Notice2026-04146
Self-Regulatory Organizations; NYSE Texas, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Establishing Limited Underwriting Members
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
March 3, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 41 (Tuesday, March 3, 2026)</title>
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[Federal Register Volume 91, Number 41 (Tuesday, March 3, 2026)]
[Notices]
[Pages 10425-10432]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-04146]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104899; File No. SR-NYSETEX-2026-06]
Self-Regulatory Organizations; NYSE Texas, Inc.; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change Establishing
Limited Underwriting Members
February 26, 2026.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on February 19, 2026, the NYSE Texas, Inc. (``NYSE Texas'' or the
``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\ 15 U.S.C. 78a.
\3\ 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 (1) a new Article 3, Rule 20 establishing a
category of market participant granted access to the Exchange for the
limited purpose of performing underwriting activity as a principal
underwriter and imposing related requirements for principal
underwriting activity; (2) related amendments to the definition of
``Participant'' in Article 1, Rule 1; and (3) a new definition of
``Principal underwriter'' in Article 22, Rule 1(b)(14) establishing
requirements for the engagement of the principal underwriter by an
issuer seeking approval for initial listing in connection with a
transaction involving an underwriter. The proposed rule change is
available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a> and at the
principal office of the Exchange.
[[Page 10426]]
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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes a new Article 3, Rule 20 titled ``Limited
Underwriting Members and Associated Persons'' establishing a category
of market participant that is a member of the Financial Industry
Regulatory Authority (``FINRA'') and that would qualify as a ``Limited
Underwriting Member'' for purposes of proposed requirements in the new
definition of ``Principal underwriter'' in Article 22, Rule 1(b)(14),
requiring that any issuer applying to list in connection with a
transaction involving an underwriter must have a principal underwriter
that is a Participant or Participant Firm or a Limited Underwriting
Member as defined in Article 1, Rule 1(s) of the rules of the Exchange.
Proposed Article 3, Rule 20 is based on New York Stock Exchange
(``NYSE'') Rule 310 (Limited Underwriting Members and Associated
Persons), which in turn was based on Rule 5210 and General 3, Rule 1031
of the rules of The Nasdaq Stock Market LLC (``Nasdaq''), respectively.
The definition in proposed Article 22, Rule 1(b)(14) is based on
Section 108.00 (Principal Underwriter) in the NYSE Listed Company
Manual (``NYSE Listed Company Manual'').
Background and Proposed Rule Change
In 2024, Nasdaq created a new, non-trading limited underwriter
membership class and imposed related requirements for principal
underwriting activity.\4\ The impetus for the rule change came from the
critical role underwriters play as gatekeepers to the capital markets
in connection with the trading of newly issued securities.\5\
Generally, exchanges rely on underwriters to select the selling
syndicate and ensure that the shares are placed in a way that is
reasonably designed to allow liquid trading, consistent with exchange
listing requirements and the successful introduction of the company to
the market place.\6\ There is currently no requirement that
underwriters of companies going public on the Exchange be Participants
and, unless the underwriter is also an Participant, the Exchange
currently does not have authority to require responses to investigative
inquiries or to enforce its rules directly against non-member
underwriters.
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\4\ See Securities Exchange Act Release No. 99846 (March 22,
2024), 89 FR 21629 (March 28, 2024) (SR-NASDAQ-2023-022) (Notice of
Filing of Amendment No. 3 and Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by Amendment Nos. 2 and 3, To
Create a New, Non-Trading Limited Underwriter Membership Class and
Impose Related Requirements for Principal Underwriting Activity)
(``Release No. 99846'').
\5\ See id., 89 FR at 21629-30. In 2022, the Exchange and its
affiliate NYSE published a joint regulatory memorandum highlighting
the important role of underwriters as gatekeepers in the IPO process
and the applicability of market rules and the federal securities
laws. See NYSE Chicago RM-22-10 and NYSE RM-22-18, dated November
17, 2022, available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-texas/rule-interpretations/2022/NYSER_Reg_Memo_-_Regulatory_Scrutiny_in_Connection_with_IPOs_">https://www.nyse.com/publicdocs/nyse/markets/nyse-texas/rule-interpretations/2022/NYSER_Reg_Memo_-_Regulatory_Scrutiny_in_Connection_with_IPOs_</a>(2022.11.17_final).pdf.
FINRA and Nasdaq published similar bulletins around the same time.
See <a href="https://www.finra.org/rules-guidance/notices/22-25">https://www.finra.org/rules-guidance/notices/22-25</a>; <a href="https://www.nasdaqtrader.com/MicroNews.aspx?id=ERA2022-9">https://www.nasdaqtrader.com/MicroNews.aspx?id=ERA2022-9</a>.
\6\ See Release No. 99846, 89 FR at 21630.
