[Federal Register Volume 89, Number 36 (Thursday, February 22, 2024)]
[Notices]
[Pages 13386-13389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-03540]



[[Page 13386]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99548; File No. SR-MIAX-2024-10]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend Exchange Rule 1308 To Extend the Temporary Remote 
Inspection Relief for Members Through June 30, 2024

February 15, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on February 6, 2024, Miami International 
Securities Exchange, LLC (``MIAX'' or ``Exchange'') filed with the U.S. 
Securities and Exchange Commission (``Commission'' or ``SEC'') a 
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.
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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\ through June 30, 2024.
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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.
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    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-options/miax-options/rule-filings, 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 June 30, 2024. The Exchange makes this proposal to provide its 
Members continuity related to conducting inspections as part of 
satisfying the obligations of Exchange Rule 1308, Supervision of 
Accounts, at offices and locations requiring inspection during the 
first half of calendar year 2024.\4\ The Exchange believes that the 
proposed extension is necessary to provide firms the time to prepare 
for the implementation of the FINRA pilot program on remote inspections 
(``FINRA Pilot Program''). The U.S. Securities and Exchange Commission 
(``Commission'' or ``SEC'') approved the FINRA Pilot Program on 
November 17, 2023,\5\ and on January 23, 2024, FINRA announced the 
implementation date of July 1, 2024.\6\ The Exchange plans to make a 
rule filing to incorporate the FINRA Pilot Program into Exchange Rule 
1308, Supervision of Accounts, prior to the FINRA Pilot Program 
implementation date.
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    \4\ Commission staff and FINRA have stated in guidance that 
inspections must include a physical, on-site review component. See 
SEC National Examination Risk Alert, Volume I, Issue 2 (November 30, 
2011) and FINRA Regulatory Notice 11-54 (November 2011) (joint SEC 
and FINRA guidance stating, a ``broker-dealer must conduct onsite 
inspections of each of its office locations; [OSJs] and non-OSJ 
branches that supervise non-branch locations at least annually, all 
non-supervising branch offices at least every three years; and non-
branch offices periodically.'') (footnote defining an OSJ omitted). 
See also SEC Division of Market Regulation, Staff Legal Bulletin No. 
17: Remote Office Supervision (March 19, 2004) (stating, in part, 
that broker-dealers that conduct business through geographically 
dispersed offices have not adequately discharged their supervisory 
obligations where there are no on-site routine or ``for cause'' 
inspections of those offices).
    \5\ See Securities Exchange Act Release Nos. 97398 (April 28, 
2023), 88 FR 28620 (May 4, 2023) (``FINRA Pilot Program Proposal''); 
98982 (November 17, 2023), 88 FR 82464 (November 24, 2023) (``FINRA 
Pilot Program Approval Order'') (SR-FINRA-2023-007).
    \6\ See FINRA Regulatory Notice 24-02 (``FINRA Pilot Program 
Notice''), https://www.finra.org/rules-guidance/notices/24-02. See 
supra note 5.
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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, for calendar years 2020, 2021, 2022, and 2023, subject to 
specified conditions,\7\ due to the logistical challenges of going on-
site while public health and safety concerns related to COVID-19 
persisted. The temporary relief provided in Exchange Rule 1308(d), 
Annual Branch Office Inspection, lapsed on December 31, 2023.
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    \7\ See Securities Exchange Act Release Nos. 90937 (January 15, 
2021), 86 FR 6944 (January 25, 2021) (SR-MIAX-2021-01) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Exchange Rule 1308, Supervision of Accounts, To Adopt 
Temporary Rules To Extend the Time by Which Members Must Complete 
Their Branch Office Inspections for the Calendar Year 2020 and To 
Provide Temporary Remote Inspection Relief for Their Office 
Inspections for Calendar Years 2020 and 2021); 94251 (February 15, 
2022), 87 FR 9764 (February 22, 2022) (SR-MIAX-2022-09) (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); and 96867 (February 9, 2023), 88 FR 
9919 (February 15, 2023) (SR-MIAX-2022-04) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend Exchange 
Rule 1308, Supervision of Accounts).
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    The pandemic accelerated the industry's adoption of a broad remote 
work environment and the Exchange recognizes that the pandemic has 
profoundly changed attitudes on where work can occur. As a result of 
this change many firms have adopted, in varying scale, hybrid work 
models involving personnel who are working at least part time from 
alternative work locations (e.g., private residences). As part of an 
effort to modernize its rules to reflect evolving technologies and 
business models, in April 2023, FINRA filed the FINRA Pilot Program 
with the Commission.\8\ The FINRA Pilot Program provides 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. On November 17, 
2023, the Commission approved the FINRA Pilot Program.\9\ The FINRA 
Pilot Program is designed to allow both FINRA and the firms that are 
planning to participate in the FINRA Pilot Program additional time to 
develop the technology and processes that will be essential to 
operationalize compliance with the FINRA Pilot Program's requirements. 
For example, firms will need to conduct an eligibility review, and 
conduct and

