Program for Allocation of Regulatory Responsibilities Pursuant To Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amended Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc., Cboe Exchange, Inc., and Cboe C2 Exchange, Inc., 22732-22738 [2018-10369]
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Federal Register / Vol. 83, No. 95 / Wednesday, May 16, 2018 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83208; File No. 4–536]
Program for Allocation of Regulatory
Responsibilities Pursuant To Rule
17d–2; Notice of Filing and Order
Approving and Declaring Effective an
Amended Plan for the Allocation of
Regulatory Responsibilities Between
the Financial Industry Regulatory
Authority, Inc., Cboe Exchange, Inc.,
and Cboe C2 Exchange, Inc.
May 10, 2018.
sradovich on DSK3GMQ082PROD with NOTICES
Notice is hereby given that the
Securities and Exchange Commission
(‘‘Commission’’) has issued an Order,
pursuant to Section 17(d) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 approving and declaring
effective an amendment to the plan for
allocating regulatory responsibility
(‘‘Plan’’) filed on May 4, 2018, pursuant
to Rule 17d–2 of the Act,2 by the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’), Cboe
Exchange, Inc. (‘‘Cboe’’), and Cboe C2
Exchange, Inc. (‘‘C2’’) (collectively,
‘‘Participating Organizations’’ or
‘‘parties’’). This Agreement amends and
restates the agreement entered into
between FINRA, Cboe, and C2 on March
21, 2014, entitled ‘‘Agreement Among
Financial Industry Regulatory
Authority, Inc., Chicago Board Options
Exchange, Incorporated, and C2 Options
Exchange, Incorporated Pursuant to
Rule 17d–2 under the Securities
Exchange Act of 1934,’’ and any
subsequent amendments thereafter.
I. Introduction
Section 19(g)(1) of the Act,3 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) 4 or Section 19(g)(2) 5 of the Act.
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
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 15 U.S.C. 78s(g)(1).
4 15 U.S.C. 78q(d).
5 15 U.S.C. 78s(g)(2).
2 17
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unnecessary expenses for common
members and their SROs.
Section 17(d)(1) of the Act 6 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.7 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.8
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.9 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
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.10
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 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
6 15
U.S.C. 78q(d)(1).
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).
8 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
respectively.
9 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
10 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
7 See
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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.
II. The Plan
On May 14, 2007, the Commission
declared effective the Plan entered into
between NASD (n/k/a FINRA) and Cboe
for allocating regulatory responsibility
pursuant to Rule 17d–2.11 On May 9,
2014, the Commission declared effective
an amendment to the Plan to add C2 as
a Participant to the Plan.12 The Plan is
intended to reduce regulatory
duplication for firms that are common
members of FINRA and at least one of
Cboe or C2 by allocating regulatory
responsibility with respect to certain
applicable laws, rules, and regulations
that are common among them. Included
in the Plan is an exhibit that lists every
Cboe and C2 rule for which FINRA
bears responsibility under the Plan for
overseeing and enforcing with respect to
CBOE or C2 members that are also
members of FINRA and the associated
persons therewith.
III. Proposed Amendment to the Plan
On May 4, 2018, the parties submitted
a proposed amendment to the Plan
(‘‘Amended Plan’’). The primary
purposes of the Amended Plan are to (1)
remove Cboe’s former equities trading
facility, CBSX, from the Plan; (2) to the
extent that it becomes a member of
either exchange, allocate regulatory
responsibility to FINRA for Cboe’s and
C2’s affiliated routing broker-dealer,
Cboe Trading, Inc.; and (3) allocate
surveillance, investigation, and
enforcement responsibilities for Rule
14e-4 under the Act . The text of the
proposed Amended Plan is as follows
(additions are italicized; deletions are
[bracketed]):
*
*
*
*
*
Agreement Among Financial Industry
Regulatory Authority, Inc., [Chicago
Board Options Exchange, Incorporated]
CBOE Exchange, Inc., and CBOE C2
[Options] Exchange, [Incorporated] Inc.
Pursuant to Rule 17d–2 Under the
Securities Exchange Act of 1934
This Agreement, by and among
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’), [the Chicago
11 See Securities Exchange Act Release No. 55755
(May 14, 2007), 72 FR 28087 (May 18, 2007).
12 See Securities Exchange Act Release No. 72137
(May 9, 2014), 79 FR 27965 (May 15, 2014).
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Federal Register / Vol. 83, No. 95 / Wednesday, May 16, 2018 / Notices
Board Options Exchange,
Incorporated]Cboe Exchange, Inc.
(‘‘[CBOE]Cboe’’), and Cboe C2 [Options]
Exchange, [Incorporated]Inc. (‘‘C2’’) is
made this [21st]4th day of [March, 2014]
May, 2018 (the ‘‘Agreement’’), pursuant
to Section 17(d) of the Securities
Exchange Act of 1934 (the ‘‘Exchange
Act’’) and Rule 17d–2 thereunder which
permits agreements between selfregulatory organizations to allocate
regulatory responsibility to eliminate
regulatory duplication. FINRA,
[CBOE]Cboe and C2 may be referred to
individually as a ‘‘party’’ and together
as the ‘‘parties.’’
This Agreement amends and restates
the agreement entered into between
[NASD (n/k/a] FINRA[) and],
[CBOE]Cboe and C2 on [April 4,
2007]March 21, 2014, entitled
‘‘Agreement [between NASD and
CBOE]Among Financial Industry
Regulatory Authority, Inc., Chicago
Board Options Exchange, Incorporated,
and C2 Options Exchange, Incorporated
Pursuant to Rule 17d–2 under the
Securities Exchange Act of 1934,’’ and
any subsequent amendments thereafter.
WHEREAS, the parties desire to
reduce duplication in the examination
of their Common Members (as defined
herein) and in the filing and processing
of certain registration and membership
records as it relates to [the CBOE]Cboe
[options exchange,]and C2 [options
exchange and the CBOE equity
exchange facility operated by CBOE
Stock Exchange, LLC (‘‘CBSX’’)]; and
WHEREAS, the parties desire to
execute an agreement covering such
subjects pursuant to the provisions of
Rule 17d–2 under the Exchange Act and
to file such agreement with the
Securities and Exchange Commission
(the ‘‘SEC’’ or ‘‘Commission’’) for its
approval.
NOW, THEREFORE, in consideration
of the mutual covenants contained
hereinafter, the parties hereby agree as
follows:
1. Definitions. Unless otherwise
defined in this Agreement or the context
otherwise requires, the terms used in
this Agreement shall have the same
meaning as they have under the
Exchange Act and the rules and
regulations thereunder. As used in this
Agreement, the following terms shall
have the following meanings:
(a) ‘‘Rule’’ of an ‘‘exchange’’ or an
‘‘association’’ shall have the meaning
defined in Exchange Act Section
3(a)(27).
(b) ‘‘Common Rules’’ shall mean the
[CBOE]Cboe Rules and C2 Rules that are
substantially similar to the applicable
FINRA Rules in that examination for
compliance with such Rules would not
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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[;
provided, however, Common Rules
shall not include the application of SEC,
CBOE, C2 or FINRA Rules as they
pertain to violations of insider trading
activities, which is covered by a
separate 17d–2 Agreement by and
among the BATS Exchange, Inc.,
BATS–Y Exchange, Inc., CBOE, Chicago
Stock Exchange, Inc., EDGA Exchange,
Inc., EDGX Exchange, Inc., FINRA,
NASDAQ OMX BX, Inc., NASDAQ
OMX PHLX LLC, The NASDAQ Stock
Market LLC, National Stock Exchange,
Inc., New York Stock Exchange, LLC,
NYSE Amex LLC, and NYSE Arca Inc.,
effective December 16, 2011, as may be
amended from time to time]. Common
Rules shall not include any provisions
regarding: (i) Notice, reporting or any
other filings made directly to or from C2
or Cboe; (ii) incorporation by reference
of other C2 or Cboe Rules that are not
Common Rules; (iii) exercise of
discretion in a manner that differs from
FINRA’s exercise of discretion
including, but not limited to exercise of
exemptive authority by C2 or Cboe; (iv)
prior written approval of C2 or Cboe;
and (v) payment of fees or fines to C2
or Cboe.
(c) ‘‘Common Members’’ shall mean
members of FINRA and at least one of
[CBOE]Cboe or C2.
(d) ‘‘Effective Date’’ shall be the date
this Agreement is approved by the
Commission.
(e) ‘‘Enforcement Responsibilities’’
shall mean the conduct of appropriate
proceedings, in accordance with
FINRA’s Code of Procedure (the Rule
9000 Series) and other applicable
FINRA procedural Rules, to determine
whether violations of pertinent laws,
rules or regulations have occurred, and
if such violations are deemed to have
occurred, the imposition of appropriate
sanctions as specified under FINRA’s
Code of Procedure and sanctions
guidelines.
(f) ‘‘Regulatory Responsibilities’’ shall
mean the examination responsibilities
and Enforcement Responsibilities
relating to compliance by the Common
Members with the Common Rules and
the provisions of the Exchange Act and
the rules and regulations thereunder,
and other applicable laws, rules and
regulations, each as set forth on Exhibit
1 attached hereto. The term ‘‘Regulatory
Responsibility’’ shall also include the
surveillance, investigation and
Enforcement Responsibilities relating to
compliance by Common Members with
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22733
the Rule 14e–4 of the Securities
Exchange Act (‘‘Rule 14e–4’’), with a
focus on the standardized call option
provision of Rule 14e–4(a)(1)(ii)(D).
