Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX's By-Laws, 54215-54219 [2019-22014]
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Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
19(b)(3)(A)(iii) of the Act 10 and
subparagraph (f)(6) of Rule 19b–4
thereunder.11
A proposed rule change filed under
Rule 19b–4(f)(6) 12 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),13 the Commission
may 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
upon filing. Extending the pilot for an
additional year will allow the
uninterrupted operation of the existing
pilot to halt trading across the U.S.
markets. Therefore, the Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest. The Commission hereby
designates the proposed rule change to
be operative upon filing.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2019–034 on the subject line.
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10 15
U.S.C. 78s(b)(3)(A)(iii).
11 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.
12 Id.
13 17 CFR 240.19b–4(f)(6)(iii).
14 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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Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BX–2019–034. 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–BX–2019–034 and should
be submitted on or before October 30,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–22026 Filed 10–8–19; 8:45 am]
BILLING CODE 8011–01–P
54215
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87213; File No. SR–BX–
2019–032]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend BX’s By-Laws
October 3, 2019.
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
September 20, 2019, Nasdaq BX, Inc.
(‘‘BX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘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. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
By-Laws, as further discussed below.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqbx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
By-Laws to (i) harmonize certain
provisions related to the regulatory
independence of the Exchange with
those of the Exchange’s affiliates,
Nasdaq ISE, LLC (‘‘ISE’’), Nasdaq
1 15
15 17
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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GEMX, LLC (‘‘GEMX’’), and Nasdaq
MRX, LLC (‘‘MRX’’), (ii) modify Director
categorizations, (iii) update
compositional requirements of the
Regulatory Oversight Committee
(‘‘ROC’’), and (iv) make additional, nonsubstantive edits. Each change is
discussed below.3
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Regulatory Independence
The Exchange proposes to modify a
number of provisions in its By-Laws
related to the regulatory independence
of the Exchange. As discussed below,
the Exchange believes that the proposed
changes will make these provisions
more robust and will serve to align the
Exchange’s By-Laws with the Limited
Liability Company Agreements (‘‘LLC
Agreements’’) of its affiliates, ISE,
GEMX, and MRX.
• Dividends: The Exchange currently
has distribution provisions in Section
9.8 of the By-Laws that prohibits the
Exchange from issuing dividends to its
stockholder (i.e., Nasdaq, Inc.), using
Regulatory Funds.4 The Exchange now
proposes to amend this provision to
substantially conform to Section 15 in
the LLC Agreements of ISE, GEMX, and
MRX by specifying that Regulatory
Funds shall not be used for nonregulatory purposes, but rather shall be
used to fund the legal, regulatory and
surveillance operations of the Exchange.
The Exchange believes these are minor
changes that make the dividend
provisions more robust by specifying
how Regulatory Funds may be used.
Lastly, the Exchange proposes to add
that it would not be required to pay
dividends to the stockholder if such
dividends would violate the Delaware
General Corporation Law or any other
applicable law or would otherwise be
required to fulfill the regulatory
functions or responsibilities of the
Exchange.
• Books and Records: The Exchange
proposes to add in new Section 10.5 of
the By-Laws a provision requiring that
the books and records of the Exchange
must be maintained in the United
States, which will harmonize this
provision with Section 16 in the ISE,
GEMX, and MRX LLC Agreements. The
3 All references herein and in the Exhibit 5 to ‘‘the
Corporation’’ mean the Exchange. Corporation is
defined in the By-Laws to mean Nasdaq BX, Inc.
4 ‘‘Regulatory Funds’’ means fees, fines, or
penalties derived from the regulatory operations of
the Exchange. ‘‘Regulatory Funds’’ shall not be
construed to include revenues derived from listing
fees, market data revenues, transaction revenues, or
any other aspect of the commercial operations of
the Exchange, even if a portion of such revenues are
used to pay costs associated with the regulatory
operations of the Exchange. See By-Law Article I,
Section (ii). The definition of Regulatory Funds is
not changing under this proposal.
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Exchange further proposes to
substantially conform to ISE, GEMX,
and MRX in Section 10.5 by providing
that the books of the Exchange shall at
all times be maintained by the Board.
The Exchange’s books of account shall
be kept using the method of accounting
determined by the stockholder. The
Exchange’s independent auditor shall be
an independent public accounting firm
selected by the Board. Other than as
provided in Section 10.5 with respect to
the Commission, all confidential
information relating to the selfregulatory function of the Exchange
(including but not limited to
disciplinary matters, trading data,
trading practices and audit information)
contained in the books and records of
the Exchange shall: (i) Not be made
available to any persons other than to
those officers, directors, employees and
agents of the Exchange that have a
reasonable need to know the contents
thereof, (ii) be retained in confidence by
the Exchange and the officers, directors,
employees and agents of the Exchange,
and (iii) must not be used for any nonregulatory purpose. Furthermore, the
Exchange proposes to add, similar to the
ISE, GEMX, and MRX LLC Agreements,
that nothing in the By-Laws shall be
interpreted as to limit or impede the
rights of the Commission to access and
examine such confidential information
pursuant to federal securities laws and
the rules and regulations thereunder, or
to limit or impede the ability of any
officers, directors, employees or agents
of the Exchange to disclose such
confidential information to the
Commission. The Exchange believes
that the proposed changes will add
more specificity as to who may access
the Exchange’s books and records,
especially relating to confidential
information on the self-regulatory
function of the Exchange, and the use of
such information.
