83 FR 38195 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend Rule 2 To Remove Requirement That a Registered Broker-Dealer Be a Member of the Financial Industry Regulatory Authority, Inc. or Another National Securities Exchange
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 150 (August 3, 2018)
Federal Register Volume 83, Issue 150 (August 3, 2018)
| Page Range | 38195-38198 | |
| FR Document | 2018-16598 |
[Federal Register Volume 83, Number 150 (Friday, August 3, 2018)] [Notices] [Pages 38195-38198] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-16598] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83740; File No. SR-NYSE-2018-33] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend Rule 2 To Remove Requirement That a Registered Broker-Dealer Be a Member of the Financial Industry Regulatory Authority, Inc. or Another National Securities Exchange July 30, 2018. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, on July 25, 2018, New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self- regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 2 to remove a requirement that a registered broker-dealer be a member of the Financial Industry Regulatory Authority, Inc. or another national securities exchange. The proposed rule change is available on the Exchange's website at www.nyse.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the definition of ``member organization'' under Rule 2 (``Member,'' ``Membership,'' ``Membership [sic] Firm,'' etc.) to remove a requirement that a registered broker- dealer seeking to be a member organization be a member of FINRA or another national securities exchange. In 2007, the Exchange amended Rule 2 to require FINRA membership as part of the consolidation of member firm regulatory functions of then NASD and NYSE Regulation, Inc. (``NYSE Regulation'') that resulted in a combined self-regulatory organization (``SRO'') that is now known as FINRA.\4\ As part of the consolidation, NYSE Regulation and NASD sought to harmonize certain of their member firm rules. At that time, it was anticipated that the rule harmonization would not be completed by the time NASD and NYSE Regulation completed their combination. Therefore, the combination contemplated a transition period during which FINRA would apply to NYSE member organizations [[Page 38196]] the member firm rules of the NYSE. A necessary part of this transition was for NYSE to require all NYSE member organizations to become FINRA members.\5\ Prior to this time, FINRA membership was not a condition to become member organizations on the Exchange. --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release No. 56654 (October 12, 2007), 72 FR 59129 (October 18, 2007) (SR-NYSE-2007-67). \5\ Id. --------------------------------------------------------------------------- Subsequently, to enable more broker-dealers to become member organizations, the Exchange further amended Rule 2 to broaden the definition of ``member organization'' to include a registered broker- dealer that is not a member of FINRA but is a member of another national securities exchange.\6\ Rule 2 repeats the requirement in Section 15(b)(8) of the Act \7\ that requires member organizations that transact business with the public to be a member of FINRA. In addition, Rule 2 requires member organizations that conduct business on the Floor of the Exchange to be a member of FINRA, which is a requirement unique to the Exchange.\8\ --------------------------------------------------------------------------- \6\ See Securities Exchange Act Release No. 60318 (July 16, 2009), 74 FR 36797 (July 24, 2009) (SR-NYSE-2009-63). \7\ 15 U.S.C. 78o(b)(8). \8\ Id. --------------------------------------------------------------------------- On June 14, 2010, the NYSE, NYSE Regulation,\9\ and FINRA entered into a Regulatory Services Agreement, whereby FINRA was retained to perform the market surveillance and enforcement functions that had previously been performed by the NYSE. Pursuant to the Regulatory Services Agreement, FINRA had been performing Exchange enforcement- related regulatory services, including investigating and enforcing violations of Exchange rules, and conducting disciplinary proceedings arising out of such enforcement actions, including those relating to NYSE-only rules and against dual members and non-FINRA members. In October 2014, the Exchange announced that, upon expiration of the current Regulatory Services Agreement on December 31, 2015, certain market surveillance, investigation and enforcement functions performed on behalf of the Exchange would be reintegrated. Accordingly, as of January 1, 2016, the Exchange began to perform certain of the market surveillance, investigation and enforcement functions that FINRA was retained to perform in 2010. --------------------------------------------------------------------------- \9\ See Securities Exchange Act Release No. 62355 (June 22, 2010), 75 FR 36729 (June 28, 2010) (SR-NYSE-2010-46). --------------------------------------------------------------------------- As a result of the reintegration of these various regulatory functions, the Exchange proposes to make membership more readily available to registered broker-dealers that are not FINRA members or members of another national securities exchange. As proposed, the term ``member organization'' under Rule 2(i) would be defined as ``a registered broker or dealer (unless exempt pursuant to the Securities Exchange Act of 1934) (the `Act'), including sole proprietors, partnerships, limited liability partnerships, corporations, and limited liability corporations, approved by the Exchange pursuant to Rule 311.'' This proposed rule text is based in part on NYSE Arca, Inc. (``NYSE Arca'') Rule 2.3(a), which similarly provides that membership on that exchange ``may be held by any entity which is a registered broker or dealer pursuant to Section 15 of the Securities Exchange Act of 1934, as amended, including sole proprietors, partnerships, limited liability partnerships, corporations, and limited liability companies.'' \10\ The Exchange proposes to include a cross reference to Rule 311, which is the rule that governs formation and approval of an exchange member organization. --------------------------------------------------------------------------- \10\ See also NYSE Arca Rule 1.1(n). --------------------------------------------------------------------------- The Exchange believes that the proposed change to the definition of ``member organization'' can be made without any regulatory impact because member organizations will continue to be subject to a comprehensive regulatory regime regardless of whether they are a member of another SRO or not. As discussed above, the Exchange did not require member organizations to also be members of FINRA prior to 2007 and only required FINRA membership as part of the combination of NASD and NYSE Regulation staff to form FINRA. The Exchange later contracted with FINRA to perform certain market surveillance, investigation and enforcement functions on behalf of the Exchange.\11\ However, since January 1, 2016, the Exchange is once again directly performing certain of those previously outsourced regulatory functions. For instance, the Exchange surveils and examines member organizations for compliance with its own rules and provisions of the federal securities laws governing various matters, including sales practices and trading activities and practices. The Exchange also investigates and enforces violations of Exchange rules and conducts disciplinary proceedings arising out of such enforcement actions. FINRA continues to perform, pursuant to a Regulatory Services Agreement with the Exchange, investigations and enforcement of matters arising from FINRA's cross-market surveillances, as well as from its examination of members of the NYSE. --------------------------------------------------------------------------- \11\ See Securities Exchange Act Release No. 62355 (June 22, 2010), 75 FR 36729 (June 28, 2010) (SR-NYSE-2010-46). --------------------------------------------------------------------------- The reasons behind initially requiring FINRA membership no longer exist. As it does today, and as was the case prior to 2007, the Exchange performs the necessary regulatory oversight of member organizations as outlined above. For those member organizations that are FINRA members, they will continue to be regulated pursuant to the terms of an existing allocation plan pursuant to Rule 17d-2 of the Act between FINRA\12\ and the Exchange for compliance with common FINRA and Exchange rules. Under the oversight of the NYSE's regulatory unit, FINRA will continue to perform certain regulatory services pursuant to the Regulatory Services Agreement, including certain membership application review services, registration, testing, and continuing education services, education and training services, examination services, surveillance and investigation services, disciplinary services, ancillary regulatory services, and audit services for the Exchange.\13\ --------------------------------------------------------------------------- \12\ See Securities Exchange Act Release No. 60409 (July 30, 2009), 74 FR 39353 (August 6, 2009) (Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Declaring Effective a Proposed Plan for the Allocation of Regulatory Responsibilities Among the Financial Industry Regulatory Authority, Inc., New York Stock Exchange LLC, NYSE Regulation, Inc. and NYSE Amex LLC). See, e.g., Securities Exchange Act Release Nos. 78473 (August 3, 2016), 81 FR 52722 (August 9, 2016) (Multiparty 17d-2 Plan Relating to the Surveillance, Investigation, and Enforcement of Insider Trading Rules); and 79928 (February 2, 2017), 82 FR 9814 (February 8, 2017) (Regulation NMS Multiparty 17d-2 Plan). \13\ The Exchange has also entered into Regulatory Services Agreements with FINRA covering member compliance with the Tick Size Pilot Program's data collection and reporting requirements as well as for investigations and enforcement activities related to insider trading. --------------------------------------------------------------------------- Rule 17d-1 of the Act authorizes the Commission to name a single SRO as the Designated Examining Authority (``DEA'') to examine members of more than one SRO (``common member'') for compliance with the financial responsibility requirements imposed by the Act, or by Commission or SRO rules.\14\ The NYSE does not currently act as the as the DEA for any member organization. Should the NYSE be assigned by the Commission as the DEA for a member organization and, [[Page 38197]] therefore be required to examine that member organization for compliance with the financial responsibility requirements pursuant to Rule 17d-1 of the Act, FINRA will perform those duties on behalf of the Exchange pursuant to the same Regulatory Services Agreement and under the continued oversight of the NYSE's regulatory unit.