Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Consolidate Certain Committee Functions Into the BX Review Council, 28564-28568 [2014-11294]
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• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2014–32 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–Phlx–2014–32. 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 Web site (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 Web site 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
offices of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–Phlx–
2014–32, and should be submitted on or
before June 6, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–11295 Filed 5–15–14; 8:45 am]
[Release No. 34–72149; File No. SR–BX–
2014–024]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Consolidate
Certain Committee Functions Into the
BX Review Council
May 12, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 30,
2014, NASDAQ OMX BX, Inc. (‘‘BX’’ 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 Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
BX proposes a rule change to
consolidate responsibilities of certain
committees of the Board of Directors
and to make related changes to the
Exchange By-Laws and Rules.
The text of the proposed rule change
is available from BX’s Web site at https://
nasdaqomxbx.cchwallstreet.com, at
BX’s principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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SECURITIES AND EXCHANGE
COMMISSION
1. Purpose
The Exchange is proposing to expand
the regulatory responsibilities of the
1 15
31
17 CFR 200.30–3(a)(12).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Exchange Review Council (the ‘‘Review
Council’’), a committee of the Exchange
Board of Directors (the ‘‘Board’’) not
composed solely of Directors, to include
responsibilities of other Board
committees not composed solely of
Directors and consequently sunset those
committees. The Exchange’s committee
structure and related Exchange By-Laws
are largely based on those of its sister
exchange NASDAQ,3 which are largely
based on those of NASD (now known as
FINRA) and were adopted pursuant to
NASDAQ’s approval as a national
securities exchange.4 The Exchange is
proposing to make its committee
structure more efficient and effective by
vesting the Review Council, which is a
committee of the Board with both
adjudicatory and policy responsibilities,
with the adjudicatory responsibilities of
the Market Operations Review
Committee (‘‘MORC’’) and with the
advisory role of the Market Regulation
Committee.
Review Council
The Review Council is a Board
committee charged with considering
and making recommendations to the
Board on policy and rule changes
relating to business and sales practices
of members and associated persons and
enforcement policies, including policies
with respect to fines and other
sanctions. The Review Council is also
an adjudicatory body, responsible for
the review of appeals of disciplinary
proceedings, statutory disqualification
proceedings, or membership
proceedings.5 In addition, the Review
Council may review offers of settlement,
letters of acceptance, waiver and
consent, and minor rule violation plan
letters, exercises of exemptive authority,
and such proceedings or actions as may
be authorized by the Exchange’s rules.
The Review Council is comprised of no
fewer than eight and no more than
twelve members, whereby at least
twenty percent of the members must be
nominated by the Board’s Member
Nominating Committee.6 Moreover, the
3 Securities Exchange Act Release No. 59154
(December 23, 2008), 73 FR 80468 (December 31,
2008) (SR–BSE–2008–48).
4 Securities Exchange Act Release No. 53128
(January 13, 2006), 71 FR 3550 (January 23, 2006).
5 Decisions issued by the Review Council may be
reviewed by the Board. See, e.g., Rule 9351. If the
Board does not call the proceeding for review, the
proposed written decision of the Review Council
shall constitute the final disciplinary action of BX
for purposes of Exchange Act Rule 19d–1(c)(1),
unless the Review Council remands the proceeding.
See, e.g., Rule 9349(c).
6 Pursuant to the By-Laws, the Board’s Member
Nominating Committee is responsible for the
nomination of candidates for each Member
Representative Director position on the Board in
accordance with Section 4.4 of the By-Laws, and
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Review Council must have at least three
Public members,7 as defined in the ByLaws, and the number of Non-Industry
members 8 shall equal or exceed the sum
of the number of Industry members 9
and Member Representative members.10
The By-Laws provide that a quorum for
the transaction of business consists of a
majority of the Review Council,
including not less than 50 percent of the
Non-Industry members of the Review
Council and at least one Member
Representative member.
shall nominate candidates for appointment by the
Board for each vacant or new position on the
Exchange Listing and Hearing Review Council, the
Exchange Review Council, or other committee that
is to be filled with a Member Representative
member under the terms of the By-Laws. See
Exchange By-Law, Article IV, Section 4.14(b).
Further provided by the By-Laws, the Member
Nominating Committee shall consist of no fewer
than three and no more than six members, and all
members of the Member Nominating Committee
shall be a current associated person of a current
Exchange Member. See Exchange By-Law, Article
IV, Section 4.14(b)(iii).
7 ‘‘Public member’’ means an Exchange Listing
and Hearing Review Council member, Exchange
Review Council member, or member of any other
committee appointed by the Board who has no
material business relationship with a broker or
dealer, the Corporation or its affiliates, or FINRA.
See Exchange By-Law, Article I(hh).
8 ‘‘Non-Industry member’’ means an Exchange
Listing and Hearing Review Council member,
Exchange Review Council member, or member of
any other committee appointed by the Board who
is (i) a Public member; (ii) an officer or employee
of an issuer of securities listed on the Exchange; or
(iii) any other individual who would not be an
Industry member. See Exchange By-Law, Article
I(cc).
