[Federal Register Volume 89, Number 139 (Friday, July 19, 2024)]
[Notices]
[Pages 58810-58816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15909]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100535; File No. 4-818]


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 Nasdaq PHLX LLC

July 15, 2024.
    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 July 1, 2024, pursuant to Rule 17d-2 
of the Act,\2\ the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') and Nasdaq PHLX LLC (``PHLX'') (collectively, 
``Participating Organizations'' or ``parties''). This Agreement amends 
and restates the agreement entered into between FINRA and PHLX approved 
by the SEC on January 2, 2024, entitled ``Agreement between Financial 
Industry Regulatory Authority, Inc. and Nasdaq PHLX LLC pursuant to 
Rule 17d-2 under the Securities Exchange Act of 1934,'' and any 
subsequent amendments thereafter.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 15 CFR 240.17d-2.
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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.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
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    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.
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    \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).
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    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.
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    \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).
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    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

[[Page 58811]]

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.
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    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan

    On January 2, 2024, the Commission declared effective the Plan 
entered into between FINRA and PHLX 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 PHLX 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 PHLX rule for 
which FINRA bears responsibility under the Plan for overseeing and 
enforcing with respect to PHLX members that are also members of FINRA 
and the associated persons therewith (``Certification'').
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    \11\ See Securities Exchange Act Release No. 99260 (January 2, 
2024), 89 FR 981 (January 8, 2024).
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III. Proposed Amendment to the Plan

    On July 1, 2024, the parties submitted a proposed amendment to the 
Plan (``Amended Plan''). The primary purpose of the Amended Plan is to 
update the list of Common Rules and to add surveillance and 
investigation coverage for certain Common Rules specified in Exhibit 1 
to the Amended Plan. The text of the proposed Amended Plan is as 
follows (additions are in italics; deletions are [bracketed]):
* * * * *

Agreement Between Financial Industry Regulatory Authority, Inc. and 
NASDAQ PHLX LLC Pursuant to Rule 17d-2 Under the Securities Exchange 
Act of 1934

    This Agreement, by and between Financial Industry Regulatory 
Authority, Inc. (``FINRA'') and Nasdaq PHLX LLC (``PHLX''), is made 
this [15th] 27th day of [November, 2023] June, 2024 (the 
``Agreement''), pursuant to Section 17(d) of the Securities Exchange 
Act 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 PHLX may be referred to individually as a ``party'' and together as 
the ``parties.''
    This Agreement amends and restates the agreement entered into 
between FINRA and PHLX approved by the SEC on January 2, 2024, entitled 
``Agreement between Financial Industry Regulatory Authority, Inc. and 
Nasdaq PHLX LLC pursuant to Rule 17d-2 under the Securities Exchange 
Act of 1934,'' and any subsequent amendments thereafter.
    Whereas, FINRA and PHLX desire to reduce duplication in the 
examination, surveillance and investigation of their Dual Members (as 
defined herein) and in the filing and processing of certain 
registration and membership records; and
    Whereas, FINRA and PHLX 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 U.S. Securities and 
Exchange Commission (the ``SEC'' or ``Commission'') for its approval.
    Now, Therefore, in consideration of the mutual covenants contained 
hereinafter, FINRA and PHLX 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) ``PHLX Rules'' or ``FINRA Rules'' shall mean the rules of PHLX 
or FINRA, respectively, as the rules of an exchange or association are 
defined in Exchange Act Section 3(a)(27).
    (b) ``Common Rules'' shall mean the PHLX 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, surveillance or investigation for compliance with 
such provisions and rules would not require FINRA to develop one or 
more new examination, surveillance or investigation 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 provision or rule; provided, however, Common Rules shall not 
include the application of the SEC, PHLX 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., Investors' Exchange LLC and 
Long-Term Stock Exchange, Inc. approved by the Commission on 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 PHLX; (ii) incorporation by reference 
of other PHLX 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 PHLX; 
(iv) prior written approval of PHLX; and (v) payment of fees or fines 
to PHLX.
    (c) ``Dual Members'' shall mean those PHLX members that are also 
members of FINRA and the associated persons therewith.
    (d) ``Effective Date'' shall [have the meaning set forth in 
paragraph 13] be the date this Agreement is approved by the Commission.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with the FINRA 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 the FINRA Code of Procedure and FINRA's 
sanction guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination, 
surveillance and investigation 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. [The term 
``Regulatory Responsibilities'' shall also include the surveillance, 
investigation and Enforcement Responsibilities relating to compliance 
by Dual Members with Rule 14e-4 of the Exchange Act (``Rule 14e-4''), 
with a focus on the standardized call option provision of Rule 14e-
4(a)(1)(ii)(D).]
    2. Regulatory Responsibilities. FINRA shall assume Regulatory

