[Federal Register Volume 84, Number 144 (Friday, July 26, 2019)]
[Notices]
[Pages 36151-36152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15870]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86422]
Order Granting Application by: Nasdaq BX, Inc., Nasdaq GEMX, LLC,
Nasdaq ISE, LLC, Nasdaq MRX, LLC, and Nasdaq Phlx LLC for Exemption
Pursuant to Section 36(a) of the Exchange Act From the Rule Filing
Requirements of Section 19(b) of the Exchange Act With Respect to
Certain Rules Incorporated by Reference
July 22, 2019.
Nasdaq BX, Inc. (``BX''), Nasdaq GEMX, LLC (``GEMX''), Nasdaq ISE,
LLC (``ISE''), Nasdaq MRX, LLC (``MRX''), and Nasdaq Phlx LLC
(``Phlx'') (each the ``Exchange'' and collectively, the ``Exchanges'')
have filed with the Securities and Exchange Commission (``Commission'')
an application for an exemption under Section 36(a)(1) of the
Securities Exchange Act of 1934 (``Exchange Act'') \1\ from the rule
filing requirements of Section 19(b) of the Exchange Act \2\ with
respect to certain rules of the Nasdaq Stock Market, LLC (``Nasdaq'')
\3\ that the Exchanges seek to incorporate by reference.\4\ Section 36
of the Exchange Act authorizes the Commission to conditionally or
unconditionally exempt any person, security, or transaction, or any
class thereof, from any provision of the Exchange Act or rule
thereunder, if necessary or appropriate in the public interest and
consistent with the protection of investors.
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\1\ 15 U.S.C. 78mm(a)(1).
\2\ 15 U.S.C. 78s(b).
\3\ Nasdaq is an affiliate of the Exchanges.
\4\ See Letter from Angela Dunn, Senior Associate General
Counsel, Nasdaq Inc., to Vanessa Countryman, Acting Secretary,
Commission, dated April 30, 2019 (``Exemptive Request'').
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The Exchanges each filed a proposed rule change under Section 19(b)
of the Exchange Act to delete their existing registration,
qualification, and continuing education rules \5\ and incorporate by
reference Nasdaq's General 4 rules (``Nasdaq Registration and
Continuing Education Rules''), as such rules may be in effect from time
to time. The proposed rule changes would
[[Page 36152]]
make the Nasdaq Registration and Continuing Education Rules applicable
to the Exchanges' members, member organizations (as applicable),
associated persons, and other persons subject to their jurisdiction as
though such rules were fully set forth within each Exchange's rulebook.
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\5\ See Securities Exchange Act Release Nos. 85726 (April 26,
2019) (SR-BX-2019-010), 85737 (April 26, 2019) (SR-GEMX-2019-05),
85728 (April 26, 2019) (SR-ISE-2019-12), 85730 (April 26, 2019) (SR-
MRX-2019-09), and 85761 (May 2, 2019) (SR-Phlx-2019-18). Although
the proposed rule changes were filed pursuant to Section
19(b)(3)(A)(iii) of the Exchange Act, and thereby became effective
upon filing with the Commission, the Exchanges stipulated in their
proposals that the incorporation by reference would not be operative
until such time as the Commission grants this exemptive request.
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The Exchanges have requested, pursuant to Rule 0-12 under the
Exchange Act,\6\ that the Commission grant the Exchanges an exemption
from the rule filing requirements of Section 19(b) of the Exchange Act
for changes to each Exchange's rules that are effected solely by virtue
of a change to the Nasdaq Registration and Continuing Education Rules.
Specifically, the Exchanges request that they be permitted to
incorporate by reference changes made to the Nasdaq Registration and
Continuing Education Rules without the need for each Exchange to
separately file with the Commission the same proposed rule changes
pursuant to Section 19(b) of the Exchange Act.\7\
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\6\ 17 CFR 240.0-12.
\7\ See Exemptive Request, supra note 4, at 2.
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The Exchanges represent that the Nasdaq Registration and Continuing
Education Rules are not trading rules.\8\ Moreover, the Exchanges state
that they propose to incorporate by reference categories of rules
(rather than individual rules within a category) that are regulatory in
nature.\9\ The Exchanges also represent that, as a condition of this
exemption, they would provide written notice to their members whenever
Nasdaq proposes a change to the Nasdaq Registration and Continuing
Education Rules.\10\
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\8\ Id.
\9\ Id.
