Federal Register / Vol. 89, No. 37 / Friday, February 23, 2024 / Notices 13779 

27NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. 

Cir. 2010) (quoting Securities Exchange Act Release 

No. 59039 (December 2, 2008), 73 FR 74770, 74782– 

83 (December 9, 2008) (SR–NYSEArca–2006–21)). 

28 15 U.S.C. 78s(b)(3)(A). 

29 17 CFR 240.19b–4(f). 30 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 97985 

(July 25, 2023), 88 FR 49508. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 98366, 

88 FR 63999 (Sept. 18, 2023). The Commission 

designated October 29, 2023, as the date by which 

the Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

approve or disapprove, the proposed rule change. 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 98606, 

88 FR 68894 (Oct. 4, 2023). 

8Amendment No. 1 is available at https://

www.sec.goc/comments/sr-nasdaq-2023-022/

srnasdaq2023022-267740-644342.pdf. 

dealers that act as their order-routing 

agents, have a wide range of choices of 

where to route orders for execution’; 

[and] ‘no exchange can afford to take its 

market share percentages for granted’ 

because ‘no exchange possesses a 

monopoly, regulatory or otherwise, in 

the execution of order flow from broker 

dealers’. . . .’’.27 Accordingly, the 

Exchange does not believe its proposed 

change imposes any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 28 and paragraph (f) of Rule 

19b–4 29 thereunder. At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change 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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

CboeBZX–2024–016 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–CboeBZX–2024–016. 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 (https://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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBZX–2024–016 and should be 

submitted on or before March 15, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–03641 Filed 2–22–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99557; File No. SR– 

NASDAQ–2023–022] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing of Amendment No. 2 to a 

Proposed Rule Change To Create a 

New, Non-Trading Limited Underwriter 

Membership Class and Impose Related 

Requirements for Principal 

Underwriting Activity 

February 16, 2024. 

On July 12, 2023, The Nasdaq Stock 

Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to create a new, non-trading 

limited underwriter membership class 

and impose related requirements for 

principal underwriting activity in 

connection with a company applying for 

initial listing on the exchange with a 

transaction involving an underwriter. 

The proposed rule change was 

published for comment in the Federal 

Register on July 31, 2023.3

On September 12, 2023, pursuant to 

Section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change.5 On September 

29, 2023, the Commission instituted 

proceedings under Section 19(b)(2)(B) of 

the Act 6 to determine whether to 

disapprove the proposed rule change.7

On September 29, 2023, the Exchange 

filed Amendment No. 1 to the proposed 

rule change, which amended and 

replaced the proposed rule change in its 

entirety.8

On January 22, 2024, the Exchange 

filed Amendment No. 2 to the proposed 

rule change which amended and 

replaced the proposed rule change, as 


ddrumheller on DSK120RN23PROD with NOTICES1
13780 Federal Register / Vol. 89, No. 37 / Friday, February 23, 2024 / Notices 

9Amendment No. 2 is available at https://

www.sec.goc/comments/sr-nasdaq-2023-022/

srnasdaq2023022-414859-982462.pdf. 

10See Securities Exchange Act Release No. 99433, 

89 FR 6559 (Feb. 1, 2024). 

11 ‘‘Principal underwriter’’ will have the same 

definition used in Rule 405 promulgated under the 

Securities Act of 1933 (‘‘Securities Act’’): an 

underwriter in privity of contract with the issuer of 

the securities as to which he is underwriter. Such 

definition provides that the term ‘‘issuer’’ in the 

definition of ‘‘principal underwriter’’ has the 

meaning given in Sections 2(4) and 2(11) of the 

Securities Act. 17 CFR 230.405. 

12The Exchange proposes to apply the 

requirements herein to a principal underwriter 

(defined as an underwriter in privity of contract 

with the issuer of the securities as to which he is 

underwriter) because the definition of principal 

underwriter points to the lead underwriter, who is 

generally responsible for organizing the offering, 

including tasks such as determining allocation of 

shares and the offering price, in conjunction with 

the issuer. Although offerings may require more 

than one underwriter, or a group of underwriters 

known as an underwriting syndicate, the Exchange 

proposes to focus on the lead underwriters given 

the substantial role they typically play in the 

offering process. 

