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Notice2022-22989

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 MEMX LLC

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Published

October 24, 2022

Issuing agencies

Securities and Exchange Commission

Full Text

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<title>Federal Register, Volume 87 Issue 204 (Monday, October 24, 2022)</title>
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[Federal Register Volume 87, Number 204 (Monday, October 24, 2022)]
[Notices]
[Pages 64280-64285]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-22989]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96101; File No. 4-762]

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 MEMX LLC

October 18, 2022.
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 October 6, 2022, pursuant to Rule
17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority,
Inc. (``FINRA'') and MEMX LLC (``MEMX'') (collectively, ``Participating
Organizations'' or ``parties''). This agreement amends and restates the
agreement entered into between FINRA and MEMX on April 16, 2020,
entitled ``Agreement between Financial Industry Regulatory Authority,
Inc. and MEMX 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\ 17 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 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 June 17, 2020, the Commission declared effective the Plan
entered into between FINRA and MEMX 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 MEMX 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 MEMX rule for
which FINRA bears responsibility under the Plan for overseeing and
enforcing with respect to MEMX members that are also members of FINRA
and the associated persons therewith (``Certification'').
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\11\ See Securities Exchange Act Release No. 89084 (June 17,
2020), 85 FR 37701 (June 23, 2020).
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III. Proposed Amendment to the Plan

On October 6, 2022, the parties submitted a proposed amendment to
the Plan (``Amended Plan''). The primary purpose of the Amended Plan is
to add Securities Exchange Act Rule 14e-4(a)(1)(ii)(D) to the
Certification to accommodate the upcoming launch of MEMX's new options
facility and to reflect updated rule citations. The text of the
proposed Amended Plan is as follows (additions are italicized;
deletions are [bracketed]):
* * * * *

AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND
MEMX LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF
1934

This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and MEMX LLC (``MEMX''), is made this
[16th] 6th day of [April, 2020] October, 2022 (the ``Agreement''),
pursuant to Section 17(d) of the Securities Exchange Act

[[Page 64281]]

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 MEMX may be referred to individually as a ``party'' and together
as the ``parties.''
Whereas, FINRA and MEMX desire to reduce duplication in the
examination and surveillance of their Dual Members (as defined
herein) and in the filing and processing of certain registration and
membership records; and
Whereas, FINRA and MEMX 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 Securities and
Exchange Commission (the ``SEC'' or ``Commission'') for its
approval.
Now, therefore, in consideration of the mutual covenants
contained hereinafter, FINRA and MEMX 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) ``MEMX Rules'' or ``FINRA Rules'' shall mean: (i) the rules
of MEMX, or (ii) the rules of FINRA, respectively, as the rules of
an exchange or association are defined in Exchange Act Section
3(a)(27).
(b) ``Common Rules'' shall mean MEMX 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 or surveillance for compliance with such
provisions and rules would not require FINRA to develop one or more
new examination or surveillance standards, modules, procedures, or
criteria in order to analyze the application of the provision or
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, MEMX 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., and Investors' Exchange LLC and Long-Term Stock
Exchange, Inc. effective [August 1, 2019] 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 MEMX, (ii) incorporation by reference of MEMX
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 MEMX, (iv)
prior written approval of MEMX and (v) payment of fees or fines to
MEMX.
(c) ``Dual Members'' shall mean those MEMX members that are also
members of FINRA and the associated persons therewith.
(d) ``Effective Date'' shall be the date this Agreement is
approved by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with FINRA's 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 FINRA's
Code of Procedure and sanctions guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities, surveillance 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.
2. Regulatory and Enforcement Responsibilities. FINRA shall
assume Regulatory Responsibilities and Enforcement Responsibilities
for Dual Members. Attached as Exhibit 1 to this Agreement and made
part hereof, MEMX furnished FINRA with a current list of Common
Rules and certified to FINRA that such rules that are MEMX 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 rules of MEMX or
FINRA, MEMX shall submit an updated list of Common Rules to FINRA
for review which shall add MEMX Rules not included in the current
list of Common Rules that qualify as Common Rules as defined in this
Agreement; delete MEMX 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 MEMX 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 MEMX shall retain full responsibility for
(unless otherwise addressed by separate agreement or rule)
(collectively, the ``Retained Responsibilities'') the following:
(a) surveillance, examination, investigation and enforcement
with respect to trading activities or practices involving MEMX's own
marketplace for rules that are not Common Rules;
(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 MEMX Rules that are not Common Rules, except for MEMX
Rules for any MEMX member that operates as a facility (as defined in
Section 3(a)(2) of the Exchange Act), acts as an outbound router for
the MEMX and is a member of FINRA (``Router Member'') as provided in
paragraph 6. As of the date of this Agreement, MEMX Execution
Services LLC is the only Router Member.
3. Dual Members. Prior to the Effective Date, MEMX shall furnish
FINRA with a current list of Dual Members, which shall be updated no
less frequently than once each quarter.
4. No Charge. There shall be no charge to MEMX by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as otherwise agreed by
the parties, either herein or in a separate agreement.
5. 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 statute, rule or order is inconsistent with this
Agreement, 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 MEMX Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities
assumed hereunder, FINRA shall notify MEMX of those apparent
violations for such response as MEMX deems appropriate. With respect
to apparent violations of any MEMX Rules by any Router Member, FINRA
shall not make referrals to MEMX pursuant to this paragraph 6. 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 MEMX becomes aware of apparent violations
of any Common Rules, discovered pursuant to the performance of the
Retained Responsibilities, MEMX shall notify FINRA of those apparent
violations and such matters shall be handled by FINRA as provided in
this Agreement.
(c) Apparent violations of Common Rules shall be processed by,
and enforcement proceedings in respect thereto shall be conducted by
FINRA as provided hereinbefore; provided, however, that in the event
a Dual Member is the subject of an investigation relating to a
transaction on MEMX, MEMX 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 MEMX 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

