Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Order Approving and Declaring Effective a Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and the National Stock Exchange, Inc., 7871-7873 [2016-02982]
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Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 10 and paragraph (f) of Rule
19b–4 11 thereunder. 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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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–
CBOE–2016–008 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–CBOE–2016–008. 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 the
filing also will be available for
inspection and copying at the principal
office 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–CBOE–
2016–008 and should be submitted on
or before March 8, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Brent J. Fields,
Secretary.
[FR Doc. 2016–02986 Filed 2–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77089; File No. 4–694]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Order Approving and Declaring
Effective a Proposed Plan for the
Allocation of Regulatory
Responsibilities Between the Financial
Industry Regulatory Authority, Inc. and
the National Stock Exchange, Inc.
February 9, 2016.
On December 23, 2015, the National
Stock Exchange, Inc. (‘‘NSX’’) and the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) (together
with NSX, the ‘‘Parties’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) a plan for the
allocation of regulatory responsibilities,
dated December 22, 2015 (‘‘17d–2 Plan’’
or the ‘‘Plan’’). The Plan was published
for comment on January 14, 2016.1 The
Commission received no comments on
the Plan. This order approves and
declares effective the Plan.
12 17
CFR 200.30–3(a)(12).
Securities Exchange Act Release No. 76856
(January 8, 2016), 81 FR 1971.
10 15
U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f).
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7871
I. Introduction
Section 19(g)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),2 among
other things, requires every selfregulatory organization (‘‘SRO’’)
registered as either a national securities
exchange or national securities
association to examine for, and enforce
compliance by, its members and persons
associated with its members with the
Act, the rules and regulations
thereunder, and the SRO’s own rules,
unless the SRO is relieved of this
responsibility pursuant to Section 17(d)
or Section 19(g)(2) of the Act.3 Without
this relief, the statutory obligation of
each individual SRO could result in a
pattern of multiple examinations of
broker-dealers that maintain
memberships in more than one SRO
(‘‘common members’’). Such regulatory
duplication would add unnecessary
expenses for common members and
their SROs.
Section 17(d)(1) of the Act 4 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.5 With respect to
a common member, Section 17(d)(1)
authorizes the Commission, by rule or
order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules, and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 and Rule 17d–2 under the Act.6
Rule 17d–1 authorizes the Commission
to name a single SRO as the designated
examining authority (‘‘DEA’’) to
examine common members for
compliance with the financial
responsibility requirements imposed by
the Act, or by Commission or SRO
rules.7 When an SRO has been named as
a common member’s DEA, all other
SROs to which the common member
belongs are relieved of the responsibility
to examine the firm for compliance with
the applicable financial responsibility
rules. On its face, Rule 17d–1 deals only
with an SRO’s obligations to enforce
member compliance with financial
responsibility requirements. Rule 17d–1
does not relieve an SRO from its
2 15
U.S.C. 78s(g)(1).
U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2),
respectively.
4 15 U.S.C. 78q(d)(1).
5 See Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session 32 (1975).
6 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
respectively.
7 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
3 15
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Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Notices
obligation to examine a common
member for compliance with its own
rules and provisions of the federal
securities laws governing matters other
than financial responsibility, including
sales practices and trading activities and
practices.
To address regulatory duplication in
these and other areas, the Commission
adopted Rule 17d–2 under the Act.8
Rule 17d–2 permits SROs to propose
joint plans for the allocation of
regulatory responsibilities with respect
to their common members. Under
paragraph (c) of Rule 17d–2, the
Commission may declare such a plan
effective if, after providing for
appropriate notice and comment, it
determines that the plan is necessary or
appropriate in the public interest and
for the protection of investors; to foster
cooperation and coordination among the
SROs; to remove impediments to, and
foster the development of, a national
market system and a national clearance
and settlement system; and is in
conformity with the factors set forth in
Section 17(d) of the Act. Commission
approval of a plan filed pursuant to Rule
17d–2 relieves an SRO of those
regulatory responsibilities allocated by
the plan to another SRO.