13This Amendment 2 modifies the Exhibit 5 by: 

(i) updating the numbering in Rule 5210 to account 

for recently added rule language; (ii) updating a 

related reference to Rule 5210 in General 3, Section 

1031(b); (iii) excluding Section 1032 of General 3, 

a new provision, from the Rules the Exchange 

proposes to apply under General 3, Section 1031(c) 

for reasons described below; (iv) adds General 9, 

Section 21 to the Rules the Exchange proposes to 

apply under General 3, Section 1031(c) for reasons 

described below; and (v) updates existing Rule 

language in Equity 7, Section 10 due to recent 

changes in the Rule text. In addition, this 

Amendment 2 provides related updates and other 

clarifying updates to the narrative explanation 

herein and adds a statutory basis explanation for 

the imposition of fees. Amendment 1 modified the 

original filing to make several changes as it relates 

to Associated Persons, including: (i) removing a 

proposed exemption from registration for certain 

investment banking representatives associated 

solely with Limited Underwriting Members as the 

Exchange determined that such exemption was 

unnecessary because such representatives are not 

required to register as Associated Persons under 

current Rules; (ii) removing proposed rule language 

from proposed Rule 1032(a) about eligibility to 

become Associated Persons; (iii) removing General 

4 from the list of Rules applicable to Limited 

Underwriting Members; and (iv) revising rule 

language to clarify that associated persons of 

Limited Underwriting Members shall at all times be 

properly qualified and registered under FINRA 

rules. In addition, Amendment 1 provided 

additional information about Nasdaq’s rationale in 

not applying certain existing rules to Limited 

Underwriting Members. 

14https://www.nasdaqtrader.com/MicroNews.

aspx?id=ERA2022-9. 

15https://www.nyse.com/publicdocs/nyse/ 

markets/nyse/rule-interpretations/2022/NYSER_

Reg_Memo_-_Regulatory_Scrutiny_in_Connection_

with_IPOs_(2022.11.17_final).pdf; https://

www.finra.org/rules-guidance/notices/22-25. 

modified by Amendment No. 1, in its 

entirety.9 The proposed rule change, as 

modified by Amendment No. 2, is 

described in Items I and II below, which 

Items have been prepared by the 

Exchange. 

On January 26, 2024, the Commission 

extended the time period for approving 

or disapproving the proposal to March 

27, 2024.10 The Commission has 

received no comment letters on the 

proposed rule change. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change, 

as modified by Amendment No. 2, from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

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. 

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 purpose of the proposed rule 

change is to amend the Exchange’s 

Rules to create a new, limited 

membership class for those 

underwriters that are FINRA members 

seeking only to perform underwriting 

activity as the principal underwriter on 

the Exchange 11 (and not seeking access 

to trade via the Nasdaq Market Center) 

and require a company applying for 

initial listing in connection with a 

transaction involving an underwriter to 

have a principal underwriter 12 that is a 

member or limited member of Nasdaq.13

Specifically, the Exchange proposes to 

amend its General Rules to: (i) add a 

definition of ‘‘Limited Underwriting 

Member’’ to General 1, Section 1; and 

(ii) add a new, limited underwriting 

membership to General 3, Section 1031, 

as described below. The Exchange 

proposes to amend Equity 7, Section 10 

to exempt Limited Underwriting 

Members from being assessed a trading 

rights fee. In addition, the Exchange 

proposes to amend Rule 5210 of the 

Listing Rules to impose a requirement 

that each Company applying for initial 

listing in connection with a transaction 

involving an underwriter have a 

principal underwriter that is a Member 

or Limited Underwriting Member. 

Background 

In the fall of 2022, Nasdaq observed 

instances of unusually high price spikes 

immediately following the pricing of 

certain initial public offerings (IPOs) on 

the Exchange and other national 

securities exchanges, mostly with 

respect to small-cap companies whose 

offerings were less than $25 million. In 

many instances, the IPO securities that 

were the subject of these extreme price 

spikes then experienced equally 

dramatic price declines to a level at or 

below the offering price. These extreme 

price spikes may occur in the opening 

trade on an exchange, or in continuous 

trading on the day of, or days 

immediately following, the listing. 

