Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amended Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and MEMX LLC, 64280-64285 [2022-22989]
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Federal Register / Vol. 87, No. 204 / Monday, October 24, 2022 / Notices
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Authority: 5 U.S.C. 552b.
Dated: October 20, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022–23190 Filed 10–20–22; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96101; File No. 4–762]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Notice of Filing and Order
Approving and Declaring Effective an
Amended Plan for the Allocation of
Regulatory Responsibilities Between
the Financial Industry Regulatory
Authority, Inc. and MEMX LLC
October 18, 2022.
Notice is hereby given that the
Securities and Exchange Commission
(‘‘Commission’’) has issued an Order,
pursuant to Section 17(d) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 approving and declaring
effective an amendment to the plan for
allocating regulatory responsibility
(‘‘Plan’’) filed on October 6, 2022,
pursuant to Rule 17d–2 of the Act,2 by
the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) and MEMX
LLC (‘‘MEMX’’) (collectively,
‘‘Participating Organizations’’ or
‘‘parties’’). This agreement amends and
restates the agreement entered into
between FINRA and MEMX on April 16,
2020, entitled ‘‘Agreement between
Financial Industry Regulatory
Authority, Inc. and MEMX LLC
pursuant to Rule 17d–2 under the
Securities Exchange Act of 1934,’’ and
any subsequent amendments thereafter.
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I. Introduction
Section 19(g)(1) of the Act,3 among
other things, requires every selfregulatory organization (‘‘SRO’’)
registered as either a national securities
exchange or national securities
association to examine for, and enforce
compliance by, its members and persons
associated with its members with the
Act, the rules and regulations
thereunder, and the SRO’s own rules,
unless the SRO is relieved of this
responsibility pursuant to Section
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 15 U.S.C. 78s(g)(1).
2 17
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17:07 Oct 21, 2022
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17(d) 4 or Section 19(g)(2) 5 of the Act.
Without this relief, the statutory
obligation of each individual SRO could
result in a pattern of multiple
examinations of broker-dealers that
maintain memberships in more than one
SRO (‘‘common members’’). Such
regulatory duplication would add
unnecessary expenses for common
members and their SROs.
Section 17(d)(1) of the Act 6 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.7 With respect to
a common member, Section 17(d)(1)
authorizes the Commission, by rule or
order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules, and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 and Rule 17d–2 under the Act.8
Rule 17d–1 authorizes the Commission
to name a single SRO as the designated
examining authority (‘‘DEA’’) to
examine common members for
compliance with the financial
responsibility requirements imposed by
the Act, or by Commission or SRO
rules.9 When an SRO has been named as
a common member’s DEA, all other
SROs to which the common member
belongs are relieved of the responsibility
to examine the firm for compliance with
the applicable financial responsibility
rules. On its face, Rule 17d–1 deals only
with an SRO’s obligations to enforce
member compliance with financial
responsibility requirements. Rule 17d–1
does not relieve an SRO from its
obligation to examine a common
member for compliance with its own
rules and provisions of the federal
securities laws governing matters other
than financial responsibility, including
sales practices and trading activities and
practices.
To address regulatory duplication in
these and other areas, the Commission
adopted Rule 17d–2 under the Act.10
Rule 17d–2 permits SROs to propose
joint plans for the allocation of
regulatory responsibilities with respect
4 15
U.S.C. 78q(d).
5 15 U.S.C. 78s(g)(2).
6 15 U.S.C. 78q(d)(1).
7 See Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session 32 (1975).
8 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
respectively.
9 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
10 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8,
1976).
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to their common members. Under
paragraph (c) of Rule 17d–2, the
Commission may declare such a plan
effective if, after providing for
appropriate notice and opportunity for
comment, it determines that the plan is
necessary or appropriate in the public
interest and for the protection of
investors, to foster cooperation and
coordination among the SROs, to
remove impediments to, and foster the
development of, a national market
system and a national clearance and
settlement system, and is in conformity
with the factors set forth in Section
17(d) of the Act. Commission approval
of a plan filed pursuant to Rule 17d–2
relieves an SRO of those regulatory
responsibilities allocated by the plan to
another SRO.
II. The Plan
On June 17, 2020, the Commission
declared effective the Plan entered into
between FINRA and MEMX for
allocating regulatory responsibility
pursuant to Rule 17d–2.11 The Plan is
intended to reduce regulatory
duplication for firms that are common
members of FINRA and MEMX by
allocating regulatory responsibility with
respect to certain applicable laws, rules,
and regulations that are common among
them. Included in the Plan is an exhibit
that lists every MEMX rule for which
FINRA bears responsibility under the
Plan for overseeing and enforcing with
respect to MEMX members that are also
members of FINRA and the associated
persons therewith (‘‘Certification’’).
III. Proposed Amendment to the Plan
On October 6, 2022, the parties
submitted a proposed amendment to the
Plan (‘‘Amended Plan’’). The primary
purpose of the Amended Plan is to add
Securities Exchange Act Rule 14e–
4(a)(1)(ii)(D) to the Certification to
accommodate the upcoming launch of
MEMX’s new options facility and to
reflect updated rule citations. The text
of the proposed Amended Plan is as
follows (additions are italicized;
deletions are [bracketed]):
*
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AGREEMENT BETWEEN FINANCIAL
INDUSTRY REGULATORY AUTHORITY,
INC. AND MEMX LLC PURSUANT TO
RULE 17d–2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934
This Agreement, by and between the
Financial Industry Regulatory Authority, Inc.
(‘‘FINRA’’) and MEMX LLC (‘‘MEMX’’), is
made this [16th] 6th day of [April, 2020]
October, 2022 (the ‘‘Agreement’’), pursuant to
Section 17(d) of the Securities Exchange Act
11 See Securities Exchange Act Release No. 89084
(June 17, 2020), 85 FR 37701 (June 23, 2020).
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of 1934 (the ‘‘Exchange Act’’) and Rule 17d–
2 thereunder, which permits agreements
between self-regulatory organizations to
allocate regulatory responsibility to eliminate
regulatory duplication. FINRA and MEMX
may be referred to individually as a ‘‘party’’
and together as the ‘‘parties.’’
Whereas, FINRA and MEMX desire to
reduce duplication in the examination and
surveillance of their Dual Members (as
defined herein) and in the filing and
processing of certain registration and
membership records; and
Whereas, FINRA and MEMX desire to
execute an agreement covering such subjects
pursuant to the provisions of Rule 17d–2
under the Exchange Act and to file such
agreement with the Securities and Exchange
Commission (the ‘‘SEC’’ or ‘‘Commission’’)
for its approval.
Now, therefore, in consideration of the
mutual covenants contained hereinafter,
FINRA and MEMX hereby agree as follows:
1. Definitions. Unless otherwise defined in
this Agreement or the context otherwise
requires, the terms used in this Agreement
shall have the same meaning as they have
under the Exchange Act and the rules and
regulations thereunder. As used in this
Agreement, the following terms shall have
the following meanings:
(a) ‘‘MEMX Rules’’ or ‘‘FINRA Rules’’ shall
mean: (i) the rules of MEMX, or (ii) the rules
of FINRA, respectively, as the rules of an
exchange or association are defined in
Exchange Act Section 3(a)(27).
(b) ‘‘Common Rules’’ shall mean MEMX
Rules that are substantially similar to the
applicable FINRA Rules and certain
provisions of the Exchange Act and SEC rules
set forth on Exhibit 1 in that examination or
surveillance for compliance with such
provisions and rules would not require
FINRA to develop one or more new
examination or surveillance standards,
modules, procedures, or criteria in order to
analyze the application of the provision or
rule, or a Dual Member’s activity, conduct, or
output in relation to such provision or rule;
provided, however, Common Rules shall not
include the application of the SEC, MEMX or
FINRA rules as they pertain to violations of
insider trading activities, which is covered by
a separate 17d–2 Agreement by and among
Cboe BZX Exchange, Inc., Cboe BYX
Exchange, Inc., Chicago Stock Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX
Exchange, Inc., Financial Industry Regulatory
Authority, Inc., MEMX LLC, MIAX PEARL,
LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC,
The Nasdaq Stock Market LLC, NYSE
National, Inc., New York Stock Exchange,
LLC, NYSE American LLC, NYSE Arca Inc.,
and Investors’ Exchange LLC and Long-Term
Stock Exchange, Inc. effective [August 1,
2019] September 23, 2020, as may be
amended from time to time. Common Rules
shall not include any provisions regarding (i)
notice, reporting or any other filings made
directly to or from MEMX, (ii) incorporation
by reference of MEMX Rules that are not
Common Rules, (iii) exercise of discretion in
a manner that differs from FINRA’s exercise
of discretion including, but not limited to
exercise of exemptive authority, by MEMX,
(iv) prior written approval of MEMX and (v)
payment of fees or fines to MEMX.
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17:07 Oct 21, 2022
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(c) ‘‘Dual Members’’ shall mean those
MEMX members that are also members of
FINRA and the associated persons therewith.
(d) ‘‘Effective Date’’ shall be the date this
Agreement is approved by the Commission.
