Document ID: SEC-2020-0016-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Long-Term Stock Exchange, Inc.
Posted Date: 2020-01-03T05:00Z

[Federal Register Volume 85, Number 2 (Friday, January 3, 2020)]
[Notices]
[Pages 378-380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28360]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87861; File No. SR-LTSE-2019-05]

Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Membership Waive-in Process for FINRA Members

December 27, 2019.
    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 December 20, 2019, Long-Term Stock Exchange, Inc. (``LTSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    LTSE proposes a rule change to adopt ``Special Application 
Procedures'' for Exchange applicants that are already FINRA members and 
to modify the Membership Application form to incorporate these new 
procedures and to more generally align the form to be consistent with 
other national securities exchanges.
    The text of the proposed rule change is available at the Exchange's 
website at https://longtermstockexchange.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 self-regulatory organization 
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 self-regulatory organization 
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
    Exchange Rule 2.170 prescribes the application procedures for 
membership or to become an associated person of a member. The Exchange 
is proposing to establish a new paragraph (b), entitled ``Special 
Application Procedures for Applicants that are FINRA Members.'' \3\ 
Specifically, the proposed rule change states that such an applicant 
will have the option to ``waive-in'' to become an Exchange Member and 
to register with the Exchange all persons associated with it whose 
registrations FINRA has approved (in categories recognized by the 
Exchange's rules). The proposed rule change defines the term ``waive-
in'' to mean that the Exchange will rely substantially upon FINRA's 
prior determination to approve the applicant for FINRA membership when 
the

[[Page 379]]