[[Page 58812]]

Responsibilities for Dual Members. Attached as Exhibit 1 to this 
Agreement and made part hereof, PHLX furnished FINRA with a current 
list of Common Rules and certified to FINRA that such 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 PHLX Rules or FINRA Rules, PHLX shall 
submit an updated list of Common Rules to FINRA for review which shall 
add PHLX Rules not included in the current list of Common Rules that 
qualify as Common Rules as defined in this Agreement; delete PHLX 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 PHLX 
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 PHLX shall retain full 
responsibility for (unless otherwise addressed by separate agreement or 
rule) the following (collectively, the ``Retained Responsibilities''):
    3.(a) [S]surveillance, examination, investigation and enforcement 
with respect to trading activities or practices involving PHLX's own 
marketplaces;
    (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 PHLX Rules that are not Common Rules, except for PHLX Rules 
for any PHLX member that operates as a facility (as defined in Section 
3(a)(2) of the Exchange Act), acts as an outbound router for PHLX and 
is a member of FINRA (``Router Member'') as provided in paragraph 5. As 
of the date of this Agreement, Nasdaq Execution Services, LLC is the 
only Router Member.
    4. No Charge. There shall be no charge to PHLX by FINRA for 
performing the Regulatory Responsibilities under this Agreement except 
as hereinafter provided. FINRA shall provide PHLX with ninety (90) days 
advance written notice in the event FINRA decides to impose any charges 
to PHLX for performing the Regulatory Responsibilities under this 
Agreement. If FINRA determines to impose a charge, PHLX shall have the 
right at the time of the imposition of such charge to terminate this 
Agreement; provided, however, that FINRA's Regulatory Responsibilities 
under this Agreement shall continue until the Commission approves the 
termination of this Agreement.
    5. [Reassignment of Regulatory Responsibilities] 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 [action] 
statute, rule or order is inconsistent with this Agreement, [such 
action] 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 PHLX Rules, which are not listed as Common Rules, discovered 
pursuant to the performance of the Regulatory Responsibilities assumed 
hereunder, FINRA shall notify PHLX of those apparent violations for 
such response as PHLX deems appropriate. With respect to apparent 
violations of any PHLX Rules by any Router Member, FINRA shall not make 
referrals to PHLX pursuant to this paragraph 5. 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 PHLX becomes aware of apparent violations of 
any Common Rules, discovered pursuant to the performance of the 
Retained Responsibilities, PHLX shall notify FINRA of those apparent 
violations and such matters shall be handled by FINRA [as provided] 
consistent with the provisions in this Agreement. [Each party agrees to 
make available promptly all files, records and witnesses necessary to 
assist the other in its investigation or proceedings.]
    (c) Apparent violations of Common Rules shall be processed by, and 
enforcement proceedings in respect thereto shall be conducted by FINRA 
as provided herein before; provided, however, that in the event a Dual 
Member is the subject of an investigation relating to a transaction on 
PHLX, PHLX 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 PHLX 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 foregoing, FINRA shall 
furnish PHLX any information it obtains about Dual Members which 
reflects adversely on their financial condition. PHLX 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.
    7. Dual Member Applications.
    (a) Dual Members subject to this Agreement shall be required to 
submit, and FINRA shall be responsible for processing and acting upon 
all applications submitted on behalf of partners, officers, registered 
personnel and any other person required to be approved by the PHLX 
Rules and FINRA Rules or associated with Dual Members thereof. Upon 
request, FINRA shall advise PHLX of any changes of allied members, 
partners, officers, registered personnel and other persons required to 
be approved by the PHLX Rules and FINRA Rules.
    (b) Dual Members shall be required to send to FINRA all letters, 
termination notices or other material respecting the individuals listed 
in paragraph 7(a).
    (c) When as a result of processing such submissions 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

