Notice2022-17530
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
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
August 16, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 157 (Tuesday, August 16, 2022)</title>
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[Federal Register Volume 87, Number 157 (Tuesday, August 16, 2022)]
[Notices]
[Pages 50359-50360]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-17530]
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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.
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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, Phlx, to J. Matthew DeLesDernier, Assistant Secretary,
Commission, dated July 8, 2022 (``Exemptive Request'').
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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\
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\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).
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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\
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\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.
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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\
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\10\ See id. at 2.
\11\ See id.
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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:
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\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).
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<bullet> An SRO wishing to incorporate rules of another SRO by
reference has submitted a written request for an order exempting it
from the requirement in Section 19(b) of the Exchange Act to file
proposed rule changes relating to the rules incorporated by reference,
has identified the applicable originating SRO(s), together with the
rules it wants to incorporate by reference, and otherwise has complied
with the procedural requirements set forth in the Commission's release
governing procedures for requesting exemptive orders pursuant to Rule
0-12 under the Exchange Act; \13\
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\13\ See 17 CFR 240.0-12 and 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.\14\
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\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'')).
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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.
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\15\ See BATS Options Market Order, supra note 12, 75 FR at
8761; see also 2004 Order, supra note 14, 69 FR at 8502.
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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.
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\16\ 15 U.S.C. 78mm.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(76).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17530 Filed 8-15-22; 8:45 am]
BILLING CODE 8011-01-P
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