82 FR 16464 - Order Granting Application by MIAX PEARL, LLC for an Exemption Pursuant to Section 36(a) of the Exchange Act From the Rule Filing Requirements of Section 19(b) of the Exchange Act With Respect to Certain Rules Incorporated by Reference

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 63 (April 4, 2017)

[Federal Register Volume 82, Number 63 (Tuesday, April 4, 2017)]
[Notices]
[Pages 16464-16466]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-06570]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80338]


Order Granting Application by MIAX PEARL, LLC for an Exemption 
Pursuant to Section 36(a) of the Exchange Act From the Rule Filing 
Requirements of Section 19(b) of the Exchange Act With Respect to 
Certain Rules Incorporated by Reference

March 29, 2017.
    MIAX PEARL, LLC (``MIAX PEARL'' or ``Exchange'') has filed with the 
Securities and Exchange Commission (``Commission'') an application for 
an exemption under Section 36(a)(1) of the Securities Exchange Act of 
1934 (``Exchange Act'') \1\ from the rule filing requirements of 
Section 19(b) of the Exchange Act \2\ with respect to certain rules of 
the Miami International Securities Exchange, LLC (``MIAX Options'' \3\) 
that the Exchange seeks to incorporate by reference. Section 36 of the 
Exchange Act authorizes the Commission to conditionally or 
unconditionally exempt any person,

[[Page 16465]]

