Document ID: SEC-2015-0966-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2015-06-09T04:00Z

[Federal Register Volume 80, Number 110 (Tuesday, June 9, 2015)]
[Notices]
[Pages 32644-32647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-13985]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75098; File No. SR-NSX-2015-02]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Provide an Expedited Process for Former Equity Trading Permit Holders 
To Apply for Reinstatement and Register Associated Persons

June 3, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on May 27, 2015, the National Stock Exchange, Inc. 
(``NSX'' or the ``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 the 
Substance of the Proposed Rule Change

    The Exchange is proposing to amend Exchange Rule 2.5 (Application 
Procedures for an ETP Holder or to become an Associated Person of an 
ETP Holder)\3\ to add new Interpretations and Policies section .01, 
entitled ``Expedited Process for Reinstatement as an ETP Holder.'' The 
Exchange is proposing this amendment to allow the use of an expedited 
process to facilitate the reinstatement, subject to certain conditions, 
of former ETP Holders of NSX \4\ and to register their Associated 
Persons.\5\ The Exchange's proposal is

[[Page 32645]]

designed to facilitate an efficient reinstatement process in connection 
with a subsequent reopening of trading on the Exchange, after all 
regulatory approvals are obtained.
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    \3\ The term ``ETP Holder'' refers to the holder of an Equity 
Trading Permit, or ``ETP,'' issued by the Exchange for effecting 
approved securities transactions on the Exchange's trading 
facilities. An ETP may be issued to a sole proprietor, partnership, 
corporation, limited liability company or other organization which 
is a registered broker or dealer pursuant to section 15 of the Act 
(See Exchange Rule 1.5E.(1)).
    \4\ Pursuant to a rule filing with the Commission, the Exchange 
ceased trading operations as of the close of business on May 30, 
2014. See Securities Exchange Act Release No. 72107 (May 6, 2014), 
79 FR 27017 (May 12, 2014) (SR-NSX-2014-14). NSX continued to be 
registered as a national securities exchange and retained its status 
as a self-regulatory organization. All NSX rules remained in full 
force and effect after trading on the NSX's trading system ceased.
    \5\ The terms ``person associated with an ETP Holder'' or 
``associated person of an ETP Holder'' mean any partner, officer, 
director, or branch manager of an ETP Holder (or any person 
occupying a similar status or performing similar functions), any 
person directly or indirectly controlling, controlled by, or under 
common control with an ETP Holder, or any employee of such ETP 
Holder, except that any person associated with an ETP Holder whose 
functions are solely clerical or ministerial shall not be included 
in the meaning of such terms. See Exchange Rule 1.5P.(1).
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    The Exchange has designated this rule proposal as ``non-
controversial'' pursuant to section 19(b)(3)(A) of the Act \6\ and 
provided the Commission with the notice required by Rule 19b-
4(f)(6)(iii) under the Act.\7\ The text of the proposed rule change is 
available on the Exchange's Web site at www.nsx.com, at the Exchange's 
principal office, and at the Commission's public reference room.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6)(iii).
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II. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and statutory basis for, 
the proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those 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 parts of such statements.

