Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX Exchange Rules To Harmonize the Language With Certain Rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and Other Exchanges, 33012-33017 [2014-13312]
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33012
Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices
securities that meet the definition of
‘‘Eligible Security’’ in rule 2a–7 under
the Act, or (d) listed or traded on any
foreign securities exchange or board of
trade that satisfies regulatory
requirements under the law of the
jurisdiction in which such foreign
securities exchange or board of trade is
organized similar to those that apply to
a national securities exchange or a
national market system for securities.
4. Each Partnership and its General
Partner will maintain and preserve, for
the life of each Series of the Partnership
and at least six years thereafter, such
accounts, books and other documents
constituting the record forming the basis
for the audited financial statements that
are to be provided to the Limited
Partners in the Partnership, and each
annual report of the Partnership
required to be sent to the Limited
Partners, and agree that all such records
will be subject to examination by the
Commission and its staff.14
5. Within 120 days after the end of
each fiscal year of each Partnership, or
as soon as practicable thereafter, the
General Partner of each Partnership will
send to each Limited Partner having an
Interest in the Partnership at any time
during the fiscal year then ended,
Partnership financial statements audited
by the Partnership’s independent
accountants with respect to those Series
in which the Limited Partner had an
Interest. At the end of each fiscal year,
the General Partner will make or cause
to be made a valuation of all of the
assets of the Partnership as of such
fiscal year end in a manner consistent
with customary practice with respect to
the valuation of assets of the kind held
by the Partnership. In addition, within
120 days after the end of each fiscal year
of each Partnership (or as soon as
practicable thereafter), the General
Partner will send a report to each person
who was a Limited Partner at any time
during the fiscal year then ended,
setting forth such tax information as
shall be necessary for the preparation by
the Limited Partner of that partner’s
federal and state income tax returns and
a report of the investment activities of
the Partnership during that fiscal year.
6. If a Partnership makes purchases or
sales from or to an entity affiliated with
the Partnership by reason of an officer,
director or employee of a KKR entity (i)
serving as an officer, director, general
partner, manager or investment adviser
of the entity (other than an entity that
is an Aggregation Vehicle), or (ii) having
14 Each Partnership will preserve the accounts,
books and other documents required to be
maintained in an easily accessible place for the first
two years.
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a 5% or more investment in the entity,
such individual will not participate in
the Partnership’s determination of
whether or not to effect the purchase or
sale.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–13314 Filed 6–6–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72300; File No. SR–MIAX–
2014–16]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend MIAX Exchange
Rules To Harmonize the Language
With Certain Rules of the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) and Other Exchanges
June 3, 2014.
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 June 2, 2014, 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, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange is filing a proposal to
amend its Rules to harmonize the
language with certain rules of the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) and other
exchanges.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.miaxoptions.com/filter/
wotitle/rule_filing, at MIAX’s principal
office, and at the Commission’s Public
Reference Room.
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00106
Fmt 4703
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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
certain Rules to harmonize the language
with the rules of FINRA and other
exchanges, and to make other
conforming and technical changes.
Specifically, the Exchange proposes: (i)
To amend Rule 303, Prevention of the
Misuse of Nonpublic Information, to
adopt the language of the corresponding
rule of another exchange; (ii) to amend
Rule 315, Anti-Money Laundering
Compliance Program, by adding text to
paragraphs (c) and (d) which is identical
to text found in FINRA Rule 3310; (iii)
to amend Rule 319, to adopt the
language of the corresponding rule of
another exchange; (iv) to add a new
Rule 320, Trading Ahead of Research
Reports; (v) to amend Rule 610,
Limitation on Dealings, to adopt the
language of the corresponding rule of
another exchange; (vi) to amend
paragraphs (b) and (d) of Rule 800,
Maintenance, Retention and Furnishing
of Books, Records and Other
Information; (vii) to amend Rule 1321,
Transfer of Accounts, to incorporate by
reference FINRA Rule 11870, Customer
Account Transfer Contracts; (viii) to
amend Rule 1322, Options
Communications, to better align with
FINRA Rule 2220; and (ix) to replace the
rule text of Rule 1325, Telephone
Solicitation, with the rule text from
FINRA Rule 3230. The Exchange
anticipates entering into a 17d–2
Agreement with FINRA and possibly a
Regulatory Service Agreement within
the near future. The Exchange believes
the proposed changes to harmonize the
Exchange rules with FINRA and other
exchanges (which also have such 17d–
2 Agreements and Regulatory Service
Agreement with FINRA) should
expedite the process.
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The Exchange proposes to replace
Rule 303, Prevention of the Misuse of
Nonpublic Information, in its entirety
with the language of the corresponding
rule of another exchange.3 The new
Rule will provide that each Member
must establish, maintain and enforce
written procedures reasonably designed,
taking into consideration the nature of
such Member’s business, to prevent the
misuse of material, non-public
information by such Member or persons
associated with such Member. Members
for whom the Exchange is the
Designated Examining Authority
(‘‘DEA’’) that are required to file SEC
form X–17A–5 with the Exchange on an
annual or more frequent basis must file
contemporaneously with the submission
for the calendar year end ITSFEA
compliance acknowledgements stating
that the procedures mandated by this
Rule have been established, enforced
and maintained. In addition, any
Member or associated person of a
Member who becomes aware of a
possible misuse of material, non-public
information must notify the Exchange’s
Regulatory Department.
Interpretations and Policies .01 to
proposed Rule 303 provides that
conduct which will be characterized as
the misuse of material, non-public
information includes, but is not limited
to, the following:
• Trading in any securities issued by
a corporation, or in any related
securities or related options or other
derivative securities, while in
possession of material, non-public
information concerning that issuer; or
• Trading in a security or related
options or other derivative securities,
while in possession of material nonpublic information concerning
imminent transactions in the security or
related securities; or
• Disclosing to another person or
entity any material, non-public
information involving a corporation
whose shares are publicly traded or an
imminent transaction in an underlying
security or related securities for the
purpose of facilitating the possible
misuse of such material, non-public
information.
Interpretations and Policies .02 to
proposed Rule 303 provides that at
minimum each Member must establish,
maintain, and enforce the following
policies and procedures:
• All associated persons of the
Member must be advised in writing of
the prohibition against the misuse of
material, non-public information; and
• All associated persons of the
Member must sign attestations affirming
3 See
Proposed Rule 303. See also BATS Rule 5.5.
