Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, to Exchange Rule 1014, Imposition of Fines for Minor Rule Violations, 61051-61053 [2020-21405]
Download as PDF
<![CDATA[
61051
Federal Register / Vol. 85, No. 189 / Tuesday, September 29, 2020 / Notices
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89969; File No. SR–
PEARL–2020–15]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, to Exchange Rule
1014, Imposition of Fines for Minor
Rule Violations
September 23, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on
September 8, 2020, MIAX PEARL, LLC
(‘‘MIAX PEARL’’ or the ‘‘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.
On September 22, 2020, the Exchange
filed Amendment No. 1 to the proposed
rule change, which supersedes the
original filing in its entirety.3 The
Commission is publishing this notice to
solicit comments on Amendment No. 1
from interested persons and approving
the proposal, as modified by
Amendment No. 1, 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 change to add
certain rules applicable to the trading of
equity securities 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/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
jbell on DSKJLSW7X2PROD with NOTICES
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In Amendment No. 1, the Exchange clarifies
which fine amounts apply to violations of various
provisions of Exchange Rule 2202.
2 17
VerDate Sep<11>2014
18:14 Sep 28, 2020
Jkt 250001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On December 13, 2016, the
Commission issued an order granting
the Exchange’s application for
registration as a national securities
exchange.4 On February 6, 2020, the
Commission published for public
comment an Exchange proposal to adopt
rules governing the trading of equity
securities.5 On August 14, 2020, the
Commission approved the Exchange’s
proposal to adopt rules governing the
trading of equity securities.6 MIAX
PEARL anticipates to begin trading
equity securities on September 25, 2020.
On December 21, 2017, the Commission
issued an order declaring effective the
Exchange’s MRVP.7 The Exchange now
proposes to add certain rules applicable
to the trading of equity securities to the
list of minor rule violations in Exchange
Rule 1014.
Exchange Rule 1014 sets forth the list
of rules under which a Member may be
subject to a fine. Exchange 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 Exchange Rule 1014 to add
certain rules applicable to the trading of
equity securities to the list of rules
eligible for disposition pursuant to a
minor fine under Exchange Rule 1014.8
4 See Securities Exchange Act Release No. 79543
(December 13, 2016), 81 FR 92901 (December 20,
2016) (File No. 10–227).
5 See Securities Exchange Act Release No. 88132
(February 6, 2020), 85 FR 8053 (February 12, 2020)
(SR–PEARL–2020–03).
6 See Securities Exchange Act Release No. 89563
(August 14, 2020), 85 FR 51510 (August 20, 2020)
(‘‘Approval Order’’).
7 See Securities Exchange Act Release No. 82385
(December 21, 2017), 82 FR 61613 (December 28,
2017) (File No. 4–715).
8 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 to achieve
consistency with FINRA and also to amend its
minor rule violation plan to include such fines.
Like FINRA, the Exchange would be able to pursue
a fine greater than $2,500 for violations of Rules
2202, 2606(a)(1), 2623, 2624, and 2104 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.
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
The Exchange proposes that, as set
forth in proposed Exchange Rule
1014(d)(15), violations of the following
rules would be appropriate for
disposition under the MRVP: Rule 2202
and Interpretations thereunder
(requiring the submission of responses
to Exchange requests for trading data
within specified time period); Rule 2623
(requirement to identify short sale
orders as such); Rule 2624 (requirement
to comply with locked and crossed
market rules); Rule 2104
(Communications with the Public); Rule
2202 and Interpretations thereunder
(related to the requirement to furnish
Exchange-related order, market and
transaction data, as well as financial or
regulatory records and information); and
Rule 2606(a)(1) (requirements for
Equities Market Makers to maintain
continuous two-sided quotations).9
Violations of Exchange Rules 2202,
Preamble (requiring the submission of
responses to Exchange requests for
trading data within specified time
period), 2623, 2624, and 2104 would be
subject to the following fines:
Occurrence *
First time fined ..
Second time
fined ..............
