Exchange to charge BSTX Participants a regulatory transaction fee
pursuant to Section 31 of the Exchange Act (15 U.S.C. 78ee) and that
the Exchange will set forth fees pursuant to publicly available
schedule of fees.
---------------------------------------------------------------------------

    The Exchange believes that the proposed Rule 29000 Series (Fees) is
consistent with Sections 6(b)(5) of the Exchange Act because these
proposed rules are designed to protect investors and the public
interest by setting forth the Exchange's authority to assess fees on
BSTX Participants, which would be used to operate the BSTX System and
surveil BSTX for compliance with applicable laws and rules. The
Exchange believes that the proposed Rule 29000 Series (Fees) is also
consistent with Sections 6(b)(3) of the Exchange Act \310\ because the
proposed Rules specify that all fees assessed by the Exchange shall be
equitably allocated among BSTX Participants, issuers and other persons
using the

Exchange's facilities. The Exchange notes that the proposed Rule 29000
Series is substantially similar to the existing rules of another
exchange.\311\ The Exchange intends to submit a proposed rule change to
the Commission setting forth the proposed fees relating to trading on
BSTX in advance of the launch of BSTX.
---------------------------------------------------------------------------

    \310\ 15 U.S.C. 78f(b)(5).
    \311\ See Cboe BZX Rules 15.1 and 15.2.
---------------------------------------------------------------------------

Minor Rule Violation Plan
    The Exchange's disciplinary rules, including Exchange Rules
applicable to ``minor rule violations,'' are set forth in the Rule
12000 Series of the Exchange's current Rules. Such disciplinary rules
would apply to BSTX Participants and their associated persons pursuant
to proposed Rule 24000. The Exchange's Minor Rule Violation Plan
(``MRVP'') specifies those uncontested minor rule violations with
sanctions not exceeding $2,500 that would not be subject to the
provisions of Rule 19d-1(c)(1) under the Exchange Act \312\ requiring
that an SRO promptly file notice with the Commission of any final
disciplinary action taken with respect to any person or
organization.\313\ The Exchange's MRVP includes the policies and
procedures set forth in Exchange Rule 12140 (Imposition of Fines for
Minor Violations).
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    \312\ 17 CFR 240.19d-1(c)(1).
    \313\ The Commission adopted amendments to paragraph (c) of Rule
19d-1 to allow SROs to submit for Commission approval plans for the
abbreviated reporting of minor disciplinary infractions. See
Exchange Act Release No. 21013 (June 1, 1984), 49 FR 23828 (June 8,
1984). Any disciplinary action taken by an SRO against any person
for violation of a rule of the SRO which has been designated as a
minor rule violation pursuant to such a plan filed with and declared
effective by the Commission will not be considered ``final'' for
purposes of Section 19(d)(1) of the Exchange Act if the sanction
imposed consists of a fine not exceeding $2,500 and the sanctioned
person has not sought an adjudication, including a hearing, or
otherwise exhausted his administrative remedies.
---------------------------------------------------------------------------

    The Exchange proposes to amend its MRVP and Rule 12140 to include
proposed Rule 24010 (Penalty for Minor Rule Violations). The Rules
included in proposed Rule 24010 as appropriate for disposition under
the Exchange's MRVP are: (a) Rule 20000 (Maintenance, Retention and
Furnishing of Records); (b) Rule 25070 (Audit Trail); (c) Rule
25210(a)(1) (Two-Sided Quotation Obligations of BSTX Market Makers);
and Rule 25120 (Short Sales). The rules included in proposed Rule 12140
are the same as the rules included in the MRVPs of other
exchanges.\314\ Upon implementation of this proposal, the Exchange will
include the enumerated trading rule violations in the Exchange's
standard quarterly report of actions taken on minor rule violations
under the MRVP. The quarterly report includes: The Exchange's internal
file number for the case, the name of the individual and/or
organization, the nature of the violation, the specific rule provision
violated, the sanction imposed, the number of times the rule violation
has occurred, and the date of disposition. The Exchange's MRVP, as
proposed to be amended, is consistent with Sections 6(b)(1), 6(b)(5)
and 6(b)(6) of the Exchange Act,\315\ which require, in part, that an
exchange have the capacity to enforce compliance with, and provide
appropriate discipline for, violations of the rules of the Commission
and of the exchange. In addition, because amended Rule 12140 will offer
procedural rights to a person sanctioned for a violation listed in
proposed Rule 24010, the Exchange will provide a fair procedure for the
disciplining of members and associated persons, consistent with Section
6(b)(7) of the Exchange Act.\316\
---------------------------------------------------------------------------

    \314\ See e.g., IEX Rule 9.218 and Cboe BZX Rule 8.15.01.
    \315\ 15 U.S.C. 78f(b)(1), 78f(b)(5) and 78f(b)(6).
    \316\ 15 U.S.C. 78f(b)(7).
---------------------------------------------------------------------------

    This proposal to include the rules listed in Rule 24010 in the
Exchange's MRVP is consistent with the public interest, the protection
of investors, or otherwise in furtherance of the purposes of the
Exchange Act, as required by Rule 19d-1(c)(2) under the Exchange
Act,\317\ because it should strengthen the Exchange's ability to carry
out its oversight and enforcement responsibilities as an SRO in cases
where full disciplinary proceedings are unsuitable in view of the minor
nature of the particular violation. In requesting the proposed change
to the MRVP, the Exchange in no way minimizes the importance of
compliance with Exchange Rules and all other rules subject to the
imposition of fines under the MRVP. However, the MRVP provides a
reasonable means of addressing rule violations that do not rise to the
level of requiring formal disciplinary proceedings, while providing
greater flexibility in handling certain violations. The Exchange will
continue to conduct surveillance with due diligence and make a
determination based on its findings, on a case-by-case basis, whether a
fine of more or less than the recommended amount is appropriate for a
violation under the MRVP or whether a violation requires a formal
disciplinary action.
---------------------------------------------------------------------------

    \317\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

Amendments to Existing BOX Rules
    Due to the new BSTX trading facility and the introduction of
trading in Securities= [sic] on the Exchange, the Exchange proposes to
amend those Exchange Rules that would apply to BSTX Participants, but
that currently only contemplate trading in options. Therefore, the
Exchange is seeking to amend the following Exchange Rules, each of
which is set forth in Exhibit 5B submitted with the proposal:
     Rule 100(a) (Definitions) ``Options Participant'' or
``Participant'': The Exchange proposes to change the definition of
``Options Participant or Participant'' to ``Participant'' to reflect
Options Participants and BSTX Participants and to amend the definition
as follows: ``The term `Participant' means a firm, or organization that
is registered with the Exchange pursuant to the Rule 2000 Series for
purposes of participating in trading on a facility of the Exchange and
includes an `Options Participant' and `BSTX Participant.' ''
     Rule 100(a) (Definitions) ``Options Participant'': The
Exchange proposes to add a definition of ``Options Participant'' that
would be defined as follows: ``The term `Options Participant' is a
Participant registered with the Exchange for purposes of participating
in options trading on the Exchange.'' \318\
---------------------------------------------------------------------------

    \318\ In addition, as a result of these new defined terms, the
Exchange proposes to renumber definitions set forth in Rule 100(a)
to keep the definitions in alphabetical order.
---------------------------------------------------------------------------

     Rule 2020(g)(2) (Participant Eligibility and
Registration): The Exchange proposes to delete subsection (g)(2) and
replace it with the following: ``(2) Persons associated with a
Participant whose functions are related solely and exclusively to
transactions in municipal securities; (3) persons associated with a
Participant whose functions are related solely and exclusively to
transactions in commodities; (4) persons associated with a Participant
whose functions are related solely and exclusively to transactions in
securities futures, provided that any such person is appropriately
registered with a registered futures association; and (5) persons
associated with a Participant who are restricted from accessing the
Exchange and that do not engage in the securities business of the
Participant relating to activity that occurs on the Exchange.'' \319\
---------------------------------------------------------------------------

    \319\ In addition to revising Rule 2020(g)(2) to broaden it to
include securities activities beyond just options trading, the
Exchange proposes to add greater specificity to define persons that
are exempt from registration, consistent with the approach adopted
by other exchanges. See e.g., IEX Rule 2.160(m).
---------------------------------------------------------------------------

