Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amended Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc., Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., and Cboe EDGX Exchange, Inc., 71009-71016 [2019-27696]

Download as PDF Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II. II. Docketed Proceeding(s) 1. Docket No(s).: MC2020–78 and CP2020–77; Filing Title: USPS Request to Add First-Class Package Service Contract 106 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: December 17, 2019; Filing Authority: 39 U.S.C. 3642, 39 CFR 3020.30 et seq., and 39 CFR 3015.5; Public Representative: Christopher C. Mohr; Comments Due: December 27, 2019. This Notice will be published in the Federal Register. Ruth Ann Abrams, Acting Secretary. [FR Doc. 2019–27699 Filed 12–23–19; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87788; File No. 4–705] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d– 2; Notice of Filing and Order Approving and Declaring Effective an Amended Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc., Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., and Cboe EDGX Exchange, Inc. khammond on DSKJM1Z7X2PROD with NOTICES December 18, 2019. Notice is hereby given that the Securities and Exchange Commission (‘‘Commission’’) has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (‘‘Act’’),1 approving and declaring effective an amendment to the plan for allocating regulatory responsibility (‘‘Plan’’) filed on December 3, 2019, pursuant to Rule 17d–2 of the Act,2 by the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), Cboe BZX Exchange, Inc. (‘‘BZX’’), Cboe BYX Exchange, Inc. (‘‘BYX’’), Cboe EDGA Exchange, Inc. (‘‘EDGA’’), and Cboe EDGX Exchange, Inc. (‘‘EDGX’’) (each, a ‘‘Participating Organization,’’ or ‘‘Bats Exchange,’’ and together, the ‘‘Participating Organizations,’’ ‘‘the Bats 1 15 2 17 U.S.C. 78q(d). CFR 240.17d–2. VerDate Sep<11>2014 16:53 Dec 23, 2019 Jkt 250001 Exchanges,’’ or the ‘‘Parties’’). The Plan replaces and supersedes the agreement between FINRA and the Bats Exchanges dated September 30, 2016, entitled ‘‘Agreement between Financial Industry Regulatory Authority, Inc., Bats BZX Exchange, Inc., Bats BYS Exchange, Inc., Bats EDGA Exchange, Inc., and Bats EDGX Exchange, Inc. Pursuant to Rule 17d–2 under the Securities Exchange Act of 1934.’’ 3 I. Introduction Section 19(g)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),4 among other things, requires every selfregulatory organization (‘‘SRO’’) registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO’s own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) or Section 19(g)(2) of the Act.5 Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO (‘‘common members’’). Such regulatory duplication would add unnecessary expenses for common members and their SROs. Section 17(d)(1) of the Act 6 was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.7 With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or order, to relieve an SRO of the responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules, and regulations, or to perform other specified regulatory functions. To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d–1 and Rule 17d–2 under the Act.8 Rule 17d–1 authorizes the Commission to name a single SRO as the designated examining authority (‘‘DEA’’) to examine common members for compliance with the financial responsibility requirements imposed by the Act, or by Commission or SRO 3 See Securities Exchange Act Release No. 79057 (October 6, 2016), 81 FR 70728 (October 13, 2016). 4 15 U.S.C. 78s(g)(1). 5 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively. 6 15 U.S.C. 78q(d)(1). 7 See Securities Act Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94– 75, 94th Cong., 1st Session 32 (1975). 8 17 CFR 240.17d–1 and 17 CFR 240.17d–2, respectively. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 71009 rules.9 When an SRO has been named as a common member’s DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d–1 deals only with an SRO’s obligations to enforce member compliance with financial responsibility requirements. Rule 17d–1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices. To address regulatory duplication in these and other areas, the Commission adopted Rule 17d–2 under the Act.10 Rule 17d–2 permits SROs to propose joint plans for the allocation of regulatory responsibilities with respect to their common members. Under paragraph (c) of Rule 17d–2, the Commission may declare such a plan effective if, after providing for appropriate notice and comment, it determines that the plan is necessary or appropriate in the public interest and for the protection of investors; to foster cooperation and coordination among the SROs; to remove impediments to, and foster the development of, a national market system and a national clearance and settlement system; and is in conformity with the factors set forth in Section 17(d) of the Act. Commission approval of a plan filed pursuant to Rule 17d–2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO. II. The Plan On October 6, 2016, the Commission declared effective the Plan entered into between FINRA and the Bats Exchanges for allocating regulatory responsibility pursuant to Rule 17d–2.11 The Plan is intended to reduce regulatory duplication for firms that are common members of FINRA and at least one of the Bats Exchanges by allocating regulatory responsibility with respect to certain applicable laws, rules, and regulations that are common among them. Included in the Plan is an exhibit that lists every rule of each Bats Exchange for which FINRA bears responsibility under the Plan for overseeing and enforcing with respect to 9 See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). 10 See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). 11 See Securities Exchange Act Release No. 79057 (October 6, 2016), 81 FR 70728 (October 13, 2016). E:\FR\FM\26DEN1.SGM 26DEN1 71010 Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices members of one or more of the Bats Exchanges that are also members of FINRA and the associated persons therewith. khammond on DSKJM1Z7X2PROD with NOTICES III. Proposed Amendment to the Plan On December 3, 2019, the parties submitted a proposed amendment to the Plan (‘‘Amended Plan’’). The primary purposes of the Amended Plan are to (1) allocate surveillance, investigation, and enforcement responsibilities for Rule 14e–4 under the Act and (2) amend the Plan to reflect the name changes of the Bats Exchanges. The text of the proposed Amended Plan is as follows (additions are italicized; deletions are [bracketed]): Agreement Between Financial Industry Regulatory Authority, Inc., [BATS]CBOE BZX Exchange, Inc., [BATS]CBOE BYX EXCHANGE, INC., [BATS]CBOE EDGA Exchange, Inc., and [BATS]CBOE EDGX Exchange, Inc. Pursant to Rule 17d–2 Under the Securities Exchange Act of 1934 This Agreement, by and between the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), [Bats]Cboe BZX Exchange, Inc. (‘‘BZX’’), [Bats]Cboe BYX Exchange, Inc. (‘‘BYX’’), [Bats]Cboe EDGA Exchange, Inc. (‘‘EDGA’’), and [Bats]Cboe EDGX Exchange, Inc. (‘‘EDGX’’) (collectively, the ‘‘Bats Exchanges’’ and each a ‘‘Bats Exchange’’) is made this [30th] 2nd day of [September]December, 201[6]9 (the ‘‘Agreement’’), pursuant to Section 17(d) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) and Rule 17d–2 thereunder, which permits agreements between self-regulatory organizations to allocate regulatory responsibility to eliminate regulatory duplication. FINRA and the Bats Exchanges may be referred to individually as a ‘‘party’’ and together as the ‘‘parties.’’ Upon approval by the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) this Agreement shall replace and supersede the agreement among FINRA and the Bats Exchanges dated September 30, 2016[between FINRA and BZX dated August 25, 2008; the agreement between FINRA and BYX dated September 3, 2010; the agreement between FINRA and EDGA dated March 31, 2010; and the agreement between FINRA and EDGX dated March 31, 2010]. Whereas, FINRA and the Bats Exchanges desire to reduce duplication in the examination and surveillance of their Common Members (as defined herein) and in the filing and processing of certain registration and membership records; and Whereas, FINRA and the Bats Exchanges desire to execute an VerDate Sep<11>2014 16:53 Dec 23, 2019 Jkt 250001 agreement covering such subjects pursuant to the provisions of Rule 17d– 2 under the Exchange Act and to file such agreement with the Commission for its approval. Now, therefore, in consideration of the mutual covenants contained hereinafter, FINRA and each Bats Exchange hereby agree as follows: 1. Definitions. Unless otherwise defined in this Agreement or the context otherwise requires, the terms used in this Agreement shall have the same meaning as they have under the Exchange Act and the rules and regulations thereunder. As used in this Agreement, the following terms shall have the following meanings: (a) ‘‘Bats Exchanges Rules’’ or ‘‘FINRA Rules’’ shall mean: (i) The rules of each Bats Exchange, or (ii) the rules of FINRA, respectively, as the rules of an exchange or association are defined in Exchange Act Section 3(a)(27). (b) ‘‘Common Rules’’ shall mean the rules of each Bats Exchange that are substantially similar to the applicable FINRA Rules and certain provisions of the Exchange Act and SEC rules set forth on Exhibit 1 in that examination or surveillance for compliance with such provisions and rules would not require FINRA to develop one or more new examination or surveillance standards, modules, procedures, or criteria in order to analyze the application of the provision or rule, or a Common Member’s activity, conduct, or output in relation to such provision or rule; provided, however, Common Rules shall not include the application of the SEC, each Bats Exchange or FINRA rules as they pertain to violations of insider trading activities, which is covered by a separate 17d–2 Agreement by and among [BATS Exchange, Inc., BATS–Y Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange Inc., EDGX Exchange Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc. effective December 16, 2011] Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, NYSE National, Inc., New York Stock Exchange LLC, NYSE American LLC, NYSE Arca Inc., Investors’ Exchange LLC and Long-Term Stock Exchange, Inc. effective August 1, 2019, as may be amended from time to PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 time. Common Rules shall not include any provisions regarding (i) notice, reporting or any other filings made directly to or from any Bats Exchange, (ii) incorporation by reference of any Bats Exchange Rules that are not Common Rules, (iii) exercise of discretion in a manner that differs from FINRA’s exercise of discretion including, but not limited to exercise of exemptive authority, by any Bats Exchange, (iv) prior written approval of any Bats Exchange and (v) payment of fees or fines to any Bats Exchange. (c) ‘‘Common Members’’ shall mean those Bats Exchange members that are also members of FINRA and the associated persons therewith. (d) ‘‘Effective Date’’ shall have the meaning set forth in paragraph 13. (e) ‘‘Enforcement Responsibilities’’ shall mean the conduct of appropriate proceedings, in accordance with FINRA’s Code of Procedure and other applicable FINRA procedural rules, to determine whether violations of Common Rules have occurred, and if such violations are deemed to have occurred, the imposition of appropriate sanctions as specified under FINRA’s Code of Procedure and sanctions guidelines. (f) ‘‘Regulatory Responsibilities’’ shall mean the examination responsibilities, surveillance responsibilities and Enforcement Responsibilities relating to compliance by the Common Members with the Common Rules and the provisions of the Exchange Act and the rules and regulations thereunder, and other applicable laws, rules and regulations, each as set forth on Exhibit 1 attached hereto. 2. Regulatory Responsibilities. FINRA shall assume Regulatory Responsibilities for Common Members. Attached as Exhibit 1 to this Agreement and made part hereof, each Bats Exchange furnished FINRA with a current list of Common Rules and certified to FINRA that such rules that are Bats Exchanges Rules are substantially similar to the corresponding FINRA Rules (the ‘‘Certification’’). FINRA hereby agrees that the rules listed in the Certification are Common Rules as defined in this Agreement. Each year following the Effective Date of this Agreement, or more frequently if required by changes in either the rules of any Bats Exchange or FINRA, the Bats Exchanges shall submit an updated list of Common Rules to FINRA for review which shall add Bats Exchanges Rules not included in the current list of Common Rules that qualify as Common Rules as defined in this Agreement; delete Bats Exchanges Rules included in the current list of E:\FR\FM\26DEN1.SGM 26DEN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices Common Rules that no longer qualify as Common Rules as defined in this Agreement; and confirm that the remaining rules on the current list of Common Rules continue to be Bats Exchanges Rules that qualify as Common Rules as defined in this Agreement. Within 30 days of receipt of such updated list, FINRA shall confirm in writing whether the rules listed in any updated list are Common Rules as defined in this Agreement. Notwithstanding anything herein to the contrary, it is explicitly understood that the term ‘‘Regulatory Responsibilities’’ does not include, and each Bats Exchange shall retain full responsibility for (unless otherwise addressed by separate agreement or rule) (collectively, the ‘‘Retained Responsibilities’’) the following: (a) Surveillance, examination, investigation and enforcement with respect to trading activities or practices involving each Bats Exchange’s own marketplace for rules that are not Common Rules; (b) registration pursuant to its applicable rules of associated persons (i.e., registration rules that are not Common Rules); (c) discharge of its duties and obligations as a Designated Examining Authority pursuant to Rule 17d–1 under the Exchange Act; and (d) any Bats Exchanges Rules that are not Common Rules, except for any Bats Exchanges Rules for any broker-dealer subsidiary of [Bats Global Markets]Cboe Trading, Inc., as provided in paragraph 6. 