Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and MEMX LLC, 31838-31843 [2020-11283]

Download as PDF 31838 Federal Register / Vol. 85, No. 102 / Wednesday, May 27, 2020 / Notices Member must indemnify FICC, among others (collectively, the ‘‘LEI Indemnified Parties’’), for any and all losses, liabilities, expenses, and Legal Actions 16 suffered or incurred by the LEI Indemnified Parties arising from a Netting Member’s or CCIT Member’s failure to have its current LEI on file with FICC. FICC states that the proposed indemnity clause is appropriate because, in fulfilling its regulatory obligations under the OFR Regulation, FICC would be relying upon Netting Members and CCIT Members to keep their LEI on file with FICC current.17 (2) Sponsoring Members Applicants and Members FICC proposes to amend the GSD Rules to include the following three requirements for its Sponsoring Member applicants and Sponsoring Members. First, each Netting Member or CCIT Member who submits an application to FICC in order to become a Sponsoring Member must submit the LEIs of its Sponsored Member applicants as part of the Sponsoring Member application. This change will be implemented upon Commission approval. Second, each Sponsoring Member must provide the LEI for each of its existing Sponsored Members so that FICC has a current LEI for each such Sponsored Member at all times. For existing Sponsored Members, Sponsoring Members will have 60 calendar days from the date of the Commission’s approval to submit the LEIs to FICC. Third, each Sponsoring Member must provide the LEI for any new Sponsored Member it wishes to sponsor into membership as a Sponsored Member. This change will be implemented upon Commission approval. Additionally, FICC proposes to include an indemnity clause, as described above, for Sponsoring Members because, like Netting Members and CCIT Members, FICC would be relying on the Sponsoring Members to keep Sponsored Member LEIs on file with FICC current.18 jbell on DSKJLSW7X2PROD with NOTICES III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act 19 directs the Commission to approve a 16:59 May 26, 2020 Jkt 250001 IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and, in particular, with the requirements of Section 17A of the Act 22 and the rules and regulations promulgated thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act 23 that proposed rule change SR–FICC–2020– 002, be, and hereby is, APPROVED.24 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–11284 Filed 5–26–20; 8:45 am] BILLING CODE 8011–01–P 16 The proposed rule change would define ‘‘Legal Action,’’ to mean and include any claim, counterclaim, demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation before any federal, state or foreign court or other tribunal, or any investigative or regulatory agency or self-regulatory organization. Notice, supra note 3, at 19980. 17 See id. 18 See id. at 19981. 19 15 U.S.C. 78s(b)(2)(C). VerDate Sep<11>2014 proposed rule change of a selfregulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder applicable to such organization. After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to FICC. In particular, the Commission finds that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act,20 for the reasons described below. Section 17A(b)(3)(F) of the Act requires, in part, that clearing agency rules be designed to protect investors and the public interest.21 As stated in Section II.A above, the OFR Regulation will enhance the ability of the Council to identify and monitor risks to financial stability because the repo market serves a crucial role in providing short-term funding, among other critical functions, for U.S. markets. Specifically, the LEI requirement will facilitate an understanding of repo market participants’ exposures, concentrations, and network structures. Therefore, the Commission believes the proposed rule change could serve to protect investors and the public interest. 20 15 Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d– 2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and MEMX LLC May 20, 2020. Pursuant to Section 17(d) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 17d–2 thereunder,2 notice is hereby given that on April 16, 2020, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) and MEMX LLC (‘‘MEMX’’) (together with FINRA, the ‘‘Parties’’) filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) a plan for the allocation of regulatory responsibilities, dated April 16, 2020 (‘‘17d–2 Plan’’ or the ‘‘Plan’’). The Commission is publishing this notice to solicit comments on the 17d–2 Plan from interested persons. I. Introduction Section 19(g)(1) of the Act,3 among other things, requires every selfregulatory organization (‘‘SRO’’) registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO’s own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) or Section 19(g)(2) of the Act.4 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 5 was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.6 With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or U.S.C. 78q(d). CFR 240.17d–2. 3 15 U.S.C. 78s(g)(1). 4 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively. 5 15 U.S.C. 78q(d)(1). 6 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). 2 17 22 15 U.S.C. 78q–1. U.S.C. 78s(b)(2). 24 In approving the proposed rule change, the Commission considered the proposals’ impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 25 17 CFR 200.30–3(a)(12). 23 15 Frm 00103 [Release No. 34–88918; File No. 4–762] 1 15 U.S.C. 78q–1(b)(3)(F). 21 Id. PO 00000 SECURITIES AND EXCHANGE COMMISSION Fmt 4703 Sfmt 4703 E:\FR\FM\27MYN1.SGM 27MYN1 Federal Register / Vol. 85, No. 102 / Wednesday, May 27, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES 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.7 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.8 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.9 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. 7 17 CFR 240.17d–1 and 17 CFR 240.17d–2, respectively. 8 See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). 9 See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). VerDate Sep<11>2014 16:59 May 26, 2020 Jkt 250001 II. Proposed Plan The proposed 17d–2 Plan is intended to reduce regulatory duplication for firms that are common members of both MEMX and FINRA.10 Pursuant to the proposed 17d–2 Plan, FINRA would assume certain examination and enforcement responsibilities for common members with respect to certain applicable laws, rules, and regulations. The text of the Plan delineates the proposed regulatory responsibilities with respect to the Parties. Included in the proposed Plan is an exhibit (the ‘‘MEMX Certification of Common Rules,’’ referred to herein as the ‘‘Certification’’) that lists every MEMX rule, and select federal securities laws, rules, and regulations, for which FINRA would bear responsibility under the Plan for overseeing and enforcing with respect to MEMX members that are also members of FINRA and the associated persons therewith (‘‘Dual Members’’). Specifically, under the 17d–2 Plan, FINRA would assume examination and enforcement responsibility relating to compliance by Dual Members with the rules of MEMX that are substantially similar to the applicable rules of FINRA,11 as well as any provisions of the federal securities laws and the rules and regulations thereunder delineated in the Certification (‘‘Common Rules’’). In the event that a Dual Member is the subject of an investigation relating to a transaction on MEMX, the plan acknowledges that MEMX may, in its discretion, exercise concurrent jurisdiction and responsibility for such matter.12 Under the Plan, MEMX would retain full responsibility for surveillance, examination, investigation and enforcement with respect to trading activities or practices involving MEMX’s own marketplace, including, without limitation, registration pursuant to its applicable rules of associated persons (i.e., registration rules that are not Common Rules); its duties as a DEA pursuant to Rule 17d–1 under the Act; 10 The proposed 17d–2 Plan refers to these common members as ‘‘Dual Members.’’ See Paragraph 1(c) of the proposed 17d–2 Plan. 11 See paragraph 1(b) of the proposed 17d–2 Plan (defining Common Rules). See also paragraph 1(f) of the proposed 17d–2 Plan (defining Regulatory Responsibilities). Paragraph 2 of the Plan provides that annually, or more frequently as required by changes in either MEMX rules or FINRA rules, the parties shall review and update, if necessary, the list of Common Rules. Further, paragraph 3 of the Plan provides that MEMX shall furnish FINRA with a list of Dual Members, and shall update the list no less frequently than once each calendar quarter. 12 See paragraph 6 of the proposed 17d–2 Plan. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 31839 and any MEMX rules that are not Common Rules.13 The text of the proposed 17d–2 Plan is as follows: AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND MEMX LLC PURSUANT TO RULE 17d–2 UNDER THE SECURITIES EXCHANGE ACT OF 1934 This Agreement, by and between the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) and MEMX LLC (‘‘MEMX’’), is made this 16th day of April, 2020 (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 MEMX may be referred to individually as a ‘‘party’’ and together as the ‘‘parties.’’ Whereas, FINRA and MEMX desire to reduce duplication in the examination and surveillance of their Dual Members (as defined herein) and in the filing and processing of certain registration and membership records; and Whereas, FINRA and MEMX desire to execute an agreement covering such subjects pursuant to the provisions of Rule 17d–2 under the Exchange Act and to file such agreement with the Securities and Exchange Commission (the ‘‘SEC’’ or ‘‘Commission’’) for its approval. Now, therefore, in consideration of the mutual covenants contained hereinafter, FINRA and MEMX 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) ‘‘MEMX Rules’’ or ‘‘FINRA Rules’’ shall mean: (i) The rules of MEMX, 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 MEMX Rules 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 13 See E:\FR\FM\27MYN1.SGM paragraph 2 of the proposed 17d–2 Plan. 27MYN1 jbell on DSKJLSW7X2PROD with NOTICES 31840 Federal Register / Vol. 85, No. 102 / Wednesday, May 27, 2020 / Notices 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 Dual 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, MEMX or FINRA rules as they pertain to violations of insider trading activities, which is covered by a separate 17d–2 Agreement by and among 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 MEMX, (ii) incorporation by reference of MEMX 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 MEMX, (iv) prior written approval of MEMX and (v) payment of fees or fines to MEMX. (c) ‘‘Dual Members’’ shall mean those MEMX members that are also members of FINRA and the associated persons therewith. (d) ‘‘Effective Date’’ shall be the date this Agreement is approved by the Commission. (e) ‘‘Enforcement Responsibilities’’ shall mean the conduct of appropriate proceedings, in accordance with FINRA’s Code of Procedure (the Rule 9000 Series) and other applicable FINRA procedural rules, to determine whether violations of 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 Dual 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. VerDate Sep<11>2014 16:59 May 26, 2020 Jkt 250001 2. Regulatory and Enforcement Responsibilities. FINRA shall assume Regulatory Responsibilities and Enforcement Responsibilities for Dual Members. Attached as Exhibit 1 to this Agreement and made part hereof, MEMX furnished FINRA with a current list of Common Rules and certified to FINRA that such rules that are MEMX 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 MEMX or FINRA, MEMX shall submit an updated list of Common Rules to FINRA for review which shall add MEMX Rules not included in the current list of Common Rules that qualify as Common Rules as defined in this Agreement; delete MEMX Rules included in the current list of Common Rules that no longer qualify as Common Rules as defined in this Agreement; and confirm that the remaining rules on the current list of Common Rules continue to be MEMX 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 MEMX 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 MEMX’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 MEMX Rules that are not Common Rules, except for MEMX Rules for any MEMX member that operates as a facility (as defined in Section 3(a)(2) of the Exchange Act), acts as an outbound router for the MEMX and is a member of FINRA (‘‘Router Member’’) as provided in paragraph 6. As of the date of this Agreement, MEMX Execution Services LLC is the only Router Member. PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 3. Dual Members. Prior to the Effective Date, MEMX shall furnish FINRA with a current list of Dual Members, which shall be updated no less frequently than once each quarter. 4. No Charge. There shall be no charge to MEMX by FINRA for performing the Regulatory Responsibilities and Enforcement Responsibilities under this Agreement except as otherwise agreed by the parties, either herein or in a separate agreement. 5. Applicability of Certain Laws, Rules, Regulations or Orders. Notwithstanding any provision hereof, this Agreement shall be subject to any statute, or any rule or order of the Commission. To the extent such statute, rule or order is inconsistent with this Agreement, the statute, rule or order shall supersede the provision(s) hereof to the extent necessary for them to be properly effectuated and the provision(s) hereof in that respect shall be null and void. 6. Notification of Violations. (a) In the event that FINRA becomes aware of apparent violations of any MEMX Rules, which are not listed as Common Rules, discovered pursuant to the performance of the Regulatory Responsibilities assumed hereunder, FINRA shall notify MEMX of those apparent violations for such response as MEMX deems appropriate. With respect to apparent violations of any MEMX Rules by any Router Member, FINRA shall not make referrals to MEMX 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. (b) In the event that MEMX becomes aware of apparent violations of any Common Rules, discovered pursuant to the performance of the Retained Responsibilities, MEMX shall notify FINRA of those apparent violations and such matters shall be handled by FINRA as provided in this Agreement. (c) Apparent violations of Common Rules shall be processed by, and enforcement proceedings in respect thereto shall be conducted by FINRA as provided hereinbefore; provided, however, that in the event a Dual Member is the subject of an investigation relating to a transaction on MEMX, MEMX may in its discretion assume concurrent jurisdiction and responsibility. (d) Each party agrees to make available promptly all files, records and witnesses necessary to assist the other in its investigation or proceedings. 