35034 Federal Register / Vol. 87, No. 110 / Wednesday, June 8, 2022 / Notices 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 In 2013, the Commission approved the New 

York Stock Exchange LLC’s (‘‘NYSE’’) adoption of 

FINRA’s disciplinary rules. See Securities Exchange 

Act Release No. 69045 (March 5, 2013), 78 FR 

15394 (March 11, 2013) (SR–NYSE–2013–02). In 

2016, NYSE American LLC (‘‘NYSE American’’) 

adopted its Rule 8000 and Rule 9000 Series based 

on the NYSE and FINRA Rule 8000 and Rule 9000 

Series. See Securities Exchange Act Release Nos. 

77241 (February 26, 2016), 81 FR 11311 (March 3, 

2016) (SR–NYSEMKT–2016–30). In 2018, the 

Commission approved NYSE National, Inc.’s 

(‘‘NYSE National’’) adoption of the NYSE National 

Rule 10.8000 and Rule 10.9000 Series based on the 

NYSE American and FINRA Rule 8000 and Rule 

9000 Series. See Securities Exchange Act Release 

No. 83289 (May 17, 2018), 83 FR 23968 (May 23, 

2018) (SR–NYSENat–2018–02). In 2019, NYSE 

Arca, Inc. (‘‘NYSE Arca’’) adopted the NYSE Arca 

Rule 10.8000 and 10.9000 Series based on the NYSE 

American Rule 8000 and Rule 9000 Series. See 

Securities Exchange Act Release No. 85639 (April 

12, 2019), 84 FR 16346 (April 18, 2019) (SR– 

NYSEArca–2019–15) (‘‘NYSE Arca Notice’’). 

5There are currently 66 Participants on the 

Exchange. The term ‘‘Participant’’ is defined in 

Article 1, Rule 1(s) to mean, among other things, 

any Participant Firm that holds a valid Trading 

Permit and that a Participant shall be considered a 

‘‘member’’ of the Exchange for purposes of the Act. 

If a Participant is not a natural person, the 

Participant may also be referred to as a Participant 

Firm, but unless the context requires otherwise, the 

term Participant shall refer to an individual 

Participant and/or a Participant Firm. For the 

avoidance of doubt, this rule filing and the 

proposed disciplinary rules will use the phrase 

Participant and/or Participant Firm. 

6 ‘‘Associated Person’’ has the meaning set forth 

in Section 3(a)(21) of the Exchange Act. See Article 

1, Rule 1(d). The term is sometimes capitalized in 

the Exchange’s rules and will be capitalized herein. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95020; File No. SR– 

NYSECHX–2022–10] 

Self-Regulatory Organizations; NYSE 

Chicago, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Adopt Investigation, 

Disciplinary, Sanction, and Other 

Procedural Rules Modeled on the 

Rules of the Exchange’s Affiliates 

June 1, 2022. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on May 20, 

2022, the NYSE Chicago, Inc. (‘‘NYSE 

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

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt 

investigation, disciplinary, sanction, 

and other procedural rules modeled on 

the rules of its affiliates, and to make 

certain conforming and technical 

changes. The proposed rule change is 

available on the Exchange’s website at 

www.nyse.com, at the principal office of 

the Exchange, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to adopt 

investigation, disciplinary, sanction, 

and other procedural rules modeled on 

the rules of its affiliates, and to make 

certain conforming and technical 

changes. 

Background and General Description of 

Proposed Rule Change 

Beginning in 2013, each of the 

Exchange’s affiliates have adopted rules 

relating to investigation, discipline, 

sanction, and other procedural rules 

based on the rules of the Financial 

Industry Regulatory Authority 

(‘‘FINRA’’).4 To facilitate rule 

harmonization among self-regulatory 

organizations (‘‘SROs’’), the Exchange 

proposes the NYSE Chicago Rule 

10.8000 and 10.9000 Series based on the 

text of the NYSE Arca Rule 10.8000 and 

Rule 10.9000 Series, with certain 

changes, as described below. 

The Exchange notes that all but five 

Participants 5 are already subject to 

similar rules by virtue of their 

membership in the NYSE, NYSE 

American, NYSE National, NYSE Arca, 

FINRA and/or the NASDAQ Stock 

Market LLC (‘‘NASDAQ’’), whose 

disciplinary rules are similar to FINRA’s 

rules. The overwhelming majority of 

Exchange’s Participant and Participant 

Firms are thus already subject to rules 

similar to the proposed rules described 

herein. 

Set forth below are (1) a description 

of the Exchange’s current disciplinary 

rules (current Article 12, Rules 1–10, 

and Article 13); (2) a description of the 

proposed rule change and transition; (3) 

a more detailed description of the 

proposed rules with a comparison to the 

current rules; (4) a description of 

technical and conforming amendments; 

and (5) a description of current rules 

that will not be carried over into the 

proposed rule set and the reason(s) 

therefor. 

Description of Current NYSE Chicago 

Article 12 

The Exchange’s current rules 

governing disciplinary proceedings and 

appeals are set forth in Article 12 

(Disciplinary Matters and Trial 

Proceedings Investigation and Charges) 

in Rules 1 through 10. 

Article 12, Rule 1 (Investigation and 

Charges) 

Article 12, Rule 1 concerns 

investigations and the commencement 

of disciplinary actions by the Exchange. 

Article 12, Rule 1(a) governs 

investigations and the written report of 

investigative findings. Under Article 12, 

Rule 1(a), the staff of the Market 

Regulation Department has the authority 

to conduct investigations of any 

possible violation of any Exchange rule 

or any provision of the federal securities 

laws (or any rule thereunder) by any 

Participant, associated person 6 thereof 

or any other person or organization 

subject to the jurisdiction of the 

Exchange. Except in emergency 

situations, Article 12, Rule 1(a) requires 

staff to prepare a written report of such 

investigation whenever seeking to 

institute a proceeding pursuant to 

Article 12, Rule 1(b)(1) to be presented 

to the Chief Regulatory Officer (‘‘CRO’’). 

Article 12, Rule 1(b)(1)–(2) govern 

written charges. Under Article 12, Rule 

1(b)(1), if in the CRO’s judgment it 

appears from the written investigative 

report that any Participant, Associated 

Person thereof or any other person or 

organization subject to the Exchange’s 

jurisdiction (the ‘‘Respondent’’) is 

violating or has violated any provision 

of the Bylaws, Exchange rules or of the 

federal securities laws or the regulations 

thereunder, the CRO shall direct staff to 

prepare and present written charges 


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against the Respondent, except as 

otherwise provided in the Exchange’s 

rules. The written charges must identify 

each Respondent and specifically state 

each Exchange rule or provision of the 

federal securities laws (or any rule 

thereunder) alleged to have been 

violated. Charges must be served upon 

a Respondent and filed with the 

Secretary of the Exchange (the 

‘‘Secretary’’). 

Article 12, Rule 1(b)(2) provides that, 

in addition to the process set out in 

paragraph (1) above, the Board of 

Directors (the ‘‘Board’’) and the 

Executive Committee each have the 

authority to direct the CRO to authorize 

the institution of a disciplinary 

proceeding when, on information and 

belief, either the Board or the 

Committee is of the opinion that any 

Participant, Associated Person thereof 

or any other person or organization 

subject to the jurisdiction of the 

Exchange is violating or has violated 

any provision of the Bylaws or rules of 

the Exchange or of the federal securities 

laws or the regulations thereunder. 

Article 12, Rule 1(c) governs service 

of charges, orders, notices or any 

instrument on Respondents and 

provides that these may be served upon 

the Respondent either personally or by 

leaving same at his or its place of 

business during office hours or by 

deposit in the United States post office, 

postage prepaid via registered or 

certified mail with return receipt 

requested, addressed to the Respondent 

at the last business address given by the 

Respondent to the Exchange. 

The settlement procedure is set forth 

in Article 12, Rule 1(d). A Respondent 

can settle a proceeding instituted 

pursuant to Article 12, Rule 1, at any 

time by entering into a settlement 

agreement with the Exchange without 

admitting or denying the charges, except 

as to jurisdiction, which must be 

admitted. Under the rule, settlement 

agreements must include a waiver by 

the Respondent of all rights of appeal to 

the Executive Committee, the Board, 

Securities and Exchange Commission 

(the ‘‘Commission’’), and United States 

Court of Appeals or to otherwise 

challenge or contest the validity of the 

decision if the offer of settlement is 

accepted. The rule also requires 

settlement agreements to contain a 

proposed penalty to be imposed which 

must be reasonable under the 

circumstances and consistent with the 

seriousness of the alleged violations. 

All settlement agreements require 

CRO approval. Where the CRO rejects 

an offer of settlement, the offer of 

settlement is deemed withdrawn and 

will not be given consideration in the 

determination of the issues involved in 

the disciplinary proceeding. Moreover, 

the Respondent will be granted an 

additional 10-day period from the time 

of receipt of the non-acceptance of the 

offer to file any response required under 

Article 12, Rule 5(b), described below. 

Supplementary Material .01 to Article 

12, Rule 1 provides that prior to making 

a report pursuant to paragraph (a) of 

Rule 1, the staff may notify the person(s) 

who is (are) the subject of the report of 

the general nature of the allegations and 

of the specific provisions of the Act, 

rules and regulations promulgated 

thereunder or constitutional provisions, 

by-laws or rules of the Exchange or any 

interpretation thereof or any resolution 

of the Board regulating the conduct of 

business on the Exchange, that appear to 

have been violated. Under the rule, the 

subject(s) may, within the time frame set 

forth in the notice from the staff, submit 

a written statement to the Exchange 

setting forth their interests and position 

in regard to the subject matter of the 

investigation. To assist a subject in 

preparing such a written statement he or 

she shall, upon request, have access to 

any documents and other materials in 

the investigative file of the Exchange 

that were furnished by him or her or his 

or her agents to the Exchange. 

Article 12, Rule 2 (Summary Procedure) 

Article 12, Rule 2 sets forth the 

Exchange’s summary procedure rules. 

Under Article 12, Rule 2(a), if in the 

CRO’s judgment it appears from the 

investigation and report provided for in 

Article 12, Rule 1(a) that the 

Respondent committed a minor 

infraction of the Bylaws or Rules of the 

Exchange, the CRO may summarily 

censure the Respondent or impose a fine 

not in excess of $500 or both. 

Any fine imposed pursuant to 

subsection (a) of Article 12, Rule 2 and 

not contested shall not be publicly 

reported, except as may be required by 

Rule 19d–1 under the Act, and as may 

be required by any other regulatory 

authority. 

Any contested fine will be publicly 

reported to the same extent that 

Exchange disciplinary proceedings will 

be publicly reported. In any action taken 

by the Exchange pursuant to Article 12, 

Rule 2, the person against whom a fine 

is imposed shall be served (as provided 

in Article 12, Rule 1(c)) with a written 

statement signed by the CRO or his 

designee, setting forth the 

(1) rule(s) or policy(ies) alleged to 

have been violated; 

(2) act or omission constituting each 

such violation; 

(3) fine imposed for each such 

violation; 

(4) date on which such action is 

taken; and 

(5) date on which such determination 

becomes final and such fine becomes 

due and payable to the Exchange, or on 

which such action must be contested as 

provided below. 

Any person against whom a minor 

fine is imposed under the Rule may 

contest the Exchange’s determination by 

filing with the Secretary not later than 

30 days after the service of the Notice 

of Fines, a written response meeting the 

requirements of an Answer as provided 

in Article 12, Rule 4(b) at which point 

the matter shall become a ‘‘Disciplinary 

Proceeding’’ subject to the provisions of 

Article 12 applicable to disciplinary 

proceedings. 

Article 12, Rule 2(b)(1) governs 

collateral proceedings involving a 

Participant, partner, officer, registered 

employee or Associated Person that is 

suspended or expelled from any other 

securities exchange or any national 

securities association, or is suspended 

or barred from being associated with 

any member or member organization of 

such exchange or association, or is 

suspended or barred by any 

governmental securities agency from 

dealing in securities or being associated 

with any broker or dealer in securities. 

In those circumstances, the CRO may 

suspend or expel such person or 

organization as a Participant, partner, 

officer, registered employee or 

Associated Person. Pursuant to the Rule, 

no such suspension by the CRO may 

commence before or expire after the 

suspension imposed by such other 

exchange, association or agency, and no 

such expulsion may be imposed by the 

CRO unless such person or organization 

has been expelled or barred by such 

other exchange, association or agency. 

Finally, Article 12, Rule 2(b) does not 

preclude any proceeding against any 

Participant, partner, officer, registered 

employee or Associated Person under 

any other Rule of the Exchange. 

Under Article 12, Rule 2(b)(2), the 

procedure required by Article 12, Rule 

1 is inapplicable to contested 

proceedings under Article 12, Rule 2(b). 

A Respondent in a collateral 

proceeding, however, must be given not 

less than ten days’ notice in writing that 

the Chief Executive Officer (‘‘CEO’’) will 

appoint a Hearing Officer pursuant to 

the provisions of Article 12, Rule 5 to 

conduct a hearing to determine whether 

or not to suspend or expel the 

Respondent as provided in Article 12, 

Rule 2(b). 

At such hearing, the respondent 

Participant or any respondent partner, 

officer, registered employee or 

associated person of a Participant Firm 


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7For purposes of Article 12, Rule 4(c), the term 

‘‘documents’’ means a writing, drawing, graph, 

report, table, chart, photograph, video or audio 

recording, or any other data compilation, including 

data stored by computer, from which information 

can be obtained. 

shall be afforded an opportunity to 

explain why it would be inappropriate 

for the Hearing Officer to accept the 

finding of such other exchange, 

association or agency or to suspend or 

expel the Respondent notwithstanding 

the suspension, expulsion or bar by 

such other exchange, association or 

agency. In the event that the Hearing 

Officer determines not to accept the 

finding by such other exchange, 

association or agency, he may order a 

proceeding under any other Rule of 

Article 12. In the event that the 

Respondent fails or refuses to appear 

before the Hearing Officer, the Hearing 

Officer may nevertheless determine the 

matter and suspend or expel the 

Respondent as provided in Article 12, 

Rule 2(b). A written notice of the result 

shall be served upon the Respondent in 

a manner provided by Article 12, Rule 

1(c) and a copy shall be sent to each 

member of the Board. 

Any action by the Hearing Officer 

pursuant to Article 12, Rule 2(b) can be 

reviewed in accordance with the 

procedure specified in Article 12, Rule 

6. In the event no request for review is 

filed within 15 days after the 

Respondent is notified of the 

determination of the Hearing Officer, 

such determination shall become final 

and not subject to appeal at the 

Exchange. 

Under Article 12, Rule 2(b)(3), a 

Participant, partner, officer, registered 

employee or Associated Person may 

consent to the penalty or suspension or 

expulsion from the Exchange solely by 

reason of the imposition of the 

suspension, expulsion or bar by such 

other exchange, association or agency, 

and without either the separate 

determination of the Hearing Officer as 

provided above in Article 12, Rule 

2(b)(2) or the procedure provided by 

Article 12, Rule 1. The required consent 

takes effect immediately and must be in 

writing, signed by the Respondent, and 

delivered to the Exchange not later than 

two business days after the Exchange 

gives the Respondent with written 

notice of a proceeding under Article 12, 

Rule 2(b). 

Article 12, Rule 3 (Admission of 

Charges by Respondent) 

Article 12, Rule 3 governs admission 

of charges by a Respondent. 

Under Article 12, Rule 3(a), where a 

respondent makes a written admission 

of charges prepared and presented 

pursuant to Article 12 and waives his or 

its right to be heard on the penalty to 

be imposed, the CRO may determine 

and impose the penalty. The CRO’s 

determination is final. 

Under Article 12, Rule 3(b), if a 

Respondent makes written admission of 

the charges and also makes a written 

request for a hearing on the penalty to 

be imposed, the CRO shall promptly 

order a hearing be conducted pursuant 

to the procedures set forth in Article 12, 

Rule 5 that would be limited to such 

matters as are in extenuation or 

aggravation of the circumstances or as 

shall have material bearing on the 

penalty only. Under the Rule, the 

Respondent and the staff who 

investigated the charges shall be given 

an opportunity to be heard at such 

hearing conducted for the purpose of 

determining the penalty. A written 

notice of the result shall be served upon 

the Respondent in a manner provided 

by Rule 1(c) of this Article. Any penalty 

imposed under this paragraph may be 

reviewed pursuant to Rule 6 of this 

Article. 

Article 12, Rule 4 (Hearing Procedure) 

Article 12, Rule 4 sets forth hearing 

procedures. 

Article 12, Rule 4(a) provides that, in 

the absence of a written admission by 

the Respondent or other settlement of 

charges pursuant to Article 12, Rule 

1(d), a hearing of the charges before a 

Hearing Officer appointed by the CEO 

for the purpose of conducting the 

particular hearing shall be held. 

Subsection (b) governs the answer to 

charges, and provides that a written 

answer to the charges shall be filed by 

the Respondent with the Secretary (with 

copies to the Market Regulation 

Department) within 30 days from the 

date of service of the charges or within 

such further time as the Hearing Officer 

may grant. The answer to the charges 

must specifically admit or deny each 

charge, and any charge not specifically 

denied is deemed to be admitted. 

Affirmative defenses must be asserted in 

the answer or deemed waived. If a 

Respondent fails to file an answer 

within the required timeframe, the 

allegations of the charging document are 

deemed admitted, and the Hearing 

Officer will hold a hearing to determine 

the appropriate sanctions. 

Subsection (c) sets forth prehearing 

procedure. Article 12, Rule 4(c)(1) 

provides that the parties must exchange 

witness lists for the hearing no less than 

30 days prior to the hearing. No person 

who is not identified on a witness list 

will be permitted to give evidence at the 

hearing, unless the party requesting the 

testimony of such witness shows good 

cause for failing to have previously 

included the person on the witness list 

and the party requesting the testimony 

of such witness can show that the 

failure to permit such testimony would 

result in undue hardship. 

Subsection (c)(2) provides that any 

party may request production of all or 

some of the documents 7 that its 

adversary intends to introduce as 

evidence either in support of or to 

counter the charges Production requests 

for some of the documents to be 

introduced as evidence must reasonably 

specify which documents are to be 

produced, and the party making the 

request shall do so at least 45 days prior 

to the hearing and be responsible for 

paying all reasonable costs associated 

with the production of such documents. 

Further, the rule provides that all 

documents must be produced at least 30 

days prior to the hearing. If a request is 

made to produce all or some of the 

documents that are intended to be 

introduced as evidence at the hearing, 

the party responding to the request will 

be precluded from introducing at the 

hearing any documents that were not 

produced in response to the request, 

unless (1) there is good cause shown for 

failing to produce the document(s) 30 

days prior to the hearing, and (2) failure 

to permit introduction of such evidence 

would result in undue hardship. 

Upon request of any party, the 

Hearing Officer may shorten or lengthen 

the time periods for the exchange of 

witness lists or the production of 

documents. 

Subsection (d) governs the conduct of 

the hearing. Under Article 12, Rule 4(d), 

the Hearing Officer must schedule the 

time and place at which the Hearing 

shall be held within 30 days of the filing 

of an answer by the Respondent. 

The rule further provides that formal 

rules of evidence do not apply in any 

part of any disciplinary proceedings, 

although the parties may stipulate as to 

the rules relating to the introduction of 

evidence at the hearing. Such 

stipulations must be in writing and filed 

with the Hearing Officer and the 

Secretary no less than 5 days prior to 

the scheduled date for the 

commencement of the hearing. 

The Respondent has the right to be 

present at the hearing and be permitted 

to examine and cross-examine all 

witnesses produced by the Exchange, 

and also to present testimony, defense 

or explanation. The rule affords the 

Market Regulation Department the right 

to produce witnesses and other 

evidence in support of the charges, 

cross-examine all witnesses produced 


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8Article 12, Rule 4(g) mistakenly refers to the 

MRVP as being in Article 12, Rule 9 which, as 

noted below, is marked ‘‘Reserved.’’ See note 12 

[sic], infra. 

9Article 12, Rule 5(a) mistakenly refers to an 

Order under Article 12, Rule 4(b). As discussed, 

Article 12, Rule 4(b) governs answers to charges. 

The Hearing Officer’s decision is governed by 

subsection (f). 

by the Respondent, and introduce 

additional witnesses and evidence 

solely in rebuttal to the Respondent’s 

evidence. The Respondent in turn has 

the right to cross-examine any rebuttal 

witnesses and enter additional evidence 

to counter any rebuttal evidence entered 

by the Exchange staff. Both parties have 

the right to make opening and closing 

oral arguments. The Market Regulation 

Department has the right to make a 

rebuttal oral argument after 

Respondent’s opening and closing 

argument. Finally, Article 12, Rule 4(d) 

requires that a transcript of the 

testimony at the proceedings be made. 

Article 12, Rule 4(e) governs 

appointment of the Hearing Officer and 

requires that the Hearing Officer for 

each particular matter be selected by the 

CEO. Under the rule, prospective 

Hearing Officers must disclose to the 

Exchange their employment history for 

the past 10 years, any past or current 

material business or other financial 

relationships with the Exchange or any 

members of the Exchange, and any other 

information deemed relevant by the 

Exchange. Disclosures relating to the 

particular Hearing Officer selected by 

the CEO must be provided to a 

Respondent upon request after the 

selection of the Hearing Officer. In 

selecting a Hearing Officer for a 

particular matter, the CEO should give 

reasonable consideration to the 

prospective Hearing Officer’s 

professional competence and 

reputation, experience in the securities 

industry, familiarity with the subject 

matter involved, the absence of bias and 

any actual or perceived conflict of 

interest, and any other relevant factors. 

Article 12, Rule 4(f) governs the 

decision of the Hearing Officer. After 

considering the entire record, a Hearing 

Officer must prepare a written Order 

setting forth the determination as to 

whether the Respondent committed the 

violations alleged in the charging 

document or otherwise established at 

the Hearing and, if so, the sanction(s) to 

be imposed. The Hearing Officer must 

sign two copies of the written Order and 

deliver one signed copy to the 

Respondent and file the other with the 

Secretary (with copies to the Market 

Regulation Department). 

The rule requires the Order to make 

specific findings as to each charge 

brought by the Exchange and, where a 

violation is found, impose appropriate 

sanctions, including expulsion or 

suspension of a Participant’s Trading 

Permit, the imposition of limitations on 

the activities, privileges, functions, and/ 

or operations of a Participant or person 

associated with a Participant, the 

imposition of fine(s), censure, 

suspending or barring a person or 

organization from being associated with 

a Participant or any other fitting 

sanction. Absent the granting of an 

extension of time by either the Board or 

the Executive Committee for good cause 

shown, the Hearing Officer shall issue 

an Order within 90 days of the 

conclusion of the hearing. 

Article 12, Rule 4(g) governs a 

Respondent’s right to counsel. Under 

Article 12, Rule 4(g), Respondent shall 

have the right to be represented by legal 

or other counsel at the Respondent’s 

own expense except in the case of 

summary procedure under Article 12, 

Rule 2(a), Rule 3 or Rule 4(a), and under 

the Minor Rules Violation Plan 

(‘‘MRVP’’) of Article 12, Rule 8.8 The 

rule also provides that preparation of 

the charges and the presentation of 

evidence in support of charges is the 

responsibility of the Market Regulation 

Department and that Exchange counsel 

shall be counsel to the Hearing Officer. 

Pursuant to Article 12, Rule 4(g), 

Exchange counsel must not be an 

employee in the Market Regulation 

Department and must not have directly 

participated in any examination, 

investigation or decision associated 

with the initiation or conduct of the 

particular proceeding. 

Article 12, Rule 4(h) governs the 

impartiality of Hearing Officer. The rule 

requires that when a Hearing Officer 

considers a disciplinary matter, he or 

she is expected to function impartially 

and independently of the staff members 

who prepared and prosecuted the 

charges. Under the rule, Exchange 

counsel may assist the Hearing Officer 

in preparing his written 

recommendations or judgments. 

Within 15 days of the appointment of 

the Hearing Officer, a Respondent may 

move for disqualification of the Hearing 

Officer based upon bias or conflict of 

interest. Motions to disqualify a Hearing 

Officer must be in writing, state with 

specificity the facts and circumstances 

giving rise to the alleged bias or conflict 

of interest, and filed with the Hearing 

Officer and the Secretary (with copies to 

the Market Regulation Department). The 

Exchange may file a brief in opposition 

to the Respondent’s motion within 15 

days of service. Article 12, Rule 4(h) 

requires the Hearing Officer to rule on 

such motions no later than 30 days from 

filing by the Respondent. Prior adverse 

rulings against the Respondent or his 

attorney in other matters do not, in and 

of themselves, constitute grounds for 

disqualification. If a Hearing Officer 

believes the Respondent has provided 

satisfactory evidence in support of the 

motion to disqualify, the Hearing Officer 

shall remove himself or herself and 

request the CEO to reassign the hearing 

to another Hearing Officer. If the 

Hearing Officer determines that the 

Respondent’s grounds for 

disqualification are insufficient, the 

Hearing Office must deny the 

Respondent’s motion for 

disqualification by setting forth the 

reasons for the denial in writing. The 

Hearing Officer will thereupon proceed 

with the hearing. Ruling by the Hearing 

Officer on motions to disqualify are not 

subject to interlocutory review. 

Article 12, Rule 5 (Review) 

Article 12, Rule 5 governs review of 

penalties and decisions. 

Subsection (a) of Article 12, Rule 5 

provides for review by the Judiciary 

Committee. The Judiciary Committee is 

governed by Article 2, Rule 3, which 

provides that whenever, in accordance 

with the Rules, a disciplinary matter is 

to be reviewed by a Judiciary 

Committee, the CEO shall appoint five 

disinterested Participants of the 

Exchange and/or general partners or 

officers of Participant Firms as a 

Judiciary Committee, for that purpose. A 

new Judiciary Committee is appointed 

to consider and determine each such 

matter. In the event of a vacancy on a 

Judiciary Committee after it has begun 

its proceedings, the remaining members 

appointed by the CEO shall complete 

consideration and disposition of the 

matter. Once a Judiciary Committee has 

determined the matter for which it was 

appointed and has notified the Secretary 

in writing of its decision, it shall be 

dissolved automatically. 

Under Article 12, Rule 5(a), a 

Respondent has 15 days from the date 

of service of notice of a penalty imposed 

under Article 12, Rule 2(b), Rule 4(b) or 

Rule 5 to demand a review of the 

penalty imposed. The Exchange in turn 

has 15 days from the date of service of 

notice of an Order under Article 12, 

Rule 2(b), Rule 4(b) 9 or Rule 5 

containing a decision with a finding that 

the Respondent did not commit any of 

the violations as alleged in the charging 

document or imposing a penalty that 

Exchange staff deems inadequate to 

demand a review thereof. 

Demand for review shall be made in 

writing and filed with the Secretary, 

with copies to the opposing party. In the 


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10The Exchange adopted its current MRVP in 

1996. See Securities Exchange Act Release No. 

37255 (May 30, 1996), 61 FR 28918 (June 6, 1996) 

(SR–CHX–95–25) (Order). The original procedure 

authorizing the Exchange, in lieu of commencing 

disciplinary proceeding, to impose a fine, not to 

exceed $2,500, on any member, member 

organization, associated person or registered or 

nonregistered employee of a member or member 

organization for any violation of an Exchange rule 

which the Exchange determines to be minor in 

nature was contained in Article 12, Rule 9, now 

Article 12, Rule 8. The recommended dollar 

amounts for the first, second, third and subsequent 

violations, as calculated on a twelve-month rolling 

basis, of a rule designated as a minor rule violation 

was contained in a separate Recommended Fine 

Schedule in the Fee Schedule. See id., 61 FR at 

28918–19 & n. 10. 

In 2011, the Exchange increased the maximum 

fine pursuant to the MRVP from $2,500 to $5,000 

and also increased the recommended fines from 

$100/$500/$1000 for 1st, 2nd and 3rd tier fines, 

respectively, to $250/$750/$1500. The Exchange 

also recommended fines of $500/$1000/$2500 for 

other, more serious trading rule violations (i.e., ones 

involving the potential for customer harm), as well 

as violations of the obligation to establish, maintain 

and enforce written supervisory procedures, and to 

provide information to the Exchange in connection 

with regulatory inquiries or other matters. 

