81 FR 70728 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective a Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc., Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA Exchange, Inc., and Bats EDGX Exchange, Inc.
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 198 (October 13, 2016)
Federal Register Volume 81, Issue 198 (October 13, 2016)
| Page Range | 70728-70735 | |
| FR Document | 2016-24709 |
[Federal Register Volume 81, Number 198 (Thursday, October 13, 2016)] [Notices] [Pages 70728-70735] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-24709] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79057; File No. 4-705] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective a Proposed Plan for the Allocation of Regulatory Responsibilities Between the Financial Industry Regulatory Authority, Inc., Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA Exchange, Inc., and Bats EDGX Exchange, Inc. October 6, 2016. 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 a plan for allocating regulatory responsibility (``Plan'') filed on September 30, 2016, pursuant to Rule 17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority, Inc. (``FINRA''), Bats BZX Exchange, Inc. (``BZX''), Bats BYX Exchange, Inc. (``BYX''), Bats EDGA Exchange, Inc. (``EDGA''), and Bats EDGX Exchange, Inc. (``EDGX'') (each, a ``Participating Organization,'' or ``Bats Exchange,'' and together, the ``Participating Organizations,'' ``the Bats Exchanges,'' or the ``Parties''). The Plan replaces and supersedes the agreement between FINRA and BZX dated August 25, 2008; \3\ the agreement between FINRA and BYX dated September 3, 2010; \4\ the agreement between FINRA and EDGX dated March 31, 2010; \5\ and the agreement between FINRA and EDGA dated March 31, 2010.\6\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78q(d). \2\ 17 CFR 240.17d-2. \3\ See Securities Exchange Act Release No. 58563 (September 17, 2008), 73 FR 55180 (September 24, 2008) (File No. 4-569) (notice of filing of proposed plan). See also Securities Exchange Act Release No. 58818 (October 20, 2008), 73 FR 63752 (October 27, 2008) (File No. 4-569) (order approving proposed plan). \4\ See Securities Exchange Act Release No. 62935 (September 17, 2010), 75 FR 57998 (September 23, 2010) (File No. 4-613) (notice of filing of proposed plan). See also Securities Exchange Act Release No. 63102 (October 14, 2010), 75 FR 64765 (October 20, 2010) (File No. 4-613) (order approving proposed plan). \5\ See Securities Exchange Act Release No. 61861 (April 7, 2010), 75 FR 18920 (April 13, 2010) (File No. 4-598) (notice of filing of proposed plan). See also Securities Exchange Act Release No. 62079 (May 11, 2010), 75 FR 28080 (May 19, 2010) (File No. 4- 598) (order approving proposed plan). \6\ See Securities Exchange Act Release No. 61860 (April 7, 2010), 75 FR 18915 (April 13, 2010) (File No. 4-597) (notice of filing of proposed plan). See also Securities Exchange Act Release No. 62078 (May 11, 2010), 75 FR 28078 (May 19, 2010) (File No. 4- 597) (order approving proposed plan). --------------------------------------------------------------------------- I. Introduction Section 19(g)(1) of the Securities Exchange Act of 1934 (``Act''),\7\ 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.\8\ 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. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78s(g)(1). \8\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively. --------------------------------------------------------------------------- Section 17(d)(1) of the Act \9\ was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.\10\ 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. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78q(d)(1). \10\ 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). --------------------------------------------------------------------------- To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.\11\ 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.\12\ 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- 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. --------------------------------------------------------------------------- \11\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively. \12\ See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). --------------------------------------------------------------------------- To address regulatory duplication in these and other areas, the Commission adopted Rule 17d-2 under the Act.\13\ 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. --------------------------------------------------------------------------- \13\ See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). --------------------------------------------------------------------------- II. Proposed Plan The proposed 17d-2 Plan is intended to reduce regulatory duplication for firms that are common members of a Bats Exchange and FINRA.\14\ 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. The Plan replaces and supersedes the individual agreements between FINRA and each Bats Exchange \15\ and is intended to reduce the administrative burden associated with maintaining four separate plans. --------------------------------------------------------------------------- \14\ See Paragraph 1(c) of the proposed 17d-2 Plan. \15\ See supra notes 3-6. --------------------------------------------------------------------------- [[Page 70729]] The text of the Plan delineates the proposed regulatory responsibilities with respect to the Parties. Included in the proposed Plan is an exhibit (the ``Bats BZX Exchange, Inc. (``BZX''), Bats BYX Exchange, Inc. (``BYX''), Bats EDGA Exchange, Inc. (``EDGA''), and Bats EDGX Exchange, Inc. (``EDGX'') Rules Certification for 17d-2 Agreement with FINRA,'' referred to herein as the ``Certification'') that lists every rule of the Bats Exchanges, and select federal securities laws, rules, and regulations, for which FINRA would bear responsibility under the Plan for overseeing and enforcing with respect to members of the Bats Exchanges that are also members of FINRA and the associated persons therewith (``Common Members''). Specifically, under the 17d-2 Plan, FINRA would assume examination and enforcement responsibility relating to compliance by Common Members with the rules of each Bats Exchange that are substantially similar to the applicable rules of FINRA,\16\ 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 Common Member is the subject of an investigation relating to a transaction on a Bats Exchange, the plan acknowledges that the Bats Exchange may, in its discretion, exercise concurrent jurisdiction and responsibility for such matter.\17\ --------------------------------------------------------------------------- \16\ 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 the Bats Exchanges rules or FINRA rules, the parties shall review and update, if necessary, the list of Common Rules. Further, paragraph 3 of the Plan provides that the Bats Exchanges shall furnish FINRA with a list of Common Members, and shall update the list no less frequently than once each calendar quarter. \17\ See paragraph 6 of the proposed 17d-2 Plan. --------------------------------------------------------------------------- Under the Plan, each Bats Exchange would retain full responsibility for surveillance and enforcement with respect to trading activities or practices involving the Bats Exchange'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 rules of the Bats Exchange that are not Common Rules, except for the Bats Exchanges rules for any broker-dealer subsidiary of the Bats Exchanges' parent company, Bats Global Markets, Inc.