Document ID: SEC-2023-1410-0001
Agency: sec
Document Type: Notice
Title: Allocation of Regulatory Responsibilities: Financial Industry Regulatory Authority, Inc. and Nasdaq PHLX, LLC
Posted Date: 2023-12-07T05:00Z

[Federal Register Volume 88, Number 234 (Thursday, December 7, 2023)]
[Notices]
[Pages 85338-85343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26800]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99065; File No. 4-818]

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

December 1, 2023.
    Pursuant to section 17(d) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that 
on November 17, 2023, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') and Nasdaq PHLX LLC (``PHLX'') (together with FINRA, the 
``Parties'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') a plan for the allocation of regulatory 
responsibilities, dated November 15, 2023 (``17d-2 Plan'' or the 
``Plan''). The Commission is publishing this notice to solicit comments 
on the 17d-2 Plan from interested persons.
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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) or section 19(g)(2) of the Act.\4\ Without 
this relief, the statutory obligation of each individual SRO could 
result in a pattern of multiple examinations of broker-dealers that 
maintain memberships in more than one SRO (``common members''). Such 
regulatory duplication would add unnecessary expenses for common 
members and their SROs.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
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    Section 17(d)(1) of the Act \5\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\6\ With 
respect to a common member, section 17(d)(1) authorizes the Commission, 
by rule or

[[Page 85339]]

order, to relieve an SRO of the responsibility to receive regulatory 
reports, to examine for and enforce compliance with applicable 
statutes, rules, and regulations, or to perform other specified 
regulatory functions.
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    \5\ 15 U.S.C. 78q(d)(1).
    \6\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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    To implement section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\7\ Rule 17d-1 authorizes the 
Commission to name a single SRO as the designated examining authority 
(``DEA'') to examine common members for compliance with the financial 
responsibility requirements imposed by the Act, or by Commission or SRO 
rules.\8\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the federal securities laws governing matters 
other than financial responsibility, including sales practices and 
trading activities and practices.
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    \7\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \8\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\9\ 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 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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    \9\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. Proposed Plan

    The proposed 17d-2 Plan is intended to reduce regulatory 
duplication for firms that are common members of both PHLX and 
FINRA.\10\ Pursuant to the proposed 17d-2 Plan, FINRA would assume 
certain examination and enforcement responsibilities for common members 
with respect to certain applicable laws, rules, and regulations.
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    \10\ The proposed 17d-2 Plan refers to these common members as 
``Dual Members.'' See Paragraph 1(c) of the proposed 17d-2 Plan.
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    The text of the Plan delineates the proposed regulatory 
responsibilities with respect to the Parties. Included in the proposed 
Plan is an exhibit (the ``PHLX Certification of Common Rules,'' 
referred to herein as the ``Certification'') that lists every PHLX 
rule, and select federal securities laws, rules, and regulations, for 
which FINRA would bear responsibility under the Plan for overseeing and 
enforcing with respect to PHLX members that are also members of FINRA 
and the associated persons therewith (``Dual Members'').
    Specifically, under the 17d-2 Plan, FINRA would assume examination 
and enforcement responsibility relating to compliance by Dual Members 
with the rules of PHLX that are substantially similar to the applicable 
rules of FINRA,\11\ as well as any provisions of the federal securities 
laws and the rules and regulations thereunder delineated in the 
Certification (``Common Rules''). In the event that a Dual Member is 
the subject of an investigation relating to a transaction on PHLX, the 
plan acknowledges that PHLX may, in its discretion, exercise concurrent 
jurisdiction and responsibility for such matter.\12\
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    \11\ See paragraph 1(b) of the proposed 17d-2 Plan (defining 
Common Rules). See also paragraph 1(f) of the proposed 17d-2 Plan 
(defining Regulatory Responsibilities). Paragraph 2 of the Plan 
provides that annually, or more frequently as required by changes in 
either PHLX rules or FINRA rules, the parties shall review and 
update, if necessary, the list of Common Rules.
    \12\ See paragraph 5 of the proposed 17d-2 Plan.
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    Under the Plan, PHLX would retain full responsibility for 
surveillance, examination, investigation and enforcement with respect 
to trading activities or practices involving PHLX's own marketplace, 
including, without limitation, registration pursuant to its applicable 
rules of associated persons (i.e., registration rules that are not 
Common Rules); its duties as a DEA pursuant to Rule 17d-1 under the 
Act; and any PHLX rules that are not Common Rules, except for PHLX 
Rules for any PHLX member that operates as a facility (as defined in 
section 3(a)(2) of the Exchange Act), acts as an outbound router for 
PHLX and is a member of FINRA (``Router Member'').\13\
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    \13\ See paragraph 2 of the proposed 17d-2 Plan.
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    The text of the proposed 17d-2 Plan is as follows:

Agreement Between Financial Industry Regulatory Authority, Inc. and 
NASDAQ PHLX LLC Pursuant to Rule 17d-2 Under the Securities Exchange 
Act of 1934

    This Agreement, by and between Financial Industry Regulatory 
Authority, Inc. (``FINRA'') and Nasdaq PHLX LLC (``PHLX''), is made 
this 15th day of November, 2023 (the ``Agreement''), pursuant to 
section 17(d) of the Securities Exchange Act of 1934 (the ``Exchange 
Act'') and Rule 17d-2 thereunder, which permits agreements between 
self-regulatory organizations to allocate regulatory responsibility 
to eliminate regulatory duplication. FINRA and PHLX may be referred 
to individually as a ``party'' and together as the ``parties.''
    Whereas, FINRA and PHLX desire to reduce duplication in the 
examination of their Dual Members (as defined herein) and in the 
filing and processing of certain registration and membership 
records; and
    Whereas, FINRA and PHLX 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 U.S. Securities and 
Exchange Commission (the ``SEC'' or ``Commission'') for its 
approval.
    Now, therefore, in consideration of the mutual covenants 
contained hereinafter, FINRA and PHLX 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) ``PHLX Rules'' or ``FINRA Rules'' shall mean the rules of 
PHLX or FINRA, respectively, as the rules of an exchange or 
association are defined in Exchange Act section 3(a)(27).
    (b) ``Common Rules'' shall mean the PHLX 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 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 provision or rule; provided, however, 
Common Rules shall not include the application of the SEC, PHLX 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

[[Page 85340]]

