Document ID: SEC-2022-0256-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange, LLC
Posted Date: 2022-02-22T05:00Z

[Federal Register Volume 87, Number 35 (Tuesday, February 22, 2022)]
[Notices]
[Pages 9764-9766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-03648]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94251; File No. SR-MIAX-2022-09]

Self-Regulatory Organizations: 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

February 15, 2022.
    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 3, 2022, Miami International 
Securities Exchange, LLC (``MIAX Options'' 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 proposal to amend Exchange Rule 1308, 
Supervision of Accounts, to extend the temporary remote inspection 
relief for Members \3\ to complete their branch office \4\ inspections 
for the calendar years 2020 and 2021 to include calendar year 2022 
through December 31, 2022.
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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.
    \4\ A ``branch office'' is any location where one or more 
associated persons of a Member regularly conduct the business of 
effecting any transactions in, or inducing or attempting to induce 
the purchase or sale of any security, or is held out as such, with 
such exclusions pursuant to Exchange Rule 1306(c)(1)-(7). See 
Exchange Rule 1306(c).
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    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/ at MIAX Options' 
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 
to complete their branch office inspections for the calendar years 2020 
and 2021 to include calendar year 2022 through December 31, 2022.
    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.
    Exchange Rules require Members to conduct branch \5\ and non-branch 
office and location inspections pursuant to certain annual cycles. 
Specifically, pursuant to Exchange Rule 1308(d), each branch office 
that supervises one or more non-branch location must be inspected no 
less often than once each calendar year, unless it qualifies for 
certain exemptions.\6\ Every branch office, without exception, must be 
inspected at least once every three calendar-years. Members must 
maintain written reports of such inspections.\7\
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    \5\ The Exchange notes that notwithstanding the exclusions in 
subparagraphs (c)(1)-(7) of Exchange Rule 1306, any location that is 
responsible for supervising the activities of persons associated 
with a Member at one or more non-branch locations of such Member is 
considered to be a branch office. See Exchange Rule 1306(d).
    \6\ A Member may demonstrate to the satisfaction of the Exchange 
that because of proximity, special reporting or supervisory 
practice, other arrangements may satisfy Exchange Rule 1308(d)'s 
requirements for a particular branch office, or that, based upon the 
written policies and procedures of such Member providing for a 
systematic risk-based surveillance system, the Member submits a 
proposal to the Exchange and receives, in writing, an exemption from 
the requirement in Exchange 1308(d), pursuant to Exchange Rule 
1308(e).
    \7\ See Exchange Rule 1308(d)(2).
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    In November 2020, the Exchange adopted Exchange Rule 1308(d)(4) and 
(d)(5), which has expired by its terms, that extended the time by which 
Members must complete their calendar year 2020 inspection obligations 
to March 31, 2021, without an on-site visit to the office or 
location.\8\ The Exchange Rule 1308(d)(5) automatically sunset on 
December 31, 2021, to provide Members the option of satisfying their 
inspection obligations under Exchange Rule 1308 remotely for calendar 
years 2020 and 2021, subject to specified conditions,\9\ due to the 
logistical challenges of going on-site while public health and safety 
concerns related to COVID-19 persisted. The Exchange notes that these 
temporary rules are substantively identical to the temporary inspection 
extension and remote relief rules filed by the Financial Industry 
Regulatory Authority (``FINRA'').\10\
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    \8\ See Securities Exchange Act Release No. 90937 (January 25, 
2021), 86 FR 6944 (January 15, 2021) (SR-MIAX-2021-01).
    \9\ See id.
    \10\ See Securities and Exchange Act Release Nos. 89188 (June 
30, 2020), 85 FR 40713 (July 7, 2020) (SR-FINRA-2020-019); and 90454 
(November 18, 2020), 85 FR 75097 (November 24, 2020) (Notice of 
Filing and Immediate Effectiveness of File No. SR-FINRA-2020-040).
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    While there are signs of improvement, much uncertainty remains. The 
emergence of the COVID-19 variants,\11\ dissimilar vaccination rates 
throughout the United States, and the uptick in transmissions in many 
locations indicate that COVID-19 remains an active and real public 
health concern.\12\

[[Page 9765]]

