Participant Firm or covered person may be subject to a fine under
proposed Rule 10.9216(b) with respect to any rules listed below.
    Proposed Rule 10.9217(e) would be titled ``Exchange Rules and
Policies subject to a Minor Rule Violation'' and would set forth the
list of rules under which a Participant, Participant Firm or covered
person may be subject to a fine under a minor rule violation letter as
described in proposed Rule 10.9216(b). The Exchange would retain the
list of rules currently set forth in Article 12, Rule 8(h) under the
existing headings for ``Reporting and Record Retention Violations'' and
``Minor Trading Rule Violations'' with the following additions and
changes.
    First, the Exchange would add subsection (b) of Article 6, Rule 2
(Registration and Approval of Participant Personnel) to proposed Rule
10.9217(e)(13).
    Article 6, Rule 2 currently sets forth certain employee
registration, approval and other exchange requirements. Specifically,
Article 6, Rule 2(a) governs registration of representatives, as
defined in Article 6, Rule 14(b)(1), with the Exchange and is currently
eligible for a minor rule fine under Article 12, Rule 8(h). Article 6,
Rule 2(b) provides for the registration of principals, as defined in
Article 6, Rule 14(a)(1). The Exchange proposes that the registration
requirements of principals set forth in Article 6, Rule 2(b) be
eligible for a minor rule fine. The proposed change would be consistent
with the practice on the Exchange's affiliates whose comparable rule
requiring the registration of principals is eligible for a minor rule
fine.\35\
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    \35\ See, e.g., NYSE National Rules 2.2(c) (Obligations of ETP
Holders and the Exchange) and 10.9217(f). The entirety of NYSE
National Rule 2.2 is eligible for minor rule treatment; registration
of principals under NYSE Nationals' rules is governed by subsection
(c).
---------------------------------------------------------------------------

    Second, the Exchange would add subsections (a) and (b) of Article
6, Rule 5 (Supervision of Representatives and Branch and Resident
Offices) to proposed Rule 10.9217(e)(14). As discussed below, the
Exchange's current minor rule incorrectly references Article 6, Rule
5(b) for violations relating to written supervisory procedures. The
correct reference should be to Article 6, Rule 5(c), which the Exchange
proposes to retain as proposed Rule 10.9217(e)(15).
    Article 6, Rule 5(a) (Adherence to Law) provides that no
Participant shall engage in conduct in violation of the Act, as
amended, rules or regulations thereunder, the Bylaws or the Rules of
the Exchange, or any written interpretation thereof and that every
Participant is responsible for reasonably supervising its associated
persons to prevent such violations. The requirement to reasonably
supervise individuals to ensure compliance with applicable laws, rules
and regulations, is currently eligible for minor rule fines in the
rules of the Exchange's affiliate NYSE Arca.\36\
---------------------------------------------------------------------------

    \36\ See NYSE Arca Rule 11.18(a) (Supervision) and
10.9217(g)(8).
---------------------------------------------------------------------------

    Article 6, Rule 5(b) (Designation of persons with supervisory
authority) provides that each Participant Firm must designate a
principal executive officer, general partner or managing partner to
hold overall authority and responsibility for the firm's internal
supervision and compliance with securities laws and regulations. This
designated supervisor may formally delegate his or her supervisory
duties and authority to other persons within the firm. The Rule further
provides that Participants must maintain, for a period of not less than
six years (the first two years in an easily accessible place), records
of the names of all persons who are designated as supervisory personnel
and the dates for which those designations are effective. In the
absence of such designation by a Participant Firm, the Firm's General
Partner(s), President, Chief Executive Officer or other principal
executive officer shall be deemed to be responsible for a Firm's
internal supervision and compliance function. In addition, each
Participant Firm shall designate and specifically identify to the
Exchange on Schedule A of Form BD one or more principals to serve as a
Chief Compliance Officer. The requirement in Article 6, Rule 5(b) to
designate and specifically identify persons with supervisory
responsibility is currently eligible for minor rule fines in the rules
of the Exchange's affiliate NYSE Arca.\37\ The Exchange accordingly
proposes to permit minor rule fines for violations of Article 6, Rule
5(b).
---------------------------------------------------------------------------

    \37\ See NYSE Arca Rule 11.18(b)(2) & (4) (Supervision) and
10.9217(g)(8).
---------------------------------------------------------------------------

    As noted, Article 12, Rule 8(h)(1)(N) of the Exchange's current
minor rule plan makes failure to establish, maintain and enforce
written supervisory procedures under Article 6, Rule 5(b) eligible for
a minor rule fine. However, as described above Article 6, Rule 5(b)
relates to the designation of persons with supervisory authority and
not written supervisory procedures, which is governed by Article 6,
Rule 5(c). In 2011, Article 12, Rule 8 was amended to include, among
other things, new reporting and recordkeeping provisions, which
included ``written supervisory procedures (Article 6, Rule 5(b)).''
\38\ At the time, Article 6, Rule 5(b) was titled ``Written supervisory
procedures'' and contained the text of current subsection (c). In 2013,
the Exchange filed to amend Article 6, Rule 5. As part of that filing,
subsection (a), which was titled ``Designation of persons with
supervisory authority,'' became new subsection (b), and old subsection
(b), which was titled ``Written supervisory procedures,'' became
current subsection (c).\39\ The Exchange did not, however, update
Article 12, Rule 8 to reflect that Article 6, Rule 5(b) had become
Article 6, Rule 5(c). The Exchange proposes to make that correction in
the text of proposed Rule 10.9217(e)(15). The Exchange notes that the
requirement to establish, maintain and enforce written procedures is
also currently eligible for minor rule fines in the rules of the
Exchange's affiliate NYSE Arca.\40\
---------------------------------------------------------------------------

    \38\ See Securities Exchange Act Release No. 64370 (April 29,
2011), 76 FR 25727, 25727 (May 5, 2011) (SR-CHX-2011-07) (Notice);
Securities Exchange Act Release 64686 (June 16, 2011), 76 FR 36596
(June 22, 2011) (SR-CHX-2011-07) (Order). See generally note 10,
supra.
    \39\ See Securities Exchange Act Release No. 70597 (October 2,
2013), 78 FR 62728, 62732 (October 22, 2013) (SR-CHX-2013-14)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change).
    \40\ See NYSE Arca Rule 11.18(c) (Supervision) and
10.9217(g)(8).
---------------------------------------------------------------------------

    Finally, the Exchange proposes a new subsection (f) titled
``Recommended Fine Schedule'' that would reproduce the current
Recommended Fine Schedule from the Fee Schedule with the following
changes and corrections. The Recommended Fine Schedule in the Fee
Schedule would be deleted:
     The Exchange would add a new sub-heading titled
``Reporting and Record Retention Violations'' \41\ that would set forth
the corresponding fines for first, second and third and subsequent
violations for the rules set forth under the heading ``Reporting and
Record Retention Violations'' in proposed Rule 10.9217(e).
---------------------------------------------------------------------------

    \41\ Immediately before the new sub-heading, the Exchange would
include the following text based on NYSE Arca Rule 10.9217: ``These
fines are intended to apply to minor violations. For more serious
violations, other disciplinary action may be sought.''
---------------------------------------------------------------------------

     The first 12 entries as well as entries 16 through 23
would be reproduced without change from the current Recommended Fine
Schedule in the Fee Schedule.

     Item 13 would be ``Registration and Approval of
Participant Personnel (Article 6, Rule 2(a) & (b)''. The proposed
first, second and third level fines for violations of Article 6, Rule
2(b) of $250 for the first violation, $750 for the second violation and
$1,500 for the third and subsequent violations would be the same as
those in the Exchange's current Recommended Fine Schedule in the Fee
Schedule for violations of Article 6, Rule 2(a).
     Items 14 and 15--``Failure to Comply with Supervision
Requirements (Article 6, Rule 5(a) & (b))'' and ``Written Supervisory
Procedures (Article 6, Rule 5(c)),'' respectively--would be added to
proposed Rule 10.9271(f) consistent with the changes to proposed Rule
10.9217(e)(14) and (15) described above. The proposed first, second and
third level fines for violations of Article 6, Rule 5(a) and (b) in
proposed Rule 10.9217(e)(14) and Article 6, Rule 5(c) in proposed Rule
10.9217(e)(15) would be $500 for the first violation, $1,000 for the
second violation and $2,500 for the third and subsequent violations.
These fine levels would be the same as the current fines in the
Recommended Fine Schedule in the Fee Schedule for violations of Article
6, Rule 5(b).
     Finally, item 24 would be ``Consolidated Audit Compliance
Rule (Rule 6.6800 Series).'' The corresponding fine ``Up to $2,500.00''
would be transposed from current Article 12, Rule 8 to new footnote **
following ``Rule 6.6800 Series.'' \42\ The Exchange would also add the
current text from Article 12, Rule 8(a) providing that ``For failures
to comply with the Consolidated Audit Trail Compliance Rule
requirements of the Rule 6.6800 Series, the Exchange may impose a minor
rule violation fine of up to $2,500. For more serious violations, other
disciplinary action may be sought'' to new footnote **.
---------------------------------------------------------------------------

    \42\ In 2020, the Exchange added the Consolidated Audit Trail
(``CAT'') industry member compliance rules to the list of minor rule
violations in Article 12, Rule 8 and the corresponding fine up to
$2,500. At the time, the Exchange inadvertently did not amend the
Recommended Fine Schedule in the Fee Schedule. See Securities
Exchange Act Release No. 89410 (July 28, 2020), 85 FR 46741 (August
3, 2020) (SR-CHX-2020-21).
---------------------------------------------------------------------------

     The Exchange would add a new second sub-heading titled
``Minor Trading Rule Violations'' that would set forth the
corresponding fines for first, second and third and subsequent
violations for the 11 rules set forth under the heading ``Minor Trading
Rule Violations'' in proposed Rule 10.9217(e), with the following
changes and corrections:
    [cir] The entry for ``Failure to clear the Matching System (Article
20, Rule 7)'' and corresponding fines would not be included. This rule
was deleted from Article 12, Rule 8 8(h)(2)(F) in 2019 as part of the
transition of trading on the Exchange to the Pillar trading platform
but the Exchange inadvertently failed to update the Recommended Fine
Schedule in the Fee Schedule.\43\
---------------------------------------------------------------------------

    \43\ See Securities Exchange Act Release No. 87264 (October 9,
2019), 84 FR 55345, 55349 (October 16, 2019) (SR-CHX-2019-08).
---------------------------------------------------------------------------

    [cir] The Exchange would include ``Short Sales (Rule 7.16)'' as
item 10. Rule 7.16 was added to Article 12, Rule 8 in 2019 as part of
the transition of trading on the Exchange to the Pillar trading
platform but the Exchange inadvertently failed to update the
Recommended Fine Schedule in the Fee Schedule.\44\ The proposed first,
second and third level fines for violations of Rule 7.16 of $500 for
the first violation, $1,000 for the second violation and $2,500 for the
third and subsequent violations are the same as those in NYSE Arca Rule
10.9217(i)(1)1. for violations of NYSE Arca Rule 7.16-E.\45\
---------------------------------------------------------------------------

    \44\ See id.
    \45\ See NYSE Arca Rule 7.16-E (Short Sales) & 10.9217(i)(1)1.
---------------------------------------------------------------------------

    [cir] Finally, the Exchange would include ``Failure to comply with
Authorized Trader requirements (Rule 7.30)'' as item 11. Rule 7.30 was
also added to Article 12, Rule 8 as part of the transition to Pillar in
2019 but the Exchange inadvertently failed to update the Recommended
Fine Schedule in the Fee Schedule.\46\ The proposed first, second and
third level fines for violations of Rule 7.30 of $1,000 for the first
violation, $2,500 for the second violation and $3,500 for the third and
subsequent violations are the same as those in NYSE Arca Rule
10.9217(i)(1)5. for violations of NYSE Arca Rule 7.30-E.\47\
---------------------------------------------------------------------------

    \46\ See Securities Exchange Act Release No. 87264 (October 9,
2019), 84 FR 55345, 55349 (October 16, 2019) (SR-CHX-2019-08).
    \47\ See NYSE Arca Rule 7.30-E (Authorized Traders) &
10.9217(i)(1)5.
---------------------------------------------------------------------------

    As noted, proposed subsection (a) of proposed Rule 10.9217 is
substantially the same as NYSE Arca Rule 10.9217(a) except for changes
reflecting the Exchange's membership. The Exchange proposes that a fine
thereunder would not exceed $5,000 (the amount reflected in current
Article 12, Rule 8).\48\
---------------------------------------------------------------------------

    \48\ See note 10, supra.
---------------------------------------------------------------------------

    Proposed subsections (b), (c) and (d) are also substantially the
same as NYSE Arca Rule 10.9217(b), (c) and (d) with the only changes
reflecting the Exchange's membership.
    Unlike current Article 12, Rule 8(e) described above, proposed Rule
10.9216(b) and Rule 10.9217 would not permit a Respondent to contest a
minor rule violation letter. Rather, as proposed, if the Respondent
rejects the minor rule violation letter, then a complaint must be filed
under proposed Rule 10.9211, and the minor rule violation letter may
not be introduced into evidence.\49\ The Exchange believes the proposed
rule is appropriate because it will harmonize the Exchange's minor rule
violation process with its affiliates' rules.
---------------------------------------------------------------------------

