Document ID: SEC-2016-1830-0001
Agency: sec
Document Type: Notice
Title: Filings and Orders: Proposed Plan for Allocation of Regulatory Responsibilities between Financial Industry Regulatory Authority, Inc.; Bats BZX Exchange, Inc.; Bats BYX Exchange, Inc.; Bats EDGA Exchange, Inc.; and Bats EDGX Exchange, Inc.
Posted Date: 2016-10-13T04:00Z

[Federal Register Volume 81, Number 198 (Thursday, October 13, 2016)]
[Notices]
[Pages 70728-70735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24709]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79057; File No. 4-705]

Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing and Order Approving and Declaring 
Effective a Proposed Plan for the Allocation of Regulatory 
Responsibilities Between the Financial Industry Regulatory Authority, 
Inc., Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA 
Exchange, Inc., and Bats EDGX Exchange, Inc.

October 6, 2016.
    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 a plan for allocating regulatory responsibility (``Plan'') 
filed on September 30, 2016, pursuant to Rule 17d-2 of the Act,\2\ by 
the Financial Industry Regulatory Authority, Inc. (``FINRA''), Bats BZX 
Exchange, Inc. (``BZX''), Bats BYX Exchange, Inc. (``BYX''), Bats EDGA 
Exchange, Inc. (``EDGA''), and Bats EDGX Exchange, Inc. (``EDGX'') 
(each, a ``Participating Organization,'' or ``Bats Exchange,'' and 
together, the ``Participating Organizations,'' ``the Bats Exchanges,'' 
or the ``Parties''). The Plan replaces and supersedes the agreement 
between FINRA and BZX dated August 25, 2008; \3\ the agreement between 
FINRA and BYX dated September 3, 2010; \4\ the agreement between FINRA 
and EDGX dated March 31, 2010; \5\ and the agreement between FINRA and 
EDGA dated March 31, 2010.\6\
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
    \3\ See Securities Exchange Act Release No. 58563 (September 17, 
2008), 73 FR 55180 (September 24, 2008) (File No. 4-569) (notice of 
filing of proposed plan). See also Securities Exchange Act Release 
No. 58818 (October 20, 2008), 73 FR 63752 (October 27, 2008) (File 
No. 4-569) (order approving proposed plan).
    \4\ See Securities Exchange Act Release No. 62935 (September 17, 
2010), 75 FR 57998 (September 23, 2010) (File No. 4-613) (notice of 
filing of proposed plan). See also Securities Exchange Act Release 
No. 63102 (October 14, 2010), 75 FR 64765 (October 20, 2010) (File 
No. 4-613) (order approving proposed plan).
    \5\ See Securities Exchange Act Release No. 61861 (April 7, 
2010), 75 FR 18920 (April 13, 2010) (File No. 4-598) (notice of 
filing of proposed plan). See also Securities Exchange Act Release 
No. 62079 (May 11, 2010), 75 FR 28080 (May 19, 2010) (File No. 4-
598) (order approving proposed plan).
    \6\ See Securities Exchange Act Release No. 61860 (April 7, 
2010), 75 FR 18915 (April 13, 2010) (File No. 4-597) (notice of 
filing of proposed plan). See also Securities Exchange Act Release 
No. 62078 (May 11, 2010), 75 FR 28078 (May 19, 2010) (File No. 4-
597) (order approving proposed plan).
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I. Introduction

    Section 19(g)(1) of the Securities Exchange Act of 1934 
(``Act''),\7\ 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) or Section 19(g)(2) of the Act.\8\ 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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    \7\ 15 U.S.C. 78s(g)(1).
    \8\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
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    Section 17(d)(1) of the Act \9\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\10\ 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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    \9\ 15 U.S.C. 78q(d)(1).
    \10\ 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.\11\ 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.\12\ 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- 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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    \11\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \12\ 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.\13\ 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 appropriate 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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    \13\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. Proposed Plan

    The proposed 17d-2 Plan is intended to reduce regulatory 
duplication for firms that are common members of a Bats Exchange and 
FINRA.\14\ Pursuant to the proposed 17d-2 Plan, FINRA would assume 
certain examination and enforcement responsibilities for common members 
with respect to certain applicable laws, rules, and regulations. The 
Plan replaces and supersedes the individual agreements between FINRA 
and each Bats Exchange \15\ and is intended to reduce the 
administrative burden associated with maintaining four separate plans.
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    \14\ See Paragraph 1(c) of the proposed 17d-2 Plan.
    \15\ See supra notes 3-6.

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[[Page 70729]]

    The text of the Plan delineates the proposed regulatory 
responsibilities with respect to the Parties. Included in the proposed 
Plan is an exhibit (the ``Bats BZX Exchange, Inc. (``BZX''), Bats BYX 
Exchange, Inc. (``BYX''), Bats EDGA Exchange, Inc. (``EDGA''), and Bats 
EDGX Exchange, Inc. (``EDGX'') Rules Certification for 17d-2 Agreement 
with FINRA,'' referred to herein as the ``Certification'') that lists 
every rule of the Bats Exchanges, and select federal securities laws, 
rules, and regulations, for which FINRA would bear responsibility under 
the Plan for overseeing and enforcing with respect to members of the 
Bats Exchanges that are also members of FINRA and the associated 
persons therewith (``Common Members'').
    Specifically, under the 17d-2 Plan, FINRA would assume examination 
and enforcement responsibility relating to compliance by Common Members 
with the rules of each Bats Exchange that are substantially similar to 
the applicable rules of FINRA,\16\ as well as any provisions of the 
federal securities laws and the rules and regulations thereunder 
delineated in the Certification (``Common Rules''). In the event that a 
Common Member is the subject of an investigation relating to a 
transaction on a Bats Exchange, the plan acknowledges that the Bats 
Exchange may, in its discretion, exercise concurrent jurisdiction and 
responsibility for such matter.\17\
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    \16\ See paragraph 1(b) of the proposed 17d-2 Plan (defining 
Common Rules). See also paragraph 1(f) of the proposed 17d-2 Plan 
(defining Regulatory Responsibilities). Paragraph 2 of the Plan 
provides that annually, or more frequently as required by changes in 
either the Bats Exchanges rules or FINRA rules, the parties shall 
review and update, if necessary, the list of Common Rules. Further, 
paragraph 3 of the Plan provides that the Bats Exchanges shall 
furnish FINRA with a list of Common Members, and shall update the 
list no less frequently than once each calendar quarter.
    \17\ See paragraph 6 of the proposed 17d-2 Plan.
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    Under the Plan, each Bats Exchange would retain full responsibility 
for surveillance and enforcement with respect to trading activities or 
practices involving the Bats Exchange's own marketplace, including, 
without limitation, registration pursuant to its applicable rules of 
associated persons (i.e., registration rules that are not Common 
Rules); its duties as a DEA pursuant to Rule 17d-1 under the Act; and 
any rules of the Bats Exchange that are not Common Rules, except for 
the Bats Exchanges rules for any broker-dealer subsidiary of the Bats 
Exchanges' parent company, Bats Global Markets, Inc.\18\ Apparent 
violations of any the Bats Exchanges rules by any broker-dealer 
subsidiary of Bats Global Markets will be processed by, and enforcement 
proceedings in respect thereto will be conducted by, FINRA.\19\
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    \18\ See paragraph 2 of the proposed 17d-2 Plan.
    \19\ See paragraph 6 of the proposed 17d-2 Plan.
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    The text of the proposed 17d-2 Plan is as follows:

AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., BATS 
BZX EXCHANGE, INC., BATS BYX EXCHANGE, INC., BATS EDGA EXCHANGE, INC., 
AND BATS EDGX EXCHANGE, INC. PURSUANT TO RULE 17d-2 UNDER THE 
SECURITIES EXCHANGE ACT OF 1934

    This Agreement, by and between the Financial Industry Regulatory 
Authority, Inc. (``FINRA''), Bats BZX Exchange, Inc. (``BZX''), Bats 
BYX Exchange, Inc. (``BYX''), Bats EDGA Exchange, Inc. (``EDGA''), and 
Bats EDGX Exchange, Inc. (``EDGX'') (collectively, the ``Bats 
Exchanges'' and each a ``Bats Exchange'') is made this 30th day of 
September, 2016 (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 and the Bats Exchanges may be referred to 
individually as a ``party'' and together as the ``parties.'' Upon 
approval by the Securities and Exchange Commission (``Commission'' or 
``SEC'') this Agreement shall replace and supersede the agreement 
between FINRA and BZX dated August 25, 2008; the agreement between 
FINRA and BYX dated September 3, 2010; the agreement between FINRA and 
EDGA dated March 31, 2010; and the agreement between FINRA and EDGX 
dated March 31, 2010.
    Whereas, FINRA and the Bats Exchanges desire to reduce duplication 
in the examination and surveillance of their Common Members (as defined 
herein) and in the filing and processing of certain registration and 
membership records; and
    Whereas, FINRA and the Bats Exchanges 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 
Commission for its approval.
    Now, therefore, in consideration of the mutual covenants contained 
hereinafter, FINRA and each Bats Exchange 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) ``Bats Exchanges Rules'' or ``FINRA Rules'' shall mean: (i) The 
rules of each Bats Exchange, or (ii) the rules of FINRA, respectively, 
as the rules of an exchange or association are defined in Exchange Act 
Section 3(a)(27).
    (b) ``Common Rules'' shall mean the rules of each Bats Exchange 
that are substantially similar to the applicable FINRA Rules and 
certain provisions of the Exchange Act and SEC rules set forth on 
Exhibit 1 in that examination or surveillance for compliance with such 
provisions and rules would not require FINRA to develop one or more new 
examination or surveillance standards, modules, procedures, or criteria 
in order to analyze the application of the provision or rule, or a 
Common Member's activity, conduct, or output in relation to such 
provision or rule; provided, however, Common Rules shall not include 
the application of the SEC, each Bats Exchange or FINRA rules as they 
pertain to violations of insider trading activities, which is covered 
by a separate 17d-2 Agreement by and among Bats Exchange, Inc., Bats-Y 
Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago 
Stock Exchange, Inc., EDGA Exchange Inc., EDGX Exchange Inc., Financial 
Industry Regulatory Authority, Inc., 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.
    (c) ``Common Members'' shall mean those Bats Exchange members that 
are also members of FINRA and the associated persons therewith.
    (d) ``Effective Date'' shall have the meaning set forth in 
paragraph 13.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with FINRA's Code of Procedure 
and other applicable FINRA procedural rules, to determine whether 
violations of Common Rules 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, surveillance responsibilities and Enforcement 
Responsibilities relating to

[[Page 70730]]

