Document ID: SEC-2021-1781-0001
Agency: sec
Document Type: Notice
Title: Order: Nasdaq BX, Inc., The Nasdaq Stock Market, LLC, and Nasdaq PHLX, LLC
Posted Date: 2021-12-22T05:00Z

[Federal Register Volume 86, Number 243 (Wednesday, December 22, 2021)]
[Notices]
[Pages 72656-72658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27664]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93804]

Order Granting Applications by Nasdaq BX, Inc., The Nasdaq Stock 
Market LLC, and Nasdaq PHLX LLC for 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 the Nasdaq ISE, LLC Options 4 
Options Listing Rules Incorporated by Reference

December 16, 2021.
    Nasdaq BX, Inc. (``BX''), The Nasdaq Stock Market LLC (``Nasdaq''), 
and Nasdaq PHLX LLC (``Phlx'') (collectively the ``Exchanges'') have 
filed with the Securities and Exchange Commission (the ``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

[[Page 72657]]

Exchange Act \2\ with respect to certain rules of Nasdaq ISE, LLC 
(``ISE'') that the Exchanges seek to incorporate by reference (``ISE 
Options 4 Rules'').\3\ Section 36(a)(1) of the Exchange Act,\4\ 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, Nasdaq Inc., to J. Matthew DeLesDernier, Assistant 
Secretary, Commission, dated September 3, 2021 (``Exemptive 
Request'').
    \4\ 15 U.S.C. 78mm(a)(1).
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    The Exchanges each filed a proposed rule change \5\ under Section 
19(b) of the Exchange Act to replace its Options 4 Options Listing 
Rules (``Options Listing Rules''), as set forth in Options 4 of their 
respective rulebooks, with the Options 4 Rules of the ISE rulebook, as 
such rules may be in effect from time to time. Namely, in the proposed 
rule changes, the Exchanges each proposed to incorporate by reference 
the ISE Options 4 Rules such that ISE Options 4 Rules would be 
applicable to each of the Exchanges' respective members, member 
organizations, Participants, Options Participants, associated persons 
and personnel, and other persons subject to the Exchanges' jurisdiction 
as though such rules were fully set forth within each of the Exchanges' 
rulebooks.\6\
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    \5\ See Securities Exchange Act Release Nos. 92987 (September 
15, 2021), 86 FR 52511 (September 21, 2021) (SR-BX-2021-038); 93003 
(September 15, 2021), 86 FR 52534 (September 21, 2021) (SR-NASDAQ-
2021-070); 92990 (September 15, 2021) 86 FR 52513 (September 21, 
2021) (SR-PHLX-2021-53). Although the proposed rule changes were 
filed pursuant to Section 19(b)(3)(A)(iii) of the Exchange Act, and 
thereby became effective upon filing with the Commission, the 
Exchanges stipulated in their proposals that the incorporation by 
reference would not be operative until such time as the Commission 
grants this Exemptive Request.
    \6\ See note 5, supra.
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    The Exchanges have requested, pursuant to Rule 0-12 under the 
Exchange Act,\7\ that the Commission grant the Exchanges an exemption 
from the rule filing requirements of Section 19(b) of the Exchange Act 
for changes to each of the Exchanges' rules that are effected solely by 
virtue of a change to the ISE Options 4 Rules that are incorporated by 
reference. Specifically, the Exchanges request that they be permitted 
to incorporate by reference changes made to the ISE Options 4 Rules 
that are cross-referenced in each of the Exchanges' rules without the 
need for each of the Exchanges to file separately the same proposed 
rule change pursuant to Section 19(b) of the Exchange Act.\8\
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    \7\ 17 CFR 240.0-12.
    \8\ See Exemptive Request, supra note 3.
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    The Exchanges represent that the ISE Options 4 Rules are not 
trading rules.\9\ Moreover, the Exchanges state that in each instance, 
they propose to incorporate by reference a category of rules (rather 
than individual rules within a category).\10\ The Exchanges also 
represent that, as a condition of this exemption, the Exchanges will 
provide written notice to their respective members, member 
organizations, Participants, Options Participants, associated persons 
and personnel, whenever ISE proposes a change to ISE Options 4 
Rules.\11\ Additionally, the Exchange will similarly inform their 
members, member organizations, Participants, associated persons and 
personnel, in writing when the Commission approves any such proposed 
changes.\12\
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    \9\ Id. at 2.
    \10\ Id. at 2, n.7.
    \11\ Id. at 3. The Exchanges state that they will provide such 
notice via a posting on the same website location where the 
Exchanges post their own rule filings pursuant to Rule 19b-4(l) 
within the timeframe required by such Rule. In addition, the 
Exchanges state that the website posting will include a link to the 
location on ISE's website where the applicable proposed rule change 
is posted. Id. at 3 n.8.
    \12\ See id. at 3.
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    According to the Exchanges, this exemption is necessary and 
appropriate because it will result in the Exchanges' Options Listing 
Rules being consistent with the relevant cross-referenced ISE Options 
Listing Rules at all times.\13\ The Exchanges states that harmonization 
of the Options Listing Rules between the Exchanges and ISE will ensure 
consistent regulation of joint members of the Phlx, Nasdaq, BX and ISE 
and increase internal efficiencies associated with administering the 
options listing rules of each exchange.\14\
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    \13\ See id. at 2.
    \14\ See id.
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    The Commission has issued exemptions similar to the Exchanges' 
request.\15\ The Commission has stated that it would consider exemption 
requests, provided that:
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    \15\ See Securities Exchange Act Release No. 70050 (July 26, 
2013), 78 FR 46622 (August 1, 2013) (order granting approval of 
Topaz Exchange, LLC as a national securities exchange and 
incorporating by reference listing rules of Nasdaq ISE, LLC). See 
also, e.g., Securities Exchange Act Release Nos. 92136 (June 9, 
2021), 86 FR 31772 (June 15, 2021) (order granting exemptive request 
from Nasdaq GEMX, LLC and Nasdaq MRX, LLC relating to rules of The 
Nasdaq Stock Market LLC incorporation by reference); 91202 (February 
24, 2021), 86 FR 12250 (March 2, 2021) (order granting application 
by Nasdaq ISE, LLC for 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 the Nasdaq Rule 1000 Series 
incorporated by reference); 89902 (September 17, 2020), 85 FR 59843 
(September 23, 2020) (order granting exemptive request from Nasdaq 
BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, and 
Nasdaq PHLX LLC relating to investigatory, disciplinary, and 
adjudication rules of The Nasdaq Stock Market LLC incorporation by 
reference); 86896 (September 6, 2019), 84 FR 48186 (September 12, 
2019) (order granting exemptive request from Nasdaq BX, Inc. 
relating to rules of The Nasdaq Stock Market LLC incorporation by 
reference); 80338 (March 29, 2017), 82 FR 16464 (April 4, 2017) 
(order granting exemptive request from MIAX PEARL, LLC relating to 
rules of Miami International Securities Exchange, LLC incorporated 
by reference); 72650 (July 22, 2014), 79 FR 44075 (July 29, 2014) 
(order granting exemptive requests from NASDAQ OMX BX, Inc. and the 
NASDAQ Stock Market LLC relating to rules of NASDAQ OMX PHLX LLC 
incorporated by reference); 67256 (June 26, 2012), 77 FR 39277, 
39286 (July 2, 2012) (order approving SR-BX-2012-030 and granting 
exemptive request relating to rules incorporated by reference by the 
BX Options rules); 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''); and 57478 
(March 12, 2008), 73 FR 14521, 14539-40 (March 18, 2008) (order 
approving SR-NASDAQ-2007-004 and SR-NASDAQ-2007-080, and granting 
exemptive request relating to rules incorporated by reference by The 
NASDAQ Options Market).
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     A self-regulatory organization (``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; \16\
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    \16\ 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.\17\
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    \17\ See BATS Options Market Order, supra note 15 (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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[[Page 72658]]