    \49\ See proposed Rule 10.9216(b)(4).
---------------------------------------------------------------------------

Proposed Rule 10.9220 (Request for Hearing; Extensions of Time,
Postponements, Adjournments)
    Proposed Rule 10.9220 would set forth the following rules.
    Proposed Rules 10.9221 (Request for Hearing) and 10.9222
(Extensions of Time, Postponements, and Adjournments) would describe
the process for a Respondent to request a hearing; the notice of a
hearing; timing considerations; and the authority of a Hearing Officer,
Hearing Panel or Extended Hearing Panel to order a hearing. Proposed
Rule 10.9221 provides that a Hearing Officer generally must provide at
least 28 days' notice of the hearing. Current Article 12, Rule 4
governing hearing procedures does not provide for a respondent to
request a hearing. Rather, Article 12, Rule 4(d) provides that within
30 days of the filing of a respondent's answer, the Hearing Officer
will schedule the time and place at which the Hearing shall be held.
Similarly, current Article 12, Rule 4 also does not provide for
extensions of time, postponements, and adjournments like proposed Rule
10.9222.
Proposed Rules 10.9230 Through 10.9235
    Proposed Rule 10.9231 (Appointment by the Chief Hearing Officer of
Hearing Panel or Extended Hearing Panel or Replacement Hearing Officer)
would govern appointment of a Hearing Panel or Extended Hearing Panel,
and would also govern appointment of a replacement Hearing Officer and
the designation of an observer to a Hearing Panel or an Extended
Hearing Panel. As proposed, under proposed Rule 10.9231(a) the Exchange
would rely on FINRA's Chief Hearing Officer to appoint a Hearing Panel
or an Extended Hearing Panel to conduct disciplinary proceedings and
issue a decision. The Chief Hearing Officer and the Hearing Officers
would all be FINRA employees. Under proposed Rule 10.9231(b), a Hearing
Panel would be composed of a

Hearing Officer and two Panelists, except as provided in paragraph (e)
and in proposed Rule 10.9234(a), (c), (d), or (e). The Hearing Officer
would serve as the chair of the Hearing Panel. The Chief Hearing
Officer would appoint Panelists pursuant to the criteria in proposed
Rule 10.9232.\50\ The proposed procedure would differ from the current
procedure under Article 12, Rule 4(e) where the Exchange CEO appoints a
Hearing Officer to conduct a hearing but the rule does not provide for
the appointment of panelist.
---------------------------------------------------------------------------

    \50\ NYSE Arca Rule 10.9231(b)(1) incorrectly states that the
Hearing Officer would appoint the Panelists pursuant to the criteria
of Rule 10.9232. The rules adopted by the Exchange's other
affiliates contain the same error. See NYSE Rule 9231(b)(1); NYSE
American Rule 9231(b)(1); NYSE National Rule 10.9231(b)(1). The
Exchange understands that its affiliates will submit separate rule
filing to conform their version of proposed Rule 10.9231(b)(1).
---------------------------------------------------------------------------

    Proposed Rule 10.9231(c) describes Extended Hearing Panels. As
proposed, upon consideration of the complexity of the issues involved,
the probable length of the hearing, or other factors that the Chief
Hearing Officer deems material, the Chief Hearing Officer may determine
that a matter shall be designated an Extended Hearing, and that such
matter shall be considered by an Extended Hearing Panel. The Extended
Hearing Panel shall be composed of a Hearing Officer and two Panelists,
except as provided in proposed Rule 10.9234(a), (c), (d), or (e). The
Hearing Officer would serve as the chair of the Extended Hearing Panel.
The Chief Hearing Officer would have discretion to compensate any or
all Panelists of an Extended Hearing Panel at the rate then in effect
for FINRA arbitrators. The Chief Hearing Officer shall select as a
Panelist a person who meets the criteria set forth in Rule 10.9232.
    Proposed Rule 10.9231(d) provides for the appointment of an
observer. As proposed, a person who is qualified to serve as a Panelist
may be designated by the Chief Hearing Officer to serve as an observer
to a Hearing Panel or an Extended Hearing Panel. If the Chief Hearing
Officer designates more than two people to serve as observers to a
Hearing Panel or an Extended Hearing Panel, the Chief Hearing Officer
would obtain the consent of the Parties. An observer may attend any
hearing of a disciplinary proceeding and observe the proceeding, but
may not vote or participate in any other manner in the hearing or the
deliberations of the Hearing Panel or the Extended Hearing Panel, or
participate in the administration of the disciplinary proceeding.
    Proposed Rule 10.9231(e) provides for the appointment of a
replacement Hearing Officer. As proposed, in the event that a Hearing
Officer withdraws, is incapacitated, or otherwise is unable to continue
service after being appointed, the Chief Hearing Officer shall appoint
a replacement Hearing Officer. To ensure fairness to the parties and
expedite completion of the proceeding when a replacement Hearing
Officer is appointed after the hearing has commenced, the proposed Rule
provides that a replacement Hearing Officer would have the discretion
to (1) allow the Hearing Panelists to resolve the issues in the
proceeding and issue a decision without the participation of the
replacement Hearing Officer in the decision. The replacement Hearing
Officer may advise the Hearing Panelists regarding legal issues, and
shall exercise the powers of the Hearing Officer under Rule 10.9235(a),
including preparing and signing the decision on behalf of the Hearing
Panel, in accordance with Rule 10.9268; or (2) certify familiarity with
the record and participate in the resolution of the issues in the case
and in the issuance of the decision. In exercising this power, the
replacement Hearing Officer may recall any witness before the Hearing
Panel.
    Proposed Rule 10.9231(c)-(e) would be substantially the same as
NYSE Arca Rule 10.9231 except that the proposed rule would not provide
for the selection of a Floor-Based Panelist because the Exchange does
not have a trading floor.
    Proposed Rule 10.9232 (Criteria for Selection of Panelists and
Replacement Panelists) would set forth the criteria for the selection
of Panelists and Replacement Panelists. Proposed Rule 10.9232 would be
substantially the same as NYSE Arca Rule 10.9232. As is the case under
the NYSE Arca Rule, Panelists would be required to be persons of
integrity and judgment and, other than the Hearing Officer, would be a
member of the Exchange hearing board. Moreover, at least one Panelist
would be engaged in securities activities differing from that of the
Respondent or, if retired, was so engaged in differing activities at
the time of retirement. Proposed Rule 10.9232 would also provide that
the Exchange Board would from time to time appoint a hearing board to
be composed of such number of permit holders of the Exchange that are
not members of the Exchange Board and registered employees and
nonregistered employees of Participants and Participant Firms. In order
to have the largest number of potential Panelists available, the
proposed Rule would further provide that former Participants and
registered and non-registered employees of Participants and Participant
Firms who have retired from the securities industry may be appointed to
the hearing board. The Exchange believes that there are well-qualified
persons, in particular retirees, who would be valuable members of the
hearing board. The members of the hearing board would also be appointed
annually and would serve at the pleasure of the Exchange Board. As
reflected in Article 12, Rule 4, Exchange hearings are currently
conducted by a Hearing Officer appointed by the CEO acting alone.
    Finally, proposed Rule 10.9232 would include Panelist selection
criteria, which would be expertise, absence of any conflict of interest
or bias or any appearance thereof, availability, and the frequency with
which a person has served as a Panelist in the last two years, favoring
the selection of a person as a Panelist who has never served or who has
served infrequently as a Panelist during the period. Article 12, Rule 4
contains similar provisions with respect to Hearing Officers appointed
by the CEO.
    Proposed Rules 10.9233 (Hearing Panel or Extended Hearing Panel:
Recusal and Disqualification of Hearing Officers) and 10.9234 (Hearing
Panel or Extended Hearing Panel: Recusal and Disqualification of
Panelists) would establish the processes for recusal and
disqualification of Hearing Officers or Panelists.
    Under proposed Rule 10.9233(a), if at any time a Hearing Officer
determines that he or she has a conflict of interest or bias or
circumstances otherwise exist where his or her fairness might
reasonably be questioned, the Hearing Officer would notify the Chief
Hearing Officer and the Chief Hearing Officer would issue and serve on
the Parties a notice stating that the Hearing Officer has withdrawn
from the matter. In the event that a Hearing Officer withdraws, is
incapacitated, or otherwise is unable to continue service after being
appointed, the Chief Hearing Officer would appoint a replacement
Hearing Officer. In such a case, the replacement Hearing Officer would
proceed according to proposed Rule 10.9231(e).
    Proposed Rule 10.9233(b) governs motions for disqualification.
Under the proposed Rule, a Party may move for the disqualification of a
Hearing Officer. Such a motion must be based upon a reasonable, good
faith belief that a conflict of interest or bias exists or
circumstances otherwise exist where the Hearing Officer's fairness
might reasonably be questioned, and must be accompanied by an affidavit
setting forth in detail the facts alleged to

constitute grounds for disqualification, and the dates on which the
Party learned of those facts. Under the proposed Rule, such motions
shall be filed not later than 15 days after the later of (1) when the
Party learned of the facts believed to constitute the disqualification;
or (2) when the Party was notified of the assignment of the Hearing
Officer.
    Finally, proposed Rule 10.9233(c) describes the disposition of a
disqualification motion. Under the proposed Rule, a motion for
disqualification of a Hearing Officer shall be decided by the Chief
Hearing Officer who shall promptly investigate whether disqualification
is required and issue a written ruling on the motion. In the event of a
disqualification of the Hearing Officer, the Chief Hearing Officer
shall appoint a replacement Hearing Officer.
    Proposed Rule 10.9234 sets forth similar procedures for the recusal
of panelists on a Hearing Panel and Extended Hearing Panel. Under
proposed Rule 10.9234(a), if at any time a Panelist of a Hearing Panel
or an Extended Hearing Panel determines that he or she has a conflict
of interest or bias or circumstances otherwise exist where his or her
fairness might reasonably be questioned, the Panelist must notify the
Hearing Officer and the Hearing Officer would issue and serve on the
Parties a notice stating that the Panelist has withdrawn from the
matter. In the event that a Panelist withdraws, is incapacitated, or
otherwise is unable to continue service after being appointed, the
Chief Hearing Officer may, in the exercise of discretion, determine
whether to appoint a replacement Panelist. In the event that both
Panelists withdraw, are incapacitated, or otherwise are unable to
continue service after being appointed, the proposed Rule permits the
Chief Hearing Officer to appoint two replacement Panelists.
    Proposed Rule 10.9234(b) provides that a Party may file a motion to
disqualify a Panelist of a Hearing Panel or an Extended Hearing Panel.
Such a motion must be based upon a reasonable, good faith belief that a
conflict of interest or bias exists or circumstances otherwise exist
where the Panelist's fairness might reasonably be questioned, and shall
be accompanied by an affidavit setting forth in detail the facts
alleged to constitute grounds for disqualification, and the dates on
which the Party learned of those facts. As proposed, such motions shall
be filed not later than 15 days after the later of (1) when the Party
learned of the facts believed to constitute the disqualification; or
(2) when the Party was notified of the appointment of the Panelist. As
proposed, the Chief Hearing Officer may order the disqualification of a
Panelist of a Hearing Panel or an Extended Hearing Panel if the Chief
Hearing Officer determines that a conflict of interest or bias exists
or circumstances otherwise exist where the Panelist's fairness might
reasonably be questioned, and shall state the facts constituting the
grounds for disqualification.
    Under proposed Rule 10.9234(c), if a Party files a motion to
disqualify a Panelist of a Hearing Panel or an Extended Hearing Panel,
the Hearing Officer shall promptly investigate whether disqualification
is required and shall issue a written ruling on the motion. In the
event a Panelist is disqualified, the Chief Hearing Officer may, in the
exercise of discretion, appoint a replacement Panelist.
    Under subsection (d) of proposed Rule 10.9234, if a Party files a
motion to disqualify both Panelists of a Hearing Panel or an Extended
Hearing Panel, the Hearing Officer shall promptly investigate whether
disqualification is required and issue a written ruling on the motion.
I n the event one Panelist is disqualified, the Chief Hearing Officer
may, in the exercise of discretion, appoint a replacement Panelist. In
the event both Panelists are disqualified, the Chief Hearing Officer
will promptly appoint two persons as replacement Panelists.
    Under proposed Rule 10.9234(e), if a Party files a motion to
disqualify both Panelists of a Hearing Panel or an Extended Hearing
Panel and the Hearing Officer, the Chief Hearing Officer shall promptly
investigate whether disqualification is required and issue a written
ruling on the motion. Under the proposed Rule, in the event a Panelist
is disqualified, the Chief Hearing Officer may, in the exercise of
discretion, appoint a replacement Panelist. In the event both Panelists
are disqualified, the Chief Hearing Officer shall promptly appoint two
persons as replacement Panelists. In the event a Hearing Officer and a
Panelist are disqualified, the Chief Hearing Officer shall promptly
appoint a replacement Hearing Officer. In the event both Panelists and
the Hearing Officer are disqualified, the Chief Hearing Officer shall
promptly appoint a replacement Hearing Officer and two persons as
replacement Panelists.
    Finally, proposed subsection (f) would provide that if a Chief
Hearing Officer appoints a replacement Panelist by operation of the
proposed Rule, the Chief Hearing Officer would do so using the criteria
set forth in Rule 10.9232.
    Current Article 12, Rule 4(h) does not address recusal of a Hearing
Officer but does permit a party to move for disqualification of the
Hearing Officer within 15 days of the appointment of the Hearing
Officer based upon bias or conflict of interest. The proposed Rule is
broader and permits recusal as well as motions for disqualification.
Moreover, the proposed Rule permits motions for disqualification not
later than 15 days after the later of (1) when the Party learned of the
facts believed to constitute the disqualification, or (2) when the
Party was notified of the assignment of the Hearing Officer or the
appointment of the Panelist, respectively. The Exchange's current rule
permits motions to disqualify based upon bias or conflict of interest
within 15 days of the appointment of the Hearing Officer.
    Proposed Rule 10.9235 (Hearing Officer Authority) would set forth
the Hearing Officer's duties and authority in detail. The Exchange does
not have a comparable rule.
Proposed Rules 10.9240 Through 10.9242
    Proposed Rule 10.9240 would set forth the following rules.
    Proposed Rules 10.9241 (Pre-hearing Conference) and 10.9242 (Pre-
hearing Submission) would govern the substantive and procedural
requirements for pre-hearing conferences and pre-hearing submissions.
Proposed Rule 10.9242 would also prohibit former Regulatory Staff,
within a period of one year immediately following termination of
employment with the Exchange or FINRA, from providing expert testimony
on behalf of any other person in any proceeding under the Rule 10.9000
Series. Nothing in the proposed Rule would prohibit former Regulatory
Staff from testifying as a witness on behalf of the Exchange or FINRA.
As noted above, current Article 12, Rule 4 gives the Hearing Officer
general authority in procedural matters, but there are no specific
provisions in the current Rules relating to pre-hearing conferences and
submissions.
Proposed Rules 10.9250 Through 10.9253
    Proposed Rule 10.9250 (Discovery) through 10.9253 would address
discovery, including the requirements and limitations relating to the
inspection and copying of documents in the possession of Exchange
staff, requests for information and limitations on such requests, and
the production of witness statements and any harmless

