Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Change References in the Codes of Arbitration Procedure From the Neutral List Selection System to the List Selection Algorithm, 58854-58856 [2022-21031]
Download as PDF
<![CDATA[
58854
Federal Register / Vol. 87, No. 187 / Wednesday, September 28, 2022 / Notices
order routing practices, the Exchange
does not believe its proposed fee change
can impose any burden on intermarket
competition.
The Exchange believes that the
proposed change could promote
competition between the Exchange and
other execution venues, including those
that currently offer similar order types
and comparable transaction pricing, by
encouraging additional orders to be sent
to the Exchange for execution.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 16 of the Act and
subparagraph (f)(2) of Rule 19b–4 17
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such 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
under Section 19(b)(2)(B) 18 of the Act 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:
• 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–NYSENAT–2022–20. 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–NYSENAT–2022–20 and
should be submitted on or before
October 19, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–20954 Filed 9–27–22; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
lotter on DSK11XQN23PROD with NOTICES1
Paper 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–
NYSENAT–2022–20 on the subject line.
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
18 15 U.S.C. 78s(b)(2)(B).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95871; File No. SR–FINRA–
2022–026]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Change References in
the Codes of Arbitration Procedure
From the Neutral List Selection System
to the List Selection Algorithm
September 22, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on September 15, 2022, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) 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 FINRA. FINRA has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
this filing by the Commission. 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
FINRA is proposing to change
references in the Codes of Arbitration
Procedure (‘‘Codes’’) from the Neutral
List Selection System to the list
selection algorithm.
The text of the proposed rule change
is available on FINRA’s website at
https://www.finra.org, at the principal
office of FINRA 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,
FINRA 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. FINRA has prepared
summaries, set forth in sections A, B,
16 15
1 15
17 17
2 17
VerDate Sep<11>2014
18:06 Sep 27, 2022
19 17
Jkt 256001
PO 00000
CFR 200.30–3(a)(12).
Frm 00091
Fmt 4703
Sfmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
E:\FR\FM\28SEN1.SGM
28SEN1
Federal Register / Vol. 87, No. 187 / Wednesday, September 28, 2022 / Notices
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
lotter on DSK11XQN23PROD with NOTICES1
From November 1998 until October
2006, the Neutral List Selection System
(‘‘NLSS’’) was the computer system that
generated lists of arbitrators from FINRA
Dispute Resolution Services’ (‘‘DRS’’)
rosters of arbitrators for the selected
hearing location for each arbitration
proceeding. In October 2006, DRS
replaced the NLSS with the Mediation
and Arbitration Tracking and Retrieval
Interactive Case System (‘‘MATRICS’’).4
As a result, all of the information
contained in the NLSS was transferred
to MATRICS such that MATRICS now
contains the list selection algorithm
DRS uses to generate lists of arbitrators
from its rosters of arbitrators.5 However,
the Codes refer to the NLSS as a
computer system that governs arbitrator
list selection in the DRS arbitration
forum.6
FINRA is proposing to update the
Codes by making technical, nonsubstantive changes to remove
references to the NLSS from those rules
describing arbitrator list selection and
instead refer to the ‘‘list selection
algorithm.’’ 7 The proposed rule change
4 MATRICS is an internal, web-based computer
system used to manage all arbitration and
mediation cases in the DRS arbitration forum and
to maintain DRS’s rosters of arbitrators and
mediators.
5 See Securities Exchange Act Release No. 51339
(March 9, 2005), 70 FR 12763 (March 15, 2005)
(Order Approving File No. SR–NASD–2004–164);
see also Notice to Members 07–07 (February 2007)
(announcing the effective date of April 16, 2007 for
the amendments discussed in File No. SR–NASD–
2004–164).
6 In February 2022, the Audit Committee of
FINRA’s Board of Governors engaged Lowenstein
Sandler LLP to provide an independent review and
analysis in connection with a Fulton County
(Georgia) Superior Court decision vacating an
arbitration award in favor of Wells Fargo Clearing
Services, LLC. See Order Granting Mot. to Vacate
Arb. Award and Den. Cross Mot. to Confirm Arb.
Award at 37, Leggett v. Wells Fargo Clearing Servs.,
LLC, No. 2019–CV–328949 (Ga. Super. Ct., January
25, 2022). In its report, Lowenstein Sandler made
several recommendations to provide greater
transparency and consistency in the arbitrator
selection process, one of which was to make
technical amendments to the Codes to clarify the
automated system used by DRS for arbitrator
selection. See https://www.finra.org/sites/default/
files/2022-06/report-independent-review-drsarbitrator-selection-process.pdf. Since publication
of the report, the Fulton County (Georgia) Superior
Court’s decision was reversed by the Court of
Appeals of Georgia. See Wells Fargo Clearing Servs.
v. Leggett, No. A22A1149, 2022 Ga. App. (Ct. App.
