[Federal Register Volume 83, Number 147 (Tuesday, July 31, 2018)]
[Notices]
[Pages 36992-37012]
[FR Doc No: 2018-16271]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83703; File No. SR-ISE-2018-59]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Align Existing
Investigatory and Disciplinary Processes and Related Rules With the
Investigatory and Disciplinary Processes and Associated Rules of Nasdaq
BX, Inc.

July 25, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 12, 2018, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. 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\ 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

    The Exchange proposes to align its existing investigatory and
disciplinary processes and related rules with the investigatory and
disciplinary processes and associated rules of Nasdaq BX, Inc.
(``BX'').
    The text of the proposed rule change is available on the Exchange's
website at http://ise.cchwallstreet.com/, at the principal office of
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange 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 statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
    The Exchange proposes to eliminate its existing processes for: (1)
Summarily suspending and limiting or prohibiting access to Exchange
services by Exchange members (``Members''), persons associated with
such Members (``Associated Persons''), (2) investigating and
disciplining Exchange Members and Associated Persons, and (3)
adjudicating actions brought by persons economically aggrieved by
certain Exchange actions. The Exchange also seeks to eliminate Chapters
15, 16, and 17 \3\ of the Exchange's Rules (with certain exceptions,
discussed below), which set forth and govern such processes,
respectively, and it proposes to eliminate the Exchange's Business
Conduct Committee (``BCC''), which is a body that exists to help to
enforce the Exchange's Rules. The Exchange further proposes to adopt,
in place of the aforementioned Rules, the investigatory, disciplinary,
and adjudicatory processes of the Exchange's sister exchange, BX. It
also proposes to replace the BCC with an Exchange Review Council that
is similar to one that BX has in place. Specifically, the Exchange
proposes to establish new Chapters 80 and 90 of its Rules \4\ and
incorporate by reference into those Chapters (again with certain
exceptions, described below) the BX

Rule 8000 and 9000 Series,\5\ which set forth and govern the BX
investigatory, disciplinary, and adjudicative processes.\6\ The
proposed changes, when coupled with certain changes to the Exchange's
other Rules, including Rules that govern appeals of the Exchange's
membership and other decisions, will render the Exchange's
investigative, disciplinary, and adjudicatory processes substantially
the same as those, not only of BX, but also of other Nasdaq, Inc.
family of [sic] exchanges (the ``Nasdaq, Inc. Exchanges'').\7\ The
proposal [sic] change will also further harmonize the work that the
Financial Industry Regulatory Authority (``FINRA'') conducts for all
these exchanges.
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    \3\ As discussed below, the Exchange proposes to replace Chapter
17, which sets forth processes for persons aggrieved by Exchange
actions, including adverse membership or association determinations,
by adding to Exchange Rules 302 and 307 provisions adapted from BX
Rules 1015 and 1016, which provide for similar adjudicative
processes. Portions of proposed Chapter 90 also replace portions of
Chapter 17, e.g., statutory disqualification in the 9520 Series.
    \4\ The Exchange proposes to add Chapters 23-79 and Chapters 81-
89 to its Rules, but reserve such Chapters for future use.
    \5\ Citation herein to rules of the proposed Chapters 80 and 90
will be preceded by the term ``BX Rule'' to reflect incorporation of
the BX Rule 8000 and 9000 Series. References to current rules will
be preceded by the term ``Existing Rule.''
    \6\ The Exchange proposes to separately request an exemption
from the rule filing requirements of Section 19(b) of the Act for
changes to Chapters 80 and 90 to the extent such rules are effected
solely by virtue of a change to the BX Rule 8000 and 9000 Series.
    \7\ The Exchange notes that the BX Rule 8000 and 9000 Series are
substantially similar to corresponding rules of The Nasdaq Stock
Market, LLC (``Nasdaq'') and Nasdaq PHLX, LLC (``Phlx''). Moreover,
the Exchange notes that Nasdaq MRX, LLC and Nasdaq GEMX, LLC will
propose similar changes to their respective investigatory and
disciplinary processes and associated rules that will render them
substantially similar to those of BX.
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Overview of the Exchange's Existing Investigatory, Disciplinary, and
Adjudicatory Processes and Rules

    The existing processes for investigating and disciplining Exchange
Members \8\ and Associated Persons,\9\ for taking summary action
against them, and for adjudicating Exchange actions that aggrieve them,
are set forth in Existing Chapters 15-17 of the Exchange's Rulebook.
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    \8\ As defined in Existing Rule 100(a)(30).
    \9\ As defined in Existing Rule 100(a)(4).
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    With respect to investigations, Existing Rule 1602 authorizes the
Exchange's regulatory staff (hereinafter described in this filing, for
consistency with the BX rules, as ``Regulation Department'' or
``Exchange Regulation Department'')\10\ to investigate Members and
Associated Persons based on information it receives from a variety of
sources, such as surveillance reviews, examinations, industry
notifications, third party complaints, and referrals.\11\
Alternatively, the Rule provides that the Exchange may, and it
typically does, refer such investigatory matters to FINRA.
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    \10\ The Exchange notes that the scope of its Regulation
Department is the same as that of the BX Regulation Department.
    \11\ Existing Rule 1601 obligates each Member and Associated
person to comply with investigatory requests by the Exchange (or
FINRA, acting on its behalf) for testimony, or for written
information or documentary materials.
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    FINRA performs, among other things, investigatory and prosecutorial
work for the Exchange pursuant to a Regulatory Services Agreement
between the two parties (the ``RSA'').\12\ Under the RSA, FINRA is
responsible \13\ for the investigation of potential violations of the
Exchange Rules and the Act, and for the prosecution of any such
violations thereof, by Exchange Members and Associated Persons.\14\
Upon completion of an investigation, FINRA analyzes the evidence and
applicable law, and makes preliminary determinations, known as
``Sufficiency of Evidence'' reviews, as to whether or not violations
have occurred.\15\ The Sufficiency of Evidence review determines the
nature of FINRA's recommendation to the Exchange's Chief Regulatory
Officer (``CRO'') as to whether and how to proceed further with
matters. If probable cause exists that a Member or Associated Person
has violated the Exchange Rules or the Act, then the Regulation
Department may file charges against the Member or Associated Person for
adjudication before a Current Hearing Panel.\16\ A Current Hearing
Panel consists of a professional hearing officer and two members of the
Exchange's BCC.
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    \12\ See RSA, dated June 10, 2013, as amended. The Exchange
retains ultimate legal responsibility for the regulation of its
Members, persons associated with its Members, and its market. See
Existing Rule 1615 and its Supplementary Material.
    \13\ Although Existing Rule 1615 and its Supplementary Material
authorizes the Exchange to contract with FINRA or another self-
regulatory organization (``SRO'') to perform its disciplinary
functions, the Existing Rule states that the Exchange retains
ultimately legal responsibility for and control over such functions.
    \14\ Under the RSA, ISE's Regulation Department may elect to
exercise jurisdiction over a matter involving an ISE Member or an
Associated Person, performing the investigation and any resulting
prosecutorial work without FINRA's involvement.
    \15\ See FINRA Regulatory Notice 09-17 (March 2009) (available
at http://www.finra.org/sites/default/files/NoticeDocument/p118171.pdf).
    \16\ Both the Existing Rules and the BX Rules refer to their
respective disciplinary adjudication panels as ``Hearing Panels.''
In the discussion that follows, the Exchange distinguishes between
these two types of panels, which differ from one another
substantively, by referring to the type of panel that exists under
the Existing Rules as a ``Current Hearing Panel'' and the panel that
the Exchange proposes to establish under the BX Rules as a ``New
Hearing Panel.'' For purposes of the following discussion, the term
New Hearing Panel shall also refer to an ``Extended Hearing Panel,''
as that term is defined in BX Rule 9120(l).
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    Currently, the BCC is charged with enforcing the Rules of the
Exchange with respect to Members and Associated Persons. The BCC is a
committee, established by the Board,\17\ whose enforcement jurisdiction
includes the following: (1) Ordering investigations of possible Rule
violations; (2) considering letters of consent in expedited
disciplinary actions; (3) making its members available to serve on
Current Hearing Panels that adjudicate formal disciplinary proceedings;
(4) imposing sanctions on Members or Associated Persons in disciplinary
proceedings (``Respondents''); (5) reviewing Exchange actions involving
minor rule violations; (6) appointing panels to conduct hearings and
reviews of Exchange actions that deny membership or Member association
privileges; and (7) generally overseeing all matters relating to the
conduct of disciplinary hearings and hearings for review of Exchange
decisions, and providing the Exchange with advice for improving
disciplinary procedures.\18\
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    \17\ See Resolution of the Board of Directors of the
International Securities Exchange LLC Delegating Authority, dated
May 11, 2000.
    \18\ See ISE Business Conduct Committee Charter, as amended, May
1, 2003.
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    The Existing Rules provide several means by which the Exchange may
pursue disciplinary actions.
    First, Existing Rule 1603 permits informal disposition of
disciplinary matters through ``letters of consent.'' The Existing Rule
states that disciplinary matters are disposable in this manner if: (1)
The Parties agree to the terms of such a letter, including any
sanctions imposed therein; (2) the CRO approves of the draft letter;
and (3) the BCC subsequently approves of the draft letter. If the
Parties to the letter cannot reach agreement to [sic] its terms, or if
the CRO or BCC reject [sic] it, then the disciplinary matter proceeds
through formal channels.
    Second, Existing Rules 1604-1613 provide for formal adjudication of
disciplinary matters. These Existing Rules state that, whenever
probable cause exists for finding that a Member or Associated Person
has committed a violation within the disciplinary jurisdiction of the
Exchange, regulatory staff may prepare a ``statement of charges,''
subject to the approval of the CRO. The Existing Rules further provide
for Current Hearing Panels to adjudicate disciplinary matters. Current
Hearing Panels are composed of a professional hearing officer, who
serves as the Current Hearing Panel Chair, and two members of the BCC.
The Existing Rules provide for the Parties to a disciplinary proceeding
to receive at least 28 calendar days' notice prior to the occurrence of
a hearing. They also provide for a pre-hearing conference to

