Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt New Conflicts of Interest Rules, 54583-54586 [2022-19114]

Download as PDF Federal Register / Vol. 87, No. 171 / Tuesday, September 6, 2022 / Notices jspears on DSK121TN23PROD with NOTICES products have been preceded by a shortened reporting timeframe.42 The Commission believes that shortening the timeframe for FINRA members to report transactions in U.S. Treasury Securities to TRACE to as soon as practicable, but no later than within 60 minutes of the Time of Execution (or within 60 minutes after the TRACE system opens for trades executed during specified periods, as described above) will assist FINRA in carrying out its statutory duties to surveil and regulate this segment of the market by providing FINRA with more timely information about activity in the market for U.S. Treasury Securities, including more timely data about intraday pricing and liquidity. The Commission recognizes that the proposal may result in costs for FINRA members that need to implement changes to their processes and systems. The Commission notes that, according to FINRA, approximately 96 percent of U.S. Treasury Security transaction reports were reported within 60 minutes of the Time of Execution during a sample period of July 2020 to June 2021.43 In addition, FINRA represents that some FINRA members who trade in U.S. Treasury Securities also trade in other types of TRACE-Eligible Securities that already require reporting within a shorter timeframe.44 While these transactions may occur on separate trading desks, the Commission agrees with FINRA that, to the extent that members are able to leverage existing technology within the firm, the costs associated with the proposed reporting timeframe changes for U.S. Treasury Securities could potentially be reduced. With respect to comments suggesting that FINRA should review the benefits of a shortened reporting timeframe in light of how FINRA and its regulatory partners are using TRACE data,45 the Commission agrees with FINRA’s assessment that the proposal strikes an appropriate balance to provide FINRA 42 See FINRA Response Letter at 3. With respect to the U.S. Treasury Department’s RFI, FINRA further states that, should that initiative result in a proposal or recommendation to increase transparency for transactions in U.S. Treasury Securities, such a result would harmonize with a reduced reporting timeframe for U.S. Treasury Securities. See id. 43 See Notice, supra note 3, at 33848. 44 For example, FINRA states that transactions in corporate bonds and Agency Debt Securities generally are required to be reported to FINRA as soon as practicable, but no later than within 15 minutes of the Time of Execution. In the FINRA sample period, of the 750 MPIDs that reported transactions in U.S. Treasury Securities, 691 MPIDs also reported transactions in corporate bonds and Agency Debt Securities. See Notice, supra note 3, at 33848. 45 See supra note 36 and accompanying text. VerDate Sep<11>2014 20:04 Sep 02, 2022 Jkt 256001 and the official sector with more timely information about U.S. Treasury Security market activity. The Commission notes that FINRA members already report over 90 percent of transactions in U.S. Treasury Securities within 60 minutes of the Time of Execution.46 Finally, the Commission believes that it would not be appropriate to delay implementation of the proposal beyond the timeframe set forth in the Notice. The Commission agrees with FINRA in its assessment that the proposal does not conflict with other TRACE-related initiatives and that the benefits of a shortened reporting timeframe for transactions in U.S. Treasury Securities are not reduced in light of these other initiatives. Moreover, the Commission believes that further delaying implementation of the proposal would undermine the regulatory interest that the official sector and FINRA have in obtaining access to more timely information about activity in the market for U.S. Treasury Securities. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,47 that the proposed rule change (SR–FINRA– 2022–013) is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.48 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–19112 Filed 9–2–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 95637; File No. SR–ISE–2022– 17] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt New Conflicts of Interest Rules August 30, 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 August 18, 2022, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and 46 See FINRA Response Letter at 4. U.S.C. 78s(b)(2). 