2. Regulatory and Enforcement
Responsibilities. FINRA shall assume
Regulatory Responsibilities and
Enforcement Responsibilities for
Common Members. Attached as Exhibit
1 to this Agreement and made part
hereof, [CBOE]Cboe and C2 furnished
FINRA with a current list of Common
Rules and certified to FINRA that such
Rules are substantially similar to the
corresponding FINRA Rule (the
‘‘Certification’’). FINRA hereby agrees
that the Rules listed in the Certification
are Common Rules as defined in this
Agreement. Each year following the
Effective Date of this Agreement, or
more frequently if required by changes
in the Rules of the parties, [CBOE]Cboe
and C2 shall submit an updated list of
Common Rules to FINRA for review
which shall add [CBOE]Cboe or C2
Rules not included in the current list of
Common Rules that qualify as Common
Rules as defined in this Agreement;
delete [CBOE]Cboe or C2 Rules included
in the current list of Common Rules that
no longer qualify as Common Rules as
defined in this Agreement; and confirm
that the remaining Rules on the current
list of Common Rules continue to be
[CBOE]Cboe or C2 Rules that qualify as
Common Rules as defined in this
Agreement. Within 30 days of receipt of
such updated list, FINRA shall confirm
in writing whether the Rules listed in
any updated list are Common Rules as
defined in this Agreement.
Notwithstanding anything herein to the
contrary, it is explicitly understood that
the term ‘‘Regulatory Responsibilities’’
does not include, and [CBOE]Cboe and
C2 shall retain full responsibility for
(unless otherwise addressed by separate
agreement or rule) the following
(collectively, the ‘‘Retained
Responsibilities’’):
(a) Surveillance and enforcement with
respect to trading activities or practices
involving [CBOE]Cboe’s or C2’s own
marketplace, including without
limitation [CBOE]Cboe’s or C2’s Rules
relating to the rights and obligations of
market makers;
(b) registration pursuant to their
applicable Rules of associated persons
(i.e., registration rules that are not
Common Rules);
(c) discharge of their duties and
obligations as a Designated Examining
Authority pursuant to Rule 17d–1 under
the Exchange Act; and
(d) any [CBOE]Cboe Rules and C2
Rules that are not Common Rules,
except Cboe Rules or C2 Rules for any
Cboe or C2 affiliate that is a member
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that operates as a facility (as defined in
Section 3(a)(2) of the Exchange Act),
acts as a router for Cboe or C2 and is
a member of FINRA (‘‘Router Member’’)
as provided in paragraph 6. As of the
date of this Agreement, Cboe Trading,
Inc. is the only Router Member.
3. Common Members. Prior to the
Effective Date, [CBOE]Cboe and C2 shall
furnish FINRA with a current list of
Common Members, which shall be
updated no less frequently than once
every six months.
4. No Charge. There shall be no charge
to [CBOE]Cboe and C2 by FINRA for
performing the Regulatory
Responsibilities and Enforcement
Responsibilities under this Agreement
except as hereinafter provided. FINRA
shall provide[CBOE]Cboe and C2 with
ninety (90) days advance written notice
in the event FINRA decides to impose
any charges to [CBOE]Cboe and C2 for
performing the Regulatory
Responsibilities under this Agreement.
If FINRA determines to impose a charge,
[CBOE]Cboe and C2 shall have the right
at the time of the imposition of such
charge to terminate this Agreement;
provided, however, that FINRA’s
Regulatory Responsibilities under this
Agreement shall continue until the
Commission approves the termination
of this Agreement.
5. Reassignment of Regulatory
Responsibilities. Notwithstanding any
provision hereof, this Agreement shall
be subject to any statute, or any rule or
order of the Commission, or industry
agreement, restructuring the regulatory
framework of the securities industry or
reassigning Regulatory Responsibilities
between self-regulatory organizations.
To the extent such action is inconsistent
with this Agreement, such action shall
supersede the provisions hereof to the
extent necessary for them to be properly
effectuated and the provisions hereof in
that respect shall be null and void.
6. Notification of Violations. In the
event that FINRA becomes aware of
apparent violations of any [CBOE]Cboe
or C2 Rules, which are not listed as
Common Rules, discovered pursuant to
the performance of the Regulatory
Responsibilities assumed hereunder,
FINRA shall notify [CBOE]Cboe and C2
of those apparent violations for such
response as [CBOE]Cboe and C2 deems
appropriate. In the event, [CBOE]Cboe
or C2 becomes aware of apparent
violations of any Common Rules,
discovered pursuant to the Retained
Responsibilities, [CBOE]Cboe and C2
shall notify FINRA of those apparent
violations and such matters shall be
handled by FINRA as provided in this
Agreement. Apparent violations of
Common Rules shall be processed by,
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and enforcement proceedings in respect
thereto shall be conducted by FINRA as
provided hereinbefore; provided,
however, that in the event a Common
Member is the subject of an
investigation relating to a transaction on
[the CBOE]Cboe or C2 options
exchanges, [or the CBSX, CBOE]Cboe
and C2 may in their discretion assume
concurrent jurisdiction and
responsibility. With respect to apparent
violations of any Cboe or C2 Rules by
any Router Member, FINRA shall not
make referrals to Cboe or C2 pursuant
to this paragraph 6. Such apparent
violations shall be processed and
enforcement proceedings in respect
thereto will be conducted, by FINRA as
provided in this Agreement. Each party
agrees to make available promptly all
files, records and witnesses necessary to
assist the other in its investigation or
proceedings.
7. Continued Assistance. FINRA shall
make available to [CBOE]Cboe and C2
all information obtained by FINRA in
the performance by it of the Regulatory
Responsibilities hereunder in respect to
the Common Members subject to this
Agreement. In particular, and not in
limitation of the foregoing, FINRA shall
furnish [CBOE]Cboe and C2 any
information it obtains about Common
Members which reflects adversely on
their financial condition. It is
understood that such information is of
an extremely sensitive nature and,
accordingly, [CBOE]Cboe and C2
acknowledge and agree to take all
reasonable steps to maintain its
confidentiality. [CBOE]Cboe and C2
shall make available to FINRA any
information coming to their attention
that reflects adversely on the financial
condition of Common Members or
indicates possible violations of
applicable laws, rules or regulations by
such firms.
8. Common Member Applications.
(a) Common Members subject to this
Agreement shall be required to submit,
and FINRA shall be responsible for
processing and acting upon all
applications submitted on behalf of
allied persons, partners, officers,
registered personnel and any other
person required to be approved by the
Rules of the parties or associated with
Common Members thereof. Upon
request, FINRA shall advise
[CBOE]Cboe and C2 of any changes of
allied members, partners, officers,
registered personnel and other persons
required to be approved by the Rules of
the parties.
(b) Common Members shall be
required to send to FINRA all letters,
termination notices or other material
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respecting the individuals listed in
paragraph 8(a).
(c) When as a result of processing
such submissions FINRA becomes
aware of a statutory disqualification as
defined in the Exchange Act with
respect to a Common Member, FINRA
shall determine pursuant to Sections
15A(g) and/or Section 6(c) of the
Exchange Act the acceptability or
continued applicability of the person to
whom such disqualification applies and
keep [CBOE]Cboe and C2 advised of its
actions in this regard for such
subsequent proceedings as [CBOE]Cboe
and C2 may initiate.
(d) Notwithstanding the foregoing,
FINRA shall not review the membership
application, reports, filings, fingerprint
cards, notices, or other writings filed to
determine if such documentation
submitted by a broker or dealer, or a
person associated therewith or other
persons required to register or qualify by
examination meets [the CBOE]Cboe or
C2 requirements for general
membership or for specified categories
of membership or participation in the
[CBOE]Cboe or C2. FINRA shall not
review applications or other
documentation filed to request a change
in the rights or status described in this
paragraph 8(d), including termination or
limitation on activities, of a member or
a participant of [the CBOE]Cboe or C2,
or a person associated with, or
requesting association with, a member
or participant of [the CBOE]Cboe or C2.
9. Branch Office Information. FINRA
shall also be responsible for processing
and, if required, acting upon all requests
for the opening, address changes, and
terminations of branch offices by
Common Members and any other
applications required of Common
Members with respect to the Common
Rules as they may be amended from
time to time. Upon request, FINRA shall
advise [CBOE]Cboe and C2 of the
opening, address change and
termination of branch and main offices
of Common Members and the names of
such branch office managers.
10. Customer Complaints.
[CBOE]Cboe and C2 shall forward to
FINRA copies of all customer
complaints involving Common
Members received by [CBOE]Cboe and
C2 relating to FINRA’s Regulatory
Responsibilities under this Agreement.
It shall be FINRA’s responsibility to
review and take appropriate action in
respect to such complaints.