expedite disciplinary proceedings by, among other things, seeking the
Parties' agreement regarding undisputed facts. They permit non-Parties
to proceedings to intervene, under certain circumstances, and they
grant the Current Hearing Panel Chair broad discretion to determine the
course of the proceedings, including with respect to timing, filing
deadlines, if not specified in the Rules, and evidentiary matters. They
generally prohibit interlocutory review of Current Hearing Panel
decisions as well as ex parte communications among Members and
Associated Persons and Panelists, the BCC, or the Board concerning the
merits of a disciplinary matter. They require Current Hearing Panels to
issue their decisions by majority vote and in writing.
    Existing Rule 1608 permits Current Hearing Panels to engage in
summary disciplinary proceedings, meaning that they may reach decisions
and impose penalties without holding hearings as to violations that
Respondents admit, do not dispute, or fail to answer. The Rule
provides, in such instances, that Respondents have 10 calendar days
following service of such summary decisions to request hearings as to
matters not previously admitted or to contest the penalties imposed.
    Existing Rule 1609 sets forth procedures for settlements of
disciplinary matters. The Rule generally provides that a Party may
submit up to two written ``offers of settlement'' at any time period
prior to 120 calendar days following service of the statement of
charges. Settlements must be approved by the Current Hearing Panel (or
the CRO if a Current Hearing Panel has yet to be appointed).
    Pursuant to Existing Rule 1610, Respondents may appeal Current
Hearing Panel decisions to the Board. The Rule also permits the Board
to review Current Hearing Panel decisions upon its own initiative
within 30 calendar days after service of such decisions. The Rule
permits the Board to delegate responsibility for its review to a
committee composed of at least three of its Directors whose decision
must be ratified by the Board. The Board may affirm, reverse, or modify
decisions of Current Hearing Panels, and such Board decisions are
final.
    Third, Existing Rule 1614 provides for the disposition of certain
minor disciplinary violations through the summary assessment of
fines.\19\ This Rule comprises violations of the Rules listed in Rule
1614(d) and that are set forth in the Exchange's Minor Rule Violation
Plan (``MRVP'') approved by the Commission pursuant to SEC Rule 19d-1
(``MRVP violations'') as well as violations that are not included in
the Exchange's MRVP but may be considered ``minor'' in nature (``minor
rule violations'') and thus possibly resolved outside of the formal
disciplinary process.\20\ Existing Rule 1614(a) sets forth the
Exchange's general authority to assess such fines in amounts no greater
than $5,000 (up to $2,500 for MRVP violations, and up to $5,000 for
minor rule violations). Existing Rule 1614(b) sets forth the notice
requirements for service upon the Member or person against which the
fine is to be levied (a ``Subject''). The Existing Rule requires the
Exchange to serve notice upon the Subject, along with a written
statement that describes the nature of the alleged violation and the
basis for finding that the Subject committed the violation, the amount
of the fine to be imposed for each violation, and a date, not less than
30 calendar days after service of the notice, by which such
determination becomes final and such fine must be paid or contested.
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    \19\ Generally, notice to the SEC of final disciplinary action
by an SRO is required pursuant to Rule 19d-1 of the Act; however,
uncontested fines of $2,500 or less assessed for violations of MRVP
rules are subject to abbreviated periodic SEC reporting. None of the
fines assessed in lieu of formal disciplinary action exceed $5,000.
    \20\ Determinations to issue a fine under Rule 1614 are made on
a case-by-case basis, whereby the Exchange considers the individual
facts and circumstances to determine whether a fine of more or less
than the recommended amount is appropriate for the violation, or
whether the violation requires formal disciplinary action.
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    Under Existing Rule 1614(c), a Subject may contest the fine by
filing an answer to this written determination prior to the date when
the fine is payable. Additionally, the Subject may request a hearing as
part of the answer.\21\ The Rule charges the BCC, or a subcommittee
thereof, with adjudicating contested fines. The BCC may decide to
overturn, affirm, or modify fines levied by the Exchange.\22\ A Subject
or the Exchange staff may appeal such determinations to the Board, and
the Board may also call the matter for review on its own
initiative.\23\
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    \21\ Existing Rule 1614(c).
    \22\ See id.
    \23\ See id.
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    Existing Rule 1614(d) sets forth the list of violations and a
corresponding schedule of fines that the Exchange may impose and
disciplinary actions it may pursue for MRVP violations and minor rule
violations.\24\ They include the following:
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    \24\ See n.20, infra.
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     Violations of Rule 412 pertaining to position limits (with
fines ranging from $500 for the first offense within any 24 month
rolling period to $5,000 for the fourth and subsequent offenses within
the same period);
     Violation of Rule 1403 for failing to file focus reports
(with sanctions ranging from a $200 fine for delinquencies of up to 30
calendar days and formal disciplinary action for delinquencies of 90 or
more calendar days);
     Failing to make timely responses to requests for trade
data in violation of Rule 1404 (with sanctions for the first offense
ranging from a $200 fine for delinquencies of up to 9 business days to
formal disciplinary action for delinquencies of 30 or more business
days, and sanctions for subsequent offenses ranging from a $500 fine
for the second offense to formal disciplinary action beginning with the
fifth offense);
     Violating Rule 717(d) and (e) regarding limits on orders
entered by Electronic Access Members (with a letter of caution for the
first five offenses within one calendar year, fines escalating from
$500 to $2,000 for the sixth through the twentieth offenses within the
same period, and formal disciplinary action thereafter);
     Violations of Rule 803 and 805(b)(1)(i) regarding pre- and
post-opening quote spread parameters for market maker quotations (with
a letter of caution for the first offense within any 24 month rolling
period, fines escalating from $1,000 to $5,000 for the second through
the fourth offenses within the same period, and formal disciplinary
action thereafter);
     Violations of Rule 805, which requires market makers to
execute in appointed options classes a minimum percentage of the total
number of contracts executed during a quarter (with a letter of caution
for the first offense within any 12 month rolling period, fines
escalating from $500 to $2,500 for the second through the fourth
offenses within the same period, and formal disciplinary action
thereafter);
     Failure to conduct mandatory systems testing in violation
of Rule 419 (with fines escalating from $250 to $2,000 for the first
through the fourth offenses within one calendar year, and formal
disciplinary action thereafter);
     Failure to timely submit information or instructions
regarding the exercise or non-exercise of noncash-settled equity
options in violation of Rule 1100 (with fines for member

organizations\25\ escalating from $1,000 for the first offense within
any 24 month rolling period to $5,000 for the third and subsequent
offenses within the same period, and for individuals, from $500 for the
first offense within any 24 month rolling period to $2,500 for the
third and subsequent offenses within the same period);
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    \25\ The Exchange notes that it proposes to amend the term
``Member Organization'' so that it merely reads ``Member.'' These
terms are synonymous.
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     Failure to accurately report positions and account
information in violation of Rule 415 (with fines escalating from $500
for the first offense within any 24 month rolling period to $5,000 for
the fourth and subsequent offenses within the same period); and
     Failure of a market maker to enter continuous quotations
for the option classes to which it is appointed in violation of Rule
804(e) (with fines ranging from a letter of caution for the first
offense within any 24 month rolling period, to fines ranging from
$1,000 to $5,000 for the second through fourth offenses within the same
period, and formal disciplinary actions beginning with the fifth
offense).\26\
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    \26\ As explained below, the Exchange also proposes to retain
Existing Rule 1600, which sets forth the general jurisdiction of the
Exchange with respect to disciplinary matters. Existing Rule 1600
states that a Member or Associated Person who is alleged to have
violated or aided and abetted a violation of the Act, the rules and
regulations promulgated thereunder, and the By-Laws or Rules of the
Exchange, or any interpretation thereof are subject to the
disciplinary jurisdiction of the Exchange and may be, after notice
and opportunity for a hearing, appropriately disciplined by
expulsion, suspension, fine, censure, limitation or termination as
to activities, functions, operations, or association with a Member,
or any other fitting sanction in accordance with the provisions of
the disciplinary rules. It also permits the Exchange to charge a
supervisor with a violation of a rule within the disciplinary
jurisdiction of the Exchange committed by an employee under his
supervision or by the Member as though such violations were his own.
Finally, it extends the disciplinary jurisdiction of the Exchange to
continue after deregistration of the Member from the Exchange or a
person's termination of association with a Member as to matters that
occurred prior to such termination or deregistration. The Exchange
must serve written notice to the former Member within one year of
receipt by the Exchange of notice of such termination or
deregistration that the Exchange is making inquiry into a matter or
matters.
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    As explained below, the Exchange proposes to retain but renumber
Existing Rule 1614(d) insofar as the Exchange's MRVP and schedule of
minor violations are unique to it. The Exchange cannot and does not
seek to simply incorporate by reference the BX MRVP.
    Existing Rule 1615 and its Supplementary Material authorizes the
Exchange to contract with FINRA or another SRO to perform its
disciplinary functions, but the Existing Rule states that the Exchange
retains ultimately [sic] legal responsibility for and control over such
functions.
    Existing Rule 1616 authorizes and prescribes the process for
adjudicating expedited client suspensions that may be imposed upon
Members or Associated Persons that violate the prohibition in Existing
Rule 403 on disruptive quoting and trading activity. Existing Rule 1616
states that the initiation of expedited suspension proceedings requires
the prior written authorization of the CRO or his designees. It
requires the Exchange to provide prior notice to the Respondent as well
as to convene a Current Hearing Panel to adjudicate the matter. The
Existing Rule provides that such hearings are to be administered
generally in accordance with Existing Rule 1606. If a Respondent fails
to appear at a hearing for which it receives proper notice, the
Existing Rule states that the Current Hearing Panel may issue a
suspension order without further proceedings, while the failure of the
Exchange to appear may result in the dismissal of the suspension
proceeding. Existing Rule 1616(d) requires a Current Hearing Panel to
issue a written decision as to whether to order [sic] suspension not
later than 10 days after receiving the hearing transcript. It further
provides that a Panel may issue an order imposing suspension only if it
finds, by a preponderance of the evidence, that the alleged violation
specified in the notice occurred. At any time after a Respondent is
served with a suspension order, a Party may apply to the Current
Hearing Panel to modify, set aside, limit, or revoke the order, and the
Current Hearing Panel must respond to the request within 10 days after
receipt thereof, unless extended. Finally, Existing Rule 1616(f)
provides for the right of a Respondent to seek Commission review of a
suspension order.
    Chapter 15 of the Existing Rules states that the Board, a committee
thereof, or an Exchange Official designated by the Board may summarily
suspend a Member or an Associated Person that has been expelled or
suspended from any other SRO or has been barred or suspended from being
associated with a member of another SRO, if the Board, a committee
thereof, or a designated Exchange Official determines that their
ongoing transaction of business on the Exchange would compromise the
safety of investors, creditors, other Members of the Exchange, or the
Exchange itself.\27\ On the same grounds, the Board, a committee
thereof, or a designated Exchange Official may summarily suspend a
Member if it is experiencing operational or financial difficulties and
cannot continue doing business as a member with safety to investors,
creditors, other Members, or the Exchange.\28\ Furthermore, the Board,
committee, or Exchange Official may limit or prohibit any person's
access to services offered by the Exchange for these same reasons or,
as to a Member, they [sic] may take such actions if they [sic]
determine that such Member does not meet the qualification requirements
or other prerequisites for access with safety to investors, creditors,
Members, or the Exchange.\29\ Chapter 15 provides for the Exchange to
notify the SEC upon imposing a summary suspension or when summarily
limiting or prohibiting access to Exchange services.\30\
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    \27\ See Existing Rule 1500.
    \28\ See id.
    \29\ See id.
    \30\ See id.
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    Chapter 15 provides that, following the imposition of a suspension
or a limitation on or prohibition against accessing Exchange services,
the Exchange will conduct an investigation of the affairs of the
affected Member, Associated Person, or person.\31\ A suspended,
limited, or prohibited Member, Associated Person, or person must file
with the Exchange a written statement covering all information that the
Exchange may request in this regard, including a complete list of
creditors and amounts owed to each as well as a complete list of
positions in Exchange options contracts they [sic] maintain on their
[sic] own behalf and that of their [sic] customers.\32\
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    \31\ See Existing Rule 1501.
    \32\ See id.
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    Those subject to summary suspension or that are limited or
prohibited with respect to access to Exchange services may petition for
reinstatement within six months of their suspension, limitation, or
prohibition, if they are suspended, limited, or prohibited due to
operating difficulty, or within 30 days of suspension, limitation, or
prohibition, if they are suspended, limited, or prohibited for reason
of financial difficulty.\33\ An applicant for reinstatement is afforded
an opportunity for a hearing, in certain circumstances.\34\ The
Exchange may approve an application for reinstatement if it finds that
the applicant is operationally and financially able to conduct their
[sic] business with safety to investors, creditors, Members, and the
Exchange.\35\

