes to offer an Early Trading Session, the Contingent Open would serve as a transition from the Early Trading Session to the Regular Trading Session. Exchange Rule 2615 previously provided for a Contingent Open. Because it did not previously offer an early trading session, the Exchange proposed in December 2023 to remove references to the Contingent Open from its Rules. In sum, the Exchange proposes to reverse those changes it made to its Rules by amending Exchange Rule 2615(d) to provide for a Contingent Open at 9:45 a.m. Eastern Time. Exchange Rule 2615(d) would again describe the Contingent Open and provide that if the conditions to establish the price of the Opening Process described above do not occur by 9:45:00 a.m. Eastern Time, the Exchange will handle all orders in time sequence, beginning with the order with the oldest timestamp, and be placed on the MIAX Pearl Equities Book, cancelled, executed, or routed to away Trading Centers in accordance with the terms of the order. The earlier version of the Contingent Open that the Exchange removed in December 2023 provided that the Exchange will conduct a Contingent Open and match all orders eligible to participate in the Opening Process at the midpoint of the then prevailing NBBO. Instead, due to the likely lack of liquidity in the security and other factors that would cause it to not open on the primary listing exchange, the Exchange proposes to simply feed any orders it may have received in time sequence onto the MIAX Pearl Equities Book, just as it proposes to do at 4:00 a.m. Eastern Time when the Early Trading Session would begin.

Exchange Rule 2615(d) would further provide that if the midpoint of the NBBO is not available for the Contingent Open, all orders are handled in time sequence, beginning with the order with the oldest timestamp, and are placed on the MIAX Pearl Equities Book, cancelled, executed, or routed to away Trading Centers in accordance with the terms of the order. The Exchange also proposes to make a corresponding change to reinsert a reference to the Contingent Open in the definition of Regular Trading Session in Exchange Rule 1901.

Next, the Exchange proposes to describe in Exchange Rule 2615 which orders may be eligible for execution in the time between the start of Regular Trading Hours at 9:30 a.m. and the Exchange's Opening Process or Contingent Opening Process. During this time, ISOs designated as RHO and all other orders without a TIF instruction of RHO may execute against eligible Early Trading Session contra-side interest resting on the MIAX Pearl Equities Book in the time period between the start of 9:30 a.m. Eastern Time and the Exchange's Opening Process or a Contingent Open. Any unexecuted portion of an ISO that is designated RHO will be converted into a non-ISO and be queued for participation in the Opening Process. This provision would be set for under Exchange Rule 2615(a)(1) and the subsequent paragraphs would be renumbered accordingly.

Lastly, the Exchange proposes to adopt Exchange Rule 2615(e)(1)(iii) to describe how the Exchange would re-open a security following a halt during the Early and Late Trading Sessions. Specifically, proposed Exchange Rule 2615(e)(1)(iii) would provide that during the Early Trading Session and Late Trading Session, the Re-Opening Process will occur at the midpoint of the NBBO after one second has passed following: (i) for Tape A securities, the Exchange's receipt of the first NBBO following the resumption of trading after a halt, suspension, or pause; or (ii) for Tape B and C securities, the publication of the first two-sided quotation by the listing exchange following the resumption of trading after a halt, suspension, or pause. The Exchange believes it is reasonable to have different standards for Tape A securities that Tape B and C securities for the following reason. Tape A securities are listing on the NYSE, which is only open during Regular Trading Hours and, therefore, the Exchange believes it is appropriate to look for the first NBBO, which may comprise of quotes from other exchanges that are open for trading outside of Regular Trading Hours. Meanwhile, Tape B and C securities are listing on exchanges that engage in trading outside of Regular Trading Hours and may disseminate a two-sided quotation that may be used to calculate the midpoint of the NBBO. This proposed rule change is identical to the rules of at least one other national securities exchange and would provide clarity to market participants on how the Exchange would re-open a security that was halted during the Early and Late Trading Sessions.

