Document ID: SEC-2022-0162-0001
Agency: sec
Document Type: Notice
Title: Exemption: Nasdaq PHLX, LLC
Posted Date: 2022-02-02T05:00Z

[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Notices]
[Pages 5929-5930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02085]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94091]

Order Granting Application by Nasdaq PHLX LLC for an Exemption 
Pursuant to Section 36(a) of the Exchange Act From the Rule Filing 
Requirements of Section 19(b) of the Exchange Act With Respect to 
Certain Rules Incorporated by Reference

January 27, 2022.
    Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') has filed with the 
Securities and Exchange Commission (``Commission'') an application for 
an exemption under Section 36(a)(1) of the Securities Exchange Act of 
1934 (``Exchange Act'') \1\ from the rule filing requirements of 
Section 19(b) of the Exchange Act \2\ with respect to certain rules of 
the Financial Industry Regulatory Authority, Inc. (``FINRA'') that the 
Exchange seeks to incorporate by reference.\3\ Section 36 of the 
Exchange Act, subject to certain limitations, authorizes the Commission 
to conditionally or unconditionally exempt any person, security, or 
transaction, or any class thereof, from any provision of the Exchange 
Act or rule thereunder, if necessary or appropriate in the public 
interest and consistent with the protection of investors.
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    \1\ 15 U.S.C. 78mm(a)(1).
    \2\ 15 U.S.C. 78s(b).
    \3\ See Letter from Angela S. Dunn, Principal Associate General 
Counsel, Phlx, to J. Matthew DeLesDernier, Assistant Secretary, 
Commission, dated August 26, 2021 (``Exemptive Request'').
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    The Exchange has requested, pursuant to Rule 0-12 under the 
Exchange Act,\4\ that the Commission grant the Exchange an exemption 
from the rule filing requirements of Section 19(b) of the Exchange Act 
for changes to the Exchange's rules that are effected solely by virtue 
of a change to a cross-referenced FINRA rule. Specifically, the 
Exchange requests that it be permitted to incorporate by reference 
changes made to the FINRA rules that are cross-referenced in the 
Exchange's rules identified below, without the need for the Exchange to 
file separately similar proposed rule changes pursuant to Section 19(b) 
of the Exchange Act: \5\
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    \4\ 17 CFR 240.0-12.
    \5\ See Exemptive Request, supra note 3, at 2.
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     General 9, Section 1(a) (Prohibition Against Trading Ahead 
of Customer Orders) cross-references FINRA Rule 5320 (except for FINRA 
Rule 5320.02(b) and the reference to FINRA Rule 6420 in FINRA Rule 
5320).
     Options 10, Section 20 (Options Communications) cross-
references FINRA Rule 2220 (except for FINRA Rule 2220(c)).
    The Exchange represents that the FINRA rules listed above are 
regulatory rules and not trading rules.\6\ The Exchange represents 
that, as a condition to the requested exemption from Section 19(b) of 
the Exchange Act, the Exchange will provide written notice to its 
members and member organizations whenever FINRA proposes a change to 
FINRA Rule 2220 or 5320.\7\ The Exchange states that such notice will 
alert its members, member organizations, and associated persons to the 
proposed FINRA rule change and give them an opportunity to comment on 
the proposal.\8\ The Exchange further represents that it will inform 
members, member organizations, and associated persons in writing when 
the Commission approves any such proposed rule changes.\9\
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    \6\ See id. at 2, n.8. The Exchange also states that it is not 
``cherry picking'' because the Exchange would be incorporating 
categories of rules. See id.
    \7\ See id. at 2-3. The Exchange represents that it will provide 
such notice via a posting on the same website location where the 
Exchange posts its own rule filings pursuant to Rule 19b-4(l) within 
the time frame required by such rule. See id. at 3, n.9. The website 
posting will include a link to the location on FINRA's website where 
the applicable proposed rule change is posted. See id.
    \8\ See id. at 3.
    \9\ See id.
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    According to the Exchange, this exemption is appropriate because it 
would result in the Exchange's rules pertaining to prohibition against 
trading ahead of customer orders and options communications being 
consistent with the relevant cross-referenced FINRA rules at all times, 
thus ensuring consistent regulation of joint members of Phlx and 
FINRA.\10\ The Exchange further states that, even if members are not 
joint members of Phlx and FINRA, the exemption is appropriate because 
it will permit its rules to remain consistent with FINRA's rules and 
ensure consistent treatment of industry members with respect to the 
aforementioned rules.\11\
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    \10\ See id. at 2.
    \11\ See id.
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    The Commission has issued exemptions similar to the Exchange's