Third time fined
Individual
Member
firm
$100
$500
300
500
1,000
2,500
* Within a ‘‘rolling’’ 12-month period.
Violations of Exchange Rules 2202,
Interpretation .01 (related to the
requirement to furnish Exchange-related
order, market and transaction data, as
well as financial or regulatory records
and information) and 2606(a)(1) would
be subject to fines $100 per violation.
The Exchange notes that these proposed
fine levels are based on those approved
for LTSE and proposed by MEMX.10
9 MEMX, LLC’s (‘‘MEMX’’) proposal to adopt a
MRVP includes MEMX Rule 12.11 Interpretations
and Policy .01 and Exchange Act Rule 604 (failure
to properly display limit orders) MEMX Rules 4.5
through 4.16 (Consolidated Audit Trail Compliance
Rules). See Securities Exchange Act Release No.
89485 (August 5, 2020), 85 FR 48577 (August 11,
2020) (File No. 4–764). The Exchange notes that it
recently amended Exchange Rule 1014 to include
Chapter XVII, its Consolidated Order Trail
Compliance Rule. See Securities Exchange Act
Release No. 89166 (June 26, 2020), 85 FR 39943
(July 2, 2020) (SR–PEARL–2020–07). The Exchange
Rules does not include a rule identical to MEMX
Rule 12.11.01 that could be included in this
proposal. The Exchange notes that MEMX Rule
12.11.01 simply refers to their member’s existing
obligations under Exchange Act Rule 604 and a
similar rule is also not included in Long Term Stock
Exchange, Inc.’s (‘‘LTSE’’) MRVP. See Securities
Exchange Act Release Nos. 87415 (October 29,
2019), 84 FR 59427 (November 4, 2019) (File No.
4–753).
10 Id.
E:\FR\FM\29SEN1.SGM
29SEN1
61052
Federal Register / Vol. 85, No. 189 / Tuesday, September 29, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
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.
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 certain rules
related to the trading of equity securities
where a more formal disciplinary action
may not be warranted or appropriate
consistent with the approach of other
exchanges for the same conduct.
In connection with the fine level
specified in the proposed rule change,
adding language describing the fine
levels would further the goal of
transparency and add clarity to the
Exchange’s rules. Adopting the same
caps as MEMX and LTSE for minor rule
fines in connection with the included
11 15
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Sep<11>2014
18:14 Sep 28, 2020
rules applicable to the trading of equity
securities would also promote
regulatory consistency across selfregulatory 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
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 certain rules
applicable to the trading of equity
securities 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 certain
equity related rules 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 Amendment No. 1 to
13 15
14 15
Jkt 250001
PO 00000
U.S.C. 78f(b)(6).
U.S.C. 78f(b)(7) and 78f(d).
Frm 00098
Fmt 4703
Sfmt 4703
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–
PEARL–2020–15 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–PEARL–2020–15. 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–PEARL–2020–15 and
should be submitted on or before
October 20, 2020.
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds that the
proposed rule change, as modified by
Amendment No. 1, is consistent with
the requirements of the Act and the
rules and regulations thereunder
E:\FR\FM\29SEN1.SGM
29SEN1
Federal Register / Vol. 85, No. 189 / Tuesday, September 29, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
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.
As stated above, the Exchange
proposes to amend Exchange Rule 1014
to add certain rules applicable to the
trading of equity securities to the list of
rules eligible for disposition pursuant to
a minor fine under Exchange Rule 1014.
The Commission believes that the
amended MRVP will permit the
Exchange to carry out its oversight and
enforcement responsibilities as a selfregulatory organization (‘‘SRO’’) more
efficiently in cases where full
disciplinary proceedings are not
necessary due to the minor nature of the
particular violation.
In declaring the Exchange’s amended
MRVP effective, the Commission in no
way minimizes the importance of
compliance with Exchange rules and all
other rules subject to the imposition of
sanctions under Exchange Rule 1014.
The Commission believes that the
violation of an SRO’s rules, as well as
Commission rules, is a serious matter.