Director Categorizations
Currently, the definition of ‘‘NonIndustry Director’’ in the Exchange ByLaws refers to, among other individuals,
an officer or employee of an issuer of
securities listed on the Exchange.5
Because only its affiliate, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’), currently
operates an equities listing market, the
Exchange seeks to amend the definition
of Non-Industry Director to refer to an
officer or employee of an issuer of
securities listed on a national securities
exchange operated by the Exchange or
5 In addition, the term ‘‘Non-Industry Director’’
encompasses a Director (excluding Staff Directors)
who is a Public Director or any other individual
who would not be an Industry Director. See By-Law
Article I, Section (bb).
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one of its affiliates. The Exchange
believes that the proposed changes will
bring greater clarity to the Exchange’s
rules by aligning the By-Law provision
to how the Exchange currently operates.
In addition, the Exchange proposes a
non-substantive change in (ii) of the
definition of Non-Industry Director to
add a reference to ‘‘director’’ in order to
align with its affiliated exchanges.6 The
Exchange notes that the qualifications
for a Non-Industry Director are not
expanding under this proposal and as a
practical matter, no changes to the
current composition of Non-Industry
Directors on the Exchange’s Board are
contemplated by this rule change.
Today, a Non-Industry Director who is
not designated by the Exchange as a
Public Director 7 under (i) of the
definition of Non-Industry Director, and
that does not explicitly fall under (ii)
(i.e., ‘‘an officer or employee of an issuer
of securities listed on the national
securities exchange operated by the
Exchange’’) would still fall under (iii) an
individual who would not be an
Industry Director.8 With the proposed
6 In particular, the definitions of Non-Industry
Director on Nasdaq Phlx LLC (‘‘Phlx’’), Nasdaq, ISE,
GEMX, and MRX all refer to, among other
individuals, ‘‘. . . an officer, director, or employee
of an issuer of securities . . .’’ See Phlx By-Law
Article I, Section (bb); Nasdaq By-Law Article I,
Section (v); ISE By-Law Article I, Section (w);
GEMX By-Law Article I, Section (w); and MRX ByLaw Article I, Section (w).
7 The term ‘‘Public Director’’ means a Director
who has no material business relationship with a
broker or dealer, the Corporation or its affiliates, or
FINRA. See By-Law Article I, Section (gg).
8 The term ‘‘Industry Director’’ means a Director
(excluding any two officers of the Corporation,
selected at the sole discretion of the Board, amongst
those officers who may be serving as Directors (the
‘‘Staff Directors’’)), who (i) is or has served in the
prior three years as an officer, director, or employee
of a broker or dealer, excluding an outside director
or a director not engaged in the day-to-day
management of a broker or dealer; (ii) is an officer,
director (excluding an outside director), or
employee of an entity that owns more than ten
percent of the equity of a broker or dealer, and the
broker or dealer accounts for more than five percent
of the gross revenues received by the consolidated
entity; (iii) owns more than five percent of the
equity securities of any broker or dealer, whose
investments in brokers or dealers exceed ten
percent of his or her net worth, or whose ownership
interest otherwise permits him or her to be engaged
in the day-to-day management of a broker or dealer;
(iv) provides professional services to brokers or
dealers, and such services constitute twenty percent
or more of the professional revenues received by the
Director or twenty percent or more of the gross
revenues received by the Director’s firm or
partnership; (v) provides professional services to a
director, officer, or employee of a broker, dealer, or
corporation that owns fifty percent or more of the
voting stock of a broker or dealer, and such services
relate to the director’s, officer’s, or employee’s
professional capacity and constitute twenty percent
or more of the professional revenues received by the
Director or twenty percent or more of the gross
revenues received by the Director’s firm or
partnership; or (vi) has a consulting or employment
relationship with or provides professional services
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changes, these Non-Industry Directors
could fall under both (ii) and (iii)
because they would be representative of
issuers listed on the Exchange’s affiliate,
Nasdaq, and at the same time, not be
considered Industry Directors. The
Exchange also proposes to make
conforming changes to the definition of
a ‘‘Non-Industry member’’ of a
committee.9
Currently, the Exchange’s Board
compositional requirements require at
least one Public Director and at least
one Director representative of issuers
and investors.10 As set forth in Article
I, Section (gg), a ‘‘Public Director’’ is
defined as a Director who has no
material business relationship with a
broker or dealer, the Exchange or its
affiliates, or FINRA. ‘‘Director
representative of issuers and investors’’
is not defined specifically in the
Exchange’s By-Laws, but is implicitly
defined in the term Non-Industry
Director as ‘‘an officer or employee of an
issuer of securities listed on the
Exchange.’’ 11 The Exchange now
proposes to clarify in the definition of
Public Director that, for the avoidance of
doubt, a director of an issuer of
securities listed on a national securities
exchange operated by the Exchange or
one of its affiliates shall not be
precluded from being considered a
Public Director solely on the basis of
such directorship. The Exchange
believes that a director of a listed
company can adequately represent the
interests of listed companies on the
Board and therefore be considered a
Director representative of issuers and
investors. At the same time, the
Exchange does not believe that such a
directorship always constitutes a
material business relationship with a
broker or dealer, the Exchange or its
affiliates, or FINRA, which would
prohibit the individual from being
considered a Public Director.12 Of
to the Corporation or any affiliate thereof or to
FINRA or has had any such relationship or
provided any such services at any time within the
prior three years. See By-Law Article I, Section (t).