Recommended fines of $1000/$2500/$5000 were 

reserved for Trading Ahead violations. The 

Exchange also expanded the rolling time period in 

which violations would result in escalation to the 

next highest tier from 12 to 24 months. See 

Securities Exchange Act Release No. 64370 (April 

29, 2011), 76 FR 25727, 25727 (May 5, 2011) (SR– 

CHX–2011–07) (Notice); Securities Exchange Act 

Release 64686 (June 16, 2011), 76 FR 36596 (June 

22, 2011) (SR–CHX–2011–07) (Order). 

11Proposed Rule 10.9217 would retain the 

Exchange’s maximum $5,000 fine for minor rule 

violations under current Article 12, Rule 8. 

12As set forth in Article 12, Rule 8(f), the 

Exchange is not required to impose a censure or 

fine with respect to the violation of any rule or 

policy included in any such listing and the 

Exchange shall be free, whenever it determines that 

any violation is not minor in nature, to proceed 

event no request for review is filed 

within 15 days after the parties are 

notified of the Hearing Officer’s 

determination, such determination 

becomes final and conclusive. 

Under Article 12, Rule 5(a), a 

Judiciary Committee appointed by the 

Board or the Executive Committee will 

review the terms of an Order under 

Article 12, Rule 2(b), Rule 4(b) or Rule 

5. Under Article 12, Rule 5, the 

Judiciary Committee may not reverse, or 

modify, in whole or in part, the decision 

of the Hearing Officer under Article 12, 

Rule 2(c), Rule 4(b) or Rule 5 if the 

factual conclusions in the decision are 

supported by substantial evidence and 

such decision is not arbitrary, 

capricious or an abuse of discretion. 

Modifications may include an increase 

or decrease of the penalty imposed. 

Unless the Judiciary Committee decides 

to open the record for the introduction 

of evidence to hear argument, such 

review shall be upon the factual record 

as certified to the Judiciary Committee 

by the Secretary. 

Under Article 12, Rule 5(a), both the 

Respondent and the Exchange staff have 

the right to file memoranda (not to 

exceed 25 pages, inclusive of 

attachments). The appellant must file its 

memorandum with the Secretary within 

45 days of service of the notice of 

appeal, or within such other time as 

directed by the Executive Committee. 

The appellee must file its memorandum 

within 30 days of the filing of the 

appellant’s memorandum, or within 

such other time as directed by the 

Executive Committee. In its sole 

discretion, the Judiciary Committee may 

hear oral argument by the parties. The 

decision of the Judiciary Committee 

must be in writing and address the 

principal arguments forwarded by the 

appellant and appellee. The decision of 

the Judiciary Committee will be the 

final decision of the Exchange, except as 

provided in Article 12, Rule 5(b), 

described below. 

Article 12, Rule 5(b) provides a 

process for review by the Board of 

matters subject to Judiciary Committee 

review under Rule 5(a). Article 12, Rule 

5(b) provides that, notwithstanding 

Article 12, Rule 5 (a), if the Judiciary 

Committee determines that a matter 

presented to it for review involves an 

issue of sufficient importance, it may 

request that the Board, rather than the 

Judiciary Committee, conduct the 

review. The Board may in its discretion 

determine to review any decision of the 

Judiciary Committee. Under Article 12, 

Rule 5(b), any review by the Board shall 

be upon the record as certified to the 

Board by the Secretary, and the Board 

may not reverse or modify any decision 

if the factual conclusions in the decision 

are supported by substantial evidence 

and such decision is not arbitrary, 

capricious or an abuse of discretion. The 

Board may also consider any 

memoranda submitted by the 

Respondent or Exchange staff to the 

Judiciary Committee pursuant to Article 

12, Rule 5(a). The Board may, in its sole 

discretion, hear oral argument by the 

parties. Under the rule, modifications 

may include an increase or decrease of 

the penalty imposed on the Respondent. 

Any decision by the Board shall be the 

final decision of the Exchange. 

Article 12, Rule 6 (Effective Date of 

Judgment) 

Article 12, Rule 6 governs the 

effective date of judgments. The rule 

provides that enforcement of any Orders 

or penalties imposed under Article 12 

shall be stayed upon the filing of a 

notice of appeal under Article 12, Rule 

6(a) pending the outcome of final review 

by a Judiciary Committee or the Board 

as provided for in Article 12 or until the 

decision otherwise becomes final, 

subject, however, to the power of the 

Hearing Officer to impose such 

limitations on the Respondent as are 

necessary or desirable, in the Hearing 

Officer’s judgment, for the protection of 

the Respondent’s customers, creditors or 

the Exchange or for the maintenance of 

just and equitable principles of trade. 

Article 12, Rule 7 (Disciplinary 

Jurisdiction) 

Article 12, Rule 7 describes the 

Exchange’s disciplinary jurisdiction. 

Article 12, Rule 7(a) provides that a 

Participant or a person associated with 

a Participant alleged to have violated or 

aided and abetted a violation of any 

provision of the Act, the rules and 

regulations promulgated thereunder, or 

any constitutional provisions by-law or 

rule of the Exchange or any 

interpretation thereof or resolution of 

the Board of the Exchange regulating the 

conduct of business on the Exchange is 

subject to the disciplinary jurisdiction 

of the Exchange and, after notice and 

opportunity for a hearing, may be 

appropriately disciplined by expulsion, 

suspension, limitation of activities, 

functions, and operations, fine, censure, 

being suspended or barred from being 

associated with a Participant or any 

other fitting sanction, in accordance 

with the provisions of these Rules. 

Subsection (b) of Article 12, Rule 7 

provides that any Participant or person 

associated with a Participant shall 

continue to be subject to the 

disciplinary jurisdiction of the 

Exchange following such person’s 

termination of their Trading Permit or 

association with a Participant with 

respect to any matter that occurred prior 

to such termination; provided that 

written notice of the commencement of 

an inquiry into such matters is given by 

the Exchange to such former Participant 

or Associated Person within one year of 

receipt by the Exchange of written 

notice of the termination of such 

person’s status as a Participant or 

person associated with a Participant. 

Rule 8 (Minor Rule Violations) 

Article 12, Rule 8 sets forth the 

Exchange’s MRVP.10 Under Article 12, 

Rule 8, in lieu of commencing a 

‘‘disciplinary proceeding’’ as that term 

is used in Article 12 of the Exchange’s 

rules, the Exchange may, subject to the 

requirements set forth in this Rule, 

impose a censure or fine, not to exceed 

$5,000,11 on any Participant, Associated 

Person, or registered or non-registered 

employee of a Participant, for any 

violation of a rule of the Exchange, 

which violation the Exchange shall have 

determined is minor in nature.12 For 


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under other provisions of Article 12 rather than 

under Article 12, Rule 8. 13Article 12, Rule 9 is marked ‘‘Reserved.’’ 

failures to comply with the 

Consolidated Audit Trail Compliance 

Rule requirements of the Rule 6.6800 

Series, the Exchange may impose a 

minor rule violation fine of up to 

$2,500. For more serious violations, 

other disciplinary action may be sought. 

Any censure or fine imposed pursuant 

to Article 12, Rule 8 and not contested 

shall not be publicly reported, except as 

may be required by Rule 19d–1 under 

the Act, and as may be required by any 

other regulatory authority. Any censure 

or fine that is contested may be publicly 

reported to the same extent that 

Exchange disciplinary proceedings may 

be publicly reported. Any fine imposed 

pursuant to Article 12, Rule 8 that (1) 

does not exceed $2,500 and (2) is not 

contested, shall be reported by the 

Exchange to the Securities and 

Exchange Commission on a periodic, 

rather than a current, basis, except as 

may otherwise be required by Act Rule 

19d–1 and by any other regulatory 

authority. Under Article 12, Rule 8(b), 

the Chief Enforcement Counsel or CRO 

have the authority to impose a fine 

pursuant to the rule. 

Under Article 12, Rule 8(c), in any 

action taken by the Exchange pursuant 

to the rule, the person against whom a 

censure or fine is imposed shall be 

served as provided in Article 12, Rule 

1(c) with a written statement, signed by 

an Exchange officer setting forth (1) the 

rule(s) or policy(ies) alleged to have 

been violated; (2) the act or omission 

constituting each violation; (3) the 

sanctions imposed for each violation; (4) 

the date on which such action is taken; 

and (5) the date on which such 

determination becomes final and such 

fine, if any, becomes due and payable to 

the Exchange, or on which such action 

must be contested as provided in 

paragraph (e) of Article 12, Rule 8, such 

date to be not less than 15 days after the 

date of service of the written statement. 

Pursuant to Article 12, Rule 8(d), if the 

person fined pursuant to the rule pays 

the fine, such payment is deemed a 

waiver of any right to a disciplinary 

proceeding under Article 12 and any 

right to review or appeal. Commentary 

.01 to Article 12, Rule 8 provides that, 

with respect to subsection (d), a failure 

to pay a fine imposed Article 12, Rule 

8 by the time it is due, without timely 

contesting the action upon which such 

fine was based pursuant to Article 12, 

Rule 8(e), shall be deemed a waiver by 

the person against whom the fine is 

imposed of such person’s right to a 

disciplinary proceeding under Article 

12 and any right to review or appeal. 

Under Article 12, Rule 8(e), any 

person censured or fined pursuant to 

the rule may contest such censure or 

fine by filing with the Secretary a 

written response meeting the 

requirements of an Answer as provided 

in Article 12, Rule 4(b) no later than the 

date by which such determination must 

be contested. The Secretary may deny 

the answer if such answer is untimely 

or the answer fails to meet the standards 

of Article 12, Rule 4(b). If the Secretary 

denies the answer without leave to 

amend and refile, the sanction imposed 

by the Exchange pursuant to Article 12, 

Rule 8(b) shall become final and the 

censure shall be imposed and/or fine 

become due and payable. Unless denied 

by the Secretary, an answer filed by 

Respondent is deemed accepted, at 

which point the matter shall become a 

‘‘Disciplinary Proceeding’’ subject to the 

provisions of Article 12 applicable to 

disciplinary proceedings. 

Pursuant to Article 12, Rule 8(f), the 

Exchange must prepare and announce to 

its Participants from time to time a 

listing of the Exchange rules and 

policies as to which the Exchange may 

impose censures or fines as provided in 

this Rule that must also indicate the 

specific or recommended dollar amount 

that may be imposed as a fine hereunder 

with respect to any violation of such 

rule or policy, or may indicate the 

minimum and maximum dollar amount 

that may be imposed by the Exchange 

with respect to any such violation. In 

applying the Recommended Fine 

Schedule, the Exchange shall consider a 

violation as having occurred at the time 

that the underlying conduct of the 

Participant occurred. Nothing in Article 

12, Rule 8 requires the Exchange to 

impose a censure or fine pursuant to 

this Rule with respect to the violation of 

any rule or policy included in any such 

listing and the Exchange shall be free, 

whenever it determines that any 

violation is not minor in nature, to 

proceed under other provisions of 

Article 12 rather than under Rule 8. 

Under Article 12, Rule 8(g), any fine 

assessed under Rule 8 cannot be 

deemed to satisfy any damages or 

liability incurred from the violation. 

Finally, Article 12, Rule 8(h) sets forth 

the Exchange rules and policies that are 

subject to the MRVP. 

Rule 10 (Pending Proceedings) 13

Article 12, Rule 10 provides that the 

Exchange will report to the Central 

Registration Depository (‘‘CRD’’) the 

initiation of, and all significant changes 

in the status of, a formal disciplinary 

proceeding. For purposes of this rule, 

significant changes in the status of a 

pending formal disciplinary proceeding 

include, but are not limited to, issuance 

of a decision by the Hearing Officer the 

filing of an appeal to and/or the 

issuance of a decision by a Judiciary 

Committee or the Exchange’s Board. 

Article 13 (Suspension—Reinstatement) 

Article 13 addresses suspensions, and 

reinstatements. 

Article 13, Rule 1 governs automatic 

suspensions. Under the rule, a 

Participant failing to perform his or its 

contracts, or being insolvent, shall 

immediately inform the Secretary of the 

Exchange in writing that he or it is 

unable to perform his or its contracts or 

is insolvent. Such Participant’s Trading 

Permit shall thereupon be suspended by 

the CEO and prompt notice of such 

suspension shall be given to all 

Participants. Such suspension shall 

continue until the Participant’s Trading 

Permit is reinstated by the Board. 

Article 13, Rule 2 governs emergency 

suspensions. Under Article 13, Rule 

2(a)(1), whenever it appears to the CRO 

(after verification and with such 

opportunity for comment by the 

Participant as the circumstances 

reasonably permit) that a Participant, or, 

with respect to Article 13, Rule 

2(a)(1)(B), any Associated Person has: 

• Failed to perform his or its 

contracts or is insolvent or is in such 

financial or operational condition or 

otherwise conducting his or its business 

in such a manner that he or it cannot be 

permitted to continue in business with 

safety to his or its customers or creditors 

or to the Exchange, including but not 

limited to, the reasonable belief that the 

Participant is violating and will 

continue to violate any provision of the 

Rules of the Exchange, the federal 

securities laws (or rules promulgated 

thereunder) or any condition or 

restriction imposed pursuant to the 

provisions of Article 7, Rule 3(d) or 

Article 7, Rule 8(a) (Article 13, Rule 

2(a)(1)(A)); or 

• failed to perform or is failing to 

perform any material responsibility 

imposed on the Participant as a result of 

its registration as an Institutional Broker 

or Market Maker (or an associated 

person thereof who is registered as an 

Institutional Broker Representative or 

Market Maker Authorized Trader, 

respectively) and, as a result, cannot be 

permitted to continue in business with 

safety to its customers or creditors or to 

the Exchange ((Article 13, Rule 

2(a)(1)(B)); or 

• been and is expelled or suspended 

from any self-regulatory organization or 

barred or suspended from being 

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regulatory organization (Article 13, Rule 

2(a)(1)(C)), 

the CRO may suspend such Participant 

Firm Trading Permit or such 

Participant’s registration under Article 6 

or limit or prohibit such Participant, 

Participant Firm’s or associated person 

with respect to access to services offered 

by the Exchange, or limit or revoke such 

Participant’s registration as Institutional 

Broker or Market Maker and if so 

suspended, revoked, limited or 

prohibited, prompt notice of action shall 

be given to all Participants and the 

written statement described below shall 

be provided to the person affected by 

the suspension, limitation or 

prohibition. 

Unless the CRO determines after 

further inquiry that lifting the 

suspension, revocation, limitation or 

prohibition without further proceedings 

is appropriate, such suspension, 

limitation, revocation or prohibition 

shall continue until the Participant 

Firm’s Trading Permit, such 

Participant’s registration or the access of 

the associated person is reinstated or 

terminated pursuant to the provisions of 

Article 13, Rule 3 or unless otherwise 

determined pursuant to Article 13, Rule 

2(b). 

Under Article 13, Rule 2(a)(2), 

whenever it appears to the CRO that a 

person who is not a Participant (after 

verification and with such opportunity 

for comment by the person as 

circumstances reasonably permit) does 

not meet the qualification requirements 

or prerequisites for access to services 

offered by the Exchange and such 

person cannot be permitted to continue 

to have such access with safety to 

investors, creditors, Participants or the 

Exchange, the CRO may limit or 

prohibit any person with respect to such 

access. 

Under Article 13, Rule 2(a)(3), the 

CRO shall, within two business days of 

taking action pursuant to Article 13, 

Rule 2 (whether with respect to a 

Participant, an associated person of a 

Participant or any other person), furnish 

such person with a written statement 

setting forth the reasons and specific 

grounds which constitute the basis for 

the action taken. 

Article 13, Rule 2(b) governs appeals 

of CRO action under Article 13, Rule 

2(a). Subsection (b) provides that, in the 

event the CRO takes any action pursuant 

to Article 13, Rule 2(a), any person 

named in such action shall have the 

right to appeal. Appeals pursuant to 

Article 13, Rule 2(b) shall be made by 

filing a written notice of appeal with the 

secretary of the Exchange within five 

days after notification of the action. The 

notice shall state with particularity the 

action complained of, the appellant’s 

reasons for taking exception to the 

decision and the relief sought. Appeals 

filed under Article 13, Rule 2(b) are 

considered and decided by a panel 

appointed by the Board, composed of 

three Board members, at least two of 

whom shall be public members of the 

Board. No member of such panel shall 

have any direct or indirect interest in 

the matter presented before them which 

might preclude such member from 

rendering an objective and impartial 

determination. All appeals heard 

pursuant to Article 13, Rule 2(b) are 

expedited to the maximum extent 

possible and, in any event, shall be 

heard within ten days. Appellants are 

notified of the composition of the panel 

and the time, place and date when the 

panel will meet. Written materials in 

support of the appeal or requests to 

make an oral presentation shall be filed 

with the panel prior to the date when 

the panel will meet. The panel will 

grant requests for oral presentation. 

After consideration of the appeal, the 

panel shall, by vote of a majority of its 

members, affirm, reverse, or modify the 

action upon which the appeal was 

made. All decisions by the panel are 

final. 

Finally, under Article 13, Rule 2(c), 

any appeal from a decision of the CRO 

shall be made pursuant to the 

procedures set out in Article 15 

(Hearings and Reviews). 

Commentary .01 to Article 13, Rule 2 

provide that any Exchange Officer 

designated by the CRO may suspend the 

trading privileges of a Participant on the 

Exchange’s facilities pursuant to the 

provisions of Article 13, Rule 2 if a 

Qualified Clearing Agency refuses to act 

to clear and settle the trades of that 

Participant. The CRO must approve any 

such suspensions within two (2) days of 

the action. If the CRO does not approve 

the action taken, the suspension shall be 

immediately lifted as of the time of his 

or her decision or after the expiration of 

two days, whichever is earlier. 

Article 13, Rule 3 governs failure to 

obtain reinstatement and provides that 

if a Participant suspended under the 

provisions of Article 13, Rule 1 or 

Article 13, Rule 2(a) fails to obtain 

reinstatement within one year from the 

time of his or its suspension, or within 

such further time as the Board may 

grant, or fails to obtain reinstatement as 

hereinafter provided, his or its Trading 

Permit shall be terminated. Any person 

suspended under Article 13 may, at any 

time, be reinstated by the Board upon 

their own motion. 

Article 13, Rule 4 sets forth the 

procedure for reinstatement. 

Article 13, Rule 4(a) provides that 

when a Participant (or any Associated 

Person) suspended under the provisions 

of Article 13, Rule 1 applies for 

reinstatement, he or it shall be 

investigated by the staff to determine if 

the circumstances which brought about 

the suspension have been corrected and 

if any specified requirements imposed 

as a condition of reinstatement have 

been met, prior to the consideration of 

the application by the Executive 

Committee. 

Article 13, Rule 4(b) provides that if 

the staff recommends that the applicant 

not be reinstated, the applicant shall be 

sent a statement of reasons therefore and 

may, within 15 days of the receipt 

thereof, file a request with the Executive 

Committee that it consider his or its 

application together with a written 

statement indicating why in his or its 

opinion the staff recommendation is in 

error or insufficient to preclude his or 

its reinstatement. 

Under Article 13, Rule 4(c), if the staff 

recommends that the applicant be 

reinstated or if the applicant files a 

request with the Executive Committee 

pursuant to Article 13, Rule 4(b), the 

Executive Committee shall consider and 

vote upon the application for 

reinstatement. An affirmative vote of 

two-thirds of the members of the 

Executive Committee present at the time 

of voting shall be required for 

reinstatement. 

Under Article 13, Rule 4(d), in the 

event the applicant does not receive 

two-thirds vote, he or it shall have the 

right to a hearing before the Executive 

Committee, conducted in accordance 

with procedures set forth in a notice of 

such hearing to be given to the 

applicant. Following the hearing, the 

Executive Committee shall again vote 

upon the applicant, a two-thirds vote of 

the members of the Executive 

Committee present at the time of voting 

being required for reinstatement. The 

applicant may petition the Board for 

review of any adverse determination 

made by the Executive Committee 

following a hearing, a two-thirds vote of 

the members of the Board present at the 

time of voting being required for 

reinstatement. The Board shall not 

reverse, modify or remand for further 

consideration any determination made 

by the Executive Committee if the 

factual conclusions in such 

determination are supported by 

substantial evidence and such 

determination is not arbitrary, 

capricious or an abuse of discretion. 

Finally, Article 13, Rule 5 governs 

termination of rights by suspension and 

provides that a Participant suspended 

under the provisions of Article 13 shall 


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14See Article 1, Rule 1(d). See also id. at (d) & 

note 7 [sic], supra. 

15The Exchange has filed a separate notice and 

comment filing to adopt proposed Rules 9216(b) 

and 9217 and to move the Recommended Fine 

Schedule for minor rule violations from the Fee 

Schedule to proposed Rule 10.9217 and make 

certain amendments and corrections. See SR– 

NYSECHX–2022–08. These rules relating to minor 

rule violations would not be operative until 

approval of the Exchange’s companion rule filing. 

16The Exchange has filed a separate filing to 

adopt a new Rule 11.2210 governing 

communications with the public that would 

incorporate FINRA Rule 2210 by reference and 

rename and amend Article 8, Rule 13 governing 

advertising, promotion and telemarketing. See SR– 

NYSECHX–2022–09. The Exchange will also file a 

request with the Commission for an exemption 

under Section 36 of the Act from the rule filing 

requirements of Section 19(b) of the Act with 

respect to the incorporation by reference of 

proposed Rule 11.2210 and to the extent Rule 

11.2210 is effected solely by virtue of a change to 

cross-referenced FINRA rule. To the extent any 

rules in this proposed filing refer to Rule 11.2210, 

such rules would not be effective with respect to 

Rule 11.2210 until such separate filing is operative. 

17The proposed Information Memorandum 

would be substantially the same as that published 

for NYSE Arca. See NYSE Arca Equities RB–19–060 

NYSE Arca Options RB–19–02 (April 26, 2019). 

be deemed not in good standing and 

shall be deprived during the term of his 

or its suspension of all rights and 

privileges of a holder of a Trading 

Permit, as provided in Article 3, Rule 

2(b). The suspension of a Participant or 

any Associated Person thereof shall 

create a vacancy in any office or 

position held by him. 

Proposed Rule Change 

The Exchange proposes the Rule 

10.8000 Series (Investigations and 

Sanctions) and the Rule 10.9000 Series 

(Code of Procedure), which would be 

based on the text of the NYSE Arca Rule 

10.8000 and 10.9000 Series. The 

Exchange proposes to include the new 

disciplinary rules in current Rule 10 

that would be renamed ‘‘Disciplinary 

Proceedings; Suspension, Cancellation 

and Reinstatement.’’ 

Unless otherwise specified below, the 

individual rules in the proposed Rule 

10.8000 Series and Rule 10.9000 Series 

are based on the individual rules of the 

counterpart NYSE Arca Rule 10.8000 

and 10.9000 Series without any 

differences, except that the Exchange 

would: 

• describe its own transition process 

in Article 12, Rule 10 and in proposed 

Rules 10.8001, 10.8130(d), and 10.9001 

as well as for Article 13, which governs 

suspension and reinstatement; 

• use the terms ‘‘Participant’’ and 

‘‘Participant Firm,’’ together or 

separately, as applicable, rather than 

‘‘ETP Holder,’’ ‘‘OTP Holder’’ and ‘‘OTP 

Firm,’’ consistent with the Exchange’s 

other rules; 

• define ‘‘covered person’’ in 

proposed Rule 10.9120 to mean an 

Associated Person 14 and any other 

person subject to the jurisdiction of the 

Exchange. The NYSE Arca rule is 

similar except for the reference to 

Approved Persons, a registration 

category that has no direct analogue on 

the Exchange; 

• not utilize Floor-Based Panelists 

referenced in NYSE Arca Rules 9120(q), 

9212(a)(2)(B), 9221(a)(3), 9231(b)(2) and 

(c)(2), and 9232(c) because the Exchange 

does not have a trading floor; 

• retain the text of the Exchange’s 

currently applicable list of minor rule 

violations in proposed Rule 10.9217, 

move the Recommended Fine Schedule 

for minor rule violations from the Fee 

Schedule to proposed Rule 10.9217 and 

make certain corrections and 

additions; 15

• adopt substantially the same 

appellate and call for review processes 

as its affiliate NYSE Arca except that the 

Exchange will not be adopting appeals 

panels as provided for in NYSE Arca 

Rule 3.3 (Board Committees) and NYSE 

Arca Rule 10.9310(b). NYSE Arca 

retained appeals panels from its legacy 

disciplinary rules. The Exchange does 

not have a similar current process; and 

• make certain other technical and 

conforming changes as described below 

and herein. 

The Exchange also proposes to adopt 

the following rules in order to 

harmonize its rules with those of its 

affiliates, as described in detail below:16

• A new Rule 11.21 governing 

disruptive quoting and trading activity 

modeled on NYSE Arca Rule 11.21; and 

• a new Article 2, Rule 4 that would 

create a Committee for Review (‘‘CFR’’) 

as a sub-committee of the Regulatory 

Oversight Committee (‘‘ROC’’) that 

would replace the Judiciary Committee 

as the Exchange’s appellate body 

reviewing disciplinary decisions on 

behalf of the Board under the proposed 

disciplinary rules. 

Finally, the Exchange proposes 

certain changes to Article 7, Rule 12 

governing non-payment of any debt for 

Trading Permit fees, fines, transaction 

fees, or other sums owing the Exchange 

or its subsidiaries, to reflect that failure 

to pay any fine, sanction or cost levied 

in connection with a disciplinary action 

would be governed by proposed Rule 

10.8320. 

First, the heading of Article 7, Rule 12 

would become ‘‘Failure to Pay Fees.’’ 

Second, the Exchange would replace 

‘‘any debt for Trading Permit fees, fines, 

transaction fees, or other sums owing 

the Exchange or its subsidiaries’’ with 

‘‘a fee.’’ For the avoidance of doubt, and 

consistent with the requirements of 

Article 15 (Hearings and Reviews), the 

Exchange would add text providing that 

Exchange actions under Article 7, Rule 

12 would be subject to the procedural 

safeguards set forth in Article 15, which 

sets out the procedures to seek an 

opportunity to be heard and to appeal 

from non-disciplinary actions taken by 

the Exchange pursuant to its Rules. 

Amended Article 7, Rule 12 would also 

specify that failure to pay any fine 

levied in connection with a disciplinary 

action shall be governed by proposed 

Rule 10.8320. Finally, the Exchange 

would remove ‘‘pursuant to Article 12’’ 

following ‘‘disciplinary proceedings.’’ 

Transition 

Once the proposed rule change is 

effective, the Exchange intends to 

announce by Information Memorandum 

with at least 30 days advance notice the 

effective date of the new rules.17 To 

further facilitate an orderly transition 

from the current rules to the new rules, 

the Exchange proposes that matters 

already initiated under the current rules 

would be completed under such rules. 

The proposed transition is substantially 

the same as the NYSE Arca transition to 

its Rule 10.8000 and 10.9000 Series. 

Specifically, the Exchange proposes 

that current Article 12, whose coverage 

overlaps the proposed Rule 10.8000 and 

Rule 10.9000 Series, would continue to 

apply to an investigation or proceeding 

instituted under Article 12, Rule 1 prior 

to the effective date of the new rules and 

would continue to apply until such 

proceeding was final. Article 12 would 

also continue to apply to any 

Participant, Participant Firm or person 

associated with a Participant or 

Participant Firm over whom the 

Exchange asserted jurisdiction by 

providing written notice of the 

commencement of an inquiry pursuant 

to Article 12, Rule 7(b) prior to the 

effective date of the new rules. In all 

other cases, the proposed Rule 10.8000 

and Rule 10.9000 Series, as described 

below, would apply. 

Until the effective date, the Exchange 

could suspend from trading on the 

Exchange any Participant or Participant 

Firm that fails to pay any debt for 

Trading Permit fees, fines, transaction 

fees, or other sums owing the Exchange 

or its subsidiaries under current Article 

7, Rule 12, which would remain in 

effect until payment was made. 

Thereafter, the Exchange would proceed 

against an individual or entity subject to 

its jurisdiction that failed to pay a fine, 

monetary sanction, or cost levied in 

connection with a disciplinary action 

under proposed Rule 10.8320. 


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18The new Rule 2.0 titled ‘‘Rule 2.0. Disciplinary 

Jurisdiction’’ would appear below ‘‘Rule 2 Trading 

Permits.’’ 