7. Continued Assistance. E:\FR\FM\27MYN1.SGM 27MYN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 85, No. 102 / Wednesday, May 27, 2020 / Notices (a) FINRA shall make available to MEMX all information obtained by FINRA in the performance by it of the Regulatory Responsibilities hereunder with respect to the Dual Members subject to this Agreement. In particular, and not in limitation of the foregoing, FINRA shall furnish MEMX any information it obtains about Dual Members which reflects adversely on their financial condition. MEMX shall make available to FINRA any information coming to its attention that reflects adversely on the financial condition of Dual 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. Neither party shall assert regulatory or other privileges as against the other 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 Dual 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 MEMX advised of its actions in this regard for such subsequent proceedings as MEMX may initiate. 9. Customer Complaints. MEMX shall forward to FINRA copies of all customer complaints involving Dual Members received by MEMX 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 Dual 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. VerDate Sep<11>2014 16:59 May 26, 2020 Jkt 250001 11. No Restrictions on Regulatory Action. Nothing contained in this Agreement shall restrict or in any way encumber the right of either party to conduct its own independent or concurrent investigation, examination or enforcement proceeding of or against Dual Members, as either party, in its sole discretion, shall deem appropriate or necessary. 12. Termination. This Agreement may be terminated by MEMX or FINRA at any time upon the approval of the Commission after six (6) month’s written notice to the other party. 13. Arbitration. In the event of a dispute between the parties as to the operation of this Agreement, MEMX and FINRA hereby agree that any such dispute shall be settled by arbitration in Washington, DC in accordance with the rules of the American Arbitration Association then in effect, or such other procedures as the parties may mutually agree upon. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. 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 party. 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 13 shall interfere with a party’s right to terminate this Agreement as set forth herein. 14. Notification of Members. MEMX and FINRA shall notify Dual Members of this Agreement after the Effective Date by means of a uniform joint notice. 15. 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. 16. Limitation of Liability. Neither FINRA nor MEMX nor any of their respective directors, governors, officers or employees shall be liable to the other party to this Agreement for any liability, loss or damage resulting from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibilities as provided hereby or for the failure to provide any such responsibility, except with respect PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 31841 to such liability, loss or damages as shall have been suffered by one or the other of FINRA or MEMX 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 MEMX with respect to any of the responsibilities to be performed by each of them hereunder. 17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) and 19(g) of the Exchange Act and Rule 17d– 2 thereunder, FINRA and MEMX join in requesting the Commission, upon its approval of this Agreement or any part thereof, to relieve MEMX 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. 18. 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. 19. 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 MEMX Certification of Common Rules MEMX hereby certifies that the requirements contained in the rules listed below for MEMX are identical to, or substantially similar to, the comparable FINRA (NASD) Rules, Exchange Act provision or SEC rule identified (‘‘Common Rules’’). # Common Rules shall not include any provisions regarding (i) notice, reporting or any other filings made directly to or from MEMX, (ii) incorporation by reference of MEMX 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 MEMX, (iv) prior written approval of MEMX and (v) payment of fees or fines to MEMX. E:\FR\FM\27MYN1.SGM 27MYN1 31842 Federal Register / Vol. 85, No. 102 / Wednesday, May 27, 2020 / Notices MEMX Rule FINRA (NASD) Rule, Exchange Act Provision, 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 3.3 Use of Fraudulent Devices ∧ .................................................... Rule 3.5 Rule 3.6 Communications with the Public ............................................. 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(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 Rule 3.16 Rule 3.17 Disclosure of Control ............................................................. Discretionary Accounts .......................................................... Customer’s Securities or Funds ............................................ Rule 3.21 Rule 3.18 Communications with Customers .......................................... Prohibition Against Guarantees ............................................. Rule 3.19 Sharing in Accounts; Extent Permissible ............................... Rule Rule Rule Rule 3.21 Customer Disclosures ............................................................ 3.20 Influencing or Rewarding Employees of Others; Gratuities .. 3.26 Telemarketing and Interpretations and Policies .01 .............. 4.1 Requirements # ........................................................................ Rule 4.3 Rule 5.1 Rule 5.2 Record of Written Complaints ................................................. Written Procedures # ............................................................... Responsibility of Members ...................................................... Rule 5.3 Records .................................................................................... Rule 5.4 Review of Activities .................................................................. Rule 5.6 Anti-Money Laundering Compliance Program # ...................... Rule 9.3 Predispute Arbitration Agreements .......................................... jbell on DSKJLSW7X2PROD with NOTICES Rule 11.16(e)(3) & (4) Trading Halts Due to Extraordinary Market Volatility. Rule 11.10(a)(5) Order Execution-Short Sales # ∧∧ ................................ Rule 12.2 Fictitious Transactions ........................................................... Rule Rule Rule Rule 12.3 Excessive Sales By A Member ............................................. 12.4 Manipulative Transactions ..................................................... 12.5 Dissemination of False Information ....................................... 12.6 Prohibition Against Trading Ahead of Customer Orders #** Rule Rule Rule Rule 12.9 Trade Shredding .................................................................... 12.11 Best Execution and Interpositioning ** ................................. 12.13 Trading Ahead of Research Reports ** ............................... 12.14 Front Running of Block Transactions ** ............................... VerDate Sep<11>2014 16:59 May 26, 2020 Jkt 250001 PO 00000 Frm 00107 Fmt 4703 FINRA Rule 1240(a)(1)–(4) Continuing Education Requirements # ;. 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 Rule 1010(e) Electronic Filing Requirements for Uniform Forms. FINRA By-Laws of the Corporation, Article IV, Section 1(c) Application for Membership and Article V, Sec. 2(c); FINRA Rule 1010(c) Electronic Filing Requirements for Uniform Forms. 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 ∧. 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,∧ 1 FINRA Rule 2111 Suitability. FINRA Rule 2111(a) and SM .03 Suitability. FINRA Rule 11860 COD Orders. 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. FINRA Rule 3260 Discretionary Accounts. FINRA Rule 2150(a) Improper Use of Customers’ Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts—Improper Use. FINRA Rule 2210 Communications with the Public. 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 rules thereunder and FINRA Rule 4511(a) and (c) General Requirements 2. 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) & (b) Compliance with Regulation NMS Plan to Address Extraordinary Market Volatility. FINRA Rule 6182 Trade Reporting of Short Sales ∧ ∧. FINRA Rule 6140 Other Trading Practices and FINRA Rule 5210 Supplementary Material .02 Self-Trades. FINRA Rule 6140(c) Other Trading Practices. FINRA Rule 6140 Other Trading Practices. FINRA Rule 6140(e) Other Trading Practices. FINRA Rule 5320 Prohibition Against Trading Ahead of Customer Orders **. FINRA Rule 5290 Order Entry and Execution Practices. FINRA Rule 5310 Best Execution and Interpositioning **. FINRA Rule 5280 Trading Ahead of Research Reports **. FINRA Rule 5270 Front Running of Block Transactions **. Sfmt 4703 E:\FR\FM\27MYN1.SGM 27MYN1 Federal Register / Vol. 85, No. 102 / Wednesday, May 27, 2020 / Notices MEMX Rule 31843 FINRA (NASD) Rule, Exchange Act Provision, SEC Rule Rule 13.3(a), (b)(i), (d) and Interpretation and Policy .01 Proxy and Other Issuer-Related Materials. Forwarding of FINRA Rule 2251 Processing and Forwarding of Proxy and Other Issuer-Related Materials. 1 FINRA shall not have Regulatory Responsibilities regarding .01 of MEMX Rule 3.6. shall not have Regulatory Responsibilities regarding requirements to keep records ‘‘in conformity with . . . Exchange Rules;’’ responsibility for such requirement remains with MEMX. In addition, the following provisions shall be part of this 17d–2 Agreement: SEA Rules: • SEA Rule 200 of Regulation SHO—Definition of Short Sales and Marking Requirements ** • SEA Rule 201 of Regulation SHO—Circuit Breaker ** • SEA Rule 203 of Regulation SHO—Borrowing and Delivery Requirements ** • SEA Rule 204 of Regulation SHO—Close-Out Requirement ** • SEA Rule 101 of Regulation M—Activities by Distribution Participants ** • SEA Rule 102 of Regulation M—Activities by Issuers and Selling Security Holders During a Distribution ** • SEA Rule 103 of Regulation M—Nasdaq Passive Market Making ** • SEA Rule 104 of Regulation M—Stabilizing and Other Activities in Connection with an Offering ** • SEA Rule 105 of Regulation M—Short Selling in Connection With a Public Offering ** • SEA Rule 604 of Regulation NMS—Display of Customer Limit Orders ** • SEA Rule 606 of Regulation NMS—Disclosure of Routing Information ** • SEA Rule 610(d) of Regulation NMS—Locking or Crossing Quotations ** • SEA Rule 611 of Regulation NMS—Order Protection Rule ** • SEA Rule 10b–5 Employment of Manipulative and Deceptive Devices ∧ • SEA Rule 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 ∧ ∧ 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 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., and Investors’ Exchange LLC and the Long-Term Stock Exchange, Inc. effective August 1, 2019, as may be amended from time to time. ** FINRA shall perform the surveillance responsibilities for the double star rules. These rules may be cited by FINRA in both the context of this Agreement and the Regulatory Services Agreement. 2 FINRA III. Date of Effectiveness of the Proposed Plan and Timing for Commission Action Electronic Comments Pursuant to Section 17(d)(1) of the Act 14 and Rule 17d–2 thereunder,15 after June 11, 2020, the Commission may, by written notice, declare the plan submitted by MEMX and FINRA, File No. 4–762, to be effective if the Commission finds that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among self-regulatory organizations, or to remove impediments to and foster the development of the national market system and a national system for the clearance and settlement of securities transactions and in conformity with the factors set forth in Section 17(d) of the Act. jbell on DSKJLSW7X2PROD with NOTICES IV. Solicitation of Comments In order to assist the Commission in determining whether to approve the proposed 17d–2 Plan and to relieve MEMX of the responsibilities which would be assigned to FINRA, interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: 14 15 15 17 U.S.C. 78q(d)(1). CFR 240.17d–2. VerDate Sep<11>2014 16:59 May 26, 2020 Jkt 250001 • Use the Commission’s internet comment form (https://www.sec.gov/ rules/other.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number 4– 762 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number 4–762. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/rules/ other.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 plan also will be available for inspection and copying at the principal offices of MEMX and FINRA. 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 4–762 and should be submitted on or before June 11, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–11283 Filed 5–26–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meetings Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission Fixed Income Market Structure Advisory Committee will hold a public meeting on June 1, 2020, at 9:30 a.m. (ET). PLACE: The meeting will be conducted by remote means. Members of the public may watch the webcast of the meeting TIME AND DATE: 16 17 E:\FR\FM\27MYN1.SGM CFR 200.30–3(a)(34). 27MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 102 (Wednesday, May 27, 2020)]
[Notices]
[Pages 31838-31843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11283]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88918; File No. 4-762]

Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of
Regulatory Responsibilities Between the Financial Industry Regulatory
Authority, Inc. and MEMX LLC

May 20, 2020.
Pursuant to Section 17(d) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that
on April 16, 2020, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') and MEMX LLC (``MEMX'') (together with FINRA, the
``Parties'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a plan for the allocation of regulatory
responsibilities, dated April 16, 2020 (``17d-2 Plan'' or the
``Plan''). The Commission is publishing this notice to solicit comments
on the 17d-2 Plan from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------

I. Introduction

Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or national securities association to examine for,
and enforce compliance by, its members and persons associated with its
members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) or Section 19(g)(2) of the Act.\4\ Without
this relief, the statutory obligation of each individual SRO could
result in a pattern of multiple examinations of broker-dealers that
maintain memberships in more than one SRO (``common members''). Such
regulatory duplication would add unnecessary expenses for common
members and their SROs.
---------------------------------------------------------------------------

\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
---------------------------------------------------------------------------

Section 17(d)(1) of the Act \5\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\6\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or

[[Page 31839]]

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.
---------------------------------------------------------------------------

\5\ 15 U.S.C. 78q(d)(1).
\6\ 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.\7\ 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.\8\ 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.
---------------------------------------------------------------------------

\7\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\8\ 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.\9\ 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.
---------------------------------------------------------------------------

\9\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------

II. Proposed Plan

The proposed 17d-2 Plan is intended to reduce regulatory
duplication for firms that are common members of both MEMX and
FINRA.\10\ Pursuant to the proposed 17d-2 Plan, FINRA would assume
certain examination and enforcement responsibilities for common members
with respect to certain applicable laws, rules, and regulations.
---------------------------------------------------------------------------

\10\ The proposed 17d-2 Plan refers to these common members as
``Dual Members.'' See Paragraph 1(c) of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

The text of the Plan delineates the proposed regulatory
responsibilities with respect to the Parties. Included in the proposed
Plan is an exhibit (the ``MEMX Certification of Common Rules,''
referred to herein as the ``Certification'') that lists every MEMX
rule, and select federal securities laws, rules, and regulations, for
which FINRA would bear responsibility under the Plan for overseeing and
enforcing with respect to MEMX members that are also members of FINRA
and the associated persons therewith (``Dual Members'').
Specifically, under the 17d-2 Plan, FINRA would assume examination
and enforcement responsibility relating to compliance by Dual Members
with the rules of MEMX that are substantially similar to the applicable
rules of FINRA,\11\ as well as any provisions of the federal securities
laws and the rules and regulations thereunder delineated in the
Certification (``Common Rules''). In the event that a Dual Member is
the subject of an investigation relating to a transaction on MEMX, the
plan acknowledges that MEMX may, in its discretion, exercise concurrent
jurisdiction and responsibility for such matter.\12\
---------------------------------------------------------------------------

\11\ See paragraph 1(b) of the proposed 17d-2 Plan (defining
Common Rules). See also paragraph 1(f) of the proposed 17d-2 Plan
(defining Regulatory Responsibilities). Paragraph 2 of the Plan
provides that annually, or more frequently as required by changes in
either MEMX rules or FINRA rules, the parties shall review and
update, if necessary, the list of Common Rules. Further, paragraph 3
of the Plan provides that MEMX shall furnish FINRA with a list of
Dual Members, and shall update the list no less frequently than once
each calendar quarter.
\12\ See paragraph 6 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

Under the Plan, MEMX would retain full responsibility for
surveillance, examination, investigation and enforcement with respect
to trading activities or practices involving MEMX's own marketplace,
including, without limitation, registration pursuant to its applicable
rules of associated persons (i.e., registration rules that are not
Common Rules); its duties as a DEA pursuant to Rule 17d-1 under the
Act; and any MEMX rules that are not Common Rules.\13\
---------------------------------------------------------------------------

\13\ See paragraph 2 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

The text of the proposed 17d-2 Plan is as follows:

AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND
MEMX LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF
1934

This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and MEMX LLC (``MEMX''), is made this 16th
day of April, 2020 (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 MEMX may be referred to individually
as a ``party'' and together as the ``parties.''
Whereas, FINRA and MEMX desire to reduce duplication in the
examination and surveillance of their Dual Members (as defined herein)
and in the filing and processing of certain registration and membership
records; and
Whereas, FINRA and MEMX desire to execute an agreement covering
such subjects pursuant to the provisions of Rule 17d-2 under the
Exchange Act and to file such agreement with the Securities and
Exchange Commission (the ``SEC'' or ``Commission'') for its approval.
Now, therefore, in consideration of the mutual covenants contained
hereinafter, FINRA and MEMX 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) ``MEMX Rules'' or ``FINRA Rules'' shall mean: (i) The rules of
MEMX, 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 MEMX Rules 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

[[Page 31840]]