\18\ Apparent violations of any the Bats Exchanges rules by any broker-dealer subsidiary of Bats Global Markets will be processed by, and enforcement proceedings in respect thereto will be conducted by, FINRA.\19\ --------------------------------------------------------------------------- \18\ See paragraph 2 of the proposed 17d-2 Plan. \19\ See paragraph 6 of the proposed 17d-2 Plan. --------------------------------------------------------------------------- The text of the proposed 17d-2 Plan is as follows: AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., BATS BZX EXCHANGE, INC., BATS BYX EXCHANGE, INC., BATS EDGA EXCHANGE, INC., AND BATS EDGX EXCHANGE, INC. PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934 This Agreement, by and between the Financial Industry Regulatory Authority, Inc. (``FINRA''), Bats BZX Exchange, Inc. (``BZX''), Bats BYX Exchange, Inc. (``BYX''), Bats EDGA Exchange, Inc. (``EDGA''), and Bats EDGX Exchange, Inc. (``EDGX'') (collectively, the ``Bats Exchanges'' and each a ``Bats Exchange'') is made this 30th day of September, 2016 (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 the Bats Exchanges may be referred to individually as a ``party'' and together as the ``parties.'' Upon approval by the Securities and Exchange Commission (``Commission'' or ``SEC'') this Agreement shall replace and supersede the agreement between FINRA and BZX dated August 25, 2008; the agreement between FINRA and BYX dated September 3, 2010; the agreement between FINRA and EDGA dated March 31, 2010; and the agreement between FINRA and EDGX dated March 31, 2010. Whereas, FINRA and the Bats Exchanges desire to reduce duplication in the examination and surveillance of their Common Members (as defined herein) and in the filing and processing of certain registration and membership records; and Whereas, FINRA and the Bats Exchanges 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 Commission for its approval. Now, therefore, in consideration of the mutual covenants contained hereinafter, FINRA and each Bats Exchange 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) ``Bats Exchanges Rules'' or ``FINRA Rules'' shall mean: (i) The rules of each Bats Exchange, 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 the rules of each Bats Exchange 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 Common 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, each Bats Exchange or FINRA rules as they pertain to violations of insider trading activities, which is covered by a separate 17d-2 Agreement by and among Bats Exchange, Inc., Bats-Y Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange Inc., EDGX Exchange Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc. effective December 16, 2011, as may be amended from time to time. (c) ``Common Members'' shall mean those Bats Exchange 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 FINRA's Code of Procedure 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 [[Page 70730]] compliance by the Common 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 Responsibilities. FINRA shall assume Regulatory Responsibilities for Common Members. Attached as Exhibit 1 to this Agreement and made part hereof, each Bats Exchange furnished FINRA with a current list of Common Rules and certified to FINRA that such rules that are Bats Exchanges 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 any Bats Exchange or FINRA, the Bats Exchanges shall submit an updated list of Common Rules to FINRA for review which shall add Bats Exchanges Rules not included in the current list of Common Rules that qualify as Common Rules as defined in this Agreement; delete Bats Exchanges 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 Bats Exchanges 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 each Bats Exchange 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 each Bats Exchange'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 Bats Exchanges Rules that are not Common Rules, except for any Bats Exchanges Rules for any broker-dealer subsidiary of Bats Global Markets, Inc., as provided in paragraph 6. 3. Common Members. Prior to the Effective Date, each Bats Exchange shall furnish FINRA with a current list of Common Members, which shall be updated no less frequently than once each quarter. 4. No Charge. There shall be no charge to the Bats Exchanges by FINRA for performing the Regulatory Responsibilities under this Agreement except as otherwise agreed by the parties, either herein or in a separate agreement. 5. Reassignment of Regulatory Responsibilities. Notwithstanding any provision hereof, this Agreement shall be subject to any statute, or any rule or order of the Commission, or industry agreement, restructuring the regulatory framework of the securities industry or reassigning Regulatory Responsibilities between self-regulatory organizations. 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. 6. Notification of Violations. In the event that FINRA becomes aware of apparent violations of any Bats Exchanges Rules, which are not listed as Common Rules, discovered pursuant to the performance of the Regulatory Responsibilities assumed hereunder, FINRA shall notify the Bats Exchanges of those apparent violations for such response as the Bats Exchanges deem appropriate. In the event that any of the Bats Exchanges becomes aware of apparent violations of any Common Rules, discovered pursuant to the performance of the Retained Responsibilities, the applicable Bats Exchange shall notify FINRA of those apparent violations and such matters shall be handled by FINRA as provided in this Agreement. With respect to apparent violations of any Bats Exchanges Rules by any broker-dealer subsidiary of Bats Global Markets, Inc., FINRA shall not make referrals to the Bats Exchanges 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. 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, FINRA Rules, federal securities laws, and rules and regulations thereunder, 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 Common Member is the subject of an investigation relating to a transaction on a Bats Exchange, the Bats Exchange may in its discretion assume concurrent jurisdiction and responsibility. 7. Continued Assistance. (a) FINRA shall make available to the Bats Exchanges all information obtained by FINRA in the performance by it of the Regulatory Responsibilities hereunder with respect to the Common Members subject to this Agreement. In particular, and not in limitation of the foregoing, FINRA shall furnish the Bats Exchanges any information it obtains about Common Members which reflects adversely on their financial condition. The Bats Exchanges shall make available to FINRA any information coming to its attention that reflects adversely on the financial condition of Common 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. The parties shall not assert regulatory or other privileges as against another 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 Common 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 the Bats Exchanges advised of its actions in this regard for such subsequent proceedings as the Bats Exchanges may initiate. 9. Customer Complaints. The Bats Exchanges shall forward to FINRA copies of all customer complaints involving Common Members received by the Bats Exchanges relating to FINRA's Regulatory Responsibilities under this Agreement. It shall be FINRA's responsibility to review and [[Page 70731]] take appropriate action in respect to such complaints. 