[Federal Register Volume 85, Number 37 (Tuesday, February 25, 2020)]
[Notices]
[Pages 10746-10752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03739]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88246; File No. 4-618]


Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing of an Amendment to the Plan for the 
Allocation of Regulatory Responsibilities Between Cboe BZX Exchange, 
Inc., Cboe BYX Exchange, Inc., BOX Exchange LLC, Cboe Exchange, Inc., 
Cboe C2 Exchange, Inc., NYSE Chicago, Inc., Cboe EDGA Exchange, Inc., 
Cboe EDGX Exchange, Inc., Financial Industry Regulatory Authority, 
Inc., Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq MRX, LLC, Investors 
Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, 
LLC, MIAX Emerald, LLC, The Nasdaq Stock Market LLC, Nasdaq BX, Inc., 
Nasdaq LLC, NYSE National, Inc., New York Stock Exchange LLC, NYSE 
American LLC, NYSE Arca, Inc., and Long-Term Stock Exchange, Inc. 
Concerning Covered Regulation NMS and Consolidated Audit Trail Rules

February 20, 2020.
    Pursuant to Section 17(d) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that 
on February 3, 2020, Cboe BZX Exchange, Inc. (``BZX''), Cboe BYX 
Exchange, Inc. (``BATS Y''), BOX Exchange LLC (``BOX''), Cboe Exchange, 
Inc. (``Cboe''), Cboe C2 Exchange, Inc. (``C2''), NYSE Chicago, Inc. 
(``CHX''), Cboe EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, 
Inc. (``EDGX''), Financial Industry Regulatory Authority, Inc. 
(``FINRA''), Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC (``GEMX''), 
Nasdaq MRX, LLC (``MRX''), Investors Exchange LLC (``IEX''), Miami 
International Securities Exchange, LLC (``MIAX''), MIAX PEARL, LLC 
(``MIAX PEARL''), MIAX Emerald, LLC (``MIAX Emerald''), The Nasdaq 
Stock Market LLC (``Nasdaq''), Nasdaq BX, Inc. (``BX''), Nasdaq PHLX 
LLC (``PHLX''), NYSE National, Inc. (``NYSE National''), New York Stock 
Exchange LLC (``NYSE''), NYSE American LLC (``NYSE American''), NYSE 
Arca, Inc. (``NYSE Arca''), and Long-Term Stock Exchange, Inc. 
(``LTSE'') (each, a ``Participating Organization,'' and, together, the 
``Participating Organizations'' or the ``Parties'') filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') an 
amended plan for the allocation of regulatory responsibilities (``17d-2 
Plan'' or the ``Plan''). This

[[Page 10747]]

Agreement amends and restates the agreement by and among the 
Participating Organizations approved by the Commission on July 25, 
2019.\3\ The Commission is publishing this notice to solicit comments 
on the 17d-2 Plan from interested persons.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
    \3\ See Securities Exchange Act Release No. 86470, 84 FR 37363 
(July 31, 2019).
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I. Introduction

