9110 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Notices 

16See Amendment No. 1, supra note 4. 

17See Notice, supra note 3 at 85754. 

18See Notice, supra note 3 at 85755. 

19 15 U.S.C. 78s(b)(2). 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See infra Section II. 

4See Exchange Act Release No. 90324 (November 

3, 2020), 85 FR 71387 (November 9, 2020) (File No. 

SR–FINRA–2020–037) (the ‘‘Notice’’). 

5See id. at 71388, n.4 (citing the Plan, Sec. II., 

FINRA Regulation, Inc., https://www.finra.org/ 

rules-guidance/rulebooks/corporate-organization/iifinra-regulation-inc). 

6See id. (citing Article V, Sec. 5.1 of the FINRA 

Regulation By-Laws). 

7See id. FINRA states that the NAC also exercises 

exemption authority and acts in other proceedings 

as set forth in the FINRA Rule 9000 Series (Code 

of Procedure). The FINRA Board may also delegate 

other powers and duties to the NAC as the FINRA 

Board deems appropriate and in a manner not 

inconsistent with the Plan. See id. 

8See id. 

9See id. 

10See id. As FINRA explains, the FINRA 

Regulation By-Laws were amended in 2008 to, 

among other things, designate the FINRA Board as 

the body authorized to oversee the NAC and 

empowered to remove NAC members for the 

grounds mentioned above. See id. (citing Exchange 

Act Release No. 58909 (November 6, 2008), 73 FR 

68467 (November 18, 2008) (Order Approving File 

No. SR–FINRA–2008–046) (the ‘‘FINRA Regulation 

By-Laws Approval Order’’). 

11See id. Compare Article VII, Section 1(b) of the 

FINRA By-Laws, with Article V, Sec. 5.8 of the 

FINRA Regulation By-Laws. 

12See Notice, 85 FR at 71388. 

13See id. 

14See id. As FINRA notes, both FINRA and 

FINRA Regulation are corporations organized under 

Program should be modified, 

discontinued, extended, or permanently 

approved. Furthermore, the Exchange’s 

ongoing analysis of the P.M. Pilot 

Program should help it monitor any 

potential risks from large P.M.-settled 

positions and take appropriate action on 

a timely basis if warranted. 

The Exchange represents that it has 

adequate surveillance procedures to 

monitor trading in these options thereby 

helping to ensure the maintenance of a 

fair and orderly market 16 and has 

represented that it has sufficient 

capacity to handle additional traffic 

associated with this new listing.17

For the reasons discussed above, the 

Commission finds that Cboe’s proposal 

is consistent with the Act, including 

Section 6(b)(5) thereof, in that it is 

designed to remove impediments to and 

perfect the mechanism of a free and 

open market, and, in general, to protect 

investors and the public interest. In 

light of the enhanced closing procedures 

at the underlying markets and the 

potential benefits to investors discussed 

by the Exchange in the Notice,18 the 

Commission finds that it is appropriate 

and consistent with the Act to approve 

Cboe’s proposal on a pilot basis. The 

collection of data during the P.M. Pilot 

Program and Cboe’s active monitoring of 

any effects of P.M.-settled MRUT 

options on the markets will help Cboe 

and the Commission assess any impact 

of P.M. settlement in today’s market. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,19 that the 

proposed rule change (SR–CBOE–2020– 

116), as modified by Amendment No. 1, 

be, and hereby is, approved, subject to 

a pilot period set to expire on May 3, 

2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02780 Filed 2–10–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91070; File No. SR–FINRA– 

2020–037] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Amend the 

By-Laws of FINRA Regulation, Inc. To 

Align the Grounds for Member 

Removal From the NAC With an 

Existing Provision in the FINRA ByLaws 

February 5, 2021. 

I. Introduction 

On October 22, 2020, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend a provision in the ByLaws of FINRA Regulation, Inc. 