[[Page 58813]]

applicability of the person to whom such disqualification applies and 
keep PHLX advised of its actions in this regard for such subsequent 
proceedings as PHLX may initiate.
    (d) Notwithstanding the foregoing, FINRA shall not review the 
membership application, reports, filings, fingerprint cards, notices, 
or other writings filed to determine if such documentation submitted by 
a broker or dealer, or an associated person therewith or other persons 
required to register or qualify by examination meets the PHLX 
requirements for general membership or for specified categories of 
membership or participation in PHLX, such as PSX Market Maker, Equities 
ECN, Order Entry Firm, or any similar type of PHLX membership or 
participation that is created after this Agreement is executed. FINRA 
shall not review applications or other documentation filed to request a 
change in the rights or status described in this paragraph 7(d), 
including termination or limitation on activities, of a member or a 
participant of PHLX, or a person associated with, or requesting 
association with, a member or participant of PHLX.
    8. Branch Office Information. FINRA shall also be responsible for 
processing and, if required, acting upon all requests for the opening, 
address changes, and terminations of branch offices by Dual Members and 
any other applications required of Dual Members with respect to the 
Common Rules as they may be amended from time to time. Upon request, 
FINRA shall advise PHLX of the opening, address change and termination 
of branch and main offices of Dual Members and the names of such branch 
office managers.
    9. Customer Complaints. PHLX shall forward to FINRA copies of all 
customer complaints involving Dual Members received by PHLX 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. Notwithstanding anything 
else herein and to the contrary, except for paragraph 5(a), [N]nothing 
contained in this Agreement shall restrict or in any way encumber the 
right of either FINRA or PHLX [party] to conduct its own independent or 
concurrent investigation, examination or enforcement proceeding of or 
against Dual Members of the Common Rules, as either [party] FINRA or 
PHLX, in its sole discretion, shall deem appropriate or necessary.
    12. Termination. This Agreement may be terminated by PHLX or FINRA 
at any time upon the approval of the Commission after one (1) year's 
written notice to the other party, except as provided in paragraph 3.
    [13. Effective Date. This Agreement shall be effective upon 
approval of the Commission.]
    13[4]. Arbitration. In the event of a dispute between the parties 
as to the operation of this Agreement, PHLX 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 paragraph 13[4] shall interfere with a party's right to 
terminate this Agreement as set forth herein.
    14[5]. 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.
    15[6]. Limitation of Liability. Neither FINRA nor PHLX 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 PHLX 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 PHLX with respect 
to any of the responsibilities to be performed by each of them 
hereunder.
    16[7]. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) 
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and PHLX 
join in requesting the Commission, upon its approval of this Agreement 
or any part thereof, to relieve PHLX 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.
    17[8]. 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.
    18[9]. Separate Agreement. This Agreement is wholly separate from 
any other 17d-2 agreement where FINRA and PHLX are parties, including 
but not limited to, (1) the multiparty Agreement made pursuant to Rule 
17d-2 of the Exchange Act 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 LL[C]C approved by the Commission on 
October 18, 2022 concerning options related sales-practice matters 
[involving the allocation of regulatory responsibilities with respect 
to common members for compliance with common rules relating to the 
conduct by broker-dealers of accounts for listed options, index 
warrants, currency index warrants and currency warrants or] and (2) the 
multiparty Agreement made pursuant to Rule 17d-2 of the Exchange Act 
among NYSE American LLC, Cboe BZX Exchange, Inc., the Cboe EDGX 
Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Nasdaq 
ISE, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, 
Inc., The Nasdaq Stock Market LLC, BOX Exchange LLC, Nasdaq BX, Inc., 
Nasdaq PHLX LLC, Miami International Securities Exchange, LLC, Nasdaq 
GEMX, LLC, Nasdaq MRX, LLC, MIAX PEARL, LLC, MIAX Emerald, LLC, and