3. Common Members. Prior to the Effective Date, each Bats Exchange shall furnish FINRA with a current list of Common Members, which shall be updated no less frequently than once each quarter. 4. No Charge. There shall be no charge to the Bats Exchanges by FINRA for performing the Regulatory Responsibilities under this Agreement except as otherwise agreed by the parties, either herein or in a separate agreement. 5. Reassignment of Regulatory Responsibilities. Notwithstanding any provision hereof, this Agreement shall be subject to any statute, or any rule or order of the Commission, or industry agreement, restructuring the regulatory framework of the securities industry or reassigning Regulatory Responsibilities between self-regulatory organizations. To the extent such action is inconsistent with this Agreement, such action shall supersede the provisions hereof to the extent necessary for them to be properly effectuated and the provisions hereof in that respect shall be null and void. VerDate Sep<11>2014 16:53 Dec 23, 2019 Jkt 250001 6. Notification of Violations. In the event that FINRA becomes aware of apparent violations of any Bats Exchanges Rules, which are not listed as Common Rules, discovered pursuant to the performance of the Regulatory Responsibilities assumed hereunder, FINRA shall notify the Bats Exchanges of those apparent violations for such response as the Bats Exchanges deem appropriate. In the event that any of the Bats Exchanges becomes aware of apparent violations of any Common Rules, discovered pursuant to the performance of the Retained Responsibilities, the applicable Bats Exchange shall notify FINRA of those apparent violations and such matters shall be handled by FINRA as provided in this Agreement. With respect to apparent violations of any Bats Exchanges Rules by any broker-dealer subsidiary of Bats Global Markets, Inc., FINRA shall not make referrals to the Bats Exchanges pursuant to this paragraph 6. Such apparent violations shall be processed by, and enforcement proceedings in respect thereto will be conducted by, FINRA as provided in this Agreement. Each party agrees to make available promptly all files, records and witnesses necessary to assist the other in its investigation or proceedings. Apparent violations of Common Rules, FINRA Rules, federal securities laws, and rules and regulations thereunder, shall be processed by, and enforcement proceedings in respect thereto shall be conducted by FINRA as provided hereinbefore; provided, however, that in the event a Common Member is the subject of an investigation relating to a transaction on a Bats Exchange, the Bats Exchange may in its discretion assume concurrent jurisdiction and responsibility. 7. Continued Assistance. (a) FINRA shall make available to the Bats Exchanges all information obtained by FINRA in the performance by it of the Regulatory Responsibilities hereunder with respect to the Common Members subject to this Agreement. In particular, and not in limitation of the foregoing, FINRA shall furnish the Bats Exchanges any information it obtains about Common Members which reflects adversely on their financial condition. The Bats Exchanges shall make available to FINRA any information coming to its attention that reflects adversely on the financial condition of Common Members or indicates possible violations of applicable laws, rules or regulations by such firms. (b) The parties agree that documents or information shared shall be held in confidence, and used only for the PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 71011 purposes of carrying out their respective regulatory obligations. The parties shall not assert regulatory or other privileges as against another with respect to documents or information that is required to be shared pursuant to this Agreement. (c) The sharing of documents or information between the parties pursuant to this Agreement shall not be deemed a waiver as against third parties of regulatory or other privileges relating to the discovery of documents or information. 8. Statutory Disqualifications. When FINRA becomes aware of a statutory disqualification as defined in the Exchange Act with respect to a Common Member, FINRA shall determine pursuant to Sections 15A(g) and/or Section 6(c) of the Exchange Act the acceptability or continued applicability of the person to whom such disqualification applies and keep the Bats Exchanges advised of its actions in this regard for such subsequent proceedings as the Bats Exchanges may initiate. 9. Customer Complaints. The Bats Exchanges shall forward to FINRA copies of all customer complaints involving Common Members received by the Bats Exchanges relating to FINRA’s Regulatory Responsibilities under this Agreement. It shall be FINRA’s responsibility to review and take appropriate action in respect to such complaints. 10. Advertising. FINRA shall assume responsibility to review the advertising of Common Members subject to the Agreement, provided that such material is filed with FINRA in accordance with FINRA’s filing procedures and is accompanied with any applicable filing fees set forth in FINRA Rules. 11. No Restrictions on Regulatory Action. Nothing contained in this Agreement shall restrict or in any way encumber the right of any party to conduct its own independent or concurrent investigation, examination or enforcement proceeding of or against Common Members, as any party, in its sole discretion, shall deem appropriate or necessary. 12. Termination. This Agreement may be terminated by the Bats Exchanges or FINRA at any time upon the approval of the Commission after one (1) year’s written notice to the other party, except as provided in paragraph 4. 13. Effective Date. This Agreement shall be effective upon approval of the Commission. 14. Arbitration. In the event of a dispute among the parties as to the operation of this Agreement, the Bats Exchanges and FINRA hereby agree that E:\FR\FM\26DEN1.SGM 26DEN1 71012 Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices khammond on DSKJM1Z7X2PROD with NOTICES any such dispute shall be settled by arbitration in Washington, DC in accordance with the rules of the American Arbitration Association then in effect, or such other procedures as the parties may mutually agree upon. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. Each party acknowledges that the timely and complete performance of its obligations pursuant to this Agreement is critical to the business and operations of the other parties. In the event of a dispute between the parties, the parties shall continue to perform their respective obligations under this Agreement in good faith during the resolution of such dispute unless and until this Agreement is terminated in accordance with its provisions. Nothing in this Section 14 shall interfere with a party’s right to terminate this Agreement as set forth herein. 15. Notification of Members. The Bats Exchanges and FINRA shall notify Common Members of this Agreement after the Effective Date by means of a uniform joint notice. 16. Amendment. This Agreement may be amended in writing duly approved by each party. All such amendments must be filed with and approved by the Commission before they become effective. 17. Limitation of Liability. Neither FINRA nor any Bats Exchange nor any of their respective directors, governors, officers or employees shall be liable to the other parties to this Agreement for any liability, loss or damage resulting from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibilities as provided hereby or for the failure to provide any such responsibility, except with respect to such liability, loss or damages as shall have been suffered by one or the other of FINRA or any Bats Exchange and caused by the willful misconduct of the other party or their respective directors, governors, officers or employees. No warranties, express or implied, are made by FINRA or any Bats Exchange with respect to any of the responsibilities to be performed by each of them hereunder. 18. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) and 19(g) of the Exchange Act and Rule 17d– 2 thereunder, FINRA and the Bats Exchanges join in requesting the Commission, upon its approval of this Agreement or any part thereof, to relieve the Bats Exchanges of any and all responsibilities with respect to matters allocated to FINRA pursuant to this Agreement; provided, however, that this Agreement shall not be effective until the Effective Date. 19. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. 20. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and such counterparts together shall constitute one and the same instrument. Exhibit 1 Cboe [Bats] BZX Exchange, Inc. (‘‘BZX’’), Cboe [Bats] BYX Exchange, Inc. (‘‘BYX’’), Cboe [Bats] EDGA Exchange, Inc. (‘‘EDGA’’), and Cboe [Bats] EDGX Exchange, Inc. (‘‘EDGX’’) Rules Certification for 17d–2 Agreement with FINRA Each Bats Exchange hereby certifies that the requirements contained in the rules listed below are identical to, or substantially similar to, the comparable FINRA Rule, NASD Rule, Exchange Act provision or SEC Rule identified (‘‘Common Rules’’). # Common Rules shall not include provisions regarding (i) notice, reporting or any other filings made directly to or from any Bats Exchange, (ii) incorporations by reference of any Bats Exchange Rules that are not Common Rules (iii) exercise of discretion in a manner that differs from FINRA’s exercise of discretion including, but not limited to exercise of exemptive authority, by any Bats Exchanges, (iv) prior written approval of any Bats Exchanges, and (v) payment of fees or fines to any Bats Exchange. BZX Rule BYX Rule EDGA Rule EDGX Rule FINRA Rule, NASD Rule, Exchange Act Provision or SEC Rule Rule 2.5 Restrictions, Interpretation and Policy .02 Continuing Education Requirements #. Rule 2.5 Restrictions, Interpretation and Policy .04 Termination of Employment. Rule 2.6(g) Application Procedures for Membership or to become an Associated Person of a Member #. Rule 3.1 Business Conduct of Members *. Rule 3.2 Violations Prohibited *. Rule 2.5 Restrictions, Interpretation and Policy .02 Continuing Education Requirements #. Rule 2.5 Restrictions, Interpretation and Policy .04 Termination of Employment. Rule 2.6(g) Application Procedures for Membership or to become an Associated Person of a Member #. Rule 3.1 Business Conduct of Members *. Rule 3.2 Violations Prohibited *. Rule 2.5 Restrictions, Interpretation and Policy .02 Continuing Education Requirements #. Rule 2.5 Restrictions, Interpretation and Policy .04 Termination of Employment. Rule 2.6(g) Application Procedures for Membership or to become an Associated Person of a Member #. Rule 3.1 Business Conduct of Members *. Rule 3.2 Violations Prohibited *. Rule 2.5 Restrictions, Interpretation and Policy .02 Continuing Education Requirements #. Rule 2.5 Restrictions, Interpretation and Policy .04 Termination of Employment. Rule 2.6(g) Application Procedures for Membership or to become an Associated Person of a Member #. Rule 3.1 Business Conduct of Members *. Rule 3.2 Violations Prohibited *. FINRA Rule 12[5]40(a)(1)–(4) Continuing Education Requirements 1; FINRA Rule 1010(a); FINRA Bylaws Article V, Sec. 2. Rule 3.3 Use of Fraudulent Devices *. Rule 3.5 Communications with the Public. Rule 3.6 Fair Dealing with Customers. Rule 3.7(a) Recommendations to Customers. Rule 3.3 Use of Fraudulent Devices *. Rule 3.5 Communications with the Public. Rule 3.6 Fair Dealing with Customers. Rule 3.7(a) Recommendations to Customers. Rule 3.8(a) The Prompt Receipt and Delivery of Securities. Rule 3.3 Use of Fraudulent Devices *. Rule 3.5 Communications with the Public. Rule 3.6 Fair Dealing with Customers. Rule 3.7(a) Recommendations to Customers. Rule 3.8(a) The Prompt Receipt and Delivery of Securities. Rule 3.3 Use of Fraudulent Devices *. Rule 3.5 Communications with the Public. Rule 3.6 Fair Dealing with Customers. Rule 3.7(a) Recommendations to Customers. Rule 3.8(a) The Prompt Receipt and Delivery of Securities. Rule 3.8(a) The Prompt Receipt and Delivery of Securities. VerDate Sep<11>2014 16:53 Dec 23, 2019 Jkt 250001 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 FINRA By-Laws of the Corporation, Article V, Section 3 Notification by Member to the Corporation and Associated Person of Termination; Amendments to Notification. FINRA By-Laws of the Corporation, Article IV, Section 1(c) Application for Membership. FINRA Rule 2010 Standards of Commercial Honor and Principles of Trade.* FINRA Rule 2010 Standards of Commercial Honor and Principles of Trade and FINRA Rule 3110 Supervision.* 2 FINRA Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent Devices.* FINRA Rule 2210 Communications with the Public. FINRA Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent Devices.