Stock Market LLC, NYSE National, Inc., New York Stock Exchange LLC, 
NYSE American LLC, NYSE Arca, Inc., Investors' Exchange LLC and 
Long-Term Stock Exchange, Inc. approved by the Commission on 
September 23, 2020. Common Rules shall not include any provisions 
regarding: (i) notice, reporting or any other filings made directly 
to or from PHLX; (ii) incorporation by reference of other PHLX 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 PHLX; (iv) prior 
written approval of PHLX; and (v) payment of fees or fines to PHLX.
    (c) ``Dual Members'' shall mean those PHLX members that are also 
members of FINRA and the associated persons therewith.
    (d) ``Effective Date'' shall have the meaning set forth in 
paragraph 13.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with the FINRA 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 the FINRA 
Code of Procedure and FINRA's sanction guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination 
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. The term ``Regulatory 
Responsibilities'' shall also include the surveillance, 
investigation and Enforcement Responsibilities relating to 
compliance by Dual Members with Rule 14e-4 of the Exchange Act 
(``Rule 14e-4''), with a focus on the standardized call option 
provision of Rule 14e-4(a)(1)(ii)(D).
    2. Regulatory Responsibilities. FINRA shall assume Regulatory 
Responsibilities for Dual Members. Attached as Exhibit 1 to this 
Agreement and made part hereof, PHLX furnished FINRA with a current 
list of Common Rules and certified to FINRA that such rules are 
substantially similar to the corresponding FINRA Rule (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 PHLX Rules or FINRA 
Rules, PHLX shall submit an updated list of Common Rules to FINRA 
for review which shall add PHLX Rules not included in the current 
list of Common Rules that qualify as Common Rules as defined in this 
Agreement; delete PHLX 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 PHLX 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 PHLX shall retain full responsibility for 
(unless otherwise addressed by separate agreement or rule) the 
following (collectively, the ``Retained Responsibilities''):
    (a) Surveillance, examination, investigation and enforcement 
with respect to trading activities or practices involving PHLX's own 
marketplaces;
    (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 PHLX Rules that are not Common Rules, except for PHLX 
Rules for any PHLX member that operates as a facility (as defined in 
section 3(a)(2) of the Exchange Act), acts as an outbound router for 
PHLX and is a member of FINRA (``Router Member'') as provided in 
paragraph 5. As of the date of this Agreement, Nasdaq Execution 
Services, LLC is the only Router Member.
    3. No Charge. There shall be no charge to PHLX by FINRA for 
performing the Regulatory Responsibilities under this Agreement 
except as hereinafter provided. FINRA shall provide PHLX with ninety 
(90) days advance written notice in the event FINRA decides to 
impose any charges to PHLX for performing the Regulatory 
Responsibilities under this Agreement. If FINRA determines to impose 
a charge, PHLX shall have the right at the time of the imposition of 
such charge to terminate this Agreement; provided, however, that 
FINRA's Regulatory Responsibilities under this Agreement shall 
continue until the Commission approves the termination of this 
Agreement.
    4. Reassignment of Regulatory Responsibilities. Notwithstanding 
any provision hereof, this Agreement shall be subject to any 
statute, or any rule or order of the Commission. To the extent such 
action is inconsistent with this Agreement, such action shall 
supersede the provisions hereof to the extent necessary for them to 
be properly effectuated and the provisions hereof in that respect 
shall be null and void.
    5. Notification of Violations. In the event that FINRA becomes 
aware of apparent violations of any PHLX Rules, which are not listed 
as Common Rules, discovered pursuant to the performance of the 
Regulatory Responsibilities assumed hereunder, FINRA shall notify 
PHLX of those apparent violations for such response as PHLX deems 
appropriate. With respect to apparent violations of any PHLX Rules 
by any Router Member, FINRA shall not make referrals to PHLX 
pursuant to this paragraph 5. Such apparent violations shall be 
processed by, and enforcement proceedings in respect thereto will be 
conducted by, FINRA as provided in this Agreement. In the event that 
PHLX becomes aware of apparent violations of any Common Rules, 
discovered pursuant to the performance of the Retained 
Responsibilities, PHLX shall notify FINRA of those apparent 
violations and such matters shall be handled by FINRA as provided in 
this Agreement. Each party agrees to make available promptly all 
files, records and witnesses necessary to assist the other in its 
investigation or proceedings. 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 PHLX, PHLX may in its 
discretion assume concurrent jurisdiction and responsibility.
    6. Continued Assistance.
    (a) FINRA shall make available to PHLX all information obtained 
by FINRA in the performance by it of the Regulatory Responsibilities 
hereunder with respect to the Dual Members subject to this 
Agreement. In particular, and not in limitation of the foregoing, 
FINRA shall furnish PHLX any information it obtains about Dual 
Members which reflects adversely on their financial condition. PHLX 
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.
    7. Dual Member Applications.
    (a) Dual Members subject to this Agreement shall be required to 
submit, and FINRA shall be responsible for processing and acting 
upon all applications submitted on behalf of partners, officers, 
registered personnel and any other person required to be approved by 
the PHLX Rules and FINRA Rules or associated with Dual Members 
thereof. Upon request, FINRA shall advise PHLX of any changes of 
allied members, partners, officers, registered personnel and other 
persons required to be approved by the PHLX Rules and FINRA Rules.
    (b) Dual Members shall be required to send to FINRA all letters, 
termination notices or other material respecting the individuals 
listed in paragraph 7(a).
    (c) When as a result of processing such submissions 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 PHLX advised of its actions 
in this regard for such subsequent proceedings as PHLX may initiate.