Underwriters play a critical role as 

gatekeepers to the capital markets in 

connection with the trading of newly 

issued securities. Unusual price 

volatility following IPOs of certain 

small-cap issuers highlights the 

essential role underwriters play. Nasdaq 

relies on underwriters to select the 

selling syndicate and ensure that the 

shares are placed in a way that is 

reasonably designed to allow liquid 

trading, consistent with Nasdaq’s listing 

requirements, and the successful 

introduction of the company to the 

marketplace. In a recent Equity 

Regulatory Alert,14 Nasdaq highlighted 

the important role of underwriters as 

gatekeepers in the IPO process and the 

applicability of market rules and the 

federal securities laws. The Financial 

Industry Regulatory Authority (FINRA) 

and the New York Stock Exchange 

(NYSE) published similar alerts at the 

same time.15 In Nasdaq’s Equity 

Regulatory Alert, the Exchange also 

noted: 

Nasdaq members, as well as the members 

of other self-regulatory organizations, that 

underwrite IPOs, and that play other roles in 

the offering process, should expect a 

heightened focus when an IPO experiences 

unusual price movements. Nasdaq 

Regulation will continue to investigate to 

determine whether such members have 

complied with applicable rules designed to 

prevent fraudulent and manipulative acts 

and practices, to promote just and equitable 

principles of trade, and to protect investors 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 37 / Friday, February 23, 2024 / Notices 13781 

16Supra note 14. 

17Nasdaq does, however, have broad 

discretionary authority over the initial and 

continued listing of securities in Nasdaq and over 

Members of the Exchange in order to maintain the 

quality of and public confidence in its market, to 

prevent fraudulent and manipulative acts and 

practices, to promote just and equitable principles 

of trade, and to protect investors and the public 

interest. The Exchange may request information 

from companies that are going public on the 

Exchange and from Members who are permitted to 

trade on the Exchange. They are required to 

respond to those requests. The Exchange may also 

request information from non-Members, including 

non-Member underwriters, but they are not 

required to respond to these requests. As described 

further below, this proposal would provide the 

Exchange with authority to directly obtain 

information from Limited Underwriting Members, 

whether pre- or post-IPO. 

18A revised Membership Application is attached 

[sic] as Exhibit 3, in which Nasdaq proposes to add 

a category for Limited Underwriting Members and 

clarify that Limited Underwriting Members are not 

subject to the requirement to provide an NSCC 

account number. 

19Supra note 11. 

20 In relevant part, General 3, Section 1002(b) 

provides that, subject to certain exceptions, no 

registered broker or dealer shall be admitted to 

membership, and no Member shall be continued in 

membership, if such broker, dealer, or Member fails 

or ceases to satisfy the qualification requirements 

established by the Rules, or if such broker, dealer, 

or Member is or becomes subject to a statutory 

disqualification, or if such broker, dealer, or 

Member fails to file such forms as may be required 

in accordance with such process as the Exchange 

may prescribe. 

21Members of the Exchange, unlike Limited 

Underwriting Members, are subject to all of the 

Exchange’s Rules (which includes the limited 

ruleset applicable to the newly proposed limited 

membership class). 

and the public interest. Areas of focus will 

include suspected manipulation and, beyond 

manipulation, whether the members are 

complying with their obligation to observe 

high standards of commercial honor and just 

and equitable principles of trade pursuant to 

Nasdaq Rule General 9, Section 1(a). That 

rule sets forth a standard intended to 

encompass a wide variety of conduct that 

may operate as an injustice to investors or 

other participants in the marketplace.16

Notwithstanding the important role of 

underwriters, Nasdaq does not currently 

require underwriters of companies that 

are going public on the Exchange to be 

Members of the Exchange. As such, 

Nasdaq does not have authority to 

require responses to investigative 

inquiries or to enforce its Rules directly 

against non-member underwriters.17

Nasdaq proposes creating a new, 

limited membership class and requiring 

underwriters involved in Nasdaq-listed 

IPOs to be Members or Limited 

Underwriting Members in order to serve 

as a principal underwriter of an IPO on 

the Exchange. By creating a new, 

limited membership class, Nasdaq 

would provide those firms seeking only 

to perform principal underwriting 

activity on the Exchange (and not 

seeking access to trade via the Nasdaq 

Market Center) the option of selecting a 

membership that is less burdensome 

(i.e., to become a Limited Underwriting 

Member rather than a Member).18

Proposed Changes to Listing Rules 

The proposed rule change primarily 

impacts membership rules and other 

non-listing rules, which would apply to 

the underwriters themselves. However, 

as part of the proposal, Nasdaq would 

impose a new requirement in its Listing 

Rules at Rule 5210(m), requiring each 

Company applying for initial listing in 

connection with a transaction involving 

an underwriter to have a principal 

underwriter that is a Member or Limited 

Underwriting Member of Nasdaq. In 

proposed Rule 5210(m), the Exchange 

would also specify that ‘‘principal 

underwriter’’ shall have the same 

definition used in Rule 405 promulgated 

under the Securities Act.19 The rule 

would cross reference the definition of 

‘‘Limited Underwriting Member,’’ 