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33013
their awareness of, and agreement to
abide by the aforementioned
prohibitions. These signed attestations
must be maintained for at least three
years, the first two years in an easily
accessible place; and
• Each Member must receive and
retain copies of trade confirmations and
monthly account statements for each
account in which an associated person:
has a direct or indirect financial interest
or makes investment decisions. The
activity in such brokerage accounts
should be reviewed at least quarterly by
the Member for the purpose of detecting
the possible misuse of material, nonpublic information; and
• All associated persons must
disclose to the Member whether they, or
any person in whose account they have
a direct or indirect financial interest, or
make investment decisions, are an
officer, director or 10% shareholder in
a company whose shares are publicly
traded. Any transaction in the stock (or
option thereon) of such company shall
be reviewed to determine whether the
transaction may have involved a misuse
of material non-public information.
Maintenance of the foregoing policies
and procedures will not, in all cases,
satisfy the requirements and intent of
this Rule; the adequacy of each
Member’s policies and procedures will
depend upon the nature of such
Member’s business.
The Exchange believes that the
proposed changes to the Prevention of
the Misuse of Nonpublic Information
Rule clarifies activity which it believes
to be inconsistent with just and
equitable principles of trade.
Additionally, the Exchange believes the
proposed changes will assist in the
prevention of fraudulent and
manipulative acts by providing an
appropriate mechanism designed to
ensure that material, non-public
information continues to be protected
while promoting the protecting of
investors and the public interest.
The Exchange proposes to amend
Rule 315(c) to provide additional clarity
and instruction to Members’ regarding
independent testing for compliance and
to more closely align the language of the
Rule with the corresponding FINRA
Rule 3310.4 The proposed rule change
will require ‘‘annual (on a calendar year
basis)’’ independent testing for
compliance of the Member’s anti-money
laundering program, to be conducted by
the Member’s personnel or by a
qualified outside party. Further, the
proposed rule change will provide that
testing be done on a periodic basis,
‘‘every two years (on a calendar-year
basis),’’ if the Member does not execute
transactions for customers or otherwise
hold customer accounts or act as an
introducing broker with respect to
customer accounts. Finally, the
proposed rule change clarifies that the
individual responsible for implementing
and monitoring the program must be an
associated person of the Member. The
Exchange believes the proposed changes
to Rule 315(c) will more closely align
the Rule with the corresponding FINRA
Rule 3310, and creates a more concise
rule which benefits investors and the
public by establishing uniform and
clearly defined time parameters for
review. The Exchange proposes to
amend Rule 315(d) to clarify that
implementation and monitoring of a
Member’s Anti-Money Laundering
Compliance Program be performed by
an associated person of the Member.
The proposed change to Rule 315(d)
clarifies a Member’s obligation for
implementing and maintaining its
program and more closely aligns to
FINRA Rule 3310.
The Exchange proposes to replace
Rule 319, Proxy Voting, in its entirety
with the language of the corresponding
rule of another exchange, Forwarding of
Proxy and Other Issuer-Related
Materials; Proxy Voting.5 The new Rule
will provide that a Member when so
requested by an issuer and upon being
furnished with: (1) Sufficient copies of
proxy material, annual reports,
information statements or other material
required by law to be sent to security
holders periodically, and (2) satisfactory
assurance that it will be reimbursed by
such issuer for all out-of-pocket
expenses, including reasonable clerical
expenses, shall transmit promptly to
each beneficial owner of securities (or
the beneficial owner’s designated
investment adviser) of such issuer
which are in its possession and control
and registered in a name other than the
name of the beneficial owner all such
material furnished. In the event of a
proxy solicitation, such material shall
include a signed proxy indicating the
number of shares held for such
beneficial owner and bearing a symbol
identifying the proxy with proxy
records maintained by the Member, and
a letter informing the beneficial owner
(or the beneficial owner’s designated
investment adviser) of the time limit
and necessity for completing the proxy
form and forwarding it to the person
soliciting proxies prior to the expiration
of the time limit in order for the shares
to be represented at the meeting. In
4 See Proposed Rule 315(c). See also FINRA Rule
3310.
5 See Proposed Rule 319. See also BATS Rule
13.3.
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addition, a Member shall furnish a copy
of the symbols to the person soliciting
the proxies and shall also retain a copy
thereof pursuant to the provisions of
Exchange Act Rule 17a–4. This
paragraph shall not apply to beneficial
owners residing outside of the United
States of America though Members may
voluntarily comply with the provisions
hereof in respect of such persons if they
so desire. Further, the new Rule
provides that No Member shall give a
proxy to vote stock that is registered in
its name, unless: (i) Such Member is the
beneficial owner of such stock; (ii) such
proxy is given pursuant to the written
instructions of the beneficial owner; or
(iii) such proxy is given pursuant to the
rules of any national securities exchange
or association of which it is a member
provided that the records of the Member
clearly indicate the procedure it is
following. In addition, notwithstanding
the foregoing, a Member that is not the
beneficial owner of a security registered
under Section 12 of the Exchange Act is
prohibited from granting a proxy to vote
the security in connection with a
shareholder vote on the election of a
member of the board of directors of an
issuer (except for a vote with respect to
uncontested election of a member of the
board of directors of any investment
company registered under the
Investment Company Act of 1940),
executive compensation, or any other
significant matter, as determined by the
Commission, by rule, unless the
beneficial owner of the security has
instructed the Member to vote the proxy
in accordance with the voting
instructions of the beneficial owner.
Notwithstanding the foregoing, a
Member may give a proxy to vote any
stock registered in its name if such
Member holds such stock as executor,
administrator, guardian, trustee, or in a
similar representative or fiduciary
capacity with authority to vote. A
Member that has in its possession or
within its control stock registered in the
name of another Member and that
desires to transmit signed proxies
pursuant to the provisions of paragraph
(a) of this proposed Rule 319, shall
obtain the requisite number of signed
proxies from such holder of record.
Notwithstanding the foregoing: (1) Any
Member designated by a named
Employee Retirement Income Security
Act of 1974 (as amended) (‘‘ERISA’’)
Plan fiduciary as the investment
manager of stock held as assets of the
ERISA Plan may vote the proxies in
accordance with the ERISA Plan
fiduciary responsibilities if the ERISA
Plan expressly grants discretion to the
investment manager to manage, acquire,
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or dispose of any plan asset and has not
expressly reserved the proxy voting
right for the named ERISA Plan
fiduciary; and (2) any designated
investment adviser may vote such
proxies.
Interpretations and Policies .01 to
proposed Rule 319 provides that for
purposes of this Rule, the term
‘‘designated investment adviser’’ is a
person registered under the Investment
Advisers Act of 1940, or registered as an
investment adviser under the laws of a
state, who exercises investment
discretion pursuant to an advisory
contract for the beneficial owner and is
designated in writing by the beneficial
owner to receive proxy and related
materials and vote the proxy, and to
receive annual reports and other
material sent to security holders. For
purposes of this Rule, the term ‘‘state’’
shall have the meaning given to such
term in Section 202(a)(19) of the
Investment Advisers Act (as the same
may be amended from time to time).