9 ‘‘Industry member’’ means an Exchange Listing
and Hearing Review Council member, Exchange
Review Council member, or member of any other
committee appointed by the Board who (i) is or has
served in the prior three years as an officer,
director, or employee of a broker or dealer,
excluding an outside director or a director not
engaged in the day-to-day management of a broker
or dealer; (ii) is an officer, director (excluding an
outside director), or employee of an entity that
owns more than ten percent of the equity of a
broker or dealer, and the broker or dealer accounts
for more than five percent of the gross revenues
received by the consolidated entity; (iii) owns more
than five percent of the equity securities of any
broker or dealer, whose investments in brokers or
dealers exceed ten percent of his or her net worth,
or whose ownership interest otherwise permits him
or her to be engaged in the day-to-day management
of a broker or dealer; (iv) provides professional
services to brokers or dealers, and such services
constitute twenty percent or more of the
professional revenues received by the person or
twenty percent or more of the gross revenues
received by the person’s firm or partnership; (v)
provides professional services to a director, officer,
or employee of a broker, dealer, or corporation that
owns fifty percent or more of the voting stock of a
broker or dealer, and such services relate to the
director’s, officer’s, or employee’s professional
capacity and constitute twenty percent or more of
the professional revenues received by the person or
twenty percent or more of the gross revenues
received by the person’s firm or partnership; or (vi)
has a consulting or employment relationship with
or provides professional services to the Corporation
or any affiliate thereof or to FINRA or has had any
such relationship or provided any such services at
any time within the prior three years. See Exchange
By-Law, Article I(u).
10 ‘‘Member Representative member’’ means an
Exchange Listing and Hearing Review Council
member, Exchange Review Council member, or
member of any other committee appointed by the
Board who has been elected or appointed after
having been nominated by the Member Nominating
Market Operations Review Committee
The MORC is responsible for
considering Exchange member appeals
of determinations made pursuant to
Exchange Rules 4612, 4619, 4620,
11890, and Exchange Options Rules
Chapter V Section 6. Decisions of the
MORC in these matters are not
appealable, however, determinations of
the MORC with respect to Rule 11890
may be arbitrated.11 The By-Laws
require that the MORC be comprised of
a number of Member Representative
members that is equal to at least 20
percent of the total number of members
of the MORC. Moreover, the By-Laws
require that no more than 50 percent of
the members of the MORC be engaged
in market making activity or employed
by a BX member firm whose revenues
from market making exceed 10 percent
of its total revenues. The By-Laws do
not provide a description of what is a
quorum for purposes of holding a
meeting of the MORC, however, the
committee has adopted a three member
quorum requirement.12
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Market Regulation Committee
The Market Regulation Committee
(the ‘‘Regulation Committee’’) is a
committee of the Board, which is
responsible for providing advice and
guidance to the Board on regulatory
proposals and industry initiatives
relating to quotations, execution, trade
reporting, and trading practices;
advising the Board in its administration
of programs and systems for the
surveillance and enforcement of rules
governing Exchange Member’s conduct
and trading activities in the Exchange;
providing a pool of attorney panelists
for hearing panels under the Exchange
Committee pursuant to these By-Laws. See
Exchange By-Law, Article I(y).
11 See Rule 11890(c)(3). Unlike disciplinary
proceedings under the Rule 9000 Series, speedy
resolution of matters under the MORC’s jurisdiction
is important to ensuring fair and equitable
treatment of market makers, and, with regard to
clearly erroneous determinations, benefits market
participants and helps ensure the accuracy of
transactional information disseminated to investors.
12 Rule 11890(c)(2) expressly requires a panel to
consist of three or more members of the MORC,
provided that no more than 50 percent of the
members of any panel are directly engaged in
market making activity or employed by a member
firm whose revenues from market making activity
exceed ten percent of its total revenues. The rule
also states that in no case shall a MORC Panel
include a person affiliated with a party to the trade
in question.
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28565
rules; participating in the training of
hearing panelists on issues relating to
quotations, executions, trade reporting,
and trading practices; and reviewing
and recommending to the Review
Council changes to the Exchange’s
guidelines for sanctions to be imposed
on members for violations of Exchange
rules. The Regulation Committee must
have at least 50 percent Non-Industry
committee members and must include a
broad representation of participants in
the Exchange, including investors,
market makers, integrated retail firms
and order entry firms. The By-Laws
provide that a quorum for the
transaction of business consists of a
majority of the Regulation Committee,
including not less than 50 percent of the
Non-Industry committee members. The
requirement that not less than 50
percent of Non-Industry members be
present will be waived if at least 50
percent of the Non-Industry members
are present at or have filed a waiver of
attendance for a meeting after receiving
an agenda prior to such meeting.
The New Review Council
The Exchange is proposing to expand
the responsibilities of the Review
Council by merging the adjudicatory
role of the MORC and the advisory role
of the Regulation Committee, both as
described above, into the Review
Council. The Exchange is proposing to
amend the By-Laws and Exchange Rules
by eliminating references to the
Regulation Committee and MORC, and
adding the description of these roles to
the Review Council’s responsibilities
under the By-Laws and Exchange Rules.
The Exchange is also proposing to
define a new type of Panelist under the
rules, which will replace the Regulation
Committee Panelist. The new ‘‘Special
Panelist’’ will take on the role provided
currently by Regulation Committee
Panelists, which is discussed in more
detail below. All of these changes taken
together will ensure each function of the
MORC and Regulation Committee will
continue, unaltered.
The current composition
requirements of the Review Council are
as prescriptive, if not more so, than the
composition requirements of the MORC
and Regulation Committee. As noted
above, the Review Council must have
between eight and twelve members,
whereas the MORC and Regulation
Committee have no such minimum and
maximum composition requirements. In
practice, both the MORC and Regulation
Committee have fewer members than
eight members each. In addition, the
Review Council must have at least
twenty percent of its members
nominated by the Member Nominating
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Committee. The MORC has an identical
requirement, but the Regulation
Committee does not. The Review
Council is also required to have at least
three Public Members, which helps
ensure that there is representation on
the Review Council by individuals with
no material relationship with a broker or
dealer, the Exchange, its affiliates, or
FINRA, whereas neither the MORC nor
Regulation Committee has such a
representation requirement. Similarly,
the Review Council is required to have
a number of Non-Industry Members that
is greater than or equal to the total
number of Industry and Member
Nominating Committee Members, which
is another means of ensuring
independent members of the Review
Council. The Regulation Committee has
a similar requirement that Non-Industry
Members must be greater than or equal
to at least 50 percent of the total number
of members, however, the MORC has no
such requirement.
