Document ID: SEC-2021-1580-0001
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 62229-62231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-24412]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93514; File No. SR-BX-2021-050]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
of Proposed Rule Change To Amend the BX Equities LLC Operating 
Agreement

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 to reflect that Nasdaq, 
Inc. (``Nasdaq HoldCo''), the Exchange's sole stockholder, will 
transfer its entire ownership interest in the Exchange's subsidiary 
Nasdaq BX Equities LLC (``BX Equities'') to the Exchange, thereby 
resulting in the Exchange becoming the 100% direct owner and sole LLC 
member of BX Equities.
    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 purpose of the proposed rule change is to amend the Exchange's 
rules to reflect that Nasdaq HoldCo, the Exchange's sole stockholder, 
will transfer its entire ownership interest in the Exchange's 
subsidiary BX Equities to the Exchange (the ``Transfer''), thereby 
resulting in the Exchange becoming the 100% direct owner and sole LLC 
member of BX Equities. The Exchange notes that the proposed Transfer is 
the first part of a two-step process, the second part of which is the 
upstream merger of BX Equities with and into the Exchange (the 
``Merger'' and together with the Transfer, the ``Transactions'').\3\ 
The Transactions will ultimately result in the elimination of BX 
Equities. The Transactions are designed to simplify the corporate 
structure of 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 Merger 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-2021-051 (not yet published).
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Background
    BX Equities was acquired by Nasdaq HoldCo in 2008,\4\ and 
established as a facility of and controlled subsidiary owned and 
operated by the Exchange for the listing and trading of cash equity 
securities.\5\ Today, Nasdaq HoldCo directly owns 100% of the Exchange. 
The Exchange directly owns 53.21% of BX Equities, and Nasdaq HoldCo 
directly owns the remaining 46.79% of

[[Page 62230]]