error relating to the production of such witness statements.
    Proposed Rule 10.9251 (Inspection and Copying of Documents in
Possession of Staff) would require Enforcement to make available to a
Respondent any documents prepared or obtained in connection with the
investigation that led to the proceedings, except that certain
privileged or other internal documents, such as examination or
inspection reports or documents that would reveal an examination,
investigation, or enforcement technique or confidential source, or
documents that are prohibited from disclosure under federal law, are
not required to be made available. A Hearing Officer may require that a
withheld document list be prepared. Proposed Rule 10.9251 also sets
forth procedures for inspection and copying of produced documents. In
addition, if a Document required to be made available to a Respondent
pursuant to the proposed Rule was not made available by Enforcement, no
rehearing or amended decision of a proceeding already heard or decided
would be required unless the Respondent establishes that the failure to
make the Document available was not harmless error. The Hearing
Officer, or, upon review under proposed Rule 10.9310, the Exchange
Board, would determine whether the failure to make the document
available was not harmless error, applying applicable Exchange, FINRA,
SEC, and federal judicial precedent. The proposed Rule would not
establish any preference for Exchange versus other precedent in this
respect; rather the Adjudicators could determine in their discretion
what precedent to apply. The Exchange's current rules do not include a
comparable provision.
    Under proposed Rule 10.9252 (Requests for Information), a
Respondent could request that the Exchange invoke proposed Rule 10.8210
to compel the production of Documents or testimony at the hearing if
the Respondent can show that certain standards are met, e.g., that the
information sought is relevant, material, and non-cumulative. Under
proposed Rule 10.9253 (Production of Witness Statements), a Respondent
could file a motion to obtain certain witness statements. Current
Article 12, Rule 4(c)(2) permits any party to request production of all
or some of the documents that its adversary intends to introduce as
evidence either in support of or to counter the charges but does not
specify that such production can be compelled. Rather, under Article
12, Rule 4(c)(2), a party responding to a request to produce all or
some of the documents that are intended to be introduced as evidence at
the hearing will be precluded from introducing at the hearing any
documents that were not produced in response to the request, unless
there is good cause shown for failing to produce the document(s) 30
days prior to the hearing and the failure to permit the introduction of
such evidence would result in undue hardship to the party requesting to
introduce such document.
Proposed Rules 10.9260 Through 10.9269
    Proposed Rules 10.9260 (Hearing and Decision) through 10.9269 would
govern hearings and decisions.
    Proposed Rule 10.9261 (Evidence and Procedure in Hearing) would
generally require the Parties to submit copies of documentary evidence
and the names of the witnesses each Party intends to present at the
hearing no later than 10 days before the hearing. Current Article 12,
Rule 4(c) (1) requires the parties to exchange a list of witnesses that
they each plan to call to testify at the hearing no less than 30 days
prior to the hearing. The proposed Rule would also provide that if a
hearing is held, a Party shall be entitled to be heard in person, by
counsel, or by the Party's representative. The Exchange's current rule
does not include such an explicit provision. Finally, under the
proposed rule, a Party, for good cause shown, may seek to submit any
additional evidence at the hearing as the Hearing Officer, in his or
her discretion, determines may be relevant and necessary for a complete
record. The Exchange's current rules do not contain a comparable
provision. Under Article 12, Rule 4(d), the Market Regulation
Department and the Respondent can introduce additional witnesses and
evidence solely in rebuttal to the respondent's evidence.\51\
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    \51\ In 2020, NYSE Arca filed to harmonize Rules 10.9261 and
10.9830 with certain changes by FINRA that temporarily granted the
Chief or Deputy Chief Hearing Officer the authority to order that
hearings be conducted by video conference if warranted by public
health risks posed by in-person hearings during the ongoing COVID-19
pandemic. See Securities Exchange Act Release No. 90088 (October 5,
2020), 85 FR 64186 (October 9, 2020) (SR-NYSEArca-2020-85). The
expiration of the temporary amendments to NYSE Arca Rules 10.9261
and 10.9830 have been extended to July 31, 2022. See Securities
Exchange Act Release No. 94663 (April 11, 2022), 87 FR 22587 (April
15, 2022) (SR-NYSEArca-2022-18). NYSE, NYSE American and NYSE
National made similar filings. The amended NYSE Arca rules will
revert back to their original state at the conclusion of the
temporary relief period and any extension thereof. See 87 FR at
22588, n.5 The Exchange does not propose to incorporate these
temporary amendments to NYSE Arca Rule 10.9261 and 10.9830 into the
proposed rule text and will evaluate the need for such temporary
relief once the current rule filing is operative.
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    Proposed Rule 10.9262 (Testimony) would require persons subject to
the Exchange's jurisdiction to testify under oath or affirmation at a
hearing. The Exchange's current rules do not contain comparable
provisions.
    Proposed Rule 10.9263 (Evidence: Admissibility) would authorize the
Hearing Officer to exclude irrelevant, immaterial, or unduly
repetitious or prejudicial evidence and permit a Party to object to the
admission of evidence. Under the proposed Rule, objections to the
admission or exclusion of evidence would be made on the record and
would succinctly state the grounds relied upon; excluded material would
be deemed a supplemental document and would be attached to the record
and retained under proposed Rule 10.9267. The Exchange's current rules
do not contain a comparable provision.
    Proposed Rule 10.9264 (Motion for Summary Disposition) would allow
Parties to file a motion for summary disposition under certain
circumstances and would describe the procedures for filing and ruling
on such motion. Under current Article 12, Rule 4, the Hearing Officer
regulates the hearing, but the Rule does not specifically provide for
motions for summary disposition.
    Proposed Rule 10.9265 (Record of Hearing) would require that the
hearing be recorded by a court reporter, that a transcript be prepared
and made available for purchase, and that a Party or a witness be
permitted to seek a correction of the transcript from the Hearing
Officer. Current Article 12, Rule 4(d) provides generally that the
Exchange must make a transcript of the hearing.
    Proposed Rule 10.9266 (Proposed Findings of Fact, Conclusions of
Law, and Post-Hearing Briefs) would authorize the Hearing Officer to
require a post-hearing brief or proposed findings of fact and
conclusions of law and would outline the form and timing for such
submissions. There is no comparable current rule, although the Hearing
Officer generally regulates the conduct of a hearing under Article 12,
Rule 4.
    Proposed Rule 10.9267 (Record; Supplemental Documents Attached to
Record; Retention) would detail the required contents of the hearing
record and the treatment of any supplemental documents attached to the
record. The Exchange's current rules do not contain a similar
provision.
    Proposed Rule 10.9268 (Decision of Hearing Panel or Extended
Hearing Panel) would set forth the timing and

the contents of a decision of the Hearing Panel or Extended Hearing
Panel and the procedures for a dissenting opinion, service of the
decision, and any requests for review. Under proposed Rule 10.9268, the
decision would be issued within 60 days after the final date allowed
for filing proposed findings of fact, conclusions of law, and post-
hearing briefs, or by a date established at the discretion of the Chief
Hearing Officer. Under current Article 12, Rule 4(f), a decision must
be issued within 90 days after the conclusion of the hearing. The
Exchange believes that the shorter period of time is appropriate to
allow the Hearing Panel or Extended Hearing Panel adequate time to
reach its decision and agree on the text of the decision and would not
prejudice any Party.\52\
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    \52\ Under the proposed rule, a dissenting opinion must be
served within 65 days after such final date. The Exchange does not
have a comparable current rule.
---------------------------------------------------------------------------

    The Exchange proposes to include text providing that a disciplinary
decision concerning an affiliate of the Exchange as such term is
defined in Rule 12b-2 under the Act would not be subject to review
under proposed Rule 10.9310 but instead would be treated as a final
disciplinary action subject to SEC review. The Exchange does not
believe that an appeal by an affiliate to the Exchange Board is
appropriate, but rather such affiliate should be permitted to appeal
directly to the SEC. The proposed text is identical to NYSE Arca Rule
10.9268(e)(2).
    The proposed Rule would further provide that, unless otherwise
provided in the majority decision issued under proposed Rule
10.9268(a), a sanction (other than a bar or an expulsion) specified in
a decision constituting final disciplinary action of the Exchange for
purposes of Act Rule 19d-1(c)(1) would become effective on a date to be
determined by the Exchange, and a bar or an expulsion specified in a
decision would become effective immediately upon the decision becoming
the final disciplinary action of the Exchange for purposes of Act Rule
19d-1(c)(1).
    Finally, proposed Rule 10.9269 (Default Decisions) would establish
the process for the issuance and review of default decisions by a
Hearing Officer when a Respondent fails to timely answer a complaint or
fails to appear at a pre-hearing conference or hearing where due notice
has been provided. A Party may, for good cause shown, file a motion to
set aside a default decision. Under Article 12, Rule 4(b), if a
Respondent fails to file an answer within the required timeframe, the
allegations of the charging document are deemed admitted and the
Hearing Officer will hold a hearing to determine the appropriate
sanctions. Under Article 12, Rule 5(a), a party can request review by
the Judiciary Committee of such default decision. Proposed Rule 10.9269
would provide a robust process for the issuance and content of default
decisions.
Proposed Rule 10.9270 (Settlement Procedure)
    Proposed Rule 10.9270 would provide for a settlement procedure for
a Respondent who has been notified that a proceeding has been
instituted against him or her. The proposed settlement procedure is
similar to the settlement procedures in current Article 12, Rule 1(d),
except that the Exchange's rule does not distinguish between contested
and uncontested settlements.
    Under proposed Rule 10.9270(a), a Respondent notified of the
institution of a disciplinary proceeding could make a written offer of
settlement at any time, but the proposal would not stay the proceeding
unless otherwise decided by the Hearing Officer. If a Respondent
proposes an offer of settlement after the hearing on the merits has
begun, the making of an offer of settlement shall not stay the
proceeding, unless otherwise decided by the Hearing Panel or, if
applicable, the Extended Hearing Panel. Current Article 12, Rule 1(d)
does not explicitly provide that a proceeding is not stayed.
    Under proposed Rule 10.9270(b), a Respondent making an offer of
settlement would also be required to do so in conformity with the
provisions of the proposed Rule and would be prohibited from making a
frivolous settlement offer or one that was inconsistent with the
seriousness of the violations. Current Article 12, Rule 1(d) does not
contain a similar prohibition.
    Proposed Rule 10.9270(c) would provide that an offer of settlement
shall be in writing and signed by the person making the offer, and, if
the person is represented by counsel or a representative, signed also
by the counsel or representative. Under the proposed Rule, the offer of
settlement should contain in reasonable detail the required content of
the proposal, which would include, among other things, a statement
consenting to findings of fact and violations, a description of the
proposed sanction and the effective date of any sanction(s) imposed, or
a statement that the effective date of the sanction(s) will be a date
to be determined by Regulatory Staff. Current Article 12, Rule 1(d) is
not as detailed but specifies that the settlement agreement must admit
jurisdiction and contain a proposed penalty that must be reasonable and
consistent with the seriousness of the alleged violations.
    Proposed Rule 10.9270(d) would provide that submission of a
settlement offer waives a Respondent's right to a hearing, to claim
bias or ex parte communication violations, any right to claim that a
person or body violated the ex parte prohibitions of proposed Rule
10.9143 or the separation of functions prohibitions of proposed Rule
10.9144, and the right to review by the Board, the Commission, or the
courts. Under current Article 12, Rule 1(d), settlement agreements must
include a waiver by the respondent of all rights of appeal to the
Executive Committee, Board, the Commission and United States Court of
Appeals or to otherwise challenge or contest the validity of the
decision if the offer of settlement is accepted.
    Proposed Rule 10.9270(e) would address contested settlement offers.
Under the proposed rule, if a Respondent made an offer of settlement
and Enforcement opposed it, the offer of settlement would be contested
and thereby deemed rejected, and thus the proceeding would continue to
completion under the proposed Rule 10.9200 Series. The contested offer
of settlement would not be transmitted to the Office of Hearing
Officers, CRO, or Hearing Panel or Extended Hearing Panel, and would
not constitute a part of the record in any proceeding against the
Respondent making the offer. Current Article 12, Rule 1(d) does not
contain a comparable provision. The Exchange believes that its proposed
rule would encourage Respondents to make reasonable offers of
settlement that would be acceptable to Enforcement.
    Proposed Rule 10.9270(f) and (h) would address uncontested
settlement offers. Under the proposed rule, if a hearing on the merits
had not begun, the CRO could accept the settlement offer; if a hearing
on the merits had begun, the Hearing Panel or Extended Hearing Panel
could accept the settlement offer.\53\ If they did not, the offer would
be deemed withdrawn and the matter would proceed under the proposed
Rule 10.9200 Series and the settlement offer would not be part of the
record. Under current Article 12, Rule 1(d), where an offer of
settlement is rejected by the CRO, the offer of settlement shall be
deemed withdrawn and it will not be given consideration in the

