[Federal Register Volume 84, Number 177 (Thursday, September 12, 2019)]
[Notices]
[Pages 48186-48187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19716]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86896]


Order Granting Application by Nasdaq BX, Inc. for Exemption 
Pursuant to Section 36(a) of the Exchange Act From the Rule Filing 
Requirements of Section 19(b) of the Exchange Act With Respect to the 
Nasdaq Rule 1000 Series Incorporated by Reference

September 6, 2019.
    Nasdaq BX, Inc. (the ``Exchange'') has filed with the Securities 
and Exchange Commission (the ``Commission'') an application for an 
exemption under Section 36(a)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ from the rule filing requirements of Section 
19(b) of the Exchange Act \2\ with respect to certain rules of The 
Nasdaq Stock Market LLC (``Nasdaq'') that the Exchange seeks to 
incorporate by reference.\3\ Section 36(a)(1) of the Exchange Act,\4\ 
subject to certain limitations, authorizes the Commission to 
conditionally or unconditionally exempt any person, security, or 
transaction, or any class thereof, from any provision of the Exchange 
Act or rule thereunder, if necessary or appropriate in the public 
interest and consistent with the protection of investors.
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    \1\ 15 U.S.C. 78mm(a)(1).
    \2\ 15 U.S.C. 78s(b).
    \3\ See letter from Brett M. Kitt, Senior Associate General 
Counsel, Nasdaq Inc., to Vanessa Countryman, Secretary, Commission, 
dated June 17, 2019, at 2 (``Exemptive Request'').
    \4\ 15 U.S.C. 78mm(a)(1).
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    The Exchange filed a proposed rule change \5\ under Section 19(b) 
of the Exchange Act to replace its existing membership rules, as set 
forth in the Rule 1000 Series of its rulebook, with the Rule 1000 
Series of the Nasdaq rulebook, as such rules may be in effect from time 
to time.\6\ Namely, in the proposed rule change, the Exchange proposed 
to incorporate by reference the Nasdaq Rule 1000 Series such that 
Nasdaq Rule 1000 Series would be applicable to the Exchange's 
applicants, members, associated persons, and other persons subject to 
the Exchange's jurisdiction as though such rules were fully set forth 
within the Exchange's rulebook.\7\
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    \5\ See Securities Exchange Act Release No. 86425 (July 22, 
2019), 84 FR 36139 (July 26, 2019) (SR-BX-2019-022). Although the 
proposed rule change was filed pursuant to Section 19(b)(3)(A)(iii) 
of the Exchange Act, and thereby became effective upon filing with 
the Commission, the Exchange stipulated in its proposal that the 
incorporation by reference would not be operative until such time as 
the Commission grants this Exemptive Request.
    \6\ For purposes of this application, the Nasdaq Rule 1000 
Series refers to the Nasdaq Rule 1000 Series with the exception of 
Nasdaq Rules 1031, 1050, 1090, 1130, 1150, 1160, or 1170. The 
Exchange will retain its existing corresponding versions of each of 
these rules and will not incorporate by reference the Nasdaq 
versions of the same.
    \7\ See note 5, supra.
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    The Exchange has requested, pursuant to Rule 0-12 under the 
Exchange Act,\8\ that the Commission grant the Exchange an exemption 
from the rule filing requirements of Section 19(b) of the Exchange Act 
for changes to the Exchange's rules that are effected solely by virtue 
of a change to the Nasdaq Rule 1000 Series that are incorporated by 
reference. Specifically, the Exchange requests that it be permitted to 
incorporate by reference changes made to the Nasdaq Rule 1000 Series 
that are cross-referenced in the Exchange's rules without the need for 
the Exchange to file separately the same proposed rule change pursuant 
to Section 19(b) of the Exchange Act.\9\
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    \8\ 17 CFR 240.0-12.
    \9\ See Exemptive Request, supra note 3.
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    The Exchange represents that the Nasdaq Rule 1000 Series are not 
trading rules.\10\ Moreover, the Exchange states that it proposes to 
incorporate by reference a category of rules (rather than individual 
rules within a category).\11\ The Exchange also represents that, as a 
condition of this exemption, the Exchange will provide written notice 
to its applicants and members whenever

[[Page 48187]]

