Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Supplementary Material .15 of IEX Rule 5.110 (Supervision) To Extend the Temporary Remote Inspection Relief to IEX Members for Calendar Year 2022, 76222-76225 [2022-26950]
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Federal Register / Vol. 87, No. 238 / Tuesday, December 13, 2022 / Notices
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monitor risks and promptly notify the
fund or its adviser of material changes
in risks. The primary custodian and
other custodians also are required to
agree to exercise at least reasonable care,
prudence, and diligence.
The collection of information
requirements in rule 17f–7 are intended
to provide workable standards that
protect funds from the risks of using
foreign securities depositories while
assigning appropriate responsibilities to
the fund’s primary custodian and
investment adviser based on their
capabilities. The requirement that the
foreign securities depository meet
specified minimum standards is
intended to ensure that the depository is
subject to basic safeguards deemed
appropriate for all depositories. The
requirement that the fund or its adviser
must receive from the primary
custodian (or its agent) an initial risk
analysis of the depository arrangements,
and that the fund’s contract with its
primary custodian must state that the
custodian will monitor risks and
promptly notify the fund or its adviser
of material changes in risks, is intended
to provide essential information about
custody risks to the fund’s investment
adviser as necessary for it to approve the
continued use of the depository. The
requirement that the primary custodian
agree to exercise reasonable care is
intended to provide assurances that its
services and the information it provides
will meet an appropriate standard of
care.
The staff estimates that each of
approximately 1,445 investment
advisers 1 will make an average of 8
responses annually under the rule to
address depository compliance with
minimum requirements, any
indemnification or insurance
arrangements, and reviews of risk
analyses or notifications.2 The staff
estimates each response will take 6
hours, requiring a total of approximately
48 hours for each adviser.3 Thus the
total annual burden associated with
these requirements of the rule is
approximately 69,360.4
In addition, based on public filings
made with the Commission, we estimate
that there are approximately 38 global
1 From a review of the Form ADV filings and
Form N–CEN filings, respectively, as of December
31, 2021 and for filings received through August 31,
2022, Commission staff estimated that 1,445
registered investment advisers managed or
sponsored open-end registered funds (including
exchange-traded funds) and closed-end registered
funds.
2 1,445 advisers × 8 responses = 11,560 responses.
3 8 responses per adviser × 6 hours per response
= 48 hours per adviser.
4 1,445 advisers × 48 hours per adviser = 69,360
hours.
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16:56 Dec 12, 2022
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custodians that are engaged to perform
global custodial services to funds and
thus subject to the provisions of rule
17f–7.5 This estimate is based on
information that is publicly available on
Form N–CEN filings.6 The staff further
estimates that during each year, each of
approximately 38 global custodians will
make an average of 4 responses to
analyze custody risks and provide
notice of any material changes to
custody risk under the rule.7 The staff
estimates that each response will take
260 hours, requiring approximately
1,040 hours annually per global
custodian.8 Thus the total annual
burden associated with this specific
aspect of the rule is approximately
39,520 hours.9 The staff estimates that
the total annual hour burden associated
with all collection of information
requirements of the rule is therefore
108,880 hours.10
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules and forms.
Compliance with the collection of
information requirements of the rule is
necessary to obtain the benefit of relying
on the rule’s permission for funds to
maintain their assets in foreign
custodians. The information provided
under rule 17f–7 will not be kept
confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid OMB control number.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimate of the burden of the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
5 We analyzed Form N–CEN filings for registrants
as of December 31, 2021 and based on these filings,
we estimated the number of global custodians that
have been retained by funds and are subject to the
provisions of rule 17f–7 to be 38.
6 See Item C.12.a.vii.7 of Form N–CEN.
7 38 custodians × 4 responses = 152 responses.
8 260 hours per response × 4 responses per global
custodian = 1,040 hours per global custodian.
9 38 global custodians × 1,040 hours per global
custodian = 39,520 hours.
10 69,360 hours + 39,520 hours = 108,880 hours.
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to comments and suggestions submitted
by February 13, 2023.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: David Bottom, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: December 7, 2022.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–26961 Filed 12–12–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96460; File No. SR–IEX–
2022–12]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Supplementary Material .15 of IEX Rule
5.110 (Supervision) To Extend the
Temporary Remote Inspection Relief to
IEX Members for Calendar Year 2022
December 7, 2022.