    Section 19(g)(1) of the Act,\4\ 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) or Section 19(g)(2) of the Act.\5\ 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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    \4\ 15 U.S.C. 78s(g)(1).
    \5\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
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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 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 December 3, 2010, the Commission approved the SRO participants' 
plan for allocating regulatory responsibilities pursuant to Rule 17d-
2.\11\ On October 29, 2015, the Commission approved an amended plan 
that added Regulation NMS Rules 606, 607, and 611(c) and (d) and added 
additional Participating Organizations that are options markets to the 
Plan.\12\ On August 11, 2016, the Commission approved an amended plan 
that added IEX and ISE Mercury as Participating Organizations.\13\ On 
February 2, 2017, the Commission approved an amended plan that added 
MIAX PEARL as a Participating Organization.\14\ On February 4, 2019, 
the Commission approved an amended plan that added MIAX Emerald as a 
Participating Organization and reflected name changes of certain 
Participating Organizations.\15\ On July 25, 2019, the Commission 
approved an amended plan that added LTSE as a Participating 
Organization and reflected name changes of certain Participating 
Organizations.\16\
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    \11\ See Securities Exchange Act Release No. 63430, 75 FR 76758 
(December 9, 2010).
    \12\ See Securities Exchange Act Release No. 76311, 80 FR 68377 
(November 4, 2015).
    \13\ See Securities Exchange Act Release No. 78552, 81 FR 54905 
(August 17, 2016).
    \14\ See Securities Exchange Act Release No. 79928, 82 FR 9814 
(February 8, 2017).
    \15\ See Securities Exchange Act Release No. 85046, 84 FR 2643 
(February 7, 2019).
    \16\ See Securities Exchange Act Release No. 86470, 84 FR 37363 
(July 31, 2019).
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    The proposed 17d-2 Plan is intended to reduce regulatory 
duplication for firms that are members of more than one Participating 
Organization.\17\ The Plan provides for the allocation of regulatory 
responsibility according to whether the covered rule pertains to NMS 
stocks or NMS securities. For covered rules that pertain to NMS stocks 
(i.e., Rules 607, 611, and 612), FINRA serves as the ``Designated 
Regulation NMS Examining Authority'' (``DREA'') for common members that 
are members of FINRA, and assumes certain examination and enforcement 
responsibilities for those members with respect to specified Regulation 
NMS rules. For common members that are not members of FINRA, the 
member's DEA serves as the DREA, provided that the DEA exchange 
operates a national securities exchange or facility that trades NMS 
stocks and the common member is a member of such exchange or facility. 
Section 1(c) of the Plan contains a list of principles that are 
applicable to the allocation of common members in cases not 
specifically addressed in the Plan. An exchange that does not trade NMS 
stocks would have no regulatory authority for covered Regulation NMS 
rules pertaining to NMS stocks. For covered rules that pertain to NMS 
securities, and thus include options (i.e., Rule 606), the Plan 
provides that the DREA will be the same as the DREA for the rules 
pertaining to NMS stocks. For common members that are not members of an 
exchange that trades NMS stocks, the common member would be allocated 
according to the principles set forth in Section 1(c) of the Plan.
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    \17\ The proposed 17d-2 Plan refers to these members as ``Common 
Members.''
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    The text of the Plan delineates the proposed regulatory 
responsibilities with respect to the Parties. Included in the proposed 
Plan is an exhibit (the ``Covered Regulation NMS Rules'') that lists 
the federal securities laws, rules,

[[Page 10748]]

and regulations, for which the applicable DREA would bear examination 
and enforcement responsibility under the Plan for common members of the 
Participating Organization and their associated persons.
    Specifically, the applicable DREA assumes examination and 
enforcement responsibility relating to compliance by common members 
with the Covered Regulation NMS Rules. Covered Regulation NMS Rules do 
not include the application of any rule of a Participating 
Organization, or any rule or regulation under the Act, to the extent 
that it pertains to violations of insider trading activities, because 
such matters are covered by a separate multiparty agreement under Rule 
17d-2.\18\ Under the Plan, Participating Organizations retain full 
responsibility for surveillance and enforcement with respect to trading 
activities or practices involving their own marketplace.\19\
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    \18\ See Securities Exchange Act Release No. 84392 (October 10, 
2018), 83 FR 52243 (October 16, 2018) (File No. 4-566) (notice of 
filing and order approving and declaring effective an amendment to 
the insider trading 17d-2 plan).
    \19\ See paragraph 1(d) of the Plan.
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III. Proposed Amendment to the Plan

    On February 3, 2020, the parties submitted a proposed amendment to 
the Plan. The primary purpose of the amendment is to: (i) Add Rule 613 
under the Act and the rules of each Participating Organization related 
to Rule 613 listed on Exhibit A to the Plan; and (ii) to reflect the 
name change of Nasdaq PHLX, Inc. to Nasdaq PHLX LLC.
    The text of the proposed amended 17d-2 Plan is as follows 
(additions are in italics; deletions are in brackets):
* * * * *

Agreement for the Allocation of Regulatory Responsibility for the 
Covered Regulation NMS and Consolidated Audit Trail Rules Pursuant to 
Sec.  17(d) of the Securities Exchange Act of 1934, 15 U.S.C. 78q(d), 
and Rule 17d-2 Thereunder

