Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add the Consolidated Audit Trail Industry Member Compliance Rules to Exchange Rule 1014, Imposition of Fines for Minor Rule Violations, 39013-39016 [2020-13878]
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Federal Register / Vol. 85, No. 125 / Monday, June 29, 2020 / Notices
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
[Release No. 34–89136; File No. SR–MIAX–
2020–17]
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–
NYSEArca–2020–57 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–NYSEArca–2020–57. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (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
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2020–57, and
should be submitted on or before July
20, 2020.
jbell on DSKJLSW7X2PROD with NOTICES
SECURITIES AND EXCHANGE
COMMISSION
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–13873 Filed 6–26–20; 8:45 am]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Order
Granting Accelerated Approval of a
Proposed Rule Change To Add the
Consolidated Audit Trail Industry
Member Compliance Rules to
Exchange Rule 1014, Imposition of
Fines for Minor Rule Violations
June 23, 2020
Pursuant to 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 18,
2020, Miami International Securities
Exchange, LLC (‘‘MIAX Options’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons and
approving the proposal on an
accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
add the Consolidated Audit Trail
(‘‘CAT’’) industry member compliance
rules to the list of minor rule violations
in Rule 1014.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/ at MIAX Options’ 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.
BILLING CODE 8011–01–P
1 15
26 17
CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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39013
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to add its
CAT industry member compliance rules
(the ‘‘CAT Compliance Rules’’) to the
list of minor rule violations in Rule
1014. This proposal is based upon the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filing to
amend FINRA Rule 9217 in order to add
FINRA’s corresponding CAT
Compliance Rules to FINRA’s list of
rules that are eligible for minor rule
violation plan treatment.3 This proposal
is also based upon the New York Stock
Exchange, Inc. (‘‘NYSE’’) filing to
amend NYSE Rule 9217 in order to add
NYSE’s corresponding CAT Compliance
Rules to NYSE’s list of rules that are
eligible for minor rule violation plan
treatment.4
Proposed Rule Change
The Exchange recently adopted the
CAT Compliance Rules under Chapter
XVII in order to implement the National
Market System Plan Governing the
Consolidated Audit Trail (the ‘‘CAT
NMS Plan’’ or ‘‘Plan’’).5 The CAT NMS
Plan was filed by the Plan Participants
to comply with Rule 613 of Regulation
NMS under the Exchange Act,6 and
each Plan Participant accordingly has
adopted the same compliance rules in
the Exchange’s Chapter XVII. The
common compliance rules adopted by
each Plan Participant are designed to
require industry members to comply
with the provisions of the CAT NMS
Plan, which broadly calls for industry
members to record and report timely
and accurately customer, order, and
trade information relating to activity in
NMS Securities and OTC Equity
Securities.
Rule 1014 sets forth the list of rules
under which a member may be subject
to a fine. Rule 1014 permits the
Exchange to impose a fine of up to
$5,000 on any member or a person
associated with or employed by a
member for a minor violation of an
eligible rule. The Exchange proposes to
amend Rule 1014 to add the CAT
Compliance Rules under Chapter XVII
to the list of rules eligible for
3 See Securities Exchange Act Release Nos. 88870
(May 14, 2020), 85 FR 30768 (May 20, 2020) (SR–
FINRA–2020–013).
4 See SR–NYSE–2020–51.
5 See Securities Exchange Act Release No. 80256
(March 152017), 82 FR 14526 (March 21, 2017) (SR–
MIAX–2017–03).
6 17 CFR 242.613.
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disposition pursuant to a minor fine
under Rule 1014.7
The Exchange is coordinating with
FINRA and other Plan Participants to
promote harmonized and consistent
enforcement of all the Plan Participants’
CAT Compliance Rules. The
Commission recently approved a Rule
17d–2 Plan under which the regulation
of CAT Compliance Rules will be
allocated among Plan Participants to
reduce regulatory duplication for
industry members that are members of
more than one Participant (‘‘common
members’’).8 Under the Rule 17d–2
Plan, the regulation of CAT Compliance
Rules with respect to common members
that are members of FINRA is allocated
to FINRA. Similarly, under the Rule
17d–2 Plan, responsibility for common
members of multiple other Plan
Participants and not a member of FINRA
will be allocated among those other Plan
Participants, including to the Exchange.