11. Advertising. FINRA shall assume
responsibility to review the advertising
of Common Members subject to the
Agreement, provided that such material
is filed with FINRA in accordance with
FINRA’s filing procedures and is
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accompanied with any applicable filing
fees set forth in FINRA Rules. Such
review shall be made in accordance
with then applicable FINRA Rules and
interpretations. The advertising of
Common Members shall be subject only
to compliance with appropriate FINRA
Rules and interpretations.
12. No Restrictions on Regulatory
Action. Nothing contained in this
Agreement shall restrict or in any way
encumber the right of any party to
conduct its own independent or
concurrent investigation, examination
or enforcement proceeding of or against
Common Members, as any party, in its
sole discretion, shall deem appropriate
or necessary.
13. Termination. This Agreement may
be terminated by any party at any time
upon the approval of the Commission
after one (1) year’s written notice (or
such shorter time as may be agreed by
the parties) to the other parties, except
as provided in paragraph 4.
14. Effective Date. This Agreement
shall be effective upon approval of the
Commission.
15. Arbitration. In the event of a
dispute among the parties as to the
operation of this Agreement, the parties
hereby agree that any such dispute shall
be settled by arbitration in Washington,
DC in accordance with the rules of the
American Arbitration Association then
in effect, or such other procedures as the
parties may mutually agree upon.
Judgment on the award rendered by the
arbitrator(s) may be entered in any court
having jurisdiction.
16. Separate Agreement. This
Agreement is wholly separate from the
following agreements: (1) The
multiparty Agreement made pursuant to
Rule 17d–2 of the Exchange Act among
[BATS]Bats BZX Exchange, Inc., BOX
Options Exchange, LLC, [CBOE]Cboe,
C2, [the International Securities
Exchange]Nasdaq ISE, LLC, FINRA,
Miami International Securities
Exchange, LLC, MIAX PEARL, LLC, [the
New York Stock Exchange, LLC,] NYSE
[Amex]American LLC, the NYSE Arca,
Inc., The NASDAQ Stock Market LLC,
NASDAQ [OMX] BX, Inc., [and]
NASDAQ [OMX] PHLX LLC, Nasdaq
GMX, LLC, Nasdaq MRX, LLC, and Bats
EDGX Exchange, Inc. involving the
allocation of regulatory responsibilities
with respect to common members for
compliance with common rules relating
to the conduct by broker-dealers of
accounts for listed options or index
warrants entered into on [April 25,
2012]January 13, 2017, and as may be
amended from time to time; and (2) the
multiparty Agreement made pursuant to
Rule 17d–2 of the Exchange Act among
NYSE [Amex]American LLC,
[BATS]Bats BZX Exchange, Inc., C2,
[CBOE]Cboe, [International Securities
Exchange]Nasdaq ISE, LLC, FINRA,
NYSE Arca, Inc., The NASDAQ Stock
Market LLC, the BOX Options
Exchange, LLC, NASDAQ [OMX] BX,
Inc., [and] NASDAQ [OMX] PHLX LLC,
Nasdaq GMX, LLC, Nasdaq MRX, LLC,
Bats EDGX Exchange, Inc., Miami
International Securities Exchange, LLC,
and MIAX PEARL, LLC, involving the
allocation of regulatory responsibilities
with respect to SRO market surveillance
of common members activities with
regard to certain common rules relating
to listed options entered into on [April
25, 2012]January 23, 2017, and as may
be amended from time to time.
17. Notification of Members. The
parties shall notify Common Members
of this Agreement after the Effective
Date by means of a uniform joint notice.
18. Amendment. This Agreement may
be amended in writing duly approved
by each party. All such amendments
must be filed with and approved by the
Commission before they become
effective.
19. Limitation of Liability. None of
the parties nor any of their respective
directors, governors, officers or
employees shall be liable to any other
party to this Agreement for any liability,
loss or damage resulting from or
claimed to have resulted from any
delays, inaccuracies, errors or omissions
with respect to the provision of
Regulatory Responsibilities as provided
hereby or for the failure to provide any
such responsibility, except with respect
C2 rule(s)
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3.4(c) Qualification and Registration ..................
3.4(e) Qualification and Registration ..................
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to such liability, loss or damages as
shall have been suffered by any party
and caused by the willful misconduct of
another party or their respective
directors, governors, officers or
employees. No warranties, express or
implied, are made by any party hereto
with respect to any of the
responsibilities to be performed by them
hereunder.
20. Relief from Responsibility.
Pursuant to Sections 17(d)(1)(A) and
19(g) of the Exchange Act and Rule 17d–
2 thereunder, FINRA, C2 and
[CBOE]Cboe join in requesting the
Commission, upon its approval of this
Agreement, to relieve [CBOE]Cboe and
C2 of any and all responsibilities with
respect to matters allocated to FINRA
pursuant to this Agreement; provided,
however, that this Agreement shall not
be effective until the Effective Date.
21. Counterparts. This Agreement
may be executed in one or more
counterparts, each of which shall be
deemed an original, and such
counterparts together shall constitute
one and the same instrument.
*
*
*
*
*
Exhibit 1
Exhibit 1 is deleted in its entirety and
replaced with the following:
CBOE and C2 Certification of Common
Rules
Cboe and C2 hereby certify that the
requirements contained in the Rules
listed below are identical to, or
substantially similar to, the NASD/
FINRA or SEC Rules identified.
# Common Rules shall not include
any provisions regarding (i) notice,
reporting or any other filings made
directly to or from C2 or Cboe; (ii)
incorporation by reference of other C2
or Cboe Rules that are not Common
Rules; (iii) exercise of discretion in a
manner that differs from FINRA’s
exercise of discretion including, but not
limited to exercise of exemptive
authority by C2 or Cboe; (iv) prior
written approval of C2 or Cboe; and (v)
payment of fees or fines to C2 or Cboe.
CBOE rule(s)
3.4(a) Qualification and Registration ..................
VerDate Sep<11>2014
22735
Jkt 244001
NASD/FINRA or SEC rule(s)
3.4 Foreign Trading Permit Holders ..............
3.6A(a) Qualification and Registration of Trading Permit Holders and Associated Persons #.
NASD Rule 1090 Foreign Members.
NASD Rule 1031(a) Registration Requirements and NASD Rule 1060(a)(1)–(4)(A),
(C) and (D) Persons Exempt from Registration.
NASD Rule 1022(b) Categories of Principal
Registration.
3.6A(b) Qualification and Registration of Trading Permit Holders and Associated Persons #.
3.6A(c) Qualification and Registration of Trading Permit Holders and Associated Persons.
3.6A(e) Qualification and Registration of Trading Permit Holders and Associated Persons.
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
NASD Rule 1022(a)(1)(C) Categories of Principal Registration. 1
NASD Rule 1021(c) Registration Requirements.
E:\FR\FM\16MYN1.SGM
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Federal Register / Vol. 83, No. 95 / Wednesday, May 16, 2018 / Notices
C2 rule(s)
CBOE rule(s)
NASD/FINRA or SEC rule(s)
3.4 Qualification and Registration, Interpretation and Policy .01.
3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, Interpretations and Policies .01 and
.02.
3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, Interpretations and Policies .04.
3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, Interpretation and Policy .05 #.
3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, Interpretation and Policy .07 #.
FINRA Rule 1010(c) Electronic Filing Requirements for Uniform Forms and FINRA Bylaws Article V, Sec. 2.
3.4 Qualification and Registration, Interpretations and Policies .03.
3.4 Qualification and Registration, Interpretation and Policy.04.
3.4 Qualification and Registration, Interpretation and Policy .06.
3.4 Qualification and Registration, Interpretation and Policy .07.
3.4 Qualification and Registration, Interpretation and Policy .08.
Chapter 4 Business Conduct—CBOE Rule 4.1
incorporated by reference.
Chapter 4 Business Conduct—CBOE Rule 4.7
incorporated by reference.
3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, Interpretation and Policy .08.
3.6A Qualification and Registration of Trading Permit Holders and Associated Persons, Interpretation and Policy .09.
3.7(c) Certain Documents Required of Trading
Permit Holders, Applicants and Associated
Persons.
3.7(d) Certain Documents Required of Trading Permit Holders, Applicants and Associated Persons.
4.1 Just and Equitable Principles of Trade ...
4.7
Manipulation ............................................
Chapter 4 Business Conduct—CBOE Rule
4.18 is incorporated by reference.
4.18 Prevention of the Misuse of Material,
Nonpublic Information #.
Chapter 4 Business Conduct—CBOE Rule
4.20 is incorporated by reference.
Chapter 9 Doing Business with the Public—
CBOE Rule 9.3A is incorporated by reference.
Chapter 9 Doing Business with the Public—
CBOE Rule 9.4(a) is incorporated by reference.
Chapter 9 Doing Business with the Public—
CBOE Rule 9.13 is incorporated by reference.
Chapter 9 Doing Business with the Public—
CBOE Rule 9.16 is incorporated by reference.
Chapter 9 Doing Business with the Public—
CBOE Rule 9.20 is incorporated by reference.
Chapter 9 Doing Business with the Public—
CBOE Rule 9.24 is incorporated by reference.
Chapter 9 Doing Business with the Public—
CBOE Rule 9.25 is incorporated by reference.
4.20 Anti-Money Laundering Compliance
Program.
9.3A Continuing Education For Registered
Persons #.