Nasdaq proposes a change to Nasdaq Rule 1000 Series.\12\
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    \10\ Id. at 2.
    \11\ Id.
    \12\ The Exchange states that it will provide such notice via a 
posting on the same website location where the Exchange posts its 
own rule filings pursuant to Rule 19b-4(l) within the timeframe 
required by such Rule. In addition, the Exchange states that the 
website posting will include a link to the location on Nasdaq's 
website where the applicable proposed rule change is posted. Id. at 
2-3.
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    According to the Exchange, this exemption is necessary and 
appropriate because it will result in the Exchange's membership rules 
and processes being consistent with the relevant cross-referenced 
Nasdaq membership rules and processes at all times.\13\ The Exchange 
states that harmonization of the membership rules and processes between 
the Exchange and Nasdaq will ease compliance burdens for those seeking 
membership on both exchanges and increase internal efficiencies 
associated with administering the membership rules and processes of 
each exchange.\14\
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    \13\ See Exemptive Request, supra note 3, at 2.
    \14\ See id.
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    The Commission has issued exemptions similar to the Exchange's 
request.\15\ In granting similar exemptions, the Commission stated that 
it would consider future exemption requests, provided that:
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    \15\ See, e.g., Securities Exchange Act Release Nos. 80338 
(March 29, 2017), 82 FR 16464 (April 4, 2017) (order granting 
exemptive request from MIAX PEARL, LLC relating to rules of Miami 
International Securities Exchange, LLC incorporated by reference); 
72650 (July 22, 2014), 79 FR 44075 (July 29, 2014) (order granting 
exemptive requests from NASDAQ OMX BX, Inc. and the NASDAQ Stock 
Market LLC relating to rules of NASDAQ OMX PHLX LLC incorporated by 
reference); 67256 (June 26, 2012), 77 FR 39277, 39286 (July 2, 2012) 
(order approving SR-BX-2012-030 and granting exemptive request 
relating to rules incorporated by reference by the BX Options 
rules); 61534 (February 18, 2010), 75 FR 8760 (February 25, 2010) 
(order granting BATS Exchange, Inc.'s exemptive request relating to 
rules incorporated by reference by the BATS Exchange Options Market 
rules) (``BATS Options Market Order''); and 57478 (March 12, 2008), 
73 FR 14521, 14539-40 (March 18, 2008) (order approving SR-NASDAQ-
2007-004 and SR-NASDAQ-2007-080, and granting exemptive request 
relating to rules incorporated by reference by The NASDAQ Options 
Market).
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     A self-regulatory organization (``SRO'') wishing to 
incorporate rules of another SRO by reference has submitted a written 
request for an order exempting it from the requirement in Section 19(b) 
of the Exchange Act to file proposed rule changes relating to the rules 
incorporated by reference, has identified the applicable originating 
SRO(s), together with the rules it wants to incorporate by reference, 
and otherwise has complied with the procedural requirements set forth 
in the Commission's release governing procedures for requesting 
exemptive orders pursuant to Rule 0-12 under the Exchange Act; \16\
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    \16\ See 17 CFR 240.0-12 and Securities Exchange Act Release No. 
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) 
(``Commission Procedures for Filing Applications for Orders for 
Exemptive Relief Pursuant to Section 36 of the Exchange Act; Final 
Rule'').
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     The incorporating SRO has requested incorporation of 
categories of rules (rather than individual rules within a category) 
that are not trading rules (e.g., the SRO has requested incorporation 
of rules such as margin, suitability, or arbitration); and
     The incorporating SRO has reasonable procedures in place 
to provide written notice to its members each time a change is proposed 
to the incorporated rules of another SRO.\17\
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    \17\ See BATS Options Market Order, supra note 15 (citing 
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004) (order granting exemptive request relating 
to rules incorporated by reference by several SROs) (``2004 
Order'')).
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    The Commission believes that the Exchange has satisfied each of 
these conditions. Further, the Commission also believes that granting 
the Exchange an exemption from the rule filing requirements under 
Section 19(b) of the Exchange Act will promote efficient use of the 
Commission's and the Exchange's resources by avoiding duplicative rule 
filings based on simultaneous changes to identical rule text sought by 
more than one SRO.\18\ The Commission therefore finds it appropriate in 
the public interest and consistent with the protection of investors to 
exempt the Exchange from the rule filing requirements under Section 
19(b) of the Exchange Act with respect to the above-described rules it 
incorporates by reference. This exemption is conditioned upon the 
Exchange promptly providing written notice to its applicants and 
members whenever Nasdaq changes a rule that the Exchange incorporates 
by reference.
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    \18\ See BATS Options Market Order, supra note 15, 75 FR at 
8761; see also 2004 Order, supra note 17, 69 FR at 8502.
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    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\19\ that the Exchange is exempt from the rule filing requirements 
of Section 19(b) of the Exchange Act solely with respect to changes to 
the rules identified in the Exemptive Request, provided that the 
Exchange promptly provides written notice to its applicants and members 
whenever Nasdaq proposes to change a rule that the Exchange has 
incorporated by reference.
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    \19\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(76).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19716 Filed 9-11-19; 8:45 am]
 BILLING CODE 8011-01-P