     Rule 2060 (Revocation of Participant Status or Association
with a Participant): The Exchange proposes to amend Rule 2060 to refer
to ``securities

transactions'' rather than ``options securities transactions.''
     Rule 3180(a) (Mandatory Systems Testing): The Exchange
proposes to amend subsection (a)(1) of Rule 3180 to also include BSTX
Participants, in addition to the categories of Market Makers and OFPs.
     Rule 7130(a)(2)(v) Execution and Price/Time Priority: The
Exchange proposes to update the cross reference to Rule 100(a)(58) to
refer to Rule 100(a)(59), which defines the term ``Request for Quote''
or ``RFQ'' under the Rules after the proposed renumbering.
     Rule 7150(a)(2) (Price Improvement Period): The Exchange
proposes to amend Rule 7150(a)(2) to update the cross reference to the
definition of a Professional in Rule 100(a)(51) to instead refer to
Rule 100(a)(52), which is where that term would be defined in the Rules
after the proposed renumbering.
     Rule 7230 (Limitation of Liability): The Exchange proposes
to amend the references in Rule 7230 to ``Options Participants'' to
simply ``Participants.''
     Rule 7245(a)(4) (Complex Order Price Improve Period): The
Exchange proposes to update the cross reference to Rule 100(a)(51) to
refer to Rule 100(a)(52), which defines the term ``Professional'' after
the proposed renumbering.
     IM-8050-3: The Exchange proposes to update the cross
reference to Rule 100(a)(56) to refer to Rule 100(a)(57), which defines
the term ``quote'' or ``quotation'' after the proposed renumbering.
     Rule 11010(a) ``Investigation Following Suspension'': The
Exchange proposes to amend subsection (a) of Rule 11010 to remove the
reference to ``in BOX options contracts'' and to modify the word
``position'' with the word ``security'' as follows: ``. . . the amount
owing to each and a complete list of each open long and short security
position maintained by the Participant and each of his or its
Customers.''
     Rule 11030 (Failure to Obtain Reinstatement): The Exchange
proposes to amend Rule 11030 to replace the reference to ``Options
Participant'' to simply ``Participant.''
     Rule 12140 (Imposition of Fines for Minor Rule
Violations): The Exchange proposes to amend Rule 12140 to replace
references to ``Options Participant'' to simply ``Participant.'' In
addition, the Exchange proposes to add paragraph (f) to Rule 12140, to
incorporate the aforementioned modifications to the Exchange's MRVP.
New paragraph (f) of Rule 12140 would provide: ``(f) Transactions on
BSTX. Rules and penalties relating to trading on BSTX that are set
forth in Rule 24010 (Penalty for Minor Rule Violations).''
    The Exchange believes that the proposed amendments to the
definitions set forth in Rule 100 are consistent with Section 6(b)(5)
of the Exchange Act \320\ because they protect investors and the public
interest by setting forth clear definitions that help BOX and BSTX
Participants understand and apply Exchange Rules. Without defining
terms used in the Exchange Rules clearly, market participants could be
confused as to the application of certain rules, which could cause harm
to investors.
---------------------------------------------------------------------------

    \320\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed amendments to the other
Exchange Rules detailed above are consistent with Section 6(b)(5) of
the Exchange Act \321\ because the proposed rule change is designed to
foster cooperation and coordination with persons engaged in
facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest.
The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system by ensuring that market participants can
easily navigate, understand and comply with the Exchange's rulebook.
The Exchange believes that the proposed rule change enables the
Exchange to continue to enforce the Exchange's rules. The Exchange
notes that none of the proposed changes to the current Exchange
rulebook would materially alter the application of any of those Rules,
other than by extending them to apply to BSTX Participants and trading
on the BSTX System. As such, the proposed amendments 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 exchange system.
Further, the Exchange believes that, by ensuring the rulebook
accurately reflects the intention of the Exchange's rules, the proposed
rule change reduces potential investor or market participant confusion.
---------------------------------------------------------------------------

    \321\ Id.
---------------------------------------------------------------------------

Forms To Be Used in Connection With BSTX
    In connection with the operation of BSTX, the Exchange proposes to
use a series of new forms to facilitate becoming a BSTX Participant and
for issuers to list their Securities. These forms have been submitted
with the proposal as Exhibits 3A-3L. Each are described below.
BSTX Participant Application
    Pursuant to proposed Rule 18000(b), in order to become a BSTX
Participant, an applicant must complete a BSTX Participant Application,
which has been submitted with the proposal as Exhibit 3A. The proposed
BSTX Participant Application requires the applicant to provide certain
basic information such as identifying the applicants name and contact
information, Designated Examining Authority, organizational structure,
and Central Registration Depository (``CRD'') number. The BSTX
Participant Application also requires applicants to provide additional
information including certain beneficial ownership information, the
applicant's current Form BD, an organization chart, a description of
how the applicant receives orders from customers, how it will send
orders to BSTX, and a copy of written supervisory procedures and
information barrier procedures.
    In addition, the BSTX Participant Application allows applicants to
indicate whether they are applying to be a BSTX Market Maker or a
Designated Market Maker. Applicants wishing to become a BSTX Market
Maker or Designated Market Maker must provide certain additional
information including a list of each of the applicant's trading
representatives (including a copy of each representative's Form U4), a
copy of the applicant's written supervisory procedures relating to
market making, a description of the source and amount of the
applicant's capital, and information regarding the applicant's other
business activities and information barrier procedures.
BSTX Participant Agreement
    Pursuant to Exchange Rule 18000(b), to transact business on BSTX,
prospective BSTX Participants must complete a BSTX Participant
Agreement. The BSTX Participant Agreement has been submitted with the
proposal as Exhibit 3B. The BSTX Participant Agreement provides that a
BSTX Participant must agree with the Exchange as follows:
    1. Participant agrees to abide by the Rules of the Exchange and
applicable bylaws, as amended from time to time, and all circulars,
notices, interpretations, directives and/or decisions adopted by the
Exchange.
    2. Participant acknowledges that BSTX Participant and its
associated

persons are subject to the oversight and jurisdiction of the Exchange.
    3. Participant authorizes the Exchange to make available to any
governmental agency or SRO any information it may have concerning the
BSTX Participant or its associated persons, and releases the Exchange
from any and all liability in furnishing such information.
    4. Participant acknowledges its obligation to update any and all
information contained in any part of the BSTX Participant's
application, including termination of membership with another SRO.
    These provisions of the BSTX Participant Agreement and others
therein are generally designed to reflect the Exchange's SRO
obligations to regulate BSTX Participants. Accordingly, these
provisions contractually bind a BSTX Participant to comply with
Exchange rules, acknowledge the Exchange's oversight and jurisdiction,
authorize the Exchange to disclose information regarding the
Participant to any governmental agency or SRO and acknowledge the
obligation to update any and all Application contained in the
Participant's application.
BSTX User Agreement
    In order to become a BSTX Participant, prospective participants
must also execute a BSTX User Agreement pursuant to proposed Rule
18000(b). The BSTX User Agreement, submitted with the proposal as
Exhibit 3C, includes provisions related to the term of the agreement,
compliance with exchange rules, right and obligations under the
agreement, changes to BSTX, proprietary rights under the agreement, use
of information received under the relationship, disclaimer of warranty,
limitation of liability, indemnification, termination and assignment.
The information is necessary to outline the rights and obligations of
the prospective Participant and the Exchange under the terms of the
agreement. Both the BSTX Participant Agreement and BSTX User Agreement
will be available on the Exchange's website (http://boxoptions.com">boxoptions.com).
BSTX Security Market Designated Market Maker Selection Form
    In accordance with proposed Rule 25230(b)(1), BSTX will maintain
the BSTX Security Designated Market Maker Selection Form, which has
been submitted with the proposal as Exhibit 3D. The issuer may select
its DMM from among a pool of DMMs eligible to participate in the
process. Within two business days of the issuer selecting its DMM, it
will use the BSTX Security Market Designated Market Maker Selection
form to notify BSTX of the selection. The form must be signed by a duly
authorized officer as specified in proposed Rule 25230(b)(1).
Clearing Authorization Forms
    In accordance with proposed Rule 18010, BSTX Participants that are
not members/participants of a registered clearing agency must clear
their transactions through a BSTX Participant that is a member of a
registered clearing agency. A BSTX Participant clearing through another
BSTX Participant would do so using, as applicable, either the BSTX
Clearing Authorization (non-Market Maker) form (submitted with the
proposal as Exhibit 3E) or the BSTX Participant Clearing Authorization
(Market Maker) form (submitted with the proposal as Exhibit 3F). Each
form would be maintained by BSTX and each form specifies that the BSTX
Participant clearing on behalf of the other BSTX Participant accepts
financial responsibility for all transactions on BSTX that are made by
the BSTX Participant designated on the form.
BSTX Listing Applications
    The Exchange proposes to specify the required forms of listing
application, listing agreement and other documentation that listing
applicants and listed companies must execute or complete (as
applicable) as a prerequisite for initial and ongoing listing on the
Exchange, as applicable (collectively, ``listing documentation''). As
proposed, the listing forms are substantially similar to those
currently in use by NYSE American LLC, with certain differences to
account for the trading of Securities. All listing documentation will
be available on the Exchange's website (http://boxoptions.com">boxoptions.com). Each of the
listing documents form a duly authorized representative of the company
must sign an affirmation that the information provided is true and
correct as of the date the form was signed. In the event that in the
future the Exchange makes any substantive changes (including changes to
the rights, duties, or obligations of a listed company or listing
applicant or the Exchange, or that would otherwise require a rule
filing) to such documents, it will submit a rule filing in accordance
with Rule 19b-4.\322\
---------------------------------------------------------------------------

