36992 Federal Register / Vol. 83, No. 147 / Tuesday, July 31, 2018 / Notices 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3As discussed below, the Exchange proposes to 

replace Chapter 17, which sets forth processes for 

persons aggrieved by Exchange actions, including 

adverse membership or association determinations, 

by adding to Exchange Rules 302 and 307 

provisions adapted from BX Rules 1015 and 1016, 

which provide for similar adjudicative processes. 

Portions of proposed Chapter 90 also replace 

portions of Chapter 17, e.g., statutory 

disqualification in the 9520 Series. 

4The Exchange proposes to add Chapters 23–79 

and Chapters 81–89 to its Rules, but reserve such 

Chapters for future use. 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) 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– 

NASDAQ–2018–057 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–NASDAQ–2018–057. 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–NASDAQ–2018–057, and 

should be submitted on or before 

August 21, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–16270 Filed 7–30–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83703; File No. SR–ISE– 

2018–59] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Align Existing 

Investigatory and Disciplinary 

Processes and Related Rules With the 

Investigatory and Disciplinary 

Processes and Associated Rules of 

Nasdaq BX, Inc. 

July 25, 2018. 

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 July 12, 

2018, 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 align its 

existing investigatory and disciplinary 

processes and related rules with the 

investigatory and disciplinary processes 

and associated rules of Nasdaq BX, Inc. 

(‘‘BX’’). 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://ise.cchwallstreet.com/, 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 

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 eliminate 

its existing processes for: (1) Summarily 

suspending and limiting or prohibiting 

access to Exchange services by 

Exchange members (‘‘Members’’), 

persons associated with such Members 

(‘‘Associated Persons’’), (2) investigating 

and disciplining Exchange Members 

and Associated Persons, and (3) 

adjudicating actions brought by persons 

economically aggrieved by certain 

Exchange actions. The Exchange also 

seeks to eliminate Chapters 15, 16, and 

17 3 of the Exchange’s Rules (with 

certain exceptions, discussed below), 

which set forth and govern such 

processes, respectively, and it proposes 

to eliminate the Exchange’s Business 

Conduct Committee (‘‘BCC’’), which is a 

body that exists to help to enforce the 

Exchange’s Rules. The Exchange further 

proposes to adopt, in place of the 

aforementioned Rules, the investigatory, 

disciplinary, and adjudicatory processes 

of the Exchange’s sister exchange, BX. It 

also proposes to replace the BCC with 

an Exchange Review Council that is 

similar to one that BX has in place. 

Specifically, the Exchange proposes to 

establish new Chapters 80 and 90 of its 

Rules 4 and incorporate by reference 

into those Chapters (again with certain 

exceptions, described below) the BX 


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5Citation herein to rules of the proposed Chapters 

80 and 90 will be preceded by the term ‘‘BX Rule’’ 

to reflect incorporation of the BX Rule 8000 and 

9000 Series. References to current rules will be 

preceded by the term ‘‘Existing Rule.’’ 

6The Exchange proposes to separately request an 

exemption from the rule filing requirements of 

Section 19(b) of the Act for changes to Chapters 80 

and 90 to the extent such rules are effected solely 

by virtue of a change to the BX Rule 8000 and 9000 

Series. 

7The Exchange notes that the BX Rule 8000 and 

9000 Series are substantially similar to 

corresponding rules of The Nasdaq Stock Market, 

LLC (‘‘Nasdaq’’) and Nasdaq PHLX, LLC (‘‘Phlx’’). 

Moreover, the Exchange notes that Nasdaq MRX, 

LLC and Nasdaq GEMX, LLC will propose similar 

changes to their respective investigatory and 

disciplinary processes and associated rules that will 

render them substantially similar to those of BX. 

8As defined in Existing Rule 100(a)(30). 

9As defined in Existing Rule 100(a)(4). 

10The Exchange notes that the scope of its 

Regulation Department is the same as that of the BX 

Regulation Department. 

11Existing Rule 1601 obligates each Member and 

Associated person to comply with investigatory 

requests by the Exchange (or FINRA, acting on its 

behalf) for testimony, or for written information or 

documentary materials. 

12See RSA, dated June 10, 2013, as amended. The 

Exchange retains ultimate legal responsibility for 

the regulation of its Members, persons associated 

with its Members, and its market. See Existing Rule 

1615 and its Supplementary Material. 

13Although Existing Rule 1615 and its 

Supplementary Material authorizes the Exchange to 

contract with FINRA or another self-regulatory 

organization (‘‘SRO’’) to perform its disciplinary 

functions, the Existing Rule states that the Exchange 

retains ultimately legal responsibility for and 

control over such functions. 

14Under the RSA, ISE’s Regulation Department 

may elect to exercise jurisdiction over a matter 

involving an ISE Member or an Associated Person, 

performing the investigation and any resulting 

prosecutorial work without FINRA’s involvement. 

15See FINRA Regulatory Notice 09–17 (March 

2009) (available at http://www.finra.org/sites/ 

default/files/NoticeDocument/p118171.pdf). 

16Both the Existing Rules and the BX Rules refer 

to their respective disciplinary adjudication panels 

as ‘‘Hearing Panels.’’ In the discussion that follows, 

the Exchange distinguishes between these two types 

of panels, which differ from one another 

substantively, by referring to the type of panel that 

exists under the Existing Rules as a ‘‘Current 

Hearing Panel’’ and the panel that the Exchange 

proposes to establish under the BX Rules as a ‘‘New 

Hearing Panel.’’ For purposes of the following 

discussion, the term New Hearing Panel shall also 

refer to an ‘‘Extended Hearing Panel,’’ as that term 

is defined in BX Rule 9120(l). 

17See Resolution of the Board of Directors of the 

International Securities Exchange LLC Delegating 

Authority, dated May 11, 2000. 

18See ISE Business Conduct Committee Charter, 

as amended, May 1, 2003. 

Rule 8000 and 9000 Series,5 which set 

forth and govern the BX investigatory, 

disciplinary, and adjudicative 

processes.6 The proposed changes, 

when coupled with certain changes to 

the Exchange’s other Rules, including 

Rules that govern appeals of the 

Exchange’s membership and other 

decisions, will render the Exchange’s 

investigative, disciplinary, and 

adjudicatory processes substantially the 

same as those, not only of BX, but also 

of other Nasdaq, Inc. family of [sic] 

exchanges (the ‘‘Nasdaq, Inc. 

Exchanges’’).7 The proposal [sic] change 

will also further harmonize the work 

that the Financial Industry Regulatory 

Authority (‘‘FINRA’’) conducts for all 

these exchanges. 

Overview of the Exchange’s Existing 

Investigatory, Disciplinary, and 

Adjudicatory Processes and Rules 

The existing processes for 

investigating and disciplining Exchange 

Members 8 and Associated Persons,9 for 

taking summary action against them, 

and for adjudicating Exchange actions 

that aggrieve them, are set forth in 

Existing Chapters 15–17 of the 

Exchange’s Rulebook. 

With respect to investigations, 

Existing Rule 1602 authorizes the 

Exchange’s regulatory staff (hereinafter 

described in this filing, for consistency 

with the BX rules, as ‘‘Regulation 

Department’’ or ‘‘Exchange Regulation 

Department’’)10 to investigate Members 

and Associated Persons based on 

information it receives from a variety of 

sources, such as surveillance reviews, 

examinations, industry notifications, 

third party complaints, and referrals.11

Alternatively, the Rule provides that the 

Exchange may, and it typically does, 

refer such investigatory matters to 

FINRA. 

FINRA performs, among other things, 

investigatory and prosecutorial work for 

the Exchange pursuant to a Regulatory 

Services Agreement between the two 

parties (the ‘‘RSA’’).12 Under the RSA, 

FINRA is responsible 13 for the 

investigation of potential violations of 

the Exchange Rules and the Act, and for 

the prosecution of any such violations 

thereof, by Exchange Members and 

Associated Persons.14 Upon completion 

of an investigation, FINRA analyzes the 

evidence and applicable law, and makes 

preliminary determinations, known as 

‘‘Sufficiency of Evidence’’ reviews, as to 

whether or not violations have 

occurred.15 The Sufficiency of Evidence 

review determines the nature of 

FINRA’s recommendation to the 

Exchange’s Chief Regulatory Officer 

(‘‘CRO’’) as to whether and how to 

proceed further with matters. If probable 

cause exists that a Member or 

Associated Person has violated the 

Exchange Rules or the Act, then the 

Regulation Department may file charges 

against the Member or Associated 

Person for adjudication before a Current 

Hearing Panel.16 A Current Hearing 

Panel consists of a professional hearing 

officer and two members of the 

Exchange’s BCC. 

Currently, the BCC is charged with 

enforcing the Rules of the Exchange 

with respect to Members and Associated 

Persons. The BCC is a committee, 

established by the Board,17 whose 

enforcement jurisdiction includes the 

following: (1) Ordering investigations of 

possible Rule violations; (2) considering 

letters of consent in expedited 

disciplinary actions; (3) making its 

members available to serve on Current 

Hearing Panels that adjudicate formal 

disciplinary proceedings; (4) imposing 

sanctions on Members or Associated 

Persons in disciplinary proceedings 

(‘‘Respondents’’); (5) reviewing 

Exchange actions involving minor rule 

violations; (6) appointing panels to 

conduct hearings and reviews of 

Exchange actions that deny membership 

or Member association privileges; and 

(7) generally overseeing all matters 

relating to the conduct of disciplinary 

hearings and hearings for review of 

Exchange decisions, and providing the 

Exchange with advice for improving 

disciplinary procedures.18

The Existing Rules provide several 

means by which the Exchange may 

pursue disciplinary actions. 

First, Existing Rule 1603 permits 

informal disposition of disciplinary 

matters through ‘‘letters of consent.’’ 

The Existing Rule states that 

disciplinary matters are disposable in 

this manner if: (1) The Parties agree to 

the terms of such a letter, including any 

sanctions imposed therein; (2) the CRO 

approves of the draft letter; and (3) the 

BCC subsequently approves of the draft 

letter. If the Parties to the letter cannot 

reach agreement to [sic] its terms, or if 

the CRO or BCC reject [sic] it, then the 

disciplinary matter proceeds through 

formal channels. 

Second, Existing Rules 1604–1613 

provide for formal adjudication of 

disciplinary matters. These Existing 

Rules state that, whenever probable 

cause exists for finding that a Member 

or Associated Person has committed a 

violation within the disciplinary 

jurisdiction of the Exchange, regulatory 

staff may prepare a ‘‘statement of 

charges,’’ subject to the approval of the 

CRO. The Existing Rules further provide 

for Current Hearing Panels to adjudicate 

disciplinary matters. Current Hearing 

Panels are composed of a professional 

hearing officer, who serves as the 

Current Hearing Panel Chair, and two 

members of the BCC. The Existing Rules 

provide for the Parties to a disciplinary 

proceeding to receive at least 28 

calendar days’ notice prior to the 

occurrence of a hearing. They also 

provide for a pre-hearing conference to 


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19 Generally, notice to the SEC of final 

disciplinary action by an SRO is required pursuant 

to Rule 19d–1 of the Act; however, uncontested 

fines of $2,500 or less assessed for violations of 

MRVP rules are subject to abbreviated periodic SEC 

reporting. None of the fines assessed in lieu of 

formal disciplinary action exceed $5,000. 

20 Determinations to issue a fine under Rule 1614 

are made on a case-by-case basis, whereby the 

Exchange considers the individual facts and 

circumstances to determine whether a fine of more 

or less than the recommended amount is 

appropriate for the violation, or whether the 

violation requires formal disciplinary action. 

21Existing Rule 1614(c). 

22See id. 

23See id. 

24See n.20, infra. 

expedite disciplinary proceedings by, 

among other things, seeking the Parties’ 

agreement regarding undisputed facts. 

They permit non-Parties to proceedings 

to intervene, under certain 

circumstances, and they grant the 

Current Hearing Panel Chair broad 

discretion to determine the course of the 

proceedings, including with respect to 

timing, filing deadlines, if not specified 

in the Rules, and evidentiary matters. 

They generally prohibit interlocutory 

review of Current Hearing Panel 

decisions as well as ex parte 

communications among Members and 

Associated Persons and Panelists, the 

BCC, or the Board concerning the merits 

of a disciplinary matter. They require 

Current Hearing Panels to issue their 

decisions by majority vote and in 

writing. 

Existing Rule 1608 permits Current 

Hearing Panels to engage in summary 

disciplinary proceedings, meaning that 

they may reach decisions and impose 

penalties without holding hearings as to 

violations that Respondents admit, do 

not dispute, or fail to answer. The Rule 

provides, in such instances, that 

Respondents have 10 calendar days 

following service of such summary 

decisions to request hearings as to 

matters not previously admitted or to 

contest the penalties imposed. 

Existing Rule 1609 sets forth 

procedures for settlements of 

disciplinary matters. The Rule generally 

provides that a Party may submit up to 

two written ‘‘offers of settlement’’ at any 

time period prior to 120 calendar days 

following service of the statement of 

charges. Settlements must be approved 

by the Current Hearing Panel (or the 

CRO if a Current Hearing Panel has yet 

to be appointed). 

Pursuant to Existing Rule 1610, 

Respondents may appeal Current 

Hearing Panel decisions to the Board. 

The Rule also permits the Board to 

review Current Hearing Panel decisions 

upon its own initiative within 30 

calendar days after service of such 

decisions. The Rule permits the Board 

to delegate responsibility for its review 

to a committee composed of at least 

three of its Directors whose decision 

must be ratified by the Board. The Board 

may affirm, reverse, or modify decisions 

of Current Hearing Panels, and such 

Board decisions are final. 

Third, Existing Rule 1614 provides for 

the disposition of certain minor 

disciplinary violations through the 

summary assessment of fines.19 This 

Rule comprises violations of the Rules 

listed in Rule 1614(d) and that are set 

forth in the Exchange’s Minor Rule 

Violation Plan (‘‘MRVP’’) approved by 

the Commission pursuant to SEC Rule 

19d–1 (‘‘MRVP violations’’) as well as 

violations that are not included in the 

Exchange’s MRVP but may be 

considered ‘‘minor’’ in nature (‘‘minor 

rule violations’’) and thus possibly 

resolved outside of the formal 

disciplinary process.20 Existing Rule 

1614(a) sets forth the Exchange’s general 

authority to assess such fines in 

amounts no greater than $5,000 (up to 

$2,500 for MRVP violations, and up to 

$5,000 for minor rule violations). 

Existing Rule 1614(b) sets forth the 

notice requirements for service upon the 

Member or person against which the 

fine is to be levied (a ‘‘Subject’’). The 

Existing Rule requires the Exchange to 

serve notice upon the Subject, along 

with a written statement that describes 

the nature of the alleged violation and 

the basis for finding that the Subject 

committed the violation, the amount of 

the fine to be imposed for each 

violation, and a date, not less than 30 

calendar days after service of the notice, 

by which such determination becomes 

final and such fine must be paid or 

contested. 

Under Existing Rule 1614(c), a Subject 

may contest the fine by filing an answer 

to this written determination prior to 

the date when the fine is payable. 

Additionally, the Subject may request a 

hearing as part of the answer.21 The 

Rule charges the BCC, or a 

subcommittee thereof, with adjudicating 

contested fines. The BCC may decide to 

overturn, affirm, or modify fines levied 

by the Exchange.22 A Subject or the 

Exchange staff may appeal such 

determinations to the Board, and the 

Board may also call the matter for 

review on its own initiative.23

Existing Rule 1614(d) sets forth the 

list of violations and a corresponding 

schedule of fines that the Exchange may 

impose and disciplinary actions it may 

pursue for MRVP violations and minor 

rule violations.24 They include the 

following: 

• Violations of Rule 412 pertaining to 

position limits (with fines ranging from 

$500 for the first offense within any 24 

month rolling period to $5,000 for the 

fourth and subsequent offenses within 

the same period); 

• Violation of Rule 1403 for failing to 

file focus reports (with sanctions 

ranging from a $200 fine for 

delinquencies of up to 30 calendar days 

and formal disciplinary action for 

delinquencies of 90 or more calendar 

days); 

• Failing to make timely responses to 

requests for trade data in violation of 

Rule 1404 (with sanctions for the first 

offense ranging from a $200 fine for 

delinquencies of up to 9 business days 

to formal disciplinary action for 

delinquencies of 30 or more business 

days, and sanctions for subsequent 

offenses ranging from a $500 fine for the 

second offense to formal disciplinary 

action beginning with the fifth offense); 

• Violating Rule 717(d) and (e) 

regarding limits on orders entered by 

Electronic Access Members (with a 

letter of caution for the first five offenses 

within one calendar year, fines 

escalating from $500 to $2,000 for the 

sixth through the twentieth offenses 

within the same period, and formal 

disciplinary action thereafter); 

• Violations of Rule 803 and 

805(b)(1)(i) regarding pre- and postopening quote spread parameters for 

market maker quotations (with a letter 

of caution for the first offense within 

any 24 month rolling period, fines 

escalating from $1,000 to $5,000 for the 

second through the fourth offenses 

within the same period, and formal 

disciplinary action thereafter); 

• Violations of Rule 805, which 

requires market makers to execute in 

appointed options classes a minimum 

percentage of the total number of 

contracts executed during a quarter 

(with a letter of caution for the first 

offense within any 12 month rolling 

period, fines escalating from $500 to 

$2,500 for the second through the fourth 

offenses within the same period, and 

formal disciplinary action thereafter); 

• Failure to conduct mandatory 

systems testing in violation of Rule 419 

(with fines escalating from $250 to 

$2,000 for the first through the fourth 

offenses within one calendar year, and 

formal disciplinary action thereafter); 

• Failure to timely submit 

information or instructions regarding 

the exercise or non-exercise of noncashsettled equity options in violation of 

Rule 1100 (with fines for member 


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25The Exchange notes that it proposes to amend 

the term ‘‘Member Organization’’ so that it merely 

reads ‘‘Member.’’ These terms are synonymous. 