determination of the issues involved in the disciplinary proceeding.
---------------------------------------------------------------------------

    \53\ The CRO, Hearing Panel, or Extended Hearing Panel, as
applicable, would consider Exchange precedent or such other
precedent as it deemed appropriate in determining whether to accept
the settlement offer.
---------------------------------------------------------------------------

    As described below, if the offer of settlement were accepted by the
CRO, Hearing Panel or Extended Hearing Panel, it would become final 10
days after being sent, together with an order of acceptance, to each
Director and each member of the CFR, unless review by the Exchange
Board is required pursuant to proposed Rule 10.9310(a)(1)(A) or (B).
The Exchange anticipates that the required acceptance by the CRO,
Hearing Panel, or Extended Hearing Panel would help ensure objectivity
and consistency among offers of settlement that are issued. The
proposed rule change would also allow an offer of settlement to be
called for review by the Exchange Board. The Exchange believes that
this review mechanism provides an additional, appropriate check and
balance to the proposed settlement process.
    Proposed Rule 10.9270(g) would provide that the proceeding under
the proposed rule would conclude as of the date the order of acceptance
is final, and the order of acceptance would constitute final
disciplinary action of the Exchange. The sanction would take effect as
set forth in the order.
    Proposed Rule 10.9270(i) would address disciplinary proceedings
with multiple Respondents and permit settlement offers to be accepted
or rejected as to any one or all of such Respondents. Current Article
12, Rule 1(d) does not contain similar authorizations.
    Proposed Rule 10.9270(j) would provide that a Respondent may not be
prejudiced by a rejected offer of settlement nor may it be introduced
into evidence. Current Article 12, Rule 1(d) contains a substantially
similar provision.
Proposed Rule 10.9280 (Contemptuous Conduct)
    Proposed Rule 10.9280 would set forth sanctions for contemptuous
conduct by a Party or attorney or other representative, which may
include exclusion from a hearing or conference, and would set forth a
process for reviewing such exclusions. The proposed Rule would also
provide for adjournments in the event an exclusion is upheld to allow
for the retention of new counsel or selection of a new representative,
and would set forth the criteria for determining whether to grant an
adjournment and the length of an adjournment.
    The Chief Hearing Officer would review exclusions. The Exchange
believes that Respondents and their attorneys and representatives would
have adequate procedural protections with a review by the Chief Hearing
Officer. The Exchange's current rules do not have similar procedures
addressing contemptuous conduct.
Proposed Rule 10.9290 (Expedited Disciplinary Proceedings)
    Under proposed Rule 10.9290, for any disciplinary proceeding, the
subject matter of which also is subject to a temporary cease and desist
proceeding initiated pursuant to proposed Rule 10.9810 or a temporary
cease and desist order, hearings would be required to be held and
decisions rendered at the earliest possible time. The proposed Rule is
identical to NYSE Arca Rule 10.9290. The Exchange does not currently
have a similar rule.
    Proposed Rule 10.9291 (Permanent Cease and Desist Orders) would
govern the content, scope, form and delivery requirements of permanent
cease and desist orders. Under proposed Rule 10.9291(a), when a
decision issued under proposed Rule 10.9268 or proposed Rule 10.9269 or
an order of acceptance issued under proposed Rule 10.9270 imposes a
permanent cease and desist order, the decision shall: Order a
Respondent (and any successor of a Respondent, where the Respondent is
a Participant or Participant Firm) to cease and desist permanently from
violating a specific rule or statutory provision; set forth the
violation; and describe in reasonable detail the act or acts the
Respondent (and any successor of a Respondent, where the Respondent is
a Participant or Participant Firm) shall take or refrain from taking.
The proposed Rule would also require Respondents that are a Participant
or Participant Firm to deliver a copy of a permanent cease and desist
order, within one business day of receiving it, to its covered persons.
With the exception of conforming changes reflecting the Exchange's
membership, the text of the proposed Rule is substantially same as NYSE
Arca Rule 10.9291. The Exchange currently does not have a similar rule.
Proposed Rules 10.9300 Through 10.9310
    The Exchange's appellate and call for review processes would be set
forth in the Rule 10.9300 Series (Review of Disciplinary Proceeding by
Exchange Board) and would be substantially the same as the current NYSE
Arca process.
    Proposed Rule 10.9310 (Review by Exchange Board of Directors) would
provide for one review at the Board of Directors level, and discontinue
the current practice under Article 12, Rule 5 whereby a decision by the
Judiciary Committee is the final decision of the Exchange under
subsection (a) except where the Board in its discretion determines to
review a Judiciary Committee decision, as provided for in subsection
(b). Under proposed Rule 10.9310(b), upon review, and with the advice
of the CFR, the Board may, by the affirmative vote of a majority of the
Board then in office, sustain any determination or penalty imposed,
(including the terms of any permanent cease and desist order), or both,
modify or reverse any such determination, and increase, decrease or
eliminate any such penalty, or impose any penalty permitted under the
Exchange's rules, as it deems appropriate. Unless the Board otherwise
specifically directs, the determination and penalty, if any, of the
Board after review shall be final and conclusive subject to the
provisions for review of the Act. The Exchange believes that the
proposed appellate review process would be fair and efficient and
harmonize the Exchange's appellate process with the process of the
Exchange's affiliates who have adopted similar disciplinary rules.
    Under proposed Rule 10.9310(a)(1)(A), any Party, any Director, and
any member of the CFR could require a review by the Exchange Board of
any determination or penalty, or both, imposed by a Hearing Panel or
Extended Hearing Panel under the proposed Rule 10.9200 Series, except
that none of the aforementioned persons could request a review by the
Exchange Board of a decision concerning an affiliate of the Exchange as
that term is defined in Rule 12b-2 under the Act. Under current Article
12, Rule 5, there is no similar call for review process; only a
Respondent or the Exchange may request review and that review is
conducted by the Judiciary Committee, subject to the exceptions in
Article 12, Rule 5(b).
    Moreover, under proposed Rule 10.9310(a)(1)(A), a request for
review would be made by filing with the Secretary a written request
stating the basis and reasons for such review, within 25 days after
notice of the determination and/or penalty was served upon the
Respondent. However, any request for review of an offer of settlement
determined to be uncontested after a hearing on the merits has begun
under proposed Rule 10.9270(f) that has been accepted by a Hearing
Panel or Extended Hearing Panel would be governed by Rule
10.9310(a)(1)(B)(i). The Secretary of the Exchange would give notice of
any such request for review to the Parties.
    Under proposed Rule 10.9310(a)(1)(B)(i), any Director and any

member of the CFR could require a review by the Board of any
determination or penalty, or both, imposed in connection with an AWC
under Rule 10.9216 or an offer of settlement determined to be
uncontested before a hearing on the merits has begun under Rule
10.9270(f), except for a determination or penalty concerning an
Exchange affiliate as defined in Rule 12b-2 under the Act. Under the
proposed rule, a request for review shall be made by filing with the
Secretary of the Exchange a written request therefor, which states the
basis and reasons for such review, within 10 days after a letter of
acceptance, waiver, and consent or an offer of settlement has been sent
to each Director and each member of the CFR pursuant to proposed Rule
0.9216(a)(4) or Rule 10.9270(f)(3). The Secretary would give notice of
any such request for review to the Parties.
    Under proposed Rule 10.9310(a)(1)(B)(ii), any Party could require a
review by the Exchange Board of any rejection by the CRO of a letter of
acceptance, waiver, and consent under Rule 10.9216 or an offer of
settlement determined to be uncontested before a hearing on the merits
has begun under Rule 10.9270(f), except that no Party may request Board
review of a rejection of an AWC or an offer of settlement concerning an
Exchange affiliate as defined in Rule 12b-2 under the Act. As proposed,
a request for review shall be made by filing with the Secretary a
written request stating the basis and reasons for such review within 25
days after notification pursuant to proposed Rule 10.9216(a)(3) or Rule
10.9270(h) that a letter of acceptance, waiver, and consent, or an
uncontested offer of settlement or an order of acceptance is not
accepted by the CRO. The Secretary would provide notice of any such
request for review to the Parties.
    Under current Article 12, Rule 5(a), the parties have 15 days from
the date of service of notice of a decision, while under Article 12,
Rule 5(b) the Board has no time period in which to request
discretionary review of a Judiciary Committee decision. The proposed
rule would apply a longer period to requests to review of contested
determinations.
    Under proposed Rule 10.9310(a)(2), the Secretary would direct the
Office of Hearing Officers to complete and transmit a record of the
disciplinary proceeding in accordance with Rule 10.9267. Within 21 days
after the Secretary gives notice of a request for review to the
Parties, or at such later time as the Secretary could designate, the
Office of Hearing Officers would assemble and prepare an index to the
record, transmit the record and the index to the Secretary, and serve
copies of the index upon all Parties. The Hearing Officer who
participated in the disciplinary proceeding, or the Chief Hearing
Officer, would certify that the record transmitted to the Secretary was
complete. Under Article 12, Rule 5(a), unless the Judiciary Committee
decides to open the record for the introduction of evidence to hear
argument, its review must be based on the factual record as certified
to the Judiciary Committee by the Secretary and Board review of matters
as provided in Article 12, Rule 5(b) must be upon the record as
certified to the Board by the Secretary.
    Under proposed Rule 10.9310(b), review by the Exchange Board would
be based on oral arguments and written briefs and limited to
consideration of the record before the Hearing Panel or Extended
Hearing Panel. Under current Article 12, Rule 5, the Judiciary
Committee has the discretion but is not required to hear oral argument.
Moreover, the Judiciary Committee is not bound by the factual record as
certified by the Secretary but can open the record for the introduction
of evidence to hear argument.
    Proposed Rule 10.9310(b) further provides that, upon review, and
with the advice of the CFR, the Board, by the affirmative vote of a
majority of the Exchange Board then in office, could sustain any
determination or penalty imposed, (including the terms of any permanent
cease and desist order), or both, could modify or reverse any such
determination, and could increase, decrease or eliminate any such
penalty, or impose any penalty permitted under the Exchange's rules, as
it deems appropriate. Unless the Board otherwise specifically directs,
its determination and penalty, if any, after review shall be final and
conclusive subject to the provisions for review of the Act.
    As noted above, the Exchange would discontinue the current practice
under Article 12, Rule 5 whereby a decision by the Judiciary Committee
is a final decision of the Exchange except where the Board determines
to review the Judiciary Committee's decision on a discretionary basis.
As proposed, under Rule 10.9310(b), the Board's determination, with the
advice of the CFR, if any, would be final and conclusive subject to the
provisions for review of the Act unless the Board specifically directs
otherwise. In addition, NYSE Arca Rule 10.9310(b) permits the CFR to
appoint an Appeals Panel to conduct a review and make a recommendation
to the CFR. NYSE Arca retained appeals panels from its legacy
disciplinary rules. The Exchange does not currently have a similar
process and does not propose to follow NYSE Arca on this point.
Proposed Rule 10.9310(b) accordingly omits a comparable provision.
    Under proposed Rule 10.9310(c), notwithstanding the foregoing, if
either Party upon review applied to the Exchange Board for leave to
adduce additional evidence, and showed to the satisfaction of the
Exchange Board that the additional evidence was material and that there
were reasonable grounds for failure to adduce it before the Hearing
Panel or Extended Hearing Panel, the Exchange Board could remand the
case for further proceedings, in whatever manner and on whatever
conditions the Exchange Board considered appropriate. Article 12, Rule
5 does not contain a remand provision.
    Under proposed Rule 10.9310(d), notwithstanding any other
provisions of the proposed Rule 10.9000 Series, the CEO could not
require a review by the Exchange Board under this rule and would be
recused from deliberations and actions of the Exchange Board with
respect to such matters. Current Article 12, Rule 5 does not have a
comparable provision.
Proposed Rules 10.9500 Through 10.9527
    The proposed Rule 10.9500 Series (Other Proceedings) would relate
to other proceedings under the Exchange Rules.
    The proposed Rule 10.9520 Series would set forth procedures for a
covered person to become or remain associated with a Participant or
Participant Firm notwithstanding the existence of a statutory
disqualification as defined in Section 3(a)(39) of the Act, and for a
Participant, Participant Firm or covered person to obtain relief from
the eligibility or qualification requirements of the Exchange's Rules,
which the proposed rule refers to as ``eligibility proceedings.'' The
proposed rules are substantially similar to the NYSE Arca Rule 10.9520
Series.
    Proposed Rule 10.9521 (Purpose and Definitions) would add certain
definitions relating to eligibility proceedings that are not currently
part of the Exchange's definitions, including ``Application,''
``disqualified Participant,'' ``disqualified Participant Firm,''
``disqualified person,'' ``sponsoring Participant,'' and ``sponsoring
Participant Firm.''
    Proposed Rule 10.9522 (Initiation of Eligibility Proceeding; Member
Regulation Consideration) would govern the initiation of an eligibility
proceeding by the Exchange and the obligation for