9 See By-Law Article I, Section (cc).
10 See By-Law Article IV, Section 4.3.
11 See By-Law Article I, Section (bb). As
discussed above, the Exchange will amend this
provision to refer to an ‘‘officer, director, or
employee of an issuer of securities listed on a
national securities exchange operated by the
Exchange or one of its affiliates.’’
12 This is consistent with the longstanding best
practice of the Exchange’s parent, Nasdaq, Inc.,
having the Chairman of the Audit Committee of the
board of directors of Nasdaq, Inc. serve as the
Chairman of the Exchange Board’s Regulatory
Oversight Committee, which is required to be
comprised of Public Directors who are also
considered ‘‘independent directors’’ as defined in
Nasdaq Rule 5605. See By-Law Article IV, Section
4.13(c). Because Nasdaq, Inc. is a listed company,
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course, such issuer representative must
still meet the requirements of a Public
Director and not have such material
business relationships by definition.
Thus in limited circumstances, the
Exchange believes that it is possible for
directors of listed companies to be
considered both Public Directors and
Directors representative of issuers and
investors. In light of the foregoing, the
Exchange also proposes to make
conforming changes to the definition of
a ‘‘Public member’’ of a committee.13
The Exchange does not seek to amend
the Board’s qualification requirements
in the By-Laws other than the proposed
changes to the definitions of NonIndustry Director and Public Director.
With the proposed changes, the
composition of the Board would still be
required to reflect a balance among NonIndustry Directors (including Public
Directors and Directors representative of
issuers and investors), Industry
Directors, and Member Representative
Directors.14 Accordingly, current Board
qualification requirements such as the
number of Non-Industry Directors,
including at least one Public Director
and at least one Director representative
of issuers and investors, equaling or
exceeding the sum of the number of
Industry Directors and Member
Representative Directors would
continue to apply.15
Regulatory Oversight Committee
Currently, By-Law Article IV, Section
4.13(c) requires that the Regulatory
Oversight Committee (‘‘ROC’’) be
comprised of three members, each of
whom shall be a Public Director and an
‘‘independent director’’ as defined in
Nasdaq Rule 4200. The Exchange
proposes to amend Section 4.13(c) to
provide that the ROC shall be comprised
of at least three members, as is currently
this Exchange Director could be considered both an
issuer representative and a Public Director.
13 See By-Law Article I, Section (hh).
14 The term ‘‘Member Representative Director’’
means a Director who has been elected by the
stockholders after having been nominated by the
Member Nominating Committee or voted upon by
Exchange Members pursuant to the Exchange’s ByLaws (or elected by the stockholders without such
nomination or voting in the case of the Member
Representative Directors elected pursuant to
Section 4.3(b)). A Member Representative Director
may, but is not required to be, an officer, director,
employee, or agent of an Exchange Member. See ByLaw Article I, Section (x). Member Representative
Directors are directors that meet the fair
representation requirement in Section 6(b)(3) of the
Act, which requires that the ‘‘rules of the Exchange
assure a fair representation of its members in the
selection of its directors and administration of its
affairs . . .’’
15 In addition, the Board qualification
requirement that at least 20 percent of the Directors
be Member Representative Directors will continue
to apply. See By-Law Article IV, Section 4.3.
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54217
set forth in the ROC Charter.16 All
members of the ROC will continue to be
Public Directors and ‘‘independent
directors.’’ Lastly, the Exchange also
proposes to make technical changes in
Section 4.13(c) to correct a
typographical error and to update the
reference to Nasdaq Rule 4200 to Rule
5605.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,17 in general, and furthers the
objectives of Section 6(b)(1), Section
6(b)(3), and Section 6(b)(5) of the Act,18
in particular, which require, among
other things, an exchange to be so
organized as to have the capacity to be
able to carry out the purposes of the Act;
that one or more directors be
representative of issuers and investors
and not be associated with a member of
the exchange, broker, or dealer; and that
the rules of an exchange be 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.
Regulatory Independence
The Exchange believes that the
proposed changes to the By-Law
provisions on dividends, and books and
records are consistent with the Act. As
discussed above, the Exchange believes
that its proposal will bring greater
specificity and detail to provisions
related to the regulatory independence
of the Exchange. The Exchange believes
that the proposed changes will make
clear the independence of the
Exchange’s regulatory function and
facilitate the ability of the Exchange to
carry out its responsibility and operate
in a manner consistent with the Act.
Furthermore, the proposed amendments
will have the additional benefit of
bringing the Exchange’s By-Laws into
greater conformity with similar
provisions in the LLC Agreements of
ISE, GEMX, and MRX, thereby creating
more consistent standards among the
affiliated exchanges owned by Nasdaq,
Inc.19
Director Categorizations
The Exchange believes that the
changes to the definitions of NonIndustry Director and Non-Industry
16 The ROC Charter is available at: https://
ir.nasdaq.com/static-files/ad0a0102-e977-40cf8139-15c359576a25.
17 15 U.S.C. 78f(b).
18 15 U.S.C. 78f(b)(1), (b)(3), and (b)(5).