Under the Exchange’s By-Laws, the
MORC has a unique composition
requirement that limits its membership
to no more than 50 percent of members
that are [sic] be engaged in market
making activity or employed by a BX
member firm whose revenues from
market making exceed 10 percent of its
total revenues. This requirement
ensures that the composition of the
MORC is never overrepresented by
market making members. The Exchange
is proposing to adopt this requirement
for the new Review Council under the
By-Laws.
The By-Laws limit the members of the
Review Council to a maximum of two
consecutive three-year terms. The ByLaws further require that membership of
the Review Council is divided into three
classes of members, whose terms expire
in different years, thus ensuring that the
Review Council is not completely
reconstituted in any given year. Neither
the MORC nor the Regulation
Committee has such requirements. Last,
although the By-Laws are silent on what
constitutes a quorum for the conduct of
business of the MORC, the committee
has adopted a three member quorum
requirement. Accordingly, BX is
proposing to adopt a three Review
Council member quorum requirement,
solely applicable to the conduct of
business formerly within the scope of
the MORC.
In terms of the functions of the
MORC, the Review Council will now be
responsible for determinations pursuant
to Exchange Rules 4612, 4619, 4620,
11890, and Exchange Options Rules
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Chapter V Section 6.13 As noted above,
the current Review Council is an
adjudicatory body charged with the
review of disciplinary, statutory
disqualification and membership
proceedings. In this regard, members of
the Review Council are called upon to
preside over matters, apply Exchange
rules and render decisions that
represent disposition of the matter for
the parties. As such, it is wellpositioned to take on the additional
adjudicatory responsibilities of the
MORC, which likewise requires its
members to preside over matters, apply
Exchange rules and render decisions.
Moreover, the Exchange believes that
given the diverse composition of the
Review Council, which includes both
Member Representative Members, and
Industry and Non-Industry members, it
has an adequately broad representation
of Exchange constituents and
independent members that are well
suited to make determinations
concerning the rules within the current
jurisdiction of the MORC. In this regard,
the Exchange notes that the Review
Council is currently constituted with
members who are compliance officers at
member firms, associated persons of
member firms, academics, and
attorneys. The MORC is constituted
with a similar mix of members.14
In terms of the policy role of the
Regulation Committee, under the
proposed changes the Board will
continue to be able to solicit advice and
guidance on regulatory proposals and
industry initiatives relating to
quotations, execution, trade reporting,
and trading practices from the Review
Council, when the Board determines to
do so, much as it can under the current
By-Law provisions on policies
concerning member sales practices,
enforcement policies, fines and
sanctions.
The Exchange notes that it is only
transferring the advisory role of the
Regulation Committee to the Review
Council. The Exchange is not proposing
to draw upon the Review Council as a
source of attorney panelists for hearing
panels or the training thereof on issues
relating to quotations, executions, trade
reporting, and trading practices. Rather,
the Exchange is proposing to draw upon
members of FINRA’s pool of Hearing
13 Unlike decisions of the Review Council issued
pursuant to proceedings concerning disciplinary,
statutory disqualification and membership
proceedings, decisions made by the new Review
Council with regard to Exchange Rules 4612, 4619,
4620, 11890, and Exchange Options Rules Chapter
V Section 6 are not eligible for Board review or
appeal to the SEC, but rather will represent the final
resolution of such matters.
14 In fact, one individual serves on both the
Review Council and MORC.
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Panelists provided by their Market
Regulation Committee and from other
sources the Board deems appropriate
given the responsibilities of Hearing
Panelists. Accordingly, the Exchange
proposes to delete the definition of
Market Regulation Committee under
Rule 9120(u) and hold the rule in
reserve.
Changes to Rule 9231(b)
The Exchange is proposing minor
technical changes to Rule 9231(b),
which concerns the composition of
Hearing Panels. BX is eliminating an
erroneous reference to a paragraph (2)
under Rule 9231(b)(1), which was
included when the Exchange adopted
the rule.15
BX is also replacing references to the
Regulation Committee in Rule
9231(b)(1)(D) with references to FINRA
Panelists, including members of
FINRA’s Member Regulation
Committee. BX may currently draw
upon a person who: Previously served
on the Exchange Review Council;
previously served on a disciplinary
subcommittee of the Exchange Review
Council, including a Subcommittee, an
Extended Proceeding Committee, or
their predecessor subcommittees;
previously served as a Director, or as a
Governor of the Exchange prior to its
acquisition by The NASDAQ OMX
Group, Inc., but does not serve currently
in that position; or currently serves on
the Regulation Committee or who
previously served on the Regulation
Committee not earlier than four years
before the date the complaint was
served upon the Respondent who was
the first served Respondent in the
disciplinary proceeding for which the
Hearing Panel or the Extended Hearing
Panel is being appointed.16 BX is also
making clear that it may draw upon a
FINRA Panelist approved by the
Exchange Board, including a member of
FINRA’s Market Regulation Committee
if the Panelist is approved by the Board
at least annually. BX is also
memorializing that a Panelist may be
drawn from other sources the Board
deems appropriate given the
responsibilities of Panelists.