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In 2025, the Exchange's affiliate NYSE adopted a new Section 108.00
of the NYSE Manual, requiring that any issuer applying to list in
connection with a transaction involving an underwriter must have a
principal underwriter that is a member organization as defined in NYSE
Rule 2 or a Limited Underwriting Member, as defined in NYSE Rule 2(k),
as well as a new NYSE Rule 310 establishing a category of market
participant that is a FINRA member and that would qualify as a
``Limited Underwriting Member'' for purposes of proposed Section 108.00
of the NYSE Manual. Section 108.00 of the NYSE Manual was based on
Nasdaq Rule 5210 and NYSE Rule 310 was based on General 3, Nasdaq Rule
1031.\7\
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\7\ See Securities Exchange Act Release No. 102877 (April 17,
2025), 90 FR 17107 (April 23, 2025) (SR-NYSE-2025-14) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change of New
Section 108.00 in the NYSE Listed Company Manual) (``Release No.
102877''). The Exchange's affiliate NYSE American LLC (``NYSE
American'') recently also adopted substantially similar rules
establishing limited underwriting members. See Securities Exchange
Act Release No. 103462 (July 15, 2025), 90 FR 34059 (July 18, 2025)
(SR-NYSEAmer-2025-4o) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change Establishing Limited Underwriting
Members).
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The Exchange similarly proposes to establish a category of market
participant known as ``Limited Underwriting Member'' that would be
granted access to the Exchange for the limited purpose of acting as a
principal underwriter \8\ (an ``Initial Listing Principal
Underwriter'') of an underwritten public offering in connection with
which a company seeks to list on the Exchange. As with the Nasdaq and
NYSE rules, access to the Exchange for this limited purpose would not
confer trading privileges on Limited Underwriting Members. As a result,
this category of market participant would not constitute a traditional
Exchange membership under Article 3 insofar as only Participants that
meet the qualifications set forth in Article 3, Rule 1 can acquire and
hold an Exchange-issued Trading Permit to conduct business as a broker
or dealer in securities on the Exchange.\9\
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\8\ ``Principal underwriter'' will have the same definition used
in Rule 405 promulgated under the Securities Act of 1933
(``Securities Act''), i.e., an underwriter in privity of contract
with the issuer of the securities as to which he is underwriter. The
term ``issuer'' in the definition of ``principal underwriter'' has
the meaning given in Sections 2(4) and 2(11) of the Securities Act.
See 17 CFR 230.405.
\9\ See Article 3, Rule 1. Article 1, Rule 1 (Definitions)
defines a ``Participant'' as ``any Participant Firm that holds a
valid Trading Permit and any person associated with a Participant
Firm who is registered with the Exchange under Articles 16 and 17 as
a Market Maker Authorized Trader or Institutional Broker
Representative, respectively'' and notes that a Participant is
considered a ``member'' of the Exchange for purposes of the Act.
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Rather, Limited Underwriting Members would fall within the language
proposed for Article 1, Rule 1, which would provide that a Participant
or Participant Firm also includes any registered broker or dealer that
does not own a trading permit and agrees to be regulated by the
Exchange, and which the Exchange has agreed to regulate, as a Limited
Underwriting Member.\10\
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\10\ Because the proposed rules would establish the authority
for the Exchange to require responses to investigative inquiries and
take appropriate enforcement action when a Limited Underwriting
Member violates one of the rules enumerated in proposed Article 3,
Rule 20(c)(1), Limited Underwriting Members would be ``members'' of
a national securities exchange under the Act based on their
agreement to be regulated by the Exchange in connection with
underwriting activity. See 15 U.S.C. 78c(a)(3)(A)(iv) (``The term
`member' when used with respect to a national securities exchange
means . . . any other registered broker or dealer which agrees to be
regulated by such exchange and with respect to which the exchange
undertakes to enforce compliance with the provisions of this
chapter, the rules and regulations thereunder, and its own
rules.''). See the discussion of Article 3, Rule 20, Supplementary
Material .01, infra.
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The Exchange would further amend Article 1, Rule 1(s) to provide
that a ``Limited Underwriting Member'' means a registered broker or
dealer that is
[[Page 10427]]
subject to the jurisdiction of the Exchange solely for purposes of
Article 3, Rule 20 and the rules enumerated in Article 3, Rule
20(b)(1). The proposed definition is the same as NYSE Rule 2(k) and
substantially similar to General 1, Nasdaq Rule 1(b)(20) defining a
``Limited Underwriting Member'' as a broker or dealer admitted to
limited underwriting membership in Nasdaq. The Exchange does not
propose to adopt language similar to General 3, Nasdaq Rule 1031(c)(1),
which provides that for purposes of interpreting and applying its rules
relating to Limited Underwriting Members, references to ``Member,''
``Members,'' or ``membership'' shall be functionally equivalent to
``Limited Underwriting Member,'' ``Limited Underwriting Members,'' or
``limited underwriting membership'' respectively. The Exchange believes
that the proposed amendments to Article 1, Rule 1 renders it
unnecessary for the Exchange to adopt the language from the Nasdaq
rule.