19 See ISE, GEMX, and MRX LLC Agreements,
Sections 15 and 16.
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member proposed above will enhance
the clarity of these provisions given that
only the Exchange’s affiliate (Nasdaq)
currently operates an equities listing
market. Accordingly, the proposed
changes should more accurately reflect
how the Exchange currently operates.
The Exchange also believes that the
proposed changes to the definitions of
Public Director and Public member are
consistent with the Act as these
modifications are intended to make
clear that a Director is not barred from
being considered a Public Director
merely because the Director serves as a
director of an issuer of securities listed
on a national securities exchange
operated by the Exchange or one of its
affiliates, and are consistent with
current corporate governance
practices.20 Furthermore, as discussed
above, the requirements that the number
of Non-Industry Directors (including at
least one Public Director and at least
one Director representative of issuers
and investors) equal or exceed the sum
of the number of Industry Directors and
Member Representative Directors, and at
least 20 percent of the Directors be
Member Representative Directors,
would continue to apply.21
Accordingly, the Exchange believes that
the proposed changes will more
accurately reflect the Exchange’s current
operations and governance practices
while continuing to comport with the
Exchange’s statutory obligations
regarding fair representation under
Section 6(b)(3) of the Act. Lastly, the
proposed change to add ‘‘director’’ in
the definition of Non-Industry Director
will bring this definition in greater
conformity with the Exchange’s
affiliated exchanges, thereby creating
more consistent standards among the
affiliated exchanges owned by Nasdaq,
Inc.
Regulatory Oversight Committee
The Exchange believes that the
proposed rule change in By-Law Article
IV, Section 4.13(c) to provide that the
ROC shall be comprised of at least three
members is consistent with the Act
because it will promote transparency to
the Exchange’s current practices by
conforming the By-Law language to the
ROC Charter. As discussed above, the
composition requirements that all ROC
members be Public Directors and
‘‘independent directors’’ as defined in
Nasdaq’s Rules will remain unchanged
with this proposal, thereby ensuring
that an independent Board committee
will continue to be responsible for the
20 See
21 See
supra note 12.
supra notes 14 and 15, with accompanying
text.
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regulatory oversight of the Exchange.
Lastly, the proposed technical changes
in Section 4.13(c) to correct a
typographical error and to update the
reference to Nasdaq Rule 4200 to Rule
5605 will bring greater clarity to the
Exchange’s rules, which will protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Because the proposed rule change
relates to the corporate governance of
the Exchange and not to the Exchange’s
operations, 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.
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
become effective pursuant to Section
19(b)(3)(A) of the Act 22 and
subparagraph (f)(6) of Rule 19b–4
thereunder.23
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 24 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 25
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
requested that the Commission waive
the 30-day operative delay. The
Commission notes that waiver of the
operative delay would allow the
Exchange to effect the changes to its ByLaws, which would provide more
specificity and would better align
22 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of 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.
24 17 CFR 240.19b–4(f)(6).
25 17 CFR 240.19b–4(f)(6)(iii).
23 17
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provisions in the Exchange’s By-Laws
with those in the By-Laws and LLC
Agreements of its affiliates, in time for
the Exchange Board meeting on
September 25, 2019. The Commission
believes that waiver of the 30-day
operative delay is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
hereby waives the operative delay and
designates the proposed rule change
operative upon filing.26
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2019–032 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BX–2019–032. 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
26 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
E:\FR\FM\09OCN1.SGM
09OCN1
Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
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–BX–2019–032 and should
be submitted on or before October 30,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–22014 Filed 10–8–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87205; File No. SR–FINRA–
2019–024]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend FINRA Rule
7620B To Modify the Trade Reporting
Fees Applicable to Participants That
Use the FINRA/NYSE Trade Reporting
Facility
khammond on DSKJM1Z7X2PROD with NOTICES
October 3, 2019.
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
September 26, 2019, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by FINRA. FINRA
has designated the proposed rule change
as ‘‘establishing or changing a due, fee
or other charge’’ under Section
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:13 Oct 08, 2019
Jkt 250001
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) thereunder,4 which renders the
proposal effective upon receipt of this
filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend FINRA
Rule 7620B (Trade Reporting Facility
Reporting Fees) to modify the trade
reporting fees applicable to participants
that use the FINRA/NYSE Trade
Reporting Facility (‘‘FINRA/NYSE
TRF’’).
The text of the proposed rule change
is available on FINRA’s website at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA 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. FINRA 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 FINRA/NYSE TRF, which is
operated by NYSE Market (DE), Inc.
(‘‘NYSE Market (DE)’’), is one of four
FINRA facilities 5 that FINRA members
can use to report over-the-counter
(‘‘OTC’’) trades in NMS stocks. While
members are required to report all OTC
trades in NMS stocks to FINRA, they
may choose which FINRA Facility (or
Facilities) to use to satisfy their trade
reporting obligations.6
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
5 The four FINRA facilities are the FINRA/NYSE
TRF, two FINRA/Nasdaq Trade Reporting Facilities
(together, the ‘‘FINRA/Nasdaq TRF’’), and the
Alternative Display Facility (‘‘ADF’’ and together,
the ‘‘FINRA Facilities’’).
