5284 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Notices 

2To facilitate arbitrage, an ActiveShares ETF 

disseminates a ‘‘verified intraday indicative value’’ 

or ‘‘VIIV,’’ reflecting the value of its portfolio 

holdings, calculated every second during the 

trading day. To protect the identity and weightings 

of its portfolio holdings, an ActiveShares ETF sells 

and redeems its Shares in creation units to 

authorized participants only through an unaffiliated 

broker-dealer acting on an agency basis. 

3Aspects of the Funds are covered by intellectual 

property rights, including but not limited to those 

which are described in one or more patent 

applications. 

4All entities that currently intend to rely on the 

Order are named as applicants. Any other entity 

that relies on the Order in the future will comply 

with the terms and conditions of the Order and the 

terms and conditions of the Reference Order that 

are incorporated by reference into the Order. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

application. The complete application 

may be obtained via the Commission’s 

website by searching for the file 

number, or for an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants 

1. The Trust is a statutory trust 

established under the laws of the State 

of Maryland and will consist of one or 

more series operating as ActiveShares 

ETFs. The Trust is registered as an 

open-end management investment 

company under the Act. Applicants 

seek relief with respect to Funds (as 

defined below), including an initial 

Fund (the ‘‘Initial Fund’’). The Funds 

will operate as ActiveShares ETFs as 

described in the Reference Order.2

2. The Initial Adviser, a Delaware 

limited liability company, will be the 

investment adviser to the Initial Fund. 

An Adviser (as defined below) will 

serve as investment adviser to each 

Fund. The Initial Adviser is, and any 

other Adviser will be, registered as an 

investment adviser under the 

Investment Advisers Act of 1940 

(‘‘Advisers Act’’). The Adviser may 

enter into sub-advisory agreements with 

other investment advisers to act as subadvisers with respect to the Funds (each 

a ‘‘Sub-Adviser’’). Any Sub-Adviser will 

be registered under the Advisers Act. 

3. The Distributor is a Delaware 

limited liability company and a brokerdealer registered under the Securities 

Exchange Act of 1934, as amended, and 

will act as the principal underwriter of 

Shares of the Funds. Applicants request 

that the requested relief apply to any 

distributor of Shares, whether affiliated 

or unaffiliated with the Adviser and/or 

Sub-Adviser (included in the term 

‘‘Distributor’’). Any Distributor will 

comply with the terms and conditions 

of the Order. 

Applicants’ Requested Exemptive Relief 

4. Applicants seek the requested 

Order under section 6(c) of the Act for 

an exemption from sections 2(a)(32), 

5(a)(1), and 22(d) of the Act and rule 

22c–1 under the Act, and under sections 

6(c) and 17(b) of the Act for an 

exemption from sections 17(a)(1) and 

17(a)(2) of the Act. The requested Order 

would permit applicants to offer 

ActiveShares ETFs. Because the relief 

requested is the same as certain of the 

relief granted by the Commission under 

the Reference Order and because the 

Initial Adviser, or an affiliate thereof, 

has entered into a license agreement 

with Precidian Investments LLC, or an 

affiliate thereof, in order to offer 

ActiveShares ETFs,3 the Order would 

incorporate by reference the terms and 

conditions of the same relief of the 

Reference Order. 

5. Applicants request that the Order 

apply to the Initial Fund and to any 

other existing or future registered openend management investment company 

or series thereof that: (a) Is advised by 

the Initial Adviser or any entity 

controlling, controlled by, or under 

common control with the Initial Adviser 

(any such entity, along with the Initial 

Adviser, included in the term 

‘‘Adviser’’); (b) operates as an 

ActiveShares ETF as described in the 

Reference Order; and (c) complies with 

the terms and conditions of the Order 

and the terms and conditions of the 

Reference Order that are incorporated 

by reference into the Order (each such 

company or series and the Initial Fund, 

a ‘‘Fund’’).4

6. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provisions of the 

Act, if and to the extent that such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Section 17(b) 

of the Act authorizes the Commission to 

exempt a proposed transaction from 

section 17(a) of the Act if evidence 

establishes that the terms of the 

transaction, including the consideration 

to be paid or received, are reasonable 

and fair and do not involve 

overreaching on the part of any person 

concerned, and the transaction is 

consistent with the policies of the 

registered investment company and the 

general purposes of the Act. Applicants 

submit that for the reasons stated in the 

Reference Order the requested relief 

meets the exemptive standards under 

sections 6(c) and 17(b) of the Act. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–00960 Filed 1–15–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90903; File No. SR–ISE– 

2020–43] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Delete the Exchange 

Membership Rules and Incorporate by 

Reference the Membership Rules of 

The Nasdaq Stock Market LLC 

January 12, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

29, 2020, Nasdaq ISE, LLC (‘‘ISE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to delete the 

Exchange’s membership rules currently 

under the General 3 title, incorporate by 

reference The Nasdaq Stock Market 

LLC’s (‘‘Nasdaq’’) rules in the General 3 

Rule 1000 Series, and other related 

changes. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/ise/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

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 

Exchange 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 these 

statements may be examined at the 


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3The Exchange will separately request an 

exemption from the rule filing requirements of 

Section 19(b) of the Act for changes to General 3 

to the extent such rules are effected solely by virtue 

of a change to the Nasdaq Rule 1000 Series. The 

Exchange’s proposed rule change will not become 

effective unless and until the Commission approves 

this exemption request. 

4The BX membership rules were previously 

amended to incorporate by reference Nasdaq’s 

membership rules. See Securities Exchange Act 

Release No. 34–86425 (July 22, 2019), 84 FR 36139 

(July 26, 2019) (SR–BX–2019–022). 

5The Exchange notes that its General 4 title 

(entitled ‘‘Regulation’’) currently incorporates by 

reference the rules contained in Nasdaq’s General 

4 title. See Securities Exchange Act Release No. 

85728 (April 26, 2019), 84 FR 18892 (May 2, 2019) 

(SR–ISE–2019–12). 

6Nasdaq’s General 4, Section 1 (Registration, 

Qualification and Continuing Education) is 

currently incorporated by reference into the 

Exchange’s General 4 title. See supra note 5. 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

General 3 of the Exchange’s General 

Rules and Nasdaq’s General 3, Rules 

1000 Series prescribe the qualifications 

and procedures for applying for 

membership, respectively, on the 

Exchange and Nasdaq. The Exchange 

proposes to delete in their entirety the 

rules under its General 3 title, entitled 

‘‘Membership and Access,’’ and 

incorporate by reference the Nasdaq 

General 3, Rules 1000 Series (the 

‘‘Nasdaq Rule 1000 Series’’ or ‘‘Nasdaq 

Membership Rules’’) as described 

below.3 The Exchange will also relocate 

the text under its rule General 3, Section 

5(g) and place it under new Options 2A, 

Section 1(f) rule and General 3, Section 

4(b) which will be placed under new 

Exchange General 2, Section 11, as 

further described below. 

This proposal is part of the 

Exchange’s plan to harmonize its 

membership rules with the membership 

rules of the Nasdaq and Nasdaq BX, Inc. 

(‘‘BX’’) exchanges.4 The Exchange notes 

that Nasdaq GEMX, LLC, Nasdaq MRX, 

LLC, and Nasdaq Phlx, LLC (‘‘Phlx’’) 

(together with Nasdaq and BX, the 

‘‘Affiliated Exchanges’’) each plan to 

propose similar rule changes that will 

render their membership rules 

substantially similar to those of Nasdaq 

and BX. To account for any differences 

that may exist, the proposed 

introductory paragraphs list instances in 

which cross references in the Nasdaq 

Series 1000 Rules to other Nasdaq rules 

shall be read to refer instead to the 

Exchange Rules, and references to 

Nasdaq terms (whether or not defined) 

shall be read to refer to the Exchangerelated meanings of those terms. For 

instance, references to defined terms 

‘‘Exchange’’ or ‘‘Nasdaq’’ shall be read 

to refer to the Nasdaq ISE Exchange; 

‘‘Rule’’ or ‘‘Exchange Rule’’ shall be 

read to refer to the Exchange Rules; the 

defined term ‘‘Applicant’’ in the Nasdaq 

Rule 1000 Series shall be read to refer 

to an Applicant to the Nasdaq ISE 

Exchange; the defined terms ‘‘Board’’ or 

‘‘Exchange Board’’ in the Nasdaq Rule 

1000 Series shall be read to refer to the 

Nasdaq ISE Board of Directors; the 

defined term ‘‘Director’’ in the Nasdaq 

Rule 1000 Series shall be read to refer 

to a Director of the Board of the Nasdaq 

ISE Exchange; the defined term 

‘‘Exchange Review Council’’ in the 

Nasdaq Rule 1000 Series shall be read 

to refer to the Nasdaq ISE Exchange 

Review Council; the defined term 

‘‘Subcommittee’’ in the Nasdaq Rule 

1000 Series shall be read to refer to a 

Subcommittee of the Nasdaq ISE 

Exchange Review Council; the defined 

term ‘‘Interested Staff’’ in the Nasdaq 

Rule 1000 Series shall be read to refer 

to Interested Staff of Nasdaq ISE; the 

defined term ‘‘Member’’ in the Nasdaq 

Rule 1000 Series shall be read to refer 

to a Nasdaq ISE Member who acts in its 

capacity as an Electronic Access 

Member, a Primary Market Maker, or a 

Competitive Market Maker (including a 

‘‘Foreign Member,’’ as defined under 

Nasdaq General 9, Section 50); the 

defined term ‘‘Associated Person’’ shall 

be read to refer to a Nasdaq ISE 

Associated Person; the defined terms 

‘‘Exchange Membership Department’’ or 

‘‘Membership Department’’ shall be read 

to refer to the Nasdaq ISE Membership 

Department; and the defined term 

‘‘Exchange Regulation Department’’ 

shall be read to refer to the Nasdaq ISE 

Regulation Department. 

Additionally, cross references in the 

Nasdaq Rule 1000 Series to ‘‘General 1 

and Equity 1’’ shall be read as references 

to Nasdaq ISE General 1, Section 1; 

cross references in the Nasdaq Rule 

1000 Series to ‘‘General 9, Section 20’’ 

shall be read as references to Nasdaq ISE 

Options 10, Section 5(c)(2); cross 

references in the Nasdaq Rule 1000 

Series to ‘‘General 9, Section 37’’ shall 

be read as references to Nasdaq ISE 

Options 9, Section 21; and cross 

references to the ‘‘General 4, Rule 1200 

Series’’ shall be read as references to 

Nasdaq ISE General 4, Section 1.5

Finally, as explained below, the 

introductory paragraph will indicate 

that the Nasdaq Rule 1000 Series shall 

also apply to Nasdaq ISE Members who 

meet the requirements of a ‘‘Foreign 

Member.’’ 