    \322\ The Exchange will not submit a rule filing if the changes
made to a document are solely typographical or stylistic in nature.
---------------------------------------------------------------------------

    Pursuant to Rule 26130 and 26300 of the Exchange Rules, a company
must file and execute the BSTX Original Listing Application (submitted
with the proposal as Exhibit 3G) or the BSTX Additional Listing
Application (submitted with the proposal as Exhibit 3H) to apply for
the listing of Securities on BSTX.\323\ The BSTX Original Listing
Application provides information necessary, and in accordance with
Section 12(b) of the Exchange Act,\324\ for Exchange regulatory staff
to conduct a due diligence review of a company to determine if it
qualifies for listing on the Exchange. The BSTX Additional Listing
Application requires certain further information for an additional
listing of Securities. Relevant factors regarding the company and
securities to be listed would determine the type of information
required. The following describes each category and use of application
information:
---------------------------------------------------------------------------

    \323\ Pursuant to proposed Exchange Rule 26130, an applicant
seeking the initial listing of its Security must also provide a
legal opinion that the applicant's Security is a security under
applicable United States securities laws.
    \324\ 15 U.S.C. 78l(b).
---------------------------------------------------------------------------

    1. Corporate information regarding the issuer of the security to be
listed, including company name, address, contact information, Central
Index Key Code (CIK), SEC File Number, state and country of
incorporation, date of incorporation, whether the company is a foreign
private issuer, website address, SIC Code, CUSIP number of the security
being listed and the date of fiscal year end. This information is
required of all applicants and is necessary in order for the Exchange's
regulatory staff to collect basic company information for recordkeeping
and due diligence purposes, including review of information contained
in the company's SEC filings.
    2. For original listing applications only, corporate contact
information including the company's Chief Executive Officer, Chief
Financial Officer, Corporate Secretary, General Counsel and Investor
Relations Officer. This information is required of all initial
applicants and is necessary in order for the Exchange's regulatory
staff to collect current company contact information for purposes of
obtaining any additional due diligence information to complete a
listing qualification review of the applicant.
    3. For original listing applications only, offering and security
information regarding an offering, including the type of offering, a
description of the issue, par value, number of Securities outstanding
or offered, total Securities unissued, but reserved for issuance, date
authorized, purpose of Securities to be issued, number of Securities
authorized, and information relating to payment of dividends. This
information is required of all applicants listing Securities on the

Exchange, and is necessary in order for the Exchange's regulatory staff
to collect basic information about the offering.
    4. For original listing applications only, information regarding
the company's transfer agent. Transfer agent information is required
for all applicants. This information is necessary in order for the
Exchange's regulatory staff to collect current contact information for
such company transfer agent for purposes of obtaining any additional
due diligence information to complete a listing qualification review of
the applicant.
    5. For original listing applications only, contact information for
the outside counsel with respect to the listing application, if any.
This information is necessary in order for the Exchange's regulatory
staff to collect applicable contact information for purposes of
obtaining any additional due diligence information to complete a
listing qualification review of the applicant and assess compliance
with Exchange Rule 26130.
    6. For original listing applications only, a description of any
security preferences. This information is necessary to determine
whether the Applicant issuer has any existing class of common stock or
equity securities entitling the holders to differential voting rights,
dividend payments, or other preferences.
    7. For original listing applications only, type of Security
listing, including the type of transaction (initial public offering of
a Security, merger, spin-off, follow on offering, reorganization,
exchange offer or conversion) and other details related to the
transaction, including the name and contact information for the
investment banker/financial advisor contacts. This information is
necessary in order for the Exchange's regulatory staff to collect
information for such company for purposes of obtaining any additional
due diligence information to complete a listing qualification review of
the applicant.
    8. For original listing applications only, exchange requirements
for listing consideration. This section notes that to be considered for
listing, the Applicant Issuer must meet the Exchange's minimum listing
requirements, that the Exchange has broad discretion regarding the
listing of any Security and may deny listing or apply additional or
more stringent criteria based on any event, condition or circumstance
that makes the listing of an Applicant Issuer's Security inadvisable or
unwarranted in the opinion of the Exchange. The section also notes that
even if an Applicant Issuer meets the Exchange's listing standards for
listing on the BSTX Security Market, it does not necessarily mean that
its application will be approved. This information is necessary in
order for the Exchange's regulatory staff to assess whether an
Applicant Issuer is qualified for listing.
    9. For original listing applications only, regulatory review
information, including a certification that no officer, board member or
non-institutional shareholder with greater than 10% ownership of the
company has been convicted of a felony or misdemeanor relating to
financial issues during the past ten years or a detailed description of
any such matters. This section also notes that the Exchange will review
background materials available to it regarding the aforementioned
individuals as part of the eligibility review process. This regulatory
review information is necessary in order for the Exchange's regulatory
staff to assess whether there are regulatory matters related to the
company that render it unqualified for listing.
    10. For original listing applications only, supporting
documentation required prior to listing approval includes a listing
agreement, corporate governance affirmation, listing application
checklist and underwriter's letter. This documentation is necessary in
order to support the Exchange's regulatory staff listing qualification
review (corporate governance affirmation, listing application checklist
and underwriter's letter) and to effectuate the listed company's
agreement to the terms of listing (listing agreement).
    11. For additional listing applications only, transaction details,
including the purpose of the issuance, total Securities, date of board
authorization, date of shareholder authorization and anticipated date
of issuance. This information is required of all applicants listing
additional Securities on the Exchange, and is necessary in order for
the Exchange's regulatory staff to collect basic information about the
offering.
    12. For additional listing applications only, insider participation
and future potential issuances, including whether any director, officer
or principal shareholder of the company has a direct or indirect
interest in the transaction, and if the transaction potentially
requires the company to issue any Securities in the future above the
amount they are currently applying for. This information is required of
all applicants listing additional Securities on the Exchange, and is
necessary in order for the Exchange's regulatory staff to collect basic
information about the offering.
    13. For additional listing applications only, information for a
technical original listing, including reverse Security splits and
changes in states of incorporation. This information is required of all
applicants listing additional Securities on the Exchange, and is
necessary in order for the Exchange's regulatory staff to collect basic
information about the offering.
    14. For additional listing applications only, information for a
forward Security split or Security dividend, including forward Security
split ratios and information related to Security dividends. This
information is required of all applicants listing additional Securities
on the Exchange, and is necessary in order to determine the rights
associated with the Securities.
    15. For additional listing applications only, relevant company
documents. This information is required of all applicants listing
additional Securities on the Exchange, and is necessary to assess to
support the Exchange's regulatory staff listing qualification review.
    16. For additional listing applications only, reconciliation for
technical original listing, including Securities issued and outstanding
after the technical original event, listed reserves previously approved
for listing, and unlisted reserves not yet approved by the Exchange.
This information is required of all applicants listing additional
Securities on the Exchange, and is necessary to assess to support the
Exchange's regulatory staff listing qualification review and to obtain
all of the information relevant to the offering.
Checklist for Original Listing Application
    In order to assist issuers seeking to list its Securities on BSTX,
the Exchange has provided a checklist for issuers to seeking to file an
original listing application with BSTX. The BSTX Listing Application
Checklist, submitted with the proposal as Exhibit 3I, provides that
issuers must provide BSTX with a listing application, listing
agreement, corporate governance affirmation, underwriter's letter (for
an initial public offering of a Security only) and relevant SEC filings
(e.g., 8-A, 10, 40-F, 20-F). Each of the above referenced forms are
fully described herein. The checklist is necessary to assist issuers
and the Exchange regulatory staff in assessing the completion of the
relevant documents.
BSTX Security Market Listing Agreement
    Pursuant to proposed Exchange Rule 26132, to apply for listing on
the