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.
    2. Regulatory Responsibilities. FINRA shall assume Regulatory 
Responsibilities for Common Members. Attached as Exhibit 1 to this 
Agreement and made part hereof, each Bats Exchange furnished FINRA with 
a current list of Common Rules and certified to FINRA that such rules 
that are Bats Exchanges Rules are substantially similar to the 
corresponding FINRA Rules (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 either the 
rules of any Bats Exchange or FINRA, the Bats Exchanges shall submit an 
updated list of Common Rules to FINRA for review which shall add Bats 
Exchanges Rules not included in the current list of Common Rules that 
qualify as Common Rules as defined in this Agreement; delete Bats 
Exchanges 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 Bats Exchanges 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 each Bats Exchange shall retain full responsibility for 
(unless otherwise addressed by separate agreement or rule) 
(collectively, the ``Retained Responsibilities'') the following:
    (a) Surveillance, examination, investigation and enforcement with 
respect to trading activities or practices involving each Bats 
Exchange's own marketplace for rules that are not Common Rules;
    (b) registration pursuant to its applicable rules of associated 
persons (i.e., registration rules that are not Common Rules);
    (c) discharge of its duties and obligations as a Designated 
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
    (d) any Bats Exchanges Rules that are not Common Rules, except for 
any Bats Exchanges Rules for any broker-dealer subsidiary of Bats 
Global Markets, Inc., as provided in paragraph 6.
    3. Common Members. Prior to the Effective Date, each Bats Exchange 
shall furnish FINRA with a current list of Common Members, which shall 
be updated no less frequently than once each quarter.
    4. No Charge. There shall be no charge to the Bats Exchanges by 
FINRA for performing the Regulatory Responsibilities under this 
Agreement except as otherwise agreed by the parties, either herein or 
in a separate 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 Bats Exchanges Rules, which are not 
listed as Common Rules, discovered pursuant to the performance of the 
Regulatory Responsibilities assumed hereunder, FINRA shall notify the 
Bats Exchanges of those apparent violations for such response as the 
Bats Exchanges deem appropriate. In the event that any of the Bats 
Exchanges becomes aware of apparent violations of any Common Rules, 
discovered pursuant to the performance of the Retained 
Responsibilities, the applicable Bats Exchange shall notify FINRA of 
those apparent violations and such matters shall be handled by FINRA as 
provided in this Agreement. With respect to apparent violations of any 
Bats Exchanges Rules by any broker-dealer subsidiary of Bats Global 
Markets, Inc., FINRA shall not make referrals to the Bats Exchanges 
pursuant to this paragraph 6. Such apparent violations shall be 
processed by, 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. Apparent 
violations of Common Rules, FINRA Rules, federal securities laws, and 
rules and regulations thereunder, 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 
a Bats Exchange, the Bats Exchange may in its discretion assume 
concurrent jurisdiction and responsibility.
    7. Continued Assistance.
    (a) FINRA shall make available to the Bats Exchanges all 
information obtained by FINRA in the performance by it of the 
Regulatory Responsibilities hereunder with respect to the Common 
Members subject to this Agreement. In particular, and not in limitation 
of the foregoing, FINRA shall furnish the Bats Exchanges any 
information it obtains about Common Members which reflects adversely on 
their financial condition. The Bats Exchanges shall make available to 
FINRA any information coming to its attention that reflects adversely 
on the financial condition of Common Members or indicates possible 
violations of applicable laws, rules or regulations by such firms.
    (b) The parties agree that documents or information shared shall be 
held in confidence, and used only for the purposes of carrying out 
their respective regulatory obligations. The parties shall not assert 
regulatory or other privileges as against another with respect to 
documents or information that is required to be shared pursuant to this 
Agreement.
    (c) The sharing of documents or information between the parties 
pursuant to this Agreement shall not be deemed a waiver as against 
third parties of regulatory or other privileges relating to the 
discovery of documents or information.
    8. Statutory Disqualifications. When 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 the Bats Exchanges advised of its actions in this regard for such 
subsequent proceedings as the Bats Exchanges may initiate.
    9. Customer Complaints. The Bats Exchanges shall forward to FINRA 
copies of all customer complaints involving Common Members received by 
the Bats Exchanges relating to FINRA's Regulatory Responsibilities 
under this Agreement. It shall be FINRA's responsibility to review and

[[Page 70731]]

take appropriate action in respect to such complaints.
    10. 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 accompanied with any applicable filing fees set forth 
in FINRA Rules.
    11. 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.
    12. Termination. This Agreement may be terminated by the Bats 
Exchanges or FINRA at any time upon the approval of the Commission 
after one (1) year's written notice to the other party, except as 
provided in paragraph 4.
    13. Effective Date. This Agreement shall be effective upon approval 
of the Commission.
    14. Arbitration. In the event of a dispute among the parties as to 
the operation of this Agreement, the Bats Exchanges and FINRA 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. Each 
party acknowledges that the timely and complete performance of its 
obligations pursuant to this Agreement is critical to the business and 
operations of the other parties. In the event of a dispute between the 
parties, the parties shall continue to perform their respective 
obligations under this Agreement in good faith during the resolution of 
such dispute unless and until this Agreement is terminated in 
accordance with its provisions. Nothing in this Section 14 shall 
interfere with a party's right to terminate this Agreement as set forth 
herein.
    15. Notification of Members. The Bats Exchanges and FINRA shall 
notify Common Members of this Agreement after the Effective Date by 
means of a uniform joint notice.
    16. 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.
    17. Limitation of Liability. Neither FINRA nor any Bats Exchange 
nor any of their respective directors, governors, officers or employees 
shall be liable to the other parties 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 one or the 
other of FINRA or any Bats Exchange and caused by the willful 
misconduct of the other party or their respective directors, governors, 
officers or employees. No warranties, express or implied, are made by 
FINRA or any Bats Exchange with respect to any of the responsibilities 
to be performed by each of them hereunder.
    18. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) 
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and the 
Bats Exchanges join in requesting the Commission, upon its approval of 
this Agreement or any part thereof, to relieve the Bats Exchanges 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.
    19. Severability. Any term or provision of this Agreement that is 
invalid or unenforceable in any jurisdiction shall, as to such 
jurisdiction, be ineffective to the extent of such invalidity or 
unenforceability without rendering invalid or unenforceable the 
remaining terms and provisions of this Agreement or affecting the 
validity or enforceability of any of the terms or provisions of this 
Agreement in any other jurisdiction.
    20. 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

Bats BZX Exchange, Inc. (``BZX''), Bats BYX Exchange, Inc. (``BYX''), 
Bats EDGA Exchange, Inc. (``EDGA''), and Bats EDGX Exchange, Inc. 
(``EDGX'') Rules Certification for 17d-2 Agreement With FINRA

    Each Bats Exchange hereby certifies that the requirements contained 
in the rules listed below are identical to, or substantially similar 
to, the comparable FINRA Rule, NASD Rule, Exchange Act provision or SEC 
Rule identified (``Common Rules'').