The failure of a suspended, limited, or prohibited Member to obtain
reinstatement will result in disposition of membership, unless the
Member sells or leases their [sic] membership.\36\ Finally, Existing
Rule 1504 provides that a Member suspended under Chapter 15 shall be
deprived for [sic] all of the rights and privileges of being a Member
of the Exchange during the period of suspension.
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    \33\ See Existing Rule 1502.
    \34\ See id.
    \35\ See id.
    \36\ See Existing Rule 1503.
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    Lastly, Chapter 17 of the Existing Rules sets forth a procedure by
which persons who are economically aggrieved by Exchange actions,
including but not limited to those organizations whose applications for
membership are denied, persons who are prohibited from becoming
associated with a Member, and organizations and persons that are
prohibited or limited with respect to the use of Exchange services or
the services of Members, may seek review of such actions.\37\
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    \37\ See Existing Rule 1700.
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    Existing Rule 1701 provides that aggrieved persons must file
written applications for hearing and review within 30 days of the
occurrence of relevant Exchange actions, unless the Chair of the BCC
grants, in writing, an extension of time to file an appeal.
    Existing Rule 1702 provides for the BCC, or a panel comprised of at
least three members thereof, to review applications. The BCC, or the
panel, must set a hearing date and receive materials relevant to the
proceeding at least 72 hours in advance of the hearing.
    Existing Rule 1703 provides for intervention in a hearing by a
third party under certain circumstances. Current Rule 1703 also
authorizes the panel to determine all questions concerning the
admissibility of evidence and to otherwise regulate the conduct of
hearings. Finally, Existing Rule 1703 directs panels to render their
decisions in writing and to include in such decisions the Panel's
reasons for their [sic] conclusions.
    Existing Rule 1704 states that panel decisions are subject to
review by the Board (or a committee composed of at least three
Directors thereof), either upon the Board's own motion (within 30 days
of issuance of the decision), upon written request of the President of
the Exchange (within 15 days after issuance of the decision), or upon
written request by the applicant. The Board has discretion to grant
requests for written or oral arguments before it. The Board may affirm,
reverse, or modify the decision of the panel. A decision of the Board
is a final Exchange Action [sic].
    Existing Rule 1705 governs the service of process for notices or
other documents served pursuant to the proceedings set forth in Chapter
17 and the extension of time limits for the submission of answers,
petitions, or other materials.
    Existing Rule 1706 states that the Exchange may contract with
another SRO to perform some or all of the functions specified in
Chapter 17, provided that the Exchange shall retain ultimate legal
responsibility for and control of such functions.

Overview of the Exchange Review Council and the BX Rule 8000 and 9000
Series

    The Exchange proposes to amend its By-Laws to replace the BCC with
a new ``Exchange Review Council.'' The Exchange also proposes, with
limited exceptions described below, to delete in their entirety
Chapters 15-17 of the Existing Rules, establish new Chapters 80 and 90
of the Exchange's Rulebook, and then incorporate by reference into
Chapters 80 and 90 the BX Rule 8000 and 9000 Series, respectively. The
principal purpose of these proposals is to harmonize the Exchange's
disciplinary processes and Rules consistent with those of its sister
exchanges, including not only BX, but also Nasdaq and Phlx.
    Broadly speaking, the BX Rules and processes will be similar to the
existing ones. Both provide processes for informal resolution and
formal adjudication of disciplinary matters. Both set forth procedures
that are designed to provide due process to Members and Associated
Persons, including fair notice of allegations and proceedings,
opportunities to be heard and to present and rebut arguments and
evidence before hearing panels, and opportunities to appeal adverse
determinations made by such panels.
    However, in a number of respects, the new Rules and processes will
differ from the existing ones. One key difference concerns the role
that FINRA will play in the new regime. Not only will FINRA continue to
assist the Exchange in investigating matters under the BX Rules,
through FINRA's Department of Enforcement and Department of Market
Regulation (collectively, the ``Departments'') \38\ but it will also
assist in the adjudication of matters. Specifically, the adjudicatory
functions of the BCC and Current Hearing Panels will be administered by
FINRA's Office of Disciplinary Affairs (``ODA'') and Office of Hearing
Officers (``OHO''), respectively.\39\ The ODA and OHO are offices
within FINRA that are independent of the FINRA enforcement function and
not involved in investigating or litigating cases. The ODA will review
each proposed complaint to determine the legal and evidentiary
sufficiency of proposed charges as well as proposed settlements, in
certain instances.\40\ A recommendation proposed by the Departments or
the Exchange's Regulation Department in a matter involving formal
disciplinary action will require approval by the ODA. Going forward,
the ODA will authorize (pursuant to a request by the Exchange's
Regulation Department or the Departments) the issuance of a
complaint.\41\ The OHO, in turn, will be responsible for convening and
administering New Hearing Panels in lieu of the Exchange's Current
Hearing Panels.
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    \38\ The Departments are authorized to act on behalf of BX in
investigating and administering disciplinary matters pursuant to the
RSA, and will do the same for the Exchange upon adoption of the new
process.
    \39\ See FINRA Rule 9211(a); see also BX Rule 9211(a). The
Exchange notes, however, that the Board may direct the ODA to
authorize a complaint when, on the basis of information and belief,
it is of the opinion that a Member or Associated Person has
committed a violation which the Exchange has jurisdiction to
enforce. See BX Rule 9211(a)(2).
    \40\ Pursuant to BX Rule 9270, proposed settlements must be
submitted to and accepted by the Exchange Review Council, except
that proposed settlements involving an affiliate of the Exchange
must be reviewed by the ODA. BX Rule 9216(a) provides that proposed
letters of acceptance, waiver, and consent must be submitted to and
accepted by either the ODA, the Review Subcommittee, or the Exchange
Review Council.
    \41\ BX Rule 9211(a) also provides that the Board has authority
to direct the issuance of a complaint.
---------------------------------------------------------------------------

    Another key difference involves the replacement of the BCC with the
Exchange Review Council. The Exchange Review Council, as the successor
to the BCC, will play a more limited role in disciplinary matters than
does the BCC presently. As to disciplinary matters, the Exchange Review
Council will not be responsible for approving the issuance of
complaints (formerly, statements of charges) or routinely approving
\42\ letters of acceptance, waiver, and consent or offers of
settlement. Instead, the

Exchange Review Council will function principally as an intermediate
appellate body for decisions rendered by the New Hearing Panels. As to
non-disciplinary matters, the Exchange Review Council will assume
regulatory responsibilities that currently rest with various panels,
including reviews of staff determinations made as to obvious errors.
---------------------------------------------------------------------------

    \42\ Under BX Rule 9216(a), the ODA or a Review Subcommittee of
the Exchange Review Council may accept or refer letters of
acceptance, waiver, and consent to the Exchange Review Council for
approval or rejection. The Review Subcommittee can also reject such
letters. Similarly, under BX Rule 9270, a Review Subcommittee of the
Exchange Review Council may accept, reject, or refer offers of
settlement to the Exchange Review Council for approval or rejection
(except where the offer of settlement involves an affiliate of the
Exchange, in which case the ODA must decide whether to accept or
reject the offer). As a practical matter and based upon the
experiences of Nasdaq and BX, the Exchange expects such referrals to
the Exchange Review Council to occur infrequently.
---------------------------------------------------------------------------

    Other noteworthy differences between the Existing Rules and the BX
Rules and processes include the following:
     The BX Rules generally include more comprehensive rights
and detailed procedures for, among other things, discovery and service
of process than do the Existing Rules.
     As to the assessment of fines for violations of the
Exchange's MRVP or other minor rule violations, the BX Rules do not
authorize the issuance of minor rule violation letters or the
imposition of fines of more than $2,500.\43\ Should a Respondent fail
to consent to the imposition of a fine or if the Review Subcommittee or
the Exchange Review Council reject [sic] the terms of an MRVP or minor
rule violation letter, then the matter will proceed through formal
disciplinary channels. The BX Rules do not allow for a fine to be
reversed, modified or affirmed, prior to formal disciplinary
proceedings.
---------------------------------------------------------------------------

    \43\ As the Exchange discusses below, the Exchange proposes to
retain certain of its Existing Rules to preserve its existing
authorities with respect to minor rule violations, the issuance of
minor rule violation letters, and the imposition of fines for such
minor rule violations of up to $5,000.
---------------------------------------------------------------------------

    The following is a more detailed overview of each of the Exchange's
proposals.

Overview of the Exchange Review Council

    The Exchange proposes to retire the BCC \44\ and to amend its By-
Laws to establish in its place an Exchange Review Council. The amended
By-Laws that the Exchange proposes to adopt in this regard are
substantially the same as those that BX adopted to establish the BX
Exchange Review Council.\45\ Thus, the By-Laws provide for the Exchange
Review Council to have the same general structure and powers as does
the BX Exchange Review Council.\46\ The proposed By-Laws will authorize
the Exchange Review Council to adjudicate disciplinary actions and
approve settlements thereof as well as make recommendations to the
Board on certain policy matters and rule changes. Such policy functions
of the Exchange Review Council render its jurisdiction broader than
that of the BCC.
---------------------------------------------------------------------------

    \44\ In a May 11, 2000 resolution, the Exchange Board delegated
its authority to the President of the Exchange to establish a BCC
to, among other things, conduct disciplinary hearings under Chapter
16 of the Existing Rules and conduct other hearings and reviews as
set forth in Chapter 17 of the Existing Rules. On February 1, 2017,
the Board passed a resolution that both revoked the President's
authority to establish a BCC and authorized the establishment of an
Exchange Review Council, effective upon the date when this rule
filing becomes operative.
    \45\ The BX by-laws differ from the proposed Exchange By-Laws
because the BX by-laws have a different numbering convention from
the Exchange's By-Laws and, in various places, the BX by-laws refer
to a Listing and Hearing Review Council, which has no analogue with
respect to the Exchange.
    \46\ The BX by-laws do not describe in detail the process of the
proceedings over which the BX Exchange Review Council presides.
However, Section 7.9 of the BX by-laws state that a quorum of three
BX Exchange Review Council members is necessary to adjudicate
appeals of determinations made under BX Rules 4612 (appeal of denial
of registration as an Equities Market Maker), 4619 (review of denial
of an excused withdrawal of Equities Market Maker quotation), 4620
(appeal of denial of reinstatement of Equities Market Maker that
accidentally withdraws), 11890 (appeal of clearly erroneous
transaction determination), and BX Options Chapter V, Section 6
(appeal of obvious error determination). See BX by-laws, Article
VII, Section 9. The Exchange's Rules do not have analogues to BX
Rules 4612, 4620, and 11890 and, as such, the corresponding
provision of the Exchange's proposed By-Laws (Article VII, Section
9) provides only that a quorum of three Exchange Review Council
members is necessary for it to adjudicate appeals involving
determinations made under Rules 720 (appeal of obvious error
determination), 720A (appeal of determinations of erroneous trades
due to system malfunctions and disruptions), and 804 (review of
denial of an excused withdrawal of market maker quotation).
---------------------------------------------------------------------------