Exchange, a company must execute the BSTX Security Market Listing
Agreement (the ``Listing Agreement''), which has been submitted with
this proposal as Exhibit 3J. Pursuant to the proposed Listing
Agreement, a company agrees with the Exchange as follows:
    1. Company certifies that it will comply with all Exchange rules,
policies, and procedures that apply to listed companies as they are now
in effect and as they may be amended from time to time, regardless of
whether the Company's organization documents would allow for a
different result.
    2. Company shall notify the Exchange at least 20 days in advance of
any change in the form or nature of any listed Securities or in the
rights, benefits, and privileges of the holders of such Securities.
    3. Company understands that the Exchange may remove its Securities
from listing on the BSTX Security Market, pursuant to applicable
procedures, if it fails to meet one or more requirements of Paragraphs
1 and 2 of this agreement.
    4. In order to publicize the Company's listing on the BSTX Security
Market, the Company authorizes the Exchange to use the Company's
corporate logos, website address, trade names, and trade/service marks
in order to convey quotation information, transactional reporting
information, and other information regarding the Company in connection
with the Exchange. In order to ensure the accuracy of the information,
the Company agrees to provide the Exchange with the Company's current
corporate logos, website address, trade names, and trade/service marks
and with any subsequent changes to those logos, trade names and marks.
The Listing Agreement further requires that the Company specify a
telephone number to which questions regarding logo usage should be
directed.
    5. Company indemnifies the Exchange and holds it harmless from any
third-party rights and/or claims arising out of use by the Exchange or,
any affiliate or facility of the Exchange (``Corporations'') of the
Company's corporate logos, website address, trade names, trade/service
marks, and/or the trading symbol used by the Company.
    6. Company warrants and represents that the trading symbol to be
used by the Company does not violate any trade/service mark, trade
name, or other intellectual property right of any third party. The
Company's trading symbol is provided to the Company for the limited
purpose of identifying the Company's security in authorized quotation
and trading systems. The Exchange reserves the right to change the
Company's trading symbol at the Exchange's discretion at any time.
    7. Company agrees to furnish to the Exchange on demand such
information concerning the Company as the Exchange may reasonably
request.
    8. Company agrees to pay when due all fees associated with its
listing of Securities on the BSTX Security Market, in accordance with
the Exchange's Rules.
    9. Company agrees to file all required periodic financial reports
with the SEC, including annual reports and, where applicable, quarterly
or semi-annual reports, by the due dates established by the SEC.
    The various provisions of the Listing Agreement are designed to
accomplish several objectives. First, clauses 1-3 and 6-8 reflect the
Exchange's SRO obligations to assure that only listed companies that
are compliant with applicable Exchange rules may remain listed. Thus,
these provisions contractually bind a listed company to comply with
Exchange rules, provide notification of any corporate action or other
event that will cause the company to cease to be in compliance with
Exchange listing requirements, evidence the company's understanding
that it may be removed from listing (subject to applicable procedures)
if it fails to be in compliance or notify the Exchange of any event of
noncompliance, furnish the Exchange with requested information on
demand, pay all fees due and file all required periodic reports with
the SEC. Clauses four and five contain standard legal representations
and agreements from the listed company to the Exchange regarding use of
its logo, trade names, trade/service markets, and trading symbols as
well as potential legal claims against the Exchange in connection
thereto.
BSTX Security Market Company Corporate Governance Affirmation
    In accordance with the proposed Rule 26800 Series, companies listed
on BSTX would be required to comply with certain corporate governance
standards, relating to, for example, audit committees, director
nominations, executive compensation, board composition, and executive
sessions. In certain circumstances the corporate governance standards
that apply vary depending on the nature of the company. In addition,
there are phase-in periods and exemptions available to certain types of
companies. The proposed BSTX Security Market Corporate Governance
Affirmation, submitted with this proposal as Exhibit 3K, enables a
company to confirm to the Exchange that it is in compliance with the
applicable standards, and specify any applicable phase-ins or
exemptions. Companies are required to submit a BSTX Security Market
Corporate Governance Affirmation upon initial listing on the Exchange
and thereafter when an event occurs that makes an existing form
inaccurate. This BSTX Security Market Corporate Governance Affirmation
assists the Exchange regulatory staff in monitoring listed company
compliance with the corporate governance requirements.
Sample Underwriter's Letter
    In accordance with proposed Rule 26101, an initial public offering
of a Security must meet certain listing requirements. The Exchange
seeks to require the issuer's underwriter to execute a letter setting
forth the details of the offering, including the name of the offering
and why the offering meets the criteria of the BSTX rules. This
information, set forth in the proposed Sample Underwriter's Letter and
submitted with this proposal as Exhibit 3L, is necessary to assist the
Exchange's regulatory staff in assessing the offering's compliance with
BSTX listing standards for an initial public offering of a Security.
Regulation
    In connection with the operation of BSTX, the Exchange will
leverage many of the structures it established to operate a national
securities exchange in compliance with Section 6 of the Exchange
Act.\325\ Specifically, the Exchange will extend its Regulatory
Services Agreement with FINRA to cover BSTX Participants and trading on
the BSTX System. This Regulatory Services Agreement will govern many
aspects of the regulation and discipline of BSTX Participants, just as
it does for options regulation. The Exchange will perform Security
listing regulation, authorize BSTX Participants to trade on the BSTX
System, and conduct surveillance of Security trading on the BSTX
System.
---------------------------------------------------------------------------

    \325\ 15 U.S.C. 78f.
---------------------------------------------------------------------------

    Section 17(d) of the Exchange Act \326\ and the related Exchange
Act rules permit SROs to allocate certain regulatory responsibilities
to avoid duplicative oversight and regulation. Under Exchange Act Rule
17d-1,\327\ the SEC designates one SRO to be the Designated Examining
Authority, or DEA, for each broker-dealer that is a member of more than
one SRO. The DEA is responsible for the financial aspects of that
broker-dealer's regulatory

oversight. Because Exchange Participants, including BSTX Participants,
also must be members of at least one other SRO, the Exchange would
generally not be designated as the DEA for any of its members.\328\
---------------------------------------------------------------------------

    \326\ 15 U.S.C. 78q(d).
    \327\ 17 CFR 240.17d-1.
    \328\ See Exchange Rule 2020(a) (requiring that a Participant be
a member of another registered national securities exchange or
association).
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    Rule 17d-2 under the Exchange Act \329\ permits SROs to file with
the Commission plans under which the SROs allocate among each other the
responsibility to receive regulatory reports from, and examine and
enforce compliance with specified provisions of the Exchange Act and
rules thereunder and SRO rules by, firms that are members of more than
one SRO (``common members''). If such a plan is declared effective by
the Commission, an SRO that is a party to the plan is relieved of
regulatory responsibility as to any common member for whom
responsibility is allocated under the plan to another SRO. The Exchange
plans to join the Plan for the Allocation of Regulatory
Responsibilities Regarding Regulation NMS.\330\ The Exchange may choose
to join certain Rule 17d-2 agreements such as the agreement allocating
responsibility for insider trading rules.\331\
---------------------------------------------------------------------------

    \329\ 17 CFR 240.17d-2.
    \330\ Exchange Act Release No. 85046 (February 4, 2019), 84 FR
2643 (February 7, 2019).
    \331\ Exchange Act Release No. 84392 (October 10, 2018), 83 FR
52243 (October 16, 2018).
---------------------------------------------------------------------------

    For those regulatory responsibilities that fall outside the scope
of any Rule 17d-2 agreements that the Exchange may join, subject to
Commission approval, the Exchange will retain full regulatory
responsibility under the Exchange Act. However, as noted, the Exchange
will extend its existing Regulatory Services Agreement with FINRA to
provide that FINRA personnel will operate as agents for the Exchange in
performing certain regulatory functions with respect to BSTX. As is the
case with the Exchange's options trading platform, the Exchange will
supervise FINRA and continue to bear ultimate regulatory responsibility
for BSTX. Consistent with the Exchange's existing regulatory structure,
the Exchange's Chief Regulatory Officer shall have general supervision
of the regulatory operations of BSTX, including responsibility for
overseeing the surveillance, examination, and enforcement functions and
for administering all regulatory services agreements applicable to
BSTX. Similarly, the Exchange's existing Regulatory Oversight Committee
will be responsible for overseeing the adequacy and effectiveness of
Exchange's regulatory and self-regulatory organization
responsibilities, including those applicable to BSTX. Finally, as it
does with options, the Exchange will perform automated surveillance of
trading on BSTX for the purpose of maintaining a fair and orderly
market at all times and monitor BSTX to identify unusual trading
patterns and determine whether particular trading activity requires
further regulatory investigation by FINRA.
    In addition, the Exchange will oversee the process for determining
and implementing trade halts, identifying and responding to unusual
market conditions, and administering the Exchange's process for
identifying and remediating ``clearly erroneous trades'' pursuant to
proposed Rule 25110.
NMS Plans
    The Exchange intends to join the Order Execution Quality Disclosure
Plan, the Plan to Address Extraordinary Market Volatility, the Plan
Governing the Process of Selecting a Plan Processor, and the applicable
plan(s) for consolidation and dissemination of market data. The
Exchange is already a participant in the NMS plan related to the
Consolidated Audit Trail. Consistent with Section 6(b)(5) of the
Exchange Act,\332\ the Exchange believes that joining the same set of
NMS plans that all other national securities exchanges that trade
equities must join fosters cooperation and coordination with other
national securities exchanges and other market participants engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities.
---------------------------------------------------------------------------