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
November 30, 2022, the Investors
Exchange LLC (‘‘IEX’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by IEX. IEX has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under Section 19(b)(3)(A) 4 of
the Act and Rule 19b–4(f)(6) 5
thereunder, which renders the proposal
effective upon receipt of this filing by
the Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 15 U.S.C. 78s(b)(3)(A).
5 17 CFR 240.19b–4(f)(6).
2 15
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Federal Register / Vol. 87, No. 238 / Tuesday, December 13, 2022 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Pursuant to the provisions of Section
19(b)(1) under the Act,6 and Rule 19b–
4 thereunder,7 the Exchange is filing
with the Commission a proposed rule
change to amend Supplementary
Material .15 of IEX Rule 5.110
(Supervision) to extend the temporary
remote inspection relief to IEX Members
for calendar year 2022.
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
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 these statement may be examined at
the places specified in Item IV below.
The self-regulatory organization 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 the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The COVID–19 pandemic has caused
a host of operational disruptions to the
securities industry and impacted IEX
Members,8 regulators, investors, and
other stakeholders. In response to the
pandemic, IEX, adopted Supplementary
Material .15 of IEX Rule 5.110 to
provide Members the temporary option
of satisfying their inspection obligations
for offices of supervisory jurisdiction,
branch offices, or non-branch locations
under IEX Rule 5.110 (Supervision)
remotely for calendar year 2021, subject
to specified conditions,9 due to the
logistical challenges of going on-site
while public health and safety concerns
related to COVID–19 persisted. While
there are several signs that the
pandemic has receded, much
uncertainty still remains. The
emergence of new variants, dissimilar
6 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
8 See IEX Rule 1.160(s).
9 See Securities Exchange Act Release No. 92222
(June 22, 2021), 86 FR 34069 (June 28, 2021) (SR–
IEX–2021–09) (providing remote inspection relief to
Members for calendar year 2021).
7 17
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vaccination rates throughout the U.S.,
and varying levels of transmissions of
the virus all indicate that COVID–19
remains an active and real public health
concern. Against this setting, IEX
understands the complexity Members
face in assessing when and how to
effectively and safely recall their
employees back into offices alongside
fashioning permanent telework
arrangements or a hybrid workforce
model in which some employees may
work on-site in a commercial office
space and other employees may work
off-site in an alternative location (e.g., a
personal residence).10 Accordingly, due
to the continued logistical challenges of
going on-site to branch offices or
locations while these public health and
safety concerns related to COVID–19
persist coupled with several Members
delaying their return-to-office plans, IEX
believes that extending the temporary
remote inspection relief to Members
through calendar year 2022 represents a
prudent accommodation.11 IEX also
makes this proposed rule change to
conform its rules with those of FINRA,
which has extended the same temporary
remote inspection relief to all FINRA
member firms through December 31,
2022.12
This proposed extension would
provide further clarity to Members on
regulatory requirements and account for
time needed for many Members to
carefully assess when and how to have
their employees safely return to their
offices considering vaccination coverage
in the U.S. and transmission levels of
the virus, including any emergent
variants throughout the country.
The proposed amendment would
provide that Members have the option
to conduct remotely those inspections
described in Supplementary Material
.15 to IEX Rule 5.110 through the end
of 2022. IEX is not proposing to amend
the other conditions of the temporary
relief in Supplementary Material .15 of
IEX Rule 5.110. The current conditions
of Supplementary Material .15 of IEX
Rule 5.110 for Members that elect to
conduct remote inspections would
remain unchanged: such firms must still
10 For example, IEX understands that both the
Commission and FINRA do not currently require
employees to return to the office. See SEC Fiscal
Year 2022 Agency Financial Report, available at
https://www.sec.gov/files/sec-2022-agencyfinancial-report.pdf and https://www.finra.org/
rules-guidance/key-topics/covid-19.
11 The proposed rule change will automatically
sunset on December 31, 2022. IEX will submit a
separate rule filing if it seeks to extend the duration
of the temporary proposed rule beyond December
31, 2022.
12 See Securities Exchange Act Release No. 94018
(January 20, 2022), 87 FR 4072 (January 26, 2022)
(SR–FINRA–2022–001).
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76223
amend or supplement their written
supervisory procedures for remote
inspections, use remote inspections as
part of an effective supervisory system,
and maintain the required
documentation. The additional period
of time would also allow IEX to further
monitor the effectiveness of remote
inspections and their impacts—positive
or negative—on Members’ overall
supervisory systems in the evolving
workplace.