[[Page 64282]]

foregoing, FINRA shall furnish MEMX any information it obtains about
Dual Members which reflects adversely on their financial condition.
MEMX 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.
8. Statutory Disqualifications. When 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 applicability of the person to whom such disqualification
applies and keep MEMX advised of its actions in this regard for such
subsequent proceedings as MEMX may initiate.
9. Customer Complaints. MEMX shall forward to FINRA copies of
all customer complaints involving Dual Members received by MEMX
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. Nothing contained in
this Agreement shall restrict or in any way encumber the right of
either party to conduct its own independent or concurrent
investigation, examination or enforcement proceeding of or against
Dual Members, as either party, in its sole discretion, shall deem
appropriate or necessary.
12. Termination. This Agreement may be terminated by MEMX or
FINRA at any time upon the approval of the Commission after six (6)
month's written notice to the other party.
13. Arbitration. In the event of a dispute between the parties
as to the operation of this Agreement, MEMX 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 Section 13 shall
interfere with a party's right to terminate this Agreement as set
forth herein.
14. Notification of Members. MEMX and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
15. 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.
16. Limitation of Liability. Neither FINRA nor MEMX 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 MEMX 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 MEMX with respect to any of the
responsibilities to be performed by each of them hereunder.
17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and
MEMX join in requesting the Commission, upon its approval of this
Agreement or any part thereof, to relieve MEMX 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.
18. 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.
19. 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