[[Page 5930]]

request.\12\ In granting similar exemptions, the Commission stated that 
it would consider similar future exemption requests, provided that:
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    \12\ See, e.g., Securities Exchange Act Release Nos. 83296 (May 
21, 2018), 83 FR 24362 (May 25, 2018) (order granting NYSE National, 
Inc.'s exemptive request relating to rules of FINRA incorporated by 
reference); 83040 (April 12, 2018), 83 FR 17198 (April 18, 2018) 
(order granting MIAX PEARL, LLC's exemptive request relating to 
rules of the Miami International Securities Exchange, LLC 
incorporated by reference); 76998 (January 29, 2016), 81 FR 6066, 
6083-84 (February 4, 2016) (order granting application for 
registration as a national securities exchange of ISE Mercury, LLC 
and exemptive request relating to rules of certain self-regulatory 
organizations (``SROs'') (including FINRA) incorporated by 
reference); 61534 (February 18, 2010), 75 FR 8760 (February 25, 
2010) (order granting BATS Exchange, Inc.'s exemptive request 
relating to rules incorporated by reference by the BATS Exchange 
Options Market rules) (``BATS Options Market Order''); 61152 
(December 10, 2009), 74 FR 66699, 66709-10 (December 16, 2009) 
(order granting application for registration as a national 
securities exchange of C2 Options Exchange, Incorporated and 
exemptive request relating to rules of the Chicago Board Options 
Exchange, Incorporated, incorporated by reference).
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     An SRO wishing to incorporate rules of another SRO by 
reference has submitted a written request for an order exempting it 
from the requirement in Section 19(b) of the Exchange Act to file 
proposed rule changes relating to the rules incorporated by reference, 
has identified the applicable originating SRO(s), together with the 
rules it wants to incorporate by reference, and otherwise has complied 
with the procedural requirements set forth in the Commission's release 
governing procedures for requesting exemptive orders pursuant to Rule 
0-12 under the Exchange Act; \13\
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    \13\ See 17 CFR 240.0-12 and Securities Exchange Act Release No. 
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) (Commission 
Procedures for Filing Applications for Orders for Exemptive Relief 
Pursuant to Section 36 of the Exchange Act; Final Rule).
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     The incorporating SRO has requested incorporation of 
categories of rules (rather than individual rules within a category) 
that are not trading rules (e.g., the SRO has requested incorporation 
of rules such as margin, suitability, or arbitration); and
     The incorporating SRO has reasonable procedures in place 
to provide written notice to its members each time a change is proposed 
to the incorporated rules of another SRO.\14\
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    \14\ See BATS Options Market Order, supra note 12 (citing 
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004) (order granting exemptive request relating 
to rules incorporated by reference by several SROs) (``2004 
Order'')).
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    The Commission believes that the Exchange has satisfied each of 
these conditions. The Commission also believes that granting the 
Exchange an exemption from the rule filing requirements under Section 
19(b) of the Exchange Act will promote efficient use of the 
Commission's and the Exchange's resources by avoiding duplicative rule 
filings based on simultaneous changes to identical rule text sought by 
more than one SRO.\15\ The Commission therefore finds it appropriate in 
the public interest and consistent with the protection of investors to 
exempt the Exchange from the rule filing requirements under Section 
19(b) of the Exchange Act with respect to the above-described FINRA 
rules it has incorporated by reference. This exemption is conditioned 
upon the Exchange promptly providing written notice to its members 
whenever FINRA changes a rule that the Exchange has incorporated by 
reference.
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    \15\ See BATS Options Market Order, supra note 12, 75 FR at 
8761; see also 2004 Order, supra note 14, 69 FR at 8502.
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    Accordingly, IT IS ORDERED, pursuant to Section 36 of the Exchange 
Act,\16\ that the Exchange is exempt from the rule filing requirements 
of Section 19(b) of the Exchange Act solely with respect to changes to 
the rules identified in the Exemptive Request, provided that the 
Exchange promptly provides written notice to its members whenever FINRA 
proposes to change a rule that the Exchange has incorporated by 
reference.
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    \16\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(76).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-02085 Filed 2-1-22; 8:45 am]
BILLING CODE 8011-01-P