\15\ --------------------------------------------------------------------------- \14\ 17 CFR 240.17d-1. Rule 17d-1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices, which the Exchange will retain and continue to perform. \15\ Though FINRA would examine member organizations for which NYSE is the DEA on the NYSE's behalf, the NYSE would remain responsible under Rule 17d-1 to ensure that FINRA performs those regulatory duties in compliance with Act under the Regulatory Services Agreement. The Exchange notes that its affiliates, NYSE American LLC and NYSE Arca, Inc., have both been named by the Commission as DEAs for certain of their members and that FINRA examines those members as required by Rule 17d-1 of the Act pursuant to a Regulatory Services Agreement. In addition, Cboe Exchange, Inc. and Cboe C2 Exchange, Inc. (collectively, ``Cboe'') have also entered into Regulatory Services Agreements with FINRA under which FINRA performs, among other things, examination functions of Cboe members for which Cboe is DEA on Cboe's behalf. See, FINRA Signs Regulatory Services Agreement with CBOE and C2, available at http://www.finra.org/newsroom/2014/finra-signs-regulatory-services-agreement-cboe-and-c2, dated December 22, 2014. See also, CBOE and C2 Enter into Agreements with FINRA Involving Regulatory Services, available at http://ir.cboe.com/press-releases/2014/dec-22-2014, dated December 22, 2014. See Regulatory Services, FINRA Exchange Solutions, available at http://www.finra.org/industry/regulatory-services for a list of exchanges that FINRA provides examination services on behalf of. --------------------------------------------------------------------------- The Exchange also proposes to make various related changes to the rule. Because Section 15(b)(8) of the Act \16\ requires broker-dealers that transact with the public to be FINRA members, the Exchange proposes to remove this requirement from its definition of member organization as redundant. Consistent with the proposed amendment, Rule 2(i) would also no longer require that a member organization that conducts business on the Floor of the Exchange to [sic] be a FINRA member. The Exchange also proposes to amend paragraph (ii) of Rule 2 to remove references to being a member of FINRA or another national securities exchange. These provisions and references to FINRA would no longer be necessary in the Exchange's rules since membership in FINRA, or another SRO, would no longer be required as a condition to becoming a members [sic] organization on the Exchange. Those member organizations that transact business with the public would, however, continue to be required to be members of FINRA pursuant to Section 15(b)(8) of the Act.\17\ --------------------------------------------------------------------------- \16\ 15 U.S.C. 78o(b)(8). \17\ Id. --------------------------------------------------------------------------- The definition of ``member organization'' under Rule 2 will continue to require a registered broker or dealer to be approved by the Exchange and authorized to designate an associated natural person to effect transactions on the floor of the Exchange or any facility thereof. The Exchange proposes to delete the last sentence of Rule 2(i), which currently provides that member organizations include a natural person so registered, approved and licensed who directly effects transactions on the floor of the Exchange or any facility thereof. The Exchange does not currently have any natural persons that are member organizations of the Exchange, and, therefore, removing this language would not impact any current member organizations. The Exchange further believes that the addition of the reference to ``sole proprietor'' to Rule 2(i) would address any natural persons that seek to be approved as a member organization in the future. In addition, removing this sentence would also further harmonize the Exchange's membership requirements with its affiliate, NYSE Arca.\18\ --------------------------------------------------------------------------- \18\ See supra note 9. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act,\19\ in general, and furthers the objectives of Sections 6(b)(5) of the Act,\20\ in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, to protect investors and the public interest and because it is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \19\ 15 U.S.C. 78f(b). \20\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change would remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, protect investors and the public interest by expanding the number of registered brokers-dealers that would be eligible to become NYSE member organizations and trade on the Exchange, while maintaining high regulatory standards and a comprehensive regulatory regime with respect to such firms. The Exchange notes that it did not require member organizations to also be members of FINRA prior to 2007. It only subsequently required FINRA membership to accommodate a transition period as part of the combination of NASD and NYSE Regulation to form FINRA. Since that time, the Exchange reintegrated numerous regulatory function performed by FINRA.