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

1. Purpose
    The Exchange is proposing to amend Rule 2.5 to implement, on a 
temporary basis, an expedited procedure to permit approved ETP Holders 
in good standing as of the close of business on May 30, 2014, when the 
Exchange ceased trading operations, to reinstate their ETP Holder 
status and register with the Exchange each Associated Person of such 
ETP Holder. As proposed, the Exchange will require that: (i) The ETP 
Holder using the expedited process is a member of another self-
regulatory organization (``SRO''); and (ii) each proposed Associated 
Person holds an active and recognized securities industry 
registration.\8\ Former ETP Holders seeking reinstatement under the 
proposed expedited process would use a short-form application to 
reinstate their ETP Holder status and register Associated Persons.
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    \8\ See footnote 4, supra. As provided in the Exchange's rule 
filing to cease trading operations on the Exchange as of May 30, 
2014, all ETPs terminated automatically as of that date.
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    The Exchange proposes that the expedited procedure for 
reinstatement as an ETP Holder and registering Associated Persons would 
be effective for 90 days from the date on which the rule amendment 
permitting the use of expedited procedure becomes effective. The short-
form application that the Exchange proposes for use in connection with 
the expedited reinstatement process will include an agreement 
conforming with Rule 2.5(a)(1) through (a)(5).\9\ The short form 
application will also include the Exchange's standard routing 
agreement. The Exchange may request further documentation, in addition 
to the short-form application, in order to confirm that a former ETP 
Holder using the expedited process and any proposed Associated Persons 
meet the qualification standards set forth in Exchange Rule 2.4 
(Restrictions). As part of the expedited application process, the 
Exchange will review the records of the prospective ETP Holder and each 
proposed Associated Person maintained by the Central Registration 
Depository System (``CRD'').\10\
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    \9\ Exchange Rule 2.5 (a)(1) through (a)(5) require [sic] that 
applications for an ETP contain certain agreements, including, inter 
alia: an agreement by the applicant to adhere to the provisions of 
the Exchange's amended certificate of incorporation, its by-laws, 
the Exchange Rules, the policies, interpretations and guidelines of 
the Exchange and all orders and decisions of the Exchange's Board of 
Directors; an agreement to pay dues, assessments and other charges 
in the manner and amount fixed by the Exchange; an agreement that 
the Exchange, its officers, employees and members of the Board and 
of any committee shall not be liable, except for willful 
malfeasance, to the applicant or to any other person for any action 
taken by such director, officer of member in his official capacity, 
or by any employee while acting within the scope of his employment, 
in connection with the administration or enforcement of any of the 
provisions of the Exchange's by-laws, its Rules, policies, 
interpretations or guidelines of the Exchange or of any penalty 
imposed by the exchange, its Board or any duly authorized committee; 
an agreement to maintain and make available to the Exchange, its 
authorized employees and its Board or committee members such books 
and records as may be required to be maintained by the Commission or 
the Exchange Rules; and such other reasonable information with 
respect to the applicant as the Exchange may require.
    \10\ The Financial Industry Regulatory Authority (``FINRA'') 
operates the CRD System.
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    After the expiration of the 90-day period, the expedited process 
would no longer be available and any former ETP Holder and Associated 
Person seeking reinstatement after that date would be required to 
complete a full application. The expedited process will not be 
available to new ETP applicants (i.e., an applicant that was not an 
approved ETP Holder in good standing as of May 30, 2014) or to ETP 
Holders that ceased to be members of another SRO after May 30, 2014. 
The Exchange will not approve any application unless the prospective 
ETP Holder is a member of another SRO.
    The Exchange's proposal is intended to allow former ETP Holders to 
reinstate their status and register Associated Persons in an efficient 
manner that will enable the Exchange to progress toward a reopening of 
trading as soon as practicable after the Exchange has obtained all of 
the necessary regulatory approvals to do so. Reinstating ETP Holders 
and registering their Associated Persons is a critical element of this 
process from both an organizational and operational standpoint. Before 
trading on the Exchange can resume, ETP Holders will need to re-
establish and test their connectivity. The Exchange will need to test 
its systems to confirm that the functionality to process, route and 
execute orders and issue reports to customers, which has not been 
modified since May 30, 2014, will continue to operate without incident 
upon a resumption of trading on the Exchange. Given these imperatives, 
the Exchange believes that it is important to effectuate the 
reinstatement of qualified former ETP Holders and the registration of 
their Associated Persons as quickly and efficiently as possible.
    The Exchange submits that its proposal does not present any 
significant regulatory risk. Prior to May 30, 2014, every ETP Holder 
was a member of another SRO with oversight responsibility, and the 
Exchange will not approve any ETP Holder application unless the 
applicant is a current member of another SRO. The short form 
application requires each prospective ETP Holder to identify its 
Designated Examining Authority (``DEA''). The expedited process 
proposed in this filing will only be available to approved ETP Holders 
in good standing as of May 30, 2014, each of which had previously been 
approved by the Exchange through its regular application process 
pursuant to Rule 2.5. Further, the Exchange will not approve any 
proposed Associated Person unless such person holds an active and 
recognized securities industry registration and meets the requirements 
of Rule 2.4 (Restrictions).
    The Exchange notes that the Commission has approved the use of an 
expedited membership approval process and a short-form application in 
other

[[Page 32646]]