----------------------------------------------------------------------------------------------------------------
                                                                                               FINRA rule, NASD
                                                                                                rule,  Exchange
            BZX rule:                  BYX rule:          EDGA rule:          EDGX rule:       Act Provision or
                                                                                                   SEC rule:
----------------------------------------------------------------------------------------------------------------
Rule 2.5 Restrictions,            Rule 2.5            Rule 2.5            Rule 2.5            FINRA Rule
 Interpretation and Policy .02     Restrictions,       Restrictions,       Restrictions,       1250(a)(1)-(4)
 Continuing Education              Interpretation      Interpretation      Interpretation      Continuing
 Requirements .                   and Policy .02      and Policy .02      and Policy .02      Education
                                   Continuing          Continuing          Continuing          Requirements.\1\
                                   Education           Education           Education
                                   Requirements .     Requirements .     Requirements .
Rule 2.5 Restrictions,            Rule 2.5            Rule 2.5            Rule 2.5            FINRA By-Laws of
 Interpretation and Policy .04     Restrictions,       Restrictions,       Restrictions,       the Corporation,
 Termination of Employment.        Interpretation      Interpretation      Interpretation      Article V,
                                   and Policy .04      and Policy .04      and Policy .04      Section 3
                                   Termination of      Termination of      Termination of      Notification by
                                   Employment.         Employment.         Employment.         Member to the
                                                                                               Corporation and
                                                                                               Associated Person
                                                                                               of Termination;
                                                                                               Amendments to
                                                                                               Notification.
Rule 2.6(g) Application           Rule 2.6(g)         Rule 2.6(g)         Rule 2.6(g)         FINRA By-Laws of
 Procedures for Membership or to   Application         Application         Application         the Corporation,
 become an Associated Person of    Procedures for      Procedures for      Procedures for      Article IV,
 a Member .                       Membership or to    Membership or to    Membership or to    Section 1(c)
                                   become an           become an           become an           Application for
                                   Associated Person   Associated Person   Associated Person   Membership.
                                   of a Member .      of a Member .      of a Member .
Rule 3.1 Business Conduct of      Rule 3.1 Business   Rule 3.1 Business   Rule 3.1 Business   FINRA Rule 2010
 Members *.                        Conduct of          Conduct of          Conduct of          Standards of
                                   Members *.          Members *.          Members *.          Commercial Honor
                                                                                               and Principles of
                                                                                               Trade.*
Rule 3.2 Violations Prohibited *  Rule 3.2            Rule 3.2            Rule 3.2            FINRA Rule 2010
                                   Violations          Violations          Violations          Standards of
                                   Prohibited *.       Prohibited *.       Prohibited *.       Commercial Honor
                                                                                               and Principles of
                                                                                               Trade and FINRA
                                                                                               Rule 3110
                                                                                               Supervision.* \2\

[[Page 70732]]

