Document ID: SEC-2018-0763-0001
Agency: sec
Document Type: Notice
Title: Programs for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2: Amended Plan for Allocation of Regulatory Responsibilities Between Financial Industry Regulatory Authority, Inc., Cboe Exchange, Inc., and Cboe C2 Exchange, Inc.
Posted Date: 2018-05-16T04:00Z

[Federal Register Volume 83, Number 95 (Wednesday, May 16, 2018)]
[Notices]
[Pages 22732-22738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10369]

[[Page 22732]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83208; File No. 4-536]

Program for Allocation of Regulatory Responsibilities Pursuant To 
Rule 17d-2; Notice of Filing and Order Approving and Declaring 
Effective an Amended Plan for the Allocation of Regulatory 
Responsibilities Between the Financial Industry Regulatory Authority, 
Inc., Cboe Exchange, Inc., and Cboe C2 Exchange, Inc.

May 10, 2018.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Section 17(d) of the 
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring 
effective an amendment to the plan for allocating regulatory 
responsibility (``Plan'') filed on May 4, 2018, pursuant to Rule 17d-2 
of the Act,\2\ by the Financial Industry Regulatory Authority, Inc. 
(``FINRA''), Cboe Exchange, Inc. (``Cboe''), and Cboe C2 Exchange, Inc. 
(``C2'') (collectively, ``Participating Organizations'' or 
``parties''). This Agreement amends and restates the agreement entered 
into between FINRA, Cboe, and C2 on March 21, 2014, entitled 
``Agreement Among Financial Industry Regulatory Authority, Inc., 
Chicago Board Options Exchange, Incorporated, and C2 Options Exchange, 
Incorporated Pursuant to Rule 17d-2 under the Securities Exchange Act 
of 1934,'' and any subsequent amendments thereafter.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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I. Introduction

    Section 19(g)(1) of the Act,\3\ among other things, requires every 
self-regulatory organization (``SRO'') registered as either a national 
securities exchange or national securities association to examine for, 
and enforce compliance by, its members and persons associated with its 
members with the Act, the rules and regulations thereunder, and the 
SRO's own rules, unless the SRO is relieved of this responsibility 
pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act. 
Without this relief, the statutory obligation of each individual SRO 
could result in a pattern of multiple examinations of broker-dealers 
that maintain memberships in more than one SRO (``common members''). 
Such regulatory duplication would add unnecessary expenses for common 
members and their SROs.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
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    Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\7\ With 
respect to a common member, Section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules, and regulations, or to perform other 
specified regulatory functions.
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    \6\ 15 U.S.C. 78q(d)(1).
    \7\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the 
Commission to name a single SRO as the designated examining authority 
(``DEA'') to examine common members for compliance with the financial 
responsibility requirements imposed by the Act, or by Commission or SRO 
rules.\9\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the federal securities laws governing matters 
other than financial responsibility, including sales practices and 
trading activities and practices.
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    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \9\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits 
SROs to propose joint plans for the allocation of regulatory 
responsibilities with respect to their common members. Under paragraph 
(c) of Rule 17d-2, the Commission may declare such a plan effective if, 
after providing for notice and comment, it determines that the plan is 
necessary or appropriate in the public interest and for the protection 
of investors, to foster cooperation and coordination among the SROs, to 
remove impediments to, and foster the development of, a national market 
system and a national clearance and settlement system, and is in 
conformity with the factors set forth in Section 17(d) of the Act. 
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an 
SRO of those regulatory responsibilities allocated by the plan to 
another SRO.
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    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan

    On May 14, 2007, the Commission declared effective the Plan entered 
into between NASD (n/k/a FINRA) and Cboe for allocating regulatory 
responsibility pursuant to Rule 17d-2.\11\ On May 9, 2014, the 
Commission declared effective an amendment to the Plan to add C2 as a 
Participant to the Plan.\12\ The Plan is intended to reduce regulatory 
duplication for firms that are common members of FINRA and at least one 
of Cboe or C2 by allocating regulatory responsibility with respect to 
certain applicable laws, rules, and regulations that are common among 
them. Included in the Plan is an exhibit that lists every Cboe and C2 
rule for which FINRA bears responsibility under the Plan for overseeing 
and enforcing with respect to CBOE or C2 members that are also members 
of FINRA and the associated persons therewith.
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    \11\ See Securities Exchange Act Release No. 55755 (May 14, 
2007), 72 FR 28087 (May 18, 2007).
    \12\ See Securities Exchange Act Release No. 72137 (May 9, 
2014), 79 FR 27965 (May 15, 2014).
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III. Proposed Amendment to the Plan

