Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Supplementary Material to Rule 706 To Harmonize Its Sponsored Access Rules With Those of Its Affiliates, 23498-23502 [2018-10706]
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Federal Register / Vol. 83, No. 98 / Monday, May 21, 2018 / Notices
Trading Permit Holders and other
persons using its facilities.
The Exchange believes that reducing
the $400 per month to $0.02 per
contract with a cap of $400 per month
on a TPH sending drop copies from
PULSe to a non-TPH customer is
reasonable because the fee will continue
to allow the Exchange to monitor,
develop and implement upgrades,
maintain, and customize PULSe to
ensure a non-TPH customer receives
timely and accurate drop copies while
also potentially reducing the sending
TPH’s costs. The Exchange believes the
fee is equitable and not unfairly
discriminatory because the monthly fee
is assessed equally to any TPH sending
drop copies to its non-TPH customers.
Additionally, use of the drop copy
functionality by a TPH and non-TPH
customer is voluntary.
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burdens on competition that are not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed PULSe-related
fees are assessed equally to TPH
broker’s electing to use the optional
Drop Copy functionality. The Exchange
does not believe that the proposed
change will cause any unnecessary
burden on intermarket competition
because the proposed fees relate to use
of an Exchange-provided order entry
system. To the extent that any proposed
change makes the Exchange a more
attractive marketplace for market
participants at other exchanges, such
market participants are welcome to
become Exchange market participants.
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2018–033 on the subject line.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 6 and paragraph (f) of Rule
19b–4 7 thereunder. At any time within
6 15
U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4(f).
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2018–033. 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 rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for 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
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
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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 SR–CBOE–2018–033 and
should be submitted on or before June
11, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–10711 Filed 5–18–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83239; File No. SR–MRX–
2018–14]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend
Supplementary Material to Rule 706 To
Harmonize Its Sponsored Access
Rules With Those of Its Affiliates
May 15, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 9,
2018, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Regulatory Organization’s Statement
of the Terms of Substance of the
Proposed Rule Change
The Exchange proposes to amend
Supplementary Material to Rule 706 to
harmonize its sponsored access rules
with those of its affiliates.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqmrx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The purpose of the proposed rule
change is to amend Supplementary
Material to Rule 706, which contains the
Exchange’s sponsored access rules, to
harmonize these rules with those of the
Nasdaq Exchanges.3 On March 9, 2016,
the Exchange and its affiliates,
International Securities Exchange, LLC
(now, Nasdaq ISE, LLC) (‘‘ISE’’) and ISE
Gemini, LLC (now, Nasdaq GEMX, LLC)
(‘‘GEMX’’ and together with ISE and
MRX, ‘‘ISE Exchanges’’), were acquired
by Nasdaq, Inc. (‘‘Acquisition’’).4 In the
context of the Acquisition, the ISE
Exchanges have been working to align
certain of its rules and processes with
those of the Nasdaq Exchanges in order
to provide consistent standards across
the six exchanges owned and operated
by Nasdaq, Inc. (collectively, ‘‘Affiliated
Exchanges’’). As part of this effort, the
proposal set forth below harmonizes the
Exchange’s sponsored access rules with
the Nasdaq Sponsored Access Rules in
order to provide uniform standards and
requirements for users of the Affiliated
Exchanges.5
In particular, the Exchange proposes
to (1) define the term ‘‘Sponsored
Access’’ and ‘‘Customer Agreement;’’ (2)
specify the requirement to comply with
Rule 15c3–5 under the Act (‘‘Market
Access Rule’’); (3) remove the
requirements that each Sponsored
Customer and each Sponsoring Member
enter into certain agreements with the
3 See NQX Rule 4615, BX Rule 4615 and PHLX
Rule 1094 (collectively, ‘‘Nasdaq Sponsored Access
Rules’’).
4 See Securities Exchange Act Release No. 78119
(June 21, 2016), 81 FR 41611 (June 27, 2016) (SR–
ISE–2016–11; SR–ISEGemini–2016–05; SR–
ISEMercury–2016–10).
5 ISE and GEMX will each file similar rule change
proposals with the Commission to harmonize their
sponsored access rules with the Nasdaq Sponsored
Access Rules.
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Exchange; and (4) make a number of
related, non-substantive changes. Each
change is discussed in detail as follows.
Defining Sponsored Access
A Sponsored Customer is a nonmember of the Exchange, such as an
institutional investor, that gains access
to the Exchange 6 and trades under a
Sponsoring Member’s execution and
clearing identity pursuant to a
sponsorship arrangement between such
non-member and Sponsoring Member,
as set forth in Supplementary Material
to Rule 706. The Exchange is proposing
to define the term ‘‘Sponsored Access’’
to clarify the type of market access
arrangement that is subject to this rule.
Accordingly, the Exchange proposes to
amend Supplementary Material .01(a) to
Rule 706 to add the following
definition: ‘‘Sponsored Access shall
mean an arrangement whereby a
Member permits its customers to enter
orders into the System that bypass the
Member’s trading system and are routed
directly to the Exchange, including
routing through a service bureau or
other third party technology provider.’’
This definition mirrors the language set
forth in the Nasdaq Sponsored Access
Rules,7 and is derived from the
Commission’s description of Sponsored
Access used in the release approving the
Market Access Rule.8 The Exchange
believes that defining Sponsored Access
in Supplementary Material .01(a) to
Rule 706 will provide market
participants with greater clarity
regarding Sponsored Access and their
obligations with respect to this type of
access arrangement.