August 2, 2022).
7 See proposed Rules 12400 (List Selection
Algorithm and Arbitrator Rosters), 12402 (Cases
VerDate Sep<11>2014
18:06 Sep 27, 2022
Jkt 256001
would provide greater transparency and
consistency regarding arbitrator list
selection, as the Codes would reflect
and align with DRS’s existing practices,
processes and systems relating to
arbitrator list selection.
In the proposed rule change, FINRA is
not proposing any changes to the list
selection algorithm, or any of DRS’s
existing practices, processes and
systems related to arbitrator list
selection.8
FINRA has filed the proposed rule
change for immediate effectiveness and
has requested that the SEC waive the
requirement that the proposed rule
change not become operative for 30 days
after the date of the filing, so FINRA can
implement the proposed rule change
immediately.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Exchange
Act,9 which requires, among other
things, that FINRA rules must be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and, in general, to protect
investors and the public interest. FINRA
believes that the proposed rule change
will provide greater transparency to
members and the public regarding
arbitrator list selection by updating
FINRA rules to reflect and align with
DRS’s existing practices, processes and
systems related to arbitrator list
selection.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
The proposed rule change brings
transparency and consistency to FINRA
with One Arbitrator), 12403 (Cases with Three
Arbitrators), 12404 (Additional Parties), 12800
(Simplified Arbitration), 12801 (Default
Proceedings), 13400 (List Selection Algorithm and
Arbitrator Rosters), 13403 (Generating and Sending
Lists to the Parties), 13406 (Appointment of
Arbitrators; Discretion to Appoint Arbitrators Not
on List), 13407 (Additional Parties), 13411
(Replacement of Arbitrators), 13800 (Simplified
Arbitration), 13801 (Default Proceedings) and 13803
(Coordination of Sexual Assault Claims, Sexual
Harassment Claims or Statutory Employment
Discrimination Claims Filed in Court and in
Arbitration).
8 The proposed rule change would apply to all
members, including members that are funding
portals or have elected to be treated as capital
acquisition brokers (‘‘CABs’’), given that the
funding portal and CAB rule sets incorporate the
impacted FINRA rules by reference.
9 15 U.S.C. 78o–3(b)(6).
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
58855
rules without adding any burden on
member firms.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor 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 10 and Rule 19b–
4(f)(6) thereunder.11
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–
FINRA–2022–026 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–FINRA–2022–026. 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
10 15
11 17
E:\FR\FM\28SEN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
28SEN1
58856
Federal Register / Vol. 87, No. 187 / Wednesday, September 28, 2022 / Notices
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 such
filing also will be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–FINRA–2022–026 and
should be submitted on or before
October 19, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–21031 Filed 9–27–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95885; File No. SR–
EMERALD–2022–29]
Self-Regulatory Organizations: Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by MIAX
Emerald, LLC To Amend Its Fee
Schedule
lotter on DSK11XQN23PROD with NOTICES1
September 22, 2022.
Pursuant to the provisions of 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 September 13, 2022, MIAX Emerald,
LLC (‘‘MIAX Emerald’’ or ‘‘Exchange’’),
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
18:06 Sep 27, 2022
Jkt 256001
Items I, II, and III 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 is filing a proposal to
amend the MIAX Emerald Fee Schedule
(the ‘‘Fee Schedule’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/emerald, at MIAX’s principal
office, 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 amend
Section 1)a)i) of the Fee Schedule to
amend the rebates provided for Market
Maker Origins for Simple 3 Maker
(defined below) volume in Penny
Classes (defined below) that trade contra
to Priority Customers 4 Origins by $0.02
in each Tier (defined below). The
Exchange initially filed this proposal on
September 1, 2022 (SR–EMERALD–
2022–26). On September 13, 2022, the
Exchange withdrew SR–EMERALD–
2022–26 and resubmitted this proposal
(SR–EMERALD–2022–29).
Background
The Exchange currently assesses
transaction rebates and fees to all
3 The Simple Order Book is the Exchange’s
regular electronic book of orders and quotes. See
Exchange Rule 518(a)(15).
4 ‘‘Priority Customer’’ means a person or entity
that (i) is not a broker or dealer in securities, and
(ii) does not place more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Exchange Rule
100, including Interpretation and Policy .01.
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
market participants, which are based
upon a threshold tier structure (‘‘Tier’’).
