[Federal Register Volume 83, Number 152 (Tuesday, August 7, 2018)]
[Notices]
[Pages 38748-38750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16799]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83757]


Order Granting Applications by Nasdaq BX, Inc., Nasdaq GEMX, LLC, 
Nasdaq ISE, LLC, Nasdaq MRX, LLC, and Nasdaq PHLX LLC for Exemption 
Pursuant to Section 36(a) of the Exchange Act From the Rule Filing 
Requirements of Section 19(b) of the Exchange Act With Respect to 
Certain CAT Rules Incorporated by Reference

August 1, 2018.
    Nasdaq BX, Inc. (``BX''), Nasdaq GEMX, LLC (``GEMX''), Nasdaq ISE, 
LLC (``ISE''), Nasdaq MRX, LLC (``MRX''), and Nasdaq PHLX LLC 
(``Phlx'') (each the ``Exchange'' and collectively, the ``Exchanges'') 
have filed with the Securities and Exchange Commission (the 
``Commission'') an application for an exemption from the rule filing 
requirements of Section 19(b) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') \1\ with respect to certain rules of The Nasdaq 
Stock Market LLC (the ``Nasdaq Market'') that the Exchanges seek to 
incorporate by reference. Section 36(a)(1) of the Exchange Act,\2\ 
subject to certain limitations, authorizes the Commission to 
conditionally or unconditionally exempt any person, security, or 
transaction, or any class thereof, from any provision of the Exchange 
Act or rule thereunder, if necessary or appropriate in the public 
interest and consistent with the protection of investors.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b).
    \2\ 15 U.S.C. 78mm(a)(1).

---------------------------------------------------------------------------

[[Page 38749]]

    The Nasdaq Market and the Exchanges are Participants in the 
National Market System Plan Governing the Consolidated Audit Trail 
(``CAT NMS Plan'' or ``Plan'').\3\ Each Participant in the CAT NMS Plan 
is required to enforce compliance by its members with the provisions of 
the Plan by adopting a Compliance Rule applicable to its members.\4\ In 
2017, pursuant to the CAT NMS Plan, the Nasdaq Market and the Exchanges 
each adopted a Compliance Rule.\5\ On April 10, 2018, the Exchanges 
filed proposed rule changes with the Commission to delete each 
Exchange's Compliance Rule from the rulebook and instead incorporate by 
reference, in each respective Exchange's rulebook, the Nasdaq Market's 
Compliance Rule (``Nasdaq Market Compliance Rule'').\6\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696 (November 23, 2016) (``CAT NMS Plan Approval 
Order''). All capitalized terms not otherwise defined herein have 
the meaning ascribed to them in the CAT NMS Plan or CAT NMS Plan 
Approval Order.
    \4\ Id. at 84945, 84950.
    \5\ See Securities Exchange Act Release No. 80256, 82 FR 14526 
(March 21, 2017) (order approving the Compliance Rules for the 
Nasdaq Market and the Exchanges). On January 29, 2018, the Nasdaq 
Market filed a proposed rule change with the Commission to relocate 
the Nasdaq Market Compliance Rule to a new section General 7 in its 
rulebook. See Securities Exchange Act Release No. 82604 (January 30, 
2018), 83 FR 5154 (February 5, 2018) (SR-NASDAQ-2018-007).
    \6\ See Securities Exchange Act Release Nos. 83077 (April 20, 
2018), 83 FR 18358 (April 26, 2018) (SR-Phlx-2018-30); 83081 (April 
20, 2018), 83 FR 18371 (April 26, 2018) (SR-BX-2018-015); 83079 
(April 20, 2018), 83 FR 18362 (April 26, 2018) (SR-ISE-2018-35); 
83083 (April 20, 2018), 83 FR 18384 (April 26, 2018) (SR-GEMX-2018-
13); and 83085 (April 20, 2018), 83 FR 18364 (April 26, 2018) (SR-
MRX-2018-12). Although the proposed rule changes were filed pursuant 
to Section 19(b)(3)(A)(iii) of the Exchange Act, and thereby became 
effective upon filing with the Commission, the Exchanges stipulated 
in their filings that the incorporation by reference would not be 
operative until such time as the Commission grants this exemptive 
request.
---------------------------------------------------------------------------

    The Exchanges request, pursuant to Rule 0-12 under the Exchange 
Act,\7\ that the Commission grant the Exchanges an exemption from the 
rule filing requirements of Section 19(b) of the Exchange Act for 
changes to each Exchange's rules that are effected solely by virtue of 
a change to the Nasdaq Market Compliance Rule. Specifically, the 
Exchanges request that they be permitted to incorporate by reference 
changes made to the Nasdaq Market Compliance Rule that would be 
incorporated by reference in the Exchanges' rulebooks, without the need 
for each Exchange to file separately the same proposed rule changes 
pursuant to Section 19(b) of the Exchange Act.\8\ By virtue of 
incorporating the Nasdaq Market Compliance Rule by reference, members 
of each Exchange will be required to comply with the Nasdaq Market 
Compliance Rule as though it is fully set forth within each of the 
Exchanges' rulebooks.\9\
---------------------------------------------------------------------------

    \7\ 17 CFR 240.0-12.
    \8\ See Letter from Angela S. Dunn, Principal Associate General 
Counsel, Nasdaq Inc., to Brent J. Fields, Secretary, Commission, 
dated April 10, 2018, at 2-3.
    \9\ Id. at 2.
---------------------------------------------------------------------------