26As explained below, the Exchange also 

proposes to retain Existing Rule 1600, which sets 

forth the general jurisdiction of the Exchange with 

respect to disciplinary matters. Existing Rule 1600 

states that a Member or Associated Person who is 

alleged to have violated or aided and abetted a 

violation of the Act, the rules and regulations 

promulgated thereunder, and the By-Laws or Rules 

of the Exchange, or any interpretation thereof are 

subject to the disciplinary jurisdiction of the 

Exchange and may be, after notice and opportunity 

for a hearing, appropriately disciplined by 

expulsion, suspension, fine, censure, limitation or 

termination as to activities, functions, operations, or 

association with a Member, or any other fitting 

sanction in accordance with the provisions of the 

disciplinary rules. It also permits the Exchange to 

charge a supervisor with a violation of a rule within 

the disciplinary jurisdiction of the Exchange 

committed by an employee under his supervision 

or by the Member as though such violations were 

his own. Finally, it extends the disciplinary 

jurisdiction of the Exchange to continue after 

deregistration of the Member from the Exchange or 

a person’s termination of association with a 

Member as to matters that occurred prior to such 

termination or deregistration. The Exchange must 

serve written notice to the former Member within 

one year of receipt by the Exchange of notice of 

such termination or deregistration that the 

Exchange is making inquiry into a matter or 

matters. 27See Existing Rule 1500. 

28See id. 

29See id. 

30See id. 

31See Existing Rule 1501. 

32See id. 

33See Existing Rule 1502. 

34See id. 

35See id. 

organizations25 escalating from $1,000 

for the first offense within any 24 month 

rolling period to $5,000 for the third and 

subsequent offenses within the same 

period, and for individuals, from $500 

for the first offense within any 24 month 

rolling period to $2,500 for the third and 

subsequent offenses within the same 

period); 

• Failure to accurately report 

positions and account information in 

violation of Rule 415 (with fines 

escalating from $500 for the first offense 

within any 24 month rolling period to 

$5,000 for the fourth and subsequent 

offenses within the same period); and 

• Failure of a market maker to enter 

continuous quotations for the option 

classes to which it is appointed in 

violation of Rule 804(e) (with fines 

ranging from a letter of caution for the 

first offense within any 24 month rolling 

period, to fines ranging from $1,000 to 

$5,000 for the second through fourth 

offenses within the same period, and 

formal disciplinary actions beginning 

with the fifth offense).26

As explained below, the Exchange 

proposes to retain but renumber 

Existing Rule 1614(d) insofar as the 

Exchange’s MRVP and schedule of 

minor violations are unique to it. The 

Exchange cannot and does not seek to 

simply incorporate by reference the BX 

MRVP. 

Existing Rule 1615 and its 

Supplementary Material authorizes the 

Exchange to contract with FINRA or 

another SRO to perform its disciplinary 

functions, but the Existing Rule states 

that the Exchange retains ultimately 

[sic] legal responsibility for and control 

over such functions. 

Existing Rule 1616 authorizes and 

prescribes the process for adjudicating 

expedited client suspensions that may 

be imposed upon Members or 

Associated Persons that violate the 

prohibition in Existing Rule 403 on 

disruptive quoting and trading activity. 

Existing Rule 1616 states that the 

initiation of expedited suspension 

proceedings requires the prior written 

authorization of the CRO or his 

designees. It requires the Exchange to 

provide prior notice to the Respondent 

as well as to convene a Current Hearing 

Panel to adjudicate the matter. The 

Existing Rule provides that such 

hearings are to be administered 

generally in accordance with Existing 

Rule 1606. If a Respondent fails to 

appear at a hearing for which it receives 

proper notice, the Existing Rule states 

that the Current Hearing Panel may 

issue a suspension order without further 

proceedings, while the failure of the 

Exchange to appear may result in the 

dismissal of the suspension proceeding. 

Existing Rule 1616(d) requires a Current 

Hearing Panel to issue a written 

decision as to whether to order [sic] 

suspension not later than 10 days after 

receiving the hearing transcript. It 

further provides that a Panel may issue 

an order imposing suspension only if it 

finds, by a preponderance of the 

evidence, that the alleged violation 

specified in the notice occurred. At any 

time after a Respondent is served with 

a suspension order, a Party may apply 

to the Current Hearing Panel to modify, 

set aside, limit, or revoke the order, and 

the Current Hearing Panel must respond 

to the request within 10 days after 

receipt thereof, unless extended. 

Finally, Existing Rule 1616(f) provides 

for the right of a Respondent to seek 

Commission review of a suspension 

order. 

Chapter 15 of the Existing Rules states 

that the Board, a committee thereof, or 

an Exchange Official designated by the 

Board may summarily suspend a 

Member or an Associated Person that 

has been expelled or suspended from 

any other SRO or has been barred or 

suspended from being associated with a 

member of another SRO, if the Board, a 

committee thereof, or a designated 

Exchange Official determines that their 

ongoing transaction of business on the 

Exchange would compromise the safety 

of investors, creditors, other Members of 

the Exchange, or the Exchange itself.27

On the same grounds, the Board, a 

committee thereof, or a designated 

Exchange Official may summarily 

suspend a Member if it is experiencing 

operational or financial difficulties and 

cannot continue doing business as a 

member with safety to investors, 

creditors, other Members, or the 

Exchange.28 Furthermore, the Board, 

committee, or Exchange Official may 

limit or prohibit any person’s access to 

services offered by the Exchange for 

these same reasons or, as to a Member, 

they [sic] may take such actions if they 

[sic] determine that such Member does 

not meet the qualification requirements 

or other prerequisites for access with 

safety to investors, creditors, Members, 

or the Exchange.29 Chapter 15 provides 

for the Exchange to notify the SEC upon 

imposing a summary suspension or 

when summarily limiting or prohibiting 

access to Exchange services.30

Chapter 15 provides that, following 

the imposition of a suspension or a 

limitation on or prohibition against 

accessing Exchange services, the 

Exchange will conduct an investigation 

of the affairs of the affected Member, 

Associated Person, or person.31 A 

suspended, limited, or prohibited 

Member, Associated Person, or person 

must file with the Exchange a written 

statement covering all information that 

the Exchange may request in this regard, 

including a complete list of creditors 

and amounts owed to each as well as a 

complete list of positions in Exchange 

options contracts they [sic] maintain on 

their [sic] own behalf and that of their 

[sic] customers.32

Those subject to summary suspension 

or that are limited or prohibited with 

respect to access to Exchange services 

may petition for reinstatement within 

six months of their suspension, 

limitation, or prohibition, if they are 

suspended, limited, or prohibited due to 

operating difficulty, or within 30 days of 

suspension, limitation, or prohibition, if 

they are suspended, limited, or 

prohibited for reason of financial 

difficulty.33 An applicant for 

reinstatement is afforded an opportunity 

for a hearing, in certain circumstances.34

The Exchange may approve an 

application for reinstatement if it finds 

that the applicant is operationally and 

financially able to conduct their [sic] 

business with safety to investors, 

creditors, Members, and the Exchange.35


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36See Existing Rule 1503. 

37See Existing Rule 1700. 

38The Departments are authorized to act on 

behalf of BX in investigating and administering 

disciplinary matters pursuant to the RSA, and will 

do the same for the Exchange upon adoption of the 

new process. 

39See FINRA Rule 9211(a); see also BX Rule 

9211(a). The Exchange notes, however, that the 

Board may direct the ODA to authorize a complaint 

when, on the basis of information and belief, it is 

of the opinion that a Member or Associated Person 

has committed a violation which the Exchange has 

jurisdiction to enforce. See BX Rule 9211(a)(2). 

40Pursuant to BX Rule 9270, proposed 

settlements must be submitted to and accepted by 

the Exchange Review Council, except that proposed 

settlements involving an affiliate of the Exchange 

must be reviewed by the ODA. BX Rule 9216(a) 

provides that proposed letters of acceptance, 

waiver, and consent must be submitted to and 

accepted by either the ODA, the Review 

Subcommittee, or the Exchange Review Council. 

41BX Rule 9211(a) also provides that the Board 

has authority to direct the issuance of a complaint. 

42Under BX Rule 9216(a), the ODA or a Review 

Subcommittee of the Exchange Review Council may 

accept or refer letters of acceptance, waiver, and 

consent to the Exchange Review Council for 

approval or rejection. The Review Subcommittee 

can also reject such letters. Similarly, under BX 

Rule 9270, a Review Subcommittee of the Exchange 

Review Council may accept, reject, or refer offers 

of settlement to the Exchange Review Council for 

approval or rejection (except where the offer of 

settlement involves an affiliate of the Exchange, in 

which case the ODA must decide whether to accept 

or reject the offer). As a practical matter and based 

upon the experiences of Nasdaq and BX, the 

Exchange expects such referrals to the Exchange 

Review Council to occur infrequently. 

The failure of a suspended, limited, or 

prohibited Member to obtain 

reinstatement will result in disposition 

of membership, unless the Member sells 

or leases their [sic] membership.36

Finally, Existing Rule 1504 provides 

that a Member suspended under 

Chapter 15 shall be deprived for [sic] all 

of the rights and privileges of being a 

Member of the Exchange during the 

period of suspension. 

Lastly, Chapter 17 of the Existing 

Rules sets forth a procedure by which 

persons who are economically aggrieved 

by Exchange actions, including but not 

limited to those organizations whose 

applications for membership are denied, 

persons who are prohibited from 

becoming associated with a Member, 

and organizations and persons that are 

prohibited or limited with respect to the 

use of Exchange services or the services 

of Members, may seek review of such 

actions.37

Existing Rule 1701 provides that 

aggrieved persons must file written 

applications for hearing and review 

within 30 days of the occurrence of 

relevant Exchange actions, unless the 

Chair of the BCC grants, in writing, an 

extension of time to file an appeal. 

Existing Rule 1702 provides for the 

BCC, or a panel comprised of at least 

three members thereof, to review 

applications. The BCC, or the panel, 

must set a hearing date and receive 

materials relevant to the proceeding at 

least 72 hours in advance of the hearing. 

Existing Rule 1703 provides for 

intervention in a hearing by a third 

party under certain circumstances. 

Current Rule 1703 also authorizes the 

panel to determine all questions 

concerning the admissibility of evidence 

and to otherwise regulate the conduct of 

hearings. Finally, Existing Rule 1703 

directs panels to render their decisions 

in writing and to include in such 

decisions the Panel’s reasons for their 

[sic] conclusions. 

Existing Rule 1704 states that panel 

decisions are subject to review by the 

Board (or a committee composed of at 

least three Directors thereof), either 

upon the Board’s own motion (within 

30 days of issuance of the decision), 

upon written request of the President of 

the Exchange (within 15 days after 

issuance of the decision), or upon 

written request by the applicant. The 

Board has discretion to grant requests 

for written or oral arguments before it. 

The Board may affirm, reverse, or 

modify the decision of the panel. A 

decision of the Board is a final Exchange 

Action [sic]. 

Existing Rule 1705 governs the service 

of process for notices or other 

documents served pursuant to the 

proceedings set forth in Chapter 17 and 

the extension of time limits for the 

submission of answers, petitions, or 

other materials. 

Existing Rule 1706 states that the 

Exchange may contract with another 

SRO to perform some or all of the 

functions specified in Chapter 17, 

provided that the Exchange shall retain 

ultimate legal responsibility for and 

control of such functions. 

Overview of the Exchange Review 

Council and the BX Rule 8000 and 9000 

Series 

The Exchange proposes to amend its 

By-Laws to replace the BCC with a new 

‘‘Exchange Review Council.’’ The 

Exchange also proposes, with limited 

exceptions described below, to delete in 

their entirety Chapters 15–17 of the 

Existing Rules, establish new Chapters 

80 and 90 of the Exchange’s Rulebook, 

and then incorporate by reference into 

Chapters 80 and 90 the BX Rule 8000 

and 9000 Series, respectively. The 

principal purpose of these proposals is 

to harmonize the Exchange’s 

disciplinary processes and Rules 

consistent with those of its sister 

exchanges, including not only BX, but 

also Nasdaq and Phlx. 

Broadly speaking, the BX Rules and 

processes will be similar to the existing 

ones. Both provide processes for 

informal resolution and formal 

adjudication of disciplinary matters. 

Both set forth procedures that are 

designed to provide due process to 

Members and Associated Persons, 

including fair notice of allegations and 

proceedings, opportunities to be heard 

and to present and rebut arguments and 

evidence before hearing panels, and 

opportunities to appeal adverse 

determinations made by such panels. 

However, in a number of respects, the 

new Rules and processes will differ 

from the existing ones. One key 

difference concerns the role that FINRA 

will play in the new regime. Not only 

will FINRA continue to assist the 

Exchange in investigating matters under 

the BX Rules, through FINRA’s 

Department of Enforcement and 

Department of Market Regulation 

(collectively, the ‘‘Departments’’) 38 but 

it will also assist in the adjudication of 

matters. Specifically, the adjudicatory 

functions of the BCC and Current 

Hearing Panels will be administered by 

FINRA’s Office of Disciplinary Affairs 

(‘‘ODA’’) and Office of Hearing Officers 

(‘‘OHO’’), respectively.39 The ODA and 

OHO are offices within FINRA that are 

independent of the FINRA enforcement 

function and not involved in 

investigating or litigating cases. The 

ODA will review each proposed 

complaint to determine the legal and 

evidentiary sufficiency of proposed 

charges as well as proposed settlements, 

in certain instances.40 A 

recommendation proposed by the 

Departments or the Exchange’s 

Regulation Department in a matter 

involving formal disciplinary action 

will require approval by the ODA. Going 

forward, the ODA will authorize 

(pursuant to a request by the Exchange’s 

Regulation Department or the 

Departments) the issuance of a 

complaint.41 The OHO, in turn, will be 

responsible for convening and 

administering New Hearing Panels in 

lieu of the Exchange’s Current Hearing 

Panels. 

Another key difference involves the 

replacement of the BCC with the 

Exchange Review Council. The 

Exchange Review Council, as the 

successor to the BCC, will play a more 

limited role in disciplinary matters than 

does the BCC presently. As to 

disciplinary matters, the Exchange 

Review Council will not be responsible 

for approving the issuance of 

complaints (formerly, statements of 

charges) or routinely approving 42 letters 

of acceptance, waiver, and consent or 

offers of settlement. Instead, the 


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43As the Exchange discusses below, the Exchange 

proposes to retain certain of its Existing Rules to 

preserve its existing authorities with respect to 

minor rule violations, the issuance of minor rule 

violation letters, and the imposition of fines for 

such minor rule violations of up to $5,000. 

44 In a May 11, 2000 resolution, the Exchange 

Board delegated its authority to the President of the 

Exchange to establish a BCC to, among other things, 

conduct disciplinary hearings under Chapter 16 of 

the Existing Rules and conduct other hearings and 

reviews as set forth in Chapter 17 of the Existing 

Rules. On February 1, 2017, the Board passed a 

resolution that both revoked the President’s 

authority to establish a BCC and authorized the 

establishment of an Exchange Review Council, 

effective upon the date when this rule filing 

becomes operative. 

45The BX by-laws differ from the proposed 

Exchange By-Laws because the BX by-laws have a 

different numbering convention from the 

Exchange’s By-Laws and, in various places, the BX 

by-laws refer to a Listing and Hearing Review 

Council, which has no analogue with respect to the 

Exchange. 

46The BX by-laws do not describe in detail the 

process of the proceedings over which the BX 

Exchange Review Council presides. However, 

Section 7.9 of the BX by-laws state that a quorum 

of three BX Exchange Review Council members is 

necessary to adjudicate appeals of determinations 

made under BX Rules 4612 (appeal of denial of 

registration as an Equities Market Maker), 4619 

(review of denial of an excused withdrawal of 

Equities Market Maker quotation), 4620 (appeal of 

denial of reinstatement of Equities Market Maker 

that accidentally withdraws), 11890 (appeal of 

clearly erroneous transaction determination), and 

BX Options Chapter V, Section 6 (appeal of obvious 

error determination). See BX by-laws, Article VII, 

Section 9. The Exchange’s Rules do not have 

analogues to BX Rules 4612, 4620, and 11890 and, 

as such, the corresponding provision of the 

Exchange’s proposed By-Laws (Article VII, Section 

9) provides only that a quorum of three Exchange 

Review Council members is necessary for it to 

adjudicate appeals involving determinations made 

under Rules 720 (appeal of obvious error 

determination), 720A (appeal of determinations of 

erroneous trades due to system malfunctions and 

disruptions), and 804 (review of denial of an 

excused withdrawal of market maker quotation). 

47See n.52, infra. 48See id. 49See id. 50See id. 51The terms ‘‘Nominating Committee’’ and 

‘‘Member Nominating Committee’’ are defined in 

Exchange By-Laws, Article I. 

Exchange Review Council will function 

principally as an intermediate appellate 

body for decisions rendered by the New 

Hearing Panels. As to non-disciplinary 

matters, the Exchange Review Council 

will assume regulatory responsibilities 

that currently rest with various panels, 

including reviews of staff 

determinations made as to obvious 

errors. 

Other noteworthy differences between 

the Existing Rules and the BX Rules and 

processes include the following: 

• The BX Rules generally include 

more comprehensive rights and detailed 

procedures for, among other things, 

discovery and service of process than do 

the Existing Rules. 

• As to the assessment of fines for 

violations of the Exchange’s MRVP or 

other minor rule violations, the BX 

Rules do not authorize the issuance of 

minor rule violation letters or the 

imposition of fines of more than 

$2,500.43 Should a Respondent fail to 

consent to the imposition of a fine or if 

the Review Subcommittee or the 

Exchange Review Council reject [sic] the 

terms of an MRVP or minor rule 

violation letter, then the matter will 

proceed through formal disciplinary 

channels. The BX Rules do not allow for 

a fine to be reversed, modified or 

affirmed, prior to formal disciplinary 

proceedings. 

The following is a more detailed 

overview of each of the Exchange’s 

proposals. 