As compared to the Exchange’s 

existing General 3, by virtue of 

incorporating by reference the Nasdaq 

Membership Rules into the Exchange’s 

rulebook, the Exchange’s membership 

rules will be organized in a more logical 

order. The incorporated rules will 

eliminate unnecessary or vague 

provisions that exist under the current 

General 3 title, eliminate unnecessary 

complexity in the membership process, 

and otherwise streamline the 

Exchange’s existing membership rules 

and their associated procedures. 

Summary of Proposed Changes 

A comparison between the Exchange’s 

existing General 3 and the Nasdaq 

Membership Rules is summarized 

below. As a general matter, in 

comparison to the Exchange’s existing 

membership rules, the Nasdaq 

Membership Rules provide for more 

specific membership procedures and 

due process. Moreover, as described 

below, some of the Nasdaq Rule 1000 

Series rules have no analogue in the 

existing Exchange rules. Finally, as 

explained later, the Exchange will also 

relocate the text under its General 3, 

Section 5(g) rule and place it under new 

Options 2A, Section 1(f) rule and 

General 3, Section 4(b) which will be 

relocated under new Exchange General 

2, Section 11. 

Rule 1001 

Nasdaq Rule 1001 states that Nasdaq 

and the Financial Industry Regulatory 

Authority (‘‘FINRA’’) are parties to a 

Regulatory Contract, pursuant to which 

FINRA has agreed to perform certain 

functions described in the Rule 1000 

Series and the General 4, Rule 1200 

Series on behalf of Nasdaq.6 Moreover, 

Nasdaq Rule 1001 provides that Nasdaq 

rules that refer to Nasdaq’s Regulation 

Department, Nasdaq Regulation 

Department staff, Nasdaq staff, and 

Nasdaq departments should be 

understood as also referring to FINRA 

staff and FINRA departments acting on 

behalf of Nasdaq pursuant to the 

Regulatory Contract. 

Nasdaq Rule 1001 also provides that, 

notwithstanding the fact that Nasdaq 

has entered into the Regulatory Contract 

with FINRA to perform some of 

Nasdaq’s functions, Nasdaq shall retain 

ultimate legal responsibility for, and 

control of, such functions. In addition, 

the rule informs that Nasdaq has 

incorporated by reference certain FINRA 

rules and that Nasdaq members shall 

comply with those rules and 


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interpretations as if such rules and 

interpretations were part of Nasdaq’s 

Rules. 

The Exchange is proposing to 

incorporate by reference Nasdaq Rule 

1001, which currently has no analogue 

rule under its membership rules. The 

language of Nasdaq Rule 1001 is 

applicable to the Exchange, as the 

Exchange is, similarly, a signatory of a 

Regulatory Contract with FINRA, 

pursuant to which FINRA has agreed to 

perform certain membership functions 

on its behalf, and also retains the 

ultimate legal responsibility for the 

performance of said functions. The 

Exchange believes that the 

incorporation by reference to Nasdaq 

Rule 1001 is not a substantive 

amendment to the Exchange rules. 

Rule 1002 

Nasdaq Rule 1002, which will be 

incorporated by reference under the 

Exchange’s General 3 title, describes the 

qualifications of Nasdaq members and 

associated persons, the registration of 

branch offices, and the designation of a 

Member’s office of supervisory 

jurisdiction. The Exchange will adopt 

by incorporation the provisions of 

Nasdaq Rule 1002 and delete those 

under current General 3, Section 1. The 

Exchange believes that incorporating by 

reference this rule will further the 

Exchange’s objective to provide 

uniformity and clarity to its rules by 

aligning them with the membership 

rules of the Nasdaq and BX exchanges. 

Nasdaq Rule 1002(a) provides that 

any registered broker or dealer shall be 

eligible for membership in Nasdaq 

(except for those excluded under 

paragraph (b) of the rule); additionally, 

paragraph (a) provides that any person 

shall be eligible to become an 

Associated Person of a Member (except 

for those excluded under Rule 1002(b)). 

Rule 1002(a) is similar to General 3, 

Section 1(a) of the Exchange’s 

membership rules to the extent that it 

describes that brokers or dealers may 

become Exchange members 

(‘‘Members’’). General 3, Section 1(a) 

provides that a Member may be a 

corporation, partnership, or limited 

liability company, and must be a 

registered broker-dealer and meet the 

qualifications for Exchange 

membership. The Exchange believes 

that incorporating by reference Nasdaq 

Rule 1002(a) expands upon Exchange 

General 3, Section 1(a) by including an 

associated person of a Member 

(‘‘Associated Person’’) under this 

threshold requirement. 

The Exchange’s General 3, Section 

1(b) provides that a Member that does 

not maintain an office in the United 

States (‘‘Foreign Member’’) that is 

responsible for preparing and 

maintaining financial and other reports 

required to be filed with the 

Commission and with the Exchange 

must prepare such reports in English 

and in U.S. dollars, reimburse the 

Exchange for any expense incurred in 

examining the Member to the extent that 

such expense is in excess of the cost 

associated with examining a Member 

located within the continental United 

States, and ensure the availability of an 

individual who is fluent in English and 

knowledgeable in securities and 

financial matters to assist 

representatives of the Exchange during 

examinations. Nasdaq General 9, 

Section 50 is a Nasdaq rule substantially 

similar to the provisions in General 3, 

Section 1(b). In order to preserve the 

enumerated characteristics of a Foreign 

Member, which would otherwise be 

deleted from its Rulebook by 

incorporating by reference the Nasdaq 

Rule 1000 Series, the Exchange 

proposes to include the text of its 

General 3, Section 1(b) under the 

General 3’s introductory paragraph and 

indicate that the Nasdaq Membership 

Rules will also apply to the members 

who meet the Foreign Member 

requirements. 

Furthermore, General 3, Section 1(c) 

provides that every Member shall have 

as the principal purpose of being a 

Member the conduct of a public 

securities business, and that purpose 

shall be deemed to exist if and so long 

as: (1) The Member has qualified and 

acts in respect of its business on the 

Exchange in one or more of the 

following capacities: (i) An Electronic 

Access Member; (ii) a Primary Market 

Maker; or (iii) a Competitive Market 

Maker; and (2) all transactions effected 

by the Member are in compliance with 

Section 11(a) of the Exchange Act and 

the rules and regulations adopted 

thereunder. The Exchange believes that 

the membership qualifications 

described in this section are consistent 

with the eligibility criteria described in 

Nasdaq Rule 1002 and the disclosures 

and information provided by Applicant 

pursuant to Nasdaq Rule 1013. To 

account for the Exchange rights 

referenced in Section 1(c) (Electronic 

Access Member, Primary Market Maker, 

or Competitive Market Maker), as 

defined under the Exchange’s Options 1, 

Section 1 provisions, the Exchange will 

also indicate in the proposed General 3 

introductory paragraph that the defined 

term ‘‘Member’’ in the Nasdaq Rule 

1000 Series shall be read to refer to a 

Nasdaq ISE Member who acts in its 

capacity as an Electronic Access 

Member, a Primary Market Maker, or a 

Competitive Market Maker. The 

Exchange notes that the rules related to 

a Primary Market Maker’s and 

Competitive Market Maker’s trading 

rights are not being impacted by this 

proposal. These rules are preserved and 

located in the Exchange’s Options 2A 

title, ISE Market Maker Rights. 

Nasdaq Rule 1002(b)(1) establishes 

that subject to such exceptions as may 

be explicitly provided elsewhere in the 

Nasdaq rules, no registered broker or 

dealer shall be admitted to membership, 

and no Member shall be continued in 

membership, if such broker, dealer, or 

Member fails or ceases to satisfy the 

qualification requirements established 

by Nasdaq rules, or if such broker, 

dealer, or Member is or becomes subject 

to a statutory disqualification, or if such 

broker, dealer, or Member fails to file 

such forms as may be required in 

accordance with such process as Nasdaq 

may prescribe. Nasdaq Rule 1002(b)(1) 

can be compared to the provision 

currently under Exchange’s General 3, 

Section 2(b) that establishes that the 

Exchange may deny or condition the 

approval of a Member, or preclude or 

condition a person from becoming 

associated with a Member, for the same 

reasons that the Commission may deny 

or revoke a broker-dealer registration 

and for those reasons required or 

allowed under the Act. Furthermore, the 

requirement to comply with Nasdaq 

rules under Section (b)(1), is also 

consistent with the provision under 

Exchange General 3, Section 4(c) that 

states that every Member shall pledge to 

abide by the by-laws and rules of the 

Exchange, as amended from time to 

time, and by all Options Regulatory 

Alerts, notices, directives or decisions 

adopted pursuant to or made in 

accordance with the Exchange’s by-laws 

and rules. 

Nasdaq Rule 1002(b)(2) establishes 

that, subject to such exceptions as may 

be explicitly provided elsewhere in 

Nasdaq rules, no person shall become 

associated with a Member, continue to 

be associated with a Member, or transfer 

association to another Member, if such 

person fails or ceases to satisfy the 

qualification requirements established 

by Nasdaq rules, or if such person is or 

becomes subject to a statutory 

disqualification; and no broker or dealer 

shall be admitted to membership, and 

no Member shall be continued in 

membership, if any person associated 

with it is ineligible to be an Associated 

Person under Nasdaq Membership 

Rules. Nasdaq Rule 1002(b)(2) is similar 

to the requirement that applies to 

Associated Persons under General 3, 

Section 3(a) of the Exchange rules. The 


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7The Exchange notes that it will not relocate or 

carve-out this duplicative provision concerning The 

Options Clearing Corporation (‘‘OCC’’). Pursuant to 

the Exchange’s Options 9, Section 2 (‘‘Adherence to 

Law’’), Members are required to abide by the Act, 

the Exchange’s by-laws, the rules of the Exchange, 

and OCC rules. 

8See supra note 5. 

9See Securities Exchange Act Release No. 42455 

(February 24, 2000), 65 FR 11401 (March 2, 2000) 

(Order Granting Registration as a National 

Securities Exchange). 

