Document ID: SEC-2020-0515-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2020-04-06T04:00Z

[Federal Register Volume 85, Number 66 (Monday, April 6, 2020)]
[Notices]
[Pages 19203-19208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07075]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88519; File No. SR-Phlx-2020-09]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Relocate the 
Phlx Series 8000 and 9000 Rules and Incorporate by Reference the 
Disciplinary Rules of The Nasdaq Stock Market LLC

March 31, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 20, 2020, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to relocate the Phlx Series 8000 and 9000 
Rules from its current rulebook (``Rulebook'') into its new Rulebook 
shell. The Exchange is also proposing to simultaneously replace the 
text of the current Phlx Series 8000 and 9000 Rules with introductory 
paragraphs to each that incorporate by reference The Nasdaq Stock 
Market LLC's (``Nasdaq'') Series 8000 and 9000 Rules located in Nasdaq 
General 5 Discipline.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqphlx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
Rule Relocation
    The Exchange proposes to relocate the current Phlx Rule 8000 and 
9000 Series Rules into the new Rulebook shell. The relocation and 
harmonization of these rules is part of the Exchange's continued effort 
to promote efficiency and conformity of its processes with those of its 
Affiliated Exchanges.\3\ The Exchange believes that the placement of 
these Phlx Rules into their new location in the shell will facilitate 
the use of the Rulebook by members, member organizations, persons 
associated with member organizations, or other persons subject to its 
jurisdiction. Specifically, the Exchange proposes to relocate the 
following rules into General 5 Discipline:
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    \3\ The term ``Affiliated Exchanges'' refers to Nasdaq; Nasdaq 
BX, Inc.; Nasdaq ISE, LLC; Nasdaq GEMX, LLC; and Nasdaq MRX, LLC.

------------------------------------------------------------------------
        Proposed new rule number               Current rule number
------------------------------------------------------------------------
Section 1..............................  Rule 9110(d) Disciplinary
                                          Jurisdiction.
Section 2..............................  8000. Investigations and
                                          Sanctions.
Section 3..............................  9000. Code of Procedure.
------------------------------------------------------------------------

Incorporation by Reference
    The Exchange also proposes to simultaneously replace the current 
Phlx Series 8000 and 9000 Rules with introductory paragraphs to each 
that incorporate by reference the Nasdaq Series 8000 and 9000 Rules 
(located in General 5 Discipline), respectively, and state that such 
Nasdaq Rules shall be applicable to Exchange Members, Member 
Organizations, persons associated with Member Organizations, and other 
persons subject to the Exchange's jurisdiction.\4\
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    \4\ The Exchange notes that the proposed changes will not become 
operative unless and until the Commission approves the Exchange's 
request, which it has filed pursuant to Section 36 of the Exchange 
Act and SEC Rule 0-12 thereunder, for an exemption from the rule 
filing requirements of Section 19(b) of the Exchange Act as to 
changes to Phlx Series 8000 (New General 5, Section 2) and 9000 (New 
General 5, Section 3) Rules that are effected solely by virtue of a 
change to the Nasdaq Series 8000 or 9000 Rules.
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    Except as noted below, the Nasdaq Series 8000 and 9000 Rules are 
substantially similar to the current Phlx Series 8000 and 9000 Rules, 
respectively. To account for any

[[Page 19204]]