9.4(a) Other Affiliations of Registered Associated Persons.
9.13 Statement of Financial Condition to
Customers.
9.16 Restrictions on Pledge and Lending of
Customers’ Securities.
9.20 Transfer of Accounts # ..........................
FINRA Rule 1250 Continuing Education Requirements.
NASD Rule 1070(d) Qualifications Examinations and Waiver Requirements.
NASD Rule 1021(a) and (b) Registration Requirements, NASD Rule 1022(a)(6), and
1032(f) Categories of Representative Registration.
NASD Rule 1022(a)(6) Categories of Principal
Registration.
NASD Rule 1031(a) Registration Requirements and FINRA Bylaws Article V., Sec. 1.
Exchange Act Rule 17f–2.
NASD Rule 1013(a)(2) New Member Application and Interview, and FINRA Bylaws Article IV, Sec. 1.
FINRA Rule 2010 Standards of Commercial
Honor and Principles of Trade.
FINRA Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent Devices and
FINRA Rule 6140 Other Trading Practices.
Section 15(g) of the Securities Exchange Act
of 1934 (Exchange Act) and FINRA Rule
3110(b)(1) and (d) Supervision.
FINRA Rule 3310 Anti-Money Laundering
Compliance Program. 2
FINRA Rule 1250 Continuing Education Requirements.
FINRA Rule 3270 Outside Business Activities
of Registered Persons. 3
Exchange Act Rule 17a–5.
Telemarketing ........................................
FINRA Rule 4330 Customer Protection—Permissible Use of Customers’ Securities.
FINRA Rule 11870 Customer Account Transfer Contracts.
FINRA Rule 3230 Telemarketing.
9.25 Borrowing From or Lending to Customers.
FINRA Rule 3240 Borrowing From or Lending
to Customers.
9.24
sradovich on DSK3GMQ082PROD with NOTICES
1 FINRA shall have Regulatory Responsibilities to the extent the heighted qualification exam requirement of the Cboe and C2 rule is satisfied
by the Series 24.
2 FINRA shall not have any Regulatory Responsibilities regarding the requirement to conduct independent testing during the first calendar year
of a broker-dealer becoming a Trading Permit Holder or TPH organization; responsibility for such requirement remains with Cboe and C2, as applicable.
3 FINRA shall not have any Regulatory Responsibilities regarding the requirement that the Trading Permit Holder provide prior written consent
to the TPH organization; responsibility for such requirement remains with Cboe and C2, as applicable.
The following provisions are covered:
• Rule 200 of Regulation SHO—
Definition of Short Sales and Marking
Requirements
• Rule 203 of Regulation SHO—
Borrowing and Delivery Requirements
• Rule 204 of Regulation SHO—CloseOut Requirement
• Rule 105 of Regulation M—Short
Selling in Connection with a Public
Offering
• Section 14(e) of the Exchange Act
VerDate Sep<11>2014
17:34 May 15, 2018
Jkt 244001
• Rule 14e–4 of the Exchange Act—
Prohibited Transactions in
Connection with Partial Tender
Offers ∧
• Regulation ATS
• Regulation S–P
IV. Solicitation of Comments
∧ FINRA shall perform surveillance,
investigation and Enforcement
Responsibilities for SEA Rule 14e–
4(a)(1)(ii)(D).
Electronic Comments
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing.
Comments may be submitted by any of
the following methods:
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
E:\FR\FM\16MYN1.SGM
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• Send an email to rule-comments@
sec.gov. Please include File Number 4–
536 on the subject line.
sradovich on DSK3GMQ082PROD with NOTICES
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 4–536. This file number should
be included on the subject line if email
is used. To help the Commission
process and review your comments
more efficiently, please use only one
method. The Commission will post all
comments on the Commission’s internet
website (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
plan that are filed with the Commission,
and all written communications relating
to the proposed plan between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
plan also will be available for inspection
and copying at the principal offices of
FINRA, Cboe, and C2. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number 4–536 and should be submitted
on or before June 6, 2018.
V. Discussion
The Commission finds that the
proposed Amended 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
Amended 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
Amended Plan should reduce
unnecessary regulatory duplication by
allocating to FINRA certain examination
and enforcement responsibilities for
13 15
14 17
U.S.C. 78q(d).
CFR 240.17d–2(c).
VerDate Sep<11>2014
17:34 May 15, 2018
Common Members that would
otherwise be performed by Cboe, C2,
and FINRA. Accordingly, the proposed
Amended Plan promotes efficiency by
reducing costs to Common Members.
Furthermore, because Cboe, C2, and
FINRA will coordinate their regulatory
functions in accordance with the
Amended Plan, the Amended Plan
should promote investor protection.
The Commission notes that, under the
Amended Plan, Cboe, C2, and FINRA
have allocated regulatory responsibility
for those Cboe and C2 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 Amended 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 Amended Plan are
specifically listed in the Certification, as
may be amended by the Parties from
time to time.
According to the Amended Plan, Cboe
and C2 will review the Certification, at
least annually, or more frequently if
required by changes in either the rules
of Cboe, C2, or FINRA, and, if necessary,
submit to FINRA an updated list of
Common Rules to add Cboe and C2
rules not included on the then-current
list of Common Rules that are
substantially similar to FINRA rules;
delete Cboe and C2 rules included in
the then-current list of Common Rules
that no longer qualify as common rules;
and confirm that the remaining rules on
the list of Common Rules continue to be
Cboe and C2 rules that qualify as
common rules.15 FINRA will then
confirm in writing whether the rules
listed in any updated list are Common
Rules as defined in the Amended Plan.
Under the Amended Plan, Cboe and C2
will also provide FINRA with a current
list of Common Members and shall
update the list no less frequently than
once every six months.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.
15 See
16 See
Jkt 244001
PO 00000
paragraph 2 of the Amended Plan.
paragraph 3 of the Amended Plan.
Frm 00127
Fmt 4703
Sfmt 4703
22737
The Commission is hereby declaring
effective an Amended Plan that, among
other things, allocates regulatory
responsibility to FINRA for the
oversight and enforcement of all Cboe
and C2 rules that are substantially
similar to the rules of FINRA for
Common Members of Cboe and FINRA,
and C2 and FINRA. Therefore,
modifications to the Certification need
not be filed with the Commission as an
amendment to the Amended Plan,
provided that the Parties are only
adding to, deleting from, or confirming
changes to Cboe or C2 rules in the
Certification in conformance with the
definition of Common Rules provided in
the Amended Plan. However, should the
Parties decide to add a Cboe or C2 rule
to the Certification that is not
substantially similar to a FINRA rule;
delete a Cboe or C2 rule from the
Certification that is substantially similar
to a FINRA rule; or leave on the
Certification a Cboe or C2 rule that is no
longer substantially similar to a FINRA
rule, then such a change would
constitute an amendment to the
Amended Plan, which must be filed
with the Commission pursuant to Rule
17d–2 under the Act.17
Under paragraph (c) of Rule 17d–2,
the Commission may, after appropriate
notice and comment, declare a plan, or
any part of a plan, effective. In this
instance, the Commission believes that
appropriate notice and comment can
take place after the proposed
amendment is effective. The primary
purposes of the amendment are to
remove Cboe’s former equities trading
facility, CBSX, from the Plan; (2) to the
extent that it becomes a member of
either exchange, allocate regulatory
responsibility to FINRA for Cboe’s and
C2’s affiliated routing broker-dealer,
Cboe Trading, Inc.; and (3) allocate
surveillance, investigation, and
enforcement responsibilities for Rule
14e–4 under the Act . By declaring it
effective today, the Amended Plan can
become effective and be implemented
without undue delay. The Commission
notes that the prior version of this plan
immediately prior to this proposed
amendment was published for comment
and the Commission did not receive any
comments thereon.18 Furthermore, the
Commission does not believe that the
amendment to the plan raises any new
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
Amended Plan for examining, and enforcing
compliance by, Common Members, also would
constitute an amendment to the Amended Plan.
18 See supra note 12 (citing to Securities
Exchange Act Release No. 72137).
E:\FR\FM\16MYN1.SGM
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Federal Register / Vol. 83, No. 95 / Wednesday, May 16, 2018 / Notices
regulatory issues that the Commission
has not previously considered.
VI. Conclusion
This order gives effect to the
Amended Plan filed with the
Commission in File No. 4–536. The
Parties shall notify all members affected
by the Amended Plan of their rights and
obligations under the Amended Plan.
It is therefore ordered, pursuant to
Section 17(d) of the Act, that the
Amended Plan in File No. 4–536,
between the FINRA, Cboe, and C2, filed
pursuant to Rule 17d–2 under the Act,
hereby is approved and declared
effective.
It is further ordered that Cboe and C2
are relieved of those responsibilities
allocated to FINRA under the Amended
Plan in File No. 4–536.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–10369 Filed 5–15–18; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15520 and #15521;
KENTUCKY Disaster Number KY–00068]
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the Commonwealth of Kentucky
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the Commonwealth of Kentucky
(FEMA–4361–DR), dated 04/26/2018.
Incident: Severe Storms, Tornadoes,
Flooding, Landslides, and Mudslides.
Incident Period: 02/21/2018 through
03/21/2018.