19See Article 1, Rule 1(s). See also id. at (d) & 

note 6, supra. 

20NYSE Arca Rules 10.8212, 10.8213, and 

10.8312 are marked ‘‘Reserved’’ in the NYSE Arca’s 

rulebook. As such, to maintain consistency with 

NYSE Arca’s rule numbering, the Exchange has 

designated proposed Rules 10.8212, 10.8213, and 

10.8312 as ‘‘Reserved.’’ 

21The rules are available at https://nysechicago.

wolterskluwer.cloud/rules. 

As described above, Article 13, Rule 

1 governs automatic suspensions by the 

CEO of the Exchange of Participants for 

failure to perform its contracts or being 

insolvent. Article 13, Rule 2 governing 

emergency regulatory suspensions by 

the CRO that overlap with the Rule 

10.9500 Series. The Exchange proposes 

that emergency suspensions under 

Article 13, Rule 2 would continue to 

apply to a proceeding for which the 

Exchange has issued a written notice or 

statement thereunder prior to the 

effective date of the new rules. 

Thereafter, the proposed Rule 10.9500 

Series would govern all emergency 

suspensions. Automatic suspensions 

under Article 13, Rule 1 would be 

unaffected by the proposed changes. 

When the transition is complete, the 

Exchange intends to submit a proposed 

rule change that would delete the 

provisions of Article 12 and Article 13 

that are no longer necessary. 

Jurisdiction 

The Exchange proposes a new Rule 

2.0 titled ‘‘Disciplinary Jurisdiction’’ 

based on current Article 12, Rule 7, 

which describes the Exchange’s current 

disciplinary jurisdiction.18 Proposed 

Rule 2.0(a) would be substantially the 

same as current Article 12, Rule 7(a) 

except that the Exchange would: 

• add ‘‘Participant Firm’’ to the first 

sentence of the proposed rule to 

explicitly include such firms and 

persons associated with Participant 

Firms within the scope of the 

Exchange’s jurisdiction; 

• include the phrase ‘‘or any other 

person or organization subject to the 

jurisdiction of the Exchange’’ in that 

same first sentence of the proposed rule 

consistent with current Article 12, Rule 

1 and in order to explicitly include such 

persons or organizations within the 

scope of the Exchange’s jurisdiction; 

• omit the reference to 

‘‘constitutional provisions’’ from the list 

of potential violations as moot since the 

Exchange no longer has a Constitution; 

• conform the potential sanctions 

with NYSE Arca’s Rule 2.0(a), that 

exchange’s comparable jurisdiction rule; 

• replace the reference to ‘‘these 

Rules’’ with ‘‘the Rule 10.8000 and 

10.9000 Series’’ to add clarity and 

transparency; 

• add the following sentence from 

NYSE Arca Rule 2.0 in order to 

harmonize the Exchange’s rules with 

that of its affiliates and clarify the scope 

of the Exchange’s disciplinary 

jurisdiction: ‘‘A Participant or 

Participant Firm may be charged with 

any violation committed by its 

employees or other person associated 

with such Participant or Participant 

Firm, as though such violation were its 

own.’’ 

Proposed Rule 2.0(b) would be based 

on NYSE Arca Rule 2.0(b) and would 

provide that a Participant or Participant 

Firm that resigns or has its membership 

canceled or revoked, and a person who 

is no longer a covered person as defined 

in Rule 10.9120 or a covered person 

whose registration has been revoked or 

canceled, shall continue to be subject to 

the Exchange’s disciplinary jurisdiction 

as set forth in proposed Rule 10.8130. 

Proposed Rule 2.0(c) would be based 

on NYSE Arca Rule 2.0(c). The 

proposed rule would provide that the 

Board may authorize any officer, on 

behalf of the Exchange, subject to the 

approval of the Board, to enter into one 

or more agreements with another selfregulatory organization to provide 

regulatory services to the Exchange to 

assist the Exchange in discharging its 

obligations under Section 6 and Section 

19(g) of the Act. The proposed rule 

would further provide that any action 

taken by another self-regulatory 

organization, or its employees or 

authorized agents, acting on behalf of 

the Exchange pursuant to a regulatory 

services agreement shall be deemed to 

be an action taken by the Exchange; 

provided, however, that nothing in this 

provision would affect the oversight of 

such other self-regulatory organization 

by the Commission. Finally, proposed 

Rule 2.0(c) would provide that, 

notwithstanding the fact that the 

Exchange may enter into one or more 

regulatory services agreements, the 

Exchange shall retain ultimate legal 

responsibility for, and control of, its 

self-regulatory responsibilities, and any 

such regulatory services agreement shall 

so provide. 

As proposed, Rule 2.0 would set forth 

the scope of the Exchange’s disciplinary 

jurisdiction under the Rule 10.8000 and 

10.9000 Series. As discussed below, 

proposed Rule 10.8130 would address 

the Exchange’s retention of jurisdiction, 

and would enable the Exchange to 

generally retain jurisdiction to file a 

complaint against a Participant, 

Participant Firm or a covered person for 

two years after such status was 

terminated. Current Article 12 would 

continue to apply to any Participant, 

Participant Firm or covered person over 

whom the Exchange asserted 

jurisdiction by providing written notice 

of the commencement of an inquiry 

under Article 12, Rule 7(b) prior to the 

effective date. 

To continue the current coverage of 

the Exchange’s disciplinary rules, the 

proposed rule change would use the 

terms ‘‘Participant,’’ ‘‘Participant Firm’’ 

and ‘‘covered person,’’ which would be 

defined in proposed in Rule 10.9120 to 

mean an Associated Person 19 and any 

other person subject to the jurisdiction 

of the Exchange, to describe the persons 

to which the proposed Rule 10.8000 and 

10.9000 Series apply. The NYSE Arca 

rule is similar except for the reference 

to Approved Persons, a registration 

category that has no direct analogue on 

the Exchange. 

Proposed Rule 10.8000 Series 

The Proposed Rule 10.8000 Series 

would address Investigations and 

Sanctions. 

Proposed Rule 10.8001 (Effective Date 

of Rule 10.8000 Series) would include 

the effective date of the proposed rule 

change for the Rule 10.8000 Series, 

noting the exception for the retention of 

jurisdiction dates in proposed Rule 

10.8130(d), as described below. 

The text of NYSE Arca Rules 10.8110 

through 10.8330 would be adopted as 

Rules 10.8110 through 10.8330 with 

proposed changes to reflect the 

Exchange’s membership and to update 

the cross-references in proposed Rule 

10.8130(b)(1) to the rules governing 

termination of registration (Article 6, 

Rule 2; Article 16, Rule 1; and Article 

17, Rule 1). Proposed Rule 10.8100 

(General Provisions) would include 

proposed Rules 10.8110 through 

10.8130.20

Proposed Rule 10.8110 (Availability 

of Rules for Customers) would require 

Participants and Participant Firms to 

make available a current copy of the 

Exchange’s rules for examination by 

customers upon request. Although there 

is no comparable requirement in the 

current Rules, the Exchange’s rules are 

currently available on the Exchange’s 

website.21

Proposed Rule 10.8120 (Definitions) 

would provide cross-references to 

definitions of the terms ‘‘Adjudicator,’’ 

‘‘covered person,’’ and ‘‘Regulatory 

Staff’’ in proposed Rule 10.9120. 

Proposed Rule 10.8120 is technical in 

nature. 

Proposed Rule 10.8130 (Retention of 

Jurisdiction) would set forth retention of 


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22As noted below, the last sentence of proposed 

Rule 10.8210(a) will also be added to proposed Rule 

10.9110(a). 

jurisdiction provisions that are 

substantially the same as NYSE Arca 

Rule 10.8130, except for (1) references 

to reflect the Exchange’s membership, 

(2) the cross-references in paragraph 

(b)(1) and (d), and (3) clarifying in 

paragraph (d) for purposes of the 

transition Article 12 would continue to 

apply to a Participant, Participant Firm 

or covered person over whom the 

Exchange asserted jurisdiction by 

providing written notice of the 

commencement of an inquiry pursuant 

to Article 12, Rule 7(b) prior to the 

effective date of the new disciplinary 

rules. 

Generally, subject to proposed Rule 

10.8130(d), under the proposed rule 

change, the Exchange would retain 

jurisdiction to file a complaint against a 

Participant, Participant Firm or a 

covered person for two years after such 

Participant’s, Participant Firm’s or 

covered person’s status is terminated. 

This differs from current Article 12, 

Rule 7(b), which provides that 

jurisdiction is retained if a written 

notice of the commencement of an 

inquiry into such matters is given by the 

Exchange to the former Participant or 

Associated Person within one year of 

receipt by the Exchange of written 

notice of the termination of such 

person’s status as Participant or person 

associated with a Participant. The 

Exchange believes that the period under 

the proposed rule is appropriate because 

it will harmonize the Exchange’s rule 

with NYSE Arca’s rule. 

Proposed Rule 10.8200 

(Investigations) would set forth the 

following rules. Proposed Rule 10.8210 

(Provision of Information and 

Testimony and Inspection and Copying 

of Books) would set forth procedures for 

the provision of information and 

testimony and inspection and copying 

of books by the Exchange. 

Proposed Rule 10.8210(a) would 

require Participant, Participant Firm or 

a covered person to provide information 

and testimony and permit the 

inspection of books, records, and 

accounts for the purpose of an 

investigation, complaint, examination, 

or proceeding authorized by the 

Exchange’s rules. As noted above, under 

proposed Rule 10.8130, the Exchange 

would retain jurisdiction over a 

Participant, Participant Firm or a 

covered person to file a complaint or 

otherwise initiate a proceeding for two 

years after such Participant’s, 

Participant Firm’s or covered person’s 

status is terminated; as such, the 

Exchange can continue to obtain 

information and testimony during such 

period and thereafter if a complaint or 

proceeding is timely filed. The 

Exchange’s current Article 6, Rule 9(a) 

similarly provides that a Participant or 

partner, officer, director or other person 

associated with a Participant or other 

person or entity subject to the 

jurisdiction of the Exchange that fails to 

submit requested documents or 

information to the Exchange is subject 

to formal disciplinary action. 

Under current Article 6, Rules 9(b), no 

Participant, or partner, officer, director 

or other person associated with a 

Participant or other person or entity 

subject to the jurisdiction of the 

Exchange shall refuse to appear and 

testify before another exchange or selfregulatory organization in connection 

with a regulatory investigation, 

examination or disciplinary proceeding 

or refuse to furnish documentary 

materials or other information or 

otherwise impede or delay such 

investigation, examination or 

disciplinary proceeding if the Exchange 

requests such information or testimony 

in connection with an inquiry resulting 

from an agreement entered into by the 

Exchange pursuant to Article 6, Rule 

9(c). The requirements of current Article 

6, Rule 9(b) shall apply regardless of 

whether the Exchange has itself 

initiated a formal investigation or 

disciplinary proceeding. Proposed Rule 

10.8210(b) provides Exchange staff may 

exercise the authority set forth in 

10.8210(a) for the purpose of an 

investigation, complaint, examination, 

or proceeding conducted by another 

domestic or foreign self-regulatory 

organization, association, securities or 

contract market, or regulator of such 

markets with which the Exchange has 

entered into an agreement providing for 

the exchange of information and other 

forms of material assistance solely for 

market surveillance, investigative, 

enforcement, or other regulatory 

purposes. The Exchange believes that 

adopting the proposed rule is 

appropriate because it will harmonize 

the Exchange’s rules with its affiliate’s 

rules with respect to jurisdiction and 

obtaining books and records from 

Participants, Participant Firms and 

persons associated with Participants 

and Participant Firms. The Exchange 

accordingly proposes to delete the text 

of current Article 6, Rules 9(a) and (b). 

Finally, proposed Rule 10.8210(a) 

would provide that, in performing the 

functions of investigation, complaint, 

examination, or proceeding authorized 

by Exchange rules, the CRO and 

Regulatory Staff would function 

independently of the commercial 

interests of the Exchange and the 

commercial interests of Participants and 

Participant Firms. The proposed rule 

would further provide that no member 

of the Board or non-Regulatory Staff 

may interfere with or attempt to 

influence the process or resolution of 

any pending investigation or 

disciplinary proceeding, to proposed 

Rule 10.8210(a). The proposed language 

is based on NYSE Arca Rule 10.8210(a) 

with no substantive changes. The 

Exchange does not have a comparable 

rule and believes that adopting the 

proposed rule is appropriate because it 

will harmonize the Exchange’s rule with 

NYSE Arca’s rule in the important area 

of regulatory independence.22

Proposed Rule 10.8210(b)(2) would 

authorize Exchange staff to enter into 

regulatory cooperation agreements with 

a domestic federal agency or 

subdivision thereof, a foreign regulator, 

or a domestic or foreign SRO. Under 

current Article 6, Rule 9(c), the 

Exchange may enter into agreements 

with domestic and foreign SROs, but it 

does not cover domestic agencies and 

foreign regulators. As such, the 

Exchange would delete the text of 

current Article 6, Rule 9(c). The 

remainder of Article 6, Rule 9, 

consisting of interpretations and 

policies in Commentaries .01 and .02, 

would be deleted as well. 

The remainder of proposed Rule 

10.8210 would set forth certain 

procedures for investigations. Proposed 

Rule 10.8210(c) would require 

Participants, Participant Firms and 

covered person to comply with 

information requests under the Rule. 

Proposed Rule 10.8210(d) would 

provide that a notice under this Rule 

would be deemed received by the 

Participant, Participant Firm or covered 

person (including a currently or 

formerly registered person) to whom it 

is directed by mailing or otherwise 

transmitting the notice to the last known 

business address of the Participant or 

Participant Firm, or the last known 

residential address of the covered 

person as reflected in the Central 

Registration Depository (‘‘CRD’’). With 

respect to a person who is currently 

associated with a Participant or 

Participant Firm in an unregistered 

capacity, a notice under this Rule would 

be deemed received by the person by 

mailing or otherwise transmitting the 

notice to the last known business 

address of the Participant or Participant 

Firm as reflected in CRD. With respect 

to a person subject to the Exchange’s 

jurisdiction who was formerly 

associated with a Participant or 

Participant Firm in an unregistered 

capacity, a notice under the proposed 


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Rule would be deemed received by the 

person upon personal service, as set 

forth in Rule 10.9134(a)(1). 

If the Adjudicator or Exchange staff 

responsible for mailing or otherwise 

transmitting the notice to the 

Participant, Participant Firm or covered 

person had actual knowledge that the 

address in CRD is out of date or 

inaccurate, then a copy of the notice 

would be mailed or otherwise 

transmitted to: (1) the last known 

business address of the Participant or 

Participant Firm or the last known 

residential address of the covered 

person as reflected in CRD; and (2) any 

other more current address of the 

Participant, Participant Firm or covered 

person known to the Adjudicator or 

Exchange staff responsible for mailing 

or otherwise transmitting the notice. If 

the Adjudicator or Exchange staff 

responsible for mailing or otherwise 

transmitting the notice to the 

Participant, Participant Firm or covered 

person knew that the such person or 

entity was represented by counsel 

regarding the investigation, complaint, 

examination, or proceeding that is the 

subject of the notice, then the notice 

would be served upon counsel by 

mailing or otherwise transmitting the 

notice to the counsel in lieu of such 

person or entity, and any notice served 

upon counsel would be deemed 

received by the person or entity. 

Current Article 12, Rule 1(c) governs 

service of charges, orders, notices or any 

instrument on Respondents and 

provides that these may be served upon 

a Participant, Associated Person thereof 

or any other person or organization 

subject to the jurisdiction of the 

Exchange (defined as the ‘‘Respondent’’) 

either personally or by leaving same at 

his or its place of business during office 

hours or by deposit in the United States 

post office, postage prepaid via 

registered or certified mail with return 

receipt requested, addressed to the 

Respondent at the last business address 

given by the Respondent to the 

Exchange. The changes to proposed 

Rule 10.8210(d) would harmonize 

service of process across affiliated 

exchanges. 

Proposed Rule 10.8210(e) would 

provide that in carrying out its 

responsibilities under this Rule, the 

Exchange may, as appropriate, establish 

programs for the submission of 

information to the Exchange on a 

regular basis through a direct or indirect 

electronic interface between the 

Exchange and Participants and 

Participant Firms. 

Proposed Rule 10.8210(f) would 

permit a witness to inspect the official 

transcript of the witness’s own 

testimony, and permit a person who has 

submitted documentary evidence or 

testimony in an Exchange investigation 

to obtain a copy of the person’s 

documentary evidence or the transcript 

of the person’s testimony under certain 

circumstances. 

Finally, proposed Rule 10.8210(g) 

would require any Participant, 

Participant Firm or covered person who 

in response to a request pursuant to this 

Rule provided the requested 

information on a portable media device 

to ensure that such information was 

encrypted. The Exchange’s current rules 

do not contain comparable provisions. 

Commentary .01 to proposed Rule 

10.8210 would require Participants, 

Participant Firms or covered persons to 

provide Exchange staff and adjudicators 

with requested books, records and 

accounts. In specifying the books, 

records and accounts ‘‘ ‘of such 

Participant or covered person,’ ’’ 

proposed paragraph (a) of the rule refers 

to books, records and accounts that the 

broker-dealer or its covered persons 

makes or keeps relating to its operation 

as a broker-dealer or relating to the 

person’s association with the Participant 

or Participant Firm. This includes but is 

not limited to records relating to an 

Exchange investigation of outside 

business activities, private securities 

transactions or possible violations of 

just and equitable principles of trade, as 

well as other Exchange rules and the 

federal securities laws. It does not 

ordinarily include books and records 

that are in the possession, custody or 

control of a Participant, Participant Firm 

or covered person, but whose bona fide 

ownership is held by an independent 

third party and the records are unrelated 

to the business of the Participant, 

Participant Firm or covered person. The 

rule would require, however, that a 

Participant, Participant Firm or covered 

person must make available its books, 

records or accounts when these books, 

records or accounts are in the 

possession of another person or entity, 

such as a professional service provider, 

but the a Participant, Participant Firm or 

covered person controls or has a right to 

demand them. The Exchange’s current 

rules do not contain comparable 

provisions. The Exchange believes that 

the additional specificity would provide 

better notice to persons subject to its 

jurisdiction. 

Proposed Rule 10.8211 (Automated 

Submission of Trading Data Requested 

by the Exchange) would set forth the 

procedures for electronic blue sheets. 

Because FINRA now performs 

surveillance functions based on the 

information gathered as a result of these 

rules, the Exchange believes that its 

procedures for electronic blue sheets 

should be harmonized with FINRA and 

across affiliated exchanges that have 

adopted the FINRA rule. Proposed Rule 

10.8211 is substantially the same as 

NYSE Arca Rule 10.8211 except for 

references reflecting the Exchange’s 

membership. 

Proposed Rule 10.8300 (Sanctions) 

would set forth the following rules. 

Proposed Rule 10.8310 (Sanctions for 

Violation of the Rules) would set forth 

the range of sanctions that could be 

imposed in connection with 

disciplinary actions under the proposed 

rule change. Such sanctions would 

include censure, fine, suspension, 

revocation, bar, expulsion, or any other 

fitting sanction. These sanctions are 

substantially the same as the permitted 

sanctions set forth in current Article 12, 

Rule 7(a), which are expulsion; 

suspension; limitation of activities, 

functions and operations; fine; censure; 

being suspended or barred from being 

associated with a Participant; or any 

other fitting sanction. Although there is 

some difference between the text of the 

current and proposed rules, the 

Exchange believes that in practice the 

range of sanctions is the same due to the 

inclusion in both rules of the general 

category ‘‘any other fitting sanction.’’ 

Proposed Rule 10.8310 would also 

permit the Exchange to impose a 

temporary or permanent cease and 

desist order against a Participant, 

Participant Firm or covered person. 

Under proposed Rule 10.8310, each 

party to a proceeding resulting in a 

sanction is deemed to have assented to 

the imposition of the sanction unless 

such party files a written application for 

review or relief pursuant to the Rule 

10.9000 Series. 

Proposed Rule 10.8311 (Effect of a 

Suspension, Revocation, Cancellation, 

Bar or Other Disqualification) would 

provide in subsection (a) that if a person 

is subject to a suspension, revocation, or 

cancellation of registration, bar from 

association with a Participant or 

Participant Firm or other 

disqualification, a Participant or 

Participant Firm shall not allow such 

person to be associated with it in any 

capacity that is inconsistent with the 

sanction imposed or disqualified status, 

including a clerical or ministerial 

capacity. The proposed rule further 

provides that a Participant or 

Participant Firm shall not pay or credit 

to any person subject to a sanction or 

disqualification, during the period of 

the sanction or disqualification or any 

period thereafter, any salary, 

commission, profit, or any other 

remuneration that the person might 

accrue during the period of the sanction 


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23See NYSE Arca Notice, 84 FR at 16360. NYSE 

and NYSE American put forth similar arguments. 

See Securities Exchange Act Release Nos. 68678 

(January 16, 2013), 78 FR 5213, 5222 (January 24, 

2013) (SR–NYSE–2013–02) (Notice); 2016 Notice, 

81 FR at 11321. 

24Rule 13.4 requires a Participant or Associated 

Person who does not prevail in a lawsuit or other 

legal proceeding against the Exchange or any of its 

Directors, officers, committee members, employees 

or agents, and related to the business of the 

Exchange, to pay the Exchange all reasonable 

expenses, including attorneys’ fees, incurred in the 

defense of such proceeding, but only where such 

expenses exceed $50,000. This provision is by its 

terms inapplicable to, among other things, 

disciplinary proceedings. 

or disqualification. However, a 

Participant or Participant Firm may 

make payments or credits to a person 

subject to a sanction that are consistent 

with the scope of activities permitted 

under the sanction where the sanction 

solely limits a covered person from 

conducting specified activities (such as 

a suspension from acting in a principal 

capacity) or a disqualified person has 

been approved (or is otherwise 

permitted pursuant to Exchange rules 

and the federal securities laws) to 

associate with a Participant or 

Participant Firm. 

Proposed Rule 10.8311(b) would 

provide that, notwithstanding proposed 

paragraph (a), a Participant or 

Participant Firm may pay to a person 

that is subject to a sanction or 

disqualification described in Rule 

10.8311(a), any remuneration pursuant 

to an insurance or medical plan, 

indemnity agreement relating to legal 

fees, or as required by an arbitration 

award or court judgment. Proposed 

Commentary 01 of the Rule clarified 

that, notwithstanding the Rule, a 

Participant or Participant Firm may pay 

or credit to a person that is the subject 

of a sanction or disqualification, salary, 

commission, profit or any other 

remuneration that the Participant or 

Participant Firm can evidence accrued 

to the person prior to the effective date 

of such sanction or disqualification; 

provided, however, the Participant or 

Participant Firm may not pay any 

salary, commission, profit or any other 

remuneration that accrued to the person 

that relates to or results from the activity 

giving rise to the sanction or 

disqualification, and any such payment 

or credit must comply with applicable 

federal securities laws. 

The Exchange does not currently have 

similar rule that broadly describes the 

effect of a suspension, revocation, 

cancellation, bar or other 

disqualification. 

Proposed Rule 10.8313 (Release of 

Disciplinary Complaints, Decisions and 

Other Information) would provide, in 

part, that the Exchange would publish 

all final disciplinary decisions issued 

under the proposed Rule 10.9000 Series, 

other than minor rule violations, on its 

website. The Exchange does not have a 

comparable rule. 

Proposed Rule 10.8320 (Payment of 

Fines, Other Monetary Sanctions, or 

Costs; Summary Action for Failure to 

Pay) would govern payment of fines and 

other monetary sanctions or costs and 

provide for a summary action for failure 

to pay by a Participant, Participant Firm 

or covered person. 

Proposed Rule 10.8320(a) would 

provide that all fines and other 

monetary sanctions shall be paid to the 

Treasurer of the Exchange. 

Proposed Rule 10.8320(b) and (c) 

would permit the Exchange, after seven 

days’ notice in writing, to summarily 

suspend or expel from membership a 

Participant or Participant Firm or revoke 

the registration of a covered person for 

failure to pay a fine or other monetary 

sanction imposed pursuant to proposed 

Rule 10.8310 or a cost imposed 

pursuant to proposed Rule 10.8330 

when such fine, monetary sanction, or 

cost becomes finally due and payable. 

As noted above, under current Article 7, 

Rule 12, a Participant or Participant 

Firm can be suspended for failing to pay 

a fine within 60 days, after written 

notice, until payment is made. If 

payment is not made within six months 

after such suspension, the Participant’s 

status as a Participant may be 

terminated by the CEO on at least 10 

days’ written notice mailed to the 

Participant or Participant Firm at the 

address last registered with the 

Exchange. As NYSE Arca explained in 

connection with its Rule 10.8320, 

FINRA’s rules do not set forth a notice 

period but, as a matter of practice, 

FINRA typically provides a respondent 

at least 30 days to pay a fine after the 

conclusion of a proceeding. As NYSE 

Arca reasoned, a 30-day period, along 

with the seven days’ notice provided 

under Rule 10.8320, provides 

respondents with an adequate amount 

of time to pay a fine and avoid any 

further sanction by the Exchange.23 The 

Exchange proposes to follow the same 

reasoning for its proposed Rule 10.8320. 

For clarity regarding the transition, 

proposed Rule 8320(d) would provide 

that the Exchange may exercise the 

authority set forth in Rules 8320(b) and 

(c) with respect to non-payment of a 

fine, monetary sanction, or cost assessed 

in a disciplinary action initiated under 

Article 12 for which a decision was 

issued on or after the transition date. 

Proposed Rule 10.8330 (Costs of 

Proceedings) would provide that a 

disciplined Participant, Participant Firm 

or covered person may be assessed the 

costs of a proceeding, which are 

determined by the Adjudicator. The 

Exchange believes that Adjudicators 

should have the discretion to assess 

costs as they deem appropriate. The 

Exchange does not have a comparable 

rule.24

Proposed Rule 10.9000 Series 

The proposed Rule 10.9000 Series 

would set forth the Code of Procedure. 

Proposed Rules 10.9001 Through 

10.9120 

Proposed Rule 10.9001 (Effective Date 

of Rule 10.9000 Series) would set forth 

the effective date of the Rule 10.9000 

Series, noting the transitional provisions 

described above. The text of proposed 

Rule 10.9001 would include similar 

introductory text as that proposed for 

Rules 10.8001. While the transition 

would be structured in substantially the 

same manner as NYSE Arca’s transition, 

the Exchange’s proposed text would 

differ from NYSE Arca Rule 10.9001 due 

to differences in terminology and crossreferences. As noted above, Article 12 

would apply only to an investigation or 

proceeding instituted under Article 12, 

Rule 1 prior to the effective date of the 

proposed disciplinary rules and would 

continue to apply until such proceeding 

is final. Article 12 would also continue 

to apply to any Participant, Participant 

Firm or covered person over whom the 

Exchange asserted jurisdiction by 

providing written notice of the 

commencement of an inquiry under 

Article 12, Rule 7(b) prior to the 

effective date of the proposed 

disciplinary rules. 

Proposed Rule 10.9100 (Application 

and Purpose) would set forth the 

following rules. 

Proposed Rule 10.9110 (Application) 

would state the types of proceedings to 

which the proposed Rule 10.9000 Series 

would apply (each of which is described 

below) and the rights, duties, and 

obligations of Participants, Participant 

Firms or covered persons, and would set 

forth the defined terms and crossreferences. The proposed rule would 

also provide that, in performing the 

functions under the Rule 10.9000 Series, 

the CRO and Regulatory Staff shall 

function independently of the 

commercial interests of the Exchange 

and the commercial interests of the 

Participants and Participant Firms. The 

Exchange does not have a comparable 

rule. 

Proposed Rule 10.9120 (Definitions) 

would set forth definitions applicable to 

the Rule 10.9000 Series. The definitions 

are substantially the same as the 

definitions set forth in NYSE Arca Rule 


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10.9120, except that (1) references 

would reflect the Exchange’s 

membership, and (2) the Exchange 

would not define ‘‘Floor-Based 

Panelist’’ in proposed subsection (q) 

because the Exchange does not have a 

trading floor. The Exchange would 

therefore designate paragraph (q) as 

‘‘Reserved.’’ In order to maintain the 

same sequence as NYSE Arca Rule 

10.9120, paragraphs (b), (i) and (n) of 

the proposed rule would also be marked 

‘‘Reserved.’’ 