For those non-common members who
are allocated to the Exchange pursuant
to the Rule 17d–2 Plan, the Exchange
and FINRA entered into a Regulatory
Services Agreement (‘‘RSA’’) pursuant
to which FINRA will conduct
surveillance, investigation, examination,
and enforcement activity in connection
with the CAT Compliance Rules on the
Exchange’s behalf. We expect that the
other exchanges would be entering into
a similar RSA.
In order to achieve consistency with
FINRA and the other Plan Participants,
the Exchange proposes to adopt fines up
to $2,500 in connection with minor rule
fines for violations of the CAT
Compliance Rules under Chapter XVII
under Rule 1014 and the Exchange’s
MRVP.
FINRA, in connection with its
proposed amendment to FINRA Rule
9217 to make FINRA’s CAT Compliance
Rules MRVP eligible, has represented
that it will apply the minor fines for
CAT Compliance Rules in the same
7 FINRA’s maximum fine for minor rule
violations under FINRA Rule 9216(b) is $2,500. The
Exchange will apply an identical maximum fine
amount for eligible violations of Chapter XVII to
achieve consistency with FINRA and also to amend
its minor rule violation plan (‘‘MRVP’’) to include
such fines. Like FINRA, the Exchange would be
able to pursue a fine greater than $2,500 for
violations of Chapter XVII in a regular disciplinary
proceeding or Letter of Consent under Rule 1003 as
appropriate. Any fine imposed in excess of $2,500
or not otherwise covered by Rule 19d–1(c)(2) of the
Act would be subject to prompt notice to the
Commission pursuant to Rule 19d–1 under the Act.
As noted below, in assessing the appropriateness of
a minor rule fine with respect to CAT Compliance
Rules, the Exchange will be guided by the same
factors that FINRA utilizes. See text accompanying
notes 9–10, infra.
8 See Securities Exchange Act Release No. 88366
(March 12, 2020), 85 FR 15238 (March 17, 2020)
(File No. 4–618).
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20:25 Jun 26, 2020
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manner that FINRA has for its similar
existing audit trail-related rules.9
Accordingly, in order to promote
regulatory consistency, the Exchange
plans to do the same. Specifically,
application of a minor rule fine with
respect to CAT Compliance Rules will
be guided by the same factors that
FINRA referenced in its filing. However,
more formal disciplinary proceedings
may be warranted instead of minor rule
dispositions in certain circumstances
such as where violations prevent
regulatory users of the CAT from
performing their regulatory functions.
Where minor rule dispositions are
appropriate, the following factors help
guide the determination of fine
amounts:
• Total number of reports that are not
submitted or submitted late;
• The timeframe over which the
violations occur;
• Whether violations are batched;
• Whether the violations are the
result of the actions of one individual or
the result of faulty systems or
procedures;
• Whether the firm has taken
remedial measures to correct the
violations;
• Prior minor rule violations within
the past 24 months;
• Collateral effects that the failure has
on customers; and
• Collateral effects that the failure has
on the Exchange’s ability to perform its
regulatory function.10
Upon effectiveness of this rule
change, the Exchange will publish a
regulatory bulletin notifying its member
organizations of the rule change and the
specific factors that will be considered
in connection with assessing minor rule
fines described above.
For the foregoing reasons, the
Exchange believes that the proposed
rule change will result in a coordinated,
harmonized approach to CAT
compliance rule enforcement across
Plan Participants that will be consistent
with the approach FINRA has taken
with the CAT rules.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,11 in general, and furthers the
objectives of Section 6(b)(5),12 in
particular, because it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
9 See SR–FINRA–2020–013; see also FINRA
Notice to Members 04–19 (March 2004) (providing
specific factors used to inform dispositions for
violations of OATS reporting rules).
