[Federal Register Volume 83, Number 193 (Thursday, October 4, 2018)]
[Notices]
[Pages 50132-50140]
[FR Doc No: 2018-21582]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84320; File No. SR-IEX-2018-19]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 2.160 Related to the Qualification and Registration Requirements
for Associated Persons of a Member and To Delete Rule 2.150 Which is
Obsolete

September 28, 2018.
    Pursuant to Section 19(b)(1)\1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on September 25, 2018, the Investors Exchange LLC (``IEX''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Securities
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ IEX is
filing with the Commission a proposed rule change to amend IEX Rule
2.160 to (i) harmonize IEX rules with certain Financial Industry
Regulatory Authority, Inc. (``FINRA'') rules related to qualification
and registration requirements for associated persons of a Member \6\
which are pending effectiveness; (ii) specify when associated persons
of a Member are required to be registered with the Exchange; and (iii)
delete Rule 2.150 related to a temporary membership application process
and waive-in, which is obsolete. The Exchange has designated this rule
change as ``non-controversial'' under Section 19(b)(3)(A) of the Act
\7\ and provided the Commission with the notice required by Rule 19b-
4(f)(6) thereunder.\8\
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CRF 240.19b-4.
    \6\ ``Person Associated with a Member'' or ``Associated Person
of a Member'' mean [sic] any partner, officer, director, or branch
manager of a Member (or person occupying a similar status or
performing similar functions), any person directly or indirectly
controlling, controlled by, or under common control with such
Member, or any employee of such Member, except that any person
associated with a Member whose functions are solely clerical or
ministerial shall not be included in the meaning of such term for
purposes of these Rules. See IEX Rule 1.160(y). See also 15 U.S.C.
78c(a)(18).
    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4.
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    The text of the proposed rule change is available at the Exchange's
website at www.iextrading.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statement [sic] may be examined
at the places specified in Item IV below. The self-regulatory
organization has prepared summaries, set forth in Sections A, B, and C
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend Rule 2.160 to (i) harmonize with
certain FINRA rules related to qualification and registration
requirements for associated persons of a Member which are pending
effectiveness; (ii) specify when associated persons of a Member are
required to be registered with the Exchange; and (iii) delete Rule
2.150 related to a temporary membership application process and waive-
in, which is obsolete. Each proposed change is described below.

Qualification and Registration Requirements
    FINRA recently amended its rules relating to its qualification and
registration requirements in a number of respects.\9\ These amended
rules will be effective beginning on October 1, 2018. The Exchange is
proposing several amendments to IEX rules with respect to membership
and registration requirements to harmonize with such rule amendments in
the FINRA Filing and FINRA's existing rules, as described below. The
Exchange is proposing to adopt such harmonizing rule amendments and
registration categories that it determined are relevant to its
operations.\10\
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    \9\ See Securities Exchange Act Release No. 81098 (July 7,
2017), 82 FR 32419 (July 13, 2017) (SR-FINRA-2017-007) (Approval
Order) (the ``FINRA Filing'').
    \10\ The Exchange is not proposing to adopt provisions
comparable to Supplementary Material .05, .06, or .11 [sic] to FINRA
Rule 1210 because such provisions are not directly relevant to the
Exchange's operations. The Exchange is also not proposing to adopt a
provision comparable to Supplementary Material .07 to FINRA Rule
1210 because comparable provisions are included in proposed Rule
2.160(a) [sic]. In addition, the Exchange is not proposing to adopt
the registration categories specified in FINRA Rule 1220(a)(5), (6),
(8), (9), (10), (11), (12), (13) or (14) or in (b)(3), (5), (6),
(7), (8), or (9) because such registration categories are not
directly relevant to the Exchange's operations.
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    Rule 2.160, entitled ``Restrictions on Membership,'' sets forth
various requirements applicable to Members and their associated
persons, including registration requirements thereof. To make the title
of the rule more descriptive of the current and proposed requirements
set forth therein, the Exchange proposes to revise the title to
``Registration Requirements and Restrictions on Membership.'' The
Exchange believes that this title will more clearly direct Members,
their associated persons and other market participants to the total
scope of the rule.
    Rule 2.160(e) sets forth the requirement that no person shall
become an associated person of a Member unless such person agrees:
    (1) To supply the Exchange with such information with respect to
such person's relationships and dealings with the Member as may be
specified by the Exchange;
    (2) to permit examination of such person's books and records by the
Exchange to verify the accuracy of any information so supplied; and
    (3) to be regulated by the Exchange and to recognize that the
Exchange is obligated to undertake to enforce compliance with the
provisions of IEX Rules, the Operating Agreement, the interpretations
and policies of the Exchange, and the provisions of the Act and the
regulations thereunder.

The manner in which an associated person of a Member agrees to such
terms is by registering with the Exchange. However, as described below,
the Exchange is proposing amendments to Rule 2.160(m) to specify that
certain categories of associated persons of a Member are not required
to be registered with the Exchange because such persons' roles and
responsibilities are unrelated to the Exchange's operations, and
registration therefore serves no regulatory purpose. Accordingly, the
Exchange is proposing to amend Rule 2.160(e) to specify which
associated persons of a Member must be registered with the Exchange,
and also to provide that a Member shall not register or maintain the
registration of any associated person unless consistent with the
requirements of Rule 2.160.
    Further, the Exchange is proposing to adopt Supplementary Material
to Rule 2.160(e) governing permissive registrations and the status of
persons serving in the Armed Forces of the United States, each based on
provisions adopted by FINRA in the FINRA Filing that will be effective
on October 1, 2018.\11\
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    \11\ See FINRA Rules 1210.02 and 1210.10. The Exchange is not
including references to an admission fee, which is included in FINRA
Rule 1210.10(b), in paragraph (b) of Supplementary Material .02 of
Rule 2.160(e) since the Exchange does not charge an admission fee to
Members.
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    As proposed, Supplementary Material .01 provides that a Member may
make application for or maintain the registration as a representative
or principal, pursuant to Rule 2.160, of any associated person of the
Member and any individual engaged in the investment banking or
securities business of a foreign securities affiliate or subsidiary of
the Member. Individuals maintaining such permissive registrations shall
be considered registered persons and subject to all IEX rules, to the
extent relevant to their activities. Supplementary Material .01 also
addresses Members' supervisory obligations with respect to associated
persons with permissive registrations. As proposed, consistent with the
requirements of Rule 5.110, Members shall have adequate supervisory
systems and procedures reasonably designed to ensure that individuals
with permissive registrations do not act outside the scope of their
assigned functions. With respect to an individual who solely maintains
a permissive registration(s), the individual's direct supervisor shall
not be required to be a registered person. However, for purposes of
compliance with Rule 5.110(a)(5), a Member shall assign a registered
supervisor who shall be responsible for periodically contacting such
individual's direct supervisor to verify that the individual is not
acting outside the scope of his or her assigned functions. If such
individual is permissively registered as a representative, the
registered supervisor shall be registered as a representative or
principal. If the individual is permissively registered as a principal,
the registered supervisor shall be registered as a principal. Moreover,
the registered supervisor of an individual who solely maintains a
permissive registration(s) shall not be required to be registered in
the same representative or principal registration category as the
permissively-registered individual.
    As proposed, Supplementary Material .02 to Rule 2.160(e) addresses
the status of current and former registered persons serving in active
duty in the Armed Forces of the United States. With respect to a
currently registered person of a Member who volunteers for or is called
into active duty, paragraph (a) provides that after proper notification
to the Exchange,\12\ such person shall be placed on inactive status and
need not be re-registered by such Member upon his or her return to
active employment with the Member. Such person shall remain eligible to
receive transaction-related compensation, including continuing
commissions. The employing Member also may allow such person to enter
into an arrangement with another registered person of the Member to
take over and service the person's accounts and to share transaction-
related compensation based upon the business generated by such
accounts. However, because such persons are inactive, they may not
perform any of the functions and responsibilities performed by a
registered person. Further, the registered person shall not be required
to complete either the Regulatory Element or Firm Element, as set forth
in Rule 2.160(p), while such person remains inactive and registered
with the Member with which he or she was registered at the beginning of
active duty, regardless of whether the person returns to active
employment with another Member upon completion of his or her active
duty. The relief shall be provided only to a person registered