    On May 4, 2018, the parties submitted a proposed amendment to the 
Plan (``Amended Plan''). The primary purposes of the Amended Plan are 
to (1) remove Cboe's former equities trading facility, CBSX, from the 
Plan; (2) to the extent that it becomes a member of either exchange, 
allocate regulatory responsibility to FINRA for Cboe's and C2's 
affiliated routing broker-dealer, Cboe Trading, Inc.; and (3) allocate 
surveillance, investigation, and enforcement responsibilities for Rule 
14e-4 under the Act . The text of the proposed Amended Plan is as 
follows (additions are italicized; deletions are [bracketed]):
* * * * *
Agreement Among Financial Industry Regulatory Authority, Inc., [Chicago 
Board Options Exchange, Incorporated] CBOE Exchange, Inc., and CBOE C2 
[Options] Exchange, [Incorporated] Inc. Pursuant to Rule 17d-2 Under 
the Securities Exchange Act of 1934
    This Agreement, by and among Financial Industry Regulatory 
Authority, Inc. (``FINRA''), [the Chicago

[[Page 22733]]

Board Options Exchange, Incorporated]Cboe Exchange, Inc. 
(``[CBOE]Cboe''), and Cboe C2 [Options] Exchange, [Incorporated]Inc. 
(``C2'') is made this [21st]4th day of [March, 2014] May, 2018 (the 
``Agreement''), pursuant to Section 17(d) of the Securities Exchange 
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder which 
permits agreements between self-regulatory organizations to allocate 
regulatory responsibility to eliminate regulatory duplication. FINRA, 
[CBOE]Cboe and C2 may be referred to individually as a ``party'' and 
together as the ``parties.''
    This Agreement amends and restates the agreement entered into 
between [NASD (n/k/a] FINRA[) and], [CBOE]Cboe and C2 on [April 4, 
2007]March 21, 2014, entitled ``Agreement [between NASD and CBOE]Among 
Financial Industry Regulatory Authority, Inc., Chicago Board Options 
Exchange, Incorporated, and C2 Options Exchange, Incorporated Pursuant 
to Rule 17d-2 under the Securities Exchange Act of 1934,'' and any 
subsequent amendments thereafter.
    WHEREAS, the parties desire to reduce duplication in the 
examination of their Common Members (as defined herein) and in the 
filing and processing of certain registration and membership records as 
it relates to [the CBOE]Cboe [options exchange,]and C2 [options 
exchange and the CBOE equity exchange facility operated by CBOE Stock 
Exchange, LLC (``CBSX'')]; and
    WHEREAS, the parties desire to execute an agreement covering such 
subjects pursuant to the provisions of Rule 17d-2 under the Exchange 
Act and to file such agreement with the Securities and Exchange 
Commission (the ``SEC'' or ``Commission'') for its approval.
    NOW, THEREFORE, in consideration of the mutual covenants contained 
hereinafter, the parties hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement or the 
context otherwise requires, the terms used in this Agreement shall have 
the same meaning as they have under the Exchange Act and the rules and 
regulations thereunder. As used in this Agreement, the following terms 
shall have the following meanings:
    (a) ``Rule'' of an ``exchange'' or an ``association'' shall have 
the meaning defined in Exchange Act Section 3(a)(27).
    (b) ``Common Rules'' shall mean the [CBOE]Cboe Rules and C2 Rules 
that are substantially similar to the applicable FINRA Rules in that 
examination for compliance with such Rules would not require FINRA to 
develop one or more new examination standards, modules, procedures, or 
criteria in order to analyze the application of the rule, or a Common 
Member's activity, conduct, or output in relation to such rule[; 
provided, however, Common Rules shall not include the application of 
SEC, CBOE, C2 or FINRA Rules as they pertain to violations of insider 
trading activities, which is covered by a separate 17d-2 Agreement by 
and among the BATS Exchange, Inc., BATS-Y Exchange, Inc., CBOE, Chicago 
Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., FINRA, 
NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, 
National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Amex 
LLC, and NYSE Arca Inc., effective December 16, 2011, as may be amended 