[[Page 85341]]

    (d) Notwithstanding the foregoing, FINRA shall not review the 
membership application, reports, filings, fingerprint cards, 
notices, or other writings filed to determine if such documentation 
submitted by a broker or dealer, or an associated person therewith 
or other persons required to register or qualify by examination 
meets the PHLX requirements for general membership or for specified 
categories of membership or participation in PHLX, such as PSX 
Market Maker, Equities ECN, Order Entry Firm, or any similar type of 
PHLX membership or participation that is created after this 
Agreement is executed. FINRA shall not review applications or other 
documentation filed to request a change in the rights or status 
described in this paragraph 7(d), including termination or 
limitation on activities, of a member or a participant of PHLX, or a 
person associated with, or requesting association with, a member or 
participant of PHLX.
    8. Branch Office Information. FINRA shall also be responsible 
for processing and, if required, acting upon all requests for the 
opening, address changes, and terminations of branch offices by Dual 
Members and any other applications required of Dual Members with 
respect to the Common Rules as they may be amended from time to 
time. Upon request, FINRA shall advise PHLX of the opening, address 
change and termination of branch and main offices of Dual Members 
and the names of such branch office managers.
    9. Customer Complaints. PHLX shall forward to FINRA copies of 
all customer complaints involving Dual Members received by PHLX 
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 PHLX or 
FINRA at any time upon the approval of the Commission after one (1) 
year's written notice to the other party, except as provided in 
paragraph 3.
    13. Effective Date. This Agreement shall be effective upon 
approval of the Commission.
    14. Arbitration. In the event of a dispute between the parties 
as to the operation of this Agreement, PHLX 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 paragraph 14 shall 
interfere with a party's right to terminate this Agreement as set 
forth herein.
    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 PHLX 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 PHLX 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 PHLX 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 
PHLX join in requesting the Commission, upon its approval of this 
Agreement or any part thereof, to relieve PHLX 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. Separate Agreement. This Agreement is wholly separate from 
(1) the multiparty Agreement made pursuant to Rule 17d-2 of the 
Exchange Act among Cboe BZX Exchange, Inc., BOX Exchange, Cboe 
Exchange, Inc., Cboe C2 Exchange, Inc., Nasdaq ISE, LLC, Financial 
Industry Regulatory Authority, Inc., Miami International Securities 
Exchange, LLC, NYSE American LLC, NYSE Arca, Inc., The Nasdaq Stock 
Market, LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, Nasdaq GEMX, LLC, 
Cboe EDGX Exchange, Inc., Nasdaq MRX, LLC, MIAX PEARL, LLC, MIAX 
Emerald, LLC, and MEMX LCC approved by the Commission on October 18, 
2022 involving the allocation of regulatory responsibilities with 
respect to common members for compliance with common rules relating 
to the conduct by broker-dealers of accounts for listed options, 
index warrants, currency index warrants and currency warrants or (2) 
the multiparty Agreement made pursuant to Rule 17d-2 of the Exchange 
Act among NYSE American LLC, Cboe BZX Exchange, Inc., the Cboe EDGX 
Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Nasdaq 
ISE, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, 
Inc., The Nasdaq Stock Market LLC, BOX Exchange LLC, Nasdaq BX, 
Inc., Nasdaq PHLX LLC, Miami International Securities Exchange, LLC, 
Nasdaq GEMX, LLC, Nasdaq MRX, LLC, MIAX PEARL, LLC, MIAX Emerald, 
LLC, and MEMX LLC approved by the Commission on November 23, 2022 
involving options-related market surveillance matters and such 
agreements as may be amended from time to time.
    20. 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

PHLX Certification of Common Rules

    PHLX hereby certifies that the requirements contained in the 
rules listed below for PHLX are identical to, or substantially 
similar to, the comparable FINRA Rules or SEC Rules identified.
    # Common Rules shall not include provisions regarding (i) 
notice, reporting or any other filings made directly to or from 
PHLX, (ii) incorporations by reference to other PHLX 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 PHLX, (iv) prior 
written approval of PHLX, and (v) payment of fees or fines to PHLX.