with a Member and only while the person remains on active military
duty. Further, the Member with which such person is registered shall
promptly notify the Exchange in such manner as the Exchange may specify
of such person's return to active employment with the Member.\13\
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    \12\ The Exchange will issue a Regulatory Circular upon
effectiveness of this proposed rule change describing the manner in
which Members should provide notice to the Exchange with respect to
the status of their current and former registered persons serving in
active duty in the Armed Forces of the United States.
    \13\ Id.
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    Paragraph (b) of proposed Commentary .02 addresses the status of a
Member that is a sole proprietor who temporarily closes his or her
business by reason of volunteering for or being called into active duty
in the Armed Forces of the United States. As proposed, after proper
notification to the Exchange,\14\ such person shall be placed on
inactive status solely while the Member remains on active military
duty. Further, the sole proprietor shall promptly notify the Exchange
in such manner as the Exchange may specify \15\ of his or her return to
active participation in the securities business of the Member relating
to activity that occurs on the Exchange.
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    \14\ Id.
    \15\ Id.
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    Paragraph (c) of proposed Commentary .02 addresses the status of
formerly registered persons, with respect to active military duty.
Specifically, as proposed, the provision specifies that the lapse of
such person's registrations shall be deferred (i.e., tolled) during the
pendency of his or her active service in the Armed Forces of the United
States, provided the Exchange is properly notified of the person's
period of active military service within 90 days following his or her
completion of active service or upon his or her re-registration with a
Member, whichever occurs first.\16\ The deferral will terminate 90 days
following the person's completion of active service in the Armed Forces
of the United States. If a person placed on inactive status while
serving in the Armed Forces of the United States ceases to be
registered with a Member, the Exchange shall defer the lapse of
registration requirements based on existing information in the CRD
system, provided that the Exchange is properly notified \17\ of the
person's period of active military service within two years following
his or her completion of active service or upon his or her re-
registration with a Member, whichever occurs first.\18\
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    \16\ Id.
    \17\ Id.
    \18\ The deferral shall terminate 90 days following the person's
completion of active service in the Armed Forces of the United
States. Accordingly, if such person does not re-register with a
Member within 90 days following his or her completion of active
service in the Armed Forces of the United States, the amount of time
in which the person must become re-registered with a Member without
being subject to a representative or principal qualification
examination or the SIE shall consist of the standard two-year period
for representative and principal qualification examinations or the
standard four-year period for the SIE, whichever is applicable, as
provided in Rule 2.160(o).
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    Rule 2.160(f) specifies that the Exchange may require the
successful completion of a written proficiency examination to enable it
to examine and verify that prospective Members and associated persons
of Members have adequate training, experience, and competence to comply
with IEX rules and policies of the Exchange. Rule 2.160(g) specifies
that if the Exchange requires the completion of such proficiency
examinations, it may waive such examinations in exceptional cases and
where good cause is shown, upon written request of the applicant, and
accept other standards as evidence of an applicant's
qualifications.\19\ The Exchange is proposing to add Supplementary
Material .01 to provide for a waiver of examinations for individuals
working for a financial services industry affiliate of a Member,\20\
based on provisions adopted by FINRA in the FINRA Filing that will be
effective on October 1, 2018.\21\ As proposed, the waiver is available
upon request by a Member for an individual designated with the Exchange
as working for a financial services industry affiliate of a Member if
the following conditions are met: (a) prior to the individual's initial
designation, the individual was registered as a representative or
principal with the Exchange or FINRA for a total of five years within
the most recent 10-year period, including for the most recent year with
the Member that initially designated the individual; (b) the waiver
request is made within seven years of the individual's initial
designation; (c) the initial designation and any subsequent
designation(s) were made concurrently with the filing of the
individual's related Form U5; (d) the individual continuously worked
for the financial services industry affiliate(s) of a Member since the
individual's last Form U5 filing; (e) the individual has complied with
the Regulatory Element of continuing education as specified in Rule
2.160(a); and (f) the individual does not have any pending or adverse
regulatory matters, or terminations, that are reportable on the Form
U4, and has not otherwise been subject to a statutory disqualification
as defined in Section 3(a)(39) of the Exchange Act while the individual
was designated as eligible for a waiver.
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    \19\ Any such waiver is pursuant to IEX Rule Series 9.600.
    \20\ For purposes of the Supplementary Material, a ``financial
services affiliate of a Member'' is a legal entity that controls, is
controlled by or is under common control with a Member and is
regulated by the SEC, CFTC, state securities authorities, federal or
state banking authorities, state insurance authorities, or
substantially equivalent foreign regulatory authorities.
    \21\ See FINRA Rule 1210.09.
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    Rule 2.160(h) specifies that the Exchange requires the General
Securities Representative Examination (``Series 7'') or an equivalent
foreign examination module approved by the Exchange in qualifying
persons seeking registration as General Securities Representatives,
including as Authorized Traders, on behalf of Members. For those
persons seeking limited registration as Securities Traders as described
in paragraph (k) below, the Exchange requires the Securities Traders
Qualification Examination (``Series 57''). Rule 2.160(h) also provides
that the Exchange uses the Uniform Application for Securities Industry
Registration or Transfer (``Form U4'') as part of its procedure for
registration and oversight of Member personnel. The Exchange proposes
several changes to Rule 2.160(h). First, the Exchange proposes to amend
Rule 2.160(h) to specify that before the registration of a qualifying
person can be effective, such person shall pass the Securities Industry
Essentials (``SIE'') examination \22\ and an appropriate registration
qualification examination, as specified in Rule 2.160(h). The SIE is a
new general knowledge examination that was adopted by FINRA in the
FINRA Filing and will be effective on October 1, 2018. Going forward,
representative-level registration will require successful completion of
the SIE and a tailored, specialized knowledge examination for a
person's particular registered role. The Exchange's proposed change
aligns with changes to FINRA Rule 1210.03, which were included in the
FINRA Filing and will be effective beginning on October 1, 2018.
Conforming changes are also proposed to Rule 2.160(i) to reference the
SIE with respect to representative-level prerequisites to the Series 14
and 24 principal-level examinations. The Exchange also proposes to
adopt Commentary .01 to Rule 2.160(h) to provide that any person who is
in good standing as representatives with the Financial Conduct
Authority in the United Kingdom or with a Canadian stock exchange or
securities regulator