Proposed Rules 10.9130 Through 

10.9138 

Proposed Rule 10.9130 (Service; 

Filing of Papers) would govern the 

service of a complaint or other 

procedural documents under the Rules. 

Proposed Rule 10.9131 (Service of 

Complaint) would set forth the 

requirements for serving a complaint or 

document initiating a proceeding. 

Proposed Rule 10.9132 (Service of 

Orders, Notices, and Decisions by 

Adjudicator) would cover the service of 

orders, notices, and decisions by an 

Adjudicator. Proposed Rule 10.9133 

(Service of Papers Other Than 

Complaints, Orders, Notices, or 

Decisions) would govern the service of 

papers other than complaints, orders, 

notices, or decisions. Proposed Rule 

10.9134 (Methods of, Procedures for 

Service) would describe the methods of 

service and the procedures for service. 

Proposed Rule 10.9135 (Filing of Papers 

with Adjudicator: Procedure) would set 

forth the procedure for filing papers 

with an Adjudicator. Proposed Rule 

10.9136 (Filing of Papers: Form) would 

govern the form of papers filed in 

connection with any proceeding under 

the proposed Rule 10.9200 and 10.9300 

Series. Proposed Rule 10.9137 (Filing of 

Papers: Signature Requirement and 

Effect) would state the requirements for 

and the effect of a signature in 

connection with the filing of papers. 

Finally, proposed Rule 10.9138 

(Computation of Time) would establish 

the computation of time. 

With respect to service of process, 

under proposed Rule 10.9134, papers 

served on a natural person could be 

served at the natural person’s residential 

address, as reflected in CRD, if 

applicable. When a Party or other 

person responsible for serving such 

person had actual knowledge that the 

natural person’s CRD address was out of 

date, duplicate copies would be 

required to be served on the natural 

person at the natural person’s last 

known residential address and the 

business address in CRD of the entity 

with which the natural person is 

employed or affiliated. Papers could 

also be served at the business address of 

the entity with which the natural person 

is employed or affiliated, as reflected in 

CRD, or at a business address, such as 

a branch office, at which the natural 

person is employed or at which the 

natural person is physically present 

during a normal business day. The 

Hearing Officer could waive the 

requirement of serving documents 

(other than complaints) at the addresses 

listed in CRD if there were evidence that 

these addresses were no longer valid 

and there was a more current address 

available. If a natural person were 

represented by counsel or a 

representative, papers served on the 

natural person, excluding a complaint 

or a document initiating a proceeding, 

would be required to be served on the 

counsel or representative. 

Similarly, under proposed Rule 

10.9134, papers served on an entity 

would be required to be made by service 

on an officer, a partner of a partnership, 

a managing or general agent, a contact 

employee as set forth on Form BD, or 

any other agent authorized by 

appointment or by law to accept service. 

Such papers would be required to be 

served at the entity’s business address 

as reflected in CRD, if applicable; 

provided, however, that when the Party 

or other person responsible for serving 

such entity had actual knowledge that 

an entity’s CRD address was out of date, 

duplicate copies would be required to 

be served at the entity’s last known 

address. If an entity were represented by 

counsel or a representative, papers 

served on such entity, excluding a 

complaint or document initiating a 

proceeding, would be required to be 

served on such counsel or 

representative. 

By comparison, current Article 12, 

Rule 1(c), which governs service of 

charges, orders, notices or any 

instrument on Respondents, is less 

detailed. As noted, it provides that these 

may be served upon the Respondent 

either personally or by leaving same at 

his or its place of business during office 

hours or by deposit in the United States 

post office, postage prepaid via 

registered or certified mail with return 

receipt requested, addressed to the 

Respondent at the last business address 

given by the Respondent to the 

Exchange. The Exchange believes that 

the more detailed procedures for service 

of process in proposed Rules 10.9130 

through 10.9138 would increase the 

likelihood of successful service of 

process while providing appropriate 

due process protections to its 

Participants, Participant Firms and 

persons associated with Participants 

and Participant Firms. 

Proposed Rules 10.9140 Through 

10.9148 

Proposed Rule 10.9140 (Proceedings) 

would contain various rules relating to 

the conduct of disciplinary proceedings. 

Proposed Rule 10.9141 (Appearance 

and Practice; Notice of Appearance) 

would govern appearances in a 

proceeding, notices of appearance, and 

representation. Proposed Rule 10.9141 

would permit a Respondent to represent 

himself or herself, or be represented by 

an attorney at law admitted to practice 

before the highest court of any state of 

the United States, the District of 

Columbia, or any commonwealth, 

territory, or possession of the United 

States. The proposed rule also permits 

a partnership to be represented by a 

partner and a corporation, trust, or 

association to be represented by an 

officer of such entity. Proposed Rule 

10.9141 requires an attorney or 

representative to file a notice of 

appearance. Current Article 12, Rule 

4(g) is more general; it permits a 

Respondent to be represented by 

counsel but do not require a notice of 

appearance. 

Proposed Rule 10.9142 (Withdrawal 

by Attorney or Representative) would 

require an attorney or representative to 

file a motion to withdraw. The 

Exchange currently does not have a 

comparable rule. 

Subsection (a) of proposed Rule 

10.9143 (Ex Parte Communications) 

would prohibit certain ex parte 

communications with an Adjudicator or 

Exchange employee. The Exchange does 

not have a comparable rule. 

Under proposed Rule 10.9143(b), an 

Adjudicator participating in a decision 

with respect to a proceeding, or an 

Exchange employee participating or 

advising in the decision of an 

Adjudicator, who received, made, or 

knowingly caused to be made a 

communication prohibited by the rule 

would be required to place in the record 

of the proceeding (1) all such written 

communications, (2) memoranda stating 

the substance of all such oral 

communications, and (3) all written 

responses and memoranda stating the 

substance of all oral responses to all 

such communications. 

Under proposed Rule 10.9143(c), 

upon receipt of a prohibited 

communication made or knowingly 

caused to be made by any Party, any 

counsel or representative to a Party, or 

any Interested Staff, the Exchange or an 

Adjudicator may order the Party 

responsible for the communication, or 

the Party who may benefit from the ex 

parte communication made, to show 

cause why the Party’s claim or interest 


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25See proposed Rules 10.9160(e) & (f). 

in the proceeding should not be 

dismissed, denied, disregarded, or 

otherwise adversely affected by reason 

of such ex parte communication. All 

participants in a proceeding could 

respond to any allegations or 

contentions contained in a prohibited ex 

parte communication placed in the 

record, and such responses would be 

placed in the record. 

Under proposed Rule 10.9143(d), in a 

disciplinary proceeding governed by the 

Rule 10.9200 Series and the Rule 

10.9300 Series, the prohibitions of the 

rule would apply beginning with the 

authorization of a complaint as 

provided in Rule 10.9211, unless the 

person responsible for the 

communication had knowledge that the 

complaint would be authorized, in 

which case the prohibitions would 

apply beginning at the time of his or her 

acquisition of such knowledge. 

Under proposed Rule 10.9143(e), 

there would be a waiver of the ex parte 

prohibition in the case of an offer of 

settlement; letter of acceptance, waiver, 

and consent; or minor rule violation 

letter. 

Proposed Rule 10.9144 (Separation of 

Functions) would establish the 

separation of functions for Interested 

Staff and Adjudicators and provide for 

waivers. The Exchange currently does 

not have a comparable rule. 

Proposed Rule 10.9145 (Rules of 

Evidence; Official Notice) would 

provide that formal rules of evidence 

would not apply in any proceeding 

brought under the proposed Rule 

10.9000 Series. The proposed rule 

would also provide that in a proceeding 

governed by the Rule 10.9000 Series, an 

Adjudicator may take official notice of 

such matters as might be judicially 

noticed by a court, or of other matters 

within the specialized knowledge of the 

Exchange as an expert body, and that 

before an Adjudicator proposes to take 

official notice of a matter, it shall permit 

a Party the opportunity to oppose or 

otherwise comment upon the proposal 

to take official notice. Current Article 

12, Rule 4(d) also provides that formal 

rules of evidence do not apply. The 

Exchange’s rules do not currently 

contain a comparable provision to 

proposed Rule 10.9145(b) governing 

official notice. 

Proposed Rule 10.9146 (Motions) 

would govern motions a Party may 

make and requirements for responses 

and formatting. A Party would be 

permitted to make written and oral 

motions, although an Adjudicator could 

require that a motion be in writing. An 

opposition to a written motion generally 

would have to be filed within 14 days, 

but the moving party would have no 

right to reply, unless an Adjudicator so 

permits, in which case such reply 

generally would be due within five 

days. Proposed Rule 10.9146 also would 

permit a Party, a person who is the 

owner, subject, or creator of a Document 

subject to production under proposed 

Rule 10.8210 or any other rule which 

may be introduced as evidence in a 

disciplinary proceeding, or a witness 

who testifies at a hearing in a 

disciplinary proceeding, to move for a 

protective order. Article 12, Rule 4 

governing hearing procedure does not 

contain the same level of detail. The 

Exchange believes that the more 

detailed provisions of the proposed rule 

would provide additional specificity 

and clarity regarding motions to all 

Parties to a proceeding. Proposed Rule 

10.9146 is substantially the same as 

NYSE Arca Rule 10.9146. 

Proposed Rule 10.9147 (Rulings On 

Procedural Matters) would provide that 

Adjudicators may rule on procedural 

matters. The Exchange does not have a 

comparable rule. Current Article 12, 

Rule 4 provides that a Hearing Officer 

is appointed for the purpose of 

conducting a hearing and describes the 

conduct of a hearing but does not 

contain an explicit statement regarding 

the Hearing Officer’s full authority to 

rule on a procedural motion and any 

other procedural or administrative 

matter arising during the course of a 

proceeding. 

Finally, proposed Rule 10.9148 

(Interlocutory Review) would generally 

prohibit interlocutory review, except as 

provided in proposed Rule 10.9280 for 

contemptuous conduct. The Exchange 

currently does not have a comparable 

rule. Current Article 12, Rule 4(h) 

provides that motion to disqualify a 

Hearing Officer is not subject to 

interlocutory review. 

Proposed Rules 10.9150 Through 

10.9222 

Proposed Rule 10.9150 would provide 

that a representative can be excluded by 

an Adjudicator for unethical or 

improper conduct. The proposed Rule is 

identical to NYSE Arca Rule 10.9150. 

The Exchange currently does not have a 

comparable rule. 

Proposed Rule 10.9160 (Recusal or 

Disqualification) 

Proposed Rule 10.9160 would provide 

that no person may act as an 

Adjudicator if he or she has a conflict 

of interest or bias, or circumstances 

exist where his or her fairness could 

reasonably be questioned. In such case, 

the person must recuse himself or 

herself, or may be disqualified. The 

proposed rule would cover the recusal 

or disqualification of an Adjudicator, 

the Chair of the Board, or a Director. 

Disqualification of a Director or the 

Chair of the Board would be governed 

by proposed Rule 10.9160(a). 

Disqualification of a Panelist would be 

governed by Rule 10.9234 while 

disqualification of a Hearing Officer 

would be governed by Rule 10.9233.25

The Exchange currently does not have a 

strictly comparable rule. Article 12, 

Rule 4(h) requires a Hearing Officer to 

function impartially and independently 

of the staff members who prepared and 

prosecuted the charges and provides for 

a process for a respondent to make a 

motion for disqualification of the 

Hearing Officer based upon bias or 

conflict of interest. Unlike proposed 

Rule 10.9160, the Exchange’s current 

rule does not explicitly require recusal 

in the event of a conflict of interest or 

bias, or other circumstance where a 

Hearing Officer’s fairness might 

reasonably be questioned. The 

Exchange’s current Article 12, Rule 4(h) 

is also limited to Hearing Officers and 

there is no comparable recusal or 

disqualification procedure described in 

Article 12, Rule 5, governing reviews of 

penalties and decisions. The Exchange 

believes that the broader text of the 

proposed rule, applying the same 

prohibition against bias and a procedure 

for disqualification at all levels of 

review, would help to increase the 

fairness of and consistency in its 

proceedings. 

Proposed Rules 10.9160(b), (c), and 

(d) are designated as ‘‘Reserved’’ to 

maintain consistency with NYSE Arca’s 

rule numbering. 

Proposed Rules 10.9200 Through 

10.9217 

Proposed Rule 10.9200 (Disciplinary 

Proceedings) would cover disciplinary 

proceedings. Proposed Rule 10.9211 

(Authorization of Complaint) would 

permit Enforcement to request the 

authorization from the CRO to issue a 

complaint against any Participant, 

Participant Firm and covered persons of 

a Participant or Participant Firm, 

thereby commencing a disciplinary 

proceeding. Under Article 12, Rule 

1(b)(1), if in the CRO’s judgment it 

appears from the written investigative 

report that any Participant, Participant 

Firm or Associated Person is violating 

or has violated any provision of the 

Bylaws, Exchange rules or of the federal 

securities laws or the regulations 

thereunder, the CRO directs staff to 

prepare and present written charges 

against the Respondent. 


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26See Securities Exchange Act Release No. 38545 

(April 24, 1997), 62 FR 25226, 25249–50 (May 8, 

1997) (SR–NASD–97–28). 

27See id. & discussion of proposed Rule 10.9232, 

infra. 

28See SR–NYSECHX–2022–08. 

29Proposed Rule 10.9270 would address 

settlement procedures after the issuance of a 

complaint. 

30 In 2020, NYSE Arca shortened the time period 

before an AWC under NYSE Arca Rule 10.9216 and 

an uncontested offer of settlement under NYSE 

Arca Rule 10.9270(f) become final as well as the 

corresponding time period to request review of 

these settlements under NYSE Arca Rule 10.9310 

from 25 days to 10 days. See Securities Exchange 

Act Release No. 90678 (December 15, 2020), 85 FR 

83136 (December 21, 2020) (SR–SR–NYSEARCA– 

2020–111) (Notice). The Exchange’s proposes to 

omit certain transition language added to the NYSE 

Arca Rules 10.9216(a)(4), 10.9270(f)(3), and 

10.9310(a)(1)(B)(i) relating to the applicability of the 

legacy 25 day time period in its proposed version 

of these rules. 

Proposed Rule 10.9212 (Complaint 

Issuance—Requirements, Service, 

Amendment, Withdrawal, and 

Docketing) would set forth the 

requirements of the complaint, 

amendments to the complaint, 

withdrawal of the complaint, and 

service of the complaint. The proposed 

rule also requires the Office of Hearing 

Officers to promptly record each 

complaint filed with it in the 

Exchange’s disciplinary proceeding 

docket, and record in the disciplinary 

proceeding docket each event, filing, 

and change in the status of a 

disciplinary proceeding. Current Article 

12, Rule 1(b) does not contain a 

comparable detail. Further, under the 

proposed rule, the form of the complaint 

would be more prescribed than under 

current Article 12, Rule 1(b). For 

example, current Article 12, Rule 1(b) 

does not provide for withdrawal of a 

complaint. 

Proposed Rule 10.9213 (Assignment 

of Hearing Officer and Appointment of 

Panelists to Hearing Panel or Extended 

Hearing Panel) would provide for the 

appointment of a Hearing Officer and 

Panelists by the Chief Hearing Officer. 

As defined in proposed Rule 10.9120(r), 

‘‘Hearing Officer’’ means a FINRA 

employee who is an attorney and who 

is appointed by the Chief Hearing 

Officer to act in an adjudicative role and 

fulfill various adjudicative 

responsibilities and duties described in 

the Rule 10.9200 Series regarding 

disciplinary proceedings, the Rule 

10.9550 Series regarding expedited 

proceedings, and the Rule 10.9800 

Series regarding temporary cease and 

desist proceedings brought against 

Participants, Participant Firms and 

covered persons. Under current Article 

12, Rule 4(a), the CEO appoints a 

hearing officer to hear the matter. 

Although Article 12, Rule 4(e) describes 

the vetting process for Hearing Officers 

under the current rules, they are 

appointed by the CEO that includes an 

assessment of professional competence 

and reputation, experience in the 

securities industry, familiarity with the 

subject matter involved, and the absence 

of bias and any actual or perceived 

conflict of interest, among other things, 

there is no requirement that the Hearing 

Officer be an attorney. The Exchange’s 

current process also does not provide 

for the appointment of panelists to 

adjudicate a disciplinary matter. The 

Exchange believes that the participation 

of professional Hearing Officers, which 

is a long-standing practice of other 

SROs, would add legal and 

administrative expertise to the 

disciplinary process, and would 

enhance the dispassionate application 

of the rules, promote fairness in the 

disciplinary process, and help ensure 

that complex or contentious cases are 

managed effectively.26 The use of 

Panelists would help to ensure that 

market expertise and judgment would 

continue to be brought to bear on the 

disciplinary process.27

Proposed Rule 10.9214 (Consolidation 

or Severance of Disciplinary 

Proceedings) would permit the Chief 

Hearing Officer to sever or consolidate 

two or more disciplinary proceedings 

under certain circumstances and permit 

a Party to move for such action under 

certain circumstances. The Exchange 

currently does not have a comparable 

rule. 

Proposed Rule 10.9215 (Answer to 

Complaint) would set forth 

requirements for answering a complaint, 

including form, service, notice, content, 

affirmative defenses, motions for a more 

definite statement, amendments and 

extensions of time to answer amended 

complaints, default, and timing. A 

written answer to charges under current 

Article 12, Rule 4(b) is due 30 days after 

service of the Compliant, while under 

the proposed rule it would be due 25 

days after service. The proposed rule 

also allows for an extension of time for 

good cause shown, while the current 

rule provides that the time to answer 

can be extended by such further time as 

the Hearing Officer may grant. Both the 

current and proposed rules treat charges 

as admitted if no answer is filed, but the 

proposed rule would require that the 

Respondent receive a second notice 

concerning the consequences of failing 

to answer. 

Minor Rule Fines and Process 

As noted above, the Exchange has 

filed a separate notice and comment 

filing to adopt proposed Rules 9216(b) 

and 9217 and move the Recommended 

Fine Schedule for minor rule violations 

from the Fee Schedule to proposed Rule 

10.9217.28 The rules relating to minor 

rule violations described herein would 

not be operative until approval of the 

Exchange’s companion rule filing. 

Proposed Rule 10.9216(a) 

Subsection (a) of proposed Rule 

10.9216 (Acceptance, Waiver, and 

Consent; Procedure for Imposition of 

Fines for Minor Violation(s) of Rules) 

would establish the acceptance, waiver, 

and consent (‘‘AWC’’) procedures by 

which a Respondent, prior to the 

issuance of a complaint, could execute 

a letter accepting a finding of violation, 

consenting to the imposition of 

sanctions, and agreeing to waive such 

Respondent’s right to a hearing, appeal, 

and certain other procedures.29

The CRO would be authorized to 

accept or reject an AWC. If the AWC 

were accepted by the CRO, it would be 

deemed final and constitute the 

complaint, answer and decision in the 

matter 10 days after the AWC is sent to 

each Exchange Director and each 

member of the CFR, unless review by 

the Board is requested pursuant to 

proposed Rule 10.9310(a)(1)(B)(i).30 If 

the AWC were rejected by the CRO, the 

Exchange would be permitted to take 

any other appropriate disciplinary 

action with respect to the alleged 

violation or violations. If the letter were 

rejected, the Participant, Participant 

Firm or covered person would not be 

prejudiced by the execution of the AWC 

and such document could not be 

introduced into evidence in connection 

with the determination of the issues set 

forth in any complaint or in any other 

proceeding. Under proposed Rule 

10.9310(a)(1)(B)(ii) discussed below, 

any Party may require a review by the 

Exchange Board of any rejection by the 

CRO of an AWC letter under Rule 

10.9216 or an offer of settlement 

determined to be uncontested before a 

hearing on the merits has begun under 

Rule 10.9270(f), by filing with the 

Secretary of the Exchange a written 

request therefor, which states the basis 

and reasons for such review, within 25 

days after notification pursuant to Rule 

10.9216(a)(3) or Rule 10.9270(h). 

The Exchange notes that the AWC 

process is substantially similar to the 

Exchange’s current process for 

settlements prior to a hearing on the 

merits under Article 12, Rule 1(d). The 

Exchange believes that the proposed 

process provides appropriate controls to 

assure consistency and protect against 

aberrant settlements. Specifically, the 

CRO would be reviewing all proposed 


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31See SR–NYSECHX–2022–08. 

32Rule 10.9143 (Ex Parte Communications) 

would prohibit certain ex parte communications. 

Proposed 10.9144 (Separation of Functions) would 

establish separation of functions and provide for 

waivers. 

33See SR–NYSECHX–2022–08. 

34See note 10, supra. 

AWCs. The Exchange believes that 

when both Parties to a proceeding agree 

to a settlement, a review by the CRO 

would be sufficient and it is not 

necessary to bring such matters to an 

Adjudicator. The Exchange believes that 

the CRO can provide objectivity and an 

appropriate check and balance to the 

settlement process, particularly in light 

of the call for review process set forth 

in proposed Rule 10.9310. 

Proposed Rule 10.9216(b) 

As set forth in the companion notice 

and comment filing to adopt proposed 

Rules 9216(b) and 9217,31 subsection (b) 

of proposed Rule 10.9216 (Acceptance, 

Waiver, and Consent; Procedure for 

Imposition of Fines for Minor 

Violation(s) of Rules) would set forth 

the procedure for the imposition of fine 

for minor rule violations under the 

Exchange’s new disciplinary rules based 

on NYSE Arca Rule 10.9216(b). 

Proposed Rule 10.9216(b)(1) would 

provide that, notwithstanding proposed 

Rule 10.9211, the Exchange may, subject 

to the requirements set forth in 

paragraphs (b)(2) through (b)(4), impose 

a fine in accordance with the fine 

amounts and fine levels set forth in 

proposed Rule 10.9217 and/or a censure 

on any Participant, Participant Firm or 

covered person with respect to any rule 

listed in Rule 10.9217. If Enforcement 

has reason to believe a violation has 

occurred and if the Participant, 

Participant Firm or covered person does 

not dispute the violation, Enforcement 

may prepare and request that the 

Participant, Participant Firm or covered 

person execute a minor rule violation 

letter accepting a finding of violation, 

consenting to the imposition of 

sanctions, and agreeing to waive such 

Participant’s, Participant Firm’s or 

covered person’s right to a hearing 

before a Hearing Panel or, if applicable, 

an Extended Hearing Panel, and any 

right of review by the Exchange Board 

of Directors (‘‘Board’’), the Commission, 

and the courts, or to otherwise challenge 

the validity of the letter, if the letter is 

accepted. The letter would describe the 

act or practice engaged in or omitted, 

the rule, regulation, or statutory 

provision violated, and the sanction or 

sanctions to be imposed. Unless the 

letter states otherwise, the effective date 

of any sanction(s) imposed would be a 

date to be determined by Regulatory 

Staff. 

Proposed Rule 10.9216(b)(2)(A)(i) 

would provide that if a Participant, 

Participant Firm or covered person 

submits an executed minor rule 

violation letter, the submission of such 

a letter by the Participant, Participant 

Firm or covered person also waives any 

right to claim bias or prejudgment of the 

CRO, the Board, Counsel to the Board, 

or any Director, in connection with such 

person’s or body’s participation in 

discussions regarding the terms and 

conditions of the minor rule violation 

letter or other consideration of the 

minor rule violation letter, including 

acceptance or rejection of such minor 

rule violation letter. 

Proposed Rule 10.9216(b)(2)(A)(ii) 

would provide that if a Participant, 

Participant Firm or covered person 

submits an executed minor rule 

violation letter, by the submission such 

Participant, Participant Firm or covered 

person also waives any right to claim 

that a person violated the ex parte 

prohibitions of proposed Rule 10.9143 

or the separation of functions 

prohibitions of proposed Rule 10.9144, 

in connection with such person’s or 

body’s participation in discussions 

regarding the terms and conditions of 

the minor rule violation letter or other 

consideration of the minor rule 

violation letter, including acceptance or 

rejection of such minor rule violation 

letter.32

Proposed Rule 10.9216(b)(2)(B) would 

provide that if a minor rule violation 

letter is rejected, the Participant, 

Participant Firm or covered person 

would be bound by the waivers made 

under proposed paragraphs (b)(1) and 

(b)(2)(A) for conduct by persons or 

bodies occurring during the period 

beginning on the date the minor rule 

violation letter was executed and 

submitted and ending upon the 

rejection of the minor rule violation 

letter. 

Proposed Rule 10.9216(b)(3) would 

provide that if the Participant, 

Participant Firm or covered person 

executes the minor rule violation letter, 

it would be submitted to the CRO. The 

CRO, on behalf of the SRO Board, may 

accept or reject such letter. 

Proposed Rule 10.9216(b)(4) would 

provide that if the letter is accepted by 

the CRO, it would be deemed final and 

that any fine imposed pursuant to the 

proposed Rule and not contested would 

not be publicly reported, except as may 

be required by Rule 19d–1 under the 

Act, and as may be required by any 

other regulatory authority. 

Proposed Rule 10.9216(b)(4) would 

further provide that if the letter is 

rejected by the CRO, the Exchange may 

take any other appropriate disciplinary 

action with respect to the alleged 

violation or violations. Subsection (b)(4) 

would also provide that if the letter is 

rejected, the Participant, Participant 

Firm or covered person would not be 

prejudiced by the execution of the 

minor rule violation letter under 

proposed paragraph (b)(1) and that the 

letter may not be introduced into 

evidence in connection with the 

determination of the issues set forth in 

any complaint or in any other 

proceeding. 

As noted above, proposed Rule 

10.9216(b) is substantially the same as 

NYSE Arca Rule 10.9216(b). 

Proposed Rule 10.9217 

As set forth in the companion notice 

and comment filing to adopt proposed 

Rules 9216(b) and 9217,33 the Exchange 

also proposes to adopt Rule 10.9217 

based on NYSE Arca Rule 10.9217, 

which would be titled ‘‘Violations 

Appropriate for Disposition Under Rule 

10.9216(b)’’. 

Proposed Rule 10.9217(a) would 

provide that any Participant, Participant 

Firm or covered person may be subject 

to a fine, not to exceed $5,000,34 under 

Rule 10.9216(b) with respect to any 

rules listed below and that the fine 

amounts and fine levels set forth below 

would apply to the fines imposed. 

Proposed Rule 10.9217(b) would 

provide that Regulatory Staff designated 

by the Exchange would have the 

authority to impose a fine pursuant to 

the proposed Rule. 

Proposed Rule 10.9217(c) would 

provide that any person or organization 

found in violation of a minor rule would 

not be required to report such violation 

on SEC Form BD or Form U–4 if the 

sanction imposed consists of a fine not 

exceeding $2,500 and the sanctioned 

person or organization has not sought an 

adjudication, including a hearing, or 

otherwise exhausted the administrative 

remedies available with respect to the 

matter. Subsection (c) would further 

provide that any fine imposed in excess 

of $2,500 would be subject to current 

rather than quarterly reporting to the 

Commission pursuant to Rule 19d–1 

under the Act. 

Proposed Rule 10.9217(d) would 

provide that nothing in the proposed 

Rule would require the Exchange to 

impose a fine for a violation of any rule 

under this Minor Rule Plan and that if 

the Exchange determines that any 

violation is not minor in nature, the 

Exchange may, at its discretion, proceed 

under the proposed Rule 10.9000 Series 


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35See, e.g., NYSE National Rules 2.2(c) 

(Obligations of ETP Holders and the Exchange) and 

10.9217(f). The entirety of NYSE National Rule 2.2 

is eligible for minor rule treatment; registration of 

principals under NYSE Nationals’ rules is governed 

by subsection (c). 

36See NYSE Arca Rule 11.18(a) (Supervision) and 

10.9217(g)(8). 

37See NYSE Arca Rule 11.18(b)(2) & (4) 

(Supervision) and 10.9217(g)(8). 

38See Securities Exchange Act Release No. 64370 

(April 29, 2011), 76 FR 25727, 25727 (May 5, 2011) 

(SR–CHX–2011–07) (Notice); Securities Exchange 

Act Release 64686 (June 16, 2011), 76 FR 36596 

(June 22, 2011) (SR–CHX–2011–07) (Order). See 

generally note 10, supra. 

39See Securities Exchange Act Release No. 70597 

(October 2, 2013), 78 FR 62728, 62732 (October 22, 

2013) (SR–CHX–2013–14) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change). 