[[Page 13387]]

document a risk assessment for each office and location that they elect 
to inspect remotely, and implement technology to collect and report the 
required data and information to FINRA. Firms that do not elect to 
participate or would be excluded from participating in the FINRA Pilot 
Program will also be impacted and would need additional time to staff, 
schedule, and resume on-site inspections of offices or locations \10\ 
within the context of some lingering health concerns and fluid work 
locations.\11\
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    \8\ See supra note 5.
    \9\ Id.
    \10\ See supra note 4.
    \11\ While the World Health Organization declared an end to 
COVID-19 as a public health emergency, COVID-19 remains an ongoing 
public health problem. See WHO Director-General, Statement on the 
fifteenth meeting of the IHR (2005) Emergency Committee on the 
COVID-19 pandemic (May 5, 2023) (stating, in part, that the 
``[w]hile the global risk assessment remains high, there is evidence 
of reducing risks to human health. . .''), available at https://www.who.int/news/item/05-05-2023-statement-on-the-fifteenth-meeting-of-the-international-health-regulations-(2005)-emergency-committee-
regarding-the-coronavirus-disease-(covid-19)-
pandemic?_sm_au_=iVVWFFPz51g33QZrctQ2NK76F2NJ1 (last visited January 
10, 2024); see also Benjamin J. Silk, et al., COVID-19 Surveillance 
After Expiration of the Public Health Emergency Declaration--United 
States, May 11, 2023 (stating, among other things, that ``[a]lthough 
COVID-19 no longer poses the societal emergency that it did when it 
first emerged in late 2019, COVID-19 remains an ongoing public 
health challenge. By April 26, 2023, more than 104 million U.S. 
COVID-19 cases, 6 million related hospitalizations, and 1.1 million 
COVID-19- associated deaths were reported to CDC[.]''), 72 MMWR Morb 
Mortal Wkly Rep, 523-528 (2023), https://www.cdc.gov/mmwr/volumes/72/wr/pdfs/mm7219e1-H.pdf (last visited January 10, 2024). Recent 
data on hospitalizations from the CDC indicate that the number of 
hospitalizations is up 20.4% in the most recent week (as of December 
24 to December 30, 2023). See Centers for Disease Control and 
Prevents (``CDC''), COVID Data Tracker, Data Update for the United 
States, https://covid.cdc.gov/covid-data-tracker/#datatracker-home 
(last visited January 10, 2024).
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    In sum, as calendar year 2024 begins, the proposed extension of 
Exchange Rule 1308(d) would provide firms continuity in meeting their 
inspection obligations and would allow FINRA time to operationalize the 
FINRA Pilot Program. Relatedly, the proposed extension would give time 
for: (1) firms that are planning to participate in the FINRA Pilot 
Program to implement the processes needed to comply with the proposed 
terms therein; and (2) firms that are not planning to participate or 
are excluded from participating in the FINRA Pilot Program, to prepare 
to resume conducting on-site inspections of their offices and locations 
as part of satisfying the obligations of Exchange Rule 1308(d).
    The Exchange is not proposing to amend the other conditions of 
Exchange Rule 1308. The current conditions of the rule for firms that 
elect to conduct remote inspections would remain unchanged: such firms 
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 
Exchange continues to believe this temporary remote inspection option 
is a reasonable alternative for firms to fulfill their Exchange Rule 
1308 obligations under the current circumstances described above. This 
proposed extension is designed to maintain the investor protection 
objectives of the inspection requirements under these circumstances. As 
part of those objectives, firms should consider whether, under their 
particular operating conditions, continued reliance on Exchange Rule 
1308(d) to conduct remote inspections would be reasonable under the 
circumstances. For example, firms with offices that are open to the 
public or that are otherwise doing business as usual should consider 
whether some in-person inspections would be feasible and add value to 
the firms' supervisory program. The Exchange emphasizes that the 
inspection requirement is one aspect of a firm's overall supervisory 
system, and that the inspection, whether done remotely under Exchange 
Rule 1308 or in accordance with the proposed FINRA Pilot Program, or 
on-site, would be held to the existing standards of review under 
Exchange Rule 1308.\12\
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    \12\ Those standards provide, in part, that based on the factors 
set forth under that supplementary material, members ``may need to 
provide for more frequent review of certain locations.''
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    The Exchange notes that the proposed rule change is substantively 
identical to the proposed rule changes recently filed the Investors 
Exchange LLC (``IEX'').\13\ The Exchange notes that MIAX Chapter XIII 
is incorporated by reference into the rulebooks of the Exchange's 
affiliates, MIAX PEARL, LLC (``MIAX Pearl'') and MIAX Emerald, LLC 
(``MIAX 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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    \13\ See Securities Exchange Act Release No. 99383 (Jan.17, 
2024), 89 FR 4355 (Jan. 23, 2024) (SR-IEX-2024-02).
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2. Statutory Basis
    The Exchange believes that 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.\14\ Specifically, the Exchange believes that the proposed rule 
change is consistent with the Section 6(b)(5) \15\ 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 that the proposed rule change is consistent with the Section 
6(b)(5) \16\ 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 FINRA prepares for the implementation of its recently approved 
FINRA Pilot Program, and allow firms time to adapt to the pilot 
program, and prepare for conducting on-site inspections, as applicable, 
while continuing to serve and promote the protection of investors and 
the public interest.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ Id.
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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 will also provide for 
consistent application of the Exchange's supervision rules with those 
of FINRA, on which they are based. Consequently,