Overview of the Exchange Review 

Council 

The Exchange proposes to retire the 

BCC44 and to amend its By-Laws to 

establish in its place an Exchange 

Review Council. The amended By-Laws 

that the Exchange proposes to adopt in 

this regard are substantially the same as 

those that BX adopted to establish the 

BX Exchange Review Council.45 Thus, 

the By-Laws provide for the Exchange 

Review Council to have the same 

general structure and powers as does the 

BX Exchange Review Council.46 The 

proposed By-Laws will authorize the 

Exchange Review Council to adjudicate 

disciplinary actions and approve 

settlements thereof as well as make 

recommendations to the Board on 

certain policy matters and rule changes. 

Such policy functions of the Exchange 

Review Council render its jurisdiction 

broader than that of the BCC. 

Specifically, proposed Article VI, 

Section 1 of the proposed By-Laws 

provides that the Exchange Review 

Council may be authorized to act for the 

Board with respect to: an appeal or 

review of a disciplinary proceeding, a 

statutory disqualification proceeding, or 

a membership proceeding; a review of 

an offer of settlement, a letter of 

acceptance, waiver, and consent, and a 

minor rule violation plan letter; the 

exercise of exemptive authority; and 

such other proceedings or actions as 

may be authorized by the Exchange 

rules. The Exchange Review Council 

also may consider and make 

recommendations to the Board on 

policy and rule changes relating to 

business and sales practices of Exchange 

Members and Associated Persons and 

enforcement policies, including policies 

with respect to fines and other 

sanctions. It may advise the Board on 

regulatory proposals and industry 

initiatives relating to quotations, 

execution, trade reporting, and trading 

practices and it may advise the Board in 

its administration of programs and 

systems for the surveillance and 

enforcement of rules governing 

Exchange Members’ conduct and 

trading activities in the Exchange. 

Proposed Article VI, Section 2 states 

that the Exchange Review Council 

would consist of no fewer than eight 

and no more than 12 members. The 

Exchange Review Council must include 

a number of Member Representative 

members 47 that is equal to at least 20% 

of the total number of members of the 

Exchange Review Council. The number 

of Non-Industry members,48 including 

at least three Public members,49 shall 

equal or exceed the sum of the number 

of Industry members 50 and Member 

Representative members. As soon as 

practicable, following the appointment 

of members, the Exchange Review 

Council shall elect a Chair from among 

its members. The Chair shall have such 

powers and duties as may be 

determined from time to time by the 

Exchange Review Council. The Board, 

by resolution adopted by a majority of 

Directors then in office, may remove the 

Chair from such position at any time for 

refusal, failure, neglect, or inability to 

discharge the duties of Chair. No more 

than 50% of the members of the 

Exchange Review Council shall be 

engaged in market making activity or 

employed by an Exchange Member firm 

whose revenues from market making 

activity exceed 10 percent of its total 

revenues. 

Proposed Article VI, Section 3 

requires the Exchange’s Secretary to 

collect from each nominee for the office 

of member of the Exchange Review 

Council such information as is 

reasonably necessary to serve as the 

basis for a determination of the 

nominee’s qualifications and 

classification as an Industry, Member 

Representative, Non-Industry, or Public 

member. The Secretary must also certify 

to the Nominating Committee or the 

Member Nominating Committee 51 (as 

applicable) each nominee’s 

qualifications and classification. After 

appointment to the Exchange Review 

Council, each member must update 

such information at least annually and 

upon request of the Exchange’s 

Secretary, and must report immediately 

to the Secretary any change in such 

information. 

Proposed Article VI, Section 4 

provides that Exchange Review Council 

members shall serve three-year terms, or 

until a successor is duly appointed and 

qualified, except in the event of earlier 


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52 In addition to adding Article VI to the By-Laws, 

the Exchange proposes to make changes to other 

articles of the By-Laws to accommodate the 

existence of the Exchange Review Council. For 

example, the Exchange proposes to amend Article 

I, which defines the terms that the Exchange uses 

in the By-Laws, to provide that the terms ‘‘Industry 

member,’’ ‘‘Member representative member,’’ ‘‘Nonindustry member,’’ and ‘‘Public member’’ mean, in 

part, members of the Exchange Review Council. The 

Exchange also proposes to amend Article III, 

Section 6, to add a new subsection (a) that directs 

the Board to appoint an Exchange Review Council, 

as provided in Article VI. It also proposes to amend 

Article III, Section 6(b) to state that the Nominating 

Committee and the Member Nominating Committee 

of the Board shall have responsibility for 

nominating members of the Exchange Review 

Council. Finally, the Exchange proposes to amend 

Sections 7 and 8 of Article III, which deal with 

Director conflicts-of-interest/self-interested 

transactions and Director compensation, 

respectively, to ensure that the restrictions and 

benefits that these provisions provide apply to 

Exchange Review Council members. 

53The Exchange notes that it proposes to 

establish procedures in Existing Rule 302 and Rule 

307 to govern the review by the Exchange Review 

Council of adverse membership, association, or 

market maker sale or transfer determinations. The 

Exchange proposes to base these procedures upon 

those set forth BX Rules 1015 and 1016. 54See Securities Exchange Act Release No. 72149 

(May 12, 2014), 79 FR 28564 (May 16, 2014) (SR– 

BX–2014–024). 

55BX Rule 9001 also states that the Exchange has 

contracted with FINRA to perform some or all of 

the Exchange’s disciplinary functions, while noting 

that the Exchange retains ultimate legal 

responsibility for and control of such functions. 

termination from office by reason by 

death, resignation, removal, 

disqualification, or other reason. 

Members are term limited out after two 

consecutive terms. Proposed Article VI, 

Section 5 sets forth the procedures for 

resigning as a member of the Exchange 

Review Council and provides that an 

Exchange Review Council member may 

resign at any time upon written notice 

to the Board. Under proposed Article VI, 

Section 6, any member of the Exchange 

Review Council may be removed from 

office at any time for refusal, failure, 

neglect, or inability to discharge the 

duties of such office by majority vote of 

the Board. 

Under proposed Article VI, Section 7, 

an Exchange Review Council member 

would be disqualified and removed 

immediately upon a determination by 

the Board, by a majority vote, that: (a) 

The member no longer satisfies the 

classification (Industry, Member 

Representative, Non-Industry, or Public) 

for which the member was elected; and 

(b) the member’s continued service as 

such would violate the compositional 

requirements of the Exchange Review 

Council set forth in Article VI, Section 

2. If the term of office of an Exchange 

Review Council member terminates 

under this Section, and the remaining 

term of office of such member at the 

time of termination is not more than six 

months, during the period of vacancy 

the Exchange Review Council shall not 

be deemed to be in violation of Article 

VI, Section 2 by virtue of such vacancy. 

Proposed Article VI, Section 8 contains 

provisions for the filling of vacancies on 

the Exchange Review Council and states 

that if a position on the Exchange 

Review Council becomes vacant, the 

Nominating Committee or the Member 

Nominating Committee (as applicable) 

shall nominate, and the Board shall 

appoint a person satisfying the 

qualifications for the position as 

provided in Article VI, Section 2 to fill 

such vacancy, except that if the 

remaining term of office for the vacant 

position is not more than six months, no 

replacement shall be required. 

Proposed Article VI, Section 9 

provides that a quorum of the Exchange 

Review Council will consist of a 

majority of its members, including not 

less than 50% of its Non-Industry 

members and one Member 

Representative member. Proposed 

Article VI, Section 10 contains 

provisions related to the meetings of the 

Exchange Review Council. 

Under proposed Article VI, Section 

11, the Exchange Review Council is 

required to establish a Review 

Subcommittee to determine whether 

disciplinary and membership 

proceedings decisions should be called 

for review by the Exchange Review 

Council under the disciplinary and 

membership rules to be proposed for the 

Exchange. The Review Subcommittee 

shall be composed of no fewer than two 

and no more than four members of the 

Exchange Review Council. The number 

of Non-Industry members of the Review 

Subcommittee shall equal or exceed the 

sum of the number of Industry members 

and Member Representative members of 

the Review Subcommittee, and the 

subcommittee must include at least one 

Member Representative member. At all 

meetings of the Review Subcommittee, 

a quorum for the transaction of business 

shall consist of not less than 50 percent 

of the members of the Review 

Subcommittee, including not less than 

50 percent of the Non-Industry members 

of the Review Subcommittee and one 

Member Representative member of the 

Review Subcommittee.52

The BX Rules implement the 

foregoing responsibilities of the 

Exchange Review Council by 

establishing various procedures, 

described below, to govern its reviews. 

As the Exchange also describes in 

further detail below, the Exchange 

proposes to transfer to the Exchange 

Review Council (or panels thereof) 

certain responsibilities currently vested 

in other Exchange committees or the 

Board. For example, pursuant to 

Existing Rule 720, an Obvious Error 

Panel (‘‘OEP’’) is presently responsible 

for reviewing determinations regarding 

obvious and catastrophic errors. 

Pursuant to Existing Rule 720A, a 

‘‘Review Panel’’ is responsible for 

reviewing determinations to nullify or 

adjust transactions that arise from 

system disruptions and malfunctions. 

The Exchange is proposing to eliminate 

the OEP and the Review Panel and to 

transfer their responsibilities to a panel 

of the new Exchange Review Council, 

which corresponds to the practice of 

BX. Subject to Chapter 90, the Exchange 

also proposes to transfer responsibility 

to the Exchange Review Council to 

review denials or conditions imposed 

upon those that seek to become or 

remain a Member of the Exchange or 

become or remain associated with a 

Member of the Exchange, as set forth in 

Existing Rule 302. Similarly, the 

Exchange proposes to transfer 

responsibility to the Exchange Review 

Council to review denials or conditions 

imposed upon Members that seek to 

transfer or sell market maker rights, as 

set forth in the Supplementary Material 

to Existing Rule 307.53 In addition, the 

Exchange proposes to amend Existing 

Rule 804 to provide for the Exchange 

Review Council to review 

determinations regarding temporary 

withdrawals of quotations, which are 

not reviewable under the Existing Rules. 

The Exchange notes that BX vests in its 

Exchange Review Council responsibility 

for reviewing similar types of matters.54

The BX Rule 8000 Series 

The Exchange proposes to incorporate 

by reference into a new Chapter 80 of 

its Rulebook the BX Rule 8000 Series. 

The BX Rule 8000 Series is entitled 

‘‘Investigation and Sanctions,’’ and it 

governs the investigative process, 

including FINRA’s authority under the 

RSA to conduct investigations of 

Members and Associated Persons on 

behalf of the Exchange. 

BX Rule 8001 states that the Exchange 

and FINRA are parties to the RSA, 

pursuant to which FINRA has agreed to 

perform certain functions on behalf of 

the Exchange. It also specifies, however, 

that the Exchange retains ultimate legal 

responsibility for, and control over the 

functions that FINRA performs on its 

behalf.55

BX Rule 8110 requires Members to 

keep and maintain copies of the NASD 

(now known as FINRA) and Exchange 

Manuals in readily accessible places 

and make them available for 

examination by customers upon request. 

BX Rule 8120 sets forth definitions for 

the BX Rule 8000 Series. 


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56The Exchange proposes to retain Existing Rule 

1600, which provides a more general statement of 

the Exchange’s disciplinary authority than that 

which exists in BX Rule 8310. Existing Rule 1600 

states that a Member or Associated Person who is 

alleged to have violated or aided and abetted a 

violation of the Act, the rules and regulations 

promulgated thereunder, and the By-Laws or Rules 

of the Exchange, or any interpretation thereof are 

subject to the disciplinary jurisdiction of the 

Exchange and may be, after notice and opportunity 

for a hearing, appropriately disciplined by 

expulsion, suspension, fine, censure, limitation or 

termination as to activities, functions, operations, or 

association with a Member, or any other fitting 

sanction in accordance with the provisions of the 

disciplinary rules. It also permits the Exchange to 

charge a supervisor with a violation of a rule within 

the disciplinary jurisdiction of the Exchange 

committed by an employee under his supervision 

or by the Member as though such violations were 

his own. Finally, it extends the disciplinary 

jurisdiction of the Exchange to continue after 

termination of the Member from the Exchange or a 

person’s termination of association with a Member 

as to matters that occurred prior to such 

termination. Staff must serve written notice to the 

former Member or Associated Persons within one 

year of receipt by the Exchange of notice of such 

termination that the Exchange is making inquiry 

into a matter or matters. 

57See BX Rule 9110. 

58 Id. 

59See BX Rule 9120. 

60See BX Rules 9131–9138. 

61See BX Rule 9141. 

62See BX Rule 9142. 

63See BX Rule 9143. 

64See BX Rule 9144. 

65See BX Rule 9145. 

66See BX Rule 9146. 

67See BX Rule 9147. 

68See BX Rule 9148. 

69See, e.g. BX Rule 9360 (effective dates of bars, 

expulsions, and permanent cease and desist orders); 

BX Rule 9400 (various service requirements 

pertaining to expedited client suspension 

proceedings); BX Rule 9550 Series (various service 

requirements pertaining to: (1) Suspensions for 

failures to provide information or keep information 

current; (2) suspensions and cancellations for 

failures to pay Exchange dues, fees, or other 

charges; (3) suspensions or cancellations for failures 

to comply with arbitration awards, settlements, or 

restitution orders or settlements; (4) suspensions, 

cancellations, or bars from membership or 

suspensions or bars from association with Members, 

or limitations or prohibitions of access to Exchange 

services; (5) suspensions, cancellations, and bars for 

failure to comply with cease and desist orders; (6) 

restrictions on Members’ activities due to financial 

or operational difficulties; and (7) suspensions for 

actions authorized by Section 6(d)(3) of the Act). 

BX Rule 8210 generally authorizes the 

Exchange’s Regulation Department and 

FINRA, acting on the Exchange’s behalf 

to require a Member, an Associated 

Person, or another person subject to the 

Exchange’s jurisdiction to provide 

information orally, in writing or 

electronically, to provide testimony 

under oath, or to allow for the 

inspection of their [sic] books, records, 

and accounts, with respect to any matter 

associated with an investigation, 

complaint, examination, or proceeding 

of the Exchange or of other SelfRegulatory Organizations or regulators. 

BX Rule 8211 requires a Member to 

submit certain specified trade data in an 

automated form, as the Regulation 

Department or FINRA may require or 

request. 

BX Rule 8310 sets forth the 

Exchange’s authority to sanction a 

Member or an Associated Person for 

violations of the federal securities laws, 

rules, or regulations thereunder, or the 

Exchange’s Rules, as well as for neglect 

or refusal to comply with an order, 

direction, or decision issued under the 

Exchange Rules.56 BX Rule 8310(a) 

provides for sanction [sic] that include 

censure, fine, suspension of 

membership or registration of a person 

associated with a Member, expulsion or 

cancellation of membership or 

association, suspension or bar from 

association with all Members, 

temporary or permanent cease and 

desist order, or any other fitting 

sanction. BX IM–8310–1 precludes 

Members from allowing Associated 

Persons from remaining associated with 

them, even in a clerical or ministerial 

capacity, upon issuance of orders 

suspending, revoking, or cancelling the 

registration of such Associated Persons 

and it prohibits payment of any salary, 

commission, profit, or other 

remuneration such Associated Persons 

might have earned during their periods 

of suspension. BX IM–8310–3 states, in 

part, that the Exchange’s Regulation 

Department shall release certain 

information to the public regarding 

disciplinary complaints and decisions 

and release, upon request, a copy of any 

complaint or disciplinary decision 

issued by the Exchange or any 

committee thereof. 

BX Rule 8320 states that fines and 

other monetary sanctions shall be paid 

to the Treasurer of the Exchange. It 

authorizes the Exchange, after seven 

days written notice, to in part 

summarily suspend or expel Members if 

they are delinquent in paying sanctions 

or fines. 

BX Rule 8330 states that a Member or 

an Associated Person disciplined 

pursuant to Rule 8310 shall bear the 

costs of disciplinary proceedings as the 

New Hearing Panels or the Board deem 

appropriate under the circumstances. 

The BX Rule 9000 Series 

The Exchange proposes to incorporate 

by reference into a new Chapter 90 of 

its Rulebook the BX Rule 9000 Series. 

The BX Rule 9000 Series is entitled 

‘‘Code of Procedure,’’ and it governs 

proceedings for disciplining Members 

and Associated Persons, proceedings for 

regulating Members experiencing 

financial or operational difficulties, 

proceedings for summary or nonsummary suspensions, cancellations, 

bars, prohibitions, or limitations, and 

proceedings for obtaining relief from the 

eligibility requirements of the Exchange 

By-Laws and the Exchange Rules. 

BX Rule 9100 Series 

The BX Rule 9100 Series describes the 

application and purpose of the BX Rule 

9000 Series, including the types of 

proceedings covered by the BX Rules,57

the rights, duties, and obligations of 

Members and Associated Persons,58

defined terms,59 and rules concerning 

the filing and service of papers.60 The 

BX Rule 9100 Series also provides rules 

concerning proceedings, including 

appearance and practice,61 withdrawal 

by attorney or representative,62 ex parte 

communications,63 separation of 

functions among adjudicators and 

interested staff,64 rules of evidence and 

official notice,65 motions,66 rulings on 

procedural matters,67 and interlocutory 

review.68

Specifically, BX Rule 9110 sets forth 

the general rights, duties, and 

obligations of Members and Associated 

Persons under the Code of Procedure, 

including the rights, in any disciplinary 

matter thereunder, to be presented with 

specific charges, to have a hearing, to 

have due notice thereof, to present a 

defense and relevant supporting 

material, to be represented by counsel, 

to have a record kept of proceedings, 

and to receive a written determination 

that sets forth the basis therefor. 

BX Rule 9120 sets forth definitions of 

various terms used throughout the Rule 

9000 Series. 

The BX Rule 9130 Series governs the 

requirements for service of complaints 

and other written documents in 

connection with disciplinary 

proceedings. The BX Rule 9130 Series 

prescribes the timing and form of 

required service based on the type of the 

notice. BX Rule 9134 concerns the 

permissible methods of service and the 

procedures for service. BX Rule 9134 

permits personal service, service by U.S. 