would be exempt from the requirement to pass the SIE, and thus would be
required only to pass a specialized knowledge examination to register
with the Exchange as a representative. FINRA has adopted a similar
provision in the FINRA Filing and will be effective beginning on
October 1, 2018.
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    \22\ Individuals who are registered with the Exchange, FINRA, or
another national securities exchange as of October 1, 2018 will be
considered to have passed the SIE.
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    The Exchange also proposes to amend Rule 2.160(h) to provide that
any person associated with a Member whose trading activities are
conducted principally on behalf of an investment company that is
registered with the Commission pursuant to the Investment Company Act
and that controls, is controlled by or is under common control, with
the Member is not required to be registered with the Exchange as a
Securities Trader. This proposed change is substantially similar to
existing National Association of Securities Dealers, Inc. (``NASD'')
Rule 1032(f) and FINRA Rule 1220(b)(4)(A), that was included in the
FINRA Filing and will be effective on October 1, 2018.
    Rule 2.160(i) currently provides in part that a sole proprietorship
Member is not required to register at least two Principals with the
Exchange, and that the Exchange may waive the two-Principal requirement
in situations that indicate conclusively that only one Principal
associated with the Member should be required to be registered. Given
that one-person Members may be organized in legal forms other than a
sole proprietorship (such as a single-person limited liability
company), the Exchange proposes to amend the reference to a ``sole
proprietorship'' to a ``Member with only one associated person'' so
that any Member with only one associated person is not subject to the
two-Principal requirement. This proposed change is substantially
similar to Supplementary Material .01 to FINRA Rule 1210 that was
included in the FINRA Filing and will be effective on October 1, 2018.
    Rule 2.160(i) also specifies that the Exchange will accept the New
York Stock Exchange Series 14 Compliance Examination in lieu of the
Series 24 to satisfy the examination requirement for any person
designated as a Chief Compliance Officer. The Exchange proposes to
delete the phrase ``New York Stock Exchange'' since the Series 14 is
now referred to as the Series 14 Compliance Official Examination.\23\
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    \23\ See Series 14 examination description on FINRA website
available at: http://www.finra.org/industry/series14.
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    Further, the Exchange proposes to add Supplementary Material .01
related to the requirements for registered persons functioning as
principals for a limited period of up to 120 calendar days. The
provision aligns with FINRA Rule 1210.04 and is designed to provide
appropriate flexibility to a Member to designate any person currently
registered, or who becomes registered, with the Member as a
representative to function as a principal for a limited period,
providing such person has at least 18 months of experience functioning
as a registered representative within the five-year period immediately
preceding the designation. As proposed, the provision applies to
designations to any principal category, including those that are not
subject to a representative-level prerequisite examination.\24\
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    \24\ Principal categories for the Exchange that do not have such
a prerequisite are the Financial and Operations Principal,
Compliance Official, and Introducing Broker-Dealer Financial and
Operations Principal.
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    Rule 2.160(j) sets forth the requirements for designation and
registration of a Financial/Operations Principal by a Member and
relates to the requirements for a Member to designate a Financial/
Operations Principal, the Financial/Operations Principal's obligations,
and examination requirements. The rule specifies that the Financial/
Operations Principal is required to successfully complete the Financial
and Operations Principal Examination (``Series 27'') but that the
Exchange may waive such requirement if a Member has otherwise satisfied
the financial and operational requirements of its designated examining
authority. With respect to an Exchange waiver, Rule 2.160(n) provides
that an alternative acceptable examination to the Series 27 for a
Financial/Operations Principal is any other examination acceptable to
such Member's designated examining authority. The Exchange has provided
waivers under these provisions for Members that operate as introducing
broker-dealers when FINRA (as the Member's designated examining
authority) has permitted the Member's Financial/Operations Principal to
function as such based on successful completion of the Limited
Principal--Introducing Broker-Dealer Financial and Operations Principal
Examination (``Series 28'') under applicable FINRA Rules.\25\ FINRA
Rule 1220(a)(4) (which was included in the FINRA Filing and will be
effective on October 1, 2018) specifies that a FINRA member, other than
a member operating pursuant to Exchange Act Rules 15c3-1(a)(1)(ii),
(a)(2)(i) or (a)(8), may designate an Introducing Broker-Dealer
Financial and Operations Principal (who must successfully complete the
Series 27 or 28 examination) instead of a Financial and Operations
Principal (who must successfully complete the Series 27
examination).\26\ Currently, an IEX Member that is eligible to
designate an Introducing Broker-Dealer Financial and Operations
Principal under FINRA rules or the rules of another national securities
exchange must request a waiver from the Exchange, pursuant to Rule
2.160(j), so that its Financial/Operations Principal may successfully
complete the Series 28 examination instead of the Series 27
examination. Rule 2.160(j) specifies that the Exchange may waive the
requirement that the Member's Financial/Operations Principal
successfully complete the Series 27 examination if the Member has
otherwise satisfied the financial and operational requirements of its
designated examining authority. Pursuant to such waiver provisions, the
Exchange has waived the Series 27 examination requirement for a
Member's Financial/Operations Principal and accepted the Series 28
examination. In order to simplify and provide additional clarity on the
acceptable examination requirements for IEX Members' Financial/
Operations Principals, the Exchange proposes to amend Rule 2.160(j) to
specifically describe when the Series 28 is an acceptable examination
for a Member's Financial/Operations Principal. As proposed, the
Exchange would replace the language regarding possible waiver of
successful completion of the Series 27 examination with language
providing that in the case of a Member that operates other than
pursuant to Exchange Act Rule 15c3-1(a)(1)(ii), (a)(2)(i) or (a)(8),
its Financial/Operations Principal must successfully complete either
the Series 27 or Series 28 examination. Conforming amendments are also
proposed to Rule 2.160(n).
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    \25\ See NASD Rule 1022(c).
    \26\ The Exchange notes that the term Financial/Operations
Principal in IEX rules is synonymous with the term Financial and
Operations Principal in FINRA rules. A Member may designate an
Introducing Broker-Dealer Financial and Operations Principal as its
Financial/Operations Principal if the firm is not a clearing firm
and does not operate pursuant to Exchange Act Rule 15c3-1(a)(1)(ii),
(a)(2)(i) or (a)(8).
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    The Exchange is proposing to amend Rule 2.160(o), which is
currently reserved, to adopt rule provisions related to the
circumstances under which registrations lapse and the SIE expires,
aligning to FINRA Rule 1210.08 which was included in the FINRA Filing
and will be effective on October 1, 2018. For purposes of this
paragraph, an application shall not be considered to have been received
by the Exchange

if that application does not result in a registration. Rule 2.160(o)
provides that a person who was last registered as a representative or
principal two or more years immediately preceding the date of receipt
by the Exchange of a new application as a representative or principal,
shall be required to pass a representative and/or principal
qualification examination appropriate to his or her category or
registration as specified in paragraphs (h), (i), (j), (k), (l), and
(n) of Rule 2.160. Further, any person who last passed the SIE or who
was last registered as a representative, whichever occurred last, four
or more years immediately preceding the date of receipt by the Exchange
of a new application for registration as a representative, shall be
required to pass the SIE in addition to a representative qualification
examination appropriate to his or her category of registration as
specified in paragraphs (h), (i), (j), (k), (l), and (n) of Rule 2.160.
Additionally, any person whose registration has been revoked pursuant
to Rule 8.310 shall be required to pass a principal or representative
qualification examination appropriate to his or her category of
registration as specified in paragraphs (h), (i), (j), (k), (l), and
(n) of Rule 2.160 to be eligible for registration with the Exchange.
    Rule 2.160(p) specifies the Regulatory Element of the continuing
education requirements for associated persons of a Member and aligns
with the FINRA requirements for the particular registration category of
the registered person. Exchange rules do not currently address the Firm
Element continuing education requirements.\27\ The Exchange proposes to
revise Rule 2.160(p) to harmonize with the amended continuing education
requirements specified in FINRA Rule 1240, as included in the FINRA
Filing that will be effective on October 1, 2018. As proposed, Rule
2.160(p) will specify the required Continuing Education Regulatory
Element and Firm Element. The Exchange is proposing several changes to
Regulatory Element provisions. First, the Exchange proposes to add
introductory text at the beginning of Rule 2.160(p) stating that ``this
[rule] prescribes requirements regarding the continuing education of
specified persons subsequent to their initial registration with the
Exchange. The requirements shall consist of a Regulatory Element and a
Firm Element as set forth below.'' The Exchange also proposes to add
subparagraph (a) entitled ``Regulatory Element'' immediately after the
new introductory text to delineate that the provisions that follow
relate to the Regulatory Element. The Exchange also proposes several
amendments to subparagraphs (a)(1), (2) and (3) to align with changes
to FINRA Rule 1240.
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    \27\ The Exchange notes that the FINRA Firm Element requirement
is only applicable to: (i) Persons registered with a FINRA member
who have direct contact with customers in the conduct of the
member's securities sales, trading, and investment banking
activities; (ii) persons registered as an operations professional or
research analyst; and (iii) their immediate supervisors. An Exchange
Member with associated persons registered in each of the
aforementioned categories would be conducting a customer business.
The Exchange is not proposing to adopt similar language modifying
the ``direct contact with customers'' language in FINRA's rule. Any
Exchange Member with a customer business is required to be a FINRA
member pursuant to Section 15(b)(8) of the Act. Thus any Exchange
Member that is not a FINRA member would not be conducting a customer
business and thus would not have any associated persons that meet
the FINRA criteria to be subject to the FINRA Firm Element rule.
Therefore, there is no gap in the application of the Firm Element
requirement to Exchange Members and their associated persons.
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    Several changes are proposed to subparagraph (a)(1). First, in lieu
of the current text describing persons subject to the continuing
education requirements that refers to any ``Authorized Trader,
Principal, or Financial/Operations Principal'' abbreviated as
``Registered Representative,'' the language would be revised to refer
to ``any associated person registered with the Exchange'' abbreviated
as ``Registered Person'' to be simpler and more inclusive and
descriptive, since not all registered persons listed are considered to
be a Registered Representative. Conforming changes are proposed
throughout the rule. Second, existing rule text in the first paragraph
of subparagraph (a)(1) providing that ``no Member shall permit any . .
. Registered Representative to continue to, and no Registered
Representative shall continue to, perform duties as a Registered
Representative on behalf of such Member, unless such person has
complied with the continuing education requirements in this IEX Rule''
will be replaced with language aligned with language in FINRA Rule
1240(a) and (5), providing that all registered persons, including any
person who is permissively registered pursuant to Commentary .02 to
Rule 2.160 and any person who is designated as eligible for a waiver
pursuant to Commentary .01 to Rule 2.160(g), shall comply with the
requirement to complete the Regulatory Element. Additionally, the
Exchange proposes to add language at the end of subparagraph (a)(1)
stating that the content of the Regulatory Element for a person
designated as eligible for a waiver pursuant to Commentary .01 to Rule
2.160(g) shall be determined based on the person's most recent
registration status, and the Regulatory Element shall be completed
based on the same cycle had the person remained registered.
    Subparagraph (p)(2) [sic] specifies the consequences to a
Registered Person who fails to complete the Regulatory Element of the
continuing education program within the prescribed time frames.
Currently, the rule provides that such a person will have their [sic]
registration deemed inactive until such time as the requirements of the
program have been satisfied and shall cease all activities requiring
registration. The Exchange proposes to amend the rule to codify
existing FINRA guidance regarding the impact of failing to complete the
Regulation Element on a Registered Person's activities and
compensation.\28\ Specifically, as proposed, Rule 2.160(p)(2) [sic]
provides that any person whose registration has been deemed inactive
under the rule shall not be permitted to be registered in another
registration category under Rule 2.160 with that Member or to be
registered in any registration category under Rule 2.160 with another
Member, until the person has satisfied the deficiency. This provision
is comparable to FINRA Rule 1210.07 (which was included in the FINRA
Filing and will be effective on October 1, 2018). Further, the Exchange
proposes to add provisions that such a person may not accept or solicit
business or receive any compensation for the purchase or sale of
securities. However, such person may receive trail or residual
commissions resulting from transactions completed before the inactive
status, unless the Member with which such person is associated has a
policy prohibiting such trail or residual commissions. This clarifying
language is substantially similar to amendments to FINRA Rule 1240
(which was included in the FINRA Filing and will be effective on
October 1, 2018). In addition, the Exchange proposes to add language
specifying that if a person designated as eligible for a waiver
pursuant to Supplementary Material .01 to Rule 2.160(g) fails to
complete the Regulatory Element within the prescribed time frames, the
person shall no longer be eligible for such a waiver. The Exchange also
proposes a conforming change to subparagraph (a)(3) with respect to the
requirement to retake the Regulatory Element and satisfy all of its
requirements in the event the person is subject to certain