from time to time]. Common Rules shall not include any provisions 
regarding: (i) Notice, reporting or any other filings made directly to 
or from C2 or Cboe; (ii) incorporation by reference of other C2 or Cboe 
Rules that are not Common Rules; (iii) exercise of discretion in a 
manner that differs from FINRA's exercise of discretion including, but 
not limited to exercise of exemptive authority by C2 or Cboe; (iv) 
prior written approval of C2 or Cboe; and (v) payment of fees or fines 
to C2 or Cboe.
    (c) ``Common Members'' shall mean members of FINRA and at least one 
of [CBOE]Cboe or C2.
    (d) ``Effective Date'' shall be the date this Agreement is approved 
by the Commission.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with FINRA's Code of Procedure 
(the Rule 9000 Series) and other applicable FINRA procedural Rules, to 
determine whether violations of pertinent laws, rules or regulations 
have occurred, and if such violations are deemed to have occurred, the 
imposition of appropriate sanctions as specified under FINRA's Code of 
Procedure and sanctions guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination 
responsibilities and Enforcement Responsibilities relating to 
compliance by the Common Members with the Common Rules and the 
provisions of the Exchange Act and the rules and regulations 
thereunder, and other applicable laws, rules and regulations, each as 
set forth on Exhibit 1 attached hereto. The term ``Regulatory 
Responsibility'' shall also include the surveillance, investigation and 
Enforcement Responsibilities relating to compliance by Common Members 
with the Rule 14e-4 of the Securities Exchange Act (``Rule 14e-4''), 
with a focus on the standardized call option provision of Rule 14e-
4(a)(1)(ii)(D).
    2. Regulatory and Enforcement Responsibilities. FINRA shall assume 
Regulatory Responsibilities and Enforcement Responsibilities for Common 
Members. Attached as Exhibit 1 to this Agreement and made part hereof, 
[CBOE]Cboe and C2 furnished FINRA with a current list of Common Rules 
and certified to FINRA that such Rules are substantially similar to the 
corresponding FINRA Rule (the ``Certification''). FINRA hereby agrees 
that the Rules listed in the Certification are Common Rules as defined 
in this Agreement. Each year following the Effective Date of this 
Agreement, or more frequently if required by changes in the Rules of 
the parties, [CBOE]Cboe and C2 shall submit an updated list of Common 
Rules to FINRA for review which shall add [CBOE]Cboe or C2 Rules not 
included in the current list of Common Rules that qualify as Common 
Rules as defined in this Agreement; delete [CBOE]Cboe or C2 Rules 
included in the current list of Common Rules that no longer qualify as 
Common Rules as defined in this Agreement; and confirm that the 
remaining Rules on the current list of Common Rules continue to be 
[CBOE]Cboe or C2 Rules that qualify as Common Rules as defined in this 
Agreement. Within 30 days of receipt of such updated list, FINRA shall 
confirm in writing whether the Rules listed in any updated list are 
Common Rules as defined in this Agreement. Notwithstanding anything 
herein to the contrary, it is explicitly understood that the term 
``Regulatory Responsibilities'' does not include, and [CBOE]Cboe and C2 
shall retain full responsibility for (unless otherwise addressed by 
separate agreement or rule) the following (collectively, the ``Retained 
Responsibilities''):
    (a) Surveillance and enforcement with respect to trading activities 
or practices involving [CBOE]Cboe's or C2's own marketplace, including 
without limitation [CBOE]Cboe's or C2's Rules relating to the rights 
and obligations of market makers;
    (b) registration pursuant to their applicable Rules of associated 
persons (i.e., registration rules that are not Common Rules);
    (c) discharge of their duties and obligations as a Designated 
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
    (d) any [CBOE]Cboe Rules and C2 Rules that are not Common Rules, 
except Cboe Rules or C2 Rules for any Cboe or C2 affiliate that is a 
member