10 See id.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
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Frm 00175
Fmt 4703
Sfmt 4703
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
Minor rule fines provide a meaningful
sanction for minor or technical
violations of rules when the conduct at
issue does not warrant stronger,
immediately reportable disciplinary
sanctions. The inclusion of a rule in the
Exchange’s MRVP does not minimize
the importance of compliance with the
rule, nor does it preclude the Exchange
from choosing to pursue violations of
eligible rules through a Letter of
Consent if the nature of the violations or
prior disciplinary history warrants more
significant sanctions. Rather, the
Exchange believes that the proposed
rule change will strengthen the
Exchange’s ability to carry out its
oversight and enforcement
responsibilities in cases where full
disciplinary proceedings are
unwarranted in view of the minor
nature of the particular violation.
Rather, the option to impose a minor
rule sanction gives the Exchange
additional flexibility to administer its
enforcement program in the most
effective and efficient manner while still
fully meeting the Exchange’s remedial
objectives in addressing violative
conduct. Specifically, the proposed rule
change is designed to prevent
fraudulent and manipulative acts and
practices because it will provide the
Exchange the ability to issue a minor
rule fine for violations of the CAT
Compliance Rules under Chapter XVII
where a more formal disciplinary action
may not be warranted or appropriate
consistent with the approach of other
Plan Participants for the same conduct.
In connection with the fine level
specified in the proposed rule change,
adding language that minor rule fines
for violations of the CAT Compliance
Rules under Chapter XVII shall not
exceed $2,500 would further the goal of
transparency and add clarity to the
Exchange’s rules. Adopting the same
cap as FINRA for minor rule fines in
connection with the CAT Compliance
Rules would also promote regulatory
consistency across self-regulatory
organizations.
The Exchange further believes that the
proposed amendments to Rule 1014 are
consistent with Section 6(b)(6) of the
Act,13 which provides that members and
persons associated with members shall
13 15
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U.S.C. 78f(b)(6).
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Federal Register / Vol. 85, No. 125 / Monday, June 29, 2020 / Notices
be appropriately disciplined for
violation of the provisions of the rules
of the exchange, by expulsion,
suspension, limitation of activities,
functions, and operations, fine, censure,
being suspended or barred from being
associated with a member, or any other
fitting sanction. As noted, the proposed
rule change would provide the
Exchange ability to sanction minor or
technical violations of Chapter XVII
pursuant to the Exchange’s rules.
Finally, the Exchange also believes
that the proposed changes are designed
to provide a fair procedure for the
disciplining of members and persons
associated with members, consistent
with Sections 6(b)(7) and 6(d) of the
Act.14 Rule 1014 does not preclude a
member or a person associated with or
employed by a member from contesting
an alleged violation and receiving a
hearing on the matter with the same
procedural rights through a litigated
disciplinary proceeding.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not intended to
address competitive issues but rather is
concerned solely with making the CAT
Compliance Rules under Chapter XVII
eligible for a minor rule fine disposition,
thereby strengthening the Exchange’s
ability to carry out its oversight and
enforcement functions and deter
potential violative conduct.
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. 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:
jbell on DSKJLSW7X2PROD with NOTICES
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–2020–17 on the subject line.
14 15
U.S.C. 78f(b)(7) and 78f(d).
VerDate Sep<11>2014
20:25 Jun 26, 2020
Jkt 250001
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–2020–17. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (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
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MIAX–2020–17 and should
be submitted on or before July 20, 2020.
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.15 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,16 which requires that
the rules of an exchange be designed to
promote just and equitable principles of
trade, to remove impediments and to
perfect the mechanism of a free and
open market and a national market
15 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
16 15 U.S.C. 78f(b)(5).
PO 00000
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39015
system, and, in general, to protect
investors and the public interest. The
Commission also believes that the
proposal is consistent with Sections
6(b)(1) and 6(b)(6) of the Act 17 which
require that the rules of an exchange
enforce compliance with, and provide
appropriate discipline for, violations of
Commission and Exchange rules.
Finally, the Commission finds that the
proposal is consistent with the public
interest, the protection of investors, or
otherwise in furtherance of the purposes
of the Act, as required by Rule 19d1(c)(2) under the Act,18 which governs
minor rule violation plans.