40See NYSE Arca Rule 11.18(c) (Supervision) and 

10.9217(g)(8). 

41 Immediately before the new sub-heading, the 

Exchange would include the following text based 

on NYSE Arca Rule 10.9217: ‘‘These fines are 

intended to apply to minor violations. For more 

serious violations, other disciplinary action may be 

sought.’’ 

rather than under proposed Rule 

10.9217. 

The next section would be titled ‘‘List 

of Rule Violations and Fines Applicable 

Thereto’’ and would provide that any 

Participant, Participant Firm or covered 

person may be subject to a fine under 

proposed Rule 10.9216(b) with respect 

to any rules listed below. 

Proposed Rule 10.9217(e) would be 

titled ‘‘Exchange Rules and Policies 

subject to a Minor Rule Violation’’ and 

would set forth the list of rules under 

which a Participant, Participant Firm or 

covered person may be subject to a fine 

under a minor rule violation letter as 

described in proposed Rule 10.9216(b). 

The Exchange would retain the list of 

rules currently set forth in Article 12, 

Rule 8(h) under the existing headings 

for ‘‘Reporting and Record Retention 

Violations’’ and ‘‘Minor Trading Rule 

Violations’’ with the following additions 

and changes. 

First, the Exchange would add 

subsection (b) of Article 6, Rule 2 

(Registration and Approval of 

Participant Personnel) to proposed Rule 

10.9217(e)(13). 

Article 6, Rule 2 currently sets forth 

certain employee registration, approval 

and other exchange requirements. 

Specifically, Article 6, Rule 2(a) governs 

registration of representatives, as 

defined in Article 6, Rule 14(b)(1), with 

the Exchange and is currently eligible 

for a minor rule fine under Article 12, 

Rule 8(h). Article 6, Rule 2(b) provides 

for the registration of principals, as 

defined in Article 6, Rule 14(a)(1). The 

Exchange proposes that the registration 

requirements of principals set forth in 

Article 6, Rule 2(b) be eligible for a 

minor rule fine. The proposed change 

would be consistent with the practice 

on the Exchange’s affiliates whose 

comparable rule requiring the 

registration of principals is eligible for 

a minor rule fine.35

Second, the Exchange would add 

subsections (a) and (b) of Article 6, Rule 

5 (Supervision of Representatives and 

Branch and Resident Offices) to 

proposed Rule 10.9217(e)(14). As 

discussed below, the Exchange’s current 

minor rule incorrectly references Article 

6, Rule 5(b) for violations relating to 

written supervisory procedures. The 

correct reference should be to Article 6, 

Rule 5(c), which the Exchange proposes 

to retain as proposed Rule 

10.9217(e)(15). 

Article 6, Rule 5(a) (Adherence to 

Law) provides that no Participant shall 

engage in conduct in violation of the 

Act, as amended, rules or regulations 

thereunder, the Bylaws or the Rules of 

the Exchange, or any written 

interpretation thereof and that every 

Participant is responsible for reasonably 

supervising its associated persons to 

prevent such violations. The 

requirement to reasonably supervise 

individuals to ensure compliance with 

applicable laws, rules and regulations, 

is currently eligible for minor rule fines 

in the rules of the Exchange’s affiliate 

NYSE Arca.36

Article 6, Rule 5(b) (Designation of 

persons with supervisory authority) 

provides that each Participant Firm 

must designate a principal executive 

officer, general partner or managing 

partner to hold overall authority and 

responsibility for the firm’s internal 

supervision and compliance with 

securities laws and regulations. This 

designated supervisor may formally 

delegate his or her supervisory duties 

and authority to other persons within 

the firm. The Rule further provides that 

Participants must maintain, for a period 

of not less than six years (the first two 

years in an easily accessible place), 

records of the names of all persons who 

are designated as supervisory personnel 

and the dates for which those 

designations are effective. In the 

absence of such designation by a 

Participant Firm, the Firm’s General 

Partner(s), President, Chief Executive 

Officer or other principal executive 

officer shall be deemed to be 

responsible for a Firm’s internal 

supervision and compliance function. In 

addition, each Participant Firm shall 

designate and specifically identify to the 

Exchange on Schedule A of Form BD 

one or more principals to serve as a 

Chief Compliance Officer. The 

requirement in Article 6, Rule 5(b) to 

designate and specifically identify 

persons with supervisory responsibility 

is currently eligible for minor rule fines 

in the rules of the Exchange’s affiliate 

NYSE Arca.37 The Exchange 

accordingly proposes to permit minor 

rule fines for violations of Article 6, 

Rule 5(b). 

As noted, Article 12, Rule 8(h)(1)(N) 

of the Exchange’s current minor rule 

plan makes failure to establish, maintain 

and enforce written supervisory 

procedures under Article 6, Rule 5(b) 

eligible for a minor rule fine. However, 

as described above Article 6, Rule 5(b) 

relates to the designation of persons 

with supervisory authority and not 

written supervisory procedures, which 

is governed by Article 6, Rule 5(c). In 

2011, Article 12, Rule 8 was amended 

to include, among other things, new 

reporting and recordkeeping provisions, 

which included ‘‘written supervisory 

procedures (Article 6, Rule 5(b)).’’ 38 At 

the time, Article 6, Rule 5(b) was titled 

‘‘Written supervisory procedures’’ and 

contained the text of current subsection 

(c). In 2013, the Exchange filed to 

amend Article 6, Rule 5. As part of that 

filing, subsection (a), which was titled 

‘‘Designation of persons with 

supervisory authority,’’ became new 

subsection (b), and old subsection (b), 

which was titled ‘‘Written supervisory 

procedures,’’ became current subsection 

(c).39 The Exchange did not, however, 

update Article 12, Rule 8 to reflect that 

Article 6, Rule 5(b) had become Article 

6, Rule 5(c). The Exchange proposes to 

make that correction in the text of 

proposed Rule 10.9217(e)(15). The 

Exchange notes that the requirement to 

establish, maintain and enforce written 

procedures is also currently eligible for 

minor rule fines in the rules of the 

Exchange’s affiliate NYSE Arca.40

Finally, the Exchange proposes a new 

subsection (f) titled ‘‘Recommended 

Fine Schedule’’ that would reproduce 

the current Recommended Fine 

Schedule from the Fee Schedule with 

the following changes and corrections. 

The Recommended Fine Schedule in 

the Fee Schedule would be deleted: 

• The Exchange would add a new 

sub-heading titled ‘‘Reporting and 

Record Retention Violations’’ 41 that 

would set forth the corresponding fines 

for first, second and third and 

subsequent violations for the rules set 

forth under the heading ‘‘Reporting and 

Record Retention Violations’’ in 

proposed Rule 10.9217(e). 

• The first 12 entries as well as 

entries 16 through 23 would be 

reproduced without change from the 

current Recommended Fine Schedule in 

the Fee Schedule. 


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42 In 2020, the Exchange added the Consolidated 

Audit Trail (‘‘CAT’’) industry member compliance 

rules to the list of minor rule violations in Article 

12, Rule 8 and the corresponding fine up to $2,500. 

At the time, the Exchange inadvertently did not 

amend the Recommended Fine Schedule in the Fee 

Schedule. See Securities Exchange Act Release No. 

89410 (July 28, 2020), 85 FR 46741 (August 3, 2020) 

(SR–CHX–2020–21). 

43See Securities Exchange Act Release No. 87264 

(October 9, 2019), 84 FR 55345, 55349 (October 16, 

2019) (SR–CHX–2019–08). 

44See id. 

45See NYSE Arca Rule 7.16–E (Short Sales) & 

10.9217(i)(1)1. 

46See Securities Exchange Act Release No. 87264 

(October 9, 2019), 84 FR 55345, 55349 (October 16, 

2019) (SR–CHX–2019–08). 

47See NYSE Arca Rule 7.30–E (Authorized 

Traders) & 10.9217(i)(1)5. 

48See note 10, supra. 49See proposed Rule 10.9216(b)(4). 

• Item 13 would be ‘‘Registration and 

Approval of Participant Personnel 

(Article 6, Rule 2(a) & (b)’’. The 

proposed first, second and third level 

fines for violations of Article 6, Rule 

2(b) of $250 for the first violation, $750 

for the second violation and $1,500 for 

the third and subsequent violations 

would be the same as those in the 

Exchange’s current Recommended Fine 

Schedule in the Fee Schedule for 

violations of Article 6, Rule 2(a). 

• Items 14 and 15—‘‘Failure to 

Comply with Supervision Requirements 

(Article 6, Rule 5(a) & (b))’’ and ‘‘Written 

Supervisory Procedures (Article 6, Rule 

5(c)),’’ respectively—would be added to 

proposed Rule 10.9271(f) consistent 

with the changes to proposed Rule 

10.9217(e)(14) and (15) described above. 

The proposed first, second and third 

level fines for violations of Article 6, 

Rule 5(a) and (b) in proposed Rule 

10.9217(e)(14) and Article 6, Rule 5(c) 

in proposed Rule 10.9217(e)(15) would 

be $500 for the first violation, $1,000 for 

the second violation and $2,500 for the 

third and subsequent violations. These 

fine levels would be the same as the 

current fines in the Recommended Fine 

Schedule in the Fee Schedule for 

violations of Article 6, Rule 5(b). 

• Finally, item 24 would be 

‘‘Consolidated Audit Compliance Rule 

(Rule 6.6800 Series).’’ The 

corresponding fine ‘‘Up to $2,500.00’’ 

would be transposed from current 

Article 12, Rule 8 to new footnote ** 

following ‘‘Rule 6.6800 Series.’’ 42 The 

Exchange would also add the current 

text from Article 12, Rule 8(a) providing 

that ‘‘For failures to comply with the 

Consolidated Audit Trail Compliance 

Rule requirements of the Rule 6.6800 

Series, the Exchange may impose a 

minor rule violation fine of up to 

$2,500. For more serious violations, 

other disciplinary action may be 

sought’’ to new footnote **. 

• The Exchange would add a new 

second sub-heading titled ‘‘Minor 

Trading Rule Violations’’ that would set 

forth the corresponding fines for first, 

second and third and subsequent 

violations for the 11 rules set forth 

under the heading ‘‘Minor Trading Rule 

Violations’’ in proposed Rule 

10.9217(e), with the following changes 

and corrections: 

Æ The entry for ‘‘Failure to clear the 

Matching System (Article 20, Rule 7)’’ 

and corresponding fines would not be 

included. This rule was deleted from 

Article 12, Rule 8 8(h)(2)(F) in 2019 as 

part of the transition of trading on the 

Exchange to the Pillar trading platform 

but the Exchange inadvertently failed to 

update the Recommended Fine 

Schedule in the Fee Schedule.43

Æ The Exchange would include 

‘‘Short Sales (Rule 7.16)’’ as item 10. 

Rule 7.16 was added to Article 12, Rule 

8 in 2019 as part of the transition of 

trading on the Exchange to the Pillar 

trading platform but the Exchange 

inadvertently failed to update the 

Recommended Fine Schedule in the Fee 

Schedule.44 The proposed first, second 

and third level fines for violations of 

Rule 7.16 of $500 for the first violation, 

$1,000 for the second violation and 

$2,500 for the third and subsequent 

violations are the same as those in 

NYSE Arca Rule 10.9217(i)(1)1. for 

violations of NYSE Arca Rule 7.16–E.45

Æ Finally, the Exchange would 

include ‘‘Failure to comply with 

Authorized Trader requirements (Rule 

7.30)’’ as item 11. Rule 7.30 was also 

added to Article 12, Rule 8 as part of the 

transition to Pillar in 2019 but the 

Exchange inadvertently failed to update 

the Recommended Fine Schedule in the 

Fee Schedule.46 The proposed first, 

second and third level fines for 

violations of Rule 7.30 of $1,000 for the 

first violation, $2,500 for the second 

violation and $3,500 for the third and 

subsequent violations are the same as 

those in NYSE Arca Rule 10.9217(i)(1)5. 

for violations of NYSE Arca Rule 7.30– 

E.47

As noted, proposed subsection (a) of 

proposed Rule 10.9217 is substantially 

the same as NYSE Arca Rule 10.9217(a) 

except for changes reflecting the 

Exchange’s membership. The Exchange 

proposes that a fine thereunder would 

not exceed $5,000 (the amount reflected 

in current Article 12, Rule 8).48

Proposed subsections (b), (c) and (d) 

are also substantially the same as NYSE 

Arca Rule 10.9217(b), (c) and (d) with 

the only changes reflecting the 

Exchange’s membership. 

Unlike current Article 12, Rule 8(e) 

described above, proposed Rule 

10.9216(b) and Rule 10.9217 would not 

permit a Respondent to contest a minor 

rule violation letter. Rather, as 

proposed, if the Respondent rejects the 

minor rule violation letter, then a 

complaint must be filed under proposed 

Rule 10.9211, and the minor rule 

violation letter may not be introduced 

into evidence.49 The Exchange believes 

the proposed rule is appropriate because 

it will harmonize the Exchange’s minor 

rule violation process with its affiliates’ 

rules. 

Proposed Rule 10.9220 (Request for 

Hearing; Extensions of Time, 

Postponements, Adjournments) 

Proposed Rule 10.9220 would set 

forth the following rules. 

Proposed Rules 10.9221 (Request for 

Hearing) and 10.9222 (Extensions of 

Time, Postponements, and 

Adjournments) would describe the 

process for a Respondent to request a 

hearing; the notice of a hearing; timing 

considerations; and the authority of a 

Hearing Officer, Hearing Panel or 

Extended Hearing Panel to order a 

hearing. Proposed Rule 10.9221 

provides that a Hearing Officer generally 

must provide at least 28 days’ notice of 

the hearing. Current Article 12, Rule 4 

governing hearing procedures does not 

provide for a respondent to request a 

hearing. Rather, Article 12, Rule 4(d) 

provides that within 30 days of the 

filing of a respondent’s answer, the 

Hearing Officer will schedule the time 

and place at which the Hearing shall be 

held. Similarly, current Article 12, Rule 

4 also does not provide for extensions 

of time, postponements, and 

adjournments like proposed Rule 

10.9222. 

Proposed Rules 10.9230 Through 

10.9235 

Proposed Rule 10.9231 (Appointment 

by the Chief Hearing Officer of Hearing 

Panel or Extended Hearing Panel or 

Replacement Hearing Officer) would 

govern appointment of a Hearing Panel 

or Extended Hearing Panel, and would 

also govern appointment of a 

replacement Hearing Officer and the 

designation of an observer to a Hearing 

Panel or an Extended Hearing Panel. As 

proposed, under proposed Rule 

10.9231(a) the Exchange would rely on 

FINRA’s Chief Hearing Officer to 

appoint a Hearing Panel or an Extended 

Hearing Panel to conduct disciplinary 

proceedings and issue a decision. The 

Chief Hearing Officer and the Hearing 

Officers would all be FINRA employees. 

Under proposed Rule 10.9231(b), a 

Hearing Panel would be composed of a 


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50NYSE Arca Rule 10.9231(b)(1) incorrectly 

states that the Hearing Officer would appoint the 

Panelists pursuant to the criteria of Rule 10.9232. 

The rules adopted by the Exchange’s other affiliates 

contain the same error. See NYSE Rule 9231(b)(1); 

NYSE American Rule 9231(b)(1); NYSE National 

Rule 10.9231(b)(1). The Exchange understands that 

its affiliates will submit separate rule filing to 

conform their version of proposed Rule 

10.9231(b)(1). 

Hearing Officer and two Panelists, 

except as provided in paragraph (e) and 

in proposed Rule 10.9234(a), (c), (d), or 

(e). The Hearing Officer would serve as 

the chair of the Hearing Panel. The 

Chief Hearing Officer would appoint 

Panelists pursuant to the criteria in 

proposed Rule 10.9232.50 The proposed 

procedure would differ from the current 

procedure under Article 12, Rule 4(e) 

where the Exchange CEO appoints a 

Hearing Officer to conduct a hearing but 

the rule does not provide for the 

appointment of panelist. 

Proposed Rule 10.9231(c) describes 

Extended Hearing Panels. As proposed, 

upon consideration of the complexity of 

the issues involved, the probable length 

of the hearing, or other factors that the 

Chief Hearing Officer deems material, 

the Chief Hearing Officer may determine 

that a matter shall be designated an 

Extended Hearing, and that such matter 

shall be considered by an Extended 

Hearing Panel. The Extended Hearing 

Panel shall be composed of a Hearing 

Officer and two Panelists, except as 

provided in proposed Rule 10.9234(a), 

(c), (d), or (e). The Hearing Officer 

would serve as the chair of the Extended 

Hearing Panel. The Chief Hearing 

Officer would have discretion to 

compensate any or all Panelists of an 

Extended Hearing Panel at the rate then 

in effect for FINRA arbitrators. The 

Chief Hearing Officer shall select as a 

Panelist a person who meets the criteria 

set forth in Rule 10.9232. 

Proposed Rule 10.9231(d) provides for 

the appointment of an observer. As 

proposed, a person who is qualified to 

serve as a Panelist may be designated by 

the Chief Hearing Officer to serve as an 

observer to a Hearing Panel or an 

Extended Hearing Panel. If the Chief 

Hearing Officer designates more than 

two people to serve as observers to a 

Hearing Panel or an Extended Hearing 

Panel, the Chief Hearing Officer would 

obtain the consent of the Parties. An 

observer may attend any hearing of a 

disciplinary proceeding and observe the 

proceeding, but may not vote or 

participate in any other manner in the 

hearing or the deliberations of the 

Hearing Panel or the Extended Hearing 

Panel, or participate in the 

administration of the disciplinary 

proceeding. 

Proposed Rule 10.9231(e) provides for 

the appointment of a replacement 

Hearing Officer. As proposed, in the 

event that a Hearing Officer withdraws, 

is incapacitated, or otherwise is unable 

to continue service after being 

appointed, the Chief Hearing Officer 

shall appoint a replacement Hearing 

Officer. To ensure fairness to the parties 

and expedite completion of the 

proceeding when a replacement Hearing 

Officer is appointed after the hearing 

has commenced, the proposed Rule 

provides that a replacement Hearing 

Officer would have the discretion to (1) 

allow the Hearing Panelists to resolve 

the issues in the proceeding and issue 

a decision without the participation of 

the replacement Hearing Officer in the 

decision. The replacement Hearing 

Officer may advise the Hearing Panelists 

regarding legal issues, and shall exercise 

the powers of the Hearing Officer under 

Rule 10.9235(a), including preparing 

and signing the decision on behalf of the 

Hearing Panel, in accordance with Rule 

10.9268; or (2) certify familiarity with 

the record and participate in the 

resolution of the issues in the case and 

in the issuance of the decision. In 

exercising this power, the replacement 

Hearing Officer may recall any witness 

before the Hearing Panel. 

Proposed Rule 10.9231(c)–(e) would 

be substantially the same as NYSE Arca 

Rule 10.9231 except that the proposed 

rule would not provide for the selection 

of a Floor-Based Panelist because the 

Exchange does not have a trading floor. 

Proposed Rule 10.9232 (Criteria for 

Selection of Panelists and Replacement 

Panelists) would set forth the criteria for 

the selection of Panelists and 

Replacement Panelists. Proposed Rule 

10.9232 would be substantially the same 

as NYSE Arca Rule 10.9232. As is the 

case under the NYSE Arca Rule, 

Panelists would be required to be 

persons of integrity and judgment and, 

other than the Hearing Officer, would be 

a member of the Exchange hearing 

board. Moreover, at least one Panelist 

would be engaged in securities activities 

differing from that of the Respondent or, 

if retired, was so engaged in differing 

activities at the time of retirement. 

Proposed Rule 10.9232 would also 

provide that the Exchange Board would 

from time to time appoint a hearing 

board to be composed of such number 

of permit holders of the Exchange that 

are not members of the Exchange Board 

and registered employees and 

nonregistered employees of Participants 

and Participant Firms. In order to have 

the largest number of potential Panelists 

available, the proposed Rule would 

further provide that former Participants 

and registered and non-registered 

employees of Participants and 

Participant Firms who have retired from 

the securities industry may be 

appointed to the hearing board. The 

Exchange believes that there are wellqualified persons, in particular retirees, 

who would be valuable members of the 

hearing board. The members of the 

hearing board would also be appointed 

annually and would serve at the 

pleasure of the Exchange Board. As 

reflected in Article 12, Rule 4, Exchange 

hearings are currently conducted by a 

Hearing Officer appointed by the CEO 

acting alone. 

Finally, proposed Rule 10.9232 would 

include Panelist selection criteria, 

which would be expertise, absence of 

any conflict of interest or bias or any 

appearance thereof, availability, and the 

frequency with which a person has 

served as a Panelist in the last two 

years, favoring the selection of a person 

as a Panelist who has never served or 

who has served infrequently as a 

Panelist during the period. Article 12, 

Rule 4 contains similar provisions with 

respect to Hearing Officers appointed by 

the CEO. 

Proposed Rules 10.9233 (Hearing 

Panel or Extended Hearing Panel: 

Recusal and Disqualification of Hearing 

Officers) and 10.9234 (Hearing Panel or 

Extended Hearing Panel: Recusal and 

Disqualification of Panelists) would 

establish the processes for recusal and 

disqualification of Hearing Officers or 

Panelists. 

Under proposed Rule 10.9233(a), if at 

any time a Hearing Officer determines 

that he or she has a conflict of interest 

or bias or circumstances otherwise exist 

where his or her fairness might 

reasonably be questioned, the Hearing 

Officer would notify the Chief Hearing 

Officer and the Chief Hearing Officer 

would issue and serve on the Parties a 

notice stating that the Hearing Officer 

has withdrawn from the matter. In the 

event that a Hearing Officer withdraws, 

is incapacitated, or otherwise is unable 

to continue service after being 

appointed, the Chief Hearing Officer 

would appoint a replacement Hearing 

Officer. In such a case, the replacement 

Hearing Officer would proceed 

according to proposed Rule 10.9231(e). 

Proposed Rule 10.9233(b) governs 

motions for disqualification. Under the 

proposed Rule, a Party may move for the 

disqualification of a Hearing Officer. 

Such a motion must be based upon a 

reasonable, good faith belief that a 

conflict of interest or bias exists or 

circumstances otherwise exist where the 

Hearing Officer’s fairness might 

reasonably be questioned, and must be 

accompanied by an affidavit setting 

forth in detail the facts alleged to 


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constitute grounds for disqualification, 

and the dates on which the Party 

learned of those facts. Under the 

proposed Rule, such motions shall be 

filed not later than 15 days after the 

later of (1) when the Party learned of the 

facts believed to constitute the 

disqualification; or (2) when the Party 

was notified of the assignment of the 

Hearing Officer. 

Finally, proposed Rule 10.9233(c) 

describes the disposition of a 

disqualification motion. Under the 

proposed Rule, a motion for 

disqualification of a Hearing Officer 

shall be decided by the Chief Hearing 

Officer who shall promptly investigate 

whether disqualification is required and 

issue a written ruling on the motion. In 

the event of a disqualification of the 

Hearing Officer, the Chief Hearing 

Officer shall appoint a replacement 

Hearing Officer. 

Proposed Rule 10.9234 sets forth 

similar procedures for the recusal of 

panelists on a Hearing Panel and 

Extended Hearing Panel. Under 

proposed Rule 10.9234(a), if at any time 

a Panelist of a Hearing Panel or an 

Extended Hearing Panel determines that 

he or she has a conflict of interest or 

bias or circumstances otherwise exist 

where his or her fairness might 

reasonably be questioned, the Panelist 

must notify the Hearing Officer and the 

Hearing Officer would issue and serve 

on the Parties a notice stating that the 

Panelist has withdrawn from the matter. 

In the event that a Panelist withdraws, 

is incapacitated, or otherwise is unable 

to continue service after being 

appointed, the Chief Hearing Officer 

may, in the exercise of discretion, 

determine whether to appoint a 

replacement Panelist. In the event that 

both Panelists withdraw, are 

incapacitated, or otherwise are unable to 

continue service after being appointed, 

the proposed Rule permits the Chief 

Hearing Officer to appoint two 

replacement Panelists. 

Proposed Rule 10.9234(b) provides 

that a Party may file a motion to 

disqualify a Panelist of a Hearing Panel 

or an Extended Hearing Panel. Such a 

motion must be based upon a 

reasonable, good faith belief that a 

conflict of interest or bias exists or 

circumstances otherwise exist where the 

Panelist’s fairness might reasonably be 

questioned, and shall be accompanied 

by an affidavit setting forth in detail the 

facts alleged to constitute grounds for 

disqualification, and the dates on which 

the Party learned of those facts. As 

proposed, such motions shall be filed 

not later than 15 days after the later of 

(1) when the Party learned of the facts 

believed to constitute the 

disqualification; or (2) when the Party 

was notified of the appointment of the 

Panelist. As proposed, the Chief Hearing 

Officer may order the disqualification of 

a Panelist of a Hearing Panel or an 

Extended Hearing Panel if the Chief 

Hearing Officer determines that a 

conflict of interest or bias exists or 

circumstances otherwise exist where the 

Panelist’s fairness might reasonably be 

questioned, and shall state the facts 

constituting the grounds for 

disqualification. 

Under proposed Rule 10.9234(c), if a 

Party files a motion to disqualify a 

Panelist of a Hearing Panel or an 

Extended Hearing Panel, the Hearing 

Officer shall promptly investigate 

whether disqualification is required and 

shall issue a written ruling on the 

motion. In the event a Panelist is 

disqualified, the Chief Hearing Officer 

may, in the exercise of discretion, 

appoint a replacement Panelist. 

Under subsection (d) of proposed 

Rule 10.9234, if a Party files a motion 

to disqualify both Panelists of a Hearing 

Panel or an Extended Hearing Panel, the 

Hearing Officer shall promptly 

investigate whether disqualification is 

required and issue a written ruling on 

the motion. I n the event one Panelist is 

disqualified, the Chief Hearing Officer 

may, in the exercise of discretion, 

appoint a replacement Panelist. In the 

event both Panelists are disqualified, the 

Chief Hearing Officer will promptly 

appoint two persons as replacement 

Panelists. 

Under proposed Rule 10.9234(e), if a 

Party files a motion to disqualify both 

Panelists of a Hearing Panel or an 

Extended Hearing Panel and the Hearing 

Officer, the Chief Hearing Officer shall 

promptly investigate whether 

disqualification is required and issue a 

written ruling on the motion. Under the 

proposed Rule, in the event a Panelist 

is disqualified, the Chief Hearing Officer 

may, in the exercise of discretion, 

appoint a replacement Panelist. In the 

event both Panelists are disqualified, the 

Chief Hearing Officer shall promptly 

appoint two persons as replacement 

Panelists. In the event a Hearing Officer 

and a Panelist are disqualified, the Chief 

Hearing Officer shall promptly appoint 

a replacement Hearing Officer. In the 

event both Panelists and the Hearing 

Officer are disqualified, the Chief 

Hearing Officer shall promptly appoint 

a replacement Hearing Officer and two 

persons as replacement Panelists. 

Finally, proposed subsection (f) 

would provide that if a Chief Hearing 

Officer appoints a replacement Panelist 

by operation of the proposed Rule, the 

Chief Hearing Officer would do so using 

the criteria set forth in Rule 10.9232. 

Current Article 12, Rule 4(h) does not 

address recusal of a Hearing Officer but 

does permit a party to move for 

disqualification of the Hearing Officer 

within 15 days of the appointment of 

the Hearing Officer based upon bias or 

conflict of interest. The proposed Rule 

is broader and permits recusal as well 

as motions for disqualification. 

Moreover, the proposed Rule permits 

motions for disqualification not later 

than 15 days after the later of (1) when 

the Party learned of the facts believed to 

constitute the disqualification, or (2) 

when the Party was notified of the 

assignment of the Hearing Officer or the 

appointment of the Panelist, 

respectively. The Exchange’s current 

rule permits motions to disqualify based 

upon bias or conflict of interest within 

15 days of the appointment of the 

Hearing Officer. 

Proposed Rule 10.9235 (Hearing 

Officer Authority) would set forth the 

Hearing Officer’s duties and authority in 

detail. The Exchange does not have a 

comparable rule. 

Proposed Rules 10.9240 Through 

10.9242 

Proposed Rule 10.9240 would set 

forth the following rules. 

