Document ID: SEC-2023-0172-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange, LLC
Posted Date: 2023-02-15T05:00Z

[Federal Register Volume 88, Number 31 (Wednesday, February 15, 2023)]
[Notices]
[Pages 9919-9921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03165]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96867; File No. SR-MIAX-2023-04]

Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 1308, Supervision of 
Accounts

February 9, 2023.
    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 2, 2023, 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 and II below, which Items have been 
prepared by the Exchange. MIAX has designated the proposed rule change 
as constituting a ``non-controversial'' rule change under Section 
19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(6) \4\ thereunder, which 
renders the proposed rule change effective upon receipt of this filing 
by the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 \5\ through the earlier of the effective date of the 
FINRA pilot program on remote inspections (the ``FINRA Pilot 
Program''),\6\ if approved, or December 31, 2023. The proposed 
extension would alleviate the ongoing operational challenges resulting 
from the COVID-19 pandemic that many member firms may continue to face 
in planning for and timely conducting required on-site inspections at 
locations requiring inspection in calendar year 2023.
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    \5\ 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.
    \6\ See Securities Exchange Act Release No. 95452 (Aug. 9, 
2022), 87 FR 50144 (Aug. 15, 2022) (SR-FINRA-2022-021).
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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'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 the earlier of the effective date of the FINRA Pilot Program 
\7\ if approved, or December 31, 2023.
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    \7\ Id.
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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. While there are several signs that the pandemic has 
receded, much uncertainty still remains. The emergence of new variants, 
dissimilar vaccination rates through the U.S., and varying levels of 
transmissions of the virus all indicate that COVID-19 remains an active 
and real public health concern. Against this setting, the Exchange 
understands the complexity Members face in assessing when and how to 
effectively and safely recall their employees back into offices 
alongside fashioning permanent telework arrangements or a hybrid 
workforce model in which some employees may work on-site in a 
commercial office space and other employees may work off-site in an 
alternative location (e.g., a personal residence).\8\ Accordingly, due 
to the continued logistical challenge of going on-site to branch 
offices or locations while these public health and safety concerns 
related to COVID-19 persist coupled with several Members delaying their 
return-to-office plans, the Exchange believes that extending the 
temporary remote inspection relief to Members is warranted.
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    \8\ For example, the Exchange understands that both the 
Commission and FINRA do not currently require employees to return to 
the office. See SEC Fiscal Year 2022 Agency Financial Report, 
available at https://www.sec.gov/files/sec-2022-agency-financial-report.pdf and https://www.finra.org/rules-guidance/key-topics/covid-19.
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    FINRA has filed with the Commission File No. SR-FINRA-2022-021, a 
proposed rule change to adopt a voluntary, remote inspections pilot 
program that is currently pending Commission review. The FINRA Pilot 
Program would provide 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. FINRA has stated that the review period for 
its rule filing may extend well into 2023. Given the potential length 
of that review period, and the pilot program's significant planning 
requirements and varying limitations applicable to specific firms and 
office locations, FINRA believes that firms that intend to participate 
in the pilot program, if approved, would need a significant number of 
months to prepare appropriately for the pilot program. Moreover, 
further FINRA guidance might be needed to guide implementation in 
various circumstances.
    To provide regulatory certainty while the pilot program filing is 
pending, and to avoid overlapping provisions if it is approved, the 
Exchange is proposing to amend Rule 1308(d)(5) so that the temporary 
relief would expire on the earlier of the effective date of the FINRA 
Pilot Program, if approved, or December 31, 2023. In the event the 
FINRA Pilot Program is not approved by December

[[Page 9920]]