6 Members can use the FINRA/NYSE TRF as a
backup system and reserve bandwidth if there is a
failure at another FINRA Facility that supports the
reporting of OTC trades in NMS stocks. As set forth
in Trade Reporting Notice 1/20/16 (OTC Equity
Trading and Reporting in the Event of Systems
Issues), a firm that routinely reports its OTC trades
54219
As discussed below, NYSE Market
(DE) proposes to modify the trade
reporting fees applicable to FINRA
members that use the FINRA/NYSE TRF
(‘‘FINRA/NYSE TRF Participants’’ or
‘‘Participants’’). Currently, the monthly
fee for use of the FINRA/NYSE TRF is
calculated using a tiered fee structure
based on the reporting member’s OTC
trading activity. NYSE Market (DE)
proposes to:
• Change the tier basis to use just the
trading activity reported to the FINRA/
NYSE TRF, rather than using all trading
activity published on FINRA’s public
website, as it does now; and
• increase the number of fee tiers to
address differences in participant usage.
If there were no change in reporting
to the FINRA/NYSE TRF, such that
Participants’ reporting volume stayed
the same as it was in the first quarter of
2019, under the proposed fee schedule
the total monthly subscriber fees paid to
the FINRA/NYSE TRF would decrease.
FINRA is proposing to amend FINRA
Rule 7620B (FINRA/NYSE Trade
Reporting Facility Reporting Fees)
accordingly. There is no new product or
service accompanying the proposed fee
change.
Background
The FINRA/NYSE TRF
Under the governing limited liability
company agreement,7 the FINRA/NYSE
TRF has two members: FINRA and
NYSE Market (DE). FINRA, the ‘‘SRO
Member,’’ has sole regulatory
responsibility for the FINRA/NYSE TRF.
NYSE Market (DE), the ‘‘Business
Member,’’ is primarily responsible for
the management of the FINRA/NYSE
TRF’s business affairs to the extent
those affairs are not inconsistent with
the regulatory and oversight functions of
FINRA.
The Business Member establishes
pricing for use of the FINRA/NYSE TRF,
which pricing is implemented pursuant
to FINRA rules that FINRA must file
with the Commission and that must be
consistent with the Act. The relevant
FINRA rules are administered by NYSE
Market (DE), in its capacity as the
Business Member and operator of the
3 15
4 17
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
in NMS stocks to only one FINRA Facility must
establish and maintain connectivity and report to a
second FINRA Facility, if the firm intends to
continue to support OTC trading as an executing
broker while its primary facility is experiencing a
widespread systems issue.
7 See the Second Amended and Restated Limited
Liability Company Agreement of FINRA/NYSE
Trade Reporting Facility LLC. The limited liability
company agreement, which was submitted as part
of the rule filing to establish the FINRA/NYSE TRF
and was subsequently amended and restated, can be
found in the FINRA Manual.
E:\FR\FM\09OCN1.SGM
09OCN1
]]>Agencies
[Federal Register Volume 84, Number 196 (Wednesday, October 9, 2019)]
[Notices]
[Pages 54215-54219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22014]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87213; File No. SR-BX-2019-032]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX's By-
Laws
October 3, 2019.
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 September 20, 2019, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``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. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its By-Laws, as further discussed
below.
The text of the proposed rule change is available on the Exchange's
website at https://nasdaqbx.cchwallstreet.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its By-Laws to (i) harmonize certain
provisions related to the regulatory independence of the Exchange with
those of the Exchange's affiliates, Nasdaq ISE, LLC (``ISE''), Nasdaq
[[Page 54216]]
GEMX, LLC (``GEMX''), and Nasdaq MRX, LLC (``MRX''), (ii) modify
Director categorizations, (iii) update compositional requirements of
the Regulatory Oversight Committee (``ROC''), and (iv) make additional,
non-substantive edits. Each change is discussed below.\3\
---------------------------------------------------------------------------
\3\ All references herein and in the Exhibit 5 to ``the
Corporation'' mean the Exchange. Corporation is defined in the By-
Laws to mean Nasdaq BX, Inc.
---------------------------------------------------------------------------
Regulatory Independence
The Exchange proposes to modify a number of provisions in its By-
Laws related to the regulatory independence of the Exchange. As
discussed below, the Exchange believes that the proposed changes will
make these provisions more robust and will serve to align the
Exchange's By-Laws with the Limited Liability Company Agreements (``LLC
Agreements'') of its affiliates, ISE, GEMX, and MRX.
Dividends: The Exchange currently has distribution
provisions in Section 9.8 of the By-Laws that prohibits the Exchange
from issuing dividends to its stockholder (i.e., Nasdaq, Inc.), using
Regulatory Funds.\4\ The Exchange now proposes to amend this provision
to substantially conform to Section 15 in the LLC Agreements of ISE,
GEMX, and MRX by specifying that Regulatory Funds shall not be used for
non-regulatory purposes, but rather shall be used to fund the legal,
regulatory and surveillance operations of the Exchange. The Exchange
believes these are minor changes that make the dividend provisions more
robust by specifying how Regulatory Funds may be used. Lastly, the
Exchange proposes to add that it would not be required to pay dividends
to the stockholder if such dividends would violate the Delaware General
Corporation Law or any other applicable law or would otherwise be
required to fulfill the regulatory functions or responsibilities of the
Exchange.