    Specifically, proposed Article VI, Section 1 of the proposed By-
Laws provides that the Exchange Review Council may be authorized to act
for the Board with respect to: an appeal or review of a disciplinary
proceeding, a statutory disqualification proceeding, or a membership
proceeding; a review of an offer of settlement, a letter of acceptance,
waiver, and consent, and a minor rule violation plan letter; the
exercise of exemptive authority; and such other proceedings or actions
as may be authorized by the Exchange rules. The Exchange Review Council
also may consider and make recommendations to the Board on policy and
rule changes relating to business and sales practices of Exchange
Members and Associated Persons and enforcement policies, including
policies with respect to fines and other sanctions. It may advise the
Board on regulatory proposals and industry initiatives relating to
quotations, execution, trade reporting, and trading practices and it
may advise the Board in its administration of programs and systems for
the surveillance and enforcement of rules governing Exchange Members'
conduct and trading activities in the Exchange.
    Proposed Article VI, Section 2 states that the Exchange Review
Council would consist of no fewer than eight and no more than 12
members. The Exchange Review Council must include a number of Member
Representative members \47\ that is equal to at least 20% of the total
number of members of the Exchange Review Council. The number of Non-
Industry members,\48\ including at least three Public members,\49\
shall equal or exceed the sum of the number of Industry members \50\
and Member Representative members. As soon as practicable, following
the appointment of members, the Exchange Review Council shall elect a
Chair from among its members. The Chair shall have such powers and
duties as may be determined from time to time by the Exchange Review
Council. The Board, by resolution adopted by a majority of Directors
then in office, may remove the Chair from such position at any time for
refusal, failure, neglect, or inability to discharge the duties of
Chair. No more than 50% of the members of the Exchange Review Council
shall be engaged in market making activity or employed by an Exchange
Member firm whose revenues from market making activity exceed 10
percent of its total revenues.
---------------------------------------------------------------------------

    \47\ See n.52, infra.
    \48\ See id.
    \49\ See id.
    \50\ See id.
---------------------------------------------------------------------------

    Proposed Article VI, Section 3 requires the Exchange's Secretary to
collect from each nominee for the office of member of the Exchange
Review Council such information as is reasonably necessary to serve as
the basis for a determination of the nominee's qualifications and
classification as an Industry, Member Representative, Non-Industry, or
Public member. The Secretary must also certify to the Nominating
Committee or the Member Nominating Committee \51\ (as applicable) each
nominee's qualifications and classification. After appointment to the
Exchange Review Council, each member must update such information at
least annually and upon request of the Exchange's Secretary, and must
report immediately to the Secretary any change in such information.
---------------------------------------------------------------------------

    \51\ The terms ``Nominating Committee'' and ``Member Nominating
Committee'' are defined in Exchange By-Laws, Article I.
---------------------------------------------------------------------------

    Proposed Article VI, Section 4 provides that Exchange Review
Council members shall serve three-year terms, or until a successor is
duly appointed and qualified, except in the event of earlier

termination from office by reason by death, resignation, removal,
disqualification, or other reason. Members are term limited out after
two consecutive terms. Proposed Article VI, Section 5 sets forth the
procedures for resigning as a member of the Exchange Review Council and
provides that an Exchange Review Council member may resign at any time
upon written notice to the Board. Under proposed Article VI, Section 6,
any member of the Exchange Review Council may be removed from office at
any time for refusal, failure, neglect, or inability to discharge the
duties of such office by majority vote of the Board.
    Under proposed Article VI, Section 7, an Exchange Review Council
member would be disqualified and removed immediately upon a
determination by the Board, by a majority vote, that: (a) The member no
longer satisfies the classification (Industry, Member Representative,
Non-Industry, or Public) for which the member was elected; and (b) the
member's continued service as such would violate the compositional
requirements of the Exchange Review Council set forth in Article VI,
Section 2. If the term of office of an Exchange Review Council member
terminates under this Section, and the remaining term of office of such
member at the time of termination is not more than six months, during
the period of vacancy the Exchange Review Council shall not be deemed
to be in violation of Article VI, Section 2 by virtue of such vacancy.
Proposed Article VI, Section 8 contains provisions for the filling of
vacancies on the Exchange Review Council and states that if a position
on the Exchange Review Council becomes vacant, the Nominating Committee
or the Member Nominating Committee (as applicable) shall nominate, and
the Board shall appoint a person satisfying the qualifications for the
position as provided in Article VI, Section 2 to fill such vacancy,
except that if the remaining term of office for the vacant position is
not more than six months, no replacement shall be required.
    Proposed Article VI, Section 9 provides that a quorum of the
Exchange Review Council will consist of a majority of its members,
including not less than 50% of its Non-Industry members and one Member
Representative member. Proposed Article VI, Section 10 contains
provisions related to the meetings of the Exchange Review Council.
    Under proposed Article VI, Section 11, the Exchange Review Council
is required to establish a Review Subcommittee to determine whether
disciplinary and membership proceedings decisions should be called for
review by the Exchange Review Council under the disciplinary and
membership rules to be proposed for the Exchange. The Review
Subcommittee shall be composed of no fewer than two and no more than
four members of the Exchange Review Council. The number of Non-Industry
members of the Review Subcommittee shall equal or exceed the sum of the
number of Industry members and Member Representative members of the
Review Subcommittee, and the subcommittee must include at least one
Member Representative member. At all meetings of the Review
Subcommittee, a quorum for the transaction of business shall consist of
not less than 50 percent of the members of the Review Subcommittee,
including not less than 50 percent of the Non-Industry members of the
Review Subcommittee and one Member Representative member of the Review
Subcommittee.\52\
---------------------------------------------------------------------------

    \52\ In addition to adding Article VI to the By-Laws, the
Exchange proposes to make changes to other articles of the By-Laws
to accommodate the existence of the Exchange Review Council. For
example, the Exchange proposes to amend Article I, which defines the
terms that the Exchange uses in the By-Laws, to provide that the
terms ``Industry member,'' ``Member representative member,'' ``Non-
industry member,'' and ``Public member'' mean, in part, members of
the Exchange Review Council. The Exchange also proposes to amend
Article III, Section 6, to add a new subsection (a) that directs the
Board to appoint an Exchange Review Council, as provided in Article
VI. It also proposes to amend Article III, Section 6(b) to state
that the Nominating Committee and the Member Nominating Committee of
the Board shall have responsibility for nominating members of the
Exchange Review Council. Finally, the Exchange proposes to amend
Sections 7 and 8 of Article III, which deal with Director conflicts-
of-interest/self-interested transactions and Director compensation,
respectively, to ensure that the restrictions and benefits that
these provisions provide apply to Exchange Review Council members.
---------------------------------------------------------------------------

    The BX Rules implement the foregoing responsibilities of the
Exchange Review Council by establishing various procedures, described
below, to govern its reviews. As the Exchange also describes in further
detail below, the Exchange proposes to transfer to the Exchange Review
Council (or panels thereof) certain responsibilities currently vested
in other Exchange committees or the Board. For example, pursuant to
Existing Rule 720, an Obvious Error Panel (``OEP'') is presently
responsible for reviewing determinations regarding obvious and
catastrophic errors. Pursuant to Existing Rule 720A, a ``Review Panel''
is responsible for reviewing determinations to nullify or adjust
transactions that arise from system disruptions and malfunctions. The
Exchange is proposing to eliminate the OEP and the Review Panel and to
transfer their responsibilities to a panel of the new Exchange Review
Council, which corresponds to the practice of BX. Subject to Chapter
90, the Exchange also proposes to transfer responsibility to the
Exchange Review Council to review denials or conditions imposed upon
those that seek to become or remain a Member of the Exchange or become
or remain associated with a Member of the Exchange, as set forth in
Existing Rule 302. Similarly, the Exchange proposes to transfer
responsibility to the Exchange Review Council to review denials or
conditions imposed upon Members that seek to transfer or sell market
maker rights, as set forth in the Supplementary Material to Existing
Rule 307.\53\ In addition, the Exchange proposes to amend Existing Rule
804 to provide for the Exchange Review Council to review determinations
regarding temporary withdrawals of quotations, which are not reviewable
under the Existing Rules. The Exchange notes that BX vests in its
Exchange Review Council responsibility for reviewing similar types of
matters.\54\
---------------------------------------------------------------------------

    \53\ The Exchange notes that it proposes to establish procedures
in Existing Rule 302 and Rule 307 to govern the review by the
Exchange Review Council of adverse membership, association, or
market maker sale or transfer determinations. The Exchange proposes
to base these procedures upon those set forth BX Rules 1015 and
1016.
    \54\ See Securities Exchange Act Release No. 72149 (May 12,
2014), 79 FR 28564 (May 16, 2014) (SR-BX-2014-024).
---------------------------------------------------------------------------

The BX Rule 8000 Series
    The Exchange proposes to incorporate by reference into a new
Chapter 80 of its Rulebook the BX Rule 8000 Series. The BX Rule 8000
Series is entitled ``Investigation and Sanctions,'' and it governs the
investigative process, including FINRA's authority under the RSA to
conduct investigations of Members and Associated Persons on behalf of
the Exchange.
    BX Rule 8001 states that the Exchange and FINRA are parties to the
RSA, pursuant to which FINRA has agreed to perform certain functions on
behalf of the Exchange. It also specifies, however, that the Exchange
retains ultimate legal responsibility for, and control over the
functions that FINRA performs on its behalf.\55\
---------------------------------------------------------------------------

    \55\ BX Rule 9001 also states that the Exchange has contracted
with FINRA to perform some or all of the Exchange's disciplinary
functions, while noting that the Exchange retains ultimate legal
responsibility for and control of such functions.
---------------------------------------------------------------------------

    BX Rule 8110 requires Members to keep and maintain copies of the
NASD (now known as FINRA) and Exchange Manuals in readily accessible
places and make them available for examination by customers upon
request.
    BX Rule 8120 sets forth definitions for the BX Rule 8000 Series.

    BX Rule 8210 generally authorizes the Exchange's Regulation
Department and FINRA, acting on the Exchange's behalf to require a
Member, an Associated Person, or another person subject to the
Exchange's jurisdiction to provide information orally, in writing or
electronically, to provide testimony under oath, or to allow for the
inspection of their [sic] books, records, and accounts, with respect to
any matter associated with an investigation, complaint, examination, or
proceeding of the Exchange or of other Self-Regulatory Organizations or
regulators.
    BX Rule 8211 requires a Member to submit certain specified trade
data in an automated form, as the Regulation Department or FINRA may
require or request.
    BX Rule 8310 sets forth the Exchange's authority to sanction a
Member or an Associated Person for violations of the federal securities
laws, rules, or regulations thereunder, or the Exchange's Rules, as
well as for neglect or refusal to comply with an order, direction, or
decision issued under the Exchange Rules.\56\ BX Rule 8310(a) provides
for sanction [sic] that include censure, fine, suspension of membership
or registration of a person associated with a Member, expulsion or
cancellation of membership or association, suspension or bar from
association with all Members, temporary or permanent cease and desist
order, or any other fitting sanction. BX IM-8310-1 precludes Members
from allowing Associated Persons from remaining associated with them,
even in a clerical or ministerial capacity, upon issuance of orders
suspending, revoking, or cancelling the registration of such Associated
Persons and it prohibits payment of any salary, commission, profit, or
other remuneration such Associated Persons might have earned during
their periods of suspension. BX IM-8310-3 states, in part, that the
Exchange's Regulation Department shall release certain information to
the public regarding disciplinary complaints and decisions and release,
upon request, a copy of any complaint or disciplinary decision issued
by the Exchange or any committee thereof.
---------------------------------------------------------------------------

    \56\ The Exchange proposes to retain Existing Rule 1600, which
provides a more general statement of the Exchange's disciplinary
authority than that which exists in BX Rule 8310. Existing Rule 1600
states that a Member or Associated Person who is alleged to have
violated or aided and abetted a violation of the Act, the rules and
regulations promulgated thereunder, and the By-Laws or Rules of the
Exchange, or any interpretation thereof are subject to the
disciplinary jurisdiction of the Exchange and may be, after notice
and opportunity for a hearing, appropriately disciplined by
expulsion, suspension, fine, censure, limitation or termination as
to activities, functions, operations, or association with a Member,
or any other fitting sanction in accordance with the provisions of
the disciplinary rules. It also permits the Exchange to charge a
supervisor with a violation of a rule within the disciplinary
jurisdiction of the Exchange committed by an employee under his
supervision or by the Member as though such violations were his own.
Finally, it extends the disciplinary jurisdiction of the Exchange to
continue after termination of the Member from the Exchange or a
person's termination of association with a Member as to matters that
occurred prior to such termination. Staff must serve written notice
to the former Member or Associated Persons within one year of
receipt by the Exchange of notice of such termination that the
Exchange is making inquiry into a matter or matters.
---------------------------------------------------------------------------