Postal Service, or service by courier. BX 

Rules 9135 through 9138 set forth the 

form, format, and procedures for filing 

papers with adjudicators as well as the 

effect for [sic] a Party or its counsel or 

representative for affixing or failing to 

affix their [sic] signatures to such 

papers. Other BX Rules govern service 

of notices and other documents in 

particular situations.69

BX Rule 9141 concerns appearances 

before adjudications in proceedings, 

both by Parties and by their attorneys 

and representatives. BX Rule 9141 

permits a person to represent 

themselves [sic] in any proceeding as 


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70Pursuant to BX Rule 9142, an attorney or 

representative may withdraw from a proceeding for 

good cause, pursuant to written notice and at least 

30 days prior notice. 

71BX Rule 9120(t) defines ‘‘Interested Staff’’ to 

include certain enumerated Exchange or FINRA 

employees. The applicable employees who 

constitute ‘‘Interested Staff’’ under this BX Rule 

vary depending upon the type of disciplinary 

proceeding at issue. 

72BX Rule 9144(a) generally prohibits Interested 

Staff from advising adjudicators, and adjudicators 

from advising Interested Staff, with respect 

decisions of the other, including as to whether to 

file complaints, appeals or cross appeals. BX Rule 

9144(b) also prohibits Hearing Officers and 

Panelists, absent waivers in certain circumstances, 

from participating in decisions as to whether to 

issue complaints, appeal or cross-appeal 

disciplinary proceedings to the Exchange Review 

Council, or call decisions for review. 

73 In the proposed introduction to Chapter 90, the 

Exchange states that the Exchange’s procedure for 

handling MRVP letters, including as set forth in BX 

Rule 9143(e)(3), shall also apply to minor rule 

violation letters. 

74See BX Rule 9212(a)(1). 

75See id. 

76See id. 

well as to be represented by others 

(pursuant to a notice of appearance), 

including a licensed attorney,70 a 

member of a partnership (to represent a 

partnership), and a bona fide officer of 

a corporation, trust or association (to 

represent a corporation, trust or 

association). 

BX Rule 9143(a) prohibits Parties, 

their representatives, or Interested 

Staff 71 from having ex parte 

communications with adjudicators or 

with Exchange staff who are 

participating in or advising on a 

proceeding about the merits of the 

proceeding.72 BX Rule 9143(b) also 

requires adjudicators participating in a 

proceeding to disclose and place in the 

record any written ex parte 

communications (or memoranda 

summarizing any oral ex parte 

communications) concerning the merits 

of the proceeding. BX Rule 9143(c) 

furthermore permits the Exchange 

Regulation Department or an 

adjudicator (consistent with the 

interests of justice, the policies, [sic] 

underlying the Act, and the Rules of the 

Exchange) to order any Party that 

violates the ex parte prohibition to show 

cause why the Party’s claim or interest 

in the proceeding should not be 

dismissed, denied, disregarded, or 

otherwise adversely affected by reason 

of such [sic] ex parte communication. 

BX Rule 9143(d) generally specifies that 

the ex parte prohibition applies 

beginning with the authorization of a 

complaint. Finally, BX Rule 9143(e) 

specifies circumstances in which a 

Party’s claim as to a violation of the ex 

parte rules are [sic] waived, including 

when a Respondent submits an offer of 

settlement, an executed letter of 

acceptance, waiver, and consent, or an 

MRVP letter.73

BX Rule 9145 states that formal rules 

of evidence do not apply to proceedings 

brought under the BX Rule 9000 Series. 

It also permits adjudicators, after 

providing notice and an opportunity for 

a Party to comment or oppose, to take 

official notice of matters that may be 

judicially noticed by courts or of other 

matters within the specialized 

knowledge of the Exchange. 

BX Rules 9146 through 9148 govern 

motion practice before adjudicators. BX 

Rule 9146 provides that the filing of a 

motion does not stay a proceeding, 

unless an adjudicator orders otherwise. 

It also provides that, unless otherwise 

ordered by an adjudicator, a Party may 

file an opposition or response to a 

written motion within 14 days after 

service of the motion and that, if the 

Party fails to do so, it shall be deemed 

to have waived its objection to the 

motion. However, BX Rule 9146 states 

that a moving Party is not entitled to file 

a reply to such an opposition or 

response, except at the discretion of the 

adjudicator. BX Rule 9146 also 

authorizes an adjudicator to permit oral 

arguments on motions and to summarily 

deny frivolous motions. It specifically 

provides for motions for protective 

orders. Finally, along with BX Rule 

9147, BX Rule 9146 designates 

adjudicators for procedural and 

summary disposition motions at both 

the Hearing Panel and appellate levels. 

BX Rule 9148 specifies that there are no 

interlocutory reviews of rulings on 

motions or orders. 

BX Rule 9150 authorizes an 

adjudicator to exclude from disciplinary 

proceedings an attorney for a Party or 

any other person authorized to represent 

a Party to the extent that the adjudicator 

deems said attorney or persons to be 

engaging in contemptuous conduct, 

under BX Rule 9280, or unethical or 

improper professional conduct. The BX 

Rule authorizes an attorney or person so 

excluded to seek review of their [sic] 

exclusion from the Exchange Review 

Council. Moreover, BX Rule 9150(b) 

states that even if it prohibits an 

attorney or other person authorized to 

represent others from practicing or 

appearing in an Exchange proceeding, 

such action by the Exchange shall not 

preclude it from initiating other 

proceedings against such person. 

BX Rule 9160 sets forth conditions for 

the recusal or disqualification of an 

adjudicator. Such conditions include a 

conflict of interest, bias, or other 

circumstances in which the 

adjudicator’s fairness might reasonably 

be questioned. The Rule also designates 

those who are authorized to order the 

disqualification of Board Directors, 

members of the Exchange Review 

Council or committees thereof, or New 

Hearing Panels. 

The BX Rule 9200 Series 

The BX Rule 9200 Series sets forth the 

disciplinary process, providing rules 

concerning the issuance of a complaint, 

the briefing and hearings process, 

issuance of a decision and the 

settlement process. The BX Rule 9200 

Series also governs permanent cease and 

desist orders. 

BX Rule 9211(a)(1) states that if the 

Departments believe that a Member or 

an Associated Person has violated any 

law, rule, or regulation over which the 

Exchange has jurisdiction, then the 

Regulation Department or the 

Departments may request authorization 

from the ODA to issue a complaint. 

Likewise, BX Rule 9211(a)(2) states that 

the Board may direct the ODA to 

authorize and the Departments to issue 

a complaint when the Board is of the 

opinion that any Member or Associated 

Person has violated any law, rule, or 

regulation within the Exchange’s 

jurisdiction. Unlike the Existing Rule, 

the BX Rules do not specify that 

‘‘probable cause’’ or any other legal 

standard must be satisfied for the ODA 

to authorize issuance of a complaint. 

BX Rule 9212 sets forth the 

requirements for the issuance of 

complaints. It states that if a complaint 

is authorized, the Departments shall 

issue it.74 It furthermore states that 

complaints must be in writing and 

specify, in reasonable detail, the 

conduct alleged to constitute the 

violative activity and the rule, 

regulation, or statutory provision 

allegedly violated by such conduct.75

The BX Rule provides that complaints 

must be signed by the Department of 

Enforcement or of Market Regulation 

and served by the Departments on the 

Parties in accordance with the Rules.76

The BX Rules permit amendments to 

and withdrawals of complaints. As to 

amendments, BX Rule 9212(b) provides 

that the Departments may amend a 

complaint once, as a matter of course, at 

any time before the Respondent answers 

the complaint, and otherwise, upon a 

motion to the Hearing Officer, a 

showing of good cause, and a 

determination that the Respondent will 

suffer no unfair prejudice as a result of 

the amendment. As to withdrawals, BX 

Rule 9212(c) states that the Departments 

may withdraw a complaint with prior 

leave of the Hearing Officer. BX Rule 


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77See BX Rule 9215(c) and (d). 

78 If the Respondent files an answer before the 

complaint is amended, the Respondent receives 14 

days to respond to the amended complaint. See BX 

Rule 9215(e). 

79As discussed previously, the Exchange 

proposes to retain its existing MRVP fine schedule. 80Pursuant to BX Rule 9216(b), if a Member or 

Associated Person agrees to execute an MRVP or a 

violation letter, they [sic] also agree [sic] to waive 

certain of their [sic] rights with respect to the 

alleged violations, including their [sic] rights to 

dispute the allegations or the validity of the letter, 

as well as to make claims of bias or prejudgment, 

and to raise violations of the ex parte and 

separation of functions rules. 

81Because the minor rule violation process 

proceeds only to the extent that a Member or 

Associated Person assents to the letter and its terms, 

there is no provision under the BX Rules, as there 

is under the Existing Rules, for a Member or 

Associated Person to contest a minor rule violation 

fine. 

9212(d) provides for the docketing of 

complaints. 

BX Rule 9214 governs the 

consolidation and severance of 

disciplinary proceedings. Unlike 

Existing Rule 1606(d), BX Rule 9214 

does not permit a non-Party to intervene 

in disciplinary proceedings, but it does 

permit the consolidation of proceedings. 

Under the BX Rule, either the Hearing 

Officer may order or a Party may request 

consolidation of two or more 

disciplinary proceedings if such 

consolidation would further the 

efficiency of the disciplinary process, or 

if the subject complaints involve 

common questions of law or fact or one 

or more of the same Respondents. When 

determining whether to order the 

consolidation of such disciplinary 

proceedings, BX Rule 9214(a) requires 

the Chief Hearing Officer to consider 

whether the same or similar evidence 

reasonably would be expected to be 

offered at each of the hearings, whether 

the proposed consolidation would 

conserve the time and resources of the 

Parties, and whether any unfair 

prejudice would be suffered by one or 

more Parties as a result of the 

consolidation. If consolidation is 

ordered, BX Rule 9214(c) provides that 

the Chief Hearing Officer shall issue an 

order specifying which New Hearing 

Panel will preside over the consolidated 

proceedings or the Chief Hearing Panel 

shall appoint another New Hearing 

Panel to do so. 

BX Rule 9215 requires a Respondent 

to file an answer to a complaint with the 

OHO within 25 days after service of the 

complaint (unless the Hearing Officer 

extends that deadline for good cause) 

and to state in such answer whether 

they [sic] admit, deny, or lack sufficient 

information to admit or deny each 

allegation made in the complaint. 

However, the BX Rule differs in certain 

respects from Existing Rule 1605, which 

governs answers to statements of 

charges. For example, it specifically 

authorizes a Respondent to file a motion 

for a more definite statement of the 

allegations set forth in the complaint as 

well as to amend the answer.77

Although the BX Rule, similar to 

Existing Rule 1605, permits extensions 

of time to respond to an amended 

complaint, the BX Rule provides for the 

greater of the original remaining answer 

period or 14 days to do so, rather than 

25 days.78 Finally, instead of simply 

providing that a failure to file an answer 

shall be deemed to be an admission of 

the matters alleged, BX Rule 9215(f) 

requires the Departments to send a 

second notice to Respondents before 

they may impose sanctions, which may 

include, not only the admission of 

unanswered allegations, but also the 

issuance of default decisions pursuant 

to BX Rule 9269. 

BX Rule 9216 sets forth procedures to 

informally dispose of matters, where 

appropriate. Specifically, BX Rule 9216 

provides that the Departments may 

prepare and request that a Member or 

Associated Person execute a letter of 

acceptance, waiver, and consent 

(‘‘AWC’’) accepting a finding of a 

violation and consenting to the 

imposition of sanctions. Unlike Existing 

Rule 1603, which governs analogous 

‘‘letters of consent,’’ the BX Rule 

provides that in executing an AWS [sic] 

letter, a Member or Associated Person is 

deemed to waive their [sic] rights to a 

hearing, to appeal, to otherwise 

challenge the terms of a letter, to claim 

bias or prejudgment, or to claim 

violation of the ex parte prohibitions of 

BX Rule 9143. The BX Rule states that 

executed AWC letters are subject to 

approval by the ODA, the Exchange 

Review Council, or the Review 

Subcommittee and, if rejected, they may 

not be introduced into evidence in 

connection with any subsequent 

disciplinary hearing that occurs. 

BX Rule 9216(b) concerns the process 

for assessing fines for MRVP 

violations.79 Under BX Rule 9216(b), if 

the Departments have reason to believe 

that a Member or an Associated Person 

has violated certain specified Rules, 

then they may prepare an MRVP letter 

(for fines of up to $2,500 for violations 

subject to the Exchange’s MRVP plan) 

and request that the Member or 

Associated Person accept [sic] the letter 

and the fine set forth in it.80 BX Rule 

9216(b) provides that executed MRVP 

letters are to be submitted for approval 

to the Exchange Review Council. The 

Review Subcommittee or the ODA may 

accept such letters or refer them to the 

Exchange Review Council for 

acceptance or rejection. The Review 

Subcommittee may also reject such 

letters or refer them to the Exchange 

Review Council. If the letter is accepted, 

then it is deemed to be a final decision 

of the Exchange. If a Member or an 

Associated Person chooses not to 

consent to the issuance of an MRVP 

letter, or the Review Subcommittee or 

the Exchange Review Council rejects the 

letter, then the matter becomes subject 

to formal disciplinary adjudication.81

BX Rule 9216(b) will replace Existing 

Rule 1614, with three exceptions. First, 

the Exchange proposes to retain Existing 

Rule 1614(a), which sets forth its 

authority to impose fines of up to $2,500 

for MRVP violations and up to $5,000 

for minor rule violations (other than 

those subject to an MRVP), because BX 

Rule 9216(b) does not authorize the 

imposition of fines of up to $5,000 for 

minor rule violations. Existing Rule 

1614(a) also includes a sentence (that 

the BX Rules lack) clarifying that the 

Exchange has discretion to decide, on a 

case-by-case basis, whether to impose a 

fine for an MRVP violation or a minor 

rule violation or whether instead to 

proceed with a formal disciplinary 

action under proposed Chapter 90. 

Second and relatedly, the Exchange 

proposes to include in its introduction 

to Chapter 90 a statement that the 

procedures set forth in BX Rule 9216(b) 

for handling MRVP violations and 

MRVP violation letters also apply to the 

handling of minor rule violations and 

minor rule violation letters, except that 

the Exchange will promptly report to 

the Commission any final Exchange 

action, in accordance with SEC Rule 

19d–1(c)(1). Third, the Exchange 

proposes to retain Existing Rule 1614(d) 

(renumbered as Rule 1614(b)), which 

presently sets forth the Exchange’s 

schedule of MRVP violations and minor 

rule violations and their associated 

fines. This schedule is particular to the 

Exchange and cannot be replaced 

summarily with the corresponding BX 

schedule, which is set forth in BX IM– 

9216. The Exchange will not incorporate 

by reference BX IM–9216. 

The BX Rule 9200 Series sets forth the 

procedures of the Exchange for holding 

disciplinary hearings. Although the BX 

hearing rules are broadly similar to the 

Existing Rules, the BX Rules are more 

comprehensive and robust. One 

noteworthy difference between them is 

that under the Existing Rule 1606, a 

Respondent is entitled to a hearing as a 

matter of course, whereas under BX 

Rule 9221, a Respondent must 

affirmatively request a hearing in their 

[sic] answer or else, in absence of good 


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82BX Rule 9221(a) provides that any request by 

a Respondent for a hearing shall be granted. 

83See BX Rule 9221(b)-(c). 

84Like Extended New Hearing Panels, Extended 

Proceeding Committees are established for 

proceedings that involve unusually complex issues 

or will require an extended period of time to hear. 

Pursuant to BX Rule 9331(a)(2), members of 

Extended Proceeding Committees may be entitled to 

compensation at the rates then in effect for 

arbitrators appointed under the FINRA Rule 10000 

Series. 

85BX Rule 9120(z) defines the term ‘‘Panelist’’ as 

used in the Rule 9200 Series, the Rule 9550 Series, 

and the Rule 9800 Series, to mean a ‘‘member of 

a Hearing Panel or Extended Hearing Panel who is 

not a Hearing Officer.’’ As used in the Rule 9300 

Series, the term means a ‘‘current or former member 

of the Exchange Review Council or a former 

Director who is appointed to serve on a 

Subcommittee or an Extended Proceeding 

Committee.’’ The Exchange will select Panelists in 

accordance the requirements set forth in BX Rules 

9120(z) and 9231. 

86BX Rule 9232 sets forth other criteria for the 

Chief Hearing Officer to use when selecting New 

Hearing Panels, including their level of expertise, 

the absence of any conflicts of interest or bias and 

any appearance thereof, their availability for 

service, and the frequency of their prior service on 

New Hearing Panels (with a preference towards 

providing opportunities for new or infrequentlyserving individuals). 

87BX Rule 9235(b) also authorizes the Chief 

Hearing Officer or his or her Deputy to exercise the 

authority of a Hearing Officer in his or her 

temporary absence. 

88BX Rule 9233(b) permits a Party to move for the 

disqualification of a Hearing Officer not later than 

15 days after the later of: (1) When the Party learned 

of the facts believed to constitute the 

disqualification; or (2) when the Party was notified 

of the assignment of the Hearing Officer. Similarly, 

BX Rule 9234(b) permits a Party to move for the 

disqualification of a Hearing Panelist within 15 

days after the later of: (1) When the Party learned 

of the facts believed to constitute the 

disqualification; or (2) when the Party was notified 

of the assignment of the Hearing Panelist. BX Rule 

9233(c) provides that the Chief Hearing Officer shall 

promptly investigate whether disqualification is 

required and issue a written ruling on the motion. 

BX Rule 9234 provides for a similar process for 

motions and decisions on motions to disqualify 

Hearing Panelists. 

89BX Rule 9253 provides in part that, 

notwithstanding BX Rule 9251(b), a Respondent 

may file a motion requesting that the Departments 

produce witness statements or witness deposition 

transcripts. It provides that the failure to produce 

such materials shall not result in rehearing or an 

amended decision unless the Respondent 

establishes that the failure was not harmless error. 