differences that do exist, the proposed introductory paragraphs list 
instances in which cross references in the Nasdaq Series 8000 and 9000 
Rules to other Nasdaq rules shall be read to refer instead to the 
Exchange Rules, and references to Nasdaq terms (whether or not defined) 
shall be read to refer to the Exchange-related meanings of those terms. 
For example, references in both the Nasdaq Series 8000 and 9000 Rules 
to the following terms shall be read to refer to the Exchange-specific 
meanings of those terms: the terms ``Exchange'' or ``Nasdaq'' shall be 
read to refer to the Phlx Exchange; the terms ``Rule'' or ``Rules of 
Nasdaq'' shall be read to refer to the Phlx Rules; the terms ``Board'' 
or ``Nasdaq Board'' shall be read to refer to the Phlx Board of 
Directors; the terms ``member'' or ``member firm'' shall be read to 
refer to a Phlx member organization, except that with respect to Rules 
9268(e)(2), 9269(d)(2), 9312(a)(3), 9351(a), 9524(a)(10), 9524(b)(3), 
and 9559(q)(1), the term ``member'' shall be read also to apply to a 
Phlx member; the term ``Associated Person'' shall be read to refer to a 
Phlx Member or person associated with a Phlx member organization; the 
term ``person associated with a member'' shall be read to refer to a 
Phlx member or a person associated with a Phlx member organization; \5\ 
the terms ``Nasdaq Regulation'' or ``Nasdaq Regulation Department'' 
shall be read to refer to the Phlx Regulation Department; and the term 
``Chief Regulatory Officer'' shall be read to refer to the Chief 
Regulatory Officer of Phlx.
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    \5\ The Exchange notes that the term ``member'' under Nasdaq's 
rules is synonymous with the Exchange's definition of ``member 
organization,'' whereas the definition of a ``member'' of the 
Exchange relates to the permit holder. Nasdaq does not have such a 
concept. Under the Phlx rules, a ``member'' is a natural person, 
where as a ``member organization'' is an entity and not a person.
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    Additionally, the proposed introduction to the Phlx Series 8000 
Rules (New General 5, Section 2) states that references in the Nasdaq 
Series 8000 Rules to ``Rule 0120'' \6\ shall be read to refer to Phlx 
Rule General 1, Section 1 and references in the Nasdaq Series 8000 
Rules to ``Rule 1015'' shall be read to refer to Phlx Rule General 3, 
Section 16(a).
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    \6\ The definitions in Nasdaq Rule 0120 are now located under 
the General 1 title (``General Provisions'') in the Nasdaq rulebook. 
See Securities Exchange Act Release No. 34-87778 (December 17, 
2019), 84 FR 70590 (December 23, 2019) (SR-NASDAQ-2019-098). The 
Exchange plans to submit a subsequent filing for the Nasdaq rulebook 
to address references to rules in the Nasdaq Rulebook that have 
since been changed.
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    The proposed introduction to the Phlx Series 8000 Rules (New 
General 5, Section 2) also indicates how certain of the Nasdaq Series 
8000 Rules should be read to apply to Exchange members, member 
organizations, persons associated with member organizations, or other 
persons subject to its jurisdiction. Specifically, when applied to a 
Phlx member, Nasdaq Rule 8310(a)(3) shall also permit the suspension of 
the permit of a Phlx member and 8310(a)(4) shall also permit the 
revocation or cancellation of the permit of a Phlx member, or expulsion 
of a Phlx member. In addition, IM-8310-3(c)(1) shall also permit the 
Phlx Regulation Department to release to the public information with 
respect to any disciplinary decision issued pursuant to the Phlx Series 
9000 Rules (New General 5, Section 3) imposing a suspension, 
cancellation or expulsion of a Phlx member, or suspension or revocation 
of a Phlx member's permit or any decision issued pursuant to the Rule 
9550 Series imposing a suspension or cancellation of the Phlx member, 
or a suspension or bar of the association of a Phlx member with a Phlx 
member organization. Moreover, IM-8310-3(g) and (h) also shall be read 
to apply to a Phlx member with respect to decisions of the Exchange 
that impose upon him or her a monetary sanction of $10,000 or more or a 
penalty of expulsion, revocation, suspension, or bar; and IM-8310(i) 
also shall be read to apply to a Phlx member with respect to any order 
issued by the Commission of suspension, expulsion, bar, or the 
imposition of monetary sanctions of $10,000 or more. The inclusion of 
these provisions in the introductory paragraph ensures that there is no 
change in the way current Phlx Rules 8310 and IM-8310-3 are applied to 
Phlx Members who are sanctioned for violation of the Phlx Rules.
    The proposed introduction to the Phlx Series 8000 Rules (New 
General 5, Section 2) clarifies that, while Rules 8320(a)(2), (b), and 
(c) in the Nasdaq Series 8000 Rules shall also apply to Phlx members, 
subsection (a)(1) shall have no application to the Exchange or its 
members, member organizations, persons associated with member 
organizations, and other persons subject to the Exchange's 
jurisdiction. The inclusion of this in the introductory paragraph is 
needed because that subsection relates specifically to Nasdaq Options 
Market members, and there is no analogous rule in the Phlx Series 8000 
Rules (New General 5, Section 2).
    Finally, the introductory paragraph to the Phlx Series 8000 Rules 
(New General 5, Section 2) explains that Nasdaq Rule IM-8310-1 shall 
have no application to the Phlx Exchange or its members, member 
organizations, persons associated with member organizations, or other 
persons subject to its jurisdiction. Instead, current Phlx Rule IM-
8310-1 shall continue to apply. While the language of Nasdaq Rule IM-
8310-1 and current Phlx Rule IM-8310-1 is substantially similar, 
certain differences exist given the existence of member organizations 
on the Exchange such that maintaining the current Phlx Rule language is 
necessary.
    With respect to the Phlx Series 9000 Rules (New General 5, Section 
3), the proposed introduction states that cross-references in the 
Nasdaq Series 9000 Rules to the following rules shall be read to refer 
to the following Exchange Rules:

------------------------------------------------------------------------
            Nasdaq rule \7\                Corresponding exchange rule
------------------------------------------------------------------------
0120...................................  General 1, Section 1.
1013...................................  General 3, Section 5 or General
                                          3, Section 2.
1015...................................  General 3, Section 16(a).
1160...................................  General 3, Section 7(d).
2010A..................................  Options 9, Section 1.
2160...................................  General 2, Section 4.
2170...................................  General 9, Section 53.
4110A..................................  Options 6D, Section 1.
4120A..................................  Options 6D, Section 1.
Options 9, Section 4...................  General 9, Section 53.
------------------------------------------------------------------------

    In addition, when applied to a Phlx member organization, Rule 
9558(a)(2) and any other applicable rules in the Nasdaq Rule 9000 
series shall also allow the summary suspension of the associated 
permit(s) of a Phlx member organization. This language is necessary to 
make it clear that if the Chief Regulatory Officer provides written 
authorization to the Financial Industry Regulatory Authority 
(``FINRA'') staff to issue on a case-by-case basis a written notice 
that summarily suspends a Phlx member organization, the Phlx member 
organization's associated permit(s) may also be suspended.
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    \7\ The Exchange plans to submit a subsequent filing for the 
Nasdaq Series 8000 and 9000 Rules to replace references to the 
following rules with the new rule cites: Rules 0120 (now General 1), 
1160 (now General 2, Section 11), 2010A (now General 9, Section 1), 
2160 (now General 2, Section 14), 4110A (now General 9, Section 40), 
and 4120A (now General 9, Section 41).
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    Moreover, as with the current Phlx Series 8000 Rules, the proposed 
introduction to the Phlx Series 9000 Rules (New General 5, Section 3) 
indicates how certain of the Nasdaq Series 9000 Rules should be read to 
apply to Exchange members, member organizations, persons associated 
with member organizations, or other persons subject to its jurisdiction 
\8\ and indicates

[[Page 19205]]