Tiers are determined on a monthly basis
and are based on three alternative
calculation methods, as defined in
Section 1)a)ii) of the Fee Schedule. The
calculation method that results in the
highest Tier achieved by the Member 5
shall apply to all Origin types by the
Member, except the Priority Customer
Origin type. For the Priority Customer
Origin calculation, the Tier applied for
a Member and its Affiliates’ 6 is solely
determined by calculation Method 3, as
defined in Section 1)a)ii) of the Fee
Schedule, titled ‘‘Total Priority
Customer, Maker sides volume, based
on % of CTCV (‘Method 3’).’’ The
monthly volume thresholds for each of
the methods, associated with each Tier,
are calculated as the total monthly
volume executed by the Member in all
options classes on MIAX Emerald in the
relevant Origins and/or applicable
liquidity, not including Excluded
Contracts,7 (as the numerator) expressed
as a percentage of (divided by) Customer
5 ‘‘Member’’ means an individual or organization
approved to exercise the trading rights associated
with a Trading Permit. Members are deemed
‘‘members’’ under the Exchange Act. See the
Definitions Section of the Fee Schedule and
Exchange Rule 100.
6 ‘‘Affiliate’’ means (i) an affiliate of a Member of
at least 75% common ownership between the firms
as reflected on each firm’s Form BD, Schedule A,
or (ii) the Appointed Market Maker of an Appointed
EEM (or, conversely, the Appointed EEM of an
Appointed Market Maker). An ‘‘Appointed Market
Maker’’ is a MIAX Emerald Market Maker (who
does not otherwise have a corporate affiliation
based upon common ownership with an EEM) that
has been appointed by an EEM and an ‘‘Appointed
EEM’’ is an EEM (who does not otherwise have a
corporate affiliation based upon common
ownership with a MIAX Emerald Market Maker)
that has been appointed by a MIAX Emerald Market
Maker, pursuant to the following process. A MIAX
Emerald Market Maker appoints an EEM and an
EEM appoints a MIAX Emerald Market Maker, for
the purposes of the Fee Schedule, by each
completing and sending an executed Volume
Aggregation Request Form by email to
membership@miaxoptions.com no later than 2
business days prior to the first business day of the
month in which the designation is to become
effective. Transmittal of a validly completed and
executed form to the Exchange along with the
Exchange’s acknowledgement of the effective
designation to each of the Market Maker and EEM
will be viewed as acceptance of the appointment.
The Exchange will only recognize one designation
per Member. A Member may make a designation
not more than once every 12 months (from the date
of its most recent designation), which designation
shall remain in effect unless or until the Exchange
receives written notice submitted 2 business days
prior to the first business day of the month from
either Member indicating that the appointment has
been terminated. Designations will become
operative on the first business day of the effective
month and may not be terminated prior to the end
of the month. Execution data and reports will be
provided to both parties. See the Definitions
Section of the Fee Schedule.
7 The term ‘‘Excluded Contracts’’ means any
contracts routed to an away market for execution.
See the Definitions Section of the Fee Schedule.
E:\FR\FM\28SEN1.SGM
28SEN1
]]>Agencies
[Federal Register Volume 87, Number 187 (Wednesday, September 28, 2022)]
[Notices]
[Pages 58854-58856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-21031]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95871; File No. SR-FINRA-2022-026]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Change References in the Codes of Arbitration
Procedure From the Neutral List Selection System to the List Selection
Algorithm
September 22, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on September 15, 2022, the Financial Industry
Regulatory Authority, Inc. (``FINRA'') 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 FINRA. FINRA has designated the proposed rule change
as constituting a ``non-controversial'' rule change under paragraph
(f)(6) of Rule 19b-4 under the Act,\3\ which renders the proposal
effective upon receipt of this filing by the Commission. 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\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to change references in the Codes of Arbitration
Procedure (``Codes'') from the Neutral List Selection System to the
list selection algorithm.
The text of the proposed rule change is available on FINRA's
website at https://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA has prepared summaries, set forth in sections A,
B,
[[Page 58855]]
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
From November 1998 until October 2006, the Neutral List Selection
System (``NLSS'') was the computer system that generated lists of
arbitrators from FINRA Dispute Resolution Services' (``DRS'') rosters
of arbitrators for the selected hearing location for each arbitration
proceeding. In October 2006, DRS replaced the NLSS with the Mediation
and Arbitration Tracking and Retrieval Interactive Case System
(``MATRICS'').\4\ As a result, all of the information contained in the
NLSS was transferred to MATRICS such that MATRICS now contains the list
selection algorithm DRS uses to generate lists of arbitrators from its
rosters of arbitrators.\5\ However, the Codes refer to the NLSS as a
computer system that governs arbitrator list selection in the DRS
arbitration forum.\6\
---------------------------------------------------------------------------
\4\ MATRICS is an internal, web-based computer system used to
manage all arbitration and mediation cases in the DRS arbitration
forum and to maintain DRS's rosters of arbitrators and mediators.
