Notice2022-03648
Self-Regulatory Organizations: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by Miami International Securities Exchange, LLC To Amend Exchange Rule 1308, Supervision of Accounts
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Published
February 22, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 35 (Tuesday, February 22, 2022)</title>
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[Federal Register Volume 87, Number 35 (Tuesday, February 22, 2022)]
[Notices]
[Pages 9764-9766]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-03648]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94251; File No. SR-MIAX-2022-09]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami International
Securities Exchange, LLC To Amend Exchange Rule 1308, Supervision of
Accounts
February 15, 2022.
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 February 3, 2022, Miami International
Securities Exchange, LLC (``MIAX Options'' or the ``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 Exchange Rule 1308,
Supervision of Accounts, to extend the temporary remote inspection
relief for Members \3\ to complete their branch office \4\ inspections
for the calendar years 2020 and 2021 to include calendar year 2022
through December 31, 2022.
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\3\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\4\ A ``branch office'' is any location where one or more
associated persons of a Member regularly conduct the business of
effecting any transactions in, or inducing or attempting to induce
the purchase or sale of any security, or is held out as such, with
such exclusions pursuant to Exchange Rule 1306(c)(1)-(7). See
Exchange Rule 1306(c).
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The text of the proposed rule change is available on the Exchange's
website at <a href="http://www.miaxoptions.com/rule-filings/">http://www.miaxoptions.com/rule-filings/</a> at MIAX Options'
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 Exchange Rule 1308, Supervision of
Accounts, to extend the temporary remote inspection relief for Members
to complete their branch office inspections for the calendar years 2020
and 2021 to include calendar year 2022 through December 31, 2022.
The COVID-19 pandemic has caused a host of operational disruptions
to the securities industry and impacted Members, regulators, investors,
and other stakeholders. In response to the pandemic, the Exchange began
providing temporary relief to Members from specified Exchange Rules and
requirements, including Exchange Rule 1308(d), Annual Branch Office
Inspections.
Exchange Rules require Members to conduct branch \5\ and non-branch
office and location inspections pursuant to certain annual cycles.
Specifically, pursuant to Exchange Rule 1308(d), each branch office
that supervises one or more non-branch location must be inspected no
less often than once each calendar year, unless it qualifies for
certain exemptions.\6\ Every branch office, without exception, must be
inspected at least once every three calendar-years. Members must
maintain written reports of such inspections.\7\
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\5\ The Exchange notes that notwithstanding the exclusions in
subparagraphs (c)(1)-(7) of Exchange Rule 1306, any location that is
responsible for supervising the activities of persons associated
with a Member at one or more non-branch locations of such Member is
considered to be a branch office. See Exchange Rule 1306(d).
\6\ A Member may demonstrate to the satisfaction of the Exchange
that because of proximity, special reporting or supervisory
practice, other arrangements may satisfy Exchange Rule 1308(d)'s
requirements for a particular branch office, or that, based upon the
written policies and procedures of such Member providing for a
systematic risk-based surveillance system, the Member submits a
proposal to the Exchange and receives, in writing, an exemption from
the requirement in Exchange 1308(d), pursuant to Exchange Rule
1308(e).
\7\ See Exchange Rule 1308(d)(2).
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In November 2020, the Exchange adopted Exchange Rule 1308(d)(4) and
(d)(5), which has expired by its terms, that extended the time by which
Members must complete their calendar year 2020 inspection obligations
to March 31, 2021, without an on-site visit to the office or
location.\8\ The Exchange Rule 1308(d)(5) automatically sunset on
December 31, 2021, to provide Members the option of satisfying their
inspection obligations under Exchange Rule 1308 remotely for calendar
years 2020 and 2021, subject to specified conditions,\9\ due to the
logistical challenges of going on-site while public health and safety
concerns related to COVID-19 persisted. The Exchange notes that these
temporary rules are substantively identical to the temporary inspection
extension and remote relief rules filed by the Financial Industry
Regulatory Authority (``FINRA'').\10\
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\8\ See Securities Exchange Act Release No. 90937 (January 25,
2021), 86 FR 6944 (January 15, 2021) (SR-MIAX-2021-01).
\9\ See id.