The Exchange would also add a new Article 3, Rule 20 \11\ titled
``Limited Underwriting Members and Associated Persons'' governing
eligibility, access and rules applicable to proposed Limited
Underwriting Members. As proposed, any registered broker or dealer with
a disciplinary history satisfactory to the Exchange would be eligible
for approval by the Exchange to operate as a Limited Underwriting
Member, except such registered brokers or dealers as are excluded under
Article 3, Rule 1(b).\12\ The proposed language is the same as NYSE
Rule 310(a)(1) and substantially the same as General 3, Nasdaq Rule
1031(a)(1) and (c)(2) except for the explicit requirement that proposed
Limited Underwriting Members have a disciplinary history acceptable to
the Exchange.\13\ Additionally, the associated persons of Limited
Underwriting Members that will be responsible for activity of the
Limited Underwriting Member as an Initial Listing Principal Underwriter
for purposes of Article 3, Rule 20(b) must be identified on the
application. Like the NYSE and Nasdaq rule, any person shall be
eligible to become an Associated Person of a Limited Underwriting
Member, except such persons as are excluded under Article 3, Rule
1(b).\14\ Once again, the proposed language is the same as NYSE Rule
310(a)(ii) and substantially the same as General 3, Nasdaq Rule
1031(a)(2) and (c)(2).
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\11\ Current Article 3, Rule 19 marked ``Reserved'' would be
deleted and current Article 3, Rule 20 (No Affiliation between
Exchange and any Participant) would become Article 3, Rule 19 with
proposed conforming changes to change internal references to Rule
20. No substantive changes to Article 3, Rule 20 are proposed.
Current Article 3, Rule 21 (Mandatory Participation Testing of
Backup Systems) contains a legend indicating that the rule is not
applicable to trading on the Pillar trading platform under which the
Exchange currently operates. The legend and the rule text would be
deleted in their entirety.
\12\ See proposed Article 3, Rule 21(a)(i) (Eligibility to
Become Limited Underwriting Members and Associated Persons).
\13\ In order to make a determination of the firm's eligibility
for purposes of proposed Article 3, Rule 20(a), as part of the
application process to become a Limited Underwriting Member, the
Exchange would determine whether the Limited Underwriting Member was
a FINRA member in good standing and examine the prospective
applicant's relevant regulatory history, which would include an
assessment of any open or ongoing disciplinary or other regulatory
matters by FINRA, the Commission or any other regulator. Associated
persons of Limited Underwriting Members that would be responsible
for the Limited Underwriting Member's activity on the Exchange as an
Initial Listing Principal Underwriter for purposes of Article 3,
Rule 20(b) would be similarly identified and vetted as part of the
application process. Pursuant to proposed Article 3, Rule 20(c)(2)
discussed below, Limited Underwriting Members must at all times be
FINRA members and associated persons of Limited Underwriting Members
must at all times be properly qualified and registered under FINRA
rules.
\14\ See proposed Article 3, Rule 21(a)(ii).
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Pursuant to proposed Article 3, Rule 20(b) (Access to the
Exchange), approval by the Exchange to operate as a Limited
Underwriting Member provides no rights to transact on the Exchange. As
proposed, approval by the Exchange of a firm to operate as a Limited
Underwriting Member would solely permit such firm to act as a principal
underwriter (an ``Initial Listing Principal Underwriter'') of an
underwritten public offering in connection with which a company seeks
to list on the Exchange. A firm that is not an Exchange Participant or
Participant Firm cannot act as an Initial Listing Principal Underwriter
unless such firm is a Limited Underwriting Member. These requirements
are substantially similar to NYSE Rule 310(b) and to General 3, Nasdaq
Rule 1031(b).
The Exchange proposes to apply a limited ruleset to Limited
Underwriting Members and their associated persons aimed at maintaining
the fairness and integrity of the underwriting process on the Exchange.
Like the NYSE and Nasdaq, the Exchange proposes to apply: (1) conduct
rules relevant to underwriting activity; (2) supervision rules; (3)
applicable fee-related rules; and (4) disciplinary rules. Finally,
although Nasdaq applied certain administrative, business continuity,
and registration-related rules (for example, certain rules set forth in
Nasdaq General 2 and 4), the Exchange, like its affiliate NYSE, does
not propose applying analogous Exchange rules (where such rules exist),
because Limited Underwriting Members already would be subject to
similar requirements under FINRA rules.