\21\ The reasons behind initially requiring FINRA membership no longer exist. --------------------------------------------------------------------------- \21\ FINRA continues to perform pursuant to a Regulatory Services Agreement with the Exchange investigations and enforcement of matters arising from FINRA's cross-market surveillances, as well as from its examination of members of the NYSE. --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices because member organization will continue to be subject to a comprehensive, mature, and rigorous regulatory program, regardless of whether they are members of FINRA or another SRO. As mentioned above, the Exchange will perform the necessary regulatory oversight of member organizations, as it did prior to 2007. Certain of the Exchange's regulatory obligations with respect to member organizations that are FINRA members are allocated to FINRA pursuant to the terms of allocation plan under Rule 17d-2 of the Act between FINRA and the Exchange.\22\ For those member organizations that are not FINRA members, the Exchange will provide for certain of its regulatory responsibilities, including, if applicable, DEA responsibilities, pursuant to an existing Regulatory Services Agreement between the Exchange and FINRA.\23\ --------------------------------------------------------------------------- \22\ See supra note 12. \23\ See supra notes 14 and 15 and accompanying text. --------------------------------------------------------------------------- The proposed rule change would also contribute to perfecting the mechanism of a free and open market and a national market system, which outcomes are also consistent with the protection of investors and the public interest by aligning NYSE membership requirements more closely with those of the Exchange's affiliate, NYSE Arca.\24\ In addition, the proposed rule change is not without additional precedent. For example, the rules of the Cboe do not require membership in FINRA or on another SRO to be a Trading Permit Holder on Cboe.\25\ Finally, no federal securities law requires that a broker-dealer be a member of more than one national securities exchange or SRO [[Page 38198]] (e.g., FINRA).\26\ The Exchange's proposal would merely remove the requirement under its rules that broker-dealers be members of another SRO when they are not otherwise required to do so. --------------------------------------------------------------------------- \24\ See supra note 9 and accompanying text. \25\ See Cboe Rules 3.2 and 3.3. \26\ See generally 15 U.S.C. 78o. --------------------------------------------------------------------------- The proposed rule change would also not unfairly discriminate between or among market participants because both current and prospective members would be subject to the rule. All member organizations would be regulated in the same manner by the Exchange should they be a member of another SRO or not. For these reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization's Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,\27\ the Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to have a competitive impact because it is not intended to attract additional business to the Exchange. It is simply intended to align the definition of ``member organization'' with that of its affiliates [sic] and similar definitions of other national securities exchanges while ensuring the member organizations continue to be subject to comprehensive regulatory oversight. This proposal should also move to harmonize the membership requirements between the exchange and its affiliate NYSE Arca, thereby avoiding potential confusion.\28\ --------------------------------------------------------------------------- \27\ 15 U.S.C. 78f(b)(8). \28\ See supra note 9 and accompanying text. --------------------------------------------------------------------------- C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic 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 SR-NYSE-2018-33 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2018-33. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2018-33 and should be submitted on or before August 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2018-16598 Filed 8-2-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices 38195
them to better manage their orders and Commission and any person, other than I. Self-Regulatory Organization’s
may increase order interaction on the those that may be withheld from the Statement of the Terms of Substance of
Exchange in the event the Exchange public in accordance with the the Proposed Rule Change
changes its fee schedule such that the provisions of 5 U.S.C. 552, will be The Exchange proposes to amend
Post Only functionality is more relevant available for website viewing and Rule 2 to remove a requirement that a
to the operation of the Exchange. printing in the Commission’s Public registered broker-dealer be a member of
Accordingly, the Commission hereby Reference Room, 100 F Street NE, the Financial Industry Regulatory
waives the 30-day operative delay and Washington, DC 20549, on official Authority, Inc. or another national
designates the proposed rule change business days between the hours of securities exchange. The proposed rule
operative upon filing.29 10:00 a.m. and 3:00 p.m. Copies of the
At any time within 60 days of the change is available on the Exchange’s
filing also will be available for website at www.nyse.com, at the
filing of the proposed rule change, the inspection and copying at the principal
Commission summarily may principal office of the Exchange, and at
office of the Exchange. All comments the Commission’s Public Reference
temporarily suspend such rule change if received will be posted without change.
it appears to the Commission that such Room.