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II. Proposed Plan
The proposed 17d–2 Plan is intended
to reduce regulatory duplication for
firms that are common members of both
NSX and FINRA.9 Pursuant to the
proposed 17d–2 Plan, FINRA would
assume certain examination and
enforcement responsibilities for
common members with respect to
certain applicable laws, rules, and
regulations.
The text of the Plan delineates the
proposed regulatory responsibilities
with respect to the Parties. Included in
the proposed Plan is an exhibit (the
‘‘National Stock Exchange (‘‘NSX’’)
Rules Certification for 17d–2 Agreement
with FINRA,’’ referred to herein as the
‘‘Certification’’) that lists every NSX
rule, and select federal securities laws,
rules, and regulations, for which FINRA
would bear responsibility under the
Plan for overseeing and enforcing with
respect to NSX members that are also
8 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
9 The proposed 17d–2 Plan refers to these
common members as ‘‘Dual Members.’’ See
Paragraph 1(c) of the proposed 17d–2 Plan. On
December 14, 2015, the Commission approved a
proposal from NSX to resume its status as a fully
operational securities exchange and to recommence trading operations. See Securities
Exchange Act Release No. 76640 (December 14,
2015), 80 FR 79122 (December 18, 2015) (SR–NSX–
2015–05) (approval order).
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members of FINRA and the associated
persons therewith (‘‘Dual Members’’).
Specifically, under the 17d–2 Plan,
FINRA would assume examination and
enforcement responsibility relating to
compliance by Dual Members with the
rules of NSX that are substantially
similar to the applicable rules of
FINRA,10 as well as any provisions of
the federal securities laws and the rules
and regulations thereunder delineated
in the Certification (‘‘Common Rules’’).
In the event that a Dual Member is the
subject of an investigation relating to a
transaction on NSX, the plan
acknowledges that NSX may, in its
discretion, exercise concurrent
jurisdiction and responsibility for such
matter.11
Under the Plan, NSX would retain full
responsibility for surveillance and
enforcement with respect to trading
activities or practices involving NSX’s
own marketplace, including, without
limitation, registration pursuant to its
applicable rules of associated persons
(i.e., registration rules that are not
Common Rules); its duties as a DEA
pursuant to Rule 17d–1 under the Act;
and any NSX rules that are not Common
Rules.12
III. Discussion
The Commission finds that the
proposed Plan is consistent with the
factors set forth in Section 17(d) of the
Act 13 and Rule 17d–2(c) thereunder 14
in that the proposed Plan is necessary
or appropriate in the public interest and
for the protection of investors, fosters
cooperation and coordination among
SROs, and removes impediments to and
fosters the development of the national
market system. In particular, the
Commission believes that the proposed
Plan should reduce unnecessary
regulatory duplication by allocating to
FINRA certain examination and
enforcement responsibilities for
common members that would otherwise
be performed by NSX and FINRA.
Accordingly, the proposed Plan
promotes efficiency by reducing costs to
common members. Furthermore,
because NSX and FINRA will
10 See paragraph 1(b) of the proposed 17d–2 Plan
(defining Common Rules). See also paragraph 1(f)
of the proposed 17d–2 Plan (defining Regulatory
Responsibilities). Paragraph 2 of the Plan provides
that annually, or more frequently as required by
changes in either NSX rules or FINRA rules, the
parties shall review and update, if necessary, the
list of Common Rules. Further, paragraph 3 of the
Plan provides that NSX shall furnish FINRA with
a list of Dual Members, and shall update the list no
less frequently than once each calendar quarter.
11 See paragraph 6 of the proposed 17d–2 Plan.
12 See paragraph 2 of the proposed 17d–2 Plan.
13 15 U.S.C. 78q(d).
14 17 CFR 240.17d–2(c).
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coordinate their regulatory functions in
accordance with the Plan, the Plan
should promote investor protection.
