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Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES

The Exchange proposes to amend Article II, Section 2.4a of its By-Laws to provide that the Nominating Committee shall nominate to ERP
Director positions only those persons whose names have been approved and submitted by the applicable ERP
Members having the right to nominate such person pursuant to Article II, Section 2.2.18 If an ERP Member is otherwise able to nominate an ERP
Director but cannot because, for example, the ERP Member already is represented on the PEARL Board, e.g., as a Member Representative Director,19
the ERP Member will have the right to appoint an Observer in lieu of such ERP
Director nomination.20
In addition, MIAX PEARL proposes to specify that an ERP Members right to continued representation on the Board in the form of an ERP Director or Observer will be contingent upon the ERP Member meeting certain Performance Criteria 21 i.e., achievement of certain specified liquidity volume thresholds on MIAX
PEARL Equities 22 over a specified Measurement Period. 23 Thus, ERP
Members with the right to nominate an ERP Director or appoint an Observer may lose that right if the ERP Member that Observers will have the right to attend all meetings of the Board of Directors in a nonvoting observer capacity and, in this respect, the Exchange shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its Directors at the same time and in the same manner as provided to such Directors;
provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided. See also Article X, Section 10.3 of the MIAX PEARL Amended and Restated By-Laws further providing that the Exchange reserves the right, however, to withhold any information and to exclude Observers from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorneyclient privilege between the Exchange and its counsel or result in disclosure of trade secrets or a conflict of interest, and Section 10.4 of the MIAX
PEARL Amended and Restated By-Laws, in which the Exchange has proposed to provide that Observers will be subject to the same requirements to maintain the confidentiality of all books and records of the Exchange reflecting confidential information pertaining to the self-regulatory function of the Exchange.
18 The Exchange states that MIH, as the sole member of MIAX PEARL, will then be obligated to vote for the nominated ERP Director. See Notice, supra note 3, 85 FR at 79254.
19 See Article II, Section 2.2g of the MIAX
PEARL Amended and Restated By-Laws.
20 See Notice, supra note 3, 85 FR at 79254. See also note 32 and accompanying text infra.
21 See MIAX PEARL Amended and Restated ByLaws, Article Ihh, defining Performance Criteria.
22 See MIAX PEARL Amended and Restated ByLaws, Article Icc, defining MIAX PEARL Equities as the market of the Exchange on which equity securities are traded.
23 See MIAX PEARL Amended and Restated ByLaws, Article Iy, defining Measurement Period.

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fails to meet the requisite Performance Criteria.24 In the event of such occurrence, if the ERP Member later satisfies the requisite Performance Criteria for a subsequent Measurement Period, the ERP Member may regain its right to nominate or appoint such ERP
Member or Observer.25 Further, an ERP
Director or Observer position will terminate if the nominating or appointing ERP Member effects a transfer of common stock or warrants that results in such ERP Member holding less than 25% of the aggregate number of shares of common stock issued or issuable pursuant to Units acquired pursuant to the ERP
Agreement.26
The Exchange proposes to amend Article II, Section 2.2bi to provide that ERP Directors will be included in the number of Industry Directors for purposes of calculating the composition of the Board,27 and Article II, Section 2.2bii to provide that Member Representative Directors will not include ERP Directors.28 Accordingly, the Exchange states in its proposal that there will be no substantive changes to the Boards composition, and that although the Board size will increase, its composition will remain the same.29
In addition, MIAX PEARL proposes to amend the By-Law provisions that currently provide for the removal and resignation of directors and the filling of vacancies to address ERP Directors. The Exchange proposes to adopt paragraph c under Article II, Section 2.8 to provide that if an ERP Director position becomes vacant for reasons other than failure by an ERP Member to meet its Performance Criteria as discussed above, the applicable ERP Member will retain the ability to nominate a person to fill the vacant ERP Director position.30 The Exchange also proposes 24 See MIAX PEARL Amended and Restated ByLaws, Article II, Section 2.3c and d.
25 See MIAX PEARL Amended and Restated ByLaws, Article II, Section 2.3c and d.
26 See MIAX PEARL Amended and Restated ByLaws, Article II, Section 2.3d.
27 See MIAX PEARL Amended and Restated ByLaws, Article II, Section 2.2bi, and Notice, supra note 3, 85 FR at 79254.
28 See MIAX PEARL Amended and Restated ByLaws, Article II, Section 2.2bii, and Notice, supra note 3, 85 FR at 79254.
29 See Notice, supra note 3, 85 FR at 79254.
30 See MIAX PEARL Amended and Restated ByLaws, Article II, Section 2.8 and Notice, supra note 3, 85 FR at 79254. The Exchange also proposes to adopt paragraph f under Article II, Section 2.2 to provide that if an ERP Director position needs to be added pursuant to amended Article II, Section 2.2e, such ERP Director shall be nominated by the applicable ERP Member and elected by the LLC
Member and additional Director positions shall be added and filled at the same time as the election of the new ERP Director, as required to comply with the requirements set forth in Article II, Section
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to amend Article II, Section 2.9a to provide that, ERP Directors may only be removed for cause, which shall include, without limitation, such Director being subject to a statutory disqualification.31
Further, if at any time such ERP
Member is otherwise able to nominate an ERP Director, but is unable to fill such position as a result of such ERP
Member already having a representative on the Board, such ERP Member will have the right to nominate such Director in accordance with amended Article II, Section 2.2e upon the resignation or removal of such Director already serving on the Board.32
III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act,33 and the rules and regulations thereunder applicable to a national securities exchange.34 In particular, the Commission finds that the proposed rule change is consistent with Sections 6b1 and 3 of the Act,35 which requires, among other things, that the Exchange be organized and have the capacity to be able to carry out the purposes of the Act and to comply, and to enforce compliance by its Members and persons associated with its Members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the Exchange; and assure the fair representation of its members in the selection of its directors and administration of its affairs, and provide that one or more directors shall be representative of issuers and investors and not be associated with a member of the Exchange, broker, or dealer.
A. Addition of ERP Directors and Related Provisions The Commission finds that the Exchanges proposal to amend the ByLaws to provide for the inclusion of ERP
Directors on the PEARL Board, 2.2a and b. See MIAX PEARL Amended and Restated By-Laws, Article II, Section 2.2f.
31 An Observer, likewise, may not be subject to a statutory disqualification. See MIAX PEARL
Amended and Restated By-Laws, Article II, Section 2.2gii.
32 See Notice, supra note 3, 85 FR at 79253. The Exchange states that an ERP Member that is represented by a Member Representative Director may also have an Observer; however, an ERP
Member that is represented by an ERP Director may not also have an Observer. See Notice, supra note 3, 85 FR at 79253, n.7.
33 15 U.S.C. 78f.
34 In approving this proposed rule change, the Commission has considered the proposed rules impact on efficiency, competition, and capital formation. See 15 U.S.C. 78cf.
35 15 U.S.C. 78fb3.

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