The Exchange notes that FINRA’s rule
concerning the selection criteria for its
Panelists is substantially similar to that
of the Exchange. Specifically, FINRA
Rule 9231(b)(1) provides that a Panelist
be a person who: Currently serves or
previously served on a District
Committee; previously served on the
National Adjudicatory Council;
previously served on a disciplinary
15 Supra
16 See
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Rule 9231(b).
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subcommittee of the National
Adjudicatory Council or the National
Business Conduct Committee, including
a Subcommittee, an Extended
Proceeding Committee, or their
predecessor subcommittees; or,
previously served as a Director or a
Governor, but does not serve currently
in any of these positions. BX believes
that drawing from FINRA’s pool of
Panelists will provide the Exchange
with individuals that have adequate
experience and expertise to be BX
Panelists, and will provide a larger pool
from which to draw Panelists. BX notes
that, by requiring the Board to approve
a FINRA Panelist as a precondition to
participating in a BX matter, BX is
ensuring that the Panelists that review
BX matters are adequately qualified to
adjudicate such matters.
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Other Technical Changes
Lastly, BX is making two minor
technical corrections to its rules. BX is
deleting an extraneous ‘‘and’’ from the
definition of ‘‘Hearing Officer’’ under
Rule 9120(r). BX is also adding the word
‘‘to’’ to Rule 11890(c)(1), which was
erroneously omitted.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 17 in general, and furthers the
objectives of Section 6(b)(5) of the Act 18
in particular, in that it is designed 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, and is
not designed to permit unfair
discrimination between customers,
issuers, brokers or dealers. The
Exchange also believes that the
proposed rule is consistent with Section
6(b)(6) of the Act,19 which requires the
rules of an exchange provide that its
members be appropriately disciplined
for violations of the Act as well as the
rules and regulations thereunder, or the
rules of the Exchange, by expulsion,
suspension, limitation of activities,
functions, and operations, fine, censure,
being suspended or barred from being
associated with a member, or any other
fitting sanction.
The Exchange believes that the
proposed changes are consistent with
these requirements because they bring
efficiency to the committee process, by
vesting a single Board committee with
responsibilities currently spread across
17 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
19 15 U.S.C. 78f(b)(6).
18 15
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multiple committees, while ensuring
that such responsibilities are performed
to a high regulatory standard. In this
regard, the new Review Council is, by
every measure, a more diverse body
than the committees that it replaces.
The broad membership of the new
Review Council will ensure that
decisions made with respect to the
MORC’s former responsibilities are
made fairly. In this regard, the Exchange
notes that the Review Council will
adopt the MORC requirement that not
more than 50 percent of the committee’s
members be engaged in market making
activity or employed by a BX member
firm whose revenues from market
making exceed 10 percent of its total
revenues.
As discussed above, the By-Laws limit
Review Council members to a maximum
of two consecutive three-year terms,
unlike the MORC and Regulation
Committee. This requirement ensures
that there is a consistent influx of new
members to the Review Council. The
By-Laws further require that
membership of the Review Council is
divided into three classes of members,
whose terms expire in different years,
thus ensuring that the Review Council
is not completely reconstituted in any
given year. The Exchange notes that the
expansion of the Review Council’s
responsibilities is an extension of the
functions that it already performs. As
discussed above, the Review Council is
currently an adjudicatory body under
BX’s rules, as well as an advisory
committee to the Board. Accordingly,
the Exchange believes that the proposed
changes will serve to protect the public
interest and promote appropriate
discipline of members for violations of
securities laws and rules of the
Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange 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, as amended.
Specifically, the Exchange believes that
this change will bring efficiency and
consistency in application of the
investigative and adjudicatory processes
by consolidating Board committee
functions. Consequently, the changes
will not impact competition among
brokers or dealers, nor will they impact
competition among the Exchange and its
peers.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any written
comments from members or other
interested parties.
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)(ii) of the Act 20 and
subparagraph (f)(6) of Rule 19b–4
thereunder.21
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2014–024 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–BX–2014–024. This file
number should be included on the
subject line if email is used.
20 15
21 17
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E:\FR\FM\16MYN1.SGM
U.S.C. 78s(b)(3)(a)(ii).
CFR 240.19b–4(f)(6).
16MYN1
28568
Federal Register / Vol. 79, No. 95 / Friday, May 16, 2014 / Notices
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 Web site
(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 Web site 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
offices of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–BX–2014–024, and should
be submitted on or before June 6, 2014.
Act’’) 1 and Rule 19b–4(n)(1)(i),2 an
advance notice relating to a proposal to
permit OCC to issue senior unsecured
debt securities in a private placement
offering. Notice of the advance notice
was published in the Federal Register
on July 15, 2013.3 The Commission did
not receive any comments in response
to the advance notice.
On January 15, 2014, OCC notified the
Commission of its withdrawal of the
advance notice (SR–OCC–2013–804)
from consideration by the Commission.4
The Commission is hereby publishing
notice of the withdrawal.
By the Commission.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–11342 Filed 5–15–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72150; File No. SR–
NASDAQ–2014–049]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify
NASDAQ Rule 7018 Fees and Establish
Fee Tiers for the Execution of Marketon-Close and Limit-on-Close Orders
Executed in the NASDAQ Closing
Cross and Eliminate the High Volume
Market Participant Identifier Program
[FR Doc. 2014–11294 Filed 5–15–14; 8:45 am]
May 12, 2014.
BILLING CODE 8011–01–P
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’), 1 and Rule 19b–4 thereunder, 2
notice is hereby given that on April 30,
2014, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72125; File No. SR–OCC–
2013–804]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Withdrawal of an Advance Notice in
Connection With a Proposed Change
to its Operations in the Form of a
Private Offering by OCC of Senior
Unsecured Debt Securities
EMCDONALD on DSK67QTVN1PROD with NOTICES
May 8, 2014.