* 3 FINRA Rule 2111(a) Suitability. FINRA Rule 11860 COD Orders. E:\FR\FM\26DEN1.SGM 26DEN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices BZX Rule BYX Rule EDGA Rule EDGX Rule Rule 3.8(b) The Prompt Receipt and Delivery of Securities. Rule 3.9 Charges for Services Performed. Rule 3.10 Use of Information. Rule 3.11 Publication of Transactions and Quotations #. Rule 3.12 Offers at Stated Prices. Rule 3.13 Payment Designed to Influence Market Prices, Other than Paid Advertising. Rule 3.14 Disclosure on Confirmations. Rule 3.15 Disclosure of Control. Rule 3.16 Discretionary Accounts. Rule 3.17 Customer’s Securities or Funds. Rule 3.8(b) The Prompt Receipt and Delivery of Securities. Rule 3.9 Charges for Services Performed. Rule 3.10 Use of Information. Rule 3.11 Publication of Transactions and Quotations #. Rule 3.12 Offers at Stated Prices. Rule 3.13 Payment Designed to Influence Market Prices, Other than Paid Advertising. Rule 3.14 Disclosure on Confirmations. Rule 3.15 Disclosure of Control. Rule 3.16 Discretionary Accounts. Rule 3.17 Customer’s Securities or Funds. Rule 3.8(b) The Prompt Receipt and Delivery of Securities. Rule 3.9 Charges for Services Performed. Rule 3.10 Use of Information. Rule 3.11 Publication of Transactions and Quotations #. Rule 3.12 Offers at Stated Prices. Rule 3.13 Payments Involving Publications that Influence the Market Price of a Security. Rule 3.14 Disclosure on Confirmations. Rule 3.15 Disclosure of Control. Rule 3.16 Discretionary Accounts. Rule 3.17 Customer’s Securities or Funds. Rule 3.8(b) The Prompt Receipt and Delivery of Securities. Rule 3.9 Charges for Services Performed. Rule 3.10 Use of Information. Rule 3.11 Publication of Transactions and Quotations #. Rule 3.12 Offers at Stated Prices. Rule 3.13 Payments Involving Publications that Influence the Market Price of a Security. Rule 3.14 Disclosure on Confirmations. Rule 3.15 Disclosure of Control. Rule 3.16 Discretionary Accounts. Rule 3.17 Customer’s Securities or Funds. Rule 3.18 Prohibition Against Guarantees. Rule 3.18 Prohibition Against Guarantees. Rule 3.18 Prohibition Against Guarantees. Rule 3.18 Prohibition Against Guarantees. Rule 3.19 Sharing in Accounts; Extent Permissible. Rule 3.19 Sharing in Accounts; Extent Permissible. Rule 3.19 Sharing in Accounts; Extent Permissible. Rule 3.19 Sharing in Accounts; Extent Permissible. Rule 3.21[(a)–(f)] Customer Disclosures. Rule 3.22 Influencing or Rewarding Employees of Others. Rule 3.23 Telemarketing and Interpretations and Policies .01. Rule 4.1 Requirements ..... Rule 3.21[(a)–(f)] Customer Disclosures. Rule 3.22 Influencing or Rewarding Employees of Others. Rule 3.23 Telemarketing and Interpretations and Policies .01. Rule 4.1 Requirements ... Rule 3.21[(a)–(f)] Customer Disclosures. Rule 3.20 Influencing or Rewarding Employees of Others. Rule 3.26 Telemarketing and Interpretations and Policies .01. Rule 4.1 Requirements ... Rule 3.21[(a)–(f)] Customer Disclosures. Rule 3.20 Influencing or Rewarding Employees of Others. Rule 3.26 Telemarketing and Interpretations and Policies .01. Rule 4.1 Requirements ... Rule 4.3 Record of Written Complaints. Rule 5.1 Written Procedures. Rule 5.2 Responsibility of Members. Rule 4.3 Record of Written Complaints. Rule 5.1 Written Procedures. Rule 5.2 Responsibility of Members. Rule 4.3 Record of Written Complaints. Rule 5.1 Written Procedures. Rule 5.2 Responsibility of Members. Rule 4.3 Record of Written Complaints. Rule 5.1 Written Procedures. Rule 5.2 Responsibility of Members. Rule 5.3 Records .............. Rule 5.4 Review of Activities. Rule 5.3 Records ............ Rule 5.4 Review of Activities. Rule 5.3 Records ............ Rule 5.4 Review of Activities. Rule 5.3 Records ............ Rule 5.4 Review of Activities. Rule 5.6 Anti-Money Laundering Compliance Program #. Rule 9.3 Predispute Arbitration Agreements. Rule 5.6 Anti-Money Laundering Compliance Program #. Rule 9.3 Predispute Arbitration Agreements. Rule 5.6 Anti-Money Laundering Compliance Program #. Rule 9.3 Predispute Arbitration Agreements. Rule 5.6 Anti-Money Laundering Compliance Program #. Rule 9.3 Predispute Arbitration Agreements. Rule 11.18(e)(3) & (4) Trading Halts Due to Extraordinary Market Volatility. Rule 11.19(a) Short Sales # ∧∧. Rule 11.18(e)(3) & (4) Trading Halts Due to Extraordinary Market Volatility. Rule 11.19(a) Short Sales # ∧∧. Rule 12.1 Market Manipulation **. Rule 12.2 Fictitious Transactions **. Rule 12.3 Excessive Sales by a Member **. Rule 12.4 Manipulative Transactions **. Rule 12.5 Dissemination of False Information **. Rule 12.6 Prohibition Against Trading Ahead of Customer Orders ∧∧. Rule 12.1 Market Manipulation **. Rule 12.2 Fictitious Transactions **. Rule 12.3 Excessive Sales by a Member **. Rule 12.4 Manipulative Transactions **. Rule 12.5 Dissemination of False Information **. Rule 12.6 Prohibition Against Trading Ahead of Customer Orders ∧∧. Rule 11.16(e)(3) & (4) Trading Halts Due to Extraordinary Market Volatility. Rule 11.10(a)(5) Order Execution-Short Sales # ∧∧. Rule 12.1 Market Manipulation **. Rule 12.2 Fictitious Transactions **. Rule 12.3 Excessive Sales by a Member **. Rule 12.4 Manipulative Transactions **. Rule 12.5 Dissemination of False Information **. Rule 12.6 Prohibition Against Trading Ahead of Customer Orders ∧∧. Rule 11.16(e)(3) & (4) Trading Halts Due to Extraordinary Market Volatility. Rule 11.10(a)(5) Order Execution-Short Sales # ∧∧. Rule 12.1 Market Manipulation **. Rule 12.2 Fictitious Transactions **. Rule 12.3 Excessive Sales by a Member **. Rule 12.4 Manipulative Transactions **. Rule 12.5 Dissemination of False Information **. Rule 12.6 Prohibition Against Trading Ahead of Customer Orders ∧∧. VerDate Sep<11>2014 16:53 Dec 23, 2019 Jkt 250001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 71013 FINRA Rule, NASD Rule, Exchange Act Provision or SEC Rule SEC Regulation SHO. FINRA Rule 2122 Charges for Services Performed. FINRA Rule 2060 Use of Information Obtained in Fiduciary Capacity. FINRA Rule 5210 Publication of Transactions and Quotations. FINRA Rule 5220 Offers at Stated Prices. FINRA Rule 5230 Payments Involving Publications that Influence the Market Price of a Security. FINRA Rule 2232(a) Customer Confirmations and SEC Rule 10b–10 Confirmation of Transactions. FINRA Rule 2262 Disclosure of Control Relationship With Issuer. NASD Rule 2510 Discretionary Accounts.4 FINRA Rule 2150(a) Improper Use of Customers’ Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts—Improper Use. FINRA Rule 2150(b) Improper Use of Customers’ Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts—Prohibition Against Guarantees. FINRA Rule 2150(c)(1) Improper Use of Customers’ Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts—Sharing in Accounts; Extent Permissible. FINRA Rule 2265 Extended Hours Trading Risk Disclosure. FINRA Rule 3220 Influencing or Rewarding Employees of Others. FINRA Rule 3230 Telemarketing. Section 17 of the Exchange Act and the rules thereunder * 5, and FINRA Rule 4511(a) and (c) General Requirements. FINRA Rule 4513 Records of Written Customer Complaints. FINRA Rule 3110(b)(1) Supervision-Written Procedures.* FINRA Rule 3110 (a)(4), (b)(4) and (b)(7) Supervision—Supervisory System/Written Procedures—Review of Correspondence and Internal Communications.* FINRA Rule 3110 Supervision.* FINRA Rule 3110(c) and (d) Supervision—Internal Inspections/Transaction Review and Investigation.* FINRA Rule 3310 Anti-Money Laundering Compliance Program. FINRA Rule 2268 Requirements When Using Predispute Arbitration Agreements for Customer Accounts. FINRA Rule 6190(a)[(1) & (2)]& (b) Compliance with Regulation NMS Plan to Address Extraordinary Market Volatility. FINRA Rule 6182 Trade Reporting of Short Sales.∧∧ FINRA Rule 6140(a) Other Trading Practices.** FINRA Rule 6140(b) Other Trading Practices.** FINRA Rule 6140(c) Other Trading Practices.** FINRA Rule 6140(d) Other Trading Practices.** FINRA Rule 6140(e) Other Trading Practices.** FINRA Rule 5320 Prohibition Against Trading Ahead of Customer Orders.∧∧ E:\FR\FM\26DEN1.SGM 26DEN1 71014 Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices BZX Rule BYX Rule EDGA Rule EDGX Rule FINRA Rule, NASD Rule, Exchange Act Provision or SEC Rule Rule 12.9 Trade Shredding Rule 12.9 Trade Shredding. Rule 12.11 Best Execution ∧∧. Rule 12.13 Trading Ahead of Research Reports ∧∧. Rule 12.14(a) Front Running of Block Transactions ∧∧. Rule 13.2 Failure to Deliver and Failure to Receive. Rule 13.3(a), (b)(i), (d) and Interpretation and Policy .01 Forwarding of Proxy and Other Issuer-Related Materials; Proxy Voting. ......................................... Rule 12.9 Trade Shredding. Rule 12.11 Best Execution ∧∧. Rule 12.13 Trading Ahead of Research Reports ∧∧. Rule 12.14(a) Front Running of Block Transactions ∧∧. Rule 13.2 Short Sale Borrowing and Delivery Requirements. Rule 13.3(a), (b)(i), (d) and Interpretation and Policy .01 Forwarding of Proxy and Other Issuer-Related Materials. ......................................... Rule 12.9 Trade Shredding. Rule 12.11 Best Execution ∧∧. Rule 12.13 Trading Ahead of Research Reports ∧∧. Rule 12.14(a) Front Running of Block Transactions ∧∧. Rule 13.2 Short Sale Borrowing and Delivery Requirements. Rule 13.3(a), (b)(i), (d) and Interpretation and Policy .01 Forwarding of Proxy and Other Issuer-Related Materials. Rule 26.11 Restrictions on Pledge and Lending of Public Customers’ Securities. FINRA Rule 5290 Order Entry and Execution Practices. FINRA Rule 5310 Best Execution and Interpositioning.∧∧ FINRA Rule 5280 Trading Ahead of Research Reports.∧∧ Rule 12.11 Best Execution ∧∧. Rule 12.13 Trading Ahead of Research Reports ∧∧. Rule 12.14(a) Front Running of Block Transactions ∧∧. Rule 13.2 Failure to Deliver and Failure to Receive. Rule 13.3(a), (b)(i), (d) and Interpretation and Policy .01 Forwarding of Proxy and Other Issuer-Related Materials; Proxy Voting. Rule 26.11 Restrictions on Pledge and Lending of Public Customers’ Securities. FINRA Rule 5270 Front Running of Block Transactions.∧∧ Regulation SHO Rules 200 and 203. FINRA Rule 2251 Processing and Forwarding of Proxy and Other Issuer-Related Materials. FINRA Rule 4330 Customer Protection—Permissible Uses of Customers’ Securities. 1 FINRA shall only have Regulatory Responsibilities to the extent that the allowance for additional time for a registered person to satisfy the regulatory element is consistently granted. 2 FINRA shall only have Regulatory Responsibilities regarding the first phrase of the Bats Exchanges rules regarding prohibitions from violating the Securities Exchange Act of 1934 and the rules and regulations thereunder; responsibility for the remainder of the rule shall remain with the Bats Exchanges. 3 FINRA shall not have Regulatory Responsibilities regarding .01 of each Bats Exchange Rule 3.6. 4 FINRA shall not have Regulatory Responsibilities for the Bats Exchanges’ Rule to the extent the exception in NASD Rule 2510(d)(2) applies. 5 FINRA shall not have Regulatory Responsibilities regarding requirements to keep records ‘‘in conformity with . . . Exchange Rules;’’ responsibility for such requirement remains with the Bats Exchanges. In addition, the following provisions shall be part of this 17d–2 Agreement: Securities Exchange Act of 1934 (‘‘SEA’’) Section 15(g) khammond on DSKJM1Z7X2PROD with NOTICES SEC Rules Under the SEA SEC Rule 200 of Regulation SHO— Definition of ‘‘Short Sale’’ and Marking Requirements ∧∧ SEC Rule 201 of Regulation SHO— Circuit Breaker ∧∧ SEC Rule 203 of Regulation SHO— Borrowing and Delivery Requirements ∧∧ SEA Rule 204 of Regulation SHO— Close-Out Requirement ∧∧ SEC Rule 101 of Regulation M— Activities by Distribution Participants ∧∧ SEC Rule 102 of Regulation M— Activities by Issuers and Selling Security Holders During a Distribution ∧∧ SEC Rule 103 of Regulation M—Nasdaq Passive Market Making ∧∧ SEC Rule 104 of Regulation M— Stabilizing and Other Activities in Connection with an Offering ∧∧ SEC Rule 105 of Regulation M—Short Selling in Connection With a Public Offering ∧∧ SEC Rules 17a–3 / 17a–4—Records to be made by Certain Exchange Members, Brokers, and Dealers/Records to be Preserved by Certain Exchange Members, Brokers, and Dealers * VerDate Sep<11>2014 16:53 Dec 23, 2019 Jkt 250001 SEC Rule 14e–4—Prohibited Transactions in Connection with Partial Tender Offers ++ [# FINRA shall not have Regulatory Responsibilities regarding notification or reporting to the Bats Exchanges and to the extent any exercise of discretion is the same.] * FINRA shall not have any Regulatory Responsibilities for these rules as they pertain to violations of insider trading activities, which is covered by a separate 17d–2 Agreement by and among [BATS Exchange, Inc., BATS Y Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange Inc., EDGX Exchange Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Amex LLC, and NYSE Arca, Inc. effective December 16, 2011] Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, NYSE National, Inc., New York Stock Exchange LLC, NYSE American LLC, NYSE Arca Inc., Investors’ Exchange LLC and LongTerm Stock Exchange, Inc. effective August 1, 2019, as may be amended from time to time. ** FINRA shall not have Regulatory Responsibilities for these rules as they pertain to trading practices involving securities that do not meet the definition of NMS stock as defined in Rule 600(b)(47) of Regulation NMS. As of the current date, Bats Exchanges do not trade any non-NMS stock. ∧∧ FINRA shall perform the surveillance responsibilities for the double caret rules. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 These rules may be cited by FINRA in both the context of this Agreement and the Regulatory Services Agreement. ++ FINRA shall perform the surveillance responsibilities for SEC Rule 14e– 4(a)(1)(ii)(D). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number 4– 705 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number 4–705. 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 (http://www.sec.gov/rules/ sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed plan that are filed with the Commission, E:\FR\FM\26DEN1.SGM 26DEN1 Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices khammond on DSKJM1Z7X2PROD with NOTICES and all written communications relating to the proposed plan between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the plan also will be available for inspection and copying at the principal offices of FINRA, BZX, BYX, EDGX, and EDGA. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number 4–705 and should be submitted on or before January 16, 2020. V. Discussion The Commission finds that the proposed Amended Plan is consistent with the factors set forth in Section 17(d) of the Act 12 and Rule 17d–2(c) thereunder 13 in that the proposed Amended Plan is necessary or appropriate in the public interest and for the protection of investors, fosters cooperation and coordination among SROs, and removes impediments to and fosters the development of the national market system. In particular, the Commission believes that the proposed Amended Plan should reduce unnecessary regulatory duplication by allocating to FINRA certain examination and enforcement responsibilities for Common Members that would otherwise be performed by FINRA and at least one of the Bats Exchanges. Accordingly, the proposed Amended Plan promotes efficiency by reducing costs to Common Members. Furthermore, because the Bats Exchanges and FINRA will coordinate their regulatory functions in accordance with the Amended Plan, the Amended Plan should promote investor protection. The Commission notes that, under the Amended Plan, the Bats Exchanges and FINRA have allocated regulatory responsibility for those rules of the Bats Exchanges, set forth in the Certification, that are substantially similar to the applicable FINRA rules in that examination for compliance with such provisions and rules would not require FINRA to develop one or more new 12 15 13 17 U.S.C. 78q(d). CFR 240.17d–2(c). VerDate Sep<11>2014 16:53 Dec 23, 2019 examination standards, modules, procedures, or criteria in order to analyze the application of the rule, or a Common Member’s activity, conduct, or output in relation to such rule. In addition, under the Amended Plan, FINRA would assume regulatory responsibility for certain provisions of the federal securities laws and the rules and regulations thereunder that are set forth in the Certification. The Common Rules covered by the Amended Plan are specifically listed in the Certification, as may be amended by the Parties from time to time. According to the Amended Plan, the Bats Exchanges will review the Certification, at least annually, or more frequently if required by changes in either the rules of any one of the Bats Exchanges or FINRA, and, if necessary, submit to FINRA an updated list of Common Rules to add rules of any Bats Exchange not included on the thencurrent list of Common Rules that are substantially similar to FINRA rules; delete rules of any Bats Exchange included in the then-current list of Common Rules that no longer qualify as common rules; and confirm that the remaining rules on the list of Common Rules continue to be rules of each Bats Exchange that qualify as common rules.14 FINRA will then confirm in writing whether the rules listed in any updated list are Common Rules as defined in the Amended Plan. Under the Amended Plan, each Bats Exchange will also provide FINRA with a current list of Common Members and shall update the list no less frequently than once each quarter.15 The Commission believes that these provisions are designed to provide for continuing communication between the Parties to ensure the continued accuracy of the scope of the proposed allocation of regulatory responsibility. The Commission is hereby declaring effective an Amended Plan that, among other things, allocates regulatory responsibility to FINRA for the oversight and enforcement of all rules of the Bats Exchanges that are substantially similar to the rules of FINRA for Common Members of FINRA and the Bats Exchanges. Therefore, modifications to the Certification need not be filed with the Commission as an amendment to the Amended Plan, provided that the Parties are only adding to, deleting from, or confirming changes to the rules of the Bats Exchanges in the Certification in conformance with the definition of Common Rules provided in the 14 See 15 See Jkt 250001 PO 00000 paragraph 2 of the Amended Plan. paragraph 3 of the Amended Plan. Frm 00088 Fmt 4703 Sfmt 4703 71015 Amended Plan. However, should the Parties decide to add a rule of a Bats Exchange to the Certification that is not substantially similar to a FINRA rule; delete a rule of a Bats Exchange from the Certification that is substantially similar to a FINRA rule; or leave on the Certification a Bats Exchange rule that is no longer substantially similar to a FINRA rule, then such a change would constitute an amendment to the Amended Plan, which must be filed with the Commission pursuant to Rule 17d–2 under the Act.16 Under paragraph (c) of Rule 17d–2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. The primary purposes of the amendment are to allocate surveillance, investigation, and enforcement responsibilities for Rule 14e–4 under the Act, and to update the names of the Bats Exchanges. By declaring it effective today, the Amended Plan can become effective and be implemented without undue delay. The Commission notes that the prior version of this plan immediately prior to this proposed amendment was published for comment and the Commission did not receive any comments thereon.17 Furthermore, the Commission does not believe that the amendment to the plan raises any new regulatory issues that the Commission has not previously considered.18 VI. Conclusion This Order gives effect to the Plan filed with the Commission in File No. 4–705. The Parties shall notify all members affected by the Plan of their rights and obligations under the Plan. It is therefore ordered, pursuant to Section 17(d) of the Act, that the Plan in File No. 4–705, between FINRA, BZX, BYX, EDGA, and EDGX, filed pursuant to Rule 17d–2 under the Act, is approved and declared effective. It is further ordered that BZX, BYX, EDGA, and EDGX are relieved of those 16 The Commission also notes that the addition to or deletion from the Certification of any federal securities laws, rules, and regulations for which FINRA would bear responsibility under the Amended Plan for examining, and enforcing compliance by, Common Members, also would constitute an amendment to the Amended Plan. 17 See Securities Exchange Act Release No. 79057 (October 6, 2016), 81 FR 70728 (October 13, 2016). 18 See, e.g., Securities Exchange Act Release No. 85189 (February 25, 2019), 84 FR 7153 (March 1, 2019) (order approving an amendment to add Rule 14e–4 to a plan between FINRA and Miami International Securities Exchange, LLC, MIAX PEARL, LLC, and MIAX Emerald, LLC). E:\FR\FM\26DEN1.SGM 26DEN1 71016 Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices responsibilities allocated to FINRA under the Plan in File No. 4–705. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2019–27696 Filed 12–23–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87796; File No. SR– NYSEArca–2019–89] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.60–O (Price Protection—Orders) December 18, 2019. 19(b)(1) 1 Pursuant to Section of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on December 5, 2019, NYSE Arca, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. khammond on DSKJM1Z7X2PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.60–O (Price Protection—Orders) to modify and enhance certain of its current price protection mechanisms. The proposed rule change is available on the Exchange’s website at www.nyse.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 self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, 19 17 CFR 200.30–3(a)(34). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 16:53 Dec 23, 2019 Jkt 250001 set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend paragraph (c) of Rule 6.60–O to modify and enhance its Price Reasonability Checks for options orders to sell puts or calls (the ‘‘Sell Check’’). As proposed, the Exchange would enhance the Sell Checks applied when the National Best Bid (‘‘NBB’’) is below a specified price and would exclude from the Sell Check any Intermarket Sweep Orders, both of which changes would allow for a more finely calibrated Sell Check. Price Reasonability Checks The Exchange has in place various price check mechanisms that are designed to prevent incoming orders from automatically executing at potentially erroneous prices.4 In particular, the Exchange has Price Reasonability Checks (‘‘Price Checks’’) for Limit Orders based on the principle that an option order is in error and should be rejected (or canceled) when the same result can be achieved on the market for the underlying equity security at a lesser cost.5 The Price Checks are based on the consolidated last sale price of the security underlying the option, once the security opens for trading (or reopens following a Trading Halt).6 The Exchange offers Price Checks for buy and sell options orders.7 The proposed change relates only to the Price Checks for sell options orders (i.e., the Sell Check).8 4 See, e.g., Rules 6.60–O(a) (trading collars) and (b) (limit order price filter), 6.61–O(a) (price protection for Market Maker quotes). 5 A Limit Order is an order to buy or sell a stated number of option contracts at a specified price, or better. See Rule 6.62–O(b). 6 See Rule 6.60–O(c). 7 The Price Checks—or arbitrage checks—for buy orders operate as follows: Unless otherwise provided in Commentary .01 of the Rule, the Exchange rejects or cancels any limit order to buy a put option if the price of the order is equal to or greater than the strike price of the option; and, the Exchange rejects or cancels any limit order to buy a call option if the price of the order is equal to or greater than the consolidated last sale price of the underlying security, plus a dollar amount to be determined by the Exchange and announced by Trader Update. See Rule 6.60–O(c)(1)(A), (B). 8 The proposed rule change would not impact the securities that are excluded from the Price Checks per Commentary .01 to the Rule, which currently are options series for which the underlying security has a non-standard cash or stock deliverable as part of a corporate action; options series for which the underlying security is identified as OTC; option series on an index; and ByRDs. See Commentary .01 to Rule 6.60–O. PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 Current Rule 6.60–O(c)(2) sets forth the current Sell Check, which is designed to protect sellers of calls and puts from presumptively erroneous executions based on the ‘‘Intrinsic Value’’ of an option. The Intrinsic Value of an option series is measured as the difference between the strike price and the consolidated last sale price. A sell order in a call series creates an obligation to sell the underlying security at the strike price and a sell order in a put series creates an obligation to buy the underlying security at the strike price. Thus, the Intrinsic Value for a call option is equal to the consolidated last sale price of the underlying security minus the strike price; whereas the Intrinsic Value for a put option is equal to the strike price minus the consolidated last sale price of the underlying security.9 Under the current Rule, the Exchange rejects or cancels options Limit Orders to sell a call or to sell a put if the price of the order is equal to or lower than its Intrinsic Value, minus a threshold percentage (‘‘percentage threshold’’), which is determined by the Exchange and announced by Trader Update.10 The percentage threshold buffer is an important aspect of the Sell Check because there may be situations in which market participants willingly opt to execute certain trading strategies even if such trade or trades occur for a price less than the Intrinsic Value of the options series.11 Absent this percentage threshold buffer, application of the Sell Check could result in the rejection or cancelation of certain options sell orders where market participants seek an execution. Proposed Low Price Intrinsic Value Percentage Threshold The Exchange proposes to modify the Sell Check to introduce a separate percentage threshold to better account for sell orders in options series that are trading at relatively low prices so as to avoid such orders potentially being (incorrectly) rejected or canceled. 9 See Rule 6.60–O(c)(2). Rule 6.60–O(c)(2)(A). The percentage threshold for sell orders is currently set to twentyfive percent (25%). The Exchange refers to this existing percentage threshold as the ‘‘Regular Intrinsic Value percentage threshold’’ to differentiate from the proposed threshold. See proposed Rule 6.60–O(c)(2)(A). 11 For example, if the market participant is looking to close out a position, it may be financially beneficial to pay a small premium and close out the position rather than carry such position to expiration and take delivery. See, e.g., Securities Exchange Act Release No. 85922 (May 23, 2019), 84 FR 25093, 25094, fn10 (May 30, 2019) (SR– NYSEArca–2019–35) (immediately effective filing implementing Price Checks, including the Sell Check). 10 See E:\FR\FM\26DEN1.SGM 26DEN1