10. Advertising. FINRA shall assume responsibility to review the advertising of Common 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 any party to conduct its own independent or concurrent investigation, examination or enforcement proceeding of or against Common Members, as any party, in its sole discretion, shall deem appropriate or necessary. 12. Termination. This Agreement may be terminated by the Bats Exchanges 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 4. 13. Effective Date. This Agreement shall be effective upon approval of the Commission. 14. Arbitration. In the event of a dispute among the parties as to the operation of this Agreement, the Bats Exchanges 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 parties. 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 14 shall interfere with a party's right to terminate this Agreement as set forth herein. 15. Notification of Members. The Bats Exchanges and FINRA shall notify Common Members of this Agreement after the Effective Date by means of a uniform joint notice. 16. 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. 17. Limitation of Liability. Neither FINRA nor any Bats Exchange nor any of their respective directors, governors, officers or employees shall be liable to the other parties 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 any Bats Exchange 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 any Bats Exchange with respect to any of the responsibilities to be performed by each of them hereunder. 18. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A) and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and the Bats Exchanges join in requesting the Commission, upon its approval of this Agreement or any part thereof, to relieve the Bats Exchanges 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. 19. 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. 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 Bats BZX Exchange, Inc. (``BZX''), Bats BYX Exchange, Inc. (``BYX''), Bats EDGA Exchange, Inc. (``EDGA''), and Bats EDGX Exchange, Inc. (``EDGX'') Rules Certification for 17d-2 Agreement With FINRA Each Bats Exchange hereby certifies that the requirements contained in the rules listed below are identical to, or substantially similar to, the comparable FINRA Rule, NASD Rule, Exchange Act provision or SEC Rule identified (``Common Rules''). ---------------------------------------------------------------------------------------------------------------- FINRA rule, NASD rule, Exchange BZX rule: BYX rule: EDGA rule: EDGX rule: Act Provision or SEC rule: ---------------------------------------------------------------------------------------------------------------- Rule 2.5 Restrictions, Rule 2.5 Rule 2.5 Rule 2.5 FINRA Rule Interpretation and Policy .02 Restrictions, Restrictions, Restrictions, 1250(a)(1)-(4) Continuing Education Interpretation Interpretation Interpretation Continuing Requirements . and Policy .02 and Policy .02 and Policy .02 Education Continuing Continuing Continuing Requirements.\1\ Education Education Education Requirements . Requirements . Requirements . Rule 2.5 Restrictions, Rule 2.5 Rule 2.5 Rule 2.5 FINRA By-Laws of Interpretation and Policy .04 Restrictions, Restrictions, Restrictions, the Corporation, Termination of Employment. Interpretation Interpretation Interpretation Article V, and Policy .04 and Policy .04 and Policy .04 Section 3 Termination of Termination of Termination of Notification by Employment. Employment. Employment. Member to the Corporation and Associated Person of Termination; Amendments to Notification. Rule 2.6(g) Application Rule 2.6(g) Rule 2.6(g) Rule 2.6(g) FINRA By-Laws of Procedures for Membership or to Application Application Application the Corporation, become an Associated Person of Procedures for Procedures for Procedures for Article IV, a Member . Membership or to Membership or to Membership or to Section 1(c) become an become an become an Application for Associated Person Associated Person Associated Person Membership. of a Member . of a Member . of a Member . Rule 3.1 Business Conduct of Rule 3.1 Business Rule 3.1 Business Rule 3.1 Business FINRA Rule 2010 Members *. Conduct of Conduct of Conduct of Standards of Members *. Members *. Members *. Commercial Honor and Principles of Trade.* Rule 3.2 Violations Prohibited * Rule 3.2 Rule 3.2 Rule 3.2 FINRA Rule 2010 Violations Violations Violations Standards of Prohibited *. Prohibited *. Prohibited *. Commercial Honor and Principles of Trade and FINRA Rule 3110 Supervision.* \2\ [[Page 70732]] Rule 3.3 Use of Fraudulent Rule 3.3 Use of Rule 3.3 Use of Rule 3.3 Use of FINRA Rule 2020 Devices *. Fraudulent Fraudulent Fraudulent Use of Devices *. Devices *. Devices *. Manipulative, Deceptive or Other Fraudulent Devices.* Rule 3.5 Communications with the Rule 3.5 Rule 3.5 Rule 3.5 FINRA Rule 2210 Public. Communications Communications Communications Communications with the Public. with the Public. with the Public. with the Public. Rule 3.6 Fair Dealing with Rule 3.6 Fair Rule 3.6 Fair Rule 3.6 Fair FINRA Rule 2020 Customers. Dealing with Dealing with Dealing with Use of Customers. Customers. Customers. Manipulative, Deceptive or Other Fraudulent Devices.* \3\ Rule 3.7(a) Recommendations to Rule 3.7(a) Rule 3.7(a) Rule 3.7(a) FINRA Rule 2111(a) Customers. Recommendations Recommendations Recommendations Suitability. to Customers. to Customers. to Customers. Rule 3.8(a) The Prompt Receipt Rule 3.8(a) The Rule 3.8(a) The Rule 3.8(a) The FINRA Rule 11860 and Delivery of Securities. Prompt Receipt Prompt Receipt Prompt Receipt COD Orders. and Delivery of and Delivery of and Delivery of Securities. Securities. Securities. Rule 3.8(b) The Prompt Receipt Rule 3.8(b) The Rule 3.8(b) The Rule 3.8(b) The SEC Regulation and Delivery of Securities. Prompt Receipt Prompt Receipt Prompt Receipt SHO. and Delivery of and Delivery of and Delivery of Securities. Securities. Securities. Rule 3.9 Charges for Services Rule 3.9 Charges Rule 3.9 Charges Rule 3.9 Charges FINRA Rule 2122 Performed. for Services for Services for Services Charges for Performed. Performed. Performed. Services Performed. Rule 3.10 Use of Information.... Rule 3.10 Use of Rule 3.10 Use of Rule 3.10 Use of FINRA Rule 2060 Information. Information. Information. Use of Information Obtained in Fiduciary Capacity. Rule 3.11 Publication of Rule 3.11 Rule 3.11 Rule 3.11 FINRA Rule 5210 Transactions and Quotations . Publication of Publication of Publication of Publication of Transactions and Transactions and Transactions and Transactions and Quotations . Quotations . Quotations . Quotations. Rule 3.12 Offers at Stated Rule 3.12 Offers Rule 3.12 Offers Rule 3.12 Offers FINRA Rule 5220 Prices. at Stated Prices. at Stated Prices. at Stated Prices. Offers at Stated Prices. Rule 3.13 Payment Designed to Rule 3.13 Payment Rule 3.13 Payments Rule 3.13 Payments FINRA Rule 5230 Influence Market Prices, Other Designed to Involving Involving Payments than Paid Advertising. Influence Market Publications that Publications that Involving Prices, Other Influence the Influence the Publications that than Paid Market Price of a Market Price of a Influence the Advertising. Security. Security. Market Price of a Security. Rule 3.14 Disclosure on Rule 3.14 Rule 3.14 Rule 3.14 FINRA Rule 2232(a) Confirmations. Disclosure on Disclosure on Disclosure on Customer Confirmations. Confirmations. Confirmations. Confirmations and SEC Rule 10b-10 Confirmation of Transactions. Rule 3.15 Disclosure of Control. Rule 3.15 Rule 3.15 Rule 3.15 FINRA Rule 2262 Disclosure of Disclosure of Disclosure of Disclosure of Control. Control. Control. Control Relationship With Issuer. Rule 3.16 Discretionary Accounts Rule 3.16 Rule 3.16 Rule 3.16 NASD Rule 2510 Discretionary Discretionary Discretionary Discretionary Accounts. Accounts. Accounts. Accounts.