    \332\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the provisions of the Exchange Act,\333\ in general and with
Section 6(b)(5) of the Exchange Act,\334\ in particular, in that it is
designed to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest;
and it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers, or to regulate by virtue of
any authority conferred by this title matters not related to the
purposes of this title or the administration of the Exchange.
---------------------------------------------------------------------------

    \333\ 15 U.S.C. 78a et seq.
    \334\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that BSTX will benefit individual investors,
other market participants, and the equities market generally. The
Exchange proposes to establish BSTX as a facility of the Exchange that
would trade equities in a similar manner to how equities presently
trade on other exchanges. BSTX would also make available to BSTX
Participants the BSTX Market Data Blockchain, which provides certain
order and transaction information with respect to a BSTX Participant's
trading activity on BSTX, as well as anonymized order and transaction
data with respect to all trading activity occurring on BSTX. The
Exchange believes that the content of information available on the BSTX
Market Data Blockchain would generally be similar to TAQ data made
available by NYSE today, except that (i) the BSTX Market Data
Blockchain would use a private, permissioned network controlled by the
Exchange to make the market data available to BSTX Participants; (ii) a
BSTX Participant would be able to certain see non-anonymized
information about its own trading activity on BSTX; \335\ and (iii) the
BSTX Market Data Blockchain would include market data only with respect
to trading activity occurring on BSTX, while the Exchange understands
that TAQ data includes certain trading and quotation data that may
occur on other markets.\336\ The Exchange believes that the use of
blockchain technology, through a private permissioned network that
operates in manner that is fully compatible with the existing
regulatory structures for trading, recordkeeping, and clearance and
settlement that market participants are familiar with is an appropriate
way to introduce blockchain to the current market structure. BSTX
Participants would have not have affirmative obligations to provide
information to the blockchain nor would they be required to access or
use it. The data inputs to the BSTX Market Data Blockchain would be
captured in the ordinary course as BSTX Participants' orders and
messages are

sent to the Exchange through the FIX gateway. The BSTX Market Data
Blockchain, therefore, would be optional functionality available to all
BSTX Participants on equal terms, and therefore is not unfairly
discriminatory, consistent with Section 6(b)(5) of the Exchange
Act.\337\
---------------------------------------------------------------------------

    \335\ All non-anonymized information would be available only to
the BSTX Participant who provided such information to the Exchange
through its trading activity on BSTX.
    \336\ See e.g., NYSE, Daily TAQ Fact Sheet, (noting that TAQ
data ``provides users access to all trades and quotes for all issues
traded on NYSE, Nasdaq and the regional exchanges for a single
trading day'' and is ``a comprehensive history of daily activity
from NYSE markets and the U.S. Consolidated Tape covering U.S.
Equities instruments (CTA and UTP participating markets'') https://www.nyse.com/publicdocs/nyse/data/Daily_TAQ_Fact_Sheet.pdf.
    \337\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange has proposed to make the BSTX Market Data Blockchain
available only to BSTX Participants rather than other market
participants that are not BSTX Participants primarily because the
Exchange believes that BSTX Participants would be the most likely to be
interested in potentially using the BSTX Market Data Blockchain. The
BSTX Market Data Blockchain would consist of information that pertains
solely to trading activity on BSTX and not other exchanges. The
Exchange believes, therefore, that most persons interested in market
data relating to trading on BSTX would likely become a BSTX
Participant, at which time they would have access to the BSTX Market
Data Blockchain. The Exchange solicits comment from the public as to
whether non-BSTX Participants would be interested in having access to
the BSTX Market Data Blockchain and the anticipated uses of the BSTX
Market Data Blockchain by such non-BSTX Participants.\338\ To the
extent that non-BSTX Participants are interested in access to General
Market Data (i.e., anonymized market data) available on the BSTX Market
Data Blockchain, the Exchange would consider providing access to such
persons on an ad hoc basis \339\ or may consider amendments to the
proposal (or subsequent rule filings) to provide regular access to
General Market Data on the BSTX Market Data Blockchain if there is
sufficient interest or demand from non-BSTX Participants. The Exchange
notes that the anonymized data that would be available on the BSTX
Market Data Blockchain would be the same information that would be
available through the Exchange's proprietary market data feeds, which
any person (i.e., both BSTX Participants and non-BSTX Participants)
would be able to acquire. Accordingly, under the proposal, non-BSTX
Participants would still be able to access the same anonymized market
data information available on the BSTX Market Data Blockchain as BSTX
Participants, but through a different means (i.e., through the
proprietary market data feeds rather than via the BSTX Market Data
Blockchain). Because the same anonymized information would be available
to non-BSTX Participants through another means, the Exchange believes
that the proposed limitation of access to the BSTX Market Data
Blockchain is not unfairly discriminatory and does not impose a burden
on competition, consistent with Sections 6(b)(5) and 6(b)(8) of the
Exchange Act.\340\
---------------------------------------------------------------------------

    \338\ The Exchange reiterates that non-anonymized market data
available on the BSTX Market Data Blockchain would only ever be
accessible by the BSTX Participant who provided such market data
through its trading on BSTX.
    \339\ For example, the Exchange might provide temporary access
to the BSTX Market Data Blockchain to academics studying equity
markets.
    \340\ 15 U.S.C. 78f(b)(5) and (8).
---------------------------------------------------------------------------

    In addition, because the BSTX Market Data Blockchain only captures
information with respect to trading activity on BSTX, it would have no
effect or impact on other exchanges, promoting consistency with Section
6(b)(8) of the Exchange Act, which prohibits an exchange's rules from
imposing a burden on competition not necessary or appropriate in
furtherance of the Exchange Act.\341\ The entry of an innovative
competitor such as BSTX seeking to implement a measured introduction of
blockchain technology in connection with the trading of equity
securities may promote competition by encouraging other market
participants to find ways of using blockchain technology in connection
with securities transactions. The proposed regulation of BSTX and BSTX
Participants, as well as the execution of Securities using a price-time
priority model and the clearance and settlement of Securities pursuant
to the rules, policies and procedures of a registered clearing agency
will all operate in a manner substantially similar to existing equities
exchanges. In this way, the Exchange believes that BSTX provides a
robust regulatory structure that protects investors and the public
interest while introducing the use of blockchain technology as an
additional feature in connection with Securities traded on the
Exchange.
---------------------------------------------------------------------------

    \341\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In connection with the clearance and settlement of Securities
pursuant to the rules, policies and procedures of a registered clearing
agency, the Exchange proposes that BSTX Participants would be able to
include in their orders in Securities that are submitted to BSTX
certain parameters to indicate a preference for settlement on a same
day (T+0) or next trading day (T+1) basis when certain conditions are
met.\342\ Any such orders would at the time of order entry represent
orders that would be regular-way and would be presumed to settle on a
T+2 basis just like any other order submitted by a BSTX Participant
that does not include a parameter indicating a preference for faster
settlement. As described in greater detail above, however, an Order
with a T+0 Preference or an Order with a T+1 Preference would only
result in executions that would actually settle more quickly than on a
T+2 basis if, and only if, all of the conditions in Rule 25060(h) are
met and the execution that is transmitted to NSCC is eligible for T+0
or T+1 settlement under the rules, policies and procedures of a
registered clearing agency.\343\ Any such preference included by a BSTX
Participant would only become operative if the order happens to execute
against another order from a BSTX Participant that also includes a
parameter indicating a preference for settlement on a T+0 or T+1 basis.
---------------------------------------------------------------------------

    \342\ See proposed Rule 25060(h).
    \343\ See proposed Rule 25100(d).
---------------------------------------------------------------------------

    The Exchange believes that the proposed ability for BSTX
Participants to indicate a preference for shorter settlement times as
described above is consistent with the Exchange Act and in particular
Section 6(b)(5) of the Exchange Act because it would help remove
impediments to and perfect the mechanism of a free and open market and
is not designed to permit unfair discrimination between or among market
participants.\344\ Specifically, allowing for BSTX Participants to
potentially reduce the settlement time for transactions on BSTX
pursuant to the rules, policies and procedures of a registered clearing
agency helps remove impediments to and perfects a free an open market
by allowing greater choice for BSTX Participants who may want to avail
themselves of currently available functionality at registered clearing
agencies. Moreover, the Commission has previously noted a number of
positive effects relating to the liquidity risks and costs faced by
members in a clearing agency, and the Exchange believes that this
proposed functionality on BSTX would help realize such positive
effects.\345\ Proposed Rule 25060(h) is not designed to permit unfair
discrimination between market participants consistent with Section
6(b)(5) \346\ because the Rule would allow all orders that are
marketable against one another--regardless of the settlement preference
of the BSTX Participant submitting the order (or their customer)--to
execute against each

other. A BSTX Participant that would like settlement of T+2 could still
interact with orders on BSTX that indicate a preference for a shorter
settlement cycle and vice-versa. Only where two orders that both
indicate a preference for a shorter settlement cycle match on BSTX
would a shorter settlement cycle be possible.
---------------------------------------------------------------------------

