Notice2023-03165
Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 1308, Supervision of Accounts
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Published
February 15, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 31 (Wednesday, February 15, 2023)</title>
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[Federal Register Volume 88, Number 31 (Wednesday, February 15, 2023)]
[Notices]
[Pages 9919-9921]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-03165]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96867; File No. SR-MIAX-2023-04]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Exchange Rule 1308, Supervision of
Accounts
February 9, 2023.
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 2, 2023, Miami International
Securities Exchange LLC (``MIAX'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change as described in Items I and II below, which Items have been
prepared by the Exchange. MIAX has designated the proposed rule change
as constituting a ``non-controversial'' rule change under Section
19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(6) \4\ thereunder, which
renders the proposed rule change effective upon receipt of this filing
by the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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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 \5\ through the earlier of the effective date of the
FINRA pilot program on remote inspections (the ``FINRA Pilot
Program''),\6\ if approved, or December 31, 2023. The proposed
extension would alleviate the ongoing operational challenges resulting
from the COVID-19 pandemic that many member firms may continue to face
in planning for and timely conducting required on-site inspections at
locations requiring inspection in calendar year 2023.
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\5\ 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.
\6\ See Securities Exchange Act Release No. 95452 (Aug. 9,
2022), 87 FR 50144 (Aug. 15, 2022) (SR-FINRA-2022-021).
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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'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 proposes to amend Exchange Rule 1308, Supervision of
Accounts, to extend the temporary remote inspection relief for Members
through the earlier of the effective date of the FINRA Pilot Program
\7\ if approved, or December 31, 2023.
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\7\ Id.
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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. While there are several signs that the pandemic has
receded, much uncertainty still remains. The emergence of new variants,
dissimilar vaccination rates through the U.S., and varying levels of
transmissions of the virus all indicate that COVID-19 remains an active
and real public health concern. Against this setting, the Exchange
understands the complexity Members face in assessing when and how to
effectively and safely recall their employees back into offices
alongside fashioning permanent telework arrangements or a hybrid
workforce model in which some employees may work on-site in a
commercial office space and other employees may work off-site in an
alternative location (e.g., a personal residence).\8\ Accordingly, due
to the continued logistical challenge of going on-site to branch
offices or locations while these public health and safety concerns
related to COVID-19 persist coupled with several Members delaying their
return-to-office plans, the Exchange believes that extending the
temporary remote inspection relief to Members is warranted.
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\8\ For example, the Exchange understands that both the
Commission and FINRA do not currently require employees to return to
the office. See SEC Fiscal Year 2022 Agency Financial Report,
available at <a href="https://www.sec.gov/files/sec-2022-agency-financial-report.pdf">https://www.sec.gov/files/sec-2022-agency-financial-report.pdf</a> and <a href="https://www.finra.org/rules-guidance/key-topics/covid-19">https://www.finra.org/rules-guidance/key-topics/covid-19</a>.
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FINRA has filed with the Commission File No. SR-FINRA-2022-021, a
proposed rule change to adopt a voluntary, remote inspections pilot
program that is currently pending Commission review. The FINRA Pilot
Program would provide for a voluntary, three-year remote inspection
pilot program to allow broker-dealers to elect to fulfill their
obligation under FINRA Rule 3110(c), Internal Inspections, by
conducting inspections of some or all branch offices and non-branch
locations remotely without an on-site visit to such office or location,
subject to specified terms. FINRA has stated that the review period for
its rule filing may extend well into 2023. Given the potential length
of that review period, and the pilot program's significant planning
requirements and varying limitations applicable to specific firms and
office locations, FINRA believes that firms that intend to participate
in the pilot program, if approved, would need a significant number of
months to prepare appropriately for the pilot program. Moreover,
further FINRA guidance might be needed to guide implementation in
various circumstances.
To provide regulatory certainty while the pilot program filing is
pending, and to avoid overlapping provisions if it is approved, the
Exchange is proposing to amend Rule 1308(d)(5) so that the temporary
relief would expire on the earlier of the effective date of the FINRA
Pilot Program, if approved, or December 31, 2023. In the event the
FINRA Pilot Program is not approved by December
[[Page 9920]]
31, 2023, the proposed rule change will automatically sunset on
December 31, 2023. The Exchange will submit a separate rule filing if
it seeks to extend the duration of the temporary proposed rule beyond
December 31, 2023. In the event the FINRA Pilot Program is approved
prior to December 31, 2023, the Exchange will file a conforming rule
change with the Commission.
The proposed rule change will conform the Exchange's Rules with
those of FINRA, which has extended the same temporary remote inspection
relief to all FINRA member firms.\9\ This proposed extension would
provide further clarity to Members on regulatory requirements and
account for time needed for many Members to carefully assess when and
how to have their employees safely return to their offices considering
vaccination coverage in the U.S. and transmission levels of the virus,
including any emergent variants throughout the country.
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\9\ See Securities Exchange Act Release No. 94018 (Jan. 20,
2022), 87 FR 4072 (Jan. 26, 2022) (SR-FINRA-2022-01); and Securities
Exchange Act Release No. 96241 (Nov. 4, 2022), 87 FR 67969 (Nov. 10,
2022) (SR-FINRA-2022-030).