situations where the facts and circumstances did not justify the time 
and administrative costs inherent in completing and processing the 
regular application to become a member of a national securities 
exchange. In the past, such situations have involved the formation of a 
new exchange that is an affiliate of an existing exchange and the 
members of the existing exchange are permitted to become members of the 
newly-formed exchange through an expedited process, using a short-form 
application.\11\ Use of an expedited process in that circumstance was 
appropriate since the applicants for membership on the new exchange had 
already been approved as members of the affiliated exchange. The 
Exchange submits that using an expedited process and a short-form 
application is similarly appropriate in this case, where the Exchange 
is seeking to employ an efficient and cost-effective means of 
reinstating previously-approved ETP Holders and registering their 
Associated Persons.
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    \11\ See, e.g., In the Matter of the Applications of EDGX 
Exchange, Inc., and EDGA Exchange, Inc. for Registration as National 
Securities Exchanges: Findings, Opinion, and Order of the 
Commission, Exchange Act Release No. 61698 (March 12, 2010), 75 FR 
13151 (March 18, 2010) (File Nos. 10-194 and 10-196); In the Matter 
of the Application of BATS Exchange, Inc. for Registration as a 
National Securities Exchange; Findings, Opinion, and Order of the 
Commission, Exchange Act Release No. 58375 (August 18, 2008), 73 FR 
49498 (August 21, 2008) (File No. 10-182).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Exchange Act and the rules and regulations thereunder applicable to 
the Exchange and, in particular, the requirements of section 6(b) of 
the Exchange Act.\12\ Pursuant to section 6(b)(2) of the Act,\13\ and 
subject to the conditions set forth in section 6(c) of the Act,\14\ in 
its capacity as a registered national securities exchange, NSX's rules 
must provide that any registered broker-dealer may become an ETP Holder 
and any person may become an Associated Person thereof. Under section 
6(c) of the Act, the Exchange must deny ETP Holder status to any 
person, other than a natural person, that is not a registered broker or 
dealer, any natural person that is not, or is not associated with, a 
registered broker or dealer, and registered broker-dealers that do not 
satisfy certain standards, such as financial responsibility or 
operational capacity. As a registered national securities exchange, NSX 
must independently determine if an applicant satisfies the standards 
set forth in the Act and in the Exchange's rules.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(2).
    \14\ 15 U.S.C. 78f(c).
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    The Exchange submits that its proposal for an expedited approval 
process for former ETP Holders and Associated Persons thereof is 
consistent with its obligations as a registered national securities 
exchange under the Exchange Act. The expedited process would only be 
available to ETP Holders that were in good standing as of May 30, 2014; 
all of such ETP Holders had previously been approved by the Exchange 
under its regular application process as set forth in Rule 2.5.\15\ As 
part of its review process in connection with submitted ``waive-in'' 
applications, the Exchange will review the CRD records for both the ETP 
Holder applicant and proposed Associated Persons, and will request 
additional information as necessary to assure that they continue to 
meet the eligibility requirements set forth in the Ace [sic] and in the 
Exchange's rules.
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    \15\ See footnote 9, supra.
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    The Exchange further believes that its proposal is consistent with 
the requirements of section 6(b)(5) \16\ that the rules of an exchange 
be designed, among other things, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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. Additionally, the Exchange 
believes the proposed rule change is consistent with the section 
6(b)(5) requirement that the rules of an exchange not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \16\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed expedited process will 
operate to reduce the time and administrative costs normally incurred 
by both ETP Holders and the Exchange in processing applications to 
become ETP Holders and registering their Associated Persons. The 
Exchange further believes that its proposal will thus promote just and 
equitable principles of trade and remove impediments to and perfect the 
mechanism of a free and open market and a national market system. The 
Exchange's proposal will be available to all ETP Holders in good 
standing as of May 30, 2014 that seek to reinstate their status as ETP 
Holders of NSX, thus meeting the requirement of section 6(b)(5) that 
the Exchange's rules not be designed to permit unfair discrimination 
between customers, issuers, brokers or dealers.
    Additionally, the Exchange notes that its proposed expedited 
procedure for reinstatement will have duration of 90 days from the date 
that the instant rule change becomes effective. This is consistent with 
the approach in other instances where national securities exchanges 
used an expedited application process for a limited purpose and a 
similar time frame, after which the expedited process was no longer 
available. The Exchange believes that by utilizing an expedited process 
that has precedent in both its application and its time duration with 
the process used by other national securities exchanges, it is 
fulfilling the requirement of section 6(b)(5) of the Act that its rules 
foster cooperation and coordination with persons engaged in, among 
other things, regulating and processing information with respect to, 
and facilitating transactions in securities.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change is consistent 
with section 6(b)(8) of the Act \17\ in that it will not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange's proposed 
expedited process will only be available to broker-dealers that were 
registered ETP Holders as of the date the Exchange ceased trading 
operations. Allowing for an expedited and efficient process for 
reinstatement of ETP Holders and registering their Associated Persons 
will facilitate the process of preparing the Exchange for a resumption 
of trading, thereby providing another competitive trading venue for 
market participants. The Exchange notes that new ETP Holder applicants 
would not be eligible for the expedited process, nor would any 
otherwise eligible former ETP Holder that sought reinstatement after 
the 90-day time period for use of the expedited process had elapsed. 
Associated Persons that an ETP Holder seeks to register through the 
expedited process must hold an active and recognized securities 
industry registration and meet the requirements of Rule 2.4(e) [sic]. 
The Exchange submits that these factors indicate that its proposal will 
not impose any unnecessary or inappropriate burden on competition and 
therefore is consistent with the Act.
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    \17\ 15 U.S.C. 78f(b)(8).

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

    The Exchange has not solicited or received comments on the proposed 
rule change from market participants or others.

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

    Because the 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, 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 \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    At any time within 60 days of the filing of such 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 under 
section 19(b)(2)(B) of the Act \20\ to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 15 U.S.C. 78s(b)(2)(B).
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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-NSX-2015-02 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-NSX-2015-02. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NSX-2015-02 and should be 
submitted on or before June 30, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).

Robert W. Errett,
 Deputy Secretary.
[FR Doc. 2015-13985 Filed 6-8-15; 8:45 am]
 BILLING CODE 8011-01-P