The Commission notes that, under the
Plan, NSX and FINRA have allocated
regulatory responsibility for those NSX
rules, set forth in the Certification, that
are substantially similar to the
applicable FINRA rules in that
examination for compliance with such
provisions and rules would not require
FINRA to develop one or more new
examination standards, modules,
procedures, or criteria in order to
analyze the application of the rule, or a
common member’s activity, conduct, or
output in relation to such rule. In
addition, under the Plan, FINRA would
assume regulatory responsibility for
certain provisions of the federal
securities laws and the rules and
regulations thereunder that are set forth
in the Certification. The Common Rules
covered by the Plan are specifically
listed in the Certification, as may be
amended by the Parties from time to
time.
According to the Plan, NSX will
review the Certification, at least
annually, or more frequently if required
by changes in either the rules of NSX or
FINRA, and, if necessary, submit to
FINRA an updated list of Common
Rules to add NSX rules not included on
the then-current list of Common Rules
that are substantially similar to FINRA
rules; delete NSX rules included in the
then-current list of Common Rules that
are no longer substantially similar to
FINRA rules; and confirm that the
remaining rules on the list of Common
Rules continue to be NSX rules that are
substantially similar to FINRA rules.15
FINRA will then confirm in writing
whether the rules listed in any updated
list are Common Rules as defined in the
Plan. Under the Plan, NSX will also
provide FINRA with a current list of
common members and shall update the
list no less frequently than once each
quarter.16 The Commission believes that
these provisions are designed to provide
for continuing communication between
the Parties to ensure the continued
accuracy of the scope of the proposed
allocation of regulatory responsibility.
The Commission is hereby declaring
effective a Plan that, among other
things, allocates regulatory
responsibility to FINRA for the
oversight and enforcement of all NSX
rules that are substantially similar to the
rules of FINRA for common members of
NSX and FINRA. Therefore,
modifications to the Certification need
not be filed with the Commission as an
15 See
16 See
E:\FR\FM\16FEN1.SGM
paragraph 2 of the Plan.
paragraph 3 of the Plan.
16FEN1
7873
Federal Register / Vol. 81, No. 30 / Tuesday, February 16, 2016 / Notices
amendment to the Plan, provided that
the Parties are only adding to, deleting
from, or confirming changes to NSX
rules in the Certification in conformance
with the definition of Common Rules
provided in the Plan. However, should
the Parties decide to add a NSX rule to
the Certification that is not substantially
similar to a FINRA rule; delete a NSX
rule from the Certification that is
substantially similar to a FINRA rule; or
leave on the Certification a NSX rule
that is no longer substantially similar to
a FINRA rule, then such a change would
constitute an amendment to the Plan,
which must be filed with the
Commission pursuant to Rule 17d–2
under the Act.17
IV. Conclusion
This Order gives effect to the Plan
filed with the Commission in File No.
4–694. The Parties shall notify all
members affected by the Plan of their
rights and obligations under the Plan.
It is therefore ordered, pursuant to
Section 17(d) of the Act, that the Plan
in File No. 4–694, between FINRA and
NSX, filed pursuant to Rule 17d–2
under the Act, is approved and declared
effective.
It is further ordered that NSX is
relieved of those responsibilities
allocated to FINRA under the Plan in
File No. 4–694.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Brent J. Fields,
Secretary.
[FR Doc. 2016–02982 Filed 2–12–16; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77092; File No. SR–BOX–
2016–03]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Add Rule
7310 (Drill-Through Protection) To
Implement a New Price Protection
Feature
February 9, 2016.
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 January
27, 2016, BOX Options Exchange LLC
(the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add Rule
7310 (Drill-through Protection) to
implement a new price protection
feature. The text of the proposed rule
change is available from the principal
office of the Exchange, at the
Commission’s Public Reference Room
and also on the Exchange’s Internet Web
site at https://boxexchange.com.
BILLING CODE 8011–01–P
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to adopt a
mechanism that will prevent BOX from
experiencing dramatic price swings.
Specifically, the Exchange proposes to
add Rule 7310 (Drill-through Protection)
to implement a new price protection
feature on BOX. The new price
protection feature is designed to prevent
orders and quotes from drilling through
and executing at multiple price points.