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 Dual 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, MEMX or FINRA rules as
they pertain to violations of insider trading activities, which is
covered by a separate 17d-2 Agreement by and among 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
MEMX, (ii) incorporation by reference of MEMX 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 MEMX, (iv) prior written approval of MEMX
and (v) payment of fees or fines to MEMX.
(c) ``Dual Members'' shall mean those MEMX members that are also
members of FINRA and the associated persons therewith.
(d) ``Effective Date'' shall be the date this Agreement is approved
by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with FINRA's Code of Procedure
(the Rule 9000 Series) and other applicable FINRA procedural rules, to
determine whether violations of 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 Dual 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 and Enforcement Responsibilities. FINRA shall assume
Regulatory Responsibilities and Enforcement Responsibilities for Dual
Members. Attached as Exhibit 1 to this Agreement and made part hereof,
MEMX furnished FINRA with a current list of Common Rules and certified
to FINRA that such rules that are MEMX 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 MEMX or FINRA, MEMX shall submit an updated list of Common
Rules to FINRA for review which shall add MEMX Rules not included in
the current list of Common Rules that qualify as Common Rules as
defined in this Agreement; delete MEMX Rules included in the current
list of Common Rules that no longer qualify as Common Rules as defined
in this Agreement; and confirm that the remaining rules on the current
list of Common Rules continue to be MEMX 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 MEMX 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 MEMX'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 MEMX Rules that are not Common Rules, except for MEMX Rules
for any MEMX member that operates as a facility (as defined in Section
3(a)(2) of the Exchange Act), acts as an outbound router for the MEMX
and is a member of FINRA (``Router Member'') as provided in paragraph
6. As of the date of this Agreement, MEMX Execution Services LLC is the
only Router Member.
3. Dual Members. Prior to the Effective Date, MEMX shall furnish
FINRA with a current list of Dual Members, which shall be updated no
less frequently than once each quarter.
4. No Charge. There shall be no charge to MEMX by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as otherwise agreed by the
parties, either herein or in a separate agreement.
5. Applicability of Certain Laws, Rules, Regulations or Orders.
Notwithstanding any provision hereof, this Agreement shall be subject
to any statute, or any rule or order of the Commission. To the extent
such statute, rule or order is inconsistent with this Agreement, the
statute, rule or order shall supersede the provision(s) hereof to the
extent necessary for them to be properly effectuated and the
provision(s) hereof in that respect shall be null and void.
6. Notification of Violations.
(a) In the event that FINRA becomes aware of apparent violations of
any MEMX Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities assumed
hereunder, FINRA shall notify MEMX of those apparent violations for
such response as MEMX deems appropriate. With respect to apparent
violations of any MEMX Rules by any Router Member, FINRA shall not make
referrals to MEMX 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.
(b) In the event that MEMX becomes aware of apparent violations of
any Common Rules, discovered pursuant to the performance of the
Retained Responsibilities, MEMX shall notify FINRA of those apparent
violations and such matters shall be handled by FINRA as provided in
this Agreement.
(c) Apparent violations of Common Rules shall be processed by, and
enforcement proceedings in respect thereto shall be conducted by FINRA
as provided hereinbefore; provided, however, that in the event a Dual
Member is the subject of an investigation relating to a transaction on
MEMX, MEMX may in its discretion assume concurrent jurisdiction and
responsibility.
(d) Each party agrees to make available promptly all files, records
and witnesses necessary to assist the other in its investigation or
proceedings.
7. Continued Assistance.

[[Page 31841]]

(a) FINRA shall make available to MEMX all information obtained by
FINRA in the performance by it of the Regulatory Responsibilities
hereunder with respect to the Dual Members subject to this Agreement.
In particular, and not in limitation of the foregoing, FINRA shall
furnish MEMX any information it obtains about Dual Members which
reflects adversely on their financial condition. MEMX shall make
available to FINRA any information coming to its attention that
reflects adversely on the financial condition of Dual 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. Neither party shall assert
regulatory or other privileges as against the other 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 Dual 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 MEMX advised of its actions in this regard for such subsequent
proceedings as MEMX may initiate.
9. Customer Complaints. MEMX shall forward to FINRA copies of all
customer complaints involving Dual Members received by MEMX 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 Dual 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 either
party to conduct its own independent or concurrent investigation,
examination or enforcement proceeding of or against Dual Members, as
either party, in its sole discretion, shall deem appropriate or
necessary.
12. Termination. This Agreement may be terminated by MEMX or FINRA
at any time upon the approval of the Commission after six (6) month's
written notice to the other party.
13. Arbitration. In the event of a dispute between the parties as
to the operation of this Agreement, MEMX and FINRA hereby agree that
any such dispute shall be settled by arbitration in Washington, DC in
accordance with the rules of the American Arbitration Association then
in effect, or such other procedures as the parties may mutually agree
upon. Judgment on the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. 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
party. 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 13 shall interfere with a party's right to terminate
this Agreement as set forth herein.
14. Notification of Members. MEMX and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
15. 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.
16. Limitation of Liability. Neither FINRA nor MEMX nor any of
their respective directors, governors, officers or employees shall be
liable to the other party to this Agreement for any liability, loss or
damage resulting from or claimed to have resulted from any delays,
inaccuracies, errors or omissions with respect to the provision of
Regulatory Responsibilities as provided hereby or for the failure to
provide any such responsibility, except with respect to such liability,
loss or damages as shall have been suffered by one or the other of
FINRA or MEMX 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 MEMX with respect
to any of the responsibilities to be performed by each of them
hereunder.
17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and MEMX
join in requesting the Commission, upon its approval of this Agreement
or any part thereof, to relieve MEMX 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.
18. 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.
19. 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

MEMX Certification of Common Rules

MEMX hereby certifies that the requirements contained in the rules
listed below for MEMX are identical to, or substantially similar to,
the comparable FINRA (NASD) Rules, Exchange Act provision or SEC rule
identified (``Common Rules'').
^# Common Rules shall not include any provisions
regarding (i) notice, reporting or any other filings made directly to
or from MEMX, (ii) incorporation by reference of MEMX 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 MEMX, (iv) prior written approval
of MEMX and (v) payment of fees or fines to MEMX.