The written designation must be signed
by the beneficial owner; be addressed to
the Member; and include the name of
the designated investment adviser.
Members that receive such a written
designation from a beneficial owner
must ensure that the designated
investment adviser is registered with the
SEC pursuant to the Investment
Advisers Act, or with a state as an
investment adviser under the laws of
such state, and that the investment
adviser is exercising investment
discretion over the customer’s account
pursuant to an advisory contract to vote
proxies and/or to receive proxy
soliciting material, annual reports and
other material. Members must keep
records substantiating this information.
Beneficial owners have an unqualified
right at any time to rescind designation
of the investment adviser to receive
materials and to vote proxies. The
rescission must be in writing and
submitted to the Member. The Exchange
believes that the proposed changes to
the proxy voting Rule will provide a
clearer framework for Members to
handle proxy related materials in a
manner that is designed to prevent
fraudulent and manipulative acts and
practices, and to promote the protection
of investors and the public interest. The
Exchange notes that the proposed
changes will also bring the Exchange’s
Rule more closely aligned with that of
FINRA.6
The Exchange proposes to add Rule
320, to incorporate the language of
FINRA Rule 5280, Trading Ahead of
6 See
PO 00000
FINRA Rule 2251.
Frm 00108
Fmt 4703
Sfmt 4703
Research Reports.7 The proposed Rule
320 contains two provisions, paragraph
(a) and (b), pertaining to trading and
research reports. Paragraph (a) stipulates
that a Member may not change its
position in a security based upon nonpublic advance knowledge of
information contained in a research
report. Specifically, no Member shall
establish, increase, decrease or liquidate
an inventory position in a security or a
derivative of such security based on
non-public advance knowledge of the
content or timing of a research report in
that security. Paragraph (b) stipulates
that a Member must establish and
enforce policies and procedures which
are designed to restrict the flow of
information between research
department personnel and trading
department personnel. Specifically,
Members must establish, maintain and
enforce policies and procedures
reasonably designed to restrict or limit
the information flow between research
department personnel, or other persons
with knowledge of the content or timing
of a research report, and trading
department personnel, so as to prevent
trading department personnel from
utilizing non-public advance knowledge
of the issuance or content of a research
report for the benefit of the Member or
any other person. The Exchange
believes the addition of Rule 320
benefits investors and the public by
establishing specific parameters
concerning a Members’ trading activity
in a security and the timing of Research
Reports related to that security. The
Exchange also believes that adopting the
language of FINRA helps to ensure that
Members have the same obligations to
comply under the Exchange Rules as
they do under FINRA rules.8
The Exchange proposes to replace
Rule 610, Limitations on Dealings, in its
entirety with the language of the
corresponding rule of another
exchange.9 The new Rule will provide
that no Member, other than a Market
7 See Proposed Rule 320. See also FINRA Rule
5280.
8 The Exchange intends that MIAX Rule 320 be
interpreted and applied in the same manner as
FINRA interprets and applies FINRA Rule 5280,
including the application of any associated Notice
to Members, or rules, that FINRA uses to interpret
FINRA Rule 5280. See Rule 200(c)(7). MIAX Rule
200(c)(7) provides that, ‘‘[e]very Applicant must
have and maintain membership in another
registered options exchange (that is not registered
solely under Section 6(g) of the Exchange Act). If
such other registered options exchange has not been
designated by the Commission, pursuant to Rule
17d–1 under the Exchange Act, to examine
Members for compliance with financial
responsibility rules, then such Applicant must have
and maintain a membership in FINRA.’’
9 See Proposed Rule 610. See also NYSE Arca
Rule 6.83; NYSE MKT Rule 927.3NY.
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Maker acting pursuant to Rule 603,
limited partner, officer, employee,
approved person(s) approved [sic], who
is affiliated with a Market Maker or
Member, shall, during the period of
such affiliation, purchase or sell any
option in which such Market Maker is
appointed for any account in which
such person(s) has a direct or indirect
interest. Any such person(s) may,
however, reduce or liquidate an existing
position in an option in which such
Market Maker is appointed provided
that such orders are (i) identified as
being for an account in which such
person(s) has a direct or indirect
interest; (ii) approved for execution by
an Exchange Official; and (iii) executed
by the Market Maker in a manner
reasonably calculated to contribute to
the maintenance of price continuity
with reasonable depth. No order entered
pursuant to Rule 610(a) shall be given
priority over, or parity with, any order
represented in the market at the same
price. Notwithstanding the provisions of
Rule 603, an approved person or
Member that is affiliated with a Market
Maker shall not be subject to Rule
610(a), provided it has obtained
Exchange approval of procedures
restricting the flow of material nonpublic corporate or market information
between itself and the Market Maker
and any Member, officer, or employee
associated therewith. For such Member
that controls, is controlled by, or is
under common control with another
organization, the exemption provided in
Subsection (b) of Rule 610 shall be
available to it only where the Exchange
has determined that the relationship
between the Market Maker, each person
associated therewith, and such other
organization satisfies all the conditions
specified in the Exemption Guidelines.
In addition, the following restrictions
apply to a Member that is affiliated with
a Market Maker. The Member may not:
Purchase or sell for any account in
which it has a direct or indirect interest
in any security in which its affiliate is
a Market Maker; engage in any business
transaction with the issuer of a security
or its insiders in which its affiliate is a
Market Maker; or accept orders directly
from the issuer, its insiders or certain
designated parties in securities in which
its affiliate is a Market Maker.
Further, the Exchange proposes
Exemption Guidelines which provides a
means by which an affiliated firm doing
business with the public as defined in
Rule 203 (hereafter ‘‘Member’’) may
obtain an exemption from the
restrictions discussed in Rule 610
above. This exemption is only available
to a Member that obtains prior Exchange
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approval for procedures restricting the
flow of material non-public information
between it and its affiliated Market
Maker, (i.e., so-called ‘‘Chinese Wall’’
procedures). The Exemption Guideline
subsection sets forth the steps a Member
must undertake, at a minimum, to seek
to qualify for exemptive relief. Any firm
that does not obtain Exchange approval
for its procedures in accordance with
these Guidelines shall remain subject to
the restrictions set forth in Rule 610
described above.
The Exchange believes that the
proposed changes to the information
barrier rule clarify activity which it
believes to be inconsistent with just and
equitable principles of trade. The
Exchange believes that the proposed
information barrier rule is more precise
and prescriptive than the current rule
regarding which activities are
prohibitive and what constitutes an
adequate information barrier between
Market Makers and affiliated order flow
providers. The proposed rule also
contains a detailed exemptive relief
section that is absent from the current
rule. The Exchange notes that under the
proposal the Exchange will still require
the maintaining of information barriers
between Members and any affiliated
Market Makers to the same extent as the
current rule. The Exchange believes the
proposed changes will assist in the
prevention of fraudulent and
manipulative acts by providing an
appropriate mechanism designed to
ensure that there are sufficient
information barriers between Market
Makers and affiliated order flow
providers while promoting the
protecting of investors and the public
interest. The Exchange believes that the
proposed rule will provide detailed
guidelines and protections in a manner
that is easily understood and enforced
by not only Members, but also FINRA,
with whom the Exchange anticipates
entering in a17d–2 Agreement and
possibly a Regulatory Service
Agreement with in the near future.