DATES: Issued on 04/26/2018.
Physical Loan Application Deadline
Date: 06/25/2018.
Economic Injury (EIDL) Loan
Application Deadline Date: 01/28/2019.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT:
A. Escobar, Office of Disaster
Assistance, U.S. Small Business
Administration, 409 3rd Street SW,
Suite 6050, Washington, DC 20416,
(202) 205–6734.
sradovich on DSK3GMQ082PROD with NOTICES
SUMMARY:
19 17
CFR 200.30–3(a)(34).
VerDate Sep<11>2014
17:34 May 15, 2018
Jkt 244001
Incident Period: 04/13/2018 through
04/16/2018.
DATES: Issued on 05/08/2018.
Physical Loan Application Deadline
Date: 07/09/2018.
Economic Injury (EIDL) Loan
Application Deadline Date: 02/08/2019.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
President’s major disaster declaration on
05/08/2018, Private Non-Profit
organizations that provide essential
services of a governmental nature may
file disaster loan applications at the
Percent
address listed above or other locally
announced locations.
The following areas have been
2.500 determined to be adversely affected by
the disaster:
Primary Areas: The City and County of
2.500
Honolulu and Kaua’i County.
The Interest Rates are:
Notice is
hereby given that as a result of the
President’s major disaster declaration on
04/26/2018, Private Non-Profit
organizations that provide essential
services of a governmental nature may
file disaster loan applications at the
address listed above or other locally
announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Boyd, Bullitt, Butler,
Caldwell, Campbell, Carlisle,
Carroll, Carter, Crittenden, Fulton,
Gallatin, Grant, Graves, Greenup,
Hancock, Hardin, Henderson,
Henry, Hickman, Jefferson, Kenton,
Lawrence, Livingston, McCracken,
McLean, Metcalfe, Ohio, Owen,
Spencer, Trigg, Trimble, Union,
Washington, Webster.
The Interest Rates are:
SUPPLEMENTARY INFORMATION:
For Physical Damage:
Non-Profit Organizations with
Credit Available Elsewhere ...
Non-Profit Organizations without Credit Available Elsewhere .....................................
For Economic Injury:
Non-Profit Organizations without Credit Available Elsewhere .....................................
Percent
2.500
The number assigned to this disaster
for physical damage is 155206 and for
economic injury is 155210.
(Catalog of Federal Domestic Assistance
Number 59008)
James Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2018–10368 Filed 5–15–18; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15518 and #15519;
HAWAII Disaster Number HI–00046]
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the State of Hawaii
U.S. Small Business
Administration.
ACTION: Notice.
For Physical Damage:
Non-Profit Organizations with
Credit Available Elsewhere ...
Non-Profit Organizations without Credit Available Elsewhere .....................................
For Economic Injury:
Non-Profit Organizations without Credit Available Elsewhere .....................................
2.500
2.500
2.500
The number assigned to this disaster
for physical damage is 155186 and for
economic injury is 155190.
(Catalog of Federal Domestic Assistance
Number 59008)
James Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2018–10372 Filed 5–15–18; 8:45 am]
BILLING CODE 8025–01–P
AGENCY:
DEPARTMENT OF STATE
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Hawaii (FEMA–4365–DR),
dated 05/08/2018.
Incident: Severe Storms, Flooding,
Landslides, and Mudslides.
SUMMARY:
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
[Public Notice 10409]
Overseas Security Advisory Council
(OSAC) Meeting Notice
Closed Meeting
The Department of State announces a
meeting of the U.S. State Department
E:\FR\FM\16MYN1.SGM
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]]>Agencies
[Federal Register Volume 83, Number 95 (Wednesday, May 16, 2018)]
[Notices]
[Pages 22732-22738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10369]
[[Page 22732]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83208; File No. 4-536]
Program for Allocation of Regulatory Responsibilities Pursuant To
Rule 17d-2; Notice of Filing and Order Approving and Declaring
Effective an Amended Plan for the Allocation of Regulatory
Responsibilities Between the Financial Industry Regulatory Authority,
Inc., Cboe Exchange, Inc., and Cboe C2 Exchange, Inc.
May 10, 2018.
Notice is hereby given that the Securities and Exchange Commission
(``Commission'') has issued an Order, pursuant to Section 17(d) of the
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring
effective an amendment to the plan for allocating regulatory
responsibility (``Plan'') filed on May 4, 2018, pursuant to Rule 17d-2
of the Act,\2\ by the Financial Industry Regulatory Authority, Inc.
(``FINRA''), Cboe Exchange, Inc. (``Cboe''), and Cboe C2 Exchange, Inc.
(``C2'') (collectively, ``Participating Organizations'' or
``parties''). This Agreement amends and restates the agreement entered
into between FINRA, Cboe, and C2 on March 21, 2014, entitled
``Agreement Among Financial Industry Regulatory Authority, Inc.,
Chicago Board Options Exchange, Incorporated, and C2 Options Exchange,
Incorporated Pursuant to Rule 17d-2 under the Securities Exchange Act
of 1934,'' and any subsequent amendments thereafter.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
I. Introduction
Section 19(g)(1) of the Act,\3\ 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) \4\ or Section 19(g)(2) \5\ of the Act.
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.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d).
\5\ 15 U.S.C. 78s(g)(2).
---------------------------------------------------------------------------
Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ 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.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q(d)(1).
\7\ 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.\8\ 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.\9\ 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 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.
---------------------------------------------------------------------------
\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ 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.\10\ 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 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.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------
II. The Plan
On May 14, 2007, the Commission declared effective the Plan entered
into between NASD (n/k/a FINRA) and Cboe for allocating regulatory
responsibility pursuant to Rule 17d-2.\11\ On May 9, 2014, the
Commission declared effective an amendment to the Plan to add C2 as a
Participant to the Plan.\12\ The Plan is intended to reduce regulatory
duplication for firms that are common members of FINRA and at least one
of Cboe or C2 by allocating regulatory responsibility with respect to
certain applicable laws, rules, and regulations that are common among
them. Included in the Plan is an exhibit that lists every Cboe and C2
rule for which FINRA bears responsibility under the Plan for overseeing
and enforcing with respect to CBOE or C2 members that are also members
of FINRA and the associated persons therewith.
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 55755 (May 14,
2007), 72 FR 28087 (May 18, 2007).
\12\ See Securities Exchange Act Release No. 72137 (May 9,
2014), 79 FR 27965 (May 15, 2014).
---------------------------------------------------------------------------
III. Proposed Amendment to the Plan
On May 4, 2018, the parties submitted a proposed amendment to the
Plan (``Amended Plan''). The primary purposes of the Amended Plan are
to (1) remove Cboe's former equities trading facility, CBSX, from the
Plan; (2) to the extent that it becomes a member of either exchange,
allocate regulatory responsibility to FINRA for Cboe's and C2's
affiliated routing broker-dealer, Cboe Trading, Inc.; and (3) allocate
surveillance, investigation, and enforcement responsibilities for Rule
14e-4 under the Act . The text of the proposed Amended Plan is as
follows (additions are italicized; deletions are [bracketed]):
* * * * *
Agreement Among Financial Industry Regulatory Authority, Inc., [Chicago
Board Options Exchange, Incorporated] CBOE Exchange, Inc., and CBOE C2
[Options] Exchange, [Incorporated] Inc. Pursuant to Rule 17d-2 Under
the Securities Exchange Act of 1934
This Agreement, by and among Financial Industry Regulatory
Authority, Inc. (``FINRA''), [the Chicago
[[Page 22733]]
Board Options Exchange, Incorporated]Cboe Exchange, Inc.
(``[CBOE]Cboe''), and Cboe C2 [Options] Exchange, [Incorporated]Inc.
(``C2'') is made this [21st]4th day of [March, 2014] May, 2018 (the
``Agreement''), pursuant to Section 17(d) of the Securities Exchange
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder which
permits agreements between self-regulatory organizations to allocate
regulatory responsibility to eliminate regulatory duplication. FINRA,
[CBOE]Cboe and C2 may be referred to individually as a ``party'' and
together as the ``parties.''
This Agreement amends and restates the agreement entered into
between [NASD (n/k/a] FINRA[) and], [CBOE]Cboe and C2 on [April 4,
2007]March 21, 2014, entitled ``Agreement [between NASD and CBOE]Among
Financial Industry Regulatory Authority, Inc., Chicago Board Options
Exchange, Incorporated, and C2 Options Exchange, Incorporated Pursuant
to Rule 17d-2 under the Securities Exchange Act of 1934,'' and any
subsequent amendments thereafter.
WHEREAS, the parties desire to reduce duplication in the
examination of their Common Members (as defined herein) and in the
filing and processing of certain registration and membership records as
it relates to [the CBOE]Cboe [options exchange,]and C2 [options
exchange and the CBOE equity exchange facility operated by CBOE Stock
Exchange, LLC (``CBSX'')]; and
WHEREAS, the parties desire to execute an agreement covering such
subjects pursuant to the provisions of Rule 17d-2 under the Exchange
Act and to file such agreement with the Securities and Exchange
Commission (the ``SEC'' or ``Commission'') for its approval.
