Document ID: SEC-2016-1143-0001
Agency: sec
Document Type: Notice
Title: Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc. and the Investors' Exchange, LLC
Posted Date: 2016-07-05T04:00Z

[Federal Register Volume 81, Number 128 (Tuesday, July 5, 2016)]
[Notices]
[Pages 43673-43678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15757]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78179; File No. 4-700]

Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17-2; Notice of Filing of Proposed Plan for the Allocation of 
Regulatory Responsibilities Between the Financial Industry Regulatory 
Authority, Inc. and the Investors' Exchange LLC

June 28, 2016.
    Pursuant to Section 17(d) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that 
on June 20, 2016, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') and the Investors' Exchange LLC (``IEX'') (together with 
FINRA, the ``Parties'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') a plan for the allocation of 
regulatory responsibilities, dated June 20, 2016 (``17-2 Plan'' or the 
``Plan''). The Commission is publishing this notice to solicit comments 
on the 17-2 Plan from interested persons.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17-2.
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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

[[Page 43674]]

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.\4\ 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) and 15 U.S.C. 78s(g)(2), respectively.
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    Section 17(d)(1) of the Act \5\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\6\ 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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    \5\ 15 U.S.C. 78q(d)(1).
    \6\ 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 17-2 under the Act.\7\ 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.\8\ 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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    \7\ 17 CFR 240.17d-1 and 17 CFR 240.17-2, respectively.
    \8\ 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 17-2 under the Act.\9\ Rule 17-2 permits SROs 
to propose joint plans for the allocation of regulatory 
responsibilities with respect to their common members. Under paragraph 
(c) of Rule 17-2, 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 17-2 relieves 
an SRO of those regulatory responsibilities allocated by the plan to 
another SRO.
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    \9\ 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 17-2 Plan is intended to reduce regulatory duplication 
for firms that are common members of both IEX and FINRA.\10\ Pursuant 
to the proposed 17-2 Plan, FINRA would assume certain examination and 
enforcement responsibilities for common members with respect to certain 
applicable laws, rules, and regulations.
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    \10\ The proposed 17-2 Plan refers to these common members as 
``Dual Members.'' See Paragraph 1(c) of the proposed 17-2 Plan.
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    The text of the Plan delineates the proposed regulatory 
responsibilities with respect to the Parties. Included in the proposed 
Plan is an exhibit (the ``IEX Certification of Common Rules,'' referred 
to herein as the ``Certification'') that lists every IEX rule, and 
select federal securities laws, rules, and regulations, for which FINRA 
would bear responsibility under the Plan for overseeing and enforcing 
with respect to IEX members that are also members of FINRA and the 
associated persons therewith (``Dual Members'').
    Specifically, under the 17d-2 Plan, FINRA would assume examination 
and enforcement responsibility relating to compliance by Dual Members 
with the rules of IEX that are substantially similar to the applicable 
rules of FINRA,\11\ 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 Dual Member is 
the subject of an investigation relating to a transaction on IEX, the 
plan acknowledges that IEX may, in its discretion, exercise concurrent 
jurisdiction and responsibility for such matter.\12\
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    \11\ 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 IEX 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 IEX shall furnish FINRA with a list of 
Dual Members, and shall update the list no less frequently than once 
each calendar quarter.
    \12\ See paragraph 6 of the proposed 17d-2 Plan.
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    Under the Plan, IEX would retain full responsibility for 
surveillance and enforcement with respect to trading activities or 
practices involving IEX'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 IEX rules 
that are not Common Rules.\13\
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    \13\ See paragraph 2 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. AND 
INVESTORS' EXCHANGE LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES 
EXCHANGE ACT OF 1934

    This Agreement, by and between the Financial Industry Regulatory 
Authority, Inc. (``FINRA'') and Investors' Exchange LLC (``IEX''), is 
made this 20th day of June, 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 IEX may be referred to 
individually as a ``party'' and together as the ``parties.''
    WHEREAS, FINRA and IEX desire to reduce duplication in the 
examination and surveillance of their Dual Members (as defined herein) 
and in the filing and processing of certain registration and membership 
records; and
    WHEREAS, FINRA and IEX 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