The Exchange proposes to amend
Rule 800, Maintenance, Retention and
Furnishing of Books, Records and Other
Information, to include rule text from
the related FINRA Rule 4511, General
Requirements.10 The Exchange proposes
to add paragraph (b) to its rule,
specifying that each Member shall
preserve for a period of at least six years
those books and records for which there
is no specified period under Exchange
Rules or applicable Exchange Act rules.
The Exchange also proposes to add
paragraph (d) to its rule, specifying that
10 See Proposed Rule 800. See also FINRA Rule
4511.
PO 00000
Frm 00109
Fmt 4703
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33015
all books and records required to be
made pursuant to the Exchange Rules
shall be preserved in a format and
media that complies with Exchange Act
Rule 17a–4. The Exchange believes that
adding additional detail to its Rule is
appropriate as it will harmonize the
Exchange’s Rule with the related FINRA
rule, which is designed to protect
investors and the public interest.
The Exchange proposes to amend
Rule 1321, Transfer of Accounts, to
incorporate FINRA Rule 11870 by
reference into its rules so that Members
have the same obligations to comply as
if such rules and interpretations were
part of the Exchange’s rules.11 FINRA
Rule 11870 provides a comprehensive
articulation of procedures to be
followed when transferring a customer
account. The FINRA Rule establishes
the protocol and procedures for
initiating a transfer, validating the
transfer instructions, and handling fails.
Incorporating by reference the FINRA
rule ensures that Members have the
same obligations to comply as if such
rules and interpretations were part of
the Exchange’s Rules.
The Exchange proposes to amend
Rule 1322, Options Communications, to
conform with the corresponding FINRA
Rule 2220, Options Communications.12
The current rule requires each Member
to establish appropriate written
procedures for review by a Registered
Options Principal of institutional
communications used by the Member.
The Exchange proposes to add a
paragraph to section (a) Definitions, to
conform the Exchange Rule text to
FINRA by including the definition of an
institutional investor in paragraph (a)(4)
and an Institutional Investor in
paragraph (a)(5). The Exchange proposes
to update the text of paragraph (b)(3)
Institutional Communications, to clarify
that procedures for Institutional
Communications be designed to ensure
that those communications comply with
applicable standards. Further, when
procedures do not require review, the
procedures must include a provision for
the duration and training of associated
persons as to the firm’s procedures
concerning institutional
communications. In addition, evidence
that these supervisory procedures have
been implemented and carried out must
be maintained and made available to the
Exchange upon request. The Exchange
11 See Proposed Rule 1321. See also FINRA Rule
11870. In the event FINRA updates its Rule 11870,
Customer Account Transfer Contracts, MIAX will
file a 19b–4 Rule filing to adopt any corresponding
changes to its Rule 1321 to ensure it remains
consistent with FINRA Rule 11870.
12 See Proposed Rule 1322. See also FINRA Rule
2220.
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proposes to make conforming and
technical changes to Exchange Rule
1322 to align to FINRA Rule 2220.
The Exchange proposes to amend
Rule 1325, Telephone Solicitation, to
adopt the language of the corresponding
FINRA Rule 3230, Telemarketing.13 The
FINRA rule text provides detailed
guidance concerning telemarketing
activities. The Exchange believes that
the proposed changes are appropriate as
they will harmonize the Exchange’s
Rules with FINRA rules with respect to
account transfers and Exchange
Members’ communication with the
public. The Exchange’s proposed
changes are designed to further
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities. Additionally, the
Exchange believes that the proposed
changes serve to further protect
investors and the public interest by
providing detailed guidance concerning
telemarking [sic].
2. Statutory Basis
The Exchange believes that its
proposed rule change is consistent with
Section 6(b) 14 of the Act in general, and
furthers the objectives of Section
6(b)(5) 15 of the Act 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.
In particular, the Exchange believes
the proposed rule changes will provide
greater clarity to Members and the
public regarding the Exchange’s Rules.
The Exchange believes that the new
nonpublic information rule should
assist in the prevention of fraudulent
and manipulative acts by providing an
appropriate mechanism designed to
ensure that material, non-public
information continues to be protected
while promoting the protecting of
investors and the public interest. In
addition, the Exchange believes that the
proposed rule changes will help ensure
that investors are protected from
potentially false or misleading
communications with the public
distributed by Exchange Members. The
13 See Proposed Rule 1325. See also FINRA Rule
3230.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(5).
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Exchange believes that the new proxy
voting Rule will provide a clearer
framework for Members to handle proxy
related materials in a manner that is
designed to prevent fraudulent and
manipulative acts and practices, and to
promote the protection of investors and
the public interest. The Exchange
believes that the new information
barrier rule should assist in the
prevention of fraudulent and
manipulative acts by providing an
appropriate mechanism designed to
ensure that there are sufficient
information barriers between Market
Makers and affiliated order flow
providers while promoting the
protecting of investors and the public
interest. Further, the proposed rule
changes provide greater harmonization
between Exchange Rules and FINRA
Rules of similar substance and purpose,
resulting in less burdensome and more
efficient regulatory compliance for dual
members. As previously noted, the
proposed rule text is substantially
similar to FINRA’s current rule text,
which has already been approved by the
Commission. As such, the proposed rule
change will foster cooperation and
coordination with persons engaged in
facilitating transactions in securities and
will remove impediments to and perfect
the mechanism of a free and open
market and a national market system.
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 16 and Rule 19b–4(f)(6) 17
thereunder.
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.
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 not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issues but
rather is designed to provide greater
harmonization between Exchange and
FINRA rules of similar purpose,
resulting in less burdensome and more
efficient regulatory compliance for dual
members.
• 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–2014–16. 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 Web site (https://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
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
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2014–16 on the subject line.
Paper Comments
16 15
U.S.C. 78s(b)(3)(A).
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.
17 17
E:\FR\FM\09JNN1.SGM
09JNN1
Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices
provisions of 5 U.S.C. 552, will be
available for Web site 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
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–MIAX–
2014–16, and should be submitted on or
before June 30, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–13312 Filed 6–6–14; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–72302; File No. SR–NYSE–
2014–28]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending Its
Price List To Eliminate a Credit for
Certain Non-Floor Broker Transactions
June 3, 2014.
ehiers on DSK2VPTVN1PROD with NOTICES
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on May 28,
2014, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Price List to eliminate a credit for
certain non-Floor broker transactions.
