Notice2021-27664
Order Granting Applications by Nasdaq BX, Inc., The Nasdaq Stock Market 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 the Nasdaq ISE, LLC Options 4 Options Listing Rules Incorporated by Reference
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Published
December 22, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 243 (Wednesday, December 22, 2021)</title>
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[Federal Register Volume 86, Number 243 (Wednesday, December 22, 2021)]
[Notices]
[Pages 72656-72658]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-27664]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93804]
Order Granting Applications by Nasdaq BX, Inc., The Nasdaq Stock
Market 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 the Nasdaq ISE, LLC Options 4
Options Listing Rules Incorporated by Reference
December 16, 2021.
Nasdaq BX, Inc. (``BX''), The Nasdaq Stock Market LLC (``Nasdaq''),
and Nasdaq PHLX LLC (``Phlx'') (collectively the ``Exchanges'') have
filed with the Securities and Exchange Commission (the ``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
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Exchange Act \2\ with respect to certain rules of Nasdaq ISE, LLC
(``ISE'') that the Exchanges seek to incorporate by reference (``ISE
Options 4 Rules'').\3\ Section 36(a)(1) of the Exchange Act,\4\ 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.
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\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, Nasdaq Inc., to J. Matthew DeLesDernier, Assistant
Secretary, Commission, dated September 3, 2021 (``Exemptive
Request'').
\4\ 15 U.S.C. 78mm(a)(1).
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The Exchanges each filed a proposed rule change \5\ under Section
19(b) of the Exchange Act to replace its Options 4 Options Listing
Rules (``Options Listing Rules''), as set forth in Options 4 of their
respective rulebooks, with the Options 4 Rules of the ISE rulebook, as
such rules may be in effect from time to time. Namely, in the proposed
rule changes, the Exchanges each proposed to incorporate by reference
the ISE Options 4 Rules such that ISE Options 4 Rules would be
applicable to each of the Exchanges' respective members, member
organizations, Participants, Options Participants, associated persons
and personnel, and other persons subject to the Exchanges' jurisdiction
as though such rules were fully set forth within each of the Exchanges'
rulebooks.\6\
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\5\ See Securities Exchange Act Release Nos. 92987 (September
15, 2021), 86 FR 52511 (September 21, 2021) (SR-BX-2021-038); 93003
(September 15, 2021), 86 FR 52534 (September 21, 2021) (SR-NASDAQ-
2021-070); 92990 (September 15, 2021) 86 FR 52513 (September 21,
2021) (SR-PHLX-2021-53). 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.
\6\ See note 5, supra.
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The Exchanges have requested, pursuant to Rule 0-12 under the
Exchange Act,\7\ 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 of the Exchanges' rules that are effected solely by
virtue of a change to the ISE Options 4 Rules that are incorporated by
reference. Specifically, the Exchanges request that they be permitted
to incorporate by reference changes made to the ISE Options 4 Rules
that are cross-referenced in each of the Exchanges' rules without the
need for each of the Exchanges to file separately the same proposed
rule change pursuant to Section 19(b) of the Exchange Act.\8\
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\7\ 17 CFR 240.0-12.
\8\ See Exemptive Request, supra note 3.
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The Exchanges represent that the ISE Options 4 Rules are not
trading rules.\9\ Moreover, the Exchanges state that in each instance,
they propose to incorporate by reference a category of rules (rather
than individual rules within a category).\10\ The Exchanges also
represent that, as a condition of this exemption, the Exchanges will
provide written notice to their respective members, member
organizations, Participants, Options Participants, associated persons
and personnel, whenever ISE proposes a change to ISE Options 4
Rules.\11\ Additionally, the Exchange will similarly inform their
members, member organizations, Participants, associated persons and
personnel, in writing when the Commission approves any such proposed
changes.\12\
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\9\ Id. at 2.
\10\ Id. at 2, n.7.