[[Page 22734]]

that operates as a facility (as defined in Section 3(a)(2) of the 
Exchange Act), acts as a router for Cboe or C2 and is a member of FINRA 
(``Router Member'') as provided in paragraph 6. As of the date of this 
Agreement, Cboe Trading, Inc. is the only Router Member.
    3. Common Members. Prior to the Effective Date, [CBOE]Cboe and C2 
shall furnish FINRA with a current list of Common Members, which shall 
be updated no less frequently than once every six months.
    4. No Charge. There shall be no charge to [CBOE]Cboe and C2 by 
FINRA for performing the Regulatory Responsibilities and Enforcement 
Responsibilities under this Agreement except as hereinafter provided. 
FINRA shall provide[CBOE]Cboe and C2 with ninety (90) days advance 
written notice in the event FINRA decides to impose any charges to 
[CBOE]Cboe and C2 for performing the Regulatory Responsibilities under 
this Agreement. If FINRA determines to impose a charge, [CBOE]Cboe and 
C2 shall have the right at the time of the imposition of such charge to 
terminate this Agreement; provided, however, that FINRA's Regulatory 
Responsibilities under this Agreement shall continue until the 
Commission approves the termination of this Agreement.
    5. Reassignment of Regulatory Responsibilities. Notwithstanding any 
provision hereof, this Agreement shall be subject to any statute, or 
any rule or order of the Commission, or industry agreement, 
restructuring the regulatory framework of the securities industry or 
reassigning Regulatory Responsibilities between self-regulatory 
organizations. To the extent such action is inconsistent with this 
Agreement, such action shall supersede the provisions hereof to the 
extent necessary for them to be properly effectuated and the provisions 
hereof in that respect shall be null and void.
    6. Notification of Violations. In the event that FINRA becomes 
aware of apparent violations of any [CBOE]Cboe or C2 Rules, which are 
not listed as Common Rules, discovered pursuant to the performance of 
the Regulatory Responsibilities assumed hereunder, FINRA shall notify 
[CBOE]Cboe and C2 of those apparent violations for such response as 
[CBOE]Cboe and C2 deems appropriate. In the event, [CBOE]Cboe or C2 
becomes aware of apparent violations of any Common Rules, discovered 
pursuant to the Retained Responsibilities, [CBOE]Cboe and C2 shall 
notify FINRA of those apparent violations and such matters shall be 
handled by FINRA as provided in this Agreement. Apparent violations of 
Common Rules shall be processed by, and enforcement proceedings in 
respect thereto shall be conducted by FINRA as provided hereinbefore; 
provided, however, that in the event a Common Member is the subject of 
an investigation relating to a transaction on [the CBOE]Cboe or C2 
options exchanges, [or the CBSX, CBOE]Cboe and C2 may in their 
discretion assume concurrent jurisdiction and responsibility. With 
respect to apparent violations of any Cboe or C2 Rules by any Router 
Member, FINRA shall not make referrals to Cboe or C2 pursuant to this 
paragraph 6. Such apparent violations shall be processed and 
enforcement proceedings in respect thereto will be conducted, by FINRA 
as provided in this Agreement. Each party agrees to make available 
promptly all files, records and witnesses necessary to assist the other 
in its investigation or proceedings.
    7. Continued Assistance. FINRA shall make available to [CBOE]Cboe 
and C2 all information obtained by FINRA in the performance by it of 
the Regulatory Responsibilities hereunder in respect to the Common 
Members subject to this Agreement. In particular, and not in limitation 
of the foregoing, FINRA shall furnish [CBOE]Cboe and C2 any information 
it obtains about Common Members which reflects adversely on their 
financial condition. It is understood that such information is of an 
extremely sensitive nature and, accordingly, [CBOE]Cboe and C2 
acknowledge and agree to take all reasonable steps to maintain its 
confidentiality. [CBOE]Cboe and C2 shall make available to FINRA any 
information coming to their attention that reflects adversely on the 
financial condition of Common Members or indicates possible violations 
of applicable laws, rules or regulations by such firms.
    8. Common Member Applications.
    (a) Common Members subject to this Agreement shall be required to 
submit, and FINRA shall be responsible for processing and acting upon 
all applications submitted on behalf of allied persons, partners, 
officers, registered personnel and any other person required to be 
approved by the Rules of the parties or associated with Common Members 
thereof. Upon request, FINRA shall advise [CBOE]Cboe and C2 of any 
changes of allied members, partners, officers, registered personnel and 
other persons required to be approved by the Rules of the parties.
    (b) Common Members shall be required to send to FINRA all letters, 
termination notices or other material respecting the individuals listed 
in paragraph 8(a).
    (c) When as a result of processing such submissions FINRA becomes 
aware of a statutory disqualification as defined in the Exchange Act 
with respect to a Common Member, FINRA shall determine pursuant to 
Sections 15A(g) and/or Section 6(c) of the Exchange Act the 
acceptability or continued applicability of the person to whom such 
disqualification applies and keep [CBOE]Cboe and C2 advised of its 
actions in this regard for such subsequent proceedings as [CBOE]Cboe 
and C2 may initiate.
    (d) Notwithstanding the foregoing, FINRA shall not review the 
membership application, reports, filings, fingerprint cards, notices, 
or other writings filed to determine if such documentation submitted by 
a broker or dealer, or a person associated therewith or other persons 
required to register or qualify by examination meets [the CBOE]Cboe or 
C2 requirements for general membership or for specified categories of 
membership or participation in the [CBOE]Cboe or C2. FINRA shall not 
review applications or other documentation filed to request a change in 
the rights or status described in this paragraph 8(d), including 
termination or limitation on activities, of a member or a participant 
of [the CBOE]Cboe or C2, or a person associated with, or requesting 
association with, a member or participant of [the CBOE]Cboe or C2.
    9. Branch Office Information. FINRA shall also be responsible for 
processing and, if required, acting upon all requests for the opening, 
address changes, and terminations of branch offices by Common Members 
and any other applications required of Common Members with respect to 
the Common Rules as they may be amended from time to time. Upon 
request, FINRA shall advise [CBOE]Cboe and C2 of the opening, address 
change and termination of branch and main offices of Common Members and 
the names of such branch office managers.
    10. Customer Complaints. [CBOE]Cboe and C2 shall forward to FINRA 
copies of all customer complaints involving Common Members received by 
[CBOE]Cboe and C2 relating to FINRA's Regulatory Responsibilities under 
this Agreement. It shall be FINRA's responsibility to review and take 
appropriate action in respect to such complaints.
    11. Advertising. FINRA shall assume responsibility to review the 
advertising of Common Members subject to the Agreement, provided that 
such material is filed with FINRA in accordance with FINRA's filing 
procedures and is