10See Securities Exchange Act Release No. 45803 

(April 23, 2002), 67 FR 21306 (April 30, 2002) 

(Order Approving Proposed Rule Change and 

Amendment No. 1 thereto by the International 

Securities Exchange LLC To Restructure From a 

Limited Liability Company to a Corporation). 11Exchange General 1, Section 1(a)(1). 12Exchange Options 1, Section 1(a)(41) 

Exchange’s General 3, Section 3 rules 

enumerate conditions that apply to 

persons associated with Members of the 

Exchange. Exchange General 3, Section 

3(a) provides that Associated Persons 

are bound by the Exchange’s by-laws 

and rules and the rules of the Clearing 

Corporation and describes the 

circumstances concerning the barring of 

an Associated Person in such role. 

Exchange General 3, Sections 2(b), 3(a), 

and 4(c) are, substantially similar to the 

provisions of Nasdaq Rule 1002(b),7

which the Exchange proposes be 

incorporated by reference into its 

membership rules. The Exchange notes 

that General 3, Section 3(b) requires that 

Members file and keep current a list of 

its associated persons who are its 

executive officers, directors, principals, 

shareholders, and general partners. A 

Member’s obligation to maintain 

updated information for their registered 

representatives or principals is 

prescribed under Nasdaq’s General 4 

title which was previously incorporated 

by reference into the Exchange rules,8

rendering Exchange General 3, Section 

3(b) unnecessary. 

Exchange General 3, Section 3(c) 

provides that a claim of any Associated 

Person described in the first sentence of 

General 3, Section 3(b) (i.e., a Member’s 

executive officers, directors, principal 

shareholders, and general partners) 

against a Member shall be subordinate 

in right of payment of customers and 

other Members. This subordination rule 

was approved as part of the Exchange’s 

Form 1 filing on February 24, 2000.9 At 

that time, Exchange members had equity 

ownership interest in the Exchange and 

the subordination language was 

relevant. In April of 2002, the Exchange 

demutualized, which ultimately 

resulted in Exchange members no longer 

having any equity ownership interest in 

ISE. As such, this language became 

obsolete.10 The Exchange proposes to 

delete this provision in its entirety. 

Nasdaq Rule 1002(c) establishes, as a 

condition to maintaining Nasdaq 

membership, that Members shall at all 

times maintain membership in a 

registered securities association or 

another registered exchange. 

Furthermore, the rule prescribes that 

Members that transact business with 

customers shall at all times be members 

of FINRA. The Exchange proposes to 

incorporate this rule by reference. 

Because the Exchange does not act in 

the capacity of a designated examining 

authority (‘‘DEA’’), like the Nasdaq and 

BX exchanges, it requires that all 

applicants for membership have an 

assigned DEA in place as a condition of 

its membership. 

Nasdaq Rule 1002(d) states that 

Nasdaq members are deemed to comply 

with Nasdaq’s branch office registration 

requirements to the extent that they 

keep current a Uniform Branch Office 

Registration Form (‘‘Form BR’’), which 

contains the requisite information and 

which is accessible electronically to 

Nasdaq. Members that are not FINRA 

members shall continue to submit to 

Nasdaq a Branch Office Disclosure 

Form, as they have done previously. 

The Exchange proposes to incorporate 

by reference this rule, which is 

consistent with the provisions under the 

Exchange’s Options 10, Section 5, 

entitled Branch Offices. The Exchange 

proposes that the cross-reference in 

Nasdaq Rule 1002(d)(2) to General 9, 

Section 20 shall be read as a reference 

to Exchange Options 10, Section 5(c)(2). 

Rule 1011 

Nasdaq Rule 1011 contains 

definitions applicable to the Nasdaq 

Membership Rules. Nasdaq Rule 1011 

has no analogue rule in the existing 

Exchange’s General 3 title. By 

incorporating by reference the Nasdaq 

definitions under Rule 1011, the 

Exchange believes it will further 

harmonize its rules with respect to the 

membership rules of Nasdaq and BX. 

The Exchange notes that the defined 

terms in Nasdaq Rule 1011, to be 

incorporated by reference into the 

Exchange’s rules, are self-contained and 

have no impact on ISE rules outside its 

membership rules. The terms 

‘‘Applicant,’’ ‘‘Department,’’ ‘‘Director,’’ 

‘‘Interested Staff,’’ ‘‘Securities 

business,’’ ‘‘Exchange Board,’’ 

‘‘principal place of business,’’ 

‘‘registered broker or dealer,’’ 

‘‘Representative,’’ ‘‘sales practice 

event,’’ ‘‘Subcommittee,’’ and ‘‘statutory 

disqualification’’ have not been defined 

in the Exchange’s rulebook. The 

Exchange notes that the term 

‘‘associated person’’ as defined in the 

Exchange’s rulebook 11 is substantially 

similar to the definition in Nasdaq 

General 1(b)(2). Relatedly, the term 

‘‘Proprietary Trading Firm’’ as defined 

in Nasdaq Rule 1011(o) is substantially 

similar with the definition of 

‘‘proprietary trading’’ as defined in the 

Exchange’s rulebook.12 The Exchange 

proposes to adopt by incorporation the 

text of Nasdaq Rule 1011 in its entirety. 

The Exchange believes that 

incorporating by reference this rule will 

further the Exchange’s objective to 

provide uniformity and clarity to its 

rules by aligning them with the 

membership rules of the Nasdaq and BX 

exchanges. 

Rule 1012 

Nasdaq Rule 1012 (‘‘General 

Application Provisions’’) provides a 

detailed outline of the requirements that 

an Applicant must follow in order to file 

an application for membership with 

Nasdaq. In contrast, the Exchange 

membership rules contain vague 

provisions describing the manner in 

which an application shall be submitted 

or how service shall be performed. The 

Exchange believes that Nasdaq Rule 

1012 provides a more detailed set of 

instructions for Applicants, Members, 

and Associated Persons to submit 

materials and the requirements for 

service of documents. The Exchange 

believes that incorporating Rule 1012 by 

reference will further the Exchange’s 

objective to provide uniformity and 

clarity to its rules by aligning them with 

the membership rules of the Nasdaq and 

BX exchanges. 

Nasdaq Rule 1012(a) provides that 

Applicants and Nasdaq Members may 

submit an application or other 

documents and information to Nasdaq 

by first-class mail, overnight courier, 

hand delivery, or by electronic means; 

this section also provides that Nasdaq 

shall serve a notice or decision issued 

under the Nasdaq Membership Rules by 

first-class mail or electronic means on 

the Applicant or Member or its counsel, 

unless a Nasdaq rule specifies a 

different method of service; finally, this 

section also details when service by 

Nasdaq or an Applicant shall be deemed 

complete. The Exchange membership 

rules contain no such provision. The 

Exchange believes that incorporating 

Nasdaq 1012(a) by reference improves 

its membership application process by 

adopting specific provisions regarding 

the manner of submission and service of 

documents. 

Nasdaq Rule 1012(b) provides a 

definition of the term ‘‘calendar days’’ 

and describes the manner in which 

times under the Nasdaq Membership 

Rule shall be computed. The Exchange 


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membership rules contain no such 

provision. The Exchange believes that 

adopting this rule by incorporation will 

provide further clarity to the calculation 

of times under its membership rules. 

Nasdaq Rule 1012(c) describes a(n) 

Applicant’s, Member’s, and Associated 

Person’s duty to ensure that the 

information they provide to Nasdaq at 

the time of the filing is accurate, 

complete, and current. Moreover, this 

provision requires that Applicant’s, 

Member’s, and Associated Person’s shall 

ensure that membership applications 

and supporting materials filed with 

Nasdaq remain accurate, complete, and 

current at all times by filing 

supplementary amendments, which 

must be filed within 15 business days of 

their learning of the facts or 

circumstances giving rise to the need for 

an amendment. Furthermore, this 

section requires that Applicants, 

Members, and Associated Persons 

promptly notify Nasdaq, in writing, of 

any material adverse change in their 

financial condition. The Exchange 

membership rules contain no such 

provision. The Exchange believes that 

incorporating Nasdaq 1012(c) by 

reference improves its membership 

rules by adopting provisions concerning 

a Member’s duty to ensure the accuracy, 

completeness, and current nature of 

membership information. 

Exchange General 3, Section 4(b) 

states that every Member shall report to 

the Exchange all contact information 

required by the Exchange via the FINRA 

Contact System. Section 4(b) also 

requires Exchange Members to update 

their contact information promptly 

when necessary, but in no event later 

than 30 days following any change, and 

within 17 business days after the end of 

each calendar year; furthermore, it 

requires members to comply with any 

request for such information by the 

Exchange within 15 days or any longer 

period agreed upon with Exchange staff. 

The Exchange proposes the relocation of 

this provision, with minor lettering 

changes, to Exchange General 2 title 

(‘‘Organization and Administration’’) 

under new Section 11, entitled Contact 

Information Requirements. Exchange 

General 3, Section 4(b) is substantially 

similar to the rule text in both Nasdaq’s 

and BX’s General 2, Section 11. 

As previously stated, the Exchange 

proposes to adopt by incorporation the 

text of Nasdaq Rule 1012 in its entirety, 

as the rule’s provisions provide clear 

instructions concerning the submission 

of membership applications and other 

materials; the requirements for service 

of documents; and the Applicants’, 

Members’, and Associated Persons’ duty 

to ensure that the information filed with 

the Exchange is up to date. 

Rule 1013 

Nasdaq Rule 1013 sets forth the 

procedure for filing applications for new 

membership on the Exchange. The 

Exchange proposes to incorporate 

Nasdaq Rule 1013 by reference under its 

General 3 title. The Exchange is 

adopting Nasdaq Rule 1013 as it 

expands upon and provides clarity to 

the procedure in the Exchange’s General 

3, Section 5. The Exchange believes that 

incorporating Rule 1013 by reference 

will further the Exchange’s objective to 

provide uniformity and clarity to its 

rules by aligning them with the 

membership rules of the Nasdaq and BX 

exchanges. 