(e) ‘‘Enforcement Responsibilities’’ shall
mean the conduct of appropriate
proceedings, in accordance with FINRA’s
Code of Procedure (the Rule 9000 Series) and
other applicable FINRA procedural rules, to
determine whether violations of Common
Rules have occurred, and if such violations
are deemed to have occurred, the imposition
of appropriate sanctions as specified under
FINRA’s Code of Procedure and sanctions
guidelines.
(f) ‘‘Regulatory Responsibilities’’ shall
mean the examination responsibilities,
surveillance responsibilities and
Enforcement Responsibilities relating to
compliance by the Dual Members with the
Common Rules and the provisions of the
Exchange Act and the rules and regulations
thereunder, and other applicable laws, rules
and regulations, each as set forth on Exhibit
1 attached hereto.
2. Regulatory and Enforcement
Responsibilities. FINRA shall assume
Regulatory Responsibilities and Enforcement
Responsibilities for Dual Members. Attached
as Exhibit 1 to this Agreement and made part
hereof, MEMX furnished FINRA with a
current list of Common Rules and certified to
FINRA that such rules that are MEMX Rules
are substantially similar to the corresponding
FINRA Rules (the ‘‘Certification’’). FINRA
hereby agrees that the rules listed in the
Certification are Common Rules as defined in
this Agreement. Each year following the
Effective Date of this Agreement, or more
frequently if required by changes in either
the rules of MEMX or FINRA, MEMX shall
submit an updated list of Common Rules to
FINRA for review which shall add MEMX
Rules not included in the current list of
Common Rules that qualify as Common
Rules as defined in this Agreement; delete
MEMX Rules included in the current list of
Common Rules that no longer qualify as
Common Rules as defined in this Agreement;
and confirm that the remaining rules on the
current list of Common Rules continue to be
MEMX Rules that qualify as Common Rules
as defined in this Agreement. Within 30 days
of receipt of such updated list, FINRA shall
confirm in writing whether the rules listed in
any updated list are Common Rules as
defined in this Agreement. Notwithstanding
anything herein to the contrary, it is
explicitly understood that the term
‘‘Regulatory Responsibilities’’ does not
include, and MEMX shall retain full
responsibility for (unless otherwise
addressed by separate agreement or rule)
(collectively, the ‘‘Retained
Responsibilities’’) the following:
(a) surveillance, examination, investigation
and enforcement with respect to trading
activities or practices involving MEMX’s own
marketplace for rules that are not Common
Rules;
(b) registration pursuant to its applicable
rules of associated persons (i.e., registration
rules that are not Common Rules);
(c) discharge of its duties and obligations
as a Designated Examining Authority
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pursuant to Rule 17d–1 under the Exchange
Act; and
(d) any MEMX Rules that are not Common
Rules, except for MEMX Rules for any MEMX
member that operates as a facility (as defined
in Section 3(a)(2) of the Exchange Act), acts
as an outbound router for the MEMX and is
a member of FINRA (‘‘Router Member’’) as
provided in paragraph 6. As of the date of
this Agreement, MEMX Execution Services
LLC is the only Router Member.
3. Dual Members. Prior to the Effective
Date, MEMX shall furnish FINRA with a
current list of Dual Members, which shall be
updated no less frequently than once each
quarter.
4. No Charge. There shall be no charge to
MEMX by FINRA for performing the
Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except
as otherwise agreed by the parties, either
herein or in a separate agreement.
5. Applicability of Certain Laws, Rules,
Regulations or Orders. Notwithstanding any
provision hereof, this Agreement shall be
subject to any statute, or any rule or order of
the Commission. To the extent such statute,
rule or order is inconsistent with this
Agreement, the statute, rule or order shall
supersede the provision(s) hereof to the
extent necessary for them to be properly
effectuated and the provision(s) hereof in that
respect shall be null and void.
6. Notification of Violations.
(a) In the event that FINRA becomes aware
of apparent violations of any MEMX Rules,
which are not listed as Common Rules,
discovered pursuant to the performance of
the Regulatory Responsibilities assumed
hereunder, FINRA shall notify MEMX of
those apparent violations for such response
as MEMX deems appropriate. With respect to
apparent violations of any MEMX Rules by
any Router Member, FINRA shall not make
referrals to MEMX pursuant to this paragraph
6. Such apparent violations shall be
processed by, and enforcement proceedings
in respect thereto will be conducted by,
FINRA as provided in this Agreement.
(b) In the event that MEMX becomes aware
of apparent violations of any Common Rules,
discovered pursuant to the performance of
the Retained Responsibilities, MEMX shall
notify FINRA of those apparent violations
and such matters shall be handled by FINRA
as provided in this Agreement.
(c) Apparent violations of Common Rules
shall be processed by, and enforcement
proceedings in respect thereto shall be
conducted by FINRA as provided
hereinbefore; provided, however, that in the
event a Dual Member is the subject of an
investigation relating to a transaction on
MEMX, MEMX may in its discretion assume
concurrent jurisdiction and responsibility.
(d) Each party agrees to make available
promptly all files, records and witnesses
necessary to assist the other in its
investigation or proceedings.
7. Continued Assistance.
(a) FINRA shall make available to MEMX
all information obtained by FINRA in the
performance by it of the Regulatory
Responsibilities hereunder with respect to
the Dual Members subject to this Agreement.
In particular, and not in limitation of the
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foregoing, FINRA shall furnish MEMX any
information it obtains about Dual Members
which reflects adversely on their financial
condition. MEMX shall make available to
FINRA any information coming to its
attention that reflects adversely on the
financial condition of Dual Members or
indicates possible violations of applicable
laws, rules or regulations by such firms.
(b) The parties agree that documents or
information shared shall be held in
confidence, and used only for the purposes
of carrying out their respective regulatory
obligations. Neither party shall assert
regulatory or other privileges as against the
other with respect to documents or
information that is required to be shared
pursuant to this Agreement.
(c) The sharing of documents or
information between the parties pursuant to
this Agreement shall not be deemed a waiver
as against third parties of regulatory or other
privileges relating to the discovery of
documents or information.
8. Statutory Disqualifications. When
FINRA becomes aware of a statutory
disqualification as defined in the Exchange
Act with respect to a Dual Member, FINRA
shall determine pursuant to Sections 15A(g)
and/or Section 6(c) of the Exchange Act the
acceptability or continued applicability of
the person to whom such disqualification
applies and keep MEMX advised of its
actions in this regard for such subsequent
proceedings as MEMX may initiate.
9. Customer Complaints. MEMX shall
forward to FINRA copies of all customer
complaints involving Dual Members received
by MEMX relating to FINRA’s Regulatory
Responsibilities under this Agreement. It
shall be FINRA’s responsibility to review and
take appropriate action in respect to such
complaints.
10. Advertising. FINRA shall assume
responsibility to review the advertising of
Dual Members subject to the Agreement,
provided that such material is filed with
FINRA in accordance with FINRA’s filing
procedures and is accompanied with any
applicable filing fees set forth in FINRA
Rules.
11. No Restrictions on Regulatory Action.
Nothing contained in this Agreement shall
restrict or in any way encumber the right of
either party to conduct its own independent
or concurrent investigation, examination or
enforcement proceeding of or against Dual
Members, as either party, in its sole
discretion, shall deem appropriate or
necessary.
12. Termination. This Agreement may be
terminated by MEMX or FINRA at any time
upon the approval of the Commission after
six (6) month’s written notice to the other
party.
13. Arbitration. In the event of a dispute
between the parties as to the operation of this
Agreement, MEMX and FINRA hereby agree
that any such dispute shall be settled by
arbitration in Washington, DC in accordance
with the rules of the American Arbitration
Association then in effect, or such other
procedures as the parties may mutually agree
upon. Judgment on the award rendered by
the arbitrator(s) may be entered in any court
having jurisdiction. Each party acknowledges
that the timely and complete performance of
its obligations pursuant to this Agreement is
critical to the business and operations of the
other party. In the event of a dispute between
the parties, the parties shall continue to
perform their respective obligations under
this Agreement in good faith during the
resolution of such dispute unless and until
this Agreement is terminated in accordance
with its provisions. Nothing in this Section
13 shall interfere with a party’s right to
terminate this Agreement as set forth herein.
14. Notification of Members. MEMX and
FINRA shall notify Dual Members of this
Agreement after the Effective Date by means
of a uniform joint notice.
15. Amendment. This Agreement may be
amended in writing duly approved by each
party. All such amendments must be filed
with and approved by the Commission before
they become effective.
16. Limitation of Liability. Neither FINRA
nor MEMX nor any of their respective
directors, governors, officers or employees
shall be liable to the other party to this
Agreement for any liability, loss or damage
resulting from or claimed to have resulted
from any delays, inaccuracies, errors or
omissions with respect to the provision of
Regulatory Responsibilities as provided
hereby or for the failure to provide any such
responsibility, except with respect to such
liability, loss or damages as shall have been
suffered by one or the other of FINRA or
MEMX and caused by the willful misconduct
of the other party or their respective
MEMX rule
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Rule 2.6(b) and (g) Application Procedures for Membership or to become an Associated Person of a Member #.