IEX continues to believe this
temporary remote inspection option is a
reasonable alternative to provide to
Members to fulfill their IEX Rule 5.110
obligations during the ongoing
pandemic, and is designed to achieve
the investor protection objectives of the
inspection requirements under these
unique circumstances. Members should
consider whether, under their particular
operating conditions, reliance on remote
inspections would be reasonable under
the circumstances. For example,
Members with offices that are open to
the public or that are otherwise doing
business as usual should consider
whether some form of in-person
inspections would be feasible and
appropriately contribute to a
supervisory system that is reasonably
designed to achieve compliance with
applicable securities laws and
regulations, and with applicable IEX
rules.
IEX has filed the proposed rule
change for immediate effectiveness and
has requested that the SEC waive the
requirement that the proposed rule
change not become operative for 30 days
after the date of the filing, so IEX can
implement the proposed rule change
immediately.
2. Statutory Basis
IEX believes that the proposed rule
change is consistent with the provisions
of Section 6(b) 13 of the Act in general,
and furthers the objectives of Section
6(b)(5) of the Act 14 in particular, in that
it is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, 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. The
Exchange’s rule proposal is intended to
harmonize IEX’s supervision rules,
specifically with respect to the
requirements for inspections of
Members’ branch offices and other
locations, with those of FINRA, on
which they are based. Consequently, the
13 15
14 15
E:\FR\FM\13DEN1.SGM
U.S.C. 78f.
U.S.C. 78f(b)(5).
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Federal Register / Vol. 87, No. 238 / Tuesday, December 13, 2022 / Notices
proposed change will conform the
Exchange’s rules to changes made to
corresponding FINRA rules, thus
promoting application of consistent
regulatory standards with respect to
rules that FINRA enforces pursuant to
its regulatory services agreement with
the Exchange.
In recognition of the impact of
COVID–19 on performing on-site
inspections, the proposed rule change is
intended to provide firms a temporary
regulatory option to conduct inspections
of offices and locations remotely for
calendar year 2022 inspections. This
proposed supplementary material does
not relieve firms from meeting the core
regulatory obligation to establish and
maintain a system to supervise the
activities of each associated person that
is reasonably designed to achieve
compliance with applicable securities
laws and regulations, and with
applicable IEX rules that directly serve
investor protection. In a time when
faced with unique challenges resulting
from the COVID–19 pandemic, IEX
believes that the proposed rule change
provides sensibly tailored relief that
will afford firms the ability to observe
the recommendations of public health
officials to provide for the health and
safety of their personnel, while
continuing to serve and promote the
protection of investors and the public
interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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IEX does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issue but to
align the Exchange’s rules with those of
FINRA, which will assist FINRA in its
oversight work done pursuant to a
regulatory services agreement with IEX.
The proposed rule change will also
provide for consistent application of the
Exchange’s supervision rules with those
of FINRA, on which they are based.
Consequently, the Exchange does not
believe that the proposed change
implicates competition at all.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments on the proposed
rule change were neither solicited nor
received.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 15 of the Act and
Rule 19b–4(f)(6) 16 thereunder. Because
the proposed rule change does not: (i)
significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder. In addition, the
Exchange provided the Commission
with written notice of its intent to file
the proposed rule change, along with a
brief description and text of the
proposed rule change, at least five
business days prior to the date of
filing.17
The Exchange believes that this filing
is non-controversial because it raises no
novel issues and is consistent with
FINRA rules previously approved by or
filed with the Commission. In
particular, the purpose of the proposed
rule change is to harmonize with and
conform to FINRA rules. The Exchange
believes that the proposal promotes the
protection of investors as it will
harmonize the Exchange’s supervision
rules with those of FINRA, which will
simplify the oversight process
conducted by FINRA pursuant to a
regulatory services agreement with the
Exchange. Moreover, the Exchange does
not believe that the proposed rule
change implicates competition at all
because the proposed change aligns the
Exchange’s rules with those of FINRA,
which will assist it in its oversight work
done pursuant to such regulatory
services agreement.
A proposed rule change filed under
Rule 19b–4(f)(6) 18 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),19 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay to permit the Exchange
to harmonize its rules with FINRA, as
described herein, upon effectiveness of
the proposed rule filing.
15 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
17 17 CFR 240.19b–4(f)(6)(iii).
18 17 CFR 240.19b–4(f)(6).
19 17 CFR 240.19b–4(f)(6)(iii).
16 17
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IEX has indicated that extending the
relief provided in SR–IEX–2021–09
would provide assurances to its member
firms that they can plan their 2022
inspection program and conduct remote
inspections for any inspections to be
conducted through calendar year 2022.