\10\ The Exchanges state that they will provide notice on their
websites in the same section they use to post their own proposed
rule change filings and within the timeframe required by Rule 19b-
4(l). In addition, the Exchanges state that their websites will
include a link to the Nasdaq website where the proposed rule change
filings are located. Id at 3.
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According to the Exchanges, this exemption is necessary and
appropriate because it will result in the Exchanges' rules being
consistent with the relevant cross-referenced Nasdaq Registration and
Continuing Education Rules at all times, thus ensuring that the
Exchanges and Nasdaq maintain consistent registration, qualification,
and continuing education rules for their respective members, associated
persons, and other persons subject to their jurisdiction.\11\
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\11\ Id at 2.
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The Commission has issued exemptions similar to the Exchanges'
request.\12\ The Commission has previously outlined standards for
reviewing exemption requests from self-regulatory organizations
(``SROs''), provided that:
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\12\ See, e.g., Securities Exchange Act Release Nos. 83887
(August 20, 2018), 83 FR 42722 (August 23, 2018) (order granting
exemptive request from Exchanges to incorporate by reference BX's
rules for investigatory, disciplinary, and adjudicatory proceedings)
(``Nasdaq Investigatory Rules Order''); 80338 (March 29, 2017), 82
FR 16464 (April 4, 2017) (order granting exemptive request from MIAX
PEARL, LLC relating to rules of Miami International Securities
Exchange, LLC incorporated by reference); 72650 (July 22, 2014), 79
FR 44075 (July 29, 2014) (order granting exemptive requests from
NASDAQ OMX BX, Inc. and Nasdaq relating to rules of NASDAQ OMX PHLX
LLC incorporated by reference); 67256 (June 26, 2012), 77 FR 39277
(July 2, 2012) (order approving SR-BX-2012-030 and granting
exemptive request relating to rules incorporated by reference by
NASDAQ OMX BX, Inc.); 61534 (February 18, 2010), 75 FR 8760
(February 25, 2010) (order granting BATS Exchange, Inc.'s exemptive
request relating to rules incorporated by reference by the BATS
Exchange Options Market rules); and 57478 (March 12, 2008), 73 FR
14521 (order approving SR-NASDAQ-2007-004 and SR-NASDAQ-2007-080,
and granting exemptive request relating to rules incorporated by
reference by the Nasdaq Options Market).
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An SRO wishing to incorporate rules of another SRO by
reference has submitted a written request for an order exempting it
from the requirement in Section 19(b) of the Exchange Act to file
proposed rule changes relating to the rules incorporated by reference,
has identified the applicable originating SRO(s), together with the
rules it wants to incorporate by reference, and otherwise has complied
with the procedural requirements set forth in the Commission's release
governing procedures for requesting exemptive orders pursuant to Rule
0-12 under the Exchange Act; \13\
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\13\ See 17 CFR 240.0-12 and Nasdaq Investigatory Rules Order,
supra note 12 at 42723.
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The incorporating SRO has requested incorporation of
categories of rules (rather than individual rules within a category)
that are not trading rules (e.g., the SRO has requested incorporation
of rule such as margin, suitability, or arbitration); \14\ and
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\14\ Id.
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The incorporating SRO has reasonable procedures in place
to provide written notice to its members each time a change is proposed
to the incorporated rules of the other SRO.\15\
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\15\ Id.
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The Commission believes that the Exchanges have satisfied each of
these conditions. The Commission also believes that granting the
Exchanges an exemption from the rule filing requirements under Section
19(b) of the Exchange Act will promote efficient use of the
Commission's and the Exchanges' resources by avoiding duplicative rule
filings based on simultaneous changes to identical rule text sought by
more than one SRO. The Commission therefore finds it in the public
interest and consistent with the protection of investors to exempt the
Exchanges from the rule filing requirements under Section 19(b) of the
Exchange Act with respect to the Nasdaq Registration and Continuing
Education Rules described above to be incorporated by reference. This
exemption is conditioned upon the Exchanges promptly providing written
notice to their members whenever Nasdaq changes a rule which the
Exchanges have incorporated by reference.
Accordingly, it is ordered, pursuant to Section 36 of the Exchange
Act,\16\ that the Exchanges are exempt from the rule filing
requirements of Section 19(b) of the Exchange Act solely with respect
to changes to the rules identified in their request that incorporate by
reference certain Nasdaq rules, provided that the Exchanges promptly
provide written notice to their members whenever Nasdaq proposes to
change a rule that the Exchanges have incorporated by reference.
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\16\ 15 U.S.C. 78mm.
\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15870 Filed 7-25-19; 8:45 am]
BILLING CODE 8011-01-P