Document ID: SEC-2022-1390-0001
Agency: sec
Document Type: Notice
Title: Allocation of Regulatory Responsibilities: Financial Industry Regulatory Authority, Inc. and MEMX LLC
Posted Date: 2022-10-24T04:00Z

[Federal Register Volume 87, Number 204 (Monday, October 24, 2022)]
[Notices]
[Pages 64280-64285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22989]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96101; File No. 4-762]

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

October 18, 2022.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Section 17(d) of the 
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring 
effective an amendment to the plan for allocating regulatory 
responsibility (``Plan'') filed on October 6, 2022, pursuant to Rule 
17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') and MEMX LLC (``MEMX'') (collectively, ``Participating 
Organizations'' or ``parties''). This agreement amends and restates the 
agreement entered into between FINRA and MEMX on April 16, 2020, 
entitled ``Agreement between Financial Industry Regulatory Authority, 
Inc. and MEMX LLC pursuant to Rule 17d-2 under the Securities Exchange 
Act of 1934,'' and any subsequent amendments thereafter.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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I. Introduction

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

    On June 17, 2020, the Commission declared effective the Plan 
entered into between FINRA and MEMX for allocating regulatory 
responsibility pursuant to Rule 17d-2.\11\ The Plan is intended to 
reduce regulatory duplication for firms that are common members of 
FINRA and MEMX by allocating regulatory responsibility with respect to 
certain applicable laws, rules, and regulations that are common among 
them. Included in the Plan is an exhibit that lists every MEMX rule for 
which FINRA bears responsibility under the Plan for overseeing and 
enforcing with respect to MEMX members that are also members of FINRA 
and the associated persons therewith (``Certification'').
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    \11\ See Securities Exchange Act Release No. 89084 (June 17, 
2020), 85 FR 37701 (June 23, 2020).
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III. Proposed Amendment to the Plan

    On October 6, 2022, the parties submitted a proposed amendment to 
the Plan (``Amended Plan''). The primary purpose of the Amended Plan is 
to add Securities Exchange Act Rule 14e-4(a)(1)(ii)(D) to the 
Certification to accommodate the upcoming launch of MEMX's new options 
facility and to reflect updated rule citations. The text of the 
proposed Amended Plan is as follows (additions are italicized; 
deletions are [bracketed]):
* * * * *

AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND 
MEMX 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 MEMX LLC (``MEMX''), is made this 
[16th] 6th day of [April, 2020] October, 2022 (the ``Agreement''), 
pursuant to Section 17(d) of the Securities Exchange Act

[[Page 64281]]

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 MEMX may be referred to individually as a ``party'' and together 
as the ``parties.''
    Whereas, FINRA and MEMX 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 MEMX desire to execute an agreement covering 
such subjects pursuant to the provisions of Rule 17d-2 under the 
Exchange Act and to file such agreement with the Securities and 
Exchange Commission (the ``SEC'' or ``Commission'') for its 
approval.
    Now, therefore, in consideration of the mutual covenants 
contained hereinafter, FINRA and MEMX 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) ``MEMX Rules'' or ``FINRA Rules'' shall mean: (i) the rules 
of MEMX, 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 MEMX 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, MEMX or FINRA rules as they 
pertain to violations of insider trading activities, which is 
covered by a separate 17d-2 Agreement by and among Cboe BZX 
Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange, 
Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Financial 
Industry Regulatory Authority, Inc., MEMX LLC, MIAX PEARL, LLC, 
Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, NYSE 
National, Inc., New York Stock Exchange, LLC, NYSE American LLC, 
NYSE Arca Inc., and Investors' Exchange LLC and Long-Term Stock 
Exchange, Inc. effective [August 1, 2019] September 23, 2020, as may 
be amended from time to time. Common Rules shall not include any 
provisions regarding (i) notice, reporting or any other filings made 
directly to or from MEMX, (ii) incorporation by reference of MEMX 
Rules that are not Common Rules, (iii) exercise of discretion in a 
manner that differs from FINRA's exercise of discretion including, 
but not limited to exercise of exemptive authority, by MEMX, (iv) 
prior written approval of MEMX and (v) payment of fees or fines to 
MEMX.
    (c) ``Dual Members'' shall mean those MEMX 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, MEMX furnished FINRA with a current list of Common 
Rules and certified to FINRA that such rules that are MEMX 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 MEMX or 
FINRA, MEMX shall submit an updated list of Common Rules to FINRA 
for review which shall add MEMX Rules not included in the current 
list of Common Rules that qualify as Common Rules as defined in this 
Agreement; delete MEMX 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 MEMX 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 MEMX 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 MEMX'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 MEMX Rules that are not Common Rules, except for MEMX 
Rules for any MEMX member that operates as a facility (as defined in 
Section 3(a)(2) of the Exchange Act), acts as an outbound router for 
the MEMX and is a member of FINRA (``Router Member'') as provided in 
paragraph 6. As of the date of this Agreement, MEMX Execution 
Services LLC is the only Router Member.
    3. Dual Members. Prior to the Effective Date, MEMX 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 MEMX 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 MEMX Rules, which are not listed as Common Rules, discovered 
pursuant to the performance of the Regulatory Responsibilities 
assumed hereunder, FINRA shall notify MEMX of those apparent 
violations for such response as MEMX deems appropriate. With respect 
to apparent violations of any MEMX Rules by any Router Member, FINRA 
shall not make referrals to MEMX 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.
    (b) In the event that MEMX becomes aware of apparent violations 
of any Common Rules, discovered pursuant to the performance of the 
Retained Responsibilities, MEMX shall notify FINRA of those apparent 
violations and such matters shall be handled 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 MEMX, MEMX may in its discretion assume concurrent 
jurisdiction and responsibility.
    (d) Each party agrees to make available promptly all files, 
records and witnesses necessary to assist the other in its 
investigation or proceedings.
    7. Continued Assistance.
    (a) FINRA shall make available to MEMX 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