which is proposed to be added at 

General 1, Section 1, and would define 

Limited Underwriting Member to mean 

a broker or dealer admitted to limited 

underwriting membership in Nasdaq. 

Proposed Changes to General Rules 

Within its General Rules, the 

Exchange proposes to amend General 1 

(General Provisions) and General 3 

(Membership and Access). 

The Exchange proposes to add the 

definition of ‘‘Limited Underwriting 

Member’’ to General 1, Section 1 

(Definitions). As noted above, the 

Exchange proposes to define Limited 

Underwriting Member to mean a broker 

or dealer admitted to limited 

underwriting membership in Nasdaq. 

The Exchange proposes to add the 

new category of membership to General 

3, Section 1031, within which the 

Exchange proposes to include 

information about persons eligible to 

become Limited Underwriting Members, 

Limited Underwriting Member access to 

the Exchange, and rules applicable to 

Limited Underwriting Members. 

The Exchange would specify in 

General 3, Section 1031(a), that any 

registered broker or dealer shall be 

eligible for limited underwriting 

membership in the Exchange, except 

such registered brokers or dealers as are 

excluded under paragraph (b) of Rule 

1002.20 Proposed Rule 1031(a) is 

consistent with the existing rules for 

persons eligible to become Members in 

General 3, Rule 1002(a). 

The Exchange proposes to state, in 

General 3, Section 1031(b) that (i) a 

limited underwriting membership 

provides no rights to transact on the 

Exchange and (ii) a limited 

underwriting membership is solely to 

allow a firm that is not otherwise a 

Member to serve as a principal 

underwriter for a Company seeking to 

list on the Exchange, pursuant to Rule 

5210(m). 

Nasdaq proposes applying a limited 

ruleset to this newly proposed limited 

membership class.21 Specifically, the 

Exchange proposes to apply only the 

following rules to Limited Underwriting 

Members: General 1 (General 

Provisions); General 2 (Organization and 

Administration), with the exception of 

Sections 6(a) and 22; General 3 

(Membership and Access), with the 

exception of Section 1032; General 5 

(Discipline), with the exception of Rules 

8211 and 9557; General 9 (Regulation), 

Sections 1, 20, and 21; and Equity 7, 

Section 10 (Pricing Schedule, 

Membership Fees). The Exchange would 

specify the aforementioned rules 

applicable to this new membership class 

in General 3, Section 1031(c)(1). With 

the proposal, the Exchange aims to 

apply only those rules it deems 

appropriate to a firm serving as a 

principal underwriter, including those 

rules it deems critical to such firms. Of 

course, a firm registering as a Limited 

Underwriting Member on Nasdaq would 

remain subject to all applicable rules of 

the Commission and any other SelfRegulatory Organization of which it is a 

member, including FINRA. 

The Exchange acknowledges that 

there are additional, existing Rules that 

it could propose to apply to Limited 

Underwriting Members. However, the 

Exchange is proposing to apply only a 

narrow ruleset as the Exchange does not 

intend to create comprehensive rules to 

regulate underwriting activity. Rather, 

the Exchange proposes to apply a 

limited ruleset, primarily to provide the 

Exchange with the authority to require 

information directly from the Limited 

Underwriting Members and enhance its 

tools for oversight with respect to the 

role the underwriter plays in connection 

with a company listing on the Exchange, 

as described below. Limited 

Underwriting Members would be 

subject to FINRA’s rules, including its 

rules that substantively regulate 

underwriting activity. Nasdaq would 

consider whether additional existing 

Rules that are not proposed in the 

limited ruleset for Limited Underwriting 

Members or new Rules are warranted as 

the Exchange gains more experience in 

applying the rules proposed herein. As 

the Exchange adopts new Rules over 

time, it also would consider whether to 

apply such Rules to Limited 

Underwriting Members. 


ddrumheller on DSK120RN23PROD with NOTICES1
13782 Federal Register / Vol. 89, No. 37 / Friday, February 23, 2024 / Notices 

22 General 5, Rule 8001 provides that the 

Exchange and FINRA are parties to the FINRA 

Regulatory Contract (often referred to as a 

Regulatory Services Agreement (‘‘RSA’’)) pursuant 

to which FINRA has agreed to perform certain 

functions described in the Exchange’s Rules on 

behalf of the Exchange. The Exchange does not 

anticipate that the proposed rule change would 

have any material impact on the current RSA. 