(‘‘FINRA Regulation’’), FINRA’s 

regulatory subsidiary. The proposed 

rule change would further align the 

grounds in the FINRA Regulation ByLaws for removal of a member from the 

National Adjudicatory Council (‘‘NAC’’) 

with an existing provision in the FINRA 

By-Laws for removal of a governor from 

the FINRA Board of Governors (‘‘FINRA 

Board’’).3

The proposed rule change was 

published for comment in the Federal 

Register on November 9, 2020.4 The 

Commission received no comments on 

the proposed rule change. This order 

approves the proposed rule change. 

II. Description of the Proposal 

As described in the Notice, FINRA 

Regulation is the regulatory subsidiary 

of FINRA and operates according to the 

Plan of Allocation and Delegation of 

Functions by FINRA to Subsidiaries (the 

‘‘Plan’’).5 The FINRA Regulation ByLaws authorize the NAC to function on 

behalf of the FINRA Board in several 

capacities.6 For example, FINRA 

explains that the NAC presides over 

disciplinary matters that have been 

appealed to or called for review by the 

NAC and also acts on applications in 

statutory disqualification and 

membership proceedings.7 In most 

matters that the NAC considers, FINRA 

states that the NAC prepares proposed 

written decisions that become final 

FINRA action if the FINRA Board does 

not call for review of those decisions.8

FINRA also states that it periodically 

reviews its and FINRA Regulation’s ByLaws to ensure adherence to effective 

governance practices.9 Based on that 

review, FINRA explains that currently, 

Article V, Section 5.8 of the FINRA 

Regulation By-Laws provides that, 

‘‘[a]ny or all of the members of the 

[NAC] may be removed from office at 

any time for refusal, failure, neglect, or 

inability to discharge the duties of such 

office by majority vote of the FINRA 

Board.’’ 10 By comparison, however, the 

FINRA By-Laws provide that a governor 

may be removed for those grounds as 

well as ‘‘for any cause affecting the best 

interests of [FINRA] the sufficiency of 

which the Board shall be the sole 

judge.’’ 11 As a result, FINRA proposes 

to amend the FINRA Regulation ByLaws to add this ground for removal of 

a NAC member to further align the bases 

for removal of a NAC member with the 

bases for removal of a FINRA Board 

governor.12 Specifically, the proposed 

rule change would amend the FINRA 

Regulation By-Laws to permit a NAC 

member to be removed by a majority 

vote of the FINRA Board ‘‘for any cause 

affecting the best interests of the [NAC] 

the sufficiency of which the FINRA 

Board shall be the sole judge.’’ 13

FINRA further explains that the 

removal of a NAC member would 

continue to require a majority vote of 

the FINRA Board, while a vote to 

remove a FINRA Board governor 

requires a two-thirds vote.14 In 


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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Notices 9111 

Delaware law. The Delaware General Corporation 

Law provides that, in general, directors may be 

removed by a majority vote of the shares then 

entitled to vote at an election of directors. See Del. 

Code Ann. Tit. 8, § 141(k). FINRA states that it has 

adopted a removal threshold for NAC members that 

is consistent with the Delaware General Corporation 

Law, although the NAC is not subject to this 

standard. See Notice, 85 FR at 71388, n.9. 

15Notice, 85 FR at 71388. FINRA also notes that 

the provision of the FINRA Regulation By-Laws 

addressing the composition of the NAC also 

provides for a diverse, majority non-industry 

composition, and for the fair representation of the 

industry. See id. at n.10 (citing Article V, Section 

5.2(a) of the FINRA Regulation By-Laws and 

Exchange Act Release No. 78094 (June 17, 2016), 81 

FR 40932, 40934–35 (June 23, 2016)). 

16See id. 

17See id. 

18See id. at 71388–89. 

19See id. at 71388, n.11 (citing Article IV, Section 

4.14(a) of the FINRA Regulation By-Laws). 

20See id. at n.12. FINRA notes that the principles 

outlined in the NAC’s Conflict of Interest and Bias 

Policy are independence, impartiality, integrity, 

accountability and transparency; and place upon 

NAC adjudicators the responsibility for recognizing 

and reporting actual and apparent conflicts of 

interest and bias. See id. 