Specifically, the Exchange proposes to provide in proposed Article
3, Rule 20(c)(1) (Rules Applicable to Limited Underwriting Members)
that Limited Underwriting Members and their associated persons would be
subject only to the following rules:
Rule 0 Regulation of the Exchange and Participants
<bullet> Rule 0 (Regulation of the Exchange and Participants)
Rule 10 Disciplinary Proceedings; Suspension, Cancellation and
Reinstatement, Other Hearings and Appeals
<bullet> Rules 10.8000-10.8330 (Disciplinary Rules (Investigations and
Sanctions)), with the exception of Rule 10.8211 (Automated Submission
of Trading Data Requested by the Exchange)
<bullet> Rules 10.9000-10.9870 (Disciplinary Rules (Procedural)) with
the exception of Rule 10.9557 (Procedures for Regulating Activities
Under Article 7, Rules 3 or 8 Regarding a Participant or Participant
Firm Experiencing Financial or Operational Difficulties)
Rule 11 Business Conduct
<bullet> Rule 11.20 (Adherence to Law)
<bullet> Rule 11.3110 (Supervision)
<bullet> Rule 11.5.3120 (Supervisory Control Systems)
<bullet> Rule 11.5190 (Notification Requirements for Offering
Participants)
Article 3 (Participants and Participant Firms)
<bullet> Article 3, Rule 1(b) (Qualifications)
<bullet> Article 3, Rule 19 (No Affiliation between Exchange and any
Participant)
Article 5 (Access to the Exchange)
<bullet> Article 5, Rule 2 (Required Payment of Fees)
Article 7 (Financial Responsibility and Reporting Requirements)
<bullet> Article 7, Rule 12 (Failure to Pay Fees)
Article 8 (Business Conduct)
<bullet> Rule 1 (Adherence to All Rules and Bylaws)
<bullet> Rule 2 (Acts Detrimental to Interest or Welfare of Exchange)
<bullet> Rule 3 (Fraudulent Acts)
<bullet> Rule 4 (Prohibition of Misstatements)
[[Page 10428]]
<bullet> Rule 5 (Attempt to Hide Prior Misdealings)
<bullet> Rule 7 (Officers and Employees of Exchange and Other Industry
Participants)
<bullet> Rule 16 (Conduct on Exchange Premises and Conduct Involving
Participants or Exchange Employees)
Article 9 (General Trading Rules)
<bullet> Rule 2 (Just and Equitable Trade Principles)
<bullet> Rule 9 (Fictitious Transactions)
<bullet> Rule 11 (Price Manipulation)
<bullet> Rule 12 (Manipulative Operations)
<bullet> Rule 19 (Excessive Purchases or Sales--Personal Interest)
Article 15 (Hearings and Reviews)
<bullet> Rule 1 (Applicability)
<bullet> Rule 2 (Submission of Requests for Hearing)
<bullet> Rule 3 (Hearing Panel)
<bullet> Rule 4 (Extensions of Time)
<bullet> Rule 5 (Submission of Supporting Materials)
<bullet> Rule 6 (Notice of Hearing)
<bullet> Rule 7 (Conduct of Hearing)
<bullet> Rule 8 (Decision)
<bullet> Rule 9 (Appeal from Executive Committee decision)
Proposed Rules Applicable to Limited Underwriting Members
The Exchange proposes to apply Rule 0 (Regulation of the Exchange
and Participants) to Limited Underwriting Members in order to apply
requirements related to the Exchange's Regulatory Services Agreement
with FINRA set forth in subsection (a) as well as the requirements in
subsection (b) that Exchange Rules apply to all Participants and
Participant Firms and persons associated with Participants and
Participant Firms, and that persons associated with a Participant or
Participant Firm have the same duties and obligations as a Participant
or Participant Firm, as applicable, under Exchange Rules.
Rules 10.8000-10.8330 and Rules 10.9000-10.9870 \15\ contain the
Exchange's disciplinary rules, which would govern the initiation of
disciplinary proceedings against proposed Limited Underwriting Members
for violations of the rules set forth in proposed Article 3, Rule
20(c)(1). The Exchange proposes to specifically exclude Rule 10.8211
and Rule 10.9557 because Limited Underwriting Members already would be
subject to similar requirements under FINRA rules. Rule 10.8211 relates
to submission of trade data. Rule 10.9557 relates to procedures for
regulating activities under Article 7, Rules 3 and 8, which relate to
capital compliance and the inability to maintain adequate operational
capability, respectively.
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\15\ These rules also apply to ``covered persons.'' Rule
10.9120(g) defines ``covered person'' to mean an Associated Person
as defined in Article 1, Rule 1(d) and any other person subject to
the jurisdiction of the Exchange.
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The Exchange proposes to apply Rule 11.20 (Adherence to Law) to
Limited Underwriting Members, thereby extending the rule's general
business conduct requirements, including the obligation to avoid
violations of specified laws and rules and to reasonably supervise
associated persons to prevent such violations, to these Participants.
Rule 11.3110 (Supervision) requires each Participant and
Participant Firm to establish and maintain a system to supervise the
activities of each associated person that is reasonably designed to
achieve compliance with applicable securities laws and regulations and
with applicable Exchange rules. Rule 11.5.3120 (Supervisory Control
Systems) requires each Participant and Participant Firm to have a
system of supervisory control policies and procedures that tests and
verifies that supervisory procedures are reasonably designed with
respect to the activities of the Participant or Participant Firm and
their associated persons, to achieve compliance with applicable
securities laws and regulations, and with applicable Exchange rules.