Importantly, extending the relief
immediately upon filing and without a
30-day operative delay would allow
IEX’s member firms to continue
performing their supervisory
obligations, while addressing the
ongoing impacts of the COVID–19
pandemic. Moreover, like SR–IEX–
2021–09, the proposed extension would
provide only temporary relief during the
period in which IEX’s member firms’
operations remain impacted by COVID–
19. Thus, the amended rules will revert
back to their original state at the
conclusion of the temporary relief
period and, if applicable, any extension
thereof. For these reasons, the
Commission believes that waiver of the
30-day operative delay for this proposed
rule change is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
hereby waives the 30-day operative
delay and designates the proposed rule
change operative upon filing.20
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 21 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
20 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. See 15 U.S.C.
78c(f).
21 15 U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 87, No. 238 / Tuesday, December 13, 2022 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2022–12 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–96461; File No. SR–
NYSECHX–2022–28]
• 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–IEX–2022–12. This file
number should be included in 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 will also be available for
inspection and copying at the principal
office of IEX and on its internet website
at www.iextrading.com. 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–IEX–2022–12 and should
be submitted on or before January
3,2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Sherry R. Haywood,
Assistant Secretary.
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[FR Doc. 2022–26950 Filed 12–12–22; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations; NYSE
Chicago, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Fee
Schedule of NYSE Chicago, Inc.
December 7, 2022.
Effectiveness of Proposed Rule
Change to amend the Fee Schedule of
NYSE Chicago, Inc.
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
November 28, 2022, NYSE Chicago, Inc.
(‘‘NYSE Chicago’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Fee Schedule of NYSE Chicago, Inc. (the
‘‘Fee Schedule’’) to adopt a new credit
and increase an existing credit
applicable to certain Exchange
members. The Exchange proposes to
implement the fee changes effective
November 28, 2022. 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.
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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
22 17
CFR 200.30–3(a)(12).
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76225
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule to adopt a new credit and
increase an existing credit applicable to
certain Exchange members. Specifically,
the Exchange proposes new Section F.1
to adopt a Participant 4 credit applicable
to Clearing Participants and amend
Section F.2 to increase the Transaction
Fee Credit and Clearing Submission Fee
Credit applicable to Clearing Brokers.
The Exchange proposes to implement
the fee changes effective November 28,
2022.5
Background
The Exchange operates in a highly
competitive market. The Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation National Market
System (‘‘NMS’’), the Commission
highlighted the importance of market
forces in determining prices and SelfRegulatory Organizations (‘‘SRO’’)
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 6
While Regulation NMS has enhanced
competition, it has also fostered a
‘‘fragmented’’ market structure where
trading in a single stock can occur
across multiple trading centers. When
multiple trading centers compete for
order flow in the same stock, the
Commission has recognized that ‘‘such
competition can lead to the
fragmentation of order flow in that
stock.’’ 7 Indeed, equity trading is
4 A ‘‘Participant’’ is, except as otherwise
described in the Rules of the Exchange, ‘‘any
Participant Firm that holds a valid Trading Permit
and any person associated with a Participant Firm
who is registered with the Exchange under Articles
16 and 17 as a Market Maker Authorized Trader or
Institutional Broker Representative, respectively.’’
See Article 1, Rule 1(s).
5 The Exchange originally filed to amend the Fee
Schedule on November 1, 2022 (SR–NYSECHX–
2022–25). SR–NYSECHX–2022–25 was
subsequently withdrawn and replaced by SR–
NYSECHX–2022–26. SR–NYSECHX–2022–26 was
subsequently withdrawn and replaced by this filing.
6 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(File No. S7–10–04) (Final Rule) (‘‘Regulation
NMS’’).
7 See Securities Exchange Act Release No. 61358,
75 FR 3594, 3597 (January 21, 2010) (File No. S7–
02–10) (Concept Release on Equity Market
Structure).
E:\FR\FM\13DEN1.SGM
13DEN1
]]>Agencies
[Federal Register Volume 87, Number 238 (Tuesday, December 13, 2022)]
[Notices]
[Pages 76222-76225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26950]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96460; File No. SR-IEX-2022-12]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Supplementary Material .15 of IEX Rule 5.110 (Supervision) To Extend
the Temporary Remote Inspection Relief to IEX Members for Calendar Year
2022
December 7, 2022.