[[Page 13388]]

the Exchange does not believe that the proposed change implicates 
competition at all.

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) of the Act \17\ and Rule 19b-4(f)(6) \18\ 
thereunder. Because the 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 Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder. In addition, the Exchange provided the Commission with 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at least 
five business days prior to the date of filing.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange believes that this filing is non-controversial because 
it raises no novel issues and is consistent with FINRA rules previously 
approved by or filed with the Commission. In particular, the purpose of 
the proposed rule change is to harmonize with and conform to FINRA 
rules. The Exchange believes that the proposal promotes the protection 
of investors as it will harmonize the Exchange's supervision rules with 
those of FINRA, which will simplify the oversight process conducted by 
FINRA pursuant to a regulatory services agreement with the Exchange. 
Moreover, the Exchange does not believe that the proposed rule change 
implicates competition at all because the proposed change aligns the 
Exchange's rules with those of FINRA, which will assist it in its 
oversight work done pursuant to such regulatory services agreement. The 
proposed rule change is based on the recent changes by IEX,\20\ and 
therefore, does not present any new or novel issues not already 
considered by the Commission.
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    \20\ See supra note 13.
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    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\22\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and public interest. The Exchange 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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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
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    Since the proposed rule change would address Members' ability to 
conduct remote inspections for any inspections to be conducted through 
June 30, 2024, waiving the 30-day operative delay would help ensure 
that Members could plan their 2024 inspection program and conduct 
remote inspections under a harmonized rule set, while at the same time 
helping ensure that its Members continue to perform their supervisory 
obligations. The Exchange stated that the proposed rule change does not 
present any new or novel issues because the Exchange is harmonizing its 
supervision rules with those of FINRA, on which they are based. The 
Exchange further stated that the proposed rule change would provide 
only temporary relief during the period in which the Exchange 
harmonizes its supervision rules with FINRA. 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 waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\23\
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    \23\ 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) \24\ of the Act to determine whether the proposed 
rule should be approved or disapproved.
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    \24\ 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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#aad8dfc6cf87c9c5c7c7cfc4ded9ead9cfc984cdc5dc"><span class="__cf_email__" data-cfemail="2f5d5a434a024c4042424a415b5c6f5c4a4c01484059">[email protected]</span></a>. Please include 
file number SR-MIAX-2024-10 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-2024-10. 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 (https://www.sec.gov/rules/sro.shtml). 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MIAX-2024-10 and should be 
submitted on or before March 14, 2024.


[[Page 13389]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-03540 Filed 2-21-24; 8:45 am]
BILLING CODE 8011-01-P


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