    BX Rule 8320 states that fines and other monetary sanctions shall
be paid to the Treasurer of the Exchange. It authorizes the Exchange,
after seven days written notice, to in part summarily suspend or expel
Members if they are delinquent in paying sanctions or fines.
    BX Rule 8330 states that a Member or an Associated Person
disciplined pursuant to Rule 8310 shall bear the costs of disciplinary
proceedings as the New Hearing Panels or the Board deem appropriate
under the circumstances.
The BX Rule 9000 Series
    The Exchange proposes to incorporate by reference into a new
Chapter 90 of its Rulebook the BX Rule 9000 Series. The BX Rule 9000
Series is entitled ``Code of Procedure,'' and it governs proceedings
for disciplining Members and Associated Persons, proceedings for
regulating Members experiencing financial or operational difficulties,
proceedings for summary or non-summary suspensions, cancellations,
bars, prohibitions, or limitations, and proceedings for obtaining
relief from the eligibility requirements of the Exchange By-Laws and
the Exchange Rules.
BX Rule 9100 Series
    The BX Rule 9100 Series describes the application and purpose of
the BX Rule 9000 Series, including the types of proceedings covered by
the BX Rules,\57\ the rights, duties, and obligations of Members and
Associated Persons,\58\ defined terms,\59\ and rules concerning the
filing and service of papers.\60\ The BX Rule 9100 Series also provides
rules concerning proceedings, including appearance and practice,\61\
withdrawal by attorney or representative,\62\ ex parte
communications,\63\ separation of functions among adjudicators and
interested staff,\64\ rules of evidence and official notice,\65\
motions,\66\ rulings on procedural matters,\67\ and interlocutory
review.\68\
---------------------------------------------------------------------------

    \57\ See BX Rule 9110.
    \58\ Id.
    \59\ See BX Rule 9120.
    \60\ See BX Rules 9131-9138.
    \61\ See BX Rule 9141.
    \62\ See BX Rule 9142.
    \63\ See BX Rule 9143.
    \64\ See BX Rule 9144.
    \65\ See BX Rule 9145.
    \66\ See BX Rule 9146.
    \67\ See BX Rule 9147.
    \68\ See BX Rule 9148.
---------------------------------------------------------------------------

    Specifically, BX Rule 9110 sets forth the general rights, duties,
and obligations of Members and Associated Persons under the Code of
Procedure, including the rights, in any disciplinary matter thereunder,
to be presented with specific charges, to have a hearing, to have due
notice thereof, to present a defense and relevant supporting material,
to be represented by counsel, to have a record kept of proceedings, and
to receive a written determination that sets forth the basis therefor.
    BX Rule 9120 sets forth definitions of various terms used
throughout the Rule 9000 Series.
    The BX Rule 9130 Series governs the requirements for service of
complaints and other written documents in connection with disciplinary
proceedings. The BX Rule 9130 Series prescribes the timing and form of
required service based on the type of the notice. BX Rule 9134 concerns
the permissible methods of service and the procedures for service. BX
Rule 9134 permits personal service, service by U.S. Postal Service, or
service by courier. BX Rules 9135 through 9138 set forth the form,
format, and procedures for filing papers with adjudicators as well as
the effect for [sic] a Party or its counsel or representative for
affixing or failing to affix their [sic] signatures to such papers.
Other BX Rules govern service of notices and other documents in
particular situations.\69\
---------------------------------------------------------------------------

    \69\ See, e.g. BX Rule 9360 (effective dates of bars,
expulsions, and permanent cease and desist orders); BX Rule 9400
(various service requirements pertaining to expedited client
suspension proceedings); BX Rule 9550 Series (various service
requirements pertaining to: (1) Suspensions for failures to provide
information or keep information current; (2) suspensions and
cancellations for failures to pay Exchange dues, fees, or other
charges; (3) suspensions or cancellations for failures to comply
with arbitration awards, settlements, or restitution orders or
settlements; (4) suspensions, cancellations, or bars from membership
or suspensions or bars from association with Members, or limitations
or prohibitions of access to Exchange services; (5) suspensions,
cancellations, and bars for failure to comply with cease and desist
orders; (6) restrictions on Members' activities due to financial or
operational difficulties; and (7) suspensions for actions authorized
by Section 6(d)(3) of the Act).
---------------------------------------------------------------------------

    BX Rule 9141 concerns appearances before adjudications in
proceedings, both by Parties and by their attorneys and
representatives. BX Rule 9141 permits a person to represent themselves
[sic] in any proceeding as

well as to be represented by others (pursuant to a notice of
appearance), including a licensed attorney,\70\ a member of a
partnership (to represent a partnership), and a bona fide officer of a
corporation, trust or association (to represent a corporation, trust or
association).
---------------------------------------------------------------------------

    \70\ Pursuant to BX Rule 9142, an attorney or representative may
withdraw from a proceeding for good cause, pursuant to written
notice and at least 30 days prior notice.
---------------------------------------------------------------------------

    BX Rule 9143(a) prohibits Parties, their representatives, or
Interested Staff \71\ from having ex parte communications with
adjudicators or with Exchange staff who are participating in or
advising on a proceeding about the merits of the proceeding.\72\ BX
Rule 9143(b) also requires adjudicators participating in a proceeding
to disclose and place in the record any written ex parte communications
(or memoranda summarizing any oral ex parte communications) concerning
the merits of the proceeding. BX Rule 9143(c) furthermore permits the
Exchange Regulation Department or an adjudicator (consistent with the
interests of justice, the policies, [sic] underlying the Act, and the
Rules of the Exchange) to order any Party that violates the ex parte
prohibition to show cause why the Party's claim or interest in the
proceeding should not be dismissed, denied, disregarded, or otherwise
adversely affected by reason of such [sic] ex parte communication. BX
Rule 9143(d) generally specifies that the ex parte prohibition applies
beginning with the authorization of a complaint. Finally, BX Rule
9143(e) specifies circumstances in which a Party's claim as to a
violation of the ex parte rules are [sic] waived, including when a
Respondent submits an offer of settlement, an executed letter of
acceptance, waiver, and consent, or an MRVP letter.\73\
---------------------------------------------------------------------------

    \71\ BX Rule 9120(t) defines ``Interested Staff'' to include
certain enumerated Exchange or FINRA employees. The applicable
employees who constitute ``Interested Staff'' under this BX Rule
vary depending upon the type of disciplinary proceeding at issue.
    \72\ BX Rule 9144(a) generally prohibits Interested Staff from
advising adjudicators, and adjudicators from advising Interested
Staff, with respect decisions of the other, including as to whether
to file complaints, appeals or cross appeals. BX Rule 9144(b) also
prohibits Hearing Officers and Panelists, absent waivers in certain
circumstances, from participating in decisions as to whether to
issue complaints, appeal or cross-appeal disciplinary proceedings to
the Exchange Review Council, or call decisions for review.
    \73\ In the proposed introduction to Chapter 90, the Exchange
states that the Exchange's procedure for handling MRVP letters,
including as set forth in BX Rule 9143(e)(3), shall also apply to
minor rule violation letters.
---------------------------------------------------------------------------

    BX Rule 9145 states that formal rules of evidence do not apply to
proceedings brought under the BX Rule 9000 Series. It also permits
adjudicators, after providing notice and an opportunity for a Party to
comment or oppose, to take official notice of matters that may be
judicially noticed by courts or of other matters within the specialized
knowledge of the Exchange.
    BX Rules 9146 through 9148 govern motion practice before
adjudicators. BX Rule 9146 provides that the filing of a motion does
not stay a proceeding, unless an adjudicator orders otherwise. It also
provides that, unless otherwise ordered by an adjudicator, a Party may
file an opposition or response to a written motion within 14 days after
service of the motion and that, if the Party fails to do so, it shall
be deemed to have waived its objection to the motion. However, BX Rule
9146 states that a moving Party is not entitled to file a reply to such
an opposition or response, except at the discretion of the adjudicator.
BX Rule 9146 also authorizes an adjudicator to permit oral arguments on
motions and to summarily deny frivolous motions. It specifically
provides for motions for protective orders. Finally, along with BX Rule
9147, BX Rule 9146 designates adjudicators for procedural and summary
disposition motions at both the Hearing Panel and appellate levels. BX
Rule 9148 specifies that there are no interlocutory reviews of rulings
on motions or orders.
    BX Rule 9150 authorizes an adjudicator to exclude from disciplinary
proceedings an attorney for a Party or any other person authorized to
represent a Party to the extent that the adjudicator deems said
attorney or persons to be engaging in contemptuous conduct, under BX
Rule 9280, or unethical or improper professional conduct. The BX Rule
authorizes an attorney or person so excluded to seek review of their
[sic] exclusion from the Exchange Review Council. Moreover, BX Rule
9150(b) states that even if it prohibits an attorney or other person
authorized to represent others from practicing or appearing in an
Exchange proceeding, such action by the Exchange shall not preclude it
from initiating other proceedings against such person.
    BX Rule 9160 sets forth conditions for the recusal or
disqualification of an adjudicator. Such conditions include a conflict
of interest, bias, or other circumstances in which the adjudicator's
fairness might reasonably be questioned. The Rule also designates those
who are authorized to order the disqualification of Board Directors,
members of the Exchange Review Council or committees thereof, or New
Hearing Panels.
The BX Rule 9200 Series
    The BX Rule 9200 Series sets forth the disciplinary process,
providing rules concerning the issuance of a complaint, the briefing
and hearings process, issuance of a decision and the settlement
process. The BX Rule 9200 Series also governs permanent cease and
desist orders.
    BX Rule 9211(a)(1) states that if the Departments believe that a
Member or an Associated Person has violated any law, rule, or
regulation over which the Exchange has jurisdiction, then the
Regulation Department or the Departments may request authorization from
the ODA to issue a complaint. Likewise, BX Rule 9211(a)(2) states that
the Board may direct the ODA to authorize and the Departments to issue
a complaint when the Board is of the opinion that any Member or
Associated Person has violated any law, rule, or regulation within the
Exchange's jurisdiction. Unlike the Existing Rule, the BX Rules do not
specify that ``probable cause'' or any other legal standard must be
satisfied for the ODA to authorize issuance of a complaint.
    BX Rule 9212 sets forth the requirements for the issuance of
complaints. It states that if a complaint is authorized, the
Departments shall issue it.\74\ It furthermore states that complaints
must be in writing and specify, in reasonable detail, the conduct
alleged to constitute the violative activity and the rule, regulation,
or statutory provision allegedly violated by such conduct.\75\ The BX
Rule provides that complaints must be signed by the Department of
Enforcement or of Market Regulation and served by the Departments on
the Parties in accordance with the Rules.\76\ The BX Rules permit
amendments to and withdrawals of complaints. As to amendments, BX Rule
9212(b) provides that the Departments may amend a complaint once, as a
matter of course, at any time before the Respondent answers the
complaint, and otherwise, upon a motion to the Hearing Officer, a
showing of good cause, and a determination that the Respondent will
suffer no unfair prejudice as a result of the amendment. As to
withdrawals, BX Rule 9212(c) states that the Departments may withdraw a
complaint with prior leave of the Hearing Officer. BX Rule

9212(d) provides for the docketing of complaints.
---------------------------------------------------------------------------