The proposed change will be operative
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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15:08 Jun 06, 2014
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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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
18 17
on June 1, 2014. The text of the
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
The Exchange proposes to amend its
Price List to eliminate a credit for
certain non-Floor broker transactions.
The proposed change will be operative
on June 1, 2014.
On March 1, 2014, the Exchange
established a $0.0019 per share credit
per transaction for all non-Floor broker
transactions that add liquidity to the
Exchange if the member organization
executes an average daily volume
(‘‘ADV’’) during the billing month of at
least 1 million shares in Retail Price
Improvement Orders (‘‘RPIs’’) 4 and a
Customer Electronic Adding ADV 5
during the billing month of at least 5
million shares.6 A member
organization’s provide [sic] volume in
RPIs counts toward the 5 million share
Customer Electronic Adding ADV
threshold if the RPIs meet the definition
of Customer Electronic Adding ADV.
When it established this credit, the
Exchange believed that the credit would
4 ‘‘RPI’’ is defined in NYSE Rule 107C(a)(4) and
consists of non-displayed interest in NYSE-listed
securities that is priced better than the best
protected bid or best protected offer, as such terms
are defined in Regulation NMS Rule 600(b)(57), by
at least $0.001 and that is identified as such.
5 ‘‘Customer Electronic Adding ADV’’ is ADV that
adds liquidity in customer electronic orders to the
Exchange and excludes any liquidity added by a
Floor broker, Designated Market Maker, or
Supplemental Liquidity Provider. See Price List.
6 See Securities Exchange Act Release No. 71684
(March 11, 2014), 78 FR 14758 (March 17, 2014)
(SR–NYSE–2014–09). The applicable $0.0015
Midpoint Passive Liquidity (‘‘MPL’’) order credit
did not change as a result of adding this credit and
will continue to be available.
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
33017
incentivize member organizations to
submit RPIs and, therefore, contribute to
robust amounts of RPI liquidity being
available for interaction with retail
orders submitted by other market
participants and encourage overall
liquidity in customer electronic orders
that add liquidity to the Exchange.
Because the credit has not attracted
liquidity as the Exchange anticipated,
the Exchange proposes to eliminate it.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,7 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,8 in particular,
because it provides for the equitable
allocation of reasonable dues, fees, and
other charges among its members,
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers. The
Exchange believes that eliminating the
credit is reasonable because it has not
attracted liquidity as the Exchange
anticipated when it was established.
The elimination of the credit is also
equitable and not unfairly
discriminatory because it will be
eliminated for all non-Floor broker
transactions.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,9 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 credit that the Exchange is
proposing to eliminate has not attracted
liquidity to the Exchange as anticipated,
and therefore removing it will not affect
competition. The Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues if they
deem fee or credit levels at a particular
venue to be unattractive. In such an
environment, the Exchange must
continually review, and consider
adjusting, its fees and credits to remain
competitive with other exchanges. For
these reasons, the Exchange believes
that the proposed rule change reflects
this competitive environment and is
therefore consistent with the Act.
7 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
9 15 U.S.C. 78f(b)(8).
8 15
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]]>Agencies
[Federal Register Volume 79, Number 110 (Monday, June 9, 2014)]
[Notices]
[Pages 33012-33017]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13312]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72300; File No. SR-MIAX-2014-16]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend MIAX Exchange Rules To Harmonize the
Language With Certain Rules of the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and Other Exchanges
June 3, 2014.
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 June 2, 2014, 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, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing a proposal to amend its Rules to harmonize
the language with certain rules of the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and other exchanges.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.miaxoptions.com/filter/wotitle/rule_filing, 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 certain Rules to harmonize the
language with the rules of FINRA and other exchanges, and to make other
conforming and technical changes. Specifically, the Exchange proposes:
(i) To amend Rule 303, Prevention of the Misuse of Nonpublic
Information, to adopt the language of the corresponding rule of another
exchange; (ii) to amend Rule 315, Anti-Money Laundering Compliance
Program, by adding text to paragraphs (c) and (d) which is identical to
text found in FINRA Rule 3310; (iii) to amend Rule 319, to adopt the
language of the corresponding rule of another exchange; (iv) to add a
new Rule 320, Trading Ahead of Research Reports; (v) to amend Rule 610,
Limitation on Dealings, to adopt the language of the corresponding rule
of another exchange; (vi) to amend paragraphs (b) and (d) of Rule 800,
Maintenance, Retention and Furnishing of Books, Records and Other
Information; (vii) to amend Rule 1321, Transfer of Accounts, to
incorporate by reference FINRA Rule 11870, Customer Account Transfer
Contracts; (viii) to amend Rule 1322, Options Communications, to better
align with FINRA Rule 2220; and (ix) to replace the rule text of Rule
1325, Telephone Solicitation, with the rule text from FINRA Rule 3230.
The Exchange anticipates entering into a 17d-2 Agreement with FINRA and
possibly a Regulatory Service Agreement within the near future. The
Exchange believes the proposed changes to harmonize the Exchange rules
with FINRA and other exchanges (which also have such 17d-2 Agreements
and Regulatory Service Agreement with FINRA) should expedite the
process.
[[Page 33013]]
The Exchange proposes to replace Rule 303, Prevention of the Misuse
of Nonpublic Information, in its entirety with the language of the
corresponding rule of another exchange.\3\ The new Rule will provide
that each Member must establish, maintain and enforce written
procedures reasonably designed, taking into consideration the nature of
such Member's business, to prevent the misuse of material, non-public
information by such Member or persons associated with such Member.
Members for whom the Exchange is the Designated Examining Authority
(``DEA'') that are required to file SEC form X-17A-5 with the Exchange
on an annual or more frequent basis must file contemporaneously with
the submission for the calendar year end ITSFEA compliance
acknowledgements stating that the procedures mandated by this Rule have
been established, enforced and maintained. In addition, any Member or
associated person of a Member who becomes aware of a possible misuse of
material, non-public information must notify the Exchange's Regulatory
Department.
---------------------------------------------------------------------------
\3\ See Proposed Rule 303. See also BATS Rule 5.5.
---------------------------------------------------------------------------
Interpretations and Policies .01 to proposed Rule 303 provides that
conduct which will be characterized as the misuse of material, non-
public information includes, but is not limited to, the following:
Trading in any securities issued by a corporation, or in
any related securities or related options or other derivative
securities, while in possession of material, non-public information
concerning that issuer; or
Trading in a security or related options or other
derivative securities, while in possession of material non-public
information concerning imminent transactions in the security or related
securities; or
Disclosing to another person or entity any material, non-
public information involving a corporation whose shares are publicly
traded or an imminent transaction in an underlying security or related
securities for the purpose of facilitating the possible misuse of such
material, non-public information.
