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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3The Exchange proposes to add Chapters 23–79 

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

Chapters for future use. 

4Citation 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.’’ 

5The 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. 

6As discussed below, the Exchange Review 

Council will assume responsibilities that presently 

reside with the Business Conduct Committee (the 

‘‘BCC’’). The Exchange also proposes to eliminate 

the BCC. 

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 ISE, LLC 

and Nasdaq MRX, LLC will propose similar changes 

to their respective investigatory, disciplinary, and 

adjudicatory processes and associated rules that 

will render them substantially similar to those of 

BX. 

8See SR–ISE–2018–59. Nasdaq ISE proposes to 

retain Rule 1600, which sets forth the general 

jurisdiction of the Exchange with respect to 

disciplinary matters. It also proposes to retain 

Existing Rule 1614(a), which sets forth its authority 

to impose fines of up to $2,500 for violations of the 

Exchange’s Minor Rule Violation Plan (‘‘MRVP’’) 

and up to $5,000 for minor rule violations (other 

than those subject to an MRVP). Nasdaq ISE also 

proposes to retain Existing Rule 1614(d) (to be 

renumbered as Rule 1614(b)), which sets forth the 

Exchange’s schedule of MRVP violations and minor 

rule violations and their associated fines. 

9The proposed changes involve Nasdaq ISE Rules 

410, 413(b)(1), 1000, 1406, and 1800. 

10See Resolution of the Board of Directors of the 

ISE Gemini Delegating Authority, dated July 30, 

2013. 

11See GEMX Business Conduct Committee 

Charter, as amended, May 1, 2003. 

12 In a February 4, 2016 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 

Continued 

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://nasdaqgemx.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 adopt new 

investigatory, disciplinary, and 

adjudicatory processes that are 

substantially the same as those of its 

sister exchange, BX. Specifically, the 

Exchange proposes to establish new 

Chapters 80 and 90 of its Rules 3 and 

then incorporate by reference into those 

Chapters the BX Rule 8000 and 9000 

Series,4 which set forth and govern the 

BX investigatory, disciplinary, and 

adjudicative processes.5 The Exchange 

also proposes to amend its By-Laws to 

establish a new body to review 

disciplinary and certain other matters 

(the ‘‘Exchange Review Council’’) that is 

similar to the exchange review council 

that BX utilizes for such purposes.6

These proposals, 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. exchanges.7

The proposal [sic] change will also 

further harmonize the work that the 

Financial Industry Regulatory Authority 

(‘‘FINRA’’) conducts for all these 

exchanges. 

The Exchange’s current investigatory, 

disciplinary, and adjudicatory processes 

are set forth in Chapters 15–17 of its 

Rules. Chapters 15–17 of the Exchange’s 

Rules, in turn, incorporate by reference 

the investigatory, disciplinary, and 

adjudicatory processes of Nasdaq ISE, 

LLC (‘‘Nasdaq ISE’’) that are set forth in 

the corresponding chapters of the 

Nasdaq ISE rulebook. As part of a 

parallel Nasdaq ISE filing that also 

proposes to adopt the investigatory, 

disciplinary, and adjudicatory processes 

and rules of BX (and incorporate them 

by reference into new chapters 80 and 

90 of the Nasdaq ISE rules), Nasdaq ISE 

proposes to eliminate chapters 15 and 

17 of its rules, and to largely eliminate 

chapter 16.8 These proposed changes to 

ISE chapters 15–17 will apply 

automatically to Chapters 15–17 of the 

Exchange’s Rules. Accordingly, 

reference should be made to SR–ISE– 

2018–59 for a detailed explanation of 

the proposed changes to Chapters 15–17 

and the purposes of those changes. 