Nasdaq Rule 1013(a) describes in 

detail the membership application 

process. Subsection (a)(1) (‘‘Where to 

File; Contents’’), provides that an 

application shall include (A) a copy of 

the Applicant’s current Form BD, if not 

otherwise available to Nasdaq 

electronically through the Central 

Registration Depository (‘‘CRD’’); (B) an 

original Nasdaq-approved fingerprint 

card for each Associated Person who 

will be subject to SEC Rule 17f-2 and for 

whom a fingerprint card has not been 

filed with another self-regulatory 

organization (SRO), if such fingerprints 

are not otherwise available 

electronically to Nasdaq through CRD; 

(C) payment for such fee as may be 

required under the Rules; (D) a 

description of the Applicant’s proposed 

trading activities on Nasdaq, such as the 

types of securities it will trade, whether 

it will be a market maker, or an order 

entry firm, and/or engage in block 

trading activities, and the extent to 

which the Applicant is conducting such 

activities as a member of other SROs; (E) 

a copy of the Applicant’s most recent 

audited financial statements and a 

description of any material changes in 

the Applicant’s financial condition 

since the date of the financial 

statements; (F) an organizational chart; 

(G) the intended location of the 

Applicant’s principal place of business 

and all other branch offices, if any, and 

the names of the persons who will be in 

charge of each office; (H) a description 

of the communications and operational 

systems the Applicant will employ to 

conduct business and the plans and 

procedures the Applicant will employ 

to ensure business continuity, 

including: system capacity to handle the 

anticipated level of usage; contingency 

plans in the event of systems or other 

technological or communications 

problems or failures; system 

redundancies; disaster recovery plans; 

and system security; (I) a copy of any 

decision or order by a federal or state 

authority or SRO taking permanent or 

temporary adverse action with respect 

to a registration or licensing 

determination regarding the Applicant 

or an Associated Person; (J) a statement 

indicating whether the Applicant or any 

person listed on Schedule A of the 

Applicant’s Form BD is currently, or has 

been in the last ten years, the subject of 

any investigation or disciplinary 

proceeding conducted by any SRO, the 

foreign equivalent of a SRO, a foreign or 

international securities exchange, a 

contract market designated pursuant to 

the Commodity Exchange Act (‘‘CEA’’) 

or any substantially equivalent foreign 

statute or regulation, a futures 

association registered under the CEA or 

any substantially similar foreign statute 

or regulation, the Commission or any 

other ‘‘appropriate regulatory agency’’ 

(as defined in the Act), the Commodity 

Futures Trading Commission, or any 

state financial regulatory agency 

regarding the Applicant’s activities that 

has not been reported to the CRD, 

together with all relevant details, 

including any sanctions imposed; (K) a 

statement indicating whether any 

person listed on Schedule A of the 

Applicant’s Form BD is currently, or has 

been in the last ten years, the subject of 

any investigation or disciplinary 

proceeding conducted by any SRO, the 

foreign equivalent of an SRO, a foreign 

or international securities exchange, a 

contract market designated pursuant to 

the CEA or any substantially equivalent 

foreign statute or regulation, a futures 

association registered under the CEA or 

any substantially similar foreign statute 

or regulation, the Commission or any 

other ‘‘appropriate regulatory agency’’, 

the CFTC, or any state financial 

regulatory agency regarding the 

Applicant’s activities that has not been 

reported to the CRD, together with all 

relevant details, including any sanctions 

imposed; (L) a copy of any contract or 

agreement with another broker-dealer, a 

bank, a clearing entity, a service bureau 

or a similar entity to provide the 

Applicant with services regarding the 

execution or clearance and settlement of 

transactions effected on Nasdaq; (M) if 

the Applicant proposes to make markets 

on Nasdaq, a description of the source 

and amount of Applicant’s capital to 

support its market making activities on 

Nasdaq, and the source of any 

additional capital that may become 

necessary; (N) a description of the 

financial controls to be employed by the 

Applicant with respect to anti-money 

laundering compliance rules as set forth 

in General 9, Section 37; (O) a copy of 


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13Concerning the lease agreements referenced in 

Section 4(a), the Exchange also believes it 

unnecessary to preserve this text for purposes of the 

General 3 amendments. The lease agreements are 

fully described in Options 2A, Section 4. (‘‘Leasing 

Memberships’’) in the Exchange’s rulebook. 

the Applicant’s written supervisory 

procedures with respect to the activities 

identified in paragraph (a)(1)(D); (P) a 

list of the persons conducting the 

Applicant’s market making and other 

trading activities, and a list of the 

persons responsible for such persons’ 

supervision, together with the CRD 

numbers; (R) a copy of the Applicant’s 

most recent ‘‘FOCUS Report’’ (Form X– 

17A–5) filed with the SEC pursuant to 

SEC Rule 17a–5; (S) all examination 

reports and corresponding responses 

regarding the Applicant for the previous 

two years from the SROs of which it is 

a member; (T) a copy of Nasdaq’s 

Membership Agreement, duly executed 

by the Applicant, which includes, 

among other things: (1) An agreement to 

comply with the federal securities laws, 

the rules and regulations thereunder, 

Nasdaq rules, and all rulings, orders, 

directions, and decisions issued and 

sanctions imposed under Nasdaq rules; 

(2) an agreement to pay such dues, 

assessments, and other charges in the 

manner and amount as from time to 

time shall be fixed pursuant to Nasdaq 

rules; and (U) such other reasonable 

information with respect to the 

Applicant as Nasdaq may require. 

In contrast, current General 3, Section 

2(a) states simply that to become a 

Member of the Exchange an Applicant 

must seek approval in the form and 

manner prescribed by the Exchange. 

Relatedly, General 3, Section 4(a) 

provides a short list of documents that 

Applicants and Members may submit 

with their application for membership 

with the Exchange. Section 4(a) states 

that Members and Applicants shall file 

with (and be subject to review by) the 

Exchange, at a minimum, their 

partnership agreements and any 

subsequent amendments, in the case of 

partnerships; articles of incorporation, 

by-laws and their amendments, in the 

case of corporations; the articles of 

organization and operating agreements 

and their respective amendments, in the 

case of limited liability companies; and 

any lease agreements that Members may 

be subject to.13 The paragraph further 

provides that no action or failure by the 

Exchange to act shall be construed to 

mean that the Exchange has in any way 

passed on the investment merits of or 

approved the submitted document. The 

Exchange believes that deleting General 

3, Section 4(a) is appropriate because 

the Exchange’s current rule is 

ambiguous while Nasdaq Rule 

1013(a)(1), which will be incorporated 

by reference, lists in detail all of the 

supplementary application materials 

required for submission by an 

Applicant. Incorporating this provision 

by reference will further standardize the 

Exchange’s membership application 

process. 

Exchange’s General 3, Section 5(a) 

provides that to become a Member of 

the Exchange an Applicant shall file an 

application, which must be 

accompanied by a non-refundable 

application fee. The Exchange proposes 

to delete Section 5(a) because the 

provisions in this section are already 

included in Nasdaq Rule 1013, New 

Member Application which is being 

incorporated by reference. 

The Exchange also believes that the 

provision under General 3, Section 5(c) 

that indicates that an applicant must be 

approved by the Exchange to perform in 

at least one of the recognized capacities 

of a Member as stated in General 3, 

Section 1(c) (discussed above when 

describing the incorporation by 

reference of Nasdaq Rule 1002) is 

substantially similar to the language 

contained in Nasdaq Rule 1013(a)(1)(D). 

Nasdaq Rule 1013(a)(2) provides that 

the Membership Department will deem 

an application to be filed on the date 

when it is substantially complete, 

meaning the date on which the 

Membership Department receives from 

the Applicant all material 

documentation and information 

required under Rule 1013. This rule also 

provides that Nasdaq will notify the 

Applicant in writing when it deems the 

Applicant’s application to be 

substantially complete. The Exchange’s 

General 3, Section 5(d) contains a 

parallel, although brief, provision when 

describing the completion of the 

application process (‘‘Upon completion 

of the application process, the Exchange 

shall consider whether to approve the 

application, unless there is just cause 

for delay’’). 

Nasdaq Rule 1013(a)(3) provides the 

procedure concerning incomplete 

applications (including the conditions 

necessary for the refund of application 

fees); and the request for additional 

documents or supporting information. 

Specifically, Nasdaq Rule 1013(a)(3)(A) 

(‘‘Lapse of Applications that are not 

Substantially Complete’’) provides that 

if an application that was initiated 

under 1013 is not deemed to be 

substantially complete by the 

Membership Department within 90 

calendar days after an Applicant 

initiates it, then absent a showing of 

good cause by the Applicant, the 

Membership Department may, at its 

discretion, deem the application to have 

lapsed without filing, and the 

Membership Department will take no 

action in furtherance of the application. 

If the Membership Department deems 

an application to have lapsed, then the 

Membership Department shall serve a 

written notice of that determination on 

the Applicant. If an Applicant still 

wishes to apply for membership on 

Nasdaq after receiving notice of a lapse 

in its application, then the Applicant 

will be required to submit a new 

application pursuant to Nasdaq 

Membership Rules and pay a new 

application fee for doing so, if 

applicable. The Membership 

Department will refund fees that an 

Applicant has paid to the Nasdaq in 

connection with a lapsed application, in 

accordance with Nasdaq rules regarding 

fees, provided that the Nasdaq has not 

proceeded to process the application at 

the time it lapses. The rule also provides 

that, for purposes of Rule 1013(a)(3)(A), 

the Membership Department will deem 

an application to be not ‘‘substantially 

complete’’ if the Applicant fails to 

submit to the Membership Department 

materially important information or 

documentation that is required or 

requested under these Rules. 

Nasdaq Rule 1013(a)(3)(B) (‘‘Rejection 

of Filed Applications that Remain or 

Become Incomplete After Filing’’) 

provides that if an application that was 

initiated under Rule 1013 is 

substantially complete and thus is 

deemed to be filed with Nasdaq under 

Rule 1013(a)(2), but the application 

nevertheless remains or becomes 

incomplete with respect to any required 

or requested information or 

documentation, then the Membership 

Department shall serve written notice to 

the Applicant of such incompleteness 

and describe the missing information or 

documentation. If the Applicant fails to 

submit to Nasdaq the missing 

information or documentation within a 

reasonable period after it receives a 

notice of incompleteness, then absent a 

showing of good cause by the Applicant, 

the Membership Department may, at its 

discretion, reject the application. If the 

Membership Department rejects an 

application on the basis of 

incompleteness, then the Membership 

Department shall serve a written notice 

on the Applicant of the Membership 

Department’s determination and the 

reasons therefor. Nasdaq shall not 

refund the application fees that an 

Applicant has paid to Nasdaq in 

connection with an application that 

Nasdaq rejects. If the Applicant 

determines to continue to seek 

membership on Nasdaq, then the 

Applicant shall submit a new 


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14See Securities Exchange Act Release No. 34– 

85513 (April 4, 2019), 84 FR 14429 (April 10, 2019) 

(SR–NASDAQ–2019–022). 

application and pay a new application 

fee in accordance with Nasdaq rules. 