Defining Customer Agreement
The Exchange proposes to amend
Supplementary Material .01(b)(1) to
Rule 706 to define the agreement that
Sponsored Customers must enter into
and maintain with one or more
Sponsoring Members to establish proper
relationship(s) and account(s) through
which the Sponsored Customer may
6 For example, a broker-dealer may allow its
customer—whether an institution such as a hedge
fund, mutual fund, bank or insurance company, an
individual, or another broker-dealer—to use the
broker-dealer’s MPID, account or other mechanism
or mnemonic used to identify a market participant
for the purposes of electronically accessing the
Exchange.
7 See NQX Rule 4615(a), BX Rule 4615(a) and
PHLX Rule 1094(a).
8 The Market Access Rule, among other things,
requires broker-dealers providing others with access
to an exchange or alternative trading system to
establish, document, and maintain a system of risk
management controls and supervisory procedures
reasonably designed to manage the financial,
regulatory, and other risks of providing such access.
See Securities Exchange Act Release No. 63241
(November 3, 2010), 75 FR 69792 (November 15,
2010).
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trade on the Exchange, as a ‘‘Customer
Agreement.’’ 9
Market Access Rule
Pursuant to Supplementary Material
.01(b)(2) to Rule 706, the Sponsoring
Member is responsible for the activities
of the Sponsored Customer. Sponsored
Customers are required to have
procedures in place to comply with the
Exchange’s rules, and the Sponsoring
Member takes responsibility for the
Sponsored Customer’s activity on the
Exchange. Members may have multiple
Sponsored Access relationships in place
at a given time. The Exchange’s
examination program assesses
compliance with the sponsored access
rules set forth in Supplementary
Material to Rule 706, among other
rules.10 The Exchange now proposes to
specifically enumerate in
Supplementary Material .01(b)(2) to
Rule 706 the member’s obligation to
comply with the Market Access Rule,
with which Members are currently
required to comply in connection with
market access.11 The Exchange believes
that specifying the obligation to comply
with the Market Access Rule within the
rule itself will reinforce that
Supplementary Material to Rule 706
presupposes member compliance with
the Market Access Rule.
Elimination of Certain Contract
Requirements
The Exchange currently requires a
Sponsored Customer Agreement
between the Sponsored Customer and
the Exchange,12 and a Sponsored
Customer Addendum to the member
access agreement (hereinafter,
‘‘Addendum’’) that is provided to the
Exchange by the Sponsoring Member.13
At this time, the Exchange proposes to
remove the existing requirements to
submit the Sponsored Customer
Agreement and Addendum to the
Exchange in order to align its sponsored
access rules with the Nasdaq Sponsored
Access Rules. The Exchange will
continue to require a Customer
Agreement between the Sponsored
Customer and Sponsoring Member
9 The Nasdaq Sponsored Access Rules also
similarly define ‘‘Customer Agreement.’’ See NQX
Rule 4615(b)(i), BX Rule 4615(b)(i) and PHLX Rule
1094(b)(i).
10 The Exchange has a Regulatory Services
Agreement (‘‘RSA’’) with the Financial Industry
Regulatory Authority (‘‘FINRA’’) to conduct
regulatory examinations, among other obligations.
11 See NQX Rule 4615(b)(ii)(A), BX Rule
4615(b)(ii)(A) and PHLX Rule 1094(b)(ii)(A) for
consistent provisions.
12 See Supplementary Material .01(a) to Rule 706.
13 See Supplementary Material .01(b)(2)(i) and
(b)(3) to Rule 706.
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pursuant to Supplementary Material
.01(b)(2) to Rule 706.14
Today, only members may request
connectivity to the Exchange by
contacting Nasdaq Subscriber Services.
A member may obtain separate ports for
the purpose of providing Sponsored
Access. If separate ports are requested
by a member for the purpose of
providing Sponsored Access, the
member must request those ports from
the Exchange and is responsible for the
Sponsored Customer’s activity on the
Exchange.15 In all circumstances, the
Exchange only permits members to
request connectivity to the market and
the member is responsible for all
customer orders submitted through the
member’s port. In addition, such
connection by the member requires
approval by the Exchange for the
purpose of testing as well as other
relevant information sharing with the
Exchange by the member to obtain a
port. The Exchange is therefore aware of
the member responsible for each of its
ports. The Exchange may also request
further information about a member’s
particular customer relationship,
including the list of all Authorized
Traders who may have access to the
Exchange on behalf of the Sponsored
Customer, as it deems necessary.16
The Exchange believes that
completing and submitting the
Sponsored Customer Agreement and
Addendum is unnecessarily
burdensome in light of the current
structure in place at the Exchange. The
Sponsored Customer Agreement
requirement was intended to ensure that
the Sponsored Customer was informed
of its obligation to comply with the
Exchange’s Certificate of Formation, ByLaws, Rules and procedures, including
the requirements in Supplementary
Material .01(b)(2)(iii)–(ix).17 The
agreement also provided the Exchange
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14 The
Nasdaq Sponsored Access Rules likewise
only require a Customer Agreement between the
sponsored participant and sponsoring member. See
NQX Rule 4615(b)(i), BX Rule 4615(b)(i) and PHLX
Rule 1094(b)(i).
15 In such cases, the Nasdaq Exchanges also
require members to disclose the sponsored access
arrangement as a condition to approving the
member’s port request. MRX will similarly require
members requesting connectivity to MRX for the
purpose of providing Sponsored Access to disclose
sponsored access arrangements as a condition to
approval.