[[Page 58814]]

MEMX LLC approved by the Commission on November 23, 2022 involving 
options-related market surveillance matters and such agreements as may 
be amended from time to time.
    19[20]. 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

PHLX Certification of Common Rules

    PHLX hereby certifies that the requirements contained in the rules 
listed below for PHLX are identical to, or substantially similar to, 
the comparable FINRA Rules, Exchange Act provisions or SEA[C] Rules 
identified (``Common Rules'').
    # Common Rules shall not include provisions regarding (i) notice, 
reporting or any other filings made directly to or from PHLX, (ii) 
incorporations by reference to other PHLX 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 PHLX, (iv) prior written approval of PHLX, 
and (v) payment of fees or fines to PHLX.

------------------------------------------------------------------------
                                           FINRA Rule(s), Exchange Act
               PHLX Rule                     Provision(s), or SEA[C]
                                                   Rule(s)[ULE]
------------------------------------------------------------------------
General 2, Section 11 Contact            4517. Member Filing and Contact
 Information Requirements .              Information Requirements.
General 3, Rule 1002(b) Qualifications   FINRA By-Laws Article III, Sec.
 of Exchange Members and Associated       1; FINRA By-Laws Article III,
 Persons; Registration of Branch          Sec. 3(a) and (b).
 Offices and Designation of Office of
 Supervisory Jurisdiction .
General 3, Rule 1002(d). Qualifications  3110(a)(3) Supervision and SM
 of Exchange Members and Associated       .01 and .02. Supervision * and
 Persons; Registration of Branch          FINRA By-Laws Article IV, Sec.
 Offices and Designation of Office of     8.
 Supervisory Jurisdiction .
General 3, Rule 1012(c)(1). Duty to      1122. Filing of Misleading
 Ensure the Accuracy, Completeness, and   Information as to Membership
 Current Nature of Membership             or Registration; FINRA By-Laws
 Information Filed with the Exchange .   Article IV, Sec. 1(c).
General 4, Section 1, 1210.              1210. Registration
 Registration Requirements .             Requirements; FINRA By-Laws,
                                          Article V, Sec. 1; FINRA By-
                                          Laws, Article V, Sec. 2; FINRA
                                          By-Laws, Article V, Sec. 3.
General 4, Section 1, 1220.              1220. Registration Categories.
 Registration Categories \1\.
General 4, Section 1, Rule 1230(1)-      1230. Associated Persons Exempt
 (2)(D) and Supplementary Material .01.   from Registration.
 Associated Persons Exempt from
 Registration .
General 4, Section 1, 1240. Continuing   1240. Continuing Education.
 Education Requirements \2\.
General 4, Section 1, 1250. Electronic   1010. Electronic Filing
 Filing Requirements for Uniform Forms    Requirements for Uniform
 .                                       Forms.
General 9, Section 1(b). Manipulative    2020. Use of Manipulative,
 Operations and General 9, Section        Deceptive or Other Fraudulent
 2(b)(i) Customers' Securities and        Devices *; 6140 Other Trading
 Excessive Trading of Members.            Practices; 5350 Stop Orders;
                                          6130 Transactions Related to
                                          Initial Public Offerings.
General 9, Section 1(c)(1). Standards    2010. Standards of Commercial
 of Commercial Honor and Principles of    Honor and Principles of
 Trade.                                   Trade.*
General 9, Section 1(a). Prohibition     5320. Prohibition Against
