Document ID: SEC-2021-1576-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq BX, Inc.
Posted Date: 2021-11-09T05:00Z

[Federal Register Volume 86, Number 214 (Tuesday, November 9, 2021)]
[Notices]
[Pages 62222-62224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-24413]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93513; File No. SR-BX-2021-051]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
of Proposed Rule Change To Amend Exchange Rules in Connection With the 
Proposed Merger of BX Equities LLC With and Into the Exchange

November 3, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 22, 2021, Nasdaq BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules in connection with the 
proposed merger of BX Equities LLC (``BX Equities'') with and into the 
Exchange (the ``Merger''). As a result of the Merger, BX Equities will 
be eliminated, and the Exchange will directly operate its equities and 
options markets.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its rules in connection with the 
proposed Merger of BX Equities with and into the Exchange. The Exchange 
notes that the proposed Merger is the second part of a two-step 
process, the first part of which is the transfer of Nasdaq, Inc.'s 
(``Nasdaq HoldCo'') entire ownership interest in BX Equities to the 
Exchange, which will result in the Exchange becoming the 100% direct 
owner and sole LLC member of BX Equities (the ``Transfer'' and together 
with the Merger, the ``Transactions'').\3\ The Transactions will 
ultimately result in the elimination of BX Equities. The Transactions 
are designed to simplify the corporate structure of the Exchange's sole 
stockholder Nasdaq HoldCo and Nasdaq HoldCo's subsidiaries, 
specifically the Exchange and BX Equities. The Transactions will not 
have any effect on Nasdaq HoldCo's direct ownership of the Exchange.
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    \3\ The proposed Transfer is the subject of a separate rule 
filing to be filed by the Exchange with the Commission concurrent 
with this filing. Specifically, the Transfer filing would amend the 
BX Equities Operating Agreement to reflect Nasdaq HoldCo's transfer 
of ownership interest in BX Equities to the Exchange. The Merger 
filing would then delete the BX Equities Operating Agreement that 
was amended in the Transfer filing and delete the Delegation 
Agreement to reflect the Merger. See SR-BX-2021-050 (not yet 
published).
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    By way of background, BX Equities was established in 2008 as a 
facility of and controlled subsidiary owned and operated by the 
Exchange for the listing and trading of cash equity securities.\4\ BX 
Equities is currently governed by a Delegation Agreement between the 
Exchange and BX Equities (``Delegation Agreement''), under which the 
Exchange has delegated certain responsibilities to BX Equities to 
operate the Exchange's equities market.\5\ BX Equities is also 
currently governed by the Fifth Amended and Restated Operating 
Agreement (``Operating Agreement''). As noted above, the Exchange is 
concurrently submitting a separate filing that amends the Operating 
Agreement to reflect the Transfer, which will result in the

[[Page 62223]]

