[Federal Register Volume 86, Number 3 (Wednesday, January 6, 2021)]
[Notices]
[Pages 636-640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29218]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90829; File No. SR-EMERALD-2020-21]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Exchange Rule 1900, Registration Requirements, To Adopt Temporary
Interpretation and Policy .13 (Temporary Extension of the Limited
Period for Registered Persons To Function as Principals)
December 30, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on December 28, 2020, MIAX Emerald, LLC (``MIAX
Emerald'' or the
[[Page 637]]
``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 the Exchange.
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\ 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 amend Exchange Rule 1900,
Registration Requirements, to adopt temporary Interpretation and Policy
.13 (Temporary Extension of the Limited Period for Registered Persons
to Function as Principals).
The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX
Emerald'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 those statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt Interpretation and Policy .13
(Temporary Extension of the Limited Period for Registered Persons to
Function as Principals) to Exchange Rule 1900, Registration
Requirements. The proposed rule change would extend the 120-day period
that certain individuals can function as principals without having
successfully passed an appropriate qualification examination through
April 30, 2021,\3\ and would apply only to those individuals who were
designated to function as principals prior to January 1, 2021. This
proposed rule change is based on a filing recently submitted by the
Financial Regulatory Authority, Inc. (``FINRA'') \4\ and is intended to
harmonize the Exchange's registration rules with those of FINRA so as
to promote uniform standards across the securities industry.
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\3\ See Exchange Act Release No. 90617 (December 9, 2020), 85 FR
81258 (December 15, 2020) (SR-FINRA-2020-043) (``FINRA Filing'').
The Exchange notes that the FINRA Filing also provides temporarily
relief to individuals registered with FINRA as Operations
Professionals under FINRA Rule 1220. The Exchange does not have a
registration category for Operations Professionals and therefore,
the Exchange is not proposing to adopt that aspect of the FINRA
Filing. If the Exchange seeks to provide additional temporary relief
from the rule requirement identified in this proposal beyond April
30, 2021, it will submit a separate rule filing to further extend
the temporary extension of time.
\4\ See id.
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In response to COVID-19, earlier this year FINRA began providing
temporary relief by way of frequently asked questions (``FAQs'') \5\ to
address disruptions to the administration of FINRA qualification
examinations caused by the pandemic that have significantly limited the
ability of individuals to sit for examinations due to Prometric test
center capacity issues.\6\
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\5\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
\6\ At the outset of the COVID-19 pandemic, all FINRA
qualification examinations were administered at test centers
operated by Prometric. Based on the health and welfare concerns
resulting from COVID-19, in March Prometric closed all of its test
centers in the United States and Canada and began to slowly reopen
some of them at limited capacity in May. At this time, not all of
these Prometric test centers have reopened at full capacity.
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FINRA published the first FAQ on March 20, 2020, providing that
individuals who were designated to function as principals under FINRA
Rule 1210.04 \7\ prior to February 2, 2020, would be given until May
31, 2020, to pass the appropriate principal qualification
examination.\8\ On May 19, 2020, FINRA extended the relief to pass the
appropriate examination until June 30, 2020. On June 29, 2020, FINRA
extended the temporary relief providing that individuals who were
designated to function as principals under FINRA Rule 1210.04 prior to
May 4, 2020, would be given until August 31, 2020, to pass the
appropriate principal qualification examination. On August 28, 2020,
FINRA filed with the Commission a proposed rule change for immediate
effectiveness to extend the temporary relief provided via the two FAQs
by adopting: (1) Temporary Supplementary Material .12 (Temporary
Extension of the Limited Period for Registered Persons to Function as
Principals) under FINRA Rule 1210 (Registration Requirements), and (2)
temporary Supplementary Material .07 (Temporary Extension of the
Limited Period for Persons to Function as Operations Professionals)
under FINRA Rule 1220 (Registration Categories).\9\ Pursuant to this
rule filing, individuals who were designated prior to September 3,
2020, to function as a principal under FINRA Rule 1210.04 would have
until December 31, 2020, to pass the appropriate qualification
examination.
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\7\ Exchange Rule 1900, Interpretation and Policy .04, is the
corresponding rule to FINRA Rule 1210.04.
\8\ FINRA Rule 1210.04 (Requirements for Registered Persons
Functioning as Principals for a Limited Period) allows a FINRA-
member firm to designate certain individuals to function in a
principal capacity for 120 calendar days before having to pass an
appropriate principal qualification examination. Exchange Rule 1900,
Interpretation and Policy .04, provides the same allowance to
Exchange Members.
\9\ See Exchange Act Release No. 89732 (September 1, 2020), 85
FR 55535 (September 8, 2020) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2020-026).