21See id. at 71389. 

22 In approving this rule change, the Commission 

has considered the rule’s impact on efficiency, 

competition, and capital formation. See 15 U.S.C. 

78c(f). 

23 15 U.S.C. 78o–3(b)(4). 

24 15 U.S.C. 78o–3(b)(6). 

25See Notice, 85 FR at 71388 (comparing Article 

VII, Section 1(b) of the FINRA By-Laws with Article 

V, Sec. 5.8 of the FINRA Regulation By-Laws). 

26See id. at n.17 (citing Exchange Act Release No. 

56145 (July 26, 2007), 72 FR 42169 (August 1, 2007) 

(the ‘‘NASD By-Laws Approval Order’’), as 

amended by Exchange Act Release No. 56145A 

(May 30, 2008), 73 FR 32377 (June 6, 2008) (Order 

Approving File No. SR–NASD–2007–023)). These 

orders approved FINRA’s By-Laws when the NASD 

merged with the member regulation, enforcement 

and arbitration operations of the New York Stock 

Exchange (‘‘NYSE’’) to form FINRA. See also infra 

notes 31–32. 

27See NASD By-Laws Approval Order, 72 FR at 

42182 (explaining that this requirement helps to 

assure that members have a stake in the governance 

of the national securities association, which is 

charged with self-regulatory responsibilities under 

the Exchange Act). 

28See id. at 42185. 

29See id. See also supra note 7 and 

accompanying text. 

30See supra note 15 and accompanying text. 

31See FINRA Regulation By-Laws Approval 

Order, 73 FR at 68469–70. 

discussing this difference between 

voting thresholds for removal, FINRA 

states that the higher voting standard for 

the removal of a governor reflects the 

historical standard that existed at the 

National Association of Securities 

Dealers (‘‘NASD’’) prior to the formation 

of FINRA, and that it provides an 

additional safeguard at the FINRA Board 

level ‘‘to ensure a diverse, majority nonindustry composition, and fair 

representation of the industry in 

governance matters.’’ 15

FINRA also states that, given the 

NAC’s adjudicatory role, the best 

interests of the NAC are more targeted 

than the best interests of FINRA.16 More 

specifically, FINRA explains that the 

best interests of the NAC are reflected in 

conduct and attributes that ensure that 

the NAC remains an unbiased and 

competent adjudicatory body that is free 

of conflicts of interest, that its members 

conduct themselves with integrity, and 

that its decisions are rendered fairly and 

consistently with the law and rules that 

govern FINRA members and their 

associated persons.17 FINRA also states 

that the FINRA Board’s decision to 

remove a NAC member is a facts and 

circumstances determination.18 In 

considering whether to remove a NAC 

member for cause affecting the best 

interests of the NAC, FINRA explains 

that its Board may consider, among 

other things, the NAC member’s 

adherence to general standards 

concerning actual and apparent 

adjudicator conflicts of interest and 

bias,19 and to the NAC’s Conflict of 

Interest and Bias Policy, which sets 

forth broad-based principles of behavior 

that are expected from NAC members.20

FINRA recognizes that there may, 

depending on the facts and 

circumstances, be overlap in part 

between the new and existing grounds 

to remove a NAC member. However, 

FINRA states that, depending on the 

facts and circumstances, the proposed 

rule change may also provide an 

additional basis for removal for a cause 

affecting the best interests of the NAC 

that would not fall within the scope of 

the FINRA’s Board’s current removal 

authority.21

III. Discussion and Commission 

Findings 

After careful review of the proposed 

rule change, the Commission finds that 

the proposed rule change is consistent 

with the requirements of the Exchange 

Act and the rules and regulations 

thereunder that are applicable to a 

national securities association.22 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 15A(b)(4) of the Exchange 

Act,23 which requires, among other 

things, that the rules of a national 

securities association, like FINRA, 

assure the fair representation of its 

members in the administration of its 

affairs. Additionally, the Commission 

finds that the proposed rule change is 

also consistent with Section 15A(b)(6) of 

the Exchange Act,24 which requires, 

among other things, that FINRA rules be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest. 