[[Page 64282]]

foregoing, FINRA shall furnish MEMX any information it obtains about 
Dual Members which reflects adversely on their financial condition. 
MEMX 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 MEMX advised of its actions in this regard for such 
subsequent proceedings as MEMX may initiate.
    9. Customer Complaints. MEMX shall forward to FINRA copies of 
all customer complaints involving Dual Members received by MEMX 
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 MEMX or 
FINRA at any time upon the approval of the Commission after six (6) 
month'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, MEMX 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. MEMX 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 MEMX 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 MEMX 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 MEMX 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 
MEMX join in requesting the Commission, upon its approval of this 
Agreement or any part thereof, to relieve MEMX 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.
* * * * *

EXHIBIT 1

MEMX CERTIFICATION OF COMMON RULES

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

------------------------------------------------------------------------
                                         FINRA (NASD) rule, Exchange Act
               MEMX rule                       provision, SEC rule
------------------------------------------------------------------------
Rule 2.5 Restrictions, Interpretation    FINRA Rule 1240[(a)(1)-(4)]
 and Policies .02 Continuing Education    Continuing Education
 Requirements .                          Requirements.
Rule 2.5 Restrictions, Interpretations   FINRA By-Laws of the
 and Polic[y]ies .04 Termination of       Corporation, Article V,
 Employment.                              Section 3 Notification by
                                          Member to the Corporation and
                                          Associated Person of
                                          Termination; Amendments to
                                          Notification; FINRA Rule
                                          1010(e) Electronic Filing
                                          Requirements for Uniform
                                          Forms.
Rule 2.6(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 and Article V, Sec.
                                          2(c); FINRA Rule 1010(c)
                                          Electronic Filing Requirements
                                          for Uniform Forms.
Rule 3.1 Business Conduct of Members     FINRA Rule 2010 Standards of
 [supcaret].                              Commercial Honor and
                                          Principles of Trade.[supcaret]
Rule 3.2 Violations Prohibited           FINRA Rule 2010 Standards of
 [supcaret] .                            Commercial Honor and
                                          Principles of Trade and FINRA
                                          Rule 3110
                                          Supervision.[supcaret]
Rule 3.3 Use of Fraudulent Devices       FINRA Rule 2020 Use of
 [supcaret].                              Manipulative, Deceptive or
                                          Other Fraudulent
                                          Devices.[supcaret]
Rule 3.5 Communications with the Public  FINRA Rule 2210 Communications
                                          with the Public.