The Hearing Officer, or upon appeal or review, a 

Subcommittee, an Extended Proceeding Committee, 

or the Exchange Review Council, shall determine 

whether the failure to provide any statement was 

not harmless error. 

90See BX Rule 9251(c). 

91See BX Rule 9251(d). 

cause shown, they are [sic] deemed to 

waive their [sic] right to one.82 A 

Hearing Officer or the Hearing Panel 

may also call a hearing on their [sic] 

own initiative or the Hearing Panel may 

issue its decision on the record.83 BX 

Rule 9221(d) provides for notice of a 

hearing to be given to the Parties at least 

28 days beforehand, but the BX Rule 

provides an exception if the Hearing 

Officer determines that extraordinary 

circumstances require a shorter notice 

period or the Parties waive the notice 

period. 

BX Rule 9231(a) states that the Chief 

Hearing Officer of the OHO shall 

appoint a New Hearing Panel or an 

Extended New Hearing Panel 84 to 

conduct formal disciplinary procedures. 

BX Rule 9231(b) specifies that a New 

Hearing Panel, in most instances, is to 

be composed of a Hearing Officer and 

two Panelists,85 that the Hearing Officer 

shall preside over the hearings, and that 

the Chief Hearing Officer is responsible 

for selecting the Panelists, who must be 

associated with a Members or retired 

therefrom.86 BX Rule 9231(e) states that 

the Chief Hearing Officer may appoint a 

replacement Hearing Officer if the 

Hearing Officer withdraws, is 

incapacitated, or otherwise is unable to 

continue service after being 

appointed.87 Meanwhile, BX Rule 9234 

authorizes the Chief Hearing Officer to 

appoint new Hearing Panelists under 

similar circumstances. Like Existing 

Rule 1606(a)(3), BX Rules 9233 and 

9234 provide for the recusal or 

withdrawal of Hearing Officers and 

Panelists with conflicts of interest or 

biases and their replacement by the 

Chief Hearing Officer. Unlike the 

Existing Rule, however, BX Rules 9233 

and 9234 authorize a Party to file a 

request that Hearing Officers or 

Panelists be disqualified for such 

reasons.88

BX Rule 9241 governs pre-hearing 

conferences. BX Rule 9241(a) states that 

such conferences may be held to 

expedite proceedings, establish efficient 

procedures to manage proceedings, or to 

improve the quality of hearings through 

preparation. BX Rule 9241(b) states that 

pre-hearing conferences may be held 

upon the motion of the Hearing Officer 

or at the request of a Party. BX Rule 

9241(c) provides that subjects for 

discussion at pre-hearing conferences 

may include, not only the simplification 

of issues for adjudication and the 

expedition of proceedings, but also the 

exchange of witness and exhibit lists 

and exhibits, the stipulation of the 

authenticity and admissibility of 

evidence, taking official notice of facts, 

the scheduling of pre-hearing motions 

or briefs, the method of service, the 

scheduling of hearing dates, any 

amendments to the complaint or 

answers, and the production of 

documents. Generally, under BX Rule 

9241(d), initial pre-hearing conferences, 

unless determined by a Hearing Officer 

to be unnecessary or premature, shall be 

held within 21 days after the filing of an 

answer. BX Rule 9241(e) provides for 

agreements and procedural 

determination [sic] made during prehearing conferences to be recorded in 

orders issued by the Hearing Officer. 

Under BX Rule 9241(f), a Hearing 

Officer may issue a default decision 

against a Party that fails to appear at a 

pre-hearing conference, if the Party was 

provided due notice. 

Additionally, prior to a hearing, BX 

Rule 9242 authorizes a Hearing Officer 

to order a Party to furnish information 

to all other Parties and to the New 

Hearing Panel that may include an 

outline or narrative summary of the 

Party’s case or defense, the legal 

theories upon which a Party will rely, 

a list and copies of documents that the 

Party intends to introduce at the 

hearing, a list of witnesses that the Party 

intends to call to testify on their [sic] 

behalf and a summary of the expected 

testimony, and if a witness is to be 

called as an expert witness, a statement 

of the witness’ expertise. 

The BX Rule 9250 Series governs 

discovery during disciplinary 

proceedings. The BX Rule 9250 Series 

provides for more extensive discovery 

than that which exists under the 

Existing Rules. BX Rule 9251(a) 

generally provides that the Departments 

must make available to Respondents 

information and documents obtained in 

connection with the investigations that 

led to the institution of disciplinary 

proceedings, such as requests for 

information and documents, responses 

thereto, and all transcripts and exhibits. 

BX Rule 9251(b) permits the 

Departments to withhold certain 

documents from Respondents under 

certain circumstances, including to the 

extent that they are privileged, contain 

attorney work product, constitute 

internal memoranda or examination 

reports, reveal examination or 

investigatory methods, the identities of 

confidential sources, or the existence of 

other prospective investigations or 

enforcement actions, or if the Hearing 

Officer grants leave to withhold a 

document.89 The BX Rule does not 

permit the Departments to withhold 

from Respondents exculpatory 

evidence. The Hearing Officer may 

require the Departments to submit a list 

of withheld documents.90 However, the 

Rule states that unless the Hearing 

Officer orders otherwise, the 

Departments generally must make 

documents available to a Respondent 

not later than 21 days after service of the 

Respondent’s answer.91 If the 

Departments fail to make documents or 

witness statements available to 

Respondents as required under BX Rule 


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92See BX Rule 9251(g). The Hearing Officer, or, 

upon appeal or review, a Subcommittee, an 

Extended Proceeding Committee, or the Exchange 

Review Council, shall determine whether the 

failure to make the document available was not 

harmless error. See id. 

93See BX Rule 9252(b). 

94See id. 

95See BX Rule 9252(c). 

96See id. 

97 In addition to the above, BX Rule 9280 

authorizes a New Hearing Panel to exclude or 

impose sanctions upon a Party, an attorney for a 

Party, or another authorized representative of a 

Party that violates an order or otherwise engages in 

contemptuous conduct during a proceeding. 

Continued 

9251, no rehearing or amended decision 

may be in order, unless the Hearing 

Officer determines that the failure was 

not harmless error.92

BX Rule 9252 provides for a process 

by which a Respondent may request that 

the Exchange invoke BX Rule 8210 to 

compel the production of documents or 

testimony at the hearing. Pursuant to BX 

Rule 9252(a), such a request must be 

submitted to the Hearing Officer no later 

than 21 days before the hearing date. 

The request may be granted upon a 

showing that the information sought is 

relevant, material, and non-cumulative, 

that the requesting Party has been 

unsuccessful in obtaining the requested 

documents or testimony despite good 

faith attempts to do so, and that each of 

the persons for whom the documents 

and testimony are sought is subject to 

the Exchange’s jurisdiction.93 The 

Hearing Officer shall also consider 

whether the request is unreasonable, 

oppressive, excessive, [sic] in scope, or 

unduly burdensome, or whether it 

should be denied, limited, or 

modified.94 If the Hearing Officer 

determines that a request is 

unreasonable, excessive, or unduly 

burdensome, he or she may deny the 

request or grant it only upon such 

conditions as fairness requires.95 If the 

Hearing Officer grants the request, the 

Hearing Officer shall order that 

requested documents be produced to all 

Parties not less than ten days before the 

hearing, and order that witnesses whose 

testimony was requested appear and 

testify at the hearing. If the Hearing 

Officer grants the request ten or fewer 

days before a hearing on the merits is 

scheduled to begin or after such hearing 

begins, the documents or testimony 

shall be produced immediately to all 

Parties.96

Several BX Rules govern the hearing 

process. Broadly speaking, these Rules 

are similar to, albeit more 

comprehensive than, the hearings 

process that exists under Existing Rule 

1606(e). BX Rule 9261(a) requires a 

Party to submit to all other Parties and 

to the Hearing Officer, no later than 10 

days before a hearing, or at such earlier 

date as may be specified by the Hearing 

Officer, copies of documentary evidence 

and the names of the witnesses that it 

intends to present at the hearing. BX 

Rule 9261(b) states that a Party is 

entitled to appear at a hearing in person, 

by counsel, or by their [sic] 

representative. BX Rule 9262 requires 

sworn testimony at hearings. BX Rule 

9263(a) grants the Hearing Officer 

authority to receive relevant evidence 

and to exclude all evidence that is 

irrelevant, immaterial, unduly 

repetitious, or unduly prejudicial. BX 

Rule 9145(a) provides that the formal 

rules of evidence shall not apply in a 

proceeding brought under the Rule 9000 

Series. BX Rule 9265 requires hearings 

and (unless otherwise ordered by a 

Hearing Officer) pre-hearing conferences 

to be recorded by a court reporter and 

for transcripts to be available for 

correction and purchase. BX Rule 9266 

states that the Hearing Officer may 

require the Parties to file proposed 

findings of fact and conclusions of law, 

or post-hearing briefs, and it prescribes 

a procedure for doing so. BX Rule 9267 

lists the contents of the evidentiary 

record. 

BX Rule 9268 governs New Hearing 

Panel decisions. Similar to Existing Rule 

1607, BX Rule 9268(a) requires a New 

Hearing Panel to make a determination 

in a matter based on a majority vote, 

which is reflected in a written decision 

drafted by the Hearing Officer. Also 

similar to the Existing Rule, BX Rule 

9268(b) requires that each decision 

include a statement of the specific 

violations alleged, findings of 

underlying facts, and conclusions of 

law. Unlike the Existing Rule, however, 

BX Rule 9268(c) permits the Hearing 

Officer or a Hearing Panelist to prepare 

a written dissenting opinion. BX Rule 

9268(a) also specifically requires that 

the decision be issued within 60 days of 

the final date allowed for filing 

proposed findings of fact, conclusions of 

law, and post hearing briefs, or by a date 

established by the Chief Hearing Officer. 

Last, under subparagraph (d) of the BX 

Rule, the OHO must serve the decision 

and any dissenting opinion on the 

Parties, publish notice of the decision 

and any dissenting opinion in the 

Central Registration Depository (‘‘CRD’’) 

and provide a copy of the decision and 

any dissent thereto to the each Member 

of the Exchange with which the 

Respondent is associated. 

BX Rules 9264 and 9269 concern the 

disposition of a disciplinary matter 

through a summary proceeding. BX Rule 

9264 states that a motion for summary 

disposition must be initiated by a Party. 

Under BX Rule 9264(a), the Respondent 

and/or staff may, prior to the hearing 

but after the Respondent has filed an 

answer and had opportunity to inspect 

documents in the record, make a motion 

for summary disposition of any or all 

the causes of action in the complaint 

with respect to that Respondent, as well 

as any defense raised in a Respondent’s 

answer. If a hearing on the merits has 

begun, then BX Rule 9264(b) states that 

Parties may submit a motion for 

summary disposition only with leave of 

the Hearing Officer. BX Rule 9264(c) 

provides the process for proceeding 

when a summary motion does not 

dispose of the matter entirely. BX Rule 

9264(d) requires motions for summary 

disposition to be supported by a 

statement of undisputed facts, a 

supporting memorandum of points and 

authorities, and affidavits or 

declarations that set forth such facts. BX 

Rule 9264(e) concerns rulings on 

motions for summary disposition. This 

provision of the BX Rule provides that 

a Hearing Officer may deny or defer a 

decision on any motion for summary 

disposition, yet only a New Hearing 

Panel may grant such a motion (except 

the Hearing Officer may grant motions 

for summary disposition with respect to 

questions of jurisdiction). BX Rule 

9264(e) also provides that a motion for 

summary disposition may be granted if 

there is no genuine issue with regard to 

any material fact and the Party that files 

the motion is entitled to summary 

disposition as a matter of law. 

Meanwhile, BX Rule 9269 governs the 

issuance of default decisions by the 

Hearing Officer against Respondents 

that fail to provide timely answers to 

complaints or any Party that fails to 

appear at any hearing for which they 

have [sic] due notice. Where the 

defaulting Party is the Respondent, the 

BX Rule specifies that the Hearing 

Officer may issue a default decision that 

deems the allegations against the 

Respondent to be admitted. Where the 

defaulting Party is the Departments, the 

Hearing Officer may issue a default 

decision that dismisses the complaint 

with prejudice. The Hearing Officer also 

may order a Party who fails to attend a 

pre-hearing conference or a hearing to 

pay the costs of attendance for the other 

Party. Like Existing Rule 1608, the BX 

Rule provides for default decisions to be 

set aside, but unlike the Existing Rule, 

BX Rule 9269 provides for the Hearing 

Officer to set them aside only upon a 

motion and a showing of good cause. 

The BX Rule provides, however, that 

default decisions may be appealed to or 

called for review by the Board within 25 

days after service.97


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Authorized sanctions include, but are not limited 

to, imposing orders that establish facts in favor of 

the opposing Party, precluding a Party from making 

claims or defenses, striking portions of pleadings, 

or staying procedures until compliance occurs. No 

similar provisions exist in the Existing Rules. 

Meanwhile, BX Rule 9150(a) authorizes an 

adjudicator to exclude from disciplinary 

proceedings an attorney for a Party or any other 

person authorized to represent a Party to the extent 

that the adjudicator deems said attorney or persons 

to be engaging in contemptuous conduct, under BX 

Rule 9280, or unethical or unprofessional conduct. 

The BX Rule authorizes an attorney or person so 

excluded to seek review of their exclusion from the 

Exchange Review Council. 

98Finally, BX Rule 9270(i) states that, when a 

disciplinary proceeding names multiple 

respondents, settlement offers may be accepted or 

rejected as to any one or all of the Respondents 

submitting offers. 

99See BX Rule 9280(b). 

100See BX Rule 9280(c). 

101However, the Exchange notes that a decision 

involving a Respondent who is an affiliate of the 

Exchange may not be appealed to the Exchange 

Review Council. 

102Under the BX Rules, the Exchange Review 

Council is assigned its own counsel in appellate 

matters. BX Rule 9120(e) defines the term ‘‘Counsel 

to the Exchange Review Committee’’ as an attorney 

that reports to the CRO of the Exchange who is 

responsible for advising the Exchange Review 

Council, the Review Subcommittee, a 

Subcommittee, or an Extended Proceeding 

Committee regarding a disciplinary proceeding on 

appeal or review before the Exchange Review 

Council. Counsel also may decide a motion on a 

procedural matter in the BX Rule 9300 Series. See 

BX Rule 9146(j)(2). BX Rule 9313 describes the 

authority of the Counsel and the process for seeking 

the review of a Counsel decision. Under BX Rule 

9313(a), Counsel has authority to take ministerial 

and administrative actions to further the efficient 

administration of a proceeding. A Party may seek 

review of a Counsel decision on motion to the 

Exchange Review Council, the Review 

Subcommittee, a Subcommittee or, if applicable, an 

Extended Proceeding Committee. See BX Rule 

9313(b). Counsel is subject to the same conflict of 

interest prohibitions as the Exchange Review 

Council, see BX Rule 9332, which requires Counsel 

to withdraw from a matter any time that the 

Counsel has a conflict of interest or bias or 

circumstances otherwise exists where the fairness 

of the Counsel might reasonably be questioned. 

BX Rule 9270 governs settlements. It 

permits a Party to propose in writing an 

offer of settlement at any time and to do 

so without limit to the number of offers 

it proposes. Under BX Rule 9270(e), if 

an offer of settlement is uncontested, 

then the Departments must, if a hearing 

has not yet commenced, transmit the 

offer and a proposed order of acceptance 

to the Exchange Review Council (or the 

ODA, if the Respondent is an affiliate of 

the Exchange) for approval or rejection. 

If a hearing has already commenced 

when the offer is made, then the 

Departments must send the offer and 

proposed order to the New Hearing 

Panel for preliminary approval and then 

to the Exchange Review Council (or, if 

a Respondent is an affiliate of the 

Exchange, to the ODA) for ultimate 

approval or rejection. Under BX Rule 

9270(f), if an offer of settlement is made 

and it is contested, then the 

Departments must provide a written 

opposition to the New Hearing Panel, 

which may issue an order approving the 

offer, or it may order the Parties to 

attend a settlement conference. If a New 

Hearing Panel approves a contested 

offer of settlement, then the Hearing 

Officer shall send the order of 

acceptance of the offer of settlement to 

the Exchange Review Council (or, if a 

Respondent is an affiliate of the 

Exchange, to the ODA) for ultimate 

acceptance or rejection. Pursuant to BX 

Rule 9270(h), if an offer of settlement is 

rejected, then the Respondent shall be 

notified in writing, the offer shall be 

withdrawn, and the rejected order shall 

not constitute part of the record in any 

subsequent proceeding against the 

Respondent. BX Rule 9270(j) further 

clarifies that a Respondent shall not be 

prejudiced by a rejected order of 

settlement.98

BX Rule 9280 authorizes the issuance 

of sanctions for Parties, their attorneys, 

and their representatives, for 

contemptuous conduct. As set forth in 

BX Rule 9280(a)(2), such sanctions may 

include exclusion of an attorney or 

representative from proceedings. They 

may also include, in part, orders that 

establish disputed facts in favor of the 

non-sanctioned Party, preclude the 

disobedient Party from supporting or 

opposing claims or defenses, or strike 

pleadings or portions thereof.99 The 

exclusion of an attorney or 

representative is subject to review by 

the Exchange Review Council.100

BX Rule 9290 states that hearings 

shall be held and orders shall be issued 

as to temporary cease and desist 

proceedings on an expedited basis. BX 

Rule 9291 governs the form and delivery 

of permanent cease and desist orders. 

The BX Rule 9300 Series 

The BX Rule 9300 Series sets forth the 

process for review of disciplinary 

proceedings by the Exchange Review 

Council and the Board. 