Persons submitting comments are
action is: (i) Necessary or appropriate in cautioned that we do not redact or edit II. Self-Regulatory Organization’s
the public interest; (ii) for the protection personal identifying information from Statement of the Purpose of, and
of investors; or (iii) otherwise in comment submissions. You should Statutory Basis for, the Proposed Rule
furtherance of the purposes of the Act. submit only information that you wish Change
If the Commission takes such action, the to make available publicly. All
Commission shall institute proceedings In its filing with the Commission, the
submissions should refer to File self-regulatory organization included
to determine whether the proposed rule Number SR–CboeEDGA–2018–013, and
should be approved or disapproved. statements concerning the purpose of,
should be submitted on or before and basis for, the proposed rule change
IV. Solicitation of Comments August 24, 2018. and discussed any comments it received
Interested persons are invited to For the Commission, by the Division of on the proposed rule change. The text
submit written data, views, and Trading and Markets, pursuant to delegated of those statements may be examined at
arguments concerning the foregoing, authority.30 the places specified in Item IV below.
including whether the proposed rule Robert W. Errett, The Exchange has prepared summaries,
change is consistent with the Act. Deputy Secretary. set forth in sections A, B, and C below,
Comments may be submitted by any of [FR Doc. 2018–16597 Filed 8–2–18; 8:45 am] of the most significant parts of such
the following methods: BILLING CODE 8011–01–P statements.
Electronic Comments A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
• Use the Commission’s internet SECURITIES AND EXCHANGE
comment form (http://www.sec.gov/ Statutory Basis for, the Proposed Rule
COMMISSION
rules/sro.shtml); or Change
• Send an email to rule-comments@ [Release No. 34–83740; File No. SR–NYSE– 1. Purpose
sec.gov. Please include File Number SR– 2018–33]
CboeEDGA–2018–013 on the subject The Exchange proposes to amend the
line. Self-Regulatory Organizations; New definition of ‘‘member organization’’
York Stock Exchange LLC; Notice of under Rule 2 (‘‘Member,’’
Paper Comments Filing of Proposed Rule Change To ‘‘Membership,’’ ‘‘Membership [sic]
• Send paper comments in triplicate Amend Rule 2 To Remove Firm,’’ etc.) to remove a requirement
to Secretary, Securities and Exchange Requirement That a Registered Broker- that a registered broker-dealer seeking to
Commission, 100 F Street NE, Dealer Be a Member of the Financial be a member organization be a member
Washington, DC 20549–1090. Industry Regulatory Authority, Inc. or of FINRA or another national securities
All submissions should refer to File Another National Securities Exchange exchange. In 2007, the Exchange
Number SR–CboeEDGA–2018–013. This amended Rule 2 to require FINRA
July 30, 2018. membership as part of the consolidation
file number should be included on the Pursuant to Section 19(b)(1) 1 of the
subject line if email is used. To help the of member firm regulatory functions of
Securities Exchange Act of 1934 (the then NASD and NYSE Regulation, Inc.
Commission process and review your ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
comments more efficiently, please use (‘‘NYSE Regulation’’) that resulted in a
notice is hereby given that, on July 25, combined self-regulatory organization
only one method. The Commission will 2018, New York Stock Exchange LLC
post all comments on the Commission’s (‘‘SRO’’) that is now known as FINRA.4
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with As part of the consolidation, NYSE
internet website (http://www.sec.gov/ the Securities and Exchange
rules/sro.shtml). Copies of the Regulation and NASD sought to
Commission (the ‘‘Commission’’) the harmonize certain of their member firm
submission, all subsequent proposed rule change as described in
amendments, all written statements rules. At that time, it was anticipated
Items I, II, and III below, which Items that the rule harmonization would not
with respect to the proposed rule have been prepared by the self-
change that are filed with the be completed by the time NASD and
regulatory organization. The NYSE Regulation completed their
Commission, and all written Commission is publishing this notice to
amozie on DSK3GDR082PROD with NOTICES1
communications relating to the combination. Therefore, the
solicit comments on the proposed rule combination contemplated a transition
proposed rule change between the change from interested persons. period during which FINRA would
29 For purposes only of waiving the 30-day apply to NYSE member organizations
30 17 CFR 200.30–3(a)(12) and (59).