The Exchange believes it is important to apply these provisions on
supervision as it would provide the Exchange with authority to assess
whether a Limited Underwriting Member has adequate supervisory systems
and written supervisory procedures in place.
Rule 11.5190 (Notification Requirements for Offering Participants)
sets forth notice requirements applicable to all Participants
participating in offerings of securities for purposes of monitoring
compliance with the provisions of SEC Regulation M. In addition to the
requirements under Rule 11.5190, Participants and Participant Firms
also must comply with all applicable rules governing the withdrawal of
quotations in accordance with SEC Regulation M. The Exchange believes
that applying Rule 11.5190 to Limited Underwriting Members would be
appropriate given the important role Rule 11.5190 plays in maintaining
the quality of and public confidence in the Exchange's marketplace and
the initial public offering (``IPO'') process and the prevention of
fraudulent and manipulative acts and practices.
The Exchange proposes to apply Article 3, Rule 1(b)
(Qualifications), which requires that except as otherwise permitted by
the Exchange, no person may become a Participant or continue as a
Participant in any capacity on the Exchange where such person is
subject to a statutory disqualification, applicable to Limited
Underwriting Members.
The Exchange proposes to apply Article 3, Rule 19 (No Affiliation
between Exchange and any Participant) in order to apply the limitations
on affiliation between the Exchange and a Limited Underwriting Member.
The Exchange proposes applying Article 5, Rule 2 (Required Payment
of Fees) and Article 7, Rule 12 (Failure to Pay Fees) to facilitate the
Exchange's ability to collect fees for Limited Underwriting
Members.\16\
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\16\ The Exchange proposes to establish fees for Limited
Underwriting Members in a separate rule filing once proposed Article
3, Rule 21 is operative. Proposed Limited Underwriting Members would
be subject to the same general requirements to pay required fees of
Article 5, Rule 2 and the more specific requirements of Article 7,
Rule 12 for failure to pay a fee or any other sum due to the
Exchange within 60 days after the same becomes payable, including
suspension or denial of access to some or all of the facilities of
the Exchange.
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The Exchange proposes to apply certain business conduct rules \17\
to Limited Underwriting Members and their associated persons which set
forth the general standards by which Participants and/or partners,
officers, directors, principal shareholders or registered employees of
a Participant Firm must abide so that Limited Underwriting Members
would be subject at all times to the requirements to adhere to the
principles of good business practice in the conduct of business
affairs. Specifically, the Exchange proposes to apply the following
rules to Limited Underwriting Members:
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\17\ The Exchange's Business Conduct Rules are set forth in
Article 8, Rules 1-17. The Exchange does not propose to apply the
following Rules unrelated to underwriting activity to Limited
Underwriting Members: Article 8, Rule 6 (Prohibited Accounts);
Article 8, Rule 8 (Pledged Securities); Article 8, Rule 9 (Mailing
Communications to Non-Participant Customer); Article 8, Rule 10
(Customer Dealings--Account Transfers); Article 8, Rule 12 (Interest
in Customer Accounts); Article 8, Rule 13 (Advertising, Promotion
and Telemarketing); Article 8, Rule 14 (Proxies); Article 8, Rule 15
(Commissions); and Article 8, Rule 17 (Customer Disclosures).
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<bullet> Article 8, Rule 1 (Adherence to All Rules and Bylaws);
<bullet> Article 8, Rule 2 (Acts Detrimental to Interest or Welfare
of Exchange); Article 8, Rule 3 (Fraudulent Acts);
<bullet> Article 8, Rule 4 (Prohibition of Misstatements);
<bullet> Article 8, Rule 5 (Attempt to Hide Prior Misdealings);
[[Page 10429]]
<bullet> Article 8, Rule 7 (Officers and Employees of Exchange and
Other Industry Participants); \18\ and
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\18\ Article 8, Rule 7 prohibits employing, compensating or
providing gratuities in excess of $100 to any officer or employee of
the Exchange, or of another Participant, without prior written
consent.
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<bullet> Article 8, Rule 16 (Conduct on Exchange Premises and
Conduct Involving Participants or Exchange Employees).