    \74\ See BX Rule 9212(a)(1).
    \75\ See id.
    \76\ See id.
---------------------------------------------------------------------------

    BX Rule 9214 governs the consolidation and severance of
disciplinary proceedings. Unlike Existing Rule 1606(d), BX Rule 9214
does not permit a non-Party to intervene in disciplinary proceedings,
but it does permit the consolidation of proceedings. Under the BX Rule,
either the Hearing Officer may order or a Party may request
consolidation of two or more disciplinary proceedings if such
consolidation would further the efficiency of the disciplinary process,
or if the subject complaints involve common questions of law or fact or
one or more of the same Respondents. When determining whether to order
the consolidation of such disciplinary proceedings, BX Rule 9214(a)
requires the Chief Hearing Officer to consider whether the same or
similar evidence reasonably would be expected to be offered at each of
the hearings, whether the proposed consolidation would conserve the
time and resources of the Parties, and whether any unfair prejudice
would be suffered by one or more Parties as a result of the
consolidation. If consolidation is ordered, BX Rule 9214(c) provides
that the Chief Hearing Officer shall issue an order specifying which
New Hearing Panel will preside over the consolidated proceedings or the
Chief Hearing Panel shall appoint another New Hearing Panel to do so.
    BX Rule 9215 requires a Respondent to file an answer to a complaint
with the OHO within 25 days after service of the complaint (unless the
Hearing Officer extends that deadline for good cause) and to state in
such answer whether they [sic] admit, deny, or lack sufficient
information to admit or deny each allegation made in the complaint.
However, the BX Rule differs in certain respects from Existing Rule
1605, which governs answers to statements of charges. For example, it
specifically authorizes a Respondent to file a motion for a more
definite statement of the allegations set forth in the complaint as
well as to amend the answer.\77\ Although the BX Rule, similar to
Existing Rule 1605, permits extensions of time to respond to an amended
complaint, the BX Rule provides for the greater of the original
remaining answer period or 14 days to do so, rather than 25 days.\78\
Finally, instead of simply providing that a failure to file an answer
shall be deemed to be an admission of the matters alleged, BX Rule
9215(f) requires the Departments to send a second notice to Respondents
before they may impose sanctions, which may include, not only the
admission of unanswered allegations, but also the issuance of default
decisions pursuant to BX Rule 9269.
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    \77\ See BX Rule 9215(c) and (d).
    \78\ If the Respondent files an answer before the complaint is
amended, the Respondent receives 14 days to respond to the amended
complaint. See BX Rule 9215(e).
---------------------------------------------------------------------------

    BX Rule 9216 sets forth procedures to informally dispose of
matters, where appropriate. Specifically, BX Rule 9216 provides that
the Departments may prepare and request that a Member or Associated
Person execute a letter of acceptance, waiver, and consent (``AWC'')
accepting a finding of a violation and consenting to the imposition of
sanctions. Unlike Existing Rule 1603, which governs analogous ``letters
of consent,'' the BX Rule provides that in executing an AWS [sic]
letter, a Member or Associated Person is deemed to waive their [sic]
rights to a hearing, to appeal, to otherwise challenge the terms of a
letter, to claim bias or prejudgment, or to claim violation of the ex
parte prohibitions of BX Rule 9143. The BX Rule states that executed
AWC letters are subject to approval by the ODA, the Exchange Review
Council, or the Review Subcommittee and, if rejected, they may not be
introduced into evidence in connection with any subsequent disciplinary
hearing that occurs.
    BX Rule 9216(b) concerns the process for assessing fines for MRVP
violations.\79\ Under BX Rule 9216(b), if the Departments have reason
to believe that a Member or an Associated Person has violated certain
specified Rules, then they may prepare an MRVP letter (for fines of up
to $2,500 for violations subject to the Exchange's MRVP plan) and
request that the Member or Associated Person accept [sic] the letter
and the fine set forth in it.\80\ BX Rule 9216(b) provides that
executed MRVP letters are to be submitted for approval to the Exchange
Review Council. The Review Subcommittee or the ODA may accept such
letters or refer them to the Exchange Review Council for acceptance or
rejection. The Review Subcommittee may also reject such letters or
refer them to the Exchange Review Council. If the letter is accepted,
then it is deemed to be a final decision of the Exchange. If a Member
or an Associated Person chooses not to consent to the issuance of an
MRVP letter, or the Review Subcommittee or the Exchange Review Council
rejects the letter, then the matter becomes subject to formal
disciplinary adjudication.\81\
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    \79\ As discussed previously, the Exchange proposes to retain
its existing MRVP fine schedule.
    \80\ Pursuant to BX Rule 9216(b), if a Member or Associated
Person agrees to execute an MRVP or a violation letter, they [sic]
also agree [sic] to waive certain of their [sic] rights with respect
to the alleged violations, including their [sic] rights to dispute
the allegations or the validity of the letter, as well as to make
claims of bias or prejudgment, and to raise violations of the ex
parte and separation of functions rules.
    \81\ Because the minor rule violation process proceeds only to
the extent that a Member or Associated Person assents to the letter
and its terms, there is no provision under the BX Rules, as there is
under the Existing Rules, for a Member or Associated Person to
contest a minor rule violation fine.
---------------------------------------------------------------------------

    BX Rule 9216(b) will replace Existing Rule 1614, with three
exceptions. First, the Exchange proposes to retain Existing Rule
1614(a), which sets forth its authority to impose fines of up to $2,500
for MRVP violations and up to $5,000 for minor rule violations (other
than those subject to an MRVP), because BX Rule 9216(b) does not
authorize the imposition of fines of up to $5,000 for minor rule
violations. Existing Rule 1614(a) also includes a sentence (that the BX
Rules lack) clarifying that the Exchange has discretion to decide, on a
case-by-case basis, whether to impose a fine for an MRVP violation or a
minor rule violation or whether instead to proceed with a formal
disciplinary action under proposed Chapter 90. Second and relatedly,
the Exchange proposes to include in its introduction to Chapter 90 a
statement that the procedures set forth in BX Rule 9216(b) for handling
MRVP violations and MRVP violation letters also apply to the handling
of minor rule violations and minor rule violation letters, except that
the Exchange will promptly report to the Commission any final Exchange
action, in accordance with SEC Rule 19d-1(c)(1). Third, the Exchange
proposes to retain Existing Rule 1614(d) (renumbered as Rule 1614(b)),
which presently sets forth the Exchange's schedule of MRVP violations
and minor rule violations and their associated fines. This schedule is
particular to the Exchange and cannot be replaced summarily with the
corresponding BX schedule, which is set forth in BX IM-9216. The
Exchange will not incorporate by reference BX IM-9216.
    The BX Rule 9200 Series sets forth the procedures of the Exchange
for holding disciplinary hearings. Although the BX hearing rules are
broadly similar to the Existing Rules, the BX Rules are more
comprehensive and robust. One noteworthy difference between them is
that under the Existing Rule 1606, a Respondent is entitled to a
hearing as a matter of course, whereas under BX Rule 9221, a Respondent
must affirmatively request a hearing in their [sic] answer or else, in
absence of good

cause shown, they are [sic] deemed to waive their [sic] right to
one.\82\ A Hearing Officer or the Hearing Panel may also call a hearing
on their [sic] own initiative or the Hearing Panel may issue its
decision on the record.\83\ BX Rule 9221(d) provides for notice of a
hearing to be given to the Parties at least 28 days beforehand, but the
BX Rule provides an exception if the Hearing Officer determines that
extraordinary circumstances require a shorter notice period or the
Parties waive the notice period.
---------------------------------------------------------------------------

    \82\ BX Rule 9221(a) provides that any request by a Respondent
for a hearing shall be granted.
    \83\ See BX Rule 9221(b)-(c).
---------------------------------------------------------------------------

    BX Rule 9231(a) states that the Chief Hearing Officer of the OHO
shall appoint a New Hearing Panel or an Extended New Hearing Panel \84\
to conduct formal disciplinary procedures. BX Rule 9231(b) specifies
that a New Hearing Panel, in most instances, is to be composed of a
Hearing Officer and two Panelists,\85\ that the Hearing Officer shall
preside over the hearings, and that the Chief Hearing Officer is
responsible for selecting the Panelists, who must be associated with a
Members or retired therefrom.\86\ BX Rule 9231(e) states that the Chief
Hearing Officer may appoint a replacement Hearing Officer if the
Hearing Officer withdraws, is incapacitated, or otherwise is unable to
continue service after being appointed.\87\ Meanwhile, BX Rule 9234
authorizes the Chief Hearing Officer to appoint new Hearing Panelists
under similar circumstances. Like Existing Rule 1606(a)(3), BX Rules
9233 and 9234 provide for the recusal or withdrawal of Hearing Officers
and Panelists with conflicts of interest or biases and their
replacement by the Chief Hearing Officer. Unlike the Existing Rule,
however, BX Rules 9233 and 9234 authorize a Party to file a request
that Hearing Officers or Panelists be disqualified for such
reasons.\88\
---------------------------------------------------------------------------

    \84\ Like Extended New Hearing Panels, Extended Proceeding
Committees are established for proceedings that involve unusually
complex issues or will require an extended period of time to hear.
Pursuant to BX Rule 9331(a)(2), members of Extended Proceeding
Committees may be entitled to compensation at the rates then in
effect for arbitrators appointed under the FINRA Rule 10000 Series.
    \85\ BX Rule 9120(z) defines the term ``Panelist'' as used in
the Rule 9200 Series, the Rule 9550 Series, and the Rule 9800
Series, to mean a ``member of a Hearing Panel or Extended Hearing
Panel who is not a Hearing Officer.'' As used in the Rule 9300
Series, the term means a ``current or former member of the Exchange
Review Council or a former Director who is appointed to serve on a
Subcommittee or an Extended Proceeding Committee.'' The Exchange
will select Panelists in accordance the requirements set forth in BX
Rules 9120(z) and 9231.
    \86\ BX Rule 9232 sets forth other criteria for the Chief
Hearing Officer to use when selecting New Hearing Panels, including
their level of expertise, the absence of any conflicts of interest
or bias and any appearance thereof, their availability for service,
and the frequency of their prior service on New Hearing Panels (with
a preference towards providing opportunities for new or
infrequently-serving individuals).
    \87\ BX Rule 9235(b) also authorizes the Chief Hearing Officer
or his or her Deputy to exercise the authority of a Hearing Officer
in his or her temporary absence.
    \88\ BX Rule 9233(b) permits a Party to move for the
disqualification of a Hearing Officer not later than 15 days after
the later of: (1) When the Party learned of the facts believed to
constitute the disqualification; or (2) when the Party was notified
of the assignment of the Hearing Officer. Similarly, BX Rule 9234(b)
permits a Party to move for the disqualification of a Hearing
Panelist within 15 days after the later of: (1) When the Party
learned of the facts believed to constitute the disqualification; or
(2) when the Party was notified of the assignment of the Hearing
Panelist. BX Rule 9233(c) provides that the Chief Hearing Officer
shall promptly investigate whether disqualification is required and
issue a written ruling on the motion. BX Rule 9234 provides for a
similar process for motions and decisions on motions to disqualify
Hearing Panelists.
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    BX Rule 9241 governs pre-hearing conferences. BX Rule 9241(a)
states that such conferences may be held to expedite proceedings,
establish efficient procedures to manage proceedings, or to improve the
quality of hearings through preparation. BX Rule 9241(b) states that
pre-hearing conferences may be held upon the motion of the Hearing
Officer or at the request of a Party. BX Rule 9241(c) provides that
subjects for discussion at pre-hearing conferences may include, not
only the simplification of issues for adjudication and the expedition
of proceedings, but also the exchange of witness and exhibit lists and
exhibits, the stipulation of the authenticity and admissibility of
evidence, taking official notice of facts, the scheduling of pre-
hearing motions or briefs, the method of service, the scheduling of
hearing dates, any amendments to the complaint or answers, and the
production of documents. Generally, under BX Rule 9241(d), initial pre-
hearing conferences, unless determined by a Hearing Officer to be
unnecessary or premature, shall be held within 21 days after the filing
of an answer. BX Rule 9241(e) provides for agreements and procedural
determination [sic] made during pre-hearing conferences to be recorded
in orders issued by the Hearing Officer. Under BX Rule 9241(f), a
Hearing Officer may issue a default decision against a Party that fails
to appear at a pre-hearing conference, if the Party was provided due
notice.
    Additionally, prior to a hearing, BX Rule 9242 authorizes a Hearing
Officer to order a Party to furnish information to all other Parties
and to the New Hearing Panel that may include an outline or narrative
summary of the Party's case or defense, the legal theories upon which a
Party will rely, a list and copies of documents that the Party intends
to introduce at the hearing, a list of witnesses that the Party intends
to call to testify on their [sic] behalf and a summary of the expected
testimony, and if a witness is to be called as an expert witness, a
statement of the witness' expertise.
    The BX Rule 9250 Series governs discovery during disciplinary
proceedings. The BX Rule 9250 Series provides for more extensive
discovery than that which exists under the Existing Rules. BX Rule
9251(a) generally provides that the Departments must make available to
Respondents information and documents obtained in connection with the
investigations that led to the institution of disciplinary proceedings,
such as requests for information and documents, responses thereto, and
all transcripts and exhibits. BX Rule 9251(b) permits the Departments
to withhold certain documents from Respondents under certain
circumstances, including to the extent that they are privileged,
contain attorney work product, constitute internal memoranda or
examination reports, reveal examination or investigatory methods, the
identities of confidential sources, or the existence of other
prospective investigations or enforcement actions, or if the Hearing
Officer grants leave to withhold a document.\89\ The BX Rule does not
permit the Departments to withhold from Respondents exculpatory
evidence. The Hearing Officer may require the Departments to submit a
list of withheld documents.\90\ However, the Rule states that unless
the Hearing Officer orders otherwise, the Departments generally must
make documents available to a Respondent not later than 21 days after
service of the Respondent's answer.\91\ If the Departments fail to make
documents or witness statements available to Respondents as required
under BX Rule