    This agreement (the ``Agreement'') by and among Cboe BZX Exchange, 
Inc. (``BZX''), Cboe BYX Exchange, Inc. (``BATS Y''), BOX Exchange LLC 
(``BOX''), Cboe Exchange, Inc. (``Cboe''), Cboe C2 Exchange, Inc. 
(``C2''), NYSE Chicago, Inc. (``CHX''), Cboe EDGA Exchange, Inc. 
(``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX''), Financial Industry 
Regulatory Authority, Inc. (``FINRA''), Nasdaq ISE, LLC (``ISE''), 
Nasdaq GEMX, LLC (``GEMX''), Nasdaq MRX, LLC (``MRX''), Investors 
Exchange LLC (``IEX''), Miami International Securities Exchange, LLC 
(``MIAX''), MIAX PEARL, LLC (``MIAX PEARL''), MIAX Emerald, LLC (``MIAX 
Emerald''), The Nasdaq Stock Market LLC (``Nasdaq''), Nasdaq BX, Inc. 
(``BX''), Nasdaq PHLX[, Inc.] LLC (``PHLX''), NYSE National, Inc. 
(``NYSE National''), New York Stock Exchange LLC (``NYSE''), NYSE 
American LLC (``NYSE American''), NYSE Arca, Inc. (``NYSE Arca'') and 
Long-Term Stock Exchange, Inc. (``LTSE'') (each, a ``Participating 
Organization,'' and, together, the ``Participating Organizations''), is 
made pursuant to Sec.  17(d) of the Securities Exchange Act of 1934 
(the ``Act'' or ``SEA''), 15 U.S.C. 78q(d), and Rule 17d-2 thereunder, 
which allow for plans to allocate regulatory responsibility among self-
regulatory organizations (``SROs''). Upon approval by the Securities 
and Exchange Commission (``Commission'' or ``SEC''), this Agreement 
shall amend and restate the agreement by and among the Participating 
Organizations approved by the SEC on [February 4, 2019] July 25, 2019.
    WhereaS, the Participating Organizations desire to: (a) Foster 
cooperation and coordination among the SROs; (b) remove impediments to, 
and foster the development of, a national market system; (c) strive to 
protect the interest of investors; [and] (d) eliminate duplication in 
their examination and enforcement of (i) SEA Rules 606, 607, 611, [and] 
612 and 613 (the ``Covered Regulation NMS Rules'') and (ii) rules of 
each Participating Organization related to SEA Rule 613 listed on 
Exhibit A hereto (``SRO Covered CAT Rules,'' together with the Covered 
Regulation NMS Rules, collectively, the ``Covered Rules'') and (e) 
eliminate duplication in their surveillance, examination, investigation 
and enforcement of SEA Rule 613 and the SRO Covered CAT Rules;
    Whereas, the Participating Organizations are interested in 
allocating regulatory responsibilities with respect to broker-dealers 
that are members of more than one Participating Organization (the 
``Common Members'') relating to the examination and enforcement of the 
Covered [Regulation NMS] Rules and the surveillance, examination, 
investigation and enforcement of SEA Rule 613 and the SRO Covered CAT 
Rules; and
    Whereas, the Participating Organizations will request regulatory 
allocation of these regulatory responsibilities by executing and filing 
with the SEC this plan for the above stated purposes pursuant to the 
provisions of Sec.  17(d) of the Act, and Rule 17d-2 thereunder, as 
described below.
    Now, therefore, in consideration of the mutual covenants contained 
hereafter, and other valuable consideration to be mutually exchanged, 
the Participating Organizations hereby agree as follows:
    1. Assumption of Surveillance Responsibility. The Designated CAT 
Surveillance Authority (the ``DCSA'') shall assume surveillance, 
investigation and enforcement responsibility relating to compliance by 
Common Members with SEA Rule 613 and the SRO Covered CAT Rules listed 
on Exhibit A (``Surveillance Responsibility''). Included in the 
Surveillance Responsibility assumed hereunder the DCSA shall perform 
investigations and enforcement resulting from reports and metrics 
concerning potentially non-compliant CAT reporting generated by the 
Plan Processor for the National Market System Plan Governing the 
Consolidated Audit Trail and as provided for in the Monitoring CAT 
Reporter Compliance Policy (dated August 13, 2019 and as amended from 
time to time) relating to Common Members. FINRA shall serve as DCSA for 
Common Members that are members of FINRA. The DREA allocated below 
shall serve as DCSA for Common Members that are not members of FINRA.
    [1]2. Assumption of [Regulatory]Examination Responsibility. The 
Designated Regulation NMS Examining Authority (the ``DREA'') shall 
assume examination and enforcement responsibilities relating to 
compliance by Common Members with the Covered [Regulation NMS] Rules to 
which the DREA is allocated responsibility (``[Regulatory]Examination 
Responsibility''). A list of the Covered [Regulation NMS] Rules is 
attached hereto as Exhibit A.
    a. For Covered Regulation NMS Rules Pertaining to ``NMS stocks'' 
(as defined in Regulation NMS) (i.e., Rules 607, 611 and 612): FINRA 
shall serve as DREA for Common Members that are members of FINRA. The 
Designated Examining Authority (``DEA'') pursuant to SEA Rule 17d-1 
shall serve as DREA (and accordingly as DCSA as provided in paragraph 1 
above) for Common Members that are not members of FINRA, provided that 
the DEA operates a national securities exchange or facility that trades 
NMS stocks and the Common Member is a member of such exchange or 
facility. For all other Common Members, the Participating Organizations 
shall allocate Common Members among the Participating