Similarly, the Exchange proposes to apply the following rules from
Article 9 (General Trading Rules):
<bullet> Rule 2 (Just and Equitable Trade Principles), which
prohibits Participants, Participant Firms or partners, officers,
directors or registered employees of a Participant Firm from engaging
in conduct or proceeding inconsistent with just and equitable
principles of trade;
<bullet> Rule 9 (Fictitious Transactions), which prohibits the same
persons from making a fictitious transaction or giving an order for the
purchase or sale of securities, the execution of which would involve no
change of ownership, or execute such order with knowledge of its
character;
<bullet> Rule 11 (Price Manipulation), which prohibits a
Participant or partner, officer, director, registered employee or
associated person of a Participant Firm from entering orders for, or
executing or causing to be executed, the purchase or sale of any
security at a higher price or successively higher prices or the sale of
any security at a lower price or successively lower prices for the
purpose of creating or inducing a false, misleading, or artificial
appearance of activity in such security, or for the purpose of unduly
or improperly influencing the market price of such security, or for the
purpose of making a price which does not reflect the true state of the
market in such security;
<bullet> Rule 12 (Manipulative Operations), which prohibits a
Participant or any other person or organization subject to the
jurisdiction of the Exchange from directly or indirectly participating
in or have any interest in the profit of a manipulative operation or
knowingly managing or financing a manipulative operation; and
<bullet> Rule 19 prohibits Participants, or any partner, officer,
director or registered employee in a Participant Firm, from effecting
on the Exchange purchases or sales for any account in which he or it is
directly or indirectly interested, if such purchases or sales are
excessive in view of his or its financial resources, or in view of the
market for such security.
Finally, the Exchange proposes to apply the 9 rules in Article 15
(Hearings and Reviews) to proposed Limited Underwriting Members in
order to permit challenges to Exchange disapprovals of Limited
Underwriting Member applications.
Proposed Article 3, Rule 20(c)(1) would provide that the rules
enumerated therein would apply to all Limited Underwriting Members and
their associated persons in the same manner that these rules apply to
Participants and persons associated with a Participant. Persons
associated with a Limited Underwriting Member would also have the same
duties and obligations under these rules as a Limited Underwriting
Member under these rules.
Finally, proposed Article 3, Rule 20(c)(2) would provide that
Limited Underwriting Members must at all times be FINRA members in good
standing and that associated persons of Limited Underwriting Members
must at all times be properly qualified and registered under FINRA
rules.
The proposed list of rules applicable to Limited Underwriting
Members is not intended to be comprehensive or foreclose the
possibility of modifying the list in the future. The Exchange
represents that it will consider whether additional existing rules that
are not proposed in the limited ruleset for Limited Underwriting
Members or new rules are warranted as the Exchange gains more
experience in applying the rules proposed.
Like the NYSE and Nasdaq, the Exchange proposes to apply only those
rules it deems appropriate to a firm serving as a principal
underwriter, including those rules it deems critical to such firms, in
an effort to impose minimal burden on Limited Underwriting Members,
while still allowing the Exchange to have regulatory authority over
such Limited Underwriting Members.\19\ The Exchange acknowledges that
there are additional rules that the Exchange does not propose to apply
to proposed Limited Underwriting Members. However, since proposed
Limited Underwriting Members do not have trading privileges on the
Exchange, the Exchange has sought to avoid applying all those Exchange
rules applicable to Participants and Participant Firms that primarily
relate to trading activity and thus not relevant to the activities of
Limited Underwriting Members or are duplicative of FINRA requirements.
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\19\ See Release No. 99846, 89 FR at 21631; Release No. 102877,
90 FR at 17111.
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Rules Inapplicable to Limited Underwriting Members
The Exchange does not propose to apply the following Rules to
Limited Underwriting Members at this time because they are
definitional, relate to trading, settlement and/or operational matters
on the Exchange and/or are otherwise not relevant to underwriting
activity:
<bullet> Rule 1.1 (Definitions);
<bullet> Rule 2.0 (Disciplinary Jurisdiction);
<bullet> Rule 2.13 (Mandatory Participation in Testing of Backup
Systems);
<bullet> Rule 3.11 (Fingerprint-Based Background Checks of Exchange
Employees and Others);
<bullet> Rule 3.13 (Data Center Pole Restrictions--Connectivity to
Co-Location Space);
<bullet> Rule 3.14 (Data Center Pole Restrictions--Connectivity to
Production Point);
<bullet> Rule 5 (Exchange Traded Products Listing Requirements);
<bullet> Rule 6 (Order Audit Trail);
<bullet> Rule 7 (Equities Trading);
<bullet> Rule 8 (Trading of Certain Equity Derivatives);
<bullet> Rule 11.21 (Disruptive Quoting and Trading Activity
Prohibited);
<bullet> Rule 11.30 (Prevention of the Misuse of Material, Non-
Public Information);
<bullet> Rule 11.2210 (Communications with the Public);
<bullet> Rule 11.4530 (Reporting Requirements);
<bullet> Rule 12 (Arbitration);
<bullet> Rule 13 (Liability of Directors and Exchange);
<bullet> Article 1 (Definitions and General Information), all
rules;
<bullet> Article 2 (Committees), all rules;
<bullet> Article 3 (Participants and Participant Firms), with the
exception of Rules 1(b) and 19;
<bullet> Article 5 (Access To The Exchange), with the exception of
Rule 2; \20\
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\20\ Article 4 (Exchange Systems and Services) is not applicable
to trading on the Pillar trading platform.