    \344\ 15 U.S.C. 78f(b)(5).
    \345\ See supra notes 888-91 and accompanying text.
    \346\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange also proposes to suspend unlisted trading privileges
for Securities that qualify as Thinly Traded Securities, which the
Exchange also believes is consistent with the Exchange Act for the
reasons detailed in Part II.H above.\347\ The Exchange proposes to
suspend UTP only for Securities that qualify as Thinly Traded
Securities, which are generally those with an ADV of trading of 100,000
or less and a market capitalization of less than $1 billion, and where
an issuer of a Thinly Traded Security elects to have UTP suspended. The
Exchange believes that the proposed suspension of UTP is consistent
with Section 6(b)(5) of the Exchange Act \348\ because it is designed
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest by concentrating displayed liquidity
on a single exchange, which many, including the Commission, have
suggested could potentially improve the market quality for thinly
traded securities. The Exchange believes that concentrating displayed
liquidity on a single venue could make market making more attractive in
Thinly Traded Securities, thereby increasing the overall amount and
depth of liquidity in the market and in turn making it easier for
investors to acquire and dispose of positions in Thinly Traded
Securities, which furthers the protection of investors and the public
interest, consistent with Section 6(b)(5) of the Exchange Act.\349\ The
Exchange would make available order and transaction data relating to
Thinly Traded Securities to regulators, academics, and others upon
request to evaluate how the suspension of UTP has impacted Thinly
Traded Securities. The Exchange will also perform its own analysis
across a range of market quality metrics to evaluate whether the
suspension of UTP has had the intended effect of improving market
quality for Thinly Traded Securities.\350\ The Exchange believes that
by studying the effect of the suspension of UTP for Thinly Traded
Securities and making available market data for others to make similar
studies, the Exchange can help ensure that the suspension of UTP is in
fact having the intended effect of improving market quality for Thinly
Traded Securities and/or determine what else might be necessary to
improve market quality, all of which the Exchange believes will help
further the protection of investors and the public interest.
---------------------------------------------------------------------------

    \347\ See supra notes 71-76 and accompanying text.
    \348\ 15 U.S.C. 78f(b)(5).
    \349\ Id.
    \350\ See Part II.H.5.
---------------------------------------------------------------------------

    Similarly, consistent the Exchange believes that the proposed
suspension of UTP for Thinly Traded Securities would not permit unfair
discrimination between customers, issuers, brokers or dealers, because
the suspension is for the purpose of furthering the regulatory
objective of improving market quality for securities that are thinly
traded. Although non-Thinly Traded Securities would not be able to have
UTP suspended, this discriminatory treatment is not ``unfair'' given
the substantial public interest, as demonstrated through the
Commission's statements and by market participants at the Roundtable,
in improving market conditions for thinly traded securities. The
Exchange believes that the proposed suspension of UTP would help
protect investors and the public interest, consistent with Section
6(b)(5), by concentrating displayed liquidity on a single venue,
thereby providing greater incentives for market makers in Thinly Traded
Securities and in turn making it easier for investors to buy and sell
shares of Thinly Traded Securities. The Exchange believes that there is
a general consensus among members of Commission staff, former
Commissioners (including former Chairman Jay Clayton), the Department
of the Treasury, and market participants, as well as empirical
evidence, making clear that operating company stocks with an ADV of
less than 100,000 shares suffer significant liquidity and market
quality challenges not faced by stocks with greater trading volume. It
is for this reason, the Exchange believes, that the Commission
specifically solicited requests from exchanges for innovative
approaches to improve the market for thinly traded securities,
including requests for suspension of UTP.\351\
---------------------------------------------------------------------------

    \351\ Commission Statement on Thinly Traded Securities at 56956.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Exchange Act.\352\
The Exchange operates in an intensely competitive global marketplace
for transaction services. The Exchange competes for the privilege of
providing market services to broker-dealers through the Exchange's
service offerings and associated benefits it is able to provide. The
Exchange's ability to compete in this environment is based in large
part on the quality of its trading systems, the overall quality of its
market and its attractiveness to market participants who evaluate the
Exchange on, among other things, speed, reliability, the likelihood and
costs of executions, as well as spreads, fairness, and transparency.
---------------------------------------------------------------------------

    \352\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that the primary areas where the proposed
rule change could potentially result in a burden on competition are
with regard to the terms on which: (1) Issuers may list their
securities for trading, (2) market participants may access BSTX as a
facility of the Exchange and use its services including the BSTX Market
Data Blockchain, (3) Security transactions may be cleared and settled,
(4) Security transactions would occur OTC (5) Security transactions
would occur on other exchanges through an extension of UTP to
Securities that are not Thinly Traded Securities; and (6) there would
be a suspension of UTP for Thinly Traded Securities.
    Regarding considerations (1) and (2), and as described in detail in
Item 3 above, the BSTX Rules are drawn substantially from the existing
rules of other exchanges that the Commission has already found to be
consistent with the Exchange Act, including regarding whether they
impose any burden on competition that is not necessary or appropriate
in furtherance of its purposes. For example, the BSTX Non-ETP Listing
Rules in the 26000 Series and Suspension and Delisting Rules in the
27000 Series that affect issuers and their ability to list Securities
for trading are based substantially on the current rules of NYSE
American. Additionally, the BSTX Trading and Listing of ETPs Rules in
the 28000 Series that concern issuers and their ability to list
Securities that are exchange-traded products are based substantially on
the current rules of NYSE Arca. Additionally, the BSTX Rules regarding
membership and access to and use of the facilities of BSTX are also
substantially based on existing exchange rules. Specifically, the
relevant BSTX Rules are as follows: participation on BSTX (Rule 18000
Series); business conduct for BSTX participants (Rule 19000 Series);

financial and operational rules for BSTX participants (Rule 20000
Series); supervision (Rule 21000 Series); miscellaneous provisions
(Rule 22000 Series); trading practices (Rule 23000 Series); discipline
and summary suspension (Rule 24000 Series); trading (Rule 25000
Series); market making (Rule 25200 Series); and dues, fees,
assessments, and other charges (Rule 28000 [sic] Series). As described
in detail in Item 3, these rules are substantially based on analogous
rules of the following exchanges, as applicable: BOX; Investors
Exchange LLC; Cboe BZX Exchange, Inc.; The Nasdaq Stock Market LLC; and
NYSE American LLC.
    Regarding consideration (2) and use of the BSTX Market Data
Blockchain, the terms on which BSTX would operate the BSTX Market Data
Blockchain under Rule 17020 would apply equally to all BSTX
Participants and would therefore not impose any different burden on one
BSTX Participant compared to another. As described in detail in Item 3,
BSTX would issue login credentials to each BSTX Participant through
which the BSTX Participant may choose to access the BSTX Market Data
Blockchain. Accessing the BSTX Market Data Blockchain would not be
required. If a Participant chooses to do so, it would be able to see
its order and transaction information on BSTX as well as certain
anonymized General Market Data from other BSTX Participants. Because
the General Market Data would be anonymized, the Exchange believes that
there would not be cause for concern regarding potential trading
information leakage or the ability for a BSTX Participant to reverse
engineer another BSTX Participant's trading strategies. Moreover, the
BSTX Market Data Blockchain would not require any affirmative action on
the part of a BSTX Participant for its information to be recorded to
the BSTX Market Data Blockchain. Rather the Exchange would control all
aspects of the BSTX Market Data Blockchain as a private, permission-
based blockchain accessible to BSTX Participants, and the BSTX Market
Data Blockchain would capture order and execution activity that occurs
in the normal course on BSTX and is made available to BSTX Participants
as an additional resource that they may use in their discretion. The
BSTX Market Data Blockchain would functionally provide market data
similarly to what NYSE offers through TAQ data, but would simply
provide it using distributed ledger technology. Accordingly, although
capturing a different set of market data than captured by NYSE TAQ
data, the BSTX Market Data Blockchain is pro-competitive by offering a
similar type of market data and using an innovative technology to do
so. For these reasons, the Exchange believes that the BSTX Market Data
Blockchain would not impose any burden on competition.
    In addition to not imposing any burden on competition, the Exchange
believes that the BSTX Market Data Blockchain would provide two primary
benefits to BSTX Participants. First, the Exchange believes that BSTX
Participants that choose to access the BSTX Market Data Blockchain may
find the information useful as a focused source of market data
regarding order and transaction information on BSTX.\353\ Second, the
Exchange believes that the BSTX Market Data Blockchain would help
familiarize BSTX Participants that access the market data with the
capabilities of blockchain technology in a manner that does not impose
any burden on competition on them or others. The Commission has stated
that it is ``mindful of the benefits of increasing use of new
technologies for investors and the markets, and has encouraged
experimentation and innovation . . .'' stating further that
``[i]nformation and communications technologies are critical to healthy
and efficient primary and secondary markets.'' \354\ Regarding the
judgment of whether the benefits of certain technologies are
meritorious, the Commission has explained its view that ``[t]he market
will ultimately prove the worth of technology--whether the benefits to
the industry and its investors of developing and using new services are
greater than the associated costs.'' \355\ Consistent with these
statements, the Exchange believes that promoting use of the
functionality of blockchain technology through the BSTX Market Data
Blockchain will allow BSTX Participants to observe and increase their
familiarity with the capabilities and potential benefits of blockchain
technology in a context that operates within the current equity market
infrastructure and thereby advances and protects the public's interest
in the use and development of new data processing techniques that may
create opportunities for more efficient, effective and safe securities
markets.\356\
---------------------------------------------------------------------------