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Organizations (other than FINRA) that operate a national securities 
exchange that trades NMS stocks based on the principles outlined below 
and the Participating Organization to which such a Common Member is 
allocated shall serve as the DREA for that Common Member. (A 
Participating Organization that operates a national securities exchange 
that does not trade NMS stocks has no regulatory responsibilities 
related to Covered Regulation NMS Rules pertainining to NMS stocks and 
will not serve as DREA for such Covered Regulation NMS Rules.)
    b. For Covered Regulation NMS Rules Pertaining to ``NMS 
securities'' (as defined in Regulation NMS) (i.e., Rule 606 and Rule 
613) and the SRO Covered CAT Rules listed on Exhibit A hereto, the DREA 
shall be the same as the DREA for Covered Regulation NMS Rules 
pertaining to NMS stocks (and shall serve as the DCSA in paragraph 1 
above). For Common Members that are not members of a national 
securities exchange that trades NMS stocks and thus have not been 
appointed a DREA under paragraph a., the Participating Organizations 
shall allocate the Common Members among the Participating Organizations 
(other than FINRA) that operate a national securities exchange that 
trades NMS securities based on the principles outlined below and the 
Participating Organization to which such a Common Member is allocated 
shall serve as the DREA for that Common Member with respect to Covered 
Regulation NMS Rules pertaining to NMS securities. The allocation of 
Common Members to DREAs (including FINRA) and accordingly to serve as 
DCSA in paragraph 1 above for all Covered [Regulation NMS] Rules is 
provided in Exhibit B.
    c. For purposes of this paragraph [1]2, any allocation of a Common 
Member to a Participating Organization other than as specified in 
paragraphs a. and b. above shall be based on the following principles, 
except to the extent all affected Participating Organizations consent 
to one or more different principles and any such agreement to different 
principles would be deemed an amendment to this Agreement as provided 
in paragraph [22]24:
    i. The Participating Organizations shall not allocate a Common 
Member to a Participating Organization unless the Common Member is a 
member of that Participating Organization.
    ii. To the extent practicable, Common Members shall be allocated 
among the Participating Organizations of which they are members in such 
a manner as to equalize, as nearly as possible, the allocation among 
such Participating Organizations.
    iii. To the extent practicable, the allocation will take into 
account the amount of NMS stock activity (or NMS security activity, as 
applicable) conducted by each Common Member in order to most evenly 
divide the Common Members with the largest amount of activity among the 
Participating Organizations of which they are a members. The allocation 
will also take into account similar allocations pursuant to other plans 
or agreements to which the Participating Organizations are party to 
maintain consistency in oversight of the Common Members.\1\
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    \1\ \1\ For example, if one Participating Organization was 
allocated responsibility for a particular Common Member pursuant to 
a separate Rule 17d-2 Agreement, that Participant Organization would 
be assigned to be the DREA of that Common Member, unless there is 
good cause not to make that assignment.
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    iv. The Participating Organizations may reallocate Common Members 
from time-to-time and in such manner as they deem appropriate 
consistent with the terms of this Agreement.
    v. Whenever a Common Member ceases to be a member of its DREA 