MEMX CERTIFICATION OF COMMON RULES

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

------------------------------------------------------------------------
FINRA (NASD) rule, Exchange Act
MEMX rule provision, SEC rule
------------------------------------------------------------------------
Rule 2.5 Restrictions, Interpretation FINRA Rule 1240[(a)(1)-(4)]
and Policies .02 Continuing Education Continuing Education
Requirements . Requirements.
Rule 2.5 Restrictions, Interpretations FINRA By-Laws of the
and Polic[y]ies .04 Termination of Corporation, Article V,
Employment. Section 3 Notification by
Member to the Corporation and
Associated Person of
Termination; Amendments to
Notification; FINRA Rule
1010(e) Electronic Filing
Requirements for Uniform
Forms.
Rule 2.6(b) and (g) Application FINRA By-Laws of the
Procedures for Membership or to become Corporation, Article IV,
an Associated Person of a Member . Section 1(c) Application for
Membership and Article V, Sec.
2(c); FINRA Rule 1010(c)
Electronic Filing Requirements
for Uniform Forms.
Rule 3.1 Business Conduct of Members FINRA Rule 2010 Standards of
[supcaret]. Commercial Honor and
Principles of Trade.[supcaret]
Rule 3.2 Violations Prohibited FINRA Rule 2010 Standards of
[supcaret] . Commercial Honor and
Principles of Trade and FINRA
Rule 3110
Supervision.[supcaret]
Rule 3.3 Use of Fraudulent Devices FINRA Rule 2020 Use of
[supcaret]. Manipulative, Deceptive or
Other Fraudulent
Devices.[supcaret]
Rule 3.5 Communications with the Public FINRA Rule 2210 Communications
with the Public.

[[Page 64283]]

