[Federal Register Volume 87, Number 157 (Tuesday, August 16, 2022)]
[Notices]
[Pages 50359-50360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17530]



[[Page 50359]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95461]


Order Granting Application by Nasdaq PHLX LLC for an Exemption 
Pursuant to Section 36(a) of the Exchange Act From the Rule Filing 
Requirements of Section 19(b) of the Exchange Act With Respect to 
Certain Rules Incorporated by Reference


August 10, 2022. Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') has filed 
with the Securities and Exchange Commission (``Commission'') an 
application for an exemption under Section 36(a)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ from the rule filing 
requirements of Section 19(b) of the Exchange Act \2\ with respect to 
certain rules of The Nasdaq Stock Exchange, LLC (``Nasdaq'') that the 
Exchange seeks to incorporate by reference.\3\ Section 36 of the 
Exchange Act, subject to certain limitations, authorizes the Commission 
to conditionally or unconditionally exempt any person, security, or 
transaction, or any class thereof, from any provision of the Exchange 
Act or rule thereunder, if necessary or appropriate in the public 
interest and consistent with the protection of investors.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78mm(a)(1).
    \2\ 15 U.S.C. 78s(b).
    \3\ See Letter from Angela S. Dunn, Principal Associate General 
Counsel, Phlx, to J. Matthew DeLesDernier, Assistant Secretary, 
Commission, dated July 8, 2022 (``Exemptive Request'').
---------------------------------------------------------------------------

    The Exchange has requested, pursuant to Rule 0-12 under the 
Exchange Act,\4\ that the Commission grant the Exchange an exemption 
from the rule filing requirements of Section 19(b) of the Exchange Act 
for changes to the Exchange's rules that are effected solely by virtue 
of a change to a cross-referenced Nasdaq rule. Specifically, the 
Exchange requests that it be permitted to incorporate by reference 
changes made to the General 3 Membership and Access Rule 1000 Series 
(``Rule 1000 Series'') of the Nasdaq rulebook into General 3 Membership 
and Access of the Exchange's rulebook.\5\
---------------------------------------------------------------------------

    \4\ 17 CFR 240.0-12.
    \5\ See Exemptive Request, supra note 3, at 2. The Exchange 
notes that it recently filed a proposed rule change under Section 
19(b) of the Exchange Act to replace its existing membership rules, 
as set forth in General 3 of its rulebook, with the Rule 1000 Series 
of the Nasdaq rulebook, as such rules may be in effect from time to 
time. See id., at 1, n. 4. See also Securities Exchange Act Release 
No. 95219 (July 7, 2022), 87 FR 41814 (July 13, 2022) (SR-Phlx-2022-
28).
---------------------------------------------------------------------------

    The Exchange represents that the Nasdaq rules listed above are 
regulatory rules and not trading rules.\6\ The Exchange represents 
that, as a condition to the requested exemption from Section 19(b) of 
the Exchange Act, the Exchange will provide written notice to its 
applicants, members, and member organizations whenever Nasdaq proposes 
a change to the Rule 1000 Series.\7\ The Exchange states that such 
notice will alert its applicants, members, and member organizations to 
the proposed Nasdaq rule change and give them an opportunity to comment 
on the proposal.\8\ The Exchange further represents that it will inform 
applicants, members, and member organizations in writing when the 
Commission approves any such proposed rule changes.\9\
---------------------------------------------------------------------------

    \6\ See id. at 2, n.7. The Exchange also states that it is not 
``cherry picking'' because the Exchange would be incorporating 
categories of rules. See id.
    \7\ See id. at 3. The Exchange represents that it will provide 
such notice via a posting on the same website location where the 
Exchange posts its own rule filings pursuant to Rule 19b-4(l) within 
the time frame required by such rule. See id. at 3, n.8. The website 
posting will include a link to the location on Nasdaq's website 
where the applicable proposed rule change is posted. See id.
    \8\ See id.
    \9\ See id.
---------------------------------------------------------------------------

    According to the Exchange, this exemption is appropriate because it 
would result in the Exchange's rules pertaining to membership being 
consistent with the relevant cross-referenced Nasdaq rules at all 
times.\10\ The Exchange further states that harmonization of these 
membership rules and processes will ease compliance burdens for those 
seeking membership on both exchanges and increase internal efficiencies 
associated with administering the membership rules and processes of 
each exchange.\11\
---------------------------------------------------------------------------

    \10\ See id. at 2.
    \11\ See id.
---------------------------------------------------------------------------