This circumstance can exist if, for
example, a Market Order,3 or
aggressively priced Limit Order 4 or
quote is entered that is larger than the
total volume of contracts quoted at the
top-of-book across all U.S. options
exchanges.5 Currently, without any
protections in place, this could result in
options executing at prices that have
little or no relation to the theoretical
price of the option.
For example, in a thinly traded
option:
AWAY EXCHANGES
Exchange
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Away
Away
Away
Away
Exchange
Exchange
Exchange
Exchange
#1
#2
#3
#4
Bid size
..........................................................................................
..........................................................................................
..........................................................................................
..........................................................................................
17 The Commission also notes that the addition to
or deletion from the Certification of any federal
securities laws, rules, and regulations for which
FINRA would bear responsibility under the Plan for
examining, and enforcing compliance by, common
members, also would constitute an amendment to
the Plan.
18 17 CFR 200.30–3(a)(34).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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Bid price
5
5
5
5
3 Market Orders submitted to BOX are executed
at the best price obtainable for the total quantity
available when the order reaches the BOX market.
Any remaining quantity is executed at the next best
price available for the total quantity available. This
process continues until the Market Order is fully
executed. Prior to execution at each price level,
Market Orders are filtered pursuant to the
procedures set forth in Rule 7130(b) to avoid
trading through the NBBO. See Rule 7110(c)(3).
4 Limit Orders entered into the BOX Book are
executed at the price stated or better. Any residual
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$2.00
2.00
2.00
2.00
Offer price
$2.05
2.10
2.10
2.15
Offer size
5
5
5
5
volume left after part of a Limit Order has traded
is retained in the BOX Book until it is withdrawn
or traded (unless a designation described in
Rule7110(d) is added which prevents the untraded
part of a limit order from being retained). All Limit
Orders (with the exception of those with a Good ’Til
Cancelled (‘‘GTC’’) designation as described in Rule
7110(d)(1)) are automatically withdrawn by the
Trading Host at market close.
5 There are currently 12 options exchanges.
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]]>Agencies
[Federal Register Volume 81, Number 30 (Tuesday, February 16, 2016)]
[Notices]
[Pages 7871-7873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02982]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77089; File No. 4-694]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Order Approving and Declaring Effective a Proposed Plan for
the Allocation of Regulatory Responsibilities Between the Financial
Industry Regulatory Authority, Inc. and the National Stock Exchange,
Inc.
February 9, 2016.
On December 23, 2015, the National Stock Exchange, Inc. (``NSX'')
and the Financial Industry Regulatory Authority, Inc. (``FINRA'')
(together with NSX, the ``Parties'') filed with the Securities and
Exchange Commission (``Commission'' or ``SEC'') a plan for the
allocation of regulatory responsibilities, dated December 22, 2015
(``17d-2 Plan'' or the ``Plan''). The Plan was published for comment on
January 14, 2016.\1\ The Commission received no comments on the Plan.
This order approves and declares effective the Plan.
---------------------------------------------------------------------------
\1\ See Securities Exchange Act Release No. 76856 (January 8,
2016), 81 FR 1971.
---------------------------------------------------------------------------
I. Introduction
Section 19(g)(1) of the Securities Exchange Act of 1934
(``Act''),\2\ among other things, requires every self-regulatory
organization (``SRO'') registered as either a national securities
exchange or national securities association to examine for, and enforce
compliance by, its members and persons associated with its members with
the Act, the rules and regulations thereunder, and the SRO's own rules,
unless the SRO is relieved of this responsibility pursuant to Section
17(d) or Section 19(g)(2) of the Act.\3\ Without this relief, the
statutory obligation of each individual SRO could result in a pattern
of multiple examinations of broker-dealers that maintain memberships in
more than one SRO (``common members''). Such regulatory duplication
would add unnecessary expenses for common members and their SROs.
---------------------------------------------------------------------------
\2\ 15 U.S.C. 78s(g)(1).
\3\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
---------------------------------------------------------------------------
Section 17(d)(1) of the Act \4\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\5\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q(d)(1).