However, Exchange Rule 1014 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.
The Commission expects that the
Exchange will continue to conduct
surveillance and make determinations
based on its findings, on a case-by-case
basis, regarding whether a sanction
under the amended MRVP is
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).
VerDate Sep<11>2014
18:14 Sep 28, 2020
Jkt 250001
appropriate, or whether a violation
requires formal disciplinary action.
For the same reasons discussed above,
the Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,19 for approving the proposed rule
change, as modified by Amendment No.
1, prior to the thirtieth day after the date
of publication of the notice of the filing
thereof in the Federal Register. The
proposal merely amends Exchange Rule
1014 to add certain rules applicable to
the trading of equity securities to the
current list of rules eligible for
disposition pursuant to a minor fine
under Exchange Rule 1014. In addition,
the Commission notes that the proposal
is consistent with the minor rule
violation plans of other SROs.20
Accordingly, the Commission believes
that a full notice-and-comment period is
not necessary before approving the
proposal.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 21 and Rule
19d–1(c)(2) thereunder,22 that the
proposed rule change (SR–PEARL–
2020–15), as modified by Amendment
No. 1, be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–21405 Filed 9–28–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89971; File No. SR–
PEARL–2020–16]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Exchange
Rule 2618, Risk Settings and Trading
Risk Metrics
September 23, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
19 15
U.S.C. 78s(b)(2).
Securities Exchange Act Release Nos.
87415 (October 29, 2019), 84 FR 59427 (November
4, 2019) (File No. 4–753) (order declaring effective
the LTSE MRVP); and 89485 (September 11, 2020),
85 FR 58081 (September 17, 2020) (File No. 4–764)
(order declaring effective the MEMX MRVP).
21 Id.
22 17 CFR 240.19d–1(c)(2).
23 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
20 See
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
61053
notice is hereby given that on
September 14, 2020, MIAX PEARL, LLC
(‘‘MIAX PEARL’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange is filing a proposed rule
change to provide Equity Members 3
certain optional risk settings under
Exchange Rule 2618 when trading
equity securities on the Exchange’s
equity trading platform (referred to
herein as ‘‘MIAX PEARL Equities’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to provide Equity Members
certain optional risk settings under
Exchange Rule 2618 when trading
equity securities on MIAX PEARL
Equities.4 To help Equity Members
3 See Exchange Rule 1901 for the definition of
Equity Member.
4 The proposed rule changes are substantially
similar to a recent rule amendment by Cboe BZX
Exchange, Inc. (‘‘BZX’’) and Cboe EDGX Exchange,
Inc. (‘‘EDGX’’). See Interpretation and Policy .03 to
BZX Rule 11.13 and Interpretation and Policy .03
to EDGX Rule 11.10. See Securities Exchange Act
Nos. 88599 (April 8, 2020) 85 FR 20793 (April 14,
2020) (the ‘‘BZX Approval’’); and 88783 (April 30,
2020), 85 FR 26991 (May 6, 2020) (the ‘‘EDGX
Notice’’). See also Securities Exchange Act Release
E:\FR\FM\29SEN1.SGM
Continued
29SEN1
]]>Agencies
[Federal Register Volume 85, Number 189 (Tuesday, September 29, 2020)]
[Notices]
[Pages 61051-61053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21405]
[[Page 61051]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89969; File No. SR-PEARL-2020-15]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, to Exchange Rule
1014, Imposition of Fines for Minor Rule Violations
September 23, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on September 8, 2020, MIAX PEARL, LLC (``MIAX PEARL'' or the
``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. On
September 22, 2020, the Exchange filed Amendment No. 1 to the proposed
rule change, which supersedes the original filing in its entirety.\3\
The Commission is publishing this notice to solicit comments on
Amendment No. 1 from interested persons and approving the proposal, as
modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange clarifies which fine
amounts apply to violations of various provisions of Exchange Rule
2202.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a change to add certain rules applicable to
the trading of equity securities 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/pearl at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On December 13, 2016, the Commission issued an order granting the
Exchange's application for registration as a national securities
exchange.\4\ On February 6, 2020, the Commission published for public
comment an Exchange proposal to adopt rules governing the trading of
equity securities.\5\ On August 14, 2020, the Commission approved the
Exchange's proposal to adopt rules governing the trading of equity
securities.\6\ MIAX PEARL anticipates to begin trading equity
securities on September 25, 2020. On December 21, 2017, the Commission
issued an order declaring effective the Exchange's MRVP.\7\ The
Exchange now proposes to add certain rules applicable to the trading of
equity securities to the list of minor rule violations in Exchange Rule
1014.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 79543 (December 13,
2016), 81 FR 92901 (December 20, 2016) (File No. 10-227).