Exchange Rule 2617, Order Execution and Routing

Regulation NMS Compliance

Exchange Rule 2617(a)(2), Compliance with Regulation NMS and Trade-Through Protections, includes subparagraph (i), which provides that for any execution to occur during Regular Trading Hours, the price of an order to buy (sell) must be equal to or lower (greater) than the PBO (PBB), unless the order is marked ISO or the execution falls within another exception set forth in Rule 611(b) of Regulation NMS. To address the addition of the Early and Late Trading Sessions, the Exchange proposes to add subparagraph (ii) to Exchange Rule 2617(a)(2). Proposed subparagraph (ii) to Exchange Rule 2617(a)(2) would be identical to the rules of other national securities exchanges, and provide for any execution to occur during the Early Trading Session and Late Trading Session, the price must be equal to or better than the highest Protected Bid or lowest Protected Offer, unless the order is marked ISO or a Protected Bid is crossing a Protected Offer. The addition of Exchange Rule 2617(a)(2)(ii) would align the Exchange's rules with other national securities exchanges and provide investors certainty that the Exchange would execute orders consistent with Regulation NMS's Trade Through protections during the Early and Late Trading Sessions.

PAC Routing Option

The Exchange offers the PAC routing option that enables an Equity Member to designate that their order be routed to the primary listing market to participate in the primary listing market's opening, re-opening or closing process. Specifically, Exchange Rule 2617(b)(5)(ii) describes PAC as a routing option for Market Orders and displayed Limit Orders designated with a TIF of 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 if received before the opening, re-opening, or closing process of such market. Exchange Rule 2617(b)(5)(B)2. provides that if a Limit Order designated as IOC is entered after the security has opened on the primary listing market, the Exchange will check the System for available shares and then route the remaining shares pursuant to the PI routing option described under Exchange Rule 2617(b)(5)(iii). Any shares that remain unexecuted after routing will be cancelled in accordance with the terms of the order. The Exchange proposes to amend Exchange Rule 2617(b)(5)(B)2. to describe how the Exchange would handle Limit Orders designated as IOC and coupled with the PAC routing option received during the Early and Late Trading Session. Specifically, the Exchange proposes to handle such Limit Orders as it would if not coupled with the PAC routing option by checking the System for any available shares and any shares that remain unexecuted would be cancelled in accordance with the terms of the order. Limit Orders with a time-in-force of IOC that are not designated as “Do Not Route” pursuant to Exchange Rule 2614(c)(1) and that cannot be executed when reaching the Exchange will be eligible for routing away pursuant to Exchange Rule 2617(b). Exchange Rule 2617(b)(5)(B)2. would, therefore, be amended to provide that if a Limit Order designated as IOC is entered during the Early or Late Trading Sessions, the Exchange will check the System for available shares and any shares that remain unexecuted will be routed pursuant to Exchange Rule 2617(b) (4)(ii) or cancelled in accordance with the terms of the order.

Amendments to Risk Controls

To help Equity Members manage their risk, the Exchange currently offers the Trading Collar, Limit Order Price Protection, and other risk controls that authorize the Exchange to take automated action if certain conditions are met. Such risk controls provide Equity Members with enhanced abilities to manage their risk when trading on the Exchange. All of the Exchange's existing risk controls would be available during the proposed Early and Late Trading Sessions. To account for the different trading environment that occurs during trading outside of Regular Trading Hours described above, the Exchange proposes to adopt one new risk control and to augment the operation of Limit Order Price Protection under Exchange Rule 2614(a)(1)(ix) and Trading Collars under Exchange Rule 2618(b)(1) to provide Equity Members with the proper tools to manage their risk and control their order flow during these times. Each of these changes are described below.

Trading Collar

The Exchange prevents all incoming orders, including those marked as Intermarket Sweep Orders (“ISO”), from executing at a price outside the Trading Collar price range as described in Exchange Rule 2618(b). The Trading Collar prevents buy orders from trading or routing at prices above the collar and prevents sell orders from trading or routing at prices below the collar.