specified disciplinary action. These provisions align with FINRA Rule
1240.
---------------------------------------------------------------------------

    \28\ See, e.g., NASD Notice to Members 95-35 (May 1995).
---------------------------------------------------------------------------

    Additionally, the Exchange proposes to add subparagraphs (a)(5)-(7)
to align with FINRA Rule 1240. As proposed, subparagraph (a)(5) is
reserved. The corresponding part of FINRA Rule 1240 pertains to the
definition of a ``Covered Person'' under FINRA rules, who is subject to
the Regulatory Element. As discussed above, the Exchange is using the
term ``Registered Person'' which is incorporated into subparagraph
(a)(1).\29\ Subparagraph (a)(6) specifies that delivery of the
Regulatory Element will be administered through web-based delivery or
such other technological manner and format as specified [sic] by FINRA.
Subparagraph (a)(7) requires designation and identification of the
Regulatory Element Contact Person to FINRA on behalf of the Exchange
and describes the role of such person to receive email notifications
provided via CRD regarding Regulatory Element deadlines for Registered
Persons subject to the Regulatory Element, including when such a person
is deemed inactive for failure to complete the Regulatory Element.
---------------------------------------------------------------------------

    \29\ The term ``Registered Person'' in the Regulatory Element
rule provisions has substantially the same meaning as FINRA's term
``Covered Person'' except that FINRA excludes ``Foreign Associates''
from the term ``Covered Person.'' Foreign Associate is a
discontinued FINRA registration category, as described in the FINRA
Filing, and is not recognized by IEX rules. Accordingly, the
Exchange does not believe it is necessary to exclude Foreign
Associates from the definition of ``Registered Person.''
---------------------------------------------------------------------------

    The Exchange also proposes to add new subparagraph (b) to Rule
2.160(p) to set forth the Firm Element requirements, which are
substantially similar to FINRA Rule 1240(b) \30\ and consist of annual,
Member-developed and administered training programs designed to enhance
covered registered persons' securities knowledge, skill, and
professionalism, taking into consideration the Member's size,
organizational structure, and scope of business activities, as well as
regulatory developments and the performance of covered registered
persons in the Regulatory Element.\31\ If a Member's analysis
establishes the need for supervisory training for persons with
supervisory responsibilities, such training must be included in the
Member's training plan.
---------------------------------------------------------------------------

    \30\ In setting forth the persons subject to the Firm Element,
proposed Rule 2.160(b)(1) [sic] is limited to persons registered
with a Member pursuant to Rule 2.160 who have direct contact with
customers in the securities business of the Member relating to
activity that occurs on the Exchange, and to their immediate
supervisors. FINRA Rule 1240(b)(1) is broader in scope given FINRA's
broader regulatory mandate.
    \31\ The definition of ``covered registered person'' under
proposed Rule 2.160(p)(b) does not include Registered Options
Professionals [sic] because that is not a registration category
provided for in Exchange rules.
---------------------------------------------------------------------------

    As proposed, any person registered with a Member pursuant to Rule
2.160 who has direct contact with customers \32\ in the securities
business of the Member relating to activity that occurs on the
Exchange, and the immediate supervisors of such persons, must take all
appropriate and reasonable steps to participate in the Firm Element
training as required by his or her Member. Subparagraph (b)(2)(B) sets
forth the minimum standards for the Firm Element training programs.
Such programs must be appropriate for the business of the Member and,
at a minimum, must cover training in ethics and professional
responsibility and the following matters concerning securities
products, services and strategies offered by the Member: General
investment features and associated risk factors; suitability and sales
practice considerations; and applicable regulatory requirements.
Further, a Member must administer its continuing education programs in
accordance with its annual evaluation and written plan, and must
maintain records documenting the content of the programs and completion
of the programs by covered Registered Persons.\33\
---------------------------------------------------------------------------

    \32\ ``Customer'' means any natural person and any organization,
other than another broker or dealer, executing securities
transactions with or through a Member.
    \33\ The Exchange may also require a Member, individually or as
part of a larger group, to provide specific training to its covered
Registered Persons in such areas as the Exchange deems appropriate.
See proposed Rule 2.160(p)(b)(4).
---------------------------------------------------------------------------

    Finally, the Exchange also proposes to correct a typographical
error in the footnote numbering of the chart in Rule 2.160(n).
Exchange Registration Exceptions
    The Exchange is proposing to amend Rule 2.160(m), which is
currently reserved, to specify that certain associated persons of a
Member are not required to be registered with the Exchange, because
such person's roles and responsibilities are unrelated to the
Exchange's operations, and registration therefore serves no regulatory
purpose. As proposed, the following categories of associated persons of
a Member are not required to be registered with the Exchange:
    (1) Associated persons of a Member whose functions are solely and
exclusively clerical or ministerial.
    (2) Associated persons of a Member whose functions are related
solely and exclusively to:
    (A) Effecting transactions on the floor of a national securities
exchange and who are appropriately registered with such exchange;
    (B) transactions in municipal securities;
    (C) transactions in commodities; or
    (D) transactions in securities futures, provided that any such
person is appropriately registered with a registered futures
association.
    (3) Associated persons of a Member that are restricted from
accessing the Exchange and that do not engage in the securities
business of the Member relating to activity that occurs on the
Exchange.
    The Exchange notes that each proposed exception is based on
existing exceptions in FINRA rules or those of other exchanges. The
proposed exceptions in Rule 2.160(m)(1) and (2) are substantially
similar to FINRA rules, and the exception in Rule 2.160(m)(3) is
substantially similar to a CBOE [sic] Exchange, Inc. (``CBOE'')
rule.\34\
---------------------------------------------------------------------------

    \34\ See current NASD Rule 1060, FINRA Rule 1230 (which is
pending effectiveness), and CBOE [sic] Exchange, Inc. Rule
3.6A(a)(2)(D).
---------------------------------------------------------------------------