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Thereafter, on December 9, 2020, FINRA filed with the Commission a
proposed rule change for immediate effectiveness to extend the limited
period for registered persons to function as a principal through April
30, 2021.\10\ Pursuant to this rule filing, individuals who were
designated prior to January 1, 2021 to function as a principal would
have until April 30, 2021 to pass the appropriate qualifying
examination.
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\10\ See supra note 3.
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The Exchange continues to closely monitor the impact of the COVID-
19 pandemic on Members,\11\ investors, and other stakeholders. The
COVID-19 conditions necessitating the extension of relief provided in
the FINRA's FAQs and rule amendments persist and, in fact, appear to be
worsening.\12\ One of the impacts of COVID-19 continues to be serious
interruptions in the administration of FINRA qualification examinations
at Prometric test centers and the limited ability of individuals to sit
for the examinations.\13\ Although Prometric has begun reopening test
centers, Prometric's safety practices mean that currently not all test
centers are open, some of the open test centers are at limited
capacity, and some open test centers are delivering only certain
[[Page 638]]
examinations that have been deemed essential by the local
government.\14\ Furthermore, Prometric has had to close some reopened
test centers due to incidents of COVID-19 cases. The initial nationwide
closure in March along with the inability to fully reopen all Prometric
test centers due to COVID-19 have led to a significant backlog of
individuals who are waiting to sit for FINRA examinations.\15\
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\11\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\12\ See, e.g., Meryl Kornfield, Jacqueline Dupree, Marisa Iati,
Paulina Villegas, Siobhan O'Grady and Hamza Shaban, New daily
coronavirus cases in U.S. rise to 145,000, latest all-time high,
Wash. Post, November 11, 2020, https://www.washingtonpost.com/nation/2020/11/11/coronavirus-covid-live-updates-us/.
\13\ Information about the continued impact of COVID-19 on
FINRA-administered examinations is available at https://www.finra.org/rules-guidance/key-topics/covid-19/exams.
\14\ Information from Prometric about its safety practices and
the impact of COVID-19 on its operations is available at https://www.prometric.com/corona-virus-update.
\15\ Although an online test delivery service has been launched
to help address the backlog, the General Securities Principal Exam
(Series 24) is not available online. See supra note 13. FINRA is
considering making additional qualifications examinations available
remotely on a limited basis.
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In addition, firms are continuing to experience operational
challenges with much of their personnel working from home due to
shelter-in-place orders, restrictions on businesses and social activity
imposed in various states, and adherence to other social distancing
guidelines consistent with the recommendations of public health
officials.\16\ As a result, firms continue to face potentially
significant disruptions to their normal business operations that may
include a limitation of in-person activities and staff absenteeism as a
result of the health and welfare concerns stemming from COVID-19. Such
potential disruptions may be further exacerbated and may even affect
client services if firms cannot continue to keep principal positions
filled as they may have difficulty finding other qualified individuals
to transition into these roles or may need to reallocate employee time
and resources away from other critical responsibilities at the firm.
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\16\ See, e.g., Centers for Disease Control and Prevention, How
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html.
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These ongoing, extenuating circumstances make it impracticable for
Members to ensure that the individuals whom they have designated to
function in a principal capacity, as set forth in Exchange Rule 1900,
Interpretation and Policy .04, are able to successfully sit for and
pass an appropriate qualification examination within the 120-calendar
day period required under the rule, or to find other qualified staff to
fill this position. The ongoing circumstances also require individuals
to be exposed to the health risks associated with taking an in-person
examination, because the General Securities Principal examination is
not available online. Therefore, the Exchange is proposing to provide
the temporary relief provided through the FINRA FAQs by adopting
Interpretation and Policy .13 to Exchange Rule 1900 to extend the 120-
day period during which an individual can function as a principal
before having to pass an applicable qualification examination until
April 30, 2021.\17\ The proposed rule change would apply only to those
individuals who were designated to function as a principal prior to
January 1, 2021. Any individuals designated to function as a principal
on or after January 1, 2021, would need to successfully pass an
appropriate qualification examination within 120 days.
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\17\ See supra note 3.
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The Exchange believes that this proposed extension of time is
tailored to address the needs and constraints on a Member's operations
during the COVID-19 pandemic, without significantly compromising
critical investor protection. The proposed extension of time will help
to minimize the impact of COVID-19 on Members by providing flexibility
so that Members can ensure that principal positions remain filled. The
potential risks from the proposed extension of the 120-day period are
mitigated by the Member's requirement to supervise the activities of
these designated individuals and ensure compliance with federal
securities laws and regulations, as well as Exchange rules.
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Exchange Act \18\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \19\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanisms of a free and open market and a national market system and,
in general, to protect investors and the public interest.
