Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 10401 

38 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. 92206 

(June 17, 2021), 86 FR 33402 (‘‘Notice’’). Comments 

on the proposed rule change can be found at: 

https://www.sec.gov/comments/sr-box-2021-14/ 

srbox202114.htm. The Commission received one 

comment letter that expresses opposition to the 

proposal but without specificity as to why. See 

Letter from David (September 23, 2021). 

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

5See Securities Exchange Act Release No. 92556, 

86 FR 43572 (August 9, 2021). The Commission 

designated September 22, 2021, 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 In Amendment No. 1, the Exchange revised the 

proposal to: (1) Adopt the BSTX LLC Third 

Amended and Restated Limited Liability Company 

Agreement prior to the commencement of 

operations of BSTX as a facility of the Exchange, 

which, among other things, (a) changes the legal 

name of the facility from ‘‘Boston Security Token 

Exchange LLC’’ to ‘‘BSTX LLC,’’ (b) modifies certain 

defined terms, including ‘‘BSTX Product’’ and 

‘‘Competing Business,’’ (c) defines the term 

‘‘Governmental Authority’’ and modifies certain 

provisions to permit access to certain confidential 

information by any such authority, and (d) adds a 

provision that would, among other things, require 

an effective rule filing pursuant to Section 19 of the 

Exchange Act prior to any Member, or Related 

Person of such Member, becoming a BSTX 

Participant if such Member, alone or together with 

any Related Persons of such Member, has the right 

to appoint more than 20% of the BSTX Directors 

entitled to vote; (2) provide additional information 

about ownership of non-voting Class B Units; (3) 

clarify how limitations on voting of interests in 

BOX Holdings are implemented by reallocating 

voting rights to other BOX Holdings owners, and 

how a similar provision in the BSTX LLC 

Agreement would operate; (4) discuss certain 

provisions and associated definitions in the BSTX 

LLC Agreement that are the same or different from 

those that currently apply to BOX Holdings and 

BOX Options, particularly with respect to the board 

structure, intellectual property, and automatic 

admission of Class B Units as Members; (5) provide 

additional description of limitations on voting and 

ownership of interests in the Exchange; (6) provide 

additional description of the roles, obligations, and 

authorities of BOX Digital, tZERO, and the 

Exchange with respect to BSTX; (7) describe the 

funding of operations of BSTX; (8) clarify 

representation of BSTX Participants on the 

Exchange’s Board and committees, and how those 

representatives would be appointed at the 

commencement of operations; and (9) make other 

technical, clarifying and conforming changes. 

7 15 U.S.C. 78s(b)(2)(B). 

8See Securities Exchange Act Release No. 93094, 

86 FR 53365 (September 27, 2021) (Notice of Filing 

of Amendment No. 1 and Order Instituting 

Proceedings) (‘‘OIP’’). 

9 15 U.S.C. 78s(b)(2). 

10See Securities Exchange Act Release No. 93786, 

86 FR 72296 (December 21, 2021). 

11 In Amendment No. 2, the Exchange revised the 

proposal to: (1) Revise the BSTX LLC Agreement by, 

among other things, (a) introducing certain defined 

terms, including ‘‘Shortfall Amount,’’ ‘‘Statutory 

Disqualification,’’ and ‘‘Tax Matters 

Representative,’’ (b) converting existing class A and 

class B units of BSTX to economic units and voting 

units of BSTX, (c) prohibiting events that would 

Continued 

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– 

DTC–2022–001 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–DTC–2022–001. 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 DTC and on DTCC’s website 

(http://dtcc.com/legal/sec-rulefilings.aspx). 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–DTC– 

2022–001 and should be submitted on 

or before March 17, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03875 Filed 2–23–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94278; File No. SR–BOX– 

2021–14] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing of 

Amendment No. 2 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 2, in Connection With 

the Proposed Establishment of BSTX 

LLC as a Facility of the Exchange 

February 17, 2022. 

I. Introduction 

On June 7, 2021, BOX Exchange LLC 

(‘‘Exchange’’ or ‘‘BOX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

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

19b–4 thereunder,2 a proposed rule 

change in connection with the proposed 

commencement of operations of BSTX 

LLC (‘‘BSTX’’) as a facility of the 

Exchange. The proposed rule change 

was published for comment in the 

Federal Register on June 24, 2021.3 On 

August 3, 2021, pursuant to Section 

19(b)(2) of the Exchange 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 

16, 2021, the Exchange filed 

Amendment No. 1 to the proposed rule 

change (‘‘Amendment No. 1’’), which 

replaced and superseded the proposed 

rule change as originally filed.6 On 

September 21, 2021, the Commission 

published notice of Amendment No. 1 

and instituted proceedings pursuant to 

Section 19(b)(2)(B) of the Exchange 

Act 7 to determine whether to approve or 

disapprove the proposed rule change, as 

modified by Amendment No. 1.8 On 

December 15, 2021, pursuant to Section 

19(b)(2) of the Exchange Act,9 the 

Commission designated a longer period 

for Commission action on the proposed 

rule change, as modified by Amendment 

No. 1.10 On January 18, 2022, the 

Exchange filed Amendment No. 2, 

which replaced and superseded the 

proposed rule change, as modified by 

Amendment No. 1.11 The Commission 


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result in any person, together with its related 

persons, holding an economic interest in BSTX 

greater than 40% or a voting interest in BSTX 

greater than 20% without both Exchange approval 

and an effective rule filing pursuant to Section 19 

of the Exchange Act, (d) prohibiting BSTX 

Participants from holding either an economic 

interest or voting interest in BSTX greater than 

20%, (e) modifying the structure and composition 

of the BSTX board of directors by limiting BOX 

Digital and tZERO to one director each, providing 

the regulatory director with voting rights, adding 

the BSTX CEO as a director, and providing that the 

independent director will serve as chairman of the 

board of directors, (f) providing that no person 

subject to a statutory disqualification will serve as 

a BSTX director or officer, and (g) removing the 

requirement that the BSTX board of directors will 

create and appoint audit and compensation 

committees; (2) specify the individuals and entities 

that own economic and voting interests in BSTX 

and at what levels, including that BOX Digital and 

tZERO’s economic interests have been reduced to 

40% each and that BOX Digital and tZERO’s voting 

interests have been reduced to 20% each; (3) state 

that the Exchange will not distribute regulatory 

funds to its owners and that regulatory funds will 

not be used for non-regulatory purposes; (4) 

represent that the Exchange will have adequate 

funding for the Exchange’s operations with respect 

to BSTX; (5) revise Exhibit 5B to propose the form 

of Instrument of Accession that each identified 

Controlling Person would sign; and (6) make other 

technical, clarifying and conforming changes. 

Amendment No. 2 is available on the Commission’s 

website at: https://www.sec.gov/comments/sr-box2021-14/srbox202114-20112131-265232.pdf 

(‘‘Amendment No. 2’’). 

12See OIP, supra note 8; Amendment No. 2, 

supra note 11. 

13See OIP, supra note 8, 86 FR at 53366. Pursuant 

to Section 3(a)(2) of the Exchange Act, 15 U.S.C. 

78c(a)(2), the term ‘‘facility’’ when used with 

respect to an exchange, includes ‘‘its premises, 

tangible or intangible property whether on the 

premises or not, any right to the use of such 

premises or property or any service thereof for the 

purpose of effecting or reporting a transaction on an 

exchange (including, among other things, any 

system of communication to or from the exchange, 

by ticker or otherwise, maintained by or with the 

consent of the exchange), and any right of the 

exchange to the use of any property or service.’’ 

14The proposed LLC Agreement is Exhibit 5A to 

Amendment No. 2. See Amendment No. 2, supra 

note 11. Capitalized terms not otherwise defined 

herein have the meanings specified in the BSTX 

LLC Agreement. 15See id. at 3, 5. 16See Securities Exchange Act Release No. 94092 

(January 27, 2022), 87 FR 5881 (February 2, 2022) 

(SR–BOX–2021–06) (approving the trading of equity 

securities on the Exchange through a facility of the 

Exchange known as BSTX). Among other things, the 

BSTX trading rules proposal established rules 

regarding the listing and trading of securities on 

BSTX and the operations of and eligibility to 

participate on the BSTX Market. 

17See BSTX LLC Agreement, Sections 1.1 and 

2.5(a); Amendment No. 2, supra note 11, at 7. 

18See BSTX LLC Agreement, Sections 1.1 and 

2.5(b); Amendment No. 2, supra note 11, at 7. The 

Exchange proposes that all Economic Units would 

be identical to each other and accord the holders 

thereof the same obligations, rights, and privileges 

as accorded to each other holder thereof. Similarly, 

all Voting Units would be identical to each other 

and accord the holder thereof the same obligations, 

rights, and privileges as accorded to each other 

holder thereof. See BSTX LLC Agreement, Sections 

2.5(a), (b); Amendment No. 2, supra note 11, at 7. 

19See BSTX LLC Agreement, Section 1.1; 

Amendment No. 2, supra note 11, at 7. Members of 

the Exchange that are eligible for trading on the 

BSTX Market would be ‘‘BSTX Participants.’’ See 

BSTX LLC Agreement, Section 1.1 (defining BSTX 

Participant as a firm or organization that is 

registered with the Exchange pursuant to Exchange 

Rules for purposes of participating in Trading on 

the BSTX Market as an order flow provider or 

market maker). 

20See Amendment No. 2, supra note 11, at 7–8. 

21See id. at 8; see also id. at 7, n.14. 

22See BSTX LLC Agreement, Section 2.5(c); 

Amendment No. 2, supra note 11, at 8. 

23See BSTX LLC Agreement, Section 2.5(b). 

24See id. Section 7.1(a); Amendment No. 2, supra 

note 11, at 47–48. 

25See infra note 102 and accompanying text. 

26See BSTX LLC Agreement, Section 7.4(g)(i); 

Amendment No. 2, supra note 11, at 19–20. 

27 ‘‘Economic Percentage Interest’’ would mean, 

with respect to a Member, the ratio of the number 

of Economic Units held by the Member, directly or 

indirectly, of record or beneficially, to the total of 

all of the issued and outstanding Economic Units 

held by Members, expressed as a percentage. See 

BSTX LLC Agreement, Section 1.1. ‘‘Voting 

Percentage Interest’’ would mean, with respect to a 

Member, the ratio of the number of Voting Units 

held by the Member, directly or indirectly, of record 

or beneficially, to the total of all of the issued and 

outstanding Voting Units held by Members, 

expressed as a percentage. Voting Units held by a 

Member that are ineligible to vote would not be 

counted in the numerator or the denominator when 

determining such ratio. See id. 

28The Exchange states that BOX Digital is a 

subsidiary of BOX Holdings and an affiliate of the 

Exchange, and that BSTX would be an affiliate of 

the Exchange. BOX Holdings owns 98% of BOX 

Digital and 2% of BOX Digital is held by Lisa Fall. 

BOX Holdings already owns one subsidiary that is 

an existing facility of the Exchange—BOX Options 

Market LLC (‘‘BOX Options’’)—which operates a 

market for trading option contracts on U.S. equities. 

BOX Holdings is the parent company for both BOX 

Digital and BOX Options and currently has seven 

separate, unaffiliated owners. See Amendment No. 