16 See Rule 1601.
17 These requirements include, among others, the
Sponsored Customer’s obligation to maintain, keep
current and provide to the Sponsoring Member a
list of Authorized Traders who may obtain access
to the Exchange on behalf of the Sponsored
Customer. In addition, the Sponsored Customer
must take reasonable security precautions to
prevent unauthorized use or access to the Exchange,
and is responsible for having adequate procedures
and controls in place to comply with MRX’s rules.
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with contractual privity, which would
no longer exist with the removal of the
Sponsored Customer Agreement. The
Exchange does not believe the loss of
privity with the Sponsored Customer
creates a concern as the Exchange has
the ability to remove access to the port
at any time if it determines that the
activity of the Sponsored Customer
warrants such removal. In addition, as
discussed below, the Sponsored
Customer will be informed of its
obligations through the Customer
Agreement that it executed with the
Sponsoring Member. As noted above,
the Exchange only permits its members
to request connectivity to the
Exchange’s trading system, and
members remain responsible for all
trades submitted through such ports.
Pursuant to Supplementary Material
.01(b)(2)(vii) to Rule 706, the trading
activity of a Sponsored Customer must
be monitored by the Sponsoring
Member for compliance with the terms
of the Customer Agreement with the
Sponsored Customer. Finally,
Sponsoring Members continue to be
obligated to comply with
Supplementary Material .01(b) to Rule
706 and the Market Access Rule. As
such, the Sponsoring Member is
responsible for any and all actions taken
by its Sponsored Customer and any
person acting on behalf of or in the
name of such Sponsored Customer.
The Addendum requirement was
intended to notify the Exchange of the
relationship between the Sponsoring
Member and the Sponsored Customer,
and to provide the Sponsoring
Member’s express acknowledgment of
the Sponsoring Member’s responsibility
for the orders, executions and actions of
its Sponsored Customer. However, as
noted above, the Exchange may request
additional information about a
particular customer relationship as it
deems necessary.18 The Exchange will
also require that its members disclose
the Sponsored Customer relationship as
a condition for approving any ports
requested for the purpose of providing
Sponsored Access.19 Accordingly, the
Exchange will continue to be notified of
Sponsored Customer arrangements even
with the removal of the Addendum.
Furthermore, as discussed above,
Sponsoring Members continue to be
obligated to comply with
Supplementary Material .01(b) to Rule
706 and the Market Access Rule, and are
therefore responsible for any and all
actions taken by its Sponsored Customer
and any person acting on behalf of or in
the name of such Sponsored Customer.
18 See
19 See
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Rule 1601.
note 15 above.
Frm 00087
Fmt 4703
The Exchange, through its RSA with
FINRA, reviews member compliance
with Supplementary Material to Rule
706, including compliance with the
Market Access Rule.
Supplementary Material .01(b)(1) to
Rule 706 requires that the Sponsored
Customer and the Sponsoring Member
maintain a Customer Agreement with
the sponsorship provisions set forth in
paragraph (2) to ensure compliance with
Exchange’s rules and obligations related
to security, among other things.
Additionally, Supplementary Material
.01(b)(2)(iv) and (v) require that the
Customer Agreement include the
Sponsored Customer’s obligation to
maintain, keep current and provide to
the Sponsoring Member a list of
Authorized Traders who have been
granted access to the Exchange on
behalf of the Sponsored Customer, and
provide such Authorized Traders with
appropriate training prior to any use or
access to the Exchange. In addition,
pursuant to the Customer Agreement
provisions required by Rule 706,
Supplementary Material .01(b)(vii), the
Sponsored Customer is obligated to take
reasonable security precautions to
prevent unauthorized use or access to
the Exchange, including unauthorized
entry of information into the Exchange’s
System, or the information and data
made available therein. Finally, the
Customer Agreement must provide that
the Sponsored Customer is responsible
for any and all orders, trades and other
messages and instructions entered,
transmitted or received under
identifiers, passwords and security
codes of Authorized Traders, and for the
trading and other consequences thereof,
including granting unauthorized access
to the Exchange.20 The contents and the
requirement for a Customer Agreement
are unchanged.
Clean-Up Changes
The Exchange proposes to correct two
typographical errors in subsections (vii)
and (ix) of Supplementary Material
.01(b)(2) to Rule 706. First in subsection
(vii), the Exchange proposes to correct a
typo by replacing ‘‘of’’ with ‘‘or’’ in the
first sentence. The proposed sentence
would therefore state ‘‘Sponsored
Customer shall take reasonable security
precautions to prevent unauthorized use
or access to the Exchange . . .’’
Second, subsection (ix) would be
amended to correct a typo in the last
portion of the first sentence. In
particular, the phrase ‘‘. . . Sponsored
Customers access to and use of the
Exchange’’ should be ‘‘. . . Sponsored
20 See Rule 706, Supplementary Material
.01(b)(vii).
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Customer’s access to and use of the
Exchange.’’ Both of these proposed
changes are non-substantive clean-ups,
and are intended to ensure that the rule
text is as accurate and clear as possible.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,21 in general, and furthers the
objectives of Section 6(b)(5) of the Act,22
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
Overall, the proposed rule change is
intended to align the Exchange’s
sponsored access rules in
Supplementary Material to Rule 706
with the Nasdaq Sponsored Access
Rules, and is part of the Exchange’s
continued effort to promote efficiency
and conformity of its processes with
those of the Nasdaq Exchanges.