\10\ See Securities and Exchange Act Release Nos. 89188 (June
30, 2020), 85 FR 40713 (July 7, 2020) (SR-FINRA-2020-019); and 90454
(November 18, 2020), 85 FR 75097 (November 24, 2020) (Notice of
Filing and Immediate Effectiveness of File No. SR-FINRA-2020-040).
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While there are signs of improvement, much uncertainty remains. The
emergence of the COVID-19 variants,\11\ dissimilar vaccination rates
throughout the United States, and the uptick in transmissions in many
locations indicate that COVID-19 remains an active and real public
health concern.\12\
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The Exchange understands that Members have delayed their return-to-
office plans due to the continued pandemic and are considering
implementing or have implemented hybrid work arrangements dependent on
functions and regulatory requirements.\13\ To that end, in order to
address ongoing industry-wide concerns regarding having to conduct in-
person office inspections while safety concerns related to the pandemic
persist and to align with pandemic-related regulatory relief provided
by FINRA, which recently extended their substantively identical
temporary remote inspection rules,\14\ the Exchange proposes to extend
Exchange Rule 1308(d)(5) to cover calendar year 2022 inspection
obligations through December 31, 2022. The proposed extension would
provide clarity to Members on regulatory requirements and account for
the time needed for many Members to carefully assess when and how to
have their employees safely return to their offices in light of
vaccination coverage in the U.S. and transmission levels of the virus,
including any emergent variants throughout the country.
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\11\ See The Centers for Disease Control and Prevention
(``CDC''), What You Need to Know About Variants, <a href="https://www.cdc.gov/coronavirus/2019-ncov/variants/variant.html">https://www.cdc.gov/coronavirus/2019-ncov/variants/variant.html</a> (stating, in
part, that ``the Delta variant causes more infections and spreads
faster than earlier forms of the virus that causes COVID19'')
(updated September 3, 2021). See also CDC, The Possibility of COVID-
19 Illness After Vaccination: Breakthrough Infections, <a href="https://www.cdc.gov/coronavirus/2019-ncov/vaccines/effectiveness/why-measure-effectiveness/breakthrough-cases.html">https://www.cdc.gov/coronavirus/2019-ncov/vaccines/effectiveness/why-measure-effectiveness/breakthrough-cases.html</a> (stating, in part,
that ``COVID-19 vaccines are effective at preventing infection,
serious illness, and death. Most people who get COVID-19 are
unvaccinated. However, since vaccines are not 100% effective at
preventing infection, some people who are fully vaccinated will
still get COVID-19 . . . People who get vaccine breakthrough
infections can be contagious'') (updated August 23, 2021).
\12\ For example, President Joe Biden on July 29, 2021,
announced several measures to increase the number of people
vaccinated against COVID-19 and to slow the spread of the Delta
variant, including strengthening safety protocols for federal
government employees and contractors. See <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/29/factsheet-president-biden-to-announce-new-actions-to-get-more-americansvaccinated-and-slow-the-spread-of-the-delta-variant">https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/29/factsheet-president-biden-to-announce-new-actions-to-get-more-americansvaccinated-and-slow-the-spread-of-the-delta-variant</a>. More
recently, President Joe Biden on August 31, 2021, briefed the press
on, among other things, the government's response to the COVID-19
surge, noting the government's continuing efforts to help states
with Delta variant outbreaks. See <a href="https://www.whitehouse.gov/briefing-rom/press-briefings/2021/08/31/pressbriefing-by-white-house-covid-19-response-team-and-public-health-officials-53/">https://www.whitehouse.gov/briefing-rom/press-briefings/2021/08/31/pressbriefing-by-white-house-covid-19-response-team-and-public-health-officials-53/</a>.
\13\ The Exchange notes that a majority of its Members are FINRA
member firms as well, and that through FINRA's ongoing monitoring,
the Exchange has learned that many of its Members have delayed plans
to require a full return to the office and that most continue to
operate in a remote or hybrid environment.
\14\ See Securities and Exchange Act Release Nos. 93002
(September 15, 2021), 86 FR 52508 (September 21, 2021) (SR-FINRA-
2021-023); and 94018 (January 20, 2022), 87 FR 4072 (January 26,
2022) (SR-FINRA-2022-001).
