Notice2021-24413
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing of Proposed Rule Change To Amend Exchange Rules in Connection With the Proposed Merger of BX Equities LLC With and Into the Exchange
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 9, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 214 (Tuesday, November 9, 2021)</title>
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[Federal Register Volume 86, Number 214 (Tuesday, November 9, 2021)]
[Notices]
[Pages 62222-62224]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-24413]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93513; File No. SR-BX-2021-051]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
of Proposed Rule Change To Amend Exchange Rules in Connection With the
Proposed Merger of BX Equities LLC With and Into the Exchange
November 3, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 22, 2021, Nasdaq BX, Inc. (``BX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rules in connection with the
proposed merger of BX Equities LLC (``BX Equities'') with and into the
Exchange (the ``Merger''). As a result of the Merger, BX Equities will
be eliminated, and the Exchange will directly operate its equities and
options markets.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/bx/rules">https://listingcenter.nasdaq.com/rulebook/bx/rules</a>, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its rules in connection with the
proposed Merger of BX Equities with and into the Exchange. The Exchange
notes that the proposed Merger is the second part of a two-step
process, the first part of which is the transfer of Nasdaq, Inc.'s
(``Nasdaq HoldCo'') entire ownership interest in BX Equities to the
Exchange, which will result in the Exchange becoming the 100% direct
owner and sole LLC member of BX Equities (the ``Transfer'' and together
with the Merger, the ``Transactions'').\3\ The Transactions will
ultimately result in the elimination of BX Equities. The Transactions
are designed to simplify the corporate structure of the Exchange's sole
stockholder Nasdaq HoldCo and Nasdaq HoldCo's subsidiaries,
specifically the Exchange and BX Equities. The Transactions will not
have any effect on Nasdaq HoldCo's direct ownership of the Exchange.
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\3\ The proposed Transfer is the subject of a separate rule
filing to be filed by the Exchange with the Commission concurrent
with this filing. Specifically, the Transfer filing would amend the
BX Equities Operating Agreement to reflect Nasdaq HoldCo's transfer
of ownership interest in BX Equities to the Exchange. The Merger
filing would then delete the BX Equities Operating Agreement that
was amended in the Transfer filing and delete the Delegation
Agreement to reflect the Merger. See SR-BX-2021-050 (not yet
published).
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By way of background, BX Equities was established in 2008 as a
facility of and controlled subsidiary owned and operated by the
Exchange for the listing and trading of cash equity securities.\4\ BX
Equities is currently governed by a Delegation Agreement between the
Exchange and BX Equities (``Delegation Agreement''), under which the
Exchange has delegated certain responsibilities to BX Equities to
operate the Exchange's equities market.\5\ BX Equities is also
currently governed by the Fifth Amended and Restated Operating
Agreement (``Operating Agreement''). As noted above, the Exchange is
concurrently submitting a separate filing that amends the Operating
Agreement to reflect the Transfer, which will result in the
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Exchange becoming the sole owner and LLC member of BX Equities.\6\
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\4\ See Securities Exchange Act Release No. 59154 (December 23,
2008), 73 FR 80468 (December 31, 2008) (SR-BSE-2008-48) (``BX
Equities Approval Order''). The NASDAQ OMX Group, Inc. (as
referenced in the BX Equities Approval Order) is now Nasdaq, Inc.
\5\ The Exchange also directly operates an options market.
\6\ See supra note 3.
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Following the Merger, the Exchange will be the surviving entity,
and it will directly operate both the Exchange's equities and options
markets. The Exchange is proposing amendments in order to reflect those
changes.
Specifically, the proposed amendments would ultimately allow the
Exchange to directly operate both markets by:
<bullet> Terminating the existing delegation to BX Equities;
<bullet> removing the BX Equities Operating Agreement; and
<bullet> amending the Exchange's rules to eliminate all references
to the Delegation Agreement, BX Equities Operating Agreement, and BX
Equities LLC.
Each item will be discussed in detail below. The Exchange intends
to implement the Transactions (including the proposed changes in this
filing to reflect the Merger) by the end of Q4 2021. The Exchange
anticipates that the Merger will occur immediately after the Transfer.
Termination of Delegation
The Delegation Agreement was executed in 2008 following the
establishment of BX Equities as a cash equities trading facility of the
Exchange. The delegation is limited to the Exchange's equities market
functions and does not include other functions not specifically
mentioned in the limited delegation. However, the Exchange retains
ultimate responsibility for its equities market, including the
responsibility to ensure the fulfillment of statutory and self-
regulatory obligations under the Act.\7\
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\7\ See Delegation Agreement (providing that the Exchange shall
have ultimate responsibility for the operations, rules and
regulations developed by BX Equities, as well as their enforcement,
and that actions taken by BX Equities pursuant to delegated
authority remain subject to review, approval or rejection by the
Exchange's Board in accordance with the procedures established by
the Board). See also BX Equities Approval Order at 80470.
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In connection with the proposed Merger, the Exchange now proposes
to terminate the delegation of functions to BX Equities set forth in
the Delegation Agreement, and remove the Delegation Agreement from its
rules. With the termination of the Delegation Agreement, all of the
functions that were previously delegated to BX Equities will now be
performed by the Exchange as the Exchange will directly operate its
equities market upon the elimination of BX Equities. Furthermore, the
Exchange will continue to bear responsibility over its equities market
of ensuring the fulfillment of its statutory and self-regulatory
obligations.