[[Page 43675]]

hereinafter, FINRA and IEX 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) ``IEX Rules'' or ``FINRA Rules'' shall mean: (i) the rules of 
IEX, 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 IEX Rules 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 Dual 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, IEX 
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, Inc., 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) ``Dual Members'' shall mean those IEX members that are also 
members of FINRA and the associated persons therewith.
    (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 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 compliance by the Dual 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 and Enforcement Responsibilities. FINRA shall assume 
Regulatory Responsibilities and Enforcement Responsibilities for Dual 
Members. Attached as Exhibit 1 to this Agreement and made part hereof, 
IEX furnished FINRA with a current list of Common Rules and certified 
to FINRA that such rules that are IEX 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 IEX or FINRA, IEX shall submit an updated list of Common Rules 
to FINRA for review which shall add IEX Rules not included in the 
current list of Common Rules that qualify as Common Rules as defined in 
this Agreement; delete IEX 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 IEX 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 IEX 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 IEX'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 IEX Rules that are not Common Rules, except for IEX Rules 
for IEX Services LLC as provided in paragraph 6.
    3. Dual Members. Prior to the Effective Date, IEX shall furnish 
FINRA with a current list of Dual Members, which shall be updated no 
less frequently than once each quarter.
    4. No Charge. There shall be no charge to IEX by FINRA for 
performing the Regulatory Responsibilities and Enforcement 
Responsibilities under this Agreement except as otherwise agreed by the 
parties, either herein or in a separate agreement.
    5. Applicability of Certain Laws, Rules, Regulations or Orders. 
Notwithstanding any provision hereof, this Agreement shall be subject 
to any statute, or any rule or order of the Commission. To the extent 
such statute, rule or order is inconsistent with this Agreement, the 
statute, rule or order shall supersede the provision(s) hereof to the 
extent necessary for them to be properly effectuated and the 
provision(s) hereof in that respect shall be null and void.
    6. Notification of Violations.
    (a) In the event that FINRA becomes aware of apparent violations of 
any IEX Rules, which are not listed as Common Rules, discovered 
pursuant to the performance of the Regulatory Responsibilities assumed 
hereunder, FINRA shall notify IEX of those apparent violations for such 
response as IEX deems appropriate.
    (b) In the event that IEX becomes aware of apparent violations of 
any Common Rules, discovered pursuant to the performance of the 
Retained Responsibilities, IEX 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 IEX Services LLC 
FINRA shall not make referrals to IEX 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.
    (c) 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 Dual 
Member is the subject of an investigation relating to a transaction on 
IEX, IEX may in its discretion assume concurrent jurisdiction and 
responsibility.
    (d) Each party agrees to make available promptly all files, records 
and

[[Page 43676]]

witnesses necessary to assist the other in its investigation or 
proceedings.
    7. Continued Assistance.
    (a) FINRA shall make available to IEX all information obtained by 
FINRA in the performance by it of the Regulatory Responsibilities 
hereunder with respect to the Dual Members subject to this Agreement. 
In particular, and not in limitation of the foregoing, FINRA shall 
furnish IEX any information it obtains about Dual Members which 
reflects adversely on their financial condition. IEX shall make 
available to FINRA any information coming to its attention that 
reflects adversely on the financial condition of Dual 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. Neither party shall assert 
regulatory or other privileges as against the other 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 Dual 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 IEX advised of its actions in this regard for such subsequent 
proceedings as IEX may initiate.
    9. Customer Complaints. IEX shall forward to FINRA copies of all 
customer complaints involving Dual Members received by IEX 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.
    10. Advertising. FINRA shall assume responsibility to review the 
advertising of Dual 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 either 
party to conduct its own independent or concurrent investigation, 
examination or enforcement proceeding of or against Dual Members, as 
either party, in its sole discretion, shall deem appropriate or 
necessary.
    12. Termination. This Agreement may be terminated by IEX or FINRA 
at any time upon the approval of the Commission after one (1) year's 
written notice to the other party.
    13. Arbitration. In the event of a dispute between the parties as 
to the operation of this Agreement, IEX 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 
party. 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 13 shall interfere with a party's right to terminate 
this Agreement as set forth herein.
    14. Notification of Members. IEX and FINRA shall notify Dual 
Members of this Agreement after the Effective Date by means of a 
uniform joint notice.
    15. 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.
    16. Limitation of Liability. Neither FINRA nor IEX nor any of their 
respective directors, governors, officers or employees shall be liable 
to the 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 one or the other of 
FINRA or IEX 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 IEX with respect 
to any of the responsibilities to be performed by each of them 
hereunder.
    17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) 
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and IEX 
join in requesting the Commission, upon its approval of this Agreement 
or any part thereof, to relieve IEX 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.
    18. 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.
    19. 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.
    [Remainder of page intentionally left blank.]
    IN WITNESS WHEREOF, each party has executed or caused this 
Agreement to be executed on its behalf by a duly authorized officer as 
of the date first written above.