[[Page 22735]]

accompanied with any applicable filing fees set forth in FINRA Rules. 
Such review shall be made in accordance with then applicable FINRA 
Rules and interpretations. The advertising of Common Members shall be 
subject only to compliance with appropriate FINRA Rules and 
interpretations.
    12. No Restrictions on Regulatory Action. Nothing contained in this 
Agreement shall restrict or in any way encumber the right of any party 
to conduct its own independent or concurrent investigation, examination 
or enforcement proceeding of or against Common Members, as any party, 
in its sole discretion, shall deem appropriate or necessary.
    13. Termination. This Agreement may be terminated by any party at 
any time upon the approval of the Commission after one (1) year's 
written notice (or such shorter time as may be agreed by the parties) 
to the other parties, except as provided in paragraph 4.
    14. Effective Date. This Agreement shall be effective upon approval 
of the Commission.
    15. Arbitration. In the event of a dispute among the parties as to 
the operation of this Agreement, the parties hereby agree that any such 
dispute shall be settled by arbitration in Washington, DC in accordance 
with the rules of the American Arbitration Association then in effect, 
or such other procedures as the parties may mutually agree upon. 
Judgment on the award rendered by the arbitrator(s) may be entered in 
any court having jurisdiction.
    16. Separate Agreement. This Agreement is wholly separate from the 
following agreements: (1) The multiparty Agreement made pursuant to 
Rule 17d-2 of the Exchange Act among [BATS]Bats BZX Exchange, Inc., BOX 
Options Exchange, LLC, [CBOE]Cboe, C2, [the International Securities 
Exchange]Nasdaq ISE, LLC, FINRA, Miami International Securities 
Exchange, LLC, MIAX PEARL, LLC, [the New York Stock Exchange, LLC,] 
NYSE [Amex]American LLC, the NYSE Arca, Inc., The NASDAQ Stock Market 
LLC, NASDAQ [OMX] BX, Inc., [and] NASDAQ [OMX] PHLX LLC, Nasdaq GMX, 
LLC, Nasdaq MRX, LLC, and Bats EDGX Exchange, Inc. involving the 
allocation of regulatory responsibilities with respect to common 
members for compliance with common rules relating to the conduct by 
broker-dealers of accounts for listed options or index warrants entered 
into on [April 25, 2012]January 13, 2017, and as may be amended from 
time to time; and (2) the multiparty Agreement made pursuant to Rule 
17d-2 of the Exchange Act among NYSE [Amex]American LLC, [BATS]Bats BZX 
Exchange, Inc., C2, [CBOE]Cboe, [International Securities 
Exchange]Nasdaq ISE, LLC, FINRA, NYSE Arca, Inc., The NASDAQ Stock 
Market LLC, the BOX Options Exchange, LLC, NASDAQ [OMX] BX, Inc., [and] 
NASDAQ [OMX] PHLX LLC, Nasdaq GMX, LLC, Nasdaq MRX, LLC, Bats EDGX 
Exchange, Inc., Miami International Securities Exchange, LLC, and MIAX 
PEARL, LLC, involving the allocation of regulatory responsibilities 
with respect to SRO market surveillance of common members activities 
with regard to certain common rules relating to listed options entered 
into on [April 25, 2012]January 23, 2017, and as may be amended from 
time to time.
    17. Notification of Members. The parties shall notify Common 
Members of this Agreement after the Effective Date by means of a 
uniform joint notice.
    18. Amendment. This Agreement may be amended in writing duly 
approved by each party. All such amendments must be filed with and 
approved by the Commission before they become effective.
    19. Limitation of Liability. None of the parties nor any of their 
respective directors, governors, officers or employees shall be liable 
to any other party to this Agreement for any liability, loss or damage 
resulting from or claimed to have resulted from any delays, 
inaccuracies, errors or omissions with respect to the provision of 
Regulatory Responsibilities as provided hereby or for the failure to 
provide any such responsibility, except with respect to such liability, 
loss or damages as shall have been suffered by any party and caused by 
the willful misconduct of another party or their respective directors, 
governors, officers or employees. No warranties, express or implied, 
are made by any party hereto with respect to any of the 
responsibilities to be performed by them hereunder.
    20. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) 
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA, C2 and 
[CBOE]Cboe join in requesting the Commission, upon its approval of this 
Agreement, to relieve [CBOE]Cboe and C2 of any and all responsibilities 
with respect to matters allocated to FINRA pursuant to this Agreement; 
provided, however, that this Agreement shall not be effective until the 
Effective Date.
    21. Counterparts. This Agreement may be executed in one or more 
counterparts, each of which shall be deemed an original, and such 
counterparts together shall constitute one and the same instrument.
* * * * *

Exhibit 1

    Exhibit 1 is deleted in its entirety and replaced with the 
following:

CBOE and C2 Certification of Common Rules

    Cboe and C2 hereby certify that the requirements contained in the 
Rules listed below are identical to, or substantially similar to, the 
NASD/FINRA or SEC Rules identified.
    # Common Rules shall not include any provisions regarding (i) 
notice, reporting or any other filings made directly to or from C2 or 
Cboe; (ii) incorporation by reference of other C2 or Cboe Rules that 
are not Common Rules; (iii) exercise of discretion in a manner that 
differs from FINRA's exercise of discretion including, but not limited 
to exercise of exemptive authority by C2 or Cboe; (iv) prior written 
approval of C2 or Cboe; and (v) payment of fees or fines to C2 or Cboe.