On June 10, 2013, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 806(e)(1) of the Payment,
Clearing, and Settlement Supervision
Act of 2010 (‘‘Clearing Supervision
22 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
20:00 May 15, 2014
Jkt 232001
1 12
U.S.C. 5465(e)(1).
CFR 240.19b–4(n)(1)(i).
3 See Securities Exchange Act Release No. 69955
(July 10, 2013), 78 FR 42125 (July 15, 2013), (SR–
OCC–2014–804).
4 See Letter from Stephen M. Szarmack, Vice
President and Associate General Counsel, The
Options Clearing Corporation, to Office of the
Secretary, Commission (January 15, 2014).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
2 17
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I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
NASDAQ is proposing to modify
NASDAQ Rule 7018 fees assessed for
execution and routing [sic] securities
listed on the New York Stock Exchange
(‘‘NYSE’’) and on exchanges other than
NASDAQ and NYSE, as well as
establishing fee tiers for the execution of
Market-on-Close and Limit-on-Close
orders executed in the NASDAQ Closing
Cross and eliminating the high volume
Market Participant Identifier program.
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on May 1, 2014.
The text of the proposed rule change
is available at nasdaq.cchwallstreet.com
at NASDAQ’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,
NASDAQ 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
NASDAQ is proposing to amend
NASDAQ Rule 7018 to modify
NASDAQ Rule 7018 [sic] fees assessed
for execution and routing [sic] securities
listed on NYSE (‘‘Tape A’’) and on
exchanges other than NASDAQ and the
NYSE (‘‘Tape B’’), as well as
establishing fee tiers for the execution of
Market-on-Close and Limit-on-Close
(‘‘MOC/LOC’’) orders executed in the
NASDAQ Closing Cross.
Specifically, NASDAQ is proposing to
offer reduced access fees for firms that
execute against resting midpoint
liquidity for both Tape A and Tape B
securities. The standard access fees are
currently $0.0030 per executed share,
but the Exchange proposes to reduce
this fee for Tape A and Tape B securities
to $0.0027 per executed share. The
Exchange believes that the proposed
discounted executions for taking
E:\FR\FM\16MYN1.SGM
16MYN1
Agencies
[Federal Register Volume 79, Number 95 (Friday, May 16, 2014)]
[Notices]
[Pages 28564-28568]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-11294]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72149; File No. SR-BX-2014-024]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To
Consolidate Certain Committee Functions Into the BX Review Council
May 12, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 30, 2014, NASDAQ OMX BX, Inc. (``BX'' 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 Exchange. 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).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
BX proposes a rule change to consolidate responsibilities of
certain committees of the Board of Directors and to make related
changes to the Exchange By-Laws and Rules.
The text of the proposed rule change is available from BX's Web
site at https://nasdaqomxbx.cchwallstreet.com, at BX's principal office,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to expand the regulatory responsibilities
of the Exchange Review Council (the ``Review Council''), a committee of
the Exchange Board of Directors (the ``Board'') not composed solely of
Directors, to include responsibilities of other Board committees not
composed solely of Directors and consequently sunset those committees.
The Exchange's committee structure and related Exchange By-Laws are
largely based on those of its sister exchange NASDAQ,\3\ which are
largely based on those of NASD (now known as FINRA) and were adopted
pursuant to NASDAQ's approval as a national securities exchange.\4\ The
Exchange is proposing to make its committee structure more efficient
and effective by vesting the Review Council, which is a committee of
the Board with both adjudicatory and policy responsibilities, with the
adjudicatory responsibilities of the Market Operations Review Committee
(``MORC'') and with the advisory role of the Market Regulation
Committee.
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release No. 59154 (December 23,
2008), 73 FR 80468 (December 31, 2008) (SR-BSE-2008-48).
\4\ Securities Exchange Act Release No. 53128 (January 13,
2006), 71 FR 3550 (January 23, 2006).
---------------------------------------------------------------------------
Review Council
The Review Council is a Board committee charged with considering
and making recommendations to the Board on policy and rule changes
relating to business and sales practices of members and associated
persons and enforcement policies, including policies with respect to
fines and other sanctions. The Review Council is also an adjudicatory
body, responsible for the review of appeals of disciplinary
proceedings, statutory disqualification proceedings, or membership
proceedings.\5\ In addition, the Review Council may review offers of
settlement, letters of acceptance, waiver and consent, and minor rule
violation plan letters, exercises of exemptive authority, and such
proceedings or actions as may be authorized by the Exchange's rules.
The Review Council is comprised of no fewer than eight and no more than
twelve members, whereby at least twenty percent of the members must be
nominated by the Board's Member Nominating Committee.\6\ Moreover, the
[[Page 28565]]
Review Council must have at least three Public members,\7\ as defined
in the By-Laws, and the number of Non-Industry members \8\ shall equal
or exceed the sum of the number of Industry members \9\ and Member
Representative members.\10\ The By-Laws provide that a quorum for the
transaction of business consists of a majority of the Review Council,
including not less than 50 percent of the Non-Industry members of the
Review Council and at least one Member Representative member.
---------------------------------------------------------------------------
\5\ Decisions issued by the Review Council may be reviewed by
the Board. See, e.g., Rule 9351. If the Board does not call the
proceeding for review, the proposed written decision of the Review
Council shall constitute the final disciplinary action of BX for
purposes of Exchange Act Rule 19d-1(c)(1), unless the Review Council
remands the proceeding. See, e.g., Rule 9349(c).