 
Rule 3.3 Use of Fraudulent        Rule 3.3 Use of     Rule 3.3 Use of     Rule 3.3 Use of     FINRA Rule 2020
 Devices *.                        Fraudulent          Fraudulent          Fraudulent          Use of
                                   Devices *.          Devices *.          Devices *.          Manipulative,
                                                                                               Deceptive or
                                                                                               Other Fraudulent
                                                                                               Devices.*
Rule 3.5 Communications with the  Rule 3.5            Rule 3.5            Rule 3.5            FINRA Rule 2210
 Public.                           Communications      Communications      Communications      Communications
                                   with the Public.    with the Public.    with the Public.    with the Public.
Rule 3.6 Fair Dealing with        Rule 3.6 Fair       Rule 3.6 Fair       Rule 3.6 Fair       FINRA Rule 2020
 Customers.                        Dealing with        Dealing with        Dealing with        Use of
                                   Customers.          Customers.          Customers.          Manipulative,
                                                                                               Deceptive or
                                                                                               Other Fraudulent
                                                                                               Devices.* \3\
Rule 3.7(a) Recommendations to    Rule 3.7(a)         Rule 3.7(a)         Rule 3.7(a)         FINRA Rule 2111(a)
 Customers.                        Recommendations     Recommendations     Recommendations     Suitability.
                                   to Customers.       to Customers.       to Customers.
Rule 3.8(a) The Prompt Receipt    Rule 3.8(a) The     Rule 3.8(a) The     Rule 3.8(a) The     FINRA Rule 11860
 and Delivery of Securities.       Prompt Receipt      Prompt Receipt      Prompt Receipt      COD Orders.
                                   and Delivery of     and Delivery of     and Delivery of
                                   Securities.         Securities.         Securities.
Rule 3.8(b) The Prompt Receipt    Rule 3.8(b) The     Rule 3.8(b) The     Rule 3.8(b) The     SEC Regulation
 and Delivery of Securities.       Prompt Receipt      Prompt Receipt      Prompt Receipt      SHO.
                                   and Delivery of     and Delivery of     and Delivery of
                                   Securities.         Securities.         Securities.
Rule 3.9 Charges for Services     Rule 3.9 Charges    Rule 3.9 Charges    Rule 3.9 Charges    FINRA Rule 2122
 Performed.                        for Services        for Services        for Services        Charges for
                                   Performed.          Performed.          Performed.          Services
                                                                                               Performed.
Rule 3.10 Use of Information....  Rule 3.10 Use of    Rule 3.10 Use of    Rule 3.10 Use of    FINRA Rule 2060
                                   Information.        Information.        Information.        Use of
                                                                                               Information
                                                                                               Obtained in
                                                                                               Fiduciary
                                                                                               Capacity.
Rule 3.11 Publication of          Rule 3.11           Rule 3.11           Rule 3.11           FINRA Rule 5210
 Transactions and Quotations .    Publication of      Publication of      Publication of      Publication of
                                   Transactions and    Transactions and    Transactions and    Transactions and
                                   Quotations .       Quotations .       Quotations .       Quotations.
Rule 3.12 Offers at Stated        Rule 3.12 Offers    Rule 3.12 Offers    Rule 3.12 Offers    FINRA Rule 5220
 Prices.                           at Stated Prices.   at Stated Prices.   at Stated Prices.   Offers at Stated
                                                                                               Prices.
Rule 3.13 Payment Designed to     Rule 3.13 Payment   Rule 3.13 Payments  Rule 3.13 Payments  FINRA Rule 5230
 Influence Market Prices, Other    Designed to         Involving           Involving           Payments
 than Paid Advertising.            Influence Market    Publications that   Publications that   Involving
                                   Prices, Other       Influence the       Influence the       Publications that
                                   than Paid           Market Price of a   Market Price of a   Influence the
                                   Advertising.        Security.           Security.           Market Price of a
                                                                                               Security.
Rule 3.14 Disclosure on           Rule 3.14           Rule 3.14           Rule 3.14           FINRA Rule 2232(a)
 Confirmations.                    Disclosure on       Disclosure on       Disclosure on       Customer
                                   Confirmations.      Confirmations.      Confirmations.      Confirmations and
                                                                                               SEC Rule 10b-10
                                                                                               Confirmation of
                                                                                               Transactions.
Rule 3.15 Disclosure of Control.  Rule 3.15           Rule 3.15           Rule 3.15           FINRA Rule 2262
                                   Disclosure of       Disclosure of       Disclosure of       Disclosure of
                                   Control.            Control.            Control.            Control
                                                                                               Relationship With
                                                                                               Issuer.
Rule 3.16 Discretionary Accounts  Rule 3.16           Rule 3.16           Rule 3.16           NASD Rule 2510
                                   Discretionary       Discretionary       Discretionary       Discretionary
                                   Accounts.           Accounts.           Accounts.           Accounts.\4\
Rule 3.17 Customer's Securities   Rule 3.17           Rule 3.17           Rule 3.17           FINRA Rule 2150(a)
 or Funds.                         Customer's          Customer's          Customer's          Improper Use of
                                   Securities or       Securities or       Securities or       Customers'
                                   Funds.              Funds.              Funds.              Securities or
                                                                                               Funds;
                                                                                               Prohibition
                                                                                               Against
                                                                                               Guarantees and
                                                                                               Sharing in
                                                                                               Accounts--Imprope
                                                                                               r Use.
Rule 3.18 Prohibition Against     Rule 3.18           Rule 3.18           Rule 3.18           FINRA Rule 2150(b)
 Guarantees.                       Prohibition         Prohibition         Prohibition         Improper Use of
                                   Against             Against             Against             Customers'
                                   Guarantees.         Guarantees.         Guarantees.         Securities or
                                                                                               Funds;
                                                                                               Prohibition
                                                                                               Against
                                                                                               Guarantees and
                                                                                               Sharing in
                                                                                               Accounts--Prohibi
                                                                                               tion Against
                                                                                               Guarantees.
Rule 3.19 Sharing in Accounts;    Rule 3.19 Sharing   Rule 3.19 Sharing   Rule 3.19 Sharing   FINRA Rule
 Extent Permissible.               in Accounts;        in Accounts;        in Accounts;        2150(c)(1)
                                   Extent              Extent              Extent              Improper Use of
                                   Permissible.        Permissible.        Permissible.        Customers'
                                                                                               Securities or
                                                                                               Funds;
                                                                                               Prohibition
                                                                                               Against
                                                                                               Guarantees and
                                                                                               Sharing in
                                                                                               Accounts--Sharing
                                                                                               in Accounts;
                                                                                               Extent
                                                                                               Permissible.
Rule 3.21(a)-(f) Customer         Rule 3.21(a)-(f)    Rule 3.21(a)-(f)    Rule 3.21(a)-(f)    FINRA Rule 2265
 Disclosures.                      Customer            Customer            Customer            Extended Hours
                                   Disclosures.        Disclosures.        Disclosures.        Trading Risk
                                                                                               Disclosure.
Rule 3.22 Influencing or          Rule 3.22           Rule 3.20           Rule 3.20           FINRA Rule 3220
 Rewarding Employees of Others.    Influencing or      Influencing or      Influencing or      Influencing or
                                   Rewarding           Rewarding           Rewarding           Rewarding
                                   Employees of        Employees of        Employees of        Employees of
                                   Others.             Others.             Others.             Others.
Rule 3.23 Telemarketing.........  Rule 3.23           Rule 3.26           Rule 3.26           FINRA Rule 3230
                                   Telemarketing.      Telemarketing.      Telemarketing.      Telemarketing.
Rule 4.1 Requirements...........  Rule 4.1            Rule 4.1            Rule 4.1            Section 17 of the
                                   Requirements.       Requirements.       Requirements.       Exchange Act and
                                                                                               the rules
                                                                                               thereunder.* \5\
Rule 4.3 Record of Written        Rule 4.3 Record of  Rule 4.3 Record of  Rule 4.3 Record of  FINRA Rule 4513
 Complaints.                       Written             Written             Written             Records of
                                   Complaints.         Complaints.         Complaints.         Written Customer
                                                                                               Complaints.
Rule 5.1 Written Procedures.....  Rule 5.1 Written    Rule 5.1 Written    Rule 5.1 Written    FINRA Rule
                                   Procedures.         Procedures.         Procedures.         3110(b)(1)
                                                                                               Supervision-
                                                                                               Written
                                                                                               Procedures.* \6\
Rule 5.2 Responsibility of        Rule 5.2            Rule 5.2            Rule 5.2            FINRA Rule 3110
 Members.                          Responsibility of   Responsibility of   Responsibility of   (a)(4) and (b)(4)
                                   Members.            Members.            Members.            Supervision--Supe
                                                                                               rvisory System/
                                                                                               Written
                                                                                               Procedures--Revie
                                                                                               w of
                                                                                               Correspondence
                                                                                               and Internal
                                                                                               Communications.*

[[Page 70733]]