------------------------------------------------------------------------
                                                      NASD/FINRA or SEC
         C2 rule(s)               CBOE rule(s)             rule(s)
------------------------------------------------------------------------
                              3.4 Foreign Trading   NASD Rule 1090
                               Permit Holders.       Foreign Members.
3.4(a) Qualification and      3.6A(a)               NASD Rule 1031(a)
 Registration.                 Qualification and     Registration
                               Registration of       Requirements and
                               Trading Permit        NASD Rule
                               Holders and           1060(a)(1)-(4)(A),
                               Associated Persons    (C) and (D) Persons
                               #.                    Exempt from
                                                     Registration.
3.4(b) Qualification and      3.6A(b)               NASD Rule 1022(b)
 Registration.                 Qualification and     Categories of
                               Registration of       Principal
                               Trading Permit        Registration.
                               Holders and
                               Associated Persons
                               #.
3.4(c) Qualification and      3.6A(c)               NASD Rule
 Registration.                 Qualification and     1022(a)(1)(C)
                               Registration of       Categories of
                               Trading Permit        Principal
                               Holders and           Registration. \1\
                               Associated Persons.
3.4(e) Qualification and      3.6A(e)               NASD Rule 1021(c)
 Registration.                 Qualification and     Registration
                               Registration of       Requirements.
                               Trading Permit
                               Holders and
                               Associated Persons.

[[Page 22736]]

 
3.4 Qualification and         3.6A Qualification    FINRA Rule 1010(c)
 Registration,                 and Registration of   Electronic Filing
 Interpretation and Policy     Trading Permit        Requirements for
 .01.                          Holders and           Uniform Forms and
                               Associated Persons,   FINRA Bylaws
                               Interpretations and   Article V, Sec. 2.
                               Policies .01 and
                               .02.
3.4 Qualification and         3.6A Qualification    FINRA Rule 1250
 Registration,                 and Registration of   Continuing
 Interpretations and           Trading Permit        Education
 Policies .03.                 Holders and           Requirements.
                               Associated Persons,
                               Interpretations and
                               Policies .04.
3.4 Qualification and         3.6A Qualification    NASD Rule 1070(d)
 Registration,                 and Registration of   Qualifications
 Interpretation and            Trading Permit        Examinations and
 Policy.04.                    Holders and           Waiver
                               Associated Persons,   Requirements.
                               Interpretation and
                               Policy .05 #.
3.4 Qualification and         3.6A Qualification    NASD Rule 1021(a)
 Registration,                 and Registration of   and (b)
 Interpretation and Policy     Trading Permit        Registration
 .06.                          Holders and           Requirements, NASD
                               Associated Persons,   Rule 1022(a)(6),
                               Interpretation and    and 1032(f)
                               Policy .07 #.         Categories of
                                                     Representative
                                                     Registration.
3.4 Qualification and         3.6A Qualification    NASD Rule 1022(a)(6)
 Registration,                 and Registration of   Categories of
 Interpretation and Policy     Trading Permit        Principal
 .07.                          Holders and           Registration.
                               Associated Persons,
                               Interpretation and
                               Policy .08.
3.4 Qualification and         3.6A Qualification    NASD Rule 1031(a)
 Registration,                 and Registration of   Registration
 Interpretation and Policy     Trading Permit        Requirements and
 .08.                          Holders and           FINRA Bylaws
                               Associated Persons,   Article V., Sec. 1.
                               Interpretation and
                               Policy .09.
                              3.7(c) Certain        Exchange Act Rule
                               Documents Required    17f-2.
                               of Trading Permit
                               Holders, Applicants
                               and Associated
                               Persons.
                              3.7(d) Certain        NASD Rule 1013(a)(2)
                               Documents Required    New Member
                               of Trading Permit     Application and
                               Holders, Applicants   Interview, and
                               and Associated        FINRA Bylaws
                               Persons.              Article IV, Sec. 1.
Chapter 4 Business Conduct--  4.1 Just and          FINRA Rule 2010
 CBOE Rule 4.1 incorporated    Equitable             Standards of
 by reference.                 Principles of Trade.  Commercial Honor
                                                     and Principles of
                                                     Trade.
Chapter 4 Business Conduct--  4.7 Manipulation....  FINRA Rule 2020 Use
 CBOE Rule 4.7 incorporated                          of Manipulative,
 by reference.                                       Deceptive or Other
                                                     Fraudulent Devices
                                                     and FINRA Rule 6140
                                                     Other Trading
                                                     Practices.
Chapter 4 Business Conduct--  4.18 Prevention of    Section 15(g) of the
 CBOE Rule 4.18 is             the Misuse of         Securities Exchange
 incorporated by reference.    Material, Nonpublic   Act of 1934
                               Information #.        (Exchange Act) and
                                                     FINRA Rule
                                                     3110(b)(1) and (d)
                                                     Supervision.
Chapter 4 Business Conduct--  4.20 Anti-Money       FINRA Rule 3310 Anti-
 CBOE Rule 4.20 is             Laundering            Money Laundering
 incorporated by reference.    Compliance Program.   Compliance Program.
                                                     \2\
Chapter 9 Doing Business      9.3A Continuing       FINRA Rule 1250
 with the Public--CBOE Rule    Education For         Continuing
 9.3A is incorporated by       Registered Persons    Education
 reference.                    #.                    Requirements.
Chapter 9 Doing Business      9.4(a) Other          FINRA Rule 3270
 with the Public--CBOE Rule    Affiliations of       Outside Business
 9.4(a) is incorporated by     Registered            Activities of
 reference.                    Associated Persons.   Registered Persons.
                                                     \3\
Chapter 9 Doing Business      9.13 Statement of     Exchange Act Rule
 with the Public--CBOE Rule    Financial Condition   17a-5.
 9.13 is incorporated by       to Customers.
 reference.
Chapter 9 Doing Business      9.16 Restrictions on  FINRA Rule 4330
 with the Public--CBOE Rule    Pledge and Lending    Customer
 9.16 is incorporated by       of Customers'         Protection--Permiss
 reference.                    Securities.           ible Use of
                                                     Customers'
                                                     Securities.
Chapter 9 Doing Business      9.20 Transfer of      FINRA Rule 11870
 with the Public--CBOE Rule    Accounts #.           Customer Account
 9.20 is incorporated by                             Transfer Contracts.
 reference.
Chapter 9 Doing Business      9.24 Telemarketing..  FINRA Rule 3230
 with the Public--CBOE Rule                          Telemarketing.
 9.24 is incorporated by
 reference.
Chapter 9 Doing Business      9.25 Borrowing From   FINRA Rule 3240
 with the Public--CBOE Rule    or Lending to         Borrowing From or
 9.25 is incorporated by       Customers.            Lending to
 reference.                                          Customers.
------------------------------------------------------------------------
\1\ FINRA shall have Regulatory Responsibilities to the extent the
  heighted qualification exam requirement of the Cboe and C2 rule is
  satisfied by the Series 24.
\2\ FINRA shall not have any Regulatory Responsibilities regarding the
  requirement to conduct independent testing during the first calendar
  year of a broker-dealer becoming a Trading Permit Holder or TPH
  organization; responsibility for such requirement remains with Cboe
  and C2, as applicable.
\3\ FINRA shall not have any Regulatory Responsibilities regarding the
  requirement that the Trading Permit Holder provide prior written
  consent to the TPH organization; responsibility for such requirement
  remains with Cboe and C2, as applicable.