(including FINRA), the DREA shall promptly inform the Participating 
Organizations, who shall review the matter and reallocate the Common 
Member to another Participating Organization.
    vi. The DEA or DREA (including FINRA) may request that a Common 
Member be reallocated to another Participating Organization (including 
the DEA or DREA (including FINRA)) by giving 30 days written notice to 
the Participating Organizations. The Participating Organizations shall 
promptly consider such request and, in their discretion, may approve or 
disapprove such request and if approved, reallocate the Common Member 
to such Participating Organization.
    vii. All determinations by the Participating Organizations with 
respect to allocations shall be by the affirmative vote of a majority 
of the Participating Organizations that, at the time of such 
determination, share the applicable Common Member being allocated; a 
Participating Organization shall not be entitled to vote on any 
allocation related to a Common Member unless the Common Member is a 
member of such Participating Organization.
    d. The Participating Organizations agree that they shall conduct 
meetings among them as needed for the purposes of ensuring proper 
allocation of Common Members and identifying issues or concerns with 
respect to the regulation of Common Members. To promote consistency in 
connection with regulation of Common Members, the Participating 
Organizations further agree to conduct meetings to discuss the 
overarching principles as to how Covered Rules, in particular SEA Rule 
613 and the SRO Covered CAT Rules, should be surveilled, examined, 
investigated and enforced. On an ongoing basis, the Participating 
Organizations agree to consult with and solicit input from the 
Participating Organizations regarding their surveillance, examination, 
investigation and enforcement programs regarding SEA Rule 613 and the 
SRO Covered CAT Rules. In particular, FINRA will consult with 
Participating Organizations prior to finalizing its disposition and 
sanctions guidelines with respect to violations of SEA Rule 613 and the 
SRO Covered CAT Rules. Further, in the period preceding the full 
implementation of CAT for equities and options securities, FINRA will 
consult with other Participating Organizations prior to finalizing 
dispositions other than no further action that involve their Common 
Members.
    e. By signing this Agreement, the Participating Organizations 
hereby certify that the list of SRO Covered CAT Rules listed on Exhibit 
A hereto are correct and are identical or substantially similar to each 
other.
    f. Each year following the commencement date of operation of this 
Agreement, or more frequently if required by changes in any of the SRO 
Covered CAT Rules, each Participating Organization shall submit an 
updated list of SRO Covered CAT Rules to FINRA for review which shall 
(1) add SRO Covered CAT Rules not included in the current list of SRO 
Covered CAT Rules that are substantially similar to each other; (2) 
delete SRO Covered CAT Rules included in the current list that are no 
longer substantially similar; and (3) confirm that the remaining rules 
on the current list of SRO Covered CAT Rules continue to be 
substantially similar. FINRA shall review each Participating 
Organization's annual certification and confirm whether FINRA agrees 
with the submitted certified and updated list of SRO Covered CAT Rules. 
The DREA/DCSA shall not have Regulatory Responsibility for any 
provision in a SRO Covered CAT Rule provision requiring a member of a 
Participating Organization to provide notice, reports or any other 
filings directly to a Participating Organization.
    3. Scope of Responsibility. Notwithstanding anything herein to the