\11\ Id. at 3. The Exchanges state that they will provide such
notice via a posting on the same website location where the
Exchanges post their own rule filings pursuant to Rule 19b-4(l)
within the timeframe required by such Rule. In addition, the
Exchanges state that the website posting will include a link to the
location on ISE's website where the applicable proposed rule change
is posted. Id. at 3 n.8.
\12\ See id. at 3.
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According to the Exchanges, this exemption is necessary and
appropriate because it will result in the Exchanges' Options Listing
Rules being consistent with the relevant cross-referenced ISE Options
Listing Rules at all times.\13\ The Exchanges states that harmonization
of the Options Listing Rules between the Exchanges and ISE will ensure
consistent regulation of joint members of the Phlx, Nasdaq, BX and ISE
and increase internal efficiencies associated with administering the
options listing rules of each exchange.\14\
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\13\ See id. at 2.
\14\ See id.
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The Commission has issued exemptions similar to the Exchanges'
request.\15\ The Commission has stated that it would consider exemption
requests, provided that:
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\15\ See Securities Exchange Act Release No. 70050 (July 26,
2013), 78 FR 46622 (August 1, 2013) (order granting approval of
Topaz Exchange, LLC as a national securities exchange and
incorporating by reference listing rules of Nasdaq ISE, LLC). See
also, e.g., Securities Exchange Act Release Nos. 92136 (June 9,
2021), 86 FR 31772 (June 15, 2021) (order granting exemptive request
from Nasdaq GEMX, LLC and Nasdaq MRX, LLC relating to rules of The
Nasdaq Stock Market LLC incorporation by reference); 91202 (February
24, 2021), 86 FR 12250 (March 2, 2021) (order granting application
by Nasdaq ISE, 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 the Nasdaq Rule 1000 Series
incorporated by reference); 89902 (September 17, 2020), 85 FR 59843
(September 23, 2020) (order granting exemptive request from Nasdaq
BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, and
Nasdaq PHLX LLC relating to investigatory, disciplinary, and
adjudication rules of The Nasdaq Stock Market LLC incorporation by
reference); 86896 (September 6, 2019), 84 FR 48186 (September 12,
2019) (order granting exemptive request from Nasdaq BX, Inc.
relating to rules of The Nasdaq Stock Market LLC incorporation by
reference); 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 the
NASDAQ Stock Market LLC relating to rules of NASDAQ OMX PHLX LLC
incorporated by reference); 67256 (June 26, 2012), 77 FR 39277,
39286 (July 2, 2012) (order approving SR-BX-2012-030 and granting
exemptive request relating to rules incorporated by reference by the
BX Options rules); 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''); and 57478
(March 12, 2008), 73 FR 14521, 14539-40 (March 18, 2008) (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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<bullet> A self-regulatory organization (``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; \16\
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\16\ 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'').
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<bullet> 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
<bullet> 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.\17\
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\17\ See BATS Options Market Order, supra note 15 (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'')).
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The Commission believes that the Exchanges have satisfied each of
these conditions. Further, 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.\18\ The Commission therefore finds it appropriate 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 above-described rules it
incorporates by reference. This exemption is conditioned upon the
Exchanges promptly providing written notice to their respective
members, member organizations, Participants, Options Participants,
associated persons and personnel whenever ISE proposes to change a rule
that the Exchanges incorporate by reference and whenever the Commission
approves any such proposed rule change.
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\18\ See BATS Options Market Order, supra note 15, 75 FR at
8761; see also 2004 Order, supra note 17, 69 FR at 8502.
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Accordingly, it is ordered, pursuant to Section 36 of the Exchange
Act,\19\ 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 the Exemptive Request, provided
that the Exchanges promptly provide written notice to their applicants
and members whenever ISE proposes to change a rule that the Exchanges
have incorporated by reference.
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\19\ 15 U.S.C. 78mm.
\20\ 17 CFR 200.30-3(a)(76).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27664 Filed 12-21-21; 8:45 am]
BILLING CODE 8011-01-P
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