23Limited Underwriting Members would, 

therefore, be eligible to waive-in to Exchange 

membership, as provided for in General 3, Section 

1013(b). Prospective Limited Underwriting 

Members would need to submit a membership 

application (see supra note 18) in which they 

would select ‘‘Waive-In Membership’’ for the 

application type and ‘‘Limited Underwriting 

Member of NQX’’ for the nature of intended 

activity. For ‘‘waive-in’’ applicants, the Exchange 

relies substantially upon FINRA’s determination to 

approve the applicant for FINRA membership when 

the Exchange evaluates the applicant for Exchange 

membership. 

The Exchange proposes to apply 

General 1 to Limited Underwriting 

Members because General 1 provides 

defined terms that would be applicable 

to Limited Underwriting Members and, 

as explained above, the proposed rule 

change would also add a definition 

(‘‘Limited Underwriting Member’’) to 

General 1. 

The Exchange proposes to apply 

General 2 (with the exception of 

Sections 6(a) and 22) to Limited 

Underwriting Members because General 

2 relates to organization and 

administration including requirements 

surrounding fees, limitations on 

affiliations, and a requirement for an 

executive representative, among other 

obligations. The Exchange proposes to 

specifically exclude General 2, Sections 

6(a) and Section 22. General 2, Section 

6(a) states that General Equity and 

Options Rules and Equity Rules shall 

apply to all members and persons 

associated with a member, which is not 

accurate in the case of Limited 

Underwriting Members. General 2, 

Section 22 relates to Sponsored 

Participants and client access to the 

Nasdaq Market Center via a Member, 

which is not applicable to underwriting 

activity. 

The Exchange also proposes to subject 

Limited Underwriting Members to 

General 3 (with the exception of Section 

1032) because General 3 contains 

membership rules, including an 

obligation to follow specified 

procedures for applying to be a member, 

making changes to membership, or 

terminating membership. The Exchange 

proposes to specifically exclude General 

3, Section 1032 because such section 

includes requirements related to Nasdaq 

Market Center Participant registration. 

This section is inapplicable to Limited 

Underwriting Members because they are 

not permitted to transact on the Nasdaq 

Market Center. As described herein, the 

proposed rule change would also add 

additional details regarding the limited 

underwriting membership to General 3, 

Rule 1031. 

The Exchange believes it is critical to 

subject Limited Underwriting Members 

to General 5 (with the exception of 

Rules 8211 and 9557), which contains 

the Exchange’s disciplinary rules.22

Notably, General 5, Rule 8210 provides 

the Exchange with authority to require 

information from Exchange Members. 

The Exchange proposes to specifically 

exclude General 5, Rule 8211 and Rule 

9557. Rule 8211 relates to members 

submission of trade data. Rule 9557 

relates to procedures for regulating 

activities under General 9, Sections 40 

and 41, which incorporate FINRA Rules 

4110 and 4120, which relate to FINRA 

carrying or clearing members. Therefore, 

Rule 8211 and Rule 9557 are not 

relevant to underwriting activity. 

The Exchange also believes it is 

important to subject Limited 

Underwriting Members to General 9, 

Section 1 which includes general 

standards by which Members must 

abide. Specifically, of importance, 

General 9, Section 1(a) requires 

Members to observe just and equitable 

principles of trade. General 9, Sections 

20 and 21 require Members to establish 

and maintain a system to supervise the 

activities of each registered 

representative and associated person 

that is reasonably designed to achieve 

compliance with applicable securities 

laws and regulations and with 

applicable Nasdaq rules, and to identify 

principles who must establish, 

maintain, and enforce a system of 

supervisory control policies and 

procedures that, among other things, 

tests that the member’s supervisory 

procedures are reasonably designed 

with respect to the activities of the 

member and its associated persons, to 

achieve compliance with applicable 

securities laws and regulations, and 

with applicable Nasdaq rules. The 

Exchange believes it is important to 

apply these provisions on supervision 

as it would provide the Exchange with 

authority to assess whether a Limited 

Underwriting Member has an adequate 

supervisory system and written 

supervisory procedures in place. With 

the exception of General 9, Section 1, 

Section 20, and Section 21, the 

Exchange does not propose to apply 

other sections of General 9 to Limited 

Underwriting Members at this time. 