\5\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------
To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\6\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\7\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its
[[Page 7872]]
obligation to examine a common member for compliance with its own rules
and provisions of the federal securities laws governing matters other
than financial responsibility, including sales practices and trading
activities and practices.
---------------------------------------------------------------------------
\6\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\7\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
---------------------------------------------------------------------------
To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\8\ Rule 17d-2 permits SROs
to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for appropriate notice and comment, it determines that
the plan is necessary or appropriate in the public interest and for the
protection of investors; to foster cooperation and coordination among
the SROs; to remove impediments to, and foster the development of, a
national market system and a national clearance and settlement system;
and is in conformity with the factors set forth in Section 17(d) of the
Act. Commission approval of a plan filed pursuant to Rule 17d-2
relieves an SRO of those regulatory responsibilities allocated by the
plan to another SRO.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------
II. Proposed Plan
The proposed 17d-2 Plan is intended to reduce regulatory
duplication for firms that are common members of both NSX and FINRA.\9\
Pursuant to the proposed 17d-2 Plan, FINRA would assume certain
examination and enforcement responsibilities for common members with
respect to certain applicable laws, rules, and regulations.
---------------------------------------------------------------------------
\9\ The proposed 17d-2 Plan refers to these common members as
``Dual Members.'' See Paragraph 1(c) of the proposed 17d-2 Plan. On
December 14, 2015, the Commission approved a proposal from NSX to
resume its status as a fully operational securities exchange and to
re-commence trading operations. See Securities Exchange Act Release
No. 76640 (December 14, 2015), 80 FR 79122 (December 18, 2015) (SR-
NSX-2015-05) (approval order).
---------------------------------------------------------------------------
The text of the Plan delineates the proposed regulatory
responsibilities with respect to the Parties. Included in the proposed
Plan is an exhibit (the ``National Stock Exchange (``NSX'') Rules
Certification for 17d-2 Agreement with FINRA,'' referred to herein as
the ``Certification'') that lists every NSX rule, and select federal
securities laws, rules, and regulations, for which FINRA would bear
responsibility under the Plan for overseeing and enforcing with respect
to NSX members that are also members of FINRA and the associated
persons therewith (``Dual Members'').
Specifically, under the 17d-2 Plan, FINRA would assume examination
and enforcement responsibility relating to compliance by Dual Members
with the rules of NSX that are substantially similar to the applicable
rules of FINRA,\10\ as well as any provisions of the federal securities
laws and the rules and regulations thereunder delineated in the
Certification (``Common Rules''). In the event that a Dual Member is
the subject of an investigation relating to a transaction on NSX, the
plan acknowledges that NSX may, in its discretion, exercise concurrent
jurisdiction and responsibility for such matter.\11\
---------------------------------------------------------------------------
\10\ See paragraph 1(b) of the proposed 17d-2 Plan (defining
Common Rules). See also paragraph 1(f) of the proposed 17d-2 Plan
(defining Regulatory Responsibilities). Paragraph 2 of the Plan
provides that annually, or more frequently as required by changes in
either NSX rules or FINRA rules, the parties shall review and
update, if necessary, the list of Common Rules. Further, paragraph 3
of the Plan provides that NSX shall furnish FINRA with a list of
Dual Members, and shall update the list no less frequently than once
each calendar quarter.
\11\ See paragraph 6 of the proposed 17d-2 Plan.
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Under the Plan, NSX would retain full responsibility for
surveillance and enforcement with respect to trading activities or
practices involving NSX's own marketplace, including, without
limitation, registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules); its
duties as a DEA pursuant to Rule 17d-1 under the Act; and any NSX rules
that are not Common Rules.\12\
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\12\ See paragraph 2 of the proposed 17d-2 Plan.
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III. Discussion
The Commission finds that the proposed Plan is consistent with the
factors set forth in Section 17(d) of the Act \13\ and Rule 17d-2(c)
thereunder \14\ in that the proposed Plan is necessary or appropriate
in the public interest and for the protection of investors, fosters
cooperation and coordination among SROs, and removes impediments to and
fosters the development of the national market system. In particular,
the Commission believes that the proposed Plan should reduce
unnecessary regulatory duplication by allocating to FINRA certain
examination and enforcement responsibilities for common members that
would otherwise be performed by NSX and FINRA. Accordingly, the
proposed Plan promotes efficiency by reducing costs to common members.