NOW, THEREFORE, in consideration of the mutual covenants contained
hereinafter, the parties hereby agree as follows:
1. Definitions. Unless otherwise defined in this Agreement or the
context otherwise requires, the terms used in this Agreement shall have
the same meaning as they have under the Exchange Act and the rules and
regulations thereunder. As used in this Agreement, the following terms
shall have the following meanings:
(a) ``Rule'' of an ``exchange'' or an ``association'' shall have
the meaning defined in Exchange Act Section 3(a)(27).
(b) ``Common Rules'' shall mean the [CBOE]Cboe Rules and C2 Rules
that are substantially similar to the applicable FINRA Rules in that
examination for compliance with such 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[;
provided, however, Common Rules shall not include the application of
SEC, CBOE, C2 or FINRA Rules as they pertain to violations of insider
trading activities, which is covered by a separate 17d-2 Agreement by
and among the BATS Exchange, Inc., BATS-Y Exchange, Inc., CBOE, Chicago
Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., FINRA,
NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC,
National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Amex
LLC, and NYSE Arca Inc., effective December 16, 2011, as may be amended
from time to time]. Common Rules shall not include any provisions
regarding: (i) Notice, reporting or any other filings made directly to
or from C2 or Cboe; (ii) incorporation by reference of other C2 or Cboe
Rules that are not Common Rules; (iii) exercise of discretion in a
manner that differs from FINRA's exercise of discretion including, but
not limited to exercise of exemptive authority by C2 or Cboe; (iv)
prior written approval of C2 or Cboe; and (v) payment of fees or fines
to C2 or Cboe.
(c) ``Common Members'' shall mean members of FINRA and at least one
of [CBOE]Cboe or C2.
(d) ``Effective Date'' shall be the date this Agreement is approved
by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with FINRA's Code of Procedure
(the Rule 9000 Series) and other applicable FINRA procedural Rules, to
determine whether violations of pertinent laws, rules or regulations
have occurred, and if such violations are deemed to have occurred, the
imposition of appropriate sanctions as specified under FINRA's Code of
Procedure and sanctions guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities and Enforcement Responsibilities relating to
compliance by the Common Members with the Common Rules and the
provisions of the Exchange Act and the rules and regulations
thereunder, and other applicable laws, rules and regulations, each as
set forth on Exhibit 1 attached hereto. The term ``Regulatory
Responsibility'' shall also include the surveillance, investigation and
Enforcement Responsibilities relating to compliance by Common Members
with the Rule 14e-4 of the Securities Exchange Act (``Rule 14e-4''),
with a focus on the standardized call option provision of Rule 14e-
4(a)(1)(ii)(D).
2. Regulatory and Enforcement Responsibilities. FINRA shall assume
Regulatory Responsibilities and Enforcement Responsibilities for Common
Members. Attached as Exhibit 1 to this Agreement and made part hereof,
[CBOE]Cboe and C2 furnished FINRA with a current list of Common Rules
and certified to FINRA that such Rules are substantially similar to the
corresponding FINRA Rule (the ``Certification''). FINRA hereby agrees
that the Rules listed in the Certification are Common Rules as defined
in this Agreement. Each year following the Effective Date of this
Agreement, or more frequently if required by changes in the Rules of
the parties, [CBOE]Cboe and C2 shall submit an updated list of Common
Rules to FINRA for review which shall add [CBOE]Cboe or C2 Rules not
included in the current list of Common Rules that qualify as Common
Rules as defined in this Agreement; delete [CBOE]Cboe or C2 Rules
included in the current list of Common Rules that no longer qualify as
Common Rules as defined in this Agreement; and confirm that the
remaining Rules on the current list of Common Rules continue to be
[CBOE]Cboe or C2 Rules that qualify as Common Rules as defined in this
Agreement. Within 30 days of receipt of such updated list, FINRA shall
confirm in writing whether the Rules listed in any updated list are
Common Rules as defined in this Agreement. Notwithstanding anything
herein to the contrary, it is explicitly understood that the term
``Regulatory Responsibilities'' does not include, and [CBOE]Cboe and C2
shall retain full responsibility for (unless otherwise addressed by
separate agreement or rule) the following (collectively, the ``Retained
Responsibilities''):
(a) Surveillance and enforcement with respect to trading activities
or practices involving [CBOE]Cboe's or C2's own marketplace, including
without limitation [CBOE]Cboe's or C2's Rules relating to the rights
and obligations of market makers;
(b) registration pursuant to their applicable Rules of associated
persons (i.e., registration rules that are not Common Rules);
(c) discharge of their duties and obligations as a Designated
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
(d) any [CBOE]Cboe Rules and C2 Rules that are not Common Rules,
except Cboe Rules or C2 Rules for any Cboe or C2 affiliate that is a
member
[[Page 22734]]
that operates as a facility (as defined in Section 3(a)(2) of the
Exchange Act), acts as a router for Cboe or C2 and is a member of FINRA
(``Router Member'') as provided in paragraph 6. As of the date of this
Agreement, Cboe Trading, Inc. is the only Router Member.
3. Common Members. Prior to the Effective Date, [CBOE]Cboe and C2
shall furnish FINRA with a current list of Common Members, which shall
be updated no less frequently than once every six months.
4. No Charge. There shall be no charge to [CBOE]Cboe and C2 by
FINRA for performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as hereinafter provided.
FINRA shall provide[CBOE]Cboe and C2 with ninety (90) days advance
written notice in the event FINRA decides to impose any charges to
[CBOE]Cboe and C2 for performing the Regulatory Responsibilities under
this Agreement. If FINRA determines to impose a charge, [CBOE]Cboe and
C2 shall have the right at the time of the imposition of such charge to
terminate this Agreement; provided, however, that FINRA's Regulatory
Responsibilities under this Agreement shall continue until the
Commission approves the termination of this Agreement.
5. Reassignment of Regulatory Responsibilities. Notwithstanding any
provision hereof, this Agreement shall be subject to any statute, or
any rule or order of the Commission, or industry agreement,
restructuring the regulatory framework of the securities industry or
reassigning Regulatory Responsibilities between self-regulatory
organizations. To the extent such action is inconsistent with this
Agreement, such action shall supersede the provisions hereof to the
extent necessary for them to be properly effectuated and the provisions
hereof in that respect shall be null and void.
6. Notification of Violations. In the event that FINRA becomes
aware of apparent violations of any [CBOE]Cboe or C2 Rules, which are
not listed as Common Rules, discovered pursuant to the performance of
the Regulatory Responsibilities assumed hereunder, FINRA shall notify
[CBOE]Cboe and C2 of those apparent violations for such response as
[CBOE]Cboe and C2 deems appropriate. In the event, [CBOE]Cboe or C2
becomes aware of apparent violations of any Common Rules, discovered
pursuant to the Retained Responsibilities, [CBOE]Cboe and C2 shall
notify FINRA of those apparent violations and such matters shall be
handled by FINRA as provided in this Agreement. Apparent violations of
Common Rules shall be processed by, and enforcement proceedings in
respect thereto shall be conducted by FINRA as provided hereinbefore;
provided, however, that in the event a Common Member is the subject of
an investigation relating to a transaction on [the CBOE]Cboe or C2
options exchanges, [or the CBSX, CBOE]Cboe and C2 may in their
discretion assume concurrent jurisdiction and responsibility. With
respect to apparent violations of any Cboe or C2 Rules by any Router
Member, FINRA shall not make referrals to Cboe or C2 pursuant to this
paragraph 6. Such apparent violations shall be processed and
enforcement proceedings in respect thereto will be conducted, by FINRA
as provided in this Agreement. Each party agrees to make available
promptly all files, records and witnesses necessary to assist the other
in its investigation or proceedings.
7. Continued Assistance. FINRA shall make available to [CBOE]Cboe
and C2 all information obtained by FINRA in the performance by it of
the Regulatory Responsibilities hereunder in respect to the Common
Members subject to this Agreement. In particular, and not in limitation
of the foregoing, FINRA shall furnish [CBOE]Cboe and C2 any information
it obtains about Common Members which reflects adversely on their
financial condition. It is understood that such information is of an
extremely sensitive nature and, accordingly, [CBOE]Cboe and C2
acknowledge and agree to take all reasonable steps to maintain its
confidentiality. [CBOE]Cboe and C2 shall make available to FINRA any
information coming to their attention that reflects adversely on the
financial condition of Common Members or indicates possible violations
of applicable laws, rules or regulations by such firms.
8. Common Member Applications.
(a) Common Members subject to this Agreement shall be required to
submit, and FINRA shall be responsible for processing and acting upon
all applications submitted on behalf of allied persons, partners,
officers, registered personnel and any other person required to be
approved by the Rules of the parties or associated with Common Members
thereof. Upon request, FINRA shall advise [CBOE]Cboe and C2 of any
changes of allied members, partners, officers, registered personnel and
other persons required to be approved by the Rules of the parties.
(b) Common Members shall be required to send to FINRA all letters,
termination notices or other material respecting the individuals listed
in paragraph 8(a).
(c) When as a result of processing such submissions FINRA becomes
aware of a statutory disqualification as defined in the Exchange Act
with respect to a Common Member, FINRA shall determine pursuant to
Sections 15A(g) and/or Section 6(c) of the Exchange Act the
acceptability or continued applicability of the person to whom such
disqualification applies and keep [CBOE]Cboe and C2 advised of its
actions in this regard for such subsequent proceedings as [CBOE]Cboe
and C2 may initiate.