Rule 3.1
Business Conduct of Members ∧ .............................................
Rule 3.2
Violations Prohibited ∧ # ...........................................................
Rule 3.3
Use of Fraudulent Devices ∧ ...................................................
Rule 3.5
Communications with the Public .............................................
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EXHIBIT 1
MEMX CERTIFICATION OF COMMON
RULES
MEMX hereby certifies that the
requirements contained in the rules listed
below for MEMX are identical to, or
substantially similar to, the comparable
FINRA (NASD) Rules, Exchange Act
provision or SEC rule identified (‘‘Common
Rules’’).
# Common Rules shall not include any
provisions regarding (i) notice, reporting or
any other filings made directly to or from
MEMX, (ii) incorporation by reference of
MEMX Rules that are not Common Rules,
(iii) exercise of discretion in a manner that
differs from FINRA’s exercise of discretion
including, but not limited to exercise of
exemptive authority, by MEMX, (iv) prior
written approval of MEMX and (v) payment
of fees or fines to MEMX.
FINRA (NASD) rule, Exchange Act provision, SEC rule
Rule 2.5 Restrictions, Interpretation and Policies .02 Continuing Education Requirements #.
Rule 2.5 Restrictions, Interpretations and Polic[y]ies .04 Termination
of Employment.
VerDate Sep<11>2014
directors, governors, officers or employees.
No warranties, express or implied, are made
by FINRA or MEMX with respect to any of
the responsibilities to be performed by each
of them hereunder.
17. Relief from Responsibility. Pursuant to
Sections 17(d)(1)(A) and 19(g) of the
Exchange Act and Rule 17d-2 thereunder,
FINRA and MEMX join in requesting the
Commission, upon its approval of this
Agreement or any part thereof, to relieve
MEMX of any and all responsibilities with
respect to matters allocated to FINRA
pursuant to this Agreement; provided,
however, that this Agreement shall not be
effective until the Effective Date.
18. Severability. Any term or provision of
this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent
of such invalidity or unenforceability
without rendering invalid or unenforceable
the remaining terms and provisions of this
Agreement or affecting the validity or
enforceability of any of the terms or
provisions of this Agreement in any other
jurisdiction.
19. Counterparts. This Agreement may be
executed in one or more counterparts, each
of which shall be deemed an original, and
such counterparts together shall constitute
one and the same instrument.
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FINRA Rule 1240[(a)(1)–(4)]
Continuing Education Requirements#.
FINRA By-Laws of the Corporation, Article V, Section 3 Notification by
Member to the Corporation and Associated Person of Termination;
Amendments to Notification; FINRA Rule 1010(e) Electronic Filing
Requirements for Uniform Forms.
FINRA By-Laws of the Corporation, Article IV, Section 1(c) Application
for Membership and Article V, Sec. 2(c); FINRA Rule 1010(c) Electronic Filing Requirements for Uniform Forms.
FINRA Rule 2010 Standards of Commercial Honor and Principles of
Trade.∧
FINRA Rule 2010 Standards of Commercial Honor and Principles of
Trade and FINRA Rule 3110 Supervision.∧
FINRA Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent
Devices.∧
FINRA Rule 2210 Communications with the Public.
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MEMX rule
Rule 3.6
FINRA (NASD) rule, Exchange Act provision, SEC rule
Fair Dealing with Customers ...................................................
Rule 3.7(a) Recommendations to Customers .......................................
Rule 3.8(a) The Prompt Receipt and Delivery of Securities .................
Rule 3.8(b) The Prompt Receipt and Delivery of Securities .................
Rule 3.9 Charges for Services Performed .............................................
Rule 3.10 Use of Information .................................................................
Rule 3.11 Publication of Transactions and Quotations # .......................
Rule 3.12 Offers at Stated Prices ..........................................................
Rule 3.13 Payments Involving Publications that Influence the Market
Price of a Security.
Rule 3.14 Disclosure on Confirmations .................................................
Rule 3.15
Rule 3.16
Rule 3.17
Disclosure of Control .............................................................
Discretionary Accounts ..........................................................
Customer’s Securities or Funds ............................................
Rule 3.18
Prohibition Against Guarantees ............................................
Rule 3.19
Sharing in Accounts; Extent Permissible ..............................
Rule
Rule
Rule
Rule
3.21 Customer Disclosures ...........................................................
3.20 Influencing or Rewarding Employees of Others ...................
3.22 Telemarketing and Interpretations and Policies .01 .............
4.1 Requirements # ........................................................................
Rule 4.3
Rule 5.1
Rule 5.2
Record of Written Complaints .................................................
Written Procedures # ................................................................
Responsibility of Members ......................................................
Rule 5.3
Rule 5.4
Records ...................................................................................
Review of Activities .................................................................
Rule 5.6
Rule 9.3
Anti-Money Laundering Compliance Program # ......................
Predispute Arbitration Agreements .........................................
Rule 11.16(e)(3) & (4) Trading Halts Due to Extraordinary Market Volatility.
Rule 11.10(a)(5) Order Execution # ∧∧ ....................................................
Rule 11.10(f) Locking Quotation or Crossing Quotations in NMS
Stocks **.
Rule 12.1 Market Manipulation ..............................................................
Rule 12.2 Fictitious Transactions ...........................................................
Rule
Rule
Rule
Rule
12.3
12.4
12.5
12.6
Excessive Sales [B]by [A]a Member .....................................
Manipulative Transactions .....................................................
Dissemination of False Information .......................................
Prohibition Against Trading Ahead of Customer Orders # **
Rule 12.9 Trade Shredding ....................................................................
Rule 12.11 Best Execution ** .................................................................
Rule 12.13 Trading Ahead of Research Reports ** ...............................
Rule 12.14 Front Running of Block Transactions ** ..............................
Rule 13.3(a), (b)(i), (d) and Interpretation and Policy .01 Forwarding of
Proxy and Other Issuer-Related Materials; Proxy Voting.
Rule 26.11 Restrictions on Pledge and Lending of Public Customers’
Securities.
FINRA Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent
Devices,∧ 1 FINRA Rule 2111 Suitability.
FINRA Rule 2111(a) and SM .03 Suitability.
FINRA Rule 11860 COD Orders.
SEC Regulation SHO.
FINRA Rule 2122 Charges for Services Performed.
FINRA Rule 2060 Use of Information Obtained in Fiduciary Capacity.
FINRA Rule 5210 Publication of Transactions and Quotations.
FINRA Rule 5220 Offers at Stated Prices.
FINRA Rule 5230 Payments Involving Publications that Influence the
Market Price of a Security.
FINRA Rule 2232(a) Customer Confirmations and SEC Rule 10b–10
Confirmation of Transactions.
FINRA Rule 2262 Disclosure of Control Relationship With Issuer.
FINRA Rule 3260 Discretionary Accounts.
FINRA Rule 2150(a) Improper Use of Customers’ Securities or
Funds; Prohibition Against Guarantees and Sharing in Accounts—
Improper Use
FINRA Rule 2150(b) Improper Use of Customers’ Securities or
Funds; Prohibition Against Guarantees and Sharing in Accounts—
Prohibition Against Guarantees.
FINRA Rule 2150(c)(1) Improper Use of Customers’ Securities or
Funds; Prohibition Against Guarantees and Sharing in Accounts—
Sharing in Accounts; Extent Permissible.
FINRA Rule 2265 Extended Hours Trading Risk Disclosure.
FINRA Rule 3220 Influencing or Rewarding Employees of Others.
FINRA Rule 3230 Telemarketing.
Section 17 of the Exchange Act and rules thereunder and FINRA Rule
4511(a) and (c) General Requirements.2
FINRA Rule 4513 Records of Written Customer Complaints.
FINRA Rule 3110(b)(1) Supervision-Written Procedures.∧
FINRA Rule 3110 (a)(4), (b)(4) and (b)(7) Supervision—Supervisory
System/Written Procedures—Review of Correspondence and Internal
Communications.∧
FINRA Rule 3110 Supervision.∧
FINRA Rule 3110(c) and (d) Supervision—Internal Inspections/Transaction Review and Investigation.∧
FINRA Rule 3310 Anti-Money Laundering Compliance Program.
FINRA Rule 2268 Requirements When Using Predispute Arbitration
Agreements for Customer Accounts.
FINRA Rule 6190(a) & (b) Compliance with Regulation NMS Plan to
Address Extraordinary Market Volatility.
FINRA Rule 6182 Trade Reporting of Short Sales.∧∧
FINRA Rule 6240 Prohibition from Locking or Crossing Quotations in
NMS Stocks.**
FINRA Rule 6140(a) Other Trading Practices.
FINRA Rule 6140 Other Trading Practices and FINRA Rule 5210
Supplementary Material .02 Self-Trades.
FINRA Rule 6140(c) Other Trading Practices.
FINRA Rule 6140 Other Trading Practices.