[[Page 31842]]

------------------------------------------------------------------------
FINRA (NASD) Rule, Exchange Act
MEMX Rule Provision, SEC Rule
------------------------------------------------------------------------
Rule 2.5 Restrictions, FINRA Rule 1240(a)(1)-(4)
Interpretation and Policy .02 Continuing Education Requirements
Continuing Education Requirements ;.
.
Rule 2.5 Restrictions, FINRA By-Laws of the Corporation,
Interpretation and Policy .04 Article V, Section 3 Notification
Termination of Employment. by Member to the Corporation and
Associated Person of Termination;
Amendments to Notification; FINRA
Rule 1010(e) Electronic Filing
Requirements for Uniform Forms.
Rule 2.6(g) Application Procedures FINRA By-Laws of the Corporation,
for Membership or to become an Article IV, Section 1(c)
Associated Person of a Member . Application for Membership and
Article V, Sec. 2(c); FINRA Rule
1010(c) Electronic Filing
Requirements for Uniform Forms.
Rule 3.1 Business Conduct of FINRA Rule 2010 Standards of
Members [supcaret]. Commercial Honor and Principles of
Trade [supcaret].
Rule 3.2 Violations Prohibited FINRA Rule 2010 Standards of
[supcaret] . Commercial Honor and Principles of
Trade and FINRA Rule 3110
Supervision [supcaret].
Rule 3.3 Use of Fraudulent Devices FINRA Rule 2020 Use of
[supcaret]. Manipulative, Deceptive or Other
Fraudulent Devices [supcaret].
Rule 3.5 Communications with the FINRA Rule 2210 Communications with
Public. the Public.
Rule 3.6 Fair Dealing with FINRA Rule 2020 Use of
Customers. Manipulative, Deceptive or Other
Fraudulent Devices,[supcaret] \1\
FINRA Rule 2111 Suitability.
Rule 3.7(a) Recommendations to FINRA Rule 2111(a) and SM .03
Customers. Suitability.
Rule 3.8(a) The Prompt Receipt and FINRA Rule 11860 COD Orders.
Delivery of Securities.
Rule 3.8(b) The Prompt Receipt and SEC Regulation SHO.
Delivery of Securities.
Rule 3.9 Charges for Services FINRA Rule 2122 Charges for
Performed. Services Performed.
Rule 3.10 Use of Information....... FINRA Rule 2060 Use of Information
Obtained in Fiduciary Capacity.
Rule 3.11 Publication of FINRA Rule 5210 Publication of
Transactions and Quotations . Transactions and Quotations.
Rule 3.12 Offers at Stated Prices.. FINRA Rule 5220 Offers at Stated
Prices.
Rule 3.13 Payments Involving FINRA Rule 5230 Payments Involving
Publications that Influence the Publications that Influence the
Market Price of a Security. Market Price of a Security.
Rule 3.14 Disclosure on FINRA Rule 2232(a) Customer
Confirmations. Confirmations and SEC Rule 10b-10
Confirmation of Transactions.
Rule 3.15 Disclosure of Control.... FINRA Rule 2262 Disclosure of
Control Relationship With Issuer.
Rule 3.16 Discretionary Accounts... FINRA Rule 3260 Discretionary
Accounts.
Rule 3.17 Customer's Securities or FINRA Rule 2150(a) Improper Use of
Funds. Customers' Securities or Funds;
Prohibition Against Guarantees and
Sharing in Accounts--Improper Use.
Rule 3.21 Communications with FINRA Rule 2210 Communications with
Customers. the Public.
Rule 3.18 Prohibition Against FINRA Rule 2150(b) Improper Use of
Guarantees. Customers' Securities or Funds;
Prohibition Against Guarantees and
Sharing in Accounts--Prohibition
Against Guarantees.
Rule 3.19 Sharing in Accounts; FINRA Rule 2150(c)(1) Improper Use
Extent Permissible. of Customers' Securities or Funds;
Prohibition Against Guarantees and
Sharing in Accounts--Sharing in
Accounts; Extent Permissible.
Rule 3.21 Customer Disclosures..... FINRA Rule 2265 Extended Hours
Trading Risk Disclosure.
Rule 3.20 Influencing or Rewarding FINRA Rule 3220 Influencing or
Employees of Others; Gratuities. Rewarding Employees of Others.
Rule 3.26 Telemarketing and FINRA Rule 3230 Telemarketing.
Interpretations and Policies .01.
Rule 4.1 Requirements ............ Section 17 of the Exchange Act and
rules thereunder and FINRA Rule
4511(a) and (c) General
Requirements \2\.
Rule 4.3 Record of Written FINRA Rule 4513 Records of Written
Complaints. Customer Complaints.
Rule 5.1 Written Procedures ...... FINRA Rule 3110(b)(1) Supervision-
Written Procedures [supcaret].
Rule 5.2 Responsibility of Members. FINRA Rule 3110 (a)(4), (b)(4) and
(b)(7) Supervision--Supervisory
System/Written Procedures--Review
of Correspondence and Internal
Communications [supcaret].
Rule 5.3 Records................... FINRA Rule 3110 Supervision
[supcaret].
Rule 5.4 Review of Activities...... FINRA Rule 3110(c) and (d)
Supervision--Internal Inspections/
Transaction Review and
Investigation [supcaret].
Rule 5.6 Anti-Money Laundering FINRA Rule 3310 Anti-Money
Compliance Program . Laundering Compliance Program.
Rule 9.3 Predispute Arbitration FINRA Rule 2268 Requirements When
Agreements. Using Predispute Arbitration
Agreements for Customer Accounts.
Rule 11.16(e)(3) & (4) Trading FINRA Rule 6190(a) & (b) Compliance
Halts Due to Extraordinary Market with Regulation NMS Plan to
Volatility. Address Extraordinary Market
Volatility.
Rule 11.10(a)(5) Order Execution- FINRA Rule 6182 Trade Reporting of
Short Sales [supcaret][supcaret]. Short Sales [supcaret] [supcaret].
Rule 12.2 Fictitious Transactions.. FINRA Rule 6140 Other Trading
Practices and FINRA Rule 5210
Supplementary Material .02 Self-
Trades.
Rule 12.3 Excessive Sales By A FINRA Rule 6140(c) Other Trading
Member. Practices.
Rule 12.4 Manipulative Transactions FINRA Rule 6140 Other Trading
Practices.
Rule 12.5 Dissemination of False FINRA Rule 6140(e) Other Trading
Information. Practices.
Rule 12.6 Prohibition Against FINRA Rule 5320 Prohibition Against
Trading Ahead of Customer Orders Trading Ahead of Customer Orders
**. **.
Rule 12.9 Trade Shredding.......... FINRA Rule 5290 Order Entry and
Execution Practices.
Rule 12.11 Best Execution and FINRA Rule 5310 Best Execution and
Interpositioning **. Interpositioning **.
Rule 12.13 Trading Ahead of FINRA Rule 5280 Trading Ahead of
Research Reports **. Research Reports **.
Rule 12.14 Front Running of Block FINRA Rule 5270 Front Running of
Transactions **. Block Transactions **.

[[Page 31843]]

Rule 13.3(a), (b)(i), (d) and FINRA Rule 2251 Processing and
Interpretation and Policy .01 Forwarding of Proxy and Other
Forwarding of Proxy and Other Issuer-Related Materials.
Issuer-Related Materials.
------------------------------------------------------------------------
\1\ FINRA shall not have Regulatory Responsibilities regarding .01 of
MEMX Rule 3.6.
\2\ FINRA shall not have Regulatory Responsibilities regarding
requirements to keep records ``in conformity with . . . Exchange
Rules;'' responsibility for such requirement remains with MEMX.
In addition, the following provisions shall be part of this 17d-2
Agreement:
SEA Rules:
SEA Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements **
SEA Rule 201 of Regulation SHO--Circuit Breaker **
SEA Rule 203 of Regulation SHO--Borrowing and Delivery
Requirements **
SEA Rule 204 of Regulation SHO--Close-Out Requirement **
SEA Rule 101 of Regulation M--Activities by Distribution
Participants **
SEA Rule 102 of Regulation M--Activities by Issuers and Selling
Security Holders During a Distribution **
SEA Rule 103 of Regulation M--Nasdaq Passive Market Making **
SEA Rule 104 of Regulation M--Stabilizing and Other Activities
in Connection with an Offering **
SEA Rule 105 of Regulation M--Short Selling in Connection With
a Public Offering **
SEA Rule 604 of Regulation NMS--Display of Customer Limit
Orders **
SEA Rule 606 of Regulation NMS--Disclosure of Routing
Information **
SEA Rule 610(d) of Regulation NMS--Locking or Crossing
Quotations **
SEA Rule 611 of Regulation NMS--Order Protection Rule **
SEA Rule 10b-5 Employment of Manipulative and Deceptive Devices
[supcaret]
SEA Rule 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 [supcaret]
[supcaret] 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 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., and Investors'
Exchange LLC and the Long-Term Stock Exchange, Inc. effective August
1, 2019, as may be amended from time to time.
** FINRA shall perform the surveillance responsibilities for the double
star rules. These rules may be cited by FINRA in both the context of
this Agreement and the Regulatory Services Agreement.

III. Date of Effectiveness of the Proposed Plan and Timing for
Commission Action

Pursuant to Section 17(d)(1) of the Act \14\ and Rule 17d-2
thereunder,\15\ after June 11, 2020, the Commission may, by written
notice, declare the plan submitted by MEMX and FINRA, File No. 4-762,
to be effective if the Commission finds that the plan is necessary or
appropriate in the public interest and for the protection of investors,
to foster cooperation and coordination among self-regulatory
organizations, or to remove impediments to and foster the development
of the national market system and a national system for the clearance
and settlement of securities transactions and in conformity with the
factors set forth in Section 17(d) of the Act.
---------------------------------------------------------------------------

\14\ 15 U.S.C. 78q(d)(1).
\15\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------

IV. Solicitation of Comments

In order to assist the Commission in determining whether to approve
the proposed 17d-2 Plan and to relieve MEMX of the responsibilities
which would be assigned to FINRA, interested persons are invited to
submit written data, views, and arguments concerning the foregoing.
Comments may be submitted by any of the following methods:

Electronic Comments

Use the Commission's internet comment form (https://www.sec.gov/rules/other.shtml); or
Send an email to [email protected]. Please include
File Number 4-762 on the subject line.

Paper Comments

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

All submissions should refer to File Number 4-762. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (https://www.sec.gov/rules/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the plan also will be available for inspection and
copying at the principal offices of MEMX and FINRA. 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 4-762 and should be submitted on or before
June 11, 2020.
---------------------------------------------------------------------------

\16\ 17 CFR 200.30-3(a)(34).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11283 Filed 5-26-20; 8:45 am]
BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.