    With respect to the proposed exception in Rule 2.160(m)(3), the
Exchange believes that such individuals do not need to be registered
with the Exchange because those individuals do not access the Exchange
directly and do not engage in the securities business of the Member
relating to activity that occurs on the Exchange. For example, suppose
that Firm XYZ is an Exchange Member and a member of the Nasdaq Stock
Market LLC (``Nasdaq''). Ms. ABC is an associated person of XYZ,
assigned to XYZ's Nasdaq market maker ``desk'' which only sends orders
to Nasdaq. Ms. ABC is subject to Nasdaq's registration and
qualification requirements. Ms. ABC would not be required to separately
register with the Exchange so long as Ms. ABC does not send orders
directly to the Exchange through XYZ and not another Exchange
Member.\35\
---------------------------------------------------------------------------

    \35\ For example, an order originating from XYZ's Nasdaq market
maker desk may be routed to the Exchange by another Member.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to add Supplementary Material
.01 to clarify the registration requirements applicable to associated
persons of a Member who accept customer orders, and the applicability
to a determination of whether the functions of an associated person of
a Member are solely and exclusively clerical or ministerial. As
proposed, Supplementary Material .01 provides that the function of
accepting customer orders is not considered a clerical or ministerial
function. Each associated person of a Member who accepts

customer orders under any circumstances shall be registered in an
appropriate registration category pursuant to Rule 2.160. However, an
associated person of a Member shall not be considered to be accepting a
customer order where occasionally, when an appropriately registered
person is unavailable, such person transcribes order details submitted
by a customer and the registered person contacts the customer to
confirm the order details before entering the order. This clarification
is substantially similar to Supplementary Material .01 to FINRA Rule
1230 (which was included in the FINRA Filing and will be effective on
October 1, 2018), and is designed to provide that acceptance of
customer orders is appropriately overseen by a registered associated
person of a Member.
    The Exchange also proposes a conforming amendment to Rule 2.160(e)
to incorporate the registration exception.
Deletion of Obsolete Rule 2.150
    As approved by the Commission as part of the Exchange's Form 1
application,\36\ Rule 2.150 provided a temporary Member Application and
Waive-In Process that permitted current subscribers to the alternative
trading system previously operated by the Exchange's affiliate, IEX
Services, LLC, to apply to become a Member of the Exchange by
submitting a ``waive-in application'' within ninety (90) days of
approval of the Form 1 by the Commission. The Commission approved the
Exchange's Form 1 application on June 17, 2016, meaning that waive-in
applications must have been received by the Exchange on or prior to
September 15, 2016. Accordingly, Rule 2.150 is obsolete, and the
Exchange proposes to delete the rule.
---------------------------------------------------------------------------

    \36\ See Securities Exchange Act Release No. 34-78101 (June 17,
2016), 81 FR 41141 (June 23, 2016) (File No. 10-222).
---------------------------------------------------------------------------

2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) of the Act \37\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \38\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, 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. The Exchange also believes that the proposed rule
change furthers the objectives of Section 6(c)(3)(B) of the Act,\39\
which authorizes the exchange to prescribe standards of training,
experience and competence for persons associated with an IEX Member.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78f.
    \38\ 15 U.S.C. 78f(b)(5).
    \39\ 15 U.S.C. 78(c)(3)(B).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change overall will
harmonize its membership and registration rules with FINRA rules,\40\
thus assisting Members and associated persons of Members in complying
with those rules and thereby enhancing regulatory efficiency. In
addition, the Exchange believes that providing greater harmonization
between IEX and FINRA rules with a similar purpose will result in less
burdensome and more efficient regulatory compliance for IEX Members
that are subject to regulatory examination and oversight by FINRA
pursuant to a regulatory services agreement between IEX and FINRA, and
facilitate FINRA's performance of its regulatory functions for IEX
under the regulatory services agreement, thereby removing impediments
to and perfecting the mechanism of a free and open market and a
national market system, consistent with the objectives of Section
6(b)(5) of the Act.
---------------------------------------------------------------------------

    \40\ The Exchange is proposing to harmonize with those aspects
of FINRA rules that IEX determined are relevant to its operations.
---------------------------------------------------------------------------

    As described in the Purpose section, the Exchange proposes various
revisions to Rule 2.160, which sets forth the requirements applicable
to Members and their associated persons, including registration
requirements thereof. The Exchange believes that these proposed rule
amendments are consistent with the public interest and the protection
of investors. With respect to the revisions to the rule title, the
Exchange believes that referencing registration requirements, as well
as restrictions on membership, is a clearer description of the scope of
the rule and will thereby enable Members, their associated persons, and
other market participants to better identify such requirements in IEX
rules. Similarly, the Exchange believes that adding text to paragraph
(e) of Rule 2.160 to reference proposed changes to paragraph (m)
regarding registration exemptions (as discussed further below) and
impermissible registrations will help to assure that IEX's rules are
clear regarding such requirements.
    The Exchange further believes that the addition of Supplementary
Material .01 to Rule 2.160(e), to permit permissive registrations, is
consistent with the Act in order to allow Members to develop a depth of
associated persons with registrations to respond to unanticipated
personnel changes and will encourage greater regulatory understanding.
The Exchange also believes that the addition Supplementary .02 to Rule
2.160(e) regarding the status of current and former registered persons
serving in active duty in the Armed Forces of the United States is
consistent with the Act because it provides a reasonable accommodation
to such persons, who are engaged in efforts to protect and defend the
United States, with an appropriate notification process to the
Exchange, thereby removing impediments to and perfecting the mechanism
of a free and open market and a national market system, consistent with
the objectives of Section 6(b)(5) [sic] of the Act.
    Additionally, the Exchange believes it is consistent with the Act
to provide an examination waiver for individuals working for a
financial services industry affiliate of a Member, pursuant to
Supplementary Material .02 to Rule 2.160(g), because it will provide
appropriate flexibility to Members and their financial services
industry affiliates in the management of their personnel, thereby
removing impediments to and perfecting the mechanism of a free and open
market and a national market system, consistent with the objectives of
Section 6(b)(5 [sic] of the Act.
    The Exchange also believes that its proposed changes to Rule
2.160(h) are consistent with the Act. Specifically, adoption of the SIE
is designed to promote uniformity and consistency with FINRA's rules of
similar purpose, thereby fostering cooperation and coordination with
persons engaged in regulating and facilitating transactions in
securities. In addition, the Exchange believes that it is consistent
with the Act to not require Exchange registration as a Securities
Trader for associated persons of a Member whose trading activities are
conducted principally on behalf of an investment company affiliate of
the Member, as described in the Purpose section. This exemption has
been part of FINRA (and its predecessor, the NASD) rules applicable to
the current Securities Trader examination as well as the predecessor
Series 55 examination for many years, and recognizes that such traders
are generally in the same position as ``buy-side'' professionals
employed within investment companies, who would not be subject to the
examination requirement.\41\
---------------------------------------------------------------------------

    \41\ See, e.g., NASD Notice to Members 98-17 and Securities
Exchange Act Release No. 75783 (August 28, 2015), 80 FR 53369
(September 03, 2015) (approving File No. SR-FINRA-2015-17).