The Exchange currently contains two 

provisions related to the lapsing of its 

membership applications. Pursuant to 

General 3, Section 5(f), if the 

membership application process is not 

completed within six (6) months of the 

filing of the application form and 

payment of the appropriate fee, the 

application shall be deemed to be 

automatically withdrawn. The Exchange 

plans to replace General 3, Section 5(f) 

by incorporating by reference Rule 

1013(a)(3) which provides well-defined 

processes for the treatment of 

applications that become stale or result 

in the Applicant’s failure to pursue 

membership by not responding to 

requests for additional information. 

The second rule describing the 

lapsing of an application is currently 

located under the Exchange’s General 3, 

Section 5(g). Section 5(g) is specific to 

Applicants who are seeking approval as 

either a Competitive Market Maker or a 

Primary Market Maker on the Exchange, 

either of which require the Applicant to 

purchase or lease trading rights. This 

provision establishes that approved 

Applicants must become effective 

Members within 90 days of the date of 

approval by owning or leasing a 

membership or else the approval will 

expire (unless the Exchange grants an 

extension). Because this rule 

specifically relates to the requirement 

for Market Makers to promptly secure 

their trading rights, the Exchange 

believes that it will be better situated 

under the Options 2A, Section 1 

(‘‘Market Maker Rights’’) title. The 

Exchange thus proposes to relocate the 

rule text in General 3, Section 5(g) and 

create new subsection Options 2A, 

Section 1(f) in the Exchange’s rulebook 

(the Exchange will make some minor 

style changes to the rule text to facilitate 

its reading). The Exchange intends to 

preserve the rules related to Competitive 

Market Makers and Primary Market 

Makers in Options 2A due to the unique 

nature of this structure. As stated above, 

the Exchange is not amending this 

structure nor the process by which 

Exchange Members secure and exercise 

Market Maker trading rights. 

Nasdaq Rule 1013(a)(4) (‘‘Requests by 

the Department for Additional 

Documents or Information from the 

Applicant or from Third Parties’’) 

establishes that (A) at any time before 

the Membership Department serves its 

decision as to an application for new 

membership in Nasdaq, the Membership 

Department may serve a written request 

for additional information or 

documentation, from the Applicant or 

from a third party, if the Membership 

Department deems such information or 

documentation to be necessary to 

clarify, verify, or supplement the 

application materials. The Membership 

Department may, at its discretion, 

request that the Applicant or the third 

party provide the requested information 

or documentation in writing or through 

an in-person or telephonic interview. In 

the written request, the Membership 

Department shall afford the Applicant 

or the third party a reasonable period of 

time within which to respond to the 

request; moreover, (B) in the event that 

the Membership Department obtains 

information or documentation about an 

Applicant from a third party that the 

Membership Department reasonably 

believes could adversely impact its 

decision on an application, then the 

Membership Department shall promptly 

inform the Applicant in writing and 

provide the Applicant with a 

description of the information or a copy 

of the documentation that the 

Membership Department obtained, 

where appropriate under the 

circumstances. Prior to rendering an 

application decision on the basis of 

information or documentation obtained 

from a third party source, the 

Membership Department shall afford the 

Applicant with a reasonable 

opportunity to discuss or to otherwise 

address the information or 

documentation that the Membership 

Department obtained from the third 

party. 

The provisions under the Nasdaq Rule 

1013(a)(4) are similar to the Exchange’s 

General 3, Section 4(a), to the extent 

that they describe the Exchange’s 

authority to request additional 

documents or information from the 

Applicant or Member. Relatedly, 

General 3, Section (d) also provides the 

Exchange with authority to request 

Associated Persons to provide 

additional information or testimony. 

The Exchange believes that 

incorporating by reference Nasdaq Rule 

1013(a)(4) into its membership rules 

will provide a greater degree of detail 

concerning the Exchange’s discretion 

and authority to request additional 

information. 

Nasdaq Rule 1013(b)(1) sets forth the 

procedure that allows an Applicant who 

is a FINRA member to ‘‘waive-in’’ to 

become an Exchange Member and to 

register with the Exchange all persons 

associated with it whose registrations 

FINRA has approved (in categories 

recognized by the Exchange’s rules). 

This section defines the term ‘‘waivein’’ to mean that the Membership 

Department will rely substantially upon 

FINRA’s prior determination to approve 

the Applicant for FINRA membership 

when the Membership Department 

evaluates the Applicant for Exchange 

membership. That is, the Membership 

Department will normally permit a 

FINRA member to waive-into Exchange 

membership without conducting an 

independent examination of the 

Applicant’s qualifications for 

membership on the Exchange, provided 

that the Membership Department is not 

otherwise aware of any basis set forth in 

Nasdaq Rule 1014 to deny or condition 

approval of the application. 

The second special application 

process, which is set forth in Nasdaq 

1013(b)(2), permits Applicants for 

Nasdaq membership that are already 

approved members of one or more of the 

affiliated exchanges to waive-into 

Nasdaq. In this context, ‘‘waive-in’’ 

means that the Membership Department 

will rely substantially upon an affiliated 

exchange’s prior determination to 

approve the Applicant for Nasdaq 

membership. The procedures in Nasdaq 

Rule 1013(b)(2) for an Applicant to 

submit a waive-in application under 

this provision and for the Membership 

Department to issue a decision based 

upon such an application are identical 

to the procedures described above for 

FINRA members that seek to waive-into 

Nasdaq membership. Applicants who 

meet the criteria for this waive-in 

review process have already 

demonstrated their ability to meet 

membership standards on one or more 

of the affiliated exchanges which 

eliminates the need for a full review. 

Nasdaq Rule 1013(b) (‘‘Special 

Application Procedures’’) was adopted 

by Nasdaq to expedite the membership 

application process of Applicants who 

were already members of FINRA or 

members of one of the affiliated 

exchanges. The Special Application 

Procedures also include updated 

provisions requiring compliance with 

Nasdaq’s anti-money laundering rules.14

The Exchange proposes to adopt by 

incorporation these same provisions to 

facilitate Applicants who meet the rule 

requirements. The adoption of this rule 

will offer members of FINRA, Nasdaq, 

and BX the option to apply for 

membership on the Exchange through 

an expedited membership application 

process. 

Current Exchange rules do not allow 

this expedited process. However, today, 

this concept does exist in both GEMX 

and MRX General 3, Section 5. Both 

GEMX and MRX rules afford an 

Exchange member in good standing the 

ability to become a GEMX or MRX 


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member of the same category without 

application. The Exchange believes that 

incorporating by reference Nasdaq’s 

waive-in provisions will further the 

Exchange’s objective to provide 

uniformity and clarity to its rules by 

aligning its membership application 

process with the Nasdaq and BX 

exchanges. 

Rule 1014 

Nasdaq Rule 1014 (‘‘Department 

Decision’’) describes the Membership 

Department’s process for the issuance of 

a decision. The Exchange proposes to 

incorporate by reference Nasdaq Rule 

1014 in its entirety as it provides a more 

organized, detailed, and logical 

description of the procedure currently 

described in General 3, Section 2 (in 

addition to the grounds for approval or 

disapproval referenced in General 3, 

Section 5(d) and (e)). Incorporating 

Nasdaq Rule 1014 by reference in the 

Exchange’s rules will improve the 

membership application and decision 

making process by better defining the 

Membership Department’s authority and 

obligations, describing the basis for 

approval, conditional approval or denial 

of an application. Further, the Exchange 

believes that this proposed change 

provides consistency in the treatment of 

Exchange Applicants. Nasdaq Rule 

1014(a) describes the Membership 

Department’s authority to act on an 

application by approving it, denying it, 

or approving it subject to restrictions: 

(1) That are reasonably designed to 

address a specific (financial, 

operational, supervisory, disciplinary, 

investor protection, or other regulatory) 

concern; or (2) that mirror a restriction 

placed upon the Applicant by FINRA or 

an affiliated exchange. 

Nasdaq Rule 1014(b), entitled ‘‘Bases 

for Approval, Conditional Approval, or 

Denial,’’ provides that the Membership 

Department will approve, grant 

conditional approval, or deny a 

membership application filed under 

Nasdaq Rules 1013 and 1017 by an 

Applicant that is not, and is not 

required to become, a FINRA member. 

Nasdaq Rule 1014(b)(1) indicates that 

the Membership Department may deny 

or condition membership approval for 

the same reasons that the Commission 

may deny or revoke a broker or dealer’s 

registration; this Nasdaq Rule parallels 

existing General 3, Section 2(b), which 

describes the Exchange’s authority to 

deny an application for the same 

reasons that the SEC may deny or 

revoke a broker-dealer registration and 

for those reasons required or allowed 

under the Act. 

Nasdaq Rule 1014(b)(2) enumerates 

the reasons for denial or conditional 

approval of a membership application 

in the cases when the Applicant (A) is 

unable to satisfactorily demonstrate its 

capacity to adhere to the Exchange and 

Commission rules; (B) has previously 

violated, and there is a reasonable 

likelihood that such Applicant will 

again engage in violative acts or 

practices, of any Exchange or 

Commission policies, rules, and 

regulations; (C) has engaged in acts or 

practices inconsistent with just and 

equitable principles of trade, and there 

is a reasonable likelihood that such 

Applicant will again engage in violative 

acts or practices, of any Exchange or 

Commission policies, rules, and 

regulations; (D) is not in compliance 

with the Commission’s net capital rule 

or has financial difficulties greater than 

5% of their net worth; (E) has been 

itself, or is the successor to an entity 

subject to a bankruptcy, proceeding, 

receivership, or arrangement for the 

benefit of creditors within the past 3 

years; (F) has engaged in an established 

pattern of failure to pay just debts; (G) 

does not hold required licenses or 

registrations; or (H) is unable to 

satisfactorily demonstrate reasonably 

adequate systems capacity and 

capability. 

The Exchange notes that the basis for 

denial listed under its General 3, 

Section 2(c)(1), regarding an Applicant 

who has a negative net worth, has 

financial difficulties involving an 

amount that is more than five percent 

(5%) of the applicant’s net worth, or has 

a pattern of failure to pay just debts 

(whether or not such debts have been 

the subject of a bankruptcy action), is 

parallel to Nasdaq Rule 1014(b)(2)(D). 

Similarly, the Exchange’s basis for 

denial under General 3, Section 2(c)(2), 

regarding an Applicant unable 

satisfactorily to demonstrate a capacity 

to adhere to all applicable Exchange, 

SEC, the Clearing Corporation and 

Federal Reserve Board policies, rules 

and regulations, including those 

concerning record-keeping, reporting, 

finance and trading procedures, is 

parallel to Nasdaq Rule 1014(b)(2)(A). 