Likewise, reference should be made to 

SR–ISE–2018–59 for a detailed 

discussion of the BX Rule 8000 and 

9000 Series, which will largely replace 

Chapters 15–17 for both Nasdaq ISE and 

the Exchange. Lastly, reference should 

be made to SR–ISE–2018–59 for a 

discussion of proposed changes to 

certain other ISE rules that the Exchange 

also incorporates by reference and that 

are relevant to the Exchange’s adoption 

of its new investigatory, disciplinary, 

and adjudicatory processes.9

The following is a discussion of 

proposed changes that are specific to the 

Rules of the Exchange and that are not 

otherwise addressed in or accomplished 

by the corresponding Nasdaq ISE filing. 

These changes include: (1) The 

elimination of the Exchange’s BCC and 

its replacement with the Exchange 

Review Council; and (2) changes to 

Exchange Rules that are necessary to 

accommodate the new investigatory, 

disciplinary, and adjudicatory processes 

and rules and to harmonize those 

processes and rules with those of BX. 

Elimination of the Business Conduct 

Committee and Establishment of the 

Exchange Review Council 

The Exchange presently utilizes the 

BCC to help it enforce its Rules with 

respect to its members (‘‘Members’’) and 

persons associated with its members 

(‘‘Associated Persons’’). The BCC is a 

committee, established by the Board of 

Directors,10 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 Hearing Panels that 

adjudicate formal disciplinary 

proceedings; (4) imposing sanctions on 

Members or Associated Persons in 

disciplinary proceedings; (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.11

The Exchange proposes to retire the 

BCC 12 and to amend its By-Laws to 


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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. 

13The 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. 

14The 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 [sic] 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). 

15See n.20, infra. 

16See id. 

17See id. 

18See id. 

19The terms ‘‘Nominating Committee’’ and 

‘‘Member Nominating Committee’’ are defined in 

Exchange By-Laws, Article I. 

establish in its place the 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.13 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.14 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 15 that is equal to at least 20% 

of the total number of members of the 

Exchange Review Council. The number 

of Non-Industry members,16 including 

at least three Public members,17 shall 

equal or exceed the sum of the number 

of Industry members 18 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 19 (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 

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, (a) that 

the member no longer satisfies the 

classification (Industry, Member 

Representative, Non-Industry, or Public) 

for which the member was elected; and 

(b) that 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 


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20 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. 

21The Exchange notes that it proposes to 

establish procedures in Existing Rule 303 to govern 

the review by the Exchange Review Council of 

adverse membership and association 

determinations. The Exchange proposes to base 

these procedures upon those set forth BX Rules 

1015 and 1016. 22See Securities Exchange Act Release No. 72149 

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

BX–2014–024). 

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.20

The BX Rules implement the 

foregoing responsibilities of the 

Exchange Review Council by 

establishing various procedures to 

govern its reviews. As the Exchange 

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 303.21 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.22

Other Conforming Rule 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 

definition of ‘‘SEC’’ so that it also 

includes the word ‘‘Commission.’’ 

Existing Rule 206 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 206 provides that 

instances of nonpayment shall be 

reported to the Exchange’s Chief 

Executive Officer and President when 

they are 30 days past due, and that the 

Chief Executive Officer and President 

thereafter shall provide reasonable 

notice to the delinquent Member that 

continued non-payment will result in 

suspension of trading privileges. An 

Associated Person that fails to pay may 

be suspended from association with a 

Member. By contrast, BX Rule 9553 

states that the Exchange’s 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 303 sets forth 

circumstances in which the Exchange 

may deny or condition approval of 

membership applications or 

applications to associate with Members. 

Existing Rule 303(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 303(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 


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23See proposed Rule 303(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 

303(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. 

24See proposed Rule 303(g)(1). 

25See proposed Rule 303(g)(4). The Exchange 

notes that Existing Rule 1702 provides for review 

by a BCC panel composed of two or more of its 

members. 

26See proposed Rule 303(g)(6)(A). 

27See proposed Rule 303(g)(6)(B) & (C). Unlike 

Existing Rule 1703, proposed Rule 303(g) does not 

provide for intervention in proceedings by 

interested non-parties. 

28See proposed Rule 303(g)(9). 

29See proposed Rule 303(g)(10)(A). 

30See proposed Rule 303(g)(10)(D). 