As stated above, the Exchange
proposes to add the CAT Compliance
Rules to the list of minor rule violations
in Rule 1014 to be consistent with the
approach FINRA has taken for minor
violations of its corresponding CAT
Compliance Rules.19 The Commission
has already approved FINRA’s treatment
of CAT Compliance Rules violations
when it approved the addition of CAT
Compliance Rules to FINRA’s MRVP.20
As noted in that order, and similarly
herein, the Commission believes that
Exchange’s treatment of CAT
Compliance Rules violations as part of
its MRVP provides a reasonable means
of addressing violations that do not rise
to the level of requiring formal
disciplinary proceedings, while
providing greater flexibility in handling
certain violations. However, the
Commission expects that, as with
FINRA, the Exchange will continue to
conduct surveillance with due diligence
and make determinations based on its
findings, on a case-by-case basis,
regarding whether a sanction under the
rule is appropriate, or whether a
violation requires formal disciplinary
action. Accordingly, the Commission
believes the proposal raises no novel or
significant issues.
For the same reasons discussed above,
the Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,21 for approving the proposed rule
17 15
U.S.C. 78f(b)(1) and 78f(b)(6).
CFR 240.19d–1(c)(2).
19 As discussed above, the Exchange has entered
into a Rule 17d–2 Plan and an RSA with FINRA
with respect to the CAT Compliance Rules. The
Commission notes that, unless relieved by the
Commission of its responsibility, as may be the case
under the Rule 17d–2 Plan, the Exchange continues
to bear the responsibility for self-regulatory conduct
and liability for self-regulatory failures, not the selfregulatory organization retained to perform
regulatory functions on the Exchange’s behalf
pursuant to an RSA. See Securities Exchange
Release No. 61419 (January 26, 2010), 75 FR 5157
(February 1, 2010) (SR–BATS–2009–031), note 93
and accompanying text.
20 See supra note 3.
21 15 U.S.C. 78s(b)(2).
18 17
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change prior to the thirtieth day after
the date of publication of the notice of
the filing thereof in the Federal
Register. The proposal merely adds the
CAT Compliance Rules to the
Exchange’s MRVP and harmonizes its
application with FINRA’s application of
CAT Compliance Rules under its own
MRVP. Accordingly, the Commission
believes that a full notice-and-comment
period is not necessary before approving
the proposal.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add the
Consolidated Audit Trail (‘‘CAT’’)
industry member compliance rules to
the list of minor rule violations in Rule
9217. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
V. Conclusion
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.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 22 and Rule
19d–1(c)(2) thereunder,23 that the
proposed rule change (SR–MIAX–2020–
17) be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–13878 Filed 6–26–20; 8:45 am]
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89123; File No. SR–NYSE–
2020–51)
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Order Granting Accelerated
Approval of a Proposed Rule Change
To Add the Consolidated Audit Trail
Industry Member Compliance Rules to
the List of Minor Rule Violations
June 23, 2020.
jbell on DSKJLSW7X2PROD 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 June 12,
2020, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons and approving
the proposal on an accelerated basis.
U.S.C. 78s(b)(2).
23 17 CFR 240.19d–1(c)(2).
24 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
20:25 Jun 26, 2020
Proposed Rule Change
The Exchange recently adopted the
CAT Compliance Rules in the Rule 6800
Series in order to implement the
National Market System Plan Governing
the Consolidated Audit Trail (the ‘‘CAT
NMS Plan’’ or ‘‘Plan’’).5 The CAT NMS
Plan was filed by the Plan Participants
to comply with Rule 613 of Regulation
NMS under the Exchange Act,6 and
each Plan Participant accordingly has
adopted the same compliance rules in
the Exchange’s Rule 6800 Series. The
4 See Securities Exchange Act Release No. 88870
(May 14, 2020), 85 FR 30768 (May 20, 2020) (SR–
FINRA–2020–013).
5 See Securities Exchange Act Release No. 79907
(January 31, 2017), 82 FR 9413 (February 6, 2017)
(SR–NYSE–2017–01).
6 17 CFR 242.613.
22 15
VerDate Sep<11>2014
1. Purpose
The Exchange proposes to add
NYSE’s CAT industry member
compliance rules (the ‘‘CAT Compliance
Rules’’) to the list of minor rule
violations in Rule 9217. This proposal is
based upon the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filing to amend FINRA Rule 9217 in
order to add FINRA’s corresponding
CAT Compliance Rules to FINRA’s list
of rules that are eligible for minor rule
violation plan treatment.4
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common compliance rules adopted by
each Plan Participant are designed to
require industry members to comply
with the provisions of the CAT NMS
Plan, which broadly calls for industry
members to record and report timely
and accurately customer, order, and
trade information relating to activity in
NMS Securities and OTC Equity
Securities.
