[Federal Register Volume 87, Number 19 (Friday, January 28, 2022)]
[Notices]
[Pages 4676-4678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01699]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94031]


Order Granting Application by The Nasdaq Stock Market LLC for an 
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 Rules Incorporated by Reference

January 24, 2022.
    The Nasdaq Stock Market LLC (``Nasdaq'' or ``Exchange'') has filed 
with the Securities and Exchange Commission (``Commission'') an 
application for an exemption under Section 36(a)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ from the rule filing 
requirements of Section 19(b) of the Exchange Act \2\ with respect to 
certain rules of the Financial Industry Regulatory Authority, Inc. 
(``FINRA''), Cboe Exchange, Inc. (``Cboe''), and New York Stock 
Exchange LLC (``NYSE''), that the Exchange seeks to incorporate by 
reference.\3\ Section 36 of the Exchange Act, 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.
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    \1\ 15 U.S.C. 78mm(a)(1).
    \2\ 15 U.S.C. 78s(b).
    \3\ See Letter from Angela S. Dunn, Principal Associate General 
Counsel, Nasdaq, to J. Matthew DeLesDernier, Assistant Secretary, 
Commission, dated January 20, 2022 (``Exemptive Request'').
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    The Exchange has requested, pursuant to Rule 0-12 under the 
Exchange Act,\4\ that the Commission grant the Exchange an exemption 
from the rule filing requirements of Section 19(b) of the Exchange Act 
for changes to the Exchange's rules that are effected solely by virtue 
of a change to a cross-referenced FINRA, Cboe, or NYSE rule. 
Specifically, the Exchange requests that it be permitted to incorporate 
by reference changes made to the FINRA, Cboe, and NYSE rules that are 
cross-referenced in the Exchange's rules identified below, without the 
need for the Exchange to file separately similar proposed rule changes 
pursuant to Section 19(b) of the Exchange Act: \5\
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    \4\ 17 CFR 240.0-12.
    \5\ See Exemptive Request, supra note 3, at 5.
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    <bullet> General 9, Section 1(b) (Prohibition Against Trading Ahead 
of Customer Orders) cross-references FINRA Rule 5320 (except for FINRA 
Rule 5320.02(b) and the reference to FINRA Rule 6420 in FINRA Rule 
5320).
    <bullet> General 9, Section 1(c) (Front Running Policy) cross-
references FINRA Rule 5270.
    <bullet> General 9, Section 1(f) (Confirmation of Callable Common 
Stock) cross-references FINRA Rule 2232.
    <bullet> General 9, Section 1(h) (Interfering With the Transfer of 
Customer Accounts in the Context of Employment Disputes) cross-
references FINRA Rule 2140.
    <bullet> General 9, Section 2 (Customers' Securities or Funds) 
cross-references FINRA Rule 2150.
    <bullet> General 9, Section 3 (Communications with the Public) 
cross-references FINRA Rule 2210 (except for FINRA Rule 2210(c)).
    <bullet> General 9, Section 5 (Telemarketing) cross-references 
FINRA Rule 3230.
    <bullet> General 9, Section 6 (Forwarding of Proxy and Other 
Issuer-Related Materials) cross-references FINRA Rule 2251.
    <bullet> General 9, Section 7 (Disclosure of Financial Condition, 
Control Relationship with Issuer and Participation or Interest in 
Primary or Secondary Distribution) cross-references FINRA Rules 2261, 
2262, and 2269.
    <bullet> General 9, Section 8 (SIPC Information) cross-references 
FINRA Rule 2266.
    <bullet> General 9, Section 9 (Fairness Opinions) cross-references 
FINRA Rule 5150.
    <bullet> General 9, Section 10(a) (Recommendations to Customers 
(Suitability)) cross-references FINRA Rule 2111 (except for the 
references to FINRA Rule 2214 in FINRA Rule 2111).
    <bullet> General 9, Section 10(c) (Know Your Customer) cross-
references FINRA Rule 2090.
    <bullet> General 9, Section 11 (Best Execution and 
Interpositioning) cross-references FINRA Rule 5310 (except for the 
references to FINRA Rule 2121 and its supplementary material in FINRA 
Rule 5310).
    <bullet> General 9, Section 12 (Customer Account Statements) cross-
references FINRA Rule 2231.
    <bullet> General 9, Section 13 (Margin Disclosure Statement) cross-
references FINRA Rule 2264.
    <bullet> General 9, Section 14 (Approval Procedures for Day-Trading 
Accounts) cross-references FINRA Rules 2130 and 2270.
    <bullet> General 9, Section 15 (Borrowing From or Lending to 
Customers) cross-references FINRA Rule 3240.
    <bullet> General 9, Section 16 (Charges for Services Performed) 
cross-references FINRA Rule 2122.

