[Federal Register Volume 86, Number 38 (Monday, March 1, 2021)]
[Notices]
[Pages 12064-12066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04091]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91192]


Order Granting Application by MIAX PEARL, LLC for an Exemption 
Pursuant to Section 36(a) of the Exchange Act From the Rule Filing 
Requirements of Section 19(b) of the Exchange Act With Respect to 
Certain Rules Incorporated by Reference

February 23, 2021.
    MIAX PEARL, LLC (``MIAX PEARL'' or ``Exchange'') has filed with the 
Securities and Exchange Commission

[[Page 12065]]

(``Commission'') an application for an exemption under Section 36(a)(1) 
of the Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') 
\1\ from the rule filing requirements of Section 19(b) of the Exchange 
Act \2\ with respect to certain rules of the Financial Industry 
Regulatory Authority, Inc. (``FINRA'') and Miami International 
Securities Exchange, LLC (``MIAX''), an affiliate of MIAX PEARL, that 
the Exchange seeks to incorporate by reference.\3\ Section 36 of the 
Exchange Act authorizes the Commission to conditionally or 
unconditionally exempt any person, security, or transaction, or any 
class thereof, from any provision of the Exchange Act or rule 
thereunder, if necessary or appropriate in the public interest and 
consistent with the protection of investors.
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    \1\ 15 U.S.C. 78mm(a)(1).
    \2\ 15 U.S.C. 78s(b).
    \3\ See Letter from Christopher Solgan, VP, Senior Counsel, MIAX 
PEARL, to Vanessa Countryman, Secretary, Commission, dated January 
15, 2021 (``Exemptive Request''). The Exchange submitted the 
Exemptive Request in connection with its proposal to adopt rules to 
govern the trading of equity securities on the Exchange (referred to 
herein as ``MIAX PEARL Equities Rules''). See Securities Exchange 
Act Release Nos. 88132 (February 6, 2020), 85 FR 8053 (February, 12, 
2020) (Notice of Filing of a Proposed Rule Change To Adopt Rules 
Governing the Trading of Equity Securities); and 88859 (May 12, 
2020), 85 FR 29759 (May 18, 2020) (Notice of Filing of Amendment No. 
1 and Order Instituting Proceedings To Determine Whether To Approve 
or Disapprove a Proposed Rule Change, as Modified by Amendment No. 
1, To Establish Rules Governing the Trading of Equity Securities).
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    On August 14, 2020, the Commission approved the Exchange's proposal 
to adopt rules to govern the trading of cash equities and establish an 
equities trading facility of the Exchange.\4\ Among other things, these 
MIAX PEARL Equities Rules include conduct and operational rules 
applicable to a new category of Exchange member participation, referred 
to as ``Equity Members.''
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    \4\ See Securities Exchange Act Release No. 83289 (August 14, 
2020), 85 FR 51510 (August 20, 2020) (SR-PEARL-2020-03).
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    MIAX PEARL has requested, pursuant to Rule 0-12 under the Exchange 
Act,\5\ that the Commission grant the Exchange an exemption from the 
rule filing requirements of Section 19(b) of the Act for changes to 
those MIAX PEARL Equities Rules that are effected solely by virtue of a 
change to a cross-referenced FINRA or MIAX rule.\6\ Specifically, the 
Exchange requests that it be permitted to incorporate by reference 
changes made to each FINRA or MIAX rule (or series of rules as the case 
may be) that is cross-referenced in the following MIAX PEARL Equities 
Rules, without the need for the Exchange to file separately the same 
proposed rule changes pursuant to Section 19(b) of the Act: \7\
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    \5\ 17 CFR 240.0-12.
    \6\ See Exemptive Request, supra note 3, at 2.
    \7\ Id. at 2-3.
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     Rule 2101 (Violations Prohibited) cross-references MIAX 
Rule 300 (Adherence to Law),
     Rule 2104 (Communications with the Public) cross-
references FINRA Rule 2210 (Communications with the Public) (except for 
paragraph (c) of FINRA Rule 2210),
     Rule 2105 (Know Your Customer) cross-references FINRA Rule 
2090 (Know Your Customer),
     Rule 2107 (Suitability) cross-references FINRA Rule 2111 
(Suitability),