FINRA Rule 6140(e) Other Trading Practices.
FINRA Rule 5320 Prohibition Against Trading Ahead of Customer Orders.**
FINRA Rule 5290 Order Entry and Execution Practices.
FINRA Rule 5310 Best Execution and Interpositioning.**
FINRA Rule 5280 Trading Ahead of Research Reports.**
FINRA Rule 5270 Front Running of Block Transactions.**
FINRA Rule 2251 Processing and Forwarding of Proxy and Other
Issuer-Related Materials.
FINRA Rule 4330 Customer Protection—Permissible Use of Customers’ Securities.
1 FINRA
shall not have Regulatory Responsibilities regarding .01 of MEMX Rule 3.6.
shall not have Regulatory Responsibilities regarding requirements to keep records ‘‘in conformity with . . . Exchange Rules;’’ responsibility for such requirement remains with MEMX.
In addition, the following provisions shall be part of this 17d–2 Agreement:
SEA Rules:
• SEA Rule 200 of Regulation SHO—Definition of Short Sales and Marking Requirements **
• SEA Rule 201 of Regulation SHO—Circuit Breaker **
• SEA Rule 203 of Regulation SHO—Borrowing and Delivery Requirements **
• SEA Rule 204 of Regulation SHO—Close-Out Requirement **
• SEA Rule 101 of Regulation M—Activities by Distribution Participants **
• SEA Rule 102 of Regulation M—Activities by Issuers and Selling Security Holders During a Distribution **
• SEA Rule 103 of Regulation M—Nasdaq Passive Market Making **
• SEA Rule 104 of Regulation M—Stabilizing and Other Activities in Connection with an Offering **
• SEA Rule 105 of Regulation M—Short Selling in Connection With a Public Offering **
2 FINRA
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• SEA Rule 604 of Regulation NMS—Display of Customer Limit Orders **
• SEA Rule 606 of Regulation NMS—Disclosure of Routing Information **
• SEA Rule 610(d) of Regulation NMS—Locking or Crossing Quotations **
• SEA Rule 611 of Regulation NMS—Order Protection Rule **
• SEA Rule 10b–5 Employment of Manipulative and Deceptive Devices ∧
• SEA Rule 17a–3/17a–4—Records to Be Made by Certain Exchange Members, Brokers, and Dealers/Records to Be Preserved by Certain
Exchange Members, Brokers, and Dealers ∧
• SEA Rule 14e–4—Prohibited Transactions in Connection with Partial Tender Offers ∂∂
∧ FINRA shall not have any Regulatory Responsibilities for these rules as they pertain to violations of insider trading activities, which is covered
by a separate 17d–2 Agreement by and among Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange, Inc., Cboe
EDGA Exchange Inc., Cboe EDGX Exchange Inc., Financial Industry Regulatory Authority, Inc., MEMX LLC, MIAX PEARL, LLC, Nasdaq BX,
Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, NYSE National, Inc., New York Stock Exchange, LLC, NYSE American LLC, NYSE
Arca Inc., and Investors’ Exchange LLC and [the] Long-Term Stock Exchange, Inc. effective [August 1, 2019] September 23, 2020, as may be
amended from time to time.
** FINRA shall perform the surveillance responsibilities for the double star rules. These rules may be cited by FINRA in both the context of this
Agreement and the Regulatory Services Agreement.
∂∂ FINRA shall perform the surveillance responsibilities for SEA Rule 14e–4(a)(1)(ii)(D).
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing.
Comments may be submitted by any of
the following methods:
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number 4–762 and should be submitted
on or before November 14, 2022.
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 4–
762 on the subject line.
The Commission finds that the
proposed Amended Plan is consistent
with the factors set forth in Section
17(d) of the Act 12 and Rule 17d–2(c)
thereunder 13 in that the proposed
Amended Plan is necessary or
appropriate in the public interest and
for the protection of investors, fosters
cooperation and coordination among
SROs, and removes impediments to and
fosters the development of the national
market system. In particular, the
Commission believes that the proposed
Amended Plan should reduce
unnecessary regulatory duplication by
allocating to FINRA certain examination
and enforcement responsibilities for
Dual Members that would otherwise be
performed by FINRA and MEMX.
Accordingly, the proposed Amended
Plan promotes efficiency by reducing
costs to Dual Members. Furthermore,
because MEMX and FINRA will
coordinate their regulatory functions in
accordance with the Amended Plan, the
Amended Plan should promote investor
protection.
The Commission notes that, under the
Amended Plan, MEMX and FINRA have
allocated regulatory responsibility for
those MEMX rules, set forth in the
Certification, that are substantially
similar to the applicable FINRA rules in
that examination for compliance with
such provisions and rules would not
require FINRA to develop one or more
new examination standards, modules,
procedures, or criteria in order to
analyze the application of the rule, or a
Dual Member’s activity, conduct, or
output in relation to such rule. In
addition, under the Amended Plan,
FINRA would assume regulatory
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 4–762. This file number should
be included on the subject line if email
is used. To help the Commission
process and review your comments
more efficiently, please use only one
method. The Commission will post all
comments on the Commission’s internet
website (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
plan that are filed with the Commission,
and all written communications relating
to the proposed plan between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
plan also will be available for inspection
and copying at the principal offices of
FINRA and MEMX. 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
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V. Discussion
12 15
13 17
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CFR 240.17d–2(c).
Frm 00086
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responsibility for certain provisions of
the federal securities laws and the rules
and regulations thereunder that are set
forth in the Certification. The Common
Rules covered by the Amended Plan are
specifically listed in the Certification, as
may be amended by the Parties from
time to time.
According to the Amended Plan,
MEMX will review the Certification at
least annually, or more frequently if
required by changes in either the rules
of MEMX or FINRA, and, if necessary,
submit to FINRA an updated list of
Common Rules to add MEMX rules not
included on the then-current list of
Common Rules that are substantially
similar to FINRA rules; delete MEMX
rules included in the then-current list of
Common Rules that no longer qualify as
common rules; and confirm that the
remaining rules on the list of Common
Rules continue to be MEMX rules that
qualify as common rules.14 FINRA will
then confirm in writing whether the
rules listed in any updated list are
Common Rules as defined in the
Amended Plan. The Commission
believes that these provisions are
designed to provide for continuing
communication between the Parties to
ensure the continued accuracy of the
scope of the proposed allocation of
regulatory responsibility.
The Commission is hereby declaring
effective an Amended Plan that, among
other things, allocates regulatory
responsibility to FINRA for the
oversight and enforcement of all MEMX
rules that are substantially similar to the
rules of FINRA for Dual Members of
MEMX and FINRA. Therefore,
modifications to the Certification need
not be filed with the Commission as an
amendment to the Amended Plan,
provided that the Parties are only
adding to, deleting from, or confirming
changes to MEMX rules in the
Certification in conformance with the
definition of Common Rules provided in
the Amended Plan. However, should the
14 See
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Parties decide to add an MEMX rule to
the Certification that is not substantially
similar to a FINRA rule; delete an
MEMX rule from the Certification that is
substantially similar to a FINRA rule; or
leave on the Certification an MEMX rule
that is no longer substantially similar to
a FINRA rule, then such a change would
constitute an amendment to the
Amended Plan, which must be filed
with the Commission pursuant to Rule
17d-2 under the Act.15
Under paragraph (c) of Rule 17d–2,
the Commission may, after appropriate
notice and comment, declare a plan, or
any part of a plan, effective. In this
instance, the Commission believes that
appropriate notice and comment can
take place after the proposed
amendment is effective. The primary
purpose of the Amended Plan is to add
Securities Exchange Act Rule 14e–
4(a)(1)(ii)(D) to the Certification. The
Commission notes that the prior version
of this plan immediately prior to this
proposed amendment was published for
comment and the Commission did not
receive any comments thereon.16
Furthermore, the Commission does not
believe that the amendment to the plan
raises any new regulatory issues that the
Commission has not previously
considered.
VI. Conclusion
This order gives effect to the
Amended Plan filed with the
Commission in File No. 4–762. The
Parties shall notify all members affected
by the Amended Plan of their rights and
obligations under the Amended Plan.
It is therefore ordered, pursuant to
Section 17(d) of the Act, that the
Amended Plan in File No. 4–762,
between the FINRA and MEMX, filed
pursuant to Rule 17d–2 under the Act,
hereby is approved and declared
effective.
It is further ordered that MEMX is
relieved of those responsibilities
allocated to FINRA under the Amended
Plan in File No. 4–762.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–22989 Filed 10–21–22; 8:45 am]
BILLING CODE 8011–01–P
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15 The
addition to or deletion from the
Certification of any federal securities laws, rules,
and regulations for which FINRA would bear
responsibility under the Amended Plan for
examining, and enforcing compliance by, Dual
Members, also would constitute an amendment to
the Amended Plan.
16 See Securities Exchange Act Release No. 88981
(May 20, 2020), 85 FR 34690 (June 5, 2020).