Although the Exchange acknowledges 

that certain other sections of General 9 

could be applied to underwriters, the 

Exchange is targeting limited inclusion 

of those Rules it deems critical. Further, 

many of the standards in General 9 are 

FINRA rules that are incorporated by 

reference into the Exchange’s Rules. 

Limited Underwriting Members would 

therefore be subject to such FINRA rules 

by virtue of their FINRA membership. 

Finally, the Exchange proposes to 

include Equity 7, Section 10 to Limited 

Underwriting Members because this 

section includes the membership and 

application fees applicable to Limited 

Underwriting Members. The Exchange 

proposes to avoid applying all those 

Exchange rules not specified in 

proposed General 3, Section 1031(c)(1) 

to Limited Underwriting Members in an 

effort to impose minimal burden on 

Limited Underwriting Members, while 

still allowing the Exchange to have 

regulatory authority over such members. 

Furthermore, the Exchange believes that 

the Exchange’s rules that Limited 

Underwriting Members would not be 

subject to under the proposal primarily 

relate to trading activity and are, 

therefore, not relevant to the activities of 

Limited Underwriting Members. As 

noted above, Nasdaq would consider 

whether additional existing Rules that 

are not proposed in the limited ruleset 

for Limited Underwriting Members or 

new Rules are warranted as the 

Exchange gains more experience in 

applying the rules proposed herein. 

The Exchange proposes to include 

language in General 3, Section 

1031(c)(1) providing that, for purposes 

of interpreting and applying the rules to 

Limited Underwriting Members, 

references to ‘‘Member,’’ ‘‘Members,’’ or 

‘‘membership’’ shall be functionally 

equivalent to ‘‘Limited Underwriting 

Member,’’ ‘‘Limited Underwriting 

Members,’’ or ‘‘limited underwriting 

membership’’ respectively. The 

Exchange also proposes to include a 

requirement, in General 3, Section 

1031(c)(2), that Limited Underwriting 

Members shall at all times be members 

of FINRA and associated persons of 

Limited Underwriting Members shall at 

all times be properly qualified and 

registered under FINRA rules.23

Proposed Change to Equity Rules 

The Exchange proposes to exempt 

Limited Underwriting Members from 

the trading rights fee of $1,250 per 

month that is normally charged to 

Members because such Limited 

Underwriting Members would not be 

eligible to trade on the Exchange. 

Accordingly, the Exchange proposes to 

add language to Equity 7, Section 10(a) 

to specify that Limited Underwriting 

Members would not be charged the 

monthly trading rights fee. Limited 

Underwriting Members would be 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 37 / Friday, February 23, 2024 / Notices 13783 

24See FINRA Rules, Rule 1210 (Registration 

Requirements) and Rule 1220 (Registration 

Categories). 

25 15 U.S.C. 78f(b). 

26 15 U.S.C. 78f(b)(5). 

27 15 U.S.C. 78f(b)(7). 

28As noted above, the Exchange acknowledges 

that additional, existing Rules could apply to 

underwriters. The Exchange proposes to apply a 

limited ruleset to Limited Underwriting Members, 

consisting of those Rules it deems most critical. 

Today, underwriters are not required to be Members 

and therefore, non-member underwriters are not 

subject to any of the Exchange’s Rules. 

29 15 U.S.C. 78f(b)(5). 

subject to a $2,000 application fee (per 

Equity 7, Section 10(b)) and a $4,000 

yearly membership fee (per Equity 7, 

Section 10(a)). 

Excluded Rules 

As noted above, Nasdaq 

acknowledges that additional Rules 

could theoretically be applied to 

Limited Underwriting Members. 