a Participant or Participant Firm to file an application or, for
matters set forth in proposed Rule 10.9522(e)(1), a written request for
relief if the Participant or Participant Firm determines prior to
receiving a notice under Rule 10.9522(a) that (1) it has become a
disqualified Participant or Participant Firm; (2) a person associated
with such Participant or Participant Firm or whose association is
proposed by an applicant for membership under Exchange rules has become
a disqualified person; or (3) the Participant or Participant Firm or
applicant for membership under Exchange rules wishes to sponsor the
association of a covered person who is a disqualified person. The
proposed rule also contains provisions governing withdrawal of an
application or written request for relief as well as the application of
the prohibitions against ex parte communications set forth in Rule
10.9143 to the Rule 10.9520 Series.
    Finally, the proposed rule describes the matters that may be
approved by the Department of Member Regulation (``Member Regulation'')
without the filing of an application and after filing an application,
and the rights of a disqualified Participant or Participant Firm,
Sponsoring Participant or Participant Firm, Disqualified Person, and
Member Regulation where Member Regulation does not approve a written
request for relief from the eligibility requirements pursuant to
proposed Rule 10.9522(e)(1) or an application pursuant to proposed Rule
10.9522(e)(2).
    Proposed Rule 10.9523 (Acceptance of Member Regulation
Recommendations and Supervisory Plans by Consent Pursuant to Exchange
Act Rule 19h-1) would generally allow Member Regulation to recommend a
supervisory plan to which a disqualified Participant or Participant
Firm, or sponsoring Participant or Participant Firm and/or disqualified
person, as the case may be, could consent and by doing so, waive the
right to hearing or appeal if the plan is accepted and the right to
claim bias or prejudgment, prohibited ex parte communications or the
separation of functions prohibitions.
    Specifically, under subsection (a), which would apply to all
disqualifications except those arising solely from findings or orders
specified in Section 15(b)(4)(D), (E) or (H) of the Act or arising
under Section 3(a)(39)(E) of the Act, a disqualified Participant or
Participant Firm, sponsoring Participant or Participant Firm, and/or
disqualified person (the ``Disqualified Person''), would execute a
letter consenting to the imposition of the supervisory plan. By
submitting such a letter, the Disqualified Person waive the right to a
hearing before a Hearing Panel and any right of appeal to the Exchange
Board, the Commission, and the courts, or otherwise challenge the
validity of the supervisory plan, if the supervisory plan is accepted;
any right to claim bias or prejudgment by Member Regulation, the CRO,
the Board, or any member of the Board, in connection with such person's
or body's participation in discussions regarding the terms and
conditions of Member Regulation's recommendation or the supervisory
plan, or other consideration of the recommendation or supervisory plan,
including acceptance or rejection of such recommendation or supervisory
plan; and any right to claim that a person violated the ex parte
prohibitions of proposed Rule 10.9143 or the separation of functions
prohibitions of proposed Rule 10.9144, in connection with such person's
or body's participation in discussions regarding the terms and
conditions of the recommendation or supervisory plan, or other
consideration of the recommendation or supervisory plan, including
acceptance or rejection of such recommendation or supervisory plan.
    If a recommendation or supervisory plan is rejected, the
Disqualified Person would be bound by the waivers made under proposed
paragraph (a)(1) for conduct by persons or bodies occurring during the
period beginning on the date the supervisory plan was submitted and
ending upon the rejection of the supervisory plan and would have the
right to proceed under the proposed rule and proposed Rule 10.9524, as
applicable. Under subsection (a), if a Disqualified Person executes a
letter consenting to the supervisory plan, such letter would be
submitted to the CRO by Member Regulation with a proposed Notice under
Act Rule 19h-1, where required. The CRO may accept or reject Member
Regulation's recommendation and the supervisory plan. If accepted, the
recommendation and supervisory plan would be deemed final and, where
required, the proposed Notice under Rule 19h-1 of the Act would be
filed by the Exchange. If rejected by the CRO, the Exchange would be
able to take any other appropriate action with respect to the
Disqualified Person. The Disqualified Person would not be prejudiced by
the execution of the letter consenting to the supervisory plan, and the
letter could not be introduced into evidence in any proceeding.
    Under subsection (b), which would apply to disqualifications
arising solely from findings or orders specified in Section
15(b)(4)(D), (E) or (H) of the Act or arising under Section 3(a)(39)(E)
of the Act, in approving an application under proposed Rule
10.9522(e)(2)(F), Member Regulation would be authorized to accept the
membership or continued membership of a Disqualified Person or the
association or continuing association of a Disqualified Person pursuant
to a supervisory plan where the Disqualified Person would consent to
the imposition of the supervisory plan. The Disqualified Person would
execute a letter consenting to the imposition of the supervisory plan
and Member Regulation would prepare a proposed Notice under Rule 19h-1
of the Act where required to be filed by the Exchange.
    By submitting an executed letter consenting to a supervisory plan,
a Disqualified Person would waive the right of appeal to the Board, the
Commission, and the courts, or otherwise challenge the validity of the
supervisory plan, if the supervisory plan is accepted; any right to
claim bias or prejudgment by Member Regulation or the CRO in connection
with such person's or body's participation in discussions regarding the
terms and conditions of Member Regulation's recommended supervisory
plan, or other consideration of the supervisory plan, including
acceptance or rejection of such recommendation or supervisory plan; and
any right to claim that a person violated the ex parte prohibitions of
proposed Rule 10.9143 or the separation of functions prohibitions of
proposed Rule 10.9144, in connection with such person's or body's
participation in discussions regarding the terms and conditions of the
supervisory plan, or other consideration of the supervisory plan,
including acceptance or rejection of such supervisory plan. If the
supervisory plan is rejected, the Disqualified Person would be bound by
the waivers made under proposed paragraph (b)(1) for conduct by persons
or bodies occurring during the period beginning on the date the
supervisory plan was submitted and ending upon the rejection of the
supervisory plan and would have the right to proceed under proposed
Rule 10.9524 (Exchange Board Consideration), which would allow a
request for review by the applicant to the Exchange Board. Proposed
Rule 10.9527 would provide that a filing of an application for review
would not stay the effectiveness of final action by the Exchange unless
the Commission otherwise ordered. To maintain consistency with NYSE
Arca's rule numbering, proposed Rules 10.9525 and 10.9526 would be
designated ``Reserved.''

Proposed Rules 10.9550 Through 10.9559
    Proposed Rules 10.9550 through 10.9559 would govern expedited
proceedings.
    Under proposed Rule 10.9551 (Failure to Comply with Public
Communication Standards Pursuant to FINRA Rule 2210 as Incorporated by
Reference in Rule 11.2210), Regulatory Staff could issue a written
notice requiring a Participant or Participant Firm to file
communications with FINRA's Advertising Regulation Department at least
10 days prior to use if the staff determined that the Participant or
Participant Firm had departed from the standards of proposed Rule
11.2210 (Communications with the Public).\54\ The notice would state
the specific grounds and include the factual basis for the action as
well as the effective date. The Participant or Participant Firm could
file a written request for a hearing with the Office of Hearing
Officers pursuant to proposed Rule 10.9559. A Participant or
Participant Firm would be required to set forth with specificity any
and all defenses to the action in its request for a hearing. Pursuant
to proposed Rules 10.8310(a) and 10.9559(n), a Hearing Officer or, if
applicable, Hearing Panel, could approve, modify or withdraw any and
all sanctions or limitations imposed by the staff's notice, and impose
any other fitting sanction. A Participant or Participant Firm subject
to a pre-use filing requirement also could file a written request for
modification or termination of the requirement. FINRA Rule 2210
proposed to be incorporated by reference in proposed Rule 11.2210
references the procedures in FINRA Rules 9551 and 9559, which are
substantially the same as proposed Rules 10.9551 and 10.9559.
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    \54\ The Exchange has filed a separate filing to adopt a new
Rule 11.2210 governing communications with the public that would
incorporate FINRA Rule 2210 by reference and rename and amend
Article 8, Rule 13 governing advertising, promotion and
telemarketing. See note 17 [sic], supra. Accordingly, proposed Rule
10.9551 would not be operative until approval of the Exchange's
companion rule filing.
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    Under proposed Rule 10.9552 (Failure to Provide Information or Keep
Information Current) would establish procedures in the event that a
Participant, Participant Firm or covered person failed to provide any
information, report, material, data, or testimony requested or required
to be filed under the Exchange's rules, or failed to keep its
membership application or supporting documents current. In the event of
the foregoing, under proposed Rule 10.9552, the Participant,
Participant Firm or covered person could be suspended if corrective
action were not taken within 21 days after service of notice. A
Participant, Participant Firm or covered person served with a notice
could request a hearing within the 21-day period. A Participant,
Participant Firm or covered person subject to a suspension could file a
written request for termination of the suspension on the ground of full
compliance. A Participant, Participant Firm or covered person suspended
under the proposed rule that failed to request termination of the
suspension within three months of issuance of the original notice of
suspension would automatically be expelled or barred.\55\ Proposed Rule
10.9552 is substantially the same as its NYSE Arca counterpart except
for references reflecting the Exchange's membership. Under the
Exchange's current rules, there is no procedure that relates to failure
to keep a membership application or supporting documents current. Under
current Article 6, Rule 9(a), a Participant or partner, officer,
director or other person associated with a Participant or other person
or entity subject to the jurisdiction of the Exchange that fails to
submit requested documents or information to the Exchange is subject to
formal disciplinary action. The Exchange's current rules do not
authorize an expedited proceeding against persons who fail to submit
documents or information.
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    \55\ The Exchange believes that the provision for automatic
expulsion or bar after three months is consistent with Section 6 of
the Act because the Respondent would have ample notice and
opportunity to be heard under proposed Rule 10.9552, the proposed
rule is substantially the same as NYSE Arca's and FINRA's
counterpart rules, and the Commission has upheld at least one bar
under a prior version of FINRA's rule. See, e.g., Dennis A. Pearson,
Jr., Securities Exchange Act Rel. Nos. 54913 (December 11, 2006)
(dismissing application for review by associated person barred under
NASD Rule 9552(h)) and 55597A (April 6, 2007) (denying motion for
reconsideration).
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    Proposed Rule 10.9554 (Failure to Comply with an Arbitration Award
or Related Settlement or an Order of Restitution or Settlement
Providing for Restitution) \56\ would contain similar procedures and
consequences as proposed Rule 10.9552 relating to a failure to comply
with an arbitration award or related settlement or an Exchange order of
restitution or Exchange settlement agreement providing for restitution.
Under proposed Rule 10.9554, if a Participant, Participant Firm or
covered person fails to comply with an arbitration award or a
settlement agreement related to an arbitration or mediation under the
Exchange's rules, or an Exchange order of restitution or Exchange
settlement agreement providing for restitution, Regulatory Staff could
provide written notice to such Participant, Participant Firm or covered
person stating that the failure to comply within 21 days of service of
the notice will result in a suspension or cancellation of membership or
a suspension from associating with any Participant or Participant Firm.
Proposed Rule 10.9554 is substantially the same as NYSE Arca Rule
10.9554 except for references reflecting the Exchange's membership. The
Exchange lacks a comparable rule setting forth a uniform notice period
and specific procedures to be followed in the event of suspension or
cancellation.
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    \56\ Proposed Rule 10.9553 would be designated ``Reserved'' to
maintain consistency with NYSE Arca's rule numbering.
---------------------------------------------------------------------------