    \353\ For example, a BSTX Participant may wish to use the market
data to review its trading activity on BSTX, determine what the
market quality was at a particular time for a given Security or to
evaluate execution quality on BSTX.
    \354\ See supra n. 366-38 and accompanying text.
    \355\ Id.
    \356\ See supra n. 39 and accompanying text.
---------------------------------------------------------------------------

    Regarding consideration (3) and the manner in which Security
transactions may be cleared and settled, the Exchange proposes under
BSTX Rule 25100(d) to clear and settle transactions in Securities in
accordance with the rules, policies and procedures of a registered
clearing agency. The Exchange believes that this is consistent with how
other exchange-listed equity securities are cleared and settled today.
Therefore, BSTX's rules regarding clearance and settlement of Security
transactions do not impose any relative burden on competition regarding
the manner in which trades may be cleared and settled because market
participants would be able to clear and settle Security transactions in
the same manner as they already do in other types of NMS stock. The
Exchange believes that this is equally true regarding the proposed
ability of BSTX Participants to submit to BSTX orders in Securities in
which they include a parameter expressing a preference for T+1 or T+0
settlement, consistent with the rules, policies and procedures of a
registered clearing agency, as proposed in the operation of proposed
BSTX Rules 25060(h) and 25100(d). As described in detail in Item 3
above, BSTX believes that NSCC and DTC already have authority under
their rules policies and procedures to clear and settle certain trades
on a T+1 or T+0 basis and that these clearing agencies do already clear
and settle trades in accordance with this authority.
    The Exchange believes that answering the question of whether a
burden on competition is imposed by the proposal to allow BSTX
Participants to specify an order parameter indicating a preference for
potential settlement on a T+0 or T+1 basis requires an assessment under
three general circumstances for order submissions and executions. The
first possible circumstance contemplates orders that BSTX Participants
would submit to the BSTX System and that would result in an execution
on BSTX. Here, it would be entirely the choice of any BSTX Participant
regarding whether to include an order parameter indicating a preference
for T+0 or T+1 settlement where possible under the settlement logic in
BSTX Rule 25060(h). If no such additional parameter is included in the
order, the order defaults to settle on a regular-way T+2 basis under
the settlement logic in proposed BSTX Rule 25060(h). As described in
Part II.I of Item 3, an order that includes a parameter indicating a
preference for potential T+0 settlement will execute against any order
against which it is marketable with settlement occurring on

a regular-way settlement cycle of T+2 except where: (i) The order with
the parameter for potential settlement on T+0 executes against another
order with a parameter for potential settlement on T+0 (in which case
settlement would occur on the trade date if the transaction is also
eligible for settlement on T+0 under the rules, policies and procedures
of a registered clearing agency) or (ii) the order with a parameter for
potential settlement on T+0 executes against an order with a parameter
for potential settlement on T+1 (in which case settlement would occur
T+1). Similarly, as proposed, an order that includes a parameter for
potential settlement on T+1 will execute against any order against
which it is marketable with settlement occurring on a regular-way
settlement date of T+2 except where: (i) An order that includes a
parameter for potential settlement on T+1 executes against another such
order or an order that includes a parameter for potential settlement on
T+0 (in which case settlement would occur T+1). In all cases under the
settlement logic in proposed BSTX Rule 25060(h), an order that does not
include an optional parameter indicating a preference for potential
settlement on T+0 or T+1 would be a regular way order that would always
receive T+2 settlement if it executes against any other order in the
BSTX System. In this way, all of the orders submitted to BSTX would be
regular way orders that in and of themselves would be presumed to
settle on T+2. Only where a BSTX Participant includes the optional
parameters to express a preference for potential T+0 or T+1 settlement
(where consistent with the rules, policies and procedures of a
registered clearing agency) and the order matches against another order
seeking a shorter settlement time than T+2 could a transaction settle
more quickly than T+2 under the settlement logic in proposed BSTX Rule
25060(h) and as described immediately above. Thus, every market
participant seeking T+2 settlement for an execution on BSTX would be
able to interact with any order against which their order is
marketable, including those marked for possible T+0 or T+1 settlement.
In addition, the possibility of shortened settlement timing would have
no impact on the Exchange's price time priority.\357\ For these
reasons, the Exchange believes that no burden on competition is imposed
in this first possible circumstance.
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    \357\ See supra n. 82 and accompanying text.
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    The second possible circumstance arises when an order that would be
required under Exchange Act Rule 611,\358\ the Commission's ``order
protection rule'', to be routed to BSTX from a third party exchange
that extends UTP to a Security. This required routing of the order in
such a Security would occur in this setting because the NBBO existed on
BSTX at the time of the entry of the order. Under proposed BSTX Rule
25060(h), the order routed to BSTX would execute against any order
against which it is marketable without regard to whether a BSTX
Participant may have included an optional parameter for potential T+0
or T+1 settlement where the order executes against another order that
also has an optional parameter for potential T+0 or T+1 settlement
under the settlement logic in BSTX Rule 25060(h). In the event the
order routed to BSTX executes against another order on BSTX against
which it is marketable, that executed transaction in the Security would
be bound for regular way T+2 settlement under BSTX Rule 25060(h)
because the Exchange believes that the routed order from a third party
exchange would not include a parameter for T+0 or T+1 settlement. This
is because the Exchange believes that no other exchange currently
includes any such optional parameters to be able to indicate a
preference for potential T+0 or T+1 settlement. This structure means
that any non-BSTX Participant that sees a quote in a Security on BSTX
would remain able to execute against that quote even if that quote
includes an optional parameter indicating a preference for T+0 or T+1
settlement where an executed order becomes eligible for any such
settlement on a basis that is faster that T+2 under the settlement
logic in BSTX Rule 25060(h). The Exchange believes that no burden on
competition results in this second possible circumstance because an
order routed to BSTX would interact against any order on BSTX against
which it is marketable. All orders in a Security that are submitted
directly to BSTX by BSTX Participants or that may be routed to BSTX
would be regular way orders that when viewed in isolation would be
presumed to settle on a T+2 basis at the time of order entry. It would
only be upon execution against another order that also includes an
order parameter expressing a preference for settlement on a T+0 or T+1
basis that the executed transaction (i.e., not the initial orders)
would become eligible for settlement faster than T+2 under the
settlement logic in Rule 25060(h). The Exchange believes this imposes
no burden on competition on BSTX Participants because inclusion of any
T+0 or T+1 parameter would be entirely optional and any BSTX
Participant that includes such a parameter would do so with an ex-ante
understanding of the settlement logic in BSTX Rule 25060 that could
cause an executed transaction to settle more quickly than T+2. As
noted, the Exchange believes that orders in a Security that would be
required to be routed to BSTX, for example under the Commission's Order
Protection Rule, would also not impose any burden on competition
because other exchanges do not have rules that similarly contemplate
the inclusion of a T+0 or T+1 parameter, such routed orders would
therefore result in T+2 settlement if executed against any other order
on BSTX against which the order is marketable (regardless of whether
the order against which it executes includes an optional parameter
indicating a preference for T+0 or T+1 settlement). Therefore, any
order routed to BSTX would be able to interact with any other order on
BSTX against which it is marketable and would settle on a regular way
T+2 basis just as occurs today regarding any order in an NMS stock that
is routed to a national securities exchange.
---------------------------------------------------------------------------

