Document ID: SEC-2021-0373-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2021-03-17T04:00Z

[Federal Register Volume 86, Number 50 (Wednesday, March 17, 2021)]
[Notices]
[Pages 14659-14661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05444]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91303; File No. SR-PEARL-2021-04]

Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange 
Rule 2300, Supervision, and Exchange Rule 2301, Supervisory Control 
System

March 11, 2021.
    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 25, 2021, MIAX PEARL, LLC (``MIAX 
PEARL'' 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 proposed rule change to amend Exchange 
Rules 2300 and 2301 to incorporate the provisions of Financial Industry 
Regulatory Authority Rules 3110 and 3120 regarding supervision and 
supervisory controls.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL'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 purpose of the proposed rule change is to amend Exchange Rules 
2300 and 2301 to incorporate the provisions of Financial Industry 
Regulatory Authority, Inc. (``FINRA'') Rules 3110 and 3120 regarding 
supervision and supervisory controls.\3\
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    \3\ The proposed rule change is based on Investors Exchange, 
Inc. (``IEX'') Rules 5.110 and 5.120.
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Exchange Rule 2300, Supervision
    The Exchange proposes to amend Exchange Rule 2300 to incorporate 
the provisions of FINRA Rule 3110. Exchange Rule 2300 would be 
identical to the FINRA Rule with the only differences being replacing 
references to ``FINRA'' with the ``Exchange'' and to replacing 
references to the following FINRA Rules with the applicable Exchange 
Rule:

 FINRA Rule 3110 would be replaced with Exchange Rule 2300

[[Page 14660]]

 FINRA Rule 3210 would be replaced with Exchange Rule 2305
 FINRA Rule 2210(b)(1) would be replaced with Exchange Rule 
2104

    Like FINRA Rule 3110, Exchange Rule 2300 would require a firm to 
establish and maintain a system to supervise the activities of its 
associated persons that is reasonably designed to achieve compliance 
with the applicable securities laws and regulations and Exchange rules.
    Exchange Rule 2300 would detail requirements for a firm to have 
reasonably designed written supervisory procedures (``WSPs'') to 
supervise the activities of its associated persons and the types of 
businesses in which it engages. Among other things, a firm's WSPs must 
address supervision of supervisory personnel and provide for the review 
of a firm's investment banking and securities business, correspondence 
and internal communications, and customer complaints. WSPs should 
describe:
     The specific individual(s) responsible for each review,
     the supervisory activities such persons will perform,
     the frequency of the review, and
     the manner of documentation.
    The rule further sets forth requirements to designate and register 
branch offices and offices of supervisory jurisdiction (OSJs), conduct 
internal inspections and review transactions for insider trading.
    Firms must also adopt procedures that include a means of customer 
confirmation for certain transactions such as transmittal of customer 
funds, changes in address, and changes in investment objectives.
Exchange Rule 2301, Supervisory Control System
    The Exchange proposes to amend Exchange Rule 2301 to incorporate 
the provisions of FINRA Rule 3120. Exchange Rule 2301 would be 
identical to FINRA Rule 3120 with the only differences being replacing 
references to ``FINRA'' with the ``Exchange''.
    Like FINRA Rule 3120, Exchange Rule 2301 would require a firm to 
have a system of supervisory control policies and procedures (``SCPs'') 
that tests and verifies a firm's supervisory procedures. It is 
essential for a firm to recognize that FINRA Rule 3120's requirement to 
have specific SCPs differs from the requirement for WSPs. A firm not 
only needs to maintain WSPs, but the firm also must have SCPs to test 
and verify, at least annually, that its WSPs are reasonably designed 
with respect to the firm's and its associated persons' activities to 
achieve compliance with applicable securities laws and regulations and 
Exchange Rules, and to create additional or amend WSPs as identified by 
such testing and verification. Risk-based methodologies and sampling 
may be used to determine the scope of testing. The testing ensures that 
a firm's supervisory procedures are reviewed and amended regularly in 
light of changing business and regulatory environments.
    Pursuant to Exchange Rule 2301, like FINRA Rule 3120, a firm must 
designate principal(s) to be responsible for establishing, maintaining 
and enforcing a firm's SCPs. The designated principal(s) also must 
prepare, at least annually, a report detailing the firm's supervisory 
control system and submit it to senior management (Rule 2301 Report). 
The Rule 2301 Report must include a summary of the test results and 
significant identified exceptions, and any additional or amended 
supervisory procedures created in response to the test results.
    If a firm has reported $200 million or more in gross revenue on its 
FOCUS report in the prior calendar year, like FINRA Rule 3120, Exchange 
Rule 2301 would require that the firm's annual report include specified 
additional content, to the extent applicable to the firm's business.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\4\ in general, and furthers the objectives of Section 6(b)(5),\5\ 
in particular, because it is 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. The proposed 
rule change would remove impediments to and promote just and equitable 
principles of trade because it would memorialize within the Exchange's 
rules supervisory requirements identical to those set forth in FINRA 
Rules 3110 and 3120. Doing so would explicitly set forth Member's 
supervisory requirements within the Exchange Rules without setting 
forth additional supervisory requirements or undue burden on Members. 
The Exchange notes the proposed rule change would also align the 
Exchange's supervisory rules with those of IEX.\6\
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ IEX Rules 5.110 and 5.120.
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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 
impose 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 have a competitive impact because it is not intended to 
attract additional business to the Exchange. It is simply intended to 
incorporate the provisions of Financial Industry Regulatory Authority 
Rules 3110 and 3120 regarding supervision and supervisory controls 
within Exchange Rules 2300 and 2301.

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 \7\ and Rule 19b-4(f)(6) \8\ 
thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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.

[[Page 14661]]

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-PEARL-2021-04 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-PEARL-2021-04. 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 (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 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; 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-PEARL-2021-04 and 
should be submitted on or before April 7, 2021. For the Commission, by 
the Division of Trading and Markets, pursuant to delegated 
authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05444 Filed 3-16-21; 8:45 am]
BILLING CODE 8011-01-P