However, Nasdaq proposes to apply the 

limited ruleset for the reasons described 

above. In addition to the Rules 

discussed above, the Exchange has not 

proposed to apply the following Rules 

to Limited Underwriting Members at 

this time: General 4; General 6; General 

7; General 8; Equity Rules (with the 

exception of Equity 7, Section 10); and 

Options Rules. General 4 requires 

certain categories of persons associated 

with members to register with the 

Exchange. Because these categories do 

not relate to underwriting, the Exchange 

does not propose to apply General 4 to 

Limited Underwriting Members. 

However, as noted above, the Exchange 

would require all Limited Underwriting 

Members to be FINRA members and 

associated persons of Limited 

Underwriting Members to be properly 

qualified and registered under FINRA 

rules. Limited Underwriting Members 

and their associated persons would be 

subject to FINRA’s registration and 

qualification rules,24 including, for 

example, requirements regarding 

relevant examinations for underwriting 

(Series 79, Investment Banking, IB) and 

supervision of underwriting (Series 79 

plus Series 24, Investment Banking 

Principal). General 6 relates generally to 

FINRA arbitration rules to which the 

Limited Underwriting Members would 

be subject to directly by virtue of their 

FINRA membership. The Exchange does 

not propose to apply General 7 to 

Limited Underwriting Members because 

it governs consolidated audit trail 

compliance and would not apply to 

underwriting activity. General 8 governs 

connectivity to the Exchange and would 

not be relevant to Limited Underwriting 

Members given their lack of access to 

trade on the Exchange. Similarly, the 

Equities Rules and the Options Rules 

are generally not relevant to the 

activities of Limited Underwriting 

Members due to their lack of access to 

trade on the Exchange. Although 

Limited Underwriting Members could 

access the Exchange via other means, 

such as trading through another 

Member, Limited Underwriting 

Members would have no direct access to 

trade on the Exchange. 

Implementation 

The Exchange would designate the 

proposed changes to be operative 60 

days after publication of the 

Commission’s approval order of SR– 

NASDAQ–2023–022, as amended, in the 

Federal Register. This delay will allow 

time for firms involved with upcoming 

IPOs to become Limited Underwriting 

Members, if they choose, and for 

companies planning IPOs to select 

alternative underwriters if their current 

firm is not, and does not intend to 

become, a Member or Limited 

Underwriting Member. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,25 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,26

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, by 

strengthening Nasdaq’s ability to carry 

out its oversight responsibilities. It is 

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

the Act in that it provides for a fair 

procedure for prohibiting or limiting 

any person with respect to access to 

services offered by the Exchange or a 

Member thereof.27 As discussed above, 

the proposal would create a new, 

limited membership class for those 

firms seeking only to perform activity as 

the principal underwriter of an IPO on 

the Exchange (and not seeking access to 

trade via the Nasdaq Market Center) and 

require a company applying for initial 

listing in connection with a transaction 

involving an underwriter to have a 

principal underwriter that is a member 

or limited member of Nasdaq. The 

Exchange would apply specified rules to 

Limited Underwriting Members, as 

explained above. Such rules include 

general provisions and standards, 

membership and access rules, 

organization and administration rules, 

registration requirements, disciplinary 

rules, and certain fees. Creating this new 

membership class and subjecting 

principal underwriters to such specified 

rules supports fair and orderly markets, 

which protects investors and the public 

interest, consistent with Section 6(b)(5) 

of the Act. Notably, the proposal would 

subject Limited Underwriting Members 

to Nasdaq’s disciplinary rules, which 

provides Nasdaq authority to require 

information from such underwriters (per 

General 5, Rule 8210), as well as other 

general rules, including the requirement 

to observe just and equitable principles 

of trade (per General 9, Section 1(a)), the 

requirement to establish and maintain a 

system to supervise the activities of 

registered representatives and 

associated persons (per General 9, 

Section 20), and the requirement to test 

and verify that the system is reasonably 

designed (per General 9, Section 21). 

Nasdaq believes that imposing these 

Nasdaq rules, as well as the other rules 

included in proposed Rule 1031(c)(1), 

on principal underwriters will 

strengthen 28 Nasdaq’s ability to carry 

out its oversight responsibilities and 

deter potential violative conduct, such 

as fraud or manipulation, thereby 

protecting investors and the public 

interest. Nasdaq also believes that it is 

appropriate and consistent with the 

protection of investors and the public 

interest that it not impose those rules 

excluded from proposed Rule 1031(c)(1) 

because these rules are not directly 

applicable to the activities a Limited 

Underwriting Members is permitted to 

conduct on the Exchange, and the firms 

will be subject to all applicable FINRA 

rules. 