Removal of Operating Agreement
As discussed above, the Exchange is concurrently proposing
amendments to the Operating Agreement to reflect that the Exchange will
be the only owner and sole LLC member of BX Equities. In addition,
management of BX Equities is vested solely in the Exchange.\8\ As
stated in the BX Equities Approval Order, having the managerial powers
vested solely in the Exchange is designed to preserve the Exchange's
regulatory authority over BX Equities, and grants the Exchange the
ability to direct BX Equities to perform any required, necessary, or
appropriate act.\9\ By virtue of BX Equities' structure as a facility
of the Exchange, and the Exchange's exclusive management rights, BX
Equities is bound by all of the regulatory obligations of its SRO-
member. For instance, the Exchange's independent regulatory oversight
committee (``ROC'') currently oversees the regulatory program of the
Exchange and its facilities, and meets regularly with the Exchange's
Chief Regulatory Officer (``CRO'').\10\ In addition, the Exchange'
independent regulatory department under the oversight of the ROC
carries out the Exchange's regulatory functions, including
administering its membership and disciplinary rules, and performing
real-time surveillance over participants in the Exchange's equities and
options market. Ultimately, BX Equities can only act through the action
of the Exchange and its officers and directors by virtue of the fact
that there is no separate BX Equities board of directors and all BX
Equities officers are officers of the Exchange.\11\
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\8\ See Section 4.1, Operating Agreement (stating that as sole
manager of BX Equities, the Exchange shall have the power to do any
and all acts necessary, convenient or incidental to or for the
furtherance of the purposes described in the Operating Agreement,
and that the Exchange has the authority to bind BX Equities).
\9\ See BX Equities Approval Order at 80470.
\10\ See Section 4.13(c) of the Exchange's By-Laws. BX Equities
does not have a separate ROC.
\11\ See supra note 7 [sic]. See also Section 5.1, Operating
Agreement (stating that officers of BX Equities must also be
officers of the Exchange).
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With the termination of the Delegation Agreement proposed above, BX
Equities would no longer be operating the Exchange's equities market
and as a result, the Operating Agreement will become obsolete.
Accordingly, the Exchange proposes to remove the Operating Agreement
from its rules.
Exchange Rule Amendments
The Exchange proposes to make certain conforming amendments to its
rules to reflect the proposed Merger of BX Equities into the Exchange
and the resulting deletion of the Delegation Agreement and Operating
Agreement. In particular, the Exchange proposes to make the following
conforming amendments:
<bullet> General 2, Section 8 currently references the Delegation
Agreement, and states that the staff, books, records and premises of BX
Equities LLC are the staff, books, records and premises of the Exchange
subject to oversight pursuant to the Act, and all officers, employees
and agents of BX Equities LLC are the officers, employees and agents of
the Exchange for purposes of the Act. The Exchange now proposes to
delete the rule text and reserve the rule.
<bullet> Equity 1, Section 1 currently includes the definitions of
Delegation Agreement (Equity 1, Section 1(a)(2)) and BX Equities
(Equity 1, Section 1(a)(5)). The Exchange now proposes to delete these
definitions and reserve the respective rules.
<bullet> In Equity 1, Section 1(a)(3), the Exchange proposes to
delete the references to the Delegation Agreement and Operating
Agreement.
<bullet> In Equity 1, Section 1(a)(6), the Exchange proposes to
delete ``through BX Equities LLC as a facility of the Exchange'' from
the first sentence.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\12\ in general, and furthers the objectives of Section
6(b)(1) of the Act,\13\ in particular, in that it enables the Exchange
to be so organized as to have the capacity to be able to carry out the
purposes of the Exchange Act and to comply, and to enforce compliance
by its exchange members and persons associated with its exchange
members, with the provisions of the Exchange Act, the rules and
regulations thereunder, and the rules of the Exchange.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(1).
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Specifically, termination of the Delegation Agreement would result
in the Exchange directly operating the equities market facility of the
Exchange. With the termination of the Delegation Agreement, all of the
functions that were previously delegated to BX Equities will now be
performed by the Exchange as the Exchange will directly operate its
equities market upon the elimination of BX Equities. Furthermore, the
Exchange will continue to bear responsibility over its
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equities market of ensuring the fulfillment of its statutory and self-
regulatory obligations. As stated above, the independent ROC of the
Exchange's Board would continue to oversee the Exchange's regulatory
and self-regulatory organization responsibilities with regards to both
the equities and options markets, and the Exchange's regulatory
department would continue to carry out its regulatory functions with
respect to both markets under the oversight of the ROC.\14\ For the
same reasons, the Exchange believes that its proposal to remove BX
Equities' Operating Agreement from the Exchange's rules in connection
with the proposed termination of the Delegation Agreement is also
consistent with Section 6(b)(1) of the Act.
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\14\ See supra note 9 [sic].
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The Exchange also believes that this filing furthers the objectives
of Section 6(b)(5) of the Act,\15\ in particular, in that it is
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general to protect investors and the
public interest. The Exchange believes that the deletion of the
Delegation Agreement and Operating Agreement from the Exchange's rules,
and related conforming Exchange rule amendments, each as discussed
above, is consistent with Section 6(b)(5) of the Act because the
proposed changes would add clarity and transparency to the Exchange's
Rulebook, ensuring that persons subject to the Exchange's jurisdiction,
regulators, and the investing public can more easily navigate and
understand the Exchange's rules.
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\15\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is not
designed to address any competitive issues but rather is concerned
solely with the corporate structure of the Exchange and the
administration and function of its corporate governance structures.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#addfd8c1c880cec2c0c0c8c3d9deeddec8ce83cac2db"><span class="__cf_email__" data-cfemail="5123243d347c323e3c3c343f2522112234327f363e27">[email protected]</span></a>. Please include
File Number SR-BX-2021-051 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to: Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number SR-BX-2021-051. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BX-2021-051 and should be submitted on
or before November 30, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-24413 Filed 11-8-21; 8:45 am]
BILLING CODE 8011-01-P
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