operative delay, the Commission has also
1 15 U.S.C. 78s(b)(1).
considered the proposed rule’s impact on 4 See Securities Exchange Act Release No. 56654
2 15 U.S.C. 78a.
efficiency, competition, and capital formation. See (October 12, 2007), 72 FR 59129 (October 18, 2007)
15 U.S.C. 78c(f). 3 17 CFR 240.19b–4. (SR–NYSE–2007–67).
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therefore be required to examine that continue to require a registered broker notes that it did not require member
member organization for compliance or dealer to be approved by the organizations to also be members of
with the financial responsibility Exchange and authorized to designate FINRA prior to 2007. It only
requirements pursuant to Rule 17d–1 of an associated natural person to effect subsequently required FINRA
the Act, FINRA will perform those transactions on the floor of the membership to accommodate a
duties on behalf of the Exchange Exchange or any facility thereof. transition period as part of the
pursuant to the same Regulatory The Exchange proposes to delete the combination of NASD and NYSE
Services Agreement and under the last sentence of Rule 2(i), which Regulation to form FINRA. Since that
continued oversight of the NYSE’s currently provides that member time, the Exchange reintegrated
regulatory unit.15 organizations include a natural person numerous regulatory function
The Exchange also proposes to make so registered, approved and licensed performed by FINRA.21 The reasons
various related changes to the rule. who directly effects transactions on the behind initially requiring FINRA
Because Section 15(b)(8) of the Act 16 floor of the Exchange or any facility membership no longer exist.
requires broker-dealers that transact thereof. The Exchange does not
with the public to be FINRA members, currently have any natural persons that The Exchange believes that the
the Exchange proposes to remove this are member organizations of the proposed rule change is designed to
requirement from its definition of Exchange, and, therefore, removing this prevent fraudulent and manipulative
member organization as redundant. language would not impact any current acts and practices because member
Consistent with the proposed member organizations. The Exchange organization will continue to be subject
amendment, Rule 2(i) would also no further believes that the addition of the to a comprehensive, mature, and
longer require that a member reference to ‘‘sole proprietor’’ to Rule rigorous regulatory program, regardless
organization that conducts business on 2(i) would address any natural persons of whether they are members of FINRA
the Floor of the Exchange to [sic] be a that seek to be approved as a member or another SRO. As mentioned above,
FINRA member. The Exchange also organization in the future. In addition, the Exchange will perform the necessary
proposes to amend paragraph (ii) of removing this sentence would also regulatory oversight of member
Rule 2 to remove references to being a further harmonize the Exchange’s organizations, as it did prior to 2007.
member of FINRA or another national membership requirements with its Certain of the Exchange’s regulatory
securities exchange. These provisions affiliate, NYSE Arca.18 obligations with respect to member
and references to FINRA would no organizations that are FINRA members
longer be necessary in the Exchange’s 2. Statutory Basis
are allocated to FINRA pursuant to the
rules since membership in FINRA, or The Exchange believes that the terms of allocation plan under Rule 17d-
another SRO, would no longer be proposal is consistent with Section 6(b) 2 of the Act between FINRA and the
required as a condition to becoming a of the Act,19 in general, and furthers the Exchange.22 For those member
members [sic] organization on the objectives of Sections 6(b)(5) of the organizations that are not FINRA
Exchange. Those member organizations Act,20 in particular, because it is members, the Exchange will provide for
that transact business with the public designed to prevent fraudulent and certain of its regulatory responsibilities,
would, however, continue to be manipulative acts and practices, to including, if applicable, DEA
required to be members of FINRA promote just and equitable principles of
responsibilities, pursuant to an existing
pursuant to Section 15(b)(8) of the trade, to foster cooperation and
Regulatory Services Agreement between
Act.17 coordination with persons engaged in
the Exchange and FINRA.23
The definition of ‘‘member regulating, clearing, settling, processing
organization’’ under Rule 2 will information with respect to, and The proposed rule change would also
facilitating transactions in securities, to contribute to perfecting the mechanism
15 Though FINRA would examine member
remove impediments to, and perfect the of a free and open market and a national
organizations for which NYSE is the DEA on the mechanisms of, a free and open market market system, which outcomes are also
NYSE’s behalf, the NYSE would remain responsible
under Rule 17d–1 to ensure that FINRA performs and a national market system and, in consistent with the protection of
those regulatory duties in compliance with Act general, to protect investors and the investors and the public interest by
under the Regulatory Services Agreement. The public interest and because it is not aligning NYSE membership
Exchange notes that its affiliates, NYSE American requirements more closely with those of
LLC and NYSE Arca, Inc., have both been named
designed to permit unfair
by the Commission as DEAs for certain of their discrimination between customers, the Exchange’s affiliate, NYSE Arca.24 In
members and that FINRA examines those members issuers, brokers, or dealers. addition, the proposed rule change is
as required by Rule 17d–1 of the Act pursuant to The Exchange believes that the not without additional precedent. For
a Regulatory Services Agreement. In addition, Cboe
Exchange, Inc. and Cboe C2 Exchange, Inc.