Rule 9217 sets forth the list of rules
under which a member organization or
covered person may be subject to a fine
under Rule 9216(b). Rule 9217 permits
the Exchange to impose a fine of up to
$5,000 on any member or covered
person for a minor violation of an
eligible rule. The Exchange proposes to
amend Rule 9217 to add the CAT
Compliance Rules in the Rule 6800
Series to the list of rules in Rule 9217
eligible for disposition pursuant to a
minor fine under Rule 9216(b).7
The Exchange is coordinating with
FINRA and other Plan Participants to
promote harmonized and consistent
enforcement of all the Plan Participants’
CAT Compliance Rules. The
Commission recently approved a Rule
17d–2 Plan under which the regulation
of CAT Compliance Rules will be
allocated among Plan Participants to
reduce regulatory duplication for
industry members that are members of
more than one Participant (‘‘common
members’’).8 Under the Rule 17d–2
Plan, the regulation of CAT Compliance
Rules with respect to common members
that are members of FINRA is allocated
to FINRA. Similarly, under the Rule
17d–2 Plan, responsibility for common
members of multiple other Plan
Participants and not a member of FINRA
will be allocated among those other Plan
Participants, including to the Exchange.
For those non-common members who
are allocated to NYSE pursuant to the
Rule 17d–2 Plan, the Exchange and
FINRA entered into a Regulatory
7 FINRA’s maximum fine for minor rule
violations under FINRA Rule 9216(b) is $2,500. The
Exchange will apply an identical maximum fine
amount for eligible violations of the Rule 6800
Series to achieve consistency with FINRA and also
to amend its minor rule violation plan (‘‘MRVP’’)
to include such fines. Like FINRA, the Exchange
would be able to pursue a fine greater than $2,500
for violations of the Rule 6800 Series in a regular
disciplinary proceeding or an acceptance, waiver,
and consent (‘‘AWC’’) under the Rule 9000 Series
as appropriate. Any fine imposed in excess of
$2,500 or not otherwise covered by Rule 19d–1(c)(2)
of the Act would be subject to prompt notice to the
Commission pursuant to Rule 19d–1 under the Act.
As noted below, in assessing the appropriateness of
a minor rule fine with respect to CAT Compliance
Rules, the Exchange will be guided by the same
factors that FINRA utilizes. See text accompanying
notes 9–10, infra.
8 See Securities Exchange Act Release No. 88366
(March 12, 2020), 85 FR 15238 (March 17, 2020)
(File No. 4–618).
E:\FR\FM\29JNN1.SGM
29JNN1
]]>Agencies
[Federal Register Volume 85, Number 125 (Monday, June 29, 2020)]
[Notices]
[Pages 39013-39016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13878]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89136; File No. SR-MIAX-2020-17]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Order Granting Accelerated Approval
of a Proposed Rule Change To Add the Consolidated Audit Trail Industry
Member Compliance Rules to Exchange Rule 1014, Imposition of Fines for
Minor Rule Violations
June 23, 2020
Pursuant to 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 18, 2020, Miami International Securities Exchange, LLC
(``MIAX Options'' or the ``Exchange'') filed with the Securities and
Exchange Commission (the ``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
the self-regulatory organization. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons and approving the proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to add the Consolidated Audit
Trail (``CAT'') industry member compliance rules to the list of minor
rule violations in Rule 1014.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings/ at MIAX Options'
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 add its CAT industry member compliance
rules (the ``CAT Compliance Rules'') to the list of minor rule
violations in Rule 1014. This proposal is based upon the Financial
Industry Regulatory Authority, Inc. (``FINRA'') filing to amend FINRA
Rule 9217 in order to add FINRA's corresponding CAT Compliance Rules to
FINRA's list of rules that are eligible for minor rule violation plan
treatment.\3\ This proposal is also based upon the New York Stock
Exchange, Inc. (``NYSE'') filing to amend NYSE Rule 9217 in order to
add NYSE's corresponding CAT Compliance Rules to NYSE's list of rules
that are eligible for minor rule violation plan treatment.\4\
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\3\ See Securities Exchange Act Release Nos. 88870 (May 14,
2020), 85 FR 30768 (May 20, 2020) (SR-FINRA-2020-013).