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The proposed amendment would provide that Members have the option
to conduct remotely those inspections described in Exchange Rule
1308(d)(5) through the earlier of the effective date of the FINRA Pilot
program, if approved, or December 31, 2023. The Exchange is not
proposing to amend the other conditions of the temporary relief in
Exchange Rule 1308(d). The current conditions of Rule 1308(d) for
Members that elect to conduct remote inspections would remain
unchanged: such firms must still 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 allow 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.
The Exchange continues to believe this temporary remote inspection
option is a reasonable alternative to provide to Members to fulfill
their Rule 1308 obligations during the ongoing 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, and with applicable Exchange Rules.
The Exchange has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, so the Exchange can implement the proposed rule
change immediately.
The Exchange notes that the proposed rule change is substantively
identical to the proposed rule changes recently filed by FINRA \10\ and
the Investors Exchange LLC (``IEX'').\11\ 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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\10\ See supra note 9.
\11\ See Securities Exchange Act Release No. 96606 (Jan. 6,
2023), 88 FR 2140 (Jan. 12, 2023) (SR-IEX-2022-14).
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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.\12\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \13\ 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) \14\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange's rule proposal
is intended to harmonize the Exchange's supervision rules, specifically
with respect to the requirements for inspections of Members' branch
offices and other locations, with those of FINRA, on which they are
based. Consequently, the proposed change will conform the Exchange's
rules to changes made to corresponding FINRA rules, thus promoting
application of consistent regulatory standards with respect to rules
that FINRA enforces pursuant to its regulatory services agreement with
the Exchange. The proposed rule change would also avoid a potential
lapse in the temporary relief while challenges from COVID-19 persist,
provide firms regulatory continuity in meeting their inspection
obligations during the remaining Commission review period of the Pilot
Proposal, and allow firms time to adapt to the pilot program, if
approved, and prepare for conducting on-site inspections, as
applicable.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ Id.
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In recognition of the impact of COVID-19 on performing on-site
inspections, the proposed rule change is intended to provide firms a
temporary regulatory option to conduct inspections of offices and
locations remotely for calendar year 2023 inspections (or until the
effective date of the FINRA pilot program). This proposed supplementary
material does not relieve firms from meeting the core regulatory
obligation to establish and maintain a system to supervise the
activities of each associated person that is reasonably designed to
achieve compliance with applicable securities laws and regulations, and
with applicable Exchange Rules that directly serve investor protection.
In a time when faced with unique challenges resulting from the COVID-19
pandemic, the Exchange believes that the proposed rule change provides
sensibly tailored relief that will afford firms the ability to observe
the recommendations of public health officials to provide for 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
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
rule change is not designed to address any competitive issue but to
align the Exchange's rules with those of FINRA, which will assist FINRA
in its oversight work done pursuant to a regulatory services agreement
with the Exchange. The proposed rule change
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will also provide for consistent application of the Exchange's
supervision rules with those of FINRA, on which they are based.
Consequently, the Exchange does not believe that the proposed change
implicates competition at all. 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.\15\
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\15\ See supra note 9.
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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
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \16\ of the Act and Rule 19b-4(f)(6) \17\
thereunder. 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 \18\ and Rule 19b-4(f)(6) \19\
thereunder.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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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A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. MIAX has asked the
Commission to waive the 30-day operative delay to permit the Exchange
to harmonize its rules with FINRA, as described herein, upon
effectiveness of the proposed rule filing.
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
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MIAX has indicated that extending the relief provided in SR-MIAX-
2022-09 would provide assurances to its member firms that they can plan
their 2023 inspection program and conduct remote inspections for any
inspections to be conducted through the earlier of the effective date
of the FINRA Pilot Program, if approved, or December 31, 2023.
Importantly, extending the relief immediately upon filing and without a
30-day operative delay would allow MIAX's member firms to continue
performing their supervisory obligations, while addressing the ongoing
impacts of the COVID-19 pandemic. Moreover, like SR-MIAX-2022-09, the
proposed extension would provide only temporary relief during the
period in which MIAX's member firms' operations remain impacted by
COVID-19. Thus, the amended rules will revert back to their original
state at the conclusion of the temporary relief period and, if
applicable, any extension thereof. For these reasons, the Commission
believes that waiver of the 30-day operative delay for this proposed
rule change is consistent with the protection of investors and the
public interest. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\22\
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\22\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change'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 under
Section 19(b)(2)(B) of the Act \23\ to determine whether the proposed
rule should be approved or disapproved.
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\23\ 15 U.S.C. 78s(b)(2)(B).
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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 (<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#255750494008464a4848404b5156655640460b424a53"><span class="__cf_email__" data-cfemail="5a282f363f77393537373f342e291a293f39743d352c">[email protected]</span></a>. Please include
File Number SR-MIAX-2023-04 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-2023-04. 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-2023-04 and
should be submitted on or before March 8, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-03165 Filed 2-14-23; 8:45 am]
BILLING CODE 8011-01-P
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