48 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 47 15 PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 54583 III, below, which Items have been prepared by the Exchange. The Exchange filed the proposed rule change as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 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 adopt two new rules within Sections 26 and 27 of Options 10. Also, the Exchange proposes to make other technical amendments. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/ise/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 The Exchange proposes to adopt two new rules within Sections 26 and 27 of Options 10. Also, the Exchange proposes to make technical amendments to General 2, Organization and Administration; Options 1, Section 1, Definitions; and Options 4A, Section 12, Terms of Index Options Contracts. Each change is described below. Proposed Options 10, Section 26 The Exchange proposes to adopt a new Options 10, Section 26, titled ‘‘Transactions Involving ISE Employees’’ that is substantively identical to FINRA Rule 2070. This proposed rule is intended to address 3 15 4 17 E:\FR\FM\06SEN1.SGM U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 06SEN1 jspears on DSK121TN23PROD with NOTICES 54584 Federal Register / Vol. 87, No. 171 / Tuesday, September 6, 2022 / Notices conflicts of interest involving ISE and its employees. The Exchange proposes to adopt rule text within proposed Options 10, Section 26(a) that requires a Member, when it has actual notice that an ISE employee has a financial interest or controls trading in an account, to promptly obtain and implement an instruction from the employee directing that duplicate account statements be provided by the Member to ISE. The Exchange proposes to adopt rule text within proposed Options 10, Section 26(b) that prohibits a Member from directly or indirectly making any loan of money or securities to an ISE employee. This proposed prohibition would not apply to loans made in the context of disclosed, routine banking and brokerage agreements, or loans that are clearly motivated by a personal or family relationship. Finally, the Exchange proposes to adopt rule text within proposed Options 10, Section 26(c) that prohibits any Member from directly or indirectly giving, or permitting to be given, anything of more than nominal value to any ISE employee who has responsibility for a regulatory matter involving the Member. This prohibition would apply regardless of the annual dollar limitation set forth in proposed Options 10, Section 27, which is discussed below. The term ‘‘regulatory matter’’ is proposed to be defined to include, without limitation, examinations, disciplinary proceedings, membership applications, listing applications, delisting proceedings, and dispute-resolution proceedings that involve the Member. The Exchange believes that requiring a Member to direct that duplicate account statements be provided by the Member to ISE when it has actual notice that an ISE employee has a financial interest or controls trading in an account, prohibiting Members from making any loan of money or securities to an ISE employee subject to the exceptions set forth herein, and prohibiting Members from directly or indirectly giving, or permitting to be given, anything above nominal value to any ISE employee who has responsibility for a ‘‘regulatory matter’’ involving the Member will avoid conflicts of interest for ISE and its employees in the regulation of its Members. With this proposal, ISE Members who are also FINRA members would be subject to this rule which is substantively identical to FINRA Rule 2070. Additionally, ISE Members who are not FINRA members would also be subject to proposed Options 10, Section VerDate Sep<11>2014 20:04 Sep 02, 2022 Jkt 256001 26 to the extent that such Members conduct business with the public. Proposed Options 10, Section 27 The Exchange proposes to adopt a new Options 10, Section 27, titled ‘‘Influencing or Rewarding Employees of Others’’ that is substantively identical to FINRA Rule 3220. This proposed rule is intended to provide a limitation on gifts and thereby govern influencing or rewarding the employees of others. The Exchange proposes to adopt rule text within proposed Options 10, Section 27(a) that prohibits a Member or person associated with a Member from directly or indirectly giving or permitting to be given anything of value, including gratuities, in excess of one hundred dollars per individual per year to any person, principal, proprietor, employee, agent or representative of another person where such payment or gratuity is in relation to the business of the employer of the recipient of the payment or gratuity. A gift of any kind would be considered a gratuity. The Exchange proposes to adopt rule text within proposed Options 10, Section 27(b) that provides that Options 10, Section 27 shall not apply to contracts of employment with or to compensation for services