Finally, the provision under General 3, 

Section 2(c)(3), regarding an Applicant 

unable satisfactorily to demonstrate 

reasonably adequate systems capability 

and capacity, is parallel to Nasdaq Rule 

1014(b)(2)(H). 

Furthermore, the Exchange believes 

that the provisions under Nasdaq Rule 

1014(b)(2)(A), (B), and (C), which 

describe the basis for a decision 

regarding the Applicant’s inability to 

satisfy the Exchange and securities 

rules, previous violative conduct, and 

past or potential conduct inconsistent 

with just and equitable principles of 

trade, provide the Exchange with greater 

authority than the one described under 

General 3, Section 2(d), which provides 

that when an Applicant is a subject of 

an investigation conducted by any SRO 

or government agency involving its 

fitness for becoming a Member, the 

Exchange need not act on the 

application until the matter has been 

resolved. 

The Exchange notes that current 

General 3, Section 2(e) and (f), which 

refer to the basis for membership denial 

as it relates to statutory disqualification, 

are substantially similar to Nasdaq Rule 

1002(b)(1) and (2), which describe an 

Applicant’s ineligibility of certain 

persons for membership or association 

due to statutory disqualification. As 

stated above, the Exchange proposes to 

incorporate Nasdaq Rule 1002 in its 

entirety. 

Nasdaq Rule 1014(b)(3) provides that 

the Membership Department will not 

approve an Applicant unless the 

Applicant is a member of another 

registered securities exchange or 

association that is not registered solely 

under Section 6(g) or Section 15A(k) of 

the Act. This rule also provides that an 

Applicant that will transact business 

with the public must be a member of 

FINRA. This requirement exists in the 

Exchange’s rulebook in Options 10, 

Section 1 (‘‘Exchange Approval’’); 

however, to maintain harmonization of 

the rules, the Exchange proposes to 

incorporate by reference this same 

parallel rule. There are no proposed 

changes to rule text found in Exchange 

Options 10, Section 1 at this time. 

The Exchange proposes to incorporate 

by reference Nasdaq Rule 1014(c) to 

establish the time and content of a 

decision and the recourse available to 

an Applicant if the Membership 

Department fails to timely issue a 

decision on a membership application. 

Current Exchange General 3, Section 

5(d), broadly prescribes that the 

Exchange will consider approval of the 

membership application, ‘‘unless there 

is just cause for delay.’’ Nasdaq Rule 

1014(c) outlines this process in greater 

detail. The Nasdaq rule requires the 

Membership Department to serve a 

decision on the membership application 

within a reasonable time period, not to 

exceed 45 (calendar) days after the 

Applicant files and provides to the 

Exchange all required and requested 

information or documents in connection 

with the application. Additionally, the 

rule allows the Membership Department 

and the Applicant the ability to agree to 

further extensions of the decision 

deadlines. Nasdaq Rule 1014(c) also 

provides that the decision will detail the 

reason(s) for the denial of membership 


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15The Exchange notes that, recently, Nasdaq 

adopted Rule 1015(f)(5) which provides for the 

Exchange Review Council to conduct its hearings 

via video conferencing. See Securities Exchange Act 

Release No. 34–90390 (November 10, 2020), 85 FR 

73302 (November 17, 2020) (SR–NASDAQ–2020– 

076). The Exchange has adopted an identical 

provision under General 3, Section 2(g)(6)(E). See 

Securities Exchange Act Release No. 34–90756 

(December 21, 2020), 85 FR 85817 (December 29, 

2020) (SR–ISE–2020–42). 

16See Securities Exchange Act Release No. 34– 

83703 (July 25, 2018), 83 FR 36992 (July 31, 2018) 

(SR–ISE–2018–59). 

17See supra note 4. 

18See supra note 14. 

or the approval of the application 

subject to restrictions. This provision is 

similar to General 3, Section 5(e), which 

currently establishes that the Exchange 

will inform the Applicant of the 

grounds for disapproval of a 

membership application. Moreover, if 

the Membership Department fails to 

timely issue a decision, the rule 

prescribes that the Applicant may 

request the Exchange Board to direct the 

Membership Department to issue a 

decision. The rule further provides that 

the Exchange Board, within seven days, 

will direct the Membership Department 

to serve its decision or to show good 

cause for a time extension. If the 

Membership Department shows good 

cause, the Exchange Board may grant 

the Membership Department up to 45 

days to issue the decision. 

Nasdaq Rule 1014(e) prescribes that 

service of the Membership Department’s 

decision shall be made pursuant to 

Nasdaq Rule 1012. Further, the rule 

provides that the decision shall become 

effective upon service and shall remain 

in effect during the pendency of any 

review until a decision constituting 

final action of the Exchange is issued 

under Rule 1015 or 1016, unless 

otherwise directed by the Exchange 

Review Council, the Exchange Board, or 

the Commission. Current Exchange 

General 3, Section 5(e) prescribes that a 

notice of the Exchange’s decision shall 

be provided to the Applicant but does 

not specify the manner of such 

notification. In addition, Exchange 

General 3, Section 5(h) indicates that 

once an Applicant’s membership 

becomes effective, the Exchange will 

promptly notify the Applicant of such 

decision. The Exchange believes that 

incorporating this rule by reference 

clarifies the process for serving the 

Membership Department’s decision on 

applications. 

Nasdaq Rules 1014(f) and (g), 

respectively, provide for the 

effectiveness of restrictions on an 

approved application and what 

constitutes final action in the 

Membership Department’s decision. 

Rule 1014(f) establishes that a 

restriction imposed under Rule 1014 

shall remain in effect and bind the 

Applicant and all successors to the 

ownership or control of the Applicant 

unless (1) it is removed or modified by 

a decision constituting final action of 

the Exchange issued under Nasdaq 

Rules 1015, 1016, or 1017; or (2) stayed 

by the Exchange Review Council, the 

Exchange Board, or the Commission. 

Rule 1014(g) provides that unless the 

Applicant files a written request for a 

review under Rule 1015, the 

Membership Department’s decision 

shall constitute final action by Nasdaq. 

Rule 1015 

The Exchange proposes to incorporate 

by reference Nasdaq Rule 1015 in its 

entirety under its General 3 title. Nasdaq 

Rule 1015, subsections (a) through (j) 

are substantially similar to the current 

provisions concerning a review by the 

Exchange Review Council detailed in 

Exchange General 3, Section 2(g).15

Current Exchange General 3, Section 

2(g) (formerly Exchange Rule 302(g)) 

was amended in 2018 16 to base the 

Exchange’s procedures on those set 

forth in Nasdaq and BX Rules 1015 and 

1016 (which were identical to Nasdaq’s 

and now incorporate by reference the 

Nasdaq Membership rules 17). The 

Exchange believes that incorporating by 

reference Nasdaq Rule 1015 it will 

further the Exchange’s objective to 

provide uniformity and clarity to its 

rules by aligning them with the 

membership rules of the Nasdaq and BX 

exchanges. 

The Exchange proposes also to 

incorporate by reference Nasdaq Rule 

1015(k) and (l) (respectively, ‘‘Ex Parte 

Communications’’ and ‘‘Recusal or 

Disqualification’’). Both paragraphs (k) 

and (l) were, respectively, previously 

located under Nasdaq Rule 1012(c) and 

(d) but were moved to their current 

location in the Nasdaq rulebook as the 

two provisions logically fit within the 

section of the membership rules that 

govern appeals of membership 

decisions.18 Nasdaq Rule 1015(k) 

prohibits ex parte communications 

involving membership decisions subject 

to review among certain Exchange staff, 

members of the Exchange Review 

Council, members of a Subcommittee of 

the Council, and the Board of Directors. 

Nasdaq Rule 1015(l) governs the recusal 

and disqualification of a member of the 

Exchange Review Council, a 

Subcommittee thereof, or the Board of 

Directors from participating in a review 

of a membership decision. The 

Exchange has no parallel provisions in 

its rulebook to Nasdaq Rule 1015(k) and 

(l). The Exchange believes that 

incorporating Rule 1015(k) and (l) by 

reference enhances the Exchange 

Review Council’s procedures and is in 

line with the Exchange’s goal of 

harmonizing its rules with those of the 

Nasdaq and BX exchanges. 

Rule 1016 

Aside from their respective internal 

cross-references, the text in Nasdaq Rule 

1016 and Exchange General 3, Section 

2(h) (both entitled ‘‘Discretionary 

Review by the Exchange Board’’) are 

identical. The Exchange proposes to 

incorporate by reference Nasdaq Rule 

1016 under its General 3 title. The 

Exchange believes that incorporating by 

reference this rule will further the 

Exchange’s objective to provide 

uniformity and clarity to its rules by 

aligning them with the membership 

rules of the Nasdaq and BX exchanges. 

Rule 1017 

Nasdaq Rule 1017, ‘‘Application for 

Approval of Change in Ownership, 

Control, or Material Business 

Operations,’’ has no analogue rule in the 

Exchange’s current General 3 title. 

Incorporating Nasdaq Rule 1017 by 

reference in its entirety in the 

Exchange’s rules will enhance the 

Exchange’s ongoing regulatory oversight 

capabilities by clearly identifying events 

that would trigger the requirement for 

an approved Member to file an 

application with the Exchange. As 

stated below, Nasdaq Rule 1017 outlines 

in detail the circumstances that trigger 

the filing of an application pursuant to 

this rule. While the Exchange has no 

corresponding rule, it does have a 

similar process in place that it 

administers procedurally. For example, 

if an existing Electronic Access Member 

of the Exchange is seeking market maker 

status for the first time, the current 

Exchange process is to require that the 

Member submit an amended Exchange 

application along with relevant 

supplementary material. The Exchange 

believes that incorporating Nasdaq Rule 

1017 by reference and harmonizing its 

process with that of Nasdaq and BX will 

improve its current practice by further 

streamlining its current practices. As 

stated previously, the objective is to 

eventually harmonize membership rules 

across all Affiliated Exchanges in order 

to advance uniformity within the 

membership rules and procedures. 

Nasdaq Rule 1017(a) prescribes the 

events that require Members to file 

applications with the Exchange. 