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is intended to minimize the impact of
COVID-19 on Member operations by extending the 120-day period certain
individuals may function as a principal without having successfully
passed an appropriate qualification examination under Exchange Rule
1900, Interpretation and Policy. 04, until April 30, 2021. The proposed
rule change does not relieve Members from maintaining, under the
circumstances, a reasonably designed system to supervise the activities
of their associated persons to achieve compliance with applicable
securities laws and regulations, and with applicable Exchange rules
that directly serve investor protection. In a time when faced with
unique challenges resulting from the COVID-19 pandemic, the Exchange
believes that the proposed rule change is a sensible accommodation that
will continue to afford Members the ability to ensure that critical
positions are filled and client services maintained, while continuing
to serve and promote the protection of investors and the public
interest in this unique environment.
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 Exchange Act. The proposed rule
change is intended to provide temporary relief given the impacts of the
COVID-19 pandemic crisis and to also maintain consistency with the
rules of other self-regulatory organizations (``SROs'') with respect to
the registration requirements applicable to Members and their
registered personnel. In that regard, the Exchange believes that any
burden on competition would be clearly outweighed by providing Members
with temporary relief in this unique environment while also ensuring
clear and consistent requirements applicable across SROs and mitigating
any risk of SROs implementing different standards in these important
areas. In its filing, FINRA provides an abbreviated economic impact
assessment maintaining that the changes are necessary to temporarily
rebalance the attendant benefits and costs of the obligations under
FINRA Rule 1210 in response to the impacts of the COVID-19 pandemic
that is equally applicable to the changes the Exchange proposes.\20\
The Exchange accordingly incorporates FINRA's abbreviated economic
impact assessment by reference.
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\20\ See supra notes 3 and 9.
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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.
[[Page 639]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days 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 \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
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 of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
pursuant to Rule 19b-4(f)(6)(iii), 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 so that the proposed
rule change may become operative immediately upon filing. As noted
above, the Exchange stated that the proposed extension of time will
help minimize the impact of the COVID-19 outbreak on Members'
operations by allowing them to keep principal positions filled and
minimizing disruptions to client services and other critical
responsibilities. The Exchange further stated that the ongoing
extenuating circumstances of the COVID-19 pandemic make it impractical
to ensure that individuals designated to act in these capacities are
able to take and pass the appropriate qualification examination during
the 120-calendar day period required under the rules. The Exchange also
explained that shelter-in-place orders, quarantining, restrictions on
business and social activity and adherence to social distancing
guidelines consistent with the recommendations of public officials
remain in place in various states.\23\ In addition, the Exchange
observed that, following a nationwide closure of all test centers
earlier in the year, some test centers have re-opened, but are
operating at limited capacity or are only delivering certain
examinations that have been deemed essential by the local
government.\24\ Although, as the Exchange noted, FINRA has launched an
online test delivery service to help address this backlog, the General
Securities Principal (Series 24) Examination is not available
online.\25\ Nevertheless, the Exchange explained that the proposed rule
change will provide needed flexibility to ensure that these positions
remain filled and is tailored to address the constraints on Members'
operations during the COVID-19 pandemic without significantly
compromising critical investor protection.\26\
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\23\ See supra note 16.
\24\ See supra notes 13 and 14. The Exchange states that
Prometric has also had to close some reopened test centers due to
incidents of COVID-19 cases.
\25\ See supra note 15. FINRA is considering making additional
qualification examinations available remotely on a limited basis.
\26\ The Exchange states that Members remain subject to the
continued requirement to supervise the activities of these
designated individuals and ensure compliance with federal securities
laws and regulations, as well as MIAX Emerald rules.
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The Commission observed that the Exchange's proposal, like FINRA's
analogous filing, provides only temporary relief from the requirement
to pass certain qualification examinations within the 120-day period in
the rules. As proposed, this relief would extend the 120-day period
that certain individuals can function as principals through April 30,
2021. If a further extension of temporary relief from the rule
requirements identified in this proposal beyond April 30, 2021 is
required, the Exchange noted that it may submit a separate rule filing
to extend the effectiveness of the temporary relief under these
rules.\27\ For these reasons, the Commission believes that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest.\28\ Accordingly, the Commission
hereby waives the 30-day operative delay and designates the proposal
operative upon filing.\29\
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\27\ See supra note 3.
\28\ As noted above by the Exchange, this proposed temporary
change is based on a recent filing by FINRA that the Commission
approved with a waiver of the 30-day operative delay. See supra note
3, FINRA Filing at 81260.
\29\ 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 to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-EMERALD-2020-21on 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-EMERALD-2020-21. 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 (http://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 such filing also will be available for inspection
and copying at the principal office of MIAX Emerald. 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-EMERALD-2020-21and
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should be submitted on or before January 27, 2021.
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\30\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-29218 Filed 1-5-21; 8:45 am]
BILLING CODE 8011-01-P