\4\ Rule 3.17 Customer's Securities Rule 3.17 Rule 3.17 Rule 3.17 FINRA Rule 2150(a) or Funds. Customer's Customer's Customer's Improper Use of Securities or Securities or Securities or Customers' Funds. Funds. Funds. Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts--Imprope r Use. Rule 3.18 Prohibition Against Rule 3.18 Rule 3.18 Rule 3.18 FINRA Rule 2150(b) Guarantees. Prohibition Prohibition Prohibition Improper Use of Against Against Against Customers' Guarantees. Guarantees. Guarantees. Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts--Prohibi tion Against Guarantees. Rule 3.19 Sharing in Accounts; Rule 3.19 Sharing Rule 3.19 Sharing Rule 3.19 Sharing FINRA Rule Extent Permissible. in Accounts; in Accounts; in Accounts; 2150(c)(1) Extent Extent Extent Improper Use of Permissible. Permissible. Permissible. Customers' Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts--Sharing in Accounts; Extent Permissible. Rule 3.21(a)-(f) Customer Rule 3.21(a)-(f) Rule 3.21(a)-(f) Rule 3.21(a)-(f) FINRA Rule 2265 Disclosures. Customer Customer Customer Extended Hours Disclosures. Disclosures. Disclosures. Trading Risk Disclosure. Rule 3.22 Influencing or Rule 3.22 Rule 3.20 Rule 3.20 FINRA Rule 3220 Rewarding Employees of Others. Influencing or Influencing or Influencing or Influencing or Rewarding Rewarding Rewarding Rewarding Employees of Employees of Employees of Employees of Others. Others. Others. Others. Rule 3.23 Telemarketing......... Rule 3.23 Rule 3.26 Rule 3.26 FINRA Rule 3230 Telemarketing. Telemarketing. Telemarketing. Telemarketing. Rule 4.1 Requirements........... Rule 4.1 Rule 4.1 Rule 4.1 Section 17 of the Requirements. Requirements. Requirements. Exchange Act and the rules thereunder.* \5\ Rule 4.3 Record of Written Rule 4.3 Record of Rule 4.3 Record of Rule 4.3 Record of FINRA Rule 4513 Complaints. Written Written Written Records of Complaints. Complaints. Complaints. Written Customer Complaints. Rule 5.1 Written Procedures..... Rule 5.1 Written Rule 5.1 Written Rule 5.1 Written FINRA Rule Procedures. Procedures. Procedures. 3110(b)(1) Supervision- Written Procedures.* \6\ Rule 5.2 Responsibility of Rule 5.2 Rule 5.2 Rule 5.2 FINRA Rule 3110 Members. Responsibility of Responsibility of Responsibility of (a)(4) and (b)(4) Members. Members. Members. Supervision--Supe rvisory System/ Written Procedures--Revie w of Correspondence and Internal Communications.* [[Page 70733]] Rule 5.3 Records................ Rule 5.3 Records.. Rule 5.3 Records.. Rule 5.3 Records.. FINRA Rule 3110 Supervision.* Rule 5.4 Review of Activities... Rule 5.4 Review of Rule 5.4 Review of Rule 5.4 Review of FINRA Rule 3110(c) Activities. Activities. Activities. and (d) Supervision--Inte rnal Inspections/ Transaction Review and Investigation.* Rule 5.6 Anti-Money Laundering Rule 5.6 Anti- Rule 5.6 Anti- Rule 5.6 Anti- FINRA Rule 3310 Compliance Program . Money Laundering Money Laundering Money Laundering Anti-Money Compliance Compliance Compliance Laundering Program . Program . Program . Compliance Program. Rule 9.3 Predispute Arbitration Rule 9.3 Rule 9.3 Rule 9.3 FINRA Rule 2268 Agreements. Predispute Predispute Predispute Requirements When Arbitration Arbitration Arbitration Using Predispute Agreements. Agreements. Agreements. Arbitration Agreements for Customer Accounts. Rule 11.18(e)(3) & (4) Trading Rule 11.18(e)(3) & Rule 11.16(e)(3) & Rule 11.16(e)(3) & FINRA Rule Halts Due to Extraordinary (4) Trading Halts (4) Trading Halts (4) Trading Halts 6190(a)(1) & (2) Market Volatility. Due to Due to Due to Compliance with Extraordinary Extraordinary Extraordinary Regulation NMS Market Volatility. Market Volatility. Market Volatility. Plan to Address Extraordinary Market Volatility. Rule 11.19(a) Short Sales Rule 11.19(a) Rule 11.10(a)(5) Rule 11.10(a)(5) FINRA Rule 6182 [supcaret][supcaret]. Short Sales Order Execution- Order Execution- Trade Reporting [supcaret][supcar Short Sales Short Sales of Short et]. [supcaret][supcar [supcaret][supcar Sales.[supcaret][ et]. et]. supcaret] Rule 12.1 Market Manipulation ** Rule 12.1 Market Rule 12.1 Market Rule 12.1 Market FINRA Rule 6140 Manipulation **. Manipulation **. Manipulation **. Other Trading Practices.** Rule 12.2 Fictitious Rule 12.2 Rule 12.2 Rule 12.2 FINRA Rule 6140 Transactions **. Fictitious Fictitious Fictitious Other Trading Transactions **. Transactions **. Transactions **. Practices.** Rule 12.3 Excessive Sales by a Rule 12.3 Rule 12.3 Rule 12.3 FINRA Rule 6140(c) Member **. Excessive Sales Excessive Sales Excessive Sales Other Trading by a Member **. by a Member **. by a Member **. Practices.** Rule 12.4 Manipulative Rule 12.4 Rule 12.4 Rule 12.4 FINRA Rule 6140(d) Transactions **. Manipulative Manipulative Manipulative Other Trading Transactions **. Transactions **. Transactions **. Practices.** Rule 12.5 Dissemination of False Rule 12.5 Rule 12.5 Rule 12.5 FINRA Rule 6140(e) Information **. Dissemination of Dissemination of Dissemination of Other Trading False Information False Information False Information Practices.** **. **. **. Rule 12.6 Prohibition Against Rule 12.6 Rule 12.6 Rule 12.6 FINRA Rule 5320 Trading Ahead of Customer Prohibition Prohibition Prohibition Prohibition Orders [supcaret][supcaret]. Against Trading Against Trading Against Trading Against Trading Ahead of Customer Ahead of Customer Ahead of Customer Ahead of Customer Orders Orders Orders Orders.[supcaret] [supcaret][supcar [supcaret][supcar [supcaret][supcar [supcaret] et]. et]. et]. Rule 12.9 Trade Shredding....... Rule 12.9 Trade Rule 12.9 Trade Rule 12.9 Trade FINRA Rule 5290 Shredding. Shredding. Shredding. Order Entry and Execution Practices. Rule 12.11 Best Execution Rule 12.11 Best Rule 12.11 Best Rule 12.11 Best FINRA Rule 5310 [supcaret][supcaret]. Execution Execution Execution Best Execution [supcaret][supcar [supcaret][supcar [supcaret][supcar and et]. et]. et]. Interpositioning. [supcaret][supcar et] Rule 12.13 Trading Ahead of Rule 12.13 Trading Rule 12.13 Trading Rule 12.13 Trading FINRA Rule 5280 Research Reports Ahead of Research Ahead of Research Ahead of Research Trading Ahead of [supcaret][supcaret]. Reports Reports Reports Research [supcaret][supcar [supcaret][supcar [supcaret][supcar Reports.[supcaret et]. et]. et]. ][supcaret] Rule 12.14(a) Front Running of Rule 12.14(a) Rule 12.14(a) Rule 12.14(a) FINRA Rule 5270 Block Transactions Front Running of Front Running of Front Running of Front Running of [supcaret][supcaret]. Block Block Block Block Transactions Transactions Transactions Transactions.