[[Page 4677]]

    <bullet> General 9, Section 17 (Net Transactions with Customers) 
cross-references FINRA Rule 2124.
    <bullet> General 9, Section 19 (Discretionary Accounts) cross-
references FINRA Rule 3260.
    <bullet> General 9, Section 20 (Supervision) cross-references FINRA 
Rules 3110 and 3170.
    <bullet> General 9, Section 21 (Supervisory Control System, Annual 
Certification of Compliance and Supervisory Processes) cross-references 
FINRA Rules 3120 and 3130 (except for the references to MSRB rules in 
FINRA Rule 3130).
    <bullet> General 9, Section 23 (Outside Business Activities of an 
Associated Person) cross-references FINRA Rule 3270.
    <bullet> General 9, Section 24 (Private Securities Transactions of 
an Associated Person) cross-references FINRA Rule 3280.
    <bullet> General 9, Section 25 (Transactions for or by Associated 
Persons) cross-references FINRA Rule 3210.
    <bullet> General 9, Section 26 (Influencing or Rewarding Employees 
of Others) cross-references FINRA Rule 3220.
    <bullet> General 9, Section 27 (Reporting Requirements) cross-
references FINRA Rule 4530 (except for FINRA Rule 4530(h)).
    <bullet> General 9, Section 28 (Disclosure to Associated Persons 
When Signing Form U4) cross-references FINRA Rule 2263 (except for 
subsection (2) of FINRA Rule 2263).
    <bullet> General 9, Section 30 (Books and Records) cross-references 
FINRA Rule 4511.
    <bullet> General 9, Section 31 (Use of Information Obtained in 
Fiduciary Capacity) cross-references FINRA Rule 2060.
    <bullet> General 9, Section 33 (Reporting Requirements for Clearing 
Firms) cross-references FINRA Rule 4540.
    <bullet> General 9, Section 34 (Extensions of Time Under Regulation 
T and SEC Rule 15c3-3) cross-references FINRA Rule 4230.
    <bullet> General 9, Section 37 (Anti-Money Laundering Compliance 
Program) cross-references FINRA Rule 3310.
    <bullet> General 9, Section 38(b) (Margin Requirements) cross-
references FINRA Rule 4210.
    <bullet> General 9, Section 39(b) (Fidelity Bonds) cross-references 
FINRA Rule 4360.
    <bullet> General 9, Section 40 (Capital Compliance) cross-
references FINRA Rule 4110.
    <bullet> General 9, Section 41 (Regulatory Notification and 
Business Curtailment) cross-references FINRA Rule 4120.
    <bullet> General 9, Section 42 (Audit) cross-references FINRA Rule 
4140.
    <bullet> General 9, Section 43 (General Requirements) cross-
references FINRA Rule 4511.
    <bullet> General 9, Section 44 (Records of Written Customer 
Complaints) cross-references FINRA Rule 4513.
    <bullet> General 9, Section 45 (Customer Account Information) 
cross-references FINRA Rule 4512.
    <bullet> General 9, Section 46 (Authorization Records for 
Negotiable Instruments Drawn From a Customer's Account) cross-
references FINRA Rule 4514.
    <bullet> General 9, Section 47 (Approval and Documentation of 
Changes in Account Name or Designation) cross-references FINRA Rule 
4515.
    <bullet> General 9, Section 48 (Notifications, Questionnaires and 
Reports) cross-references FINRA Rule 4521.
    <bullet> Equity 10, Section 1 (Direct Participation Programs) 
cross-references FINRA Rules 2310 and 5110.
    <bullet> Equity 10, Section 2 (Investment Company Securities) 
cross-references FINRA Rule 2341 (except for the reference to FINRA 
Rule 2320 in FINRA Rule 2341).
    <bullet> Equity 11, Rule 11860 (Acceptance and Settlement of COD 
Orders) cross-references FINRA Rule 11860.
    <bullet> Equity 11, Rule 11870 (Customer Account Transfer 
Contracts) cross-references FINRA Rule 11870.
    <bullet> Options 6C, Section 3 (Margin Requirements) cross-
references the initial and maintenance margin requirements of Cboe and 
NYSE.
    <bullet> Options 10, Section 20 (Communications with Public 
Customers) cross-references FINRA's Communications with Public 
Customers rule.
    The Exchange represents that the FINRA, Cboe, and NYSE rules listed 
above are regulatory rules and not trading rules.\6\ The Exchange 
represents that, as a condition to the requested exemption from Section 
19(b) of the Exchange Act, the Exchange will provide written notice to 
its members whenever FINRA, Cboe, or NYSE proposes a change to a cross-
referenced rule.\7\ The Exchange states that such notice will alert its 
members and persons associated with a member to the proposed FINRA, 
Cboe, or NYSE rule change and give them an opportunity to comment on 
the proposal.\8\ The Exchange further represents that it will inform 
members in writing when the Commission approves any such proposed rule 
changes.\9\
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    \6\ See id. at 6, n.12. The Exchange also states that it is not 
``cherry picking'' because the Exchange would be incorporating 
categories of rules. See id.
    \7\ See id. at 6. The Exchange represents that it will provide 
such notice via a posting on the same website location where the 
Exchange posts its own rule filings pursuant to Rule 19b-4(l) within 
the time frame required by such rule. See id. at 6, n.13. The 
website posting will include a link to the location on FINRA's, 
Cboe's, or NYSE's website where the applicable proposed rule change 
is posted. See id.
    \8\ See id. at 6.
    \9\ See id.
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    According to the Exchange, this exemption is appropriate because it 
would result in the Exchange's rulebook being consistent with the 
relevant cross-referenced FINRA, Cboe, and NYSE rules at all times, 
thus ensuring consistent regulation of joint members of Nasdaq, FINRA, 
Cboe, and NYSE.\10\ The Exchange further states that, even if members 
are not joint members of Nasdaq, FINRA, Cboe, and NYSE, the exemption 
is appropriate because it will permit its rules to remain consistent 
with FINRA's, Cboe's, and NYSE's rules and ensure consistent treatment 
of industry members with respect to the aforementioned rules.\11\
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    \10\ See id. at 5.
    \11\ See id. at 5-6.
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    The Commission has issued exemptions similar to the Exchange's 
request.\12\ In granting similar exemptions, the Commission stated that 
it would consider similar future exemption requests, provided that:
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    \12\ See, e.g., Securities Exchange Act Release Nos. 83296 (May 
21, 2018), 83 FR 24362 (May 25, 2018) (order granting NYSE National, 
Inc.'s exemptive request relating to rules of FINRA incorporated by 
reference); 83040 (April 12, 2018), 83 FR 17198 (April 18, 2018) 
(order granting MIAX PEARL, LLC's exemptive request relating to 
rules of the Miami International Securities Exchange, LLC 
incorporated by reference); 76998 (January 29, 2016), 81 FR 6066, 
6083-84 (February 4, 2016) (order granting application for 
registration as a national securities exchange of ISE Mercury, LLC 
and exemptive request relating to rules of certain self-regulatory 
organizations (``SROs'') (including FINRA) incorporated by 
reference); 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''); 61152 
(December 10, 2009), 74 FR 66699, 66709-10 (December 16, 2009) 
(order granting application for registration as a national 
securities exchange of C2 Options Exchange, Incorporated and 
exemptive request relating to rules of the Chicago Board Options 
Exchange, Incorporated, incorporated by reference).
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    <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