9251, no rehearing or amended decision may be in order, unless the
Hearing Officer determines that the failure was not harmless error.\92\
---------------------------------------------------------------------------

    \89\ BX Rule 9253 provides in part that, notwithstanding BX Rule
9251(b), a Respondent may file a motion requesting that the
Departments produce witness statements or witness deposition
transcripts. It provides that the failure to produce such materials
shall not result in rehearing or an amended decision unless the
Respondent establishes that the failure was not harmless error. The
Hearing Officer, or upon appeal or review, a Subcommittee, an
Extended Proceeding Committee, or the Exchange Review Council, shall
determine whether the failure to provide any statement was not
harmless error.
    \90\ See BX Rule 9251(c).
    \91\ See BX Rule 9251(d).
    \92\ See BX Rule 9251(g). The Hearing Officer, or, upon appeal
or review, a Subcommittee, an Extended Proceeding Committee, or the
Exchange Review Council, shall determine whether the failure to make
the document available was not harmless error. See id.
---------------------------------------------------------------------------

    BX Rule 9252 provides for a process by which a Respondent may
request that the Exchange invoke BX Rule 8210 to compel the production
of documents or testimony at the hearing. Pursuant to BX Rule 9252(a),
such a request must be submitted to the Hearing Officer no later than
21 days before the hearing date. The request may be granted upon a
showing that the information sought is relevant, material, and non-
cumulative, that the requesting Party has been unsuccessful in
obtaining the requested documents or testimony despite good faith
attempts to do so, and that each of the persons for whom the documents
and testimony are sought is subject to the Exchange's jurisdiction.\93\
The Hearing Officer shall also consider whether the request is
unreasonable, oppressive, excessive, [sic] in scope, or unduly
burdensome, or whether it should be denied, limited, or modified.\94\
If the Hearing Officer determines that a request is unreasonable,
excessive, or unduly burdensome, he or she may deny the request or
grant it only upon such conditions as fairness requires.\95\ If the
Hearing Officer grants the request, the Hearing Officer shall order
that requested documents be produced to all Parties not less than ten
days before the hearing, and order that witnesses whose testimony was
requested appear and testify at the hearing. If the Hearing Officer
grants the request ten or fewer days before a hearing on the merits is
scheduled to begin or after such hearing begins, the documents or
testimony shall be produced immediately to all Parties.\96\
---------------------------------------------------------------------------

    \93\ See BX Rule 9252(b).
    \94\ See id.
    \95\ See BX Rule 9252(c).
    \96\ See id.
---------------------------------------------------------------------------

    Several BX Rules govern the hearing process. Broadly speaking,
these Rules are similar to, albeit more comprehensive than, the
hearings process that exists under Existing Rule 1606(e). BX Rule
9261(a) requires a Party to submit to all other Parties and to the
Hearing Officer, no later than 10 days before a hearing, or at such
earlier date as may be specified by the Hearing Officer, copies of
documentary evidence and the names of the witnesses that it intends to
present at the hearing. BX Rule 9261(b) states that a Party is entitled
to appear at a hearing in person, by counsel, or by their [sic]
representative. BX Rule 9262 requires sworn testimony at hearings. BX
Rule 9263(a) grants the Hearing Officer authority to receive relevant
evidence and to exclude all evidence that is irrelevant, immaterial,
unduly repetitious, or unduly prejudicial. BX Rule 9145(a) provides
that the formal rules of evidence shall not apply in a proceeding
brought under the Rule 9000 Series. BX Rule 9265 requires hearings and
(unless otherwise ordered by a Hearing Officer) pre-hearing conferences
to be recorded by a court reporter and for transcripts to be available
for correction and purchase. BX Rule 9266 states that the Hearing
Officer may require the Parties to file proposed findings of fact and
conclusions of law, or post-hearing briefs, and it prescribes a
procedure for doing so. BX Rule 9267 lists the contents of the
evidentiary record.
    BX Rule 9268 governs New Hearing Panel decisions. Similar to
Existing Rule 1607, BX Rule 9268(a) requires a New Hearing Panel to
make a determination in a matter based on a majority vote, which is
reflected in a written decision drafted by the Hearing Officer. Also
similar to the Existing Rule, BX Rule 9268(b) requires that each
decision include a statement of the specific violations alleged,
findings of underlying facts, and conclusions of law. Unlike the
Existing Rule, however, BX Rule 9268(c) permits the Hearing Officer or
a Hearing Panelist to prepare a written dissenting opinion. BX Rule
9268(a) also specifically requires that the decision be issued within
60 days of the final date allowed for filing proposed findings of fact,
conclusions of law, and post hearing briefs, or by a date established
by the Chief Hearing Officer. Last, under subparagraph (d) of the BX
Rule, the OHO must serve the decision and any dissenting opinion on the
Parties, publish notice of the decision and any dissenting opinion in
the Central Registration Depository (``CRD'') and provide a copy of the
decision and any dissent thereto to the each Member of the Exchange
with which the Respondent is associated.
    BX Rules 9264 and 9269 concern the disposition of a disciplinary
matter through a summary proceeding. BX Rule 9264 states that a motion
for summary disposition must be initiated by a Party. Under BX Rule
9264(a), the Respondent and/or staff may, prior to the hearing but
after the Respondent has filed an answer and had opportunity to inspect
documents in the record, make a motion for summary disposition of any
or all the causes of action in the complaint with respect to that
Respondent, as well as any defense raised in a Respondent's answer. If
a hearing on the merits has begun, then BX Rule 9264(b) states that
Parties may submit a motion for summary disposition only with leave of
the Hearing Officer. BX Rule 9264(c) provides the process for
proceeding when a summary motion does not dispose of the matter
entirely. BX Rule 9264(d) requires motions for summary disposition to
be supported by a statement of undisputed facts, a supporting
memorandum of points and authorities, and affidavits or declarations
that set forth such facts. BX Rule 9264(e) concerns rulings on motions
for summary disposition. This provision of the BX Rule provides that a
Hearing Officer may deny or defer a decision on any motion for summary
disposition, yet only a New Hearing Panel may grant such a motion
(except the Hearing Officer may grant motions for summary disposition
with respect to questions of jurisdiction). BX Rule 9264(e) also
provides that a motion for summary disposition may be granted if there
is no genuine issue with regard to any material fact and the Party that
files the motion is entitled to summary disposition as a matter of law.
    Meanwhile, BX Rule 9269 governs the issuance of default decisions
by the Hearing Officer against Respondents that fail to provide timely
answers to complaints or any Party that fails to appear at any hearing
for which they have [sic] due notice. Where the defaulting Party is the
Respondent, the BX Rule specifies that the Hearing Officer may issue a
default decision that deems the allegations against the Respondent to
be admitted. Where the defaulting Party is the Departments, the Hearing
Officer may issue a default decision that dismisses the complaint with
prejudice. The Hearing Officer also may order a Party who fails to
attend a pre-hearing conference or a hearing to pay the costs of
attendance for the other Party. Like Existing Rule 1608, the BX Rule
provides for default decisions to be set aside, but unlike the Existing
Rule, BX Rule 9269 provides for the Hearing Officer to set them aside
only upon a motion and a showing of good cause. The BX Rule provides,
however, that default decisions may be appealed to or called for review
by the Board within 25 days after service.\97\
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    \97\ In addition to the above, BX Rule 9280 authorizes a New
Hearing Panel to exclude or impose sanctions upon a Party, an
attorney for a Party, or another authorized representative of a
Party that violates an order or otherwise engages in contemptuous
conduct during a proceeding. Authorized sanctions include, but are
not limited to, imposing orders that establish facts in favor of the
opposing Party, precluding a Party from making claims or defenses,
striking portions of pleadings, or staying procedures until
compliance occurs. No similar provisions exist in the Existing
Rules. Meanwhile, BX Rule 9150(a) authorizes an adjudicator to
exclude from disciplinary proceedings an attorney for a Party or any
other person authorized to represent a Party to the extent that the
adjudicator deems said attorney or persons to be engaging in
contemptuous conduct, under BX Rule 9280, or unethical or
unprofessional conduct. The BX Rule authorizes an attorney or person
so excluded to seek review of their exclusion from the Exchange
Review Council.

