Document ID: SEC-2014-1197-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange LLC
Posted Date: 2014-07-17T04:00Z

[Federal Register Volume 79, Number 137 (Thursday, July 17, 2014)]
[Notices]
[Pages 41717-41719]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16787]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72600; File No. SR-MIAX-2014-38]

Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Change Its Procedure for Processing 
Fingerprints Under Existing Rule 807

July 11, 2014.
    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 July 1, 2014, 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, 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 the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to change its procedure for 
processing fingerprints under its existing Rule 807.
    The text of the proposed rule change is available on the Exchange's 
Web site

[[Page 41718]]

at http://www.miaxoptions.com/filter/wotitle/rule_filing, at MIAX's 
principal office, and at the Commission's Public Reference Room.\3\
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    \3\ The Commission notes that there is no text for this proposed 
rule change. Rather, MIAX is changing its procedure for processing 
fingerprints.
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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 change the procedure under its existing 
Rule 807 (Fingerprint-Based Background Checks of Exchange Employees and 
Independent Contractors) regarding its current practice of conducting 
fingerprint-based criminal records checks of (i) all prospective and 
current employees of the Exchange (ii) all prospective and current 
independent contractors who have or are anticipated to have access to 
the facilities of the Exchange for ten (10) business days or longer 
(``contractors'') and (iii) all prospective and current temporary 
employees who have or are anticipated to have access to facilities of 
the Exchange for ten (10) business days or longer (``temporary 
employees'').\4\ A number of securities markets have filed rules and 
procedures with the Securities and Exchange Commission (``Commission'' 
or ``SEC'') to obtain fingerprints from certain enumerate [sic] 
parties.\5\ MIAX's proposal to change its procedure under its Rule 807 
is consistent with these rules. Specifically, the Exchange is proposing 
to: (1) Discontinue the current method of manual fingerprinting via 
fingerprint cards and (2) utilize a Live-Scan \6\ electronic system for 
the taking of fingerprints. All of the proposed changes are consistent 
with the requirements of other options exchanges.\7\
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    \4\ See Rule 807.
    \5\ See Securities Exchange Act Release No. 69496 (May 2, 2013), 
78 FR 26671 (May 7, 2013), (Notice of filing and immediate 
effectiveness of a proposed Chicago Board Options Exchange 
(``CBOE'') rule change relating to fingerprint-based background 
checks (SR-CBOE-2013-044)); Rule 28 of the New York Stock Exchange 
(``NYSE''); Rule 0140 of the Nasdaq Stock Market, Inc. (``Nasdaq''); 
71066 (December 12, 2013) 78 FR 76667 (December 18, 2013) (SR-ISE-
2013-66); and Securities Exchange Act Release No. 50157 (August 5, 
2004), 69 FR 49924 (August 12, 2004) (policy adopted by the 
Financial Industry Regulatory Authority (``FINRA''), formerly known 
as National Association of Securities Dealers, Inc. (``NASD''), to 
conduct fingerprint-based background checks of NASD employees and 
independent contractors).
    \6\ Live-Scan refers to the process of capturing fingerprints 
directly into a digitized format as opposed to traditional ink and 
paper methods. Using Live-Scan technology, images are captured and 
transmitted to a central location and/or interface for 
identification processing. Certified Live-Scan systems produce 
consistent high quality fingerprint images, thereby reducing 
rejection rates and lowering turnaround times. Live-Scan systems are 
used by law enforcement agencies for processing criminal fingerprint 
records and in government and commercial markets for applicant 
employment background checks.
    \7\ See supra note 5.
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    Access to the Federal Bureau of Investigation's (``FBI'') (the 
fingerprint processing arm of the Office of the Attorney General of the 
United States) database of fingerprint-based records is permitted only 
when authorized by law. Section 17(f)(2) of the Act explicitly directs 
the Attorney General of the United States (i.e., the FBI) to provide 
SROs designated by the Commission with access to criminal history 
record information. The Exchange has conducted its fingerprint-based 
record checks of (i) employees of the Exchange, (ii) contractors, and 
(iii) temporary employees since Rule 807 was adopted on December 3, 
2012. Under the current fingerprinting procedure, the Exchange staff 
manually rolls the fingerprints and submits the fingerprint cards to 
the FBI.\8\ The Exchange understands that the FBI is no longer 
accepting card stocks of fingerprints due to the high costs associated 
with processing these submissions, thereby requiring that all 
fingerprints be submitted in an electronic format for processing. The 
FBI requires a minimum of 3,000 submissions per year in order to 
maintain a direct FBI connection for electronic fingerprint processing. 
However, the Exchange's annual volume of fingerprint submissions is 
approximately 100 per year. Because this is a mere fraction of the 
minimum requirement set forth by the FBI, it is necessary that MIAX 
engage an FBI-authorized Channel Partner for these services in order to 
comply with applicable federal law.\9\ Accordingly, the Exchange is now 
proposing to utilize a Live-Scan electronic fingerprinting system, as 
mentioned above. Any Live-Scan system utilized by the Exchange will 
have been certified by the FBI for compliance with the FBI's Integrated 
Automated Fingerprint Identification System (``IAFIS'') \10\ image 
quality specifications. The Live-Scan system will electronically 
capture and transmit fingerprints to the FBI for processing and 
transmit fingerprint reports back to the MIAX.\11\ The Live-Scan system 
will be maintained by an FBI-approved Channel Partner \12\ and operated 
by a qualified Channel Partner representative. The Exchange notes that 
at least two other exchanges employ the same method for processing 
fingerprints electronically.\13\
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    \8\ The Exchange notes that one to two weeks generally elapses 
between the time when MIAX submits fingerprint cards and when MIAX 
received [sic] fingerprint reports.
    \9\ 15 U.S.C. 78q(f)(2); 17 CFR 240.17f-2(c).
    \10\ The IAFIS, which was launched in July 1999, was developed 
to offer rapid suspect identification to law enforcement agencies 
and organizations where criminal background histories are a critical 
factor in consideration for employment. Because fingerprint cards 
must be physically transported and processes [sic], substantial 
delays can be experienced in the identification cycle. To improve 
the speed and accuracy of the fingerprint identification process and 
eliminate the need for contributing agencies to create and mail 
paper fingerprint cards to the FBI for processing, the FBI Criminal 
Justice Information Services Division developed the IAFIS to support 
the paperless submission of fingerprint records. IAFIS provides 
Federal, state and local criminal justice agencies the ability to 
electronically transmit fingerprint information, vastly improving 
response time.
    \11\ The Exchange estimates that under this proposed change 
approximately two days will elapse between when MIAX submits 
electronic fingerprints and when the FBI returns fingerprint reports 
to the MIAX.
    \12\ FBI-approved Channel Partners receive the fingerprint 
submission and relevant data, collect the associated fee(s), 
electronically forward the fingerprint submission with the necessary 
information to the FBI Criminal Justice Information Services 
Division (``CJIS'') for a national Criminal History Summary check, 
and receive the electronic summary check result for dissemination to 
the individual. An FBI-approved Channel Partner simply helps 
expedite the delivery of Criminal History Summary information on 
behalf of the FBI. The process for making a request through an FBI-
approved Channel Partner is consistent with FBI submission 
procedures.
    \13\ See Securities Exchange Act Release Nos. 46467 (September 
6, 2002), 67 FR 58088 (September 13, 2002), (Approval of CBOE using 
electronic system for submitting fingerprints under its 
fingerprinting plan), as corrected by 46467A (December 19, 2002), 67 
FR 79195 (December 27, 2002). See also Securities Exchange Act 
Release No. 71066 (December 12, 2013) 78 FR 76667 (December 18, 
2013) (SR-ISE-2013-66).
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    The procedural change that MIAX is proposing under its existing 
Rule is concerned with the constitution [sic] of a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing Rule of MIAX and MIAX 
believes that it is therefore eligible to be filed pursuant to