rendered by persons enumerated in paragraph (a) provided that there is in existence prior to the time of employment or before the services are rendered, a written agreement between the Member and the person who is to be employed to perform such services. Such agreement would include the nature of the proposed employment, the amount of the proposed compensation, and the written consent of such person’s employer or principal. The Exchange notes that this express exclusion for payments made pursuant to a bone fide, prior written agreement in paragraph (b) is excluded from the dollar value consideration in paragraph (a). The Exchange proposes to adopt rule text within proposed Options 10, Section 27(c) that requires a separate record of all payments or gratuities in any amount known to the Member, the employment agreement referred to in paragraph (b) and further requires the Member to retain any employment compensation paid as a result thereof for the period specified by Rule 17a–4 of the Exchange Act.5 Proposed Options 10, Section 27 prevents gifts in excess of a fixed amount, currently $100. The Exchange believes that there is no business need to justify giving gifts in amounts greater than the limit specified in the rule. With 5 17 PO 00000 CFR 240.17a–4. Frm 00136 Fmt 4703 Sfmt 4703 this proposal, ISE Members who are also FINRA members would be subject to this rule which is substantively identical to FINRA Rule 3220. Additionally, ISE Members who are not FINRA members would also be subject to proposed Options 10, Section 27 to the extent that such Members conduct business with the public. The Exchange believes this proposed rule appropriately protects against improprieties that might arise when substantial gifts or monetary payments are given to certain persons. Technical Amendments The Exchange proposes to reserve rules within General 2, Organization and Administration in addition to currently reserved Sections 13 through 22, to harmonize ISE’s rules with those of Nasdaq affiliate exchanges. Specifically, the Exchange proposes to reserve new Sections 23 and 24 within General 2 and add an ‘‘s’’ to the word ‘‘Section.’’ The Exchange proposes to amend a citation within the definition of ‘‘proprietary trading’’ at Options 1, Section 1(a)(41). The citation to ‘‘General 4, Section 1.1210’’ is incorrect. The citation should be to ‘‘General 4, Section 1210’’. Correcting this citation will avoid confusion. The Exchange proposes to remove the word ‘‘pilot’’ within Supplementary Material to Options 4A, Section 12. Options 4A, Section 12 describes the options listing rules. The Quarterly Options Series pilot program was approved in 2009.6 The Exchange proposes to remove this updated reference to the pilot. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Section 6(b)(5) of the Act,8 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. Together, proposed Options 10, Sections 26 and 27 address conflicts of interest by adopting rules that govern influencing or rewarding the employees of others and transactions involving ISE 6 See Securities Exchange Act Release No. 60275 (July 9, 2009), 74 FR 34809 (July 17, 2009) (SR–ISE– 2009–50) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Permanently Establish the Quarterly Options Series Pilot Program). 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). E:\FR\FM\06SEN1.SGM 06SEN1 Federal Register / Vol. 87, No. 171 / Tuesday, September 6, 2022 / Notices employees. The Exchange believes that adopting rules substantively identical to FINRA will help avoid confusion among Members of the Exchange who conduct business with the public that are also members of FINRA and would harmonize the Exchange’s rules with FINRA rules with respect to conflicts of interest, resulting in greater uniformity and less burdensome and more efficient regulatory compliance. As such, the proposed rule change would foster cooperation and coordination with persons engaged in facilitating transactions in securities and would remove impediments to and perfect the mechanism of a free and open market and a national market system. Proposed Options 10, Section 26 is consistent with the Act and protects investors and the general public by requiring a Member to direct that duplicate account statements be provided by the Member to ISE when it has actual notice that an ISE employee has a financial interest or controls trading in an account, prohibiting Members from making any loan of money or securities to an ISE employee subject to the exceptions set forth herein, and prohibiting Members from directly or indirectly giving, or permitting to be given, anything above nominal value to any ISE employee who has responsibility for a ‘‘regulatory matter’’ involving the Member. These proposed rules are intended to