Exchange becoming the sole owner and LLC member of BX Equities.\6\
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    \4\ See Securities Exchange Act Release No. 59154 (December 23, 
2008), 73 FR 80468 (December 31, 2008) (SR-BSE-2008-48) (``BX 
Equities Approval Order''). The NASDAQ OMX Group, Inc. (as 
referenced in the BX Equities Approval Order) is now Nasdaq, Inc.
    \5\ The Exchange also directly operates an options market.
    \6\ See supra note 3.
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    Following the Merger, the Exchange will be the surviving entity, 
and it will directly operate both the Exchange's equities and options 
markets. The Exchange is proposing amendments in order to reflect those 
changes.
    Specifically, the proposed amendments would ultimately allow the 
Exchange to directly operate both markets by:
     Terminating the existing delegation to BX Equities;
     removing the BX Equities Operating Agreement; and
     amending the Exchange's rules to eliminate all references 
to the Delegation Agreement, BX Equities Operating Agreement, and BX 
Equities LLC.
    Each item will be discussed in detail below. The Exchange intends 
to implement the Transactions (including the proposed changes in this 
filing to reflect the Merger) by the end of Q4 2021. The Exchange 
anticipates that the Merger will occur immediately after the Transfer.
Termination of Delegation
    The Delegation Agreement was executed in 2008 following the 
establishment of BX Equities as a cash equities trading facility of the 
Exchange. The delegation is limited to the Exchange's equities market 
functions and does not include other functions not specifically 
mentioned in the limited delegation. However, the Exchange retains 
ultimate responsibility for its equities market, including the 
responsibility to ensure the fulfillment of statutory and self-
regulatory obligations under the Act.\7\
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    \7\ See Delegation Agreement (providing that the Exchange shall 
have ultimate responsibility for the operations, rules and 
regulations developed by BX Equities, as well as their enforcement, 
and that actions taken by BX Equities pursuant to delegated 
authority remain subject to review, approval or rejection by the 
Exchange's Board in accordance with the procedures established by 
the Board). See also BX Equities Approval Order at 80470.
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    In connection with the proposed Merger, the Exchange now proposes 
to terminate the delegation of functions to BX Equities set forth in 
the Delegation Agreement, and remove the Delegation Agreement from its 
rules. With the termination of the Delegation Agreement, all of the 
functions that were previously delegated to BX Equities will now be 
performed by the Exchange as the Exchange will directly operate its 
equities market upon the elimination of BX Equities. Furthermore, the 
Exchange will continue to bear responsibility over its equities market 
of ensuring the fulfillment of its statutory and self-regulatory 
obligations.
Removal of Operating Agreement
    As discussed above, the Exchange is concurrently proposing 
amendments to the Operating Agreement to reflect that the Exchange will 
be the only owner and sole LLC member of BX Equities. In addition, 
management of BX Equities is vested solely in the Exchange.\8\ As 
stated in the BX Equities Approval Order, having the managerial powers 
vested solely in the Exchange is designed to preserve the Exchange's 
regulatory authority over BX Equities, and grants the Exchange the 
ability to direct BX Equities to perform any required, necessary, or 
appropriate act.\9\ By virtue of BX Equities' structure as a facility 
of the Exchange, and the Exchange's exclusive management rights, BX 
Equities is bound by all of the regulatory obligations of its SRO-
member. For instance, the Exchange's independent regulatory oversight 
committee (``ROC'') currently oversees the regulatory program of the 
Exchange and its facilities, and meets regularly with the Exchange's 
Chief Regulatory Officer (``CRO'').\10\ In addition, the Exchange' 
independent regulatory department under the oversight of the ROC 
carries out the Exchange's regulatory functions, including 
administering its membership and disciplinary rules, and performing 
real-time surveillance over participants in the Exchange's equities and 
options market. Ultimately, BX Equities can only act through the action 
of the Exchange and its officers and directors by virtue of the fact 
that there is no separate BX Equities board of directors and all BX 
Equities officers are officers of the Exchange.\11\
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    \8\ See Section 4.1, Operating Agreement (stating that as sole 
manager of BX Equities, the Exchange shall have the power to do any 
and all acts necessary, convenient or incidental to or for the 
furtherance of the purposes described in the Operating Agreement, 
and that the Exchange has the authority to bind BX Equities).
    \9\ See BX Equities Approval Order at 80470.
    \10\ See Section 4.13(c) of the Exchange's By-Laws. BX Equities 
does not have a separate ROC.
    \11\ See supra note 7 [sic]. See also Section 5.1, Operating 
Agreement (stating that officers of BX Equities must also be 
officers of the Exchange).
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    With the termination of the Delegation Agreement proposed above, BX 
Equities would no longer be operating the Exchange's equities market 
and as a result, the Operating Agreement will become obsolete. 
Accordingly, the Exchange proposes to remove the Operating Agreement 
from its rules.
Exchange Rule Amendments
    The Exchange proposes to make certain conforming amendments to its 
rules to reflect the proposed Merger of BX Equities into the Exchange 
and the resulting deletion of the Delegation Agreement and Operating 
Agreement. In particular, the Exchange proposes to make the following 
conforming amendments:
     General 2, Section 8 currently references the Delegation 
Agreement, and states that the staff, books, records and premises of BX 
Equities LLC are the staff, books, records and premises of the Exchange 
subject to oversight pursuant to the Act, and all officers, employees 
and agents of BX Equities LLC are the officers, employees and agents of 
the Exchange for purposes of the Act. The Exchange now proposes to 
delete the rule text and reserve the rule.
     Equity 1, Section 1 currently includes the definitions of 
Delegation Agreement (Equity 1, Section 1(a)(2)) and BX Equities 
(Equity 1, Section 1(a)(5)). The Exchange now proposes to delete these 
definitions and reserve the respective rules.
     In Equity 1, Section 1(a)(3), the Exchange proposes to 
delete the references to the Delegation Agreement and Operating 
Agreement.
     In Equity 1, Section 1(a)(6), the Exchange proposes to 
delete ``through BX Equities LLC as a facility of the Exchange'' from 
the first sentence.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of Section 
6(b)(1) of the Act,\13\ in particular, in that it enables the Exchange 
to be so organized as to have the capacity to be able to carry out the 
purposes of the Exchange Act and to comply, and to enforce compliance 
by its exchange members and persons associated with its exchange 
members, with the provisions of the Exchange Act, the rules and 
regulations thereunder, and the rules of the Exchange.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(1).
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    Specifically, termination of the Delegation Agreement would result 
in the Exchange directly operating the equities market facility of the 
Exchange. With the termination of the Delegation Agreement, all of the 
functions that were previously delegated to BX Equities will now be 
performed by the Exchange as the Exchange will directly operate its 
equities market upon the elimination of BX Equities. Furthermore, the 
Exchange will continue to bear responsibility over its

[[Page 62224]]

equities market of ensuring the fulfillment of its statutory and self-
regulatory obligations. As stated above, the independent ROC of the 
Exchange's Board would continue to oversee the Exchange's regulatory 
and self-regulatory organization responsibilities with regards to both 
the equities and options markets, and the Exchange's regulatory 
department would continue to carry out its regulatory functions with 
respect to both markets under the oversight of the ROC.\14\ For the 
same reasons, the Exchange believes that its proposal to remove BX 
Equities' Operating Agreement from the Exchange's rules in connection 
with the proposed termination of the Delegation Agreement is also 
consistent with Section 6(b)(1) of the Act.
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    \14\ See supra note 9 [sic].
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    The Exchange also believes that this filing furthers the objectives 
of Section 6(b)(5) of the Act,\15\ in particular, in that it is 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest. The Exchange believes that the deletion of the 
Delegation Agreement and Operating Agreement from the Exchange's rules, 
and related conforming Exchange rule amendments, each as discussed 
above, is consistent with Section 6(b)(5) of the Act because the 
proposed changes would add clarity and transparency to the Exchange's 
Rulebook, ensuring that persons subject to the Exchange's jurisdiction, 
regulators, and the investing public can more easily navigate and 
understand the Exchange's rules.
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    \15\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
designed to address any competitive issues but rather is concerned 
solely with the corporate structure of the Exchange and the 
administration and function of its corporate governance structures.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 [email protected]. Please include 
File Number SR-BX-2021-051 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-BX-2021-051. 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-BX-2021-051 and should be submitted on 
or before November 30, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-24413 Filed 11-8-21; 8:45 am]
BILLING CODE 8011-01-P