Consistent rules and processes across
the Affiliated Exchanges would in turn
simplify the regulatory requirements for
members of the Exchange that are also
participants on the Nasdaq Exchanges.
The Exchange believes that its proposal
would provide greater harmonization
among similar rules and procedures of
the Affiliated Exchanges, resulting in
greater uniformity and more efficient
regulatory compliance. As such, the
proposed rule change would foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities and would
remove impediments to and perfect the
mechanism of a free and open market
and national market system.
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Defining Sponsored Access
Adding a definition of Sponsored
Access will assist market participants to
understand the type of arrangements
that are subject to Supplementary
Material to Rule 706, and such clarity
will serve to promote just and equitable
principles of trade. The Exchange
believes that adding the Sponsored
Access definition will provide its
members with additional guidance with
respect to this Rule.
Defining Customer Agreement
Defining the agreement that
Sponsored Customers must enter into
and maintain with one or more
Sponsoring Members to establish proper
relationship(s) and account(s) through
which the Sponsored Customer may
21 15
22 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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18:20 May 18, 2018
trade on the Exchange, as a ‘‘Customer
Agreement’’ will also serve to provide
members with clarity on the agreement
that the Exchange will continue to
require and the obligations that are
contained within the Customer
Agreement. This amendment is nonsubstantive.
Market Access Rule
As discussed above, Exchange
members will continue to be required to
comply with Supplementary Material to
Rule 706 and the Market Access Rule.
The Exchange believes that specifically
enumerating the member’s
responsibility to comply with the
Market Access Rule within the Rule
itself will provide members with
additional guidance concerning the
application of the Rule. This change is
non-substantive as members are
currently responsible for complying
with the Market Access Rule.
Elimination of Certain Contract
Requirements
Removing the requirements to submit
and complete a Sponsored Customer
Agreement and Addendum will remove
impediments to and perfect the
mechanism of a free and open market by
aligning the Exchange’s sponsored
access rules with the Nasdaq Sponsored
Access Rules, which currently do not
require additional agreements for their
sponsored participants other than a
Customer Agreement.23 The Exchange
believes that its proposal would create
equivalent sponsored access standards
and requirements among the Affiliated
Exchanges and also provide clarity to its
members, which is beneficial to both
investors and the public interest. While
elimination of the Sponsored Customer
Agreement requirement will also
eliminate the Exchange’s contractual
privity with the Sponsored Customer,
the Exchange notes that any potential
concerns to the loss of privity are
mitigated by the Exchange’s ability to
restrict the Sponsored Customer’s access
to a port at any time it is warranted by
the Sponsored Customer’s trading
activity. As discussed above,
connectivity to the Exchange must be
requested by a member of the Exchange.
Such connection requires approval by
the Exchange, testing and other security
features as well as information sharing
with the Exchange by the member. In
addition, Supplementary Material
.01(b)(2) to Rule 706 delineates the
terms of the required contractual
relationship between the Sponsoring
Member and the Sponsored Customer in
23 See NQX Rule 4615, BX Rule 4615 and PHLX
Rule 1094.
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23501
the Customer Agreement, which
remains in effect. The Exchange also
believes that the Addendum is
unnecessary in light of the fact that
Sponsoring Members must request
connectivity to the Exchange as well as
enter into a Customer Agreement with
the Sponsored Customer. Furthermore,
as discussed above, the Exchange will
require members to disclose the
Sponsored Customer relationship as a
condition to approving the member’s
port request to provide Sponsored
Access. Finally, as is the case with other
Exchange rules, the Exchange examines
for compliance with Supplementary
Material to Rule 706 and may request
information about any customer
relationship which concerns the
Exchange pursuant to Rule 1601.
Clean-Up Changes
The Exchange believes that the
proposed changes to correct the two
typos in subsections (vii) and (ix) of
Supplementary Material .01(b)(2) to
Rule 706 will add further clarification to
the Exchange’s Rulebook and alleviate
potential confusion as to the
applicability of the Exchange’s rules,
which will protect investors and the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act because all
members would be subject to the same
sponsored access requirements, as
discussed above. The proposed rule
change is designed to provide greater
harmonization among the sponsored
access rules across the Affiliated
Exchanges, resulting in more efficient
regulatory compliance for common
members, and is not intended to have
any competitive effect.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
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become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 24 and
subparagraph (f)(6) of Rule 19b–4
thereunder.25
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 26 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 27
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange represents that
waiver of the operative delay would
allow the Exchange to harmonize its
sponsored access rule to the rules of the
Nasdaq Exchanges.28 The Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest because the proposed rule
change would simplify the regulatory
requirements of members of the
Exchange that are also participants on
the Nasdaq Exchanges. Further, the
Commission does not believe that the
proposed rule change raises any new or
novel issues. Accordingly, the
Commission hereby waives the
operative delay and designates the
proposal operative upon filing.29
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
24 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
26 17 CFR 240.19b–4(f)(6).
27 17 CFR 240.19b–4(f)(6)(iii).
28 See supra note 3.
29 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
sradovich on DSK3GMQ082PROD with NOTICES
25 17
VerDate Sep<11>2014
18:20 May 18, 2018
Jkt 244001
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
Proposed Collection; Comment
Request
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MRX–2018–14 on the subject line.
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MRX–2018–14. 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 rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for 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
filing also will be available for
inspection and copying at the principal
office of the Exchange. 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 SR–MRX–2018–14 and should
be submitted on or before June 11, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–10706 Filed 5–18–18; 8:45 am]
BILLING CODE 8011–01–P
30 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00089
Fmt 4703
Sfmt 4703
Extension:
Rule 12b–1, SEC File No. 270–188, OMB
Control No. 3235–0212.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget (‘‘OMB’’) for
extension and approval.