\5\ See Securities Exchange Act Release No. 88132 (February 6,
2020), 85 FR 8053 (February 12, 2020) (SR-PEARL-2020-03).
\6\ See Securities Exchange Act Release No. 89563 (August 14,
2020), 85 FR 51510 (August 20, 2020) (``Approval Order'').
\7\ See Securities Exchange Act Release No. 82385 (December 21,
2017), 82 FR 61613 (December 28, 2017) (File No. 4-715).
---------------------------------------------------------------------------
Exchange Rule 1014 sets forth the list of rules under which a
Member may be subject to a fine. Exchange 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 Exchange Rule 1014 to add
certain rules applicable to the trading of equity securities to the
list of rules eligible for disposition pursuant to a minor fine under
Exchange Rule 1014.\8\
---------------------------------------------------------------------------
\8\ 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 to achieve consistency with
FINRA and also to amend its minor rule violation plan to include
such fines. Like FINRA, the Exchange would be able to pursue a fine
greater than $2,500 for violations of Rules 2202, 2606(a)(1), 2623,
2624, and 2104 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.
---------------------------------------------------------------------------
The Exchange proposes that, as set forth in proposed Exchange Rule
1014(d)(15), violations of the following rules would be appropriate for
disposition under the MRVP: Rule 2202 and Interpretations thereunder
(requiring the submission of responses to Exchange requests for trading
data within specified time period); Rule 2623 (requirement to identify
short sale orders as such); Rule 2624 (requirement to comply with
locked and crossed market rules); Rule 2104 (Communications with the
Public); Rule 2202 and Interpretations thereunder (related to the
requirement to furnish Exchange-related order, market and transaction
data, as well as financial or regulatory records and information); and
Rule 2606(a)(1) (requirements for Equities Market Makers to maintain
continuous two-sided quotations).\9\
---------------------------------------------------------------------------
\9\ MEMX, LLC's (``MEMX'') proposal to adopt a MRVP includes
MEMX Rule 12.11 Interpretations and Policy .01 and Exchange Act Rule
604 (failure to properly display limit orders) MEMX Rules 4.5
through 4.16 (Consolidated Audit Trail Compliance Rules). See
Securities Exchange Act Release No. 89485 (August 5, 2020), 85 FR
48577 (August 11, 2020) (File No. 4-764). The Exchange notes that it
recently amended Exchange Rule 1014 to include Chapter XVII, its
Consolidated Order Trail Compliance Rule. See Securities Exchange
Act Release No. 89166 (June 26, 2020), 85 FR 39943 (July 2, 2020)
(SR-PEARL-2020-07). The Exchange Rules does not include a rule
identical to MEMX Rule 12.11.01 that could be included in this
proposal. The Exchange notes that MEMX Rule 12.11.01 simply refers
to their member's existing obligations under Exchange Act Rule 604
and a similar rule is also not included in Long Term Stock Exchange,
Inc.'s (``LTSE'') MRVP. See Securities Exchange Act Release Nos.
87415 (October 29, 2019), 84 FR 59427 (November 4, 2019) (File No.
4-753).