    Current Article 14, Rule 1(e) simply provides that any Participant,
or covered person who fails to honor an arbitration award can be
subject to disciplinary proceedings in accordance with Article 12. To
add clarity to the Exchange's rules, the Exchange would delete the
phrase ``in accordance with Article 12'' following ``disciplinary
proceedings'' in Article 14, Rule 1(e).
    Proposed Rule 10.9555 (Failure to Meet the Eligibility or
Qualification Standards or Prerequisites for Access to Services) would
govern the failure to meet the eligibility or qualification standards
or prerequisites for access to services offered by the Exchange. Under
proposed Rule 10.9555, if a Participant, Participant Firm or covered
person did not meet the eligibility or qualification standards set
forth in the Exchange's rules, Exchange staff could provide written
notice to such Participant, Participant Firm or covered person that the
failure to become eligible or qualified will result in a suspension or
cancellation of membership or a suspension or bar from associating with
any Participant or Participant Firm. Similarly, if a Participant,
Participant Firm or covered person did not meet the prerequisites for
access to services offered by the Exchange or a Participant or
Participant Firm thereof or could not be permitted to continue to have
access to services offered by the Exchange or a Participant or
Participant Firm thereof with safety to investors, creditors,
Participant, Participant Firms or the Exchange, Exchange staff could
provide written notice to such Participant, Participant Firm or covered
person limiting or prohibiting access to services offered by the
Exchange or a Participant or Participant Firm thereof. The limitation,
prohibition, suspension, cancellation, or bar referenced in the notice
would become effective 14 days after service of the notice except that
the

effective date for a notice of a limitation or prohibition on access to
services offered by the Exchange or a Participant, or Participant Firm
thereof with respect to services to which the Participant, Participant
Firm or covered person does not have access would be upon service of
the notice.
    Proposed Rule 10.9556 (Failure to Comply with Temporary and
Permanent Cease and Desist Orders) would provide procedures and set
forth consequences for a failure to comply with temporary and permanent
cease and desist orders issued under the Rule 10.9200, 10.9300 or
10.9800 Series. The Exchange does not currently have rules governing
cease and desist orders or that sets forth procedures and consequences
for a failure to comply with a cease and desist order. The proposed
rule is the substantially the same as NYSE Arca Rule 10.9556 except for
references reflecting the Exchange's membership.
    Proposed Rule 10.9557 (Procedures for Regulating Activities Under
Article 7, Rules 3 or 8 Regarding a Participant or Participant Firm
Experiencing Financial or Operational Difficulties) would allow the
Exchange to issue a notice directing a Participant or Participant Firm
comply with the provisions of Article 7, Rule 3 (Net Capital and
Aggregate Indebtedness) or Article 7, Rule 8 (Operational Capability)
or otherwise directing it to restrict its business activities. Article
7, Rule 3 establishes minimum net capital requirements and Article 7,
Rule 8 governs the operational capability of Participants and
Participant Firms. Article 7, Rule 3 and Rule 8 provide that the
Exchange can take certain actions when it appears that a Participant
Firm is unable or unwilling to comply with the requirements set forth
in those rules. Proposed Rule 10.9557 would govern the process to be
followed when the Exchange determines to take the prescribed actions
under Article 7, Rules 3 and 8. Except for these rule references and
references to reflect the Exchange's membership, the proposed rule is
otherwise substantially the same as NYSE Arca Rule 10.9557.
    The requirements and/or restrictions imposed by a notice issued and
served under the proposed Rule would be immediately effective, except
that a timely request for a hearing would stay the effective date for
ten business days after service of the notice or until the Office of
Hearing Officers issues a written order under proposed Rule
10.9559(o)(4)(A) (whichever period is less), unless the Exchange's CRO
(or such other senior officer as the CRO may designate) determines that
such a stay cannot be permitted with safety to investors, creditors or
other Participants or Participant Firms. Such a determination by the
Exchange's CRO (or such other senior officer as the CRO may designate)
would not be appealable and an extension of the stay period would not
be permitted. Under the proposed Rule, where a timely request for a
hearing stays the action for ten business days after service of the
notice or until the Office of Hearing Officers issues a written order
under Rule 10.9559(o)(4)(A) (whichever period is less), the notice
would not be deemed to have taken effect during that entire period. Any
requirements and/or restrictions imposed by an effective notice would
remain in effect unless Exchange staff removes or reduces the
requirements and/or restrictions pursuant to a letter of withdrawal of
the notice issued as set forth in proposed Rule 10.9557(g)(2).
    Proposed Rule 10.9558 (Summary Proceedings for Actions Authorized
by Section 6(d)(3) of the Exchange Act) would allow the Exchange's CRO
to provide written authorization to Exchange staff to issue a written
notice for a summary proceeding for an action authorized by Section
6(d)(3) of the Act. The list of proceedings in the proposed Rule would
track the types of proceedings currently provided for in Article 13,
Rule 2(a), which governs summary proceedings in accordance with Section
6(d)(3) of the Act. The Exchange does not have a rule comparable to
NYSE Arca Rule 11.2(a)-(f), hence the Exchange will not include a
subsection (4) to proposed Rule 10.9558(a).
    The notice issued under the proposed Rule would be immediately
effective; a Participant, Participant Firm or covered person would have
seven days to request a hearing. As noted, emergency proceedings are
currently authorized under Article 13, Rule 2(a)(1), under which the
Exchange has authority to, in part, (i) suspend a Participant or
Participant Firm or Associated Person that is expelled or suspended by
another SRO or an Associated Person that is barred or suspended from
being associated with a member of an SRO; (ii) suspend a Participant,
Participant Firm, or any other covered person who is in financial or
operating difficulty; or (iii) limit or prohibit any person with
respect to access to Exchange services in certain circumstances.
Article 13, Rule 2(b) provides that any person subject to an action
under Article 13, Rule 2(a) has five days after notification of the
action to file a written notice of appeal with the secretary of the
Exchange. The Exchange would retain the seven day period in NYSE Arca
Rule 10.9558 in order to harmonize with its affiliates. The Exchange
believes that the seven day period to request a hearing is not
unreasonable given the summary nature of the action. The proposed rule
is substantially the same as its NYSE Arca counterpart except for
references reflecting the Exchange's membership and the reference to
NYSE Arca Rule 11.2(a)-(f), which has no counterpart on the Exchange.
    Proposed Rule 10.9559 (Hearing Procedures for Expedited Proceedings
Under the Rule 10.9550 Series) would set forth uniform hearing
procedures for all expedited proceedings under the proposed Rule
10.9550 Series. Currently, emergency suspensions under Article 13, Rule
2 utilize the Article 15 rules, which are used for hearings and appeals
from certain decisions made by the Exchange pursuant to the Rules. The
proposed rule is substantially the same as its NYSE Arca counterpart
except for references reflecting the Exchange's membership.
    Proposed Rule 10.9560 (Expedited Suspension Proceeding) would set
forth procedures for issuing suspension orders, immediately prohibiting
a Participant, Participant Firm or covered person from conducting
continued disruptive quoting and trading activity on the Exchange and
would also provide the Exchange the authority to order a Participant,
Participant Firm or covered person to cease and desist from providing
access to the Exchange to a client that is conducting disruptive
quoting and trading activity. The proposed Rule is substantially the
same as NYSE Arca Rule 10.9560 except for changes reflecting the
Exchange's membership.
    Proposed Rule 10.9560(a)(1) provides that, with the prior written
authorization of the CRO or such other senior officers as the CRO may
designate, Enforcement may initiate an expedited suspension proceeding
with respect to alleged violations of Rule 11.21 (Disruptive Quoting
and Trading Activity Prohibited).\57\ Proposed Rule 10.9560(a) would
also set forth the requirements for notice and service ((a)(2)), and
the content of such notice ((a)(3)) pursuant to the Rule.
---------------------------------------------------------------------------

    \57\ As discussed below, the Exchange proposes to adopt a new
Rule 11.21 prohibiting disruptive quoting and trading activity.
---------------------------------------------------------------------------

    Proposed Rule 10.9560(b) would govern the appointment of a Hearing
Panel as well as potential disqualification or recusal of Hearing
Officers or Panelists. The proposed provision is consistent with
proposed Rule 10.9231(b) and (c), which govern

the appointment of a Hearing Panel or Extended Hearing Panel to conduct
disciplinary proceedings, and proposed Rules 10.9233 (Hearing Panel or
Extended Hearing Panel: Recusal and Disqualification of Hearing
Officers) and 10.9234 (Hearing Panel or Extended Hearing Panel: Recusal
and Disqualification of Panelists), which would establish the processes
for recusal and disqualification of Hearing Officers or Panelists.
Proposed Rule 10.9233 provides for a Hearing Officer to be recused in
the event he or she has a conflict of interest or bias or other
circumstances exist where his or her fairness might reasonably be
questioned. In addition to recusal initiated by such a Hearing Officer,
a party to the proceeding would be permitted to file a motion to
disqualify a Hearing Officer. This is similar to the requirements under
proposed Rule 10.9234 for Panelists. However, due to the compressed
schedule pursuant to which the process would operate under Rule
10.9560, the proposed rule would require such motion to be filed no
later than 5 days after the announcement of the Hearing Panel and the
Exchange's brief in opposition to such motion would be required to be
filed no later than 5 days after service thereof.
    Under proposed Rule 10.9560(c)(1), the hearing would be held not
later than 15 days after service of the notice initiating the
suspension proceeding, unless otherwise extended by the Hearing Officer
with the consent of the Parties for good cause shown. In the event of a
recusal or disqualification of a Hearing Officer or Panelist, the
hearing shall be held not later than five days after a replacement
Hearing Officer or Panelist is appointed. Under proposed Rule
10.9560(c)(2), a notice of date, time, and place of the hearing shall
be served on the Parties not later than seven days before the hearing,
unless otherwise ordered by the Hearing Officer. Under the proposed
Rule, service shall be made by personal service or overnight commercial
courier and the notice shall be effective upon service.
    Proposed Rule 10.9560(c) would also govern how the hearing is
conducted, including the authority of Hearing Officers ((c)(3)),
witnesses ((c)(4)), additional information that may be required by the
Hearing Panel ((c)(5)), the requirement that a transcript of the
proceeding be created and details related to such transcript ((c)(6)),
and details regarding the creation and maintenance of the record of the
proceeding ((c)(7)). Proposed Rule 10.9560(c)(8) would also provide
that if a Respondent fails to appear at a hearing for which it has
notice, the allegations in the notice and accompanying declaration may
be deemed admitted, and the Hearing Panel may issue a suspension order
without further proceedings.
    Finally, as proposed, if Enforcement fails to appear at a hearing
for which it has notice, the Hearing Panel may order that the
suspension proceeding be dismissed.
    Under proposed Rule 10.9560(d)(1), the Hearing Panel would be
required to issue a written decision stating whether a suspension order
would be imposed. The Hearing Panel would be required to issue the
decision not later than 10 days after receipt of the hearing
transcript, unless otherwise extended by the Hearing Officer with the
consent of the Parties for good cause shown. The proposed Rule would
state that a suspension order shall be imposed if the Hearing Panel
finds by a preponderance of the evidence that the alleged violation
specified in the notice has occurred and that the violative conduct or
continuation thereof is likely to result in significant market
disruption or other significant harm to investors.
    Proposed Rule 10.9560(d)(2) would also describe the content, scope
and form of a suspension order. As proposed, under proposed Rule
10.9560(d)(2)(A), a suspension order shall be limited to ordering a
Respondent to cease and desist from violating Rule 11.21, and/or to
ordering a Respondent to cease and desist from providing access to the
Exchange to a client of Respondent that is causing violations of Rule
11.21. Under proposed Rule 10.9560(d)(2)(B), a suspension order shall
also set forth the alleged violation and the significant market
disruption or other significant harm to investors that is likely to
result without the issuance of an order. The order shall describe in
reasonable detail the act or acts the Respondent is to take or refrain
from taking, and suspend such Respondent unless and until such action
is taken or refrained from ((d)(2)(C)). Finally, the order shall
include the date and hour of its issuance ((d)(2)(D)). As proposed,
under proposed paragraph (d)(3), a suspension order would remain
effective and enforceable unless modified, set aside, limited, or
revoked pursuant to proposed paragraph (e), as described below.
Finally, paragraph (d)(4) would require service of the Hearing Panel's
decision and any suspension order by personal service or overnight
commercial courier.
    Proposed Rule 10.9560(e) would provide that at any time after the
Respondent is served with a suspension order, a Party could apply to
the Hearing Panel to have the order modified, set aside, limited, or
revoked. The filing of an application to have a suspension order
modified, set aside, limited, or revoked under the proposed Rule would
not stay the effectiveness of the suspension order.
    For example, if a suspension order suspends Respondent unless and
until Respondent ceases and desists providing access to the Exchange to
a client of Respondent, and after the order is entered the Respondent
complies, the Hearing Panel can modify the order to lift the suspension
portion of the order while keeping in place the cease and desist
portion of the order. With its broad modification powers, the Hearing
Panel also maintains the discretion to impose conditions upon the
removal of a suspension--for example, the Hearing Panel could modify an
order to lift the suspension portion of the order in the event a
Respondent complies with the cease and desist portion of the order but
additionally order that the suspension will be re-imposed if Respondent
violates the cease and desist provisions of the modified order in the
future. The Hearing Panel generally would be required to respond to the
request in writing within 10 days after receipt of the request. An
application to modify, set aside, limit or revoke a suspension order
would not stay the effectiveness of the suspension order.
    Proposed Rule 10.9560(f) would describe the call for review process
by the Exchange Board. Specifically, the proposed Rule would provide
that if there is no pending application to the Hearing Panel to have a
suspension order modified, set aside, limited, or revoked, the Board,
in accordance with proposed Rule 10.9310 (Review by Exchange Board),
may call for review the Hearing Panel decision on whether to issue a
suspension order. Further, the proposed Rule would provide that a call
for review by the Exchange Board shall not stay the effectiveness of a
suspension order.
    Finally, proposed Rule 10.9560(g) would generally provide that
sanctions issued under proposed Rule 10.9560 would constitute final and
immediately effective disciplinary sanctions imposed by the Exchange,
and that the right to have any action under the Rule reviewed by the
Commission would be governed by Section 19 of the Act. The filing of an
application for review would not stay the effectiveness of a suspension
order unless the Commission otherwise ordered.