 
Rule 5.3 Records................  Rule 5.3 Records..  Rule 5.3 Records..  Rule 5.3 Records..  FINRA Rule 3110
                                                                                               Supervision.*
Rule 5.4 Review of Activities...  Rule 5.4 Review of  Rule 5.4 Review of  Rule 5.4 Review of  FINRA Rule 3110(c)
                                   Activities.         Activities.         Activities.         and (d)
                                                                                               Supervision--Inte
                                                                                               rnal Inspections/
                                                                                               Transaction
                                                                                               Review and
                                                                                               Investigation.*
Rule 5.6 Anti-Money Laundering    Rule 5.6 Anti-      Rule 5.6 Anti-      Rule 5.6 Anti-      FINRA Rule 3310
 Compliance Program .             Money Laundering    Money Laundering    Money Laundering    Anti-Money
                                   Compliance          Compliance          Compliance          Laundering
                                   Program .          Program .          Program .          Compliance
                                                                                               Program.
Rule 9.3 Predispute Arbitration   Rule 9.3            Rule 9.3            Rule 9.3            FINRA Rule 2268
 Agreements.                       Predispute          Predispute          Predispute          Requirements When
                                   Arbitration         Arbitration         Arbitration         Using Predispute
                                   Agreements.         Agreements.         Agreements.         Arbitration
                                                                                               Agreements for
                                                                                               Customer
                                                                                               Accounts.
Rule 11.18(e)(3) & (4) Trading    Rule 11.18(e)(3) &  Rule 11.16(e)(3) &  Rule 11.16(e)(3) &  FINRA Rule
 Halts Due to Extraordinary        (4) Trading Halts   (4) Trading Halts   (4) Trading Halts   6190(a)(1) & (2)
 Market Volatility.                Due to              Due to              Due to              Compliance with
                                   Extraordinary       Extraordinary       Extraordinary       Regulation NMS
                                   Market Volatility.  Market Volatility.  Market Volatility.  Plan to Address
                                                                                               Extraordinary
                                                                                               Market
                                                                                               Volatility.
Rule 11.19(a) Short Sales        Rule 11.19(a)       Rule 11.10(a)(5)    Rule 11.10(a)(5)    FINRA Rule 6182
 [supcaret][supcaret].             Short Sales        Order Execution-    Order Execution-    Trade Reporting
                                   [supcaret][supcar   Short Sales        Short Sales        of Short
                                   et].                [supcaret][supcar   [supcaret][supcar   Sales.[supcaret][
                                                       et].                et].                supcaret]
Rule 12.1 Market Manipulation **  Rule 12.1 Market    Rule 12.1 Market    Rule 12.1 Market    FINRA Rule 6140
                                   Manipulation **.    Manipulation **.    Manipulation **.    Other Trading
                                                                                               Practices.**
Rule 12.2 Fictitious              Rule 12.2           Rule 12.2           Rule 12.2           FINRA Rule 6140
 Transactions **.                  Fictitious          Fictitious          Fictitious          Other Trading
                                   Transactions **.    Transactions **.    Transactions **.    Practices.**
Rule 12.3 Excessive Sales by a    Rule 12.3           Rule 12.3           Rule 12.3           FINRA Rule 6140(c)
 Member **.                        Excessive Sales     Excessive Sales     Excessive Sales     Other Trading
                                   by a Member **.     by a Member **.     by a Member **.     Practices.**
Rule 12.4 Manipulative            Rule 12.4           Rule 12.4           Rule 12.4           FINRA Rule 6140(d)
 Transactions **.                  Manipulative        Manipulative        Manipulative        Other Trading
                                   Transactions **.    Transactions **.    Transactions **.    Practices.**
Rule 12.5 Dissemination of False  Rule 12.5           Rule 12.5           Rule 12.5           FINRA Rule 6140(e)
 Information **.                   Dissemination of    Dissemination of    Dissemination of    Other Trading
                                   False Information   False Information   False Information   Practices.**
                                   **.                 **.                 **.
Rule 12.6 Prohibition Against     Rule 12.6           Rule 12.6           Rule 12.6           FINRA Rule 5320
 Trading Ahead of Customer         Prohibition         Prohibition         Prohibition         Prohibition
 Orders [supcaret][supcaret].      Against Trading     Against Trading     Against Trading     Against Trading
                                   Ahead of Customer   Ahead of Customer   Ahead of Customer   Ahead of Customer
                                   Orders              Orders              Orders              Orders.[supcaret]
                                   [supcaret][supcar   [supcaret][supcar   [supcaret][supcar   [supcaret]
                                   et].                et].                et].
Rule 12.9 Trade Shredding.......  Rule 12.9 Trade     Rule 12.9 Trade     Rule 12.9 Trade     FINRA Rule 5290
                                   Shredding.          Shredding.          Shredding.          Order Entry and
                                                                                               Execution
                                                                                               Practices.
Rule 12.11 Best Execution         Rule 12.11 Best     Rule 12.11 Best     Rule 12.11 Best     FINRA Rule 5310
 [supcaret][supcaret].             Execution           Execution           Execution           Best Execution
                                   [supcaret][supcar   [supcaret][supcar   [supcaret][supcar   and
                                   et].                et].                et].                Interpositioning.
                                                                                               [supcaret][supcar
                                                                                               et]
Rule 12.13 Trading Ahead of       Rule 12.13 Trading  Rule 12.13 Trading  Rule 12.13 Trading  FINRA Rule 5280
 Research Reports                  Ahead of Research   Ahead of Research   Ahead of Research   Trading Ahead of
 [supcaret][supcaret].             Reports             Reports             Reports             Research
                                   [supcaret][supcar   [supcaret][supcar   [supcaret][supcar   Reports.[supcaret
                                   et].                et].                et].                ][supcaret]
Rule 12.14(a) Front Running of    Rule 12.14(a)       Rule 12.14(a)       Rule 12.14(a)       FINRA Rule 5270
 Block Transactions                Front Running of    Front Running of    Front Running of    Front Running of
 [supcaret][supcaret].             Block               Block               Block               Block
                                   Transactions        Transactions        Transactions        Transactions.[sup
                                   [supcaret][supcar   [supcaret][supcar   [supcaret][supcar   caret][supcaret]
                                   et].                et].                et].
Rule 13.2 Failure to Deliver and  Rule 13.2 Failure   Rule 13.2 Short     Rule 13.2 Short     Regulation SHO
 Failure to Receive.               to Deliver and      Sale Borrowing      Sale Borrowing      Rules 200 and
                                   Failure to          and Delivery        and Delivery        203.
                                   Receive.            Requirements.       Requirements.
Rule 13.3(a), (b), (d) and        Rule 13.3(a), (b),  Rule 13.3(a), (b),  Rule 13.3(a), (b),  FINRA Rule 2251
 Interpretation and Policy .01     (d) and             (d) and             (d) and             Processing and
 Forwarding of Proxy and Other     Interpretation      Interpretation      Interpretation      Forwarding of
 Issuer-Related Materials; Proxy   and Policy .01      and Policy .01      and Policy .01      Proxy and Other
 Voting.                           Forwarding of       Forwarding of       Forwarding of       Issuer-Related
                                   Proxy and Other     Proxy and Other     Proxy and Other     Materials.
                                   Issuer-Related      Issuer-Related      Issuer-Related
                                   Materials; Proxy    Materials.          Materials.
                                   Voting.
----------------------------------------------------------------------------------------------------------------
In addition, the following provisions shall be part of this 17d-2 Agreement:
Securities Exchange Act of 1934 (``SEA''):
Section 15(g)
SEC Rules under the SEA:
SEC Rule 200 of Regulation SHO--Definition of ``Short Sale'' and Marking Requirements [supcaret][supcaret]
SEC Rule 201 of Regulation SHO--Circuit Breaker [supcaret][supcaret]
SEC Rule 203 of Regulation SHO--Borrowing and Delivery Requirements [supcaret][supcaret]
SEA Rule 204 of Regulation SHO--Close-Out Requirement [supcaret][supcaret]
SEC Rule 101 of Regulation M--Activities by Distribution Participants [supcaret][supcaret]
SEC Rule 102 of Regulation M--Activities by Issuers and Selling Security Holders During a Distribution
 [supcaret][supcaret]
SEC Rule 103 of Regulation M--Nasdaq Passive Market Making [supcaret][supcaret]
SEC Rule 104 of Regulation M--Stabilizing and Other Activities in Connection with an Offering
 [supcaret][supcaret]
SEC Rule 105 of Regulation M--Short Selling in Connection With a Public Offering [supcaret][supcaret]
SEC Rules 17a-3/17a-4--Records to be made by Certain Exchange Members, Brokers, and Dealers/Records to be
 Preserved by Certain Exchange Members, Brokers, and Dealers *
----------------------------------------------------------------------------------------------------------------
  FINRA shall not have Regulatory Responsibilities regarding notification or reporting to the Bats Exchanges
  and to the extent any exercise of discretion is not the same.
* FINRA shall not have any Regulatory Responsibilities for these rules as they pertain to violations of insider
  trading activities, which is covered by a separate 17d-2 Agreement by and among Bats Exchange, Inc., Bats-Y
  Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange
  Inc., EDGX Exchange Inc., Financial Industry Regulatory Authority, Inc., 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.
** FINRA shall not have Regulatory Responsibilities for these rules as they pertain to trading practices
  involving securities that do not meet the definition of NMS stock as defined in Rule 600(b)(47) of Regulation
  NMS. As of the current date, Bats Exchanges do not trade any non-NMS stock.
[supcaret][supcaret] FINRA shall perform the surveillance responsibilities for the double caret rules. These
  rules may be cited by FINRA in both the context of this Agreement and the Regulatory Services Agreement.
\1\ FINRA shall only have Regulatory Responsibilities to the extent that the allowance for additional time for a
  registered person to satisfy the regulatory element is consistently granted.