INVESTORS' EXCHANGE LLC

By:--------------------------------------------------------------------

    Name:

    Title:

FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.

By:--------------------------------------------------------------------

    Name:

    Title:

EXHIBIT 1

IEX CERTIFICATION OF COMMON RULES
    IEX hereby certifies that the requirements contained in the rules 
listed below for IEX are identical to, or substantially similar to, the 
comparable FINRA (NASD) Rules, Exchange Act provision or SEC rule 
identified (``Common Rules'').

[[Page 43677]]

------------------------------------------------------------------------
                                         FINRA (NASD) Rule, exchange act
                IEX Rule                       provision, SEC Rule
------------------------------------------------------------------------
Rule 2.140 Prohibited Conditions         FINRA Rule 2081 Prohibited
 Relating to Expungement of Customer      Conditions Relating to
 Dispute.                                 Expungement of Customer
                                          Dispute.
Rule 2.160(p) Restrictions on            FINRA Rule 1250(a)(1)-(4)
 Membership--Continuing Education         Continuing Education
 Requirements.                            Requirements.\1\
Rule 2.170(b) and (g) Application        FINRA By-Laws of the
 Procedures for Membership or to become   Corporation, Article IV,
 an Associated Person of a Member .      Section 1(c) Application for
                                          Membership.
Rule 2.240 Fidelity Bonds..............  FINRA Rule 4360 Fidelity
                                          Bonds.\2\
Rule 3.110 Business Conduct of Members   FINRA Rule 2010 Standards of
 [supcaret].                              Commercial Honor and
                                          Principles of Trade.[supcaret]
Rule 3.120 Violations Prohibited \3\     FINRA Rule 2010 Standards of
 [supcaret].                              Commercial Honor and
                                          Principles of Trade [supcaret]
                                          and FINRA Rule 3110
                                          Supervision.
Rule 3.130 Use of Fraudulent Devices     FINRA Rule 2020 Use of
 [supcaret].                              Manipulative, Deceptive or
                                          Other Fraudulent
                                          Devices.[supcaret]
Rule 3.150 Know Your Customer..........  FINRA Rule 2090 Know Your
                                          Customer.
Rule 3.160 Fair Dealing with Customers.  FINRA Rule 2020 Use of
                                          Manipulative, Deceptive or
                                          Other Fraudulent
                                          Device.[supcaret]
Rule 3.170 Suitability.................  FINRA Rule 2111 Suitability.
Rule 3.180(a) The Prompt Receipt and     FINRA Rule 11860 COD Orders.
 Delivery of Securities.
Rule 3.180(b) The Prompt Receipt and     SEA Regulation SHO.
 Delivery of Securities.
Rule 3.190 Charges for Services          FINRA Rule 2122 Charges for
 Performed.                               Services Performed.
Rule 3.200 Use of Information Obtained   FINRA Rule 2060 Use of
 in a Fiduciary Capacity.                 Information Obtained in
                                          Fiduciary Capacity.
Rule 3.210 Publication of Transactions   FINRA Rule 5210 Publication of
 and Quotations.                          Transactions and Quotations.
Rule 3.220 Offers at Stated Prices.....  FINRA Rule 5220 Offers at
                                          Stated Prices.
Rule 3.230 Payments Involving            FINRA Rule 5230 Payments
 Publications that Influence the Market   Involving Publications that
 Price of a Security.                     Influence the Market Price of
                                          a Security.
Rule 3.240 Customer Confirmations......  FINRA Rule 2232(a) Customer
                                          Confirmations and SEC Rule 10b-
                                          10 Confirmation of
                                          Transactions.
Rule 3.250 Disclosure of Control         FINRA Rule 2262 Disclosure of
 Relationship with Issuer.                Control Relationship with
                                          Issuer.
Rule 3.260 Discretionary Accounts......  NASD Rule 2510 Discretionary
                                          Accounts.
Rule 3.270 Improper Use of Customers'    FINRA Rule 2150 Improper Use of
 Securities or Funds; Prohibition         Customers' Securities or
 Against Guarantees and Sharing in        Funds; Prohibition Against
 Accounts.                                Guarantees and Sharing in
                                          Accounts.
Rule 3.280 Communications with the       FINRA Rule 2210 Communications
 Public.                                  with the Public.
Rule 3.290 Customer Disclosures........  FINRA Rule 2265 Extended Hours
                                          Trading Risk Disclosure.