security, or transaction, or any class thereof, from any provision of 
the Exchange Act or rule thereunder, if necessary or appropriate in the 
public interest and consistent with the protection of investors.
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    \1\ 15 U.S.C. 78mm(a)(1).
    \2\ 15 U.S.C. 78s(b).
    \3\ The Commission notes that MIAX PEARL referred to the Miami 
International Securities Exchange, LLC as ``MIAX Options'' in its 
application for an exemption under Section 36(a)(1) of the Exchange 
Act. See Letter from Deborah L. Carroll, Associate General Counsel, 
MIAX PEARL, to Brent J. Fields, Secretary, Commission, dated 
February 17, 2017 (``Exemptive Request''). References herein to the 
rules of MIAX Options are to the rules of the Miami International 
Securities Exchange, LLC.
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    Both MIAX PEARL and MIAX Options are Participants in the National 
Market System Plan Governing the Consolidated Audit Trail (``CAT NMS 
Plan'' or ``Plan'').\4\ Each Participant in the CAT NMS Plan is 
required to enforce compliance by its members with the provisions of 
the Plan by adopting a ``Compliance Rule'' applicable to its 
members.\5\ On January 30, 2017, MIAX Options filed a proposed rule 
change with the Commission to adopt new Chapter XVII comprising MIAX 
Options Rules 1701-1712 (``MIAX Options Compliance Rule'').\6\ On 
February 1, 2017, MIAX PEARL filed a proposed rule change with the 
Commission to incorporate by reference, in new Chapter XVII of the MIAX 
PEARL rulebook, the rules contained in MIAX Options Chapter XVII.\7\
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    \4\ See Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696 (November 23, 2016) (``CAT NMS Plan Approval 
Order''). All capitalized terms not otherwise defined herein shall 
have the meaning ascribed to them in the CAT NMS Plan or CAT NMS 
Plan Approval Order.
    \5\ Id. at 84945, 84950.
    \6\ See Securities Exchange Act Release No. 79937 (February 2, 
2017), 82 FR 9790 (February 8, 2017).
    \7\ See Securities Exchange Act Release No. 79938 (February 2, 
2017), 82 FR 9929 (February 8, 2017). MIAX PEARL and MIAX Options' 
proposed rule changes were approved by the Commission on March 15, 
2017. See Securities Exchange Act Release No. 80256, 82 FR 14526 
(March 21, 2017).
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    MIAX PEARL has requested, pursuant to Rule 0-12 under the Exchange 
Act,\8\ that the Commission grant the Exchange an exemption from the 
rule filing requirements of Section 19(b) of the Exchange Act for 
changes to MIAX PEARL Chapter XVII that are effected solely by virtue 
of a change to Chapter XVII of the MIAX Options rules. Specifically, 
MIAX PEARL requests that it be permitted to incorporate by reference 
changes made to each MIAX Options Compliance Rule that is cross-
referenced in the MIAX PEARL Chapter XVII rules,\9\ without the need 
for the Exchange to file separately the same proposed rule changes 
pursuant to Section 19(b) of the Exchange Act.\10\ By virtue of these 
incorporations by reference, MIAX PEARL members will comply with the 
Compliance Rule by complying with the MIAX Options rules referenced in 
the MIAX PEARL Chapter XVII rules.\11\ MIAX PEARL does not intend to 
incorporate by reference any trading rules. The Exchange states that in 
each instance, the Exchange proposes to incorporate by reference 
categories of rules (rather than individual rules within a category) 
that are regulatory rules. MIAX PEARL will, as a condition of this 
exemption, provide written notice to its members whenever MIAX Options 
proposes a change to Chapter XVII of its rules.\12\ Such notice will 
alert MIAX PEARL members to the proposed rule change and give them an 
opportunity to comment on the proposal. MIAX PEARL states that it will 
also inform members in writing when the Commission approves any such 
proposed changes.\13\
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    \8\ 17 CFR 240.0-12.
    \9\ MIAX PEARL Chapter XVII states ``the rules contained in MIAX 
Options Exchange Chapter XVII, as such rules may be in effect from 
time to time (the `Chapter XVII Rules'), are hereby incorporated by 
reference into this MIAX PEARL Chapter XVII, and are thus MIAX PEARL 
Rules and thereby applicable to MIAX PEARL Members.''
    \10\ See Exemptive Request, supra note 3, at 2-3.
    \11\ Id. at 3.
    \12\ The Exchange states that it will provide such notice on its 
Web site in the same section it uses to post its own proposed rule 
change filings pursuant to Rule 19b-4(l). In addition, the Exchange 
states that its Web site will also include a link to the MIAX 
Options Web site where the proposed rule change filings are located. 
Id.
    \13\ Id.
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    The Exchange believes this exemption is appropriate in the public 
interest and consistent with the protection of investors because it 
will promote more efficient use of the Exchange's and the Commission's 
resources by avoiding duplicative rule filings based on simultaneous 
changes to identical rules sought by more than one self-regulatory 
organization (``SRO''),\14\ and because it will result in the 
Exchange's rules being consistent with the relevant cross-referenced 
MIAX Options rules at all times, thus ensuring identical regulation of 
joint members of MIAX PEARL and MIAX Options with respect to the 
incorporated rules.\15\ The Exchange believes that, without such an 
exemption, joint members could be subject to two different 
standards.\16\
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    \14\ Id.
    \15\ Id.
    \16\ Id.
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    The Commission has issued exemptions similar to the Exchange's 
request.\17\ In granting one such exemption in 2010, the Commission 
repeated a prior, 2004 Commission statement that it would consider 
similar future exemption requests from other SROs, provided that:
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    \17\ See, e.g., Securities Exchange Act Release Nos. 72650 (July 
22, 2014), 79 FR 44075 (July 29, 2014) (order granting exemptive 
requests from NASDAQ OMX BX, Inc. and the NASDAQ Stock Market LLC 
relating to rules of NASDAQ OMX PHLX LLC incorporated by reference); 
67256 (June 26, 2012), 77 FR 39277, 39286 (July 2, 2012) (order 
approving SR-BX-2012-030 and granting exemptive request relating to 
rules incorporated by reference by the BX Options rules); 61534 
(February 18, 2010), 75 FR 8760 (February 25, 2010) (order granting 
BATS Exchange, Inc.'s exemptive request relating to rules 
incorporated by reference by the BATS Exchange Options Market rules) 
(``BATS Options Market Order''); 67256 (June 26, 2012), 77 FR 39277, 
39286 (July 2, 2012) (order approving SR-BX-2012-030 and granting 
exemptive request relating to rules incorporated by reference by the 
BX Options rules); and 57478 (March 12, 2008), 73 FR 14521, 14539-40 
(March 18, 2008) (order approving SR-NASDAQ-2007-004 and SR-NASDAQ-
2007-080, and granting exemptive request relating to rules 
incorporated by reference by The NASDAQ Options Market).
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     An SRO wishing to incorporate rules of another SRO by 
reference has submitted a written request for an order exempting it 
from the requirement in Section 19(b) of the Exchange Act to file 
proposed rule changes relating to the rules incorporated by reference, 
has identified the applicable originating SRO(s), together with the 
rules it wants to incorporate by reference, and otherwise has complied 
with the procedural requirements set forth in the Commission's release 
governing procedures for requesting exemptive orders pursuant to Rule 
0-12 under the Exchange Act; \18\
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    \18\ See 17 CFR 240.0-12 and Securities Exchange Act Release No. 
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) 
(``Commission Procedures for Filing Applications for Orders for 
Exemptive Relief Pursuant to Section 36 of the Exchange Act; Final 
Rule'').
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     The incorporating SRO has requested incorporation of 
categories of rules (rather than individual rules within a category) 
that are not trading rules (e.g., the SRO has requested incorporation 
of rules such as margin, suitability, or arbitration); and
     The incorporating SRO has reasonable procedures in place 
to provide written notice to its members each time a change is proposed 
to the incorporated rules of another SRO.\19\
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    \19\ See BATS Options Market Order, supra note 17 (citing 
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004) (order granting exemptive request relating 
to rules incorporated by reference by several SROs) (``2004 
Order'')).
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    The Commission believes that the Exchange has satisfied each of 
these conditions. The Commission also believes that granting the 
Exchange an exemption from the rule filing requirements under Section 
19(b) of the Exchange Act will promote efficient use of Commission and 
Exchange resources by avoiding duplicative rule filings based on 
simultaneous changes to identical rule text sought by more than one 
SRO.\20\ The Commission therefore finds it appropriate in the public 
interest and consistent with the protection of investors to exempt the 
Exchange from the rule filing requirements under Section 19(b) of the

[[Page 16466]]

Exchange Act with respect to the above-described rules it has 
incorporated by reference. This exemption is conditioned upon the 
Exchange promptly providing written notice to its members whenever MIAX 
Options changes a rule that the Exchange has incorporated by reference.
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    \20\ See BATS Options Market Order, supra note 17, 75 FR at 
8761; see also 2004 Order, supra note 19, 69 FR at 8502.
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    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\21\ that the Exchange is exempt from the rule filing requirements 
of Section 19(b) of the Exchange Act solely with respect to changes to 
the rules identified in its request that incorporate by reference 
certain MIAX Options rules that are the result of changes to such MIAX 
Options' rules, provided that the Exchange promptly provides written 
notice to its members whenever MIAX Options proposes to change a rule 
that the Exchange has incorporated by reference.
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    \21\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(76).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06570 Filed 4-3-17; 8:45 am]
 BILLING CODE 8011-01-P