Paragraph (a) provides that a Member 

shall file an application for approval 

prior to effecting the following changes: 

(1) A merger of the Member with 

another Member; (2) a direct or indirect 


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acquisition by the Member of another 

Member; (3) direct or indirect 

acquisitions or transfers of 25% or more 

in the aggregate of the Member’s assets 

or any asset, business line or line of 

operations that generates revenues 

comprising 25% or more in the 

aggregate of the Member’s earnings 

measured on a rolling 36 month basis; 

(4) a change in the equity ownership or 

partnership capital of the Member that 

results in one person or entity directly 

or indirectly owning or controlling 25% 

or more of the equity or partnership 

capital; or (5) a material change in 

business operations, which consist of 

(A) removing or modifying a 

membership restriction; (B) acting as a 

dealer or a market maker for the first 

time; (C) adding business activities that 

require a higher minimum net capital 

under SEC Rule 15c3–1; or (D) adding 

business activities that would cause a 

proprietary trading firm no longer to 

meet the definition of that term 

contained in the Rule 1000 Series. 

Nasdaq Rule 1017(b), governs the 

filing and content of applications filed 

under Nasdaq Rule 1017. This Rule 

provides that the application should be 

filed with the Membership Department; 

if the Applicant seeks approval of 

change of ownership or control or a 

material change in the Member’s 

business operations, the application 

should (A) provide a detailed 

description of the proposed change, (B) 

provide a business plan, pro forma 

financials, an organizational chart, and 

written supervisory procedures 

reflecting the proposed change; and (C) 

if the application requests approval of a 

change in ownership or control, the 

application also shall include the names 

of the new owners, their percentage of 

ownership, and the sources of their 

funding for the purchase and 

recapitalization of the member. 

Furthermore, Nasdaq Rule 1017(b) 

provides that if the application requests 

the removal or modification of a 

membership restriction, the application 

also shall, (A) present facts showing that 

the circumstances that gave rise to the 

restriction have changed; and (B) state 

with specificity why the restriction 

should be modified or removed in light 

of the applicable bases for denial or 

standards for approval set forth in 

Nasdaq Rules 1014 or 1017 and the 

articulated rationale for the imposition 

of the restriction. Moreover, the Rule 

indicates that if the application requests 

approval of an increase in Associated 

Persons involved in sales, offices, or 

markets made, the application shall set 

forth the increases in such areas during 

the preceding 12 months. 

Nasdaq Rule 1017(c) indicates when 

an application shall or may be filed. 

Specifically, the Rule provides that (1) 

an application for approval of a change 

in ownership or control shall be filed at 

least 30 days prior to such change; (2) 

that an application to remove or modify 

a membership restriction may be filed at 

any time (clarifying that an existing 

restriction shall remain in effect during 

the pendency of the proceeding); and 

that (3) an application for approval of a 

material change in business operations, 

other than the modification or removal 

of a restriction, may be filed at any time, 

but the Member may not effect such 

change until the conclusion of the 

proceeding, unless the Membership 

Department and the Member otherwise 

agree. 

Nasdaq Rule 1017(d) prescribes that 

an application will be deemed to be 

filed on the date when it is substantially 

complete, meaning the date on which 

the Membership Department receives 

from the Applicant all material 

documentation and information 

required under this Rule, and that the 

Membership Department will notify the 

Applicant in writing when the 

Membership Department deems the 

Applicant’s application to be 

substantially complete. 

Nasdaq Rule 1017(e) indicates that, 

pursuant to Nasdaq Rule 1013(a)(3), the 

Membership Department may treat an 

application filed under this Rule as 

having lapsed or it may reject such an 

application, except that the Membership 

Department may treat an application as 

having lapsed if it is not substantially 

complete for 30 days or more after the 

Applicant initiates it. 

Nasdaq Rule 1017(f) provides that the 

Membership Department, at any time 

before it serves its decision, may request 

additional information or 

documentation from the Applicant or 

from a third party in accordance with 

Nasdaq Rule 1013(a)(4). 

Nasdaq Rule 1017(g) establishes that a 

Membership Department’s decision 

shall be issued in accordance with 

Nasdaq Rule 1014, except that (1) In 

rendering a decision on an application 

submitted under the Rule that requests 

the modification or removal of a 

membership restriction, the 

Membership Department shall consider 

whether maintenance of the restriction 

is appropriate in light of: (A) The 

applicable bases for denial or standards 

for approval set forth in Nasdaq Rule 

1014; (B) the circumstances that gave 

rise to the imposition of the restriction; 

(C) the Applicant’s operations since the 

restriction was imposed; (D) any change 

in ownership or control or supervisors 

and principals; and (E) any new 

evidence submitted in connection with 

the application. Furthermore, this Rule 

provides that the Membership 

Department shall serve a written 

decision on an application filed under 

this Rule in accordance with Nasdaq 

Rule 1013(c). Moreover, the Rule 

provides that in the event that a 

proposed change in ownership, control, 

or business operations by a Member 

requires such Member to become a 

member of FINRA, the Membership 

Department shall not be required to 

serve a written decision under this Rule 

until 10 business days after the Member 

becomes a FINRA member. 

Nasdaq Rule 1017(h) provides that 

service of the decision on the Applicant 

in accordance with Nasdaq Rule 1012. 

Moreover, the Rule indicates that the 

decision shall become effective upon 

service and shall remain in effect during 

the pendency of any review until a 

decision constituting final action of the 

Exchange is issued under Rules 1015 or 

1016, unless otherwise directed by the 

Exchange Review Council, the Exchange 

Board, or the Commission. 

Nasdaq Rule 1017(i) indicates that an 

Applicant may file a written request for 

review of the Membership Department’s 

decision with the Exchange Review 

Council pursuant to Nasdaq Rule 1015, 

the rule further clarifies that the 

procedures set forth in Nasdaq Rule 

1015 shall apply to such review, and the 

Exchange Review Council’s decision 

shall be subject to discretionary review 

by the Exchange Board pursuant to 

Nasdaq Rule 1016. If the Applicant does 

not file a request for a review, the 

Membership Department’s decision 

shall constitute final action by Nasdaq. 

Nasdaq Rule 1017(j) prescribes that 

the Membership Department shall 

modify or remove a restriction on its 

own initiative if the Membership 

Department determines such action is 

appropriate in light of the 

considerations set forth in paragraph 

(g)(1) of the Rule. The Membership 

Department shall notify the member in 

writing of the Membership Department’s 

determination and inform the member 

that it may apply for further 

modification or removal of a restriction 

by filing an application under paragraph 

Rule 1017(a). 

Rule 1018 

Nasdaq Rule 1018, ‘‘Resignation, 

Reinstatement, Termination, and 

Transfer of Membership,’’ has no 

analogue rule in the Exchange’s current 

General 3 title. The Exchange proposes 

to incorporate the rule by reference 

under its General 3 title. Nasdaq Rule 

1018 outlines the process for 

resignation, reinstatement, termination, 


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and transfers of memberships. 

Incorporating Nasdaq Rule 1018 by 

reference will eventually allow the 

Exchange to standardize the processing 

of these requests across all the Affiliated 

Exchanges. 

Nasdaq Rule 1018(a) provides that 

membership in Nasdaq may be 

voluntarily terminated only by formal 

resignation. Resignations of Members 

must be filed via electronic process or 

such other process as the Exchange may 

prescribe. Any Member may resign from 

Nasdaq at any time. Such resignation 

shall not take effect until all 

indebtedness due to Nasdaq from such 

Member shall have been paid in full and 

so long as any complaint or action is 

pending against the Member under the 

Rules. Nasdaq, however, may in its 

discretion declare a resignation effective 

at any time. 

Nasdaq Rule 1018(b) indicates that no 

Member may transfer its membership or 

any right arising therefrom; the 

membership of a corporation, 

partnership, or any other business 

organization that is a Member shall 

terminate upon its liquidation, 

dissolution, or winding up; and the 

membership of a sole proprietorship 

that is a Member shall terminate at 

death, provided that all obligations of 

membership under the Rules have been 

fulfilled. Moreover, the Rule provides 

that the consolidation, reorganization, 

merger, change of name, or similar 

change in any corporate Member shall 

not terminate the membership of such 

corporate Member, provided that the 

Exchange Member or surviving 

corporation, if any, shall be deemed a 

successor to the business of the 

corporate Member, and the Member or 

the surviving organization shall 

continue in the securities business, and 

shall possess the qualifications for 

membership in the Exchange. 

Furthermore, the death, change of name, 

withdrawal of any partner, the addition 

of any new partner, reorganization, 

consolidation, or any change in the legal 

structure of a partnership Member shall 

not terminate the membership of such 

partnership Member, provided that the 

Member or surviving organization, if 

any, shall be deemed a successor to the 

business of the partnership Member, 

and the Member or surviving 

organization shall possess the 

qualifications for membership in the 

Exchange. If the business of any 

predecessor Member is to be carried on 

by an organization deemed to be a 

successor organization by the Exchange, 

the membership of such predecessor 

Member shall be extended to the 

successor organization subject to the 

notice and application requirements of 

the Rules and the right of the Exchange 

to place restrictions on the successor 

organization pursuant to the Rules; 

otherwise, any surviving organization 

shall be required to satisfy all of the 

membership application requirements 

of the Exchange’s Rules. 

Nasdaq Rule 1018(c) establishes that 

any membership or registration 

suspended or canceled under the Rules 

may be reinstated by the Exchange upon 

such terms and conditions as are 

permitted under the Act and the 

Exchange rules; provided, however, that 

any applicant for reinstatement of 

membership or registration shall possess 

the qualifications required for 

membership or registration in the 

Exchange. 

Rule 1019 

Nasdaq Rule 1019 (‘‘Application to 

Commission for Review’’) has no 

analogue rule in the Exchange’s current 

General 3 title. Nasdaq Rule 1019 allows 

Applicants to request the Commission 

to review an Exchange final action, as 

provided under the Nasdaq Rule 1010 

Series. Incorporating Nasdaq Rule 1019 

by reference standardizes the process by 

which an Applicant may dispute any 

final action of the Exchange. 

Nasdaq Rule 1019 provides that a 

person aggrieved by a Nasdaq’s final 

action under Nasdaq Membership Rules 

may apply for review by the 

Commission pursuant to Section 

19(d)(2) of the Act. The filing of an 

application for review shall not stay the 

effectiveness of a decision constituting 

final action of the Exchange, unless the 

Commission otherwise orders. 