proposed rule change would remove example, the rules of the Cboe do not
(collectively, ‘‘Cboe’’) have also entered into impediments to, and perfect the require membership in FINRA or on
Regulatory Services Agreements with FINRA under mechanisms of, a free and open market another SRO to be a Trading Permit
which FINRA performs, among other things, and a national market system and, in Holder on Cboe.25 Finally, no federal
examination functions of Cboe members for which
Cboe is DEA on Cboe’s behalf. See, FINRA Signs
general, protect investors and the public securities law requires that a broker-
Regulatory Services Agreement with CBOE and C2, interest by expanding the number of dealer be a member of more than one
available at http://www.finra.org/newsroom/2014/ registered brokers-dealers that would be national securities exchange or SRO
finra-signs-regulatory-services-agreement-cboe-and- eligible to become NYSE member
c2, dated December 22, 2014. See also, CBOE and
C2 Enter into Agreements with FINRA Involving organizations and trade on the 21 FINRA continues to perform pursuant to a
Exchange, while maintaining high Regulatory Services Agreement with the Exchange
amozie on DSK3GDR082PROD with NOTICES1
Regulatory Services, available at http://ir.cboe.com/
press-releases/2014/dec-22–2014, dated December regulatory standards and a investigations and enforcement of matters arising
22, 2014. See Regulatory Services, FINRA Exchange from FINRA’s cross-market surveillances, as well as
comprehensive regulatory regime with from its examination of members of the NYSE.
Solutions, available at http://www.finra.org/
industry/regulatory-services for a list of exchanges respect to such firms. The Exchange 22 See supra note 12.
that FINRA provides examination services on behalf 23 See supra notes 14 and 15 and accompanying
of. 18 See supra note 9. text.
16 15 U.S.C. 78o(b)(8). 19 15 U.S.C. 78f(b). 24 See supra note 9 and accompanying text.
17 Id. 20 15 U.S.C. 78f(b)(5). 25 See Cboe Rules 3.2 and 3.3.
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![38198 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices
(e.g., FINRA).26 The Exchange’s organization consents, the Commission submit only information that you wish
proposal would merely remove the will: to make available publicly. All
requirement under its rules that broker- (A) by order approve or disapprove submissions should refer to File
dealers be members of another SRO the proposed rule change, or Number SR–NYSE–2018–33 and should
when they are not otherwise required to (B) institute proceedings to determine be submitted on or before August 24,
do so. whether the proposed rule change 2018.
The proposed rule change would also should be disapproved. For the Commission, by the Division of
not unfairly discriminate between or Trading and Markets, pursuant to delegated
IV. Solicitation of Comments
among market participants because both authority.29
current and prospective members would Interested persons are invited to Robert W. Errett,
be subject to the rule. All member submit written data, views, and Deputy Secretary.
organizations would be regulated in the arguments concerning the foregoing,
[FR Doc. 2018–16598 Filed 8–2–18; 8:45 am]
same manner by the Exchange should including whether the proposed rule
BILLING CODE 8011–01–P
they be a member of another SRO or not. change is consistent with the Act.