[[Page 64283]]

 
Rule 3.6 Fair Dealing with Customers...  FINRA Rule 2020 Use of
                                          Manipulative, Deceptive or
                                          Other Fraudulent
                                          Devices,[supcaret] 1 FINRA
                                          Rule 2111 Suitability.
Rule 3.7(a) Recommendations to           FINRA Rule 2111(a) and SM .03
 Customers.                               Suitability.
Rule 3.8(a) The Prompt Receipt and       FINRA Rule 11860 COD Orders.
 Delivery of Securities.
Rule 3.8(b) The Prompt Receipt and       SEC Regulation SHO.
 Delivery of Securities.
Rule 3.9 Charges for Services Performed  FINRA Rule 2122 Charges for
                                          Services Performed.
Rule 3.10 Use of Information...........  FINRA Rule 2060 Use of
                                          Information Obtained in
                                          Fiduciary Capacity.
Rule 3.11 Publication of Transactions    FINRA Rule 5210 Publication of
 and Quotations .                        Transactions and Quotations.
Rule 3.12 Offers at Stated Prices......  FINRA Rule 5220 Offers at
                                          Stated Prices.
Rule 3.13 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 3.14 Disclosure on Confirmations..  FINRA Rule 2232(a) Customer
                                          Confirmations and SEC Rule 10b-
                                          10 Confirmation of
                                          Transactions.
Rule 3.15 Disclosure of Control........  FINRA Rule 2262 Disclosure of
                                          Control Relationship With
                                          Issuer.
Rule 3.16 Discretionary Accounts.......  FINRA Rule 3260 Discretionary
                                          Accounts.
Rule 3.17 Customer's Securities or       FINRA Rule 2150(a) Improper Use
 Funds.                                   of Customers' Securities or
                                          Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts--Improper Use
Rule 3.18 Prohibition Against            FINRA Rule 2150(b) Improper Use
 Guarantees.                              of Customers' Securities or
                                          Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts--Prohibition Against
                                          Guarantees.
Rule 3.19 Sharing in Accounts; Extent    FINRA Rule 2150(c)(1) Improper
 Permissible.                             Use of Customers' Securities
                                          or Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts--Sharing in Accounts;
                                          Extent Permissible.
Rule 3.21 Customer Disclosures.........  FINRA Rule 2265 Extended Hours
                                          Trading Risk Disclosure.
Rule 3.20 Influencing or Rewarding       FINRA Rule 3220 Influencing or
 Employees of Others.                     Rewarding Employees of Others.
Rule 3.22 Telemarketing and              FINRA Rule 3230 Telemarketing.
 Interpretations and Policies .01.
Rule 4.1 Requirements ................  Section 17 of the Exchange Act
                                          and rules thereunder and FINRA
                                          Rule 4511(a) and (c) General
                                          Requirements.2
Rule 4.3 Record of Written Complaints..  FINRA Rule 4513 Records of
                                          Written Customer Complaints.
Rule 5.1 Written Procedures ..........  FINRA Rule 3110(b)(1)
                                          Supervision-Written
                                          Procedures.[supcaret]
Rule 5.2 Responsibility of Members.....  FINRA Rule 3110 (a)(4), (b)(4)
                                          and (b)(7) Supervision--
                                          Supervisory System/Written
                                          Procedures--Review of
                                          Correspondence and Internal
                                          Communications.[supcaret]
Rule 5.3 Records.......................  FINRA Rule 3110
                                          Supervision.[supcaret]
Rule 5.4 Review of Activities..........  FINRA Rule 3110(c) and (d)
                                          Supervision--Internal
                                          Inspections/Transaction Review
                                          and Investigation.[supcaret]
Rule 5.6 Anti-Money Laundering           FINRA Rule 3310 Anti-Money
 Compliance Program .                    Laundering Compliance Program.
Rule 9.3 Predispute Arbitration          FINRA Rule 2268 Requirements
 Agreements.                              When Using Predispute
                                          Arbitration Agreements for
                                          Customer Accounts.
Rule 11.16(e)(3) & (4) Trading Halts     FINRA Rule 6190(a) & (b)
 Due to Extraordinary Market Volatility.  Compliance with Regulation NMS
                                          Plan to Address Extraordinary
                                          Market Volatility.
Rule 11.10(a)(5) Order Execution        FINRA Rule 6182 Trade Reporting
 [supcaret][supcaret].                    of Short
                                          Sales.[supcaret][supcaret]
Rule 11.10(f) Locking Quotation or       FINRA Rule 6240 Prohibition
 Crossing Quotations in NMS Stocks **.    from Locking or Crossing
                                          Quotations in NMS Stocks.**
Rule 12.1 Market Manipulation..........  FINRA Rule 6140(a) Other
                                          Trading Practices.
Rule 12.2 Fictitious Transactions......  FINRA Rule 6140 Other Trading
                                          Practices and FINRA Rule 5210
                                          Supplementary Material .02
                                          Self-Trades.
Rule 12.3 Excessive Sales [B]by [A]a     FINRA Rule 6140(c) Other
 Member.                                  Trading Practices.
Rule 12.4 Manipulative Transactions....  FINRA Rule 6140 Other Trading
                                          Practices.
Rule 12.5 Dissemination of False         FINRA Rule 6140(e) Other
 Information.                             Trading Practices.
Rule 12.6 Prohibition Against Trading    FINRA Rule 5320 Prohibition
 Ahead of Customer Orders  **.           Against Trading Ahead of
                                          Customer Orders.**
Rule 12.9 Trade Shredding..............  FINRA Rule 5290 Order Entry and
                                          Execution Practices.
Rule 12.11 Best Execution **...........  FINRA Rule 5310 Best Execution
                                          and Interpositioning.**
Rule 12.13 Trading Ahead of Research     FINRA Rule 5280 Trading Ahead
 Reports **.                              of Research Reports.**
Rule 12.14 Front Running of Block        FINRA Rule 5270 Front Running
 Transactions **.                         of Block Transactions.**
Rule 13.3(a), (b)(i), (d) and            FINRA Rule 2251 Processing and
 Interpretation and Policy .01            Forwarding of Proxy and Other
 Forwarding of Proxy and Other Issuer-    Issuer-Related Materials.
 Related Materials; Proxy Voting.
Rule 26.11 Restrictions on Pledge and    FINRA Rule 4330 Customer
 Lending of Public Customers'             Protection--Permissible Use of
 Securities.                              Customers' Securities.
------------------------------------------------------------------------
1 FINRA shall not have Regulatory Responsibilities regarding .01 of MEMX
  Rule 3.6.
2 FINRA shall not have Regulatory Responsibilities regarding
  requirements to keep records ``in conformity with . . . Exchange
  Rules;'' responsibility for such requirement remains with MEMX.
In addition, the following provisions shall be part of this 17d-2
  Agreement:
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 **