2, supra note 11, at 9. The seven separate, 

unaffiliated owners include: MX US 2, Inc. (‘‘MX 

US 2’’), a wholly owned, indirect subsidiary of 

TMX Group Limited (‘‘TMX’’), which holds 47.89% 

of the outstanding units of BOX Holdings, IB 

Exchange Corp. (‘‘IB’’), which holds 25.5% of the 

outstanding units in BOX Holdings, and Citadel 

Securities Principal Investment LLC, which holds 

15.5% of the outstanding units in BOX Holdings. 

The additional four owners each hold less than five 

percent of the outstanding units of BOX Holdings. 

See id. at 9. The Exchange states that Lisa Fall is 

a Director of BOX Digital. See id. at 8 n.18. 

29The Exchange states that ownership of tZERO 

is held by Medici Ventures, L.P. (‘‘Medici’’), a 

Delaware limited partnership, which owns 44% of 

the outstanding shares of tZERO, and Overstock, a 

publicly held corporation organized under the laws 

of Delaware, which owns 43% of the outstanding 

shares of tZERO. An individual, Joseph Cammarata, 

holds 7.53% of the outstanding shares of tZERO, 

and the remaining shares are held in less than three 

percent by thirty-one individuals and entities. 

Pelion MV GP, L.L.C. (‘‘Medici GP’’), a Delaware 

limited liability company, serves as the general 

partner of Medici and has the sole right to manage 

its affairs. Medici GP owns one percent of the 

partnership interest in Medici and Overstock owns 

99% of the partnership interests in Medici. 

Membership interests in Medici GP are held by 

fifteen individuals and entities, all of who hold less 

than a 25% interest. The Exchange states that both 

tZERO and BSTX are affiliates of Overstock, Medici, 

and Medici GP. See OIP, supra note 8, 86 FR at 

53367–68. 

30See Amendment No. 2, supra note 11, at 8. The 

Exchange states that FBP Digital LLC, which is 

is publishing this notice to solicit 

comments on the proposed rule change, 

as modified by Amendment No. 2 

(‘‘BSTX Governance Proposal’’), from 

interested persons and is approving the 

proposed rule change, as modified by 

Amendment No. 2, on an accelerated 

basis. 

II. Overview 

As set forth in the OIP and 

Amendment No. 2,12 the Exchange 

proposes to establish BSTX as a facility 

of the Exchange (as defined in Section 

3(a)(2) of the Exchange Act).13 The 

Exchange proposes that BSTX would 

operate a market for the trading of 

securities (‘‘BSTX Market’’), and with 

this proposed rule change, the Exchange 

proposes to adopt the BSTX LLC Third 

Amended and Restated Limited 

Liability Company Agreement (‘‘BSTX 

LLC Agreement’’ or ‘‘LLC 

Agreement’’) 14 as the source of 

governance and operating authority for 

BSTX.15 In a separate action, the 

Commission approved the Exchange’s 

proposed rule change to establish the 

trading rules for BSTX.16

Ownership interests in BSTX would 

be represented by two classes of Units: 

Economic Units 17 and Voting Units.18

Duly admitted holders of these limited 

liability company interests would be 

‘‘Members’’ of BSTX.19 Economic Units 

would represent equity interests in 

BSTX and entitle holders to participate 

in BSTX’s allocations and distributions, 

but would not include the right to 

vote.20 Voting Units would represent 

voting interests in BSTX and entitle 

holders to participate in votes of BSTX’s 

Members.21 Each Member would be a 

holder of both Voting Units and 

Economic Units.22 The total number of 

Voting Units would be equal to the total 

number of Economic Units; 23 Voting 

Units may not be transferred separately 

from their related Economic Units.24

Unless required to be adjusted, as 

discussed further below,25 each Member 

would hold the number of Voting Units 

equal to the number of Economic Units 

it holds.26 A Member’s level of 

ownership interest would be expressed 

in terms of its Economic Percentage 

Interest and Voting Percentage 

Interest.27

Upon adoption of the LLC Agreement, 

BOX Digital Markets LLC (‘‘BOX 

Digital’’), a Delaware limited liability 

company and a subsidiary of BOX 

Holdings Group LLC (‘‘BOX 

Holdings’’),28 and tZERO Group, Inc. 

(‘‘tZERO’’), a Delaware corporation and 

an affiliate of Overstock.com, Inc. 

(‘‘Overstock’’),29 would each own a 40% 

Economic Percentage Interest and a 20% 

Voting Percentage Interest in BSTX.30


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wholly owned by Lisa Fall, would own an 11.1% 

Economic Percentage Interest in BSTX, and each of 

the following would own less than 5% Economic 

Percentage Interest: Susan Chamberlin (1.9%), 

Saum Noursalehi (0.4%), Will Easley (0.4%), Alan 

Konevsky (0.7%), Jay Fraser (1.4%), Enid 

Acquisition LLC (1.9%), Chris Zaremba (1.4%), and 

Todd Treworgy (0.4%). The Exchange also states 

that FBP Digital LLC will own a 19.6% Voting 

Percentage Interest in BSTX, and each of the 

following will own less than a 10% Voting 

Percentage Interest: Susan Chamberlin (8.8%), 

Saum Noursalehi (2.1%), Will Easley (2.1%), Alan 

Konevsky (3.1%), Jay Fraser (6.6%), Enid 

Acquisition LLC (wholly owned by Glen 

Openshaw) (8.8%), Chris Zaremba (6.6%), and 

Todd Treworgy (2.2%). See id. at 8–9. The 

Exchange states that Alan Konevsky is the CEO of 

tZERO. See id. at 8 n.21. The Exchange also states 

that the eleven Members are parties to the LLC 

Agreement. See id. at 7–8 n.15. 

31See BSTX LLC Agreement, Section 3.2(b); OIP, 

supra note 8, 86 FR at 53375. The Exchange states 

that among other things, under an IP License and 

Services Agreement by and between tZERO and 

BSTX (‘‘LSA’’), tZERO will provide BSTX and the 

Exchange with a license to use tZERO’s intellectual 

property comprising the BSTX trading system, and 

will provide services to BSTX related to 

implementing, administering, maintaining, 

supporting, hosting, developing, testing and 

securing the trading system. See OIP, supra note 8, 

86 FR at 53369, 53375. 

32See BSTX LLC Agreement, Section 3.2(c); 

Amendment No. 2, supra note 11, at 37. ‘‘BSTX 

Product’’ would mean a Security, as defined in the 

Exchange Rules, trading on the BSTX System. See 

BSTX LLC Agreement, Section 1.1. ‘‘BSTX System’’ 

would mean the technology, know-how, software, 

equipment, communication lines or services, 

services and other deliverables or materials of any 

kind as may be necessary or desirable for the 

operation of the BSTX Market. See id. Section 1.1. 

33See OIP, supra note 8, 86 FR at 53366 

(describing BOX Holdings ownership of BOX 

Options, as well as the ownership of BOX 

Holdings). 

34See id. at 53366. The Exchange states that it 

currently operates BOX Options as its only facility, 

and that it filed a separate proposed rule change to 

accommodate regulation of BSTX in addition to 

BOX Options (‘‘Multiple Facilities Filing’’). See id. 

The Commission approved this proposal, which 

included amendments to the Exchange’s governing 

documents designed to provide the Exchange the 

flexibility to regulate additional facilities. See 

Securities Exchange Act Release Nos. 88236 

(February 19, 2020), 85 FR 10765 (February 25, 

2020) (Notice of Filing of Proposed Rule Change); 

88934 (May 22, 2020), 85 FR 32085 (May 28, 2020) 

(Order Granting Approval of a Proposed Rule 

Change) (‘‘BOX–2020–04 Approval’’). 

35See 15 U.S.C. 78f(b)(1). 

36See id.; see also Section 19(g) of the Exchange 

Act, 15 U.S.C. 78s(g). 

37The Exchange proposes that the LLC 

Agreement would provide that the Exchange will 

act as the SEC-approved SRO for the BSTX Market, 

have regulatory responsibility for the activities of 

the BSTX Market, and provide regulatory services 

to the BSTX pursuant to the Facility Agreement. 

See BSTX LLC Agreement, Section 3.2(a); OIP, 

supra note 8, 86 FR at 53370; see also infra Sections 

III.A and III.B (describing provisions in the LLC 

Agreement providing for and clarifying the 

regulatory authority and jurisdiction of the 

Exchange over the BSTX facility and its Members, 

Officers, Directors, employees, agents, and 

Controlling Persons (see infra note 57)). 

38See OIP, supra note 8, 86 FR at 53366. For 

example, the Exchange would receive notice of all 

planned or proposed changes to BSTX (other than 

with respect to Non-Market Matters). The Exchange 

states that this authority would ensure that while 

BSTX operates as a facility of the Exchange, BSTX 

would be required to submit any such changes to 

the Exchange for approval and the Exchange would 

have the right to direct BSTX to make any 

modifications deemed necessary or appropriate by 

the Exchange to resolve any Regulatory Deficiency. 

The Exchange states that this regulatory authority 

would override any authority of BSTX management, 

its Members or its Board regardless of any Member’s 

level of ownership or control of the Board at the 

facility level. See OIP, supra note 8, 86 FR at 53381; 

Amendment No. 2, supra note 11, at 68. 

39See BSTX LLC Agreement, Section 3.2(a); OIP, 

supra note 8, 86 FR at 53372–73. ‘‘Regulatory 

Deficiency’’ would be defined as ‘‘the operation of 

the Company (in connection with matters that are 

not Non-Market Matters) or the BSTX Market 

(including, but not limited to, the BSTX System) in 

a manner that is not consistent with the Exchange 

Rules and/or the SEC Rules governing the BSTX 

Market or BSTX Participants, or that otherwise 

impedes the Exchange’s ability to regulate the BSTX 

Market or BSTX Participants or to fulfill its 

obligations under the Exchange Act as an SRO.’’ See 

BSTX LLC Agreement, Section 1.1. The Exchange 

states that the proposed provisions in Section 3.2(a) 

of the LLC Agreement are substantially the same as 

those in the Amended and Restated Limited 

Liability Company Agreement of BOX Options 

Market LLC, dated as of August 15, 2018, and help 

guarantee the Exchange’s ability to fulfill its 

regulatory responsibilities and operate in a manner 

consistent with the Exchange Act, and in particular 

with Section 6(b)(1) of the Exchange Act. See OIP, 

supra note 8, 86 FR at 53373; see also id. at 53377 

n.87 and accompanying text. 

40See OIP, supra note 8, 86 FR at 53366. 41See BSTX LLC Agreement, Section 4.1(a); OIP, 

supra note 8, 86 FR at 53370, 53881. The Exchange 

proposes that only to the extent expressly provided 

for in the LLC Agreement and the Related 

Agreements, and as delegated by the Board to 

committees of the Board or to duly appointed 

Officers or agents of BSTX, neither a Member nor 

any other Person other than the Board of Directors 

shall be an agent of BSTX or have any right, power 

or authority to transact any business in the name 

of BSTX or to act for or on behalf of or to bind 

BSTX. See BSTX LLC Agreement, Section 4.9; OIP, 

supra note 8, 86 FR at 53370; Amendment No. 2, 

supra note 11, at 23–24. Members would have the 

right to vote on the admission of additional or 

substitute Members, the admission of a personal 

representative or successor in interest of a Member, 

and the dissolution and winding up of the BSTX. 

See BSTX LLC Agreement, Sections 7.1(b), 7.5, and 

10.1(a)(iii); Amendment No. 2, supra note 11, at 7 

n.14. 