Agencies

[Federal Register Volume 84, Number 247 (Thursday, December 26, 2019)]
[Notices]
[Pages 71009-71016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27696]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87788; File No. 4-705]


Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing and Order Approving and Declaring 
Effective an Amended Proposed Plan for the Allocation of Regulatory 
Responsibilities Between the Financial Industry Regulatory Authority, 
Inc., Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Cboe EDGA 
Exchange, Inc., and Cboe EDGX Exchange, Inc.

December 18, 2019.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Section 17(d) of the 
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring 
effective an amendment to the plan for allocating regulatory 
responsibility (``Plan'') filed on December 3, 2019, pursuant to Rule 
17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority, 
Inc. (``FINRA''), Cboe BZX Exchange, Inc. (``BZX''), Cboe BYX Exchange, 
Inc. (``BYX''), Cboe EDGA Exchange, Inc. (``EDGA''), and Cboe EDGX 
Exchange, Inc. (``EDGX'') (each, a ``Participating Organization,'' or 
``Bats Exchange,'' and together, the ``Participating Organizations,'' 
``the Bats Exchanges,'' or the ``Parties''). The Plan replaces and 
supersedes the agreement between FINRA and the Bats Exchanges dated 
September 30, 2016, entitled ``Agreement between Financial Industry 
Regulatory Authority, Inc., Bats BZX Exchange, Inc., Bats BYS Exchange, 
Inc., Bats EDGA Exchange, Inc., and Bats EDGX Exchange, Inc. Pursuant 
to Rule 17d-2 under the Securities Exchange Act of 1934.'' \3\
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
    \3\ See Securities Exchange Act Release No. 79057 (October 6, 
2016), 81 FR 70728 (October 13, 2016).
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I. Introduction

    Section 19(g)(1) of the Securities Exchange Act of 1934 
(``Act''),\4\ among other things, requires every self-regulatory 
organization (``SRO'') registered as either a national securities 
exchange or national securities association to examine for, and enforce 
compliance by, its members and persons associated with its members with 
the Act, the rules and regulations thereunder, and the SRO's own rules, 
unless the SRO is relieved of this responsibility pursuant to Section 
17(d) or Section 19(g)(2) of the Act.\5\ Without this relief, the 
statutory obligation of each individual SRO could result in a pattern 
of multiple examinations of broker-dealers that maintain memberships in 
more than one SRO (``common members''). Such regulatory duplication 
would add unnecessary expenses for common members and their SROs.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(g)(1).
    \5\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
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    Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\7\ With 
respect to a common member, Section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules, and regulations, or to perform other 
specified regulatory functions.
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    \6\ 15 U.S.C. 78q(d)(1).
    \7\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------

    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the 
Commission to name a single SRO as the designated examining authority 
(``DEA'') to examine common members for compliance with the financial 
responsibility requirements imposed by the Act, or by Commission or SRO 
rules.\9\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the federal securities laws governing matters 
other than financial responsibility, including sales practices and 
trading activities and practices.
---------------------------------------------------------------------------

    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \9\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
---------------------------------------------------------------------------

    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits 
SROs to propose joint plans for the allocation of regulatory 
responsibilities with respect to their common members. Under paragraph 
(c) of Rule 17d-2, the Commission may declare such a plan effective if, 
after providing for appropriate notice and comment, it determines that 
the plan is necessary or appropriate in the public interest and for the 
protection of investors; to foster cooperation and coordination among 
the SROs; to remove impediments to, and foster the development of, a 
national market system and a national clearance and settlement system; 
and is in conformity with the factors set forth in Section 17(d) of the 
Act. Commission approval of a plan filed pursuant to Rule 17d-2 
relieves an SRO of those regulatory responsibilities allocated by the 
plan to another SRO.
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------

II. The Plan

    On October 6, 2016, the Commission declared effective the Plan 
entered into between FINRA and the Bats Exchanges for allocating 
regulatory responsibility pursuant to Rule 17d-2.\11\ The Plan is 
intended to reduce regulatory duplication for firms that are common 
members of FINRA and at least one of the Bats Exchanges by allocating 
regulatory responsibility with respect to certain applicable laws, 
rules, and regulations that are common among them. Included in the Plan 
is an exhibit that lists every rule of each Bats Exchange for which 
FINRA bears responsibility under the Plan for overseeing and enforcing 
with respect to

[[Page 71010]]

members of one or more of the Bats Exchanges that are also members of 
FINRA and the associated persons therewith.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 79057 (October 6, 
2016), 81 FR 70728 (October 13, 2016).
---------------------------------------------------------------------------

III. Proposed Amendment to the Plan

    On December 3, 2019, the parties submitted a proposed amendment to 
the Plan (``Amended Plan''). The primary purposes of the Amended Plan 
are to (1) allocate surveillance, investigation, and enforcement 
responsibilities for Rule 14e-4 under the Act and (2) amend the Plan to 
reflect the name changes of the Bats Exchanges. The text of the 
proposed Amended Plan is as follows (additions are italicized; 
deletions are [bracketed]):

Agreement Between Financial Industry Regulatory Authority, Inc., 
[BATS]CBOE BZX Exchange, Inc., [BATS]CBOE BYX EXCHANGE, INC., 
[BATS]CBOE EDGA Exchange, Inc., and [BATS]CBOE EDGX Exchange, Inc. 
Pursant to Rule 17d-2 Under the Securities Exchange Act of 1934

    This Agreement, by and between the Financial Industry Regulatory 
Authority, Inc. (``FINRA''), [Bats]Cboe BZX Exchange, Inc. (``BZX''), 
[Bats]Cboe BYX Exchange, Inc. (``BYX''), [Bats]Cboe EDGA Exchange, Inc. 
(``EDGA''), and [Bats]Cboe EDGX Exchange, Inc. (``EDGX'') 
(collectively, the ``Bats Exchanges'' and each a ``Bats Exchange'') is 
made this [30th] 2nd day of [September]December, 201[6]9 (the 
``Agreement''), pursuant to Section 17(d) of the Securities Exchange 
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder, which 
permits agreements between self-regulatory organizations to allocate 
regulatory responsibility to eliminate regulatory duplication. FINRA 
and the Bats Exchanges may be referred to individually as a ``party'' 
and together as the ``parties.'' Upon approval by the Securities and 
Exchange Commission (``Commission'' or ``SEC'') this Agreement shall 
replace and supersede the agreement among FINRA and the Bats Exchanges 
dated September 30, 2016[between FINRA and BZX dated August 25, 2008; 
the agreement between FINRA and BYX dated September 3, 2010; the 
agreement between FINRA and EDGA dated March 31, 2010; and the 
agreement between FINRA and EDGX dated March 31, 2010].
    Whereas, FINRA and the Bats Exchanges desire to reduce duplication 
in the examination and surveillance of their Common Members (as defined 
herein) and in the filing and processing of certain registration and 
membership records; and
    Whereas, FINRA and the Bats Exchanges desire to execute an 
agreement covering such subjects pursuant to the provisions of Rule 
17d-2 under the Exchange Act and to file such agreement with the 
Commission for its approval.
    Now, therefore, in consideration of the mutual covenants contained 
hereinafter, FINRA and each Bats Exchange hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement or the 
context otherwise requires, the terms used in this Agreement shall have 
the same meaning as they have under the Exchange Act and the rules and 
regulations thereunder. As used in this Agreement, the following terms 
shall have the following meanings:
    (a) ``Bats Exchanges Rules'' or ``FINRA Rules'' shall mean: (i) The 
rules of each Bats Exchange, or (ii) the rules of FINRA, respectively, 
as the rules of an exchange or association are defined in Exchange Act 
Section 3(a)(27).
    (b) ``Common Rules'' shall mean the rules of each Bats Exchange 
that are substantially similar to the applicable FINRA Rules and 
certain provisions of the Exchange Act and SEC rules set forth on 
Exhibit 1 in that examination or surveillance for compliance with such 
provisions and rules would not require FINRA to develop one or more new 
examination or surveillance standards, modules, procedures, or criteria 
in order to analyze the application of the provision or rule, or a 
Common Member's activity, conduct, or output in relation to such 
provision or rule; provided, however, Common Rules shall not include 
the application of the SEC, each Bats Exchange or FINRA rules as they 
pertain to violations of insider trading activities, which is covered 
by a separate 17d-2 Agreement by and among [BATS Exchange, Inc., BATS-Y 
Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago 
Stock Exchange, Inc., EDGA Exchange Inc., EDGX Exchange Inc., Financial 
Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX 
PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., 
New York Stock Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc. 
effective December 16, 2011] Cboe BZX Exchange, Inc., Cboe BYX 
Exchange, Inc., Chicago Stock Exchange, Inc., Cboe EDGA Exchange, Inc., 
Cboe EDGX Exchange, Inc., Financial Industry Regulatory Authority, 
Inc., Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, 
NYSE National, Inc., New York Stock Exchange LLC, NYSE American LLC, 
NYSE Arca Inc., Investors' Exchange LLC and Long-Term Stock Exchange, 
Inc. effective August 1, 2019, as may be amended from time to time. 
Common Rules shall not include any provisions regarding (i) notice, 
reporting or any other filings made directly to or from any Bats 
Exchange, (ii) incorporation by reference of any Bats Exchange Rules 
that are not Common Rules, (iii) exercise of discretion in a manner 
that differs from FINRA's exercise of discretion including, but not 
limited to exercise of exemptive authority, by any Bats Exchange, (iv) 
prior written approval of any Bats Exchange and (v) payment of fees or 
fines to any Bats Exchange.
    (c) ``Common Members'' shall mean those Bats Exchange members that 
are also members of FINRA and the associated persons therewith.
    (d) ``Effective Date'' shall have the meaning set forth in 
paragraph 13.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with FINRA's Code of Procedure 
and other applicable FINRA procedural rules, to determine whether 
violations of Common Rules have occurred, and if such violations are 
deemed to have occurred, the imposition of appropriate sanctions as 
specified under FINRA's Code of Procedure and sanctions guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination 
responsibilities, surveillance responsibilities and Enforcement 
Responsibilities relating to compliance by the Common Members with the 
Common Rules and the provisions of the Exchange Act and the rules and 
regulations thereunder, and other applicable laws, rules and 
regulations, each as set forth on Exhibit 1 attached hereto.
    2. Regulatory Responsibilities. FINRA shall assume Regulatory 
Responsibilities for Common Members. Attached as Exhibit 1 to this 
Agreement and made part hereof, each Bats Exchange furnished FINRA with 
a current list of Common Rules and certified to FINRA that such rules 
that are Bats Exchanges Rules are substantially similar to the 
corresponding FINRA Rules (the ``Certification''). FINRA hereby agrees 
that the rules listed in the Certification are Common Rules as defined 
in this Agreement. Each year following the Effective Date of this 
Agreement, or more frequently if required by changes in either the 
rules of any Bats Exchange or FINRA, the Bats Exchanges shall submit an 
updated list of Common Rules to FINRA for review which shall add Bats 
Exchanges Rules not included in the current list of Common Rules that 
qualify as Common Rules as defined in this Agreement; delete Bats 
Exchanges Rules included in the current list of

[[Page 71011]]