Revised Membership Application 

As part of the harmonization of its 

membership rules and procedures with 

those of Nasdaq and BX, the Exchange 

is adopting a standardized BrokerDealer Membership Application 

(‘‘Membership Application’’). The 

Membership Application is submitted 

as Exhibit 3A of this proposed rule 

change with underlined changes 

concerning the ISE market. Each 

Exchange Membership Application will 

be accompanied by a ‘‘Membership 

Agreement’’ (submitted as Exhibit 3B of 

the attached), which should be signed 

by all applicants to membership with 

the Exchange. 

Conclusion 

The changes proposed herein will 

allow the Exchange to harmonize its 

membership rules and processes with 

those of Nasdaq and BX, and ultimately, 

with the other Affiliated Exchanges, 

which will eventually provide a 

uniform criteria across the Affiliated 

Exchanges for membership 

qualifications and a consistent process 

across the Affiliated Exchanges for 

processing membership applications. 

The proposal will also provide for full 

membership reciprocity between 

Nasdaq, BX, and the Exchange—and 

hopefully, in time, across all of the 

Affiliated Exchanges—so that a member 

of one Affiliated Exchange would 

receive expedited treatment in applying 

for membership on any other Affiliated 

Exchange. Similarly, harmonized 

membership rules and processes will 

benefit Exchange Applicants and 

Members by establishing consistent 

membership requirements and 

processes that must be followed to 

apply for membership on the Exchange. 

Moreover, as to the Exchange itself, 

the proposed changes described herein 

will render the Exchange’s membership 

rules and processes clearer, better 

organized, simpler, and easier to comply 

with. Again, such changes will provide 

benefits both to the Exchange’s 

Membership Department and to 

Exchange Applicants. 

The proposed membership rules and 

processes are substantially similar to the 

existing rules and process, and where 

there are differences between the new 

and old processes, the Exchange 

believes that the new process does not 

disadvantage its Members or Associated 

Persons. To the contrary, the Exchange 

believes that the new rules and 

processes will benefit all parties as it 

again provides greater clarity, 

simplicity, and efficiency than the 

retired rules and processes. 

Implementation 

To facilitate an orderly transition from 

the existing rules under the General 3 

title and the Nasdaq Membership Rules 

to be incorporated by reference, the 

Exchange is proposing to apply the 

existing Rules to all applications which 

have been submitted to the Exchange 

(including applications that are not yet 

complete) and are pending approval 

prior to the operative date. The 

Exchange also will apply the existing 

Rules to any appeal of an Exchange 

membership decision or any request for 

the Board to direct action on an 

application pending before the 

Exchange Review Council, the Board, or 

the Commission, as applicable. As a 

consequence of this transition process, 

the Exchange will retain the existing 

processes during the transition period 

until such time that there are no longer 

any applications or matters proceeding 

under the existing rules. To facilitate 

this transition process, the Exchange 

will retain a transitional rulebook that 

will contain the Exchange’s membership 


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19 15 U.S.C. 78f(b). 

20 15 U.S.C. 78f(b)(5). 

21 15 U.S.C. 78f(b)(7). 22 15 U.S.C. 78f(b)(7). 

rules as they are at the time that this 

proposal is filed with the Commission. 

This transitional rulebook will apply 

only to matters initiated prior to the 

operational date of the changes 

proposed herein and it will be posted to 

the Exchange’s public rules website. 

When the transition is complete, the 

Exchange will remove the transitional 

rulebook from its public rules website. 

The Exchange will announce and 

explain this transition process in a 

regulatory alert. 

The Exchange notes that Nasdaq 

applied the same process described 

above to govern its transition to its 

amended membership rules. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,19 in general, and furthers the 

objectives of Section 6(b)(5) and of the 

Act,20 in particular, in that it is designed 

to promote just and equitable principles 

of trade, 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. It is 

also consistent with Section 6(b)(7) of 

the Act in that it provides for a fair 

procedure for denying Exchange 

membership to any person who seeks it, 

barring any person from becoming 

associated with an Exchange Member, 

and prohibiting or limiting any person 

with respect to access to services offered 

by the Exchange or a Member thereof.21

As a general matter, the Exchange 

believes that its proposal to delete its 

existing membership rules, incorporate 

by reference the Nasdaq Membership 

Rules, and other related changes will 

promote a free and open market, and 

will benefit investors, the public, and 

the markets, because the new rules will 

be clearer, better organized, and 

simpler. 

The proposal is just and equitable 

because it will render the Exchange’s 

membership rules easier for Applicants 

and Members to read and understand, 

including by doing the following: 

• Establishing a ‘‘roadmap’’ 

paragraph as shown in Nasdaq Rule 

1014(a) that sets forth the basic 

authority of the Membership 

Department to approve, approve with 

conditions, or deny applications for 

membership before the Rule goes on to 

enumerate criteria for the Membership 

Department to apply when taking each 

of those actions; 

• Making the titles of the rules more 

accurate and descriptive (e.g., Nasdaq 

Rule 1014(b)); 

• Grouping logically-related 

provisions together in the rules (e.g., 

provisions governing resignation, 

termination, transfer, and reinstatement 

of membership) and recusals and 

disqualifications; 

• Clarifying when the Membership 

Department will deem an application to 

be filed (when the application is 

‘‘substantially complete,’’ as set forth in 

Nasdaq Rule 1013(a)(2)) and by 

requiring the Membership Department 

to notify an Applicant in writing of the 

filing date; 

• Clarifying what the Exchange 

means when it states that an Applicant 

may ‘‘waive-in’’ to Exchange 

membership (as set forth in Nasdaq Rule 

1013(b)); and 

The proposal will also make 

compliance with the membership rules 

simpler and less burdensome for 

Applicants and Members by, for 

example, doing the following: 

• Eliminating obsolete requirements 

to submit paper copies of Forms U–4 

and BD or explain information listed on 

the forms where the Membership 

Department already has electronic 

access to the Forms and the information 

contained therein; 

• Permitting electronic filing of 

applications (Nasdaq Rule 1012(a)(1); 

• Allowing payment of application 

fees by means other than paper check 

(Nasdaq Rule 1013(a)(1)(C)); 

• Harmonizing disparate procedures 

under Nasdaq Rules 1013 and 1017 for 

filing, evaluating, and responding to 

initial membership applications and 

applications for approval of business 

changes; 

• Detailing the circumstances in 

which an Applicant may waive-into 

Exchange membership to include the 

Applicant’s membership in any of the 

affiliated exchanges and defining 

procedures for processing and 

responding to waive-in applications 

(Nasdaq Rule 1013(b)); 

In sum, the foregoing changes will 

update, rationalize, and streamline the 

Exchange’s membership rules and 

processes, all to the benefit of 

Applicants and Members. Moreover, 

these changes will not adversely impact 

the rights of Applicants or Members to 

appeal adverse Membership Department 

decisions under these Rules or to 

request Board action to compel the 

Membership Department to render 

decisions on applications. 

Last, the Exchange believes that its 

proposal to phase-in the 

implementation of the new membership 

rules and processes is consistent with 

Section 6(b)(7) of the Act 22 because 

both the current and proposed processes 

provide fair procedures for granting and 

denying applications for becoming an 

Exchange Member, becoming an 

Associated Person, and making material 

changes to the business operations of a 

Member. The Exchange is proposing to 

provide advanced notice of the 

implementation date of the new 

processes, and will apply the new 

processes to new applications, appeals, 

and requests for Board action that are 

initiated on or after that implementation 

date. Any application, appeal, or request 

for Board action initiated prior to the 

implementation date will be completed 

using the current processes. As a 

consequence, the Exchange will 

maintain a transitional rulebook on the 

Exchange’s public rules website which 

will contain the Exchange Rules as they 

are at the time of filing this rule change. 

These transitional rules will apply 

exclusively to applications, appeals, and 

requests for Board action initiated prior 

to the implementation date. Upon 

conclusion of the last decision on a 

matter to which the transitional rules 

apply, the Exchange will remove the 

defunct transitional rules from its public 

rules website. Thus, the transition will 

be conducted in a fair, orderly, and 

transparent manner. Lastly, the 

proposed transition process is the same 

process that Nasdaq and BX 

implemented during its transition to 

new membership rules. 

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not expect that its 

proposed changes to the membership 

rules will have any competitive impact 

on its existing or prospective 

membership. The proposed changes will 

apply equally to all similarly situated 

Applicants and Members and they will 

confer no relative advantage or 

disadvantage upon any category of 

Exchange Applicant or Member. 

Moreover, the Exchange does not expect 

that its proposal will have an adverse 

impact on competition among 

exchanges for members; to the contrary, 

the Exchange hopes that by clarifying, 

reorganizing, and streamlining its 

membership rules, the Exchange’s 

membership process will be less 

burdensome for Applicants and 

Members and the Exchange will 


khammond on DSKJM1Z7X2PROD with NOTICES
5296 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Notices 

23 15 U.S.C. 78s(b)(3)(A)(iii). 

24 17 CFR 240.19b-4(f)(6). In addition, Rule 19b4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

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. 

25 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 ‘‘Market Maker’’ means a Member registered 

with the Exchange for the purpose of making 

markets in options contracts traded on the 

Exchange and that is vested with the rights and 

responsibilities specified in Chapter VI of Exchange 

Rules. See the Definitions Section of the Fee 

Schedule. 

improve its competitive standing 

relative to other exchanges. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

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)(iii) of the Act 23 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.24

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 

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 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

ISE–2020–43 on the subject line. 

Paper Comments 

• 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–ISE–2020–43. 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/sro.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 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. 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 SR–ISE–2020–43 and should be 

submitted on or before February 9, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–00948 Filed 1–15–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90906; File No. SR– 

PEARL–2020–38] 

Self-Regulatory Organizations; MIAX 

PEARL, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change to Amend the MIAX 

PEARL Fee Schedule 

January 12, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b-4 thereunder,2

notice is hereby given that on December 

31, 2020, MIAX PEARL, LLC (‘‘MIAX 

PEARL’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I, II, and III 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX PEARL Fee Schedule 

(the ‘‘Fee Schedule’’) for the Exchange’s 

options market. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal 

office, and at the Commission’s Public 

Reference Room. 

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 

Exchange 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 these 

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 aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Add/Remove Tiered Rebates/Fees set 

forth in Section (1)(a) of the Fee 

Schedule that apply to the MIAX 

PEARL Market Maker 3 Origin, to: (i) 

Modify the volume threshold for the 

alternative Volume Criteria in Tier 2; 

and (ii) add a new, alternative Volume 

Criteria to Tier 3. 

Background 

The Exchange currently assesses 

transaction rebates and fees to all 

market participants which are based 

upon the total monthly volume 


khammond on DSKJM1Z7X2PROD with NOTICES