    \358\ 17 CFR 242.611.
---------------------------------------------------------------------------

    The third possible circumstance contemplates an order that must be
routed under the order protection rule from BSTX to a third party
exchange that extends UTP for a Security because the third party
exchange has the NBBO at that time. The Exchange believes that this
setting is not relevant under the proposed rules of BSTX. Specifically,
the Exchange believes that it is not relevant because proposed BSTX
Rule 25130(d) states that the BSTX System will reject any order or
quotation that would lock or cross a protected quotation of another
exchange at the time of entry. Therefore, any such orders that would
otherwise be required to be routed by BSTX to another exchange will
instead be rejected by the BSTX System. Accordingly, any specification
by a BSTX Participant of a T+0 or T+1 settlement timing parameter for
an order in this setting could not create any burden on competition
because the order will be rejected and would never lead to an
execution.
    In addition to not imposing any burden on competition, the Exchange
believes that allowing BSTX Participants to use faster settlement
cycles where consistent with the rules, policies and procedures of a
registered clearing agency would mitigate settlement risk for
transactions in such Securities, consistent with the benefits the
Commission has noted in this area. Namely, in adopting amendments to
SEC Rule 15c6-1 in 2017 to shorten the standard settlement cycle for
most

broker-dealer transactions in securities from T+3 to T+2, the
Commission stated its belief that the shorter settlement cycle would
have positive effects regarding the liquidity risks and costs faced by
members in a clearing agency, like NSCC, that performs CCP services,
and that it would also have positive effects for other market
participants. Specifically, the Commission stated its belief that the
resulting ``reduction in the amount of unsettled trades and the period
of time during which the CCP is exposed to risk would reduce the amount
of financial resources that the CCP members may have to provide to
support the CCP's risk management process . . .'' and that ``[t]his
reduction in the potential need for financial resources should, in
turn, reduce the liquidity costs and capital demands clearing broker-
dealers face . . . and allow for improved capital utilization.'' \359\
The Commission went on to state its belief that shortening the
settlement cycle ``would also lead to benefits to other market
participants, including introducing broker-dealers, institutional
investors, and retail investors'' such as ``quicker access to funds and
securities following trade execution'' and ``reduced margin charges and
other fees that clearing broker-dealers may pass down to other market
participants[.]'' \360\ The Commission also ``noted that a move to a
T+1 standard settlement cycle could have similar qualitative benefits
of market, credit, and liquidity risk reduction for market
participants[.]'' \361\ The Exchange agrees with these statements by
the Commission and has therefore proposed BSTX Rule 25100(d) in a form
that would promote the benefits of shorter settlement cycles for
Securities without imposing burdens on other national securities
exchanges or market participants that are not BSTX Participants.
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    \359\ See supra n. 88-91 and accompanying text.
    \360\ Id.
    \361\ Id.
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    With respect to consideration (4) above, as previously noted,
market participants would not be limited in their ability to trade
Securities OTC because Securities could be traded OTC, including Thinly
Traded Securities for which UTP has been suspended, and would be
cleared and settled in the same manner as other NMS stocks through the
facilities of a registered clearing agency. Thus, the Exchange does not
believe that its proposal will place any new burden on competition with
respect to OTC trading, given that trading, clearance and settlement
will take place in the same manner as for other NMS stocks.
    With respect to consideration (5) noted above regarding other
exchanges extending UTP to Securities that are not Thinly Traded
Securities (and for which the issuer elected to suspend UTP), the
Exchange does not believe that the proposed Rules would impose a burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Exchange Act. This is because, with the exception
of Thinly Traded Securities described below, other national securities
exchanges would be able to extend UTP to Securities in accordance with
Commission rules just as they can regarding any other NMS stock.
    Regarding consideration (6) and suspensions of UTP for Thinly
Traded Securities, the Exchange believes that proposed BSTX Rule 25150
would impose a burden on competition as described below. However, for
the reasons described below the Exchange believes that the degree of
the burden on competition is justified under the Exchange Act because
it is necessary and appropriate to promote other express objectives of
the Exchange Act.
    If an operating company that is an issuer of a Security gives
written notice to the Exchange under BSTX Rule 25150(b) that it elects
a suspension of UTP and the Exchange determines that the Security
qualifies as a Thinly Traded Security, the Thinly Traded Security would
be eligible to trade only on BSTX and OTC while the suspension of UTP
is in effect. This would burden competition regarding other national
securities exchanges for the time that the suspension of UTP is in
effect because it would mean that the exchanges would not be permitted
to extend UTP to the Thinly Traded Security and therefore the Thinly
Traded Security would only trade on BSTX and OTC. The Exchange
believes, however, that this burden on other exchanges is appropriately
limited to the subset of Securities that are Thinly Traded Securities
because it would only apply (i) in the event that the Security meets
the average daily trading volume thresholds in BSTX Rule 25150 and (ii)
the issuer elects to notify the Exchange in writing that it wishes to
suspend UTP. Therefore, the burden on other exchanges would never apply
regarding a Security that is not a Thinly Traded Security.
    As also described in Item 3, Part II.H, the Exchange believes that
this limited burden on other exchanges would be offset and necessary
and appropriate under Section 6(b)(8) of the Exchange Act \362\ because
the suspension of UTP has the potential to help solve market quality
problems for Thinly Traded Securities that have been publicly
identified by the Commission, Commission staff, the U.S. Department of
Treasury, academics, and a broad spectrum of market participants.\363\
The Exchange agrees with the views expressed in the related
publications that ``the current `one-size-fits-all' equity market
structure, as largely governed under Regulation NMS, may not be optimal
for thinly traded securities'' \364\ and that ``more needs to be done
to promote liquidity and to improve the listing and trading environment
for thinly traded stocks.'' \365\ The Commission noted that the
``secondary market for thinly traded securities faces liquidity
challenges that can have a negative effect on both investors and
issuers traded securities faces liquidity challenges that can have a
negative effect on both investors and issuer'' including ``wider
spreads and less displayed size relative to securities that trade in
greater volume, often resulting in higher transaction costs for
investors.'' \366\ These concerns have been echoed in statements by
former Commission Chairman Jay Clayton, former Director of the Division
of Trading and Market Brett Redfearn, the Commission's Small Business
Advisory Committee and demonstrated through empirical analyses by the
Division of Trading and Market's Office of Analytics and Research (OAR)
and academics.\367\ A frequently discussed potential solution to these
liquidity and poor market quality issues facing thinly traded
securities has been the suspension of UTP for such securities, allowing
for displayed liquidity to be concentrated on a single exchange.\368\
The Exchange has thus proposed the suspension of UTP in response to
these concerns. The Exchange notes that it proposes to use the same
criteria as used by OAR (i.e., an ADV of less than 100,000 shares)
\369\ to distinguish thinly traded securities from more actively traded
securities with the additional conditions that only the Securities of
an operating company and must have a market capitalization of less than
$1

billion, which the Exchange believes helps ensure that the competitive
burden imposed by the proposed suspension of UTP is narrowly tailored
to address liquidity and market quality concerns for securities that
are thinly traded.\370\ It is for these reasons that the Exchange
believes that the burden on competition through the suspension of UTP
for Thinly Traded Securities (at the election of the issuer) is
justified in furtherance of goal of improving market quality for
securities that are thinly traded.
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    \362\ 15 U.S.C. 78f(b)(8).
    \363\ See supra n. 42-50 and accompanying text.
    \364\ Id.
    \365\ Id.
    \366\ Id.
    \367\ Id.
    \368\ See supra note 51-52.
    \369\ See supra note 56 noting the immaterial difference between
the construction used by OAR of an ADV of less than 100,000 shares
versus the Exchange's proposed construction of an ADV of 100,000
shares or less.
    \370\ In addition, the Exchange proposes to work with other SROs
to amend the revenue allocation formula of the applicable NMS
plan(s) for consolidated market data to exclude Thinly Traded
Securities in order to prevent the Exchange from unduly profiting
from the suspension of UTP under such formula. See supra notes 70-71
and accompanying text.
---------------------------------------------------------------------------

    In addition, the Exchange does not believe that the suspension of
UTP for Thinly Traded Securities will impose a burden on competition
not necessary or appropriate in furtherance of the Exchange Act \371\
because other exchanges could similarly be granted a suspension of UTP
for qualifying thinly traded securities listed on their markets.
Exchanges can compete with each other in attracting issuers of thinly
traded securities to be singly-listed and traded on their respective
exchanges. Exchanges would still be able to compete with one another
for listings and the market for all thinly traded securities could be
improved. Moreover, if the suspension of UTP has the desired effect of
improving the overall liquidity of a Thinly Traded Security, such
Security should hopefully exceed the 100,000 share ADV or $1 billion
market capitalization thresholds and become available for UTP, thus
removing any barrier to competition once the purpose for which the
suspension of UTP was initiated has been fulfilled.
---------------------------------------------------------------------------

    \371\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    Written comments were not and are not intended to be solicited with
respect to the proposed rule change and none have been received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-BOX-2021-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2021-06. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BOX-2021-06 and should be submitted on
or before June 23, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\372\
---------------------------------------------------------------------------

    \372\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11410 Filed 6-1-21; 8:45 am]
BILLING CODE 8011-01-P