The Securities and Exchange Commission has published a notice in the Federal Register detailing a proposed rule change by MIAX PEARL, LLC, a self-regulatory organization operating an options exchange. Filed on February 5, 2026, and effective immediately under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, the amendment to Exchange Rule 531 introduces the Purge Liquidity Taker Report. This development allows market makers to access historical data on quote cancellations, potentially enhancing their risk management and trading efficiency in a competitive options market. The notice, appearing in Volume 91, Number 35 of the Federal Register on February 23, 2026, invites public comments to assess the proposal's alignment with investor protection and fair market principles.
Background and Purpose of the Rule Change
MIAX PEARL operates as an options exchange under the oversight of the SEC, governed by the Securities Exchange Act of 1934. The proposed rule change amends Rule 531, which covers reports and market data products, by adding subparagraph (c) for the new Purge Liquidity Taker Report. This report is an optional product tailored for market makers, who are members obligated to provide continuous two-sided quotes in assigned options series. The exchange aims to offer this report to help these participants analyze instances where their purge messages—sent to cancel resting quotes—fail to prevent executions due to timing differences.
The filing explains that the report will provide data on executions against a market maker's resting quotes before and after a purge message, within specific microsecond timeframes. This builds on existing reports under Rule 531, such as the Liquidity Taker Event Report, but focuses specifically on purge-related events. MIAX PEARL notes that market makers have expressed interest in such data to refine their quoting strategies amid fluctuating market conditions. The exchange plans to charge fees for the report, to be detailed in a separate filing.
Key Components of the Purge Liquidity Taker Report
The report's content is outlined in proposed Rule 531(c)(1). It includes details on the resting quote and contra-side responses, such as execution time, symbol, origin type (e.g., priority customer or market maker), side (buy or sell), displayed price and size, a unique resting liquidity identification number, and a trade reference number. For executions, it provides the Pearl Best Bid or Offer (PBBO) and Away Best Bid or Offer (ABBO) at the time of the first response, noting that only initial PBBO and ABBO are included if multiple responses occur.
Information on the purge message itself covers the recipient member's identifier, the time the exchange received the purge, time differences between response receipts and purge arrivals, sizes and types of responses executing against the quote, and a unique purge message identifier. The report is member-specific, anonymizing any data about other participants except for specified resting quote details.
Timeframes for inclusion are precise: data within 100 microseconds from execution to purge receipt for post-execution purges, and within 200 microseconds from purge receipt to the next execution for pre-execution purges. Historical data covers the previous trading day, delivered on a T+1 basis after regular hours.
Statutory Basis and Regulatory Context
MIAX PEARL asserts that the proposal aligns with Section 6(b)(5) of the Act, which requires exchange rules to promote just and equitable principles of trade, prevent fraudulent practices, and protect investors without permitting unfair discrimination. The exchange argues that the report fosters transparency by democratizing access to latency data, allowing market makers to improve quote cancellation success and manage risk better. It emphasizes that the report is voluntary and provides no real-time data, reducing potential market impacts.
This filing draws parallels to similar reports offered by other exchanges, such as the Missed Cancels Report on Cboe BZX and Cboe EDGX, approved in SEC releases like Nos. 102239 and 102240 from January 2025. Those reports provide liquidity response details for order cancellations within defined periods, up to 1 millisecond post-execution and 100 microseconds pre-execution. MIAX PEARL's version is narrower, focusing on market maker quotes via purge ports, as order-entering members can use alternatives like immediate-or-cancel orders under Rule 516(e).
The immediate effectiveness under Rule 19b-4(f)(6) reflects the SEC's determination that the change does not significantly affect investor protection or burden competition, with a waiver of the 30-day operative delay. This procedural path is common for non-controversial rule changes enhancing data products without altering core trading mechanics.
Implications and Perspectives
Short-term implications include enhanced tools for market makers, potentially leading to more efficient quoting and reduced unintended executions. This could improve overall market liquidity, as market makers adjust strategies based on report insights. Long-term, the report may influence competitive dynamics among exchanges, encouraging others to innovate similar products to retain participants.
From a regulatory perspective, supporters view this as a step toward greater transparency, consistent with the Act's goals. Critics might argue it could favor sophisticated market makers, though the filing counters this by noting equal access and voluntary subscription. No comments were received prior to filing, but the notice solicits input, which could shape any SEC suspension or further proceedings.
The proposal operates in a broader context of evolving options market regulation, where data products are scrutinized for fairness. Precedents like the SIFMA case (Initial Decision Release No. 1015, 2016) affirm competition in non-core market data, supporting MIAX PEARL's offering.
In conclusion, MIAX PEARL's rule change introduces a targeted data tool that could refine market maker operations while adhering to statutory requirements. Potential next steps include the SEC reviewing comments by March 16, 2026, and possibly instituting proceedings if concerns arise. Ongoing debates may focus on balancing innovation with equitable access, with challenges centering on whether such reports inadvertently advantage certain participants. Future trajectories could involve expansions to include order cancellations if demand emerges, or adjustments based on user feedback and regulatory input.