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contrary, it is explicitly understood that the terms ``Surveillance 
Responsibility'' and ``Examination Responsibility'' (collectively 
referred to herein as the ``Regulatory Responsibility'') do[es] not 
include any responsibilities beyond those concerning the Covered Rules, 
and each of the Participating Organizations shall retain full 
responsibility for, examination, surveillance and enforcement with 
respect to trading activities or practices involving its own 
marketplace unless otherwise allocated pursuant to a separate Rule 17d-
2 Agreement. The allocation of DCSA Responsibility to a Participating 
Organization shall not limit another Participating Organization's 
ability to utilize data from the Consolidated Audit Trail to perform 
examination, surveillance, investigative, enforcement or other 
regulatory work concerning potential or identified violations of 
statutes or rules other than the SRO Covered CAT Rules.
    [2]4. No Retention of Regulatory Responsibility. The Participating 
Organizations do not contemplate the retention of any responsibilities 
with respect to the regulatory activities being assumed by the DREA/
DCSA under the terms of this Agreement. Nothing in this Agreement will 
be interpreted to prevent a DREA/DCSA from entering into Regulatory 
Services Agreement(s) to perform its Regulatory Responsibility.
    [3]5. No Charge. A DREA/DCSA shall not charge Participating 
Organizations for performing the Regulatory Responsibility under this 
Agreement.
    [4]6. 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 SEC. To the extent such 
statute, rule, or order is inconsistent with one or more provisions of 
this Agreement, the statute, rule, or order shall supersede the 
provision(s) hereof to the extent necessary to be properly effectuated 
and the provision(s) hereof in that respect shall be null and void.
    [5]7. Customer Complaints. If a Participating Organization receives 
a copy of a customer complaint relating to a DREA's/DCSA's Regulatory 
Responsibility as set forth in this Agreement, the Participating 
Organization shall promptly forward to such DREA/DCSA a copy of such 
customer complaint. It shall be such DREA's/DCSA's responsibility to 
review and take appropriate action in respect to such complaint.
    [6]8. Parties to Make Personnel Available as Witnesses. Each 
Participating Organization shall make its personnel available to the 
DREA/DCSA to serve as testimonial or non-testimonial witnesses as 
necessary to assist the DREA/DCSA in fulfilling the Regulatory 
Responsibility allocated under this Agreement. The DREA/DCSA shall 
provide reasonable advance notice when practicable and shall work with 
a Participating Organization to accommodate reasonable scheduling 
conflicts within the context and demands as the entity with ultimate 
regulatory responsibility. The Participating Organization shall pay all 
reasonable travel and other expenses incurred by its employees to the 
extent that the DREA/DCSA requires such employees to serve as 
witnesses, and provide information or other assistance pursuant to this 
Agreement.
    [7]9. Sharing of Work-Papers, Data and Related Information.
    a. Sharing. A Participating Organization shall make available to 
the DREA/DCSA information necessary to assist the DREA/DCSA in 
fulfilling the Regulatory Responsibility assumed under the terms of 
this Agreement. Such information shall include any information 
collected by a Participating Organization in the course of performing 
its regulatory obligations under the Act, including information 
relating to an on-going disciplinary investigation or action against a 
member, the amount of a fine imposed on a member, financial 
information, or information regarding proprietary trading systems 
gained in the course of examining a member (``Regulatory 
Information''). This Regulatory Information shall be used by the DREA/
DCSA solely for the purposes of fulfilling the DREA's/DCSA's Regulatory 
Responsibility.
    b. No Waiver of Privilege. 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]10. Special or Cause Examinations and Enforcement Proceedings. 
Nothing in this Agreement shall restrict or in any way encumber the 
right of a Participating Organization to conduct special or cause 
examinations of a Common Member, or take enforcement proceedings 
against a Common Member as a Participating Organization, in its sole 
discretion, shall deem appropriate or necessary.
    [9]11. Dispute Resolution Under this Agreement.
    a. Negotiation. The Participating Organizations will attempt to 
resolve any disputes through good faith negotiation and discussion, 
escalating such discussion up through the appropriate management levels 
until reaching the executive management level. In the event a dispute 
cannot be settled through these means, the Participating Organizations 
shall refer the dispute to binding arbitration.
    b. Binding Arbitration. All claims, disputes, controversies, and 
other matters in question between the Participating Organizations to 
this Agreement arising out of or relating to this Agreement or the 
breach thereof that cannot be resolved by the Participating 
Organizations will be resolved through binding arbitration. Unless 
otherwise agreed by the Participating Organizations, a dispute 
submitted to binding arbitration pursuant to this paragraph shall be 
resolved using the following procedures:
    (i) The arbitration shall be conducted in a city selected by the 
DREA/DCSA in which it maintains a principal office or where otherwise 
agreed to by the Participating Organizations in accordance with the 
Commercial Arbitration Rules of the American Arbitration Association 
and judgment upon the award rendered by the arbitrator may be entered 
in any court having jurisdiction thereof; and
    (ii) There shall be three arbitrators, and the chairperson of the 
arbitration panel shall be an attorney. The arbitrators shall be 
appointed in accordance with the Commercial Arbitration Rules of the 
American Arbitration Association.
    [10]12. Limitation of Liability. As between the Participating 
Organizations, no Participating Organization, including its respective 
directors, governors, officers, employees and agents, will be liable to 
any other Participating Organization, or its directors, governors, 
officers, employees and agents, for any liability, loss or damage 
resulting from any delays, inaccuracies, errors or omissions with 
respect to its performing or failing to perform regulatory 
responsibilities, obligations, or functions, except: (a) As otherwise 
provided for under the Act; (b) in instances of a Participating 
Organization's gross negligence, willful misconduct or reckless 
disregard with respect to another Participating Organization; or (c) in 
instances of a breach of confidentiality obligations owed to another 
Participating Organization. The Participating Organizations understand 
and agree that the regulatory responsibilities are being performed on a 
good faith and best effort basis and no warranties, express or implied, 
are made by any Participating Organization to any other Participating 
Organization with respect