17 17 CFR 200.30–3(a)(34).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96100; File No. S7–966]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Notice of Filing and Order
Approving and Declaring Effective an
Amendment to the Plan for the
Allocation of Regulatory
Responsibilities Among Cboe BZX
Exchange, Inc., BOX Exchange, LLC,
Cboe Exchange, Inc., Cboe C2
Exchange, Inc., Nasdaq ISE, LLC,
Financial Industry Regulatory
Authority, Inc., Miami International
Securities Exchange, LLC, NYSE
American LLC, NYSE Arca, Inc., The
Nasdaq Stock Market LLC, Nasdaq BX,
Inc., Nasdaq PHLX LLC, Nasdaq
GEMX, LLC, Cboe EDGX Exchange,
Inc., Nasdaq MRX, LLC, MIAX PEARL,
LLC, MIAX Emerald, LLC and MEMX
LLC Concerning Options-Related Sales
Practice Matters
October 18, 2022.
Notice is hereby given that the
Securities and Exchange Commission
(‘‘Commission’’) has issued an Order,
pursuant to Section 17(d) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 approving and declaring
effective an amendment to the plan for
allocating regulatory responsibility
(‘‘Plan’’) filed on September 20, 2022,
pursuant to Rule 17d–2 of the Act,2 by
Cboe BZX Exchange, Inc. (‘‘BZX’’), BOX
Exchange, LLC (‘‘BOX’’), Cboe
Exchange, Inc., Cboe C2 Exchange, Inc.
(‘‘C2’’), Nasdaq ISE, LLC (‘‘ISE’’),
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’), Miami
International Securities Exchange, LLC
(‘‘MIAX’’), The Nasdaq Stock Market
LLC (‘‘Nasdaq’’), Nasdaq BX, Inc.
(‘‘BX’’), NYSE American LLC (‘‘NYSE
American’’), NYSE Arca, Inc. (‘‘NYSE
Arca’’), Nasdaq PHLX LLC (‘‘PHLX’’),
Nasdaq GEMX, LLC (‘‘GEMX’’), Cboe
EDGX Exchange, Inc. (‘‘EDGX’’), Nasdaq
MRX, LLC (‘‘MRX’’), MIAX PEARL, LLC
(‘‘MIAX PEARL’’), MIAX Emerald, LLC
(‘‘MIAX Emerald’’), and MEMX LLC
(‘‘MEMX’’) (collectively, ‘‘Participating
Organizations’’ or ‘‘parties’’).
I. Introduction
Section 19(g)(1) of the Act,3 among
other things, requires every selfregulatory organization (‘‘SRO’’)
registered as either a national securities
exchange or national securities
association to examine for, and enforce
compliance by, its members and persons
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 15 U.S.C. 78s(g)(1).
2 17
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64285
associated with its members with the
Act, the rules and regulations
thereunder, and the SRO’s own rules,
unless the SRO is relieved of this
responsibility pursuant to Section
17(d) 4 or Section 19(g)(2) 5 of the Act.
Without this relief, the statutory
obligation of each individual SRO could
result in a pattern of multiple
examinations of broker-dealers that
maintain memberships in more than one
SRO (‘‘common members’’). Such
regulatory duplication would add
unnecessary expenses for common
members and their SROs.
Section 17(d)(1) of the Act 6 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.7 With respect to
a common member, Section 17(d)(1)
authorizes the Commission, by rule or
order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules, and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 and Rule 17d–2 under the Act.8
Rule 17d–1 authorizes the Commission
to name a single SRO as the designated
examining authority (‘‘DEA’’) to
examine common members for
compliance with the financial
responsibility requirements imposed by
the Act, or by Commission or SRO
rules.9 When an SRO has been named as
a common member’s DEA, all other
SROs to which the common member
belongs are relieved of the responsibility
to examine the firm for compliance with
the applicable financial responsibility
rules. On its face, Rule 17d–1 deals only
with an SRO’s obligations to enforce
member compliance with financial
responsibility requirements. Rule 17d–1
does not relieve an SRO from its
obligation to examine a common
member for compliance with its own
rules and provisions of the federal
securities laws governing matters other
than financial responsibility, including
sales practices and trading activities and
practices.
To address regulatory duplication in
these and other areas, the Commission
4 15
U.S.C. 78q(d).
U.S.C. 78s(g)(2).
6 15 U.S.C. 78q(d)(1).
7 See Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session 32 (1975).
8 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
respectively.
9 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
5 15
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]]>Agencies
[Federal Register Volume 87, Number 204 (Monday, October 24, 2022)]
[Notices]
[Pages 64280-64285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22989]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96101; File No. 4-762]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing and Order Approving and Declaring
Effective an Amended Plan for the Allocation of Regulatory
Responsibilities Between the Financial Industry Regulatory Authority,
Inc. and MEMX LLC
October 18, 2022.
Notice is hereby given that the Securities and Exchange Commission
(``Commission'') has issued an Order, pursuant to Section 17(d) of the
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring
effective an amendment to the plan for allocating regulatory
responsibility (``Plan'') filed on October 6, 2022, pursuant to Rule
17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority,
Inc. (``FINRA'') and MEMX LLC (``MEMX'') (collectively, ``Participating
Organizations'' or ``parties''). This agreement amends and restates the
agreement entered into between FINRA and MEMX on April 16, 2020,
entitled ``Agreement between Financial Industry Regulatory Authority,
Inc. and MEMX LLC pursuant to Rule 17d-2 under the Securities Exchange
Act of 1934,'' and any subsequent amendments thereafter.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
I. Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or national securities association to examine for,
and enforce compliance by, its members and persons associated with its
members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act.
Without this relief, the statutory obligation of each individual SRO
could result in a pattern of multiple examinations of broker-dealers
that maintain memberships in more than one SRO (``common members'').
Such regulatory duplication would add unnecessary expenses for common
members and their SROs.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d).
\5\ 15 U.S.C. 78s(g)(2).
---------------------------------------------------------------------------
Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q(d)(1).
\7\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------
To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\9\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its obligation to examine a common member for compliance with its own
rules and provisions of the federal securities laws governing matters
other than financial responsibility, including sales practices and
trading activities and practices.
---------------------------------------------------------------------------
\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
---------------------------------------------------------------------------
To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits
SROs to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for appropriate notice and opportunity for comment, it
determines that the plan is necessary or appropriate in the public
interest and for the protection of investors, to foster cooperation and
coordination among the SROs, to remove impediments to, and foster the
development of, a national market system and a national clearance and
settlement system, and is in conformity with the factors set forth in
Section 17(d) of the Act. Commission approval of a plan filed pursuant
to Rule 17d-2 relieves an SRO of those regulatory responsibilities
allocated by the plan to another SRO.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------
II. The Plan
On June 17, 2020, the Commission declared effective the Plan
entered into between FINRA and MEMX for allocating regulatory
responsibility pursuant to Rule 17d-2.\11\ The Plan is intended to
reduce regulatory duplication for firms that are common members of
FINRA and MEMX by allocating regulatory responsibility with respect to
certain applicable laws, rules, and regulations that are common among
them. Included in the Plan is an exhibit that lists every MEMX rule for
which FINRA bears responsibility under the Plan for overseeing and
enforcing with respect to MEMX members that are also members of FINRA
and the associated persons therewith (``Certification'').
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 89084 (June 17,
2020), 85 FR 37701 (June 23, 2020).
---------------------------------------------------------------------------
III. Proposed Amendment to the Plan
On October 6, 2022, the parties submitted a proposed amendment to
the Plan (``Amended Plan''). The primary purpose of the Amended Plan is
to add Securities Exchange Act Rule 14e-4(a)(1)(ii)(D) to the
Certification to accommodate the upcoming launch of MEMX's new options
facility and to reflect updated rule citations. The text of the
proposed Amended Plan is as follows (additions are italicized;
deletions are [bracketed]):
* * * * *
AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND
MEMX LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF
1934
This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and MEMX LLC (``MEMX''), is made this
[16th] 6th day of [April, 2020] October, 2022 (the ``Agreement''),
pursuant to Section 17(d) of the Securities Exchange Act
[[Page 64281]]
of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder, which
permits agreements between self-regulatory organizations to allocate
regulatory responsibility to eliminate regulatory duplication. FINRA
and MEMX may be referred to individually as a ``party'' and together
as the ``parties.''
Whereas, FINRA and MEMX desire to reduce duplication in the
examination and surveillance of their Dual Members (as defined
herein) and in the filing and processing of certain registration and
membership records; and
Whereas, FINRA and MEMX desire to execute an agreement covering
such subjects pursuant to the provisions of Rule 17d-2 under the
Exchange Act and to file such agreement with the Securities and
Exchange Commission (the ``SEC'' or ``Commission'') for its
approval.
Now, therefore, in consideration of the mutual covenants
contained hereinafter, FINRA and MEMX hereby agree as follows:
1. Definitions. Unless otherwise defined in this Agreement or
the context otherwise requires, the terms used in this Agreement
shall have the same meaning as they have under the Exchange Act and
the rules and regulations thereunder. As used in this Agreement, the
following terms shall have the following meanings:
(a) ``MEMX Rules'' or ``FINRA Rules'' shall mean: (i) the rules
of MEMX, or (ii) the rules of FINRA, respectively, as the rules of
an exchange or association are defined in Exchange Act Section
3(a)(27).