     Rule 2119 (Telemarketing) cross-references MIAX Rule 1325 
(Telemarketing),
     Rule 2200 (General Requirements) cross-references FINRA 
Rule 4511 (General Requirements),
     Rule 2201 (Customer Account Information) cross-references 
FINRA Rule 4512 (Customer Account Information),
     Rule 2203 (Record of Written Complaints) cross-references 
FINRA Rule 4513 (Records of Written Customer Complaints),
     Rule 2204 (Disclosure of Financial Condition) cross-
references MIAX Rule 1313 (Statement of Financial Condition to 
Customers),
     Rule 2302 (Annual Certification of Compliance and 
Supervisory Processes) cross-references FINRA Rule 3130 (Annual 
Certification of Compliance and Supervisory Processes),
     Rule 2303 (Prevention of the Misuse of Material, Non-
Public Information) cross-references MIAX Rule 303 (Prevention of the 
Misuse of Material Non-Public Information),
     Rule 2304 (Anti-Money Laundering Compliance Program) 
cross-references MIAX Rule 315 (Anti-Money Laundering Compliance 
Program),
     Rule 2305 (Transactions for or by Associated Persons) 
cross-references FINRA Rule 3210 (Accounts at Other Broker-Dealers and 
Financial Institutions),
     Rule 2712 (Trading Ahead of Research Reports) cross-
references MIAX Rule 320 (Trading Ahead of Research Reports),
     Rule 2714 (Front Running of Block Transactions) cross-
references FINRA Rule 5270 (Front Running of Block Transactions), and
     Rule 2715 (Disruptive Quoting and Trading Activity 
Prohibited) cross-references MIAX Rule 322 (Disruptive Quoting and 
Trading Activity Prohibited).
    The Exchange states that the direct incorporations by reference of 
FINRA and MIAX rules, which are regulatory in nature,\8\ are intended 
to be a comprehensive integration of the relevant FINRA and MIAX rules 
into the MIAX PEARL Equities Rules.\9\ As the Exchange notes, the MIAX 
PEARL Rules currently incorporate by reference Chapters III and XIII of 
the MIAX Rules, and the Exchange has previously received an exemption 
from the rule filing requirements of Section 19(b) with respect to 
these rules.\10\ Equity Members are a subset of MIAX PEARL Members,\11\ 
and MIAX PEARL Members are currently subject to the MIAX Rules that are 
already incorporated by reference.\12\ According to the Exchange, the 
recently approved MIAX PEARL Equities Rules cross-reference to these 
MIAX Rules for completeness and to remove doubt as to whether an Equity 
Member would be subject to these cross-referenced MIAX Rules.\13\
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    \8\ See id. at 4. The Exchange represents that the FINRA and 
MIAX rules proposed to be incorporated by reference are not trading 
rules. In addition, the Exchange notes that several other self-
regulatory organizations (``SROs'') incorporate by reference certain 
regulatory rules of another SRO and have received from the 
Commission similar exemptions from Section 19(b) of the Exchange 
Act. See id. at 4 n.7.
    \9\ See id. at 4.
    \10\ See id. at 3; Securities Exchange Act Release No. 79543 
(December 13, 2016), 81 FR 92901 (December 20, 2016) (File No. 10-
227) (In the Matter of the Application of MIAX PEARL, LLC for 
Registration as a National Securities Exchange; Findings, Opinion, 
and Order of the Commission) (granting the application of MIAX PEARL 
for registration as a national securities exchange, and 
conditionally exempting MIAX PEARL from the rule filing requirements 
of Section 19(b) of the Act with respect to the MIAX, Chicago Board 
Options Exchange, Incorporated (``CBOE''), New York Stock Exchange 
LLC, and FINRA rules that MIAX PEARL proposed to incorporate by 
reference, including MIAX Rules Chapters III and XIII).
    \11\ See MIAX PEARL Rule 2000.
    \12\ See MIAX PEARL Rules Chapters III and XIII.
    \13\ See Exemptive Request, supra note 3, at 4.
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    The Exchange represents that, as a condition to the requested 
exemption from Section 19(b) of the Act, the Exchange will provide 
written notice to its members whenever FINRA or MIAX proposes a change 
to a cross-referenced rule.\14\ Such notice will alert Exchange members 
to the proposed rule change and give them an opportunity to comment on 
the proposal.\15\ The Exchange further represents that it similarly 
will inform members in