Common Rules that no longer qualify as Common Rules as defined in this 
Agreement; and confirm that the remaining rules on the current list of 
Common Rules continue to be Bats Exchanges Rules that qualify as Common 
Rules as defined in this Agreement. Within 30 days of receipt of such 
updated list, FINRA shall confirm in writing whether the rules listed 
in any updated list are Common Rules as defined in this Agreement. 
Notwithstanding anything herein to the contrary, it is explicitly 
understood that the term ``Regulatory Responsibilities'' does not 
include, and each Bats Exchange shall retain full responsibility for 
(unless otherwise addressed by separate agreement or rule) 
(collectively, the ``Retained Responsibilities'') the following:
    (a) Surveillance, examination, investigation and enforcement with 
respect to trading activities or practices involving each Bats 
Exchange's own marketplace for rules that are not Common Rules;
    (b) registration pursuant to its applicable rules of associated 
persons (i.e., registration rules that are not Common Rules);
    (c) discharge of its duties and obligations as a Designated 
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
    (d) any Bats Exchanges Rules that are not Common Rules, except for 
any Bats Exchanges Rules for any broker-dealer subsidiary of [Bats 
Global Markets]Cboe Trading, Inc., as provided in paragraph 6.
    3. Common Members. Prior to the Effective Date, each Bats Exchange 
shall furnish FINRA with a current list of Common Members, which shall 
be updated no less frequently than once each quarter.
    4. No Charge. There shall be no charge to the Bats Exchanges by 
FINRA for performing the Regulatory Responsibilities under this 
Agreement except as otherwise agreed by the parties, either herein or 
in a separate agreement.
    5. Reassignment of Regulatory Responsibilities. Notwithstanding any 
provision hereof, this Agreement shall be subject to any statute, or 
any rule or order of the Commission, or industry agreement, 
restructuring the regulatory framework of the securities industry or 
reassigning Regulatory Responsibilities between self-regulatory 
organizations. To the extent such action is inconsistent with this 
Agreement, such action shall supersede the provisions hereof to the 
extent necessary for them to be properly effectuated and the provisions 
hereof in that respect shall be null and void.
    6. Notification of Violations. In the event that FINRA becomes 
aware of apparent violations of any Bats Exchanges Rules, which are not 
listed as Common Rules, discovered pursuant to the performance of the 
Regulatory Responsibilities assumed hereunder, FINRA shall notify the 
Bats Exchanges of those apparent violations for such response as the 
Bats Exchanges deem appropriate. In the event that any of the Bats 
Exchanges becomes aware of apparent violations of any Common Rules, 
discovered pursuant to the performance of the Retained 
Responsibilities, the applicable Bats Exchange shall notify FINRA of 
those apparent violations and such matters shall be handled by FINRA as 
provided in this Agreement. With respect to apparent violations of any 
Bats Exchanges Rules by any broker-dealer subsidiary of Bats Global 
Markets, Inc., FINRA shall not make referrals to the Bats Exchanges 
pursuant to this paragraph 6. Such apparent violations shall be 
processed by, and enforcement proceedings in respect thereto will be 
conducted by, FINRA as provided in this Agreement. Each party agrees to 
make available promptly all files, records and witnesses necessary to 
assist the other in its investigation or proceedings. Apparent 
violations of Common Rules, FINRA Rules, federal securities laws, and 
rules and regulations thereunder, shall be processed by, and 
enforcement proceedings in respect thereto shall be conducted by FINRA 
as provided hereinbefore; provided, however, that in the event a Common 
Member is the subject of an investigation relating to a transaction on 
a Bats Exchange, the Bats Exchange may in its discretion assume 
concurrent jurisdiction and responsibility.
    7. Continued Assistance.
    (a) FINRA shall make available to the Bats Exchanges all 
information obtained by FINRA in the performance by it of the 
Regulatory Responsibilities hereunder with respect to the Common 
Members subject to this Agreement. In particular, and not in limitation 
of the foregoing, FINRA shall furnish the Bats Exchanges any 
information it obtains about Common Members which reflects adversely on 
their financial condition. The Bats Exchanges shall make available to 
FINRA any information coming to its attention that reflects adversely 
on the financial condition of Common Members or indicates possible 
violations of applicable laws, rules or regulations by such firms.
    (b) The parties agree that documents or information shared shall be 
held in confidence, and used only for the purposes of carrying out 
their respective regulatory obligations. The parties shall not assert 
regulatory or other privileges as against another with respect to 
documents or information that is required to be shared pursuant to this 
Agreement.
    (c) The sharing of documents or information between the parties 
pursuant to this Agreement shall not be deemed a waiver as against 
third parties of regulatory or other privileges relating to the 
discovery of documents or information.
    8. Statutory Disqualifications. When FINRA becomes aware of a 
statutory disqualification as defined in the Exchange Act with respect 
to a Common Member, FINRA shall determine pursuant to Sections 15A(g) 
and/or Section 6(c) of the Exchange Act the acceptability or continued 
applicability of the person to whom such disqualification applies and 
keep the Bats Exchanges advised of its actions in this regard for such 
subsequent proceedings as the Bats Exchanges may initiate.
    9. Customer Complaints. The Bats Exchanges shall forward to FINRA 
copies of all customer complaints involving Common Members received by 
the Bats Exchanges relating to FINRA's Regulatory Responsibilities 
under this Agreement. It shall be FINRA's responsibility to review and 
take appropriate action in respect to such complaints.
    10. Advertising. FINRA shall assume responsibility to review the 
advertising of Common Members subject to the Agreement, provided that 
such material is filed with FINRA in accordance with FINRA's filing 
procedures and is accompanied with any applicable filing fees set forth 
in FINRA Rules.
    11. No Restrictions on Regulatory Action. Nothing contained in this 
Agreement shall restrict or in any way encumber the right of any party 
to conduct its own independent or concurrent investigation, examination 
or enforcement proceeding of or against Common Members, as any party, 
in its sole discretion, shall deem appropriate or necessary.
    12. Termination. This Agreement may be terminated by the Bats 
Exchanges or FINRA at any time upon the approval of the Commission 
after one (1) year's written notice to the other party, except as 
provided in paragraph 4.
    13. Effective Date. This Agreement shall be effective upon approval 
of the Commission.
    14. Arbitration. In the event of a dispute among the parties as to 
the operation of this Agreement, the Bats Exchanges and FINRA hereby 
agree that

[[Page 71012]]

any such dispute shall be settled by arbitration in Washington, DC in 
accordance with the rules of the American Arbitration Association then 
in effect, or such other procedures as the parties may mutually agree 
upon. Judgment on the award rendered by the arbitrator(s) may be 
entered in any court having jurisdiction. Each party acknowledges that 
the timely and complete performance of its obligations pursuant to this 
Agreement is critical to the business and operations of the other 
parties. In the event of a dispute between the parties, the parties 
shall continue to perform their respective obligations under this 
Agreement in good faith during the resolution of such dispute unless 
and until this Agreement is terminated in accordance with its 
provisions. Nothing in this Section 14 shall interfere with a party's 
right to terminate this Agreement as set forth herein.
    15. Notification of Members. The Bats Exchanges and FINRA shall 
notify Common Members of this Agreement after the Effective Date by 
means of a uniform joint notice.
    16. Amendment. This Agreement may be amended in writing duly 
approved by each party. All such amendments must be filed with and 
approved by the Commission before they become effective.
    17. Limitation of Liability. Neither FINRA nor any Bats Exchange 
nor any of their respective directors, governors, officers or employees 
shall be liable to the other parties to this Agreement for any 
liability, loss or damage resulting from or claimed to have resulted 
from any delays, inaccuracies, errors or omissions with respect to the 
provision of Regulatory Responsibilities as provided hereby or for the 
failure to provide any such responsibility, except with respect to such 
liability, loss or damages as shall have been suffered by one or the 
other of FINRA or any Bats Exchange and caused by the willful 
misconduct of the other party or their respective directors, governors, 
officers or employees. No warranties, express or implied, are made by 
FINRA or any Bats Exchange with respect to any of the responsibilities 
to be performed by each of them hereunder.
    18. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) 
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and the 
Bats Exchanges join in requesting the Commission, upon its approval of 
this Agreement or any part thereof, to relieve the Bats Exchanges of 
any and all responsibilities with respect to matters allocated to FINRA 
pursuant to this Agreement; provided, however, that this Agreement 
shall not be effective until the Effective Date.
    19. Severability. Any term or provision of this Agreement that is 
invalid or unenforceable in any jurisdiction shall, as to such 
jurisdiction, be ineffective to the extent of such invalidity or 
unenforceability without rendering invalid or unenforceable the 
remaining terms and provisions of this Agreement or affecting the 
validity or enforceability of any of the terms or provisions of this 
Agreement in any other jurisdiction.
    20. Counterparts. This Agreement may be executed in one or more 
counterparts, each of which shall be deemed an original, and such 
counterparts together shall constitute one and the same instrument.

Exhibit 1

Cboe [Bats] BZX Exchange, Inc. (``BZX''), Cboe [Bats] BYX Exchange, 
Inc. (``BYX''), Cboe [Bats] EDGA Exchange, Inc. (``EDGA''), and Cboe 
[Bats] EDGX Exchange, Inc. (``EDGX'') Rules Certification for 17d-2 
Agreement with FINRA

    Each Bats Exchange hereby certifies that the requirements contained 
in the rules listed below are identical to, or substantially similar 
to, the comparable FINRA Rule, NASD Rule, Exchange Act provision or SEC 
Rule identified (``Common Rules'').
    # Common Rules shall not include provisions regarding (i) notice, 
reporting or any other filings made directly to or from any Bats 
Exchange, (ii) incorporations by reference of any Bats Exchange Rules 
that are not Common Rules (iii) exercise of discretion in a manner that 
differs from FINRA's exercise of discretion including, but not limited 
to exercise of exemptive authority, by any Bats Exchanges, (iv) prior 
written approval of any Bats Exchanges, and (v) payment of fees or 
fines to any Bats Exchange.

----------------------------------------------------------------------------------------------------------------
                                                                                          FINRA Rule, NASD Rule,
            BZX Rule                  BYX Rule          EDGA Rule          EDGX Rule      Exchange Act Provision
                                                                                                or SEC Rule
----------------------------------------------------------------------------------------------------------------
Rule 2.5 Restrictions,           Rule 2.5           Rule 2.5           Rule 2.5           FINRA Rule
 Interpretation and Policy .02    Restrictions,      Restrictions,      Restrictions,      12[5]40(a)(1)-(4)
 Continuing Education             Interpretation     Interpretation     Interpretation     Continuing Education
 Requirements .                  and Policy .02     and Policy .02     and Policy .02     Requirements \1\;
                                  Continuing         Continuing         Continuing         FINRA Rule 1010(a);
                                  Education          Education          Education          FINRA Bylaws Article
                                  Requirements .    Requirements .    Requirements .    V, Sec. 2.
Rule 2.5 Restrictions,           Rule 2.5           Rule 2.5           Rule 2.5           FINRA By-Laws of the
 Interpretation and Policy .04    Restrictions,      Restrictions,      Restrictions,      Corporation, Article
 Termination of Employment.       Interpretation     Interpretation     Interpretation     V, Section 3
                                  and Policy .04     and Policy .04     and Policy .04     Notification by
                                  Termination of     Termination of     Termination of     Member to the
                                  Employment.        Employment.        Employment.        Corporation and
                                                                                           Associated Person of
                                                                                           Termination;
                                                                                           Amendments to
                                                                                           Notification.
Rule 2.6(g) Application          Rule 2.6(g)        Rule 2.6(g)        Rule 2.6(g)        FINRA By-Laws of the
 Procedures for Membership or     Application        Application        Application        Corporation, Article
 to become an Associated Person   Procedures for     Procedures for     Procedures for     IV, Section 1(c)
 of a Member .                   Membership or to   Membership or to   Membership or to   Application for
                                  become an          become an          become an          Membership.
                                  Associated         Associated         Associated
                                  Person of a        Person of a        Person of a
                                  Member .          Member .          Member .
Rule 3.1 Business Conduct of     Rule 3.1 Business  Rule 3.1 Business  Rule 3.1 Business  FINRA Rule 2010
 Members *.                       Conduct of         Conduct of         Conduct of         Standards of
                                  Members *.         Members *.         Members *.         Commercial Honor and
                                                                                           Principles of Trade.*
Rule 3.2 Violations Prohibited   Rule 3.2           Rule 3.2           Rule 3.2           FINRA Rule 2010
 *.                               Violations         Violations         Violations         Standards of
                                  Prohibited *.      Prohibited *.      Prohibited *.      Commercial Honor and
                                                                                           Principles of Trade
                                                                                           and FINRA Rule 3110
                                                                                           Supervision.* \2\
Rule 3.3 Use of Fraudulent       Rule 3.3 Use of    Rule 3.3 Use of    Rule 3.3 Use of    FINRA Rule 2020 Use of
 Devices *.                       Fraudulent         Fraudulent         Fraudulent         Manipulative,
                                  Devices *.         Devices *.         Devices *.         Deceptive or Other
                                                                                           Fraudulent Devices.*
Rule 3.5 Communications with     Rule 3.5           Rule 3.5           Rule 3.5           FINRA Rule 2210
 the Public.                      Communications     Communications     Communications     Communications with
                                  with the Public.   with the Public.   with the Public.   the Public.
Rule 3.6 Fair Dealing with       Rule 3.6 Fair      Rule 3.6 Fair      Rule 3.6 Fair      FINRA Rule 2020 Use of
 Customers.                       Dealing with       Dealing with       Dealing with       Manipulative,
                                  Customers.         Customers.         Customers.         Deceptive or Other
                                                                                           Fraudulent Devices.*
                                                                                           \3\
Rule 3.7(a) Recommendations to   Rule 3.7(a)        Rule 3.7(a)        Rule 3.7(a)        FINRA Rule 2111(a)
 Customers.                       Recommendations    Recommendations    Recommendations    Suitability.
                                  to Customers.      to Customers.      to Customers.
Rule 3.8(a) The Prompt Receipt   Rule 3.8(a) The    Rule 3.8(a) The    Rule 3.8(a) The    FINRA Rule 11860 COD
 and Delivery of Securities.      Prompt Receipt     Prompt Receipt     Prompt Receipt     Orders.
                                  and Delivery of    and Delivery of    and Delivery of
                                  Securities.        Securities.        Securities.

