Document ID: SEC-2020-1431-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX PEARL, LLC
Posted Date: 2020-09-09T04:00Z

[Federal Register Volume 85, Number 175 (Wednesday, September 9, 2020)]
[Notices]
[Pages 55730-55732]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19839]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89736; File No. SR-PEARL-2020-14]

Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Relating to the 
Designation of Members for Mandatory Disaster Recovery Testing Pursuant 
to Regulation SCI for Calendar Year 2020

September 2, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 26, 2020, MIAX PEARL, LLC (``MIAX PEARL'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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 how the Exchange will 
designate certain Members \3\ to participate in mandatory disaster 
recovery testing pursuant to Regulation SCI and Miami International 
Securities Exchange, LLC (``MIAX'') Rule 321, which is incorporated by 
reference in the Exchange's Rules, for calendar year 2020.
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    \3\ See MIAX and Exchange Rule 100.
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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/pearl at MIAX 
PEARL's principal office, and at the Commission's Public Reference 
Room.

II. Self-Regulatory Organization's Statement on 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 how the Exchange will designate 
certain Members to participate in mandatory disaster recovery testing 
pursuant to Regulation SCI and MIAX Rule 321, which is incorporated by 
reference in Chapter III of the Exchange's Rules, for calendar year 
2020. This proposed rule change is based on a recent proposed rule 
change by the Long Term Stock Exchange, Inc. (``LTSE'').\4\
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    \4\ See Securities Exchange Act Release No. 89216 (July 2, 
2020), 85 FR 41259 (July 9, 2020) (SR-LTSE-2020-10).
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    Regulation SCI requires MIAX PEARL, as an SCI entity, to maintain 
business continuity and disaster recovery plans that provide for 
resilient and geographically diverse backup and recovery capabilities 
that are reasonably designed to achieve two-hour resumption of critical 
SCI systems and

[[Page 55731]]