 Against Trading Ahead of Customer        Trading Ahead of Customer
 Orders.                                  Orders.
General 9, Section 1(c)(2). Anti-        5240. Anti-Intimidation/
 Intimidation/Coordination.               Coordination.
General 9, Section 1(c)(3). Conduct      5290. Order Entry and Execution
 Inconsistent with Just and Equitable     Practices.
 Principles of Trade.
General 9, Section 2(a). Customers'      2150(a). Improper Use of
 Securities and Excessive Trading of      Customers' Securities or
 Members.                                 Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts.
General 9, Section 11. Best Execution    5310. Best Execution and
 and Interpositioning.                    Interpositioning.
General 9, Section 19. Discretionary     3260. Discretionary Accounts.
 Accounts.
General 9, Section 20. Supervision.....  3110. Supervision.
General 9, Section 30. Books and         4511. General Requirements.
 Records.
General 9, Section 35. Nonregistered     Rule 2040(c). Payments to
 Foreign Finders.                         Unregistered Persons.
General 9, Section 39. Fidelity Bonds..  4360. Fidelity Bonds.
General 9, Section 58. Advertisements,   2210. Communications with the
 Market Letters, Research Reports and     Public.
 Sales Literature.
Options 6E, Section 1(a). Maintenance,   4511(a). General Requirements.
 Retention and Furnishing of Books,
 Records and Other Information .
Options 10, Section 7(g) and (h).       3120. Supervisory Control
 Supervision of Accounts.                 System
                                         3130. Annual Certification of
                                          Compliance and Supervisory
                                          Processes.
Options 10, Section 10. Confirmations    2232. Customer Confirmations.
 to Customers.
Options 10, Section 17. Profit Sharing.  2150(c). Improper Use of
                                          Customers' Securities or
                                          Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts.
General 9, Section 11. Best Execution    5310. Best Execution and
 and Interpositioning.                    Interpositioning.**
General 9, Section 1(a) Prohibition      5320. Prohibition Against
 Against Trading Ahead of Customer        Trading Ahead of Customer
 Orders.                                  Orders.**
Equity 2, Section 5(d) Locked and        6240. Prohibition from Locking
 Crossed Markets.                         or Crossing Quotations in NMS
                                          Stocks.**
------------------------------------------------------------------------
\1\ FINRA shall only have Regulatory Responsibilities regarding General
  4, Section 1, 1200 to the extent that PHLX recognizes the same
  categories of limited principal and representative registration.
\2\ FINRA Rule 1240.01 allows for other persons to make their election
  to participate in the continuing education program under Rule 1240(c)
  either (1) between January 31, 2022, and March 15, 2022; or (2)
  between March 15, 2023, and December 31, 2023. In contrast,
  Supplementary Material .02 of Nasdaq PHLX General 4, Section 1, 1240
  allows for other persons to make their election to participate in the
  continuing education program under PHLX General 4, Section 1, 1240(c)
  either (1) by March 15, 2022, or (2) between July 6, 2023, and
  December 31, 2023. Therefore, FINRA shall not have Regulatory
  Responsibilities regarding election, made by other persons under
  General 4, Section 1, 1240(c) between March 15, 2023, and July 5,
  2023.
[In addition, the following provisions shall be part of this 17d-2
  Agreement:]
The following provisions are covered by the Agreement between the
  Parties:

[[Page 58815]]