    The Commission has issued exemptions similar to the Exchange's 
request.\12\ In granting similar exemptions, the Commission stated that 
it would consider similar future exemption requests, provided that:
---------------------------------------------------------------------------

    \12\ See, e.g., Securities Exchange Act Release Nos. 83296 (May 
21, 2018), 83 FR 24362 (May 25, 2018) (order granting NYSE National, 
Inc.'s exemptive request relating to rules of Nasdaq incorporated by 
reference); 83040 (April 12, 2018), 83 FR 17198 (April 18, 2018) 
(order granting MIAX PEARL, LLC's exemptive request relating to 
rules of the Miami International Securities Exchange, LLC 
incorporated by reference); 76998 (January 29, 2016), 81 FR 6066, 
6083-84 (February 4, 2016) (order granting application for 
registration as a national securities exchange of ISE Mercury, LLC 
and exemptive request relating to rules of certain self-regulatory 
organizations (``SROs'') (including Nasdaq) incorporated by 
reference); 61534 (February 18, 2010), 75 FR 8760 (February 25, 
2010) (order granting BATS Exchange, Inc.'s exemptive request 
relating to rules incorporated by reference by the BATS Exchange 
Options Market rules) (``BATS Options Market Order''); 61152 
(December 10, 2009), 74 FR 66699, 66709-10 (December 16, 2009) 
(order granting application for registration as a national 
securities exchange of C2 Options Exchange, Incorporated and 
exemptive request relating to rules of the Chicago Board Options 
Exchange, Incorporated, incorporated by reference).
---------------------------------------------------------------------------

     An SRO wishing to incorporate rules of another SRO by 
reference has submitted a written request for an order exempting it 
from the requirement in Section 19(b) of the Exchange Act to file 
proposed rule changes relating to the rules incorporated by reference, 
has identified the applicable originating SRO(s), together with the 
rules it wants to incorporate by reference, and otherwise has complied 
with the procedural requirements set forth in the Commission's release 
governing procedures for requesting exemptive orders pursuant to Rule 
0-12 under the Exchange Act; \13\
---------------------------------------------------------------------------

    \13\ See 17 CFR 240.0-12 and Securities Exchange Act Release No. 
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) (Commission 
Procedures for Filing Applications for Orders for Exemptive Relief 
Pursuant to Section 36 of the Exchange Act; Final Rule).
---------------------------------------------------------------------------

     The incorporating SRO has requested incorporation of 
categories of rules (rather than individual rules within a category) 
that are not trading rules (e.g., the SRO has requested incorporation 
of rules such as margin, suitability, or arbitration); and
     The incorporating SRO has reasonable procedures in place 
to provide written notice to its members each time a change is proposed 
to the incorporated rules of another SRO.\14\
---------------------------------------------------------------------------

    \14\ See BATS Options Market Order, supra note 12 (citing 
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004) (order granting exemptive request relating 
to rules incorporated by reference by several SROs) (``2004 
Order'')).
---------------------------------------------------------------------------

    The Commission believes that the Exchange has satisfied each of 
these conditions. The Commission also believes that granting the 
Exchange an exemption from the rule filing requirements under Section 
19(b) of the Exchange Act will promote efficient use of the 
Commission's and the Exchange's resources by avoiding duplicative rule 
filings based on simultaneous changes to identical rule text sought by 
more than one SRO.\15\ The Commission therefore finds it appropriate in 
the public interest and consistent with the protection of investors to 
exempt the Exchange from the rule filing requirements under Section 
19(b) of the Exchange Act with respect to the above-described Nasdaq 
rules it has incorporated by reference. This exemption is conditioned 
upon the Exchange promptly providing written notice to its applicants 
and members whenever Nasdaq changes a rule that

[[Page 50360]]

the Exchange has incorporated by reference.
---------------------------------------------------------------------------

    \15\ See BATS Options Market Order, supra note 12, 75 FR at 
8761; see also 2004 Order, supra note 14, 69 FR at 8502.
---------------------------------------------------------------------------

    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\16\ that the Exchange is exempt from the rule filing requirements 
of Section 19(b) of the Exchange Act solely with respect to changes to 
the rules identified in the Exemptive Request, provided that the 
Exchange promptly provides written notice to its applicants and members 
whenever Nasdaq proposes to change a rule that the Exchange has 
incorporated by reference.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(76).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17530 Filed 8-15-22; 8:45 am]
BILLING CODE 8011-01-P