    The following provisions are covered:

 Rule 200 of Regulation SHO--Definition of Short Sales and 
Marking Requirements
 Rule 203 of Regulation SHO--Borrowing and Delivery 
Requirements
 Rule 204 of Regulation SHO--Close-Out Requirement
 Rule 105 of Regulation M--Short Selling in Connection with a 
Public Offering
 Section 14(e) of the Exchange Act
 Rule 14e-4 of the Exchange Act--Prohibited Transactions in 
Connection with Partial Tender Offers [caret]
 Regulation ATS
 Regulation S-P

    [caret] FINRA shall perform surveillance, investigation 
and Enforcement Responsibilities for SEA Rule 14e-4(a)(1)(ii)(D).

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. 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

[[Page 22737]]

     Send an email to [email protected]. Please include 
File Number 4-536 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 4-536. 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 plan that are filed with the 
Commission, and all written communications relating to the proposed 
plan 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 plan also will be available for inspection and 
copying at the principal offices of FINRA, Cboe, and C2. 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 4-536 and should be submitted on or before 
June 6, 2018.

V. Discussion

    The Commission finds that the proposed Amended Plan is consistent 
with the factors set forth in Section 17(d) of the Act \13\ and Rule 
17d-2(c) thereunder \14\ in that the proposed Amended Plan is necessary 
or appropriate in the public interest and for the protection of 
investors, fosters cooperation and coordination among SROs, and removes 
impediments to and fosters the development of the national market 
system. In particular, the Commission believes that the proposed 
Amended Plan should reduce unnecessary regulatory duplication by 
allocating to FINRA certain examination and enforcement 
responsibilities for Common Members that would otherwise be performed 
by Cboe, C2, and FINRA. Accordingly, the proposed Amended Plan promotes 
efficiency by reducing costs to Common Members. Furthermore, because 
Cboe, C2, and FINRA will coordinate their regulatory functions in 
accordance with the Amended Plan, the Amended Plan should promote 
investor protection.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78q(d).
    \14\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------