avoid conflicts of interest for ISE and its employees in the regulation of its Members. Proposed Options 10, Section 27 is consistent with the Act and protects investors and the general public by preventing gifts in excess of a fixed amount, currently $100, because there is no business need to justify giving gifts in amounts greater than the limit specified in the rule. Options 10, Section 27 in conjunction with Options 10, Section 26, as proposed, protects investors and the general public by addressing conflicts of interest and governs influencing or rewarding the employees of others and transactions involving ISE employees. jspears on DSK121TN23PROD with NOTICES Technical Amendments The Exchange’s proposal to reserve new Sections 23 and 24 within General 2, amend a citation within the definition of ‘‘proprietary trading’’ within Options 1, Section 1, and remove the word ‘‘pilot’’ within Supplementary Material to Options 4A, Section 12 are nonsubstantive amendments. VerDate Sep<11>2014 20:04 Sep 02, 2022 Jkt 256001 B. Self-Regulatory Organization’s Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Proposed Options 10, Sections 26 and 27 The proposed rule change is not designed to address any competitive issues but rather to provide greater harmonization among Exchange and FINRA rules of similar purpose, resulting in less burdensome and more efficient regulatory compliance for common members. The Exchange’s proposal to adopt new Options 10, Sections 26 and 27 does not impose an undue burden on competition as all Members that conduct business with the public would be subject to the proposed rules. Further, ISE Members who are also FINRA members would be subject to these rules which are substantively identical to FINRA Rules 2070 and 3220. Technical Amendments The Exchange’s proposal to reserve new Sections 23 and 24 within General 2, amend a citation within the definition of ‘‘proprietary trading’’ within Options 1, Section 1, and remove the word ‘‘pilot’’ within Supplementary Material to Options 4A, Section 12 are nonsubstantive amendments. 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)(iii) of the Act 9 and subparagraph (f)(6) of Rule 19b–4 thereunder.10 9 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 10 17 PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 54585 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2022–17 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–ISE–2022–17. 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 E:\FR\FM\06SEN1.SGM 06SEN1 54586 Federal Register / Vol. 87, No. 171 / Tuesday, September 6, 2022 / Notices 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–ISE–2022–17 and should be submitted on or before September 27, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–19114 Filed 9–2–22; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #17583 and #17584; INDIANA Disaster Number IN–00078] U.S. Small Business Administration. ACTION: Notice. AGENCY: jspears on DSK121TN23PROD with NOTICES CFR 200.30–3(a)(12). VerDate Sep<11>2014 20:04 Sep 02, 2022 Jkt 256001 2.935 Percent 1.875 (Catalog of Federal Domestic Assistance Number 59008) This is a notice of an Administrative declaration of a disaster for the State of Indiana dated 08/30/ 2022. Incident: Severe Storms and Flooding. Incident Period: 07/23/2022 through 07/25/2022. DATES: Issued on 08/30/2022. Physical Loan Application Deadline Date: 10/31/2022. Economic Injury (EIDL) Loan Application Deadline Date: 05/30/2023. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator’s disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Daviess. Contiguous Counties: Indiana: Dubois, Greene, Knox, Martin, Pike. The Interest Rates are: 11 17 For Physical Damage: Homeowners with Credit Available Elsewhere ...................... Homeowners without Credit Available Elsewhere .............. Businesses with Credit Available Elsewhere ...................... Businesses without Credit Available Elsewhere .............. Non-Profit Organizations with Credit Available Elsewhere ... Non-Profit Organizations without Credit Available Elsewhere ..................................... For Economic Injury: Businesses & Small Agricultural Cooperatives without Credit Available Elsewhere .............. Non-Profit Organizations without Credit Available Elsewhere ..................................... The number assigned to this disaster for physical damage is 17583 6 and for economic injury is 17584 0. The State which received an EIDL Declaration # is Indiana. Administrative Declaration of a Disaster for the State of Indiana SUMMARY: 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the 3.375 President’s major disaster declaration on 1.688 08/26/2022, Private Non-Profit organizations that provide essential 5.870 services of a governmental nature may file disaster loan applications at the 2.935 address listed above or other locally announced locations. 