BX Equities.\6\ The Fifth Amended and Restated Operating Agreement of 
BX Equities (``Operating Agreement'') reflects that the Exchange and 
Nasdaq HoldCo are the only owners and LLC members of BX Equities. Under 
Section 8.1 of the Operating Agreement, the Exchange must obtain 
Commission approval for transfers of ownership interests in BX 
Equities, including the proposed Transfer. Subject to the Commission's 
approval of this proposed rule change, the Exchange and Nasdaq HoldCo 
will enter into a contribution and assignment agreement (``Contribution 
Agreement'') pursuant to which Nasdaq HoldCo will transfer its entire 
46.79% ownership interest in BX Equities to the Exchange. As a result 
of the Transfer, the Exchange will directly own 100% of BX Equities. In 
addition, the Exchange will continue to be 100% owned by Nasdaq HoldCo.
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    \4\ See Securities Exchange Act Release No. 58324 (August 7, 
2008), 73 FR 46936 (August 12, 2008) (SR-BSE-2008-02; -23; -25; SR-
BSECC-2008-01) (``2008 Acquisition Approval Order''). At the time of 
the acquisition, the Exchange already owned 53.21% of BX Equities, 
with the remaining 46.79% owned by several investors. Following the 
2008 Acquisition Approval Order, Nasdaq HoldCo purchased and as a 
result, became the direct owner of the 46.79% interest in BX 
Equities that was previously held by those investors. See 2008 
Acquisition Approval Order at 46950.
    \5\ 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 both the 2008 Acquisition Approval Order and the BX 
Equities Approval Order) is now Nasdaq, Inc.
    \6\ See supra note 4.
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Proposal
    As discussed above, BX Equities is currently governed by the 
Operating Agreement, which provides that the Exchange and Nasdaq HoldCo 
are the only owners and LLC members of BX Equities. Management of BX 
Equities, however, is vested solely in the Exchange. Nasdaq HoldCo has 
no direct management role in the operation of the entity, with the 
exception of its limited role as ``tax matters Member'' under Sections 
10.9 and 12.6 and in the definitions of ``Capital Account'' and ``Tax 
Amount,'' and its limited rights with regard to dissolution of the 
entity under Article 11 and capital contributions under Section 7.4.\7\
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    \7\ As stated in the BX Equities Approval Order, Nasdaq HoldCo 
remained an LLC member of BX Equities to avoid certain adverse tax 
consequences that would be associated with contributing its 
ownership interest to the Exchange. See BX Equities Approval Order 
at 80469-70. Those tax considerations have since expired.
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    To effectuate the proposed Transfer, the Exchange and Nasdaq HoldCo 
will enter into the Contribution Agreement pursuant to which Nasdaq 
HoldCo will transfer its entire ownership interest in BX Equities, and 
all of its other rights and obligations arising thereunder (including, 
without limitation, as tax matters Member of BX Equities), to the 
Exchange. Accordingly, the Exchange proposes to amend the Operating 
Agreement to reflect the foregoing, and to remove references throughout 
to Nasdaq HoldCo. Notably, the Exchange is proposing to make the 
following amendments:
     The introductory paragraphs, the definition of 
``Agreement'' in Section 1.1, and Section 2.8(e) will be amended to 
reflect the most recent version of the Operating Agreement.
     The recitals will also be amended to add language 
regarding the Contribution Agreement.
     The definitions of ``Capital Account'' and ``Tax Amount'' 
in Section 1.1, and Sections 10.9 and 12.6 will be amended to replace 
Nasdaq HoldCo with the Exchange in order to reflect that Nasdaq HoldCo 
will no longer be the tax matters Member of BX Equities.
     Section 7.4 will be amended to reflect that Nasdaq HoldCo 
will no longer have limited rights with respect to capital 
contributions in BX Equities. The Exchange will also correct a typo in 
this section.
     Section 11.1(a)(i) will be amended to reflect that Nasdaq 
HoldCo will no longer have limited rights regarding the dissolution of 
BX Equities. The Exchange will also correct a typo in this section.
     Section 18.6(a), which relates to oversight pursuant to 
the Exchange Act over the books, records, premises, officers, 
directors, agents, and employees of Nasdaq HoldCo, will be deleted in 
its entirety and Section 18.6 will be renumbered accordingly. Section 
18.6(a) will no longer be necessary upon Nasdaq HoldCo's withdrawal as 
an LLC member of BX Equities. Furthermore, Nasdaq HoldCo's By-Laws at 
Section 12.1(c) currently also contain similar oversight provisions.
     Lastly, the introductory paragraphs, the definition of 
``Member'' in Section 1.1, Section 7.2, Schedule 1, and Schedule 2 will 
be amended to remove references to Nasdaq HoldCo as an LLC member of BX 
Equities.
    Subject to Commission approval, the amended Operating Agreement 
will be operative immediately upon the Transfer. As noted above, the 
Exchange is concurrently filing a separate rule change to further amend 
the Operating Agreement by deleting it in its entirety upon the Merger 
and elimination of BX Equities.\8\ The Exchange intends to implement 
the Transactions by the end of Q4 2021. The Exchange anticipates that 
the Merger will occur immediately after the Transfer.
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    \8\ See supra note 3.
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2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(1) of the Act,\10\ 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 Act and to comply, and to enforce compliance by its 
exchange members and persons associated with its exchange members, with 
the provisions of the Act, the rules and regulations thereunder, and 
the rules of the Exchange. The proposed rule change merely seeks to 
simplify the corporate structure of BX Equities, and the Exchange will 
operate in a substantially similar manner following the Transfer as it 
operates today, with the addition of the Exchange's role as the tax 
matters Member of BX Equities. This is a corporate change, and will 
have no impact on how the Exchange operates its equities market.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(1).
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    The Exchange also believes that its proposal furthers the 
objectives of Section 6(b)(5) of the Act,\11\ 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. Specifically, the proposed rule 
change would result in the Operating Agreement correctly reflecting the 
ownership structure of its subsidiary BX Equities upon completion of 
the Transfer. The Exchange reiterates that it will continue to operate 
its equities market in the same manner as today following the Transfer.
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    \11\ 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 BX Equities.

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

[[Page 62231]]

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-2021-050 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-2021-050. 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-2021-050 and should be submitted on 
or before November 30, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-24412 Filed 11-8-21; 8:45 am]
BILLING CODE 8011-01-P