(b) ``Common Rules'' shall mean MEMX Rules that are
substantially similar to the applicable FINRA Rules and certain
provisions of the Exchange Act and SEC rules set forth on Exhibit 1
in that examination or surveillance for compliance with such
provisions and rules would not require FINRA to develop one or more
new examination or surveillance standards, modules, procedures, or
criteria in order to analyze the application of the provision or
rule, or a Dual Member's activity, conduct, or output in relation to
such provision or rule; provided, however, Common Rules shall not
include the application of the SEC, MEMX or FINRA rules as they
pertain to violations of insider trading activities, which is
covered by a separate 17d-2 Agreement by and among Cboe BZX
Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange,
Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Financial
Industry Regulatory Authority, Inc., MEMX LLC, MIAX PEARL, LLC,
Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, NYSE
National, Inc., New York Stock Exchange, LLC, NYSE American LLC,
NYSE Arca Inc., and Investors' Exchange LLC and Long-Term Stock
Exchange, Inc. effective [August 1, 2019] September 23, 2020, as may
be amended from time to time. Common Rules shall not include any
provisions regarding (i) notice, reporting or any other filings made
directly to or from MEMX, (ii) incorporation by reference of MEMX
Rules that are not Common Rules, (iii) exercise of discretion in a
manner that differs from FINRA's exercise of discretion including,
but not limited to exercise of exemptive authority, by MEMX, (iv)
prior written approval of MEMX and (v) payment of fees or fines to
MEMX.
(c) ``Dual Members'' shall mean those MEMX members that are also
members of FINRA and the associated persons therewith.
(d) ``Effective Date'' shall be the date this Agreement is
approved by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with FINRA's Code of
Procedure (the Rule 9000 Series) and other applicable FINRA
procedural rules, to determine whether violations of Common Rules
have occurred, and if such violations are deemed to have occurred,
the imposition of appropriate sanctions as specified under FINRA's
Code of Procedure and sanctions guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities, surveillance responsibilities and Enforcement
Responsibilities relating to compliance by the Dual Members with the
Common Rules and the provisions of the Exchange Act and the rules
and regulations thereunder, and other applicable laws, rules and
regulations, each as set forth on Exhibit 1 attached hereto.
2. Regulatory and Enforcement Responsibilities. FINRA shall
assume Regulatory Responsibilities and Enforcement Responsibilities
for Dual Members. Attached as Exhibit 1 to this Agreement and made
part hereof, MEMX furnished FINRA with a current list of Common
Rules and certified to FINRA that such rules that are MEMX Rules are
substantially similar to the corresponding FINRA Rules (the
``Certification''). FINRA hereby agrees that the rules listed in the
Certification are Common Rules as defined in this Agreement. Each
year following the Effective Date of this Agreement, or more
frequently if required by changes in either the rules of MEMX or
FINRA, MEMX shall submit an updated list of Common Rules to FINRA
for review which shall add MEMX Rules not included in the current
list of Common Rules that qualify as Common Rules as defined in this
Agreement; delete MEMX Rules included in the current list of Common
Rules that no longer qualify as Common Rules as defined in this
Agreement; and confirm that the remaining rules on the current list
of Common Rules continue to be MEMX Rules that qualify as Common
Rules as defined in this Agreement. Within 30 days of receipt of
such updated list, FINRA shall confirm in writing whether the rules
listed in any updated list are Common Rules as defined in this
Agreement. Notwithstanding anything herein to the contrary, it is
explicitly understood that the term ``Regulatory Responsibilities''
does not include, and MEMX shall retain full responsibility for
(unless otherwise addressed by separate agreement or rule)
(collectively, the ``Retained Responsibilities'') the following:
(a) surveillance, examination, investigation and enforcement
with respect to trading activities or practices involving MEMX's own
marketplace for rules that are not Common Rules;
(b) registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules);
(c) discharge of its duties and obligations as a Designated
Examining Authority pursuant to Rule 17d-1 under the Exchange Act;
and
(d) any MEMX Rules that are not Common Rules, except for MEMX
Rules for any MEMX member that operates as a facility (as defined in
Section 3(a)(2) of the Exchange Act), acts as an outbound router for
the MEMX and is a member of FINRA (``Router Member'') as provided in
paragraph 6. As of the date of this Agreement, MEMX Execution
Services LLC is the only Router Member.
3. Dual Members. Prior to the Effective Date, MEMX shall furnish
FINRA with a current list of Dual Members, which shall be updated no
less frequently than once each quarter.
4. No Charge. There shall be no charge to MEMX by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as otherwise agreed by
the parties, either herein or in a separate agreement.
5. Applicability of Certain Laws, Rules, Regulations or Orders.
Notwithstanding any provision hereof, this Agreement shall be
subject to any statute, or any rule or order of the Commission. To
the extent such statute, rule or order is inconsistent with this
Agreement, the statute, rule or order shall supersede the
provision(s) hereof to the extent necessary for them to be properly
effectuated and the provision(s) hereof in that respect shall be
null and void.
6. Notification of Violations.
(a) In the event that FINRA becomes aware of apparent violations
of any MEMX Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities
assumed hereunder, FINRA shall notify MEMX of those apparent
violations for such response as MEMX deems appropriate. With respect
to apparent violations of any MEMX Rules by any Router Member, FINRA
shall not make referrals to MEMX pursuant to this paragraph 6. Such
apparent violations shall be processed by, and enforcement
proceedings in respect thereto will be conducted by, FINRA as
provided in this Agreement.
(b) In the event that MEMX becomes aware of apparent violations
of any Common Rules, discovered pursuant to the performance of the
Retained Responsibilities, MEMX shall notify FINRA of those apparent
violations and such matters shall be handled by FINRA as provided in
this Agreement.
(c) Apparent violations of Common Rules shall be processed by,
and enforcement proceedings in respect thereto shall be conducted by
FINRA as provided hereinbefore; provided, however, that in the event
a Dual Member is the subject of an investigation relating to a
transaction on MEMX, MEMX may in its discretion assume concurrent
jurisdiction and responsibility.
(d) Each party agrees to make available promptly all files,
records and witnesses necessary to assist the other in its
investigation or proceedings.
7. Continued Assistance.
(a) FINRA shall make available to MEMX all information obtained
by FINRA in the performance by it of the Regulatory Responsibilities
hereunder with respect to the Dual Members subject to this
Agreement. In particular, and not in limitation of the
[[Page 64282]]
foregoing, FINRA shall furnish MEMX any information it obtains about
Dual Members which reflects adversely on their financial condition.
MEMX shall make available to FINRA any information coming to its
attention that reflects adversely on the financial condition of Dual
Members or indicates possible violations of applicable laws, rules
or regulations by such firms.
(b) The parties agree that documents or information shared shall
be held in confidence, and used only for the purposes of carrying
out their respective regulatory obligations. Neither party shall
assert regulatory or other privileges as against the other with
respect to documents or information that is required to be shared
pursuant to this Agreement.
(c) The sharing of documents or information between the parties
pursuant to this Agreement shall not be deemed a waiver as against
third parties of regulatory or other privileges relating to the
discovery of documents or information.
8. Statutory Disqualifications. When FINRA becomes aware of a
statutory disqualification as defined in the Exchange Act with
respect to a Dual Member, FINRA shall determine pursuant to Sections
15A(g) and/or Section 6(c) of the Exchange Act the acceptability or
continued applicability of the person to whom such disqualification
applies and keep MEMX advised of its actions in this regard for such
subsequent proceedings as MEMX may initiate.
9. Customer Complaints. MEMX shall forward to FINRA copies of
all customer complaints involving Dual Members received by MEMX
relating to FINRA's Regulatory Responsibilities under this
Agreement. It shall be FINRA's responsibility to review and take
appropriate action in respect to such complaints.
10. Advertising. FINRA shall assume responsibility to review the
advertising of Dual Members subject to the Agreement, provided that
such material is filed with FINRA in accordance with FINRA's filing
procedures and is accompanied with any applicable filing fees set
forth in FINRA Rules.
11. No Restrictions on Regulatory Action. Nothing contained in
this Agreement shall restrict or in any way encumber the right of
either party to conduct its own independent or concurrent
investigation, examination or enforcement proceeding of or against
Dual Members, as either party, in its sole discretion, shall deem
appropriate or necessary.
12. Termination. This Agreement may be terminated by MEMX or
FINRA at any time upon the approval of the Commission after six (6)
month's written notice to the other party.
13. Arbitration. In the event of a dispute between the parties
as to the operation of this Agreement, MEMX and FINRA hereby agree
that any such dispute shall be settled by arbitration in Washington,
DC in accordance with the rules of the American Arbitration
Association then in effect, or such other procedures as the parties
may mutually agree upon. Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. Each
party acknowledges that the timely and complete performance of its
obligations pursuant to this Agreement is critical to the business
and operations of the other party. In the event of a dispute between
the parties, the parties shall continue to perform their respective
obligations under this Agreement in good faith during the resolution
of such dispute unless and until this Agreement is terminated in
accordance with its provisions. Nothing in this Section 13 shall
interfere with a party's right to terminate this Agreement as set
forth herein.