    The Commission believes that the Exchanges have satisfied each of 
these conditions. Further, the Commission also believes that granting 
the Exchanges 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 Exchanges' resources by avoiding duplicative rule 
filings based on simultaneous changes to identical rule text sought by 
more than one SRO.\18\ The Commission therefore finds it appropriate in 
the public interest and consistent with the protection of investors to 
exempt the Exchanges from the rule filing requirements under Section 
19(b) of the Exchange Act with respect to the above-described rules it 
incorporates by reference. This exemption is conditioned upon the 
Exchanges promptly providing written notice to their respective 
members, member organizations, Participants, Options Participants, 
associated persons and personnel whenever ISE proposes to change a rule 
that the Exchanges incorporate by reference and whenever the Commission 
approves any such proposed rule change.
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    \18\ See BATS Options Market Order, supra note 15, 75 FR at 
8761; see also 2004 Order, supra note 17, 69 FR at 8502.
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    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\19\ that the Exchanges are 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 Exchanges promptly provide written notice to their applicants 
and members whenever ISE proposes to change a rule that the Exchanges 
have incorporated by reference.
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    \19\ 15 U.S.C. 78mm.
    \20\ 17 CFR 200.30-3(a)(76).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27664 Filed 12-21-21; 8:45 am]
BILLING CODE 8011-01-P