31Unlike Existing Rule 1704, proposed Rule 

303(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. 

Rule 303(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 303(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 303(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 303(g) state that, 

subject to Chapter 90, the Exchange 

Review Council will have jurisdiction to 

review these decisions. Proposed Rule 

303(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.23 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 303, or otherwise should be set 

aside and state whether a hearing is 

requested.24 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.25 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.26 Applicants and the 

Membership Department may be 

represented by counsel at the hearing 

and formal rules of evidence will not 

apply during the hearing.27 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.28 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.29 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 303(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.30

Proposed Rule 303(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.31

Existing Rule 307(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 

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 307(b), 

as modified herein. 

To maintain consistency with the BX 

Rules, the Exchange also proposes to 

eliminate Existing Rule 307(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 308 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 306 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 


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32See proposed Rule 100(a)(21A). 

33See BX Options Rules Ch. V, Sec. 6(l). 

34See id. 35See SR–ISE–2018–59. 

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 306 consistent with BX 

Rule 1070(d). 

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,32 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.33

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.34

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. 

As discussed above, Chapter 16 of the 

Exchange’s Rules incorporates by 

reference Chapter 16 of the ISE rules. 

However, Chapter 16 of the Exchange’s 

Rules contains an introductory 

paragraph that references the 

incorporation by reference and provides 

instructions for cross-references. The 

Exchange proposes to delete the last line 

of this introductory paragraph, which 

specifies that a reference in the ISE Rule 

1615 to Nasdaq ISE’s contract with 

FINRA shall be read to refer to the 

Exchange’s contract with FINRA. The 

Exchange proposes to delete this 

sentence because Nasdaq ISE is 

proposing to delete its Rule 1615, such 

that this sentence will no longer be 

necessary. The Exchange also proposes 

to change the title of Chapter 16 from 

‘‘Discipline’’ to ‘‘Disciplinary 

Jurisdiction and Minor Rule Violation 

Fines’’ so that it conforms to the new 

title of Chapter 16 of the Nasdaq ISE 

Rules and to the content of that Chapter 

that Nasdaq ISE proposes to revise.35

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 303. 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 302 and 307; ‘‘Rule 

1070’’ shall be read to refer to the 

Supplementary Material to Exchange 

Rule 306; ‘‘Rule 1160’’ shall be read to 

refer to Exchange Rule 307(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 309; ‘‘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, the introduction to Chapter 

90 states that BX IM–9216 in the BX 

Rules shall not apply to the Exchange, 

its Members, 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 procedures set forth in BX Rule 

9216(b) and 9143(e)(3), which govern 

the handling of violations of rules 

subject to the MRVP (‘‘MRVP 

violations’’) and the issuance of MRVP 

violation letters, shall also apply to the 

Exchange’s handling of other violations 

of Rules listed in Rule 1614(b) that are 

not subject to the MRVP (‘‘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). These proposed 

references are necessary to account for 

Nasdaq ISE’s proposed revisions to 

Chapter 16 of its rules, which will retain 

the Exchange’s existing authority to 

impose fines of up to $2,500 for MRVP 

violations and up to $5,000 for minor 

rule violations, as well as the 

Exchange’s existing fine schedule for 


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36The 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. 

37A ‘‘Letter of Consent’’ is a means by which the 

Exchange may consensually address a violation of 

its Rules without resort to the formal disciplinary 

process. See Existing Rule 1603. 

38A ‘‘statement of charges’’ is formal disciplinary 

complaint. See Existing Rule 1604. 

39The 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. 

40 15 U.S.C. 78f(b). 

41 15 U.S.C. 78f(b)(5). 

42 15 U.S.C. 78f(b)(6). 

such violations, which will be set forth 

in Rule 1614(b). 