[[Page 64284]]

 
 SEA Rule 604 of Regulation NMS--Display of Customer Limit
  Orders **
 SEA Rule 606 of Regulation NMS--Disclosure of Routing
  Information **
 SEA Rule 610(d) of Regulation NMS--Locking or Crossing
  Quotations **
 SEA Rule 611 of Regulation NMS--Order Protection Rule **
 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]
 SEA Rule 14e-4--Prohibited Transactions in Connection with
  Partial Tender Offers ++
[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 Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock
  Exchange, Inc., Cboe EDGA Exchange Inc., Cboe EDGX Exchange Inc.,
  Financial Industry Regulatory Authority, Inc., MEMX LLC, MIAX PEARL,
  LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC,
  NYSE National, Inc., New York Stock Exchange, LLC, NYSE American LLC,
  NYSE Arca Inc., and Investors' Exchange LLC and [the] Long-Term Stock
  Exchange, Inc. effective [August 1, 2019] September 23, 2020, 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.
++ FINRA shall perform the surveillance responsibilities for SEA Rule
  14e-4(a)(1)(ii)(D).

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number 4-762 on the subject line.

Paper Comments

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

All submissions should refer to File Number 4-762. This file number 
should be included on the subject line if email is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed plan that are filed with the 
Commission, and all written communications relating to the proposed 
plan between the Commission and any person, other than those that may 
be withheld from the public in accordance with the provisions of 5 
U.S.C. 552, will be available for website viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the plan also will be available for inspection and 
copying at the principal offices of FINRA and MEMX. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number 4-762 and should be submitted on or before 
November 14, 2022.

V. Discussion

    The Commission finds that the proposed Amended Plan is consistent 
with the factors set forth in Section 17(d) of the Act \12\ and Rule 
17d-2(c) thereunder \13\ in that the proposed Amended Plan is necessary 
or appropriate in the public interest and for the protection of 
investors, fosters cooperation and coordination among SROs, and removes 
impediments to and fosters the development of the national market 
system. In particular, the Commission believes that the proposed 
Amended Plan should reduce unnecessary regulatory duplication by 
allocating to FINRA certain examination and enforcement 
responsibilities for Dual Members that would otherwise be performed by 
FINRA and MEMX. Accordingly, the proposed Amended Plan promotes 
efficiency by reducing costs to Dual Members. Furthermore, because MEMX 
and FINRA will coordinate their regulatory functions in accordance with 
the Amended Plan, the Amended Plan should promote investor protection.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q(d).
    \13\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------