------------------------------------------------------------------------
               PHLX Rule                        FINRA or SEC Rule
------------------------------------------------------------------------
General 2, Section 11 Contact            4517. Member Filing and Contact
 Information Requirements .              Information Requirements.
General 3, Rule 1002(b) Qualifications   FINRA By-Laws Article III, Sec.
 of Exchange Members and Associated       1; FINRA By-Laws Article III,
 Persons; Registration of Branch          Sec. 3(a) and (b).
 Offices and Designation of Office of
 Supervisory Jurisdiction .

[[Page 85342]]

 
General 3, Rule 1002(d). Qualifications  3110(a)(3) Supervision and SM
 of Exchange Members and Associated       .01 and .02. Supervision* and
 Persons; Registration of Branch          FINRA By-Laws Article IV, Sec.
 Offices and Designation of Office of     8.
 Supervisory Jurisdiction .
General 3, Rule 1012(c)(1). Duty to      1122. Filing of Misleading
 Ensure the Accuracy, Completeness, and   Information as to Membership
 Current Nature of Membership             or Registration; FINRA By-Laws
 Information Filed with the Exchange .   Article IV, Sec. 1(c).
General 4, Section 1, 1210.              1210. Registration
 Registration Requirements .             Requirements; FINRA By-Laws,
                                          Article V, Sec. 1; FINRA By-
                                          Laws, Article V, Sec. 2; FINRA
                                          By-Laws, Article V, Sec. 3.
General 4, Section 1, 1220.              1220. Registration Categories.
 Registration Categories 1.
General 4, Section 1, Rule 1230(1)-      1230. Associated Persons Exempt
 (2)(D) and Supplementary Material .01.   from Registration.
 Associated Persons Exempt from
 Registration .
General 4, Section 1, 1240. Continuing   1240. Continuing Education.
 Education Requirements 2.
General 4, Section 1, 1250. Electronic   1010. Electronic Filing
 Filing Requirements for Uniform Forms    Requirements for Uniform
 .                                       Forms.
General 9, Section 1(b). Manipulative    2020. Use of Manipulative,
 Operations and General 9, Section        Deceptive or Other Fraudulent
 2(b)(i) Customers' Securities and        Devices*; 6140 Other Trading
 Excessive Trading of Members.            Practices; 5350 Stop Orders;
                                          6130 Transactions Related to
                                          Initial Public Offerings.
General 9, Section 1(c)(1). Standards    2010. Standards of Commercial
 of Commercial Honor and Principles of    Honor and Principles of Trade
 Trade.                                   *.
General 9, Section 1(a). Prohibition     5320. Prohibition Against
 Against Trading Ahead of Customer        Trading Ahead of Customer
 Orders.                                  Orders.
General 9, Section 1(c)(2). Anti-        5240. Anti-Intimidation/
 Intimidation/Coordination.               Coordination.
General 9, Section 1(c)(3). Conduct      5290. Order Entry and Execution
 Inconsistent with Just and Equitable     Practices.
 Principles of Trade.
General 9, Section 2(a). Customers'      2150(a). Improper Use of
 Securities and Excessive Trading of      Customers' Securities or
 Members.                                 Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts.
General 9, Section 11. Best Execution    5310. Best Execution and
 and Interpositioning.                    Interpositioning.
General 9, Section 19. Discretionary     3260. Discretionary Accounts.
 Accounts.
General 9, Section 20. Supervision.....  3110. Supervision.
General 9, Section 30. Books and         4511. General Requirements.
 Records.
General 9, Section 35. Nonregistered     Rule 2040(c). Payments to
 Foreign Finders.                         Unregistered Persons.
General 9, Section 39. Fidelity Bonds..  4360. Fidelity Bonds.
General 9, Section 58. Advertisements,   2210. Communications with the
 Market Letters, Research Reports and     Public.
 Sales Literature.
Options 6E, Section 1(a). Maintenance,   4511(a). General Requirements.
 Retention and Furnishing of Books,
 Records and Other Information .
Options 10, Section 7(g) and (h).       3120. Supervisory Control
 Supervision of Accounts.                 System.
                                         3130. Annual Certification of
                                          Compliance and Supervisory
                                          Processes.
Options 10, Section 10. Confirmations    2232. Customer Confirmations.
 to Customers.
Options 10, Section 17. Profit Sharing.  2150(c). Improper Use of
                                          Customers' Securities or
                                          Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts.
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\1\ FINRA shall only have Regulatory Responsibilities regarding General
  4, Section 1, 1220 to the extent that PHLX recognizes the same
  categories of limited principal and representative registration.
\2\ FINRA Rule 1240.01 allows for other persons to make their election
  to participate in the continuing education program under Rule 1240(c)
  either (1) between January 31, 2022, and March 15, 2022; or (2)
  between March 15, 2023, and December 31, 2023. In contrast,
  Supplementary Material .02 of Nasdaq PHLX General 4, Section 1, 1240
  allows for other persons to make their election to participate in the
  continuing education program under PHLX General 4, Section 1, 1240(c)
  either (1) by March 15, 2022, or (2) between July 6, 2023, and
  December 31, 2023. Therefore, FINRA shall not have Regulatory
  Responsibilities regarding elections made by other persons under
  General 4, Section 1, 1240(c) between March 15, 2023, and July 5,
  2023.
* 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., NYSE Chicago, 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., Investors'
  Exchange LLC, and the Long-Term Stock Exchange, Inc. as approved by
  the SEC on September 23, 2020.