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. exchanges, as administered 

by FINRA pursuant to Regulatory 

Services Agreements. Harmonizing the 

investigatory and disciplinary processes 

of all of the Nasdaq, Inc. exchanges 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.36 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 37 that the Chief Regulatory 

Officer of the Exchange 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 

violation 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 38 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 303 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 shared) membership of 

the BX, Nasdaq, and Phlx Review 

Councils to also become members of the 

Exchange Review Council.39 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,40 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,41

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 [sic] 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,42 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. 

First, the Exchange’s proposals are 

consistent with the Act to [sic] make 

miscellaneous changes to the Existing 

Rules to account for the adoption of the 

BX Rule 8000 and 9000 Series and the 

replacement of the BCC with the 

Exchange Review Council. For example, 

subject to Chapter 90, proposed changes 

to Rule 303 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. 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. 

Second, the Exchange’s proposals are 

consistent with the Act to [sic] make 

minor updates, corrections, and 

conforming amendments to the 

Exchange’s Rules because they are 

necessary to ensure that the Exchange’s 


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43 15 U.S.C. 78f(b)(5)–(6). 

44 Id. 

45The OHO is an office within FINRA that is 

independent of the FINRA enforcement function 

and not involved in investigating or litigating cases. 

46Pursuant 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. Like the OHO, the 

ODA is an office within FINRA that is independent 

of the FINRA enforcement function and not 

involved in investigating or litigating cases. 

47See Securities Exchange Act Release No. 34– 

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

(SR–BSE–2008–048). 48 15 U.S.C. 78f(b)(7). 49 Id. 50See n.46, supra. 51 15 U.S.C. 78f(b)(7). 

cross-references and terminology remain 

current and accurate. 

Third, the proposed rule change is 

necessary to ensure that the Exchange 

maintains a disciplinary process, in 

accordance with Section 6(b)(5) and (6) 

of the Act,43 once Nasdaq ISE deletes its 

disciplinary rules from chapters 15–17 

of the Nasdaq ISE rulebook, which the 

Exchange presently incorporates by 

reference. The proposed rule change 

will also ensure that going forward, the 

Exchange’s disciplinary rules will 

continue to exist in harmony with those 

of Nasdaq ISE. As noted earlier, Nasdaq 

ISE is similarly proposing to incorporate 

by reference the BX Rule 8000 and 9000 

Series into new chapters 80 and 90 of 

its rulebook as to well make similar 

conforming changes to its other rules. 

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 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 

303), 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,44 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 (‘‘Current Hearing Panels’’)— 

which include adjudicating disciplinary 

actions—will be handled by new 

Hearing Panels, which FINRA’s Office 

of Hearing Officers (‘‘OHO’’) shall 

convene (‘‘New Hearing Panels’’).45

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, FINRA’s Office of 

Disciplinary Affairs (the ‘‘ODA’’).46 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.47 For example, 

the Exchange proposes to replace its 

existing process for handling appeals of 

membership decisions, as set forth in 

Existing Rule 303 and Chapter 17, with 

a process that BX already employs in BX 

Rules 1015 and 1016. Moreover, 

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 SROs 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 48 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 49 because they are based on the 

existing processes used by BX. The BX 

processes are well-established as 

consistent with the Act.50

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) 51 of the Act 

because both the current and proposed 

processes are consistent with the Act, 

providing fair procedures for 

investigating, disciplining, and 

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 


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37020 Federal Register / Vol. 83, No. 147 / Tuesday, July 31, 2018 / Notices 

52The 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). 

53 15 U.S.C. 78s(b)(3)(A)(iii). 

54 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. 

55 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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://http://nasdaqgemx.cchwall

street.com/), which will contain the 

Exchange Rules as they are at the time 

of filing this rule change.52 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 and the other Nasdaq, 

Inc. Exchanges. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 53 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.54

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– 

GEMX–2018–24 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–GEMX–2018–24. 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–GEMX–2018–24 and 

should be submitted on or before 

August 21, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.55

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–16272 Filed 7–30–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83705; File No. SR–MRX– 

2018–23] 

Self-Regulatory Organizations; Nasdaq 

MRX, 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 16, 

2018, Nasdaq MRX, LLC (‘‘MRX’’ 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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