that certain of the language in particular rules of the Current Phlx 
Series 8000 and 9000 Rules will be maintained. Specifically:
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    \8\ Rule 9270(c)(5) in the current Phlx Rule 9000 Series refers 
to the ``Exchange Enforcement Sanctions User's Guide,'' whereas Rule 
9270(c)(5) in the Nasdaq Rule 9000 Series refers to ``sanction 
guidelines.'' The Exchange is not preserving the reference to the 
Exchange Enforcement Sanctions User's Guide (the ``Sanctions User 
Guide'') because the Exchange, like Nasdaq, consults FINRA's 
sanction guidelines when determining appropriate remedial sanctions. 
The Exchange notes that, pursuant to a September 11, 2000, 
settlement with the Commission (the ``Settlement''), see Release No. 
43268, September 11, 2000, the Exchange was required to ``adopt 
rules establishing, or modifying existing, sanctioning guidelines 
such that they are reasonably designed to effectively enforce 
compliance with such exchange's options order handling rules, 
including, the duty of best execution with respect to the handling 
of orders after the broker-dealer routes the order to such 
respondent exchange, limit order display, priority, firm quote, and 
trade reporting rules.'' The Exchange thereafter sought Commission 
approval to adopt new sanctioning guidelines to assist the Exchange 
in enforcing compliance with its options order handling rules. See 
Securities Exchange Act Release No. 45415 (February 7, 2002), 67 FR 
6781 (February 13, 2002). The Exchange received Commission approval 
on March 15, 2002. See Securities Exchange Act Release No. 45569 
(March 15, 2002), 67 FR 13397 (March 22. 2002). In approving the 
Sanctions User Guide, the Commission noted that ``the Commission 
expects the Exchange to continue to evaluate the adequacy of the 
proposed sanctioning guidelines to determine whether they do, in 
fact, effectively enforce compliance with the options order handling 
rules.'' See Securities Exchange Act Release No. 45569 (March 15, 
2002), 67 FR 13397, 13398 (March 22, 2002).
     After Nasdaq acquired Phlx in 2008, Phlx contracted with FINRA 
in 2010 through a regulatory services agreement to perform certain 
of the investigation and enforcement functions on its behalf that 
the Exchange's enforcement department had previously performed. Over 
time, with the support of the Exchange, FINRA began consulting 
FINRA's sanction guidelines when determining appropriate remedial 
sanctions for Members, Member Organizations, persons associated with 
Member Organizations, and other persons subject to the Exchange's 
jurisdiction. The National Adjudicatory Council (``NAC'') (formerly 
the National Business Conduct Committee) developed the sanctions 
guidelines. The NAC is an independent committee of FINRA comprised 
of professionals who also review initial decisions rendered in FINRA 
disciplinary and membership proceedings. FINRA's guidelines include 
guidance on sanctioning a member for failing to comply with best 
execution obligations, limit order display rules, and trade 
reporting rules. For those rules not specifically covered by FINRA's 
sanctions guidelines, such as priority and firm quote rules, FINRA 
and/or the Exchange, as applicable, consults the guidelines for 
analogous violations when determining the appropriate sanction. For 
each rule covered, the guidelines set forth factors that may be 
taken into account when determining the appropriate sanction, and 
the recommended sanction or sanction range (which are higher than 
the Sanctions User Guide recommends). The guidelines do not 
prescribe specific sanctions for particular violations. Instead, the 
objective is to provide recommended sanctions based on a number of 
factors that may be considered pertinent in determining what 
sanction should be levied. FINRA's guidelines also provide direction 
on when to consider a suspension, bar or other sanctions. The 
Exchange believes the higher sanction ranges and guidance on when to 
suspend or bar a member lead to better deterrence of misconduct. In 
addition, FINRA's sanctions guidelines are available publicly (see 
https://www.finra.org/sites/default/files/Sanctions_Guidelines.pdf). 
The Exchange believes that public access to guidelines that the 
Exchange considers when assessing remedial sanctions improves 
regulation and leads to better conduct.
     The Exchange notes that all other Affiliated Exchanges 
currently refer to FINRA's sanctions guidelines when determining 
appropriate remedial sanctions for each of its members, including 
Nasdaq's other options markets, the Nasdaq Options Market, the BX 
Options Market, Nasdaq ISE, LLC, Nasdaq GEMX, LLC, and Nasdaq MRX, 
LLC.