The Exchange understands that Members have delayed their return-to-
office plans due to the continued pandemic and are considering 
implementing or have implemented hybrid work arrangements dependent on 
functions and regulatory requirements.\13\ To that end, in order to 
address ongoing industry-wide concerns regarding having to conduct in-
person office inspections while safety concerns related to the pandemic 
persist and to align with pandemic-related regulatory relief provided 
by FINRA, which recently extended their substantively identical 
temporary remote inspection rules,\14\ the Exchange proposes to extend 
Exchange Rule 1308(d)(5) to cover calendar year 2022 inspection 
obligations through December 31, 2022. The proposed extension would 
provide clarity to Members on regulatory requirements and account for 
the time needed for many Members to carefully assess when and how to 
have their employees safely return to their offices in light of 
vaccination coverage in the U.S. and transmission levels of the virus, 
including any emergent variants throughout the country.
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    \11\ See The Centers for Disease Control and Prevention 
(``CDC''), What You Need to Know About Variants, https://www.cdc.gov/coronavirus/2019-ncov/variants/variant.html (stating, in 
part, that ``the Delta variant causes more infections and spreads 
faster than earlier forms of the virus that causes COVID19'') 
(updated September 3, 2021). See also CDC, The Possibility of COVID-
19 Illness After Vaccination: Breakthrough Infections, https://www.cdc.gov/coronavirus/2019-ncov/vaccines/effectiveness/why-measure-effectiveness/breakthrough-cases.html (stating, in part, 
that ``COVID-19 vaccines are effective at preventing infection, 
serious illness, and death. Most people who get COVID-19 are 
unvaccinated. However, since vaccines are not 100% effective at 
preventing infection, some people who are fully vaccinated will 
still get COVID-19 . . . People who get vaccine breakthrough 
infections can be contagious'') (updated August 23, 2021).
    \12\ For example, President Joe Biden on July 29, 2021, 
announced several measures to increase the number of people 
vaccinated against COVID-19 and to slow the spread of the Delta 
variant, including strengthening safety protocols for federal 
government employees and contractors. See https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/29/factsheet-president-biden-to-announce-new-actions-to-get-more-americansvaccinated-and-slow-the-spread-of-the-delta-variant. More 
recently, President Joe Biden on August 31, 2021, briefed the press 
on, among other things, the government's response to the COVID-19 
surge, noting the government's continuing efforts to help states 
with Delta variant outbreaks. See https://www.whitehouse.gov/briefing-rom/press-briefings/2021/08/31/pressbriefing-by-white-house-covid-19-response-team-and-public-health-officials-53/.
    \13\ The Exchange notes that a majority of its Members are FINRA 
member firms as well, and that through FINRA's ongoing monitoring, 
the Exchange has learned that many of its Members have delayed plans 
to require a full return to the office and that most continue to 
operate in a remote or hybrid environment.
    \14\ See Securities and Exchange Act Release Nos. 93002 
(September 15, 2021), 86 FR 52508 (September 21, 2021) (SR-FINRA-
2021-023); and 94018 (January 20, 2022), 87 FR 4072 (January 26, 
2022) (SR-FINRA-2022-001).
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    By extending Exchange Rule 1308(d)(5) through December 31, 2022, 
the Exchange does not propose to amend the other conditions of the 
temporary rule. The proposed amendment to Exchange Rule 1308(d)(5) 
simply provides that for calendar year 2022, a Member has the option to 
conduct those inspections remotely through December 31, 2022. The 
current conditions of Exchange Rule 1308(d)(5) for Members that elect 
to conduct remote inspections would remain unchanged. Such Members 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 additional period 
of time would also enable 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. Notwithstanding the proposed temporary rule change, a Member 
remains subject to the other requirements of Exchange Rule 1308(d).
    The Exchange continues to believe this temporary remote inspection 
option is a reasonable alternative to provide to Members to fulfill 
their Exchange Rule 1308(d) obligations during the 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 as well as with applicable Exchange Rules.
    The Exchange notes that the proposed rule change is substantively 
identical to the proposed rule changes recently filed by FINRA.\15\ 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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    \15\ Id.
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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.\16\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \17\ 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) \18\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ Id.
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    In particular, the Exchange believes that, in light of the impact 
of COVID-19 on the performance of on-site office and location 
inspections pursuant to Exchange Rule 1308(d), the proposed temporary 
rule change is intended to provide Members a temporary regulatory 
option to conduct inspections of offices and locations remotely during 
the calendar year 2022. The proposed temporary rule change does not 
relieve Members from meeting their existing core regulatory obligations 
to establish and maintain a system to supervise the activities of each 
associate person that is reasonably designed to achieve compliance with 
applicable securities laws and regulations as well as with applicable 
Exchange Rules that directly serve investor protection. In a time when 
faced with ongoing challenges resulting from the COVID-19 pandemic, the 
Exchange believes that the proposed temporary rule change provides 
sensibly tailored relief that will afford Members the ability to assess 
when and how to implement their work re-entry plans as measured against 
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 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe the proposed rule change will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because the proposed extension of the temporary 
remote inspection relief rule will apply equally to all Members 
required to conduct office and location inspections in calendar year 
2022 through December 31, 2022. The Exchange further does not believe 
that the proposed extension to the temporary rule will impose any 
burden on intermarket competition because it relates only to the 
extension

[[Page 9766]]

of the remote manner in which inspections for the calendar year 2022 
may be conducted. 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.\19\
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    \19\ See supra note 14.
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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

    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 \20\ and Rule 19b-4(f)(6) \21\ 
thereunder.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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. 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 [email protected]. Please include 
File Number SR-MIAX-2022-09 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-2022-09. 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. 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-2022-09 and 
should be submitted on or before March 15, 2022.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03648 Filed 2-18-22; 8:45 am]
BILLING CODE 8011-01-P