BX Rule 9311 sets forth the process 

for appellate reviews of New Hearing 

Panel decisions. Under BX Rule 9311, a 

Party may appeal a New Hearing Panel 

decision to the Exchange Review 

Council within 25 days after service of 

a decision.101 Additionally, on their 

[sic] own motion, any member of the 

Exchange Review Council, a Review 

Subcommittee thereof, or the CRO (as to 

default decisions) may issue a call to 

review a New Hearing Panel decision 

within 45 days after the date of service 

of the decision (or within 25 days after 

the date of service, as to calls for review 

that the CRO initiates). BX Rule 9311(c) 

and (d) require [sic] that Parties file 

written notices of appeal (and crossappeal) with the OHO and it prescribes 

requirements for such notices. BX Rule 

9311(e) states that the Exchange Review 

Council, in its discretion, may waive 

any issues not raised in appeal or crossappeal notices, but it provides a process 

by which the Parties may petition for 

consideration of such issues. 

Meanwhile, BX Rule 9312 governs the 

process by which the Exchange Review 

Council, the Review Subcommittee, or 

the CRO may call a matter for review. 

It provides that a decision of a New 

Hearing Panel issued pursuant to BX 

Rule 9268 may be called for review by 

any member of the Exchange Review 

Council or any member of a Review 

Subcommittee within 45 days after 

service of the decision. It also provides 

that a default decision against a 

Respondent, pursuant to BX Rule 9269, 

may be called for review by the CRO, on 

his or her own motion, within 25 days 

after service of the decision. 

Additionally, it provides that a decision 

with respect to a Member that is an 

affiliate of the Exchange may not be 

called for review by the Exchange 

Review Council. BX Rule 9312(b) states 

that a decision to call a matter for 

review by the Exchange Review 

Council, the Review Subcommittee, or 

the CRO operates as a stay of a final 

decision until such time as the Council 

or Board issues its decision, except with 

respect to permanent cease and desist 

orders. 

BX Rule 9321 provides for the 

transmission of the record of a 

disciplinary proceeding to the Exchange 

Review Council within 21 days after the 

filing of a notice of appeal or notice of 

review, or at such a later time as the 

Council may designate. BX Rule 9322 

grants discretion, with good cause 

shown, to the Exchange Review 

Council, the Review Subcommittee, a 

Subcommittee, an Extended Proceeding 

Committee, and Counsel to the 

Exchange Review Council (defined 

below) to modify filing deadlines, 

adjourn appeal proceedings, and change 

hearing locations in certain instances 

and subject to certain limitations. 

BX Rule 9331 states that, following 

the filing of a notice of appeal or a call 

for review, the Exchange Review 

Council or the Review Subcommittee 

shall appoint a Subcommittee or an 

Extended Proceeding Committee, 

composed of two or more persons who 

are or were members of the Exchange 

Review Council or former Directors, for 

the purpose of making 

recommendations to the full Council as 

to how to dispose of matters before it.102


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Moreover, the Counsel may be removed on motion 

based upon a good faith belief that the Counsel has 

a conflict of interest or bias or circumstances 

otherwise exists where the fairness of the Counsel 

might reasonably be questioned. 

103BX Rule 9342 states that if a Party requests, 

but fails to appear at an oral argument, then the 

Committee or Subcommittee may proceed with oral 

arguments without that Party or consider the matter 

on the basis of the record, without oral argument, 

as to that Party. 

104BX Rule 9346(f) also permits the Council, 

Extended Proceeding Committee, or Subcommittee 

to order, on its own motion, that the record be 

supplemented with such additional evidence as 

they deem relevant. 

105See BX Rule 9346(g). 

106BX Rules 9360 and 9370 states [sic] when 

sanctions become effective, including when a 

Respondent appeals a decision to the Commission. 

107Although BX Rule 9400 references the BX 

Rule that prohibits disruptive quoting and trading, 

the Exchange proposes to substitute reference to its 

own analogous provision, Rule 403. 

Under BX Rule 9332, Exchange 

Review Council members, including 

members of the Review Subcommittee, 

panelists of a Subcommittee or an 

Extended Proceeding Committee, or 

Counsel to the Exchange Review 

Council, are subject to the same 

disqualification and recusal standards 

as the Hearing Panelists and Hearing 

Officers. 

The BX Rule 9340 Series governs the 

proceedings of the Exchange Review 

Council, Extended Proceeding 

Committee, and Subcommittees. BX 

Rule 9341 provides for oral arguments 

before a Subcommittee and the 

Extended Proceeding Committee, upon 

written request of a Party or otherwise 

at the discretion of Subcommittee or 

Committee.103 BX Rule 9343 provides 

that, if no oral argument is held, a 

matter shall be decided on the record, 

supplemented by any written materials 

submitted to or issued by the Exchange 

Review Council, a Subcommittee, or the 

Extended Proceeding Committee. BX 

Rule 9344 grants discretion to the 

Council or the Review Subcommittee to 

proceed with or dismiss the appeal and 

remand appeals of Parties that failed to 

participate in initial disciplinary 

hearings and show good cause for their 

failure to participate. It also prescribes 

circumstances under which an appeal or 

cross-appeal will be deemed abandoned. 

BX Rule 9345 states that a 

Subcommittee or the Extended 

Proceeding Committee shall present a 

recommended decision to the Exchange 

Review Council. Pursuant to BX Rule 

9346, the Exchange Review Council is 

charged with issuing a decision based 

on the record, supplemented by briefs 

and other papers submitted to the 

Subcommittee, Extended Proceedings 

Committee, or the Exchange Review 

Council, any oral arguments that occur, 

and upon a showing of good cause and 

with the leave of the Council, Extended 

Proceeding Committee, or 

Subcommittee, additional evidence that 

is introduced on appeal.104 It also 

provides that the formal rules of 

evidence shall not apply during the 

appeals process.105 BX Rule 9347 sets 

forth the form, format, and filing 

procedures and deadlines for papers 

filed in Exchange Review Council 

proceedings. BX Rule 9348 states the 

powers of the Exchange Review Council 

to affirm, dismiss, modify, or reverse 

New Hearing Panel decisions with 

respect to each finding, or to remand the 

proceeding with instructions. It also 

provides that the Exchange Review 

Council may affirm, modify, reverse, 

increase, or reduce any sanction, or 

impose any other fitting sanction. The 

Exchange Review Council must issue a 

decision consistent with BX Rule 

9349(b), which provides elements 

required to be included in an Exchange 

Review Council decision. 

BX Rule 9351 governs discretionary 

review by the Board. Pursuant to BX 

Rule 9351(a), a Director may call for 

review a decision of the Exchange 

Review Council (other than a decision 

with respect to a Member that is an 

affiliate of the Exchange) not later than 

the next meeting of the Board that is at 

least 15 days after the date on which the 

Board receives the Exchange Review 

Council decision. As set forth in BX 

Rule 9351(d), the Board may affirm, 

modify, or reverse the proposed written 

decision of the Exchange Review 

Council and it may affirm, modify, 

reverse, increase, or reduce any sanction 

(including the terms of any permanent 

cease and desist order) or impose any 

other fitting sanction. The Board also 

may remand the proceeding with 

instructions. The Board is required to 

issue its decision in writing pursuant to 

BX Rule 9351(e).106

Unlike the Existing Rules, BX Rule 

9370 expressly provides for a 

Respondent aggrieved by a final 

disciplinary action to apply for review 

by the Commission pursuant to Section 

19(d)(2) of the Act. 

The BX Rule 9400 and 9500 Series 

The BX Rule 9400 Series provides the 

process for expedited client suspension 

proceedings involving alleged violations 

of Rule 403 (Disruptive Quoting and 

Trading Activity Prohibited). The BX 

Rule 9500 Series provides the process 

for proceedings other than formal 

disciplinary proceedings. The Exchange 

proposes that these BX Rules will 

replace Chapter 15 of the Existing Rules, 

which also provide for the Exchange to 

impose summary suspensions in various 

circumstance [sic]. 

BX Rule 9400 authorizes and 

prescribes the process for adjudicating 

expedited client suspensions that may 

be imposed upon Members or 

Associated Persons that violate the 

prohibition on disruptive quoting and 

trading activity.107 BX Rule 9400 states 

that the Regulation Department, with 

the prior authorization of the CRO, may 

issue a notice initiating a suspension 

proceeding of a Member or an 

Associated Person for engaging in 

disruptive quoting and trading activity, 

which shall trigger the appointment of 

a New Hearing Panel and the occurrence 

of a hearing not later than 15 days after 

service of the notice, unless extended 

for good cause shown. The New Hearing 

Panel may issue a written decision 

imposing a suspension (within 10 days 

of receipt of the hearing transcript, 

unless otherwise extended) only if the 

New Hearing Panel finds by a 

preponderance of the evidence that the 

violation occurred and that it is likely 

to result in significant market disruption 

or harm to investors. BX Rule 9400(e) 

also permits a Respondent to apply to 

the New Hearing Panel to modify, set 

aside, limit, or revoke a suspension 

order and it requires the New Hearing 

Panel to respond to such a request in 

writing within 10 days after receiving it, 

unless such time period is extended 

with the consent of the Parties for good 

cause shown. Finally, BX Rule 9400(f) 

states that suspensions imposed by New 

Hearing Panels may be appealed to the 

Commission as set forth in Section 19 of 

the Act. 

The BX Rule 9500 Series permits the 

Exchange to impose sanctions, such as 

suspensions, cancellations of 

membership, bars of association with 

Members, and prohibitions or 

restrictions on access to Exchange 

services, as well as the adjudication of 

such sanction orders, for actions or 

circumstances that include the 

following: (1) Failures to provide 

information, reports, data, or testimony 

requested or required by the Exchange 

or failures to keep membership 

applications or supporting 

documentation current (BX Rule 9552); 

(2) failures to pay Exchange dues, fees 

and other charges or to submit a 

required report or information related to 

such payment (BX Rule 9553); (3) 

failures to comply with arbitration 

awards or settlements or orders of 

restitution (BX Rule 9554); (4) failures to 

meet the eligibility or qualification 

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108The BX Rule 9520 Series provides for a 

somewhat different process from the BX Rule 9550 

Series. BX Rule 9522 requires Members and 

Associated Persons to file applications for relief 

from statutory disqualifications or determinations 

of ineligibility. BX Rule 9522(e) authorizes the 

Department of Member Regulation, to the extent it 

deems consistent with the public interest and the 

protection of investors, to approve a written request 

for relief from the eligibility requirements by a 

disqualified Member with or without the filing of 

an application by such disqualified Member, under 

certain specified conditions. Pursuant to BX Rule 

9523, the Department of Member Regulation also 

may recommend membership or association or 

continued membership or association pursuant to a 

supervisory plan that is subject to approval by the 

Chair of the Statutory Disqualification Committee (a 

Subcommittee of the Exchange Review Council, as 

defined in BX Rule 9120(cc)) or the Exchange 

Review Council. Pursuant to BX Rule 9523(a), the 

Member or Associated Person may request a hearing 

before a New Hearing Panel to seek relief from 

disqualification or conditions imposed upon 

continued membership or association. In such 

instances, the Hearing Panel shall issue a 

recommended decision to the Statutory 

Disqualification Committee, which in turn shall 

issue a recommended decision to the Exchange 

Review Council for ultimate determination. The 

decision of the Exchange Review Council is subject 

to discretionary review by the Board. See id. The 

BX Rule also provides for the Exchange Review 

Council to conduct an expedited review of a 

recommended decision of the Statutory 

Disqualification Committee. See id. Finally, it 

provides for review by the Commission of any 

action taken pursuant to the BX Rule 9520 Series. 

See id. 

109The BX Rule 9700 Series is reserved. 

110BX Rule 9810. 

111 Id. 

112BX Rule 9850. 

113BX Rule 9860. 

114BX Rule 9870. 

115As noted elsewhere, the Exchange proposes to 

retain Existing Rules 1600 and 1614(a) and (d) in 

their current form (and to renumber Rule 1614(d) 

as 1614(b)). 

services (BX Rule 9555); (5) failures to 

comply with temporary and permanent 

cease and desist orders (BX Rule 9556); 

(6) financial or operational difficulties 

that require limiting or ceasing certain 

business activities (BX Rule 9557); and 

(7) actions authorized by Section 6(d)(3) 

of the Act, including in part summary 

suspensions of or limitations or 

prohibitions with respect to services 

offered by the Exchange on Members, 

Associated Persons, or other persons 

subject to the Exchange’s jurisdiction, 

including those who have been 

suspended or expelled from another 

SRO, barred or suspended from being 

associated with a member of another 

SRO, or are experiencing severe 

financial or operation [sic] difficulties 

threaten [sic] investors, creditors, other 

Members, or the Exchange (BX Rule 

9558). The BX Rule 9520 Series also 

provides for adjudication of statutory 

disqualifications or determinations of 

ineligibility to become or remain a 

Member or associated with a Member. 

Generally, each of these provisions of 

the BX Rules require [sic] the Exchange 

to serve written notice to the Member or 

Associated Person, offer them an 

opportunity to request a hearing in 

writing, and permit them to request 

termination of sanctions upon achieving 

compliance.108 Meanwhile, BX Rule 

9559 sets forth extensive procedures 

governing hearings and it provides for 

appellate reviews by the Exchange 

Review Council, upon its call for 

review, and by the Commission, 

pursuant to Section 19 of the Act. 

The BX Rule 9600 Series 

The BX Rule 9600 Series provides 

procedures to be followed when a 

Member seeks exemptive relief pursuant 

to any Rule that references the BX Rule 

9600 Series. As discussed below, the 

Exchange proposes to amend the 

Supplementary Material to Existing 

Rule 303 to provide for the BX Rule 

9600 Series to govern requests to waive 

applicable qualification examination 

requirements for applicants that apply 

to become associated with Members of 

the Exchange. 

The BX Rule 9800 Series 109

The BX Rule 9800 Series provides the 

process followed by the Exchange in 

administering temporary cease and 

desist orders, including the initiation of 

proceeding to issue such an order,110

service thereof,111 subsequent review of 

the order by the Hearing Panel,112 the 

consequences of non-compliance,113

and the process for seeking Commission 

review of the order.114

The BX Rule 9800 Series provides for 

temporary cease and desist orders and a 

process for adjudicating them. BX Rule 

9810 states that with the prior written 

authorization of the CRO and FINRA’s 

Chief Executive Officer (or such other 

senior officers as he or she designates), 

the Departments may initiate a 

temporary cease and desist proceeding 

with respect to alleged violations of 

Section 10(b) of the Act and SEC Rule 

10b-5, SEC Rules 15g-1 through 15g-9, 

and BX Rules 2110, 2120, or 2150 

(references to these BX Rules will be 

replaced with references to Exchange 

Rules 400, 405, and Chapter 6, 

respectively). The Departments must 

serve written notice upon Respondents 

of a proposed temporary cease and 

desist order and file a copy of such 

notice with the OHO. Additionally, if a 

complaint has not already been issued 

against the Respondents, then the 

Departments must file and serve a 

complaint together with the notice of 

the temporary cease and desist order. 

BX Rule 9820 provides for the Chief 

Hearing Officer of the OHO to assign a 

New Hearing Panel to adjudicate the 

proposed cease and desist order. BX 

Rule 9830 provides for a hearing to be 

held, generally speaking, not later than 

15 days after service of the notice. BX 

Rule 9840 states that the New Hearing 

Panel shall issue a written decision as 

to whether to impose a temporary cease 

and desist order within 10 days after 

receipt of the hearing transcript, unless 

such deadline is extended for good 

cause. It states that the New Hearing 

Panel should impose such an order if it 

finds that the Departments have 

demonstrated a likelihood of success on 

the merits and that the alleged 

misconduct or continuation thereof is 

likely to result in significant dissipation 

or conversion of assets or other 

significant harm to investors prior to the 

completion of disciplinary proceedings. 

BX Rule 9850 permits a Party to apply 

to the New Hearing Panel to modify, set 

aside, limit, or suspend a temporary 

cease and desist order. BX Rule 9860 

states that a Respondent that violates a 

temporary cease and desist order may 

have its association or membership 

suspended or cancelled or be subject to 

any fitting sanction, pursuant to BX 

Rule 9556. Finally, BX Rule 9870 states 

that a Respondent may apply to the 

Commission to review the issuance of a 

temporary cease and desist order, as set 

forth in Section 19 of the Act. 

Additional Conforming Rule Changes 

As discussed above, the Exchange is 

amending its By-Laws to conform to the 

BX by-laws, largely deleting the Existing 

Rule 1500, 1600, and 1700 Series,115

and adopting in their place the BX Rule 

8000 and 9000 Series. As a consequence 

of these changes, the Exchange proposes 

to amend or delete certain other Existing 

Rules, which are either not needed, 

duplicated elsewhere, or reference the 

deleted Existing Rules. Below is a 

description of the specific changes the 

Exchange proposes to make to its 

Existing Rules. 

Existing Rule 100 provides definitions 

for purposes of the Existing Rules. The 

Exchange is proposing to amend this 

Existing Rule to include definitions for 

several new terms. For example, the 

proposed Rules will define the new 

term ‘‘Code of Procedure’’ as the 

procedural rules contained in Chapter 

90. The Exchange also defines the new 

term ‘‘Exchange Review Council,’’ 

which is largely copied from BX Rule 

0120(m). The Exchange notes that item 

(6) of the new definition differs from the 

BX item (6) in that it cites the analogous 

rules of the Exchange, which have 

different rule numbers. Finally, the 

Exchange proposes to amend the 


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116See proposed Rule 302(g)(1). The Exchange 

notes that the deadline for filing petitions for BCC 

review of an Exchange action under Existing Rule 

1701(a) is 30 days from the date of such action. The 

Existing Rules pertaining to membership do not 

reference or define the terms ‘‘Membership 

Department’’ or ‘‘Department.’’ As part of this 

proposal, the Exchange proposes to amend Rule 

302(g) to specify that the Exchange’s Membership 

Department—rather than simply the ‘‘Exchange’’— 

makes determinations as to whether to grant, deny, 

or conditionally grant applications for membership 

or association or to continue as a Member or an 

Associated Person. 

117See id. 

118See proposed Rule 302(g)(4). The Exchange 

notes that Existing Rule 1702 provides for review 

by a BCC panel composed of two or more of its 

members. 

119See proposed Rule 302(g)(6)(A). 

120See proposed Rule 302(g)(6)(B) & (C). Unlike 

Existing Rule 1703, proposed Rule 302(g) does not 

provide for intervention in proceedings by 

interested non-Parties. 