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    1. Rule 9110(d) (``Jurisdiction'') in the Nasdaq Series 9000 Rules 
shall not apply to the Exchange or its members, member organizations, 
persons associated with member organizations, or other persons subject 
to its jurisdiction. Instead, current Phlx Rule 9110(d) shall apply. 
While the language of Nasdaq Rule 9110(d) and current Phlx Rule 9110(d) 
is substantially similar, certain differences exist given the existence 
of member organizations and members on the Phlx Exchange such that 
maintaining the current Phlx Rule language is necessary.\9\ Moreover, 
as noted above, current Phlx Rule 9110(d) will be relocated to New 
General 5, Section 1.
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    \9\ See supra, n.5.
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    2. The Waiver of Ex Parte Prohibition set forth in Nasdaq Rule 
9143(e)(3) and Separation of Functions set forth in Nasdaq Rule 
9144(c)(3) shall also apply to violation letters executed pursuant to 
Phlx Rule 9216(b)(2). The inclusion of this in the introductory 
paragraph is necessary because the Nasdaq rules do not provide for the 
issuance of violation letters, whereas the Phlx rules do. This 
provision therefore ensures that there is no change in the application 
of the Waiver of Ex Parte Prohibition and Separation of Functions rules 
to Phlx member organizations or persons associated with member 
organizations who submit executed violation letters.
    3. The following text should be read to follow the existing 
paragraph in Nasdaq Rule 9211(a)(1), which is identical to the existing 
text in current Phlx Rule 9211(a)(1): ``When the number of violations 
under Exchange Rules is determined based upon an exception-based 
surveillance program, the Phlx Regulation Department or the Department 
of Enforcement may aggregate, or ``batch,'' individual violations of 
Exchange order handling Rules and consider such ``batched'' violations 
as a single offense only in accordance with the guidelines set forth in 
the Exchange's Numerical Criteria for Bringing Cases for Violations of 
Exchange Order Handling Rules. In addition, the Phlx Regulation 
Department or the Department of Enforcement may batch individual 
violations of Options 2, Section 5(c) pertaining to quote spread 
parameters (and corresponding Options Floor Procedure Advice Options 
11, Section 7). In the alternative, the Phlx Regulation Department or 
the Department of Enforcement may request authorization from the FINRA 
Office of Disciplinary Affairs to issue a complaint when (i) the Phlx 
Regulation Department or the Department of Enforcement determines that 
there exists a pattern or practice of violative conduct without 
exceptional circumstances, or (ii) any single instance of violative 
conduct without exceptional circumstances is deemed to be egregious.'' 
The inclusion of this in the introductory paragraph is necessary 
because the Nasdaq Rules do not provide for the ``batching'' of 
individual violations, whereas the Phlx Rules do. Maintaining this 
provision therefore ensures that the current process of ``batching'' on 
the Exchange for certain violations remains unchanged.
    4. Rules 9216 and IM-9216 in the Nasdaq Rules shall not apply to 
Exchange members, member organizations, persons associated with member 
organizations, or other persons subject to its jurisdiction. Instead, 
current Phlx Rules 9216 and IM-9216 shall apply. Phlx Rules 9216 and 
IM-9216 include provisions unique to that Exchange because, unlike 
Nasdaq, it has a trading floor. In addition, Phlx Rule 9216 provides 
for the imposition of fines in excess of $2,500 but not to exceed 
$10,000. Maintaining the existing language therefore ensures that the 
procedures applicable to acceptance, waiver, and consent letters, minor 
rule violation letters, and violation letters set forth in the existing 
Phlx rules remain unchanged. The Exchange also proposes to update 
certain terms and rule references that exist in Current Phlx Rule IM-
9216 to align them with current terms and rule references. Recently, 
the Exchange updated the terms ``Registered Options Trader'' to ``Floor 
Market Maker'' and ``Specialist'' to ``Lead Market Maker.'' \10\ Those 
new terms will be reflected in New Phlx Rule IM-9216. In addition, due 
to the recent relocation in the Phlx Rulebook of rules that are subject 
to the minor rule violation plan and the floor option procedure 
advices, the Exchange is updating the rule references as follows:
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    \10\ See Securities Exchange Act Release No. 85740 (April 29, 
2019), 84 FR 19136 (May 3, 2019); Securities Exchange Act Release 
No. 88213 (February 14, 2020), 85 FR 9859 (February 20, 2020).