As a threshold matter, the 

Commission observes that the provision 

that is being added to the FINRA 

Regulation By-Laws by this proposed 

rule change mirrors a parallel provision 

found in the FINRA By-Laws.25

Moreover, the Commission has 

previously reviewed and approved a 

proposal that conformed the then-NASD 

Regulation By-Laws to the FINRA ByLaws, and has also previously reviewed 

and approved the NAC committee and 

its governance structure (which remains 

the same under this proposal), finding 

both proposals to be consistent with 

Section 15A(b)(4) of the Exchange Act.26

We discuss below some of the pertinent 

aspects of the Commission’s prior 

findings as they apply, at least in part, 

to the current proposed rule change. 

As the Commission explained in 

approving the FINRA By-Laws, Section 

15A(b)(4) requires that the rules of a 

national securities association, like 

FINRA, assure the fair representation of 

its members in, among other things, the 

administration of its affairs.27 In 

approving the FINRA By-Laws, the 

Commission found, in part, that 

FINRA’s members’ participation on 

various committees provided for the fair 

representation of members in the 

administration of the affairs of a selfregulatory organization such as FINRA, 

particularly with respect to 

participation on committees relating to, 

among other things, the disciplinary 

process.28 More specifically, the 

Commission observed that FINRA has 

extensive member involvement in the 

administration of its affairs through 

representation on various subject matter 

committees, including the NAC.29 In 

connection with this proposal, FINRA 

states that, similar to the FINRA ByLaws addressing the composition of its 

Board, the FINRA Regulation By-Laws 

addressing the composition of the NAC 

provide for a diverse, majority nonindustry composition, and for the fair 

representation of industry.30 The 

Commission agrees with FINRA’s 

statements and, moreover, observes that 

the Commission found previously that 

the NAC’s governance structure, 

including the NAC’s composition as 

well as the nomination and election 

processes for NAC seats, align with 

those of the FINRA Board and were 

consistent with Section 15A(b)(4) of the 

Act.31

Furthermore, in approving certain 

amendments to the then-NASD 

Regulation By-Laws, the Commission 

found that because those amendments 

conformed certain NASD Regulation ByLaws provisions to the relevant 


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32See NASD By-Laws Approval Order, 72 FR at 

42188. 

33See supra note 7 and accompanying text. 

34See Notice, 85 FR at 71389. 

35See id. at 71388, n.12. See also supra note 20 

and accompanying text. 

36See id. at 71388 (citing Article IV, Section 

4.14(a) of the FINRA Regulation By-Laws). 

37 15 U.S.C. 78s(b)(2). 

38 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4An All-or-None Order or AON Order is a 

‘‘Market or Limit Order that is to be executed on 

the Exchange in its entirety or not at all.’’ See Rule 

900.3NY(d)(4). 

5See proposed Commentary .04 to Rule 971.2NY; 

proposed Commentary .05 to Rule 971.1NY. 

Capitalized terms have the same meaning as the 

defined terms in Rules 971.1NY and 971.2NY. 

6See Commentary .05 to Rule 971.1NY; see also 

Securities Exchange Act Release No. 90584 

(December 7, 2020), 85 FR 80196 (December 11, 

2020) (SR–NYSEAmer–2020–60) (order approving 

auction functionality for Single-Leg AON CUBE 

Orders of at least 500 contracts). As proposed, AON 

Complex CUBE Orders would be processed and 

executed in the Complex CUBE Auction in a similar 

manner as Single-Leg AON CUBE Orders are 

processed and executed in the Single-Leg CUBE 

Auction—the differences for Complex relating 

primarily to the underlying differences between 

simple and complex order processing and execution 

(i.e., auction pricing and allocation). 