\5\ See Securities Exchange Act Release No. 51339 (March 9,
2005), 70 FR 12763 (March 15, 2005) (Order Approving File No. SR-
NASD-2004-164); see also Notice to Members 07-07 (February 2007)
(announcing the effective date of April 16, 2007 for the amendments
discussed in File No. SR-NASD-2004-164).
\6\ In February 2022, the Audit Committee of FINRA's Board of
Governors engaged Lowenstein Sandler LLP to provide an independent
review and analysis in connection with a Fulton County (Georgia)
Superior Court decision vacating an arbitration award in favor of
Wells Fargo Clearing Services, LLC. See Order Granting Mot. to
Vacate Arb. Award and Den. Cross Mot. to Confirm Arb. Award at 37,
Leggett v. Wells Fargo Clearing Servs., LLC, No. 2019-CV-328949 (Ga.
Super. Ct., January 25, 2022). In its report, Lowenstein Sandler
made several recommendations to provide greater transparency and
consistency in the arbitrator selection process, one of which was to
make technical amendments to the Codes to clarify the automated
system used by DRS for arbitrator selection. See https://www.finra.org/sites/default/files/2022-06/report-independent-review-drs-arbitrator-selection-process.pdf. Since publication of the
report, the Fulton County (Georgia) Superior Court's decision was
reversed by the Court of Appeals of Georgia. See Wells Fargo
Clearing Servs. v. Leggett, No. A22A1149, 2022 Ga. App. (Ct. App.
August 2, 2022).
---------------------------------------------------------------------------
FINRA is proposing to update the Codes by making technical, non-
substantive changes to remove references to the NLSS from those rules
describing arbitrator list selection and instead refer to the ``list
selection algorithm.'' \7\ The proposed rule change would provide
greater transparency and consistency regarding arbitrator list
selection, as the Codes would reflect and align with DRS's existing
practices, processes and systems relating to arbitrator list selection.
---------------------------------------------------------------------------
\7\ See proposed Rules 12400 (List Selection Algorithm and
Arbitrator Rosters), 12402 (Cases with One Arbitrator), 12403 (Cases
with Three Arbitrators), 12404 (Additional Parties), 12800
(Simplified Arbitration), 12801 (Default Proceedings), 13400 (List
Selection Algorithm and Arbitrator Rosters), 13403 (Generating and
Sending Lists to the Parties), 13406 (Appointment of Arbitrators;
Discretion to Appoint Arbitrators Not on List), 13407 (Additional
Parties), 13411 (Replacement of Arbitrators), 13800 (Simplified
Arbitration), 13801 (Default Proceedings) and 13803 (Coordination of
Sexual Assault Claims, Sexual Harassment Claims or Statutory
Employment Discrimination Claims Filed in Court and in Arbitration).
---------------------------------------------------------------------------
In the proposed rule change, FINRA is not proposing any changes to
the list selection algorithm, or any of DRS's existing practices,
processes and systems related to arbitrator list selection.\8\
---------------------------------------------------------------------------
\8\ The proposed rule change would apply to all members,
including members that are funding portals or have elected to be
treated as capital acquisition brokers (``CABs''), given that the
funding portal and CAB rule sets incorporate the impacted FINRA
rules by reference.
---------------------------------------------------------------------------
FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, so FINRA can implement the proposed rule change
immediately.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Exchange Act,\9\ which requires,
among other things, that FINRA rules must be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and, in general, to protect investors
and the public interest. FINRA believes that the proposed rule change
will provide greater transparency to members and the public regarding
arbitrator list selection by updating FINRA rules to reflect and align
with DRS's existing practices, processes and systems related to
arbitrator list selection.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act. The proposed rule
change brings transparency and consistency to FINRA rules without
adding any burden on member firms.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor 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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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-FINRA-2022-026 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-FINRA-2022-026. 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
[[Page 58856]]
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 such filing also will be available for inspection
and copying at the principal office of FINRA. All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly.
All submissions should refer to File Number SR-FINRA-2022-026 and
should be submitted on or before October 19, 2022.
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-21031 Filed 9-27-22; 8:45 am]
BILLING CODE 8011-01-P