next business day resumption of other SCI systems following a wide-
scale disruption.\5\
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    \5\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72252 (December 5, 2014).
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    Regulation SCI and MIAX Rule 321 also require MIAX PEARL to 
designate certain members to participate in business continuity and 
disaster recovery testing in a manner specified by MIAX PEARL and at a 
frequency of not less than once every 12 months.\6\ Such testing 
ordinarily is part of an annual industry-wide test, which is next 
scheduled for October 24, 2020.
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    \6\ See MIAX Rule 321(a), (b).
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    MIAX Rule 321 governs mandatory participation in testing of MIAX 
PEARL's backup systems, and states that the Exchange will designate 
Members that account for a specified percentage of executed volume on 
the Exchange, measured on quarterly basis, as required to connect to 
the Exchange's backup systems and participate in functional and 
performance testing of such system.\7\
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    \7\ See MIAX Rule 321(b).
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    On August 14, 2020, the Commission approved the Exchange's proposal 
to adopt rules governing the trading of equity securities, referred to 
as MIAX PEARL Equities.\8\ MIAX PEARL Equities currently is not 
operational and is not expecting to have two quarters of trading data 
on which to base its Member designation prior to the October 24, 2020 
test. Thus, as currently written, MIAX Rule 321 would not permit the 
Exchange to designate any Equity Members \9\ of MIAX PEARL Equities to 
participate in the industry-wide test for 2020 because no Equity 
Members will have the requisite trading volume on MIAX PEARL Equities 
upon which a designation can be made.
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    \8\ See Securities Exchange Act Release No. 89563 (August 14, 
2020), 85 FR 51510 (August 20, 2020) (``Equities Approval Order'').
    \9\ See Exchange Rule 1901.
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    To address the unique circumstances for disaster recovery testing 
in 2020, the year in which MIAX PEARL Equities will become operational, 
the Exchange proposes to amend Chapter III of the Exchange's Rules to 
provide that for calendar year 2020, notwithstanding paragraph (b) and 
Interpretations and Policies .01 of MIAX Rule 321, which assigns the 
Exchange responsibility of ``identifying Members that account for a 
meaningful percentage of the Exchange's overall volume,'' the Exchange 
will instead designate at least three Equity Members on MIAX PEARL 
Equities who have a meaningful percentage of trading volume in NMS 
Stocks across the other equity exchanges. This would allow the Exchange 
to identify Equity Members for industry-wide disaster recovery testing 
in the absence of the metrics that will be used in the ordinary course 
to designate such firms.
    The Exchange believes that designating at least three Equity 
Members who are likely already to be participating in the industry-wide 
test by virtue of their trading activities on other exchanges is likely 
to reduce the burdens associated with being designated for disaster 
recovery testing by MIAX PEARL in absence of significant trading volume 
on MIAX PEARL Equities. Moreover, to reduce the burdens on such Equity 
Members, the Exchange proposes, where possible, to designate firms that 
have already established connections to its backup systems. This is 
intended to address the ``notice'' requirements in the existing Rule 
321.01 The Exchange believes that designating three or more such firms 
is reasonably designed to provide the minimum necessary for the 
maintenance of fair and orderly markets in the event of the activation 
of such plans. The Exchange intends to notify Equity Members of their 
designation for disaster recovery testing no later than September 30, 
2020. With respect to industry-wide disaster recovery testing in 2021 
and beyond, the Exchange will issue one or more regulatory circulars 
establishing the standards to be used for determining which Equity 
Members contribute a meaningful percentage of the Exchange's overall 
volume and thus are required to participate in functional and 
performance testing. Such standards will be informed by the Exchange's 
actual market and trading data, in accordance with MIAX Rule 321(a)-
(b).
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\10\ in general, and furthers the objectives of Section 
6(b)(5),\11\ in particular, because it is 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 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposed methodology of designating 
Equity Members who have meaningful levels of trading activity on other 
exchanges and who have established connectivity to the Exchange's 
backup systems is consistent with the protection of investors and the 
public interest. The Exchange believes that the proposed rule change 
will ensure that the Equity Members necessary to ensure the maintenance 
of fair and orderly markets in the event of the activation of the 
Exchange's disaster recovery plans have been designated consistent with 
MIAX Rule 321 and Rule 1004 of Regulation SCI. Specifically, the 
proposal will address the unique circumstances of industrywide testing 
taking place within a short time of when the Exchange commences 
operations. The Exchange believes that the proposed rule change 
balances the objectives of having Equity Members participate in 
industry-wide disaster recovery testing, including Exchange's backup 
systems, and the burdens on such Equity Members who, at the time of 
designation, will not have traded on MIAX PEARL Equities.
    As set forth in the SCI Adopting Release, ``SROs have the 
authority, and legal responsibility, under Section 6 of the Exchange 
Act, to adopt and enforce rules (including rules to comply with 
Regulation SCI's requirements relating to BC/DR testing) applicable to 
their members or participants that are designed to, among other things, 
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.'' \12\ The Exchange believes that this proposal is consistent 
with such authority and legal responsibility.
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    \12\ See supra note 5, at 72350.
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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 Exchange believes that 
the proposed rule change is designed to promote fair competition among 
brokers and dealers and exchanges by ensuring the Exchange can 
designate Equity Members to participate in mandatory disaster recovery 
testing pursuant to Regulation SCI for calendar year 2020. The Exchange 
believes that designating three or more such firms is reasonably

[[Page 55732]]

designed to provide the minimum necessary for the maintenance of fair 
and orderly markets in the event of the activation of such plans, 
thereby promoting intermarket competition between exchanges in 
furtherance of the principles of Section 11A(a)(1) of the Act.\13\
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    \13\ 15 U.S.C. 78k-1(a)(1).
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    With respect to intramarket competition, the proposed rule change 
seeks to reduce the burdens on Equity Members by only designating 
Equity Members who are likely already participating in the industry-
wide test by virtue of their trading activities on other exchanges. 
Under the proposed rule change, the Exchange will designate firms that 
have already established connections to the Exchange's backup systems. 
Consequently, the Exchange does not believe that the proposed rule 
change would impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.

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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \14\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission 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 of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay to permit the 
Exchange to notify Members of their designation earlier than would be 
possible without a waiver of the operative delay. The Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest because it would 
provide designated members additional time to receive notice of their 
designation, and thus prepare for disaster recovery testing with the 
Exchange's backup systems. Accordingly, the Commission waives the 30-
day operative delay and designates the proposal operative upon 
filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule'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 such 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- PEARL-2020-14 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-2020-14. 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-PEARL-2020-14 and 
should be submitted on or before September 30, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-19839 Filed 9-8-20; 8:45 am]
BILLING CODE 8011-01-P