[[Page 70734]]

 
\2\ FINRA shall only have Regulatory Responsibilities regarding the first phrase of the Bats Exchanges rules
  regarding prohibitions from violating the Securities Exchange Act of 1934 and the rules and regulations
  thereunder; responsibility for the remainder of the rule shall remain with the Bats Exchanges.
\3\ FINRA shall not have Regulatory Responsibilities regarding .01 of each Bats Exchange Rule 3.6.
\4\ FINRA shall not have Regulatory Responsibilities for the Bats Exchanges' Rule to the extent the exception in
  NASD Rule 2510(d)(2) applies.
\5\ FINRA shall not have Regulatory Responsibilities regarding requirements to keep records ``in conformity with
  . . . Exchange Rules;'' responsibility for such requirement remains with the Bats Exchanges.
\6\ FINRA shall not have Regulatory Responsibilities regarding requirements to assure compliance with the Bats
  Exchange Rules; responsibility for such requirement remains with each Bats Exchange.

III. 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
     Send an email to rule-comments@sec.gov. Please include 
File Number 4-705 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 4-705. 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 Web site (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 Web site 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, BZX, BYX, EDGX, and EDGA. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number 4-705 and should 
be submitted on or before November 3, 2016.

IV. Discussion

    The Commission finds that the proposed Plan is consistent with the 
factors set forth in Section 17(d) of the Act \20\ and Rule 17d-2(c) 
thereunder \21\ in that the proposed 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 notes that the proposed Plan replaces and supersedes 
each of the original bilateral Plans between FINRA and a Bats Exchange 
without materially altering the core terms of any of the Plans. The 
Bats Exchanges, which all are under the common control of Bats Global 
Markets, Inc., have substantively identical Common Rules among 
themselves. The Parties have now proposed to add additional rules to 
the list of Common Rules and have used this opportunity to also combine 
their separate bilateral 17d-2 Plans into a combined plan among all of 
the Parties.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78q(d).
    \21\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------

    Because the proposed combined Plan preserves the general framework 
of each of the current bilateral Plans, and adds a number of additional 
Common Rules to the Regulatory Responsibilities assumed by FINRA under 
the Plans, the Commission believes that the proposed combined Plan 
should continue to reduce unnecessary regulatory duplication by 
allocating to FINRA certain examination and enforcement 
responsibilities for Common Members that would otherwise be performed 
by each Bats Exchange and FINRA. Accordingly, the proposed Plan 
promotes efficiency by reducing costs to Common Members. Furthermore, 
because the Bats Exchanges and FINRA will coordinate their regulatory 
functions in accordance with the Plan, the Plan should promote investor 
protection.
    The Commission notes that when it granted the application of each 
of the Bats Exchanges for registration as a national securities 
exchange, the Commission conditioned the operation of each Bats 
Exchange on the satisfaction of several requirements.\22\ One of those 
requirements was the effectiveness of an agreement pursuant to Rule 
17d-2 between FINRA and the Bats Exchange that allocates to FINRA 
regulatory responsibility for certain specified matters.\23\ The 
original bilateral 17d-2 Plans represents the Bats Exchanges' effort to 
satisfy that prerequisite, and the proposed combined Plan preserves the 
general framework of each of the current bilateral plans while 
expanding the list of Common Rules allocated under the agreement.
---------------------------------------------------------------------------

    \22\ See Securities Exchange Act Release Nos. 58375 (August 18, 
2008), 73 FR 49498 (August 21, 2008) (File No. 10-182) (order 
granting BZX's application for registration as a national securities 
exchange); 62716 (August 13, 2010), 75 FR 51295 (August 19, 2010) 
(File No. 10-198) (order granting BYX's application for registration 
as a national securities exchange); 61698 (March 12, 2010), 75 FR 
13151 (March 18, 2010) (File No. 10-194) (order granting EDGA's 
application for registration as a national securities exchange); 
61698 (March 12, 2010), 75 FR 13151 (March 18, 2010) (File No. 10-
196) (order granting EDGX's application for registration as a 
national securities exchange).
    \23\ See id.
---------------------------------------------------------------------------