[[Page 10751]]

to any of the responsibilities to be performed hereunder. This 
paragraph is not intended to create liability of any Participating 
Organization to any third party.
    [11]13. SEC Approval.
    a. The Participating Organizations agree to file promptly this 
Agreement with the SEC for its review and approval. FINRA shall file 
this Agreement on behalf, and with the explicit consent, of all 
Participating Organizations.
    b. If approved by the SEC, the Participating Organizations will 
notify their members of the general terms of the Agreement and of its 
impact on their members.
    [12]14. Subsequent Parties; Limited Relationship. This Agreement 
shall inure to the benefit of and shall be binding upon the 
Participating Organizations hereto and their respective legal 
representatives, successors, and assigns. Nothing in this Agreement, 
expressed or implied, is intended or shall: (a) Confer on any person 
other than the Participating Organizations hereto, or their respective 
legal representatives, successors, and assigns, any rights, remedies, 
obligations or liabilities under or by reason of this Agreement, (b) 
constitute the Participating Organizations hereto partners or 
participants in a joint venture, or (c) appoint one Participating 
Organization the agent of the other.
    [13]15. Assignment. No Participating Organization may assign this 
Agreement without the prior written consent of the DREAs/DCSAs 
performing Regulatory Responsibility on behalf of such Participating 
Organization, which consent shall not be unreasonably withheld, 
conditioned or delayed; provided, however, that any Participating 
Organization may assign the Agreement to a corporation controlling, 
controlled by or under common control with the Participating 
Organization without the prior written consent of such Participating 
Organization's DREAs/DCSAs. No assignment shall be effective without 
Commission approval.
    [14]16. 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.
    [15]17. Termination. Any Participating Organization may cancel its 
participation in the Agreement at any time upon the approval of the 
Commission after 180 days written notice to the other Participating 
Organizations (or in the case of a change of control in ownership of a 
Participating Organization, such other notice time period as that 
Participating Organization may choose). The cancellation of its 
participation in this Agreement by any Participating Organization shall 
not terminate this Agreement as to the remaining Participating 
Organizations.
    [16]18. General. The Participating Organizations agree to perform 
all acts and execute all supplementary instruments or documents that 
may be reasonably necessary or desirable to carry out the provisions of 
this Agreement.
    [17]19. Written Notice. Any written notice required or permitted to 
be given under this Agreement shall be deemed given if sent by 
certified mail, return receipt requested, or by a comparable means of 
electronic communication to each Participating Organization entitled to 
receipt thereof, to the attention of the Participating Organization's 
representative at the Participating Organization's then principal 
office or by email.
    [18]20. Confidentiality. The Participating Organizations agree that 
documents or information shared shall be held in confidence, and used 
only for the purposes of carrying out their respective regulatory 
obligations under this Agreement, provided, however, that each 
Participating Organization may disclose such documents or information 
as may be required to comply with applicable regulatory requirements or 
requests for information from the SEC. Any Participating Organization 
disclosing confidential documents or information in compliance with 
applicable regulatory or oversight requirements will request 
confidential treatment of such information. No Participating 
Organization shall assert regulatory or other privileges as against the 
other with respect to Regulatory Information that is required to be 
shared pursuant to this Agreement.
    [19]21. Regulatory Responsibility. Pursuant to Section 17(d)(1)(A) 
of the Act, and Rule 17d-2 thereunder, the Participating Organizations 
request the SEC, upon its approval of this Agreement, to relieve the 
Participating Organizations which are participants in this Agreement 
that are not the DREA or DCSA as to a Common Member of any and all 
responsibilities with respect to the matters allocated to the DREA or 
DCSA pursuant to this Agreement for purposes of Sec. Sec.  17(d) and 
19(g) of the Act.
    [20]22. Governing Law. This Agreement shall be deemed to have been 
made in the State of New York, and shall be construed and enforced in 
accordance with the law of the State of New York, without reference to 
principles of conflicts of laws thereof. Each of the Participating 
Organizations hereby consents to submit to the jurisdiction of the 
courts of the State of New York in connection with any action or 
proceeding relating to this Agreement.
    [21]23. Survival of Provisions. Provisions intended by their terms 
or context to survive and continue notwithstanding delivery of the 
regulatory services by the DREA/DCSA and any expiration of this 
Agreement shall survive and continue.
    [22]24. Amendment.
    a. This Agreement may be amended to add a new Participating 
Organization, provided that such Participating Organization does not 
assume regulatory responsibility, by an amendment executed by all 
applicable DREAs/DCSAs and such new Participating Organization. All 
other Participating Organizations expressly consent to allow such 
DREAs/DCSAs to jointly add new Participating Organizations to the 
Agreement as provided above. Such DREAs/DCSAs will promptly notify all 
Participating Organizations of any such amendments to add a new 
Participating Organization.
    b. All other amendments must be approved by each Participating 
Organization. All amendments, including adding a new Participating 
Organization but excluding changes to Exhibit B, must be filed with and 
approved by the Commission before they become effective.
    [23]25. Effective Date. The Effective Date of this Agreement will 
be the date the SEC declares this Agreement to be effective pursuant to 
authority conferred by Sec.  17(d) of the Act, and Rule 17d-2 
thereunder.
    [24]26. Counterparts. This Agreement may be executed in any number 
of counterparts, including facsimile, each of which will be deemed an 
original, but all of which taken together shall constitute one single 
agreement among the Participating Organizations.
* * * * *