42The Exchange states that the one Member 

Director appointed by each of BOX Digital and 

tZERO would comprise a maximum of 20% of all 

Directors on BSTX’s Board. See Amendment No. 2, 

supra note 11, at 70. A Member Director would not 

have more than 20% of the total voting power on 

any committee of the BSTX Board. See BSTX LLC 

Agreement, Section 4.2(c); Amendment No. 2, supra 

note 11, at 25 n.52. 

43The Exchange proposes that for so long as 

BSTX is a facility of the Exchange, the Exchange 

will have the right to appoint a member of the 

senior management of the regulation staff of the 

Exchange to serve as Regulatory Director. See BSTX 

LLC Agreement, Section 4.1(a); OIP, supra note 8, 

86 FR at 53370. 

44The Exchange proposes that the Independent 

Director would be appointed by the affirmative vote 

Continued 

The Exchange proposes that pursuant to 

the LLC Agreement, tZERO would 

provide BSTX the intellectual property 

license and services necessary to 

operate the BSTX trading system.31 The 

Exchange also proposes that pursuant to 

the LLC Agreement, the Exchange will 

regulate BSTX as a facility of the 

Exchange for the listing and trading of 

BSTX Products, but will not regulate 

any other market trading BSTX 

Products.32

As is the case with the Exchange’s 

current facility for trading options, BOX 

Options, the Exchange would not hold 

an ownership interest in BSTX,33 but 

would regulate BSTX as a facility of the 

Exchange pursuant to an agreement 

between the Exchange and BSTX 

(‘‘Facility Agreement’’).34 As a selfregulatory organization (‘‘SRO’’), the 

Exchange has regulatory responsibility 

for all of its facilities, including BSTX, 

and must be so organized and have the 

capacity to carry out the purposes of the 

Exchange Act.35 Specifically, an 

exchange must be able to enforce 

compliance by its members, and persons 

associated with its members, with 

federal securities laws and rules 

thereunder and the rules of the 

Exchange.36 Pursuant to the LLC 

Agreement, the Members would agree 

that the Exchange would provide 

regulatory oversight of BSTX,37 and the 

Exchange states that its powers and 

authority under the Facility Agreement 

would ensure that the Exchange would 

have full regulatory control over 

BSTX.38 The LLC Agreement would also 

specifically require the Exchange to 

receive notice of and approve, among 

other things, changes to the BSTX 

System, and would give the Exchange 

the authority to direct BSTX to 

eliminate or prevent Regulatory 

Deficiencies and allow the Exchange to 

perform and fulfill its regulatory 

responsibilities under the Exchange 

Act.39 The Exchange will also provide 

certain business services to BSTX such 

as providing human resources and office 

technology support pursuant to an 

administrative services agreement 

between the Exchange and BSTX.40

The Exchange proposes that, subject 

to the regulatory oversight by the 

Exchange, the board of directors of 

BSTX (‘‘BSTX Board’’) would manage 

the business and affairs of BSTX 

without the need for approval of the 

Members.41 The Board would consist of 

five directors (each a ‘‘Director’’): One 

Director appointed by BOX Digital, so 

long as BOX Digital holds an Economic 

Percentage Interest equal to or greater 

than 35%, and one Director appointed 

by tZERO, so long as tZERO holds an 

Economic Percentage Interest equal to or 

greater than 35% (each a ‘‘Member 

Director’’),42 the CEO of BSTX, a 

‘‘Regulatory Director,’’ 43 and an 

‘‘Independent Director.’’ 44 Generally, 


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of a majority of the other Directors. See BSTX LLC 

Agreement, Section 4.1(a); Amendment No. 2, supra 

note 11, at 25. 

45See BSTX LLC Agreement, Section 4.3; 

Amendment No. 2, supra note 11, at 27. 

46See Amendment No. 2, supra note 11, at 37. 

47See id. at 37–38. 

48See id. at 38. Pursuant to the Facility 

Agreement, the Exchange would be entitled to 

receive all fees, fines and penalties imposed upon 

BSTX Participants with respect to the BSTX trading 

system, as well as market data fees, tape and other 

revenue including regulatory fees and trading fees, 

payable by BSTX Participants, as well as any funds 

received from any applicable market data fees, tape 

revenue, and other revenue. All such funds may be 

used by the Exchange for regulatory purposes, as 

determined solely by the Exchange, and any excess 

funds will be remitted to BSTX. See id. Further, any 

‘‘Regulatory Funds’’ received by the Exchange will 

not be distributed to the Exchange’s owners or used 

for non-regulatory purpose. See id. at 39 n.77 and 

accompanying text; see also BOX Exchange LLC 

Second Amended and Restated Limited Liability 

Company Agreement, dated November 30, 2020 

(‘‘Exchange LLC Agreement’’), Sections 1.1, 8.1. 

49 In approving the proposed rule change, the 

Commission has considered its impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

50 15 U.S.C. 78f(b)(1). 

51 15 U.S.C. 78f(b)(3). 

52 15 U.S.C. 78f(b)(5). 

53See BSTX LLC Agreement, Section 4.11(b). 

54See, e.g., Securities Exchange Act Release Nos. 

59281 (January 22, 2009), 74 FR 5014 (January 28, 

2009) (order approving New York Block Exchange 

as a facility of the New York Stock Exchange); 

55389 (March 2, 2007), 72 FR 10575 (March 8, 

2007) (order approving CBOE Stock Exchange as a 

facility of the Chicago Board Options Exchange) 

(‘‘CBSX Order’’); 54399 (September 1, 2006), 71 FR 

53728 (September 12, 2006) (order approving the 

ISE Stock Exchange as a facility of the International 

Securities Exchange) (‘‘ISE Stock Order’’); 54364 

(August 25, 2006), 71 FR 52185 (September 1, 2006) 

(order approving the Boston Equities Exchange as 

a facility of the Boston Stock Exchange); and 49065 

(January 13, 2004), 69 FR 2768 (January 20, 2004) 

(order approving the Boston Options Exchange 

Regulation as a facility of the Boston Stock 

Exchange). 

55See BSTX LLC Agreement, Section 4.11(b). 

56See id. Section 4.11(a). 

57 ‘‘Controlling Person’’ would mean a Person 

who, alone or together with any Related Persons of 

such Person, holds a Controlling Interest in a 

Member. ‘‘Controlling Interest’’ would mean direct 

or indirect ownership of 25% or more of the total 

voting power of all equity securities of a Member 

(other than voting rights solely with respect to 

matters affecting the rights, preferences, or 

privileges of a particular class of equity securities), 

by any Person, alone or together with any Related 

Persons of such Person. See id. Section 7.4(h)(iv). 

The Exchange represents that the definitions of 

‘‘Controlling Person’’ and ‘‘Controlling Interest’’ are 

the same as those that currently apply to BOX 

Holdings. See OIP, supra note 8, 86 FR at 53368. 

58See BSTX LLC Agreement, Section 7.4(h)(i); 

OIP, supra note 8, 86 FR at 53368; Amendment No. 

2, supra note 11, at 12–13. The Exchange states that 

BOX Digital’s upstream owners (BOX Holdings, MX 

US 2, MX US 1, Inc. (‘‘MX US 1’’), Bourse de 

each of the Directors would be entitled 

to vote on any action to be taken by the 

Board.45

To help ensure that the Exchange has 

and will continue to have adequate 

funding to be able to meet its 

responsibilities under the Exchange Act, 

the Exchange represents that it would 

have adequate funding for the 

Exchange’s operations with respect to 

BSTX, including the regulation of the 

Exchange.46 The Exchange also states 

that the Facility Agreement would 

require BSTX to provide adequate 

funding to the Exchange’s operations 

with respect to BSTX, including 

regulation of BSTX by the Exchange, 

and that prior to commencing 

operations as a facility of the Exchange, 

BSTX will have the necessary funds and 

assets, including furnishings, 

equipment, and servers, to adequately 

operate the BSTX facility until it begins 

receiving revenues from operations to 

operate BSTX as a facility of the 

Exchange.47 Further, BSTX would not 

be entitled to any revenue generated 

from fines, fees, or penalties imposed on 

BSTX Participants with respect to 

trading on BSTX (‘‘Regulatory Funds’’). 

Any Regulatory Funds received by the 

Exchange will not be used for nonregulatory purposes, distributed to the 

Exchange’s owners, or remitted to 

BSTX.48

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

amended, is consistent with the 

requirements of the Exchange Act and 

the rules and regulations thereunder 

applicable to a national securities 

exchange.49 In particular, the 

Commission finds that the proposed 

rule change, as amended, is consistent 

with Section 6(b)(1) of the Exchange 

Act,50 which requires a national 

securities exchange to be so organized 

and have the capacity to carry out the 

purposes of the Exchange Act and to 

enforce compliance by its members and 

persons associated with its members 

with the provisions of the Exchange Act, 

the rules or regulations thereunder, and 

the rules of the exchange. The 

Commission also finds that the 

proposed rule change, as amended, is 

consistent with Section 6(b)(3) of the 

Exchange Act,51 which, among other 

things, requires that the rules of an 

exchange ensure fair representation of 

its members in the selection of its 

directors and administration of its 

affairs. In addition, the Commission 

finds that the proposed rule change, as 

amended, is consistent with Section 

6(b)(5) of the Exchange Act,52 which 

requires that the rules of a national 

securities exchange be designed to 

prevent fraudulent and manipulative 

acts and practices; to promote just and 

equitable principles of trade; to foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities; 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. 

A. BSTX as a Facility of the Exchange 

The proposed rule change is 

consistent with Section 6(b)(1) of the 

Exchange Act in that, upon establishing 

BSTX as a facility, the Exchange would 

remain so organized and have the 

capacity to carry out the purposes of the 

Exchange Act. As an SRO, the Exchange 

would have regulatory control over 

BSTX and would be responsible for 

ensuring BSTX’s compliance with the 

federal securities laws and all 

applicable rules and regulations 

thereunder. Furthermore, BSTX would 

be obligated under the LLC Agreement 

to operate in a manner consistent with 

the regulatory and oversight 

responsibilities of the Exchange and the 

Exchange Act and the rules and 

regulations thereunder.53 The 

Commission has previously approved 

similar structures with respect to the 

operation of exchange facilities.54

Although BSTX would not carry out 

any regulatory functions, all of its 

activities must be consistent with the 

Exchange Act. As a facility of a national 

securities exchange, BSTX would not be 

solely a commercial enterprise, but an 

integral part of an SRO that is registered 

pursuant to the Exchange Act and 

therefore subject to obligations imposed 

by the Exchange Act. The proposed LLC 

Agreement is reasonably designed to 

enable BSTX to operate in a manner 

consistent with this principle. The LLC 

Agreement would provide that BSTX 

and its Members, Officers, Directors, 

agents, and employees shall comply 

with the federal securities laws and the 

rules and regulations promulgated 

thereunder and cooperate with the 

Exchange and the Commission.55

Further, BSTX’s Members, Officers, 

Directors, agents, and employees shall 

give due regard to the preservation of 

the independence of the self-regulatory 

function of the Exchange and shall not 

take actions which would interfere with 

the Exchange’s regulatory functions or 

the Exchange’s ability to carry out its 

responsibilities under the Exchange 

Act.56 In addition, each Controlling 

Person 57 would be required to become 

a party to and abide by all the 

provisions of the LLC Agreement,58 and 


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Montreal Inc. (‘‘Bourse de Montreal’’), and TMX) 

and tZERO’s upstream owners (Medici, Medici GP, 

and Overstock) would be Controlling Persons and, 

prior to the commencement of operations of BSTX, 

would be required to become parties to the LLC 

Agreement and abide by its provisions to the same 

extent as Members. See OIP, supra note 8, 86 FR 

at 53368; Amendment No. 2, supra note 11, at 13– 

14. The Exchange also states that any future 

Controlling Person would also be subject to its 

requirements. See OIP, supra note 8, 86 FR at 

53376–77; Amendment No. 2, supra note 11, at 51; 

see also infra note 112 and accompanying text 

(enumerating the current persons who would be 

Controlling Persons of BSTX at the commencement 

of operations). 