\4\ See SR-NYSE-2020-51.
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Proposed Rule Change
The Exchange recently adopted the CAT Compliance Rules under
Chapter XVII in order to implement the National Market System Plan
Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or
``Plan'').\5\ The CAT NMS Plan was filed by the Plan Participants to
comply with Rule 613 of Regulation NMS under the Exchange Act,\6\ and
each Plan Participant accordingly has adopted the same compliance rules
in the Exchange's Chapter XVII. The common compliance rules adopted by
each Plan Participant are designed to require industry members to
comply with the provisions of the CAT NMS Plan, which broadly calls for
industry members to record and report timely and accurately customer,
order, and trade information relating to activity in NMS Securities and
OTC Equity Securities.
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\5\ See Securities Exchange Act Release No. 80256 (March
152017), 82 FR 14526 (March 21, 2017) (SR-MIAX-2017-03).
\6\ 17 CFR 242.613.
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Rule 1014 sets forth the list of rules under which a member may be
subject to a fine. Rule 1014 permits the Exchange to impose a fine of
up to $5,000 on any member or a person associated with or employed by a
member for a minor violation of an eligible rule. The Exchange proposes
to amend Rule 1014 to add the CAT Compliance Rules under Chapter XVII
to the list of rules eligible for
[[Page 39014]]
disposition pursuant to a minor fine under Rule 1014.\7\
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\7\ FINRA's maximum fine for minor rule violations under FINRA
Rule 9216(b) is $2,500. The Exchange will apply an identical maximum
fine amount for eligible violations of Chapter XVII to achieve
consistency with FINRA and also to amend its minor rule violation
plan (``MRVP'') to include such fines. Like FINRA, the Exchange
would be able to pursue a fine greater than $2,500 for violations of
Chapter XVII in a regular disciplinary proceeding or Letter of
Consent under Rule 1003 as appropriate. Any fine imposed in excess
of $2,500 or not otherwise covered by Rule 19d-1(c)(2) of the Act
would be subject to prompt notice to the Commission pursuant to Rule
19d-1 under the Act. As noted below, in assessing the
appropriateness of a minor rule fine with respect to CAT Compliance
Rules, the Exchange will be guided by the same factors that FINRA
utilizes. See text accompanying notes 9-10, infra.
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The Exchange is coordinating with FINRA and other Plan Participants
to promote harmonized and consistent enforcement of all the Plan
Participants' CAT Compliance Rules. The Commission recently approved a
Rule 17d-2 Plan under which the regulation of CAT Compliance Rules will
be allocated among Plan Participants to reduce regulatory duplication
for industry members that are members of more than one Participant
(``common members'').\8\ Under the Rule 17d-2 Plan, the regulation of
CAT Compliance Rules with respect to common members that are members of
FINRA is allocated to FINRA. Similarly, under the Rule 17d-2 Plan,
responsibility for common members of multiple other Plan Participants
and not a member of FINRA will be allocated among those other Plan
Participants, including to the Exchange. For those non-common members
who are allocated to the Exchange pursuant to the Rule 17d-2 Plan, the
Exchange and FINRA entered into a Regulatory Services Agreement
(``RSA'') pursuant to which FINRA will conduct surveillance,
investigation, examination, and enforcement activity in connection with
the CAT Compliance Rules on the Exchange's behalf. We expect that the
other exchanges would be entering into a similar RSA.
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\8\ See Securities Exchange Act Release No. 88366 (March 12,
2020), 85 FR 15238 (March 17, 2020) (File No. 4-618).
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In order to achieve consistency with FINRA and the other Plan
Participants, the Exchange proposes to adopt fines up to $2,500 in
connection with minor rule fines for violations of the CAT Compliance
Rules under Chapter XVII under Rule 1014 and the Exchange's MRVP.