121See proposed Rule 302(g)(9). 

122See proposed Rule 302(g)(10)(A). 

123See proposed Rule 302(g)(10)(D). 

124Unlike Existing Rule 1704, proposed Rule 

302(h) does not authorize the applicant or the 

President of the Exchange to request that the Board 

review the decision of the Exchange Review 

Council. 

definition of ‘‘SEC’’ so that it also 

includes the word ‘‘Commission.’’ 

Existing Rule 210 concerns the 

consequences of a Member’s or an 

Associated Person’s failure to pay dues, 

fees and other charges. The Exchange 

proposes to delete this Existing Rule in 

favor of BX Rule 9553, which is more 

comprehensive than the Existing Rule 

and differs from it in several respects. 

Existing Rule 210 provides that 

instances of nonpayment shall be 

reported to the Exchange President 

when they are 30 days past due, and 

that the President thereafter shall 

provide reasonable notice to the 

delinquent Member that continued nonpayment will result in suspension of 

trading privileges. An Associated Person 

that fails to pay may be suspended from 

association with a Member. Moreover, 

although Existing Rule 210(a) does not 

specify a time period for a reasonable 

notice that precedes suspension, it 

nevertheless provides that the Exchange 

shall dispose of the memberships of 

Members who are more than six months 

delinquent. By contrast, BX Rule 9553 

states that the Regulation Department, 

within an unspecified period of time 

period [sic] after the onset of a 

delinquency, may issue a written notice 

to the delinquent Member or Associated 

Person that failure to comply within 21 

days of service of the notice will result 

in suspension or cancellation of 

membership or suspension or bar of 

association with a Member, as 

applicable. BX Rule 9553 also provides 

for detailed provisions for serving such 

notice, a provision for requesting a 

hearing with respect to such a notice, a 

provision declaring the effectiveness of 

such notices (21 days after service) 

when no hearing is requested, and a 

means to request termination of a 

suspension, which may be granted for 

good cause shown. 

Existing Rule 302 sets forth 

circumstances in which the Exchange 

may deny or condition approval of 

membership applications or 

applications to associate with Members. 

Existing Rule 302(c) also sets forth 

circumstances in which the Exchange 

may determine not to permit a Member 

or Associated Person from continuing 

their [sic] membership or association 

with a Member, including because they 

become [sic] subject to [sic] statutory 

disqualification under the Act. Existing 

Rule 302(f) furthermore permits a 

Member or Associated Person that 

becomes subject to [sic] statutory 

disqualification under the Act to apply 

to the Exchange to continue as a 

Member or as an Associated Person, 

within 30 days of becoming subject to 

the statutory disqualification. Existing 

Rule 302(g) states that, subject to the 

summary suspension rules in Chapter 

15, any applicant for membership or 

association with a Member whose 

application is denied or conditioned or 

who is not permitted to continue as a 

Member or Associated Person may 

appeal such determinations under 

Chapter 17 of the Existing Rules. 

The Exchange proposes to modify 

Existing Rule 302(f) so that it refers to 

new and more robust procedures, set 

forth in the BX Rule 9520 series, by 

which a Member or an Associated 

Person may obtain relief from 

disqualification or ineligibility 

determinations (BX Rule 9522). 

The Exchange also proposes to amend 

Existing Rule 302(g), which states that 

subject to Chapter 15, the BCC may 

review in part Exchange determinations 

to deny membership or association with 

a Member pursuant to Chapter 17 of the 

Existing Rules. The Exchange proposes 

to re-assign responsibility for these 

reviews from the BCC to the Exchange 

Review Council and replace the review 

process presently set forth in Chapter 17 

of the Existing Rules with processes that 

are substantially the same as those set 

forth in BX Rules 1015 and 1016. 

Specifically, the proposed amendments 

to Exchange Rule 302(g) state that, 

subject to Chapter 90, the Exchange 

Review Council will have jurisdiction to 

review these decisions. Proposed Rule 

302(g) states that anyone whose 

application for membership on the 

Exchange, association with an Exchange 

Member, or whose continuing 

membership or association is denied or 

conditioned by the Exchange’s 

Membership Department, may file a 

written request for review by the 

Exchange Review Council within 25 

days after service of the Exchange’s 

decision.116 The request must state 

specifically why the applicant believes 

that the Membership Department’s 

decision is inconsistent with the 

permissible bases for denial set forth in 

Rule 302, or otherwise should be set 

aside and state whether a hearing is 

requested.117 The request will be heard 

by a Subcommittee appointed by the 

Exchange Review Council or the Review 

Subcommittee composed of two or more 

persons who are either current or past 

members of the Council or former 

Directors of the Exchange.118 If a 

hearing is requested or directed, it must 

be held within 45 days after the request 

for review is filed with the Exchange or 

service of the notice by the 

Subcommittee.119 Applicants and the 

Membership Department may be 

represented by counsel at the hearing 

and formal rules of evidence will not 

apply during the hearing.120 The 

Subcommittee must present a 

recommended decision in writing to the 

Exchange Review Council within 60 

days after the date of the hearing, and 

not later than seven days before the 

meeting of the Exchange Review 

Council at which the proceeding shall 

be considered.121 The Exchange Review 

Council must issue a proposed written 

decision that affirms, modifies, or 

reverses the Membership Department’s 

decision, or remands the proceedings 

with instructions and provide the 

proposed decision to the Exchange 

Board.122 If the Exchange Board does 

not call the decision for review, it shall 

become final. If the Exchange Review 

Council does not serve its final written 

decision within the time period 

prescribed by Rule 302(g)(10)(C), then 

the Applicant may file a written request 

with the Exchange Board for the Board 

to direct the Exchange Review Council 

to issue its decision immediately or 

show good cause why it needs 

additional time to issue its decision.123

Proposed Rule 302(h), which mirrors BX 

Rule 1016, grants the Exchange Board 

discretion, at the request of a Director, 

to review decisions of the Exchange 

Review Council.124

Existing Rule 305(b) requires 

Members to file with the Exchange and 

keep current their addresses at which 

notices may be served. The Exchange 

proposes to amend this Existing Rule to 

incorporate the language set forth in BX 

Rule 1160. Rather than merely requiring 

Members to provide the Exchange with 


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125See proposed Rule 307(d)(1). 

126See proposed Rule 307(d)(3). 

127See proposed Rule 307(d)(5)(A). 

128See proposed Rule 307(d)(5)(B) & (C). 

129See proposed Rule 307(d)(8). 

130See proposed Rule 307(d)(9). 

131See proposed Rule 307(d)(9)(D). 

their current address, the proposed 

amendment more broadly requires 

Members to report to the Exchange, 

through the FINRA Contact System, all 

of their contact information, including 

their mailing addresses, email 

addresses, facsimile numbers, and other 

information. It also requires members to 

update such contact information in the 

FINRA System within 30 days of any 

changes thereto, and to generally verify 

that such information remains accurate 

within 17 business days after the end of 

each calendar year. This proposed 

amendment to the Existing Rule will 

ensure that the Exchange has available 

to it multiple means of contacting its 

Members, including for purposes of 

serving the notices specified in the BX 

Rule 9550 series by email or by 

facsimile. The Exchange proposes, in its 

introduction to Chapter 90, to state that 

cross references in the BX Rule 9000 

Series to BX Rule 1160 should be read 

instead to refer to Exchange Rule 305(b), 

as modified herein. 

To maintain consistency with the BX 

Rules, the Exchange also proposes to 

eliminate Existing Rule 305(d), which 

requires Members to maintain a current 

copy of the Exchange’s governing 

documents and Rules in an accessible 

place and make them available for 

examination by customers, and to 

replace it with BX Rule 8110, which is 

materially equivalent. 

Existing Rule 307 and its 

Supplementary Material govern the sale 

and transfer of market maker rights. 

Item .01 of the Supplementary Material 

presently provides that decisions by the 

Exchange (and specifically, by the 

Membership Department) to deny 

approval of such sales and transfers are 

appealable under Chapter 17 of the 

Existing Rules. The Exchange proposes 

to state instead that these decisions are 

appealable to the Exchange Review 

Council. The Exchange notes that no 

analogue exists to this proposal in the 

BX Rules, which do not provide for the 

sale and transfer of such rights or 

reviews of decisions to deny or 

condition such sales or transfers. 

Nevertheless, the Exchange believes that 

the Exchange Review Council is the 

logical and appropriate body for 

reviewing such determinations given its 

other responsibilities. The Exchange 

also proposes to replace the review 

procedures set forth in Chapter 17 of the 

Existing Rules with processes that are 

substantially the same as those set forth 

in BX Rules 1015 and 1016. To 

accomplish the foregoing, the Exchange 

proposes to eliminate Supplementary 

Material .01 and insert its substance into 

the body of Rule 307 as paragraphs (c) 

and (d). Proposed Rule 307(d) states that 

the Exchange Review Council will have 

jurisdiction to review Membership 

Department decisions to deny the sale 

and transfer of market maker rights. 

Proposed Rule 307(d)(1) states that 

anyone [sic] is an owner or an approved 

applicant that is a party to an executed 

transfer agreement that is denied 

approval may file a written request for 

review by the Exchange Review Council 

within 25 days after service of the 

Exchange’s decision. The request must 

state specifically why the applicant 

believes that the Membership 

Department’s decision is inconsistent 

with the permissible bases for denial set 

forth in Rule 307(c), or otherwise should 

be set aside and state whether a hearing 

is requested.125 The request will be 

heard by a Subcommittee composed of 

two or more persons who are either 

current or past members of the Council 

or former Directors of the Exchange.126

If a hearing is requested or directed, the 

hearing must be held within 45 days 

after the request for review is filed with 

the Exchange or service of the notice 

directing a hearing by the 

Subcommittee.127 Applicants and the 

Membership Department may be 

represented by counsel at the hearing 

and formal rules of evidence will not 

apply during the hearing.128 The 

Subcommittee must present a 

recommended decision in writing to the 

Exchange Review Council within 60 

days after the date of the hearing, and 

not later than seven days before the 

meeting of the Exchange Review 

Council at which the proceeding shall 

be considered.129 The Exchange Review 

Council must issue a proposed written 

decision that affirms, modifies, or 

reverses the Membership Department’s 

decision, or remands the proceedings 

with instructions and provide it to the 

Exchange Board.130 If the Exchange 

Board does not call the decision for 

review, it shall become final. If the 

Exchange Review Council does not 

serve its final written decision within 

the time period prescribed by Rule 

307(d)(9)(C), then the applicant may file 

a written request with the Exchange 

Board for the Board to direct the 

Exchange Review Council to issue its 

decision immediately or show good 

cause why it needs additional time to 

issue its decision.131 Proposed Rule 

307(d)(10), which mirrors BX Rule 1016, 

grants the Exchange Board discretion, at 

the request of a Director, to review 

decisions of the Exchange Review 

Council. 

Existing Rule 310 requires a Member 

to notify the Exchange upon its 

adoption of a plan of liquidation or 

dissolution. The Existing Rule also 

provides that upon receipt of such 

notice, the Member’s trading privileges 

may be suspended in accordance with 

Chapter 15 of the Existing Rules. The 

Exchange proposes to replace this 

reference to Chapter 15 with a reference 

to BX Rule 9558. Again, no analogue to 

this proposal exists in the BX rules 

insofar as those rules do not expressly 

address suspensions for such reasons or 

reviews of suspension determinations. 

Nevertheless, the Exchange believes that 

the process set forth in BX Rule 9558 is 

most appropriate for reviewing 

suspension determinations in these 

circumstances given that they already 

apply in circumstances where a Member 

is experiencing extreme financial or 

operating difficulty such that the 

Exchange determines that the Member 

cannot safely continue to do business on 

the Exchange. 

The Supplementary Material to 

Existing Rule 313 concerns the 

Exchange’s authority to waive the 

applicable qualification examination 

requirements and accept other standards 

as evidence of an applicant’s 

qualifications for registration. The 

Exchange is amending this Rule to 

specify that such requests are handled 

pursuant to the BX Rule 9600 Series 

process. The BX Rule 9600 Series 

concerns the procedures for requesting 

exemptions, and the appeal of adverse 

decisions regarding an exemptive 

request. The Exchange notes that the 

proposed revisions will render the text 

of the Supplementary Material to 

Existing Rule 313 consistent with BX 

Rule 1070(d). 

Existing Rule 410 provides for the 

summary suspension of a Member that 

fails to perform on its contracts or is 

insolvent or is in such financial or 

operational condition or is otherwise 

conducting business in such a manner 

that it cannot be permitted to continue 

in business without compromising the 

safety of customers, creditors, or the 

Exchange. The Existing Rule provides 

for such suspensions to be administered 

in accordance with Chapter 15 of the 

Rules. The Exchange proposes to 

replace this reference to Chapter 15 with 

a reference to BX Rule 9558, which 

provides procedures for summary 

proceedings for actions authorized by 

Section 6(d)(3) under [sic] the Act. 

Existing Rule 413(b)(1) states that 

decisions denying market makers 

exemptions from standard position 


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132See proposed Rule 100(a)(20A). 

133See BX Options Rules Ch. V, Sec. 6(l). 

134See id. 

limits in options trading on the 

Exchange are not subject to appeal 

under Chapter 17 of the Existing Rules. 

The Exchange proposes to remove this 

reference to Chapter 17 as the Exchange 

proposes to delete it. 

Existing Rule 720 concerns obvious 

and catastrophic errors. Existing Rule 

720(k) currently references the OEP as 

the body responsible for reviewing 

determinations made by Options 

Exchange Officials pursuant to the Rule 

and it sets forth procedures to govern 

OEP review proceedings. In light of the 

fact that the OEP’s responsibilities will 

be incorporated into those of the 

Exchange Review Council,132 the 

amendments to the Rule remove 

references to the OEP and replaces [sic] 

them with references to a panel of the 

Exchange Review Council. The 

amended Rule also includes language 

grafted from the BX Rules prescribing 

the composition of panels convened for 

purposes of these reviews.133

Existing Rule 720A also provides for 

reviews by a ‘‘Review Panel’’ of 

decisions nullifying or adjusting 

transactions arising out of system 

disruptions or malfunctions. The 

Exchange proposes to eliminate the 

Review Panel in the Exchange’s Rules 

and transfer its responsibility to a panel 

of the Exchange Review Council. The 

new Rule also includes language grafted 

from the BX Rules prescribing the 

composition of Exchange Review 

Council panels convened for purposes 

of these reviews.134

Existing Rule 804 permits a Primary 

Market Maker to apply to the Exchange 

to withdraw temporarily from its 

Primary Market Maker status in an 

options class. The Existing Rule does 

not presently authorize reviews of 

Exchange determinations to deny 

requests for temporary withdrawals or 

to impose conditions on the reentry of 

quotations. However, BX Rule 4619(f) 

does provide for such reviews. To 

provide consistency, the Exchange 

proposes to amend Existing Rule 804(f) 

to state that the Exchange Review 

Council will have authority conduct 

such reviews. 

Existing Rule 1000 provides for the 

treatment of the options contracts of 

suspended Members. In discussing the 

nature of suspensions to which the 

Existing Rule applies, it references 

Chapter 15 several times. The Exchange 

proposes replacing this reference with a 

reference to the Chapter 90, which 

comprises the BX Rules that govern 

suspensions in lieu of Chapter 15. 

Existing Rule 1406 states that no 

Member or Associated Person may 

refuse to appear or testify before another 

exchange or SRO in connection with a 

regulatory investigation, examination or 

disciplinary proceeding or refuse to 

furnish documentary materials or other 

information or otherwise impede or 

delay such investigation, examination or 

disciplinary proceeding if the Exchange 

requests such information or testimony 

in connection with an inquiry resulting 

from an agreement entered into by the 

Exchange. Existing Rule 1406(d) states 

that when Members and Associated 

Persons respond to such requests for 

appearance, testimony, documents, or 

information, they shall have the same 

rights and procedural protections as 

they would if they were responding to 

requests from the Exchange pursuant to 

Existing Rule 1601(b). The Exchange 

proposes to replace the reference to 

Existing Rule 1601(b), which is being 

deleted, with a reference to BX Rule 

8210. BX Rule 8210(a) authorizes the 

Regulation Department, including 

FINRA staff, to require a Member or 

Associated Persons to provide 

information and testimony and to 

permit inspection and copying of their 

[sic] books, records, and accounts as to 

any matters involved in an 

investigation, complaint, examination, 

or proceeding. BX Rule 8210(b) provides 

that the Regulation Department and 

FINRA may exercise the aforementioned 

authority with respect to investigations, 

complaints, examinations, or 

proceedings conducted by other SROs. 

Lastly, BX Rule 8210(c) states that no 

Member or Associated Person may fail 

to provide information or testimony or 

to submit to inspection and copying of 

books, records, or accounts. 

Existing Rule 1800 states that any 

Member or Associated Person that fails 

to honor an arbitration award shall be 

subject to disciplinary proceedings in 

accordance with Chapter 16. The 

Exchange proposes to replace this 

reference to Chapter 16 with a reference 

to BX Rule 9554, which is the BX Rule 

that governs such sanctions. 

Proposed Introductory Paragraphs to 

Chapters 80 and 90 

The Exchange proposes to include 

introductory paragraphs to both 

Chapters 80 and 90 which state that 

they incorporate by reference the BX 

Rule 8000 and 9000 Series, respectively, 

and that such BX Rules shall be 

applicable to Exchange Members, 

Associated Persons, and other persons 

subject to the Exchange’s jurisdiction. 