Interpretations and Policies .02 to proposed Rule 303 provides that
at minimum each Member must establish, maintain, and enforce the
following policies and procedures:
All associated persons of the Member must be advised in
writing of the prohibition against the misuse of material, non-public
information; and
All associated persons of the Member must sign
attestations affirming their awareness of, and agreement to abide by
the aforementioned prohibitions. These signed attestations must be
maintained for at least three years, the first two years in an easily
accessible place; and
Each Member must receive and retain copies of trade
confirmations and monthly account statements for each account in which
an associated person: has a direct or indirect financial interest or
makes investment decisions. The activity in such brokerage accounts
should be reviewed at least quarterly by the Member for the purpose of
detecting the possible misuse of material, non-public information; and
All associated persons must disclose to the Member whether
they, or any person in whose account they have a direct or indirect
financial interest, or make investment decisions, are an officer,
director or 10% shareholder in a company whose shares are publicly
traded. Any transaction in the stock (or option thereon) of such
company shall be reviewed to determine whether the transaction may have
involved a misuse of material non-public information. Maintenance of
the foregoing policies and procedures will not, in all cases, satisfy
the requirements and intent of this Rule; the adequacy of each Member's
policies and procedures will depend upon the nature of such Member's
business.
The Exchange believes that the proposed changes to the Prevention
of the Misuse of Nonpublic Information Rule clarifies activity which it
believes to be inconsistent with just and equitable principles of
trade. Additionally, the Exchange believes the proposed changes will
assist in the prevention of fraudulent and manipulative acts by
providing an appropriate mechanism designed to ensure that material,
non-public information continues to be protected while promoting the
protecting of investors and the public interest.
The Exchange proposes to amend Rule 315(c) to provide additional
clarity and instruction to Members' regarding independent testing for
compliance and to more closely align the language of the Rule with the
corresponding FINRA Rule 3310.\4\ The proposed rule change will require
``annual (on a calendar year basis)'' independent testing for
compliance of the Member's anti-money laundering program, to be
conducted by the Member's personnel or by a qualified outside party.
Further, the proposed rule change will provide that testing be done on
a periodic basis, ``every two years (on a calendar-year basis),'' if
the Member does not execute transactions for customers or otherwise
hold customer accounts or act as an introducing broker with respect to
customer accounts. Finally, the proposed rule change clarifies that the
individual responsible for implementing and monitoring the program must
be an associated person of the Member. The Exchange believes the
proposed changes to Rule 315(c) will more closely align the Rule with
the corresponding FINRA Rule 3310, and creates a more concise rule
which benefits investors and the public by establishing uniform and
clearly defined time parameters for review. The Exchange proposes to
amend Rule 315(d) to clarify that implementation and monitoring of a
Member's Anti-Money Laundering Compliance Program be performed by an
associated person of the Member. The proposed change to Rule 315(d)
clarifies a Member's obligation for implementing and maintaining its
program and more closely aligns to FINRA Rule 3310.
---------------------------------------------------------------------------
\4\ See Proposed Rule 315(c). See also FINRA Rule 3310.
---------------------------------------------------------------------------
The Exchange proposes to replace Rule 319, Proxy Voting, in its
entirety with the language of the corresponding rule of another
exchange, Forwarding of Proxy and Other Issuer-Related Materials; Proxy
Voting.\5\ The new Rule will provide that a Member when so requested by
an issuer and upon being furnished with: (1) Sufficient copies of proxy
material, annual reports, information statements or other material
required by law to be sent to security holders periodically, and (2)
satisfactory assurance that it will be reimbursed by such issuer for
all out-of-pocket expenses, including reasonable clerical expenses,
shall transmit promptly to each beneficial owner of securities (or the
beneficial owner's designated investment adviser) of such issuer which
are in its possession and control and registered in a name other than
the name of the beneficial owner all such material furnished. In the
event of a proxy solicitation, such material shall include a signed
proxy indicating the number of shares held for such beneficial owner
and bearing a symbol identifying the proxy with proxy records
maintained by the Member, and a letter informing the beneficial owner
(or the beneficial owner's designated investment adviser) of the time
limit and necessity for completing the proxy form and forwarding it to
the person soliciting proxies prior to the expiration of the time limit
in order for the shares to be represented at the meeting. In
[[Page 33014]]
addition, a Member shall furnish a copy of the symbols to the person
soliciting the proxies and shall also retain a copy thereof pursuant to
the provisions of Exchange Act Rule 17a-4. This paragraph shall not
apply to beneficial owners residing outside of the United States of
America though Members may voluntarily comply with the provisions
hereof in respect of such persons if they so desire. Further, the new
Rule provides that No Member shall give a proxy to vote stock that is
registered in its name, unless: (i) Such Member is the beneficial owner
of such stock; (ii) such proxy is given pursuant to the written
instructions of the beneficial owner; or (iii) such proxy is given
pursuant to the rules of any national securities exchange or
association of which it is a member provided that the records of the
Member clearly indicate the procedure it is following. In addition,
notwithstanding the foregoing, a Member that is not the beneficial
owner of a security registered under Section 12 of the Exchange Act is
prohibited from granting a proxy to vote the security in connection
with a shareholder vote on the election of a member of the board of
directors of an issuer (except for a vote with respect to uncontested
election of a member of the board of directors of any investment
company registered under the Investment Company Act of 1940), executive
compensation, or any other significant matter, as determined by the
Commission, by rule, unless the beneficial owner of the security has
instructed the Member to vote the proxy in accordance with the voting
instructions of the beneficial owner. Notwithstanding the foregoing, a
Member may give a proxy to vote any stock registered in its name if
such Member holds such stock as executor, administrator, guardian,
trustee, or in a similar representative or fiduciary capacity with
authority to vote. A Member that has in its possession or within its
control stock registered in the name of another Member and that desires
to transmit signed proxies pursuant to the provisions of paragraph (a)
of this proposed Rule 319, shall obtain the requisite number of signed
proxies from such holder of record. Notwithstanding the foregoing: (1)
Any Member designated by a named Employee Retirement Income Security
Act of 1974 (as amended) (``ERISA'') Plan fiduciary as the investment
manager of stock held as assets of the ERISA Plan may vote the proxies
in accordance with the ERISA Plan fiduciary responsibilities if the
ERISA Plan expressly grants discretion to the investment manager to
manage, acquire, or dispose of any plan asset and has not expressly
reserved the proxy voting right for the named ERISA Plan fiduciary; and
(2) any designated investment adviser may vote such proxies.
---------------------------------------------------------------------------
\5\ See Proposed Rule 319. See also BATS Rule 13.3.