[sup [supcaret][supcar [supcaret][supcar [supcaret][supcar caret][supcaret] et]. et]. et]. Rule 13.2 Failure to Deliver and Rule 13.2 Failure Rule 13.2 Short Rule 13.2 Short Regulation SHO Failure to Receive. to Deliver and Sale Borrowing Sale Borrowing Rules 200 and Failure to and Delivery and Delivery 203. Receive. Requirements. Requirements. Rule 13.3(a), (b), (d) and Rule 13.3(a), (b), Rule 13.3(a), (b), Rule 13.3(a), (b), FINRA Rule 2251 Interpretation and Policy .01 (d) and (d) and (d) and Processing and Forwarding of Proxy and Other Interpretation Interpretation Interpretation Forwarding of Issuer-Related Materials; Proxy and Policy .01 and Policy .01 and Policy .01 Proxy and Other Voting. Forwarding of Forwarding of Forwarding of Issuer-Related Proxy and Other Proxy and Other Proxy and Other Materials. Issuer-Related Issuer-Related Issuer-Related Materials; Proxy Materials. Materials. Voting. ---------------------------------------------------------------------------------------------------------------- In addition, the following provisions shall be part of this 17d-2 Agreement: Securities Exchange Act of 1934 (``SEA''): Section 15(g) SEC Rules under the SEA: SEC Rule 200 of Regulation SHO--Definition of ``Short Sale'' and Marking Requirements [supcaret][supcaret] SEC Rule 201 of Regulation SHO--Circuit Breaker [supcaret][supcaret] SEC Rule 203 of Regulation SHO--Borrowing and Delivery Requirements [supcaret][supcaret] SEA Rule 204 of Regulation SHO--Close-Out Requirement [supcaret][supcaret] SEC Rule 101 of Regulation M--Activities by Distribution Participants [supcaret][supcaret] SEC Rule 102 of Regulation M--Activities by Issuers and Selling Security Holders During a Distribution [supcaret][supcaret] SEC Rule 103 of Regulation M--Nasdaq Passive Market Making [supcaret][supcaret] SEC Rule 104 of Regulation M--Stabilizing and Other Activities in Connection with an Offering [supcaret][supcaret] SEC Rule 105 of Regulation M--Short Selling in Connection With a Public Offering [supcaret][supcaret] SEC Rules 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 * ---------------------------------------------------------------------------------------------------------------- FINRA shall not have Regulatory Responsibilities regarding notification or reporting to the Bats Exchanges and to the extent any exercise of discretion is not the same. * 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 Bats Exchange, Inc., Bats-Y Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange Inc., EDGX Exchange Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange, LLC, NYSE Amex LLC, and NYSE Arca Inc. effective December 16, 2011, as may be amended from time to time. ** FINRA shall not have Regulatory Responsibilities for these rules as they pertain to trading practices involving securities that do not meet the definition of NMS stock as defined in Rule 600(b)(47) of Regulation NMS. As of the current date, Bats Exchanges do not trade any non-NMS stock. [supcaret][supcaret] FINRA shall perform the surveillance responsibilities for the double caret rules. These rules may be cited by FINRA in both the context of this Agreement and the Regulatory Services Agreement. \1\ FINRA shall only have Regulatory Responsibilities to the extent that the allowance for additional time for a registered person to satisfy the regulatory element is consistently granted. [[Page 70734]] \2\ FINRA shall only have Regulatory Responsibilities regarding the first phrase of the Bats Exchanges rules regarding prohibitions from violating the Securities Exchange Act of 1934 and the rules and regulations thereunder; responsibility for the remainder of the rule shall remain with the Bats Exchanges. \3\ FINRA shall not have Regulatory Responsibilities regarding .01 of each Bats Exchange Rule 3.6. \4\ FINRA shall not have Regulatory Responsibilities for the Bats Exchanges' Rule to the extent the exception in NASD Rule 2510(d)(2) applies. \5\ FINRA shall not have Regulatory Responsibilities regarding requirements to keep records ``in conformity with . . . Exchange Rules;'' responsibility for such requirement remains with the Bats Exchanges. \6\ FINRA shall not have Regulatory Responsibilities regarding requirements to assure compliance with the Bats Exchange Rules; responsibility for such requirement remains with each Bats Exchange. III. 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number 4-705 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 4-705. 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 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 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 the plan also will be available for inspection and copying at the principal offices of FINRA, BZX, BYX, EDGX, and EDGA. 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 4-705 and should be submitted on or before November 3, 2016. IV. Discussion The Commission finds that the proposed Plan is consistent with the factors set forth in Section 17(d) of the Act \20\ and Rule 17d-2(c) thereunder \21\ in that the proposed 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 notes that the proposed Plan replaces and supersedes each of the original bilateral Plans between FINRA and a Bats Exchange without materially altering the core terms of any of the Plans. The Bats Exchanges, which all are under the common control of Bats Global Markets, Inc., have substantively identical Common Rules among themselves. The Parties have now proposed to add additional rules to the list of Common Rules and have used this opportunity to also combine their separate bilateral 17d-2 Plans into a combined plan among all of the Parties. --------------------------------------------------------------------------- \20\ 15 U.S.C. 78q(d). \21\ 17 CFR 240.17d-2(c). --------------------------------------------------------------------------- Because the proposed combined Plan preserves the general framework of each of the current bilateral Plans, and adds a number of additional Common Rules to the Regulatory Responsibilities assumed by FINRA under the Plans, the Commission believes that the proposed combined Plan should continue to reduce unnecessary regulatory duplication by allocating to FINRA certain examination and enforcement responsibilities for Common Members that would otherwise be performed by each Bats Exchange and FINRA. Accordingly, the proposed Plan promotes efficiency by reducing costs to Common Members. Furthermore, because the Bats Exchanges and FINRA will coordinate their regulatory functions in accordance with the Plan, the Plan should promote investor protection. The Commission notes that when it granted the application of each of the Bats Exchanges for registration as a national securities exchange, the Commission conditioned the operation of each Bats Exchange on the satisfaction of several requirements.\22\ One of those requirements was the effectiveness of an agreement pursuant to Rule 17d-2 between FINRA and the Bats Exchange that allocates to FINRA regulatory responsibility for certain specified matters.\23\ The original bilateral 17d-2 Plans represents the Bats Exchanges' effort to satisfy that prerequisite, and the proposed combined Plan preserves the general framework of each of the current bilateral plans while expanding the list of Common Rules allocated under the agreement. --------------------------------------------------------------------------- \22\ See Securities Exchange Act Release Nos. 58375 (August 18, 2008), 73 FR 49498 (August 21, 2008) (File No. 10-182) (order granting BZX's application for registration as a national securities exchange); 62716 (August 13, 2010), 75 FR 51295 (August 19, 2010) (File No. 10-198) (order granting BYX's application for registration as a national securities exchange); 61698 (March 12, 2010), 75 FR 13151 (March 18, 2010) (File No. 10-194) (order granting EDGA's application for registration as a national securities exchange); 61698 (March 12, 2010), 75 FR 13151 (March 18, 2010) (File No. 10- 196) (order granting EDGX's application for registration as a national securities exchange). \23\ See id. --------------------------------------------------------------------------- The Commission notes that, under the Plan, the Bats Exchanges and FINRA have allocated regulatory responsibility for those rules of the Bats Exchanges, set forth on 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 Common Member's activity, conduct, or output in relation to such rule. In addition, under the 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 Plan are specifically listed in the Certification, as may be amended by the Parties from time to time. Under the Plan, each Bats Exchange would retain full responsibility for surveillance and enforcement with respect to trading activities or practices involving the Bats Exchange'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 Bats Exchange rules that are not Common Rules, except for the Bats Exchange rules for any broker-dealer [[Page 70735]] subsidiary of Bats Global Markets, Inc.