[[Page 71013]]

 
Rule 3.8(b) The Prompt Receipt   Rule 3.8(b) The    Rule 3.8(b) The    Rule 3.8(b) The    SEC Regulation SHO.
 and Delivery of Securities.      Prompt Receipt     Prompt Receipt     Prompt Receipt
                                  and Delivery of    and Delivery of    and Delivery of
                                  Securities.        Securities.        Securities.
Rule 3.9 Charges for Services    Rule 3.9 Charges   Rule 3.9 Charges   Rule 3.9 Charges   FINRA Rule 2122
 Performed.                       for Services       for Services       for Services       Charges for Services
                                  Performed.         Performed.         Performed.         Performed.
Rule 3.10 Use of Information...  Rule 3.10 Use of   Rule 3.10 Use of   Rule 3.10 Use of   FINRA Rule 2060 Use of
                                  Information.       Information.       Information.       Information Obtained
                                                                                           in Fiduciary
                                                                                           Capacity.
Rule 3.11 Publication of         Rule 3.11          Rule 3.11          Rule 3.11          FINRA Rule 5210
 Transactions and Quotations .   Publication of     Publication of     Publication of     Publication of
                                  Transactions and   Transactions and   Transactions and   Transactions and
                                  Quotations .      Quotations .      Quotations .      Quotations.
Rule 3.12 Offers at Stated       Rule 3.12 Offers   Rule 3.12 Offers   Rule 3.12 Offers   FINRA Rule 5220 Offers
 Prices.                          at Stated Prices.  at Stated Prices.  at Stated Prices.  at Stated Prices.
Rule 3.13 Payment Designed to    Rule 3.13 Payment  Rule 3.13          Rule 3.13          FINRA Rule 5230
 Influence Market Prices, Other   Designed to        Payments           Payments           Payments Involving
 than Paid Advertising.           Influence Market   Involving          Involving          Publications that
                                  Prices, Other      Publications       Publications       Influence the Market
                                  than Paid          that Influence     that Influence     Price of a Security.
                                  Advertising.       the Market Price   the Market Price
                                                     of a Security.     of a Security.
Rule 3.14 Disclosure on          Rule 3.14          Rule 3.14          Rule 3.14          FINRA Rule 2232(a)
 Confirmations.                   Disclosure on      Disclosure on      Disclosure on      Customer
                                  Confirmations.     Confirmations.     Confirmations.     Confirmations and SEC
                                                                                           Rule 10b-10
                                                                                           Confirmation of
                                                                                           Transactions.
Rule 3.15 Disclosure of Control  Rule 3.15          Rule 3.15          Rule 3.15          FINRA Rule 2262
                                  Disclosure of      Disclosure of      Disclosure of      Disclosure of Control
                                  Control.           Control.           Control.           Relationship With
                                                                                           Issuer.
Rule 3.16 Discretionary          Rule 3.16          Rule 3.16          Rule 3.16          NASD Rule 2510
 Accounts.                        Discretionary      Discretionary      Discretionary      Discretionary
                                  Accounts.          Accounts.          Accounts.          Accounts.\4\
Rule 3.17 Customer's Securities  Rule 3.17          Rule 3.17          Rule 3.17          FINRA Rule 2150(a)
 or Funds.                        Customer's         Customer's         Customer's         Improper Use of
                                  Securities or      Securities or      Securities or      Customers' Securities
                                  Funds.             Funds.             Funds.             or Funds; Prohibition
                                                                                           Against Guarantees
                                                                                           and Sharing in
                                                                                           Accounts--Improper
                                                                                           Use.
Rule 3.18 Prohibition Against    Rule 3.18          Rule 3.18          Rule 3.18          FINRA Rule 2150(b)
 Guarantees.                      Prohibition        Prohibition        Prohibition        Improper Use of
                                  Against            Against            Against            Customers' Securities
                                  Guarantees.        Guarantees.        Guarantees.        or Funds; Prohibition
                                                                                           Against Guarantees
                                                                                           and Sharing in
                                                                                           Accounts--Prohibition
                                                                                           Against Guarantees.
Rule 3.19 Sharing in Accounts;   Rule 3.19 Sharing  Rule 3.19 Sharing  Rule 3.19 Sharing  FINRA Rule 2150(c)(1)
 Extent Permissible.              in Accounts;       in Accounts;       in Accounts;       Improper Use of
                                  Extent             Extent             Extent             Customers' Securities
                                  Permissible.       Permissible.       Permissible.       or Funds; Prohibition
                                                                                           Against Guarantees
                                                                                           and Sharing in
                                                                                           Accounts--Sharing in
                                                                                           Accounts; Extent
                                                                                           Permissible.
Rule 3.21[(a)-(f)] Customer      Rule 3.21[(a)-     Rule 3.21[(a)-     Rule 3.21[(a)-     FINRA Rule 2265
 Disclosures.                     (f)] Customer      (f)] Customer      (f)] Customer      Extended Hours
                                  Disclosures.       Disclosures.       Disclosures.       Trading Risk
                                                                                           Disclosure.
Rule 3.22 Influencing or         Rule 3.22          Rule 3.20          Rule 3.20          FINRA Rule 3220
 Rewarding Employees of Others.   Influencing or     Influencing or     Influencing or     Influencing or
                                  Rewarding          Rewarding          Rewarding          Rewarding Employees
                                  Employees of       Employees of       Employees of       of Others.
                                  Others.            Others.            Others.
Rule 3.23 Telemarketing and      Rule 3.23          Rule 3.26          Rule 3.26          FINRA Rule 3230
 Interpretations and Policies     Telemarketing      Telemarketing      Telemarketing      Telemarketing.
 .01.                             and                and                and
                                  Interpretations    Interpretations    Interpretations
                                  and Policies .01.  and Policies .01.  and Policies .01.
Rule 4.1 Requirements..........  Rule 4.1           Rule 4.1           Rule 4.1           Section 17 of the
                                  Requirements.      Requirements.      Requirements.      Exchange Act and the
                                                                                           rules thereunder *
                                                                                           \5\, and FINRA Rule
                                                                                           4511(a) and (c)
                                                                                           General Requirements.
Rule 4.3 Record of Written       Rule 4.3 Record    Rule 4.3 Record    Rule 4.3 Record    FINRA Rule 4513
 Complaints.                      of Written         of Written         of Written         Records of Written
                                  Complaints.        Complaints.        Complaints.        Customer Complaints.
Rule 5.1 Written Procedures....  Rule 5.1 Written   Rule 5.1 Written   Rule 5.1 Written   FINRA Rule 3110(b)(1)
                                  Procedures.        Procedures.        Procedures.        Supervision-Written
                                                                                           Procedures.*
Rule 5.2 Responsibility of       Rule 5.2           Rule 5.2           Rule 5.2           FINRA Rule 3110
 Members.                         Responsibility     Responsibility     Responsibility     (a)(4), (b)(4) and
                                  of Members.        of Members.        of Members.        (b)(7) Supervision--
                                                                                           Supervisory System/
                                                                                           Written Procedures--
                                                                                           Review of
                                                                                           Correspondence and
                                                                                           Internal
                                                                                           Communications.*
Rule 5.3 Records...............  Rule 5.3 Records.  Rule 5.3 Records.  Rule 5.3 Records.  FINRA Rule 3110
                                                                                           Supervision.*
Rule 5.4 Review of Activities..  Rule 5.4 Review    Rule 5.4 Review    Rule 5.4 Review    FINRA Rule 3110(c) and
                                  of Activities.     of Activities.     of Activities.     (d) Supervision--
                                                                                           Internal Inspections/
                                                                                           Transaction Review
                                                                                           and Investigation.*
Rule 5.6 Anti-Money Laundering   Rule 5.6 Anti-     Rule 5.6 Anti-     Rule 5.6 Anti-     FINRA Rule 3310 Anti-
 Compliance Program .            Money Laundering   Money Laundering   Money Laundering   Money Laundering
                                  Compliance         Compliance         Compliance         Compliance Program.
                                  Program .         Program .         Program .
Rule 9.3 Predispute Arbitration  Rule 9.3           Rule 9.3           Rule 9.3           FINRA Rule 2268
 Agreements.                      Predispute         Predispute         Predispute         Requirements When
                                  Arbitration        Arbitration        Arbitration        Using Predispute
                                  Agreements.        Agreements.        Agreements.        Arbitration
                                                                                           Agreements for
                                                                                           Customer Accounts.
Rule 11.18(e)(3) & (4) Trading   Rule 11.18(e)(3)   Rule 11.16(e)(3)   Rule 11.16(e)(3)   FINRA Rule 6190(a)[(1)
 Halts Due to Extraordinary       & (4) Trading      & (4) Trading      & (4) Trading      & (2)]& (b)
 Market Volatility.               Halts Due to       Halts Due to       Halts Due to       Compliance with
                                  Extraordinary      Extraordinary      Extraordinary      Regulation NMS Plan
                                  Market             Market             Market             to Address
                                  Volatility.        Volatility.        Volatility.        Extraordinary Market
                                                                                           Volatility.
Rule 11.19(a) Short Sales       Rule 11.19(a)      Rule 11.10(a)(5)   Rule 11.10(a)(5)   FINRA Rule 6182 Trade
 [caret][caret].                  Short Sales       Order Execution-   Order Execution-   Reporting of Short
                                  [caret][caret].    Short Sales       Short Sales       Sales.[caret][caret]
                                                     [caret][caret].    [caret][caret].
Rule 12.1 Market Manipulation    Rule 12.1 Market   Rule 12.1 Market   Rule 12.1 Market   FINRA Rule 6140(a)
 **.                              Manipulation **.   Manipulation **.   Manipulation **.   Other Trading
                                                                                           Practices.**
Rule 12.2 Fictitious             Rule 12.2          Rule 12.2          Rule 12.2          FINRA Rule 6140(b)
 Transactions **.                 Fictitious         Fictitious         Fictitious         Other Trading
                                  Transactions **.   Transactions **.   Transactions **.   Practices.**
Rule 12.3 Excessive Sales by a   Rule 12.3          Rule 12.3          Rule 12.3          FINRA Rule 6140(c)
 Member **.                       Excessive Sales    Excessive Sales    Excessive Sales    Other Trading
                                  by a Member **.    by a Member **.    by a Member **.    Practices.**
Rule 12.4 Manipulative           Rule 12.4          Rule 12.4          Rule 12.4          FINRA Rule 6140(d)
 Transactions **.                 Manipulative       Manipulative       Manipulative       Other Trading
                                  Transactions **.   Transactions **.   Transactions **.   Practices.**
Rule 12.5 Dissemination of       Rule 12.5          Rule 12.5          Rule 12.5          FINRA Rule 6140(e)
 False Information **.            Dissemination of   Dissemination of   Dissemination of   Other Trading
                                  False              False              False              Practices.**
                                  Information **.    Information **.    Information **.
Rule 12.6 Prohibition Against    Rule 12.6          Rule 12.6          Rule 12.6          FINRA Rule 5320
 Trading Ahead of Customer        Prohibition        Prohibition        Prohibition        Prohibition Against
 Orders [caret][caret].           Against Trading    Against Trading    Against Trading    Trading Ahead of
                                  Ahead of           Ahead of           Ahead of           Customer
                                  Customer Orders    Customer Orders    Customer Orders    Orders.[caret][caret]
                                  [caret][caret].    [caret][caret].    [caret][caret].