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 November 30, 2022, the Investors Exchange LLC (``IEX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by IEX. IEX has
designated the proposed rule change as constituting a ``non-
controversial'' rule change under Section 19(b)(3)(A) \4\ of the Act
and Rule 19b-4(f)(6) \5\ thereunder, which renders the proposal
effective upon receipt of this filing by the Commission. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
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[[Page 76223]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Act,\6\
and Rule 19b-4 thereunder,\7\ the Exchange is filing with the
Commission a proposed rule change to amend Supplementary Material .15
of IEX Rule 5.110 (Supervision) to extend the temporary remote
inspection relief to IEX Members for calendar year 2022.
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\6\ 15 U.S.C. 78s(b)(1).
\7\ 17 CFR 240.19b-4.
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The text of the proposed rule change is available at the Exchange's
website at www.iextrading.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and the
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 these statement may be examined at
the places specified in Item IV below. The self-regulatory organization
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The COVID-19 pandemic has caused a host of operational disruptions
to the securities industry and impacted IEX Members,\8\ regulators,
investors, and other stakeholders. In response to the pandemic, IEX,
adopted Supplementary Material .15 of IEX Rule 5.110 to provide Members
the temporary option of satisfying their inspection obligations for
offices of supervisory jurisdiction, branch offices, or non-branch
locations under IEX Rule 5.110 (Supervision) remotely for calendar year
2021, subject to specified conditions,\9\ due to the logistical
challenges of going on-site while public health and safety concerns
related to COVID-19 persisted. While there are several signs that the
pandemic has receded, much uncertainty still remains. The emergence of
new variants, dissimilar vaccination rates throughout the U.S., and
varying levels of transmissions of the virus all indicate that COVID-19
remains an active and real public health concern. Against this setting,
IEX understands the complexity Members face in assessing when and how
to effectively and safely recall their employees back into offices
alongside fashioning permanent telework arrangements or a hybrid
workforce model in which some employees may work on-site in a
commercial office space and other employees may work off-site in an
alternative location (e.g., a personal residence).\10\ Accordingly, due
to the continued logistical challenges of going on-site to branch
offices or locations while these public health and safety concerns
related to COVID-19 persist coupled with several Members delaying their
return-to-office plans, IEX believes that extending the temporary
remote inspection relief to Members through calendar year 2022
represents a prudent accommodation.\11\ IEX also makes this proposed
rule change to conform its rules with those of FINRA, which has
extended the same temporary remote inspection relief to all FINRA
member firms through December 31, 2022.\12\
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\8\ See IEX Rule 1.160(s).
\9\ See Securities Exchange Act Release No. 92222 (June 22,
2021), 86 FR 34069 (June 28, 2021) (SR-IEX-2021-09) (providing
remote inspection relief to Members for calendar year 2021).
\10\ For example, IEX understands that both the Commission and
FINRA do not currently require employees to return to the office.
See SEC Fiscal Year 2022 Agency Financial Report, available at
https://www.sec.gov/files/sec-2022-agency-financial-report.pdf and
https://www.finra.org/rules-guidance/key-topics/covid-19.
\11\ The proposed rule change will automatically sunset on
December 31, 2022. IEX will submit a separate rule filing if it
seeks to extend the duration of the temporary proposed rule beyond
December 31, 2022.
\12\ See Securities Exchange Act Release No. 94018 (January 20,
2022), 87 FR 4072 (January 26, 2022) (SR-FINRA-2022-001).
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This proposed extension would provide further clarity to Members on
regulatory requirements and account for time needed for many Members to
carefully assess when and how to have their employees safely return to
their offices considering vaccination coverage in the U.S. and
transmission levels of the virus, including any emergent variants
throughout the country.
The proposed amendment would provide that Members have the option
to conduct remotely those inspections described in Supplementary
Material .15 to IEX Rule 5.110 through the end of 2022. IEX is not
proposing to amend the other conditions of the temporary relief in
Supplementary Material .15 of IEX Rule 5.110. The current conditions of
Supplementary Material .15 of IEX Rule 5.110 for Members that elect to
conduct remote inspections would remain unchanged: such firms must
still amend or supplement their written supervisory procedures for
remote inspections, use remote inspections as part of an effective
supervisory system, and maintain the required documentation. The
additional period of time would also allow IEX to further monitor the
effectiveness of remote inspections and their impacts--positive or
negative--on Members' overall supervisory systems in the evolving
workplace.