    The Commission notes that, under the Plan, the Bats Exchanges and 
FINRA have allocated regulatory responsibility for those rules of the 
Bats Exchanges, set forth on 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 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 Plan are specifically listed in the 
Certification, as may be amended by the Parties from time to time.
    Under the Plan, each Bats Exchange would retain full responsibility 
for surveillance and enforcement with respect to trading activities or 
practices involving the Bats Exchange's own marketplace, including, 
without limitation, registration pursuant to its applicable rules of 
associated persons (i.e., registration rules that are not Common 
Rules); its duties as a DEA pursuant to Rule 17d-1 under the Act; and 
any Bats Exchange rules that are not Common Rules, except for the Bats 
Exchange rules for any broker-dealer

[[Page 70735]]

subsidiary of Bats Global Markets, Inc.\24\ Apparent violations of any 
Bats Exchanges rules by any broker-dealer subsidiary of Bats Global 
Markets, Inc. will be processed by, and enforcement proceedings in 
respect thereto will be conducted by, FINRA.\25\ The effect of these 
provisions is that regulatory oversight and enforcement 
responsibilities for any broker-dealer subsidiary of Bats Global 
Markets, Inc., which is the parent company of the Bats Exchanges, will 
be vested with FINRA. These provisions should help avoid any potential 
conflicts of interest that could arise if a Bats Exchange was primarily 
responsible for regulating its affiliated broker-dealers.
---------------------------------------------------------------------------

    \24\ See paragraph 2 of the proposed 17d-2 Plan.
    \25\ See paragraph 6 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

    According to the Plan, the Bats Exchanges will review the 
Certification, at least annually, or more frequently if required by 
changes in either the rules of the Bats Exchanges or FINRA, and, if 
necessary, submit to FINRA an updated list of Common Rules to add the 
Bats Exchanges rules not included on the then-current list of Common 
Rules that are substantially similar to FINRA rules; delete the Bats 
Exchanges rules included in the then-current list of Common Rules that 
are no longer substantially similar to FINRA rules; and confirm that 
the remaining rules on the list of Common Rules continue to be the Bats 
Exchanges rules that are substantially similar to FINRA rules.\26\ 
FINRA will then confirm in writing whether the rules listed in any 
updated list are Common Rules as defined in the Plan. Under the Plan, 
each Bats Exchange will also provide FINRA with a current list of 
Common Members and shall update the list no less frequently than once 
each quarter.\27\
---------------------------------------------------------------------------

    \26\ See paragraph 2 of the proposed 17d-2 Plan.
    \27\ See paragraph 3 of the proposed 17d-2 Plan.
---------------------------------------------------------------------------

    The Commission is hereby declaring effective a plan that, among 
other things, allocates regulatory responsibility to FINRA for the 
oversight and enforcement of all the Bats Exchanges rules that are 
substantially similar to the rules of FINRA for Common Members of the 
Bats Exchanges and FINRA. Therefore, modifications to the Certification 
need not be filed with the Commission as an amendment to the Plan, 
provided that the Parties are only adding to, deleting from, or 
confirming changes to the Bats Exchanges rules in the Certification in 
conformance with the definition of Common Rules provided in the Plan. 
However, should the Parties decide to add a rule of the Bats Exchanges 
to the Certification that is not substantially similar to a FINRA rule; 
delete a rule of the Bats Exchanges from the Certification that is 
substantially similar to a FINRA rule; or leave on the Certification a 
rule of the Bats Exchange that is no longer substantially similar to a 
FINRA rule, then such a change would constitute an amendment to the 
Plan, which must be filed with the Commission pursuant to Rule 17d-2 
under the Act and noticed for public comment.\28\
---------------------------------------------------------------------------

    \28\ 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 Plan 
for examining, and enforcing compliance by, Common Members, also 
would constitute an amendment to the Plan.
---------------------------------------------------------------------------

    The Plan also permits the Bats Exchanges and FINRA to terminate the 
Plan, subject to notice.\29\ The Commission notes, however, that while 
the Plan permits the Parties to terminate the Plan, the Parties cannot 
by themselves reallocate the regulatory responsibilities set forth in 
the Plan, since Rule 17d-2 under the Act requires that any allocation 
or re-allocation of regulatory responsibilities be filed with the 
Commission.\30\
---------------------------------------------------------------------------

    \29\ See paragraph 12 of the proposed 17d-2 Plan.
    \30\ The Commission notes that paragraph 12 of the Plan reflects 
the fact that FINRA's responsibilities under the Plan will continue 
in effect until the Commission approves any termination of the 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 plan is effective. 
In particular, the purpose of the proposed Plan is to consolidate, for 
administrative ease, the separate bilateral Plans between FINRA and 
each Bats Exchange into one combined Plan. The Commission notes that 
the original bilateral Plans between FINRA and each Bats Exchange were 
published for comment and the Commission did not receive any comments 
thereon.\31\ Further, as noted above, the proposed combined Plan 
preserves the general framework of each of the current bilateral Plans 
while expanding the list of Common Rules allocated under the agreement. 
Accordingly, the Commission believes that the proposed plan does not 
raise any new regulatory issues that the Commission has not previously 
considered, and therefore believes that the Plan should become 
effective without any undue delay.
---------------------------------------------------------------------------

    \31\ See supra notes 3-6.
---------------------------------------------------------------------------

V. Conclusion

    This Order gives effect to the Plan filed with the Commission in 
File No. 4-705. The Parties shall notify all members affected by the 
Plan of their rights and obligations under the Plan.
    It is therefore ordered, pursuant to Section 17(d) of the Act, that 
the Plan in File No. 4-705, between FINRA, BZX, BYX, EDGA, and EDGX, 
filed pursuant to Rule 17d-2 under the Act, is approved and declared 
effective.
    It is further ordered that BZX, BYX, EDGA, and EDGX are relieved of 
those responsibilities allocated to FINRA under the Plan in File No. 4-
705.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(34).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-24709 Filed 10-12-16; 8:45 am]
BILLING CODE 8011-01-P