59See BSTX LLC Agreement, Section 4.11(b). 

60See id. Section 4.11(a). 

61See id. 

62See Amendment No. 2, supra note 11, at 72– 

73. 

63See BSTX LLC Agreement, Section 15.6. The 

Exchange states that, in order to protect the 

confidential information of the Exchange, tZERO 

directors, officers, and employees will only receive 

confidential information of BSTX and the 

Exchange, including confidential information 

pertaining to regulatory matters of BSTX and the 

Exchange (including but not limited to disciplinary 

matters, trading data, trading practices and audit 

information), on a need-to-know basis as it relates 

to the technology services being provided or 

specific roles with respect to BSTX and the 

Exchange, and that they will be subject to 

confidentiality obligations with respect to any 

confidential information they receive in the course 

of performing their services, including regulatory 

information. The Exchange also states that tZERO 

employees providing technology services to BSTX 

or the Exchange will have offices physically 

separate from employees of BSTX and the 

Exchange. See Amendment No. 2, supra note 11, at 

45–46. 

64See BSTX LLC Agreement, Section 15.6; see 

also OIP, supra note 8, 86 FR at 53372; Amendment 

No. 2, supra note 11, at 57–58. 

65Non-Market Matters would be defined as 

changes relating solely to one or more of the 

following: Marketing, administrative matters, 

personnel matters, social or team-building events, 

meetings of the Members, communication with the 

Members, finance, location and timing of Board 

meetings, market research, real property, 

equipment, furnishings, personal property, 

intellectual property, insurance, contracts unrelated 

to the operation of the BSTX Market, and de 

minimis items. See BSTX LLC Agreement, Section 

3.2(a)(ii). 

66See id.; see also Amendment No. 2, supra note 

11, at 34–35. 

67See BSTX LLC Agreement, Section 3.2(a)(iii). 

See also Amendment No. 2, supra note 11, at 35. 

68See BSTX LLC Agreement, Section 3.2(a)(iv). 

69See id. Section 18.1; see also Amendment No. 

2, supra note 11, at 62. 

70See BSTX LLC Agreement, Section 5.8; see also 

Amendment No. 2, supra note 11, at 53. 

71See BSTX LLC Agreement, Section 5.8. 

72See id. Section 4.1(a), (b); Section 4.5; see also 

Amendment No. 2, supra note 11, at 24–25, 24 n.51. 

73 15 U.S.C. 78f(b)(1). 

thereby, like Members, commit to 

comply with the federal securities laws 

and the rules and regulations 

promulgated thereunder and to 

cooperate with the Exchange and the 

Commission,59 to give due regard to the 

preservation of the independence of the 

self-regulatory function of the 

Exchange,60 and to not take actions 

which would interfere with the 

regulatory functions of the Exchange or 

the Exchange’s ability to carry out its 

responsibilities under the Exchange 

Act.61 According to the Exchange, these 

provisions are designed to help 

maintain the independence of the 

Exchange’s regulatory function.62

The proposed LLC Agreement would 

provide that all Confidential 

Information of BSTX or the Exchange 

pertaining to regulatory matters 

(including but not limited to 

disciplinary matters, trading data, 

trading practices, and audit information) 

contained in the books and records of 

BSTX shall not be made available to any 

persons other than to those Officers, 

Directors, employees, and agents of 

BSTX that have a reasonable need to 

know the contents thereof; would be 

retained in confidence by BSTX and its 

Officers, Directors, employees, and 

agents; and would not be used for any 

non-regulatory purpose.63 Nothing in 

the LLC Agreement, however, would 

limit or impede the rights of the 

Commission or the Exchange to access 

and examine Confidential Information 

of BSTX pursuant to the federal 

securities laws or limit or impede the 

ability of Directors, Officers, employees, 

or agents of BSTX to disclose 

confidential information to the 

Commission or the Exchange.64

The LLC Agreement would also 

provide that the Exchange will receive 

notice of planned or proposed changes 

to BSTX (excluding Non-Market 

Matters 65) or the BSTX Market 

(including, but not limited to, the BSTX 

System) which would require an 

affirmative approval by the Exchange 

prior to implementation.66 Also, the 

Exchange proposes that if the Exchange 

determines that the planned or 

proposed changes could cause BSTX or 

the BSTX Market to operate in a manner 

that is not consistent with the Exchange 

Act or the Exchange’s rules or would 

otherwise impede the Exchange’s ability 

to regulate the BSTX Market or BSTX 

Participants or to fulfill its obligations 

under the Exchange Act as an SRO (each 

a ‘‘Regulatory Deficiency’’), the 

Exchange may direct BSTX to modify 

the proposal as necessary to ensure that 

it does not cause a Regulatory 

Deficiency.67 Likewise, if the Exchange 

determines that a Regulatory Deficiency 

exists or is planned, the Exchange could 

direct BSTX to undertake such 

modifications to BSTX or the BSTX 

Market as are necessary or appropriate 

to eliminate or prevent the Regulatory 

Deficiency and allow the Exchange to 

perform and fulfill its regulatory 

responsibilities.68 Furthermore, the 

Exchange would review any 

amendment, modification, waiver or 

supplement to the LLC Agreement and 

if such amendment is required to be 

filed with, or filed with and approved 

by, the Commission before it may be 

effective, then such amendment would 

not be effective until filed with, or filed 

with and approved by, the 

Commission.69

Certain additional provisions in the 

LLC Agreement that make 

accommodation for the Exchange as the 

SRO for BSTX are consistent with the 

Exchange Act because they enhance the 

ability of the Exchange to carry out its 

self-regulatory responsibilities with 

respect to BSTX. The LLC Agreement 

would provide that the Board of 

Directors may suspend or terminate a 

Member’s voting privileges or 

membership in BSTX if the Member is 

subject to Statutory Disqualification, 

violates a material provision of the LLC 

Agreement or any federal or state 

securities law, or such action is 

necessary or appropriate in the public 

interest or for the protection of 

investors.70 Any Director appointed by 

the Member subject to sanction would 

be excluded from any vote to suspend 

or terminate such Member.71 To reflect 

further that BSTX is not solely a 

commercial enterprise, the LLC 

Agreement would also provide that no 

person subject to a Statutory 

Disqualification shall serve as a Director 

or Officer of BSTX.72

The provisions discussed above, 

which are designed to help ensure the 

independence of the Exchange’s 

regulatory function and facilitate the 

ability of the Exchange to carry out its 

regulatory responsibilities under, and 

operate in a manner consistent with, the 

Exchange Act, are appropriate and 

consistent with the requirements of the 

Exchange Act, particularly with Section 

6(b)(1), which requires, in part, an 

exchange to be so organized and have 

the capacity to carry out the purposes of 

the Exchange Act.73

B. Regulatory Jurisdiction Over BSTX, 

the LLC Members, and Controlling 

Persons 

The terms of the proposed LLC 

Agreement clearly describe the 

Commission’s and the Exchange’s 

regulatory jurisdiction over BSTX and 

its Members. The LLC Agreement would 

provide that, to the extent related to the 

operation or administration of the 

Exchange or the BSTX Market, the 

books, records, premises, officers, 

directors, agents, and employees of 

BSTX and its Members shall be deemed 


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74See BSTX LLC Agreement, Section 11.1. 

75See id. 

76See supra note 58 and accompanying text. 

77See BSTX LLC Agreement, Section 18.6(b). 

78See id. Section 18.6(c); see also OIP, supra note 

8, 86 FR at 53379; Amendment No. 2, supra note 

11, at 61. 

79See supra note 58 and accompanying text. 

80 15 U.S.C. 78s(h)(4) (authorizing the 

Commission, by order, to remove from office or 

censure any officer or director of a national 

securities exchange if it finds, after notice and an 

opportunity for hearing, that such officer or director 

has: (1) Willfully violated any provision of the 

Exchange Act or the rules and regulations 

thereunder, or the rules of a national securities 

exchange; (2) willfully abused his or her authority; 

or (3) without reasonable justification or excuse, has 

failed to enforce compliance with any such 

provision by a member or person associated with 

a member of the national securities exchange). 

81 15 U.S.C. 78q(b)(1). 

82 15 U.S.C. 78t(a). 

83 15 U.S.C. 78c(a)(27). 

84 15 U.S.C. 78s(h)(1). 

85 15 U.S.C. 78t(e). 

86 15 U.S.C. 78u–3. 

87These provisions are consistent with ownership 

and voting limits approved by the Commission for 

other SROs. See, e.g., Securities Exchange Act 

Release Nos. 88806 (May 4, 2020), 85 FR 27451 

(May 8, 2020) (File No. 10–237) (order granting the 

registration of MEMX LLC) (‘‘MEMX Order’’); 78101 

(June 17, 2016), 81 FR 41142 (June 23, 2016) (File 

No. 10–222) (order granting the registration of 

Investors’ Exchange, LLC); 85828 (May 10, 2019), 84 

FR 21841 (May 15, 2019) (File No. 10–234) (order 

granting registration of Long Term Stock Exchange, 

Inc.) (‘‘LTSE Order’’); 79543 (December 13, 2016), 

81 FR 92901, 92903 (December 20, 2016) (File No. 

10–227) (order granting registration of MIAX 

PEARL, LLC) (‘‘MIAX Pearl Order’’); 68341 

(December 3, 2012), 77 FR 73065, 73067 (December 

7, 2012) (File No. 10–207) (order granting the 

registration of Miami International Securities 

Exchange, LLC); 58375 (August 18, 2008), 73 FR 

49498, 49501 (August 21, 2008) (File No. 10–182) 

(order granting the registration of BATS Exchange, 

Inc.); see also Securities Exchange Release Nos. 

76998 (January 29, 2016), 81 FR 6066, 6069 

(February 4, 2016) (File No. 10–221) (order granting 

exchange registration of ISE Mercury, LLC); 70050 

(July 26, 2013), 78 FR 46622, 46624 (August 1, 

2013) (File No. 10–209) (order granting the 

exchange registration of Topaz Exchange, LLC 

(n.k.a. Nasdaq GEMX, LLC; f.k.a. ISE Gemini, LLC); 

62158 (May 24, 2010), 75 FR 30082 (May 28, 2010) 

(SR–CBOE–2008–88) (Cboe demutualization order); 

53963 (June 8, 2006), 71 FR 34660 (June 15, 2006) 

(SR–NSX–2006–03) (NSX demutualization order); 

51149 (February 8, 2005), 70 FR 7531 (February 14, 

2005) (SR–CHX–2004–26) (CHX demutualization 

order); and 49098 (January 16, 2004), 69 FR 3974 

(January 27, 2004) (SR–Phlx–2003–73) (Phlx 

demutualization order). The Exchange states that 

Section 7.4 of the proposed LLC Agreement is 

substantially similar to provisions in the BOX 

Holdings LLC Agreement, subject to changes related 

to differences in BSTX’s structure, or provisions in 

the Exchange LLC Agreement. See Amendment No. 