Rule 12b–1 under the Investment
Company Act of 1940 (17 CFR
270.12b–1) permits a registered openend investment company (‘‘fund’’) to
bear expenses associated with the
distribution of its shares, provided that
the fund complies with certain
requirements, including, among other
things, that it adopt a written plan
(‘‘rule 12b–1 plan’’) and that it preserves
in writing any agreements relating to the
rule 12b–1 plan. The rule in part
requires that (i) the adoption or material
amendment of a rule 12b–1 plan be
approved by the fund’s directors,
including its independent directors,
and, in certain circumstances, its
shareholders; (ii) the board review
quarterly reports of amounts spent
under the rule 12b–1 plan; and (iii) the
board, including the independent
directors, consider continuation of the
rule 12b–1 plan and any related
agreements at least annually. Rule
12b–1 also requires funds relying on the
rule to preserve for six years, the first
two years in an easily accessible place,
copies of the rule 12b–1 plan and any
related agreements and reports, as well
as minutes of board meetings that
describe the factors considered and the
basis for adopting or continuing a rule
12b–1 plan.
Rule 12b–1 also prohibits funds from
paying for distribution of fund shares
with brokerage commissions on their
portfolio transactions. The rule requires
funds that use broker-dealers that sell
their shares to also execute their
portfolio securities transactions, to
implement policies and procedures
reasonably designed to prevent: (i) The
persons responsible for selecting brokerdealers to effect transactions in fund
E:\FR\FM\21MYN1.SGM
21MYN1
Agencies
[Federal Register Volume 83, Number 98 (Monday, May 21, 2018)]
[Notices]
[Pages 23498-23502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10706]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83239; File No. SR-MRX-2018-14]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend
Supplementary Material to Rule 706 To Harmonize Its Sponsored Access
Rules With Those of Its Affiliates
May 15, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 9, 2018, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Regulatory Organization's Statement of the Terms of Substance of the
Proposed Rule Change
The Exchange proposes to amend Supplementary Material to Rule 706
to harmonize its sponsored access rules with those of its affiliates.
The text of the proposed rule change is available on the Exchange's
website at https://nasdaqmrx.cchwallstreet.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
[[Page 23499]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Supplementary
Material to Rule 706, which contains the Exchange's sponsored access
rules, to harmonize these rules with those of the Nasdaq Exchanges.\3\
On March 9, 2016, the Exchange and its affiliates, International
Securities Exchange, LLC (now, Nasdaq ISE, LLC) (``ISE'') and ISE
Gemini, LLC (now, Nasdaq GEMX, LLC) (``GEMX'' and together with ISE and
MRX, ``ISE Exchanges''), were acquired by Nasdaq, Inc.
(``Acquisition'').\4\ In the context of the Acquisition, the ISE
Exchanges have been working to align certain of its rules and processes
with those of the Nasdaq Exchanges in order to provide consistent
standards across the six exchanges owned and operated by Nasdaq, Inc.
(collectively, ``Affiliated Exchanges''). As part of this effort, the
proposal set forth below harmonizes the Exchange's sponsored access
rules with the Nasdaq Sponsored Access Rules in order to provide
uniform standards and requirements for users of the Affiliated
Exchanges.\5\
---------------------------------------------------------------------------
\3\ See NQX Rule 4615, BX Rule 4615 and PHLX Rule 1094
(collectively, ``Nasdaq Sponsored Access Rules'').
\4\ See Securities Exchange Act Release No. 78119 (June 21,
2016), 81 FR 41611 (June 27, 2016) (SR-ISE-2016-11; SR-ISEGemini-
2016-05; SR-ISEMercury-2016-10).
\5\ ISE and GEMX will each file similar rule change proposals
with the Commission to harmonize their sponsored access rules with
the Nasdaq Sponsored Access Rules.
---------------------------------------------------------------------------
In particular, the Exchange proposes to (1) define the term
``Sponsored Access'' and ``Customer Agreement;'' (2) specify the
requirement to comply with Rule 15c3-5 under the Act (``Market Access
Rule''); (3) remove the requirements that each Sponsored Customer and
each Sponsoring Member enter into certain agreements with the Exchange;
and (4) make a number of related, non-substantive changes. Each change
is discussed in detail as follows.
Defining Sponsored Access
A Sponsored Customer is a non-member of the Exchange, such as an
institutional investor, that gains access to the Exchange \6\ and
trades under a Sponsoring Member's execution and clearing identity
pursuant to a sponsorship arrangement between such non-member and
Sponsoring Member, as set forth in Supplementary Material to Rule 706.
The Exchange is proposing to define the term ``Sponsored Access'' to
clarify the type of market access arrangement that is subject to this
rule. Accordingly, the Exchange proposes to amend Supplementary
Material .01(a) to Rule 706 to add the following definition:
``Sponsored Access shall mean an arrangement whereby a Member permits
its customers to enter orders into the System that bypass the Member's
trading system and are routed directly to the Exchange, including
routing through a service bureau or other third party technology
provider.'' This definition mirrors the language set forth in the
Nasdaq Sponsored Access Rules,\7\ and is derived from the Commission's
description of Sponsored Access used in the release approving the
Market Access Rule.\8\ The Exchange believes that defining Sponsored
Access in Supplementary Material .01(a) to Rule 706 will provide market
participants with greater clarity regarding Sponsored Access and their
obligations with respect to this type of access arrangement.