IEX continues to believe this temporary remote inspection option is
a reasonable alternative to provide to Members to fulfill their IEX
Rule 5.110 obligations during the ongoing pandemic, and is designed to
achieve the investor protection objectives of the inspection
requirements under these unique circumstances. Members should consider
whether, under their particular operating conditions, reliance on
remote inspections would be reasonable under the circumstances. For
example, Members with offices that are open to the public or that are
otherwise doing business as usual should consider whether some form of
in-person inspections would be feasible and appropriately contribute to
a supervisory system that is reasonably designed to achieve compliance
with applicable securities laws and regulations, and with applicable
IEX rules.
IEX has filed the proposed rule change for immediate effectiveness
and has requested that the SEC waive the requirement that the proposed
rule change not become operative for 30 days after the date of the
filing, so IEX can implement the proposed rule change immediately.
2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \13\ of the Act in general, and furthers the
objectives of Section 6(b)(5) of the Act \14\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, 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. The Exchange's rule proposal is intended to harmonize
IEX's supervision rules, specifically with respect to the requirements
for inspections of Members' branch offices and other locations, with
those of FINRA, on which they are based. Consequently, the
[[Page 76224]]
proposed change will conform the Exchange's rules to changes made to
corresponding FINRA rules, thus promoting application of consistent
regulatory standards with respect to rules that FINRA enforces pursuant
to its regulatory services agreement with the Exchange.
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\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(5).
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In recognition of the impact of COVID-19 on performing on-site
inspections, the proposed rule change is intended to provide firms a
temporary regulatory option to conduct inspections of offices and
locations remotely for calendar year 2022 inspections. This proposed
supplementary material does not relieve firms from meeting the core
regulatory obligation to establish and maintain a system to supervise
the activities of each associated person that is reasonably designed to
achieve compliance with applicable securities laws and regulations, and
with applicable IEX rules that directly serve investor protection. In a
time when faced with unique challenges resulting from the COVID-19
pandemic, IEX believes that the proposed rule change provides sensibly
tailored relief that will afford firms the ability to observe the
recommendations of public health officials to provide for the health
and safety of their personnel, while continuing to serve and promote
the protection of investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is not
designed to address any competitive issue but to align the Exchange's
rules with those of FINRA, which will assist FINRA in its oversight
work done pursuant to a regulatory services agreement with IEX. The
proposed rule change will also provide for consistent application of
the Exchange's supervision rules with those of FINRA, on which they are
based. Consequently, the Exchange does not believe that the proposed
change implicates competition at all.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \15\ of the Act and Rule 19b-4(f)(6) \16\
thereunder. Because the proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder. In addition, the Exchange provided the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing.\17\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange believes that this filing is non-controversial because
it raises no novel issues and is consistent with FINRA rules previously
approved by or filed with the Commission. In particular, the purpose of
the proposed rule change is to harmonize with and conform to FINRA
rules. The Exchange believes that the proposal promotes the protection
of investors as it will harmonize the Exchange's supervision rules with
those of FINRA, which will simplify the oversight process conducted by
FINRA pursuant to a regulatory services agreement with the Exchange.
Moreover, the Exchange does not believe that the proposed rule change
implicates competition at all because the proposed change aligns the
Exchange's rules with those of FINRA, which will assist it in its
oversight work done pursuant to such regulatory services agreement.
A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay to permit the
Exchange to harmonize its rules with FINRA, as described herein, upon
effectiveness of the proposed rule filing.
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\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
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IEX has indicated that extending the relief provided in SR-IEX-
2021-09 would provide assurances to its member firms that they can plan
their 2022 inspection program and conduct remote inspections for any
inspections to be conducted through calendar year 2022. Importantly,
extending the relief immediately upon filing and without a 30-day
operative delay would allow IEX's member firms to continue performing
their supervisory obligations, while addressing the ongoing impacts of
the COVID-19 pandemic. Moreover, like SR-IEX-2021-09, the proposed
extension would provide only temporary relief during the period in
which IEX's member firms' operations remain impacted by COVID-19. Thus,
the amended rules will revert back to their original state at the
conclusion of the temporary relief period and, if applicable, any
extension thereof. For these reasons, the Commission believes that
waiver of the 30-day operative delay for this proposed rule change is
consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposed rule change operative upon filing.\20\
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\20\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
[[Page 76225]]
Send an email to [email protected]. Please include
File Number SR-IEX-2022-12 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-IEX-2022-12. This file
number should be included in 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 will also be available for inspection
and copying at the principal office of IEX and on its internet website
at www.iextrading.com. 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-IEX-2022-12 and
should be submitted on or before January 3, 2023.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-26950 Filed 12-12-22; 8:45 am]
BILLING CODE 8011-01-P