2, supra note 11, at 53. 

to be the books, records, premises, 

officers, directors, agents, and 

employees of the Exchange for purposes 

of, and subject to oversight pursuant to, 

the Exchange Act.74 The LLC Agreement 

would also provide that the books and 

records of BSTX and its Members shall 

be maintained in the United States and 

shall be subject at all times to inspection 

and copying by the Commission and the 

Exchange.75 As discussed above, 

Controlling Persons would also be 

required to abide by the provisions of 

the LLC Agreement, including the books 

and records requirements of Section 

11.1.76

Further, the LLC Agreement would 

provide that BSTX, its Members, and 

the officers, directors, agents, and 

employees of BSTX and its Members 

irrevocably submit to the jurisdiction of 

the U.S. federal courts, the Commission, 

and the Exchange for purposes of any 

suit, action, or proceeding pursuant to 

U.S. federal securities laws and the 

rules and regulations thereunder arising 

out of, or relating to, activities of the 

Exchange and BSTX (except that such 

jurisdictions shall also include 

Delaware state courts for any such 

matter relating to the organization or 

internal affairs of BSTX) and waive, and 

agree not to assert by way of motion, as 

a defense or otherwise in any such suit, 

action, or proceeding, any claims that 

they are not personally subject to the 

jurisdiction of the U.S. federal courts, 

the Commission, the Exchange, or 

Delaware state courts, as applicable; that 

the suit, action, or proceeding is an 

inconvenient forum; that the venue of 

the suit, action, or proceeding is 

improper; or that the subject matter may 

not be enforced in or by such courts or 

agency.77 Moreover, BSTX, the 

Exchange, and each Member would be 

required to take such action as is 

necessary to ensure that BSTX’s, the 

Exchange’s, and such Member’s officers, 

directors, and employees consent in 

writing to the application to them of the 

provisions in the LLC Agreement 

regarding books and records, regulatory 

obligations, and regulatory jurisdiction 

to the extent related to the operation or 

administration of the Exchange or the 

BSTX Market.78 As discussed above, 

Controlling Persons must also abide by 

the provisions of the LLC Agreement, 

including the jurisdictional 

requirements of Section 18.6(b), as well 

as the requirement of Section 18.6(c) to 

take such action as is necessary to 

ensure that its officers, directors, and 

employees consent in writing to the 

application to them of certain 

provisions in the LLC Agreement to the 

extent related to the operation or 

administration of the Exchange or the 

BSTX Market.79

These provisions are consistent with 

the Exchange Act because they are 

reasonably designed to facilitate the 

Commission’s and the Exchange’s 

regulatory jurisdiction over BSTX and 

the BSTX Market. These provisions help 

facilitate the Commission’s inspections 

of BSTX’s books and records by 

deeming them to be the books and 

records of a national securities 

exchange. Further, these provisions 

specify that the Commission may 

exercise its authority under Section 

19(h)(4) of the Exchange Act 80 with 

respect to the officers and directors of 

BSTX and its Members, because such 

officers and directors are deemed to be 

officers and directors of the Exchange. 

Finally, the LLC Agreement states that, 

to the extent that they are related to 

BSTX’s business, the books and records 

of BSTX are subject to the Commission’s 

examination authority under Section 

17(b)(1) of the Exchange Act.81

Furthermore, even in the absence of 

these provisions, Section 20(a) of the 

Exchange Act 82 provides that any 

person with a controlling interest in 

BSTX would be jointly and severally 

liable with and to the same extent that 

BSTX is liable under any provision of 

the Exchange Act, unless the controlling 

person acted in good faith and did not 

directly or indirectly induce the act or 

acts constituting the violation or cause 

of action. Moreover, the Exchange is 

required to enforce compliance with 

these provisions, because they are 

‘‘rules of the exchange’’ within the 

meaning of Section 3(a)(27) of the 

Exchange Act.83 A failure on the part of 

the Exchange to enforce its rules could 

result in suspension or revocation of its 

registration, pursuant to Section 19(h)(1) 

of the Exchange Act.84 Also, Section 

20(e) of the Exchange Act 85 creates 

aiding and abetting liability for any 

person who knowingly provides 

substantial assistance to another person 

in violation of any provision of the 

Exchange Act or rule thereunder. 

Further, Section 21C of the Exchange 

Act 86 authorizes the Commission to 

enter a cease-and-desist order against 

any person who has been ‘‘a cause of’’ 

a violation of any provision of the 

Exchange Act through an act or 

omission that the person knew or 

should have known would contribute to 

the violation. 

C. Voting and Ownership Limitations; 

Changes in Control of BSTX 

The provisions in the LLC Agreement 

placing limits on the ownership of 

Economic Units and Voting Units as a 

result of certain ownership transactions 

and limits on ownership of Economic 

Units and Voting Units by BSTX 

Participants,87 as well as other 

provisions in the LLC Agreement 

relating to changes in control of BSTX, 

are consistent with the Exchange Act. 

These limitations and provisions are 


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88See supra note 34 and accompanying text. 89See supra notes 28–30 and accompanying text. 90 ‘‘Person’’ would be defined as any individual, 

partnership, corporation, association, trust, limited 

liability company, joint venture, unincorporated 

organization and any government, governmental 

department or agency or political subdivision 

thereof. See BSTX LLC Agreement, Section 1.1. 91 ‘‘Related Person’’ would mean with respect to 

any Person: (A) Any Affiliate of such Person; (B) 

any other Person with which such first Person has 

any agreement, arrangement or understanding 

(whether or not in writing) to act together for the 

purpose of acquiring, voting, holding or disposing 

of Units; (C) in the case of a Person that is a 

company, corporation or similar entity, any 

executive officer (as defined under Rule 3b–7 under 

the Exchange Act) or director of such Person and, 

in the case of a Person that is a partnership or 

limited liability company, any general partner, 

managing member or manager of such Person, as 

applicable; (D) in the case of any BSTX Participant 

who is at the same time a broker-dealer, any Person 

that is associated with the BSTX Participant (as 

determined using the definition of ‘‘person 

associated with a member’’ as defined under 

Section 3(a)(21) of the Exchange Act); (E) in the case 

of a Person that is a natural person and a BSTX 

Participant, any broker or dealer that is also a BSTX 

Participant with which such Person is associated; 

(F) in the case of a Person that is a natural person, 

any relative or spouse of such Person, or any 

relative of such spouse who has the same home as 

such Person or who is a director or officer of the 

Exchange or any of its parents or subsidiaries; (G) 

in the case of a Person that is an executive officer 

(as defined under Rule 3b–7 under the Exchange 

Act) or a director of a company, corporation or 

similar entity, such company, corporation or entity, 

as applicable; and (H) in the case of a Person that 

is a general partner, managing member or manager 

of a partnership or limited liability company, such 

partnership or limited liability company, as 

applicable. See id. ‘‘Units’’ would mean Economic 

Units and/or Voting Units. See id. ‘‘Affiliate’’ would 

mean with respect to any Person, any other Person 

controlling, controlled by or under common control 

with, such Person. As used in this definition, the 

term ‘‘control’’ means the possession, directly or 

indirectly, of the power to direct or cause the 

direction of the management and policies of a 

Person, whether through the ownership of voting 

securities, by contract or otherwise with respect to 

such Person. A Person is presumed to control any 

other Person, if that Person: (i) Is a director, general 

partner, or officer exercising executive 

responsibility (or having similar status or 

performing similar functions); (ii) directly or 

indirectly has the right to vote 25 percent or more 

of a class of voting security or has the power to sell 

or direct the sale of 25 percent or more of a class 

of voting securities of the Person; or (iii) in the case 

of a partnership, has contributed, or has the right 

to receive upon dissolution, 25 percent or more of 

the capital of the partnership. See id. 

92See id. Section 7.4(f); see also Amendment No. 

2, supra note 11, at 16–17. 

93See BSTX LLC Agreement, Section 7.4(f). 

94See id. Section 7.4(g). The Exchange states that 

owners of the Exchange that are also Exchange 

Facility Participants are similarly limited to a 

maximum of 20% economic ownership of the 

Exchange. See OIP, supra note 8, 86 FR at 53369, 

n.39 and accompanying text (citing to Exchange 

LLC Agreement, supra note 48, Section 7.3); 

Amendment No. 2, supra note 11, at 21 n.41 and 

accompanying text (citing to Exchange LLC 

Agreement, supra note 48, Section 7.3). The 

Exchange also represents that the existing 

ownership limits of 40% economic ownership for 

owners of the Exchange, and further limitation of 

20% economic ownership for owners that are 

Exchange Facility Participants, and the general 

limitation of 20% voting power of the Exchange 

would remain unchanged, and that these existing 

ownership limits would help ensure the 

independence of the Exchange’s regulatory 

oversight of BSTX and facilitate the ability of the 

Exchange to carry out its regulatory responsibilities 

and operate in a manner consistent with Section 

6(b)(1) of the Exchange Act. See OIP, supra note 8, 

86 FR at 53369. ‘‘Exchange Facility Participant’’ 

means a firm or organization (including a BSTX 

Participant) that is registered with the Exchange 

pursuant to the rules of the Exchange that constitute 

the ‘‘rules of an exchange’’ within the meaning of 

Section 3 of the Exchange Act for purposes of 

participating in trading on any Exchange Facility. 

See Exchange LLC Agreement, supra note 48, 

Section 1.1; Amendment No. 2, supra note 11, at 

5 n.9. ‘‘Exchange Facility’’ means any facility of the 

Exchange as defined in Section 3 of the Exchange 

Act. See Exchange LLC Agreement, supra note 48, 

Section 1.1. 

95See BSTX LLC Agreement, Section 7.4(g). A 

Member could also voluntarily impose a lower 

ownership or voting restriction on itself. See id. 

Sections 7.4(g), (f); see also Amendment No. 2, 

supra note 11, at 18–19. 

96See BSTX LLC Agreement, Sections 7.4(g), (f). 

The required determinations would be that (A) such 

waiver will not impair the ability of the Exchange 

to carry out its functions and responsibilities under 

the Exchange Act and the rules and regulations 

thereunder, (B) such waiver is otherwise in the best 

interests of the Exchange and the Members of 

BSTX, (C) such waiver will not impair the ability 

of the Commission to enforce the Exchange Act and 

(D) if applicable, the transferee in such transfer and 

its Related Persons are not subject to a Statutory 

Disqualification. See id. The Commission has 

previously approved the rules of other exchanges 

that provide for the ability of the exchange or its 

facility to waive comparable ownership and voting 

limitations for non-members of the exchange. See, 

e.g., MEMX Order, supra note 87, 85 FR at 27454; 

CBSX Order, supra note 54, 72 FR at 10578. 

97See supra notes 13–15 and accompanying text. 

98See supra note 30 and accompanying text 

(discussing the specific Economic Percentage 

Interest and Voting Percentage Interest to be held 

by each Member upon adoption of the proposed 

BSTX LLC Agreement pursuant to the proposed 

rule change). 

99See BSTX LLC Agreement, Sections 7.4(g), (f). 