\6\ Pursuant to the By-Laws, the Board's Member Nominating
Committee is responsible for the nomination of candidates for each
Member Representative Director position on the Board in accordance
with Section 4.4 of the By-Laws, and shall nominate candidates for
appointment by the Board for each vacant or new position on the
Exchange Listing and Hearing Review Council, the Exchange Review
Council, or other committee that is to be filled with a Member
Representative member under the terms of the By-Laws. See Exchange
By-Law, Article IV, Section 4.14(b). Further provided by the By-
Laws, the Member Nominating Committee shall consist of no fewer than
three and no more than six members, and all members of the Member
Nominating Committee shall be a current associated person of a
current Exchange Member. See Exchange By-Law, Article IV, Section
4.14(b)(iii).
\7\ ``Public member'' means an Exchange Listing and Hearing
Review Council member, Exchange Review Council member, or member of
any other committee appointed by the Board who has no material
business relationship with a broker or dealer, the Corporation or
its affiliates, or FINRA. See Exchange By-Law, Article I(hh).
\8\ ``Non-Industry member'' means an Exchange Listing and
Hearing Review Council member, Exchange Review Council member, or
member of any other committee appointed by the Board who is (i) a
Public member; (ii) an officer or employee of an issuer of
securities listed on the Exchange; or (iii) any other individual who
would not be an Industry member. See Exchange By-Law, Article I(cc).
\9\ ``Industry member'' means an Exchange Listing and Hearing
Review Council member, Exchange Review Council member, or member of
any other committee appointed by the Board who (i) is or has served
in the prior three years as an officer, director, or employee of a
broker or dealer, excluding an outside director or a director not
engaged in the day-to-day management of a broker or dealer; (ii) is
an officer, director (excluding an outside director), or employee of
an entity that owns more than ten percent of the equity of a broker
or dealer, and the broker or dealer accounts for more than five
percent of the gross revenues received by the consolidated entity;
(iii) owns more than five percent of the equity securities of any
broker or dealer, whose investments in brokers or dealers exceed ten
percent of his or her net worth, or whose ownership interest
otherwise permits him or her to be engaged in the day-to-day
management of a broker or dealer; (iv) provides professional
services to brokers or dealers, and such services constitute twenty
percent or more of the professional revenues received by the person
or twenty percent or more of the gross revenues received by the
person's firm or partnership; (v) provides professional services to
a director, officer, or employee of a broker, dealer, or corporation
that owns fifty percent or more of the voting stock of a broker or
dealer, and such services relate to the director's, officer's, or
employee's professional capacity and constitute twenty percent or
more of the professional revenues received by the person or twenty
percent or more of the gross revenues received by the person's firm
or partnership; or (vi) has a consulting or employment relationship
with or provides professional services to the Corporation or any
affiliate thereof or to FINRA or has had any such relationship or
provided any such services at any time within the prior three years.
See Exchange By-Law, Article I(u).
\10\ ``Member Representative member'' means an Exchange Listing
and Hearing Review Council member, Exchange Review Council member,
or member of any other committee appointed by the Board who has been
elected or appointed after having been nominated by the Member
Nominating Committee pursuant to these By-Laws. See Exchange By-Law,
Article I(y).
---------------------------------------------------------------------------
Market Operations Review Committee
The MORC is responsible for considering Exchange member appeals of
determinations made pursuant to Exchange Rules 4612, 4619, 4620, 11890,
and Exchange Options Rules Chapter V Section 6. Decisions of the MORC
in these matters are not appealable, however, determinations of the
MORC with respect to Rule 11890 may be arbitrated.\11\ The By-Laws
require that the MORC be comprised of a number of Member Representative
members that is equal to at least 20 percent of the total number of
members of the MORC. Moreover, the By-Laws require that no more than 50
percent of the members of the MORC be engaged in market making activity
or employed by a BX member firm whose revenues from market making
exceed 10 percent of its total revenues. The By-Laws do not provide a
description of what is a quorum for purposes of holding a meeting of
the MORC, however, the committee has adopted a three member quorum
requirement.\12\
---------------------------------------------------------------------------
\11\ See Rule 11890(c)(3). Unlike disciplinary proceedings under
the Rule 9000 Series, speedy resolution of matters under the MORC's
jurisdiction is important to ensuring fair and equitable treatment
of market makers, and, with regard to clearly erroneous
determinations, benefits market participants and helps ensure the
accuracy of transactional information disseminated to investors.
\12\ Rule 11890(c)(2) expressly requires a panel to consist of
three or more members of the MORC, provided that no more than 50
percent of the members of any panel are directly engaged in market
making activity or employed by a member firm whose revenues from
market making activity exceed ten percent of its total revenues. The
rule also states that in no case shall a MORC Panel include a person
affiliated with a party to the trade in question.
---------------------------------------------------------------------------
Market Regulation Committee
The Market Regulation Committee (the ``Regulation Committee'') is a
committee of the Board, which is responsible for providing advice and
guidance to the Board on regulatory proposals and industry initiatives
relating to quotations, execution, trade reporting, and trading
practices; advising the Board in its administration of programs and
systems for the surveillance and enforcement of rules governing
Exchange Member's conduct and trading activities in the Exchange;
providing a pool of attorney panelists for hearing panels under the
Exchange rules; participating in the training of hearing panelists on
issues relating to quotations, executions, trade reporting, and trading
practices; and reviewing and recommending to the Review Council changes
to the Exchange's guidelines for sanctions to be imposed on members for
violations of Exchange rules. The Regulation Committee must have at
least 50 percent Non-Industry committee members and must include a
broad representation of participants in the Exchange, including
investors, market makers, integrated retail firms and order entry
firms. The By-Laws provide that a quorum for the transaction of
business consists of a majority of the Regulation Committee, including
not less than 50 percent of the Non-Industry committee members. The
requirement that not less than 50 percent of Non-Industry members be
present will be waived if at least 50 percent of the Non-Industry
members are present at or have filed a waiver of attendance for a
meeting after receiving an agenda prior to such meeting.