(d) Notwithstanding the foregoing, FINRA shall not review the
membership application, reports, filings, fingerprint cards, notices,
or other writings filed to determine if such documentation submitted by
a broker or dealer, or a person associated therewith or other persons
required to register or qualify by examination meets [the CBOE]Cboe or
C2 requirements for general membership or for specified categories of
membership or participation in the [CBOE]Cboe or C2. FINRA shall not
review applications or other documentation filed to request a change in
the rights or status described in this paragraph 8(d), including
termination or limitation on activities, of a member or a participant
of [the CBOE]Cboe or C2, or a person associated with, or requesting
association with, a member or participant of [the CBOE]Cboe or C2.
9. Branch Office Information. FINRA shall also be responsible for
processing and, if required, acting upon all requests for the opening,
address changes, and terminations of branch offices by Common Members
and any other applications required of Common Members with respect to
the Common Rules as they may be amended from time to time. Upon
request, FINRA shall advise [CBOE]Cboe and C2 of the opening, address
change and termination of branch and main offices of Common Members and
the names of such branch office managers.
10. Customer Complaints. [CBOE]Cboe and C2 shall forward to FINRA
copies of all customer complaints involving Common Members received by
[CBOE]Cboe and C2 relating to FINRA's Regulatory Responsibilities under
this Agreement. It shall be FINRA's responsibility to review and take
appropriate action in respect to such complaints.
11. Advertising. FINRA shall assume responsibility to review the
advertising of Common Members subject to the Agreement, provided that
such material is filed with FINRA in accordance with FINRA's filing
procedures and is
[[Page 22735]]
accompanied with any applicable filing fees set forth in FINRA Rules.
Such review shall be made in accordance with then applicable FINRA
Rules and interpretations. The advertising of Common Members shall be
subject only to compliance with appropriate FINRA Rules and
interpretations.
12. No Restrictions on Regulatory Action. Nothing contained in this
Agreement shall restrict or in any way encumber the right of any party
to conduct its own independent or concurrent investigation, examination
or enforcement proceeding of or against Common Members, as any party,
in its sole discretion, shall deem appropriate or necessary.
13. Termination. This Agreement may be terminated by any party at
any time upon the approval of the Commission after one (1) year's
written notice (or such shorter time as may be agreed by the parties)
to the other parties, except as provided in paragraph 4.
14. Effective Date. This Agreement shall be effective upon approval
of the Commission.
15. Arbitration. In the event of a dispute among the parties as to
the operation of this Agreement, the parties hereby agree that any such
dispute shall be settled by arbitration in Washington, DC in accordance
with the rules of the American Arbitration Association then in effect,
or such other procedures as the parties may mutually agree upon.
Judgment on the award rendered by the arbitrator(s) may be entered in
any court having jurisdiction.
16. Separate Agreement. This Agreement is wholly separate from the
following agreements: (1) The multiparty Agreement made pursuant to
Rule 17d-2 of the Exchange Act among [BATS]Bats BZX Exchange, Inc., BOX
Options Exchange, LLC, [CBOE]Cboe, C2, [the International Securities
Exchange]Nasdaq ISE, LLC, FINRA, Miami International Securities
Exchange, LLC, MIAX PEARL, LLC, [the New York Stock Exchange, LLC,]
NYSE [Amex]American LLC, the NYSE Arca, Inc., The NASDAQ Stock Market
LLC, NASDAQ [OMX] BX, Inc., [and] NASDAQ [OMX] PHLX LLC, Nasdaq GMX,
LLC, Nasdaq MRX, LLC, and Bats EDGX Exchange, Inc. involving the
allocation of regulatory responsibilities with respect to common
members for compliance with common rules relating to the conduct by
broker-dealers of accounts for listed options or index warrants entered
into on [April 25, 2012]January 13, 2017, and as may be amended from
time to time; and (2) the multiparty Agreement made pursuant to Rule
17d-2 of the Exchange Act among NYSE [Amex]American LLC, [BATS]Bats BZX
Exchange, Inc., C2, [CBOE]Cboe, [International Securities
Exchange]Nasdaq ISE, LLC, FINRA, NYSE Arca, Inc., The NASDAQ Stock
Market LLC, the BOX Options Exchange, LLC, NASDAQ [OMX] BX, Inc., [and]
NASDAQ [OMX] PHLX LLC, Nasdaq GMX, LLC, Nasdaq MRX, LLC, Bats EDGX
Exchange, Inc., Miami International Securities Exchange, LLC, and MIAX
PEARL, LLC, involving the allocation of regulatory responsibilities
with respect to SRO market surveillance of common members activities
with regard to certain common rules relating to listed options entered
into on [April 25, 2012]January 23, 2017, and as may be amended from
time to time.
17. Notification of Members. The parties shall notify Common
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
18. Amendment. This Agreement may be amended in writing duly
approved by each party. All such amendments must be filed with and
approved by the Commission before they become effective.
19. Limitation of Liability. None of the parties nor any of their
respective directors, governors, officers or employees shall be liable
to any other party to this Agreement for any liability, loss or damage
resulting from or claimed to have resulted from any delays,
inaccuracies, errors or omissions with respect to the provision of
Regulatory Responsibilities as provided hereby or for the failure to
provide any such responsibility, except with respect to such liability,
loss or damages as shall have been suffered by any party and caused by
the willful misconduct of another party or their respective directors,
governors, officers or employees. No warranties, express or implied,
are made by any party hereto with respect to any of the
responsibilities to be performed by them hereunder.
20. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA, C2 and
[CBOE]Cboe join in requesting the Commission, upon its approval of this
Agreement, to relieve [CBOE]Cboe and C2 of any and all responsibilities
with respect to matters allocated to FINRA pursuant to this Agreement;
provided, however, that this Agreement shall not be effective until the
Effective Date.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
* * * * *
Exhibit 1
Exhibit 1 is deleted in its entirety and replaced with the
following:
CBOE and C2 Certification of Common Rules
Cboe and C2 hereby certify that the requirements contained in the
Rules listed below are identical to, or substantially similar to, the
NASD/FINRA or SEC Rules identified.
# Common Rules shall not include any provisions regarding (i)
notice, reporting or any other filings made directly to or from C2 or
Cboe; (ii) incorporation by reference of other C2 or Cboe Rules that
are not Common Rules; (iii) exercise of discretion in a manner that
differs from FINRA's exercise of discretion including, but not limited
to exercise of exemptive authority by C2 or Cboe; (iv) prior written
approval of C2 or Cboe; and (v) payment of fees or fines to C2 or Cboe.
------------------------------------------------------------------------
NASD/FINRA or SEC
C2 rule(s) CBOE rule(s) rule(s)
------------------------------------------------------------------------
3.4 Foreign Trading NASD Rule 1090
Permit Holders. Foreign Members.
3.4(a) Qualification and 3.6A(a) NASD Rule 1031(a)
Registration. Qualification and Registration
Registration of Requirements and
Trading Permit NASD Rule
Holders and 1060(a)(1)-(4)(A),
Associated Persons (C) and (D) Persons
#. Exempt from
Registration.
3.4(b) Qualification and 3.6A(b) NASD Rule 1022(b)
Registration. Qualification and Categories of
Registration of Principal
Trading Permit Registration.
Holders and
Associated Persons
#.
3.4(c) Qualification and 3.6A(c) NASD Rule
Registration. Qualification and 1022(a)(1)(C)
Registration of Categories of
Trading Permit Principal
Holders and Registration. \1\
Associated Persons.
3.4(e) Qualification and 3.6A(e) NASD Rule 1021(c)
Registration. Qualification and Registration
Registration of Requirements.
Trading Permit
Holders and
Associated Persons.
[[Page 22736]]
3.4 Qualification and 3.6A Qualification FINRA Rule 1010(c)
Registration, and Registration of Electronic Filing
Interpretation and Policy Trading Permit Requirements for
.01. Holders and Uniform Forms and
Associated Persons, FINRA Bylaws
Interpretations and Article V, Sec. 2.
Policies .01 and
.02.
3.4 Qualification and 3.6A Qualification FINRA Rule 1250
Registration, and Registration of Continuing
Interpretations and Trading Permit Education
Policies .03. Holders and Requirements.
Associated Persons,
Interpretations and
Policies .04.
3.4 Qualification and 3.6A Qualification NASD Rule 1070(d)
Registration, and Registration of Qualifications
Interpretation and Trading Permit Examinations and
Policy.04. Holders and Waiver
Associated Persons, Requirements.
Interpretation and
Policy .05 #.
3.4 Qualification and 3.6A Qualification NASD Rule 1021(a)
Registration, and Registration of and (b)
Interpretation and Policy Trading Permit Registration
.06. Holders and Requirements, NASD
Associated Persons, Rule 1022(a)(6),
Interpretation and and 1032(f)
Policy .07 #. Categories of
Representative
Registration.
3.4 Qualification and 3.6A Qualification NASD Rule 1022(a)(6)
Registration, and Registration of Categories of
Interpretation and Policy Trading Permit Principal
.07. Holders and Registration.