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<bullet> Article 6 (Registration, Supervision and Training), all
rules;
<bullet> Article 7 (Financial Responsibility and Reporting
Requirements), with the exception of Rule 12;
<bullet> Article 8 (Business Conduct), with the exception of Rules
1, 2, 3, 4, 5, 7, and 16;
<bullet> Article 9 (General Trading Rules), with the exception of
Rules 2, 9, 11, 12 and 19;
<bullet> Article 10 (Margins), all rules;
<bullet> Article 11 (Participant Books and Records);
<bullet> Article 12 (Legacy Disciplinary Matters and Trial
Proceedings Legacy
[[Page 10430]]
Disciplinary Matters and Trial Proceedings Investigation and Charges),
all rules;
<bullet> Article 13 (Suspension--Reinstatement), all rules;
<bullet> Article 14 (Arbitration), all rules;
<bullet> Article 17 (Institutional Brokers); \21\
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\21\ Articles 16 and 18 are marked ``Reserved.''
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<bullet> Article 19 (Operation of the Routing Services);
<bullet> Article 20 (Operation of the Matching System);
<bullet> Article 21 (Clearance and Settlement); and
<bullet> Article 22 (Listed Securities).
Proposed Supplementary Material
Proposed Article 3, Rule 20 would include two supplementary
material.
First, Rule Article 3, Rule 20, Supplementary Material .01 would
provide that, consistent with the definition of ``member'' in the
Securities Exchange Act of 1934, a Limited Underwriting Member agrees
to be regulated by the Exchange and is subject to the jurisdiction of
the Exchange for purposes of interpreting and applying the above rules
to Limited Underwriting Members and their associated persons.
Second, proposed Article 3, Rule 20, Supplementary Material .02
would provide that, for the purposes of this rule, the term
``associated person'' shall have the same meaning as the terms ``person
associated with a member'' or ``associated person of a member'' as
defined in Article I (rr) of the FINRA ByLaws.
The Exchange would avoid applying any Exchange rules not specified
in proposed Article 3, Rule 20(c)(1). As previously noted, the Exchange
does not propose to apply rules that would apply to Participants, such
as registration, qualification, and continuing education requirements,
including requirements for persons engaged in the securities business
of a member, that Nasdaq applies to its Limited Underwriting Members
and their associated persons. Further, the Exchange does not propose to
apply Rule 6 to Limited Underwriting Members because the rule governs
consolidated audit trail compliance and would not apply to underwriting
activity. The Exchange's arbitration rules would apply to Limited
Underwriting Members by virtue of their FINRA membership and would thus
be duplicative of FINRA requirements. The additional Exchange rules
that Limited Underwriting Members would not be subject to under the
proposal primarily relate to trading activity and are, therefore, not
relevant to the activities of Limited Underwriting Members due to their
lack of access to trade on the Exchange. While there are additional
rules that it could propose to apply to Limited Underwriting Members,
the Exchange only proposes a limited ruleset intended primarily to
provide the Exchange with the authority to require information directly
from the Limited Underwriting Members and enhance its tools for
oversight with respect to the role the underwriter plays in connection
with a company listing on the Exchange. The Exchange does not intend to
create comprehensive rules to regulate underwriting activity.
In addition, the Exchange would impose a new requirement in Article
22, Rule 1 based on Nasdaq Rule 5210(l)(ii) and Section 108.00 of the
NYSE Listed Company Manual in a new subsection (b)(14) of Rule 1
specifying that ``principal underwriter'' shall have the same
definition used in Rule 405 promulgated under the Securities Act of
1933.\22\ In addition, the proposed rule would require each Company
applying for initial listing in connection with a transaction involving
an underwriter to have a principal underwriter that is a Participant or
Participant Firm or a Limited Underwriting Member. Proposed Article 22,
Rule 1(b)(14) would be substantially the same as Nasdaq Rule
5210(l)(ii) and Section 108.00 NYSE Listed Company Manual.
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\22\ See note 8, supra.
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Implementation
The Exchange would establish fees for Limited Underwriting Members
pursuant to a separate fee filing. The Exchange proposes that the
instant filing would become operative 30 days following the effective
day of the fee filing. The Exchange will announce the implementation
date by Trader Update.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\23\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\24\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, 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 by strengthening the
Exchange's ability to oversee and police its marketplace. In addition,
the Exchange believes that the proposed rule change is designed to
provide a fair procedure for prohibiting or limiting any person with
respect to access to services offered by the Exchange or a member
thereof consistent with the objectives of Section 6(b)(7).\25\
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
\25\ 15 U.S.C. 78f(b)(7).
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As discussed above, the proposal would create a new category of
market participant for registered broker-dealers with a disciplinary
history satisfactory to the Exchange that seek to act as a principal
underwriter of a transaction in connection with which an issuer seeks
to be admitted to listing on the Exchange. Firms approved to operate as
Limited Underwriting Members on the Exchange would not have rights to
transact on the Exchange. Rather, such firms would submit to limited
Exchange jurisdiction for the purpose of acting as an underwriter on
the Exchange. The Exchange believes that this is reasonable because
proposed Limited Underwriting Members would not be admitted to the
Exchange for trading or any other purpose than acting as an Initial
Listing Principal Underwriter.