\24\ Apparent violations of any Bats Exchanges rules by any broker-dealer subsidiary of Bats Global Markets, Inc. will be processed by, and enforcement proceedings in respect thereto will be conducted by, FINRA.\25\ The effect of these provisions is that regulatory oversight and enforcement responsibilities for any broker-dealer subsidiary of Bats Global Markets, Inc., which is the parent company of the Bats Exchanges, will be vested with FINRA. These provisions should help avoid any potential conflicts of interest that could arise if a Bats Exchange was primarily responsible for regulating its affiliated broker-dealers. --------------------------------------------------------------------------- \24\ See paragraph 2 of the proposed 17d-2 Plan. \25\ See paragraph 6 of the proposed 17d-2 Plan. --------------------------------------------------------------------------- According to the Plan, the Bats Exchanges will review the Certification, at least annually, or more frequently if required by changes in either the rules of the Bats Exchanges or FINRA, and, if necessary, submit to FINRA an updated list of Common Rules to add the Bats Exchanges rules not included on the then-current list of Common Rules that are substantially similar to FINRA rules; delete the Bats Exchanges rules included in the then-current list of Common Rules that are no longer substantially similar to FINRA rules; and confirm that the remaining rules on the list of Common Rules continue to be the Bats Exchanges rules that are substantially similar to FINRA rules.\26\ FINRA will then confirm in writing whether the rules listed in any updated list are Common Rules as defined in the Plan. Under the Plan, each Bats Exchange will also provide FINRA with a current list of Common Members and shall update the list no less frequently than once each quarter.\27\ --------------------------------------------------------------------------- \26\ See paragraph 2 of the proposed 17d-2 Plan. \27\ See paragraph 3 of the proposed 17d-2 Plan. --------------------------------------------------------------------------- The Commission is hereby declaring effective a plan that, among other things, allocates regulatory responsibility to FINRA for the oversight and enforcement of all the Bats Exchanges rules that are substantially similar to the rules of FINRA for Common Members of the Bats Exchanges and FINRA. Therefore, modifications to the Certification need not be filed with the Commission as an amendment to the Plan, provided that the Parties are only adding to, deleting from, or confirming changes to the Bats Exchanges rules in the Certification in conformance with the definition of Common Rules provided in the Plan. However, should the Parties decide to add a rule of the Bats Exchanges to the Certification that is not substantially similar to a FINRA rule; delete a rule of the Bats Exchanges from the Certification that is substantially similar to a FINRA rule; or leave on the Certification a rule of the Bats Exchange that is no longer substantially similar to a FINRA rule, then such a change would constitute an amendment to the Plan, which must be filed with the Commission pursuant to Rule 17d-2 under the Act and noticed for public comment.\28\ --------------------------------------------------------------------------- \28\ The Commission also notes that the addition to or deletion from the Certification of any federal securities laws, rules, and regulations for which FINRA would bear responsibility under the Plan for examining, and enforcing compliance by, Common Members, also would constitute an amendment to the Plan. --------------------------------------------------------------------------- The Plan also permits the Bats Exchanges and FINRA to terminate the Plan, subject to notice.\29\ The Commission notes, however, that while the Plan permits the Parties to terminate the Plan, the Parties cannot by themselves reallocate the regulatory responsibilities set forth in the Plan, since Rule 17d-2 under the Act requires that any allocation or re-allocation of regulatory responsibilities be filed with the Commission.\30\ --------------------------------------------------------------------------- \29\ See paragraph 12 of the proposed 17d-2 Plan. \30\ The Commission notes that paragraph 12 of the Plan reflects the fact that FINRA's responsibilities under the Plan will continue in effect until the Commission approves any termination of the 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 plan is effective. In particular, the purpose of the proposed Plan is to consolidate, for administrative ease, the separate bilateral Plans between FINRA and each Bats Exchange into one combined Plan. The Commission notes that the original bilateral Plans between FINRA and each Bats Exchange were published for comment and the Commission did not receive any comments thereon.\31\ Further, as noted above, the proposed combined Plan preserves the general framework of each of the current bilateral Plans while expanding the list of Common Rules allocated under the agreement. Accordingly, the Commission believes that the proposed plan does not raise any new regulatory issues that the Commission has not previously considered, and therefore believes that the Plan should become effective without any undue delay. --------------------------------------------------------------------------- \31\ See supra notes 3-6. --------------------------------------------------------------------------- V. Conclusion This Order gives effect to the Plan filed with the Commission in File No. 4-705. The Parties shall notify all members affected by the Plan of their rights and obligations under the Plan. It is therefore ordered, pursuant to Section 17(d) of the Act, that the Plan in File No. 4-705, between FINRA, BZX, BYX, EDGA, and EDGX, filed pursuant to Rule 17d-2 under the Act, is approved and declared effective. It is further ordered that BZX, BYX, EDGA, and EDGX are relieved of those responsibilities allocated to FINRA under the Plan in File No. 4- 705. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\32\ --------------------------------------------------------------------------- \32\ 17 CFR 200.30-3(a)(34). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-24709 Filed 10-12-16; 8:45 am] BILLING CODE 8011-01-P
![70728 Federal Register / Vol. 81, No. 198 / Thursday, October 13, 2016 / Notices
submitted on or before November 3, dated March 31, 2010; 5 and the the Act, or by Commission or SRO
2016. agreement between FINRA and EDGA rules.12 When an SRO has been named
For the Commission, by the Division of dated March 31, 2010.6 as a common member’s DEA, all other
Trading and Markets, pursuant to delegated SROs to which the common member
I. Introduction
authority.13 belongs are relieved of the responsibility
Brent J. Fields, Section 19(g)(1) of the Securities to examine the firm for compliance with
Secretary.