Rule 3.291 Influencing or Rewarding      FINRA Rule 3220 Influencing or
 Employees of Others; Gratuities.         Rewarding Employees of Others.
Rule 3.292 Telemarketing...............  FINRA Rule 3230 Telemarketing.
Rule 4.511 General Requirements........  FINRA Rule 4511 General
                                          Requirements.
Rule 4.512 Customer Account Information  FINRA Rule 4512 Customer
                                          Account Information.
Rule 4.513 Record of Written Customer    FINRA Rule 4513 Record of
 Complaints.                              Written Customer Complaints.
Rule 4.550 Disclosure of Financial       FINRA Rule 2261 Disclosure of
 Condition.                               Financial Condition.
Rule 5.110 Supervision ...............  FINRA Rule 3110 Supervision.
Rule 5.120 Supervisory Control System..  FINRA Rule 3120 Supervisory
                                          Control System.
Rule 5.130 Annual Certification of       FINRA Rule 3130 Annual
 Compliance and Supervisory Processes.    Certification of Compliance
                                          and Supervisory Processes.
Rule 5.160 Anti-Money Laundering         FINRA Rule 3310 Anti-Money
 Compliance Program.                      Laundering Compliance Program.
Rule 5.170 Transactions for or by        NASD Rule 3050 Transactions for
 Associated Persons.                      or by Associated Persons.
Rule 6.120 Failure to Deliver and        Regulation SHO Rules 200 and
 Failure to Receive.                      203.
Rule 6.130(a), (b), (d) and (e)          FINRA Rule 2251 Forwarding of
 Forwarding of Proxy and Other Issuer-    Proxy and Other Issuer-Related
 Related Materials; Proxy Voting.         Materials.
Rule 10.110 Market Manipulation (except  FINRA Rule 6140 Other Trading
 10.110(b)).                              Practices.
Rule 10.110(b) Market Manipulation.....  FINRA Rule 5210 Publication of
                                          Transactions and Quotations,
                                          FINRA Rule 2020 Use of
                                          Manipulative, Deceptive or
                                          Other Fraudulent Devices,
                                          FINRA Rule 2010 Standards of
                                          Commercial Honor and
                                          Principles of Trade, and FINRA
                                          Rule 6140(a) Other Trading
                                          Practices.
Rule 10.120 Fictitious Transactions....  FINRA Rule 6140 Other Trading
                                          Practices and FINRA Rule 5210
                                          Supplementary Material .02
                                          Self-Trades.
Rule 10.130 Excessive Sales By A Member  FINRA Rule 6140 Other Trading
                                          Practices.
Rule 10.140 Manipulative Transactions..  FINRA Rule 6140 Other Trading
                                          Practices.
Rule 10.150 Dissemination of False       FINRA Rule 6140 Other Trading
 Information.                             Practices.
Rule 10.160 Prohibition Against Trading  FINRA Rule 5320 Prohibition
 Ahead of Customer Orders. **.           Against Trading Ahead of
                                          Customer Orders.**
Rule 10.180 Influencing the              FINRA Rule 6140(a) Other
 Consolidated Tape.                       Trading Practices.
Rule 10.190 Trade Shredding............  FINRA Rule 5290 Order Entry and
                                          Execution Practices.
Rule 10.220 Best Execution and           FINRA Rule 5310 Best Execution
 Interpositioning.**.                     and Interpositioning.**
Rule 10.240 Trading Ahead of Research    FINRA Rule 5280 Trading Ahead
 Reports.**.                              of Research Reports.**
Rule 10.260 Front Running of Block       FINRA Rule 5270 Front Running
 Transactions.                            of Block Transactions.
Rule 11.280(e)(3) & (4) Trading Halts    FINRA Rule 6190(a)(1) & (2)
 Due to Extraordinary Market Volatility.  Compliance with Regulation NMS
                                          Plan to Address Extraordinary
                                          Market Volatility.
Rule 11.290 Short Sales \4\ **.........  FINRA Rule 6182 Trade Reporting
                                          of Short Sales.**
------------------------------------------------------------------------
\1\ FINRA shall only have Regulatory Responsibilities to the extent the
  exercise of discretion by IEX is the same as FINRA.
\2\ FINRA shall only have Regulatory Responsibilities to the extent any
  exemption by IEX is the same as FINRA.
\3\ FINRA shall only have Regulatory Responsibilities regarding the
  first phrase of the IEX Rule 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 IEX.
\4\ FINRA shall not have any Regulatory Responsibilities for Rule
  11.290(b) through (d).
In addition, the following provisions shall be part of this 17d-2
  Agreement:

[[Page 43678]]

 
Securities Exchange Act of 1934 (``SEA''):
Section 15(g)
SEA Rules:
 SEA Rule 200 of Regulation SHO--Definition of Short Sales and
  Marking Requirements**
 SEA Rule 201 of Regulation SHO--Circuit Breaker**
 SEA Rule 203 of Regulation SHO--Borrowing and Delivery
  Requirements**
 SEA Rule 204 of Regulation SHO--Close-Out Requirement**
 SEA Rule 101 of Regulation M--Activities by Distribution
  Participants
 SEA Rule 102 of Regulation M--Activities by Issuers and Selling
  Security Holders During a Distribution
 SEA Rule 103 of Regulation M--Nasdaq Passive Market Making
 SEA Rule 104 of Regulation M--Stabilizing and Other Activities
  in Connection with an Offering
 SEA Rule 105 of Regulation M--Short Selling in Connection With
  a Public Offering
 SEA Rule 10b-5 Employment of Manipulative and Deceptive
  Devices[supcaret]
 SEA Rule 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[supcaret]
 FINRA shall not have Regulatory Responsibilities regarding
  notification or reporting to IEX.
[supcaret] 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 perform the surveillance responsibilities for the double
  star rules. These rules may be cited by FINRA in both the context of
  this Agreement and the Regulatory Services Agreement.

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

    Pursuant to Section 17(d)(1) of the Act \14\ and Rule 17d-2 
thereunder,\15\ after July 20, 2016, the Commission may, by written 
notice, declare the plan submitted by IEX and FINRA, File No. 4-700, to 
be effective if the Commission finds that the plan is necessary or 
appropriate in the public interest and for the protection of investors, 
to foster cooperation and coordination among self-regulatory 
organizations, or to remove impediments to and foster the development 
of the national market system and a national system for the clearance 
and settlement of securities transactions and in conformity with the 
factors set forth in Section 17(d) of the Act.
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    \14\ 15 U.S.C. 78q(d)(1).
    \15\ 17 CFR 240.17d-2.
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IV. Solicitation of Comments

    In order to assist the Commission in determining whether to approve 
the proposed 17d-2 Plan and to relieve IEX of the responsibilities 
which would be assigned to FINRA, 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/other.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number 4-700 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street NE., Washington, 
DC 20549-1090.

All submissions should refer to File Number 4-700. 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/other.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for 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 IEX and FINRA. 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 4-700 and should be submitted 
on or before July 20, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(34).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-15757 Filed 7-1-16; 8:45 am]
 BILLING CODE 8011-01-P