[[Page 19206]]

------------------------------------------------------------------------
                 Old cite                             New cite
------------------------------------------------------------------------
B-12......................................  B-11.
E-1.......................................  D-1.
F-2.......................................  E-2.
F-4.......................................  E-3.
F-5.......................................  E-4.
F-6.......................................  E-5.
F-8.......................................  E-6.
F-9.......................................  E-7.
F-11......................................  E-8.
F-12......................................  E-9.
F-13......................................  Options 11, Section 6.
F-15......................................  Options 11, Section 7.
F-19......................................  Options 11, Section 8.
F-23......................................  E-13.
F-25......................................  E-14.
F-27......................................  Options 11, Section 9.
F-30......................................  E-15.
F-31......................................  E-16.
F-33......................................  Options 11, Section 10.
F-34......................................  Options 11, Section 11.
F-35......................................  Options 11, Section 12.
G-1.......................................  Options 11, Section 13.
Section H Of the Options Floor Procedure    Options 8, Section 39, F.
 Advices.
------------------------------------------------------------------------

    5. Rule 9231(b)(1)(C) in the Nasdaq Rules shall be read to allow 
the Chief Hearing Officer to select as a Panelist a person who 
previously served as a Governor of the Exchange prior to its 
acquisition by Nasdaq, Inc., but does not serve currently in that 
position; and 9231(b)(1)(D) shall be read to allow a person who is a 
member of FINRA's Market Regulation Committee to be among the FINRA 
Panelists approved by the Exchange Board at least annually whom the 
Chief Hearing Officer may also select as a Panelist. This language is 
necessary to preserve the pool of individuals from whom the Chief 
Hearing Officer may select to serve as a Panelist for Phlx disciplinary 
matters.
    6. When applied to a Phlx member organization, Rule 9558(a)(2) in 
the Nasdaq Rule 9000 Series shall also allow the summary suspension of 
the associated permit(s) of a Phlx member organization. This language 
is necessary to make it clear that if the Chief Regulatory Officer 
provides written authorization to FINRA staff to issue on a case-by-
case basis a written notice that summarily suspends a Phlx member 
organization, the Phlx member organization's associated permit(s) may 
also be suspended.
    7. Rules 9552(f), 9553(g), 9554(g), 9555(g), 9556(g), and 9558(g) 
in the Nasdaq 9000 Series shall be read to continue to allow the filing 
of a request for termination of a suspension (or a request for 
termination of the limitation, prohibition or suspension with respect 
to Rules 9555(g) and 9558(g)), to be made with either the head of the 
Exchange or the FINRA department or office that issued the notice or 
that is handling the matter on behalf of the issuing department or 
office. The inclusion of this language is necessary so that it is clear 
that such filings may continue to be made with the Exchange.
    8. Rule 9610(b) in the Nasdaq Series 9000 Rules shall not apply to 
the Exchange or its members, member organizations, persons associated 
with member organizations, or other persons subject to its 
jurisdiction. Instead, current Phlx Rule 9610(b) shall apply. While the 
language of Nasdaq Rule 9610(b) and current Phlx Rule 9610(b) is 
substantially similar, certain differences exist given the existence of 
member organizations and members on the Phlx Exchange such that 
maintaining the current Phlx Rule language is necessary.
    9. Finally, the Exchange notes that FINRA amended its rules to 
reflect an internal reorganization of FINRA's Enforcement 
Operations.\11\ In July 2017, FINRA announced its plan to consolidate 
its existing enforcement functions into a unified Department of 
Enforcement. According to FINRA, its rule change makes technical and 
other non-substantive changes to FINRA Rules 9000 Series Code of 
Procedure (the ``Code'') to reflect the single Department of 
Enforcement.\12\ The rule change removed references to the Market 
Regulation department, its head and employees from the Code where those 
references reflect the previously separate Market Regulation 
enforcement function. In light of FINRA's reorganization, Nasdaq 
likewise removed references to the Market Regulation department, its 
head and employees from the Code, and re-lettered the remainder of 
those sections where such re-lettering was necessary (i.e., Rule 9120). 
Because FINRA's Market Regulation department no longer exists, the 
Exchange does not need to preserve references to that entity with this 
rule change.
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    \11\ See Securities Exchange Act Release No. 83781 (August 6, 
2018), 83 FR 39802 (August 10, 2018) (FINRA No. SR-FINRA-2018-027).
    \12\ Id.
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2. Statutory Basis
Rule Relocation
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\14\ in particular, in that it is designed to 
promote just and equitable principles of trade and to protect investors 
and the public interest by bringing greater transparency to its rules 
by relocating its Rules into the new Rulebook shell together with other 
rules which have already been relocated. The Exchange's proposal is 
consistent with the Act and will protect investors and the public 
interest by harmonizing its rules, where applicable, across Nasdaq 
markets so that members of the Affiliated Exchange can readily locate 
rules which cover similar topics. The relocation and harmonization of 
these Phlx Rules is part of the Exchange's continued effort to promote 
efficiency and conformity of its processes with those of its Affiliated 
Exchanges. The Exchange believes that the placement of these Phlx Rules 
into their new location will facilitate the use of the Rulebook by 
members, member organizations, persons associated with member 
organizations, or other persons subject to the Exchange's jurisdiction. 
Specifically, the Exchange believes that market participants that are 
members of more than one Nasdaq market will benefit from the ability to 
compare Rulebooks.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange is not substantively amending rule text unless noted 
otherwise within this rule change. The Exchange has already completed 
relocating corresponding rules into the same location in most of its 
Affiliated Exchange's Rulebooks for ease of reference.\15\ The Exchange 
believes its proposal will benefit investors and the general public by 
increasing the transparency of its Rulebook and promoting easy 
comparisons among the various Nasdaq Rulebooks.
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    \15\ See Securities Exchange Act Release No. 86138 (June 18, 
2019), 84 FR 29567 (June 24, 2019); Securities Exchange Act Release 
No. 86346 (July 10, 2019), 84 FR 33999 (July 16, 2019); Securities 
Exchange Act Release No. 86424 (July 22, 2019), 84 FR 36134 (July 
26, 2019); and Securities Exchange Act Release No. 87778 (December 
17, 2019), 84 FR 70590 (December 23, 2019). The Exchange plans to 
submit a similar rule filing for Nasdaq BX, Inc. in short order.
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Incorporation by Reference
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\16\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\17\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect

[[Page 19207]]

investors and the public interest, by consolidating its rules into a 
single rule set. The Exchange intends to file a similar proposed rule 
change for the Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq GEMX, LLC, and 
Nasdaq MRX, LLC markets, so that the Nasdaq 8000 Series and 9000 Series 
Rules which govern the investigative and disciplinary processes are 
similarly incorporated by reference into those rulebooks.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    Replacing the current Phlx Series 8000 and 9000 Rules with 
introductory paragraphs to each that incorporate by reference Nasdaq 
Series 8000 and 9000 Rules, respectively, will provide an easy 
reference for members, associated persons, and other persons subject to 
the Exchange's jurisdiction seeking to understand and follow the 
investigative and disciplinary processes across all of Nasdaq's 
Exchanges. As noted, the Exchange intends to file similar rule changes 
for other affiliated markets so that the Nasdaq Series 8000 and 9000 
Rules are the source document for all of the Affiliated Exchanges' 
investigative and disciplinary processes. The Exchange notes that the 
substance of the current rules is not changing. The Exchange desires to 
conform its rules to give its members and the members of its Affiliated 
Exchanges the ability to quickly locate rules in one central location.
    The Exchange also believes that the proposal is consistent with 
Section 6(b)(6) of the Act,\18\ which requires that the rules of an 
exchange provide that its members be appropriately disciplined for 
violations of the Act as well as the rules and regulations thereunder, 
or the rules of the Exchange, by expulsion, suspension, limitation of 
activities, functions, and operations, fine, censure, being suspended 
or barred from being associated with a member, or any other fitting 
sanction. As noted above, the Exchange proposes to include introductory 
paragraphs to each of the Phlx Series 8000 and 9000 Rules (new General 
5, Sections 2 and 3, respectively) that list instances in which cross 
references in the Nasdaq Series 8000 and 9000 Rules to other Nasdaq 
rules should be read to refer instead to the Exchange Rules and 
references to Nasdaq terms (whether or not defined) shall be read to 
refer to the Exchange-related meanings of those terms. This is 
consistent with the Act because it minimizes confusion and ensures the 
proper application of the Nasdaq Rules to Phlx. Also as noted above, 
the introductory paragraphs (1) indicate that certain of the Current 
Phlx Series 8000 and 9000 Rules, or portions thereof, will continue to 
apply to the Exchange, Phlx members, member organizations, persons 
associated with member organizations, and other persons subject to the 
Exchange's jurisdiction, rather than the analogous Nasdaq Series 8000 
and 9000 Rules; \19\ (2) describe how certain of the Nasdaq Series 8000 
and 9000 Rules should be read to apply to Exchange members, member 
organizations, persons associated with member organizations, or other 
persons subject to the Exchange's jurisdiction; \20\ and (3) indicate 
that certain of the language in particular rules of the current Phlx 
Series 8000 and 9000 Rules will be maintained.\21\ With respect to (1), 
the Exchange is also updating certain terms and rule references in 
Current Phlx Rule IM-9216 to align them with current terms and rule 
references contained elsewhere in the Exchange's Rulebook. The 
inclusion of these clarifying provisions is consistent with the Act 
because it preserves the way that certain Phlx Rules that differ from 
or do not exist in the Nasdaq Rules are applied. Moreover, updating 
certain terms and rule references in Current Phlx Rule IM-9216 is 
consistent with the Act because it conforms the text in that rule to 
changes already made elsewhere in the Rulebook, thus ensuring accurate 