---------------------------------------------------------------------------
Violations of Exchange Rules 2202, Preamble (requiring the
submission of responses to Exchange requests for trading data within
specified time period), 2623, 2624, and 2104 would be subject to the
following fines:
------------------------------------------------------------------------
Occurrence * Individual Member firm
------------------------------------------------------------------------
First time fined.............................. $100 $500
Second time fined............................. 300 1,000
Third time fined.............................. 500 2,500
------------------------------------------------------------------------
* Within a ``rolling'' 12-month period.
Violations of Exchange Rules 2202, Interpretation .01 (related to
the requirement to furnish Exchange-related order, market and
transaction data, as well as financial or regulatory records and
information) and 2606(a)(1) would be subject to fines $100 per
violation. The Exchange notes that these proposed fine levels are based
on those approved for LTSE and proposed by MEMX.\10\
---------------------------------------------------------------------------
\10\ Id.
---------------------------------------------------------------------------
[[Page 61052]]
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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 certain rules related to the trading
of equity securities where a more formal disciplinary action may not be
warranted or appropriate consistent with the approach of other
exchanges for the same conduct.
In connection with the fine level specified in the proposed rule
change, adding language describing the fine levels would further the
goal of transparency and add clarity to the Exchange's rules. Adopting
the same caps as MEMX and LTSE for minor rule fines in connection with
the included rules applicable to the trading of equity securities 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 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 certain rules applicable to
the trading of equity securities pursuant to the Exchange's rules.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------
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 certain equity related rules 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 Amendment No. 1
to 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-PEARL-2020-15 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-PEARL-2020-15. 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-PEARL-2020-15 and should be submitted on
or before October 20, 2020.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 1
The Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with the requirements of the Act and the
rules and regulations thereunder
[[Page 61053]]
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
As stated above, the Exchange proposes to amend Exchange Rule 1014
to add certain rules applicable to the trading of equity securities to
the list of rules eligible for disposition pursuant to a minor fine
under Exchange Rule 1014. The Commission believes that the amended MRVP
will permit the Exchange to carry out its oversight and enforcement
responsibilities as a self-regulatory organization (``SRO'') more
efficiently in cases where full disciplinary proceedings are not
necessary due to the minor nature of the particular violation.
In declaring the Exchange's amended MRVP effective, the Commission
in no way minimizes the importance of compliance with Exchange rules
and all other rules subject to the imposition of sanctions under
Exchange Rule 1014. The Commission believes that the violation of an
SRO's rules, as well as Commission rules, is a serious matter. However,
Exchange Rule 1014 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. The Commission expects that the Exchange will continue to
conduct surveillance and make determinations based on its findings, on
a case-by-case basis, regarding whether a sanction under the amended
MRVP is appropriate, or whether a violation requires formal
disciplinary action.
For the same reasons discussed above, the Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\19\ for approving the
proposed rule change, as modified by Amendment No. 1, prior to the
thirtieth day after the date of publication of the notice of the filing
thereof in the Federal Register. The proposal merely amends Exchange
Rule 1014 to add certain rules applicable to the trading of equity
securities to the current list of rules eligible for disposition
pursuant to a minor fine under Exchange Rule 1014. In addition, the
Commission notes that the proposal is consistent with the minor rule
violation plans of other SROs.\20\ Accordingly, the Commission believes
that a full notice-and-comment period is not necessary before approving
the proposal.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(2).
\20\ See Securities Exchange Act Release Nos. 87415 (October 29,
2019), 84 FR 59427 (November 4, 2019) (File No. 4-753) (order
declaring effective the LTSE MRVP); and 89485 (September 11, 2020),
85 FR 58081 (September 17, 2020) (File No. 4-764) (order declaring
effective the MEMX MRVP).
---------------------------------------------------------------------------
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\21\ and Rule 19d-1(c)(2) thereunder,\22\ that the proposed rule change
(SR-PEARL-2020-15), as modified by Amendment No. 1, be, and hereby is,
approved on an accelerated basis.
---------------------------------------------------------------------------
\21\ Id.
\22\ 17 CFR 240.19d-1(c)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-21405 Filed 9-28-20; 8:45 am]
BILLING CODE 8011-01-P