These proposed introductory 

paragraphs also list instances in which 

cross references in the BX Rule 8000 

and 9000 Series to other BX rules 

should be read to refer instead to the 

Exchange Rules, and references to 

defined BX terms shall be read to refer 

to the Exchange-related meanings of 

those terms. For example, references in 

both the BX Rule 8000 and 9000 Series 

to the following defined terms shall be 

read to refer to the Exchange-specific 

meanings of those terms: ‘‘Exchange’’ or 

‘‘Nasdaq BX’’ shall be read to refer to 

the Exchange; ‘‘Rule’’ or ‘‘BX Rule’’ 

shall be read to refer to the Exchange 

Rules; ‘‘Board’’ or ‘‘Exchange Board’’ 

shall be read to refer to the Exchange 

Board of Directors; ‘‘Member’’ shall be 

read to refer to an Exchange Member; 

‘‘Associated Person’’ shall be read to 

refer to an Exchange Associated Person; 

‘‘BX Regulatory Department’’ or 

‘‘Regulation Department’’ shall be read 

to refer to the Exchange’s Regulatory 

Department; ‘‘BX Regulation’’ shall be 

read to refer to Exchange Regulation; 

‘‘Chief Regulatory Officer’’ shall be read 

to refer to the Chief Regulatory Officer 

of the Exchange; and ‘‘Equity Rule’’ 

shall be read to refer to an Exchange 

Rule. 

Additionally, the proposed 

introduction to Chapter 80 states that 

cross references in the BX Rule 8000 

Series to the term ‘‘Rule 0120’’ shall be 

read to refer to Exchange Rule 100 and 

cross references in the BX Rule 8000 

Series to ‘‘Rule 1015’’ shall be read to 

refer to Exchange Rule 302. Similarly, 

the proposed introduction to Chapter 90 

states that cross-references in the BX 

Rule 9000 Series to the following terms 

shall be read to refer to the following 

Exchange Rules: ‘‘Rule 0120’’ shall be 

read to refer to Exchange Rule 100; 

‘‘Rule 1013’’ shall be read to refer to 

Exchange Rules 305 and 306; ‘‘Rule 

1070’’ shall be read to refer to the 

Supplementary Material to Exchange 

Rule 313; ‘‘Rule 1160’’ shall be read to 

refer to Exchange Rule 305(b); ‘‘Equity 

Rule 2110’’ shall be read to refer to 

Exchange Rule 400; ‘‘Equity Rule 2120’’ 

shall be read to refer to Exchange Rule 

405; ‘‘Rule 2140’’ shall be read to refer 

to Exchange Rule 312; ‘‘Equity Rule 

2150’’ shall be read to refer to Exchange 

Rules Chapter 6; ‘‘Rule 2170’’ shall be 

read to refer to Exchange Rule 403; 

‘‘Rule 4110A’’ shall be read to refer to 

Exchange Rules Chapter 13; ‘‘Rule 

4120A’’ shall be read to refer to 

Exchange Rules Chapter 13; ‘‘Rule 

10000 Series’’ shall be read to refer to 

Exchange Rules Chapter 18; and 

‘‘Chapter III, Section 16’’ shall be read 

to refer to Exchange Rule 403. 

Finally, as noted above, the 

introduction to Chapter 90 states that 

BX IM–9216 in the BX Rules shall not 

apply to the Exchange, its Members, 


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135The Exchange notes that the proposed changes 

will not become operative unless and until the 

Commission approves the Exchange’s request, 

which it has filed pursuant to Section 36 of the 

Exchange Act and SEC Rule 0–12 thereunder, for 

an exemption from the rule filing requirements of 

Section 19(b) of the Exchange Act as to changes to 

Chapters 80 and 90 that are effected solely by virtue 

of a change to the BX Rule 8000 or 9000 Series. 

136The Exchange anticipates that the members of 

the Exchange Review Council will serve in a 

manner that is consistent with their tenures on the 

Nasdaq, BX, and Phlx review councils. That is, to 

the extent that the tenure of a member of these other 

review councils is due to expire on a particular 

date, then the same expiration date will apply to 

that member’s tenure on the Exchange Review 

Council. All terms for members on the Exchange 

Review Council will comply with Article VI, 

Section 4 of the proposed By-Laws. 

137 15 U.S.C. 78f(b). 

138 15 U.S.C. 78f(b)(5). 

139 15 U.S.C. 78f(b)(6). 

Associated Persons, or other persons 

subject to the jurisdiction of the 

Exchange and that instead, references to 

BX IM–9216 shall be read to refer to 

Exchange Rule 1614(b). Similarly, the 

introduction states that the Exchange’s 

procedures set forth in BX Rule 9216(b) 

and 9143(e)(3), which govern its 

handling of MRVP violations and the 

issuance of MRVP violation letters, shall 

also apply to the Exchange’s handling of 

minor rule violations and the issuance 

of minor rule violation letters, except 

that the Exchange shall promptly report 

any final disciplinary action to the 

Commission, in accordance with SEC 

Rule 19d–1(c)(1). 

Conclusion 

The changes proposed herein will 

allow the Exchange to harmonize its 

investigatory and disciplinary processes 

with the processes of BX, thus providing 

a uniform process for the investigation 

and discipline of Members and 

Associated Persons across all of the 

Nasdaq, Inc. SROs, as administered by 

FINRA pursuant to RSAs. Harmonizing 

the investigatory and disciplinary 

processes of all of the Nasdaq, Inc. SROs 

will bring efficiency to FINRA’s 

administration of its responsibilities 

under the RSAs because the process 

[sic] it must follow are nearly identical, 

and are all based on the process that 

FINRA follows. Harmonized processes 

will bring consistency to investigations 

and adjudication of rule violations, and 

will reduce the number of disciplinary 

processes and requirements with which 

Members and Associated Persons, as 

well as their counsel, must be familiar. 

The Exchange believes that the new 

investigatory and disciplinary processes 

are substantially similar to the existing 

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 process 

will benefit all parties as it provides 

greater detail and specificity than the 

retired Rules, and that it is consequently 

more transparent. 

The Exchange intends to announce 

the operative date of the new Rules at 

least 30 days in advance via a regulatory 

alert.135 To facilitate an orderly 

transition from the Existing Rules to the 

new Rules, the Exchange is proposing to 

apply the Existing Rules to all Letters of 

Consent that the CRO has approved and 

which are pending approval of the BCC 

prior to the operative date. The 

Exchange also will apply the Existing 

Rules to any matter for which, prior to 

the operative date, the Exchange has 

provided notice to a Subject of its 

determination to impose an MRVP fine 

or a minor rule violation fine whereby 

the Subject may yet or has contested the 

determination pursuant to Existing Rule 

1614(a). In terms of formal disciplinary 

matters, any matter that has been 

approved for the issuance of a statement 

of charges by the CRO will continue 

under the Existing Rules. Moreover, any 

appeal of a matter that is pending before 

an OEP pursuant to Existing Rule 720, 

a Review Panel pursuant to Existing 

Rule 720A, or the BCC pursuant to 

Existing Rule 302 or Supplementary 

Material .01 to Existing Rule 307, will 

continue under the Existing Rules. As a 

consequence of this transition process, 

the Exchange will retain the BCC, the 

OEP, the Review Panel, and the existing 

processes during the transition period 

until such time that there are no longer 

any matters proceeding under the 

Existing Rules. To facilitate this 

transition process, the Exchange will 

retain a transitional Rulebook that will 

contain the Exchange’s Rules as they are 

at the time of 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 and there are no longer any 

Members, Associated Persons or other 

persons subject to the existing 

disciplinary processes, the Exchange 

will remove the transitional Rulebook 

from its public rules website. 

The Exchange furthermore notes that 

it expects the transition from the BCC to 

the Exchange Review Council to be 

smooth given that it expects to nominate 

the existing (and common) members of 

the BX, Nasdaq, and Phlx exchange 

review councils to also become 

members of the Exchange Review 

Council.136 The Exchange does not 

expect that any existing members of the 

BCC will be nominated to become 

members of the Exchange Review 

Council; however, the Exchange will 

ensure that, in advance of the operative 

day, the members of the Exchange 

Review Council will familiarize 

themselves with the Rules and 

procedures of the Exchange so that they 

will be prepared to fulfill their 

responsibilities. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,137 in general, and furthers 

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

Act,138 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, and are not designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Exchange also believes that the 

proposal is consistent with Section 

6(b)(6) of the Act,139 which requires that 

the rules of an exchange provide that its 

members be appropriately disciplined 

for violations of the Act as well as the 

rules and regulations thereunder, or the 

rules of the Exchange, by expulsion, 

suspension, limitation of activities, 

functions, and operations, fine, censure, 

being suspended or barred from being 

associated with a member, or any other 

fitting sanction. 

The Exchange believes that the 

proposed changes are consistent with 

these requirements because the changes 

harmonize the Exchange’s investigative, 

disciplinary, and adjudicatory processes 

with the similar processes used by BX. 

The new processes are well-established 

as fair and designed to protect investors 

and the public interest, providing 

greater detail and transparency in the 

processes than is currently provided 

under the Existing Rules. Because the 

Exchange is adopting these Rules 

materially unchanged from the related 

BX Rules, with minor differences to 

account for the Exchange’s unique 

MRVP and minor rule violation 

schedule of fines, the Exchange believes 

that the proposed changes should 

facilitate prompt, appropriate, and 

effective discipline of Members and 

Associated Persons consistent with the 

Act. 

The proposed Rule change also makes 

miscellaneous changes to the Existing 

Rules to account for the adoption of the 

BX Rule 8000 and 9000 Series and the 


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140 15 U.S.C. 78f(b)(5)–(6). 

141See Securities Exchange Act Release No. 34– 

59154 (Dec. 23, 2008), 73 FR 80468 (Dec. 31, 2008) 

(SR–BSE–2008–048). 142 15 U.S.C. 78f(b)(7). 143 Id. 144See n.141, supra. 145 15 U.S.C. 78f(b)(7). 

replacement of the BCC with the 

Exchange Review Council. For example, 

subject to Chapter 90, proposed changes 

to Rule 302 re-assign responsibility to 

the Exchange Review Council to review 

decisions of the Exchange’s Membership 

Department to deny or condition 

applications for membership and 

association with Exchange Members and 

to deny or condition continuing 

membership or association. The 

proposal also establishes a new process 

by which the Exchange Review Council 

will adjudicate such reviews. Likewise, 

the Exchange proposes to amend Rule 

307 to re-assign responsibility to the 

Exchange Review Council to review 

decisions of the Exchange to deny sales 

or transfers of market maker rights. It 

also proposes to establish a new process 

by which the Exchange Review Council 

will adjudicate such reviews. The 

Exchange believes that these proposed 

changes to the Existing Rules are 

consistent with the Act because the new 

adjudicatory processes that the 

Exchange proposes to adopt in place of 

its existing processes are substantially 

similar to those that BX already utilizes. 

Moreover, the Exchange believes that 

the proposed processes will facilitate 

prompt, appropriate, and fair 

adjudications, consistent with the Act. 

Additionally, the Exchange proposes 

to make minor updates, corrections, and 

conforming amendments to the 

Exchange’s Rules, which are consistent 

with the Act because they are necessary 

to ensure that the Exchange’s crossreferences and terminology remain 

current and accurate. 

The Exchange believes that 

harmonizing its investigative, 

disciplinary, and adjudicatory processes 

with those of BX will reduce the burden 

on Members and Associated Persons 

that are also members of BX, Nasdaq, 

Phlx, and/or FINRA. The Exchange 

notes that all but one of its Members are 

also members of BX, Nasdaq, Phlx, and/ 

or FINRA. BX, Nasdaq, Phlx, and FINRA 

already have in place investigative, 

disciplinary, and adjudicatory processes 

that are the same or similar to those that 

the Exchange proposes to incorporate by 

reference. 

As discussed above, the Exchange 

believes that the proposed Rules will 

benefit all parties involved in the 

Exchange’s disciplinary and 

adjudicatory processes as they will 

include greater detail and specificity 

than do the Existing Rules. The proposal 

will render the Exchange’s 

investigatory, disciplinary, and 

adjudicatory processes more transparent 

than the Existing Rules. 

The Exchange also believes that 

adopting an Exchange Review Council 

is consistent with the Act because the 

Council’s mandate is to, among other 

things, ensure consistent and fair 

application of the Exchange rules 

pertaining to discipline of Members and 

Associated Persons. The Exchange 

Review Council will be a body 

appointed by the Exchange Board of 

Directors and composed of 

representatives of the securities industry 

as well as persons from outside the 

securities industry. The broad 

membership of the new Exchange 

Review Council will ensure that the 

decisions and guidance it provides will 

be fair and balanced. The Exchange 

Review Council will be similar in 

structure and function to the BX 

exchange review council. In addition to 

reviewing appeals of disciplinary 

actions, the Exchange Review Council 

will also have jurisdiction to review 

membership decisions (proposed Rule 

302) and appeals regarding limitations 

placed on Members or their employees 

that are subject to a statutory 

disqualification (BX Rule 9524). 

Additionally, the Exchange Review 

Council may consider and make 

recommendations to the Board on 

policy and rule changes relating to 

business and sales practices of Exchange 

Members and Associated Persons, and 

enforcement policies, including policies 

with respect to fines and other 

sanctions. Thus, the Exchange Review 

Council will provide the Exchange and 

market participants with a fair and 

impartial body overseeing disciplinary 

matters, as well as the rules and policies 

concerning the disciplinary process. For 

these reasons, the Exchange believes 

that adoption of the Exchange Review 

Council is consistent with the Act. 

The Exchange believes that 

eliminating the BCC, the OEP (as 

provided for under Existing Rule 720), 

and the Review Panel (as provided for 

under Existing Rule 720A) is consistent 

with Sections 6(b)(5) and 6(b)(6) of the 

Act,140 because the Exchange Review 

Council and the New Hearing Panels 

will assume the responsibilities of the 

BCC and the Panels. In particular, the 

functions of the Current Hearing Panels 

of the BCC will be handled by the New 

Hearing Panels, which the OHO shall 

convene. Going forward, the BCC’s (and 

the CRO’s) responsibility for approving 

settlements will be assumed by the 

Exchange Review Council and, in 

certain instances, the ODA. The BCC’s 

responsibilities for hearing appeals of 

Exchange decisions on membership or 

association with a Member will be 

assumed by the Exchange Review 

Council. The responsibilities of the OEP 

and the Review Panel to hear appeals of 

Exchange determinations to nullify or 

adjust transactions that involve obvious 

errors or that result from system 

disruptions and malfunctions also will 

be assumed by the Exchange Review 

Council. The Exchange believes that the 

proposal will provide for the Exchange 

Review Council, the New Hearing 

Panels, and the ODA to execute the 

responsibilities of the BCC and the 

Panels in a manner that the 

Commission, within the context of the 

BX Rules, has already deemed to be 

consistent with the Act.141 For example, 

the Exchange proposes to replace its 

existing process for handling appeals of 

membership decisions, as set forth in 

Existing Rule 302 and Chapter 17, with 

a process that BX already employs in BX 

Rules 1015 and 1016. Moreover, most 

Exchange Members and Associated 

Persons will already be familiar with the 

proposed responsibilities and 

procedures of the Exchange Review 

Council, the New Hearing Panels, and 

the ODA from their experiences as 

members of BX and other self-regulatory 

organizations whose rules provide for 

similar assignments of responsibilities 

and processes. 

The Exchange believes that its 

proposal furthers the objectives of 

Section 6(b)(7) of the Act 142 in that it 

is designed to provide a fair procedure 

for the disciplining of members and 

Associated Persons, the denial of 

membership to any person seeking 

membership therein, the barring of any 

person from becoming associated with a 

Member thereof, and the prohibition or 

limitation by the Exchange of any 

person with respect to access to services 

offered by the Exchange or a Member 

thereof. Specifically, the Exchange 

believes that the proposed investigatory, 

disciplinary, and adjudicatory processes 

are consistent with Section 6(b)(7) of the 

Act 143 because they are based on the 

existing processes used by BX. The BX 

processes are well-established as 

consistent with the Act.144

Last, the Exchange believes that its 

proposal to phase-in the 

implementation of the new 

investigatory, disciplinary, and 

adjudicatory processes is consistent 

with Section 6(b)(7) 145 of the Act 

because both the current and proposed 

processes are consistent with the Act, 

providing fair procedures for 

investigating, disciplining, and 


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37012 Federal Register / Vol. 83, No. 147 / Tuesday, July 31, 2018 / Notices 

146The posting of the transitional rules on the 

public rules website will make it clear what 

disciplinary proceedings are governed by the 

transitional rules (i.e., matters initiated prior to the 

implementation date). 

147 15 U.S.C. 78s(b)(3)(A)(iii). 

148 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(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. 

149 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

adjudicating the rights of Members and 

Associated Persons. The Exchange is 

proposing to provide advanced notice of 

the implementation date of the new 

processes, and will apply the new 

processes to new matters that are 

initiated on or after that implementation 

date. Any matters initiated prior to the 

implementation date will be completed 

using the current processes. As a 

consequence, the Exchange will delete 

the applicable portions of Chapters 15– 

17 from the Exchange’s Rulebook, but it 

will maintain a transitional Rulebook on 

the Exchange’s public rules website 

(http://nasdaqISE.cchwallstreet.com/), 

which will contain the Exchange Rules 

as they are at the time of filing this rule 

change.146 These transitional Rules will 

apply exclusively to the matters 

initiated prior to the implementation 

date. Upon conclusion of the last 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. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended 

[sic]. The proposed rule change is not 

intended to address competitive issues, 

but it should reduce burdens on 

Members, [sic] and Associated Persons. 

Specifically and as described in detail 

above, the Exchange believes that this 

change will bring efficiency and 

consistency in application of the 

investigative, disciplinary, and 

adjudicatory processes, thereby 

reducing the burden on Members and 

Associated Persons who are also 

members of BX. 

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 147 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.148

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: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) 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–2018–59 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–2018–59. 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–2018–59 and should be 

submitted on or before August 21, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.149

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–16271 Filed 7–30–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83704; File No. SR–GEMX– 

2018–24] 

Self-Regulatory Organizations; Nasdaq 

GEMX, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Align Existing 

Investigatory and Disciplinary 

Processes and Related Rules With the 

Investigatory and Disciplinary 

Processes and Associated Rules of 

Nasdaq BX, Inc. 

July 25, 2018. 

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 July 12, 

2018, Nasdaq GEMX, LLC (‘‘GEMX’’ 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. 


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