---------------------------------------------------------------------------
Interpretations and Policies .01 to proposed Rule 319 provides that
for purposes of this Rule, the term ``designated investment adviser''
is a person registered under the Investment Advisers Act of 1940, or
registered as an investment adviser under the laws of a state, who
exercises investment discretion pursuant to an advisory contract for
the beneficial owner and is designated in writing by the beneficial
owner to receive proxy and related materials and vote the proxy, and to
receive annual reports and other material sent to security holders. For
purposes of this Rule, the term ``state'' shall have the meaning given
to such term in Section 202(a)(19) of the Investment Advisers Act (as
the same may be amended from time to time). The written designation
must be signed by the beneficial owner; be addressed to the Member; and
include the name of the designated investment adviser. Members that
receive such a written designation from a beneficial owner must ensure
that the designated investment adviser is registered with the SEC
pursuant to the Investment Advisers Act, or with a state as an
investment adviser under the laws of such state, and that the
investment adviser is exercising investment discretion over the
customer's account pursuant to an advisory contract to vote proxies
and/or to receive proxy soliciting material, annual reports and other
material. Members must keep records substantiating this information.
Beneficial owners have an unqualified right at any time to rescind
designation of the investment adviser to receive materials and to vote
proxies. The rescission must be in writing and submitted to the Member.
The Exchange believes that the proposed changes to the proxy voting
Rule will provide a clearer framework for Members to handle proxy
related materials in a manner that is designed to prevent fraudulent
and manipulative acts and practices, and to promote the protection of
investors and the public interest. The Exchange notes that the proposed
changes will also bring the Exchange's Rule more closely aligned with
that of FINRA.\6\
---------------------------------------------------------------------------
\6\ See FINRA Rule 2251.
---------------------------------------------------------------------------
The Exchange proposes to add Rule 320, to incorporate the language
of FINRA Rule 5280, Trading Ahead of Research Reports.\7\ The proposed
Rule 320 contains two provisions, paragraph (a) and (b), pertaining to
trading and research reports. Paragraph (a) stipulates that a Member
may not change its position in a security based upon non-public advance
knowledge of information contained in a research report. Specifically,
no Member shall establish, increase, decrease or liquidate an inventory
position in a security or a derivative of such security based on non-
public advance knowledge of the content or timing of a research report
in that security. Paragraph (b) stipulates that a Member must establish
and enforce policies and procedures which are designed to restrict the
flow of information between research department personnel and trading
department personnel. Specifically, Members must establish, maintain
and enforce policies and procedures reasonably designed to restrict or
limit the information flow between research department personnel, or
other persons with knowledge of the content or timing of a research
report, and trading department personnel, so as to prevent trading
department personnel from utilizing non-public advance knowledge of the
issuance or content of a research report for the benefit of the Member
or any other person. The Exchange believes the addition of Rule 320
benefits investors and the public by establishing specific parameters
concerning a Members' trading activity in a security and the timing of
Research Reports related to that security. The Exchange also believes
that adopting the language of FINRA helps to ensure that Members have
the same obligations to comply under the Exchange Rules as they do
under FINRA rules.\8\
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\7\ See Proposed Rule 320. See also FINRA Rule 5280.
\8\ The Exchange intends that MIAX Rule 320 be interpreted and
applied in the same manner as FINRA interprets and applies FINRA
Rule 5280, including the application of any associated Notice to
Members, or rules, that FINRA uses to interpret FINRA Rule 5280. See
Rule 200(c)(7). MIAX Rule 200(c)(7) provides that, ``[e]very
Applicant must have and maintain membership in another registered
options exchange (that is not registered solely under Section 6(g)
of the Exchange Act). If such other registered options exchange has
not been designated by the Commission, pursuant to Rule 17d-1 under
the Exchange Act, to examine Members for compliance with financial
responsibility rules, then such Applicant must have and maintain a
membership in FINRA.''
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The Exchange proposes to replace Rule 610, Limitations on Dealings,
in its entirety with the language of the corresponding rule of another
exchange.\9\ The new Rule will provide that no Member, other than a
Market
[[Page 33015]]
Maker acting pursuant to Rule 603, limited partner, officer, employee,
approved person(s) approved [sic], who is affiliated with a Market
Maker or Member, shall, during the period of such affiliation, purchase
or sell any option in which such Market Maker is appointed for any
account in which such person(s) has a direct or indirect interest. Any
such person(s) may, however, reduce or liquidate an existing position
in an option in which such Market Maker is appointed provided that such
orders are (i) identified as being for an account in which such
person(s) has a direct or indirect interest; (ii) approved for
execution by an Exchange Official; and (iii) executed by the Market
Maker in a manner reasonably calculated to contribute to the
maintenance of price continuity with reasonable depth. No order entered
pursuant to Rule 610(a) shall be given priority over, or parity with,
any order represented in the market at the same price. Notwithstanding
the provisions of Rule 603, an approved person or Member that is
affiliated with a Market Maker shall not be subject to Rule 610(a),
provided it has obtained Exchange approval of procedures restricting
the flow of material non-public corporate or market information between
itself and the Market Maker and any Member, officer, or employee
associated therewith. For such Member that controls, is controlled by,
or is under common control with another organization, the exemption
provided in Subsection (b) of Rule 610 shall be available to it only
where the Exchange has determined that the relationship between the
Market Maker, each person associated therewith, and such other
organization satisfies all the conditions specified in the Exemption
Guidelines. In addition, the following restrictions apply to a Member
that is affiliated with a Market Maker. The Member may not: Purchase or
sell for any account in which it has a direct or indirect interest in
any security in which its affiliate is a Market Maker; engage in any
business transaction with the issuer of a security or its insiders in
which its affiliate is a Market Maker; or accept orders directly from
the issuer, its insiders or certain designated parties in securities in
which its affiliate is a Market Maker.
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\9\ See Proposed Rule 610. See also NYSE Arca Rule 6.83; NYSE
MKT Rule 927.3NY.
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Further, the Exchange proposes Exemption Guidelines which provides
a means by which an affiliated firm doing business with the public as
defined in Rule 203 (hereafter ``Member'') may obtain an exemption from
the restrictions discussed in Rule 610 above. This exemption is only
available to a Member that obtains prior Exchange approval for
procedures restricting the flow of material non-public information
between it and its affiliated Market Maker, (i.e., so-called ``Chinese
Wall'' procedures). The Exemption Guideline subsection sets forth the
steps a Member must undertake, at a minimum, to seek to qualify for
exemptive relief. Any firm that does not obtain Exchange approval for
its procedures in accordance with these Guidelines shall remain subject
to the restrictions set forth in Rule 610 described above.