[[Page 41719]]

section 19(b)(3)(A)(i) of the Act \14\ and Rule 19b-4(f)(1) \15\ 
thereunder. The Exchange believes that this proposed procedural change 
under the existing rule is necessary in order to ensure the Exchange's 
continued compliance with its Rules and applicable federal law.\16\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(i).
    \15\ 17 CFR 240.19b-4(f)(1).
    \16\ See supra note 9.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
Securities Exchange Act of 1934 (the ``Act'') \17\ and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act. Specifically, the Exchange 
believes the proposed procedural change under Rule 807 is consistent 
with the Section 6(b)(5) \18\ 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 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.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that fingerprint-based 
background checks via a Live-Scan system of employees, contractors, and 
temporary employees is consistent with the foregoing requirements of 
Section 6(b)(5) in that it will allow MIAX to remain compliant with the 
requirements of its Rule 807 and applicable federal law.\19\ Continuing 
to run fingerprint-based background checks is imperative for the 
Exchange as they help MIAX identify and exclude persons with felony or 
misdemeanor conviction records that may pose a threat to the safety of 
Exchange personnel or the security of facilities and records, thereby 
enhancing business continuity, workplace safety and the security of the 
Exchange's operations and helping to protect investors and the public 
interest. Additionally, the proposed procedural change will allow MIAX 
to employ the same fingerprinting method currently employed by at least 
two other SR0s [sic].\20\
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    \19\ See supra note 9.
    \20\ See supra note 13.
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    For the foregoing reasons, the Exchange believes that the proposed 
procedural change under the existing rule is appropriate in order to 
ensure continued compliance with applicable state and federal laws.\21\
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    \21\ See supra note 9.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    MIAX does not believe that the proposed procedural change under the 
rule will impose any burden on competition that is not necessary or 
appropriate in the furtherance of the purposes of the Act. The proposed 
procedural change under the rule would enhance the security of the 
Exchange's facilities and records without adding any burden on market 
participants and allow the Exchange continued compliance with its 
fingerprinting rules and with Section 17(f)(2) of the Act as amended by 
the Dodd-Frank Act.\22\
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    \22\ See Section 929S of the Dodd-Frank Act.
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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 foregoing proposed rule change is filed for immediate 
effectiveness pursuant to Section 19(b)(3)(A) of the Act \23\ and Rule 
19b-4(f)(1) \24\ thereunder, because it constitutes a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule.
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(1).
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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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MIAX-2014-38 on the subject line.

Paper Comments

     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-2014-38. 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 Web site (http://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 Web site 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 such filing also will be available 
for inspection and copying at the principal offices of the Exchange. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-MIAX-2014-38, 
and should be submitted on or before August 7, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16787 Filed 7-16-14; 8:45 am]
BILLING CODE 8011-01-P