1.875 The following areas have been determined to be adversely affected by the disaster: 1.875 Primary Areas: Copper River REAA, Iditarod Area REAA, Kuspuk REAA The Interest Rates are: Percent Isabella Guzman, Administrator. [FR Doc. 2022–19145 Filed 9–2–22; 8:45 am] BILLING CODE 8026–09–P For Physical Damage: Non-Profit Organizations with Credit Available Elsewhere ... Non-Profit Organizations without Credit Available Elsewhere ..................................... For Economic Injury: Non-Profit Organizations without Credit Available Elsewhere ..................................... 1.875 1.875 1.875 The number assigned to this disaster for physical damage is 17585 6 and for economic injury is 17586 0. (Catalog of Federal Domestic Assistance Number 59008) SMALL BUSINESS ADMINISTRATION [Disaster Declaration #17585 and #17586; ALASKA Disaster Number AK–00054] Presidential Declaration of a Major Disaster for Public Assistance Only for the State of Alaska Rafaela Monchek, Acting Associate Administrator for Disaster Assistance. [FR Doc. 2022–19144 Filed 9–2–22; 8:45 am] BILLING CODE 8026–09–P U.S. Small Business Administration. ACTION: Notice. DEPARTMENT OF STATE This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of Alaska (FEMA–4667–DR), dated 08/26/2022. Incident: Flooding. Incident Period: 05/08/2022 through 05/11/2022. DATES: Issued on 08/26/2022. Physical Loan Application Deadline Date: 10/25/2022. Economic Injury (EIDL) Loan Application Deadline Date: 05/26/2023. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, Notice of Determinations; Culturally Significant Objects Being Imported for Exhibition—Determinations: ‘‘The Samaritans: A Biblical People’’ Exhibition AGENCY: SUMMARY: PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 [Public Notice: 11850] Notice is hereby given of the following determinations: I hereby determine that certain objects being imported from abroad pursuant to agreements with their foreign owners or custodians for temporary display in the exhibition ‘‘The Samaritans: A Biblical People’’ at the Museum of the Bible, Washington, District of Columbia, and at possible additional exhibitions or venues yet to be determined, are of cultural significance, and, further, that their temporary exhibition or display within the United States as aforementioned is in the national interest. I have ordered that Public SUMMARY: E:\FR\FM\06SEN1.SGM 06SEN1

Agencies

[Federal Register Volume 87, Number 171 (Tuesday, September 6, 2022)]
[Notices]
[Pages 54583-54586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19114]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 95637; File No. SR-ISE-2022-17]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Adopt New 
Conflicts of Interest Rules

August 30, 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 August 18, 2022, Nasdaq ISE, LLC (``ISE'' 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 Exchange filed the 
proposed rule change as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt two new rules within Sections 26 and 
27 of Options 10. Also, the Exchange proposes to make other technical 
amendments.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/ise/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
    The Exchange proposes to adopt two new rules within Sections 26 and 
27 of Options 10. Also, the Exchange proposes to make technical 
amendments to General 2, Organization and Administration; Options 1, 
Section 1, Definitions; and Options 4A, Section 12, Terms of Index 
Options Contracts. Each change is described below.
Proposed Options 10, Section 26
    The Exchange proposes to adopt a new Options 10, Section 26, titled 
``Transactions Involving ISE Employees'' that is substantively 
identical to FINRA Rule 2070. This proposed rule is intended to address

[[Page 54584]]

conflicts of interest involving ISE and its employees.
    The Exchange proposes to adopt rule text within proposed Options 
10, Section 26(a) that requires a Member, when it has actual notice 
that an ISE employee has a financial interest or controls trading in an 
account, to promptly obtain and implement an instruction from the 
employee directing that duplicate account statements be provided by the 
Member to ISE.
    The Exchange proposes to adopt rule text within proposed Options 
10, Section 26(b) that prohibits a Member from directly or indirectly 
making any loan of money or securities to an ISE employee. This 
proposed prohibition would not apply to loans made in the context of 
disclosed, routine banking and brokerage agreements, or loans that are 
clearly motivated by a personal or family relationship.