Proposed Rules 10.9241 (Pre-hearing 

Conference) and 10.9242 (Pre-hearing 

Submission) would govern the 

substantive and procedural 

requirements for pre-hearing 

conferences and pre-hearing 

submissions. Proposed Rule 10.9242 

would also prohibit former Regulatory 

Staff, within a period of one year 

immediately following termination of 

employment with the Exchange or 

FINRA, from providing expert testimony 

on behalf of any other person in any 

proceeding under the Rule 10.9000 

Series. Nothing in the proposed Rule 

would prohibit former Regulatory Staff 

from testifying as a witness on behalf of 

the Exchange or FINRA. As noted above, 

current Article 12, Rule 4 gives the 

Hearing Officer general authority in 

procedural matters, but there are no 

specific provisions in the current Rules 

relating to pre-hearing conferences and 

submissions. 

Proposed Rules 10.9250 Through 

10.9253 

Proposed Rule 10.9250 (Discovery) 

through 10.9253 would address 

discovery, including the requirements 

and limitations relating to the 

inspection and copying of documents in 

the possession of Exchange staff, 

requests for information and limitations 

on such requests, and the production of 

witness statements and any harmless 


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51 In 2020, NYSE Arca filed to harmonize Rules 

10.9261 and 10.9830 with certain changes by 

FINRA that temporarily granted the Chief or Deputy 

Chief Hearing Officer the authority to order that 

hearings be conducted by video conference if 

warranted by public health risks posed by in-person 

hearings during the ongoing COVID–19 pandemic. 

See Securities Exchange Act Release No. 90088 

(October 5, 2020), 85 FR 64186 (October 9, 2020) 

(SR–NYSEArca–2020–85). The expiration of the 

temporary amendments to NYSE Arca Rules 

10.9261 and 10.9830 have been extended to July 31, 

2022. See Securities Exchange Act Release No. 

94663 (April 11, 2022), 87 FR 22587 (April 15, 

2022) (SR–NYSEArca–2022–18). NYSE, NYSE 

American and NYSE National made similar filings. 

The amended NYSE Arca rules will revert back to 

their original state at the conclusion of the 

temporary relief period and any extension thereof. 

See 87 FR at 22588, n.5 The Exchange does not 

propose to incorporate these temporary 

amendments to NYSE Arca Rule 10.9261 and 

10.9830 into the proposed rule text and will 

evaluate the need for such temporary relief once the 

current rule filing is operative. 

error relating to the production of such 

witness statements. 

Proposed Rule 10.9251 (Inspection 

and Copying of Documents in 

Possession of Staff) would require 

Enforcement to make available to a 

Respondent any documents prepared or 

obtained in connection with the 

investigation that led to the 

proceedings, except that certain 

privileged or other internal documents, 

such as examination or inspection 

reports or documents that would reveal 

an examination, investigation, or 

enforcement technique or confidential 

source, or documents that are prohibited 

from disclosure under federal law, are 

not required to be made available. A 

Hearing Officer may require that a 

withheld document list be prepared. 

Proposed Rule 10.9251 also sets forth 

procedures for inspection and copying 

of produced documents. In addition, if 

a Document required to be made 

available to a Respondent pursuant to 

the proposed Rule was not made 

available by Enforcement, no rehearing 

or amended decision of a proceeding 

already heard or decided would be 

required unless the Respondent 

establishes that the failure to make the 

Document available was not harmless 

error. The Hearing Officer, or, upon 

review under proposed Rule 10.9310, 

the Exchange Board, would determine 

whether the failure to make the 

document available was not harmless 

error, applying applicable Exchange, 

FINRA, SEC, and federal judicial 

precedent. The proposed Rule would 

not establish any preference for 

Exchange versus other precedent in this 

respect; rather the Adjudicators could 

determine in their discretion what 

precedent to apply. The Exchange’s 

current rules do not include a 

comparable provision. 

Under proposed Rule 10.9252 

(Requests for Information), a 

Respondent could request that the 

Exchange invoke proposed Rule 10.8210 

to compel the production of Documents 

or testimony at the hearing if the 

Respondent can show that certain 

standards are met, e.g., that the 

information sought is relevant, material, 

and non-cumulative. Under proposed 

Rule 10.9253 (Production of Witness 

Statements), a Respondent could file a 

motion to obtain certain witness 

statements. Current Article 12, Rule 

4(c)(2) permits any party to request 

production of all or some of the 

documents that its adversary intends to 

introduce as evidence either in support 

of or to counter the charges but does not 

specify that such production can be 

compelled. Rather, under Article 12, 

Rule 4(c)(2), a party responding to a 

request to produce all or some of the 

documents that are intended to be 

introduced as evidence at the hearing 

will be precluded from introducing at 

the hearing any documents that were 

not produced in response to the request, 

unless there is good cause shown for 

failing to produce the document(s) 30 

days prior to the hearing and the failure 

to permit the introduction of such 

evidence would result in undue 

hardship to the party requesting to 

introduce such document. 

Proposed Rules 10.9260 Through 

10.9269 

Proposed Rules 10.9260 (Hearing and 

Decision) through 10.9269 would 

govern hearings and decisions. 

Proposed Rule 10.9261 (Evidence and 

Procedure in Hearing) would generally 

require the Parties to submit copies of 

documentary evidence and the names of 

the witnesses each Party intends to 

present at the hearing no later than 10 

days before the hearing. Current Article 

12, Rule 4(c) (1) requires the parties to 

exchange a list of witnesses that they 

each plan to call to testify at the hearing 

no less than 30 days prior to the 

hearing. The proposed Rule would also 

provide that if a hearing is held, a Party 

shall be entitled to be heard in person, 

by counsel, or by the Party’s 

representative. The Exchange’s current 

rule does not include such an explicit 

provision. Finally, under the proposed 

rule, a Party, for good cause shown, may 

seek to submit any additional evidence 

at the hearing as the Hearing Officer, in 

his or her discretion, determines may be 

relevant and necessary for a complete 

record. The Exchange’s current rules do 

not contain a comparable provision. 

Under Article 12, Rule 4(d), the Market 

Regulation Department and the 

Respondent can introduce additional 

witnesses and evidence solely in 

rebuttal to the respondent’s evidence.51

Proposed Rule 10.9262 (Testimony) 

would require persons subject to the 

Exchange’s jurisdiction to testify under 

oath or affirmation at a hearing. The 

Exchange’s current rules do not contain 

comparable provisions. 

Proposed Rule 10.9263 (Evidence: 

Admissibility) would authorize the 

Hearing Officer to exclude irrelevant, 

immaterial, or unduly repetitious or 

prejudicial evidence and permit a Party 

to object to the admission of evidence. 

Under the proposed Rule, objections to 

the admission or exclusion of evidence 

would be made on the record and would 

succinctly state the grounds relied 

upon; excluded material would be 

deemed a supplemental document and 

would be attached to the record and 

retained under proposed Rule 10.9267. 

The Exchange’s current rules do not 

contain a comparable provision. 

Proposed Rule 10.9264 (Motion for 

Summary Disposition) would allow 

Parties to file a motion for summary 

disposition under certain circumstances 

and would describe the procedures for 

filing and ruling on such motion. Under 

current Article 12, Rule 4, the Hearing 

Officer regulates the hearing, but the 

Rule does not specifically provide for 

motions for summary disposition. 

Proposed Rule 10.9265 (Record of 

Hearing) would require that the hearing 

be recorded by a court reporter, that a 

transcript be prepared and made 

available for purchase, and that a Party 

or a witness be permitted to seek a 

correction of the transcript from the 

Hearing Officer. Current Article 12, Rule 

4(d) provides generally that the 

Exchange must make a transcript of the 

hearing. 

Proposed Rule 10.9266 (Proposed 

Findings of Fact, Conclusions of Law, 

and Post-Hearing Briefs) would 

authorize the Hearing Officer to require 

a post-hearing brief or proposed 

findings of fact and conclusions of law 

and would outline the form and timing 

for such submissions. There is no 

comparable current rule, although the 

Hearing Officer generally regulates the 

conduct of a hearing under Article 12, 

Rule 4. 

Proposed Rule 10.9267 (Record; 

Supplemental Documents Attached to 

Record; Retention) would detail the 

required contents of the hearing record 

and the treatment of any supplemental 

documents attached to the record. The 

Exchange’s current rules do not contain 

a similar provision. 

Proposed Rule 10.9268 (Decision of 

Hearing Panel or Extended Hearing 

Panel) would set forth the timing and 


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52Under the proposed rule, a dissenting opinion 

must be served within 65 days after such final date. 

The Exchange does not have a comparable current 

rule. 

53The CRO, Hearing Panel, or Extended Hearing 

Panel, as applicable, would consider Exchange 

precedent or such other precedent as it deemed 

appropriate in determining whether to accept the 

settlement offer. 

the contents of a decision of the Hearing 

Panel or Extended Hearing Panel and 

the procedures for a dissenting opinion, 

service of the decision, and any requests 

for review. Under proposed Rule 

10.9268, the decision would be issued 

within 60 days after the final date 

allowed for filing proposed findings of 

fact, conclusions of law, and posthearing briefs, or by a date established 

at the discretion of the Chief Hearing 

Officer. Under current Article 12, Rule 

4(f), a decision must be issued within 90 

days after the conclusion of the hearing. 

The Exchange believes that the shorter 

period of time is appropriate to allow 

the Hearing Panel or Extended Hearing 

Panel adequate time to reach its 

decision and agree on the text of the 

decision and would not prejudice any 

Party.52

The Exchange proposes to include 

text providing that a disciplinary 

decision concerning an affiliate of the 

Exchange as such term is defined in 

Rule 12b–2 under the Act would not be 

subject to review under proposed Rule 

10.9310 but instead would be treated as 

a final disciplinary action subject to SEC 

review. The Exchange does not believe 

that an appeal by an affiliate to the 

Exchange Board is appropriate, but 

rather such affiliate should be permitted 

to appeal directly to the SEC. The 

proposed text is identical to NYSE Arca 

Rule 10.9268(e)(2). 

The proposed Rule would further 

provide that, unless otherwise provided 

in the majority decision issued under 

proposed Rule 10.9268(a), a sanction 

(other than a bar or an expulsion) 

specified in a decision constituting final 

disciplinary action of the Exchange for 

purposes of Act Rule 19d–1(c)(1) would 

become effective on a date to be 

determined by the Exchange, and a bar 

or an expulsion specified in a decision 

would become effective immediately 

upon the decision becoming the final 

disciplinary action of the Exchange for 

purposes of Act Rule 19d–1(c)(1). 

Finally, proposed Rule 10.9269 

(Default Decisions) would establish the 

process for the issuance and review of 

default decisions by a Hearing Officer 

when a Respondent fails to timely 

answer a complaint or fails to appear at 

a pre-hearing conference or hearing 

where due notice has been provided. A 

Party may, for good cause shown, file a 

motion to set aside a default decision. 

Under Article 12, Rule 4(b), if a 

Respondent fails to file an answer 

within the required timeframe, the 

allegations of the charging document are 

deemed admitted and the Hearing 

Officer will hold a hearing to determine 

the appropriate sanctions. Under Article 

12, Rule 5(a), a party can request review 

by the Judiciary Committee of such 

default decision. Proposed Rule 10.9269 

would provide a robust process for the 

issuance and content of default 

decisions. 

Proposed Rule 10.9270 (Settlement 

Procedure) 

Proposed Rule 10.9270 would provide 

for a settlement procedure for a 

Respondent who has been notified that 

a proceeding has been instituted against 

him or her. The proposed settlement 

procedure is similar to the settlement 

procedures in current Article 12, Rule 

1(d), except that the Exchange’s rule 

does not distinguish between contested 

and uncontested settlements. 

Under proposed Rule 10.9270(a), a 

Respondent notified of the institution of 

a disciplinary proceeding could make a 

written offer of settlement at any time, 

but the proposal would not stay the 

proceeding unless otherwise decided by 

the Hearing Officer. If a Respondent 

proposes an offer of settlement after the 

hearing on the merits has begun, the 

making of an offer of settlement shall 

not stay the proceeding, unless 

otherwise decided by the Hearing Panel 

or, if applicable, the Extended Hearing 

Panel. Current Article 12, Rule 1(d) does 

not explicitly provide that a proceeding 

is not stayed. 

Under proposed Rule 10.9270(b), a 

Respondent making an offer of 

settlement would also be required to do 

so in conformity with the provisions of 

the proposed Rule and would be 

prohibited from making a frivolous 

settlement offer or one that was 

inconsistent with the seriousness of the 

violations. Current Article 12, Rule 1(d) 

does not contain a similar prohibition. 

Proposed Rule 10.9270(c) would 

provide that an offer of settlement shall 

be in writing and signed by the person 

making the offer, and, if the person is 

represented by counsel or a 

representative, signed also by the 

counsel or representative. Under the 

proposed Rule, the offer of settlement 

should contain in reasonable detail the 

required content of the proposal, which 

would include, among other things, a 

statement consenting to findings of fact 

and violations, a description of the 

proposed sanction and the effective date 

of any sanction(s) imposed, or a 

statement that the effective date of the 

sanction(s) will be a date to be 

determined by Regulatory Staff. Current 

Article 12, Rule 1(d) is not as detailed 

but specifies that the settlement 

agreement must admit jurisdiction and 

contain a proposed penalty that must be 

reasonable and consistent with the 

seriousness of the alleged violations. 

Proposed Rule 10.9270(d) would 

provide that submission of a settlement 

offer waives a Respondent’s right to a 

hearing, to claim bias or ex parte 

communication violations, any right to 

claim that a person or body violated the 

ex parte prohibitions of proposed Rule 

10.9143 or the separation of functions 

prohibitions of proposed Rule 10.9144, 

and the right to review by the Board, the 

Commission, or the courts. Under 

current Article 12, Rule 1(d), settlement 

agreements must include a waiver by 

the respondent of all rights of appeal to 

the Executive Committee, Board, the 

Commission and United States Court of 

Appeals or to otherwise challenge or 

contest the validity of the decision if the 

offer of settlement is accepted. 

Proposed Rule 10.9270(e) would 

address contested settlement offers. 

Under the proposed rule, if a 

Respondent made an offer of settlement 

and Enforcement opposed it, the offer of 

settlement would be contested and 

thereby deemed rejected, and thus the 

proceeding would continue to 

completion under the proposed Rule 

10.9200 Series. The contested offer of 

settlement would not be transmitted to 

the Office of Hearing Officers, CRO, or 

Hearing Panel or Extended Hearing 

Panel, and would not constitute a part 

of the record in any proceeding against 

the Respondent making the offer. 

Current Article 12, Rule 1(d) does not 

contain a comparable provision. The 

Exchange believes that its proposed rule 

would encourage Respondents to make 

reasonable offers of settlement that 

would be acceptable to Enforcement. 

Proposed Rule 10.9270(f) and (h) 

would address uncontested settlement 

offers. Under the proposed rule, if a 

hearing on the merits had not begun, the 

CRO could accept the settlement offer; 

if a hearing on the merits had begun, the 

Hearing Panel or Extended Hearing 

Panel could accept the settlement 

offer.53 If they did not, the offer would 

be deemed withdrawn and the matter 

would proceed under the proposed Rule 

10.9200 Series and the settlement offer 

would not be part of the record. Under 

current Article 12, Rule 1(d), where an 

offer of settlement is rejected by the 

CRO, the offer of settlement shall be 

deemed withdrawn and it will not be 

given consideration in the 


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determination of the issues involved in 

the disciplinary proceeding. 

As described below, if the offer of 

settlement were accepted by the CRO, 

Hearing Panel or Extended Hearing 

Panel, it would become final 10 days 

after being sent, together with an order 

of acceptance, to each Director and each 

member of the CFR, unless review by 

the Exchange Board is required 

pursuant to proposed Rule 

10.9310(a)(1)(A) or (B). The Exchange 

anticipates that the required acceptance 

by the CRO, Hearing Panel, or Extended 

Hearing Panel would help ensure 

objectivity and consistency among offers 

of settlement that are issued. The 

proposed rule change would also allow 

an offer of settlement to be called for 

review by the Exchange Board. The 

Exchange believes that this review 

mechanism provides an additional, 

appropriate check and balance to the 

proposed settlement process. 

Proposed Rule 10.9270(g) would 

provide that the proceeding under the 

proposed rule would conclude as of the 

date the order of acceptance is final, and 

the order of acceptance would 

constitute final disciplinary action of 

the Exchange. The sanction would take 

effect as set forth in the order. 

Proposed Rule 10.9270(i) would 

address disciplinary proceedings with 

multiple Respondents and permit 

settlement offers to be accepted or 

rejected as to any one or all of such 

Respondents. Current Article 12, Rule 

1(d) does not contain similar 

authorizations. 

Proposed Rule 10.9270(j) would 

provide that a Respondent may not be 

prejudiced by a rejected offer of 

settlement nor may it be introduced into 

evidence. Current Article 12, Rule 1(d) 

contains a substantially similar 

provision. 

Proposed Rule 10.9280 (Contemptuous 

Conduct) 

Proposed Rule 10.9280 would set 

forth sanctions for contemptuous 

conduct by a Party or attorney or other 

representative, which may include 

exclusion from a hearing or conference, 

and would set forth a process for 

reviewing such exclusions. The 

proposed Rule would also provide for 

adjournments in the event an exclusion 

is upheld to allow for the retention of 

new counsel or selection of a new 

representative, and would set forth the 

criteria for determining whether to grant 

an adjournment and the length of an 

adjournment. 

The Chief Hearing Officer would 

review exclusions. The Exchange 

believes that Respondents and their 

attorneys and representatives would 

have adequate procedural protections 

with a review by the Chief Hearing 

Officer. The Exchange’s current rules do 

not have similar procedures addressing 

contemptuous conduct. 

Proposed Rule 10.9290 (Expedited 

Disciplinary Proceedings) 

Under proposed Rule 10.9290, for any 

disciplinary proceeding, the subject 

matter of which also is subject to a 

temporary cease and desist proceeding 

initiated pursuant to proposed Rule 

10.9810 or a temporary cease and desist 

order, hearings would be required to be 

held and decisions rendered at the 

earliest possible time. The proposed 

Rule is identical to NYSE Arca Rule 

10.9290. The Exchange does not 

currently have a similar rule. 

Proposed Rule 10.9291 (Permanent 

Cease and Desist Orders) would govern 

the content, scope, form and delivery 

requirements of permanent cease and 

desist orders. Under proposed Rule 

10.9291(a), when a decision issued 

under proposed Rule 10.9268 or 

proposed Rule 10.9269 or an order of 

acceptance issued under proposed Rule 

10.9270 imposes a permanent cease and 

desist order, the decision shall: Order a 

Respondent (and any successor of a 

Respondent, where the Respondent is a 

Participant or Participant Firm) to cease 

and desist permanently from violating a 

specific rule or statutory provision; set 

forth the violation; and describe in 

reasonable detail the act or acts the 

Respondent (and any successor of a 

Respondent, where the Respondent is a 

Participant or Participant Firm) shall 

take or refrain from taking. The 

proposed Rule would also require 

Respondents that are a Participant or 

Participant Firm to deliver a copy of a 

permanent cease and desist order, 

within one business day of receiving it, 

to its covered persons. With the 

exception of conforming changes 

reflecting the Exchange’s membership, 

the text of the proposed Rule is 

substantially same as NYSE Arca Rule 

10.9291. The Exchange currently does 

not have a similar rule. 

Proposed Rules 10.9300 Through 

10.9310 

The Exchange’s appellate and call for 

review processes would be set forth in 

the Rule 10.9300 Series (Review of 

Disciplinary Proceeding by Exchange 

Board) and would be substantially the 

same as the current NYSE Arca process. 

Proposed Rule 10.9310 (Review by 

Exchange Board of Directors) would 

provide for one review at the Board of 

Directors level, and discontinue the 

current practice under Article 12, Rule 

5 whereby a decision by the Judiciary 

Committee is the final decision of the 

Exchange under subsection (a) except 

where the Board in its discretion 

determines to review a Judiciary 

Committee decision, as provided for in 

subsection (b). Under proposed Rule 

10.9310(b), upon review, and with the 

advice of the CFR, the Board may, by 

the affirmative vote of a majority of the 

Board then in office, sustain any 

determination or penalty imposed, 

(including the terms of any permanent 

cease and desist order), or both, modify 

or reverse any such determination, and 

increase, decrease or eliminate any such 

penalty, or impose any penalty 

permitted under the Exchange’s rules, as 

it deems appropriate. Unless the Board 

otherwise specifically directs, the 

determination and penalty, if any, of the 

Board after review shall be final and 

conclusive subject to the provisions for 

review of the Act. The Exchange 

believes that the proposed appellate 

review process would be fair and 

efficient and harmonize the Exchange’s 

appellate process with the process of the 

Exchange’s affiliates who have adopted 

similar disciplinary rules. 

Under proposed Rule 

10.9310(a)(1)(A), any Party, any 

Director, and any member of the CFR 

could require a review by the Exchange 

Board of any determination or penalty, 

or both, imposed by a Hearing Panel or 

Extended Hearing Panel under the 

proposed Rule 10.9200 Series, except 

that none of the aforementioned persons 

could request a review by the Exchange 

Board of a decision concerning an 

affiliate of the Exchange as that term is 

defined in Rule 12b–2 under the Act. 

Under current Article 12, Rule 5, there 

is no similar call for review process; 

only a Respondent or the Exchange may 

request review and that review is 

conducted by the Judiciary Committee, 

subject to the exceptions in Article 12, 

Rule 5(b). 

Moreover, under proposed Rule 

10.9310(a)(1)(A), a request for review 

would be made by filing with the 

Secretary a written request stating the 

basis and reasons for such review, 

within 25 days after notice of the 

determination and/or penalty was 

served upon the Respondent. However, 

any request for review of an offer of 

settlement determined to be 

uncontested after a hearing on the 

merits has begun under proposed Rule 

10.9270(f) that has been accepted by a 

Hearing Panel or Extended Hearing 

Panel would be governed by Rule 

10.9310(a)(1)(B)(i). The Secretary of the 

Exchange would give notice of any such 

request for review to the Parties. 

Under proposed Rule 

10.9310(a)(1)(B)(i), any Director and any 


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member of the CFR could require a 

review by the Board of any 

determination or penalty, or both, 

imposed in connection with an AWC 

under Rule 10.9216 or an offer of 

settlement determined to be 

uncontested before a hearing on the 

merits has begun under Rule 10.9270(f), 

except for a determination or penalty 

concerning an Exchange affiliate as 

defined in Rule 12b–2 under the Act. 

Under the proposed rule, a request for 

review shall be made by filing with the 

Secretary of the Exchange a written 

request therefor, which states the basis 

and reasons for such review, within 10 

days after a letter of acceptance, waiver, 

and consent or an offer of settlement has 

been sent to each Director and each 

member of the CFR pursuant to 

proposed Rule 0.9216(a)(4) or Rule 

10.9270(f)(3). The Secretary would give 

notice of any such request for review to 

the Parties. 

Under proposed Rule 

10.9310(a)(1)(B)(ii), any Party could 

require a review by the Exchange Board 

of any rejection by the CRO of a letter 

of acceptance, waiver, and consent 

under Rule 10.9216 or an offer of 

settlement determined to be 

uncontested before a hearing on the 

merits has begun under Rule 10.9270(f), 

except that no Party may request Board 

review of a rejection of an AWC or an 

offer of settlement concerning an 

Exchange affiliate as defined in Rule 

12b–2 under the Act. As proposed, a 

request for review shall be made by 

filing with the Secretary a written 

request stating the basis and reasons for 

such review within 25 days after 

notification pursuant to proposed Rule 

10.9216(a)(3) or Rule 10.9270(h) that a 

letter of acceptance, waiver, and 

consent, or an uncontested offer of 

settlement or an order of acceptance is 

not accepted by the CRO. The Secretary 

would provide notice of any such 

request for review to the Parties. 

Under current Article 12, Rule 5(a), 

the parties have 15 days from the date 

of service of notice of a decision, while 

under Article 12, Rule 5(b) the Board 

has no time period in which to request 

discretionary review of a Judiciary 

Committee decision. The proposed rule 

would apply a longer period to requests 

to review of contested determinations. 

Under proposed Rule 10.9310(a)(2), 

the Secretary would direct the Office of 

Hearing Officers to complete and 

transmit a record of the disciplinary 

proceeding in accordance with Rule 

10.9267. Within 21 days after the 

Secretary gives notice of a request for 

review to the Parties, or at such later 

time as the Secretary could designate, 

the Office of Hearing Officers would 

assemble and prepare an index to the 

record, transmit the record and the 

index to the Secretary, and serve copies 

of the index upon all Parties. The 

Hearing Officer who participated in the 

disciplinary proceeding, or the Chief 

Hearing Officer, would certify that the 

record transmitted to the Secretary was 

complete. Under Article 12, Rule 5(a), 

unless the Judiciary Committee decides 

to open the record for the introduction 

of evidence to hear argument, its review 

must be based on the factual record as 

certified to the Judiciary Committee by 

the Secretary and Board review of 

matters as provided in Article 12, Rule 

5(b) must be upon the record as certified 

to the Board by the Secretary. 

Under proposed Rule 10.9310(b), 

review by the Exchange Board would be 

based on oral arguments and written 

briefs and limited to consideration of 

the record before the Hearing Panel or 

Extended Hearing Panel. Under current 

Article 12, Rule 5, the Judiciary 

Committee has the discretion but is not 

required to hear oral argument. 

Moreover, the Judiciary Committee is 

not bound by the factual record as 

certified by the Secretary but can open 

the record for the introduction of 

evidence to hear argument. 

Proposed Rule 10.9310(b) further 

provides that, upon review, and with 

the advice of the CFR, the Board, by the 

affirmative vote of a majority of the 

Exchange Board then in office, could 

sustain any determination or penalty 

imposed, (including the terms of any 

permanent cease and desist order), or 

both, could modify or reverse any such 

determination, and could increase, 

decrease or eliminate any such penalty, 

or impose any penalty permitted under 

the Exchange’s rules, as it deems 

appropriate. Unless the Board otherwise 

specifically directs, its determination 

and penalty, if any, after review shall be 

final and conclusive subject to the 

provisions for review of the Act. 

As noted above, the Exchange would 

discontinue the current practice under 

Article 12, Rule 5 whereby a decision by 

the Judiciary Committee is a final 

decision of the Exchange except where 

the Board determines to review the 

Judiciary Committee’s decision on a 

discretionary basis. As proposed, under 

Rule 10.9310(b), the Board’s 

determination, with the advice of the 

CFR, if any, would be final and 

conclusive subject to the provisions for 

review of the Act unless the Board 

specifically directs otherwise. In 

addition, NYSE Arca Rule 10.9310(b) 

permits the CFR to appoint an Appeals 

Panel to conduct a review and make a 

recommendation to the CFR. NYSE Arca 

retained appeals panels from its legacy 

disciplinary rules. The Exchange does 

not currently have a similar process and 

does not propose to follow NYSE Arca 

on this point. Proposed Rule 10.9310(b) 

accordingly omits a comparable 

provision. 

Under proposed Rule 10.9310(c), 

notwithstanding the foregoing, if either 

Party upon review applied to the 

Exchange Board for leave to adduce 

additional evidence, and showed to the 

satisfaction of the Exchange Board that 

the additional evidence was material 

and that there were reasonable grounds 

for failure to adduce it before the 

Hearing Panel or Extended Hearing 

Panel, the Exchange Board could 

remand the case for further proceedings, 

in whatever manner and on whatever 

conditions the Exchange Board 

considered appropriate. Article 12, Rule 

5 does not contain a remand provision. 

Under proposed Rule 10.9310(d), 

notwithstanding any other provisions of 

the proposed Rule 10.9000 Series, the 

CEO could not require a review by the 

Exchange Board under this rule and 

would be recused from deliberations 

and actions of the Exchange Board with 

respect to such matters. Current Article 

12, Rule 5 does not have a comparable 

provision. 

Proposed Rules 10.9500 Through 

10.9527 

The proposed Rule 10.9500 Series 

(Other Proceedings) would relate to 

other proceedings under the Exchange 

Rules. 

The proposed Rule 10.9520 Series 

would set forth procedures for a covered 

person to become or remain associated 

with a Participant or Participant Firm 

notwithstanding the existence of a 

statutory disqualification as defined in 

Section 3(a)(39) of the Act, and for a 

Participant, Participant Firm or covered 

person to obtain relief from the 

eligibility or qualification requirements 

of the Exchange’s Rules, which the 

proposed rule refers to as ‘‘eligibility 

proceedings.’’ The proposed rules are 

substantially similar to the NYSE Arca 

Rule 10.9520 Series. 