Proposed Rule 10.9600 Series (Procedures for Exemptions)
    The Exchange proposes to adopt a new Rule 10.9600 Series, which
would provide procedures for exemptions.
    Under proposed Rule 10.9610 (Application), a Participant or
Participant Firm could seek exemptive relief as permitted under
proposed Rule 10.8211 (Automated Submission of Trading Data Requested
by the Exchange) or proposed Rule 11.2210 (Communications with the
Public) \58\ by filing a written application with the appropriate
department or staff of the Exchange and provide a copy of the
application to the CRO.\59\
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    \58\ As previously noted, the Exchange has filed a separate
filing to adopt a new Rule 11.2210 governing communications with the
public that would incorporate FINRA Rule 2210 by reference and
rename and amend Article 8, Rule 13 governing advertising, promotion
and telemarketing. See note 17, supra. Accordingly, proposed Rule
10.9610 would not be operative with respect to proposed Rule 11.2210
until approval of the Exchange's companion rule filing.
    \59\ Exchange rules providing for exemptive relief would be the
two proposed rules governing communications with the public and the
submission of automated trading data. The Exchange does not have a
rule analogous to NYSE Arca Rule 2.5. Except for references to
Exchange rules specifying exemptions and references to reflect the
Exchange's membership, the proposed rule is otherwise substantially
the same as NYSE Arca Rule 10.9610.
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    Under proposed Rule 10.9620 (Decision), after considering the
application, the Exchange staff would be required to issue a written
decision setting forth its findings and conclusions. The decision would
be served on the Applicant \60\ pursuant to proposed Rules 10.9132 and
10.9134. After the decision is served on the Applicant, the application
and decision may be publicly available. Under proposed Rule 10.9630
(Appeal), an Applicant that wished to appeal the decision would be
required to file a written notice of appeal with the Exchange's CRO
within 15 days after service of the decision.
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    \60\ Under proposed Rule 10.9610(c), a Participant or
Participant Firm that files an application under Rule 10.9610 would
be referred to as an ``Applicant'' thereafter in the proposed Rule
10.9600 Series.
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    Under proposed Rule 10.9630(e), the CRO would affirm, modify, or
reverse the decision issued under proposed Rule 10.9620 and issue a
written decision setting forth his or her findings and conclusions and
serve the decision on the Applicant. The decision would be served
pursuant to proposed Rules 10.9132 and 10.9134, would be effective upon
service, and would constitute final action of the Exchange. The
Exchange does not have a comparable rule.
Proposed Rule 10.9700 Series
    To maintain consistency with NYSE Arca's rule numbering
conventions, the Rule 10.9700 Series would be marked ``Reserved.''
Proposed Rule 10.9800 Series (Temporary Cease and Desist Orders)
    The Exchange proposes a new Rule 10.9800 Series to set forth
procedures for issuing temporary cease and desist orders. The Exchange
does not currently have a comparable rule. Except for cross-references
to Exchange rules and references reflecting the Exchange's membership,
the proposed Rule 10.9800 Series is substantially the same as the NYSE
Arca Rule 10.9800 Series.
    Under proposed Rule 10.9810 (Initiation of Proceeding), with the
prior written authorization of the Exchange's CRO or such other senior
officers as the CRO may designate, Enforcement may initiate a temporary
cease and desist proceeding with respect to alleged violations of
Section 10(b) of the Act and Rule 10b-5 thereunder; Exchange Act Rules
15g-1 through 15g-9; Article 9, Rule 2 (if the alleged violation is
unauthorized trading, or misuse or conversion of customer assets, or
based on violations of Section 17(a) of the Securities Act); and
Article 9, Rules 9, 10 11 and 12, which prohibit a variety of
manipulative activity, by serving a notice (as described in proposed
Rule 10.9810(b)) on a Participant, Participant Firm or covered person
or upon counsel or other person authorized to represent others under
Rule 10.9141, and filing a copy thereof with the Office of Hearing
Officers. The notice issued under the proposed Rule would be effective
when service is complete. Proposed Rule 10.9810(c) would provide that
if the parties agree to the terms of the proposed temporary cease and
desist order, the Hearing Officer shall have the authority to approve
and issue the order. Finally, proposed Rule 10.9810(d) would provide
that if Enforcement has not issued a complaint under Rule 10.9211
relating to the subject matter of the temporary cease and desist
proceeding and alleging violations of the rule or statutory provision
specified in the notice described in proposed paragraph (b),
Enforcement shall serve and file such a complaint with the notice
initiating the temporary cease and desist proceeding. Service of the
complaint can be made in accordance with the service provisions in
proposed Rule 10.9810(a). The proposed rule is substantially the same
as its NYSE Arca counterpart except for references reflecting the
Exchange's membership and the underlying rule references.\61\ The
Exchange does not have a comparable rule.
---------------------------------------------------------------------------

    \61\ NYSE Arca Rule 10.9810 references Section 10(b) of the Act
and Rule 10b-5 thereunder and Exchange Act Rules 15g-1 through 15g-
9. Article 9, Rule 2 is the Exchange's equivalent to NYSE Arca Rules
9.2010-E and 9.2020-E.
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    Proposed Rule 10.9820 (Appointment of Hearing Officer and Hearing
Panel) would govern the appointment of a Hearing Officer and Panelists.
    Under proposed Rule 10.9830 (Hearing), the hearing would be held
not later than 15 days after service of the notice and filing
initiating the temporary cease and desist proceeding, unless otherwise
extended by the Chief Hearing Officer or Deputy Chief Hearing Officer
for good cause shown. Proposed Rule 10.9830 would govern how the
hearing was conducted.
    Under proposed Rule 10.9840 (Issuance of Temporary Cease and Desist
Order by Hearing Panel), the Hearing Panel would be authorized to issue
a written decision stating whether a temporary cease and desist order
would be imposed. The Hearing Panel would be required to issue the
decision not later than ten days after receipt of the hearing
transcript, unless otherwise extended by the Chief Hearing Officer or
Deputy Chief Hearing Officer for good cause shown.
    Under proposed Rule 10.9850 (Review by Hearing Panel), at any time
after the Office of Hearing Officers served the Respondent with a
temporary cease and desist order, a Party could apply to the Hearing
Panel to have the order modified, set aside, limited, or suspended. The
Hearing Panel generally would be required to respond to the request in
writing within ten days after receipt of the request unless extended by
the Chief Hearing Officer or Deputy Chief Hearing Officer for good
cause shown. Proposed Rule 10.9860 (Violation of Temporary Cease and
Desist Orders) would authorize the initiation of a suspension or
cancellation of a Respondent's association or membership or any fitting
sanction under proposed Rule 10.9556 if the Respondent violated a
temporary cease and desist order.
    Finally, proposed Rule 10.9870 (Application to SEC for Review)
would provide that temporary cease and desist orders issued under the
proposed Rule 10.9800 Series would constitute final and immediately
effective disciplinary sanctions imposed by the Exchange, and that the
right to have any action under this rule series reviewed by the
Commission would be governed by Section 19 of the Act. The filing of an
application for review would not stay

the effectiveness of the temporary cease and desist order, unless the
Commission otherwise ordered.
Proposed Rule 11.21 (Disruptive Quoting and Trading Activity
Prohibited)
    The Exchange proposes new Rule 11.21 based on NYSE Arca Rule 11.21,
NYSE American Rule 5220--Equities, and NYSE Rule 5220, which in turn
are modeled on Commentary .03 to FINRA Rule 5210, that defines and
prohibits two types of disruptive quoting and trading activity on the
Exchange. The Exchange proposes to include this rule under Rule 11
because it is a business conduct trading practices rule.
    Proposed Rule 11.21(a) would prohibit Participant, Participant
Firms and covered persons from engaging in or facilitating disruptive
quoting and trading activity on the Exchange, as described in proposed
Rule 11.21(b)(1) and (2), including acting in concert with other
persons to effect such activity. The Exchange believes that it is
necessary to extend the prohibition to situations when persons are
acting in concert to avoid a potential loophole where disruptive
quoting and trading activity is simply split between several brokers or
customers. The Exchange also believes that, with respect to persons
acting in concert perpetrating an abusive scheme, it is important that
the Exchange have authority to act against the parties perpetrating the
abusive scheme, whether it is one person or multiple persons.
    Proposed Rule 11.21(c) would provide that, unless otherwise
indicated, the descriptions of disruptive quoting and trading activity
do not require the facts to occur in a specific order in order for the
Rule to apply. For instance, with respect to the pattern defined in
proposed Rule 11.21(b)(1)(A)-(D), it is of no consequence whether a
party first enters Displayed Orders and then Contra-side Orders or
vice-versa. However, as proposed, it is required for supply and demand
to change following the entry of the Displayed Orders.
    The Exchange believes that the proposed descriptions of disruptive
quoting and trading activity articulated in the rule are consistent
with the activities that have been identified and described in the
client access cases described in the NYSE American notice and with the
rules of other SROs.\62\
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    \62\ See, e.g., BZX Rule 12.15; NASDAQ General 9, Section 53.
See also Securities Exchange Release No. 80804 (May 30, 2017), 82 FR
25887, 25888-25890 (June 5, 2017) (SR-NYSEMKT-2017-25) (Notice of
filing discussing matters involving Biremis Corp. and Hold Brothers
On-Line Investment Services, Inc.).
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Proposed Article 2, Rule 4 (CFR)
    The Exchange proposes to create a CFR as a sub-committee of the
ROC.\63\ As proposed, the CFR would replace the Judiciary Committee as
the Exchange's appellate body reviewing disciplinary decisions on
behalf of the Board. The Judiciary Committee would retain the
responsibility for reviewing disciplinary decisions under the legacy
disciplinary rules. To effectuate this change, ``initiated pursuant to
Article 12, Rule 1'' would be added to the first sentence of Article 2,
Rule 3 governing the Judiciary Committee.
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    \63\ The composition and responsibilities of the ROC are
described in the Second Amended and Restated CHX Bylaws (``Exchange
Bylaws''), available here https://www.nyse.com/publicdocs/nyse/regulation/nyse/NYSE_Chicago_Second_Amended_and_Restated_Bylaws.pdf.
The ROC consists of at least three members, each of whom shall be a
Public Director of the Exchange.
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    As proposed, upon the effective date of the proposed disciplinary
rules, the CFR would be responsible for reviewing disciplinary
decisions and acting in an advisory capacity to the Board with respect
to disciplinary matters. The current Judiciary Committee is limited to
reviewing disciplinary decisions and does not act in an advisory
capacity to the Board. The Exchange proposes that the CFR, like the
current NYSE Arca CFR, would also advise the Board with respect to
disciplinary matters. Unlike the NYSE Arca CFR, the Exchange does not
propose that the CFR would review determinations to limit or prohibit
the continued listing of an issuer's securities on the Exchange or act
in an advisory capacity to the Board with respect to the listing and
delisting of securities because the Exchange is not a listing
market.\64\ Further, the Exchange does not propose to permit the CFR to
appoint a CFR Appeals Panel as on NYSE Arca.\65\ As noted above, NYSE
Arca retained appeals panels from its legacy disciplinary rules and the
Exchange does not a similar current process.
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    \64\ See NYSE Arca Rule 3.3(a)(2)(A).
    \65\ See, e.g., NYSE Arca Rule 3.3(a)(2)(B).
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    Similar to NYSE Arca, the Exchange's proposed CFR would be composed
of Non-Affiliated Director(s) and the Public Directors of the Exchange.
As per the Exchange Bylaws, ``Non-Affiliated Directors'' are
individuals nominated by the trading permit holders who are permitted
to trade on the Exchange's facilities for the trading of equities that
are securities as covered by the Act.\66\ ``Public Directors'' are
persons from the public and will not be, or be affiliated with, a
broker-dealer in securities or employed by, or involved in any material
business relationship with, the Exchange or its affiliates.\67\ The
Exchange believes that member participation on the proposed CFR would
be sufficient to provide for the fair representation of members in the
administration of the affairs of the Exchange, including the
disciplinary process, consistent with Section 6(b)(3) of the Act.\68\
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    \66\ See Exchange Bylaws, Art. II, Sec. 2(a).
    \67\ See id.
    \68\ 15 U.S.C. 78f(b)(3).
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    By establishing the CFR, the Exchange would make its appellate
process consistent with that of NYSE Arca and its other affiliates, all
of which have established a CFR as a subcommittee of the respective
affiliate's ROC.\69\ Like its affiliates, proposed Article 2, Rule 4
would provide that, subject to the proposed Rule 10.9000 Series,
decisions of the proposed CFR would be subject to Board review. As
proposed, the decision of the Board would constitute the final action
of the Exchange, unless such Board remands the proceedings.
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    \69\ See, e.g., NYSE Arca Rule 3.3(a)(2)(A). See generally
Thirteenth Amended and Restated Operating Agreement of the NYSE,
Section 2.03(h)(iii); Twelfth Amended and Restated Operating
Agreement of NYSE American, Section 2.03(h)(iii); and Sixth Amended
and Re-Stated Bylaws of NYSE National, Section 5.8.
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    Current Article 2, Rule 4 (Committee Quorum) would become new
Article 2, Rule 5.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Act,\70\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\71\ in particular, in that 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, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system. In addition, the
Exchange believes that the proposed rule furthers the objectives of
Section 6(b)(7) of the Act,\72\ in particular, in that it provides fair
procedures for the disciplining of members \73\ and persons associated
with members, the denial of membership to any person seeking membership
therein, the barring of any person from becoming associated with a
member thereof, and