    Finally, the Exchange proposes to adopt rule text within proposed 
Options 10, Section 26(c) that prohibits any Member from directly or 
indirectly giving, or permitting to be given, anything of more than 
nominal value to any ISE employee who has responsibility for a 
regulatory matter involving the Member. This prohibition would apply 
regardless of the annual dollar limitation set forth in proposed 
Options 10, Section 27, which is discussed below. The term ``regulatory 
matter'' is proposed to be defined to include, without limitation, 
examinations, disciplinary proceedings, membership applications, 
listing applications, delisting proceedings, and dispute-resolution 
proceedings that involve the Member.
    The Exchange believes that requiring a Member to direct that 
duplicate account statements be provided by the Member to ISE when it 
has actual notice that an ISE employee has a financial interest or 
controls trading in an account, prohibiting Members from making any 
loan of money or securities to an ISE employee subject to the 
exceptions set forth herein, and prohibiting Members from directly or 
indirectly giving, or permitting to be given, anything above nominal 
value to any ISE employee who has responsibility for a ``regulatory 
matter'' involving the Member will avoid conflicts of interest for ISE 
and its employees in the regulation of its Members. With this proposal, 
ISE Members who are also FINRA members would be subject to this rule 
which is substantively identical to FINRA Rule 2070. Additionally, ISE 
Members who are not FINRA members would also be subject to proposed 
Options 10, Section 26 to the extent that such Members conduct business 
with the public.
Proposed Options 10, Section 27
    The Exchange proposes to adopt a new Options 10, Section 27, titled 
``Influencing or Rewarding Employees of Others'' that is substantively 
identical to FINRA Rule 3220. This proposed rule is intended to provide 
a limitation on gifts and thereby govern influencing or rewarding the 
employees of others.
    The Exchange proposes to adopt rule text within proposed Options 
10, Section 27(a) that prohibits a Member or person associated with a 
Member from directly or indirectly giving or permitting to be given 
anything of value, including gratuities, in excess of one hundred 
dollars per individual per year to any person, principal, proprietor, 
employee, agent or representative of another person where such payment 
or gratuity is in relation to the business of the employer of the 
recipient of the payment or gratuity. A gift of any kind would be 
considered a gratuity.
    The Exchange proposes to adopt rule text within proposed Options 
10, Section 27(b) that provides that Options 10, Section 27 shall not 
apply to contracts of employment with or to compensation for services 
rendered by persons enumerated in paragraph (a) provided that there is 
in existence prior to the time of employment or before the services are 
rendered, a written agreement between the Member and the person who is 
to be employed to perform such services. Such agreement would include 
the nature of the proposed employment, the amount of the proposed 
compensation, and the written consent of such person's employer or 
principal. The Exchange notes that this express exclusion for payments 
made pursuant to a bone fide, prior written agreement in paragraph (b) 
is excluded from the dollar value consideration in paragraph (a).
    The Exchange proposes to adopt rule text within proposed Options 
10, Section 27(c) that requires a separate record of all payments or 
gratuities in any amount known to the Member, the employment agreement 
referred to in paragraph (b) and further requires the Member to retain 
any employment compensation paid as a result thereof for the period 
specified by Rule 17a-4 of the Exchange Act.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 240.17a-4.
---------------------------------------------------------------------------

    Proposed Options 10, Section 27 prevents gifts in excess of a fixed 
amount, currently $100. The Exchange believes that there is no business 
need to justify giving gifts in amounts greater than the limit 
specified in the rule. With this proposal, ISE Members who are also 
FINRA members would be subject to this rule which is substantively 
identical to FINRA Rule 3220. Additionally, ISE Members who are not 
FINRA members would also be subject to proposed Options 10, Section 27 
to the extent that such Members conduct business with the public. The 
Exchange believes this proposed rule appropriately protects against 
improprieties that might arise when substantial gifts or monetary 
payments are given to certain persons.
Technical Amendments
    The Exchange proposes to reserve rules within General 2, 
Organization and Administration in addition to currently reserved 
Sections 13 through 22, to harmonize ISE's rules with those of Nasdaq 
affiliate exchanges. Specifically, the Exchange proposes to reserve new 
Sections 23 and 24 within General 2 and add an ``s'' to the word 
``Section.''
