Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Relocate the BX Disciplinary Rules and Incorporate by Reference the Disciplinary Rules of The Nasdaq Stock Market LLC, 33235-33239 [2020-11645]
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Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Notices
(1) The registrant or other person is
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By the Commission.
Vanessa A. Countryman,
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[FR Doc. 2020–11718 Filed 5–29–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88938; File No. SR–BX–
2020–009]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Relocate the BX
Disciplinary Rules and Incorporate by
Reference the Disciplinary Rules of
The Nasdaq Stock Market LLC
May 26, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 15,
2020, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to (A) relocate
the BX Series 8000 and 9000 Rules (the
‘‘Current BX 8000 Series,’’ ‘‘Current BX
9000 Series,’’ and, collectively, the
‘‘Disciplinary Rules’’) to the Exchange’s
rulebook’s (‘‘Rulebook’’) shell
structure; 3 (B) the Exchange is also
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In 2017, the Exchange added a shell structure to
its Rulebook with the purpose of improving
efficiency and readability and to align its rules
closer to those of its five sister exchanges, The
Nasdaq Stock Market LLC; Nasdaq PHLX LLC;
2 17
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33235
proposing to simultaneously replace the
text of the Disciplinary Rules with
introductory paragraphs in each that
incorporate by reference The Nasdaq
Stock Market LLC’s (‘‘Nasdaq’’) Series
8000 and 9000 Rules, currently located
under the General 5 title of the Nasdaq
rulebook.4
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqbx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
A. Rule Relocation
The Exchange proposes to relocate the
Disciplinary Rules under the General 5
title (‘‘Discipline’’) in the Rulebook
shell. The relocation and harmonization
of these rules is part of the Exchange’s
continued effort to promote efficiency
and conformity of its processes with
those of its Affiliated Exchanges. The
Exchange believes that the placement of
the Disciplinary Rules into their new
location in the shell will facilitate the
use of the Rulebook by members,
associated persons, or other persons
subject to BX’s jurisdiction.
Specifically, the Exchange proposes to
relocate the Disciplinary Rules as
follows:
Nasdaq ISE, LLC (‘‘ISE’’); Nasdaq GEMX, LLC
(‘‘GEMX’’); and Nasdaq MRX, LLC (‘‘MRX’’)
(together, the ‘‘Affiliated Exchanges’’). See
Securities Exchange Act Release No. 82174
(November 29, 2017), 82 FR 57492 (December 5,
2017) (SR–BX–2017–054).
4 See Securities Exchange Act Release No. 87778
(December 17, 2019), 84 FR 70590 (December 23,
2019) (SR–NASDAQ–2019–098).
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General 5—Discipline: Proposed new rule No.
Current BX rule No.
Section 1 .......................................................................................................................................................
Section 2 .......................................................................................................................................................
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B. Incorporation by Reference
The Exchange also proposes to
simultaneously replace the current BX
Series 8000 and 9000 Rules with
introductory paragraphs to each that
incorporate by reference the Nasdaq
Series 8000 and 9000 Rules (located in
General 5 Discipline), respectively, and
state that such Nasdaq Rules shall be
applicable to Exchange Members,
associated persons, and other persons
subject to the Exchange’s jurisdiction.5
Except as noted below, the Nasdaq
Series 8000 and 9000 Rules are
substantially similar to BX’s
Disciplinary Rules. The proposed
introductory paragraphs list instances in
which cross-references in the Nasdaq
Series 8000 and 9000 Rules to other
Nasdaq rules shall be read to refer
instead to the Exchange Rules, and
references to Nasdaq terms (whether or
not defined) shall be read to refer to the
Exchange-related meanings of those
terms. For instance, references in both
the Nasdaq Series 8000 and 9000 Rules
to the following terms shall be read to
refer to the Exchange-specific meanings
of those terms: The terms ‘‘Exchange’’ or
‘‘Nasdaq’’ shall be read to refer to BX;
the terms ‘‘Rule,’’ ‘‘Rules of Nasdaq,’’ or
‘‘Nasdaq Rules’’ shall be read to refer to
the BX Rules (also referenced in the
Disciplinary Rules as ‘‘Equity Rules’’);
in Rules 9521(b)(2) and 9521(b)(3) the
term ‘‘Nasdaq By-Laws’’ shall be read as
a reference to BX’s Rules; the terms
‘‘Board’’ or ‘‘Nasdaq Board’’ shall be
read to refer to the BX Board of
Directors; the terms ‘‘Member,’’
‘‘member firm,’’ or ‘‘associated person’’
shall be read to refer to a BX Member,
BX member firm, or BX associated
person; the terms ‘‘Nasdaq Regulation’’
or ‘‘Nasdaq Regulation Department’’
shall be read to refer to the BX
Regulation Department; the term
‘‘Nasdaq Options Market’’ shall be read
to refer to the BX Options Market; and
the term ‘‘Chief Regulatory Officer’’
shall be read to refer to BX’s Chief
Regulatory Officer.
5 The Exchange notes that the proposed changes
will not become operative unless and until the
Commission approves the Exchange’s request, to be
filed pursuant to Section 36 of the Exchange Act
and SEC Rule 0–12 thereunder, for an exemption
from the rule filing requirements of Section 19(b)
of the Exchange Act as to changes to the BX 8000
Series (New General 5, Section 1) and BX 9000
Series (New General 5, Section 2) that are effected
solely by virtue of a change to the Nasdaq Series
8000 or 9000 Rules Series.
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Additionally, the Exchange proposes
that the references in the Nasdaq Rule
9000 Series to Equity 5, Sections 4 and
5 shall be read, respectively, to refer to
BX’s Rules 7440A and 7450A.
Moreover, in addition to the proposed
introduction to the BX Series 9000
Rules (New General 5, Section 2)
indicating how certain Nasdaq Series
9000 Rules should be read to apply to
Exchange members, associated persons,
and other persons subject to the
Exchange’s jurisdiction, the proposed
introduction will indicate that specific
language in certain Disciplinary Rules
will be preserved. Specifically:
• Rule 9231(b)(1)(C) in the Nasdaq
rules shall be read to allow the Chief
Hearing Officer to select as a Panelist a
person who previously served as a
Governor of the Exchange prior to its
acquisition by Nasdaq, Inc., but does not
serve currently in that position; and
9231(b)(1)(D) shall be read to allow a
person who is a member of FINRA’s
Market Regulation Committee to be
among the FINRA Panelists approved by
the Exchange Board at least annually
whom the Chief Hearing Officer may
also select as a Panelist. This language
is necessary to preserve the pool of
individuals from whom the Chief
Hearing Officer may select to serve as a
Panelist for BX disciplinary matters.
• The term ‘‘Nasdaq By-Laws’’ in
Nasdaq Rules 9521(b)(2) and (b)(3) shall
be read as a reference to BX’s Rules (or
‘‘Rules of the Exchange,’’ as described in
Current BX Rules 9521(b)(2) and (b)(3))
for purposes of determining the
disqualification of members and
associated persons to the Exchange.6
• Rules 9552(f), 9553(g), 9554(g),
9555(g), 9556(g), and 9558(g) in the
Nasdaq 9000 Series shall be read to
continue to allow the filing of a request
for termination of a suspension (or a
request for termination of the limitation,
prohibition or suspension with respect
to Rules 9555(g) and 9558(g)), to be
made with either the head of the
Exchange or the FINRA department or
office that issued the notice or that is
handling the matter on behalf of the
issuing department or office. The
inclusion of this language is necessary
so that it is clear that such filings may
continue to be made with the Exchange.
6 In a future filing, Nasdaq will amend its Rules
9521(b)(2) and (b)(3) concerning the qualification/
disqualification of Exchange members, to align its
rules closer to BX and Phlx’s rulebook.
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8000. Investigations and Sanctions.
9000. Code of Procedure.
The Exchange also believes that it is
necessary, as a consequence of the
relocation of its Disciplinary Rules and
the incorporation by reference of the
Nasdaq rules as previously described, to
eliminate certain differences between
the BX and Nasdaq rules by adopting
the Nasdaq rule text by reference. The
following discussions identify the
differences between the current BX
Disciplinary Rules and the
corresponding Nasdaq Disciplinary
Rules to be incorporated by reference:
Current BX IM–8310–3(b)
Current BX Rule 9120(f) provides that
‘‘[t]he term ‘‘Department of
Enforcement’’ means the Department of
Enforcement of FINRA Regulation,
acting on behalf of the Exchange
pursuant to the FINRA Regulatory
Contract.’’ 7 Current BX IM–8310–3(b),
however, uses the term ‘‘Department of
Enforcement of FINRA.’’ Since Nasdaq
IM–8310–3(b) uses the term
‘‘Department of Enforcement’’ and to the
extent that such term is already defined
in the BX rulebook, the Exchange
believes that it is appropriate to apply
the term provided in Nasdaq IM–8310–
3(b) and incorporate it by reference into
the BX rule.
Current BX Rule 8320
In 2010, Nasdaq created Rule 7007
(‘‘Collection of Fees’’) to facilitate an
efficient method of collecting
undisputed or final fees, fines, charges
and/or other monetary sanctions or
monies due and owing to Nasdaq from
The Nasdaq Option Market (‘‘NOM’’)
Participants.8
Similarly, in 2012, BX adopted its
options market rules (‘‘BX Options
Market’’) to operate as a fully
automated, price/time priority
execution system built on the core
functionality of the NOM.9 In its filing,
7 This definition mirrors the one in the Nasdaq
rulebook under Rule 9120(f).
8 See Securities Exchange Act Release No. 63536
(December 14, 2010), 75 FR 80102 (December 21,
2010) (SR–NASDAQ–2010–163). Nasdaq Rule 7007
was later relocated to Options Chapter XV, Section
1 and then moved to its current location under
Options 7, Section 1, in the Nasdaq rulebook shell.
See Securities Exchange Act Release No. 66158
(January 13, 2012), 75 FR 80102 (January 13, 2012)
(SR–NASDAQ–2012–006) and Securities Exchange
Act Release No. 84684 (November 29, 2018), 83 FR
62936 (December 6, 2018) (SR–NASDAQ–2018–
098).
9 Securities Exchange Act Release No. 67256
(June 26, 2012), 77 FR 39277 (July 2, 2012) (SR–BX–
2012–030). This rule was later relocated to the BX
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BX proposed to adopt, under respective
Chapter XV, Section 2 a rule identical
to the Nasdaq Collection of Fees rule.10
Although, at the time of its creation, the
Nasdaq Collection of Fees rule was
cross-referenced to current Nasdaq Rule
8320(a)(1),11 such cross-reference was
not included in the filing that created
the BX Options Market.
Based on the above, the Exchange
believes that it is appropriate that BX
adopts the aforementioned crossreference to make the collection of fees
owed to the Exchange more efficient.
Therefore, the Exchange believes that it
is appropriate to incorporate by
reference Nasdaq Rule 8320.
Current BX Rule 9120
In 2018, the Exchange amended its
Disciplinary Rules to align them with
the investigatory and disciplinary
processes of Nasdaq PHLX LLC
(‘‘Phlx’’).12 As stated in its proposal, the
changes to the ‘‘Interested Staff’’
concept (which, at the time, was
relocated under 9120(r)) were done to
conform the BX rule to Phlx’s
definition. At the time, however, the
proposed harmonizing changes to BX
Rule 9120(r)(1)(B) inadvertently
excluded the words ‘‘Head of’’ and
omitted to add the word ‘‘the’’; indeed,
the text should have read ‘‘Head of the
Exchange’s Regulation Department’’
instead of, simply, ‘‘Exchange’s
Regulation Department.’’
The correct definition, as explained
above, would also align with the term
currently defined in Nasdaq Rule
9120(r)(1)(B), which provides that
‘‘Interested Staff’’ shall mean ‘‘an
Exchange employee of the Nasdaq
Regulation Department who reports,
directly or indirectly, to the Head of the
Nasdaq Regulation Department.’’
The Exchange believes that it is
appropriate to apply Nasdaq Rule 9120
and to incorporate it by reference into
the BX rule. Additionally, the Exchange
notes applying the Nasdaq Rule 9120
and incorporating it by reference into
the Exchange rule should correct a typo
in Current BX Rule 9120(v) that
erroneously uses the term ‘‘RINRA’’
instead of the acronym ‘‘FINRA.’’
Current BX IM–9216
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In 2007, Nasdaq filed a proposal to
adopt rules that would govern
Rulebook shell. See Securities Exchange Act
Release No. 84326 (October 1, 2018), 83 FR 50414
(October 1, 2018) (SR–BX–2018–046).
10 Id.
11 See supra note 8.
12 See Securities Exchange Act Release No. 84354
(October 3, 2018), 83 FR 50723 (October 9, 2018)
(SR–BX–2018–042).
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participation in the NOM.13 This
proposal, among other changes, adopted
NOM Rule Chapter X, Section 7
(‘‘Penalty for Minor Rule Violations’’)
and was cross-referenced in Nasdaq IM–
9216.
The provisions in the Nasdaq Penalty
for Minor Rule Violations rule were
identical to those adopted in 2012 by
the BX Options Market.14 Similarly, the
Exchange adopted under BX IM–9216 a
cross-reference to BX Chapter X, Section
7 15 (Chapter X, Section 7, was later
relocated under the Options 11 title in
the Rulebook shell 16); however, such
cross-reference was inadvertently left
out of the Rulebook. Thus, the Exchange
believes that incorporating by reference
Nasdaq IM–9216 into the BX rule will
restore the cross-reference to the current
BX’s Penalty for Minor Rule Violations
rule.
The Exchange also believes that
incorporating by reference Nasdaq IM–
9216 will correct a typo in the BX crossreference that currently points to SEC
Exchange Act (‘‘SEA’’) Rule 602(b)(5).
The cross-reference refers to the failure
to properly update published quotations
in certain Electronic Communication
Networks; however, the rules for the
dissemination of such information are
actually described in SEA Rule
605(b)(5).
Current BX Rule 9231
The Exchange proposes to adopt the
cross-reference in Nasdaq Rule 9231(c)
concerning the appointment of
arbitrators pursuant to the FINRA Rules
12000 and 13000 Series (the ‘‘FINRA
Arbitration Rules’’). Current BX Rule
9231(c) provides that arbitrators shall be
appointed pursuant to BX General 6
(‘‘BX Arbitration Rules’’).17 The BX
Arbitration Rules incorporate by
reference the similar Nasdaq arbitration
rules (also under Nasdaq’s General 6
title); in turn, the Nasdaq rules
incorporate the FINRA Arbitration Rules
by reference into its text. Following the
incorporation by reference of Nasdaq
Rule 9231, BX Rule 9231(c) will directly
cross-reference the FINRA Arbitration
Rules, which will not create any
differences from the current BX rules.
13 See Securities Exchange Act Release No. 57478
(March 12, 2008), 73 FR 14521 (March 12, 2008)
(SR–NASDAQ–2007–004).
14 See supra note 9.
15 Id.
16 See Securities Exchange Act Release No. 87468
(November 5, 2019), 84 FR 61091 (November 12,
2019) (SR–BX–2019–039).
17 See Securities Exchange Act Release No. 84476
(October 24, 2018), 83 FR 54630 (October 30, 2018)
(SR–BX–2018–048).
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33237
Current BX Rule 9232
Currently, Nasdaq Rule 9232(a)
provides a cross-reference to
subsections (A) through (D) in Nasdaq
Rule 9231(b)(1), whereas Current BX
Rule 9232(a) simply provides a
reference to BX Rule 9231(b)(1). The
Exchange believes that it is appropriate
to apply Nasdaq Rule 9232(a) and
incorporate it by reference into the BX
rule since the Nasdaq rule contains a
more precise cross-reference to Nasdaq
Rule 9231(b)(1).
Current BX Rule 9522
The Exchange proposes to apply and
incorporate by reference Nasdaq Rule
9522 into current BX Rule 9522. This
will amend the first sentence in Current
BX Rule 9522(a)(1) by replacing the
term ‘‘Exchange’s Regulation
Department’’ with the term ‘‘Department
of Member Regulation’’ as currently
provided in Nasdaq Rule 9522(a)(1). As
previously indicated by the Exchange,18
the FINRA Department of Member
Regulation 19 currently performs the
functions described in Current BX Rule
9522. Therefore applying the Nasdaq
rule and incorporating it by reference
into BX Rule 9522 provides clarity to
the rule text and aligns it with Nasdaq
and Phlx’s rules.
2. Statutory Basis
Rule Relocation
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,20 in general, and furthers the
objectives of Section 6(b)(5) of the Act,21
in particular, in that it is designed to
promote just and equitable principles of
trade and to protect investors and the
public interest by bringing greater
transparency to its rules by relocating its
Rules into the new Rulebook shell
together with other rules which have
already been relocated. The Exchange’s
proposal is consistent with the Act and
will protect investors and the public
interest by harmonizing its rules, where
applicable, across Nasdaq markets so
that members can readily locate rules
which cover similar topics. The
relocation and harmonization of the
Disciplinary Rules is part of the
Exchange’s continued effort to promote
efficiency and conformity of its
processes with those of its Affiliated
Exchanges. The Exchange believes that
the placement of these Disciplinary
Rules into their new location in the
18 See Securities Exchange Act Release No. 84354
(October 3, 2018), 83 FR 50724 (October 9, 2018)
(SR–BX–2018–042).
19 As defined in BX 9120(g).
20 15 U.S.C. 78f(b).
21 15 U.S.C. 78f(b)(5).
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shell will facilitate the use of the
Rulebook by members, associated
persons, and other persons subject to
the Exchange’s jurisdiction.
Specifically, the Exchange believes that
market participants that are members of
more than one Nasdaq market will
benefit from the ability to compare
Rulebooks.
The Exchange is not substantively
amending rule text unless noted
otherwise within this proposal. The
Exchange’s Affiliated Exchanges have
already completed or are in the process
of completing the relocation of
corresponding disciplinary rules into
the same location of their rulebooks for
ease of reference.22 The Exchange
believes its proposal will benefit
investors and the general public by
increasing the transparency of its
Rulebook and promoting easy
comparisons among the various Nasdaq
Rulebooks.
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Incorporation by Reference
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,23 in general, and furthers the
objectives of Section 6(b)(5) of the Act,24
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
consolidating its rules into a single rule
set. The Exchange’s Affiliated
Exchanges have filed similar proposed
rule changes to amend and relocate their
disciplinary rules 25 so that the Nasdaq
8000 Series and 9000 Series Rules,
which govern the investigative and
disciplinary processes, are similarly
consolidated and incorporated by
reference.
Replacing the Current BX Series 8000
(to be relocated under General 5,
Section 1) and 9000 (to be relocated
under General 5, Section 2) Rules with
introductory paragraphs to each that
incorporate by reference Nasdaq Series
8000 and 9000 Rules, respectively, will
22 See Securities Exchange Act Release No. 86138
(July 18, 2019), 84 FR 29567 (July 24, 2019) (SR–
ISE–2019–17); Securities Exchange Act Release No.
86346 (July 10, 2019), 84 FR 33999 (July 16, 2019)
(SR–GEMX–2019–08); and Securities Exchange Act
Release No. 86424 (July 12, 2019), 84 FR 36134
(July 26, 2019) (SR–MRX–2019–15); and Securities
Exchange Act Release No. 87778 (December 17,
2019), 84 FR 70590 (December 23, 2019) (SR–
NASDAQ–2019–098). Similarly, Phlx recently
submitted a proposal to relocate its disciplinary
rules. See Securities Exchange Act Release No.
88519 (March 31, 2020), 85 FR 19203 (April 6,
2020) (SR–Phlx–2020–09).
23 See supra note 20.
24 See supra note 21.
25 See supra note 22.
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provide an easy reference for members,
associated persons, and other persons
subject to the Exchange’s jurisdiction
seeking to understand and follow the
investigative and disciplinary processes
across all of Nasdaq’s Exchanges. As
noted, the Exchange’s Affiliated
Exchanges have filed similar proposed
rule changes to amend and relocate their
disciplinary rules to incorporate by
reference the Nasdaq rules so that the
Nasdaq Series 8000 and 9000 Rules are
the source document for all of the
Nasdaq Exchanges’ investigative and
disciplinary processes. The Exchange
notes that the substance of the current
rules is not changing. The Exchange
desires to conform its rules to give its
members and the members of its
Affiliated Exchanges the ability to
quickly locate rules in one central
location.
The Exchange also believes that the
proposal is consistent with Section
6(b)(6) of the Act,26 which requires that
the rules of an exchange provide that its
members be appropriately disciplined
for violations of the Act as well as the
rules and regulations thereunder, or the
rules of the Exchange, by expulsion,
suspension, limitation of activities,
functions, and operations, fine, censure,
being suspended or barred from being
associated with a member, or any other
fitting sanction. As noted above, the
Exchange proposes to include
introductory paragraphs to each of BX’s
Disciplinary Rules (to be relocated,
respectively, under General 5, Sections
1 and 2) that list instances in which
cross references in the Nasdaq Series
8000 and 9000 Rules to other Nasdaq
rules should be read to refer instead to
the Exchange Rules and references to
Nasdaq terms (whether or not defined)
shall be read to refer to the Exchangerelated meanings of those terms. This is
consistent with the Act because it
minimizes confusion and ensures the
proper application of the Nasdaq Rules
to BX.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that this rule change
does not impose an undue burden on
competition because the Exchange is
merely incorporating the Nasdaq Series
8000 and 9000 Rules, which are
substantially similar to BX’s
Disciplinary Rules (to be relocated,
respectively, under General 5, Sections
26 15
PO 00000
U.S.C. 78f(b)(6).
Frm 00160
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1 and 2). Those rules will now apply to
BX members, associated persons, and
other persons subject to the Exchange’s
jurisdiction. To the extent that there are
differences between the two rule sets,
the Exchange notes those differences in
introductory paragraphs to each of BX’s
Disciplinary Rules (to be relocated,
respectively, under General 5, Sections
1 and 2). As noted above, the proposed
introductory paragraphs list instances in
which cross references in Nasdaq Series
8000 and 9000 Rules to other Nasdaq
rules shall be read to refer instead to the
Exchange Rules, and references to
Nasdaq terms (whether or not defined)
shall be read to refer to the Exchangerelated meanings of those terms.
Because Nasdaq Current Series 8000
and 9000 Rules are substantially similar
to BX’s Disciplinary Rules (General 5,
Sections 1 and 2, respectively), and
because the introductory paragraphs
ensure that any differences are
preserved, the proposed changes do not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
Finally, the Exchange believes that
the proposed amendments do not
impose an undue burden on
competition because the amendments to
relocate the Rules are non-substantive.
This rule change is intended to bring
greater clarity to the Exchange’s Rules.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 27 and Rule 19b–
4(f)(6) thereunder.28
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
27 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
28 17
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01JNN1
Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Notices
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
jbell on DSKJLSW7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2020–009 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BX–2020–009. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
VerDate Sep<11>2014
19:40 May 29, 2020
Jkt 250001
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BX–2020–009 and should
be submitted on or before June 22, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–11645 Filed 5–29–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88948; File No. 4–566]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Notice of Filing and Order
Approving and Declaring Effective an
Amendment to the Plan for the
Allocation of Regulatory
Responsibilities Among Cboe BZX
Exchange, Inc., Cboe BYX Exchange,
Inc., NYSE Chicago, Inc., Cboe EDGA
Exchange, Inc., Cboe EDGX Exchange,
Inc., Financial Industry Regulatory
Authority, Inc., MEMX LLC, 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. Relating to
the Surveillance, Investigation, and
Enforcement of Insider Trading Rules
May 26, 2020.
Notice is hereby given that the
Securities and Exchange Commission
(‘‘Commission’’) has issued an Order,
pursuant to Section 17(d) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 approving and declaring
effective an amendment to the plan for
allocating regulatory responsibility
(‘‘Plan’’) filed on May 19, 2020,
pursuant to Rule 17d–2 of the Act,2 by
Cboe BZX Exchange, Inc. (‘‘BZX’’), Cboe
BYX Exchange, Inc. (‘‘BYX’’), NYSE
Chicago, Inc. (‘‘CHX’’), Cboe EDGA
Exchange, Inc. (‘‘EDGA’’), Cboe EDGX
Exchange, Inc. (‘‘EDGX’’), Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’), MEMX LLC (‘‘MEMX’’),
Nasdaq BX, Inc. (‘‘BX’’), Nasdaq PHLX
LLC (‘‘PHLX’’), The Nasdaq Stock
Market LLC (‘‘Nasdaq’’), NYSE National,
Inc. (‘‘NYSE National’’), New York
Stock Exchange LLC (‘‘NYSE’’), NYSE
American LLC (‘‘NYSE American’’),
NYSE Arca, Inc. (‘‘NYSE Arca’’),
Investors’ Exchange LLC (‘‘IEX’’) and
29 17
CFR 200.30–3(a)(12).
U.S.C. 78q(d).
2 17 CFR 240.17d–2.
1 15
PO 00000
Frm 00161
Fmt 4703
Sfmt 4703
33239
Long-Term Stock Exchange, Inc.
(‘‘LTSE’’) (collectively, ‘‘Participating
Organizations’’ or ‘‘Parties’’).
I. Introduction
Section 19(g)(1) of the Act,3 among
other things, requires every selfregulatory organization (‘‘SRO’’)
registered as either a national securities
exchange or national securities
association to examine for, and enforce
compliance by, its members and persons
associated with its members with the
Act, the rules and regulations
thereunder, and the SRO’s own rules,
unless the SRO is relieved of this
responsibility pursuant to Section
17(d) 4 or Section 19(g)(2) 5 of the Act.
Without this relief, the statutory
obligation of each individual SRO could
result in a pattern of multiple
examinations of broker-dealers that
maintain memberships in more than one
SRO (‘‘common members’’). Such
regulatory duplication would add
unnecessary expenses for common
members and their SROs.
Section 17(d)(1) of the Act 6 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.7 With respect to
a common member, Section 17(d)(1)
authorizes the Commission, by rule or
order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules, and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 and Rule 17d–2 under the Act.8
Rule 17d–1 authorizes the Commission
to name a single SRO as the designated
examining authority (‘‘DEA’’) to
examine common members for
compliance with the financial
responsibility requirements imposed by
the Act, or by Commission or SRO
rules.9 When an SRO has been named as
a common member’s DEA, all other
SROs to which the common member
belongs are relieved of the responsibility
to examine the firm for compliance with
the applicable financial responsibility
rules. On its face, Rule 17d–1 deals only
with an SRO’s obligations to enforce
3 15
U.S.C. 78s(g)(1).
U.S.C. 78q(d).
5 15 U.S.C. 78s(g)(2).
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.
9 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
4 15
E:\FR\FM\01JNN1.SGM
01JNN1
]]>Agencies
[Federal Register Volume 85, Number 105 (Monday, June 1, 2020)]
[Notices]
[Pages 33235-33239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11645]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88938; File No. SR-BX-2020-009]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Relocate the BX
Disciplinary Rules and Incorporate by Reference the Disciplinary Rules
of The Nasdaq Stock Market LLC
May 26, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 15, 2020, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to (A) relocate the BX Series 8000 and 9000
Rules (the ``Current BX 8000 Series,'' ``Current BX 9000 Series,'' and,
collectively, the ``Disciplinary Rules'') to the Exchange's rulebook's
(``Rulebook'') shell structure; \3\ (B) the Exchange is also proposing
to simultaneously replace the text of the Disciplinary Rules with
introductory paragraphs in each that incorporate by reference The
Nasdaq Stock Market LLC's (``Nasdaq'') Series 8000 and 9000 Rules,
currently located under the General 5 title of the Nasdaq rulebook.\4\
---------------------------------------------------------------------------
\3\ In 2017, the Exchange added a shell structure to its
Rulebook with the purpose of improving efficiency and readability
and to align its rules closer to those of its five sister exchanges,
The Nasdaq Stock Market LLC; Nasdaq PHLX LLC; Nasdaq ISE, LLC
(``ISE''); Nasdaq GEMX, LLC (``GEMX''); and Nasdaq MRX, LLC
(``MRX'') (together, the ``Affiliated Exchanges''). See Securities
Exchange Act Release No. 82174 (November 29, 2017), 82 FR 57492
(December 5, 2017) (SR-BX-2017-054).
\4\ See Securities Exchange Act Release No. 87778 (December 17,
2019), 84 FR 70590 (December 23, 2019) (SR-NASDAQ-2019-098).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://nasdaqbx.cchwallstreet.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
A. Rule Relocation
The Exchange proposes to relocate the Disciplinary Rules under the
General 5 title (``Discipline'') in the Rulebook shell. The relocation
and harmonization of these rules is part of the Exchange's continued
effort to promote efficiency and conformity of its processes with those
of its Affiliated Exchanges. The Exchange believes that the placement
of the Disciplinary Rules into their new location in the shell will
facilitate the use of the Rulebook by members, associated persons, or
other persons subject to BX's jurisdiction.
Specifically, the Exchange proposes to relocate the Disciplinary
Rules as follows:
[[Page 33236]]
----------------------------------------------------------------------------------------------------------------
General 5--Discipline: Proposed new rule No. Current BX rule No.
----------------------------------------------------------------------------------------------------------------
Section 1..................................... 8000. Investigations and Sanctions.
Section 2..................................... 9000. Code of Procedure.
----------------------------------------------------------------------------------------------------------------
B. Incorporation by Reference
The Exchange also proposes to simultaneously replace the current BX
Series 8000 and 9000 Rules with introductory paragraphs to each that
incorporate by reference the Nasdaq Series 8000 and 9000 Rules (located
in General 5 Discipline), respectively, and state that such Nasdaq
Rules shall be applicable to Exchange Members, associated persons, and
other persons subject to the Exchange's jurisdiction.\5\
---------------------------------------------------------------------------
\5\ The Exchange notes that the proposed changes will not become
operative unless and until the Commission approves the Exchange's
request, to be filed pursuant to Section 36 of the Exchange Act and
SEC Rule 0-12 thereunder, for an exemption from the rule filing
requirements of Section 19(b) of the Exchange Act as to changes to
the BX 8000 Series (New General 5, Section 1) and BX 9000 Series
(New General 5, Section 2) that are effected solely by virtue of a
change to the Nasdaq Series 8000 or 9000 Rules Series.
---------------------------------------------------------------------------
Except as noted below, the Nasdaq Series 8000 and 9000 Rules are
substantially similar to BX's Disciplinary Rules. The proposed
introductory paragraphs list instances in which cross-references in the
Nasdaq Series 8000 and 9000 Rules to other Nasdaq rules shall be read
to refer instead to the Exchange Rules, and references to Nasdaq terms
(whether or not defined) shall be read to refer to the Exchange-related
meanings of those terms. For instance, references in both the Nasdaq
Series 8000 and 9000 Rules to the following terms shall be read to
refer to the Exchange-specific meanings of those terms: The terms
``Exchange'' or ``Nasdaq'' shall be read to refer to BX; the terms
``Rule,'' ``Rules of Nasdaq,'' or ``Nasdaq Rules'' shall be read to
refer to the BX Rules (also referenced in the Disciplinary Rules as
``Equity Rules''); in Rules 9521(b)(2) and 9521(b)(3) the term ``Nasdaq
By-Laws'' shall be read as a reference to BX's Rules; the terms
``Board'' or ``Nasdaq Board'' shall be read to refer to the BX Board of
Directors; the terms ``Member,'' ``member firm,'' or ``associated
person'' shall be read to refer to a BX Member, BX member firm, or BX
associated person; the terms ``Nasdaq Regulation'' or ``Nasdaq
Regulation Department'' shall be read to refer to the BX Regulation
Department; the term ``Nasdaq Options Market'' shall be read to refer
to the BX Options Market; and the term ``Chief Regulatory Officer''
shall be read to refer to BX's Chief Regulatory Officer.
Additionally, the Exchange proposes that the references in the
Nasdaq Rule 9000 Series to Equity 5, Sections 4 and 5 shall be read,
respectively, to refer to BX's Rules 7440A and 7450A.
Moreover, in addition to the proposed introduction to the BX Series
9000 Rules (New General 5, Section 2) indicating how certain Nasdaq
Series 9000 Rules should be read to apply to Exchange members,
associated persons, and other persons subject to the Exchange's
jurisdiction, the proposed introduction will indicate that specific
language in certain Disciplinary Rules will be preserved. Specifically:
Rule 9231(b)(1)(C) in the Nasdaq rules shall be read to
allow the Chief Hearing Officer to select as a Panelist a person who
previously served as a Governor of the Exchange prior to its
acquisition by Nasdaq, Inc., but does not serve currently in that
position; and 9231(b)(1)(D) shall be read to allow a person who is a
member of FINRA's Market Regulation Committee to be among the FINRA
Panelists approved by the Exchange Board at least annually whom the
Chief Hearing Officer may also select as a Panelist. This language is
necessary to preserve the pool of individuals from whom the Chief
Hearing Officer may select to serve as a Panelist for BX disciplinary
matters.
The term ``Nasdaq By-Laws'' in Nasdaq Rules 9521(b)(2) and
(b)(3) shall be read as a reference to BX's Rules (or ``Rules of the
Exchange,'' as described in Current BX Rules 9521(b)(2) and (b)(3)) for
purposes of determining the disqualification of members and associated
persons to the Exchange.\6\
---------------------------------------------------------------------------
\6\ In a future filing, Nasdaq will amend its Rules 9521(b)(2)
and (b)(3) concerning the qualification/disqualification of Exchange
members, to align its rules closer to BX and Phlx's rulebook.
---------------------------------------------------------------------------
Rules 9552(f), 9553(g), 9554(g), 9555(g), 9556(g), and
9558(g) in the Nasdaq 9000 Series shall be read to continue to allow
the filing of a request for termination of a suspension (or a request
for termination of the limitation, prohibition or suspension with
respect to Rules 9555(g) and 9558(g)), to be made with either the head
of the Exchange or the FINRA department or office that issued the
notice or that is handling the matter on behalf of the issuing
department or office. The inclusion of this language is necessary so
that it is clear that such filings may continue to be made with the
Exchange.
The Exchange also believes that it is necessary, as a consequence
of the relocation of its Disciplinary Rules and the incorporation by
reference of the Nasdaq rules as previously described, to eliminate
certain differences between the BX and Nasdaq rules by adopting the
Nasdaq rule text by reference. The following discussions identify the
differences between the current BX Disciplinary Rules and the
corresponding Nasdaq Disciplinary Rules to be incorporated by
reference:
Current BX IM-8310-3(b)
Current BX Rule 9120(f) provides that ``[t]he term ``Department of
Enforcement'' means the Department of Enforcement of FINRA Regulation,
acting on behalf of the Exchange pursuant to the FINRA Regulatory
Contract.'' \7\ Current BX IM-8310-3(b), however, uses the term
``Department of Enforcement of FINRA.'' Since Nasdaq IM-8310-3(b) uses
the term ``Department of Enforcement'' and to the extent that such term
is already defined in the BX rulebook, the Exchange believes that it is
appropriate to apply the term provided in Nasdaq IM-8310-3(b) and
incorporate it by reference into the BX rule.
---------------------------------------------------------------------------
\7\ This definition mirrors the one in the Nasdaq rulebook under
Rule 9120(f).
---------------------------------------------------------------------------
Current BX Rule 8320
In 2010, Nasdaq created Rule 7007 (``Collection of Fees'') to
facilitate an efficient method of collecting undisputed or final fees,
fines, charges and/or other monetary sanctions or monies due and owing
to Nasdaq from The Nasdaq Option Market (``NOM'') Participants.\8\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 63536 (December 14,
2010), 75 FR 80102 (December 21, 2010) (SR-NASDAQ-2010-163). Nasdaq
Rule 7007 was later relocated to Options Chapter XV, Section 1 and
then moved to its current location under Options 7, Section 1, in
the Nasdaq rulebook shell. See Securities Exchange Act Release No.
66158 (January 13, 2012), 75 FR 80102 (January 13, 2012) (SR-NASDAQ-
2012-006) and Securities Exchange Act Release No. 84684 (November
29, 2018), 83 FR 62936 (December 6, 2018) (SR-NASDAQ-2018-098).
---------------------------------------------------------------------------
Similarly, in 2012, BX adopted its options market rules (``BX
Options Market'') to operate as a fully automated, price/time priority
execution system built on the core functionality of the NOM.\9\ In its
filing,
[[Page 33237]]
BX proposed to adopt, under respective Chapter XV, Section 2 a rule
identical to the Nasdaq Collection of Fees rule.\10\ Although, at the
time of its creation, the Nasdaq Collection of Fees rule was cross-
referenced to current Nasdaq Rule 8320(a)(1),\11\ such cross-reference
was not included in the filing that created the BX Options Market.
---------------------------------------------------------------------------
\9\ Securities Exchange Act Release No. 67256 (June 26, 2012),
77 FR 39277 (July 2, 2012) (SR-BX-2012-030). This rule was later
relocated to the BX Rulebook shell. See Securities Exchange Act
Release No. 84326 (October 1, 2018), 83 FR 50414 (October 1, 2018)
(SR-BX-2018-046).
\10\ Id.
\11\ See supra note 8.
---------------------------------------------------------------------------
Based on the above, the Exchange believes that it is appropriate
that BX adopts the aforementioned cross-reference to make the
collection of fees owed to the Exchange more efficient. Therefore, the
Exchange believes that it is appropriate to incorporate by reference
Nasdaq Rule 8320.
Current BX Rule 9120
In 2018, the Exchange amended its Disciplinary Rules to align them
with the investigatory and disciplinary processes of Nasdaq PHLX LLC
(``Phlx'').\12\ As stated in its proposal, the changes to the
``Interested Staff'' concept (which, at the time, was relocated under
9120(r)) were done to conform the BX rule to Phlx's definition. At the
time, however, the proposed harmonizing changes to BX Rule
9120(r)(1)(B) inadvertently excluded the words ``Head of'' and omitted
to add the word ``the''; indeed, the text should have read ``Head of
the Exchange's Regulation Department'' instead of, simply, ``Exchange's
Regulation Department.''
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 84354 (October 3,
2018), 83 FR 50723 (October 9, 2018) (SR-BX-2018-042).
---------------------------------------------------------------------------
The correct definition, as explained above, would also align with
the term currently defined in Nasdaq Rule 9120(r)(1)(B), which provides
that ``Interested Staff'' shall mean ``an Exchange employee of the
Nasdaq Regulation Department who reports, directly or indirectly, to
the Head of the Nasdaq Regulation Department.''
The Exchange believes that it is appropriate to apply Nasdaq Rule
9120 and to incorporate it by reference into the BX rule. Additionally,
the Exchange notes applying the Nasdaq Rule 9120 and incorporating it
by reference into the Exchange rule should correct a typo in Current BX
Rule 9120(v) that erroneously uses the term ``RINRA'' instead of the
acronym ``FINRA.''
Current BX IM-9216
In 2007, Nasdaq filed a proposal to adopt rules that would govern
participation in the NOM.\13\ This proposal, among other changes,
adopted NOM Rule Chapter X, Section 7 (``Penalty for Minor Rule
Violations'') and was cross-referenced in Nasdaq IM-9216.
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 57478 (March 12,
2008), 73 FR 14521 (March 12, 2008) (SR-NASDAQ-2007-004).
---------------------------------------------------------------------------
The provisions in the Nasdaq Penalty for Minor Rule Violations rule
were identical to those adopted in 2012 by the BX Options Market.\14\
Similarly, the Exchange adopted under BX IM-9216 a cross-reference to
BX Chapter X, Section 7 \15\ (Chapter X, Section 7, was later relocated
under the Options 11 title in the Rulebook shell \16\); however, such
cross-reference was inadvertently left out of the Rulebook. Thus, the
Exchange believes that incorporating by reference Nasdaq IM-9216 into
the BX rule will restore the cross-reference to the current BX's
Penalty for Minor Rule Violations rule.
---------------------------------------------------------------------------
\14\ See supra note 9.
\15\ Id.
\16\ See Securities Exchange Act Release No. 87468 (November 5,
2019), 84 FR 61091 (November 12, 2019) (SR-BX-2019-039).
---------------------------------------------------------------------------
The Exchange also believes that incorporating by reference Nasdaq
IM-9216 will correct a typo in the BX cross-reference that currently
points to SEC Exchange Act (``SEA'') Rule 602(b)(5). The cross-
reference refers to the failure to properly update published quotations
in certain Electronic Communication Networks; however, the rules for
the dissemination of such information are actually described in SEA
Rule 605(b)(5).
Current BX Rule 9231
The Exchange proposes to adopt the cross-reference in Nasdaq Rule
9231(c) concerning the appointment of arbitrators pursuant to the FINRA
Rules 12000 and 13000 Series (the ``FINRA Arbitration Rules''). Current
BX Rule 9231(c) provides that arbitrators shall be appointed pursuant
to BX General 6 (``BX Arbitration Rules'').\17\ The BX Arbitration
Rules incorporate by reference the similar Nasdaq arbitration rules
(also under Nasdaq's General 6 title); in turn, the Nasdaq rules
incorporate the FINRA Arbitration Rules by reference into its text.
Following the incorporation by reference of Nasdaq Rule 9231, BX Rule
9231(c) will directly cross-reference the FINRA Arbitration Rules,
which will not create any differences from the current BX rules.
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 84476 (October 24,
2018), 83 FR 54630 (October 30, 2018) (SR-BX-2018-048).
---------------------------------------------------------------------------
Current BX Rule 9232
Currently, Nasdaq Rule 9232(a) provides a cross-reference to
subsections (A) through (D) in Nasdaq Rule 9231(b)(1), whereas Current
BX Rule 9232(a) simply provides a reference to BX Rule 9231(b)(1). The
Exchange believes that it is appropriate to apply Nasdaq Rule 9232(a)
and incorporate it by reference into the BX rule since the Nasdaq rule
contains a more precise cross-reference to Nasdaq Rule 9231(b)(1).
Current BX Rule 9522
The Exchange proposes to apply and incorporate by reference Nasdaq
Rule 9522 into current BX Rule 9522. This will amend the first sentence
in Current BX Rule 9522(a)(1) by replacing the term ``Exchange's
Regulation Department'' with the term ``Department of Member
Regulation'' as currently provided in Nasdaq Rule 9522(a)(1). As
previously indicated by the Exchange,\18\ the FINRA Department of
Member Regulation \19\ currently performs the functions described in
Current BX Rule 9522. Therefore applying the Nasdaq rule and
incorporating it by reference into BX Rule 9522 provides clarity to the
rule text and aligns it with Nasdaq and Phlx's rules.
---------------------------------------------------------------------------
\18\ See Securities Exchange Act Release No. 84354 (October 3,
2018), 83 FR 50724 (October 9, 2018) (SR-BX-2018-042).
\19\ As defined in BX 9120(g).
---------------------------------------------------------------------------
2. Statutory Basis
Rule Relocation
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\20\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\21\ in particular, in that it is designed to
promote just and equitable principles of trade and to protect investors
and the public interest by bringing greater transparency to its rules
by relocating its Rules into the new Rulebook shell together with other
rules which have already been relocated. The Exchange's proposal is
consistent with the Act and will protect investors and the public
interest by harmonizing its rules, where applicable, across Nasdaq
markets so that members can readily locate rules which cover similar
topics. The relocation and harmonization of the Disciplinary Rules is
part of the Exchange's continued effort to promote efficiency and
conformity of its processes with those of its Affiliated Exchanges. The
Exchange believes that the placement of these Disciplinary Rules into
their new location in the
[[Page 33238]]
shell will facilitate the use of the Rulebook by members, associated
persons, and other persons subject to the Exchange's jurisdiction.
Specifically, the Exchange believes that market participants that are
members of more than one Nasdaq market will benefit from the ability to
compare Rulebooks.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange is not substantively amending rule text unless noted
otherwise within this proposal. The Exchange's Affiliated Exchanges
have already completed or are in the process of completing the
relocation of corresponding disciplinary rules into the same location
of their rulebooks for ease of reference.\22\ The Exchange believes its
proposal will benefit investors and the general public by increasing
the transparency of its Rulebook and promoting easy comparisons among
the various Nasdaq Rulebooks.
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\22\ See Securities Exchange Act Release No. 86138 (July 18,
2019), 84 FR 29567 (July 24, 2019) (SR-ISE-2019-17); Securities
Exchange Act Release No. 86346 (July 10, 2019), 84 FR 33999 (July
16, 2019) (SR-GEMX-2019-08); and Securities Exchange Act Release No.
86424 (July 12, 2019), 84 FR 36134 (July 26, 2019) (SR-MRX-2019-15);
and Securities Exchange Act Release No. 87778 (December 17, 2019),
84 FR 70590 (December 23, 2019) (SR-NASDAQ-2019-098). Similarly,
Phlx recently submitted a proposal to relocate its disciplinary
rules. See Securities Exchange Act Release No. 88519 (March 31,
2020), 85 FR 19203 (April 6, 2020) (SR-Phlx-2020-09).
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Incorporation by Reference
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\23\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\24\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest, by consolidating its rules into a single rule set. The
Exchange's Affiliated Exchanges have filed similar proposed rule
changes to amend and relocate their disciplinary rules \25\ so that the
Nasdaq 8000 Series and 9000 Series Rules, which govern the
investigative and disciplinary processes, are similarly consolidated
and incorporated by reference.
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\23\ See supra note 20.
\24\ See supra note 21.
\25\ See supra note 22.
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Replacing the Current BX Series 8000 (to be relocated under General
5, Section 1) and 9000 (to be relocated under General 5, Section 2)
Rules with introductory paragraphs to each that incorporate by
reference Nasdaq Series 8000 and 9000 Rules, respectively, will provide
an easy reference for members, associated persons, and other persons
subject to the Exchange's jurisdiction seeking to understand and follow
the investigative and disciplinary processes across all of Nasdaq's
Exchanges. As noted, the Exchange's Affiliated Exchanges have filed
similar proposed rule changes to amend and relocate their disciplinary
rules to incorporate by reference the Nasdaq rules so that the Nasdaq
Series 8000 and 9000 Rules are the source document for all of the
Nasdaq Exchanges' investigative and disciplinary processes. The
Exchange notes that the substance of the current rules is not changing.
The Exchange desires to conform its rules to give its members and the
members of its Affiliated Exchanges the ability to quickly locate rules
in one central location.
The Exchange also believes that the proposal is consistent with
Section 6(b)(6) of the Act,\26\ which requires that the rules of an
exchange provide that its members be appropriately disciplined for
violations of the Act as well as the rules and regulations thereunder,
or the rules of the Exchange, by expulsion, suspension, limitation of
activities, functions, and operations, fine, censure, being suspended
or barred from being associated with a member, or any other fitting
sanction. As noted above, the Exchange proposes to include introductory
paragraphs to each of BX's Disciplinary Rules (to be relocated,
respectively, under General 5, Sections 1 and 2) that list instances in
which cross references in the Nasdaq Series 8000 and 9000 Rules to
other Nasdaq rules should be read to refer instead to the Exchange
Rules and references to Nasdaq terms (whether or not defined) shall be
read to refer to the Exchange-related meanings of those terms. This is
consistent with the Act because it minimizes confusion and ensures the
proper application of the Nasdaq Rules to BX.
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\26\ 15 U.S.C. 78f(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that this
rule change does not impose an undue burden on competition because the
Exchange is merely incorporating the Nasdaq Series 8000 and 9000 Rules,
which are substantially similar to BX's Disciplinary Rules (to be
relocated, respectively, under General 5, Sections 1 and 2). Those
rules will now apply to BX members, associated persons, and other
persons subject to the Exchange's jurisdiction. To the extent that
there are differences between the two rule sets, the Exchange notes
those differences in introductory paragraphs to each of BX's
Disciplinary Rules (to be relocated, respectively, under General 5,
Sections 1 and 2). As noted above, the proposed introductory paragraphs
list instances in which cross references in Nasdaq Series 8000 and 9000
Rules to other Nasdaq rules shall be read to refer instead to the
Exchange Rules, and references to Nasdaq terms (whether or not defined)
shall be read to refer to the Exchange-related meanings of those terms.
Because Nasdaq Current Series 8000 and 9000 Rules are substantially
similar to BX's Disciplinary Rules (General 5, Sections 1 and 2,
respectively), and because the introductory paragraphs ensure that any
differences are preserved, the proposed changes do not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
Finally, the Exchange believes that the proposed amendments do not
impose an undue burden on competition because the amendments to
relocate the Rules are non-substantive. This rule change is intended to
bring greater clarity to the Exchange's Rules.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \27\ and Rule 19b-
4(f)(6) thereunder.\28\
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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may
[[Page 33239]]
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule change should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BX-2020-009 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2020-009. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BX-2020-009 and should be submitted on
or before June 22, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11645 Filed 5-29-20; 8:45 am]
BILLING CODE 8011-01-P