[[Page 12066]]

writing when the Commission approves any such proposed rule 
changes.\16\
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    \14\ The Exchange represents that it will provide such notice on 
its website in the same section it uses to post its own proposed 
rule change filings pursuant to Rule 19b-4(l) within the same time 
period required by such Rule. The MIAX PEARL website will also 
include a link to the FINRA or MIAX website where the proposed rule 
change filings are located. See id.
    \15\ See id. at 4 n.8.
    \16\ See id.
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    According to the Exchange, this exemption is necessary and 
appropriate because it would result in the MIAX PEARL Equities Rules 
being consistent with the relevant cross-referenced FINRA and MIAX 
rules at all times, thus ensuring identical regulation of joint members 
of the Exchange, FINRA, and/or MIAX with respect to such rules.\17\ 
Without such an exemption, joint members of the Exchange, FINRA, and/or 
MIAX could be subject to two different standards.\18\ In addition, the 
Exchange believes that the exemption would ensure consistency between 
certain MIAX PEARL Equities Rules and FINRA rules that are covered by 
the Exchange's regulatory services agreement (``RSA'') with FINRA, 
which would facilitate FINRA's provision of services to the Exchange 
under the RSA within the scope of those MIAX PEARL Equities Rules.\19\
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    \17\ See id. at 3.
    \18\ See id.
    \19\ See id.
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    The Commission has issued exemptions similar to the Exchange's 
request.\20\ In granting one such exemption in 2010, the Commission 
repeated a prior, 2004 Commission statement that it would consider 
similar future exemption requests from other SROs, provided that:
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    \20\ See, e.g., Securities Exchange Act Release Nos. 83296 (May 
21, 2018), 83 FR 24362 (May 25, 2018) (order granting NYSE National, 
Inc.'s exemptive request relating to rules of FINRA incorporated by 
reference); 83040 (April 12, 2018), 83 FR 17198 (April 18, 2018) 
(order granting MIAX PEARL's exemptive request relating to rules of 
MIAX incorporated by reference); 78101 (June 17, 2016), 81 FR 41141, 
41165 (June 23, 2016) (order granting application for registration 
as a national securities exchange of Investors' Exchange, LLC and 
exemptive request relating to rules of FINRA incorporated by 
reference); 76998 (January 29, 2016), 81 FR 6066, 6083-84 (February 
4, 2016) (order granting application for registration as a national 
securities exchange of ISE Mercury, LLC (now known as Nasdaq MRX, 
LLC) and exemptive request relating to rules of the International 
Securities Exchange, LLC (now known as Nasdaq ISE, LLC) (``ISE'') 
incorporated by reference, including index options rules); 70050 
(July 26, 2013), 78 FR 46622, 46642 (August 1, 2013) (order granting 
application for registration as a national securities exchange of 
Topaz Exchange, LLC (now known as Nasdaq GEMX, LLC) and exemptive 
request relating to rules of ISE incorporated by reference, 
including index options rules); 61152 (December 10, 2009), 74 FR 
66699, 66709-10 (December 16, 2009) (order granting application for 
registration as a national securities exchange of C2 Options 
Exchange, Incorporated and exemptive request relating to rules of 
CBOE incorporated by reference, including index options rules). See 
also, e.g., Securities Exchange Act Release No. 61534 (February 18, 
2010), 75 FR 8760 (February 25, 2010) (order granting BATS Exchange, 
Inc.'s exemptive request relating to rules incorporated by reference 
by the BATS Exchange Options Market rules) (``BATS Options Market 
Order'').
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     An SRO wishing to incorporate rules of another SRO by 
reference has submitted a written request for an order exempting it 
from the requirement in Section 19(b) of the Exchange Act to file 
proposed rule changes relating to the rules incorporated by reference, 
has identified the applicable originating SRO(s), together with the 
rules it wants to incorporate by reference, and otherwise has complied 
with the procedural requirements set forth in the Commission's release 
governing procedures for requesting exemptive orders pursuant to Rule 
0-12 under the Exchange Act; \21\
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    \21\ See 17 CFR 240.0-12; Securities Exchange Act Release No. 
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) (Commission 
Procedures for Filing Applications for Orders for Exemptive Relief 
Pursuant to Section 36 of the Exchange Act).
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     The incorporating SRO has requested incorporation of 
categories of rules (rather than individual rules within a category) 
that are not trading rules (e.g., the SRO has requested incorporation 
of rules such as margin, suitability, or arbitration); and
     The incorporating SRO has reasonable procedures in place 
to provide written notice to its members each time a change is proposed 
to the incorporated rules of another SRO.\22\
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    \22\ See BATS Options Market Order, supra note 20 (citing 
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004) (order granting exemptive request relating 
to rules incorporated by reference by several SROs) (``2004 
Order'')).
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    The Commission believes that the Exchange has satisfied each of 
these conditions. The Commission also believes that granting the 
Exchange an exemption from the rule filing requirements under Section 
19(b) of the Exchange Act will promote efficient use of Commission and 
Exchange resources by avoiding duplicative rule filings based on 
simultaneous changes to identical rule text sought by more than one 
SRO.\23\ The Commission therefore finds it appropriate in the public 
interest and consistent with the protection of investors to exempt the 
Exchange from the rule filing requirements under Section 19(b) of the 
Exchange Act with respect to the above-described rules it has 
incorporated by reference. This exemption is conditioned upon the 
Exchange promptly providing written notice to its members whenever 
FINRA or MIAX changes a rule that the Exchange has incorporated by 
reference.
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    \23\ See id. at 8761. See also 2004 Order, supra note 22, at 
8502.
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    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\24\ that the Exchange is exempt from the rule filing requirements 
of Section 19(b) of the Exchange Act solely with respect to changes to 
the MIAX PEARL Equities Rules identified in its request that 
incorporate by reference certain FINRA and MIAX rules that are the 
result of changes to such FINRA or MIAX rules, provided that the 
Exchange promptly provides written notice to its members whenever FINRA 
or MIAX proposes to change a rule that the Exchange has incorporated by 
reference.
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    \24\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(76).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04091 Filed 2-26-21; 8:45 am]
BILLING CODE 8011-01-P