FINRA, in connection with its proposed amendment to FINRA Rule 9217
to make FINRA's CAT Compliance Rules MRVP eligible, has represented
that it will apply the minor fines for CAT Compliance Rules in the same
manner that FINRA has for its similar existing audit trail-related
rules.\9\ Accordingly, in order to promote regulatory consistency, the
Exchange plans to do the same. Specifically, application of a minor
rule fine with respect to CAT Compliance Rules will be guided by the
same factors that FINRA referenced in its filing. However, more formal
disciplinary proceedings may be warranted instead of minor rule
dispositions in certain circumstances such as where violations prevent
regulatory users of the CAT from performing their regulatory functions.
Where minor rule dispositions are appropriate, the following factors
help guide the determination of fine amounts:
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\9\ See SR-FINRA-2020-013; see also FINRA Notice to Members 04-
19 (March 2004) (providing specific factors used to inform
dispositions for violations of OATS reporting rules).
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Total number of reports that are not submitted or
submitted late;
The timeframe over which the violations occur;
Whether violations are batched;
Whether the violations are the result of the actions of
one individual or the result of faulty systems or procedures;
Whether the firm has taken remedial measures to correct
the violations;
Prior minor rule violations within the past 24 months;
Collateral effects that the failure has on customers; and
Collateral effects that the failure has on the Exchange's
ability to perform its regulatory function.\10\
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\10\ See id.
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Upon effectiveness of this rule change, the Exchange will publish a
regulatory bulletin notifying its member organizations of the rule
change and the specific factors that will be considered in connection
with assessing minor rule fines described above.
For the foregoing reasons, the Exchange believes that the proposed
rule change will result in a coordinated, harmonized approach to CAT
compliance rule enforcement across Plan Participants that will be
consistent with the approach FINRA has taken with the CAT rules.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\11\ in general, and furthers the objectives of Section
6(b)(5),\12\ in particular, because it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to, and perfect the mechanism of, a free and open
market and a national market system and, in general, to protect
investors and the public interest.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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Minor rule fines provide a meaningful sanction for minor or
technical violations of rules when the conduct at issue does not
warrant stronger, immediately reportable disciplinary sanctions. The
inclusion of a rule in the Exchange's MRVP does not minimize the
importance of compliance with the rule, nor does it preclude the
Exchange from choosing to pursue violations of eligible rules through a
Letter of Consent if the nature of the violations or prior disciplinary
history warrants more significant sanctions. Rather, the Exchange
believes that the proposed rule change will strengthen the Exchange's
ability to carry out its oversight and enforcement responsibilities in
cases where full disciplinary proceedings are unwarranted in view of
the minor nature of the particular violation. Rather, the option to
impose a minor rule sanction gives the Exchange additional flexibility
to administer its enforcement program in the most effective and
efficient manner while still fully meeting the Exchange's remedial
objectives in addressing violative conduct. Specifically, the proposed
rule change is designed to prevent fraudulent and manipulative acts and
practices because it will provide the Exchange the ability to issue a
minor rule fine for violations of the CAT Compliance Rules under
Chapter XVII where a more formal disciplinary action may not be
warranted or appropriate consistent with the approach of other Plan
Participants for the same conduct.
In connection with the fine level specified in the proposed rule
change, adding language that minor rule fines for violations of the CAT
Compliance Rules under Chapter XVII shall not exceed $2,500 would
further the goal of transparency and add clarity to the Exchange's
rules. Adopting the same cap as FINRA for minor rule fines in
connection with the CAT Compliance Rules would also promote regulatory
consistency across self-regulatory organizations.
The Exchange further believes that the proposed amendments to Rule
1014 are consistent with Section 6(b)(6) of the Act,\13\ which provides
that members and persons associated with members shall
[[Page 39015]]
be appropriately disciplined for violation of the provisions of the
rules of the exchange, by expulsion, suspension, limitation of
activities, functions, and operations, fine, censure, being suspended
or barred from being associated with a member, or any other fitting
sanction. As noted, the proposed rule change would provide the Exchange
ability to sanction minor or technical violations of Chapter XVII
pursuant to the Exchange's rules.
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\13\ 15 U.S.C. 78f(b)(6).