As proposed, the Exchange would apply only those rules specified in
proposed Article 3, Rule 20(c)(1) to Limited Underwriting FINRA
Members, which would include fees, business conduct standards,
supervision, notification requirements for offering participants, and
disciplinary rules. The Exchange believes that subjecting the proposed
new category of principal underwriters to Exchange jurisdiction for
such specified rules supports fair and orderly markets, which protects
investors and the public interest, consistent with Section 6(b)(5) of
the Act.\26\ In this regard, the proposal would subject Limited
Underwriting Members to the Exchange's disciplinary rules, which would
provide the Exchange with the authority to require documents and
information from such underwriters. In addition, these underwriters
would be subject to various conduct rules governing their activities on
the Exchange, including the requirements to observe just and equitable
principles of trade, establish and maintain a system to supervise the
activities of associated persons, and to test and verify that the
system is reasonably designed. The Exchange believes that imposing
these rules, as well as the other rules included in proposed Article 3,
Rule 20, on principal underwriters will strengthen the Exchange's
ability to carry out its oversight responsibilities and deter potential
violative conduct, such as fraud or manipulation, thereby
[[Page 10431]]
protecting investors and the public interest. Further, the Exchange
believes that it is appropriate and consistent with the protection of
investors and the public interest that the rules specifically excluded
from proposed Article 3, Rule 20 not be imposed on proposed Limited
Underwriting Members because those rules are, as discussed above,
either inapplicable to the activities a principal underwriter would be
permitted to conduct on the Exchange and/or proposed Limited
Underwriting Members would be subject to similar rules by virtue of
their FINRA membership. As noted above, proposed Limited Underwriting
Members must at all times be FINRA members in good standing, and their
associated persons must at all times be properly qualified and
registered under FINRA rules, rendering them at all times subject to
FINRA rules, all applicable rules of the Commission and the rules of
any other self-regulatory organization of which it is a member.
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\26\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is not designed
to permit unfair discrimination between customers, issuers, brokers and
dealers, consistent with Section 6(b)(5) \27\ of the Act. The
Exchange's proposal to subject Limited Underwriting Members to a
limited set of rules and exclude certain rules applicable to
Participants and Participant Firms is not designed to permit unfair
discrimination between brokers and dealers because being permitted to
act as an underwriter on the Exchange under the proposed arrangement
does not confer the same benefits as a traditional Exchange membership,
and, therefore, does not warrant application of the same ruleset.
Moreover, all Limited Underwriting Members would be subject to the same
specified rules set forth in proposed Article 3, Rule 20(c)(1). In
addition, the proposed changes will apply equally to all similarly
situated Limited Underwriting Members, and therefore are not designed
to permit unfair discrimination. Similarly, the proposed changes to
Article 22, Rule 1(b)(14) will apply equally to all similarly situated
companies applying for initial listing in connection with a transaction
involving an underwriter on the Exchange and therefore, are thus not
designed to permit unfair discrimination.
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\27\ 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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues but rather is intended to
apply standards and qualifications to permit certain principal
underwriters to access to the Exchange for the sole purpose of acting
as a principal underwriter of an underwritten public offering in
connection with which a company seeks to list on the Exchange and to
apply a limited ruleset consistent with the purpose of a limited
underwriting membership that does not confer any access to trading on
the Exchange and only permits such member to act as a principal
underwriter for a company applying to initially list on the Exchange.
As noted above, although the Exchange proposes to subject Limited
Underwriting Members to a limited set of rules, being permitted to act
as an underwriter on the Exchange under the proposed arrangement and
for no other purpose does not confer the same benefits as a standard
Exchange membership and does not warrant application of the same
ruleset. Applying a limited ruleset to proposed Limited Underwriting
Members is therefore justified. All Limited Underwriting Members would
be subject to the same specified rules. Likewise, the proposed changes
to Article 22, Rule 1(b)(14) will apply equally to all similarly
situated companies applying for initial listing in connection with a
transaction involving an underwriter on the Exchange.
Moreover, the Exchange does not expect that its proposal will have
an adverse impact on competition among exchanges for members. The
Exchange believes the proposed rule changes will strengthen the
Exchange's ability to carry out its role and responsibilities as a
self-regulatory organization and deter potential violative conduct. As
such, 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \28\ and Rule 19b-
4(f)(6) thereunder.\29\
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#aad8dfc6cf87c9c5c7c7cfc4ded9ead9cfc984cdc5dc"><span class="__cf_email__" data-cfemail="097b7c656c246a6664646c677d7a497a6c6a276e667f">[email protected]</span></a>. Please include
file number SR-NYSETEX-2026-06 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-NYSETEX-2026-06. 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
[[Page 10432]]
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NYSETEX-2026-06 and should be submitted
on or before March 24, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-04146 Filed 3-2-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 3, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.