The Exchange's default behavior is to calculate the Trading Collar price range for a security by applying the numerical guidelines for Clearly Erroneous Executions or a specified dollar value established by the Exchange. The result is added to the Trading Collar Reference Price to determine the Trading Collar Price for buy orders, while the result is subtracted from the Trading Collar Reference Price to determine the Trading Collar Price for sell orders. Exchange Rule 2618(b)(1)(B) provides that the Trading Collar Reference Price is equal to the following: (i) consolidated last sale price disseminated during the Regular Trading Hours on trade date; or (ii) if (i) is not available, the prior day's Official Closing Price identified as such by the primary listing exchange, adjusted to account for events such as corporate actions and news events. Exchange Rule 2618(b)(1)(F) provides Equity Members the ability to override the Exchange's default behavior and provides that Equity Members may select a dollar value lower, higher, or equal to the Exchange-specified percentages and dollar value on an order-by-order basis. In other words, Equity Members may select a dollar value equal to, more, or less conservative than the Exchange's specified percentages and dollar value.

The Exchange proposes to amend Exchange Rule 2618(b)(1)(B) to update the hierarchy of reference prices used by the Exchange for Trading Collars due to the adoption of the Early and Late Trading Sessions. Each of the below proposed changes are based on the rules of another national securities exchange. First, the Exchange proposes to amend Exchange Rule 2618(b)(1)(B) to provide that the Trading Collar Reference Price is equal to the most current of the references prices outlined in the Rule. As a result of this change, the Exchange proposes to remove language from current Exchange Rule 2618(b)(1)(B)(ii) that provides that the prior day's Official Closing Price identified as such by the primary listing exchange, adjusted to account for events such as corporate actions and news events, would be used where the consolidated last sale price disseminated during the Regular Trading Hours on trade date under Exchange Rule 2618(b)(1)(B)(i) is unavailable. The Exchange notes that this change does not amend existing functionality because the sequence of reference prices to be used to calculate the Trading Collar would remain the same and the proposed language is simply intended to align the Exchange's Rule with that of another national securities exchange. This proposed change provides clarity that the Exchange would use a reference price that is most current and reflects the trading behavior of the security at the time the Trading Collar is to be applied.

The Exchange proposes to amend the current hierarchy to add an additional data point that may be used as a reference price that is used by at least one other exchange that offers Limit Order Price Protection and trading outside of Regular Trading Hours. Specifically, the Exchange proposes to amend Exchange Rule 2618(b)(1)(B) to add new paragraph (ii) to provide that the Exchange may use the last trade price for the security on trade date that occurred outside of Regular Trading Hours (Form T, as communicated by the relevant SIP) on trade date which other than for the Form T designation would have been considered a valid last sale price as the reference price. Current Exchange Rule 2618(b)(1)(B)(ii) would be renumbered to paragraph (iii) to reflect the above addition and continue to provide that the prior day's Official Closing Price identified as such by the primary listing exchange, adjusted to account for events such as corporate actions and news events may be used as a reference price.

The Exchange also proposes to make a related change to Exchange Rule 2618(b)(1)(A). Exchange Rule 2618(b)(1)(A) describes when the Trading Collar would not be applied and specifically provides that, upon entry, any portion of an order to buy (sell) that would execute at a price above (below) the Trading Collar price range is cancelled, unless: (i) the prior day's Official Closing Price identified as such by the primary listing exchange, i.e., the price listed under Exchange Rule 2618(b)(1)(B)(ii i ) described above, is to be applied and a regulatory halt has been declared by the primary listing market during that trading day; (ii) or if no consolidated last sale price has been disseminated following the conclusion of a regulatory halt declared by the primary listing market on that trading day. The Exchange proposes to amend Exchange Rule 2618(b)(1)(A)(ii) to further provide that, upon entry, any portion of an order to buy (sell) that would execute at a price above (below) the Trading Collar Price would not be cancelled where no last trade price for the security that occurred outside of Regular Trading Hours (Form T, as communicated by the relevant SIP) on trade date, which other than for the Form T designation would have been considered a valid last sale price, has been disseminated following the conclusion of a regulatory halt declared by the primary listing market on that trading day. This proposed change would ensure that the Trading Collar is not applied where the applicable Trading Collar Reference Price is unavailable. Again, each of the above changes are based on the rules of another national securities exchange.

Exchange Rule 2618(b)(1)(E) sets forth the numerical guidelines used in the Trading Collar Price calculation to account for the proposed Early and Late Trading Sessions. Specifically, Exchange Rule 2618(b)(1)(E) provides the following numerical guidelines table used in the Trading Collar Price calculation: