Order Granting Application by Nasdaq BX, Inc. for an Exemption Pursuant to Section 36(a) of the Exchange Act From the Rule Filing Requirements of Section 19(b) of the Exchange Act With Respect to Certain Rules Incorporated by Reference, 4691-4693 [2022-01712]
Download as PDF
<![CDATA[
Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Notices
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–NASDAQ–2022–003 and
should be submitted on or before
February 18, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01713 Filed 1–27–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94034]
Order Granting Application by Nasdaq
BX, Inc. for an Exemption Pursuant to
Section 36(a) of the Exchange Act
From the Rule Filing Requirements of
Section 19(b) of the Exchange Act With
Respect to Certain Rules Incorporated
by Reference
jspears on DSK121TN23PROD with NOTICES1
January 24, 2022.
Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) has filed with the
Securities and Exchange Commission
(‘‘Commission’’) an application for an
exemption under Section 36(a)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 from the rule filing
requirements of Section 19(b) of the
Exchange Act 2 with respect to certain
rules of the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
that the Exchange seeks to incorporate
by reference.3 Section 36 of the
Exchange Act, subject to certain
limitations, authorizes the Commission
to conditionally or unconditionally
15 17
CFR 200.30–3(a)(12).
U.S.C. 78mm(a)(1).
2 15 U.S.C. 78s(b).
3 See Letter from Angela S. Dunn, Principal
Associate General Counsel, BX, to J. Matthew
DeLesDernier, Assistant Secretary, Commission,
dated August 26, 2021 (‘‘Exemptive Request’’).
1 15
VerDate Sep<11>2014
18:03 Jan 27, 2022
Jkt 256001
exempt any person, security, or
transaction, or any class thereof, from
any provision of the Exchange Act or
rule thereunder, if necessary or
appropriate in the public interest and
consistent with the protection of
investors.
The Exchange has requested, pursuant
to Rule 0–12 under the Exchange Act,4
that the Commission grant the Exchange
an exemption from the rule filing
requirements of Section 19(b) of the
Exchange Act for changes to the
Exchange’s rules that are effected solely
by virtue of a change to a crossreferenced FINRA rule. Specifically, the
Exchange requests that it be permitted
to incorporate by reference changes
made to the FINRA rules that are crossreferenced in the Exchange’s rules
identified below, without the need for
the Exchange to file separately similar
proposed rule changes pursuant to
Section 19(b) of the Exchange Act: 5
• General 9, Section 1(b) (Prohibition
Against Trading Ahead of Customer
Orders) cross-references FINRA Rule
5320 (except for FINRA Rule 5320.02(b)
and the reference to FINRA Rule 6420
in FINRA Rule 5320).
• General 9, Section 1(c) (Front
Running Policy) cross-references FINRA
Rule 5270.
• General 9, Section 1(f)
(Confirmation of Callable Common
Stock) cross-references FINRA Rule
2232.
• General 9, Section 1(g) (Interfering
With the Transfer of Customer Accounts
in the Context of Employment Disputes)
cross-references FINRA Rule 2140.
• General 9, Section 2 (Customers’
Securities or Funds) cross-references
FINRA Rule 2150.
• General 9, Section 3
(Communications with the Public)
cross-references FINRA Rule 2210
(except for FINRA Rule 2210(c)).
• General 9, Section 5
(Telemarketing) cross-references FINRA
Rule 3230.
• General 9, Section 6 (Forwarding of
Proxy and Other Issuer-Related
Materials) cross-references FINRA Rule
2251.
• General 9, Section 7 (Disclosure of
Financial Condition, Control
Relationship with Issuer and
Participation or Interest in Primary or
Secondary Distribution) cross-references
FINRA Rules 2261, 2262, and 2269.
• General 9, Section 8 (SIPC
Information) cross-references FINRA
Rule 2266.
4 17
CFR 240.0–12.
Exemptive Request, supra note 3, at 6.
5 See
PO 00000
Frm 00140
Fmt 4703
Sfmt 4703
4691
• General 9, Section 9 (Fairness
Opinions) cross-references FINRA Rule
5150.
• General 9, Section 10(a)
(Recommendations to Customers
(Suitability)) cross-references FINRA
Rule 2111 (except for the references to
FINRA Rule 2214 in FINRA Rule 2111).
• General 9, Section 10(c) (Know
Your Customer) cross-references FINRA
Rule 2090.
• General 9, Section 12 (Customer
Account Statements) cross-references
FINRA Rule 2231.
• General 9, Section 13 (Margin
Disclosure Statement) cross-references
FINRA Rule 2264.
• General 9, Section 14 (Approval
Procedures for Day-Trading Accounts)
cross-references FINRA Rules 2130 and
2270.
• General 9, Section 15 (Borrowing
From or Lending to Customers) crossreferences FINRA Rule 3240.
• General 9, Section 16 (Charges for
Services Performed) cross-references
FINRA Rule 2122.
• General 9, Section 17 (Net
Transactions with Customers) crossreferences FINRA Rule 2124.
• General 9, Section 19 (Discretionary
Accounts) cross-references FINRA Rule
3260.
• General 9, Section 20 (Supervision)
cross-references FINRA Rules 3110 and
3170.
• General 9, Section 21 (Supervisory
Control System, Annual Certification of
Compliance and Supervisory Processes)
cross-references FINRA Rules 3120 and
3130 (except for the references to MSRB
rules in FINRA Rule 3130).
• General 9, Section 23 (Outside
Business Activities of an Associated
Person) cross-references FINRA Rule
3270.
• General 9, Section 24 (Private
Securities Transactions of an Associated
Person) cross-references FINRA Rule
3280.
• General 9, Section 25 (Transactions
for or by Associated Persons) crossreferences FINRA Rule 3210.
• General 9, Section 26 (Influencing
or Rewarding Employees of Others)
cross-references FINRA Rule 3220.
• General 9, Section 27 (Reporting
Requirements) cross-references FINRA
Rule 4530 (except for FINRA Rule
4530(h)).
• General 9, Section 28 (Disclosure to
Associated Persons When Signing Form
U4) cross-references FINRA Rule 2263
(except for subsection (2) of FINRA Rule
2263).
• General 9, Section 30 (Books and
Records) cross-references FINRA Rule
4511.
• General 9, Section 31 (Use of
Information Obtained in Fiduciary
E:\FR\FM\28JAN1.SGM
28JAN1
jspears on DSK121TN23PROD with NOTICES1
4692
Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Notices
Capacity) cross-references FINRA Rule
2060.
• General 9, Section 33 (Reporting
Requirements for Clearing Firms) crossreferences FINRA Rule 4540.
• General 9, Section 34 (Extensions of
Time Under Regulation T and SEC Rule
15c3–3) cross-references FINRA Rule
4230.
• General 9, Section 37 (Anti-Money
Laundering Compliance Program) crossreferences FINRA Rule 3310.
• General 9, Section 38(b) (Margin
Requirements) cross-references FINRA
Rule 4210.
• General 9, Section 39(b) (Fidelity
Bonds) cross-references FINRA Rule
4360.
• General 9, Section 40 (Capital
Compliance) cross-references FINRA
Rule 4110.
• General 9, Section 41 (Regulatory
Notification and Business Curtailment)
cross-references FINRA Rule 4120.
• General 9, Section 42 (Audit) crossreferences FINRA Rule 4140.
• General 9, Section 43 (General
Requirements) cross-references FINRA
Rule 4511.
• General 9, Section 44 (Records of
Written Customer Complaints) crossreferences FINRA Rule 4513.
• General 9, Section 45 (Customer
Account Information) cross-references
FINRA Rule 4512.
• General 9, Section 46
(Authorization Records for Negotiable
Instruments Drawn From a Customer’s
Account) cross-references FINRA Rule
4514.
• General 9, Section 47 (Approval
and Documentation of Changes in
Account Name or Designation) crossreferences FINRA Rule 4515.
• General 9, Section 48 (Notifications,
Questionnaires and Reports) crossreferences FINRA Rule 4521.
• General 9, Section 64 (Account
Approval) cross-references FINRA Rule
2360(b)(16).
• Equity 9, Section 15 (Suitability)
cross-references FINRA Rule
2360(b)(19).
• Equity 9, Section 16 (Discretionary
Accounts) cross-references FINRA Rule
2360(b)(18).
• Equity 9, Section 17 (Supervision of
Accounts) cross-references FINRA Rule
2360(b)(20).
• Equity 9, Section 18 (Customer
Complaints) cross-references FINRA
Rule 2360(b)(17)(A).
• Equity 9, Section 19
(Communications with the Public and
Customers Concerning Index Warrants,
Currency Index Warrants, and Currency
Warrants) cross-references FINRA Rule
2220 (except for FINRA Rule 2220(c)).
VerDate Sep<11>2014
18:03 Jan 27, 2022
Jkt 256001
• Equity 9, Section 20 (Maintenance
of Records) cross-references FINRA Rule
2360(b)(17)(B).
• Equity 10, Section 2 (Investment
Company Securities) cross-references
FINRA Rule 2341 (except for the
reference to FINRA Rule 2320 in FINRA
Rule 2341).
• Equity 11, Rule 11860 (Acceptance
and Settlement of COD Orders) crossreferences FINRA Rule 11860.
• Equity 11, Rule 11870 (Customer
Account Transfer Contracts) crossreferences FINRA Rule 11870.
The Exchange represents that the
FINRA rules listed above are regulatory
rules and not trading rules.6 The
Exchange represents that, as a condition
to the requested exemption from Section
19(b) of the Exchange Act, the Exchange
will provide written notice to its
members whenever FINRA proposes a
change to a cross-referenced rule.7 The
Exchange states that such notice will
alert its members and persons
associated with a member to the
proposed FINRA rule change and give
them an opportunity to comment on the
proposal.8 The Exchange further
represents that it will inform members
in writing when the Commission
approves any such proposed rule
changes.9
According to the Exchange, this
exemption is appropriate because it
would result in the Exchange’s rulebook
being consistent with the relevant crossreferenced FINRA rules at all times,
thus ensuring consistent regulation of
joint members of BX and FINRA.10 The
Exchange further states that, even if
members are not joint members of BX
and FINRA, the exemption is
appropriate because it will permit its
rules to remain consistent with FINRA’s
rules and ensure consistent treatment of
industry members with respect to the
aforementioned rules.11
The Commission has issued
exemptions similar to the Exchange’s
request.12 In granting similar
6 See id. at 6, n.14. The Exchange also states that
it is not ‘‘cherry picking’’ because the Exchange
would be incorporating categories of rules. See id.
7 See id. at 6. The Exchange represents that it will
provide such notice via a posting on the same
website location where the Exchange posts its own
rule filings pursuant to Rule 19b–4(l) within the
time frame required by such rule. See id. at 6–7,
n.15. The website posting will include a link to the
location on FINRA’s website where the applicable
proposed rule change is posted. See id.
8 See id. at 6–7.
9 See id. at 7.
10 See id. at 6.
11 See id.
12 See, e.g., Securities Exchange Act Release Nos.
83296 (May 21, 2018), 83 FR 24362 (May 25, 2018)
(order granting NYSE National, Inc.’s exemptive
request relating to rules of FINRA incorporated by
reference); 83040 (April 12, 2018), 83 FR 17198
PO 00000
Frm 00141
Fmt 4703
Sfmt 4703
exemptions, the Commission stated that
it would consider similar future
exemption requests, provided that:
• An SRO wishing to incorporate
rules of another SRO by reference has
submitted a written request for an order
exempting it from the requirement in
Section 19(b) of the Exchange Act to file
proposed rule changes relating to the
rules incorporated by reference, has
identified the applicable originating
SRO(s), together with the rules it wants
to incorporate by reference, and
otherwise has complied with the
procedural requirements set forth in the
Commission’s release governing
procedures for requesting exemptive
orders pursuant to Rule 0–12 under the
Exchange Act; 13
• The incorporating SRO has
requested incorporation of categories of
rules (rather than individual rules
within a category) that are not trading
rules (e.g., the SRO has requested
incorporation of rules such as margin,
suitability, or arbitration); and
• The incorporating SRO has
reasonable procedures in place to
provide written notice to its members
each time a change is proposed to the
incorporated rules of another SRO.14
The Commission believes that the
Exchange has satisfied each of these
conditions. The Commission also
believes that granting the Exchange an
exemption from the rule filing
requirements under Section 19(b) of the
Exchange Act will promote efficient use
of the Commission’s and the Exchange’s
resources by avoiding duplicative rule
filings based on simultaneous changes
(April 18, 2018) (order granting MIAX PEARL,
LLC’s exemptive request relating to rules of the
Miami International Securities Exchange, LLC
incorporated by reference); 76998 (January 29,
2016), 81 FR 6066, 6083–84 (February 4, 2016)
(order granting application for registration as a
national securities exchange of ISE Mercury, LLC
and exemptive request relating to rules of certain
self-regulatory organizations (‘‘SROs’’) (including
FINRA) incorporated by reference); 61534 (February
18, 2010), 75 FR 8760 (February 25, 2010) (order
granting BATS Exchange, Inc.’s exemptive request
relating to rules incorporated by reference by the
BATS Exchange Options Market rules) (‘‘BATS
Options Market Order’’); 61152 (December 10,
2009), 74 FR 66699, 66709–10 (December 16, 2009)
(order granting application for registration as a
national securities exchange of C2 Options
Exchange, Incorporated and exemptive request
relating to rules of the Chicago Board Options
Exchange, Incorporated, incorporated by reference).
13 See 17 CFR 240.0–12 and Securities Exchange
Act Release No. 39624 (February 5, 1998), 63 FR
8101 (February 18, 1998) (Commission Procedures
for Filing Applications for Orders for Exemptive
Relief Pursuant to Section 36 of the Exchange Act;
Final Rule).
14 See BATS Options Market Order, supra note 12
(citing Securities Exchange Act Release No. 49260
(February 17, 2004), 69 FR 8500 (February 24, 2004)
(order granting exemptive request relating to rules
incorporated by reference by several SROs) (‘‘2004
Order’’)).
E:\FR\FM\28JAN1.SGM
28JAN1
Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Notices
to identical rule text sought by more
than one SRO.15 The Commission
therefore finds it appropriate in the
public interest and consistent with the
protection of investors to exempt the
Exchange from the rule filing
requirements under Section 19(b) of the
Exchange Act with respect to the abovedescribed FINRA rules it has
incorporated by reference. This
exemption is conditioned upon the
Exchange promptly providing written
notice to its members whenever FINRA
changes a rule that the Exchange has
incorporated by reference.
Accordingly, it is ordered, pursuant to
Section 36 of the Exchange Act,16 that
the Exchange is exempt from the rule
filing requirements of Section 19(b) of
the Exchange Act solely with respect to
changes to the rules identified in the
Exemptive Request, provided that the
Exchange promptly provides written
notice to its members whenever FINRA
proposes to change a rule that the
Exchange has incorporated by reference.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01712 Filed 1–27–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94044; File No. SR–PHLX–
2022–02]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend References to
FINRA Continuing Education Fees
jspears on DSK121TN23PROD with NOTICES1
January 24, 2022.
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 January
12, 2022, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
15 See BATS Options Market Order, supra note
12, 75 FR at 8761; see also 2004 Order, supra note
14, 69 FR at 8502.
16 15 U.S.C. 78mm.
17 17 CFR 200.30–3(a)(76).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Sep<11>2014
18:03 Jan 27, 2022
Jkt 256001
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Phlx’s Pricing Schedule at Options 7,
Section 9, Other Member Fees, to reflect
adjustments to FINRA Continuing
Education Fees.
The Exchange also proposes technical
amendments to Phlx Options 7, Section
1, General Provisions.
While the changes proposed herein
are effective upon filing, the Exchange
has designated the new Maintaining
Qualifications Program (‘‘MQP’’) Fee,
elimination of the $100 Continuing
Education Session Fee, and technical
amendments to become operative on
January 31, 2022. Additionally, the
Exchange designates an $18 Continuing
Education Regulatory Element Session
Fee to become operative on January 1,
2023.3
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, 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
This proposal amends Phlx’s Pricing
Schedule at Options 7, Section 9C,
FINRA Fees, to reflect adjustments to
FINRA Continuing Education Fees.4 The
FINRA fees are collected and retained
by FINRA via Web CRD for the
3 See Securities Exchange Act Release No. 93928
(January 7, 2022) (SR–FINRA–2021–034).
4 FINRA operates Web CRD, the central licensing
and registration system for the U.S. securities
industry. FINRA uses Web CRD to maintain the
qualification, employment and disciplinary
histories of registered associated persons of brokerdealers.
PO 00000
Frm 00142
Fmt 4703
Sfmt 4703
4693
registration of employees of Phlx
members and member organizations that
are not FINRA members (‘‘Non-FINRA
members’’). The Exchange is merely
listing these fees on its Pricing
Schedule. The Exchange does not
collect or retain these fees.
Today, Phlx Options 7, Section 9C,
provides a list of FINRA Web CRD Fees,
Fingerprint Processing Fees, and
Continuing Education Fees. The
Exchange proposes to amend the
Continuing Education Fees within
Options 7, Section 9C on behalf of the
Exchange. The fees listed within
Options 7, Section 9C reflect fees set by
FINRA.
Specifically, the Exchange proposes to
decrease the $55 Continuing Education
Web-based Fee to $18. This amendment
is made in accordance with a recent
FINRA rule change to adjust to its fees.5
FINRA currently charges a fee of $55 to
each individual who completes the
Regulatory Element of the Continuing
Education Requirements pursuant to
Exchange General 4, Section 1240. In
conjunction with the amendments to
transition to an annual Regulatory
Element requirement, FINRA amended
the Continuing Education Regulatory
Element Session Fee from $55 to $18.6
FINRA indicated in the Continuing
Education Fee Filing that it would begin
assessing the $18 Continuing Education
Regulatory Element Session Fee as of
January 1, 2023 to coincide with the
effective date of the transition to an
annual Regulatory Element
requirement.7
5 See note 3 above. On September 21, 2021, the
SEC approved amendments to FINRA Rules 1210
(Registration Requirements) and 1240 (Continuing
Education Requirements) to, among other things,
require registered persons to complete the
Regulatory Element of CE annually by December 31
of each year, rather than every three years, and to
complete Regulatory Element content for each
representative or principal registration category that
they hold. See Securities Exchange Act Release No.
93097 (September 21, 2021), 86 FR 53358
(September 27, 2021) (Order Approving File No.
SR–FINRA–2021–015). The Regulatory Element is
administered by FINRA and focuses on regulatory
requirements and industry standards. The proposed
rule change also included amendments to the Firm
Element training, which is provided by each firm
annually to its registered persons and focuses on
securities products, services and strategies the firm
offers, firm policies and industry trends.
6 FINRA notes that the proposed $18 annual fee
is comparable to the current $55 fee over a threeyear period. Moreover, the proposed fee for the
annual Regulatory Element would be the same for
all registered persons, regardless of the amount of
annual content that they would be required to
complete (that is, an individual who holds multiple
registrations would be subject to the same proposed
$18 annual fee as an individual who holds a single
registration). See note 3 above.
7 The Exchange would file to remove the rule text
concerning the $55 fee once the $18 fee becomes
operative.
E:\FR\FM\28JAN1.SGM
28JAN1
]]>Agencies
[Federal Register Volume 87, Number 19 (Friday, January 28, 2022)]
[Notices]
[Pages 4691-4693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01712]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94034]
Order Granting Application by Nasdaq BX, Inc. for an Exemption
Pursuant to Section 36(a) of the Exchange Act From the Rule Filing
Requirements of Section 19(b) of the Exchange Act With Respect to
Certain Rules Incorporated by Reference
January 24, 2022.
Nasdaq BX, Inc. (``BX'' or ``Exchange'') has filed with the
Securities and Exchange Commission (``Commission'') an application for
an exemption under Section 36(a)(1) of the Securities Exchange Act of
1934 (``Exchange Act'') \1\ from the rule filing requirements of
Section 19(b) of the Exchange Act \2\ with respect to certain rules of
the Financial Industry Regulatory Authority, Inc. (``FINRA'') that the
Exchange seeks to incorporate by reference.\3\ Section 36 of the
Exchange Act, subject to certain limitations, authorizes the Commission
to conditionally or unconditionally exempt any person, security, or
transaction, or any class thereof, from any provision of the Exchange
Act or rule thereunder, if necessary or appropriate in the public
interest and consistent with the protection of investors.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78mm(a)(1).
\2\ 15 U.S.C. 78s(b).
\3\ See Letter from Angela S. Dunn, Principal Associate General
Counsel, BX, to J. Matthew DeLesDernier, Assistant Secretary,
Commission, dated August 26, 2021 (``Exemptive Request'').
---------------------------------------------------------------------------
The Exchange has requested, pursuant to Rule 0-12 under the
Exchange Act,\4\ that the Commission grant the Exchange an exemption
from the rule filing requirements of Section 19(b) of the Exchange Act
for changes to the Exchange's rules that are effected solely by virtue
of a change to a cross-referenced FINRA rule. Specifically, the
Exchange requests that it be permitted to incorporate by reference
changes made to the FINRA rules that are cross-referenced in the
Exchange's rules identified below, without the need for the Exchange to
file separately similar proposed rule changes pursuant to Section 19(b)
of the Exchange Act: \5\
---------------------------------------------------------------------------
\4\ 17 CFR 240.0-12.
\5\ See Exemptive Request, supra note 3, at 6.
---------------------------------------------------------------------------
General 9, Section 1(b) (Prohibition Against Trading Ahead
of Customer Orders) cross-references FINRA Rule 5320 (except for FINRA
Rule 5320.02(b) and the reference to FINRA Rule 6420 in FINRA Rule
5320).
General 9, Section 1(c) (Front Running Policy) cross-
references FINRA Rule 5270.
General 9, Section 1(f) (Confirmation of Callable Common
Stock) cross-references FINRA Rule 2232.
General 9, Section 1(g) (Interfering With the Transfer of
Customer Accounts in the Context of Employment Disputes) cross-
references FINRA Rule 2140.
General 9, Section 2 (Customers' Securities or Funds)
cross-references FINRA Rule 2150.
General 9, Section 3 (Communications with the Public)
cross-references FINRA Rule 2210 (except for FINRA Rule 2210(c)).
General 9, Section 5 (Telemarketing) cross-references
FINRA Rule 3230.
General 9, Section 6 (Forwarding of Proxy and Other
Issuer-Related Materials) cross-references FINRA Rule 2251.
General 9, Section 7 (Disclosure of Financial Condition,
Control Relationship with Issuer and Participation or Interest in
Primary or Secondary Distribution) cross-references FINRA Rules 2261,
2262, and 2269.
General 9, Section 8 (SIPC Information) cross-references
FINRA Rule 2266.
General 9, Section 9 (Fairness Opinions) cross-references
FINRA Rule 5150.
General 9, Section 10(a) (Recommendations to Customers
(Suitability)) cross-references FINRA Rule 2111 (except for the
references to FINRA Rule 2214 in FINRA Rule 2111).
General 9, Section 10(c) (Know Your Customer) cross-
references FINRA Rule 2090.
General 9, Section 12 (Customer Account Statements) cross-
references FINRA Rule 2231.
General 9, Section 13 (Margin Disclosure Statement) cross-
references FINRA Rule 2264.
General 9, Section 14 (Approval Procedures for Day-Trading
Accounts) cross-references FINRA Rules 2130 and 2270.
General 9, Section 15 (Borrowing From or Lending to
Customers) cross-references FINRA Rule 3240.
General 9, Section 16 (Charges for Services Performed)
cross-references FINRA Rule 2122.
General 9, Section 17 (Net Transactions with Customers)
cross-references FINRA Rule 2124.
General 9, Section 19 (Discretionary Accounts) cross-
references FINRA Rule 3260.
General 9, Section 20 (Supervision) cross-references FINRA
Rules 3110 and 3170.
General 9, Section 21 (Supervisory Control System, Annual
Certification of Compliance and Supervisory Processes) cross-references
FINRA Rules 3120 and 3130 (except for the references to MSRB rules in
FINRA Rule 3130).
General 9, Section 23 (Outside Business Activities of an
Associated Person) cross-references FINRA Rule 3270.
General 9, Section 24 (Private Securities Transactions of
an Associated Person) cross-references FINRA Rule 3280.
General 9, Section 25 (Transactions for or by Associated
Persons) cross-references FINRA Rule 3210.
General 9, Section 26 (Influencing or Rewarding Employees
of Others) cross-references FINRA Rule 3220.
General 9, Section 27 (Reporting Requirements) cross-
references FINRA Rule 4530 (except for FINRA Rule 4530(h)).
General 9, Section 28 (Disclosure to Associated Persons
When Signing Form U4) cross-references FINRA Rule 2263 (except for
subsection (2) of FINRA Rule 2263).
General 9, Section 30 (Books and Records) cross-references
FINRA Rule 4511.
General 9, Section 31 (Use of Information Obtained in
Fiduciary
[[Page 4692]]
Capacity) cross-references FINRA Rule 2060.
General 9, Section 33 (Reporting Requirements for Clearing
Firms) cross-references FINRA Rule 4540.
General 9, Section 34 (Extensions of Time Under Regulation
T and SEC Rule 15c3-3) cross-references FINRA Rule 4230.
General 9, Section 37 (Anti-Money Laundering Compliance
Program) cross-references FINRA Rule 3310.
General 9, Section 38(b) (Margin Requirements) cross-
references FINRA Rule 4210.
General 9, Section 39(b) (Fidelity Bonds) cross-references
FINRA Rule 4360.
General 9, Section 40 (Capital Compliance) cross-
references FINRA Rule 4110.
General 9, Section 41 (Regulatory Notification and
Business Curtailment) cross-references FINRA Rule 4120.
General 9, Section 42 (Audit) cross-references FINRA Rule
4140.
General 9, Section 43 (General Requirements) cross-
references FINRA Rule 4511.
General 9, Section 44 (Records of Written Customer
Complaints) cross-references FINRA Rule 4513.
General 9, Section 45 (Customer Account Information)
cross-references FINRA Rule 4512.
General 9, Section 46 (Authorization Records for
Negotiable Instruments Drawn From a Customer's Account) cross-
references FINRA Rule 4514.
General 9, Section 47 (Approval and Documentation of
Changes in Account Name or Designation) cross-references FINRA Rule
4515.
General 9, Section 48 (Notifications, Questionnaires and
Reports) cross-references FINRA Rule 4521.
General 9, Section 64 (Account Approval) cross-references
FINRA Rule 2360(b)(16).
Equity 9, Section 15 (Suitability) cross-references FINRA
Rule 2360(b)(19).
Equity 9, Section 16 (Discretionary Accounts) cross-
references FINRA Rule 2360(b)(18).
Equity 9, Section 17 (Supervision of Accounts) cross-
references FINRA Rule 2360(b)(20).
Equity 9, Section 18 (Customer Complaints) cross-
references FINRA Rule 2360(b)(17)(A).
Equity 9, Section 19 (Communications with the Public and
Customers Concerning Index Warrants, Currency Index Warrants, and
Currency Warrants) cross-references FINRA Rule 2220 (except for FINRA
Rule 2220(c)).
Equity 9, Section 20 (Maintenance of Records) cross-
references FINRA Rule 2360(b)(17)(B).
Equity 10, Section 2 (Investment Company Securities)
cross-references FINRA Rule 2341 (except for the reference to FINRA
Rule 2320 in FINRA Rule 2341).
Equity 11, Rule 11860 (Acceptance and Settlement of COD
Orders) cross-references FINRA Rule 11860.
Equity 11, Rule 11870 (Customer Account Transfer
Contracts) cross-references FINRA Rule 11870.
The Exchange represents that the FINRA rules listed above are
regulatory rules and not trading rules.\6\ The Exchange represents
that, as a condition to the requested exemption from Section 19(b) of
the Exchange Act, the Exchange will provide written notice to its
members whenever FINRA proposes a change to a cross-referenced rule.\7\
The Exchange states that such notice will alert its members and persons
associated with a member to the proposed FINRA rule change and give
them an opportunity to comment on the proposal.\8\ The Exchange further
represents that it will inform members in writing when the Commission
approves any such proposed rule changes.\9\
---------------------------------------------------------------------------
\6\ See id. at 6, n.14. The Exchange also states that it is not
``cherry picking'' because the Exchange would be incorporating
categories of rules. See id.
\7\ See id. at 6. The Exchange represents that it will provide
such notice via a posting on the same website location where the
Exchange posts its own rule filings pursuant to Rule 19b-4(l) within
the time frame required by such rule. See id. at 6-7, n.15. The
website posting will include a link to the location on FINRA's
website where the applicable proposed rule change is posted. See id.
\8\ See id. at 6-7.
\9\ See id. at 7.
---------------------------------------------------------------------------
According to the Exchange, this exemption is appropriate because it
would result in the Exchange's rulebook being consistent with the
relevant cross-referenced FINRA rules at all times, thus ensuring
consistent regulation of joint members of BX and FINRA.\10\ The
Exchange further states that, even if members are not joint members of
BX and FINRA, the exemption is appropriate because it will permit its
rules to remain consistent with FINRA's rules and ensure consistent
treatment of industry members with respect to the aforementioned
rules.\11\
---------------------------------------------------------------------------
\10\ See id. at 6.
\11\ See id.
---------------------------------------------------------------------------
The Commission has issued exemptions similar to the Exchange's
request.\12\ In granting similar exemptions, the Commission stated that
it would consider similar future exemption requests, provided that:
---------------------------------------------------------------------------
\12\ See, e.g., Securities Exchange Act Release Nos. 83296 (May
21, 2018), 83 FR 24362 (May 25, 2018) (order granting NYSE National,
Inc.'s exemptive request relating to rules of FINRA incorporated by
reference); 83040 (April 12, 2018), 83 FR 17198 (April 18, 2018)
(order granting MIAX PEARL, LLC's exemptive request relating to
rules of the Miami International Securities Exchange, LLC
incorporated by reference); 76998 (January 29, 2016), 81 FR 6066,
6083-84 (February 4, 2016) (order granting application for
registration as a national securities exchange of ISE Mercury, LLC
and exemptive request relating to rules of certain self-regulatory
organizations (``SROs'') (including FINRA) incorporated by
reference); 61534 (February 18, 2010), 75 FR 8760 (February 25,
2010) (order granting BATS Exchange, Inc.'s exemptive request
relating to rules incorporated by reference by the BATS Exchange
Options Market rules) (``BATS Options Market Order''); 61152
(December 10, 2009), 74 FR 66699, 66709-10 (December 16, 2009)
(order granting application for registration as a national
securities exchange of C2 Options Exchange, Incorporated and
exemptive request relating to rules of the Chicago Board Options
Exchange, Incorporated, incorporated by reference).
---------------------------------------------------------------------------
An SRO wishing to incorporate rules of another SRO by
reference has submitted a written request for an order exempting it
from the requirement in Section 19(b) of the Exchange Act to file
proposed rule changes relating to the rules incorporated by reference,
has identified the applicable originating SRO(s), together with the
rules it wants to incorporate by reference, and otherwise has complied
with the procedural requirements set forth in the Commission's release
governing procedures for requesting exemptive orders pursuant to Rule
0-12 under the Exchange Act; \13\
---------------------------------------------------------------------------
\13\ See 17 CFR 240.0-12 and Securities Exchange Act Release No.
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) (Commission
Procedures for Filing Applications for Orders for Exemptive Relief
Pursuant to Section 36 of the Exchange Act; Final Rule).
---------------------------------------------------------------------------
The incorporating SRO has requested incorporation of
categories of rules (rather than individual rules within a category)
that are not trading rules (e.g., the SRO has requested incorporation
of rules such as margin, suitability, or arbitration); and
The incorporating SRO has reasonable procedures in place
to provide written notice to its members each time a change is proposed
to the incorporated rules of another SRO.\14\
---------------------------------------------------------------------------
\14\ See BATS Options Market Order, supra note 12 (citing
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR
8500 (February 24, 2004) (order granting exemptive request relating
to rules incorporated by reference by several SROs) (``2004
Order'')).
---------------------------------------------------------------------------
The Commission believes that the Exchange has satisfied each of
these conditions. The Commission also believes that granting the
Exchange an exemption from the rule filing requirements under Section
19(b) of the Exchange Act will promote efficient use of the
Commission's and the Exchange's resources by avoiding duplicative rule
filings based on simultaneous changes
[[Page 4693]]
to identical rule text sought by more than one SRO.\15\ The Commission
therefore finds it appropriate in the public interest and consistent
with the protection of investors to exempt the Exchange from the rule
filing requirements under Section 19(b) of the Exchange Act with
respect to the above-described FINRA rules it has incorporated by
reference. This exemption is conditioned upon the Exchange promptly
providing written notice to its members whenever FINRA changes a rule
that the Exchange has incorporated by reference.
---------------------------------------------------------------------------
\15\ See BATS Options Market Order, supra note 12, 75 FR at
8761; see also 2004 Order, supra note 14, 69 FR at 8502.
---------------------------------------------------------------------------
Accordingly, it is ordered, pursuant to Section 36 of the Exchange
Act,\16\ that the Exchange is exempt from the rule filing requirements
of Section 19(b) of the Exchange Act solely with respect to changes to
the rules identified in the Exemptive Request, provided that the
Exchange promptly provides written notice to its members whenever FINRA
proposes to change a rule that the Exchange has incorporated by
reference.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78mm.
\17\ 17 CFR 200.30-3(a)(76).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01712 Filed 1-27-22; 8:45 am]
BILLING CODE 8011-01-P