 
 SEC '34 Act Section 28(e)--on Existing Law
 [SEC '34 Act] SEA Rule 10b-10--Confirmation of Transactions
 SEA Rule 200 of Regulation SHO--Definition of Short Sales and
  Marking Requirements **
 SEA Rule 201 of Regulation SHO--Circuit Breaker **
 [SEC '34 Act] SEA Rule 203 of Regulation SHO--Borrowing and
  Delivery Requirements
 SEA Rule 204 of Regulation SHO--Close-Out Requirements **
 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 **
 SEA Rule 604 of Regulation NMS--Display of Customer Limit
  Orders **
 [SEC '34 Act] SEA Rule 606 of Regulation NMS--Disclosure of
  Order Routing Information
 [SEC '34 Act Rule 607 of Regulation NMS Customer Account
  Statements]
 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[[supcaret]]
 SEA Rule 14e-4(a)(1)(ii)(D)--Prohibited Transactions in
  Connection with Partial Tender Offers (with a focus on the
  standardized call option provision) **
[[supcaret] FINRA shall perform surveillance, investigation, and
  Enforcement Responsibilities for SEA Rule 14e-4(a)(1)(ii)(D).]
** In addition to performing examinations and Enforcement
  Responsibilities as provided in this Agreement for the double star
  rules, FINRA shall also perform the surveillance and investigation
  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 between FINRA and PHLX.
* 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., NYSE Chicago, 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., Investors'
  Exchange LLC, and the Long-Term Stock Exchange, Inc. as approved by
  the SEC on September 23, 2020, as may be amended from time to time.
[supcaret] FINRA shall perform the surveillance and investigation
  responsibilities for these rules. The examination responsibility for
  these rules is covered by a separate 17d-2 Agreement by and among Cboe
  BZX Exchange, Inc., Cboe BYX Exchange, Inc., BOX Exchange LLC, Cboe
  Exchange, Inc., Cboe C2 Exchange, Inc., NYSE Chicago, Inc., Cboe EDGA
  Exchange, Inc., Cboe EDGX Exchange, Inc., Financial Industry
  Regulatory Authority, Inc., MEMX LLC, Nasdaq ISE, LLC, Nasdaq GEMX,
  LLC, Nasdaq MRX, LLC, Investors Exchange LLC, Miami International
  Securities Exchange, LLC, MIAX PEARL, LLC, MIAX Emerald, LLC, The
  Nasdaq Stock Market LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, NYSE
  National, Inc., New York Stock Exchange LLC, NYSE American LLC, NYSE
  Arca, Inc. and Long-Term Stock Exchange, Inc. as approved by the SEC
  on June 10, 2020 concerning covered Regulation NMS and Consolidated
  Audit Trail Rules, as may be amended from time to time.

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 4-818 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 4-818. 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 PHLX. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File No. 4-818 and should be submitted on or before 
August 9, 2024.

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 Common Members that would otherwise be performed 
by both FINRA and PHLX. Accordingly, the proposed Amended Plan promotes 
efficiency by reducing costs to Common Members. Furthermore, because 
PHLX 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, PHLX and FINRA 
have allocated regulatory responsibility for those PHLX 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 Common Member's activity, 
conduct, or output in relation to such rule. In addition, under the 
Amended Plan,

[[Page 58816]]

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, PHLX will review the Certification 
at least annually, or more frequently if required by changes in either 
the rules of PHLX or FINRA, and, if necessary, submit to FINRA an 
updated list of Common Rules to add PHLX rules not included on the 
then-current list of Common Rules that are substantially similar to 
FINRA rules; delete PHLX 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 PHLX 
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 PHLX rules that are substantially 
similar to the rules of FINRA for Common Members of PHLX 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 
PHLX rules in the Certification in conformance with the definition of 
Common Rules provided in the Amended Plan. However, should the Parties 
decide to add a PHLX rule to the Certification that is not 
substantially similar to a FINRA rule; delete a PHLX rule from the 
Certification that is substantially similar to a FINRA rule; or leave 
on the Certification a PHLX 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, Common 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 amendment is to update the list 
of Common Rules and to add surveillance and investigation coverage for 
certain Common Rules specified in Exhibit 1 to the Amended Plan. By 
declaring it effective today, the Amended Plan can become effective and 
be implemented without undue delay. 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 supra note 11 (citing to Securities Exchange Act 
Release No. 99260).
---------------------------------------------------------------------------

VI. Conclusion

    This order gives effect to the Amended Plan filed with the 
Commission in File No. 4-818. 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. 4-818, between the FINRA and PHLX, filed 
pursuant to Rule 17d-2 under the Act, hereby is approved and declared 
effective.
    It is further ordered that PHLX is relieved of those 
responsibilities allocated to FINRA under the Amended Plan in File No. 
4-818.

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

    \17\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15909 Filed 7-18-24; 8:45 am]
BILLING CODE 8011-01-P