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By extending Exchange Rule 1308(d)(5) through December 31, 2022,
the Exchange does not propose to amend the other conditions of the
temporary rule. The proposed amendment to Exchange Rule 1308(d)(5)
simply provides that for calendar year 2022, a Member has the option to
conduct those inspections remotely through December 31, 2022. The
current conditions of Exchange Rule 1308(d)(5) for Members that elect
to conduct remote inspections would remain unchanged. Such Members must
amend or supplement their written supervisory procedures for remote
inspections, use remote inspections as part of an effective supervisory
system, and maintain the required documentation. The additional period
of time would also enable the Exchange to further monitor the
effectiveness of remote inspections and their impacts--positive or
negative--on Members' overall supervisory systems in the evolving
workplace. Notwithstanding the proposed temporary rule change, a Member
remains subject to the other requirements of Exchange Rule 1308(d).
The Exchange continues to believe this temporary remote inspection
option is a reasonable alternative to provide to Members to fulfill
their Exchange Rule 1308(d) obligations during the pandemic and is
designed to achieve the investor protection objectives of the
inspection requirements under these unique circumstances. Members
should consider whether, under their particular operating conditions,
reliance on remote inspections would be reasonable under the
circumstances. For example, Members with offices that are open to the
public or that are otherwise doing business as usual should consider
whether some form of in-person inspections would be feasible and
appropriately contribute to a supervisory system that is reasonably
designed to achieve compliance with applicable securities laws and
regulations as well as with applicable Exchange Rules.
The Exchange notes that the proposed rule change is substantively
identical to the proposed rule changes recently filed by FINRA.\15\ The
Exchange notes that MIAX Chapter XIII is incorporated by reference into
the rulebooks of the Exchange's affiliates, MIAX PEARL, LLC (``Pearl'')
and MIAX Emerald, LLC (``Emerald''). As such, the amendments to MIAX
Chapter XIII proposed herein will also apply to MIAX Pearl and MIAX
Emerald Chapters XIII.
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\15\ Id.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\16\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \17\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \18\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
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In particular, the Exchange believes that, in light of the impact
of COVID-19 on the performance of on-site office and location
inspections pursuant to Exchange Rule 1308(d), the proposed temporary
rule change is intended to provide Members a temporary regulatory
option to conduct inspections of offices and locations remotely during
the calendar year 2022. The proposed temporary rule change does not
relieve Members from meeting their existing core regulatory obligations
to establish and maintain a system to supervise the activities of each
associate person that is reasonably designed to achieve compliance with
applicable securities laws and regulations as well as with applicable
Exchange Rules that directly serve investor protection. In a time when
faced with ongoing challenges resulting from the COVID-19 pandemic, the
Exchange believes that the proposed temporary rule change provides
sensibly tailored relief that will afford Members the ability to assess
when and how to implement their work re-entry plans as measured against
the health and safety of their personnel, while continuing to serve and
promote the protection of investors and the public interest.
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. The Exchange does not
believe the proposed rule change will impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because the proposed extension of the temporary
remote inspection relief rule will apply equally to all Members
required to conduct office and location inspections in calendar year
2022 through December 31, 2022. The Exchange further does not believe
that the proposed extension to the temporary rule will impose any
burden on intermarket competition because it relates only to the
extension
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of the remote manner in which inspections for the calendar year 2022
may be conducted. Additionally, and as stated above, FINRA has recently
submitted a filing to extend its substantively identical temporary
remote relief rule for its trading permit holders and members in the
same manner.\19\
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\19\ See supra note 14.
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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
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, it has become effective
pursuant to 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 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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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4c3e392029612f2321212922383f0c3f292f622b233a"><span class="__cf_email__" data-cfemail="3745425b521a54585a5a525943447744525419505841">[email protected]</span></a>. Please include
File Number SR-MIAX-2022-09 on the subject line.
Paper Comments
<bullet> 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-MIAX-2022-09. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-MIAX-2022-09 and
should be submitted on or before March 15, 2022.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03648 Filed 2-18-22; 8:45 am]
BILLING CODE 8011-01-P
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