Furthermore, because NSX and FINRA will coordinate their regulatory
functions in accordance with the Plan, the Plan should promote investor
protection.
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\13\ 15 U.S.C. 78q(d).
\14\ 17 CFR 240.17d-2(c).
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The Commission notes that, under the Plan, NSX and FINRA have
allocated regulatory responsibility for those NSX rules, set forth in
the Certification, that are substantially similar to the applicable
FINRA rules in that examination for compliance with such provisions and
rules would not require FINRA to develop one or more new examination
standards, modules, procedures, or criteria in order to analyze the
application of the rule, or a common member's activity, conduct, or
output in relation to such rule. In addition, under the Plan, FINRA
would assume regulatory responsibility for certain provisions of the
federal securities laws and the rules and regulations thereunder that
are set forth in the Certification. The Common Rules covered by the
Plan are specifically listed in the Certification, as may be amended by
the Parties from time to time.
According to the Plan, NSX will review the Certification, at least
annually, or more frequently if required by changes in either the rules
of NSX or FINRA, and, if necessary, submit to FINRA an updated list of
Common Rules to add NSX rules not included on the then-current list of
Common Rules that are substantially similar to FINRA rules; delete NSX
rules included in the then-current list of Common Rules that are no
longer substantially similar to FINRA rules; and confirm that the
remaining rules on the list of Common Rules continue to be NSX rules
that are substantially similar to FINRA rules.\15\ FINRA will then
confirm in writing whether the rules listed in any updated list are
Common Rules as defined in the Plan. Under the Plan, NSX will also
provide FINRA with a current list of common members and shall update
the list no less frequently than once each quarter.\16\ The Commission
believes that these provisions are designed to provide for continuing
communication between the Parties to ensure the continued accuracy of
the scope of the proposed allocation of regulatory responsibility.
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\15\ See paragraph 2 of the Plan.
\16\ See paragraph 3 of the Plan.
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The Commission is hereby declaring effective a Plan that, among
other things, allocates regulatory responsibility to FINRA for the
oversight and enforcement of all NSX rules that are substantially
similar to the rules of FINRA for common members of NSX and FINRA.
Therefore, modifications to the Certification need not be filed with
the Commission as an
[[Page 7873]]
amendment to the Plan, provided that the Parties are only adding to,
deleting from, or confirming changes to NSX rules in the Certification
in conformance with the definition of Common Rules provided in the
Plan. However, should the Parties decide to add a NSX rule to the
Certification that is not substantially similar to a FINRA rule; delete
a NSX rule from the Certification that is substantially similar to a
FINRA rule; or leave on the Certification a NSX rule that is no longer
substantially similar to a FINRA rule, then such a change would
constitute an amendment to the Plan, which must be filed with the
Commission pursuant to Rule 17d-2 under the Act.\17\
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\17\ The Commission also notes that the addition to or deletion
from the Certification of any federal securities laws, rules, and
regulations for which FINRA would bear responsibility under the Plan
for examining, and enforcing compliance by, common members, also
would constitute an amendment to the Plan.
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IV. Conclusion
This Order gives effect to the Plan filed with the Commission in
File No. 4-694. The Parties shall notify all members affected by the
Plan of their rights and obligations under the Plan.
It is therefore ordered, pursuant to Section 17(d) of the Act, that
the Plan in File No. 4-694, between FINRA and NSX, filed pursuant to
Rule 17d-2 under the Act, is approved and declared effective.
It is further ordered that NSX is relieved of those
responsibilities allocated to FINRA under the Plan in File No. 4-694.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Brent J. Fields,
Secretary.
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\18\ 17 CFR 200.30-3(a)(34).
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[FR Doc. 2016-02982 Filed 2-12-16; 8:45 am]
BILLING CODE 8011-01-P