14. Notification of Members. MEMX and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
15. Amendment. This Agreement may be amended in writing duly
approved by each party. All such amendments must be filed with and
approved by the Commission before they become effective.
16. Limitation of Liability. Neither FINRA nor MEMX nor any of
their respective directors, governors, officers or employees shall
be liable to the other party to this Agreement for any liability,
loss or damage resulting from or claimed to have resulted from any
delays, inaccuracies, errors or omissions with respect to the
provision of Regulatory Responsibilities as provided hereby or for
the failure to provide any such responsibility, except with respect
to such liability, loss or damages as shall have been suffered by
one or the other of FINRA or MEMX and caused by the willful
misconduct of the other party or their respective directors,
governors, officers or employees. No warranties, express or implied,
are made by FINRA or MEMX with respect to any of the
responsibilities to be performed by each of them hereunder.
17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and
MEMX join in requesting the Commission, upon its approval of this
Agreement or any part thereof, to relieve MEMX of any and all
responsibilities with respect to matters allocated to FINRA pursuant
to this Agreement; provided, however, that this Agreement shall not
be effective until the Effective Date.
18. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
* * * * *
EXHIBIT 1
MEMX CERTIFICATION OF COMMON RULES
MEMX hereby certifies that the requirements contained in the
rules listed below for MEMX are identical to, or substantially
similar to, the comparable FINRA (NASD) Rules, Exchange Act
provision or SEC rule identified (``Common Rules'').
# Common Rules shall not include any provisions regarding (i)
notice, reporting or any other filings made directly to or from
MEMX, (ii) incorporation by reference of MEMX Rules that are not
Common Rules, (iii) exercise of discretion in a manner that differs
from FINRA's exercise of discretion including, but not limited to
exercise of exemptive authority, by MEMX, (iv) prior written
approval of MEMX and (v) payment of fees or fines to MEMX.
------------------------------------------------------------------------
FINRA (NASD) rule, Exchange Act
MEMX rule provision, SEC rule
------------------------------------------------------------------------
Rule 2.5 Restrictions, Interpretation FINRA Rule 1240[(a)(1)-(4)]
and Policies .02 Continuing Education Continuing Education
Requirements . Requirements.
Rule 2.5 Restrictions, Interpretations FINRA By-Laws of the
and Polic[y]ies .04 Termination of Corporation, Article V,
Employment. Section 3 Notification by
Member to the Corporation and
Associated Person of
Termination; Amendments to
Notification; FINRA Rule
1010(e) Electronic Filing
Requirements for Uniform
Forms.
Rule 2.6(b) and (g) Application FINRA By-Laws of the
Procedures for Membership or to become Corporation, Article IV,
an Associated Person of a Member . Section 1(c) Application for
Membership and Article V, Sec.
2(c); FINRA Rule 1010(c)
Electronic Filing Requirements
for Uniform Forms.
Rule 3.1 Business Conduct of Members FINRA Rule 2010 Standards of
[supcaret]. Commercial Honor and
Principles of Trade.[supcaret]
Rule 3.2 Violations Prohibited FINRA Rule 2010 Standards of
[supcaret] . Commercial Honor and
Principles of Trade and FINRA
Rule 3110
Supervision.[supcaret]
Rule 3.3 Use of Fraudulent Devices FINRA Rule 2020 Use of
[supcaret]. Manipulative, Deceptive or
Other Fraudulent
Devices.[supcaret]
Rule 3.5 Communications with the Public FINRA Rule 2210 Communications
with the Public.
[[Page 64283]]
Rule 3.6 Fair Dealing with Customers... FINRA Rule 2020 Use of
Manipulative, Deceptive or
Other Fraudulent
Devices,[supcaret] 1 FINRA
Rule 2111 Suitability.
Rule 3.7(a) Recommendations to FINRA Rule 2111(a) and SM .03
Customers. Suitability.
Rule 3.8(a) The Prompt Receipt and FINRA Rule 11860 COD Orders.
Delivery of Securities.
Rule 3.8(b) The Prompt Receipt and SEC Regulation SHO.
Delivery of Securities.
Rule 3.9 Charges for Services Performed FINRA Rule 2122 Charges for
Services Performed.
Rule 3.10 Use of Information........... FINRA Rule 2060 Use of
Information Obtained in
Fiduciary Capacity.
Rule 3.11 Publication of Transactions FINRA Rule 5210 Publication of
and Quotations . Transactions and Quotations.
Rule 3.12 Offers at Stated Prices...... FINRA Rule 5220 Offers at
Stated Prices.
Rule 3.13 Payments Involving FINRA Rule 5230 Payments
Publications that Influence the Market Involving Publications that
Price of a Security. Influence the Market Price of
a Security.
Rule 3.14 Disclosure on Confirmations.. FINRA Rule 2232(a) Customer
Confirmations and SEC Rule 10b-
10 Confirmation of
Transactions.
Rule 3.15 Disclosure of Control........ FINRA Rule 2262 Disclosure of
Control Relationship With
Issuer.
Rule 3.16 Discretionary Accounts....... FINRA Rule 3260 Discretionary
Accounts.
Rule 3.17 Customer's Securities or FINRA Rule 2150(a) Improper Use
Funds. of Customers' Securities or
Funds; Prohibition Against
Guarantees and Sharing in
Accounts--Improper Use
Rule 3.18 Prohibition Against FINRA Rule 2150(b) Improper Use
Guarantees. of Customers' Securities or
Funds; Prohibition Against
Guarantees and Sharing in
Accounts--Prohibition Against
Guarantees.
Rule 3.19 Sharing in Accounts; Extent FINRA Rule 2150(c)(1) Improper
Permissible. Use of Customers' Securities
or Funds; Prohibition Against
Guarantees and Sharing in
Accounts--Sharing in Accounts;
Extent Permissible.
Rule 3.21 Customer Disclosures......... FINRA Rule 2265 Extended Hours
Trading Risk Disclosure.
Rule 3.20 Influencing or Rewarding FINRA Rule 3220 Influencing or
Employees of Others. Rewarding Employees of Others.
Rule 3.22 Telemarketing and FINRA Rule 3230 Telemarketing.
Interpretations and Policies .01.
Rule 4.1 Requirements ................ Section 17 of the Exchange Act
and rules thereunder and FINRA
Rule 4511(a) and (c) General
Requirements.2
Rule 4.3 Record of Written Complaints.. FINRA Rule 4513 Records of
Written Customer Complaints.
Rule 5.1 Written Procedures .......... FINRA Rule 3110(b)(1)
Supervision-Written
Procedures.[supcaret]
Rule 5.2 Responsibility of Members..... FINRA Rule 3110 (a)(4), (b)(4)
and (b)(7) Supervision--
Supervisory System/Written
Procedures--Review of
Correspondence and Internal
Communications.[supcaret]
Rule 5.3 Records....................... FINRA Rule 3110
Supervision.[supcaret]
Rule 5.4 Review of Activities.......... FINRA Rule 3110(c) and (d)
Supervision--Internal
Inspections/Transaction Review
and Investigation.[supcaret]
Rule 5.6 Anti-Money Laundering FINRA Rule 3310 Anti-Money
Compliance Program . Laundering Compliance Program.
Rule 9.3 Predispute Arbitration FINRA Rule 2268 Requirements
Agreements. When Using Predispute
Arbitration Agreements for
Customer Accounts.
Rule 11.16(e)(3) & (4) Trading Halts FINRA Rule 6190(a) & (b)
Due to Extraordinary Market Volatility. Compliance with Regulation NMS
Plan to Address Extraordinary
Market Volatility.
Rule 11.10(a)(5) Order Execution FINRA Rule 6182 Trade Reporting
[supcaret][supcaret]. of Short
Sales.[supcaret][supcaret]
Rule 11.10(f) Locking Quotation or FINRA Rule 6240 Prohibition
Crossing Quotations in NMS Stocks **. from Locking or Crossing
Quotations in NMS Stocks.**
Rule 12.1 Market Manipulation.......... FINRA Rule 6140(a) Other
Trading Practices.
Rule 12.2 Fictitious Transactions...... FINRA Rule 6140 Other Trading
Practices and FINRA Rule 5210
Supplementary Material .02
Self-Trades.
Rule 12.3 Excessive Sales [B]by [A]a FINRA Rule 6140(c) Other
Member. Trading Practices.
Rule 12.4 Manipulative Transactions.... FINRA Rule 6140 Other Trading
Practices.
Rule 12.5 Dissemination of False FINRA Rule 6140(e) Other
Information. Trading Practices.
Rule 12.6 Prohibition Against Trading FINRA Rule 5320 Prohibition
Ahead of Customer Orders **. Against Trading Ahead of
Customer Orders.**
Rule 12.9 Trade Shredding.............. FINRA Rule 5290 Order Entry and
Execution Practices.