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Finally, the Exchange also believes that the proposed changes are
designed to provide a fair procedure for the disciplining of members
and persons associated with members, consistent with Sections 6(b)(7)
and 6(d) of the Act.\14\ Rule 1014 does not preclude a member or a
person associated with or employed by a member from contesting an
alleged violation and receiving a hearing on the matter with the same
procedural rights through a litigated disciplinary proceeding.
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\14\ 15 U.S.C. 78f(b)(7) and 78f(d).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues but rather is concerned
solely with making the CAT Compliance Rules under Chapter XVII eligible
for a minor rule fine disposition, thereby strengthening the Exchange's
ability to carry out its oversight and enforcement functions and deter
potential violative conduct.
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. 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 [email protected]. Please include
File Number SR-MIAX-2020-17 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-2020-17. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (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 provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MIAX-2020-17 and should be submitted on
or before July 20, 2020.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\15\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\16\ which requires that the
rules of an exchange be designed to promote just and equitable
principles of trade, to remove impediments and to perfect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest. The Commission
also believes that the proposal is consistent with Sections 6(b)(1) and
6(b)(6) of the Act \17\ which require that the rules of an exchange
enforce compliance with, and provide appropriate discipline for,
violations of Commission and Exchange rules. Finally, the Commission
finds that the proposal is consistent with the public interest, the
protection of investors, or otherwise in furtherance of the purposes of
the Act, as required by Rule 19d-1(c)(2) under the Act,\18\ which
governs minor rule violation plans.
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\15\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\16\ 15 U.S.C. 78f(b)(5).
\17\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\18\ 17 CFR 240.19d-1(c)(2).
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As stated above, the Exchange proposes to add the CAT Compliance
Rules to the list of minor rule violations in Rule 1014 to be
consistent with the approach FINRA has taken for minor violations of
its corresponding CAT Compliance Rules.\19\ The Commission has already
approved FINRA's treatment of CAT Compliance Rules violations when it
approved the addition of CAT Compliance Rules to FINRA's MRVP.\20\ As
noted in that order, and similarly herein, the Commission believes that
Exchange's treatment of CAT Compliance Rules violations as part of its
MRVP provides a reasonable means of addressing violations that do not
rise to the level of requiring formal disciplinary proceedings, while
providing greater flexibility in handling certain violations. However,
the Commission expects that, as with FINRA, the Exchange will continue
to conduct surveillance with due diligence and make determinations
based on its findings, on a case-by-case basis, regarding whether a
sanction under the rule is appropriate, or whether a violation requires
formal disciplinary action. Accordingly, the Commission believes the
proposal raises no novel or significant issues.
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\19\ As discussed above, the Exchange has entered into a Rule
17d-2 Plan and an RSA with FINRA with respect to the CAT Compliance
Rules. The Commission notes that, unless relieved by the Commission
of its responsibility, as may be the case under the Rule 17d-2 Plan,
the Exchange continues to bear the responsibility for self-
regulatory conduct and liability for self-regulatory failures, not
the self-regulatory organization retained to perform regulatory
functions on the Exchange's behalf pursuant to an RSA. See
Securities Exchange Release No. 61419 (January 26, 2010), 75 FR 5157
(February 1, 2010) (SR-BATS-2009-031), note 93 and accompanying
text.
\20\ See supra note 3.
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For the same reasons discussed above, the Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\21\ for approving the
proposed rule
[[Page 39016]]
change prior to the thirtieth day after the date of publication of the
notice of the filing thereof in the Federal Register. The proposal
merely adds the CAT Compliance Rules to the Exchange's MRVP and
harmonizes its application with FINRA's application of CAT Compliance
Rules under its own MRVP. Accordingly, the Commission believes that a
full notice-and-comment period is not necessary before approving the
proposal.
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\21\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\22\ and Rule 19d-1(c)(2) thereunder,\23\ that the proposed rule change
(SR-MIAX-2020-17) be, and hereby is, approved on an accelerated basis.
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\22\ 15 U.S.C. 78s(b)(2).
\23\ 17 CFR 240.19d-1(c)(2).
\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-13878 Filed 6-26-20; 8:45 am]
BILLING CODE 8011-01-P
