[Federal Register Volume 83, Number 197 (Thursday, October 11, 2018)]
[Notices]
[Pages 51518-51520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22045]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84362; File No. SR-PEARL-2018-20]


Self-Regulatory Organizations: Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend 
Exchange Rule 203, Qualification and Registration of Members and 
Associated Persons, Relating to Registration and Qualification 
Examinations Required for Members and Associated Persons of Members 
That Engage in Trading Activities on the Exchange

October 4, 2018.
    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 September 27, 2018, MIAX PEARL, LLC (``MIAX 
PEARL'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change '') a proposed rule 
change as described in Items I and II 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 Rule 203, Qualification 
and Registration of Members and Associated Persons, relating to 
registration and qualification examinations required for Members and 
Associated Persons of Members that engage in trading activities on the 
Exchange.
    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 Securities and Exchange Commission (the ``SEC'' or the 
``Commission'') recently approved a proposed rule change to restructure 
the Financial Industry Regulatory Authority (``FINRA'') representative-
level qualification examination program.\3\ The rule change, which will 
become effective on October 1, 2018, restructures the examination 
program into a more efficient format whereby all new representative-
level applicants will be required to take a general knowledge 
examination (the Securities Industry Essentials Examination (``SIE'')) 
and a tailored, specialized knowledge examination (a revised 
representative-level qualification examination) for their particular 
registered role. Individuals are not required to be associated with the 
Exchange or any other self-regulatory organization (``SRO'') member to 
be eligible to take the SIE. However, passing the SIE alone will not 
qualify an individual for registration with the Exchange. To be 
eligible for registration, an individual must also be associated with a 
firm, pass an appropriate qualification examination for a 
representative or principal and satisfy the other requirements relating 
to the registration process.
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    \3\ See Securities Exchange Act Release No. 81098 (July 7, 
2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR-
FINRA-2017-007).
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    The SIE will assess basic product knowledge; the structure and 
function of the securities industry markets, regulatory agencies and 
their functions; and regulated and prohibited practices. In particular, 
the SIE will cover four major areas. The first, ``Knowledge of Capital 
Markets,'' focuses on topics such as types of markets and offerings, 
broker-dealers and depositories, and economic cycles. The second, 
``Understanding Products and Their Risks,'' covers securities products 
at a high level as well as associated investment risks. The third, 
``Understanding Trading, Customer Accounts and Prohibited Activities,'' 
focuses on accounts, orders, settlement and prohibited activities. The 
final, ``Overview of the Regulatory Framework,'' encompasses topics 
such as SROs, registration requirements and specified conduct rules. It 
is anticipated that the SIE will include 75 scored questions plus an 
additional 10 unscored pretest questions. The passing score will be 
determined through methodologies compliant with testing industry 
standards used to develop examinations and set passing standards.
    The restructured program will eliminate duplicative testing of 
general securities knowledge on the current representative-level 
qualification examinations by moving such content into the SIE. The SIE 
will test fundamental securities related knowledge, including knowledge 
of basic products, the structure and function of the securities 
industry, the regulatory agencies and their functions and regulated and 
prohibited practices, whereas the revised representative-level 
qualification examinations will test knowledge relevant to day-to-day 
activities, responsibilities and job functions of representatives. The 
SIE was developed in consultation with a committee of industry 
representatives and representatives of several SROs. Each of the 
current representative-level examinations covers general securities 
knowledge, with the exception of the Research Analyst (Series 86 and 
87) examinations.
    The Exchange proposes to require that effective October 1, 2018, 
new applicants seeking to register in a representative capacity with 
the Exchange must pass the SIE before their registrations can become 
effective. The Exchange proposes to make the requirement operative on 
October 1, 2018 to coincide with the effective date of FINRA's 
requirement.
    The Exchange notes that individuals who are registered as of 
October 1, 2018 will be eligible to maintain their registrations 
without being subject to any additional requirements. Individuals who 
have been registered within the last two years prior to October 1, 
2018, will also be eligible to maintain those registrations without 
being subject to any additional requirements, provided they register 
within two years from the date of their last registration. However, 
with respect to an individual who is not registered