---------------------------------------------------------------------------
\4\ ``Regulatory Funds'' means fees, fines, or penalties derived
from the regulatory operations of the Exchange. ``Regulatory Funds''
shall not be construed to include revenues derived from listing
fees, market data revenues, transaction revenues, or any other
aspect of the commercial operations of the Exchange, even if a
portion of such revenues are used to pay costs associated with the
regulatory operations of the Exchange. See By-Law Article I, Section
(ii). The definition of Regulatory Funds is not changing under this
proposal.
---------------------------------------------------------------------------
Books and Records: The Exchange proposes to add in new
Section 10.5 of the By-Laws a provision requiring that the books and
records of the Exchange must be maintained in the United States, which
will harmonize this provision with Section 16 in the ISE, GEMX, and MRX
LLC Agreements. The Exchange further proposes to substantially conform
to ISE, GEMX, and MRX in Section 10.5 by providing that the books of
the Exchange shall at all times be maintained by the Board. The
Exchange's books of account shall be kept using the method of
accounting determined by the stockholder. The Exchange's independent
auditor shall be an independent public accounting firm selected by the
Board. Other than as provided in Section 10.5 with respect to the
Commission, all confidential information relating to the self-
regulatory function of the Exchange (including but not limited to
disciplinary matters, trading data, trading practices and audit
information) contained in the books and records of the Exchange shall:
(i) Not be made available to any persons other than to those officers,
directors, employees and agents of the Exchange that have a reasonable
need to know the contents thereof, (ii) be retained in confidence by
the Exchange and the officers, directors, employees and agents of the
Exchange, and (iii) must not be used for any non-regulatory purpose.
Furthermore, the Exchange proposes to add, similar to the ISE, GEMX,
and MRX LLC Agreements, that nothing in the By-Laws shall be
interpreted as to limit or impede the rights of the Commission to
access and examine such confidential information pursuant to federal
securities laws and the rules and regulations thereunder, or to limit
or impede the ability of any officers, directors, employees or agents
of the Exchange to disclose such confidential information to the
Commission. The Exchange believes that the proposed changes will add
more specificity as to who may access the Exchange's books and records,
especially relating to confidential information on the self-regulatory
function of the Exchange, and the use of such information.
Director Categorizations
Currently, the definition of ``Non-Industry Director'' in the
Exchange By-Laws refers to, among other individuals, an officer or
employee of an issuer of securities listed on the Exchange.\5\ Because
only its affiliate, The Nasdaq Stock Market LLC (``Nasdaq''), currently
operates an equities listing market, the Exchange seeks to amend the
definition of Non-Industry Director to refer to an officer or employee
of an issuer of securities listed on a national securities exchange
operated by the Exchange or one of its affiliates. The Exchange
believes that the proposed changes will bring greater clarity to the
Exchange's rules by aligning the By-Law provision to how the Exchange
currently operates. In addition, the Exchange proposes a non-
substantive change in (ii) of the definition of Non-Industry Director
to add a reference to ``director'' in order to align with its
affiliated exchanges.\6\ The Exchange notes that the qualifications for
a Non-Industry Director are not expanding under this proposal and as a
practical matter, no changes to the current composition of Non-Industry
Directors on the Exchange's Board are contemplated by this rule change.
Today, a Non-Industry Director who is not designated by the Exchange as
a Public Director \7\ under (i) of the definition of Non-Industry
Director, and that does not explicitly fall under (ii) (i.e., ``an
officer or employee of an issuer of securities listed on the national
securities exchange operated by the Exchange'') would still fall under
(iii) an individual who would not be an Industry Director.\8\ With the
proposed
[[Page 54217]]
changes, these Non-Industry Directors could fall under both (ii) and
(iii) because they would be representative of issuers listed on the
Exchange's affiliate, Nasdaq, and at the same time, not be considered
Industry Directors. The Exchange also proposes to make conforming
changes to the definition of a ``Non-Industry member'' of a
committee.\9\
---------------------------------------------------------------------------
\5\ In addition, the term ``Non-Industry Director'' encompasses
a Director (excluding Staff Directors) who is a Public Director or
any other individual who would not be an Industry Director. See By-
Law Article I, Section (bb).
\6\ In particular, the definitions of Non-Industry Director on
Nasdaq Phlx LLC (``Phlx''), Nasdaq, ISE, GEMX, and MRX all refer to,
among other individuals, ``. . . an officer, director, or employee
of an issuer of securities . . .'' See Phlx By-Law Article I,
Section (bb); Nasdaq By-Law Article I, Section (v); ISE By-Law
Article I, Section (w); GEMX By-Law Article I, Section (w); and MRX
By-Law Article I, Section (w).
\7\ The term ``Public Director'' means a Director who has no
material business relationship with a broker or dealer, the
Corporation or its affiliates, or FINRA. See By-Law Article I,
Section (gg).