Exchange Act of 1934 (‘‘Act’’),7 among the applicable financial responsibility
other things, requires every self- rules. On its face, Rule 17d–1 deals only
[FR Doc. 2016–24696 Filed 10–12–16; 8:45 am]
regulatory organization (‘‘SRO’’) with an SRO’s obligations to enforce
BILLING CODE 8011–01–P
registered as either a national securities member compliance with financial
exchange or national securities responsibility requirements. Rule 17d–
association to examine for, and enforce does not relieve an SRO from its
SECURITIES AND EXCHANGE
compliance by, its members and persons obligation to examine a common
COMMISSION
associated with its members with the member for compliance with its own
[Release No. 34–79057; File No. 4–705] Act, the rules and regulations rules and provisions of the federal
thereunder, and the SRO’s own rules, securities laws governing matters other
Program for Allocation of Regulatory unless the SRO is relieved of this
Responsibilities Pursuant to Rule 17d– than financial responsibility, including
responsibility pursuant to Section 17(d) sales practices and trading activities and
2; Notice of Filing and Order or Section 19(g)(2) of the Act.8 Without
Approving and Declaring Effective a practices.
this relief, the statutory obligation of To address regulatory duplication in
Proposed Plan for the Allocation of each individual SRO could result in a
Regulatory Responsibilities Between these and other areas, the Commission
pattern of multiple examinations of adopted Rule 17d–2 under the Act.13
the Financial Industry Regulatory broker-dealers that maintain
Authority, Inc., Bats BZX Exchange, Rule 17d–2 permits SROs to propose
memberships in more than one SRO joint plans for the allocation of
Inc., Bats BYX Exchange, Inc., Bats (‘‘common members’’). Such regulatory
EDGA Exchange, Inc., and Bats EDGX regulatory responsibilities with respect
duplication would add unnecessary
Exchange, Inc. to their common members. Under
expenses for common members and
paragraph (c) of Rule 17d–2, the
their SROs.
October 6, 2016.
Section 17(d)(1) of the Act 9 was Commission may declare such a plan
Notice is hereby given that the intended, in part, to eliminate effective if, after providing for
Securities and Exchange Commission unnecessary multiple examinations and appropriate notice and comment, it
(‘‘Commission’’) has issued an Order, regulatory duplication.10 With respect determines that the plan is necessary or
pursuant to Section 17(d) of the to a common member, Section 17(d)(1) appropriate in the public interest and
Securities Exchange Act of 1934 authorizes the Commission, by rule or for the protection of investors; to foster
(‘‘Act’’),1 approving and declaring order, to relieve an SRO of the cooperation and coordination among the
effective a plan for allocating regulatory responsibility to receive regulatory SROs; to remove impediments to, and
responsibility (‘‘Plan’’) filed on reports, to examine for and enforce foster the development of, a national
September 30, 2016, pursuant to Rule compliance with applicable statutes, market system and a national clearance
17d–2 of the Act,2 by the Financial rules, and regulations, or to perform and settlement system; and is in
Industry Regulatory Authority, Inc. other specified regulatory functions. conformity with the factors set forth in
(‘‘FINRA’’), Bats BZX Exchange, Inc. To implement Section 17(d)(1), the Section 17(d) of the Act. Commission
(‘‘BZX’’), Bats BYX Exchange, Inc. Commission adopted two rules: Rule approval of a plan filed pursuant to Rule
(‘‘BYX’’), Bats EDGA Exchange, Inc. 17d–1 and Rule 17d–2 under the Act.11 17d–2 relieves an SRO of those
(‘‘EDGA’’), and Bats EDGX Exchange, Rule 17d–1 authorizes the Commission regulatory responsibilities allocated by
Inc. (‘‘EDGX’’) (each, a ‘‘Participating to name a single SRO as the designated the plan to another SRO.
Organization,’’ or ‘‘Bats Exchange,’’ and examining authority (‘‘DEA’’) to II. Proposed Plan
together, the ‘‘Participating examine common members for
Organizations,’’ ‘‘the Bats Exchanges,’’ compliance with the financial The proposed 17d–2 Plan is intended
or the ‘‘Parties’’). The Plan replaces and responsibility requirements imposed by to reduce regulatory duplication for
supersedes the agreement between firms that are common members of a
FINRA and BZX dated August 25, 5 See Securities Exchange Act Release No. 61861 Bats Exchange and FINRA.14 Pursuant
2008; 3 the agreement between FINRA (April 7, 2010), 75 FR 18920 (April 13, 2010) (File to the proposed 17d–2 Plan, FINRA
and BYX dated September 3, 2010; 4 the No. 4–598) (notice of filing of proposed plan). See would assume certain examination and
also Securities Exchange Act Release No. 62079
agreement between FINRA and EDGX (May 11, 2010), 75 FR 28080 (May 19, 2010) (File enforcement responsibilities for
No. 4–598) (order approving proposed plan). common members with respect to
13 17 CFR 200.30–3(a)(12). 6 See Securities Exchange Act Release No. 61860 certain applicable laws, rules, and
1 15 U.S.C. 78q(d). (April 7, 2010), 75 FR 18915 (April 13, 2010) (File regulations. The Plan replaces and
2 17 CFR 240.17d–2. No. 4–597) (notice of filing of proposed plan). See
also Securities Exchange Act Release No. 62078
supersedes the individual agreements
3 See Securities Exchange Act Release No. 58563
(May 11, 2010), 75 FR 28078 (May 19, 2010) (File between FINRA and each Bats
(September 17, 2008), 73 FR 55180 (September 24,
2008) (File No. 4–569) (notice of filing of proposed No. 4–597) (order approving proposed plan). Exchange 15 and is intended to reduce
7 15 U.S.C. 78s(g)(1).
plan). See also Securities Exchange Act Release No. the administrative burden associated
8 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2),
58818 (October 20, 2008), 73 FR 63752 (October 27, with maintaining four separate plans.
2008) (File No. 4–569) (order approving proposed respectively.
Lhorne on DSK30JT082PROD with NOTICES
9 15 U.S.C. 78q(d)(1).
plan).
10 See Securities Act Amendments of 1975, 12 See Securities Exchange Act Release No. 12352
4 See Securities Exchange Act Release No. 62935
(September 17, 2010), 75 FR 57998 (September 23, Report of the Senate Committee on Banking, (April 20, 1976), 41 FR 18808 (May 7, 1976).
13 See Securities Exchange Act Release No. 12935
2010) (File No. 4–613) (notice of filing of proposed Housing, and Urban Affairs to Accompany S. 249,
plan). See also Securities Exchange Act Release No. S. Rep. No. 94–75, 94th Cong., 1st Session 32 (October 28, 1976), 41 FR 49091 (November 8,
63102 (October 14, 2010), 75 FR 64765 (October 20, (1975). 1976).
14 See Paragraph 1(c) of the proposed 17d–2 Plan.
2010) (File No. 4–613) (order approving proposed 11 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
plan). respectively. 15 See supra notes 3–6.