The New Review Council
The Exchange is proposing to expand the responsibilities of the
Review Council by merging the adjudicatory role of the MORC and the
advisory role of the Regulation Committee, both as described above,
into the Review Council. The Exchange is proposing to amend the By-Laws
and Exchange Rules by eliminating references to the Regulation
Committee and MORC, and adding the description of these roles to the
Review Council's responsibilities under the By-Laws and Exchange Rules.
The Exchange is also proposing to define a new type of Panelist under
the rules, which will replace the Regulation Committee Panelist. The
new ``Special Panelist'' will take on the role provided currently by
Regulation Committee Panelists, which is discussed in more detail
below. All of these changes taken together will ensure each function of
the MORC and Regulation Committee will continue, unaltered.
The current composition requirements of the Review Council are as
prescriptive, if not more so, than the composition requirements of the
MORC and Regulation Committee. As noted above, the Review Council must
have between eight and twelve members, whereas the MORC and Regulation
Committee have no such minimum and maximum composition requirements. In
practice, both the MORC and Regulation Committee have fewer members
than eight members each. In addition, the Review Council must have at
least twenty percent of its members nominated by the Member Nominating
[[Page 28566]]
Committee. The MORC has an identical requirement, but the Regulation
Committee does not. The Review Council is also required to have at
least three Public Members, which helps ensure that there is
representation on the Review Council by individuals with no material
relationship with a broker or dealer, the Exchange, its affiliates, or
FINRA, whereas neither the MORC nor Regulation Committee has such a
representation requirement. Similarly, the Review Council is required
to have a number of Non-Industry Members that is greater than or equal
to the total number of Industry and Member Nominating Committee
Members, which is another means of ensuring independent members of the
Review Council. The Regulation Committee has a similar requirement that
Non-Industry Members must be greater than or equal to at least 50
percent of the total number of members, however, the MORC has no such
requirement.
Under the Exchange's By-Laws, the MORC has a unique composition
requirement that limits its membership to no more than 50 percent of
members that are [sic] be engaged in market making activity or employed
by a BX member firm whose revenues from market making exceed 10 percent
of its total revenues. This requirement ensures that the composition of
the MORC is never overrepresented by market making members. The
Exchange is proposing to adopt this requirement for the new Review
Council under the By-Laws.
The By-Laws limit the members of the Review Council to a maximum of
two consecutive three-year terms. The By-Laws further require that
membership of the Review Council is divided into three classes of
members, whose terms expire in different years, thus ensuring that the
Review Council is not completely reconstituted in any given year.
Neither the MORC nor the Regulation Committee has such requirements.
Last, although the By-Laws are silent on what constitutes a quorum for
the conduct of business of the MORC, the committee has adopted a three
member quorum requirement. Accordingly, BX is proposing to adopt a
three Review Council member quorum requirement, solely applicable to
the conduct of business formerly within the scope of the MORC.
In terms of the functions of the MORC, the Review Council will now
be responsible for determinations pursuant to Exchange Rules 4612,
4619, 4620, 11890, and Exchange Options Rules Chapter V Section 6.\13\
As noted above, the current Review Council is an adjudicatory body
charged with the review of disciplinary, statutory disqualification and
membership proceedings. In this regard, members of the Review Council
are called upon to preside over matters, apply Exchange rules and
render decisions that represent disposition of the matter for the
parties. As such, it is well-positioned to take on the additional
adjudicatory responsibilities of the MORC, which likewise requires its
members to preside over matters, apply Exchange rules and render
decisions. Moreover, the Exchange believes that given the diverse
composition of the Review Council, which includes both Member
Representative Members, and Industry and Non-Industry members, it has
an adequately broad representation of Exchange constituents and
independent members that are well suited to make determinations
concerning the rules within the current jurisdiction of the MORC. In
this regard, the Exchange notes that the Review Council is currently
constituted with members who are compliance officers at member firms,
associated persons of member firms, academics, and attorneys. The MORC
is constituted with a similar mix of members.\14\
---------------------------------------------------------------------------
\13\ Unlike decisions of the Review Council issued pursuant to
proceedings concerning disciplinary, statutory disqualification and
membership proceedings, decisions made by the new Review Council
with regard to Exchange Rules 4612, 4619, 4620, 11890, and Exchange
Options Rules Chapter V Section 6 are not eligible for Board review
or appeal to the SEC, but rather will represent the final resolution
of such matters.
\14\ In fact, one individual serves on both the Review Council
and MORC.
---------------------------------------------------------------------------
In terms of the policy role of the Regulation Committee, under the
proposed changes the Board will continue to be able to solicit advice
and guidance on regulatory proposals and industry initiatives relating
to quotations, execution, trade reporting, and trading practices from
the Review Council, when the Board determines to do so, much as it can
under the current By-Law provisions on policies concerning member sales
practices, enforcement policies, fines and sanctions.
The Exchange notes that it is only transferring the advisory role
of the Regulation Committee to the Review Council. The Exchange is not
proposing to draw upon the Review Council as a source of attorney
panelists for hearing panels or the training thereof on issues relating
to quotations, executions, trade reporting, and trading practices.
Rather, the Exchange is proposing to draw upon members of FINRA's pool
of Hearing Panelists provided by their Market Regulation Committee and
from other sources the Board deems appropriate given the
responsibilities of Hearing Panelists. Accordingly, the Exchange
proposes to delete the definition of Market Regulation Committee under
Rule 9120(u) and hold the rule in reserve.