Proposed Rule 10.9521 (Purpose and 

Definitions) would add certain 

definitions relating to eligibility 

proceedings that are not currently part 

of the Exchange’s definitions, including 

‘‘Application,’’ ‘‘disqualified 

Participant,’’ ‘‘disqualified Participant 

Firm,’’ ‘‘disqualified person,’’ 

‘‘sponsoring Participant,’’ and 

‘‘sponsoring Participant Firm.’’ 

Proposed Rule 10.9522 (Initiation of 

Eligibility Proceeding; Member 

Regulation Consideration) would govern 

the initiation of an eligibility proceeding 

by the Exchange and the obligation for 


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a Participant or Participant Firm to file 

an application or, for matters set forth 

in proposed Rule 10.9522(e)(1), a 

written request for relief if the 

Participant or Participant Firm 

determines prior to receiving a notice 

under Rule 10.9522(a) that (1) it has 

become a disqualified Participant or 

Participant Firm; (2) a person associated 

with such Participant or Participant 

Firm or whose association is proposed 

by an applicant for membership under 

Exchange rules has become a 

disqualified person; or (3) the 

Participant or Participant Firm or 

applicant for membership under 

Exchange rules wishes to sponsor the 

association of a covered person who is 

a disqualified person. The proposed rule 

also contains provisions governing 

withdrawal of an application or written 

request for relief as well as the 

application of the prohibitions against 

ex parte communications set forth in 

Rule 10.9143 to the Rule 10.9520 Series. 

Finally, the proposed rule describes 

the matters that may be approved by the 

Department of Member Regulation 

(‘‘Member Regulation’’) without the 

filing of an application and after filing 

an application, and the rights of a 

disqualified Participant or Participant 

Firm, Sponsoring Participant or 

Participant Firm, Disqualified Person, 

and Member Regulation where Member 

Regulation does not approve a written 

request for relief from the eligibility 

requirements pursuant to proposed Rule 

10.9522(e)(1) or an application pursuant 

to proposed Rule 10.9522(e)(2). 

Proposed Rule 10.9523 (Acceptance of 

Member Regulation Recommendations 

and Supervisory Plans by Consent 

Pursuant to Exchange Act Rule 19h–1) 

would generally allow Member 

Regulation to recommend a supervisory 

plan to which a disqualified Participant 

or Participant Firm, or sponsoring 

Participant or Participant Firm and/or 

disqualified person, as the case may be, 

could consent and by doing so, waive 

the right to hearing or appeal if the plan 

is accepted and the right to claim bias 

or prejudgment, prohibited ex parte 

communications or the separation of 

functions prohibitions. 

Specifically, under subsection (a), 

which would apply to all 

disqualifications except those arising 

solely from findings or orders specified 

in Section 15(b)(4)(D), (E) or (H) of the 

Act or arising under Section 3(a)(39)(E) 

of the Act, a disqualified Participant or 

Participant Firm, sponsoring Participant 

or Participant Firm, and/or disqualified 

person (the ‘‘Disqualified Person’’), 

would execute a letter consenting to the 

imposition of the supervisory plan. By 

submitting such a letter, the 

Disqualified Person waive the right to a 

hearing before a Hearing Panel and any 

right of appeal to the Exchange Board, 

the Commission, and the courts, or 

otherwise challenge the validity of the 

supervisory plan, if the supervisory plan 

is accepted; any right to claim bias or 

prejudgment by Member Regulation, the 

CRO, the Board, or any member of the 

Board, in connection with such person’s 

or body’s participation in discussions 

regarding the terms and conditions of 

Member Regulation’s recommendation 

or the supervisory plan, or other 

consideration of the recommendation or 

supervisory plan, including acceptance 

or rejection of such recommendation or 

supervisory plan; and any right to claim 

that a person violated the ex parte 

prohibitions of proposed Rule 10.9143 

or the separation of functions 

prohibitions of proposed Rule 10.9144, 

in connection with such person’s or 

body’s participation in discussions 

regarding the terms and conditions of 

the recommendation or supervisory 

plan, or other consideration of the 

recommendation or supervisory plan, 

including acceptance or rejection of 

such recommendation or supervisory 

plan. 

If a recommendation or supervisory 

plan is rejected, the Disqualified Person 

would be bound by the waivers made 

under proposed paragraph (a)(1) for 

conduct by persons or bodies occurring 

during the period beginning on the date 

the supervisory plan was submitted and 

ending upon the rejection of the 

supervisory plan and would have the 

right to proceed under the proposed rule 

and proposed Rule 10.9524, as 

applicable. Under subsection (a), if a 

Disqualified Person executes a letter 

consenting to the supervisory plan, such 

letter would be submitted to the CRO by 

Member Regulation with a proposed 

Notice under Act Rule 19h–1, where 

required. The CRO may accept or reject 

Member Regulation’s recommendation 

and the supervisory plan. If accepted, 

the recommendation and supervisory 

plan would be deemed final and, where 

required, the proposed Notice under 

Rule 19h–1 of the Act would be filed by 

the Exchange. If rejected by the CRO, 

the Exchange would be able to take any 

other appropriate action with respect to 

the Disqualified Person. The 

Disqualified Person would not be 

prejudiced by the execution of the letter 

consenting to the supervisory plan, and 

the letter could not be introduced into 

evidence in any proceeding. 

Under subsection (b), which would 

apply to disqualifications arising solely 

from findings or orders specified in 

Section 15(b)(4)(D), (E) or (H) of the Act 

or arising under Section 3(a)(39)(E) of 

the Act, in approving an application 

under proposed Rule 10.9522(e)(2)(F), 

Member Regulation would be 

authorized to accept the membership or 

continued membership of a Disqualified 

Person or the association or continuing 

association of a Disqualified Person 

pursuant to a supervisory plan where 

the Disqualified Person would consent 

to the imposition of the supervisory 

plan. The Disqualified Person would 

execute a letter consenting to the 

imposition of the supervisory plan and 

Member Regulation would prepare a 

proposed Notice under Rule 19h–1 of 

the Act where required to be filed by the 

Exchange. 

By submitting an executed letter 

consenting to a supervisory plan, a 

Disqualified Person would waive the 

right of appeal to the Board, the 

Commission, and the courts, or 

otherwise challenge the validity of the 

supervisory plan, if the supervisory plan 

is accepted; any right to claim bias or 

prejudgment by Member Regulation or 

the CRO in connection with such 

person’s or body’s participation in 

discussions regarding the terms and 

conditions of Member Regulation’s 

recommended supervisory plan, or 

other consideration of the supervisory 

plan, including acceptance or rejection 

of such recommendation or supervisory 

plan; and any right to claim that a 

person violated the ex parte 

prohibitions of proposed Rule 10.9143 

or the separation of functions 

prohibitions of proposed Rule 10.9144, 

in connection with such person’s or 

body’s participation in discussions 

regarding the terms and conditions of 

the supervisory plan, or other 

consideration of the supervisory plan, 

including acceptance or rejection of 

such supervisory plan. If the 

supervisory plan is rejected, the 

Disqualified Person would be bound by 

the waivers made under proposed 

paragraph (b)(1) for conduct by persons 

or bodies occurring during the period 

beginning on the date the supervisory 

plan was submitted and ending upon 

the rejection of the supervisory plan and 

would have the right to proceed under 

proposed Rule 10.9524 (Exchange Board 

Consideration), which would allow a 

request for review by the applicant to 

the Exchange Board. Proposed Rule 

10.9527 would provide that a filing of 

an application for review would not stay 

the effectiveness of final action by the 

Exchange unless the Commission 

otherwise ordered. To maintain 

consistency with NYSE Arca’s rule 

numbering, proposed Rules 10.9525 and 

10.9526 would be designated 

‘‘Reserved.’’ 


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54The Exchange has filed a separate filing to 

adopt a new Rule 11.2210 governing 

communications with the public that would 

incorporate FINRA Rule 2210 by reference and 

rename and amend Article 8, Rule 13 governing 

advertising, promotion and telemarketing. See note 

17 [sic], supra. Accordingly, proposed Rule 10.9551 

would not be operative until approval of the 

Exchange’s companion rule filing. 

55The Exchange believes that the provision for 

automatic expulsion or bar after three months is 

consistent with Section 6 of the Act because the 

Respondent would have ample notice and 

opportunity to be heard under proposed Rule 

10.9552, the proposed rule is substantially the same 

as NYSE Arca’s and FINRA’s counterpart rules, and 

the Commission has upheld at least one bar under 

a prior version of FINRA’s rule. See, e.g., Dennis A. 

Pearson, Jr., Securities Exchange Act Rel. Nos. 

54913 (December 11, 2006) (dismissing application 

for review by associated person barred under NASD 

Rule 9552(h)) and 55597A (April 6, 2007) (denying 

motion for reconsideration). 

56Proposed Rule 10.9553 would be designated 

‘‘Reserved’’ to maintain consistency with NYSE 

Arca’s rule numbering. 

Proposed Rules 10.9550 Through 

10.9559 

Proposed Rules 10.9550 through 

10.9559 would govern expedited 

proceedings. 

Under proposed Rule 10.9551 (Failure 

to Comply with Public Communication 

Standards Pursuant to FINRA Rule 2210 

as Incorporated by Reference in Rule 

11.2210), Regulatory Staff could issue a 

written notice requiring a Participant or 

Participant Firm to file communications 

with FINRA’s Advertising Regulation 

Department at least 10 days prior to use 

if the staff determined that the 

Participant or Participant Firm had 

departed from the standards of proposed 

Rule 11.2210 (Communications with the 

Public).54 The notice would state the 

specific grounds and include the factual 

basis for the action as well as the 

effective date. The Participant or 

Participant Firm could file a written 

request for a hearing with the Office of 

Hearing Officers pursuant to proposed 

Rule 10.9559. A Participant or 

Participant Firm would be required to 

set forth with specificity any and all 

defenses to the action in its request for 

a hearing. Pursuant to proposed Rules 

10.8310(a) and 10.9559(n), a Hearing 

Officer or, if applicable, Hearing Panel, 

could approve, modify or withdraw any 

and all sanctions or limitations imposed 

by the staff’s notice, and impose any 

other fitting sanction. A Participant or 

Participant Firm subject to a pre-use 

filing requirement also could file a 

written request for modification or 

termination of the requirement. FINRA 

Rule 2210 proposed to be incorporated 

by reference in proposed Rule 11.2210 

references the procedures in FINRA 

Rules 9551 and 9559, which are 

substantially the same as proposed 

Rules 10.9551 and 10.9559. 

Under proposed Rule 10.9552 (Failure 

to Provide Information or Keep 

Information Current) would establish 

procedures in the event that a 

Participant, Participant Firm or covered 

person failed to provide any 

information, report, material, data, or 

testimony requested or required to be 

filed under the Exchange’s rules, or 

failed to keep its membership 

application or supporting documents 

current. In the event of the foregoing, 

under proposed Rule 10.9552, the 

Participant, Participant Firm or covered 

person could be suspended if corrective 

action were not taken within 21 days 

after service of notice. A Participant, 

Participant Firm or covered person 

served with a notice could request a 

hearing within the 21-day period. A 

Participant, Participant Firm or covered 

person subject to a suspension could file 

a written request for termination of the 

suspension on the ground of full 

compliance. A Participant, Participant 

Firm or covered person suspended 

under the proposed rule that failed to 

request termination of the suspension 

within three months of issuance of the 

original notice of suspension would 

automatically be expelled or barred.55

Proposed Rule 10.9552 is substantially 

the same as its NYSE Arca counterpart 

except for references reflecting the 

Exchange’s membership. Under the 

Exchange’s current rules, there is no 

procedure that relates to failure to keep 

a membership application or supporting 

documents current. Under current 

Article 6, Rule 9(a), a Participant or 

partner, officer, director or other person 

associated with a Participant or other 

person or entity subject to the 

jurisdiction of the Exchange that fails to 

submit requested documents or 

information to the Exchange is subject 

to formal disciplinary action. The 

Exchange’s current rules do not 

authorize an expedited proceeding 

against persons who fail to submit 

documents or information. 

Proposed Rule 10.9554 (Failure to 

Comply with an Arbitration Award or 

Related Settlement or an Order of 

Restitution or Settlement Providing for 

Restitution) 56 would contain similar 

procedures and consequences as 

proposed Rule 10.9552 relating to a 

failure to comply with an arbitration 

award or related settlement or an 

Exchange order of restitution or 

Exchange settlement agreement 

providing for restitution. Under 

proposed Rule 10.9554, if a Participant, 

Participant Firm or covered person fails 

to comply with an arbitration award or 

a settlement agreement related to an 

arbitration or mediation under the 

Exchange’s rules, or an Exchange order 

of restitution or Exchange settlement 

agreement providing for restitution, 

Regulatory Staff could provide written 

notice to such Participant, Participant 

Firm or covered person stating that the 

failure to comply within 21 days of 

service of the notice will result in a 

suspension or cancellation of 

membership or a suspension from 

associating with any Participant or 

Participant Firm. Proposed Rule 10.9554 

is substantially the same as NYSE Arca 

Rule 10.9554 except for references 

reflecting the Exchange’s membership. 

The Exchange lacks a comparable rule 

setting forth a uniform notice period 

and specific procedures to be followed 

in the event of suspension or 

cancellation. 

Current Article 14, Rule 1(e) simply 

provides that any Participant, or 

covered person who fails to honor an 

arbitration award can be subject to 

disciplinary proceedings in accordance 

with Article 12. To add clarity to the 

Exchange’s rules, the Exchange would 

delete the phrase ‘‘in accordance with 

Article 12’’ following ‘‘disciplinary 

proceedings’’ in Article 14, Rule 1(e). 

Proposed Rule 10.9555 (Failure to 

Meet the Eligibility or Qualification 

Standards or Prerequisites for Access to 

Services) would govern the failure to 

meet the eligibility or qualification 

standards or prerequisites for access to 

services offered by the Exchange. Under 

proposed Rule 10.9555, if a Participant, 

Participant Firm or covered person did 

not meet the eligibility or qualification 

standards set forth in the Exchange’s 

rules, Exchange staff could provide 

written notice to such Participant, 

Participant Firm or covered person that 

the failure to become eligible or 

qualified will result in a suspension or 

cancellation of membership or a 

suspension or bar from associating with 

any Participant or Participant Firm. 

Similarly, if a Participant, Participant 

Firm or covered person did not meet the 

prerequisites for access to services 

offered by the Exchange or a Participant 

or Participant Firm thereof or could not 

be permitted to continue to have access 

to services offered by the Exchange or a 

Participant or Participant Firm thereof 

with safety to investors, creditors, 

Participant, Participant Firms or the 

Exchange, Exchange staff could provide 

written notice to such Participant, 

Participant Firm or covered person 

limiting or prohibiting access to services 

offered by the Exchange or a Participant 

or Participant Firm thereof. The 

limitation, prohibition, suspension, 

cancellation, or bar referenced in the 

notice would become effective 14 days 

after service of the notice except that the 


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57As discussed below, the Exchange proposes to 

adopt a new Rule 11.21 prohibiting disruptive 

quoting and trading activity. 

effective date for a notice of a limitation 

or prohibition on access to services 

offered by the Exchange or a Participant, 

or Participant Firm thereof with respect 

to services to which the Participant, 

Participant Firm or covered person does 

not have access would be upon service 

of the notice. 

Proposed Rule 10.9556 (Failure to 

Comply with Temporary and Permanent 

Cease and Desist Orders) would provide 

procedures and set forth consequences 

for a failure to comply with temporary 

and permanent cease and desist orders 

issued under the Rule 10.9200, 10.9300 

or 10.9800 Series. The Exchange does 

not currently have rules governing cease 

and desist orders or that sets forth 

procedures and consequences for a 

failure to comply with a cease and 

desist order. The proposed rule is the 

substantially the same as NYSE Arca 

Rule 10.9556 except for references 

reflecting the Exchange’s membership. 

Proposed Rule 10.9557 (Procedures 

for Regulating Activities Under Article 

7, Rules 3 or 8 Regarding a Participant 

or Participant Firm Experiencing 

Financial or Operational Difficulties) 

would allow the Exchange to issue a 

notice directing a Participant or 

Participant Firm comply with the 

provisions of Article 7, Rule 3 (Net 

Capital and Aggregate Indebtedness) or 

Article 7, Rule 8 (Operational 

Capability) or otherwise directing it to 

restrict its business activities. Article 7, 

Rule 3 establishes minimum net capital 

requirements and Article 7, Rule 8 

governs the operational capability of 

Participants and Participant Firms. 

Article 7, Rule 3 and Rule 8 provide that 

the Exchange can take certain actions 

when it appears that a Participant Firm 

is unable or unwilling to comply with 

the requirements set forth in those rules. 

Proposed Rule 10.9557 would govern 

the process to be followed when the 

Exchange determines to take the 

prescribed actions under Article 7, 

Rules 3 and 8. Except for these rule 

references and references to reflect the 

Exchange’s membership, the proposed 

rule is otherwise substantially the same 

as NYSE Arca Rule 10.9557. 

The requirements and/or restrictions 

imposed by a notice issued and served 

under the proposed Rule would be 

immediately effective, except that a 

timely request for a hearing would stay 

the effective date for ten business days 

after service of the notice or until the 

Office of Hearing Officers issues a 

written order under proposed Rule 

10.9559(o)(4)(A) (whichever period is 

less), unless the Exchange’s CRO (or 

such other senior officer as the CRO 

may designate) determines that such a 

stay cannot be permitted with safety to 

investors, creditors or other Participants 

or Participant Firms. Such a 

determination by the Exchange’s CRO 

(or such other senior officer as the CRO 

may designate) would not be appealable 

and an extension of the stay period 

would not be permitted. Under the 

proposed Rule, where a timely request 

for a hearing stays the action for ten 

business days after service of the notice 

or until the Office of Hearing Officers 

issues a written order under Rule 

10.9559(o)(4)(A) (whichever period is 

less), the notice would not be deemed 

to have taken effect during that entire 

period. Any requirements and/or 

restrictions imposed by an effective 

notice would remain in effect unless 

Exchange staff removes or reduces the 

requirements and/or restrictions 

pursuant to a letter of withdrawal of the 

notice issued as set forth in proposed 

Rule 10.9557(g)(2). 

Proposed Rule 10.9558 (Summary 

Proceedings for Actions Authorized by 

Section 6(d)(3) of the Exchange Act) 

would allow the Exchange’s CRO to 

provide written authorization to 

Exchange staff to issue a written notice 

for a summary proceeding for an action 

authorized by Section 6(d)(3) of the Act. 

The list of proceedings in the proposed 

Rule would track the types of 

proceedings currently provided for in 

Article 13, Rule 2(a), which governs 

summary proceedings in accordance 

with Section 6(d)(3) of the Act. The 

Exchange does not have a rule 

comparable to NYSE Arca Rule 11.2(a)– 

(f), hence the Exchange will not include 

a subsection (4) to proposed Rule 

10.9558(a). 

The notice issued under the proposed 

Rule would be immediately effective; a 

Participant, Participant Firm or covered 

person would have seven days to 

request a hearing. As noted, emergency 

proceedings are currently authorized 

under Article 13, Rule 2(a)(1), under 

which the Exchange has authority to, in 

part, (i) suspend a Participant or 

Participant Firm or Associated Person 

that is expelled or suspended by another 

SRO or an Associated Person that is 

barred or suspended from being 

associated with a member of an SRO; (ii) 

suspend a Participant, Participant Firm, 

or any other covered person who is in 

financial or operating difficulty; or (iii) 

limit or prohibit any person with 

respect to access to Exchange services in 

certain circumstances. Article 13, Rule 

2(b) provides that any person subject to 

an action under Article 13, Rule 2(a) has 

five days after notification of the action 

to file a written notice of appeal with 

the secretary of the Exchange. The 

Exchange would retain the seven day 

period in NYSE Arca Rule 10.9558 in 

order to harmonize with its affiliates. 

The Exchange believes that the seven 

day period to request a hearing is not 

unreasonable given the summary nature 

of the action. The proposed rule is 

substantially the same as its NYSE Arca 

counterpart except for references 

reflecting the Exchange’s membership 

and the reference to NYSE Arca Rule 

11.2(a)–(f), which has no counterpart on 

the Exchange. 

Proposed Rule 10.9559 (Hearing 

Procedures for Expedited Proceedings 

Under the Rule 10.9550 Series) would 

set forth uniform hearing procedures for 

all expedited proceedings under the 

proposed Rule 10.9550 Series. 

Currently, emergency suspensions 

under Article 13, Rule 2 utilize the 

Article 15 rules, which are used for 

hearings and appeals from certain 

decisions made by the Exchange 

pursuant to the Rules. The proposed 

rule is substantially the same as its 

NYSE Arca counterpart except for 

references reflecting the Exchange’s 

membership. 

Proposed Rule 10.9560 (Expedited 

Suspension Proceeding) would set forth 

procedures for issuing suspension 

orders, immediately prohibiting a 

Participant, Participant Firm or covered 

person from conducting continued 

disruptive quoting and trading activity 

on the Exchange and would also 

provide the Exchange the authority to 

order a Participant, Participant Firm or 

covered person to cease and desist from 

providing access to the Exchange to a 

client that is conducting disruptive 

quoting and trading activity. The 

proposed Rule is substantially the same 

as NYSE Arca Rule 10.9560 except for 

changes reflecting the Exchange’s 

membership. 

Proposed Rule 10.9560(a)(1) provides 

that, with the prior written 

authorization of the CRO or such other 

senior officers as the CRO may 

designate, Enforcement may initiate an 

expedited suspension proceeding with 

respect to alleged violations of Rule 

11.21 (Disruptive Quoting and Trading 

Activity Prohibited).57 Proposed Rule 

10.9560(a) would also set forth the 

requirements for notice and service 

((a)(2)), and the content of such notice 

((a)(3)) pursuant to the Rule. 

Proposed Rule 10.9560(b) would 

govern the appointment of a Hearing 

Panel as well as potential 

disqualification or recusal of Hearing 

Officers or Panelists. The proposed 

provision is consistent with proposed 

Rule 10.9231(b) and (c), which govern 


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the appointment of a Hearing Panel or 

Extended Hearing Panel to conduct 

disciplinary proceedings, and proposed 

Rules 10.9233 (Hearing Panel or 

Extended Hearing Panel: Recusal and 

Disqualification of Hearing Officers) and 

10.9234 (Hearing Panel or Extended 

Hearing Panel: Recusal and 

Disqualification of Panelists), which 

would establish the processes for 

recusal and disqualification of Hearing 

Officers or Panelists. Proposed Rule 

10.9233 provides for a Hearing Officer 

to be recused in the event he or she has 

a conflict of interest or bias or other 

circumstances exist where his or her 

fairness might reasonably be questioned. 

In addition to recusal initiated by such 

a Hearing Officer, a party to the 

proceeding would be permitted to file a 

motion to disqualify a Hearing Officer. 

This is similar to the requirements 

under proposed Rule 10.9234 for 

Panelists. However, due to the 

compressed schedule pursuant to which 

the process would operate under Rule 

10.9560, the proposed rule would 

require such motion to be filed no later 

than 5 days after the announcement of 

the Hearing Panel and the Exchange’s 

brief in opposition to such motion 

would be required to be filed no later 

than 5 days after service thereof. 

Under proposed Rule 10.9560(c)(1), 

the hearing would be held not later than 

15 days after service of the notice 

initiating the suspension proceeding, 

unless otherwise extended by the 

Hearing Officer with the consent of the 

Parties for good cause shown. In the 

event of a recusal or disqualification of 

a Hearing Officer or Panelist, the 

hearing shall be held not later than five 

days after a replacement Hearing Officer 

or Panelist is appointed. Under 

proposed Rule 10.9560(c)(2), a notice of 

date, time, and place of the hearing shall 

be served on the Parties not later than 

seven days before the hearing, unless 

otherwise ordered by the Hearing 

Officer. Under the proposed Rule, 

service shall be made by personal 

service or overnight commercial courier 

and the notice shall be effective upon 

service. 

Proposed Rule 10.9560(c) would also 

govern how the hearing is conducted, 

including the authority of Hearing 

Officers ((c)(3)), witnesses ((c)(4)), 

additional information that may be 

required by the Hearing Panel ((c)(5)), 

the requirement that a transcript of the 

proceeding be created and details 

related to such transcript ((c)(6)), and 

details regarding the creation and 

maintenance of the record of the 

proceeding ((c)(7)). Proposed Rule 

10.9560(c)(8) would also provide that if 

a Respondent fails to appear at a hearing 

for which it has notice, the allegations 

in the notice and accompanying 

declaration may be deemed admitted, 

and the Hearing Panel may issue a 

suspension order without further 

proceedings. 

Finally, as proposed, if Enforcement 

fails to appear at a hearing for which it 

has notice, the Hearing Panel may order 

that the suspension proceeding be 

dismissed. 

Under proposed Rule 10.9560(d)(1), 

the Hearing Panel would be required to 

issue a written decision stating whether 

a suspension order would be imposed. 

The Hearing Panel would be required to 

issue the decision not later than 10 days 

after receipt of the hearing transcript, 

unless otherwise extended by the 

Hearing Officer with the consent of the 

Parties for good cause shown. The 

proposed Rule would state that a 

suspension order shall be imposed if the 

Hearing Panel finds by a preponderance 

of the evidence that the alleged 

violation specified in the notice has 

occurred and that the violative conduct 

or continuation thereof is likely to result 

in significant market disruption or other 

significant harm to investors. 

Proposed Rule 10.9560(d)(2) would 

also describe the content, scope and 

form of a suspension order. As 

proposed, under proposed Rule 

10.9560(d)(2)(A), a suspension order 

shall be limited to ordering a 

Respondent to cease and desist from 

violating Rule 11.21, and/or to ordering 

a Respondent to cease and desist from 

providing access to the Exchange to a 

client of Respondent that is causing 

violations of Rule 11.21. Under 

proposed Rule 10.9560(d)(2)(B), a 

suspension order shall also set forth the 

alleged violation and the significant 

market disruption or other significant 

harm to investors that is likely to result 

without the issuance of an order. The 

order shall describe in reasonable detail 

the act or acts the Respondent is to take 

or refrain from taking, and suspend such 

Respondent unless and until such 

action is taken or refrained from 

((d)(2)(C)). Finally, the order shall 

include the date and hour of its issuance 

((d)(2)(D)). As proposed, under 

proposed paragraph (d)(3), a suspension 

order would remain effective and 

enforceable unless modified, set aside, 

limited, or revoked pursuant to 

proposed paragraph (e), as described 

below. Finally, paragraph (d)(4) would 

require service of the Hearing Panel’s 

decision and any suspension order by 

personal service or overnight 

commercial courier. 

Proposed Rule 10.9560(e) would 

provide that at any time after the 

Respondent is served with a suspension 

order, a Party could apply to the 

Hearing Panel to have the order 

modified, set aside, limited, or revoked. 

The filing of an application to have a 

suspension order modified, set aside, 

limited, or revoked under the proposed 

Rule would not stay the effectiveness of 

the suspension order. 

For example, if a suspension order 

suspends Respondent unless and until 

Respondent ceases and desists 

providing access to the Exchange to a 

client of Respondent, and after the order 

is entered the Respondent complies, the 

Hearing Panel can modify the order to 

lift the suspension portion of the order 

while keeping in place the cease and 

desist portion of the order. With its 

broad modification powers, the Hearing 

Panel also maintains the discretion to 

impose conditions upon the removal of 

a suspension—for example, the Hearing 

Panel could modify an order to lift the 

suspension portion of the order in the 

event a Respondent complies with the 

cease and desist portion of the order but 

additionally order that the suspension 

will be re-imposed if Respondent 

violates the cease and desist provisions 

of the modified order in the future. The 

Hearing Panel generally would be 

required to respond to the request in 

writing within 10 days after receipt of 

the request. An application to modify, 

set aside, limit or revoke a suspension 

order would not stay the effectiveness of 

the suspension order. 