---------------------------------------------------------------------------

    The Exchange also believes it is appropriate to provide an
exemption from the SIE for any person who is in good standing as a
representative with the Financial Conduct Authority in the United
Kingdom or with a Canadian stock exchange or securities regulatory. The
Exchange believes that there is sufficient overlap between the SIE and
such foreign qualification requirements to permit them to act as
exemptions to the SIE, and that the exemption provides appropriate
flexibility to such persons, thereby removing impediments to and
perfecting the mechanism of a free and open market and a national
market system, consistent with the objectives of Section 6(b)(5 [sic]
of the Act.
    With respect to the amendment to Rule 2.160(i) to revise the
reference to ``sole proprietorship'' to a ``Member with only one
associated person'' the Exchange believes that this change is
consistent with the Act because it recognizes that one-person Members
may be organized in legal forms other than a sole proprietorship, and
thus provides fair and consistent regulatory requirements to all one-
person Members. Further, the Exchange believes that elimination of the
reference to ``New York Stock Exchange'' with respect to the Series 14
Compliance Official Examination is consistent with the Act because it
will make the Exchange's rule in this respect accurate. The Exchange
also believes that the addition of Supplementary Material .01 to Rule
2.160(i) to provide for registered persons to function as principals
for a limited period of time is consistent with the Act because it
provides appropriate flexibility to Members, thereby removing
impediments to and perfecting the mechanism of a free and open market
and a national market system, consistent with the objectives of Section
6(b)(5 [sic] of the Act.
    With respect to the amendment to Rules 2.160(j) and (n) to specify
the circumstances under which the Series 28 would be an acceptable
examination for a Member's Financial/Operations Principal, the Exchange
believes that the proposed change will provide additional clarity to
Members with respect to such examination requirements and also reduce
the existing burden on impacted Members to request a waiver from the
Exchange for an examination that has already been accepted by the
Member's designated examining authority, thereby removing impediments
to and perfecting the mechanism of a free and open market and a
national market system, consistent with the objectives of Section
6(b)(5) of the Act.
    With respect to the amendments to Rule 2.160(o) to add rule
provisions regarding the circumstances under which registrations lapse
and the SIE expires, the Exchange believes such amendments are
consistent with the Act because they will align with FINRA rules of
similar purpose, thereby fostering cooperation and coordination with
persons engaged in regulating and facilitating transactions in
securities.
    With respect to the proposed amendments to Rule 2.160(p) regarding
continuing education requirements, the Exchange believes that the
proposed changes are consistent with the Act and the public interest,
because they will provide additional clarity and consistency to the
rule provisions in several respects and also align with FINRA rules of
similar purpose, thereby fostering cooperation and coordination with
persons engaged in regulating and facilitating transactions in
securities. First, the Exchange believes that the terminology change to
collectively refer to a ``Registered Person'' rather than a
``Registered Representative'' is more inclusive and descriptive of the
categories of associated persons of a Member who are registered with
the Exchange and subject to the continuing education requirements,
thereby avoiding any potential confusion. Second, the Exchange believes
that harmonizing with FINRA's continuing education requirements will
promote uniformity in the application of the continuing education
requirements for Registered Persons and thereby avoid any confusion on
the part of IEX Members and their associated persons on what is
required under IEX rules.
    The Exchange also believes that correcting the typographical error
in the footnote numbering of the chart in Rule 2.160(n) is consistent
with the Act because it will avoid any potential confusion regarding
the chart and its footnotes.
    The Exchange believes that the proposed amendments to Rule 2.160(m)
(and conforming amendment to Rule 2.160(e)) to specify that certain
categories of associated persons of a Member are not required to be
registered with the Exchange is consistent with the Act because such
persons' roles and responsibilities are unrelated to the Exchange's
operations, and registration therefore serves no regulatory purpose.
Further, the Exchange believes that (except for floor members of
another national securities exchange and associated persons restricted
from accessing the Exchange and that do not engage in the securities
business of the Member relating to activity that occurs on the
Exchange) such persons would not be considered actively engaged in the
securities business. With respect to persons registered as floor
members on another national securities exchange and associated persons
restricted from accessing the Exchange and that do not engage in the
securities business of the Member relating to activity that occurs on
the Exchange, the Exchange believes that requiring registration with
IEX is not warranted since the associated person's activities are
unrelated to activity that occurs on the Exchange. As discussed in the
Purpose section, the proposed registration exemptions are substantially
similar to existing registration exemptions in FINRA and CBOE [sic]
rules, and thus do not raise any new or novel issues not already
considered by the Commission. Thus, the Exchange believes that the
proposed exemptions will remove impediments to and perfect the
mechanism of a free and open market and a national market system,
consistent with the objectives of Section 6(b)(5) of the Act.
    In addition, the Exchange believes that proposed Supplementary
Material .01 to Rule 2.160(m) is consistent with the Act because it
provides clarity on when the functions of an associated person are
solely and exclusively clerical or ministerial, which also is
consistent with the objectives of Section 6(b)(5) of the Act.
    Finally, the Exchange believes that deletion of Rule 2.150 is
consistent with the Act because the rule is obsolete, as described in
the Purpose section. Accordingly, deletion of the rule will remove any
potential confusion among potential Members as to the membership
application process.

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

    IEX 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 Act. The proposed amendments are
intended to promote transparency in the Exchange's rules, and
consistency with the rules of FINRA and other national securities
exchanges with respect to the examination, qualification, and
continuing education requirements applicable to Members and their
associated persons. Accordingly, the Exchange does not believe that the
proposed rule change imposes any burden on competition that is not
necessary or appropriate in furtherance of such regulatory objectives.
Further,

the proposed changes would apply to all Members and their associated
persons in the same manner and therefore would not impose any
unnecessary intramarket burdens. The Exchange also does not believe
that the proposed rule change would impose any burden on intermarket
competition since all national securities exchanges are expected to
adopt similar rules with uniform standards for the qualification,
registration and continuing education requirements.

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

    Written comments were neither solicited nor received.

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

    The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \42\ of the Act and Rule 19b-4(f)(6) \43\
thereunder. Because the proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) \44\ of the Act and Rule 19b-
4(f)(6) \45\ thereunder.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78s(b)(3)(A).
    \43\ 17 CFR 240.19b-4(f)(6).
    \44\ 15 U.S.C. 78s(b)(3)(A).
    \45\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \46\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\47\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so the proposed rule
change may become operative on October 1, 2018. According to the
Exchange, waiving the 30-day operative delay would allow the Exchange
to harmonize its rules with FINRA as of the effective date of the FINRA
Filing. The Commission notes that, as described in detail above, the
Exchange's proposal does not raise any new or novel issues, as the
Exchange is harmonizing its rules with FINRA and Cboe, and deleting
obsolete text. Therefore, the Commission believes that waiving the 30-
day operative delay is consistent with the protection of investors and
the public interest. Accordingly, the Commission hereby waives the 30-
day operative delay and designates the proposal operative on October 1,
2018.\48\
---------------------------------------------------------------------------

    \46\ 17 CFR 240.19b-4(f)(6).
    \47\ 17 CFR 240.19b-4(f)(6)(iii).
    \48\ For purposes only of waving the 30-day operative delay, the
Commission has considered the purposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \49\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 protected]. Please include
File Number SR-IEX-2018-19 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-IEX-2018-19. 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-IEX-2018-19 and should be submitted on
or before October 25, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
---------------------------------------------------------------------------

    \50\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21582 Filed 10-3-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 171 (Wednesday, September 4, 2013)]
[Rules and Regulations]
[Pages 54383-54384]
[FR Doc No: 2013-19500]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2013-0239; Directorate Identifier 2010-SW-087-AD;
Amendment 39-17552; AD 2013-16-14]
RIN 2120-AA64

Airworthiness Directives; Eurocopter Deutschland GmbH Helicopters

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: We are adopting a new airworthiness directive (AD) for all
Eurocopter Deutschland GmbH (ECD) EC 135 P1, P2, P2+, T1, T2, and T2+
helicopters equipped with a certain main transmission housing upper
part. This AD requires installing a corrugated washer in the middle of
the main transmission filter housing upper part and modifying the main
transmission housing upper part. This AD was prompted by an inspection
of housing upper parts that revealed the bypass inlet in the oil filter
area was not manufactured in accordance with applicable design
specifications. The actions of this AD are intended to prevent failure
of the main transmission and subsequent loss of control of the
helicopter.

DATES: This AD is effective October 9, 2013.
    The Director of the Federal Register approved the incorporation by
reference of certain documents listed in this AD as of October 9, 2013.