the prohibition or limitation by the Exchange of any person with
respect to access to services offered by the Exchange or a member
thereof. In addition, the Exchange believes that the proposed rule
change furthers the objectives of Section 6(b)(3) of the Act,\74\ in
particular, in that it supports the fair representation of members in
the administration of the Exchange's affairs.
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    \70\ 15 U.S.C. 78f(b).
    \71\ 15 U.S.C. 78f(b)(5).
    \72\ 15 U.S.C. 78f(b)(7).
    \73\ The Exchange's equivalent to the term ``member'' in this
context is ``Participant'' and ``Participant Firm.''
    \74\ 15 U.S.C. 78f(b)(3).
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    The proposed changes will provide greater harmonization among SROs
resulting in less burdensome and more efficient regulatory compliance
for common members of the Exchange, the Exchange's affiliates, and
FINRA. As previously noted, the proposed rule text is substantially the
same as the NYSE Arca disciplinary rules, which were in turn modeled on
the FINRA rules. The proposed rule change will enhance the Exchange's
ability to have a direct and meaningful impact on the end-to-end
quality of its regulatory program, from detection and investigation of
potential violations through the efficient initiation and completion of
disciplinary measures where appropriate. As such, the proposed rule
change would foster cooperation and coordination with persons engaged
in facilitating transactions in securities and would remove impediments
to and perfect the mechanism of a free and open market and a national
market system. In this regard, the Exchange believes that amending
Article 7, Rule 12 so that failure to pay any fine, sanction or cost
levied in connection with a disciplinary action would be governed by
proposed Rule 10.8320 would further harmonize the Exchange's rules with
its affiliates that have adopted the substantially similar version of
proposed Rule 10.8320. Similarly, the Exchange believes that adopting a
new jurisdiction rule based on the Exchange's current jurisdiction rule
Article 12, Rule 7 that incorporates substantially similar provisions
based on NYSE Arca's jurisdiction Rule 2.0 would also further harmonize
the Exchange's disciplinary rules with its affiliates.
    The Exchange believes that the proposed processes for settling
disciplinary matters both before and after the issuance of a complaint
are fair and reasonable. While such proposed rules differ from certain
aspects of the Exchange's current settlement processes, the Exchange
believes that the proposed rule change, like the settlement process
adopted by NYSE Arca, provides adequate procedural protections to all
Parties and promotes efficiency.
    Similarly, the Exchange believes that adopting its affiliates'
appellate procedures would be fair and efficient and create consistency
with its affiliates' practices. The proposed rule change would provide
individual directors with the opportunity to call a case for review.
Currently, in addition to the parties, only the Board may order review
of a decision. Adopting the appellate rules of the Exchange's
affiliates would also apply a uniform period to all requests for review
of a disciplinary determination or penalty.
    Subject to a separate notice and comment filing, the Exchange would
retain its list of minor rule violations with certain technical and
conforming amendments, while adopting its affiliates' and FINRA's
process for imposing minor rule violation fines.\75\ In addition, as
set forth in the Exchange's companion filing and herein, the Exchange
believes that adding certain rules to its list of eligible minor rule
violations based on the rules of its affiliate will strengthen the
Exchange's ability to carry out its oversight and enforcement
responsibilities in cases where full disciplinary proceedings are
unwarranted in view of the minor nature of the particular violation.
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    \75\ See NYSE Arca Rule 10.9216(b), NYSE Rule 9216(b), & NYSE
American Rule 9216(b). See also generally FINRA Rule 9216(b). See
generally SR-NYSECHX-2022-08.
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    Specifically, the proposed additions are designed to prevent
fraudulent and manipulative acts and practices because it will provide
the Exchange the ability to issue a minor rule fine for violations of
its rules governing general registration and supervision requirements
in situations where a more formal disciplinary action may not be
warranted or appropriate. As provided for in proposed Rule 10.9217(d),
nothing in proposed Rule 10.9217 would require the Exchange to impose a
minor rule fine for a violation of any eligible rule and that if the
Exchange determines that any violation is not minor in nature, the
Exchange may, at its discretion, proceed with formal disciplinary
action rather than under proposed Rule 10.9217.
    The Exchange also believes that adding rules based on the rules of
its affiliate to its list of eligible minor rule violations would
promote fairness and consistency in the marketplace by permitting the
Exchange to issue a minor rule fine for violations of substantially
similar rules that are eligible for minor rule treatment on the
Exchange's affiliate, thereby harmonizing minor rule plan fines across
affiliated exchanges for the same conduct. As noted above, Article 6,
Rule 2(b), 5(a) and 5(b) are substantially similar to NYSE National and
NYSE Arca rules of similar purpose, which are each separately eligible
for a minor rule fine under the respective market's version of proposed
Rule 10.9217.\76\
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    \76\ See text accompanying notes 35-37, supra.
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    Further, the Exchange believes that the proposed additions to its
list of rules eligible for minor rule fines based on the rules of its
affiliate are consistent with Section 6(b)(6) of the Act,\77\ which
provides that members and persons associated with members shall be
appropriately disciplined for violation of the provisions of the rules
of the exchange, by expulsion, suspension, limitation of activities,
functions, and operations, fine, censure, being suspended or barred
from being associated with a member, or any other fitting sanction. As
noted, the proposed rule change would provide the Exchange ability to
sanction minor or technical violations pursuant to the Exchange's rules
and would increase the amounts of fines in order for the Exchange to
better deter violative activity and to harmonize its rules with that of
its affiliates.
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    \77\ 15 U.S.C. 78f(b)(6).
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    The Exchange believes that moving the Recommended Fine Schedule for
minor rule violations from the Fee Schedule to proposed Rule 10.9217
and removing it from the Fee Schedule would add clarity and
transparency to the Exchange's rules by reflecting the recommended
fines for minor rule violations in the same place in the Exchange's
rules. Similarly, updating the Recommended Fine Schedule to delete
obsolete rules and add recommended fines for rules that were added to
the list of minor rules but inadvertently omitted from the Recommended
Fine Schedule would also add clarity and transparency to the Exchange's
rules. The Exchange believes that adding such clarifying language would
also be consistent with the public interest and the protection of
investors because investors will not be harmed and in fact would
benefit from increased transparency, thereby reducing potential
confusion.
    Further, the Exchange believes that adding recommended fines for
Rule 7.16 and Rule 7.30 that were inadvertently omitted from the
current Recommended Fine Schedule based on the fines for the same rules
set forth in the rules of its affiliate would promote fairness and
consistency in the marketplace by permitting the Exchange to issue a
minor rule fine for violations of substantially similar rules that are

eligible for minor rule treatment on the Exchange's affiliate, thereby
harmonizing minor rule plan fines across affiliated exchanges for the
same conduct. As noted above, the proposed first, second and third
level fines for violations of Rule 7.16 are the same as those in NYSE
Arca Rule 10.9217(i)(1)1. for violations of NYSE Arca Rule 7.16-E, and
the proposed first, second and third level fines for violations of Rule
7.30 are the same as those in NYSE Arca Rule 10.9217(i)(1)5. for
violations of NYSE Arca Rule 7.30-E.\78\
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    \78\ See text accompanying notes 44-47, supra.
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    The Exchange also believes that the proposed changes are designed
to provide a fair procedure for the disciplining of members and persons
associated with members consistent with Sections 6(b)(7) and 6(d) of
the Act.\79\ Proposed Rules 10.9216(b) and 10.9217 would not preclude a
Participant, Participant Firm or covered person from contesting an
alleged violation and receiving a hearing on the matter with the same
procedural rights through a litigated disciplinary proceeding.
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    \79\ 15 U.S.C. 78f(b)(7) & 78f(d).
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    In addition, the Exchange believes that its proposed transition
plan would allow for a more orderly and less burdensome transition for
the Exchange's permit holders. The proposed delayed implementation of
the new rule set would provide a clear demarcation between matters that
would proceed under the new rules and those that would be completed
under the legacy rules.
    The Exchange believes adopting a new Article 2, Rule 4 to establish
a CFR as a sub-committee of the ROC, complies with Section 6(b)(7) of
the Act,\80\ which requires that the rules of a national securities
exchange provide a fair procedure for the disciplining of members and
persons associated with members. The members of the Exchange's ROC are
all Public Directors of the Exchange Board, thereby ensuring that the
ROC is comprised of independent members. In addition, the Exchange
believes that participation on the proposed CFR by Non-Affiliated
Directors would be sufficient to provide for the fair representation of
members in the administration of the affairs of the Exchange, including
rulemaking and the disciplinary process, consistent with Section
6(b)(3) of the Act.\81\ In addition, the Exchange believes that having
the CFR serve in the advisory capacity is consistent with and
facilitates a governance and regulatory structure that furthers the
objectives of Section 6(b)(5) of the Act.\82\
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    \80\ 15 U.S.C. 78f(b)(7).
    \81\ 15 U.S.C. 78f(b)(3).
    \82\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that proposed Rule 11.21 (Disruptive Quoting
and Trading Activity Prohibited), which is modeled on NYSE American
Rule 5220--Equities, NYSE Rule 5220, and NYSE Arca Rule 11.21, which in
turn are modeled on Commentary .03 to FINRA Rule 5210, would remove
impediments to and perfect the mechanism of a free and open market and
a national market system by harmonizing the Exchange's rules with those
of other SROs, including its affiliated exchanges.
    In addition, the Exchange believes that the proposed rule change is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, and to protect
investors and the public interest by providing the Exchange with
authority to prohibit specified disruptive quoting and trading activity
on the Exchange. More specifically, the Exchange believes that the
proposed rule is consistent with the public interest and the protection
of investors and otherwise furthers the purposes of the Act because the
proposal strengthens the Exchange's ability to carry out its oversight
and enforcement responsibilities as an SRO in cases where awaiting the
conclusion of a full disciplinary proceeding is unsuitable in view of
the potential harm to other member organization and their customers.
The Exchange notes that if this type of conduct is allowed to continue
on the Exchange, the Exchange's reputation could be harmed because it
may appear to the public that the Exchange is not acting to address the
behavior. The proposed expedited process would enable the Exchange to
address the behavior with greater speed. For the same reasons, the
Exchange believes that the proposal is consistent with Sections 6(b)(1)
and 6(b)(6) of the Act,\83\ which require that the rules of an exchange
enforce compliance with, and provide appropriate discipline for,
violations of the Commission and Exchange rules.
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    \83\ 15 U.S.C. 78f(b)(1) & (b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
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 intended to address competitive issues, but is rather designed to
(i) provide greater harmonization among Exchange, NYSE Arca, NYSE, NYSE
American, and FINRA rules of similar purpose for investigations and
disciplinary matters; and (ii) enhance the quality of the Exchange's
regulatory program, from detection of violations through disciplinary
actions, resulting in less burdensome and more efficient regulatory
compliance and facilitating performance of regulatory functions. In
addition, the proposed rule change will provide the Exchange with
necessary means to enforce against violations of manipulative quoting
and trading activity in an expedited manner, while providing
Participants, Participant Firms and covered person with the necessary
due process. The Exchange believes that it is important for all
exchanges to be able to take similar action to enforce its rules
against manipulative conduct thereby leaving no exchange prey to such
conduct.

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \84\ and Rule 19b-
4(f)(6) thereunder.\85\
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    \84\ 15 U.S.C. 78s(b)(3)(A).
    \85\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at