Proposed Rule 10.9560(f) would 

describe the call for review process by 

the Exchange Board. Specifically, the 

proposed Rule would provide that if 

there is no pending application to the 

Hearing Panel to have a suspension 

order modified, set aside, limited, or 

revoked, the Board, in accordance with 

proposed Rule 10.9310 (Review by 

Exchange Board), may call for review 

the Hearing Panel decision on whether 

to issue a suspension order. Further, the 

proposed Rule would provide that a call 

for review by the Exchange Board shall 

not stay the effectiveness of a 

suspension order. 

Finally, proposed Rule 10.9560(g) 

would generally provide that sanctions 

issued under proposed Rule 10.9560 

would constitute final and immediately 

effective disciplinary sanctions imposed 

by the Exchange, and that the right to 

have any action under the Rule 

reviewed by the Commission would be 

governed by Section 19 of the Act. The 

filing of an application for review would 

not stay the effectiveness of a 

suspension order unless the 

Commission otherwise ordered. 


khammond on DSKJM1Z7X2PROD with NOTICES2
35062 Federal Register / Vol. 87, No. 110 / Wednesday, June 8, 2022 / Notices 

58As previously noted, the Exchange has filed a 

separate filing to adopt a new Rule 11.2210 

governing communications with the public that 

would incorporate FINRA Rule 2210 by reference 

and rename and amend Article 8, Rule 13 governing 

advertising, promotion and telemarketing. See note 

17, supra. Accordingly, proposed Rule 10.9610 

would not be operative with respect to proposed 

Rule 11.2210 until approval of the Exchange’s 

companion rule filing. 

59Exchange rules providing for exemptive relief 

would be the two proposed rules governing 

communications with the public and the 

submission of automated trading data. The 

Exchange does not have a rule analogous to NYSE 

Arca Rule 2.5. Except for references to Exchange 

rules specifying exemptions and references to 

reflect the Exchange’s membership, the proposed 

rule is otherwise substantially the same as NYSE 

Arca Rule 10.9610. 

60Under proposed Rule 10.9610(c), a Participant 

or Participant Firm that files an application under 

Rule 10.9610 would be referred to as an 

‘‘Applicant’’ thereafter in the proposed Rule 

10.9600 Series. 

61NYSE Arca Rule 10.9810 references Section 

10(b) of the Act and Rule 10b–5 thereunder and 

Exchange Act Rules 15g–1 through 15g–9. Article 

9, Rule 2 is the Exchange’s equivalent to NYSE Arca 

Rules 9.2010–E and 9.2020–E. 

Proposed Rule 10.9600 Series 

(Procedures for Exemptions) 

The Exchange proposes to adopt a 

new Rule 10.9600 Series, which would 

provide procedures for exemptions. 

Under proposed Rule 10.9610 

(Application), a Participant or 

Participant Firm could seek exemptive 

relief as permitted under proposed Rule 

10.8211 (Automated Submission of 

Trading Data Requested by the 

Exchange) or proposed Rule 11.2210 

(Communications with the Public) 58 by 

filing a written application with the 

appropriate department or staff of the 

Exchange and provide a copy of the 

application to the CRO.59

Under proposed Rule 10.9620 

(Decision), after considering the 

application, the Exchange staff would be 

required to issue a written decision 

setting forth its findings and 

conclusions. The decision would be 

served on the Applicant 60 pursuant to 

proposed Rules 10.9132 and 10.9134. 

After the decision is served on the 

Applicant, the application and decision 

may be publicly available. Under 

proposed Rule 10.9630 (Appeal), an 

Applicant that wished to appeal the 

decision would be required to file a 

written notice of appeal with the 

Exchange’s CRO within 15 days after 

service of the decision. 

Under proposed Rule 10.9630(e), the 

CRO would affirm, modify, or reverse 

the decision issued under proposed 

Rule 10.9620 and issue a written 

decision setting forth his or her findings 

and conclusions and serve the decision 

on the Applicant. The decision would 

be served pursuant to proposed Rules 

10.9132 and 10.9134, would be effective 

upon service, and would constitute final 

action of the Exchange. The Exchange 

does not have a comparable rule. 

Proposed Rule 10.9700 Series 

To maintain consistency with NYSE 

Arca’s rule numbering conventions, the 

Rule 10.9700 Series would be marked 

‘‘Reserved.’’ 

Proposed Rule 10.9800 Series 

(Temporary Cease and Desist Orders) 

The Exchange proposes a new Rule 

10.9800 Series to set forth procedures 

for issuing temporary cease and desist 

orders. The Exchange does not currently 

have a comparable rule. Except for 

cross-references to Exchange rules and 

references reflecting the Exchange’s 

membership, the proposed Rule 10.9800 

Series is substantially the same as the 

NYSE Arca Rule 10.9800 Series. 

Under proposed Rule 10.9810 

(Initiation of Proceeding), with the prior 

written authorization of the Exchange’s 

CRO or such other senior officers as the 

CRO may designate, Enforcement may 

initiate a temporary cease and desist 

proceeding with respect to alleged 

violations of Section 10(b) of the Act 

and Rule 10b–5 thereunder; Exchange 

Act Rules 15g–1 through 15g–9; Article 

9, Rule 2 (if the alleged violation is 

unauthorized trading, or misuse or 

conversion of customer assets, or based 

on violations of Section 17(a) of the 

Securities Act); and Article 9, Rules 9, 

10 11 and 12, which prohibit a variety 

of manipulative activity, by serving a 

notice (as described in proposed Rule 

10.9810(b)) on a Participant, Participant 

Firm or covered person or upon counsel 

or other person authorized to represent 

others under Rule 10.9141, and filing a 

copy thereof with the Office of Hearing 

Officers. The notice issued under the 

proposed Rule would be effective when 

service is complete. Proposed Rule 

10.9810(c) would provide that if the 

parties agree to the terms of the 

proposed temporary cease and desist 

order, the Hearing Officer shall have the 

authority to approve and issue the 

order. Finally, proposed Rule 10.9810(d) 

would provide that if Enforcement has 

not issued a complaint under Rule 

10.9211 relating to the subject matter of 

the temporary cease and desist 

proceeding and alleging violations of 

the rule or statutory provision specified 

in the notice described in proposed 

paragraph (b), Enforcement shall serve 

and file such a complaint with the 

notice initiating the temporary cease 

and desist proceeding. Service of the 

complaint can be made in accordance 

with the service provisions in proposed 

Rule 10.9810(a). The proposed rule is 

substantially the same as its NYSE Arca 

counterpart except for references 

reflecting the Exchange’s membership 

and the underlying rule references.61

The Exchange does not have a 

comparable rule. 

Proposed Rule 10.9820 (Appointment 

of Hearing Officer and Hearing Panel) 

would govern the appointment of a 

Hearing Officer and Panelists. 

Under proposed Rule 10.9830 

(Hearing), the hearing would be held not 

later than 15 days after service of the 

notice and filing initiating the 

temporary cease and desist proceeding, 

unless otherwise extended by the Chief 

Hearing Officer or Deputy Chief Hearing 

Officer for good cause shown. Proposed 

Rule 10.9830 would govern how the 

hearing was conducted. 

Under proposed Rule 10.9840 

(Issuance of Temporary Cease and 

Desist Order by Hearing Panel), the 

Hearing Panel would be authorized to 

issue a written decision stating whether 

a temporary cease and desist order 

would be imposed. The Hearing Panel 

would be required to issue the decision 

not later than ten days after receipt of 

the hearing transcript, unless otherwise 

extended by the Chief Hearing Officer or 

Deputy Chief Hearing Officer for good 

cause shown. 

Under proposed Rule 10.9850 

(Review by Hearing Panel), at any time 

after the Office of Hearing Officers 

served the Respondent with a temporary 

cease and desist order, a Party could 

apply to the Hearing Panel to have the 

order modified, set aside, limited, or 

suspended. The Hearing Panel generally 

would be required to respond to the 

request in writing within ten days after 

receipt of the request unless extended 

by the Chief Hearing Officer or Deputy 

Chief Hearing Officer for good cause 

shown. Proposed Rule 10.9860 

(Violation of Temporary Cease and 

Desist Orders) would authorize the 

initiation of a suspension or 

cancellation of a Respondent’s 

association or membership or any fitting 

sanction under proposed Rule 10.9556 if 

the Respondent violated a temporary 

cease and desist order. 

Finally, proposed Rule 10.9870 

(Application to SEC for Review) would 

provide that temporary cease and desist 

orders issued under the proposed Rule 

10.9800 Series would constitute final 

and immediately effective disciplinary 

sanctions imposed by the Exchange, and 

that the right to have any action under 

this rule series reviewed by the 

Commission would be governed by 

Section 19 of the Act. The filing of an 

application for review would not stay 


khammond on DSKJM1Z7X2PROD with NOTICES2
Federal Register / Vol. 87, No. 110 / Wednesday, June 8, 2022 / Notices 35063 

62See, e.g., BZX Rule 12.15; NASDAQ General 9, 

Section 53. See also Securities Exchange Release 

No. 80804 (May 30, 2017), 82 FR 25887, 25888– 

25890 (June 5, 2017) (SR–NYSEMKT–2017–25) 

(Notice of filing discussing matters involving 

Biremis Corp. and Hold Brothers On-Line 

Investment Services, Inc.). 

63The composition and responsibilities of the 

ROC are described in the Second Amended and 

Restated CHX Bylaws (‘‘Exchange Bylaws’’), 

available here https://www.nyse.com/publicdocs/ 

nyse/regulation/nyse/NYSE_Chicago_Second_

Amended_and_Restated_Bylaws.pdf. The ROC 

consists of at least three members, each of whom 

shall be a Public Director of the Exchange. 

64See NYSE Arca Rule 3.3(a)(2)(A). 

65See, e.g., NYSE Arca Rule 3.3(a)(2)(B). 

66See Exchange Bylaws, Art. II, Sec. 2(a). 

67See id. 

68 15 U.S.C. 78f(b)(3). 

69See, e.g., NYSE Arca Rule 3.3(a)(2)(A). See 

generally Thirteenth Amended and Restated 

Operating Agreement of the NYSE, Section 

2.03(h)(iii); Twelfth Amended and Restated 

Operating Agreement of NYSE American, Section 

2.03(h)(iii); and Sixth Amended and Re-Stated 

Bylaws of NYSE National, Section 5.8. 

70 15 U.S.C. 78f(b). 

71 15 U.S.C. 78f(b)(5). 

72 15 U.S.C. 78f(b)(7). 

73The Exchange’s equivalent to the term 

‘‘member’’ in this context is ‘‘Participant’’ and 

‘‘Participant Firm.’’ 

the effectiveness of the temporary cease 

and desist order, unless the Commission 

otherwise ordered. 

Proposed Rule 11.21 (Disruptive 

Quoting and Trading Activity 

Prohibited) 

The Exchange proposes new Rule 

11.21 based on NYSE Arca Rule 11.21, 

NYSE American Rule 5220—Equities, 

and NYSE Rule 5220, which in turn are 

modeled on Commentary .03 to FINRA 

Rule 5210, that defines and prohibits 

two types of disruptive quoting and 

trading activity on the Exchange. The 

Exchange proposes to include this rule 

under Rule 11 because it is a business 

conduct trading practices rule. 

Proposed Rule 11.21(a) would 

prohibit Participant, Participant Firms 

and covered persons from engaging in or 

facilitating disruptive quoting and 

trading activity on the Exchange, as 

described in proposed Rule 11.21(b)(1) 

and (2), including acting in concert with 

other persons to effect such activity. The 

Exchange believes that it is necessary to 

extend the prohibition to situations 

when persons are acting in concert to 

avoid a potential loophole where 

disruptive quoting and trading activity 

is simply split between several brokers 

or customers. The Exchange also 

believes that, with respect to persons 

acting in concert perpetrating an 

abusive scheme, it is important that the 

Exchange have authority to act against 

the parties perpetrating the abusive 

scheme, whether it is one person or 

multiple persons. 

Proposed Rule 11.21(c) would provide 

that, unless otherwise indicated, the 

descriptions of disruptive quoting and 

trading activity do not require the facts 

to occur in a specific order in order for 

the Rule to apply. For instance, with 

respect to the pattern defined in 

proposed Rule 11.21(b)(1)(A)–(D), it is 

of no consequence whether a party first 

enters Displayed Orders and then 

Contra-side Orders or vice-versa. 

However, as proposed, it is required for 

supply and demand to change following 

the entry of the Displayed Orders. 

The Exchange believes that the 

proposed descriptions of disruptive 

quoting and trading activity articulated 

in the rule are consistent with the 

activities that have been identified and 

described in the client access cases 

described in the NYSE American notice 

and with the rules of other SROs.62

Proposed Article 2, Rule 4 (CFR) 

The Exchange proposes to create a 

CFR as a sub-committee of the ROC.63

As proposed, the CFR would replace the 

Judiciary Committee as the Exchange’s 

appellate body reviewing disciplinary 

decisions on behalf of the Board. The 

Judiciary Committee would retain the 

responsibility for reviewing disciplinary 

decisions under the legacy disciplinary 

rules. To effectuate this change, 

‘‘initiated pursuant to Article 12, Rule 

1’’ would be added to the first sentence 

of Article 2, Rule 3 governing the 

Judiciary Committee. 

As proposed, upon the effective date 

of the proposed disciplinary rules, the 

CFR would be responsible for reviewing 

disciplinary decisions and acting in an 

advisory capacity to the Board with 

respect to disciplinary matters. The 

current Judiciary Committee is limited 

to reviewing disciplinary decisions and 

does not act in an advisory capacity to 

the Board. The Exchange proposes that 

the CFR, like the current NYSE Arca 

CFR, would also advise the Board with 

respect to disciplinary matters. Unlike 

the NYSE Arca CFR, the Exchange does 

not propose that the CFR would review 

determinations to limit or prohibit the 

continued listing of an issuer’s 

securities on the Exchange or act in an 

advisory capacity to the Board with 

respect to the listing and delisting of 

securities because the Exchange is not a 

listing market.64 Further, the Exchange 

does not propose to permit the CFR to 

appoint a CFR Appeals Panel as on 

NYSE Arca.65 As noted above, NYSE 

Arca retained appeals panels from its 

legacy disciplinary rules and the 

Exchange does not a similar current 

process. 

Similar to NYSE Arca, the Exchange’s 

proposed CFR would be composed of 

Non-Affiliated Director(s) and the 

Public Directors of the Exchange. As per 

the Exchange Bylaws, ‘‘Non-Affiliated 

Directors’’ are individuals nominated by 

the trading permit holders who are 

permitted to trade on the Exchange’s 

facilities for the trading of equities that 

are securities as covered by the Act.66

‘‘Public Directors’’ are persons from the 

public and will not be, or be affiliated 

with, a broker-dealer in securities or 

employed by, or involved in any 

material business relationship with, the 

Exchange or its affiliates.67 The 

Exchange believes that member 

participation on the proposed CFR 

would be sufficient to provide for the 

fair representation of members in the 

administration of the affairs of the 

Exchange, including the disciplinary 

process, consistent with Section 6(b)(3) 

of the Act.68

By establishing the CFR, the Exchange 

would make its appellate process 

consistent with that of NYSE Arca and 

its other affiliates, all of which have 

established a CFR as a subcommittee of 

the respective affiliate’s ROC.69 Like its 

affiliates, proposed Article 2, Rule 4 

would provide that, subject to the 

proposed Rule 10.9000 Series, decisions 

of the proposed CFR would be subject 

to Board review. As proposed, the 

decision of the Board would constitute 

the final action of the Exchange, unless 

such Board remands the proceedings. 

Current Article 2, Rule 4 (Committee 

Quorum) would become new Article 2, 

Rule 5. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Act,70 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,71

in particular, in that it is 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, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. In 

addition, the Exchange believes that the 

proposed rule furthers the objectives of 

Section 6(b)(7) of the Act,72 in 

particular, in that it provides fair 

procedures for the disciplining of 

members 73 and persons associated with 

members, the denial of membership to 

any person seeking membership therein, 

the barring of any person from becoming 

associated with a member thereof, and 


khammond on DSKJM1Z7X2PROD with NOTICES2
35064 Federal Register / Vol. 87, No. 110 / Wednesday, June 8, 2022 / Notices 

74 15 U.S.C. 78f(b)(3). 

75See NYSE Arca Rule 10.9216(b), NYSE Rule 

9216(b), & NYSE American Rule 9216(b). See also 

generally FINRA Rule 9216(b). See generally SR– 

NYSECHX–2022–08. 

76See text accompanying notes 35–37, supra. 

77 15 U.S.C. 78f(b)(6). 

the prohibition or limitation by the 

Exchange of any person with respect to 

access to services offered by the 

Exchange or a member thereof. In 

addition, the Exchange believes that the 

proposed rule change furthers the 

objectives of Section 6(b)(3) of the Act,74

in particular, in that it supports the fair 

representation of members in the 

administration of the Exchange’s affairs. 

The proposed changes will provide 

greater harmonization among SROs 

resulting in less burdensome and more 

efficient regulatory compliance for 

common members of the Exchange, the 

Exchange’s affiliates, and FINRA. As 

previously noted, the proposed rule text 

is substantially the same as the NYSE 

Arca disciplinary rules, which were in 

turn modeled on the FINRA rules. The 

proposed rule change will enhance the 

Exchange’s ability to have a direct and 

meaningful impact on the end-to-end 

quality of its regulatory program, from 

detection and investigation of potential 

violations through the efficient 

initiation and completion of 

disciplinary measures where 

appropriate. As such, the proposed rule 

change would foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities and 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system. In this regard, the Exchange 

believes that amending Article 7, Rule 

12 so that failure to pay any fine, 

sanction or cost levied in connection 

with a disciplinary action would be 

governed by proposed Rule 10.8320 

would further harmonize the Exchange’s 

rules with its affiliates that have 

adopted the substantially similar 

version of proposed Rule 10.8320. 

Similarly, the Exchange believes that 

adopting a new jurisdiction rule based 

on the Exchange’s current jurisdiction 

rule Article 12, Rule 7 that incorporates 

substantially similar provisions based 

on NYSE Arca’s jurisdiction Rule 2.0 

would also further harmonize the 

Exchange’s disciplinary rules with its 

affiliates. 

The Exchange believes that the 

proposed processes for settling 

disciplinary matters both before and 

after the issuance of a complaint are fair 

and reasonable. While such proposed 

rules differ from certain aspects of the 

Exchange’s current settlement 

processes, the Exchange believes that 

the proposed rule change, like the 

settlement process adopted by NYSE 

Arca, provides adequate procedural 

protections to all Parties and promotes 

efficiency. 

Similarly, the Exchange believes that 

adopting its affiliates’ appellate 

procedures would be fair and efficient 

and create consistency with its affiliates’ 

practices. The proposed rule change 

would provide individual directors with 

the opportunity to call a case for review. 

Currently, in addition to the parties, 

only the Board may order review of a 

decision. Adopting the appellate rules 

of the Exchange’s affiliates would also 

apply a uniform period to all requests 

for review of a disciplinary 

determination or penalty. 

Subject to a separate notice and 

comment filing, the Exchange would 

retain its list of minor rule violations 

with certain technical and conforming 

amendments, while adopting its 

affiliates’ and FINRA’s process for 

imposing minor rule violation fines.75 In 

addition, as set forth in the Exchange’s 

companion filing and herein, the 

Exchange believes that adding certain 

rules to its list of eligible minor rule 

violations based on the rules of its 

affiliate will strengthen the Exchange’s 

ability to carry out its oversight and 

enforcement responsibilities in cases 

where full disciplinary proceedings are 

unwarranted in view of the minor 

nature of the particular violation. 

Specifically, the proposed additions 

are designed to prevent fraudulent and 

manipulative acts and practices because 

it will provide the Exchange the ability 

to issue a minor rule fine for violations 

of its rules governing general 

registration and supervision 

requirements in situations where a more 

formal disciplinary action may not be 

warranted or appropriate. As provided 

for in proposed Rule 10.9217(d), 

nothing in proposed Rule 10.9217 

would require the Exchange to impose 

a minor rule fine for a violation of any 

eligible rule and that if the Exchange 

determines that any violation is not 

minor in nature, the Exchange may, at 

its discretion, proceed with formal 

disciplinary action rather than under 

proposed Rule 10.9217. 

The Exchange also believes that 

adding rules based on the rules of its 

affiliate to its list of eligible minor rule 

violations would promote fairness and 

consistency in the marketplace by 

permitting the Exchange to issue a 

minor rule fine for violations of 

substantially similar rules that are 

eligible for minor rule treatment on the 

Exchange’s affiliate, thereby 

harmonizing minor rule plan fines 

across affiliated exchanges for the same 

conduct. As noted above, Article 6, Rule 

2(b), 5(a) and 5(b) are substantially 

similar to NYSE National and NYSE 

Arca rules of similar purpose, which are 

each separately eligible for a minor rule 

fine under the respective market’s 

version of proposed Rule 10.9217.76

Further, the Exchange believes that 

the proposed additions to its list of rules 

eligible for minor rule fines based on the 

rules of its affiliate are consistent with 

Section 6(b)(6) of the Act,77 which 

provides that members and persons 

associated with members shall be 

appropriately disciplined for violation 

of the provisions of the rules of the 

exchange, by expulsion, suspension, 

limitation of activities, functions, and 

operations, fine, censure, being 

suspended or barred from being 

associated with a member, or any other 

fitting sanction. As noted, the proposed 

rule change would provide the 

Exchange ability to sanction minor or 

technical violations pursuant to the 

Exchange’s rules and would increase the 

amounts of fines in order for the 

Exchange to better deter violative 

activity and to harmonize its rules with 

that of its affiliates. 

The Exchange believes that moving 

the Recommended Fine Schedule for 

minor rule violations from the Fee 

Schedule to proposed Rule 10.9217 and 

removing it from the Fee Schedule 

would add clarity and transparency to 

the Exchange’s rules by reflecting the 

recommended fines for minor rule 

violations in the same place in the 

Exchange’s rules. Similarly, updating 

the Recommended Fine Schedule to 

delete obsolete rules and add 

recommended fines for rules that were 

added to the list of minor rules but 

inadvertently omitted from the 

Recommended Fine Schedule would 

also add clarity and transparency to the 

Exchange’s rules. The Exchange believes 

that adding such clarifying language 

would also be consistent with the public 

interest and the protection of investors 

because investors will not be harmed 

and in fact would benefit from increased 

transparency, thereby reducing potential 

confusion. 

Further, the Exchange believes that 

adding recommended fines for Rule 7.16 

and Rule 7.30 that were inadvertently 

omitted from the current Recommended 

Fine Schedule based on the fines for the 

same rules set forth in the rules of its 

affiliate would promote fairness and 

consistency in the marketplace by 

permitting the Exchange to issue a 

minor rule fine for violations of 

substantially similar rules that are 


khammond on DSKJM1Z7X2PROD with NOTICES2
Federal Register / Vol. 87, No. 110 / Wednesday, June 8, 2022 / Notices 35065 

78See text accompanying notes 44–47, supra. 

79 15 U.S.C. 78f(b)(7) & 78f(d). 

80 15 U.S.C. 78f(b)(7). 

81 15 U.S.C. 78f(b)(3). 

82 15 U.S.C. 78f(b)(5). 

83 15 U.S.C. 78f(b)(1) & (b)(6). 

84 15 U.S.C. 78s(b)(3)(A). 

85 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

eligible for minor rule treatment on the 

Exchange’s affiliate, thereby 

harmonizing minor rule plan fines 

across affiliated exchanges for the same 

conduct. As noted above, the proposed 

first, second and third level fines for 

violations of Rule 7.16 are the same as 

those in NYSE Arca Rule 10.9217(i)(1)1. 

for violations of NYSE Arca Rule 7.16– 

E, and the proposed first, second and 

third level fines for violations of Rule 

7.30 are the same as those in NYSE Arca 

Rule 10.9217(i)(1)5. for violations of 

NYSE Arca Rule 7.30–E.78

The Exchange also believes that the 

proposed changes are designed to 

provide a fair procedure for the 

disciplining of members and persons 

associated with members consistent 

with Sections 6(b)(7) and 6(d) of the 

Act.79 Proposed Rules 10.9216(b) and 

10.9217 would not preclude a 

Participant, Participant Firm or covered 

person from contesting an alleged 

violation and receiving a hearing on the 

matter with the same procedural rights 

through a litigated disciplinary 

proceeding. 

In addition, the Exchange believes 

that its proposed transition plan would 

allow for a more orderly and less 

burdensome transition for the 

Exchange’s permit holders. The 

proposed delayed implementation of the 

new rule set would provide a clear 

demarcation between matters that 

would proceed under the new rules and 

those that would be completed under 

the legacy rules. 

The Exchange believes adopting a 

new Article 2, Rule 4 to establish a CFR 

as a sub-committee of the ROC, 

complies with Section 6(b)(7) of the 

Act,80 which requires that the rules of 

a national securities exchange provide a 

fair procedure for the disciplining of 

members and persons associated with 

members. The members of the 

Exchange’s ROC are all Public Directors 

of the Exchange Board, thereby ensuring 

that the ROC is comprised of 

independent members. In addition, the 

Exchange believes that participation on 

the proposed CFR by Non-Affiliated 

Directors would be sufficient to provide 

for the fair representation of members in 

the administration of the affairs of the 

Exchange, including rulemaking and the 

disciplinary process, consistent with 

Section 6(b)(3) of the Act.81 In addition, 

the Exchange believes that having the 

CFR serve in the advisory capacity is 

consistent with and facilitates a 

governance and regulatory structure that 

furthers the objectives of Section 6(b)(5) 

of the Act.82

The Exchange believes that proposed 

Rule 11.21 (Disruptive Quoting and 

Trading Activity Prohibited), which is 

modeled on NYSE American Rule 

5220—Equities, NYSE Rule 5220, and 

NYSE Arca Rule 11.21, which in turn 

are modeled on Commentary .03 to 

FINRA Rule 5210, would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system by 

harmonizing the Exchange’s rules with 

those of other SROs, including its 

affiliated exchanges. 

In addition, the Exchange believes 

that the proposed rule change is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, and to protect investors and the 

public interest by providing the 

Exchange with authority to prohibit 

specified disruptive quoting and trading 

activity on the Exchange. More 

specifically, the Exchange believes that 

the proposed rule is consistent with the 

public interest and the protection of 

investors and otherwise furthers the 

purposes of the Act because the 

proposal strengthens the Exchange’s 

ability to carry out its oversight and 

enforcement responsibilities as an SRO 

in cases where awaiting the conclusion 

of a full disciplinary proceeding is 

unsuitable in view of the potential harm 

to other member organization and their 

customers. The Exchange notes that if 

this type of conduct is allowed to 

continue on the Exchange, the 

Exchange’s reputation could be harmed 

because it may appear to the public that 

the Exchange is not acting to address the 

behavior. The proposed expedited 

process would enable the Exchange to 

address the behavior with greater speed. 

For the same reasons, the Exchange 

believes that the proposal is consistent 

with Sections 6(b)(1) and 6(b)(6) of the 

Act,83 which require that the rules of an 

exchange enforce compliance with, and 

provide appropriate discipline for, 

violations of the Commission and 

Exchange rules. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change is not intended to 

address competitive issues, but is rather 

designed to (i) provide greater 

harmonization among Exchange, NYSE 

Arca, NYSE, NYSE American, and 

FINRA rules of similar purpose for 

investigations and disciplinary matters; 

and (ii) enhance the quality of the 

Exchange’s regulatory program, from 

detection of violations through 

disciplinary actions, resulting in less 

burdensome and more efficient 

regulatory compliance and facilitating 

performance of regulatory functions. In 

addition, the proposed rule change will 

provide the Exchange with necessary 

means to enforce against violations of 

manipulative quoting and trading 

activity in an expedited manner, while 

providing Participants, Participant 

Firms and covered person with the 

necessary due process. The Exchange 

believes that it is important for all 

exchanges to be able to take similar 

action to enforce its rules against 

manipulative conduct thereby leaving 

no exchange prey to such conduct. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 84 and Rule 19b– 

4(f)(6) thereunder.85

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 


khammond on DSKJM1Z7X2PROD with NOTICES2
35066 Federal Register / Vol. 87, No. 110 / Wednesday, June 8, 2022 / Notices 

86 17 CFR 200.30–3(a)(12). 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSECHX–2022–10 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–NYSECHX–2022–10. 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–NYSECHX–2022–10 and 

should be submitted on or before June 

29, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.86

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–12170 Filed 6–7–22; 8:45 am] 

BILLING CODE 8011–01–P 


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