Exchange evaluates the applicant for Exchange membership. That is, the 
Exchange will normally permit a FINRA member to waive-into Exchange 
membership without conducting an independent examination of the 
applicant's qualifications for membership on the Exchange, provided 
that the Exchange is not otherwise aware of any basis set forth in Rule 
2.160 to deny or condition approval of the application. Additionally, 
implementation of the waive-in application process is facilitated by 
and within the scope of the regulatory services agreement between LTSE 
and FINRA; however, in all cases, LTSE will make the final 
determination as to whether or not to approve an applicant.
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    \3\ The proposed rule change is modeled on a similar change 
adopted by the Nasdaq Stock Market LLC. See Securities Exchange Act 
Release No. 34-85513 (April 4, 2019), 84 FR 14429 (April 10, 2019).
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    Procedurally, the proposed rule change states that a FINRA member 
that wishes to waive-into Exchange membership must do so by submitting 
to the Exchange an application form designated by the Exchange. The 
Exchange, in turn, will act upon a duly submitted waive-in application 
by promptly notifying, in writing, the applicant of the Exchange's 
determination.\4\ Finally, the proposed rule change states that a 
decision issued under this provision shall have the same effectiveness 
as set forth in renumbered paragraph (d) of Rule 2.170 and shall be 
subject to the same procedures as those for denials of full 
applications as set forth in renumbered paragraphs (e) and (f) of Rule 
2.170.
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    \4\ The Exchange does not propose to set a deadline because it 
will be relying on FINRA to review waive-in applications on its 
behalf and there are no timelines in the regulatory services 
agreement covering this function. However, FINRA routinely provides 
this service for clients and performs such services quickly. See id. 
at 14433 n14 (``[Nasdaq] proposes this [20 day] time frame to 
accommodate FINRA, which will review waive-in applications on behalf 
of the [Nasdaq] to verify that the Applicants are FINRA members in 
good standing. As a practical matter, [Nasdaq] expects to act on 
waive-in applications prior to the 20 day deadline.'').
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    The Exchange does not propose any additional changes to Rule 2.170, 
other than to re-designate paragraphs in the rule to account for this 
new paragraph (b). Additionally, cross-references to exact paragraphs 
of Rule 2.170 in Supplementary Material .02 to Rule 5.160 and in Rule 
9.522(a)(1) would be updated. Specifically, Supplementary Material .02 
to Rule 5.160 would be updated to reference Rule 2.170(h) instead of 
Rule 2.170(g), and Rule 9.522(a)(1) would be updated to reference Rule 
2.170(e) instead of 2.170(d).
    The Exchange proposes to amend the Membership Application to add a 
waive-in attestation requirement for FINRA member firms who are using 
the ``Special Application Procedures.'' Additionally, the Exchange 
proposes ministerial amendments to the Membership Application to update 
the names of other self-regulatory organizations. Finally, the Exchange 
proposes to amend the Application Checklist and Instructions to: (i) 
Describe the availability of waive-in process; (ii) streamline the list 
of supporting documents required for waive-in applicants in accordance 
with the documents required by other national securities exchanges that 
provide for waive-in membership; and (iii) update the list of 
supporting documents required for non-waive-in applicants to conform to 
the list of materials to those required by other national securities 
exchanges.\5\
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    \5\ See, e.g., Membership Application Form of Cboe BZX Exchange, 
Inc., Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., and Cboe 
EDGX Exchange, Inc., available at http://cdn.cboe.com/resources/membership/BATS_DirectEdge_Membership_Application.pdf.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\6\ Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\7\ in that it is designed 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest. It also is consistent with Section 6(b)(7) of the Act 
\8\ in that it provides for a fair procedure for denying Exchange 
membership to any person who seeks it, barring any person from becoming 
associated with an Exchange Member, and prohibiting or limiting any 
person with respect to access to services offered by the Exchange or a 
Member thereof, and Section 6(b)(2) of the Act \9\ in that it provides, 
subject to Section 6(c) and the rules of the Exchange, that any broker 
or dealer may become a member of the Exchange.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(7).
    \9\ 15 U.S.C. 78f(b)(2).
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    As a general matter, the Exchange believes that the proposed rule 
change to amend its membership rules to provide for a ``waive-in'' 
process for FINRA is consistent with the requirements of Section 
6(b)(5) of the Act in that it avoids duplication and unnecessary 
burdens associated with the membership application process while 
protecting investors and the public interest through the application of 
FINRA's membership requirements. The proposed rule change also will 
make compliance with the membership rules simpler and less burdensome 
for applicants by providing consistency to the standards by which a 
membership application is judged.
    Finally, the proposed rule change is consistent with the 
requirements of Section 6(b)(7) of the Act in that it will not 
adversely impact the rights of applicants to appeal adverse Exchange 
decisions under this proposed Rule 2.170(b) or otherwise restrict 
access to membership in the Exchange; to the contrary, providing for a 
``waive-in'' process promotes and facilitates membership in the 
Exchange in accordance with Section 6(b)(2) of the Act.

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 also does not 
expect that its proposed rule change will have any adverse competitive 
impact on its prospective membership. In particular, the proposed rule 
change will apply equally to all similarly situated applicants. 
Moreover, the Exchange does not expect that the proposed rule change 
will have an adverse impact on competition among exchanges for members; 
to the contrary, the Exchange anticipates that by clarifying its 
membership rules, and by making the Exchange's membership process less 
burdensome for applicants, the Exchange will enhance its competitive 
standing relative to other exchanges.

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

    Written comments were neither solicited nor received.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii)

[[Page 380]]

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, if consistent with the 
protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\12\ and Rule 19b-4(f)(6) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately. The Exchange requests 
that the Commission waive the 30-day operative delay so that the 
Exchange may afford the benefits of the ``waive-in'' membership process 
earlier and minimize the burden on FINRA members in applying to become 
a member of the Exchange. According to the Exchange, relieving this 
burden as soon as possible is important to enable LTSE to promptly 
establish the Exchange Board, of which Member Representative Directors 
shall be at least twenty percent of the Board.\16\ For these reasons, 
the Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposal operative upon filing.\17\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ See First Amended and Restated Bylaws of Long-Term Stock 
Exchange, Inc., art. 3 Sec.  2 (Composition of the Board).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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-LTSE-2019-05 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-LTSE-2019-05. 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-LTSE-2019-05, and should be submitted on 
or before January 24, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28360 Filed 1-2-20; 8:45 am]
 BILLING CODE 8011-01-P