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![Federal Register / Vol. 81, No. 198 / Thursday, October 13, 2016 / Notices 70735
subsidiary of Bats Global Markets, Inc.24 similar to a FINRA rule; delete a rule of 4–705. The Parties shall notify all
Apparent violations of any Bats the Bats Exchanges from the members affected by the Plan of their
Exchanges rules by any broker-dealer Certification that is substantially similar rights and obligations under the Plan.
subsidiary of Bats Global Markets, Inc. to a FINRA rule; or leave on the It is therefore ordered, pursuant to
will be processed by, and enforcement Certification a rule of the Bats Exchange Section 17(d) of the Act, that the Plan
proceedings in respect thereto will be that is no longer substantially similar to in File No. 4–705, between FINRA, BZX,
conducted by, FINRA.25 The effect of a FINRA rule, then such a change would BYX, EDGA, and EDGX, filed pursuant
these provisions is that regulatory constitute an amendment to the Plan, to Rule 17d–2 under the Act, is
oversight and enforcement which must be filed with the approved and declared effective.
responsibilities for any broker-dealer Commission pursuant to Rule 17d–2 It is further ordered that BZX, BYX,
subsidiary of Bats Global Markets, Inc., under the Act and noticed for public EDGA, and EDGX are relieved of those
which is the parent company of the Bats comment.28 responsibilities allocated to FINRA
Exchanges, will be vested with FINRA. The Plan also permits the Bats under the Plan in File No. 4–705.
These provisions should help avoid any Exchanges and FINRA to terminate the
For the Commission, by the Division of
potential conflicts of interest that could Plan, subject to notice.29 The Trading and Markets, pursuant to delegated
arise if a Bats Exchange was primarily Commission notes, however, that while authority.32
responsible for regulating its affiliated the Plan permits the Parties to terminate Brent J. Fields,
broker-dealers. the Plan, the Parties cannot by
Secretary.
According to the Plan, the Bats themselves reallocate the regulatory
Exchanges will review the Certification, responsibilities set forth in the Plan, [FR Doc. 2016–24709 Filed 10–12–16; 8:45 am]
at least annually, or more frequently if since Rule 17d–2 under the Act requires BILLING CODE 8011–01–P
required by changes in either the rules that any allocation or re-allocation of
of the Bats Exchanges or FINRA, and, if regulatory responsibilities be filed with
necessary, submit to FINRA an updated the Commission.30 DEPARTMENT OF STATE
list of Common Rules to add the Bats Under paragraph (c) of Rule 17d–2,
Exchanges rules not included on the the Commission may, after appropriate Public Notice; Culturally Significant
then-current list of Common Rules that notice and comment, declare a plan, or Objects Imported for Exhibition
are substantially similar to FINRA rules; any part of a plan, effective. In this Determinations: ‘‘Pierre Gouthière:
delete the Bats Exchanges rules instance, the Commission believes that Virtuoso Gilder at the French Court’’
included in the then-current list of appropriate notice and comment can Exhibition
Common Rules that are no longer take place after the proposed plan is
SUMMARY: Notice is hereby given of the
substantially similar to FINRA rules; effective. In particular, the purpose of
following determinations: Pursuant to
and confirm that the remaining rules on the proposed Plan is to consolidate, for
the authority vested in me by the Act of
the list of Common Rules continue to be administrative ease, the separate
October 19, 1965 (79 Stat. 985; 22 U.S.C.
the Bats Exchanges rules that are bilateral Plans between FINRA and each
2459), E.O. 12047 of March 27, 1978, the
substantially similar to FINRA rules.26 Bats Exchange into one combined Plan.
Foreign Affairs Reform and
FINRA will then confirm in writing The Commission notes that the original
Restructuring Act of 1998 (112 Stat.
whether the rules listed in any updated bilateral Plans between FINRA and each
2681, et seq.; 22 U.S.C. 6501 note, et
list are Common Rules as defined in the Bats Exchange were published for
seq.), Delegation of Authority No. 234 of
Plan. Under the Plan, each Bats comment and the Commission did not
October 1, 1999, Delegation of Authority
Exchange will also provide FINRA with receive any comments thereon.31
No. 236–3 of August 28, 2000 (and, as
a current list of Common Members and Further, as noted above, the proposed
appropriate, Delegation of Authority No.
shall update the list no less frequently combined Plan preserves the general
257 of April 15, 2003), I hereby
than once each quarter.27 framework of each of the current
determine that the objects to be
The Commission is hereby declaring bilateral Plans while expanding the list
included in the exhibition ‘‘Pierre
effective a plan that, among other of Common Rules allocated under the
Gouthière: Virtuoso Gilder at the French
things, allocates regulatory agreement. Accordingly, the
Court,’’ imported from abroad for
responsibility to FINRA for the Commission believes that the proposed
temporary exhibition within the United
oversight and enforcement of all the plan does not raise any new regulatory
States, are of cultural significance. The
Bats Exchanges rules that are issues that the Commission has not
objects are imported pursuant to loan
substantially similar to the rules of previously considered, and therefore
agreements with the foreign owners or
FINRA for Common Members of the believes that the Plan should become
custodians. I also determine that the
Bats Exchanges and FINRA. Therefore, effective without any undue delay.
exhibition or display of the exhibit
modifications to the Certification need
V. Conclusion objects at The Frick Collection, New
not be filed with the Commission as an
This Order gives effect to the Plan York, New York, from on or about
amendment to the Plan, provided that
filed with the Commission in File No. November 16, 2016, until on or about
the Parties are only adding to, deleting
February 19, 2017, and at possible
from, or confirming changes to the Bats
28 The Commission also notes that the addition to additional exhibitions or venues yet to
Exchanges rules in the Certification in
or deletion from the Certification of any federal be determined, is in the national
conformance with the definition of securities laws, rules, and regulations for which interest. I have ordered that Public
Common Rules provided in the Plan. FINRA would bear responsibility under the Plan for
Notice of these Determinations be
However, should the Parties decide to examining, and enforcing compliance by, Common
published in the Federal Register.
Lhorne on DSK30JT082PROD with NOTICES
add a rule of the Bats Exchanges to the Members, also would constitute an amendment to
the Plan. FOR FURTHER INFORMATION CONTACT: For
Certification that is not substantially 29 See paragraph 12 of the proposed 17d–2 Plan.
further information, including a list of
30 The Commission notes that paragraph 12 of the
24 See paragraph 2 of the proposed 17d–2 Plan. Plan reflects the fact that FINRA’s responsibilities
the imported objects, contact the Office
25 See paragraph 6 of the proposed 17d–2 Plan. under the Plan will continue in effect until the of Public Diplomacy and Public Affairs
26 See paragraph 2 of the proposed 17d–2 Plan. Commission approves any termination of the Plan.
27 See paragraph 3 of the proposed 17d–2 Plan. 31 See supra notes 3–6. 32 17 CFR 200.30–3(a)(34).
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Document Created: 2016-10-13 00:53:29
Document Modified: 2016-10-13 00:53:29
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 70728 |
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