\8\ The term ``Industry Director'' means a Director (excluding
any two officers of the Corporation, selected at the sole discretion
of the Board, amongst those officers who may be serving as Directors
(the ``Staff Directors'')), who (i) is or has served in the prior
three years as an officer, director, or employee of a broker or
dealer, excluding an outside director or a director not engaged in
the day-to-day management of a broker or dealer; (ii) is an officer,
director (excluding an outside director), or employee of an entity
that owns more than ten percent of the equity of a broker or dealer,
and the broker or dealer accounts for more than five percent of the
gross revenues received by the consolidated entity; (iii) owns more
than five percent of the equity securities of any broker or dealer,
whose investments in brokers or dealers exceed ten percent of his or
her net worth, or whose ownership interest otherwise permits him or
her to be engaged in the day-to-day management of a broker or
dealer; (iv) provides professional services to brokers or dealers,
and such services constitute twenty percent or more of the
professional revenues received by the Director or twenty percent or
more of the gross revenues received by the Director's firm or
partnership; (v) provides professional services to a director,
officer, or employee of a broker, dealer, or corporation that owns
fifty percent or more of the voting stock of a broker or dealer, and
such services relate to the director's, officer's, or employee's
professional capacity and constitute twenty percent or more of the
professional revenues received by the Director or twenty percent or
more of the gross revenues received by the Director's firm or
partnership; or (vi) has a consulting or employment relationship
with or provides professional services to the Corporation or any
affiliate thereof or to FINRA or has had any such relationship or
provided any such services at any time within the prior three years.
See By-Law Article I, Section (t).
\9\ See By-Law Article I, Section (cc).
---------------------------------------------------------------------------
Currently, the Exchange's Board compositional requirements require
at least one Public Director and at least one Director representative
of issuers and investors.\10\ As set forth in Article I, Section (gg),
a ``Public Director'' is defined as a Director who has no material
business relationship with a broker or dealer, the Exchange or its
affiliates, or FINRA. ``Director representative of issuers and
investors'' is not defined specifically in the Exchange's By-Laws, but
is implicitly defined in the term Non-Industry Director as ``an officer
or employee of an issuer of securities listed on the Exchange.'' \11\
The Exchange now proposes to clarify in the definition of Public
Director that, for the avoidance of doubt, a director of an issuer of
securities listed on a national securities exchange operated by the
Exchange or one of its affiliates shall not be precluded from being
considered a Public Director solely on the basis of such directorship.
The Exchange believes that a director of a listed company can
adequately represent the interests of listed companies on the Board and
therefore be considered a Director representative of issuers and
investors. At the same time, the Exchange does not believe that such a
directorship always constitutes a material business relationship with a
broker or dealer, the Exchange or its affiliates, or FINRA, which would
prohibit the individual from being considered a Public Director.\12\ Of
course, such issuer representative must still meet the requirements of
a Public Director and not have such material business relationships by
definition. Thus in limited circumstances, the Exchange believes that
it is possible for directors of listed companies to be considered both
Public Directors and Directors representative of issuers and investors.
In light of the foregoing, the Exchange also proposes to make
conforming changes to the definition of a ``Public member'' of a
committee.\13\
---------------------------------------------------------------------------
\10\ See By-Law Article IV, Section 4.3.
\11\ See By-Law Article I, Section (bb). As discussed above, the
Exchange will amend this provision to refer to an ``officer,
director, or employee of an issuer of securities listed on a
national securities exchange operated by the Exchange or one of its
affiliates.''
\12\ This is consistent with the longstanding best practice of
the Exchange's parent, Nasdaq, Inc., having the Chairman of the
Audit Committee of the board of directors of Nasdaq, Inc. serve as
the Chairman of the Exchange Board's Regulatory Oversight Committee,
which is required to be comprised of Public Directors who are also
considered ``independent directors'' as defined in Nasdaq Rule 5605.
See By-Law Article IV, Section 4.13(c). Because Nasdaq, Inc. is a
listed company, this Exchange Director could be considered both an
issuer representative and a Public Director.
\13\ See By-Law Article I, Section (hh).
---------------------------------------------------------------------------
The Exchange does not seek to amend the Board's qualification
requirements in the By-Laws other than the proposed changes to the
definitions of Non-Industry Director and Public Director. With the
proposed changes, the composition of the Board would still be required
to reflect a balance among Non-Industry Directors (including Public
Directors and Directors representative of issuers and investors),
Industry Directors, and Member Representative Directors.\14\
Accordingly, current Board qualification requirements such as the
number of Non-Industry Directors, including at least one Public
Director and at least one Director representative of issuers and
investors, equaling or exceeding the sum of the number of Industry
Directors and Member Representative Directors would continue to
apply.\15\
---------------------------------------------------------------------------
\14\ The term ``Member Representative Director'' means a
Director who has been elected by the stockholders after having been
nominated by the Member Nominating Committee or voted upon by
Exchange Members pursuant to the Exchange's By-Laws (or elected by
the stockholders without such nomination or voting in the case of
the Member Representative Directors elected pursuant to Section
4.3(b)). A Member Representative Director may, but is not required
to be, an officer, director, employee, or agent of an Exchange
Member. See By-Law Article I, Section (x). Member Representative
Directors are directors that meet the fair representation
requirement in Section 6(b)(3) of the Act, which requires that the
``rules of the Exchange assure a fair representation of its members
in the selection of its directors and administration of its affairs
. . .''
\15\ In addition, the Board qualification requirement that at
least 20 percent of the Directors be Member Representative Directors
will continue to apply. See By-Law Article IV, Section 4.3.