    The Commission notes that, under the Amended Plan, Cboe, C2, and 
FINRA have allocated regulatory responsibility for those Cboe and C2 
rules, set forth in the Certification, that are substantially similar 
to the applicable FINRA rules in that examination for compliance with 
such provisions and rules would not require FINRA to develop one or 
more new examination standards, modules, procedures, or criteria in 
order to analyze the application of the rule, or a Common Member's 
activity, conduct, or output in relation to such rule. In addition, 
under the Amended Plan, FINRA would assume regulatory responsibility 
for certain provisions of the federal securities laws and the rules and 
regulations thereunder that are set forth in the Certification. The 
Common Rules covered by the Amended Plan are specifically listed in the 
Certification, as may be amended by the Parties from time to time.
    According to the Amended Plan, Cboe and C2 will review the 
Certification, at least annually, or more frequently if required by 
changes in either the rules of Cboe, C2, or FINRA, and, if necessary, 
submit to FINRA an updated list of Common Rules to add Cboe and C2 
rules not included on the then-current list of Common Rules that are 
substantially similar to FINRA rules; delete Cboe and C2 rules included 
in the then-current list of Common Rules that no longer qualify as 
common rules; and confirm that the remaining rules on the list of 
Common Rules continue to be Cboe and C2 rules that qualify as common 
rules.\15\ FINRA will then confirm in writing whether the rules listed 
in any updated list are Common Rules as defined in the Amended Plan. 
Under the Amended Plan, Cboe and C2 will also provide FINRA with a 
current list of Common Members and shall update the list no less 
frequently than once every six months.\16\ The Commission believes that 
these provisions are designed to provide for continuing communication 
between the Parties to ensure the continued accuracy of the scope of 
the proposed allocation of regulatory responsibility.
---------------------------------------------------------------------------

    \15\ See paragraph 2 of the Amended Plan.
    \16\ See paragraph 3 of the Amended Plan.
---------------------------------------------------------------------------

    The Commission is hereby declaring effective an Amended Plan that, 
among other things, allocates regulatory responsibility to FINRA for 
the oversight and enforcement of all Cboe and C2 rules that are 
substantially similar to the rules of FINRA for Common Members of Cboe 
and FINRA, and C2 and FINRA. Therefore, modifications to the 
Certification need not be filed with the Commission as an amendment to 
the Amended Plan, provided that the Parties are only adding to, 
deleting from, or confirming changes to Cboe or C2 rules in the 
Certification in conformance with the definition of Common Rules 
provided in the Amended Plan. However, should the Parties decide to add 
a Cboe or C2 rule to the Certification that is not substantially 
similar to a FINRA rule; delete a Cboe or C2 rule from the 
Certification that is substantially similar to a FINRA rule; or leave 
on the Certification a Cboe or C2 rule that is no longer substantially 
similar to a FINRA rule, then such a change would constitute an 
amendment to the Amended Plan, which must be filed with the Commission 
pursuant to Rule 17d-2 under the Act.\17\
---------------------------------------------------------------------------

    \17\ The Commission also notes that the addition to or deletion 
from the Certification of any federal securities laws, rules, and 
regulations for which FINRA would bear responsibility under the 
Amended Plan for examining, and enforcing compliance by, Common 
Members, also would constitute an amendment to the Amended Plan.
---------------------------------------------------------------------------

    Under paragraph (c) of Rule 17d-2, the Commission may, after 
appropriate notice and comment, declare a plan, or any part of a plan, 
effective. In this instance, the Commission believes that appropriate 
notice and comment can take place after the proposed amendment is 
effective. The primary purposes of the amendment are to remove Cboe's 
former equities trading facility, CBSX, from the Plan; (2) to the 
extent that it becomes a member of either exchange, allocate regulatory 
responsibility to FINRA for Cboe's and C2's affiliated routing broker-
dealer, Cboe Trading, Inc.; and (3) allocate surveillance, 
investigation, and enforcement responsibilities for Rule 14e-4 under 
the Act . By declaring it effective today, the Amended Plan can become 
effective and be implemented without undue delay. The Commission notes 
that the prior version of this plan immediately prior to this proposed 
amendment was published for comment and the Commission did not receive 
any comments thereon.\18\ Furthermore, the Commission does not believe 
that the amendment to the plan raises any new

[[Page 22738]]

regulatory issues that the Commission has not previously considered.
---------------------------------------------------------------------------

    \18\ See supra note 12 (citing to Securities Exchange Act 
Release No. 72137).
---------------------------------------------------------------------------

VI. Conclusion

    This order gives effect to the Amended Plan filed with the 
Commission in File No. 4-536. The Parties shall notify all members 
affected by the Amended Plan of their rights and obligations under the 
Amended Plan.
    It is therefore ordered, pursuant to Section 17(d) of the Act, that 
the Amended Plan in File No. 4-536, between the FINRA, Cboe, and C2, 
filed pursuant to Rule 17d-2 under the Act, hereby is approved and 
declared effective.
    It is further ordered that Cboe and C2 are relieved of those 
responsibilities allocated to FINRA under the Amended Plan in File No. 
4-536.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10369 Filed 5-15-18; 8:45 am]
BILLING CODE 8011-01-P