[[Page 71014]]

 
Rule 12.9 Trade Shredding......  Rule 12.9 Trade    Rule 12.9 Trade    Rule 12.9 Trade    FINRA Rule 5290 Order
                                  Shredding.         Shredding.         Shredding.         Entry and Execution
                                                                                           Practices.
Rule 12.11 Best Execution        Rule 12.11 Best    Rule 12.11 Best    Rule 12.11 Best    FINRA Rule 5310 Best
 [caret][caret].                  Execution          Execution          Execution          Execution and
                                  [caret][caret].    [caret][caret].    [caret][caret].    Interpositioning.[car
                                                                                           et][caret]
Rule 12.13 Trading Ahead of      Rule 12.13         Rule 12.13         Rule 12.13         FINRA Rule 5280
 Research Reports                 Trading Ahead of   Trading Ahead of   Trading Ahead of   Trading Ahead of
 [caret][caret].                  Research Reports   Research Reports   Research Reports   Research
                                  [caret][caret].    [caret][caret].    [caret][caret].    Reports.[caret][caret
                                                                                           ]
Rule 12.14(a) Front Running of   Rule 12.14(a)      Rule 12.14(a)      Rule 12.14(a)      FINRA Rule 5270 Front
 Block Transactions               Front Running of   Front Running of   Front Running of   Running of Block
 [caret][caret].                  Block              Block              Block              Transactions.[caret][
                                  Transactions       Transactions       Transactions       caret]
                                  [caret][caret].    [caret][caret].    [caret][caret].
Rule 13.2 Failure to Deliver     Rule 13.2 Failure  Rule 13.2 Short    Rule 13.2 Short    Regulation SHO Rules
 and Failure to Receive.          to Deliver and     Sale Borrowing     Sale Borrowing     200 and 203.
                                  Failure to         and Delivery       and Delivery
                                  Receive.           Requirements.      Requirements.
Rule 13.3(a), (b)(i), (d) and    Rule 13.3(a),      Rule 13.3(a),      Rule 13.3(a),      FINRA Rule 2251
 Interpretation and Policy .01    (b)(i), (d) and    (b)(i), (d) and    (b)(i), (d) and    Processing and
 Forwarding of Proxy and Other    Interpretation     Interpretation     Interpretation     Forwarding of Proxy
 Issuer-Related Materials;        and Policy .01     and Policy .01     and Policy .01     and Other Issuer-
 Proxy Voting.                    Forwarding of      Forwarding of      Forwarding of      Related Materials.
                                  Proxy and Other    Proxy and Other    Proxy and Other
                                  Issuer-Related     Issuer-Related     Issuer-Related
                                  Materials; Proxy   Materials.         Materials.
                                  Voting.
Rule 26.11 Restrictions on       .................  .................  Rule 26.11         FINRA Rule 4330
 Pledge and Lending of Public                                           Restrictions on    Customer Protection--
 Customers' Securities.                                                 Pledge and         Permissible Uses of
                                                                        Lending of         Customers'
                                                                        Public             Securities.
                                                                        Customers'
                                                                        Securities.
----------------------------------------------------------------------------------------------------------------
\1\ FINRA shall only have Regulatory Responsibilities to the extent that the allowance for additional time for a
  registered person to satisfy the regulatory element is consistently granted.
\2\ FINRA shall only have Regulatory Responsibilities regarding the first phrase of the Bats Exchanges rules
  regarding prohibitions from violating the Securities Exchange Act of 1934 and the rules and regulations
  thereunder; responsibility for the remainder of the rule shall remain with the Bats Exchanges.
\3\ FINRA shall not have Regulatory Responsibilities regarding .01 of each Bats Exchange Rule 3.6.
\4\ FINRA shall not have Regulatory Responsibilities for the Bats Exchanges' Rule to the extent the exception in
  NASD Rule 2510(d)(2) applies.
\5\ FINRA shall not have Regulatory Responsibilities regarding requirements to keep records ``in conformity with
  . . . Exchange Rules;'' responsibility for such requirement remains with the Bats Exchanges.

    In addition, the following provisions shall be part of this 17d-2 
Agreement:

Securities Exchange Act of 1934 (``SEA'')

    Section 15(g)

SEC Rules Under the SEA

SEC Rule 200 of Regulation SHO--Definition of ``Short Sale'' and 
Marking Requirements [caret][caret]
SEC Rule 201 of Regulation SHO--Circuit Breaker [caret][caret]
SEC Rule 203 of Regulation SHO--Borrowing and Delivery Requirements 
[caret][caret]
SEA Rule 204 of Regulation SHO--Close-Out Requirement [caret][caret]
SEC Rule 101 of Regulation M--Activities by Distribution Participants 
[caret][caret]
SEC Rule 102 of Regulation M--Activities by Issuers and Selling 
Security Holders During a Distribution [caret][caret]
SEC Rule 103 of Regulation M--Nasdaq Passive Market Making 
[caret][caret]
SEC Rule 104 of Regulation M--Stabilizing and Other Activities in 
Connection with an Offering [caret][caret]
SEC Rule 105 of Regulation M--Short Selling in Connection With a Public 
Offering [caret][caret]
SEC Rules 17a-3 / 17a-4--Records to be made by Certain Exchange 
Members, Brokers, and Dealers/Records to be Preserved by Certain 
Exchange Members, Brokers, and Dealers *
SEC Rule 14e-4--Prohibited Transactions in Connection with Partial 
Tender Offers \++\

    [# FINRA shall not have Regulatory Responsibilities regarding 
notification or reporting to the Bats Exchanges and to the extent 
any exercise of discretion is the same.]
    * FINRA shall not have any Regulatory Responsibilities for these 
rules as they pertain to violations of insider trading activities, 
which is covered by a separate 17d-2 Agreement by and among [BATS 
Exchange, Inc., BATS Y Exchange, Inc., Chicago Board Options 
Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange 
Inc., EDGX Exchange Inc., Financial Industry Regulatory Authority, 
Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock 
Market LLC, National Stock Exchange, Inc., New York Stock Exchange, 
LLC, NYSE Amex LLC, and NYSE Arca, Inc. effective December 16, 2011] 
Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock 
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., 
Financial Industry Regulatory Authority, Inc., Nasdaq BX, Inc., 
Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, NYSE National, Inc., 
New York Stock Exchange LLC, NYSE American LLC, NYSE Arca Inc., 
Investors' Exchange LLC and Long-Term Stock Exchange, Inc. effective 
August 1, 2019, as may be amended from time to time.
    ** FINRA shall not have Regulatory Responsibilities for these 
rules as they pertain to trading practices involving securities that 
do not meet the definition of NMS stock as defined in Rule 
600(b)(47) of Regulation NMS. As of the current date, Bats Exchanges 
do not trade any non-NMS stock.
    [caret][caret] FINRA shall perform the surveillance 
responsibilities for the double caret rules. These rules may be 
cited by FINRA in both the context of this Agreement and the 
Regulatory Services Agreement.
    ++ FINRA shall perform the surveillance responsibilities for SEC 
Rule 14e-4(a)(1)(ii)(D).

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number 4-705 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number 4-705. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed plan that are filed with the 
Commission,

[[Page 71015]]

and all written communications relating to the proposed plan between 
the Commission and any person, other than those that may be withheld 
from the public in accordance with the provisions of 5 U.S.C. 552, will 
be available for website viewing and printing in the Commission's 
Public Reference Room, 100 F Street NE, Washington, DC 20549, on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of the plan also will be available for inspection and copying at 
the principal offices of FINRA, BZX, BYX, EDGX, and EDGA. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number 4-705 and should be submitted on or before 
January 16, 2020.

V. Discussion

    The Commission finds that the proposed Amended Plan is consistent 
with the factors set forth in Section 17(d) of the Act \12\ and Rule 
17d-2(c) thereunder \13\ in that the proposed Amended Plan is necessary 
or appropriate in the public interest and for the protection of 
investors, fosters cooperation and coordination among SROs, and removes 
impediments to and fosters the development of the national market 
system. In particular, the Commission believes that the proposed 
Amended Plan should reduce unnecessary regulatory duplication by 
allocating to FINRA certain examination and enforcement 
responsibilities for Common Members that would otherwise be performed 
by FINRA and at least one of the Bats Exchanges. Accordingly, the 
proposed Amended Plan promotes efficiency by reducing costs to Common 
Members. Furthermore, because the Bats Exchanges and FINRA will 
coordinate their regulatory functions in accordance with the Amended 
Plan, the Amended Plan should promote investor protection.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q(d).
    \13\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------

    The Commission notes that, under the Amended Plan, the Bats 
Exchanges and FINRA have allocated regulatory responsibility for those 
rules of the Bats Exchanges, set forth in the Certification, that are 
substantially similar to the applicable FINRA rules in that examination 
for compliance with such provisions and rules would not require FINRA 
to develop one or more new examination standards, modules, procedures, 
or criteria in order to analyze the application of the rule, or a 
Common Member's activity, conduct, or output in relation to such rule. 
In addition, under the Amended Plan, FINRA would assume regulatory 
responsibility for certain provisions of the federal securities laws 
and the rules and regulations thereunder that are set forth in the 
Certification. The Common Rules covered by the Amended Plan are 
specifically listed in the Certification, as may be amended by the 
Parties from time to time.
    According to the Amended Plan, the Bats Exchanges will review the 
Certification, at least annually, or more frequently if required by 
changes in either the rules of any one of the Bats Exchanges or FINRA, 
and, if necessary, submit to FINRA an updated list of Common Rules to 
add rules of any Bats Exchange not included on the then-current list of 
Common Rules that are substantially similar to FINRA rules; delete 
rules of any Bats Exchange included in the then-current list of Common 
Rules that no longer qualify as common rules; and confirm that the 
remaining rules on the list of Common Rules continue to be rules of 
each Bats Exchange that qualify as common rules.\14\ FINRA will then 
confirm in writing whether the rules listed in any updated list are 
Common Rules as defined in the Amended Plan. Under the Amended Plan, 
each Bats Exchange will also provide FINRA with a current list of 
Common Members and shall update the list no less frequently than once 
each quarter.\15\ The Commission believes that these provisions are 
designed to provide for continuing communication between the Parties to 
ensure the continued accuracy of the scope of the proposed allocation 
of regulatory responsibility.
---------------------------------------------------------------------------

    \14\ See paragraph 2 of the Amended Plan.
    \15\ See paragraph 3 of the Amended Plan.
---------------------------------------------------------------------------

    The Commission is hereby declaring effective an Amended Plan that, 
among other things, allocates regulatory responsibility to FINRA for 
the oversight and enforcement of all rules of the Bats Exchanges that 
are substantially similar to the rules of FINRA for Common Members of 
FINRA and the Bats Exchanges. Therefore, modifications to the 
Certification need not be filed with the Commission as an amendment to 
the Amended Plan, provided that the Parties are only adding to, 
deleting from, or confirming changes to the rules of the Bats Exchanges 
in the Certification in conformance with the definition of Common Rules 
provided in the Amended Plan. However, should the Parties decide to add 
a rule of a Bats Exchange to the Certification that is not 
substantially similar to a FINRA rule; delete a rule of a Bats Exchange 
from the Certification that is substantially similar to a FINRA rule; 
or leave on the Certification a Bats Exchange rule that is no longer 
substantially similar to a FINRA rule, then such a change would 
constitute an amendment to the Amended Plan, which must be filed with 
the Commission pursuant to Rule 17d-2 under the Act.\16\
---------------------------------------------------------------------------

    \16\ The Commission also notes that the addition to or deletion 
from the Certification of any federal securities laws, rules, and 
regulations for which FINRA would bear responsibility under the 
Amended Plan for examining, and enforcing compliance by, Common 
Members, also would constitute an amendment to the Amended Plan.
---------------------------------------------------------------------------

    Under paragraph (c) of Rule 17d-2, the Commission may, after 
appropriate notice and comment, declare a plan, or any part of a plan, 
effective. In this instance, the Commission believes that appropriate 
notice and comment can take place after the proposed amendment is 
effective. The primary purposes of the amendment are to allocate 
surveillance, investigation, and enforcement responsibilities for Rule 
14e-4 under the Act, and to update the names of the Bats Exchanges. By 
declaring it effective today, the Amended Plan can become effective and 
be implemented without undue delay. The Commission notes that the prior 
version of this plan immediately prior to this proposed amendment was 
published for comment and the Commission did not receive any comments 
thereon.\17\ Furthermore, the Commission does not believe that the 
amendment to the plan raises any new regulatory issues that the 
Commission has not previously considered.\18\
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 79057 (October 6, 
2016), 81 FR 70728 (October 13, 2016).
    \18\ See, e.g., Securities Exchange Act Release No. 85189 
(February 25, 2019), 84 FR 7153 (March 1, 2019) (order approving an 
amendment to add Rule 14e-4 to a plan between FINRA and Miami 
International Securities Exchange, LLC, MIAX PEARL, LLC, and MIAX 
Emerald, LLC).
---------------------------------------------------------------------------

VI. Conclusion

    This Order gives effect to the Plan filed with the Commission in 
File No. 4-705. The Parties shall notify all members affected by the 
Plan of their rights and obligations under the Plan.
    It is therefore ordered, pursuant to Section 17(d) of the Act, that 
the Plan in File No. 4-705, between FINRA, BZX, BYX, EDGA, and EDGX, 
filed pursuant to Rule 17d-2 under the Act, is approved and declared 
effective.
    It is further ordered that BZX, BYX, EDGA, and EDGX are relieved of 
those

[[Page 71016]]

responsibilities allocated to FINRA under the Plan in File No. 4-705.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27696 Filed 12-23-19; 8:45 am]
 BILLING CODE 8011-01-P