Changes to Rule 9231(b)
The Exchange is proposing minor technical changes to Rule 9231(b),
which concerns the composition of Hearing Panels. BX is eliminating an
erroneous reference to a paragraph (2) under Rule 9231(b)(1), which was
included when the Exchange adopted the rule.\15\
---------------------------------------------------------------------------
\15\ Supra note 3.
---------------------------------------------------------------------------
BX is also replacing references to the Regulation Committee in Rule
9231(b)(1)(D) with references to FINRA Panelists, including members of
FINRA's Member Regulation Committee. BX may currently draw upon a
person who: Previously served on the Exchange Review Council;
previously served on a disciplinary subcommittee of the Exchange Review
Council, including a Subcommittee, an Extended Proceeding Committee, or
their predecessor subcommittees; previously served as a Director, or as
a Governor of the Exchange prior to its acquisition by The NASDAQ OMX
Group, Inc., but does not serve currently in that position; or
currently serves on the Regulation Committee or who previously served
on the Regulation Committee not earlier than four years before the date
the complaint was served upon the Respondent who was the first served
Respondent in the disciplinary proceeding for which the Hearing Panel
or the Extended Hearing Panel is being appointed.\16\ BX is also making
clear that it may draw upon a FINRA Panelist approved by the Exchange
Board, including a member of FINRA's Market Regulation Committee if the
Panelist is approved by the Board at least annually. BX is also
memorializing that a Panelist may be drawn from other sources the Board
deems appropriate given the responsibilities of Panelists.
---------------------------------------------------------------------------
\16\ See Rule 9231(b).
---------------------------------------------------------------------------
The Exchange notes that FINRA's rule concerning the selection
criteria for its Panelists is substantially similar to that of the
Exchange. Specifically, FINRA Rule 9231(b)(1) provides that a Panelist
be a person who: Currently serves or previously served on a District
Committee; previously served on the National Adjudicatory Council;
previously served on a disciplinary
[[Page 28567]]
subcommittee of the National Adjudicatory Council or the National
Business Conduct Committee, including a Subcommittee, an Extended
Proceeding Committee, or their predecessor subcommittees; or,
previously served as a Director or a Governor, but does not serve
currently in any of these positions. BX believes that drawing from
FINRA's pool of Panelists will provide the Exchange with individuals
that have adequate experience and expertise to be BX Panelists, and
will provide a larger pool from which to draw Panelists. BX notes that,
by requiring the Board to approve a FINRA Panelist as a precondition to
participating in a BX matter, BX is ensuring that the Panelists that
review BX matters are adequately qualified to adjudicate such matters.
Other Technical Changes
Lastly, BX is making two minor technical corrections to its rules.
BX is deleting an extraneous ``and'' from the definition of ``Hearing
Officer'' under Rule 9120(r). BX is also adding the word ``to'' to Rule
11890(c)(1), which was erroneously omitted.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \17\ in general, and furthers the objectives of Section
6(b)(5) of the Act \18\ in particular, in that it is designed 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, and is not designed to permit unfair discrimination between
customers, issuers, brokers or dealers. The Exchange also believes that
the proposed rule is consistent with Section 6(b)(6) of the Act,\19\
which requires the rules of an exchange provide that its members be
appropriately disciplined for violations of the Act as well as the
rules and regulations thereunder, or the rules of the Exchange, by
expulsion, suspension, limitation of activities, functions, and
operations, fine, censure, being suspended or barred from being
associated with a member, or any other fitting sanction.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------
The Exchange believes that the proposed changes are consistent with
these requirements because they bring efficiency to the committee
process, by vesting a single Board committee with responsibilities
currently spread across multiple committees, while ensuring that such
responsibilities are performed to a high regulatory standard. In this
regard, the new Review Council is, by every measure, a more diverse
body than the committees that it replaces. The broad membership of the
new Review Council will ensure that decisions made with respect to the
MORC's former responsibilities are made fairly. In this regard, the
Exchange notes that the Review Council will adopt the MORC requirement
that not more than 50 percent of the committee's members be engaged in
market making activity or employed by a BX member firm whose revenues
from market making exceed 10 percent of its total revenues.
As discussed above, the By-Laws limit Review Council members to a
maximum of two consecutive three-year terms, unlike the MORC and
Regulation Committee. This requirement ensures that there is a
consistent influx of new members to the Review Council. The By-Laws
further require that membership of the Review Council is divided into
three classes of members, whose terms expire in different years, thus
ensuring that the Review Council is not completely reconstituted in any
given year. The Exchange notes that the expansion of the Review
Council's responsibilities is an extension of the functions that it
already performs. As discussed above, the Review Council is currently
an adjudicatory body under BX's rules, as well as an advisory committee
to the Board. Accordingly, the Exchange believes that the proposed
changes will serve to protect the public interest and promote
appropriate discipline of members for violations of securities laws and
rules of the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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, as amended.
Specifically, the Exchange believes that this change will bring
efficiency and consistency in application of the investigative and
adjudicatory processes by consolidating Board committee functions.
Consequently, the changes will not impact competition among brokers or
dealers, nor will they impact competition among the Exchange and its
peers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.
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)(ii) of the Act \20\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(a)(ii).
\21\ 17 CFR 240.19b-4(f)(6).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2014-024 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-BX-2014-024. This file
number should be included on the subject line if email is used.
[[Page 28568]]
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 Web site (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 Web site
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 offices of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly.
All submissions should refer to File Number SR-BX-2014-024, and
should be submitted on or before June 6, 2014.
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)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11294 Filed 5-15-14; 8:45 am]
BILLING CODE 8011-01-P