BSTX Participants, however, would not be eligible 

for a waiver of the applicable 20% BSTX 

Participant Economic Ownership Limit or the 

Voting Ownership Limit. See id. 

designed to prevent any owner of BSTX 

from exercising undue control over the 

operation of the Exchange and to help 

ensure that the Exchange is able to carry 

out its regulatory obligations under the 

Exchange Act. 

As described above, the BSTX Market 

would be operated by BSTX, and BSTX 

would be a facility of the Exchange.88

Ownership and voting interests in BSTX 

would be held by 11 Members, and the 

Exchange would not itself hold a voting 

or ownership interest.89 Under the LLC 

Agreement, no event that would result 

in a Person,90 together with its Related 

Persons,91 owning directly or indirectly, 

of record or beneficially, an aggregate 

Economic Percentage Interest greater 

than 40% (‘‘Economic Ownership 

Limit’’) would be effective without both 

the approval of the Exchange and an 

effective rule filed pursuant to Section 

19 of the Exchange Act.92

Notwithstanding the foregoing, a BSTX 

Participant, together with its Related 

Persons, would not be permitted to own 

directly or indirectly, of record or 

beneficially, an aggregate Economic 

Percentage Interest greater than 20% 

(‘‘BSTX Participant Economic 

Ownership Limit’’).93 With respect to 

Voting Units, no event that would result 

in a Person, together with its Related 

Persons, owning directly or indirectly, 

of record or beneficially, an aggregate 

Voting Percentage Interest greater than 

20% (‘‘Voting Ownership Limit’’) would 

be effective without both the approval of 

the Exchange and an effective rule filed 

pursuant to Section 19 of the Exchange 

Act. No BSTX Participant, however, 

would be permitted to exceed this 

Voting Ownership Limit.94

Additionally, the LLC Agreement would 

prohibit any Person from entering into 

any agreement, plan, or other 

arrangement with any other Person that 

would enable such Person, either alone 

or together with its Related Persons, to 

vote, possess the right to vote, or cause 

the voting of Voting Units in excess of 

the Voting Ownership Limit.95 In 

addition to the approval of the Exchange 

and an effective rule filed pursuant to 

Section 19 of the Exchange Act, any 

waiver of the 40% Economic Ownership 

Limit or 20% Voting Ownership Limit 

would require the Exchange to make 

certain determinations.96 As discussed 

above, the Exchange proposed to 

establish BSTX as a facility of the 

Exchange to operate the BSTX Market, 

and to adopt the LLC Agreement as the 

source of governance and operating 

authority for BSTX.97 Additionally, the 

Exchange proposed that, upon adoption 

of the LLC Agreement, no person would 

hold more than a 40% Economic 

Percentage Interest or a 20% Voting 

Percentage Interest in BSTX,98 and per 

the terms of the LLC Agreement, no 

person would be permitted to exceed a 

40% Economic Percentage Interest or 

20% Voting Percentage Interest in 

contravention of the Economic 

Ownership Limit or Voting Ownership 

Limit without the required waiver and 

an effective proposed rule change, each 

as would be required by Section 7.4 of 

the LLC Agreement.99 Accordingly, 

pursuant to the Exchange’s proposal, 

BSTX cannot commence operations as a 

facility of the Exchange until the 

proposed LLC Agreement is adopted, 

and the Economic Percentage Interest 

and Voting Percentage Interest of each 

of the Members does not exceed 40% 

and 20%, respectively. 

The LLC Agreement also contains a 

provision designed to ensure that no 


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100See infra note 102 and accompanying text. 

101See BSTX LLC Agreement, Section 7.4(g)(i). 

Upon any change in the ownership of Economic 

Units for any reason, the Voting Units held by the 

Members would be recalculated simultaneously so 

that each Member holds the number of Voting Units 

equal to the number of Economic Units, subject to 

any automatic reallocation of Voting Units required 

by the Voting Units Adjustment (see infra note 102). 

See BSTX LLC Agreement, Section 7.4(g)(ii). 

102See BSTX LLC Agreement, Section 7.4(g)(i). In 

calculating the Voting Units Adjustment, any 

applicable Voting Ownership Limit with respect to 

each Member would be observed and no Member 

would be permitted to hold Voting Units in excess 

of such Member’s applicable Voting Ownership 

Limit. See id. 

103See id. Section 7.4(e); OIP, supra note 8, 86 

FR at 53369. The Exchange states that the 

provisions in proposed Section 7.4(e) are the same 

as those contained in Section 7.4(e) of the BOX 

Holdings LLC Agreement. See OIP, supra note 8, 86 

FR at 53369 n.34. 

104See BSTX LLC Agreement, Section 7.4(e). The 

notice would be required to state: (i) Such Person’s 

full legal name; (ii) the number of Voting Units and 

Economic Units owned, directly or indirectly, of 

record or beneficially, by such Person together with 

such Person’s Related Persons; and (iii) whether 

such Person has the power, directly or indirectly, 

to direct the management or policies of BSTX, 

whether through ownership of Voting Units, by 

contract or otherwise. See id. 

105See id. Section 7.4(e). 

106See id. Section 7.4(d). 

107See id.; OIP, supra note 8, 86 FR at 53368 

(stating that this proposed provision is the same as 

a BOX Holdings provision). The Exchange states 

that Related Persons that are otherwise Controlling 

Persons are not required to become parties to the 

LLC Agreement if they are only under common 

control of an upstream owner but are not in the 

upstream ownership chain above a BSTX owner 

because they will not have the ability to exert any 

control over BSTX. See OIP, supra note 8, 86 FR 

at 53368; see also supra notes 59–61, 79, and 

accompanying text (setting forth some of the 

provisions in the BSTX LLC Agreement to which 

Controlling Persons required to become parties to 

the BSTX LLC Agreement would be subject). Also, 

any additional or substitute Member of BSTX 

would be required to execute a counterpart to the 

LLC Agreement to evidence its acceptance of the 

terms and provisions of the LLC Agreement. See 

BSTX LLC Agreement, Section 7.1(b); see also 

Amendment No. 2, supra note 11, at 48. 

108See BSTX LLC Agreement, Section 7.4(h)(iii). 

109The Exchange states that membership interests 

in Medici GP are held by the following, each of 

which holds less than 25% of Medici GP: Carine 

Clark, Susannah Duke, Steve Glover, Brad Hintze, 

Jeff Kearl, Trevor Lund, Matt Mosman, Erika Nash, 

Zain Rizavi, Laura Summerhays, The Blake G 

Modersitzki 2020 Irrevocable Trust (affiliated with 

Blake G. Modersitzki), The Capitola Trust (affiliated 

with Chad Packard), The GP Investment Trust 

(affiliated with Chris Cooper), and The Oaxaca 

Dynasty Trust (affiliated with Ben Lambert). See 

OIP, supra note 8, 86 FR at 53368; Amendment No. 

2, supra note 11, at 12. 

110 In addition to the direct owners of BOX 

Holdings identified above (see supra note 28), the 

Exchange states that UBS Americas Inc., JPMC 

Strategic Investments I Corporation, Wolverine 

Holdings, L.P., and Aragon Solutions Ltd. 

(‘‘Aragon’’), each hold less than a 5% outstanding 

units of BOX Holdings. See Amendment No. 2, 

supra note 11, at 9. The Exchange states that the 

current equity ownership and voting power of the 

direct owners of BOX Holdings are reflected in 

Securities Exchange Act Release No. 93778. See id. 

at 9 n.26. In Securities Exchange Act Release No. 

93778, the Commission approved a proposed rule 

change related to changes in ownership of the 

Exchange and BOX Holdings. See Securities 

Exchange Act Release No. 93778 (December 14, 

2021), 86 FR 72021 (December 20, 2021) (SR–BOX– 

2021–19). The Exchange also states that Will Easley 

owns Aragon and is a Director of BOX Holdings. 

See Amendment No. 2, supra note 11, at 8 n.20. 

111Specifically, Exhibit 5B of the proposal 

contains instruments of accession that will be 

executed by all Controlling Persons prior, and as a 

condition, to commencement of operations of BSTX 

as a facility of the Exchange. Following 

commencement of operations as a facility of the 

Exchange, any new Controlling Person will be 

required to execute an amendment in substantially 

the same form, and the Controlling Person will 

agree to become a party to the LLC Agreement and 

abide by all of its provisions, to the same extent and 

as if they were Members. See Amendment No. 2, 

supra note 11, at 51. 