Rule 3.6 Fair Dealing with Customers... FINRA Rule 2020 Use of
Manipulative, Deceptive or
Other Fraudulent
Devices,[supcaret] 1 FINRA
Rule 2111 Suitability.
Rule 3.7(a) Recommendations to FINRA Rule 2111(a) and SM .03
Customers. Suitability.
Rule 3.8(a) The Prompt Receipt and FINRA Rule 11860 COD Orders.
Delivery of Securities.
Rule 3.8(b) The Prompt Receipt and SEC Regulation SHO.
Delivery of Securities.
Rule 3.9 Charges for Services Performed FINRA Rule 2122 Charges for
Services Performed.
Rule 3.10 Use of Information........... FINRA Rule 2060 Use of
Information Obtained in
Fiduciary Capacity.
Rule 3.11 Publication of Transactions FINRA Rule 5210 Publication of
and Quotations . Transactions and Quotations.
Rule 3.12 Offers at Stated Prices...... FINRA Rule 5220 Offers at
Stated Prices.
Rule 3.13 Payments Involving FINRA Rule 5230 Payments
Publications that Influence the Market Involving Publications that
Price of a Security. Influence the Market Price of
a Security.
Rule 3.14 Disclosure on Confirmations.. FINRA Rule 2232(a) Customer
Confirmations and SEC Rule 10b-
10 Confirmation of
Transactions.
Rule 3.15 Disclosure of Control........ FINRA Rule 2262 Disclosure of
Control Relationship With
Issuer.
Rule 3.16 Discretionary Accounts....... FINRA Rule 3260 Discretionary
Accounts.
Rule 3.17 Customer's Securities or FINRA Rule 2150(a) Improper Use
Funds. of Customers' Securities or
Funds; Prohibition Against
Guarantees and Sharing in
Accounts--Improper Use
Rule 3.18 Prohibition Against FINRA Rule 2150(b) Improper Use
Guarantees. of Customers' Securities or
Funds; Prohibition Against
Guarantees and Sharing in
Accounts--Prohibition Against
Guarantees.
Rule 3.19 Sharing in Accounts; Extent FINRA Rule 2150(c)(1) Improper
Permissible. Use of Customers' Securities
or Funds; Prohibition Against
Guarantees and Sharing in
Accounts--Sharing in Accounts;
Extent Permissible.
Rule 3.21 Customer Disclosures......... FINRA Rule 2265 Extended Hours
Trading Risk Disclosure.
Rule 3.20 Influencing or Rewarding FINRA Rule 3220 Influencing or
Employees of Others. Rewarding Employees of Others.
Rule 3.22 Telemarketing and FINRA Rule 3230 Telemarketing.
Interpretations and Policies .01.
Rule 4.1 Requirements ................ Section 17 of the Exchange Act
and rules thereunder and FINRA
Rule 4511(a) and (c) General
Requirements.2
Rule 4.3 Record of Written Complaints.. FINRA Rule 4513 Records of
Written Customer Complaints.
Rule 5.1 Written Procedures .......... FINRA Rule 3110(b)(1)
Supervision-Written
Procedures.[supcaret]
Rule 5.2 Responsibility of Members..... FINRA Rule 3110 (a)(4), (b)(4)
and (b)(7) Supervision--
Supervisory System/Written
Procedures--Review of
Correspondence and Internal
Communications.[supcaret]
Rule 5.3 Records....................... FINRA Rule 3110
Supervision.[supcaret]
Rule 5.4 Review of Activities.......... FINRA Rule 3110(c) and (d)
Supervision--Internal
Inspections/Transaction Review
and Investigation.[supcaret]
Rule 5.6 Anti-Money Laundering FINRA Rule 3310 Anti-Money
Compliance Program . Laundering Compliance Program.
Rule 9.3 Predispute Arbitration FINRA Rule 2268 Requirements
Agreements. When Using Predispute
Arbitration Agreements for
Customer Accounts.
Rule 11.16(e)(3) & (4) Trading Halts FINRA Rule 6190(a) & (b)
Due to Extraordinary Market Volatility. Compliance with Regulation NMS
Plan to Address Extraordinary
Market Volatility.
Rule 11.10(a)(5) Order Execution FINRA Rule 6182 Trade Reporting
[supcaret][supcaret]. of Short
Sales.[supcaret][supcaret]
Rule 11.10(f) Locking Quotation or FINRA Rule 6240 Prohibition
Crossing Quotations in NMS Stocks **. from Locking or Crossing
Quotations in NMS Stocks.**
Rule 12.1 Market Manipulation.......... FINRA Rule 6140(a) Other
Trading Practices.
Rule 12.2 Fictitious Transactions...... FINRA Rule 6140 Other Trading
Practices and FINRA Rule 5210
Supplementary Material .02
Self-Trades.
Rule 12.3 Excessive Sales [B]by [A]a FINRA Rule 6140(c) Other
Member. Trading Practices.
Rule 12.4 Manipulative Transactions.... FINRA Rule 6140 Other Trading
Practices.
Rule 12.5 Dissemination of False FINRA Rule 6140(e) Other
Information. Trading Practices.
Rule 12.6 Prohibition Against Trading FINRA Rule 5320 Prohibition
Ahead of Customer Orders **. Against Trading Ahead of
Customer Orders.**
Rule 12.9 Trade Shredding.............. FINRA Rule 5290 Order Entry and
Execution Practices.
Rule 12.11 Best Execution **........... FINRA Rule 5310 Best Execution
and Interpositioning.**
Rule 12.13 Trading Ahead of Research FINRA Rule 5280 Trading Ahead
Reports **. of Research Reports.**
Rule 12.14 Front Running of Block FINRA Rule 5270 Front Running
Transactions **. of Block Transactions.**
Rule 13.3(a), (b)(i), (d) and FINRA Rule 2251 Processing and
Interpretation and Policy .01 Forwarding of Proxy and Other
Forwarding of Proxy and Other Issuer- Issuer-Related Materials.
Related Materials; Proxy Voting.
Rule 26.11 Restrictions on Pledge and FINRA Rule 4330 Customer
Lending of Public Customers' Protection--Permissible Use of
Securities. Customers' Securities.
------------------------------------------------------------------------
1 FINRA shall not have Regulatory Responsibilities regarding .01 of MEMX
Rule 3.6.
2 FINRA shall not have Regulatory Responsibilities regarding
requirements to keep records ``in conformity with . . . Exchange
Rules;'' responsibility for such requirement remains with MEMX.
In addition, the following provisions shall be part of this 17d-2
Agreement:
SEA Rules:
<bullet> SEA Rule 200 of Regulation SHO--Definition of Short Sales and
Marking Requirements **
<bullet> SEA Rule 201 of Regulation SHO--Circuit Breaker **
<bullet> SEA Rule 203 of Regulation SHO--Borrowing and Delivery
Requirements **
<bullet> SEA Rule 204 of Regulation SHO--Close-Out Requirement **
<bullet> SEA Rule 101 of Regulation M--Activities by Distribution
Participants **
<bullet> SEA Rule 102 of Regulation M--Activities by Issuers and Selling
Security Holders During a Distribution **
<bullet> SEA Rule 103 of Regulation M--Nasdaq Passive Market Making **
<bullet> SEA Rule 104 of Regulation M--Stabilizing and Other Activities
in Connection with an Offering **
<bullet> SEA Rule 105 of Regulation M--Short Selling in Connection With
a Public Offering **