    The Exchange proposes to amend a citation within the definition of 
``proprietary trading'' at Options 1, Section 1(a)(41). The citation to 
``General 4, Section 1.1210'' is incorrect. The citation should be to 
``General 4, Section 1210''. Correcting this citation will avoid 
confusion.
    The Exchange proposes to remove the word ``pilot'' within 
Supplementary Material to Options 4A, Section 12. Options 4A, Section 
12 describes the options listing rules. The Quarterly Options Series 
pilot program was approved in 2009.\6\ The Exchange proposes to remove 
this updated reference to the pilot.
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    \6\ See Securities Exchange Act Release No. 60275 (July 9, 
2009), 74 FR 34809 (July 17, 2009) (SR-ISE-2009-50) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To 
Permanently Establish the Quarterly Options Series Pilot Program).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ 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. 
Together, proposed Options 10, Sections 26 and 27 address conflicts of 
interest by adopting rules that govern influencing or rewarding the 
employees of others and transactions involving ISE

[[Page 54585]]

employees. The Exchange believes that adopting rules substantively 
identical to FINRA will help avoid confusion among Members of the 
Exchange who conduct business with the public that are also members of 
FINRA and would harmonize the Exchange's rules with FINRA rules with 
respect to conflicts of interest, resulting in greater uniformity and 
less burdensome and more efficient regulatory compliance. As such, the 
proposed rule change would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Proposed Options 10, Section 26 is consistent with the Act and 
protects investors and the general public by requiring a Member to 
direct that duplicate account statements be provided by the Member to 
ISE when it has actual notice that an ISE employee has a financial 
interest or controls trading in an account, prohibiting Members from 
making any loan of money or securities to an ISE employee subject to 
the exceptions set forth herein, and prohibiting Members from directly 
or indirectly giving, or permitting to be given, anything above nominal 
value to any ISE employee who has responsibility for a ``regulatory 
matter'' involving the Member. These proposed rules are intended to 
avoid conflicts of interest for ISE and its employees in the regulation 
of its Members.
    Proposed Options 10, Section 27 is consistent with the Act and 
protects investors and the general public by preventing gifts in excess 
of a fixed amount, currently $100, because there is no business need to 
justify giving gifts in amounts greater than the limit specified in the 
rule. Options 10, Section 27 in conjunction with Options 10, Section 
26, as proposed, protects investors and the general public by 
addressing conflicts of interest and governs influencing or rewarding 
the employees of others and transactions involving ISE employees.
Technical Amendments
    The Exchange's proposal to reserve new Sections 23 and 24 within 
General 2, amend a citation within the definition of ``proprietary 
trading'' within Options 1, Section 1, and remove the word ``pilot'' 
within Supplementary Material to Options 4A, Section 12 are non-
substantive amendments.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.
Proposed Options 10, Sections 26 and 27
    The proposed rule change is not designed to address any competitive 
issues but rather to provide greater harmonization among Exchange and 
FINRA rules of similar purpose, resulting in less burdensome and more 
efficient regulatory compliance for common members. The Exchange's 
proposal to adopt new Options 10, Sections 26 and 27 does not impose an 
undue burden on competition as all Members that conduct business with 
the public would be subject to the proposed rules. Further, ISE Members 
who are also FINRA members would be subject to these rules which are 
substantively identical to FINRA Rules 2070 and 3220.
Technical Amendments
    The Exchange's proposal to reserve new Sections 23 and 24 within 
General 2, amend a citation within the definition of ``proprietary 
trading'' within Options 1, Section 1, and remove the word ``pilot'' 
within Supplementary Material to Options 4A, Section 12 are non-
substantive amendments.

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)(iii) of the Act \9\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule 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-ISE-2022-17 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-ISE-2022-17. 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

[[Page 54586]]

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-ISE-2022-17 and should be 
submitted on or before September 27, 2022.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19114 Filed 9-2-22; 8:45 am]
BILLING CODE 8011-01-P
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