31, 2023, the proposed rule change will automatically sunset on 
December 31, 2023. The Exchange will submit a separate rule filing if 
it seeks to extend the duration of the temporary proposed rule beyond 
December 31, 2023. In the event the FINRA Pilot Program is approved 
prior to December 31, 2023, the Exchange will file a conforming rule 
change with the Commission.
    The proposed rule change will conform the Exchange's Rules with 
those of FINRA, which has extended the same temporary remote inspection 
relief to all FINRA member firms.\9\ This proposed extension would 
provide further clarity to Members on regulatory requirements and 
account for time needed for many Members to carefully assess when and 
how to have their employees safely return to their offices considering 
vaccination coverage in the U.S. and transmission levels of the virus, 
including any emergent variants throughout the country.
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    \9\ See Securities Exchange Act Release No. 94018 (Jan. 20, 
2022), 87 FR 4072 (Jan. 26, 2022) (SR-FINRA-2022-01); and Securities 
Exchange Act Release No. 96241 (Nov. 4, 2022), 87 FR 67969 (Nov. 10, 
2022) (SR-FINRA-2022-030).
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    The proposed amendment would provide that Members have the option 
to conduct remotely those inspections described in Exchange Rule 
1308(d)(5) through the earlier of the effective date of the FINRA Pilot 
program, if approved, or December 31, 2023. The Exchange is not 
proposing to amend the other conditions of the temporary relief in 
Exchange Rule 1308(d). The current conditions of Rule 1308(d) for 
Members that elect to conduct remote inspections would remain 
unchanged: such firms must still 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 allow 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.
    The Exchange continues to believe this temporary remote inspection 
option is a reasonable alternative to provide to Members to fulfill 
their Rule 1308 obligations during the ongoing 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, and with applicable Exchange Rules.
    The Exchange has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so the Exchange can implement the proposed rule 
change immediately.
    The Exchange notes that the proposed rule change is substantively 
identical to the proposed rule changes recently filed by FINRA \10\ and 
the Investors Exchange LLC (``IEX'').\11\ 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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    \10\ See supra note 9.
    \11\ See Securities Exchange Act Release No. 96606 (Jan. 6, 
2023), 88 FR 2140 (Jan. 12, 2023) (SR-IEX-2022-14).
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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.\12\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \13\ 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) \14\ 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 challenges from COVID-19 persist, 
provide firms regulatory continuity in meeting their inspection 
obligations during the remaining Commission review period of the Pilot 
Proposal, and allow firms time to adapt to the pilot program, if 
approved, and prepare for conducting on-site inspections, as 
applicable.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
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    In recognition of the impact of COVID-19 on performing on-site 
inspections, the proposed rule change is intended to provide firms a 
temporary regulatory option to conduct inspections of offices and 
locations remotely for calendar year 2023 inspections (or until the 
effective date of the FINRA pilot program). This proposed supplementary 
material does not relieve firms from meeting the core regulatory 
obligation to establish and maintain a system to supervise the 
activities of each associated person that is reasonably designed to 
achieve compliance with applicable securities laws and regulations, and 
with applicable Exchange Rules that directly serve investor protection. 
In a time when faced with unique challenges resulting from the COVID-19 
pandemic, the Exchange believes that the proposed rule change provides 
sensibly tailored relief that will afford firms the ability to observe 
the recommendations of public health officials to provide for 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 
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

[[Page 9921]]

will also provide for consistent application of the Exchange's 
supervision rules with those of FINRA, on which they are based. 
Consequently, the Exchange does not believe that the proposed change 
implicates competition at all. 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.\15\
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    \15\ See supra note 9.
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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 Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) \16\ of the Act and Rule 19b-4(f)(6) \17\ 
thereunder. 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 \18\ and Rule 19b-4(f)(6) \19\ 
thereunder.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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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    A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. MIAX 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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    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
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    MIAX has indicated that extending the relief provided in SR-MIAX-
2022-09 would provide assurances to its member firms that they can plan 
their 2023 inspection program and conduct remote inspections for any 
inspections to be conducted through the earlier of the effective date 
of the FINRA Pilot Program, if approved, or December 31, 2023. 
Importantly, extending the relief immediately upon filing and without a 
30-day operative delay would allow MIAX's member firms to continue 
performing their supervisory obligations, while addressing the ongoing 
impacts of the COVID-19 pandemic. Moreover, like SR-MIAX-2022-09, the 
proposed extension would provide only temporary relief during the 
period in which MIAX's member firms' operations remain impacted by 
COVID-19. Thus, the amended rules will revert back to their original 
state at the conclusion of the temporary relief period and, if 
applicable, any extension thereof. 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 hereby waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\22\
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    \22\ 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) of the Act \23\ to determine whether the proposed 
rule should be approved or disapproved.
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    \23\ 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

    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-2023-04 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-MIAX-2023-04. 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. 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-2023-04 and 
should be submitted on or before March 8, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-03165 Filed 2-14-23; 8:45 am]
BILLING CODE 8011-01-P