[[Page 64284]]

<bullet> SEA Rule 604 of Regulation NMS--Display of Customer Limit
Orders **
<bullet> SEA Rule 606 of Regulation NMS--Disclosure of Routing
Information **
<bullet> SEA Rule 610(d) of Regulation NMS--Locking or Crossing
Quotations **
<bullet> SEA Rule 611 of Regulation NMS--Order Protection Rule **
<bullet> SEA Rule 10b-5 Employment of Manipulative and Deceptive Devices
[supcaret]
<bullet> 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 [supcaret]
<bullet> SEA Rule 14e-4--Prohibited Transactions in Connection with
Partial Tender Offers ++
[supcaret] 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., 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., and Investors' Exchange LLC and [the] Long-Term Stock
Exchange, Inc. effective [August 1, 2019] September 23, 2020, as may
be amended from time to time.
** FINRA shall perform the surveillance 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.
++ FINRA shall perform the surveillance responsibilities for SEA Rule
14e-4(a)(1)(ii)(D).

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

<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#bbc9ced7de96d8d4d6d6ded5cfc8fbc8ded895dcd4cd"><span class="__cf_email__" data-cfemail="addfd8c1c880cec2c0c0c8c3d9deeddec8ce83cac2db">[email&#160;protected]</span></a>. Please include
File Number 4-762 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 4-762. 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 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 MEMX. 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 4-762 and should be submitted on or before
November 14, 2022.

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 Dual Members that would otherwise be performed by
FINRA and MEMX. Accordingly, the proposed Amended Plan promotes
efficiency by reducing costs to Dual Members. Furthermore, because MEMX
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, MEMX and FINRA
have allocated regulatory responsibility for those MEMX 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 Dual Member's activity,
conduct, or output in relation to such rule. In addition, under the
Amended Plan, 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, MEMX will review the Certification
at least annually, or more frequently if required by changes in either
the rules of MEMX or FINRA, and, if necessary, submit to FINRA an
updated list of Common Rules to add MEMX rules not included on the
then-current list of Common Rules that are substantially similar to
FINRA rules; delete MEMX 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 MEMX
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 MEMX rules that are substantially
similar to the rules of FINRA for Dual Members of MEMX 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
MEMX rules in the Certification in conformance with the definition of
Common Rules provided in the Amended Plan. However, should the

[[Page 64285]]

Parties decide to add an MEMX rule to the Certification that is not
substantially similar to a FINRA rule; delete an MEMX rule from the
Certification that is substantially similar to a FINRA rule; or leave
on the Certification an MEMX 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, Dual 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 Amended Plan is to add Securities
Exchange Act Rule 14e-4(a)(1)(ii)(D) to the Certification. 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 Securities Exchange Act Release No. 88981 (May 20,
2020), 85 FR 34690 (June 5, 2020).
---------------------------------------------------------------------------

VI. Conclusion

This order gives effect to the Amended Plan filed with the
Commission in File No. 4-762. 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. 4-762, between the FINRA and MEMX, filed
pursuant to Rule 17d-2 under the Act, hereby is approved and declared
effective.
It is further ordered that MEMX is relieved of those
responsibilities allocated to FINRA under the Amended Plan in File No.
4-762.
---------------------------------------------------------------------------

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

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22989 Filed 10-21-22; 8:45 am]
BILLING CODE 8011-01-P

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