[[Page 51519]]

on the effective date of the proposed rule change but was registered 
within the last two years prior to the effective date of the proposed 
rule change, the individual's SIE status in the Central Registration 
Depository (``CRD'') system would be administratively terminated if 
such individual does not register with the Exchange within four years 
from the date of the individual's last registration. The Exchange also 
notes that consistent with Rule 203 Interpretations and Policies .05, 
the Exchange will consider waivers of the SIE alone or the SIE and the 
representative or principal-level examination(s) for applicants who are 
seeking registration in a representative-or principal-level 
registration category.\4\
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    \4\ Pursuant to a Regulatory Services Agreement between FINRA 
and MIAX PEARL, FINRA provides MIAX PEARL certain exam waiver 
services in responding to exam waiver requests from MIAX PEARL 
Members.
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    The Exchange also proposes to add Interpretations and Policies .09 
to Rule 203 ``Summary of Qualifications Requirements'' which summarizes 
the qualification requirements for each of the required registration 
categories described in the Exchange Rules.
    The Exchange notes that this filing is substantially similar to a 
companion Miami International Securities Exchange, LLC (``MIAX 
Options'') filing relating to registration and qualification 
examinations required for Members and Associated Persons of Members 
that engage in trading activities on the MIAX Options Exchange.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \5\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \6\ in particular, in that 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 
mechanisms 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) \7\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
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    The Exchange believes that the proposed rule change will improve 
the efficiency of the Exchange's examination requirements, without 
compromising the qualification standards, by eliminating duplicative 
testing of general securities knowledge on examinations. FINRA has 
indicated that the SIE was developed in an effort to adopt an 
examination that would assess basic product knowledge; the structure 
and function of the securities industry markets, regulatory agencies 
and their functions; and regulated and prohibited practices. The 
Exchange also notes that the introduction of the SIE and expansion of 
the pool of individuals who are eligible to take the SIE, has the 
potential of enhancing the pool of prospective securities industry 
professionals by introducing them to securities laws, rules and 
regulations and appropriate conduct before they join the industry in a 
registered capacity. Lastly, the Exchange notes adopting the SIE 
requirement is consistent with the requirement recently adopted by 
FINRA.\8\
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    \8\ See supra note 3.
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    Furthermore, the Exchange believes that adding Interpretations and 
Policies .09 to Rule 203 will provide greater clarity regarding the 
Exchange's examination requirements as updated by, and those remaining 
in effect following, the proposed rule change, and consistency with the 
rules of other exchanges.\9\
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    \9\ See e.g. Cboe Exchange, Inc. Rule 3.6A Interpretations and 
Policies .08(b) and Nasdaq ISE, LLC Rule 313 Registration 
Requirements Supplementary Material .08 (b).
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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, which harmonizes its rules with recent rule 
changes adopted by FINRA and which is being filed in conjunction with 
similar filings by the other national securities exchanges, will reduce 
the regulatory burden placed on market participants engaged in trading 
activities across different markets. The Exchange believes that the 
harmonization of these registration requirements across the various 
markets will reduce burdens on competition by removing impediments to 
participation in the national market system and promoting competition 
among participants across the multiple national securities exchanges.

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) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days from the date of filing. However, Rule 
19b-4(f)(6)(iii) \11\ permits the Commission to 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 so that the proposal may become operative on 
October 1, 2018 to coincide with the effective date of FINRA's proposed 
rule change on which the proposal is based.\12\ The waiver of the 
operative delay would make the Exchange's qualification requirements 
consistent with those of FINRA, as of October 1, 2018. Therefore, the 
Commission believes that the waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest and 
hereby waives the 30-day operative delay and designates the proposal 
operative on October 1, 2018.\13\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ See supra note 3.
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule

[[Page 51520]]

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-PEARL-2018-20 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-PEARL-2018-20. 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 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-2018-20 and should be submitted on or before 
November 1, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22045 Filed 10-10-18; 8:45 am]
 BILLING CODE 8011-01-P