112See id. at 13–14. As discussed above, BOX 

Digital and tZERO will each hold a 40% Economic 

Percentage Interest in BSTX. See supra notes 28– 

30 and accompanying text (discussing upstream 

ownership of BSTX). The Exchange states that 

Overstock owns 43% of tZERO directly and 99% of 

Medici, which owns 44% of tZERO, and that as a 

result, Overstock owns, directly or indirectly, more 

than 80% of tZERO, which will own 40% of the 

Economic Units and 20% of the Voting Units of 

BSTX. The Exchange states that as such, Overstock, 

Medici, and Medici GP will be required to become 

parties to BSTX’s LLC Agreement by executing an 

instrument of accession and abide by its provisions, 

to the same extent and as if they were Members, 

because they are Controlling Persons of BSTX. In 

addition to the direct owners of tZERO identified 

above, the Exchange states that each of the 

following own less than 3% of the outstanding 

shares of tZERO: Todd Tobacco, Newer Ventures 

LLC, Schalk Steyn, Raj Karkara, Alec Wilkins, Dohi 

Ang, Brian Capuano, Trent Larson, Eric Fish, 

Kristen Anne Bagley, Kirstie Dougherty, 

SpeedRoute Technologies Inc., Tommy McSherry, 

Rob Collucci, John Gilchrist, John Paul DeVito, 

owner of BSTX will exceed the Voting 

Ownership Limit. Specifically, with 

certain exceptions,100 each Member 

would hold the number of Voting Units 

equal to the number of Economic Units 

held by such Member.101 However, if 

any Member holds an Economic 

Percentage Interest in excess of the 

applicable Voting Ownership Limit, 

then the excess Voting Units held by 

such Member would be automatically 

reduced and redistributed among the 

remaining Members pro rata according 

to each such Member’s respective 

Economic Percentage Interest (‘‘Voting 

Units Adjustment’’), so that the Member 

does not exceed the applicable limit.102

The LLC Agreement also contains 

other provisions that are designed to 

further safeguard the ownership and 

voting limitations described above, or 

are otherwise related to direct and 

indirect changes in control. Specifically, 

the LLC Agreement would require a 

Member to provide BSTX with written 

notice 14 days prior, and BSTX to 

provide the Exchange and the 

Commission with written notice ten 

days prior, to the closing date of any 

ownership transaction that would result 

in the Member’s Economic Percentage 

Interest or a Voting Percentage Interest 

in BSTX, either alone or together with 

its Related Persons, meeting or crossing 

the 5%, 10%, or 15% thresholds.103 In 

addition, any Person that, either alone 

or together with its Related Persons, 

owns, directly or indirectly, of record or 

beneficially, 5% or more of Voting 

Percentage Interest or Economic 

Percentage Interest would, immediately 

upon acquiring knowledge of its 

ownership, be required to give BSTX 

written notice of that ownership.104 In 

addition to these notice requirements, 

the LLC Agreement would require that 

any transfer or other ownership 

transaction that results in the 

acquisition and holding by any Person, 

alone or together with its Related 

Persons, of an aggregate Voting 

Percentage Interest or Economic 

Percentage Interest level which meets or 

crosses the threshold level of 20% or 

any successive 5 percentage interest 

would be subject to the rule filing 

process of Section 19 of the Exchange 

Act.105 Further, any ownership 

transaction that would be in 

contravention of these notification and 

filing provisions, or otherwise violate 

Article 7 of the LLC Agreement, would 

be void.106

Moreover, the LLC Agreement would 

provide that a Controlling Person, 

unless it does not directly or indirectly 

hold any interest in a Member, shall be 

required to execute an amendment to 

the BSTX LLC Agreement upon 

establishing a Controlling Interest in a 

Member that, alone or together with its 

Related Persons, holds an Economic 

Percentage Interest or Voting Percentage 

Interest in BSTX equal to or greater than 

20%, and abide by the provisions of the 

BSTX LLC Agreement to the same 

extent as if they were a Member.107 The 

LLC Agreement would further provide 

that the rights and privileges, including 

all voting rights, of the Member in 

whom a Controlling Interest is held 

would be suspended until the 

amendment has become effective 

pursuant to Section 19 of the Exchange 

Act or the Controlling Person no longer 

holds, directly or indirectly, a 

Controlling Interest in the Member.108

According to the Exchange, as 

Controlling Persons of BSTX, Overstock, 

Medici, Medici GP,109 BOX Holdings,110

MX US 2, MX US 1, Bourse de 

Montreal, and TMX would be required 

to become parties to the BSTX LLC 

Agreement prior to commencement of 

operations of BSTX as a facility of the 

Exchange, by executing an instrument of 

accession,111 and abide by its provisions 

to the same extent and as if they were 

Members.112 The LLC Agreement also 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 10409 

Jimmy Ambrose, Jason Heckler, Max Melmed, Alex 

Vlastakis, Olalekan Abebefe, Samson Arubuola, 

Ryan Mitchell, Zachary Wilezol, Anthony Bove, 

Ralph Daiuto, Rob Christiansen, Amanda Gervase, 

Derek Tobacco, Steve Bailey, and Dinosaur 

Financial. The Exchange also states that BOX 

Holdings, MX US 2, MX US 1, Bourse de Montreal, 

and TMX will each be required to become parties 

to the LLC Agreement by executing an instrument 

of accession and abide by its provisions to the same 

extent and as if they were Members because they 

are Controlling Persons of BSTX. The Exchange 

states that TMX owns 100% of Bourse de Montreal, 

which owns 100% of MX US 1, which owns 100% 

of MX US 2, which owns more than 40% of BOX 

Holdings, and that BOX Holdings owns 98% of 

BOX Digital, which will own 40% of the Economic 

Units and 20% of the Voting Units of BSTX. See 

Amendment No. 2, supra note 11, at 11–14. The 

Exchange represents that there are no other 

‘‘Controlling Persons’’ that would be required to 

become parties to the LLC Agreement prior to the 

commencement of operations of BSTX. See id. at 

14. 

113See BSTX LLC Agreement, Section 7.4(h)(iii). 

The Exchange states that the amendment will be in 

substantially the form of the instruments of 

accession filed by the Exchange as Exhibit 5B to the 

proposal and subject to the rule filing process 

pursuant to Section 19 of the Exchange Act. See 

Amendment No. 2, supra note 11, at 51. 

114The Exchange states that it will implement 

policies and procedures, including annual 

attestations by Members, to ensure potential direct 

and indirect owners of BSTX are required to 

provide any required notice to BSTX or to take 

other actions, such as executing an amendment to 

the LLC Agreement upon establishing a Controlling 

Interest, if applicable, and to monitor compliance 

with the proposed provisions related to changes in 

ownership and control. See Amendment No. 2, 

supra note 11, at 52. 

115See, e.g., MEMX Order, supra note 87, 85 FR 

at 27455; LTSE Order, supra note 87, 84 FR at 

21845; MIAX PEARL Order, supra note 87, 81 FR 

at 92906; and Securities Exchange Act Release No. 

59281 (January 22, 2009), 74 FR 5014, 5018 (January 

28, 2009) (SR–NYSE–2008–120) (order approving a 

proposed rule change relating to the Limited 

Liability Company Agreement of the New York 

Block Exchange, a facility of NYSE) (‘‘NYBX 

Order’’). 

116See, e.g., MEMX Order, supra note 87, 85 FR 

at 27455; ISE Stock Order, supra note 54, 71 FR at 

53735. 

117 15 U.S.C. 78f(b)(1). 

118See OIP, supra note 8, 86 FR at 53366 n.13 and 

accompanying text (citing BOX–2020–04 Approval, 

supra note 34); see also Bylaws of BOX Exchange 

LLC (‘‘Exchange Bylaws’’). 

119See OIP, supra note 8, 86 FR at 53366; 

Amendment No. 2, supra note 11, at 14. 

120See supra note 34. 

121See, e.g., Securities Exchange Act Release No. 

66871 (April 27, 2012), 86 FR 26323, 26325 (May 

3, 2012) (‘‘BOX Form 1 Approval’’); BOX–2020–04 

Approval, supra note 34, 85 FR at 32085–86. 

122 15 U.S.C. 78(b)(3). 

provides that any amendment to the 

LLC Agreement caused by the addition 

of a Controlling Person is subject to the 

rule filing requirements of Section 19(b) 

of the Exchange Act.113 Thus, the 

addition of any future Controlling 

Person as a party to the LLC Agreement 

would be subject to the rule filing 

requirements of Section 19(b) of the 

Exchange Act.114

A proposed rule change submitted in 

any of the circumstances noted above 

would afford the Commission an 

opportunity to evaluate whether a 

change to the LLC Agreement, or a 

change in the ownership of BSTX, 

would be consistent with the Exchange 

Act, including whether the Commission 

and the Exchange would retain 

sufficient regulatory jurisdiction over 

the proposed indirect controlling party. 

The LLC Agreement would apply to any 

ultimate parent of BSTX, no matter how 

many levels of ownership are involved, 

provided that a Controlling Interest 

meeting the required threshold exists at 

each such level. 

Although BSTX is not independently 

responsible for regulation, its activities 

with respect to the operation of BSTX 

must be consistent with, and not 

interfere with, the self-regulatory 

obligations of the Exchange. The 

proposed requirements in the LLC 

Agreement applicable to direct and 

indirect changes in control of BSTX 

described above, including the 

Economic Ownership Limit and Voting 

Ownership Limit imposed on Economic 

and Voting Unit transactions, as well as 

the Economic Ownership Limit and 

BSTX Participant Voting Limit imposed 

on owners of BSTX who are also BSTX 

Participants, are appropriate to help 

ensure that the Exchange is able to 

effectively carry out its self-regulatory 

responsibilities, including with respect 

to BSTX, and are consistent with the 

requirements of the Exchange Act. 

These limitations are also designed to 

help prevent any owner of BSTX from 

exercising undue control over the 

operation of the Exchange and to help 

assure that the Exchange is able to 

effectively carry out its regulatory 

obligations under the Exchange Act. In 

addition, these limitations are designed 

to address the conflicts of interests that 

might result from a member of a 

national securities exchange owning 

interests in a facility of the exchange. As 

the Commission has stated in the past, 

a member’s interest in an exchange or a 

facility thereof could become so large as 

to cast doubts on whether the exchange 

may fairly and objectively exercise its 

self-regulatory responsibilities with 

respect to such member.115 A member 

that is a controlling shareholder of an 

exchange or its facility could seek to 

exercise that controlling influence by 

directing the exchange to refrain from, 

or the exchange may hesitate to, 

diligently monitor and conduct 

surveillance of the member’s conduct or 

diligently enforce the exchange’s rules 

and the federal securities laws with 

respect to conduct by the member that 

violates such provisions.116 As such, 

these requirements are expected to 

minimize the potential that a person or 

entity can improperly interfere with or 

restrict the ability of the Exchange to 

effectively carry out its regulatory 

oversight responsibilities under the 

Exchange Act. 

BSTX’s proposed governance 

provisions are consistent with the 

Exchange Act, including Section 6(b)(1), 

which requires, in part, an exchange to 

be so organized and have the capacity 

to carry out the purposes of the 

Exchange Act.117 In particular, these 

requirements are designed to minimize 

the potential that a person could 

improperly interfere with or restrict the 

ability of the Commission or the 

Exchange to effectively carry out their 

regulatory oversight responsibilities 

under the Exchange Act. 

D. Fair Representation of BSTX 

Participants 

The Exchange’s governance 

provisions are designed to provide fair 

representation of members in the 

selection of directors and the 

administration of the Exchange and are 

consistent with the Exchange Act. The 

Exchange states that it previously 

proposed structural changes to the 

Exchange to accommodate regulation of 

BSTX, in addition to the Exchange’s 

existing facility (i.e., BOX Options), 

which the Commission approved,118

and that, pursuant to the proposed rule 

change the Commission is approving 

today, with the addition of BSTX as a 

facility of the Exchange, BSTX 

Participants would have the same 

representation, rights, and 

responsibilities as the Exchange’s other 

Exchange Facility Participants.119

The Exchange currently operates one 

facility, BOX Options,120 and there are 

provisions in the Exchange LLC 

Agreement and the Exchange Bylaws 

(together the ‘‘Exchange Governing 

Documents’’) that provide for the fair 

representation of Exchange members in 

the selection of directors and the 

administration of the Exchange that the 

Commission has previously found to be 

consistent with the Exchange Act, and 

in particular Section 6(b)(3) of the 

Exchange Act,121 which, among other 

things, requires that the rules of an 

exchange ensure fair representation of 

its members in the selection of its 

directors and administration of its 

affairs.122 Previously, because the 

Exchange regulated only one facility, 

the provisions in the Exchange 

Governing Documents providing for the 

fair representation of Exchange 

members were specifically applicable to 

BOX Options and to BOX Options 


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123See generally BOX Form 1 Approval, supra 

note 121, 77 FR at 26325; BOX–2020–04 Approval, 

supra note 34. A ‘‘BOX Options Participant’’ is an 

Exchange Facility Participant that is registered with 

the Exchange pursuant to the Exchange Rules for 

purposes of participating in trading on the BOX 

Options Market. See BOX Holdings LLC Agreement, 

Section 1.1; Amendment No. 2, supra note 11, at 

10, n.29. 

124See BOX–2020–04 Approval, supra note 34; 

see also supra note 118 and accompanying text. 

125See OIP, supra note 8, 86 FR at 53366. 

126See BOX–2020–04 Approval, supra note 34, 

85 FR at 32085. 

127See id. at 32086. 

128See id. at 32085–86. 

129 ‘‘Participant Director’’ means an Exchange 

Director who (i) has no material business 

relationship with the Exchange or any Affiliate of 

the Exchange, or any Exchange Facility Participant 

or any Affiliate of any Exchange Facility Participant 

and (ii) is not associated with any broker or dealer 

as required pursuant to Section 6(b)(3) of the 

Exchange Act, as amended; provided, however, that 

an individual who otherwise qualifies as a Public 

Director shall not be disqualified from serving in 

such capacity solely because such individual is a 

Director of the Exchange and/or the Chairman or 

Vice Chairman of the Exchange. See Exchange 

Bylaws, Section 1.01(w). 

130See id. Section 4.02. 

131See id. Section 4.06. 