The Exchange also believes that the 

proposed rule change is not designed to 

permit unfair discrimination between 

customers, issuers, brokers and dealers, 

consistent with Section 6(b)(5) of the 

Act.29 The proposed changes to the 

Listing Rules will apply equally to all 

similarly situated companies applying 

for initial listing in connection with a 

transaction involving an underwriter on 

the Exchange and therefore, are not 

designed to permit unfair 

discrimination. The Exchange’s 

proposal to subject Limited 

Underwriting Members to a limited set 

of rules and exclude certain rules 

applicable to Members is not designed 

to permit unfair discrimination between 

brokers and dealers because the limited 

underwriting membership does not 

confer the same benefits as a standard 

Exchange membership and does not 

warrant application of the same ruleset. 

All Limited Underwriting Members 


ddrumheller on DSK120RN23PROD with NOTICES1
13784 Federal Register / Vol. 89, No. 37 / Friday, February 23, 2024 / Notices 

30 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

would be subject to the same specified 

rules. 

Finally, Nasdaq believes that its 

proposal to impose certain fees on 

Limited Underwriting Members is 

consistent with Section 6(b) of the Act, 

in general, and furthers the objectives of 

Sections 6(b)(4) and 6(b)(5) of the Act, 

in particular, in that it provides for the 

equitable allocation of reasonable dues, 

fees and other charges among members 

and issuers and other persons using any 

facility, and is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Exchange believes that its proposal 

to charge the $2,000 application fee and 

$4,000 yearly membership fee but not 

charge the $1,250 monthly trading rights 

fee is reasonable, equitable and not 

unfairly discriminatory. The Exchange 

would apply fees that are already in 

existence and the Exchange believes 

such fees reflect the value of services it 

provides its applicants and 

membership. By charging Limited 

Underwriting Members the same 

application and yearly membership fee 

as Members, the Exchange believes that 

it would be treating the membership 

equitably. Further, the Exchange 

believes it is reasonable and equitable to 

exempt Limited Underwriting Members 

from the monthly trading rights fee 

because such members would not have 

access to trade on the Exchange. The 

Exchange believes that the fee proposal 

is not designed to permit unfair 

discrimination between Exchange 

members because the fees would be 

applied equally to all similarly situated 

members. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. As noted 

above, the proposed changes to the 

Listing Rules will apply equally to all 

similarly situated companies applying 

for initial listing in connection with a 

transaction involving an underwriter on 

the Exchange. Likewise, the proposed 

changes to the General and Equity 

Rules, including to the membership 

rules, will apply equally to all similarly 

situated Applicants and Members and 

they will confer no relative advantage or 

disadvantage upon any category of 

Exchange Applicant or Member. 

Although the Exchange proposes to 

subject Limited Underwriting Members 

to a limited set of rules, the limited 

underwriting membership does not 

confer the same benefits as a standard 

Exchange membership. Namely, a 

Limited Underwriting Member would 

not be permitted to transact on the 

Nasdaq Market Center. Therefore, 

applying a limited ruleset to Limited 

Underwriting Members is justified. All 

Limited Underwriting Members would 

be subject to the same specified rules, as 

noted above. Moreover, the Exchange 

does not expect that its proposal will 

have an adverse impact on competition 

among exchanges for members. The 

Exchange believes the proposed rule 

changes, overall, will strengthen the 

Exchange’s ability to carry out its role 

and responsibilities as a self-regulatory 

organization and deter potential 

violative conduct. As such, the 

Exchange does not believe that the 

proposed rule change will impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

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. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether Amendment No. 2 to 

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NASDAQ–2023–022 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–2023–022. 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 (https://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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–NASDAQ–2023–022 and should be 

submitted on or before March 15, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–03647 Filed 2–22–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99553; File No. SR– 

CboeEDGA–2024–006] 

Self-Regulatory Organizations; Cboe 

EDGA Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend Its 

Fees Schedule Related to Physical 

Port Fees 

February 16, 2024. 

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 February 

9, 2024, Cboe EDGA Exchange, Inc. (the 

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

Securities and Exchange Commission 

(‘‘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. 


ddrumheller on DSK120RN23PROD with NOTICES1