    The Exchanges do not intend to incorporate by reference any trading 
rules. Instead, they represent that the Nasdaq Market Compliance Rule 
is regulatory in nature. Further, the Exchanges represent that they 
will, as a condition of this exemption, provide written notice to their 
members whenever the Nasdaq Market proposes a change to the Nasdaq 
Market Compliance Rule.\10\ Such notice will alert the members of each 
Exchange to the proposed rule change and give them an opportunity to 
comment on the proposal. The Exchanges state that they will also inform 
members in writing when the Commission approves any such proposed rule 
change.\11\
---------------------------------------------------------------------------

    \10\ The Exchanges also state that they will provide such notice 
on their websites in the same section they use to post their own 
proposed rule change pursuant to Rule 19b-4(l) of the Exchange Act. 
In addition, the Exchanges state that their website will include a 
link to the Nasdaq Market website where the proposed rule change 
would be located. Id.
    \11\ Id.
---------------------------------------------------------------------------

    The Exchanges believe this exemption is appropriate because it will 
result in the Exchanges' rules pertaining to CAT NMS Plan compliance to 
remain consistent at all times, thus ensuring consistent regulation of 
joint members of the Nasdaq Market and Exchanges with respect to the 
incorporated rules.\12\
---------------------------------------------------------------------------

    \12\ Id.
---------------------------------------------------------------------------

    The Commission has issued exemptions similar to the Exchanges' 
request.\13\ In granting one such exemption in 2010, the Commission 
repeated a prior, 2004 Commission statement that it would consider 
similar future exemption requests from other self-regulatory 
organizations (``SROs''), provided that:
---------------------------------------------------------------------------

    \13\ See, e.g., Securities Exchange Act Release Nos. 80338 
(March 29, 2017), 82 FR 16464 (April 4, 2017) (order granting 
exemptive request from MIAX PEARL, LLC relating to rules of Miami 
International Securities Exchange, LLC incorporated by reference); 
72650 (July 22, 2014), 79 FR 44075 (July 29, 2014) (order granting 
exemptive requests from NASDAQ OMX BX, Inc. and the NASDAQ Stock 
Market LLC relating to rules of NASDAQ OMX PHLX LLC incorporated by 
reference); 67256 (June 26, 2012), 77 FR 39277, 39286 (July 2, 2012) 
(order approving SR-BX-2012-030 and granting exemptive request 
relating to rules incorporated by reference by the BX Options 
rules); 61534 (February 18, 2010), 75 FR 8760 (February 25, 2010) 
(order granting BATS Exchange, Inc.'s exemptive request relating to 
rules incorporated by reference by the BATS Exchange Options Market 
rules) (``BATS Options Market Order''); and 57478 (March 12, 2008), 
73 FR 14521, 14539-40 (March 18, 2008) (order approving SR-NASDAQ-
2007-004 and SR-NASDAQ-2007-080, and granting exemptive request 
relating to rules incorporated by reference by The NASDAQ Options 
Market).
---------------------------------------------------------------------------

    <bullet> An SRO wishing to incorporate rules of another SRO by 
reference has submitted a written request for an order exempting it 
from the requirement in Section 19(b) of the Exchange Act to file 
proposed rule changes relating to the rules incorporated by reference, 
has identified the applicable originating SRO(s), together with the 
rules it wants to incorporate by reference, and otherwise has complied 
with the procedural requirements set forth in the Commission's release 
governing procedures for requesting exemptive orders pursuant to Rule 
0-12 under the Exchange Act; \14\
---------------------------------------------------------------------------

    \14\ See 17 CFR 240.0-12 and Securities Exchange Act Release No. 
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) 
(``Commission Procedures for Filing Applications for Orders for 
Exemptive Relief Pursuant to Section 36 of the Exchange Act; Final 
Rule'').
---------------------------------------------------------------------------

    <bullet> The incorporating SRO has requested incorporation of 
categories of rules (rather than individual rules within a category) 
that are not trading rules (e.g., the SRO has requested incorporation 
of rules such as margin, suitability, or arbitration); and
    <bullet> The incorporating SRO has reasonable procedures in place 
to provide written notice to its members each time a change is proposed 
to the incorporated rules of another SRO.\15\
---------------------------------------------------------------------------

    \15\ See BATS Options Market Order, supra note 13 (citing 
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004) (order granting exemptive request relating 
to rules incorporated by reference by several SROs) (``2004 
Order'')).
---------------------------------------------------------------------------

    The Commission believes that the Exchanges have satisfied each of 
these conditions. Further, the Commission also believes that granting 
the Exchanges an exemption from the rule filing requirements under 
Section 19(b) of the Exchange Act will promote efficient use of the 
Commission's and the Exchanges' resources by avoiding duplicative rule 
filings based on simultaneous changes to identical rule text sought by 
more than one SRO.\16\ The Commission therefore finds it appropriate in 
the public interest and consistent with the protection of investors to 
exempt the Exchanges from the rule filing requirements under Section 
19(b) of the Exchange Act with respect to the above-described rules 
they incorporate by reference. This exemption is conditioned upon the 
Exchanges promptly providing written notice to their members whenever 
the

[[Page 38750]]

Nasdaq Market changes a rule that the Exchanges have incorporated by 
reference.
---------------------------------------------------------------------------

    \16\ See BATS Options Market Order, supra note 13, 75 FR at 
8761; see also 2004 Order, supra note 15, 69 FR at 8502.
---------------------------------------------------------------------------

    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\17\ that the Exchanges are exempt from the rule filing 
requirements of Section 19(b) of the Exchange Act solely with respect 
to changes to the rules identified in its request that incorporate by 
reference certain Nasdaq Market rules that are the result of changes to 
such Nasdaq Market rules, provided that the Exchanges promptly provide 
written notice to their members whenever the Nasdaq Market proposes to 
change a rule that the Exchanges have incorporated by reference.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(76).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2018-16799 Filed 8-6-18; 8:45 am]
 BILLING CODE 8011-01-P