Exhibit A

Covered [Regulation NMS] Rules

Covered Regulation NMS Rules
SEA Rule 606--Disclosure of Order Routing Information.*
SEA Rule 607--Customer Account Statements.

[[Page 10752]]

SEA Rule 611--Order Protection Rule.
SEA Rule 612--Minimum Pricing Increment.
SEA Rule 613(g)(2)--Consolidated Audit Trail *
    * Covered Regulation NMS Rules with asterisks (*) pertain to NMS 
securities. Covered Regulation NMS Rules without asterisks pertain to 
NMS stocks.
SRO Covered CAT Rules
BZX-Rules 4.5-4.16
BATS-Y--Rules 4.5-4.16
BOX--Rules 16020-16095
Cboe--Rules 7.20-7.32
C2--Chapter 6, Section F
EDGA--Rules 4.5-4.16
EDGX--Rules 4.5-4.16
FINRA--Rules 6810-6895
IEX--Rules 11.610-11.695
MIAX--Rules 1701-1712
MIAX PEARL--Rules 1701-1712
MIAX Emerald--Rules 1701-1712
Nasdaq--General 7, Sections 1-13
BX Equities Rules--General 7
PHLX--General 7
ISE--General 7
GEMX--General 7
MRX--General 7
NYSE--Rules 6810-6895
NYSE Arca--Rules--11.6810-11.6895
NYSE American--Rules 6810-6895
NYSE Chicago--Rules 6810-6895
NYSE National--Rules 6.6810-6.6895
LTSE--Rules 11.610-11.695

IV. Date of Effectiveness of the Proposed Plan and Timing for 
Commission Action

    Pursuant to Section 17(d)(1) of the Act \20\ and Rule 17d-2 
thereunder,\21\ after March 11, 2020, the Commission may, by written 
notice, declare the plan submitted by the Participating Organizations, 
File No. 4-618, to be effective if the Commission finds that the plan 
is necessary or appropriate in the public interest and for the 
protection of investors, to foster cooperation and coordination among 
self-regulatory organizations, or to remove impediments to and foster 
the development of the national market system and a national system for 
the clearance and settlement of securities transactions and in 
conformity with the factors set forth in Section 17(d) of the Act.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78q(d)(1).
    \21\ 17 CFR 240.17d-2.
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V. Solicitation of Comments

    In order to assist the Commission in determining whether to approve 
the proposed 17d-2 Plan and to relieve the Participating Organizations 
of the responsibilities which would be assigned to FINRA, 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

     Use the Commission's internet comment form (http://www.sec.gov/rules/other.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number 4-618 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number 4-618. 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 (http://www.sec.gov/rules/other.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change 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 the Participating Organizations. 
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 4-618 and should be submitted 
on or before March 11, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(34).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-03739 Filed 2-24-20; 8:45 am]
 BILLING CODE 8011-01-P