---------------------------------------------------------------------------
\6\ For example, a broker-dealer may allow its customer--whether
an institution such as a hedge fund, mutual fund, bank or insurance
company, an individual, or another broker-dealer--to use the broker-
dealer's MPID, account or other mechanism or mnemonic used to
identify a market participant for the purposes of electronically
accessing the Exchange.
\7\ See NQX Rule 4615(a), BX Rule 4615(a) and PHLX Rule 1094(a).
\8\ The Market Access Rule, among other things, requires broker-
dealers providing others with access to an exchange or alternative
trading system to establish, document, and maintain a system of risk
management controls and supervisory procedures reasonably designed
to manage the financial, regulatory, and other risks of providing
such access. See Securities Exchange Act Release No. 63241 (November
3, 2010), 75 FR 69792 (November 15, 2010).
---------------------------------------------------------------------------
Defining Customer Agreement
The Exchange proposes to amend Supplementary Material .01(b)(1) to
Rule 706 to define the agreement that Sponsored Customers must enter
into and maintain with one or more Sponsoring Members to establish
proper relationship(s) and account(s) through which the Sponsored
Customer may trade on the Exchange, as a ``Customer Agreement.'' \9\
---------------------------------------------------------------------------
\9\ The Nasdaq Sponsored Access Rules also similarly define
``Customer Agreement.'' See NQX Rule 4615(b)(i), BX Rule 4615(b)(i)
and PHLX Rule 1094(b)(i).
---------------------------------------------------------------------------
Market Access Rule
Pursuant to Supplementary Material .01(b)(2) to Rule 706, the
Sponsoring Member is responsible for the activities of the Sponsored
Customer. Sponsored Customers are required to have procedures in place
to comply with the Exchange's rules, and the Sponsoring Member takes
responsibility for the Sponsored Customer's activity on the Exchange.
Members may have multiple Sponsored Access relationships in place at a
given time. The Exchange's examination program assesses compliance with
the sponsored access rules set forth in Supplementary Material to Rule
706, among other rules.\10\ The Exchange now proposes to specifically
enumerate in Supplementary Material .01(b)(2) to Rule 706 the member's
obligation to comply with the Market Access Rule, with which Members
are currently required to comply in connection with market access.\11\
The Exchange believes that specifying the obligation to comply with the
Market Access Rule within the rule itself will reinforce that
Supplementary Material to Rule 706 presupposes member compliance with
the Market Access Rule.
---------------------------------------------------------------------------
\10\ The Exchange has a Regulatory Services Agreement (``RSA'')
with the Financial Industry Regulatory Authority (``FINRA'') to
conduct regulatory examinations, among other obligations.
\11\ See NQX Rule 4615(b)(ii)(A), BX Rule 4615(b)(ii)(A) and
PHLX Rule 1094(b)(ii)(A) for consistent provisions.
---------------------------------------------------------------------------
Elimination of Certain Contract Requirements
The Exchange currently requires a Sponsored Customer Agreement
between the Sponsored Customer and the Exchange,\12\ and a Sponsored
Customer Addendum to the member access agreement (hereinafter,
``Addendum'') that is provided to the Exchange by the Sponsoring
Member.\13\ At this time, the Exchange proposes to remove the existing
requirements to submit the Sponsored Customer Agreement and Addendum to
the Exchange in order to align its sponsored access rules with the
Nasdaq Sponsored Access Rules. The Exchange will continue to require a
Customer Agreement between the Sponsored Customer and Sponsoring Member
[[Page 23500]]
pursuant to Supplementary Material .01(b)(2) to Rule 706.\14\
---------------------------------------------------------------------------
\12\ See Supplementary Material .01(a) to Rule 706.
\13\ See Supplementary Material .01(b)(2)(i) and (b)(3) to Rule
706.
\14\ The Nasdaq Sponsored Access Rules likewise only require a
Customer Agreement between the sponsored participant and sponsoring
member. See NQX Rule 4615(b)(i), BX Rule 4615(b)(i) and PHLX Rule
1094(b)(i).
---------------------------------------------------------------------------
Today, only members may request connectivity to the Exchange by
contacting Nasdaq Subscriber Services. A member may obtain separate
ports for the purpose of providing Sponsored Access. If separate ports
are requested by a member for the purpose of providing Sponsored
Access, the member must request those ports from the Exchange and is
responsible for the Sponsored Customer's activity on the Exchange.\15\
In all circumstances, the Exchange only permits members to request
connectivity to the market and the member is responsible for all
customer orders submitted through the member's port. In addition, such
connection by the member requires approval by the Exchange for the
purpose of testing as well as other relevant information sharing with
the Exchange by the member to obtain a port. The Exchange is therefore
aware of the member responsible for each of its ports. The Exchange may
also request further information about a member's particular customer
relationship, including the list of all Authorized Traders who may have
access to the Exchange on behalf of the Sponsored Customer, as it deems
necessary.\16\
---------------------------------------------------------------------------
\15\ In such cases, the Nasdaq Exchanges also require members to
disclose the sponsored access arrangement as a condition to
approving the member's port request. MRX will similarly require
members requesting connectivity to MRX for the purpose of providing
Sponsored Access to disclose sponsored access arrangements as a
condition to approval.
\16\ See Rule 1601.