Rule 12.11 Best Execution **........... FINRA Rule 5310 Best Execution
and Interpositioning.**
Rule 12.13 Trading Ahead of Research FINRA Rule 5280 Trading Ahead
Reports **. of Research Reports.**
Rule 12.14 Front Running of Block FINRA Rule 5270 Front Running
Transactions **. of Block Transactions.**
Rule 13.3(a), (b)(i), (d) and FINRA Rule 2251 Processing and
Interpretation and Policy .01 Forwarding of Proxy and Other
Forwarding of Proxy and Other Issuer- Issuer-Related Materials.
Related Materials; Proxy Voting.
Rule 26.11 Restrictions on Pledge and FINRA Rule 4330 Customer
Lending of Public Customers' Protection--Permissible Use of
Securities. Customers' Securities.
------------------------------------------------------------------------
1 FINRA shall not have Regulatory Responsibilities regarding .01 of MEMX
Rule 3.6.
2 FINRA shall not have Regulatory Responsibilities regarding
requirements to keep records ``in conformity with . . . Exchange
Rules;'' responsibility for such requirement remains with MEMX.
In addition, the following provisions shall be part of this 17d-2
Agreement:
SEA Rules:
SEA Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements **
SEA Rule 201 of Regulation SHO--Circuit Breaker **
SEA Rule 203 of Regulation SHO--Borrowing and Delivery
Requirements **
SEA Rule 204 of Regulation SHO--Close-Out Requirement **
SEA Rule 101 of Regulation M--Activities by Distribution
Participants **
SEA Rule 102 of Regulation M--Activities by Issuers and Selling
Security Holders During a Distribution **
SEA Rule 103 of Regulation M--Nasdaq Passive Market Making **
SEA Rule 104 of Regulation M--Stabilizing and Other Activities
in Connection with an Offering **
SEA Rule 105 of Regulation M--Short Selling in Connection With
a Public Offering **
[[Page 64284]]
SEA Rule 604 of Regulation NMS--Display of Customer Limit
Orders **
SEA Rule 606 of Regulation NMS--Disclosure of Routing
Information **
SEA Rule 610(d) of Regulation NMS--Locking or Crossing
Quotations **
SEA Rule 611 of Regulation NMS--Order Protection Rule **
SEA Rule 10b-5 Employment of Manipulative and Deceptive Devices
[supcaret]
SEA Rule 17a-3/17a-4--Records to Be Made by Certain Exchange
Members, Brokers, and Dealers/Records to Be Preserved by Certain
Exchange Members, Brokers, and Dealers [supcaret]
SEA Rule 14e-4--Prohibited Transactions in Connection with
Partial Tender Offers ++
[supcaret] FINRA shall not have any Regulatory Responsibilities for
these rules as they pertain to violations of insider trading
activities, which is covered by a separate 17d-2 Agreement by and
among Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock
Exchange, Inc., Cboe EDGA Exchange Inc., Cboe EDGX Exchange Inc.,
Financial Industry Regulatory Authority, Inc., MEMX LLC, MIAX PEARL,
LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC,
NYSE National, Inc., New York Stock Exchange, LLC, NYSE American LLC,
NYSE Arca Inc., and Investors' Exchange LLC and [the] Long-Term Stock
Exchange, Inc. effective [August 1, 2019] September 23, 2020, as may
be amended from time to time.
** FINRA shall perform the surveillance responsibilities for the double
star rules. These rules may be cited by FINRA in both the context of
this Agreement and the Regulatory Services Agreement.
++ FINRA shall perform the surveillance responsibilities for SEA Rule
14e-4(a)(1)(ii)(D).
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number 4-762 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number 4-762. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan that are filed with the
Commission, and all written communications relating to the proposed
plan between the Commission and any person, other than those that may
be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the plan also will be available for inspection and
copying at the principal offices of FINRA and MEMX. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number 4-762 and should be submitted on or before
November 14, 2022.
V. Discussion
The Commission finds that the proposed Amended Plan is consistent
with the factors set forth in Section 17(d) of the Act \12\ and Rule
17d-2(c) thereunder \13\ in that the proposed Amended Plan is necessary
or appropriate in the public interest and for the protection of
investors, fosters cooperation and coordination among SROs, and removes
impediments to and fosters the development of the national market
system. In particular, the Commission believes that the proposed
Amended Plan should reduce unnecessary regulatory duplication by
allocating to FINRA certain examination and enforcement
responsibilities for Dual Members that would otherwise be performed by
FINRA and MEMX. Accordingly, the proposed Amended Plan promotes
efficiency by reducing costs to Dual Members. Furthermore, because MEMX
and FINRA will coordinate their regulatory functions in accordance with
the Amended Plan, the Amended Plan should promote investor protection.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78q(d).
\13\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------
The Commission notes that, under the Amended Plan, MEMX and FINRA
have allocated regulatory responsibility for those MEMX rules, set
forth in the Certification, that are substantially similar to the
applicable FINRA rules in that examination for compliance with such
provisions and rules would not require FINRA to develop one or more new
examination standards, modules, procedures, or criteria in order to
analyze the application of the rule, or a Dual Member's activity,
conduct, or output in relation to such rule. In addition, under the
Amended Plan, FINRA would assume regulatory responsibility for certain
provisions of the federal securities laws and the rules and regulations
thereunder that are set forth in the Certification. The Common Rules
covered by the Amended Plan are specifically listed in the
Certification, as may be amended by the Parties from time to time.
According to the Amended Plan, MEMX will review the Certification
at least annually, or more frequently if required by changes in either
the rules of MEMX or FINRA, and, if necessary, submit to FINRA an
updated list of Common Rules to add MEMX rules not included on the
then-current list of Common Rules that are substantially similar to
FINRA rules; delete MEMX rules included in the then-current list of
Common Rules that no longer qualify as common rules; and confirm that
the remaining rules on the list of Common Rules continue to be MEMX
rules that qualify as common rules.\14\ FINRA will then confirm in
writing whether the rules listed in any updated list are Common Rules
as defined in the Amended Plan. The Commission believes that these
provisions are designed to provide for continuing communication between
the Parties to ensure the continued accuracy of the scope of the
proposed allocation of regulatory responsibility.
---------------------------------------------------------------------------
\14\ See paragraph 2 of the Amended Plan.
---------------------------------------------------------------------------
The Commission is hereby declaring effective an Amended Plan that,
among other things, allocates regulatory responsibility to FINRA for
the oversight and enforcement of all MEMX rules that are substantially
similar to the rules of FINRA for Dual Members of MEMX and FINRA.
Therefore, modifications to the Certification need not be filed with
the Commission as an amendment to the Amended Plan, provided that the
Parties are only adding to, deleting from, or confirming changes to
MEMX rules in the Certification in conformance with the definition of
Common Rules provided in the Amended Plan. However, should the
[[Page 64285]]
Parties decide to add an MEMX rule to the Certification that is not
substantially similar to a FINRA rule; delete an MEMX rule from the
Certification that is substantially similar to a FINRA rule; or leave
on the Certification an MEMX rule that is no longer substantially
similar to a FINRA rule, then such a change would constitute an
amendment to the Amended Plan, which must be filed with the Commission
pursuant to Rule 17d-2 under the Act.\15\
---------------------------------------------------------------------------
\15\ The addition to or deletion from the Certification of any
federal securities laws, rules, and regulations for which FINRA
would bear responsibility under the Amended Plan for examining, and
enforcing compliance by, Dual Members, also would constitute an
amendment to the Amended Plan.
---------------------------------------------------------------------------
Under paragraph (c) of Rule 17d-2, the Commission may, after
appropriate notice and comment, declare a plan, or any part of a plan,
effective. In this instance, the Commission believes that appropriate
notice and comment can take place after the proposed amendment is
effective. The primary purpose of the Amended Plan is to add Securities
Exchange Act Rule 14e-4(a)(1)(ii)(D) to the Certification. The
Commission notes that the prior version of this plan immediately prior
to this proposed amendment was published for comment and the Commission
did not receive any comments thereon.\16\ Furthermore, the Commission
does not believe that the amendment to the plan raises any new
regulatory issues that the Commission has not previously considered.
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 88981 (May 20,
2020), 85 FR 34690 (June 5, 2020).
---------------------------------------------------------------------------
VI. Conclusion
This order gives effect to the Amended Plan filed with the
Commission in File No. 4-762. The Parties shall notify all members
affected by the Amended Plan of their rights and obligations under the
Amended Plan.
It is therefore ordered, pursuant to Section 17(d) of the Act, that
the Amended Plan in File No. 4-762, between the FINRA and MEMX, filed
pursuant to Rule 17d-2 under the Act, hereby is approved and declared
effective.
It is further ordered that MEMX is relieved of those
responsibilities allocated to FINRA under the Amended Plan in File No.
4-762.
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(34).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22989 Filed 10-21-22; 8:45 am]
BILLING CODE 8011-01-P