---------------------------------------------------------------------------
Regulatory Oversight Committee
Currently, By-Law Article IV, Section 4.13(c) requires that the
Regulatory Oversight Committee (``ROC'') be comprised of three members,
each of whom shall be a Public Director and an ``independent director''
as defined in Nasdaq Rule 4200. The Exchange proposes to amend Section
4.13(c) to provide that the ROC shall be comprised of at least three
members, as is currently set forth in the ROC Charter.\16\ All members
of the ROC will continue to be Public Directors and ``independent
directors.'' Lastly, the Exchange also proposes to make technical
changes in Section 4.13(c) to correct a typographical error and to
update the reference to Nasdaq Rule 4200 to Rule 5605.
---------------------------------------------------------------------------
\16\ The ROC Charter is available at: https://ir.nasdaq.com/static-files/ad0a0102-e977-40cf-8139-15c359576a25.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\17\ in general, and furthers the objectives of Section
6(b)(1), Section 6(b)(3), and Section 6(b)(5) of the Act,\18\ in
particular, which require, among other things, an exchange to be so
organized as to have the capacity to be able to carry out the purposes
of the Act; that one or more directors be representative of issuers and
investors and not be associated with a member of the exchange, broker,
or dealer; and that the rules of an exchange be 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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(1), (b)(3), and (b)(5).
---------------------------------------------------------------------------
Regulatory Independence
The Exchange believes that the proposed changes to the By-Law
provisions on dividends, and books and records are consistent with the
Act. As discussed above, the Exchange believes that its proposal will
bring greater specificity and detail to provisions related to the
regulatory independence of the Exchange. The Exchange believes that the
proposed changes will make clear the independence of the Exchange's
regulatory function and facilitate the ability of the Exchange to carry
out its responsibility and operate in a manner consistent with the Act.
Furthermore, the proposed amendments will have the additional benefit
of bringing the Exchange's By-Laws into greater conformity with similar
provisions in the LLC Agreements of ISE, GEMX, and MRX, thereby
creating more consistent standards among the affiliated exchanges owned
by Nasdaq, Inc.\19\
---------------------------------------------------------------------------
\19\ See ISE, GEMX, and MRX LLC Agreements, Sections 15 and 16.
---------------------------------------------------------------------------
Director Categorizations
The Exchange believes that the changes to the definitions of Non-
Industry Director and Non-Industry
[[Page 54218]]
member proposed above will enhance the clarity of these provisions
given that only the Exchange's affiliate (Nasdaq) currently operates an
equities listing market. Accordingly, the proposed changes should more
accurately reflect how the Exchange currently operates. The Exchange
also believes that the proposed changes to the definitions of Public
Director and Public member are consistent with the Act as these
modifications are intended to make clear that a Director is not barred
from being considered a Public Director merely because the Director
serves as a director of an issuer of securities listed on a national
securities exchange operated by the Exchange or one of its affiliates,
and are consistent with current corporate governance practices.\20\
Furthermore, as discussed above, the requirements that the number of
Non-Industry Directors (including at least one Public Director and at
least one Director representative of issuers and investors) equal or
exceed the sum of the number of Industry Directors and Member
Representative Directors, and at least 20 percent of the Directors be
Member Representative Directors, would continue to apply.\21\
Accordingly, the Exchange believes that the proposed changes will more
accurately reflect the Exchange's current operations and governance
practices while continuing to comport with the Exchange's statutory
obligations regarding fair representation under Section 6(b)(3) of the
Act. Lastly, the proposed change to add ``director'' in the definition
of Non-Industry Director will bring this definition in greater
conformity with the Exchange's affiliated exchanges, thereby creating
more consistent standards among the affiliated exchanges owned by
Nasdaq, Inc.
---------------------------------------------------------------------------
\20\ See supra note 12.
\21\ See supra notes 14 and 15, with accompanying text.
---------------------------------------------------------------------------
Regulatory Oversight Committee
The Exchange believes that the proposed rule change in By-Law
Article IV, Section 4.13(c) to provide that the ROC shall be comprised
of at least three members is consistent with the Act because it will
promote transparency to the Exchange's current practices by conforming
the By-Law language to the ROC Charter. As discussed above, the
composition requirements that all ROC members be Public Directors and
``independent directors'' as defined in Nasdaq's Rules will remain
unchanged with this proposal, thereby ensuring that an independent
Board committee will continue to be responsible for the regulatory
oversight of the Exchange. Lastly, the proposed technical changes in
Section 4.13(c) to correct a typographical error and to update the
reference to Nasdaq Rule 4200 to Rule 5605 will bring greater clarity
to the Exchange's rules, which will protect investors and the public
interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
Because the proposed rule change relates to the corporate
governance of the Exchange and not to the Exchange's operations, 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.
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 become
effective pursuant to Section 19(b)(3)(A) of the Act \22\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\23\
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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \24\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \25\ 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 requested that the Commission waive the 30-day operative delay. The
Commission notes that waiver of the operative delay would allow the
Exchange to effect the changes to its By-Laws, which would provide more
specificity and would better align provisions in the Exchange's By-Laws
with those in the By-Laws and LLC Agreements of its affiliates, in time
for the Exchange Board meeting on September 25, 2019. The Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\26\
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\24\ 17 CFR 240.19b-4(f)(6).
\25\ 17 CFR 240.19b-4(f)(6)(iii).
\26\ For purposes only of waiving the 30-day operative delay,
the Commission also has 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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-BX-2019-032 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2019-032. 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
[[Page 54219]]
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-BX-
2019-032 and should be submitted on or before October 30, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22014 Filed 10-8-19; 8:45 am]
BILLING CODE 8011-01-P