132 15 U.S.C. 78(b)(3). Among other things, these 

provisions provide that the Nominating Committee 

of the Exchange shall be composed of at least five 

members, and that at least twenty percent (20%) of 

the members of the Nominating Committee shall be 

Participant Representatives and at least one 

Participant Representative shall be selected from 

among the Exchange Facility Participants of each 

then existing Exchange Facility. See Exchange 

Bylaws, Section 4.06(a). ‘‘Participant 

Representative’’ means an officer, director or 

employee of an Exchange Facility Participant. See 

id. Section 1.01(v). The Exchange states that, under 

the Exchange Bylaws, as soon as practicable after 

the commencement of operations of BSTX as a new 

facility of the Exchange, a Participant Director, 

Participant Representative, Facility Director 

(defined further below), and Facility Representative 

(defined further below) will be appointed by the 

Exchange Board from among the eligible 

individuals with respect to the BSTX facility and 

that such individuals shall serve in their respective 

capacities until the first annual meeting of the 

Exchange members following appointment, when 

the regular selection processes shall govern. See 

OIP, supra note 8, 86 FR at 53380 (citing Exchange 

Bylaws, Section 4.02). As Exchange Facility 

Participants, and as is the case with respect to the 

Exchange’s existing facility, BOX Options, BSTX 

Participants will also be entitled to representation 

on certain other committees of the Exchange, such 

as the Exchange’s Hearing Committee. For example, 

the Exchange’s Hearing Committee or any panel 

thereof shall include at least one Participant 

Representative and shall have exclusive jurisdiction 

to conduct hearings on disciplinary proceedings 

brought by the Exchange against any Exchange 

Facility Participant, or any Person employed by or 

associated with any Exchange Facility Participant 

for any alleged violation of the Exchange Act, the 

rules and regulations thereunder, the Exchange 

Bylaws or Exchange Rules, or the interpretations 

and stated policies of the Exchange Board. See 

Exchange Bylaws, Section 6.08(a); see also OIP, 

supra note 8, 86 FR at 53380 (stating that the 

Exchange’s Hearing Committee includes Exchange 

Facility Participants, which could include one or 

more BSTX Participants). The Exchange’s Executive 

Committee, if appointed and with certain 

exceptions, may exercise all the powers and 

authority of the Exchange Board in the management 

of the business and affairs of the Exchange. 

Pursuant to the Exchange Bylaws, at least 20% of 

the members of the Executive Committee shall be 

Participant Directors and at least one Participant 

Director shall be selected from among the Exchange 

Facility Participants of each then existing Exchange 

Facility. See Exchange Bylaws, Section 6.04; see 

also Amendment No. 2, supra note 11, at 63–64. 

133See BOX Form 1 Approval, supra note 121, 86 

FR at 26325. 

134See supra note 128. 

135 ‘‘Facility Director’’ means a Director who is a 

director or senior executive officer of an Exchange 

Facility. See Exchange Bylaws, Section 1.01(j). 

136A number of directors equal to the number of 

Exchange Facilities shall be Facility Directors and 

one such Facility Director shall be selected by each 

Exchange Facility. See id. Section 4.02. 

137 ‘‘Facility Representative’’ means a member of 

the Nominating Committee who is a director or 

senior executive officer of an Exchange Facility. See 

id. Section 1.01(j). 

138One member of the Nominating Committee 

with respect to each Exchange Facility shall be the 

Facility Representative selected by such Exchange 

Facility. See id. Section 4.06(a). 

139See OIP, supra note 8, 86 FR at 53380. 

140See BOX–2020–04 Approval, supra note 34, 

85 FR at 32086. 

Participants.123 The Exchange 

subsequently amended those provisions 

to accommodate the Exchange’s 

regulation of multiple facilities.124 The 

Exchange states that, with the Multiple 

Facilities Filing, it introduced structural 

changes to the Exchange to 

accommodate regulation of BSTX in 

addition to the Exchange’s existing 

facility.125 For example and among 

other changes, with the Multiple 

Facilities Filing, the Exchange replaced 

certain references in the Exchange 

Governing Documents to BOX Options 

with the term ‘‘Exchange Facility,’’ and 

to BOX Options Participant with the 

term ‘‘Exchange Facility 

Participant.’’ 126 The Commission found 

the provisions in the Exchange 

Governing Documents consistent with 

the Exchange Act as they applied to the 

Exchange’s existing facility—BOX 

Options.127 In particular, the 

Commission found the Exchange 

Governing Document provisions to be 

consistent with Sections 6(b)(1), (3), and 

(5) of the Exchange Act.128

The requirements in the Exchange 

Governing Documents as they would 

now also apply to the representation of 

BSTX as an ‘‘Exchange Facility,’’ and to 

BSTX Participants as ‘‘Exchange Facility 

Participants,’’ are consistent with the 

Exchange Act. For example, the 

requirement in the Exchange Bylaws 

that at least 20% of the directors of the 

Exchange shall be ‘‘Participant 

Directors,’’ 129 and that at least one 

Participant Director shall be selected 

from among the Exchange Facility 

Participants of each existing Exchange 

Facility,130 and the means by which 

they will be chosen,131 provide for the 

fair representation of BSTX Participants 

in the selection of directors and the 

administration of the Exchange, 

consistent with the Exchange Act, and 

in particular with Section 6(b)(3) of the 

Exchange Act.132 As the Commission 

has previously stated, these 

requirements help to ensure that 

members of the Exchange have a voice 

in the use of self-regulatory authority, 

and that the exchange is administered in 

a way that is equitable to all those who 

trade on its markets or through its 

facilities.133

As discussed above, the Commission 

also found the Exchange’s amendments 

to the Exchange Governing Documents 

to provide for direct representation of 

the Exchange’s facility (BOX Options) 

on the Exchange Board and its 

Nominating Committee to be consistent 

with the Exchange Act.134 The Exchange 

believes that the provisions in the 

Exchange Bylaws that a Facility 

Director 135 representing BSTX would 

serve on the Exchange Board 136 and 

that a Facility Representative 137 would 

serve on the Exchange Nominating 

Committee 138 provide additional 

protection for both BSTX and BSTX 

Participants, and help to ensure that 

BSTX and BSTX Participants have a 

voice in the use of self-regulatory 

authority and that an exchange is 

administered in a way that is equitable 

to all those who trade on its market or 

through its facilities.139 The 

Commission previously stated, in the 

context of the Exchange’s existing 

facility, that changes to these provisions 

provide mechanisms whereby a facility 

of the Exchange would have direct 

representation on the Exchange Board 

and are appropriate and consistent with 

the Exchange Act.140 The Commission 

finds that these provisions would 

similarly provide a mechanism whereby 

BSTX as a facility of the Exchange, like 

BOX Options, would have 

representation on the Exchange Board 

and are appropriate and consistent with 

the Exchange Act. 

IV. Solicitation of Comments on 

Amendment No. 2 to the Proposed Rule 

Change 

Interested persons are invited to 

submit written data, views, and 

arguments concerning whether 

Amendment No. 2 is consistent with the 

Exchange 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 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 37 / Thursday, February 24, 2022 / Notices 10411 

141See Notice, supra note 3; OIP, supra note 8. 

142The Commission notes that this configuration 

is similar to other rule filings the Commission has 

approved. See, e.g., NYBX Order, supra note 115; 

ISE Stock Order, supra note 54. 

143 15 U.S.C. 78f(b)(2). 

144 15 U.S.C. 78s(b)(2). 

145 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BOX–2021–14 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–BOX–2021–14. 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–BOX–2021–14, and should 

be submitted on or before March 17, 

2022. 

V. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment No. 2 

The Commission finds good cause to 

approve the proposed rule change, as 

modified by Amendment No. 2, prior to 

the thirtieth day after the date of 

publication of notice of the filing of 

Amendment No. 2 in the Federal 

Register. The Commission notes that the 

original proposal and the proposal as 

modified by Amendment No. 1 were 

published for comment in the Federal 

Register.141

In Amendment No. 2, the Exchange 

amended the proposal to: (1) Introduce 

certain defined terms, including 

‘‘Shortfall Amount,’’ ‘‘Statutory 

Disqualification,’’ and ‘‘Tax Matters 

Representative,’’ (2) convert existing 

class A and class B units of BSTX to 

Economic Units and Voting Units of 

BSTX, (3) remove the requirement that 

the BSTX Board will appoint an Audit 

Committee and a Compensation 

Committee,142 (4) specify the 

individuals and entities that own 

economic and voting interests in BSTX 

and at what levels, including that BOX 

Digital and tZERO’s economic interests 

have been reduced to 40% each and that 

BOX Digital and tZERO’s voting 

interests have been reduced to 20% 

each, (5) revise Exhibit 5B to propose 

the form of Instrument of Accession that 

each identified Controlling Person 

would sign, and (6) make other 

technical, clarifying and conforming 

changes. These changes help to clarify 

the proposal by providing additional 

specificity regarding how and by whom 

ownership and voting interests in BSTX 

are held, the structure and operation of 

the BSTX Board, and which persons 

will be required to comply with the LLC 

Agreement. 

In addition, the Exchange made 

several changes to bring the proposed 

rules into closer alignment with the 

rules establishing the governance 

structure of other national securities 

exchanges, including by: (1) Prohibiting 

events that would result in any Person, 

together with its Related Persons, 

holding an Economic Percentage 

Interest in BSTX greater than 40% or a 

Voting Percentage Interest in BSTX 

greater than 20% without both 

Exchange approval and an effective rule 

filed pursuant to Section 19 of the 

Exchange Act, (2) prohibiting BSTX 

Participants from holding either an 

Economic Percentage Interest or Voting 

Percentage Interest in BSTX greater than 

20%, (3) providing that no person 

subject to a Statutory Disqualification 

will serve as a Director or Officer of 

BSTX, and (4) representing that the 

Exchange will have adequate funding 

for the Exchange’s operations with 

respect to BSTX. These changes help 

make these aspects of the proposal 

substantially similar to the existing 

rules of national securities exchanges. In 

addition, the Exchange modified the 

structure and composition of the BSTX 

Board by limiting BOX Digital and 

tZERO to one Member Director each, 

providing the Regulatory Director with 

voting rights, adding the BSTX CEO as 

a Director, and providing that the 

Independent Director will serve as 

chairman of the BSTX Board. These 

changes enhance the ability of the 

Exchange to carry out its regulatory 

oversight of BSTX by limiting the ability 

of Members of BSTX to control the 

BSTX Board. 

For these reasons, the changes and 

additional information in Amendment 

No. 2 assist the Commission in finding 

that the proposal is consistent with the 

Exchange Act. Accordingly, the 

Commission finds good cause, pursuant 

to Section 19(b)(2) of the Exchange 

Act,143 to approve the proposed rule 

change, as modified by Amendment No. 

2, on an accelerated basis. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act,144

that the proposed rule change (SR– 

BOX–2021–14), as modified by 

Amendment No. 2 thereto, be, and it 

hereby is, approved on an accelerated 

basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.145

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03873 Filed 2–23–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94271; File No. SR–FICC– 

2022–001] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Amend 

the Clearing Agency Model Risk 

Management Framework 

February 17, 2022. 

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 

11, 2022, Fixed Income Clearing 

Corporation (‘‘FICC’’) 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 clearing agency. FICC filed the 

proposed rule change pursuant to 


jspears on DSK121TN23PROD with NOTICES1