---------------------------------------------------------------------------
The Exchange believes that completing and submitting the Sponsored
Customer Agreement and Addendum is unnecessarily burdensome in light of
the current structure in place at the Exchange. The Sponsored Customer
Agreement requirement was intended to ensure that the Sponsored
Customer was informed of its obligation to comply with the Exchange's
Certificate of Formation, By-Laws, Rules and procedures, including the
requirements in Supplementary Material .01(b)(2)(iii)-(ix).\17\ The
agreement also provided the Exchange with contractual privity, which
would no longer exist with the removal of the Sponsored Customer
Agreement. The Exchange does not believe the loss of privity with the
Sponsored Customer creates a concern as the Exchange has the ability to
remove access to the port at any time if it determines that the
activity of the Sponsored Customer warrants such removal. In addition,
as discussed below, the Sponsored Customer will be informed of its
obligations through the Customer Agreement that it executed with the
Sponsoring Member. As noted above, the Exchange only permits its
members to request connectivity to the Exchange's trading system, and
members remain responsible for all trades submitted through such ports.
Pursuant to Supplementary Material .01(b)(2)(vii) to Rule 706, the
trading activity of a Sponsored Customer must be monitored by the
Sponsoring Member for compliance with the terms of the Customer
Agreement with the Sponsored Customer. Finally, Sponsoring Members
continue to be obligated to comply with Supplementary Material .01(b)
to Rule 706 and the Market Access Rule. As such, the Sponsoring Member
is responsible for any and all actions taken by its Sponsored Customer
and any person acting on behalf of or in the name of such Sponsored
Customer.
---------------------------------------------------------------------------
\17\ These requirements include, among others, the Sponsored
Customer's obligation to maintain, keep current and provide to the
Sponsoring Member a list of Authorized Traders who may obtain access
to the Exchange on behalf of the Sponsored Customer. In addition,
the Sponsored Customer must take reasonable security precautions to
prevent unauthorized use or access to the Exchange, and is
responsible for having adequate procedures and controls in place to
comply with MRX's rules.
---------------------------------------------------------------------------
The Addendum requirement was intended to notify the Exchange of the
relationship between the Sponsoring Member and the Sponsored Customer,
and to provide the Sponsoring Member's express acknowledgment of the
Sponsoring Member's responsibility for the orders, executions and
actions of its Sponsored Customer. However, as noted above, the
Exchange may request additional information about a particular customer
relationship as it deems necessary.\18\ The Exchange will also require
that its members disclose the Sponsored Customer relationship as a
condition for approving any ports requested for the purpose of
providing Sponsored Access.\19\ Accordingly, the Exchange will continue
to be notified of Sponsored Customer arrangements even with the removal
of the Addendum. Furthermore, as discussed above, Sponsoring Members
continue to be obligated to comply with Supplementary Material .01(b)
to Rule 706 and the Market Access Rule, and are therefore responsible
for any and all actions taken by its Sponsored Customer and any person
acting on behalf of or in the name of such Sponsored Customer. The
Exchange, through its RSA with FINRA, reviews member compliance with
Supplementary Material to Rule 706, including compliance with the
Market Access Rule.
---------------------------------------------------------------------------
\18\ See Rule 1601.
\19\ See note 15 above.
---------------------------------------------------------------------------
Supplementary Material .01(b)(1) to Rule 706 requires that the
Sponsored Customer and the Sponsoring Member maintain a Customer
Agreement with the sponsorship provisions set forth in paragraph (2) to
ensure compliance with Exchange's rules and obligations related to
security, among other things. Additionally, Supplementary Material
.01(b)(2)(iv) and (v) require that the Customer Agreement include the
Sponsored Customer's obligation to maintain, keep current and provide
to the Sponsoring Member a list of Authorized Traders who have been
granted access to the Exchange on behalf of the Sponsored Customer, and
provide such Authorized Traders with appropriate training prior to any
use or access to the Exchange. In addition, pursuant to the Customer
Agreement provisions required by Rule 706, Supplementary Material
.01(b)(vii), the Sponsored Customer is obligated to take reasonable
security precautions to prevent unauthorized use or access to the
Exchange, including unauthorized entry of information into the
Exchange's System, or the information and data made available therein.
Finally, the Customer Agreement must provide that the Sponsored
Customer is responsible for any and all orders, trades and other
messages and instructions entered, transmitted or received under
identifiers, passwords and security codes of Authorized Traders, and
for the trading and other consequences thereof, including granting
unauthorized access to the Exchange.\20\ The contents and the
requirement for a Customer Agreement are unchanged.
---------------------------------------------------------------------------
\20\ See Rule 706, Supplementary Material .01(b)(vii).
---------------------------------------------------------------------------
Clean-Up Changes
The Exchange proposes to correct two typographical errors in
subsections (vii) and (ix) of Supplementary Material .01(b)(2) to Rule
706. First in subsection (vii), the Exchange proposes to correct a typo
by replacing ``of'' with ``or'' in the first sentence. The proposed
sentence would therefore state ``Sponsored Customer shall take
reasonable security precautions to prevent unauthorized use or access
to the Exchange . . .''
Second, subsection (ix) would be amended to correct a typo in the
last portion of the first sentence. In particular, the phrase ``. . .
Sponsored Customers access to and use of the Exchange'' should be ``. .