    The Commission notes that, under the Amended Plan, MEMX and FINRA 
have allocated regulatory responsibility for those MEMX rules, set 
forth in the Certification, that are substantially similar to the 
applicable FINRA rules in that examination for compliance with such 
provisions and rules would not require FINRA to develop one or more new 
examination standards, modules, procedures, or criteria in order to 
analyze the application of the rule, or a Dual Member's activity, 
conduct, or output in relation to such rule. In addition, under the 
Amended Plan, FINRA would assume regulatory responsibility for certain 
provisions of the federal securities laws and the rules and regulations 
thereunder that are set forth in the Certification. The Common Rules 
covered by the Amended Plan are specifically listed in the 
Certification, as may be amended by the Parties from time to time.
    According to the Amended Plan, MEMX will review the Certification 
at least annually, or more frequently if required by changes in either 
the rules of MEMX or FINRA, and, if necessary, submit to FINRA an 
updated list of Common Rules to add MEMX rules not included on the 
then-current list of Common Rules that are substantially similar to 
FINRA rules; delete MEMX rules included in the then-current list of 
Common Rules that no longer qualify as common rules; and confirm that 
the remaining rules on the list of Common Rules continue to be MEMX 
rules that qualify as common rules.\14\ FINRA will then confirm in 
writing whether the rules listed in any updated list are Common Rules 
as defined in the Amended Plan. The Commission believes that these 
provisions are designed to provide for continuing communication between 
the Parties to ensure the continued accuracy of the scope of the 
proposed allocation of regulatory responsibility.
---------------------------------------------------------------------------

    \14\ See paragraph 2 of the Amended Plan.
---------------------------------------------------------------------------

    The Commission is hereby declaring effective an Amended Plan that, 
among other things, allocates regulatory responsibility to FINRA for 
the oversight and enforcement of all MEMX rules that are substantially 
similar to the rules of FINRA for Dual Members of MEMX and FINRA. 
Therefore, modifications to the Certification need not be filed with 
the Commission as an amendment to the Amended Plan, provided that the 
Parties are only adding to, deleting from, or confirming changes to 
MEMX rules in the Certification in conformance with the definition of 
Common Rules provided in the Amended Plan. However, should the

[[Page 64285]]

Parties decide to add an MEMX rule to the Certification that is not 
substantially similar to a FINRA rule; delete an MEMX rule from the 
Certification that is substantially similar to a FINRA rule; or leave 
on the Certification an MEMX rule that is no longer substantially 
similar to a FINRA rule, then such a change would constitute an 
amendment to the Amended Plan, which must be filed with the Commission 
pursuant to Rule 17d-2 under the Act.\15\
---------------------------------------------------------------------------

    \15\ The addition to or deletion from the Certification of any 
federal securities laws, rules, and regulations for which FINRA 
would bear responsibility under the Amended Plan for examining, and 
enforcing compliance by, Dual Members, also would constitute an 
amendment to the Amended Plan.
---------------------------------------------------------------------------

    Under paragraph (c) of Rule 17d-2, the Commission may, after 
appropriate notice and comment, declare a plan, or any part of a plan, 
effective. In this instance, the Commission believes that appropriate 
notice and comment can take place after the proposed amendment is 
effective. The primary purpose of the Amended Plan is to add Securities 
Exchange Act Rule 14e-4(a)(1)(ii)(D) to the Certification. The 
Commission notes that the prior version of this plan immediately prior 
to this proposed amendment was published for comment and the Commission 
did not receive any comments thereon.\16\ Furthermore, the Commission 
does not believe that the amendment to the plan raises any new 
regulatory issues that the Commission has not previously considered.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 88981 (May 20, 
2020), 85 FR 34690 (June 5, 2020).
---------------------------------------------------------------------------

VI. Conclusion

    This order gives effect to the Amended Plan filed with the 
Commission in File No. 4-762. The Parties shall notify all members 
affected by the Amended Plan of their rights and obligations under the 
Amended Plan.
    It is therefore ordered, pursuant to Section 17(d) of the Act, that 
the Amended Plan in File No. 4-762, between the FINRA and MEMX, filed 
pursuant to Rule 17d-2 under the Act, hereby is approved and declared 
effective.
    It is further ordered that MEMX is relieved of those 
responsibilities allocated to FINRA under the Amended Plan in File No. 
4-762.
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    \17\ 17 CFR 200.30-3(a)(34).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22989 Filed 10-21-22; 8:45 am]
BILLING CODE 8011-01-P