    In addition, the following provisions shall be part of this 17d-
2 Agreement:
    The following provisions are covered by the Agreement between 
the Parties:

 SEC '34 Act Section 28(e) Effect on Existing Law
 SEC '34 Act Rule 10b-10 Confirmation of Transactions
 SEC '34 Act Rule 203 of Regulation SHO Borrowing and 
Delivery Requirements
 SEC '34 Act Rule 606 of Regulation NMS Disclosure of Order 
Routing Information
 SEC '34 Act Rule 607 of Regulation NMS Customer Account 
Statements
 SEA Rule 14e-4--Prohibited Transactions in Connection with 
Partial Tender Offers[supcaret]
    [supcaret] FINRA shall perform surveillance, investigation, and 
Enforcement Responsibilities for SEA Rule 14e-4(a)(1)(ii)(D).

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

    Pursuant to section 17(d)(1) of the Act \14\ and Rule 17d-2 
thereunder,\15\ after December 22, 2023, the Commission may, by written 
notice, declare the plan submitted by PHLX and FINRA, File No. 4-818, 
to be effective if the Commission finds that the plan is necessary or 
appropriate in the public interest and for the protection of investors, 
to foster cooperation and coordination among self-regulatory 
organizations, or to remove impediments to and foster the development 
of the national market system and a national system for the clearance 
and settlement of securities transactions and in conformity with the 
factors set forth in section 17(d) of the Act.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78q(d)(1).
    \15\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    In order to assist the Commission in determining whether to approve 
the proposed 17d-2 Plan and to relieve

[[Page 85343]]

PHLX of the responsibilities which would be assigned to FINRA, 
interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/other.shtml); or
     Send an email to [email protected]. Please include 
File Number 4-818 on the subject line.

Paper Comments

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

All submissions should refer to File Number 4-818. 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/other.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for 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 PHLX and FINRA. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File No. 4-818 and should be submitted on or before 
December 22, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-26800 Filed 12-6-23; 8:45 am]
BILLING CODE 8011-01-P