For these reasons, the Exchange Comments may be submitted by any of
believes that the proposal is consistent the following methods:
SECURITIES AND EXCHANGE
with the Act. Electronic Comments COMMISSION
B. Self-Regulatory Organization’s • Use the Commission’s internet [Release No. 34–83737; File No. SR–BOX–
Statement on Burden on Competition comment form (http://www.sec.gov/ 2018–20]
In accordance with Section 6(b)(8) of rules/sro.shtml); or
the Act,27 the Exchange believes that the • Send an email to rule-comments@ Self-Regulatory Organizations; BOX
proposed rule change will not impose sec.gov. Please include File Number SR– Options Exchange LLC; Notice of
any burden on competition that is not NYSE–2018–33 on the subject line. Withdrawal of Proposed Rule Change
necessary or appropriate in furtherance To Amend BOX Rule 7300 (Preferenced
Paper Comments
of the purposes of the Act. The Orders) To Provide an Additional
proposed rule change is not designed to • Send paper comments in triplicate Allocation Preference to Preferred
have a competitive impact because it is to Secretary, Securities and Exchange Market Makers
not intended to attract additional Commission, 100 F Street NE,
Washington, DC 20549–1090. July 30, 2018.
business to the Exchange. It is simply
All submissions should refer to File On June 13, 2018, BOX Options
intended to align the definition of
Number SR–NYSE–2018–33. This file Exchange LLC (the ‘‘Exchange’’) filed
‘‘member organization’’ with that of its
number should be included on the with the Securities and Exchange
affiliates [sic] and similar definitions of
subject line if email is used. To help the Commission (‘‘Commission’’), pursuant
other national securities exchanges
Commission process and review your to Section 19(b)(1) of the Securities
while ensuring the member
comments more efficiently, please use Exchange Act of 1934 1 and Rule 19b–
organizations continue to be subject to
only one method. The Commission will 4 thereunder,2 a proposed rule change
comprehensive regulatory oversight.
post all comments on the Commission’s to amend Exchange Rule 7300
This proposal should also move to
internet website (http://www.sec.gov/ (Preferenced Orders) to provide an
harmonize the membership
rules/sro.shtml). Copies of the additional allocation preference to
requirements between the exchange and
submission, all subsequent Preferred Market Makers. The proposed
its affiliate NYSE Arca, thereby avoiding
amendments, all written statements rule change was published for comment
potential confusion.28
with respect to the proposed rule in the Federal Register on July 2, 2018.3
C. Self-Regulatory Organization’s change that are filed with the The Commission received one comment
Statement on Comments on the Commission, and all written letter on the proposal.4 On July 25,
Proposed Rule Change Received From communications relating to the 2018, the Exchange withdrew the
Members, Participants, or Others proposed rule change between the proposed rule change (SR–BOX–2018–
Commission and any person, other than 20).
No written comments were solicited
or received with respect to the proposed those that may be withheld from the For the Commission, by the Division of
rule change. public in accordance with the Trading and Markets, pursuant to delegated
provisions of 5 U.S.C. 552, will be authority.5
III. Date of Effectiveness of the available for website viewing and Robert W. Errett,
Proposed Rule Change and Timing for printing in the Commission’s Public Deputy Secretary.
Commission Action Reference Room, 100 F Street NE, [FR Doc. 2018–16595 Filed 8–2–18; 8:45 am]
Within 45 days of the date of Washington, DC 20549 on official BILLING CODE 8011–01–P
publication of this notice in the Federal business days between the hours of
Register or up to 90 days (i) as the 10:00 a.m. and 3:00 p.m. Copies of the 29 17 CFR 200.30–3(a)(12).
Commission may designate if it finds filing also will be available for 1 15 U.S.C. 78s(b)(1).
such longer period to be appropriate inspection and copying at the principal 2 17 CFR 240.19b–4.
and publishes its reasons for so finding office of the Exchange. All comments 3 See Securities Exchange Act Release No. 83525
amozie on DSK3GDR082PROD with NOTICES1
received will be posted without change. (June 26, 2018), 83 FR 31006.
or (ii) as to which the self-regulatory 4 See Letter to Brent J. Fields, Secretary,
Persons submitting comments are Commission, from Richard J. McDonald,
26 See generally 15 U.S.C. 78o. cautioned that we do not redact or edit Susquehanna International Group, LLP, dated July
27 15 U.S.C. 78f(b)(8). personal identifying information from 23, 2018.
28 See supra note 9 and accompanying text. comment submissions. You should 5 17 CFR 200.30–3(a)(12).
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Document Created: 2018-11-06 10:34:43
Document Modified: 2018-11-06 10:34:43
| 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 | 83 FR 38195 |
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