. Sponsored
[[Page 23501]]
Customer's access to and use of the Exchange.'' Both of these proposed
changes are non-substantive clean-ups, and are intended to ensure that
the rule text is as accurate and clear as possible.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\21\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\22\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest. Overall, the proposed rule change is intended to align the
Exchange's sponsored access rules in Supplementary Material to Rule 706
with the Nasdaq Sponsored Access Rules, and is part of the Exchange's
continued effort to promote efficiency and conformity of its processes
with those of the Nasdaq Exchanges. Consistent rules and processes
across the Affiliated Exchanges would in turn simplify the regulatory
requirements for members of the Exchange that are also participants on
the Nasdaq Exchanges. The Exchange believes that its proposal would
provide greater harmonization among similar rules and procedures of the
Affiliated Exchanges, resulting in greater uniformity and more
efficient regulatory compliance. As such, the proposed rule change
would foster cooperation and coordination with persons engaged in
facilitating transactions in securities and would remove impediments to
and perfect the mechanism of a free and open market and national market
system.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Defining Sponsored Access
Adding a definition of Sponsored Access will assist market
participants to understand the type of arrangements that are subject to
Supplementary Material to Rule 706, and such clarity will serve to
promote just and equitable principles of trade. The Exchange believes
that adding the Sponsored Access definition will provide its members
with additional guidance with respect to this Rule.
Defining Customer Agreement
Defining the agreement that Sponsored Customers must enter into and
maintain with one or more Sponsoring Members to establish proper
relationship(s) and account(s) through which the Sponsored Customer may
trade on the Exchange, as a ``Customer Agreement'' will also serve to
provide members with clarity on the agreement that the Exchange will
continue to require and the obligations that are contained within the
Customer Agreement. This amendment is non-substantive.
Market Access Rule
As discussed above, Exchange members will continue to be required
to comply with Supplementary Material to Rule 706 and the Market Access
Rule. The Exchange believes that specifically enumerating the member's
responsibility to comply with the Market Access Rule within the Rule
itself will provide members with additional guidance concerning the
application of the Rule. This change is non-substantive as members are
currently responsible for complying with the Market Access Rule.
Elimination of Certain Contract Requirements
Removing the requirements to submit and complete a Sponsored
Customer Agreement and Addendum will remove impediments to and perfect
the mechanism of a free and open market by aligning the Exchange's
sponsored access rules with the Nasdaq Sponsored Access Rules, which
currently do not require additional agreements for their sponsored
participants other than a Customer Agreement.\23\ The Exchange believes
that its proposal would create equivalent sponsored access standards
and requirements among the Affiliated Exchanges and also provide
clarity to its members, which is beneficial to both investors and the
public interest. While elimination of the Sponsored Customer Agreement
requirement will also eliminate the Exchange's contractual privity with
the Sponsored Customer, the Exchange notes that any potential concerns
to the loss of privity are mitigated by the Exchange's ability to
restrict the Sponsored Customer's access to a port at any time it is
warranted by the Sponsored Customer's trading activity. As discussed
above, connectivity to the Exchange must be requested by a member of
the Exchange. Such connection requires approval by the Exchange,
testing and other security features as well as information sharing with
the Exchange by the member. In addition, Supplementary Material
.01(b)(2) to Rule 706 delineates the terms of the required contractual
relationship between the Sponsoring Member and the Sponsored Customer
in the Customer Agreement, which remains in effect. The Exchange also
believes that the Addendum is unnecessary in light of the fact that
Sponsoring Members must request connectivity to the Exchange as well as
enter into a Customer Agreement with the Sponsored Customer.
Furthermore, as discussed above, the Exchange will require members to
disclose the Sponsored Customer relationship as a condition to
approving the member's port request to provide Sponsored Access.
Finally, as is the case with other Exchange rules, the Exchange
examines for compliance with Supplementary Material to Rule 706 and may
request information about any customer relationship which concerns the
Exchange pursuant to Rule 1601.
---------------------------------------------------------------------------
\23\ See NQX Rule 4615, BX Rule 4615 and PHLX Rule 1094.
---------------------------------------------------------------------------
Clean-Up Changes
The Exchange believes that the proposed changes to correct the two
typos in subsections (vii) and (ix) of Supplementary Material .01(b)(2)
to Rule 706 will add further clarification to the Exchange's Rulebook
and alleviate potential confusion as to the applicability of the
Exchange's rules, which will protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act because all members would be
subject to the same sponsored access requirements, as discussed above.
The proposed rule change is designed to provide greater harmonization
among the sponsored access rules across the Affiliated Exchanges,
resulting in more efficient regulatory compliance for common members,
and is not intended to have any competitive effect.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has
[[Page 23502]]
become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \24\
and subparagraph (f)(6) of Rule 19b-4 thereunder.\25\
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78s(b)(3)(A)(iii).
\25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \26\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \27\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The Exchange
represents that waiver of the operative delay would allow the Exchange
to harmonize its sponsored access rule to the rules of the Nasdaq
Exchanges.\28\ The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because the proposed rule change would simplify the
regulatory requirements of members of the Exchange that are also
participants on the Nasdaq Exchanges. Further, the Commission does not
believe that the proposed rule change raises any new or novel issues.
Accordingly, the Commission hereby waives the operative delay and
designates the proposal operative upon filing.\29\
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\26\ 17 CFR 240.19b-4(f)(6).
\27\ 17 CFR 240.19b-4(f)(6)(iii).
\28\ See supra note 3.
\29\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MRX-2018-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MRX-2018-14. 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 rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for 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 filing also will be available for inspection
and copying at the principal office of the Exchange. 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 SR-MRX-2018-14 and should be submitted on
or before June 11, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10706 Filed 5-18-18; 8:45 am]
BILLING CODE 8011-01-P