7See, e.g., Nasdaq ISE LLC (‘‘ISE’’), Options 3, 

Section 11(e) (setting forth its Complex Solicited 

Order Mechanism which allows an agency complex 

order to execute in full against the solicited 

complex order—both of which are designated as 

AON—at the proposed execution net price so long 

provisions in the FINRA By-Laws and 

reflected the governance structure set 

forth in the FINRA By-Laws those 

amendments were consistent with the 

Exchange Act.32 Similarly, this proposal 

will also further conform the FINRA 

Regulation By-Laws with the FINRA ByLaws and will also continue to reflect 

the previously approved governance 

structure of the NAC. As a result, the 

Commission believes that this proposal 

will continue to help assure the fair 

representation of FINRA members in the 

administration of FINRA’s affairs and, 

therefore, is consistent with Section 

15A(b)(4) of the Act. 

The Commission further observes that 

the NAC acts on behalf of the FINRA 

Board in several important capacities, 

including presiding over disciplinary 

matters that have been appealed to or 

called for review by the NAC and acting 

on applications in statutory 

disqualification and membership 

proceeding.33 Given the NAC’s ability to 

perform these actions and prepare 

written decisions on behalf of the 

FINRA Board, and that these decisions 

become FINRA’s final action in the vast 

majority of cases,34 the Commission 

finds that applying the same grounds for 

the removal of a NAC member as those 

that apply for the removal of a governor 

is consistent with the Act. The proposal 

will strengthen the FINRA Board’s 

oversight of the NAC and further 

support the principles outlined in the 

NAC’s Conflict of Interest and Bias 

Policy, which include independence, 

impartiality, integrity, and 

accountability.35 In doing so, the 

proposal will help protect investors and 

further the public interest by expanding 

the scope of the FINRA Board’s 

authority to remove NAC members that, 

in the Board’s view, may be biased or 

have actual or apparent conflicts of 

interest or otherwise impede the NAC’s 

adjudicatory responsibilities.36

In sum, the Commission finds that the 

proposal will continue to help assure 

the fair representation of FINRA 

members in the administration of 

FINRA’s affairs. The Commission also 

finds that this proposal will help protect 

investors and further the public interest 

by supporting fair and impartial 

adjudicatory processes for, among other 

things, FINRA’s disciplinary matters as 

well as statutory disqualification and 

membership proceedings. 

IV. Conclusion 

It is therefore ordered pursuant to 

Section 19(b)(2) of the Exchange Act 37

that the proposal (SR–FINRA–2020– 

037) is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02779 Filed 2–10–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91068; File No. SR– 

NYSEAMER–2021–06] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify Rule 971.2NY 

Regarding Its Complex Customer Best 

Execution Auction 

February 5, 2021. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on January 

27, 2021, NYSE American LLC (‘‘NYSE 

American’’ or the ‘‘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 modify 

Rule 971.2NY regarding its Complex 

Customer Best Execution (‘‘CUBE’’) 

auction to provide optional all-or-none 

functionality for larger-sized orders and 

to make conforming changes to Rule 

971.1NY to clarify existing functionality 

of the Single-Leg AON CUBE 

functionality. The proposed rule change 

is available on the Exchange’s website at 

www.nyse.com, at the principal office of 

the Exchange, 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 

self-regulatory organization 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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to expand its 

electronic crossing mechanism—the 

CUBE Auction, to provide optional allor-none (‘‘AON’’) 4 functionality for ATP 

Holders to execute larger-sized orders 

(i.e., at least 500 contracts on the 

smallest leg) in the Complex CUBE 

Auction and to make conforming 

changes to Rule 971.1NY to clarify 

existing functionality of the Single-Leg 

AON CUBE functionality.5

The proposed rule change would be 

consistent with the recently approved 

AON CUBE Order functionality for the 

Single-Leg CUBE Auction.6 In this 

regard, the Exchange seeks to expand 

this functionality to the Complex CUBE 

Auction, which functionality is also 

consistent with similar priceimprovement mechanisms for largersized complex orders already available 

on other options exchanges.7 As such, 


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