terms and rule references throughout. Adding this text therefore 
ensures the consistent application of Phlx Rules to its members, member 
organizations, persons associated with member organizations, or other 
persons subject to the Exchange's jurisdiction.
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    \18\ 15 U.S.C. 78f(b)(6).
    \19\ Rules IM-8310-1, 9110(d), 9211(a)(1), 9216, IM-9216, and 
9610(b).
    \20\ Rule 8310, IM-8310-3, 8320 and 9558(a)(2).
    \21\ Rules 9143(e)(3), 9144(c)(3), 9231(b)(1)(C), 9231(b)(1)(D), 
9552(f), 9553(g), 9554(g), 9555(g), 9556(g), and 9558(g).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that this 
rule change does not impose an undue burden on competition because the 
Exchange is merely incorporating Nasdaq's Series 8000 and 9000 Rules, 
which are substantially similar to the current Phlx Series 8000 and 
9000 Rules. Those rules will now apply to Phlx members, member 
organizations, persons associated with member organizations, or other 
persons subject to the Exchange's jurisdiction. To the extent that 
there are differences between the two rule sets, the Exchange notes 
those differences in introductory paragraphs to each of the Phlx Series 
8000 and 9000 Rules (new General 5, Sections 2 and 3, respectively). As 
noted above, the proposed introductory paragraphs list instances in 
which cross references in Nasdaq Series 8000 and 9000 Rules to other 
Nasdaq rules shall be read to refer instead to the Exchange Rules, and 
references to Nasdaq terms (whether or not defined) shall be read to 
refer to the Exchange-related meanings of those terms. The introductory 
paragraphs also (1) indicate that certain of the current Phlx Series 
8000 and 9000 Rules, or portions thereof, will continue to apply to the 
Exchange, Phlx members, member organizations, persons associated with 
member organizations, or other persons subject to the Exchange's 
jurisdiction, rather than the analogous Nasdaq Series 8000 and 9000 
Rules; (2) describe how certain rule text of the Nasdaq Series 8000 and 
9000 Rules should be read to apply to the Exchange, Phlx members, 
member organizations, persons associated with member organizations, or 
other persons subject to the Exchange's jurisdiction; and (3) indicate 
that certain of the language in particular rules of the current Phlx 
Series 8000 and 9000 Rules will be maintained. Because Nasdaq's current 
Series 8000 and 9000 Rules are substantially similar to the current 
Phlx Series 8000 and 9000 Rules, and because the introductory 
paragraphs ensure that any differences are preserved, the proposed 
changes do not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. Finally, 
updating certain terms and rule references in Current Phlx Rule IM-9216 
does not do not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act because it 
conforms the text in that rule to changes already made elsewhere in the 
Rulebook, thus ensuring accurate terms and rule references throughout.
    Finally, the Exchange believes that the proposed amendments do not 
impose an undue burden on competition because the amendments to 
relocate the Rules are non-substantive. This rule change is intended to 
bring greater clarity to the Exchange's Rules.

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

    No written comments were either solicited or received.

[[Page 19208]]

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \22\ and Rule 19b-
4(f)(6) thereunder.\23\
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2020-09 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2020-09. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street, NE, Washington, 
DC 20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Phlx-2020-09 and should be submitted on 
or before April 27, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07075 Filed 4-3-20; 8:45 am]
 BILLING CODE 8011-01-P