The Exchange believes that the proposed changes to the information
barrier rule clarify activity which it believes to be inconsistent with
just and equitable principles of trade. The Exchange believes that the
proposed information barrier rule is more precise and prescriptive than
the current rule regarding which activities are prohibitive and what
constitutes an adequate information barrier between Market Makers and
affiliated order flow providers. The proposed rule also contains a
detailed exemptive relief section that is absent from the current rule.
The Exchange notes that under the proposal the Exchange will still
require the maintaining of information barriers between Members and any
affiliated Market Makers to the same extent as the current rule. The
Exchange believes the proposed changes will assist in the prevention of
fraudulent and manipulative acts by providing an appropriate mechanism
designed to ensure that there are sufficient information barriers
between Market Makers and affiliated order flow providers while
promoting the protecting of investors and the public interest. The
Exchange believes that the proposed rule will provide detailed
guidelines and protections in a manner that is easily understood and
enforced by not only Members, but also FINRA, with whom the Exchange
anticipates entering in a17d-2 Agreement and possibly a Regulatory
Service Agreement with in the near future.
The Exchange proposes to amend Rule 800, Maintenance, Retention and
Furnishing of Books, Records and Other Information, to include rule
text from the related FINRA Rule 4511, General Requirements.\10\ The
Exchange proposes to add paragraph (b) to its rule, specifying that
each Member shall preserve for a period of at least six years those
books and records for which there is no specified period under Exchange
Rules or applicable Exchange Act rules. The Exchange also proposes to
add paragraph (d) to its rule, specifying that all books and records
required to be made pursuant to the Exchange Rules shall be preserved
in a format and media that complies with Exchange Act Rule 17a-4. The
Exchange believes that adding additional detail to its Rule is
appropriate as it will harmonize the Exchange's Rule with the related
FINRA rule, which is designed to protect investors and the public
interest.
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\10\ See Proposed Rule 800. See also FINRA Rule 4511.
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The Exchange proposes to amend Rule 1321, Transfer of Accounts, to
incorporate FINRA Rule 11870 by reference into its rules so that
Members have the same obligations to comply as if such rules and
interpretations were part of the Exchange's rules.\11\ FINRA Rule 11870
provides a comprehensive articulation of procedures to be followed when
transferring a customer account. The FINRA Rule establishes the
protocol and procedures for initiating a transfer, validating the
transfer instructions, and handling fails. Incorporating by reference
the FINRA rule ensures that Members have the same obligations to comply
as if such rules and interpretations were part of the Exchange's Rules.
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\11\ See Proposed Rule 1321. See also FINRA Rule 11870. In the
event FINRA updates its Rule 11870, Customer Account Transfer
Contracts, MIAX will file a 19b-4 Rule filing to adopt any
corresponding changes to its Rule 1321 to ensure it remains
consistent with FINRA Rule 11870.
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The Exchange proposes to amend Rule 1322, Options Communications,
to conform with the corresponding FINRA Rule 2220, Options
Communications.\12\ The current rule requires each Member to establish
appropriate written procedures for review by a Registered Options
Principal of institutional communications used by the Member. The
Exchange proposes to add a paragraph to section (a) Definitions, to
conform the Exchange Rule text to FINRA by including the definition of
an institutional investor in paragraph (a)(4) and an Institutional
Investor in paragraph (a)(5). The Exchange proposes to update the text
of paragraph (b)(3) Institutional Communications, to clarify that
procedures for Institutional Communications be designed to ensure that
those communications comply with applicable standards. Further, when
procedures do not require review, the procedures must include a
provision for the duration and training of associated persons as to the
firm's procedures concerning institutional communications. In addition,
evidence that these supervisory procedures have been implemented and
carried out must be maintained and made available to the Exchange upon
request. The Exchange
[[Page 33016]]
proposes to make conforming and technical changes to Exchange Rule 1322
to align to FINRA Rule 2220.
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\12\ See Proposed Rule 1322. See also FINRA Rule 2220.
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The Exchange proposes to amend Rule 1325, Telephone Solicitation,
to adopt the language of the corresponding FINRA Rule 3230,
Telemarketing.\13\ The FINRA rule text provides detailed guidance
concerning telemarketing activities. The Exchange believes that the
proposed changes are appropriate as they will harmonize the Exchange's
Rules with FINRA rules with respect to account transfers and Exchange
Members' communication with the public. The Exchange's proposed changes
are designed to further cooperation and coordination with persons
engaged in regulating, clearing, settling, processing information with
respect to, and facilitating transactions in securities. Additionally,
the Exchange believes that the proposed changes serve to further
protect investors and the public interest by providing detailed
guidance concerning telemarking [sic].
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\13\ See Proposed Rule 1325. See also FINRA Rule 3230.
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2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) \14\ of the Act in general, and furthers the
objectives of Section 6(b)(5) \15\ of the Act 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.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes the proposed rule changes will
provide greater clarity to Members and the public regarding the
Exchange's Rules. The Exchange believes that the new nonpublic
information rule should assist in the prevention of fraudulent and
manipulative acts by providing an appropriate mechanism designed to
ensure that material, non-public information continues to be protected
while promoting the protecting of investors and the public interest. In
addition, the Exchange believes that the proposed rule changes will
help ensure that investors are protected from potentially false or
misleading communications with the public distributed by Exchange
Members. The Exchange believes that the new proxy voting Rule will
provide a clearer framework for Members to handle proxy related
materials in a manner that is designed to prevent fraudulent and
manipulative acts and practices, and to promote the protection of
investors and the public interest. The Exchange believes that the new
information barrier rule should assist in the prevention of fraudulent
and manipulative acts by providing an appropriate mechanism designed to
ensure that there are sufficient information barriers between Market
Makers and affiliated order flow providers while promoting the
protecting of investors and the public interest. Further, the proposed
rule changes provide greater harmonization between Exchange Rules and
FINRA Rules of similar substance and purpose, resulting in less
burdensome and more efficient regulatory compliance for dual members.
As previously noted, the proposed rule text is substantially similar to
FINRA's current rule text, which has already been approved by the
Commission. As such, the proposed rule change will foster cooperation
and coordination with persons engaged in facilitating transactions in
securities and will remove impediments to and perfect the mechanism of
a free and open market and a national market system.
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 not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is not
designed to address any competitive issues but rather is designed to
provide greater harmonization between Exchange and FINRA rules of
similar purpose, resulting in less burdensome and more efficient
regulatory compliance for dual members.
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 \16\ and Rule 19b-4(f)(6) \17\
thereunder.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-MIAX-2014-16 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-2014-16. 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 Web site (https://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
[[Page 33017]]
provisions of 5 U.S.C. 552, will be available for Web site 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; 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-MIAX-2014-16, and should be
submitted on or before June 30, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13312 Filed 6-6-14; 8:45 am]
BILLING CODE 8011-01-P