[[Page 4678]]

orders pursuant to Rule 0-12 under the Exchange Act; \13\
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    \13\ 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).
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    <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.\14\
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    \14\ See BATS Options Market Order, supra note 12 (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'')).
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    The Commission believes that the Exchange has satisfied each of 
these conditions. The Commission also believes that granting the 
Exchange 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 Exchange's resources by avoiding duplicative rule 
filings based on simultaneous changes to identical rule text sought by 
more than one SRO.\15\ The Commission therefore finds it appropriate in 
the public interest and consistent with the protection of investors to 
exempt the Exchange from the rule filing requirements under Section 
19(b) of the Exchange Act with respect to the above-described FINRA, 
Cboe, and NYSE rules it has incorporated by reference. This exemption 
is conditioned upon the Exchange promptly providing written notice to 
its members whenever FINRA, Cboe, or NYSE changes a rule that the 
Exchange has incorporated by reference.
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    \15\ See BATS Options Market Order, supra note 12, 75 FR at 
8761; see also 2004 Order, supra note 14, 69 FR at 8502.
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    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\16\ that the Exchange is exempt from the rule filing requirements 
of Section 19(b) of the Exchange Act solely with respect to changes to 
the rules identified in the Exemptive Request, provided that the 
Exchange promptly provides written notice to its members whenever 
FINRA, Cboe, or NYSE proposes to change a rule that the Exchange has 
incorporated by reference.
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    \16\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(76).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01699 Filed 1-27-22; 8:45 am]
BILLING CODE 8011-01-P