ADDRESSES: For service information identified in this AD, contact
American Eurocopter Corporation, 2701 N. Forum Drive, Grand Prairie, TX
75052, telephone<PHONE_NUMBER> or<PHONE_NUMBER>, fax<PHONE_NUMBER>,
or at http://www.eurocopter.com/techpub. You may review the referenced
service information at the FAA, Office of the Regional Counsel,
Southwest Region, 2601 Meacham Blvd., Room 663, Fort Worth, Texas
76137.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov or in person at the Docket Operations Office
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. The AD docket contains this AD, the foreign authority's AD,
any incorporated-by-reference service information, the economic
evaluation, any comments received, and other information. The street
address for the Docket Operations Office (phone:<PHONE_NUMBER>) is U.S.
Department of Transportation, Docket Operations Office, M-30, West
Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE.,
Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Chinh Vuong, Aviation Safety Engineer,
Safety Management Group, Rotorcraft Directorate, FAA, 2601 Meacham
Blvd., Fort Worth, Texas 76137; telephone<PHONE_NUMBER>; email
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Discussion

    On March 14, 2013, at 78 FR 16196, the Federal Register published
our notice of proposed rulemaking (NPRM), which proposed to amend 14
CFR part 39 to include an AD that would apply to ECD Model EC135 P1,
P2, P2+, T1, T2, and T2+ helicopters with a certain serial numbered
main transmission FS108 housing upper part, part number (P/N) 4649 301
034. The NPRM proposed to require installing a corrugated washer in the
filter housing of the housing upper part and modifying each affected
main transmission housing upper part by machining the oil filter bypass
inlet. The proposed requirements were intended to prevent failure of
the main transmission and subsequent loss of control of the helicopter.
    The NPRM was prompted by AD No. 2010-0213, dated October 14, 2010,
issued by the European Aviation Safety Agency (EASA), which is the
Technical Agent for the Member States of the European Union. EASA
issued AD No. 2010-0213 to correct an unsafe condition for the ECD
model EC 135 and EC635 helicopters. EASA advises that a recent
inspection on some housing upper parts for the main transmission FS108
revealed the bypass inlet in the oil filter area had not been
manufactured in accordance with the applicable design specifications.
EASA advises that this condition, if not detected and corrected, could
adversely affect the oil-filter bypass function, which is essential for
continued safe flight. The EASA AD requires a temporary modification of
the main transmission housing upper part by installing a corrugated
washer, and then a ``rework'' of the oil filter area to bring the
affected parts within the applicable design specifications.

Comments

    We gave the public the opportunity to participate in developing
this AD, but we did not receive any comments on the NPRM (78 FR 16196
March 14, 2013).

FAA's Determination

    These helicopters have been approved by the aviation authority of
the Republic of Germany and are approved for operation in the United
States. Pursuant to our bilateral agreement with the Republic of
Germany, EASA, its technical representative, has notified us of the
unsafe condition described in the EASA AD. We are issuing this AD
because we evaluated all information provided by EASA and determined
the unsafe condition exists and is likely to exist or develop on other
helicopters of these same type designs and that air safety and the
public interest require adopting the AD requirements as proposed.

Related Service Information

    ECD has issued Alert Service Bulletin (ASB) ASB EC135-63A-017,
Revision 0, dated October 11, 2010 (EC135-63A-017), which specifies
removing the oil filter element and installing a corrugated washer.
EC135-63A-017 also specifies reworking the affected filter housing
upper part at the next repair or major overhaul of the main
transmission, no later than 4,000 flight hours after receipt of the
service bulletin. EASA classified this ASB as mandatory and issued AD
2010-0213 to ensure the continued airworthiness of these helicopters.
    We have also reviewed ZF Luftfahrttechnik GmbH Service Instruction
No. EC135FS108-1659-1009, dated September 14, 2010, which specifies
procedures for repairing the main transmission upper housing, and
includes dimensions and tolerances for machining the housing upper
part.

Costs of Compliance

    We estimate that this AD will affect 227 helicopters of U.S.
Registry. Based on an average labor rate of $85 per work hour, we
estimate that operators may incur the following costs in order to
comply with this AD. Installing the corrugated washer will require
about .5 work hour, and required parts cost about $10, for a cost per
helicopter of about $53, and a total cost to the U.S.

operator fleet of $12,031. Machining the housing upper part requires
about 5 work-hours and required parts cost about $73, for a total cost
per helicopter of $498, and a total cost to U.S. operators of $113,046.
    According to the ECD ASB, some of the costs of this AD may be
covered under warranty, thereby reducing the cost impact on affected
individuals. We do not control warranty coverage by Eurocopter.
Accordingly, we have included all costs in our cost estimate.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the Agency's authority.
    We are issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701: ``General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on helicopters identified in this
rulemaking action.

Regulatory Findings

    This AD will not have federalism implications under Executive Order
13132. This AD will not have a substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government.
    For the reasons discussed above, I certify that this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866;
    (2) Is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979);
    (3) Will not affect intrastate aviation in Alaska to the extent
that it justifies making a regulatory distinction; and
    (4) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.
    We prepared an economic evaluation of the estimated costs to comply
with this AD and placed it in the AD docket.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

Adoption of the Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new airworthiness
directive (AD):

2013-16-14 Eurocopter Deutschland GmbH: Amendment 39-17552; Docket
No. FAA-2013-0239; Directorate Identifier 2010-SW-087-AD.

(a) Applicability

    This AD applies to Eurocopter Deutschland GmbH Model EC135 P1,
P2, P2+, T1, T2, and T2+ helicopters with a main transmission FS108
housing upper part, part number (P/N) 4649 301 034 and a serial
number listed in Table 1 of Eurocopter Alert Service Bulletin EC135-
63A-017, Revision 0, dated October 11, 2010 (ASB EC135-63A-017),
certificated in any category.

(b) Unsafe Condition

    This AD defines the unsafe condition as an improperly
manufactured bypass inlet in the oil filter area. This condition
could adversely affect the oil-filter bypass function, resulting in
failure of the main transmission and subsequent loss of control of
the helicopter.

(c) Effective Date

    This AD becomes effective October 9, 2013.

(d) Compliance

    You are responsible for performing each action required by this
AD within the specified compliance time unless it has already been
accomplished prior to that time.

(e) Required Actions

    (1) Within 3 months, remove the oil filter element and install a
corrugated washer, P/N<PHONE_NUMBER>, in the middle of the filter
housing of the housing upper part as depicted in Figure 2 of ASB
EC135-63A-017.
    (2) Within 4,000 hours time-in-service or at the next main
transmission repair or overhaul, whichever occurs first, machine the
main transmission housing upper part in accordance with Annex A of
ZF Luftfahrttechnik GmbH Service Instruction No. EC135FS108-1659-
1009, dated September 14, 2010.
    (3) Do not install a main transmission upper part, P/N 4649 301
034, on any helicopter unless it has been modified as required by
paragraphs (e)(1) through (e)(2) of this AD.

(f) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Safety Management Group, FAA, may approve AMOCs
for this AD. Send your proposal to: Chinh Vuong, Aviation Safety
Engineer, Safety Management Group, Rotorcraft Directorate, FAA, 2601
Meacham Blvd., Fort Worth, Texas 76137; telephone<PHONE_NUMBER>;
email<EMAIL_ADDRESS>    (2) For operations conducted under a 14 CFR part 119 operating
certificate or under 14 CFR part 91, subpart K, we suggest that you
notify your principal inspector, or lacking a principal inspector,
the manager of the local flight standards district office or
certificate holding district office, before operating any aircraft
complying with this AD through an AMOC.

(g) Additional Information

    The subject of this AD is addressed in European Aviation Safety
Agency AD No. 2010-0213, dated October 14, 2010. You may view the
EASA AD in the AD docket on the Internet at http://www.regulations.gov.

(h) Subject

    Joint Aircraft Service Component (JASC) Code: 6320: Main Rotor
Gearbox.

(i) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) of the service information listed
in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless the AD specifies otherwise.
    (i) Eurocopter Alert Service Bulletin EC135-63A-017, Revision 0,
dated October 11, 2010.
    (ii) ZF Luftfahrttechnik GmbH Service Instruction No.
EC135FS108-1659-1009, dated September 14, 2010.
    (3) For service information identified in this AD, contact
American Eurocopter Corporation, 2701 N. Forum Drive, Grand Prairie,
TX 75052, telephone<PHONE_NUMBER> or<PHONE_NUMBER>, fax (972) 641-
3775, or at http://www.eurocopter.com/techpub.
    (4) You may view this service information that is incorporated
by reference in the AD docket on the Internet at http://www.regulations.gov.
    (5) You may also view this service information that is
incorporated by reference at the National Archives and Records
Administration (NARA). For information on the availability of this
material at NARA, call<PHONE_NUMBER>, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Fort Worth, Texas, on August 2, 2013.
Lance T. Gant,
Acting Directorate Manager, Rotorcraft Directorate, Aircraft
Certification Service.
[FR Doc. 2013-19500 Filed 9-3-13; 8:45 am]
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[Federal Register: February 8, 2010 (Volume 75, Number 25)]
[Notices]
[Page 6253-6254]
[DOCID:fr08fe10-111]

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

Petition for Exemption From the Federal Motor Vehicle Theft
Prevention Standard; Hyundia-Kia America Technical Center, Inc.

AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).

ACTION: Grant of petition for exemption.

-----------------------------------------------------------------------

SUMMARY: This document grants in full the Hyundai-Kia Motors
Corporation (HATCI) petition for exemption of the Hyundai VI vehicle
line in accordance with 49 CFR part 543, Exemption from Vehicle Theft
Prevention Standard. This petition is granted because the agency has
determined that the antitheft device to be placed on the line as
standard equipment is likely to be as effective in reducing and
deterring motor vehicle theft as compliance with the parts-marking
requirements of 49 CFR part 541, Federal Motor Vehicle Theft Prevention
Standard.

DATES: The exemption granted by this notice is effective beginning with
the 2011 Model Year (MY).

FOR FURTHER INFORMATION CONTACT: Ms. Carlita Ballard, International
Policy, Fuel Economy and Consumer Programs, NHTSA, W43-439, 1200 New
Jersey Avenue, SE., Washington, DC 20590. Ms. Ballard's phone number is
(202) 366-0846. Her fax number is<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: In a petition dated September 11, 2009,
Hyundai requested an exemption from the parts-marking requirements of
the Theft Prevention Standard (49 CFR Part 541) for the Hyundai VI
vehicle line, beginning with MY 2011. The petition requested an
exemption from parts-marking requirements pursuant to 49 CFR 543,
Exemption from Vehicle Theft Prevention Standard, based on the
installation of an antitheft device as standard equipment for the
entire vehicle line.
    Under Section Sec.  543.5(a), a manufacturer may petition NHTSA to
grant exemptions for one of its vehicle lines per model year. Hyundai
petitioned the agency to grant an exemption for its VI vehicle line
beginning with MY 2011. In its petition, Hyundai provided a detailed
description and diagram of the identity, design, and location of the
components of the antitheft device for the new vehicle line. Hyundai
will install its passive Smart-key Immobilizer device and alarm system
(audible and visual) on the VI vehicle line as standard equipment.
According to Hyundai, the Smart-key immobilizer device allows the
driver/operator to access and operate the vehicle by using a valid FOB
key and that no other actions by mechanical key or a remote control
unit are necessary. Hyundai further states that the immobilizer is
automatically activated when the electronic key code of the FOB key is
removed from the smart-key immobilizer control unit. The audible and
visual alarm system is automatically activated when the electronic key
code of the FOB key is removed from the smart-key immobilizer control
unit, all vehicle doors and the hood are closed, and all the doors are
locked. If the device is armed and unauthorized entry is attempted, the
vehicle's horn will sound and the hazard lamps will flash.
    Hyundai stated that its Smart-key immobilizer device also features
passive vehicle access, trunk access and door locking. Specifically,
Hyundai stated that if a valid FOB key is in the range defined by this
device, the device will automatically detect and authenticate the FOB
via wireless communication between the FOB key and the Smart-key
immobilizer unit. If communication is authenticated, the device will
allow passive accessibility to the doors and/or trunk, and/or passive
locking of all the doors.
    In addressing the specific content requirements of 543.6, Hyundai
provided information on the reliability and durability of the device.
Hyundai conducted component tests and on-vehicle tests for the Smart-
key immobilizer system and the alarm system in accordance with the EEC,
UNECE, Korea standard and Hyundai in-house standard. Specifically,
Hyundai provided approval numbers for all tests performed
    In support of its belief that its antitheft device will be as
effective as compliance with the parts marking requirements in reducing
and deterring vehicle theft, Hyundai referenced and provided an April
2006 report by JP Research, Inc., which concluded that antitheft
devices were consistently much more effective in reducing thefts when
compared to parts marking. The JP Research report showed that of the 24
vehicle lines studied, those with antitheft devices installed were 70%
more effective than parts marking in deterring theft. Hyundai also
provided theft data on other manufacturer's vehicle lines (Lincoln Town
Car, Chrysler Town and Country, Mazda MX-5 Miata and Mazda 3) that have
been exempted from the theft prevention standard. Hyundai stated

that it believes that this data supports the conclusion of the JP
Research report that the installation of antitheft devices is at least
as effective as complying with the parts marking requirements in
reducing and deterring theft. Theft rates for the Lincoln Town Car,
Chrysler Town and Country, Mazda MX-5 Miata and Mazda 3 all are below
the median theft rate of 3.5826. Hyundai also compared the theft rates
for its Azera model which has been installed with an antitheft device
as standard equipment since (MY 2006) and was granted an exemption from
the theft prevention standard in MY 2008 to the overall theft rate
reported by NHTSA for model years (MYs') 2006 and 2007. The theft rate
for the MY 2006 Hyundai Azera was 0.7758 which was comparatively lower
than the overall theft rate of 2.08 for MY 2006. The theft rate for the
MY 2007 Azera was 1.8003, also comparatively lower than the overall
theft rate of 1.86 for MY 2007. Conclusively, Hyundai stated that it
believes the data indicate that installation of antitheft devices are
effective in reducing thefts.
    Based on the supporting evidence submitted by Hyundai on the
device, the agency believes that the antitheft device for the VI
vehicle line is likely to be as effective in reducing and deterring
motor vehicle theft as compliance with the parts-marking requirements
of the Theft Prevention Standard (49 CFR part 541). The agency
concludes that the device will provide the five types of performance
listed in Sec.  543.6(a)(3): Promoting activation; attracting attention
to the efforts of unauthorized persons to enter or operate a vehicle by
means other than a key; preventing defeat or circumvention of the
device by unauthorized persons; preventing operation of the vehicle by
unauthorized entrants; and ensuring the reliability and durability of
the device.
    Pursuant to 49 U.S.C. 33106 and 49 CFR 543.7(b), the agency grants
a petition for exemption from the parts-marking requirements of part
541, either in whole or in part, if it determines that, based upon
supporting evidence, the standard equipment antitheft device is likely
to be as effective in reducing and deterring motor vehicle theft as
compliance with the parts-marking requirements of part 541. The agency
finds that Hyundai has provided adequate reasons for its belief that
the antitheft device for the Hyundai VI vehicle line is likely to be as
effective in reducing and deterring motor vehicle theft as compliance
with the parts-marking requirements of the Theft Prevention Standard
(49 CFR part 541). This conclusion is based on the information Hyundai
provided about its device.
    For the foregoing reasons, the agency hereby grants in full
Hyundai's petition for an exemption for the MY 2011 VI vehicle line
from the parts-marking requirements of 49 CFR part 541. The agency
notes that 49 CFR Part 541, Appendix A-1, identifies those lines that
are exempted from the Theft Prevention Standard for a given model year.
49 CFR 543.7(f) contains publication requirements with respect to the
disposition of all part 543 petitions. Advanced listing, including the
release of future product nameplates, the beginning model year for
which the petition is granted and a general description of the
antitheft device is necessary in order to notify law enforcement
agencies of new vehicle lines exempted from the parts-marking
requirements of the Theft Prevention Standard.
    If Hyundai decides not to use the exemption for this vehicle line,
it must formally notify the agency. If such a decision is made, the
vehicle line must be fully marked as required by 49 CFR 541.5 and 541.6
(marking of major component parts and replacement parts).
    NHTSA notes that if Hyundai wishes in the future to modify the
device on which this exemption is based, the company may have to submit
a petition to modify the exemption. Part 543.7(d) states that a part
543 exemption applies only to vehicles that belong to a line exempted
under this part and equipped with the anti-theft device on which the
line's exemption is based. Further, Sec.  543.9(c)(2) provides for the
submission of petitions to modify an exemption to permit the use of an
antitheft device similar to but differing from the one specified in
that exemption.
    The agency wishes to minimize the administrative burden that part
543.9(c)(2) could place on exempted vehicle manufacturers and itself.
The agency did not intend part 543 to require the submission of a
modification petition for every change to the components or design of
an antitheft device. The significance of many such changes could be de
minimis. Therefore, NHTSA suggests that if the manufacturer
contemplates making any changes the effects of which might be
characterized as de minimis, it should consult the agency before
preparing and submitting a petition to modify.

    Authority: 49 U.S.C. 33106; delegation of authority at 49 CFR
1.50.

    Issued on: February 2, 2010.
Stephen R. Kratzke,
Associate Administrator for Rulemaking.
[FR Doc. 2010-2595 Filed 2-5-10; 8:45 am]
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