Associated Persons,
Interpretation and
Policy .08.
3.4 Qualification and 3.6A Qualification NASD Rule 1031(a)
Registration, and Registration of Registration
Interpretation and Policy Trading Permit Requirements and
.08. Holders and FINRA Bylaws
Associated Persons, Article V., Sec. 1.
Interpretation and
Policy .09.
3.7(c) Certain Exchange Act Rule
Documents Required 17f-2.
of Trading Permit
Holders, Applicants
and Associated
Persons.
3.7(d) Certain NASD Rule 1013(a)(2)
Documents Required New Member
of Trading Permit Application and
Holders, Applicants Interview, and
and Associated FINRA Bylaws
Persons. Article IV, Sec. 1.
Chapter 4 Business Conduct-- 4.1 Just and FINRA Rule 2010
CBOE Rule 4.1 incorporated Equitable Standards of
by reference. Principles of Trade. Commercial Honor
and Principles of
Trade.
Chapter 4 Business Conduct-- 4.7 Manipulation.... FINRA Rule 2020 Use
CBOE Rule 4.7 incorporated of Manipulative,
by reference. Deceptive or Other
Fraudulent Devices
and FINRA Rule 6140
Other Trading
Practices.
Chapter 4 Business Conduct-- 4.18 Prevention of Section 15(g) of the
CBOE Rule 4.18 is the Misuse of Securities Exchange
incorporated by reference. Material, Nonpublic Act of 1934
Information #. (Exchange Act) and
FINRA Rule
3110(b)(1) and (d)
Supervision.
Chapter 4 Business Conduct-- 4.20 Anti-Money FINRA Rule 3310 Anti-
CBOE Rule 4.20 is Laundering Money Laundering
incorporated by reference. Compliance Program. Compliance Program.
\2\
Chapter 9 Doing Business 9.3A Continuing FINRA Rule 1250
with the Public--CBOE Rule Education For Continuing
9.3A is incorporated by Registered Persons Education
reference. #. Requirements.
Chapter 9 Doing Business 9.4(a) Other FINRA Rule 3270
with the Public--CBOE Rule Affiliations of Outside Business
9.4(a) is incorporated by Registered Activities of
reference. Associated Persons. Registered Persons.
\3\
Chapter 9 Doing Business 9.13 Statement of Exchange Act Rule
with the Public--CBOE Rule Financial Condition 17a-5.
9.13 is incorporated by to Customers.
reference.
Chapter 9 Doing Business 9.16 Restrictions on FINRA Rule 4330
with the Public--CBOE Rule Pledge and Lending Customer
9.16 is incorporated by of Customers' Protection--Permiss
reference. Securities. ible Use of
Customers'
Securities.
Chapter 9 Doing Business 9.20 Transfer of FINRA Rule 11870
with the Public--CBOE Rule Accounts #. Customer Account
9.20 is incorporated by Transfer Contracts.
reference.
Chapter 9 Doing Business 9.24 Telemarketing.. FINRA Rule 3230
with the Public--CBOE Rule Telemarketing.
9.24 is incorporated by
reference.
Chapter 9 Doing Business 9.25 Borrowing From FINRA Rule 3240
with the Public--CBOE Rule or Lending to Borrowing From or
9.25 is incorporated by Customers. Lending to
reference. Customers.
------------------------------------------------------------------------
\1\ FINRA shall have Regulatory Responsibilities to the extent the
heighted qualification exam requirement of the Cboe and C2 rule is
satisfied by the Series 24.
\2\ FINRA shall not have any Regulatory Responsibilities regarding the
requirement to conduct independent testing during the first calendar
year of a broker-dealer becoming a Trading Permit Holder or TPH
organization; responsibility for such requirement remains with Cboe
and C2, as applicable.
\3\ FINRA shall not have any Regulatory Responsibilities regarding the
requirement that the Trading Permit Holder provide prior written
consent to the TPH organization; responsibility for such requirement
remains with Cboe and C2, as applicable.
The following provisions are covered:
Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements
Rule 203 of Regulation SHO--Borrowing and Delivery
Requirements
Rule 204 of Regulation SHO--Close-Out Requirement
Rule 105 of Regulation M--Short Selling in Connection with a
Public Offering
Section 14(e) of the Exchange Act
Rule 14e-4 of the Exchange Act--Prohibited Transactions in
Connection with Partial Tender Offers [caret]
Regulation ATS
Regulation S-P
[caret] FINRA shall perform surveillance, investigation
and Enforcement Responsibilities for SEA Rule 14e-4(a)(1)(ii)(D).
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. 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
[[Page 22737]]
Send an email to [email protected]. Please include
File Number 4-536 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 4-536. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan that are filed with the
Commission, and all written communications relating to the proposed
plan between the Commission and any person, other than those that may
be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the plan also will be available for inspection and
copying at the principal offices of FINRA, Cboe, and C2. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number 4-536 and should be submitted on or before
June 6, 2018.
V. Discussion
The Commission finds that the proposed Amended 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 Amended 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
Amended Plan should reduce unnecessary regulatory duplication by
allocating to FINRA certain examination and enforcement
responsibilities for Common Members that would otherwise be performed
by Cboe, C2, and FINRA. Accordingly, the proposed Amended Plan promotes
efficiency by reducing costs to Common Members. Furthermore, because
Cboe, C2, and FINRA will coordinate their regulatory functions in
accordance with the Amended Plan, the Amended 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 Amended Plan, Cboe, C2, and
FINRA have allocated regulatory responsibility for those Cboe and C2
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 Amended 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 Amended Plan are specifically listed in the
Certification, as may be amended by the Parties from time to time.
According to the Amended Plan, Cboe and C2 will review the
Certification, at least annually, or more frequently if required by
changes in either the rules of Cboe, C2, or FINRA, and, if necessary,
submit to FINRA an updated list of Common Rules to add Cboe and C2
rules not included on the then-current list of Common Rules that are
substantially similar to FINRA rules; delete Cboe and C2 rules included
in the then-current list of Common Rules that no longer qualify as
common rules; and confirm that the remaining rules on the list of
Common Rules continue to be Cboe and C2 rules that qualify as common
rules.\15\ FINRA will then confirm in writing whether the rules listed
in any updated list are Common Rules as defined in the Amended Plan.
Under the Amended Plan, Cboe and C2 will also provide FINRA with a
current list of Common Members and shall update the list no less
frequently than once every six months.\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 Amended Plan.
\16\ See paragraph 3 of the Amended Plan.
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The Commission is hereby declaring effective an Amended Plan that,
among other things, allocates regulatory responsibility to FINRA for
the oversight and enforcement of all Cboe and C2 rules that are
substantially similar to the rules of FINRA for Common Members of Cboe
and FINRA, and C2 and FINRA. Therefore, modifications to the
Certification need not be filed with the Commission as an amendment to
the Amended Plan, provided that the Parties are only adding to,
deleting from, or confirming changes to Cboe or C2 rules in the
Certification in conformance with the definition of Common Rules
provided in the Amended Plan. However, should the Parties decide to add
a Cboe or C2 rule to the Certification that is not substantially
similar to a FINRA rule; delete a Cboe or C2 rule from the
Certification that is substantially similar to a FINRA rule; or leave
on the Certification a Cboe or C2 rule that is no longer substantially
similar to a FINRA rule, then such a change would constitute an
amendment to the Amended 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
Amended Plan for examining, and enforcing compliance by, Common
Members, also would constitute an amendment to the Amended Plan.
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Under paragraph (c) of Rule 17d-2, the Commission may, after
appropriate notice and comment, declare a plan, or any part of a plan,
effective. In this instance, the Commission believes that appropriate
notice and comment can take place after the proposed amendment is
effective. The primary purposes of the amendment are to remove Cboe's
former equities trading facility, CBSX, from the Plan; (2) to the
extent that it becomes a member of either exchange, allocate regulatory
responsibility to FINRA for Cboe's and C2's affiliated routing broker-
dealer, Cboe Trading, Inc.; and (3) allocate surveillance,
investigation, and enforcement responsibilities for Rule 14e-4 under
the Act . By declaring it effective today, the Amended Plan can become
effective and be implemented without undue delay. The Commission notes
that the prior version of this plan immediately prior to this proposed
amendment was published for comment and the Commission did not receive
any comments thereon.\18\ Furthermore, the Commission does not believe
that the amendment to the plan raises any new
[[Page 22738]]
regulatory issues that the Commission has not previously considered.
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\18\ See supra note 12 (citing to Securities Exchange Act
Release No. 72137).
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VI. Conclusion
This order gives effect to the Amended Plan filed with the
Commission in File No. 4-536. The Parties shall notify all members
affected by the Amended Plan of their rights and obligations under the
Amended Plan.
It is therefore ordered, pursuant to Section 17(d) of the Act, that
the Amended Plan in File No. 4-536, between the FINRA, Cboe, and C2,
filed pursuant to Rule 17d-2 under the Act, hereby is approved and
declared effective.
It is further ordered that Cboe and C2 are relieved of those
responsibilities allocated to FINRA under the Amended Plan in File No.
4-536.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(34).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10369 Filed 5-15-18; 8:45 am]
BILLING CODE 8011-01-P