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

    BX Rule 9270 governs settlements. It permits a Party to propose in
writing an offer of settlement at any time and to do so without limit
to the number of offers it proposes. Under BX Rule 9270(e), if an offer
of settlement is uncontested, then the Departments must, if a hearing
has not yet commenced, transmit the offer and a proposed order of
acceptance to the Exchange Review Council (or the ODA, if the
Respondent is an affiliate of the Exchange) for approval or rejection.
If a hearing has already commenced when the offer is made, then the
Departments must send the offer and proposed order to the New Hearing
Panel for preliminary approval and then to the Exchange Review Council
(or, if a Respondent is an affiliate of the Exchange, to the ODA) for
ultimate approval or rejection. Under BX Rule 9270(f), if an offer of
settlement is made and it is contested, then the Departments must
provide a written opposition to the New Hearing Panel, which may issue
an order approving the offer, or it may order the Parties to attend a
settlement conference. If a New Hearing Panel approves a contested
offer of settlement, then the Hearing Officer shall send the order of
acceptance of the offer of settlement to the Exchange Review Council
(or, if a Respondent is an affiliate of the Exchange, to the ODA) for
ultimate acceptance or rejection. Pursuant to BX Rule 9270(h), if an
offer of settlement is rejected, then the Respondent shall be notified
in writing, the offer shall be withdrawn, and the rejected order shall
not constitute part of the record in any subsequent proceeding against
the Respondent. BX Rule 9270(j) further clarifies that a Respondent
shall not be prejudiced by a rejected order of settlement.\98\
---------------------------------------------------------------------------

    \98\ Finally, BX Rule 9270(i) states that, when a disciplinary
proceeding names multiple respondents, settlement offers may be
accepted or rejected as to any one or all of the Respondents
submitting offers.
---------------------------------------------------------------------------

    BX Rule 9280 authorizes the issuance of sanctions for Parties,
their attorneys, and their representatives, for contemptuous conduct.
As set forth in BX Rule 9280(a)(2), such sanctions may include
exclusion of an attorney or representative from proceedings. They may
also include, in part, orders that establish disputed facts in favor of
the non-sanctioned Party, preclude the disobedient Party from
supporting or opposing claims or defenses, or strike pleadings or
portions thereof.\99\ The exclusion of an attorney or representative is
subject to review by the Exchange Review Council.\100\
---------------------------------------------------------------------------

    \99\ See BX Rule 9280(b).
    \100\ See BX Rule 9280(c).
---------------------------------------------------------------------------

    BX Rule 9290 states that hearings shall be held and orders shall be
issued as to temporary cease and desist proceedings on an expedited
basis. BX Rule 9291 governs the form and delivery of permanent cease
and desist orders.
The BX Rule 9300 Series
    The BX Rule 9300 Series sets forth the process for review of
disciplinary proceedings by the Exchange Review Council and the Board.
    BX Rule 9311 sets forth the process for appellate reviews of New
Hearing Panel decisions. Under BX Rule 9311, a Party may appeal a New
Hearing Panel decision to the Exchange Review Council within 25 days
after service of a decision.\101\ Additionally, on their [sic] own
motion, any member of the Exchange Review Council, a Review
Subcommittee thereof, or the CRO (as to default decisions) may issue a
call to review a New Hearing Panel decision within 45 days after the
date of service of the decision (or within 25 days after the date of
service, as to calls for review that the CRO initiates). BX Rule
9311(c) and (d) require [sic] that Parties file written notices of
appeal (and cross-appeal) with the OHO and it prescribes requirements
for such notices. BX Rule 9311(e) states that the Exchange Review
Council, in its discretion, may waive any issues not raised in appeal
or cross-appeal notices, but it provides a process by which the Parties
may petition for consideration of such issues.
---------------------------------------------------------------------------

    \101\ However, the Exchange notes that a decision involving a
Respondent who is an affiliate of the Exchange may not be appealed
to the Exchange Review Council.
---------------------------------------------------------------------------

    Meanwhile, BX Rule 9312 governs the process by which the Exchange
Review Council, the Review Subcommittee, or the CRO may call a matter
for review. It provides that a decision of a New Hearing Panel issued
pursuant to BX Rule 9268 may be called for review by any member of the
Exchange Review Council or any member of a Review Subcommittee within
45 days after service of the decision. It also provides that a default
decision against a Respondent, pursuant to BX Rule 9269, may be called
for review by the CRO, on his or her own motion, within 25 days after
service of the decision. Additionally, it provides that a decision with
respect to a Member that is an affiliate of the Exchange may not be
called for review by the Exchange Review Council. BX Rule 9312(b)
states that a decision to call a matter for review by the Exchange
Review Council, the Review Subcommittee, or the CRO operates as a stay
of a final decision until such time as the Council or Board issues its
decision, except with respect to permanent cease and desist orders.
    BX Rule 9321 provides for the transmission of the record of a
disciplinary proceeding to the Exchange Review Council within 21 days
after the filing of a notice of appeal or notice of review, or at such
a later time as the Council may designate. BX Rule 9322 grants
discretion, with good cause shown, to the Exchange Review Council, the
Review Subcommittee, a Subcommittee, an Extended Proceeding Committee,
and Counsel to the Exchange Review Council (defined below) to modify
filing deadlines, adjourn appeal proceedings, and change hearing
locations in certain instances and subject to certain limitations.
    BX Rule 9331 states that, following the filing of a notice of
appeal or a call for review, the Exchange Review Council or the Review
Subcommittee shall appoint a Subcommittee or an Extended Proceeding
Committee, composed of two or more persons who are or were members of
the Exchange Review Council or former Directors, for the purpose of
making recommendations to the full Council as to how to dispose of
matters before it.\102\
---------------------------------------------------------------------------

    \102\ Under the BX Rules, the Exchange Review Council is
assigned its own counsel in appellate matters. BX Rule 9120(e)
defines the term ``Counsel to the Exchange Review Committee'' as an
attorney that reports to the CRO of the Exchange who is responsible
for advising the Exchange Review Council, the Review Subcommittee, a
Subcommittee, or an Extended Proceeding Committee regarding a
disciplinary proceeding on appeal or review before the Exchange
Review Council. Counsel also may decide a motion on a procedural
matter in the BX Rule 9300 Series. See BX Rule 9146(j)(2). BX Rule
9313 describes the authority of the Counsel and the process for
seeking the review of a Counsel decision. Under BX Rule 9313(a),
Counsel has authority to take ministerial and administrative actions
to further the efficient administration of a proceeding. A Party may
seek review of a Counsel decision on motion to the Exchange Review
Council, the Review Subcommittee, a Subcommittee or, if applicable,
an Extended Proceeding Committee. See BX Rule 9313(b). Counsel is
subject to the same conflict of interest prohibitions as the
Exchange Review Council, see BX Rule 9332, which requires Counsel to
withdraw from a matter any time that the Counsel has a conflict of
interest or bias or circumstances otherwise exists where the
fairness of the Counsel might reasonably be questioned. Moreover,
the Counsel may be removed on motion based upon a good faith belief
that the Counsel has a conflict of interest or bias or circumstances
otherwise exists where the fairness of the Counsel might reasonably
be questioned.

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

    Under BX Rule 9332, Exchange Review Council members, including
members of the Review Subcommittee, panelists of a Subcommittee or an
Extended Proceeding Committee, or Counsel to the Exchange Review
Council, are subject to the same disqualification and recusal standards
as the Hearing Panelists and Hearing Officers.
    The BX Rule 9340 Series governs the proceedings of the Exchange
Review Council, Extended Proceeding Committee, and Subcommittees. BX
Rule 9341 provides for oral arguments before a Subcommittee and the
Extended Proceeding Committee, upon written request of a Party or
otherwise at the discretion of Subcommittee or Committee.\103\ BX Rule
9343 provides that, if no oral argument is held, a matter shall be
decided on the record, supplemented by any written materials submitted
to or issued by the Exchange Review Council, a Subcommittee, or the
Extended Proceeding Committee. BX Rule 9344 grants discretion to the
Council or the Review Subcommittee to proceed with or dismiss the
appeal and remand appeals of Parties that failed to participate in
initial disciplinary hearings and show good cause for their failure to
participate. It also prescribes circumstances under which an appeal or
cross-appeal will be deemed abandoned. BX Rule 9345 states that a
Subcommittee or the Extended Proceeding Committee shall present a
recommended decision to the Exchange Review Council. Pursuant to BX
Rule 9346, the Exchange Review Council is charged with issuing a
decision based on the record, supplemented by briefs and other papers
submitted to the Subcommittee, Extended Proceedings Committee, or the
Exchange Review Council, any oral arguments that occur, and upon a
showing of good cause and with the leave of the Council, Extended
Proceeding Committee, or Subcommittee, additional evidence that is
introduced on appeal.\104\ It also provides that the formal rules of
evidence shall not apply during the appeals process.\105\ BX Rule 9347
sets forth the form, format, and filing procedures and deadlines for
papers filed in Exchange Review Council proceedings. BX Rule 9348
states the powers of the Exchange Review Council to affirm, dismiss,
modify, or reverse New Hearing Panel decisions with respect to each
finding, or to remand the proceeding with instructions. It also
provides that the Exchange Review Council may affirm, modify, reverse,
increase, or reduce any sanction, or impose any other fitting sanction.
The Exchange Review Council must issue a decision consistent with BX
Rule 9349(b), which provides elements required to be included in an
Exchange Review Council decision.
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    \103\ BX Rule 9342 states that if a Party requests, but fails to
appear at an oral argument, then the Committee or Subcommittee may
proceed with oral arguments without that Party or consider the
matter on the basis of the record, without oral argument, as to that
Party.
    \104\ BX Rule 9346(f) also permits the Council, Extended
Proceeding Committee, or Subcommittee to order, on its own motion,
that the record be supplemented with such additional evidence as
they deem relevant.
    \105\ See BX Rule 9346(g).
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    BX Rule 9351 governs discretionary review by the Board. Pursuant to
BX Rule 9351(a), a Director may call for review a decision of the
Exchange Review Council (other than a decision with respect to a Member
that is an affiliate of the Exchange) not later than the next meeting
of the Board that is at least 15 days after the date on which the Board
receives the Exchange Review Council decision. As set forth in BX Rule
9351(d), the Board may affirm, modify, or reverse the proposed written
decision of the Exchange Review Council and it may affirm, modify,
reverse, increase, or reduce any sanction (including the terms of any
permanent cease and desist order) or impose any other fitting sanction.
The Board also may remand the proceeding with instructions. The Board
is required to issue its decision in writing pursuant to BX Rule
9351(e).\106\
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    \106\ BX Rules 9360 and 9370 states [sic] when sanctions become
effective, including when a Respondent appeals a decision to the
Commission.
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    Unlike the Existing Rules, BX Rule 9370 expressly provides for a
Respondent aggrieved by a final disciplinary action to apply for review
by the Commission pursuant to Section 19(d)(2) of the Act.
The BX Rule 9400 and 9500 Series
    The BX Rule 9400 Series provides the process for expedited client
suspension proceedings involving alleged violations of Rule 403
(Disruptive Quoting and Trading Activity Prohibited). The BX Rule 9500
Series provides the process for proceedings other than formal
disciplinary proceedings. The Exchange proposes that these BX Rules
will replace Chapter 15 of the Existing Rules, which also provide for
the Exchange to impose summary suspensions in various circumstance
[sic].
    BX Rule 9400 authorizes and prescribes the process for adjudicating
expedited client suspensions that may be imposed upon Members or
Associated Persons that violate the prohibition on disruptive quoting
and trading activity.\107\ BX Rule 9400 states that the Regulation
Department, with the prior authorization of the CRO, may issue a notice
initiating a suspension proceeding of a Member or an Associated Person
for engaging in disruptive quoting and trading activity, which shall
trigger the appointment of a New Hearing Panel and the occurrence of a
hearing not later than 15 days after service of the notice, unless
extended for good cause shown. The New Hearing Panel may issue a
written decision imposing a suspension (within 10 days of receipt of
the hearing transcript, unless otherwise extended) only if the New
Hearing Panel finds by a preponderance of the evidence that the
violation occurred and that it is likely to result in significant
market disruption or harm to investors. BX Rule 9400(e) also permits a
Respondent to apply to the New Hearing Panel to modify, set aside,
limit, or revoke a suspension order and it requires the New Hearing
Panel to respond to such a request in writing within 10 days after
receiving it, unless such time period is extended with the consent of
the Parties for good cause shown. Finally, BX Rule 9400(f) states that
suspensions imposed by New Hearing Panels may be appealed to the
Commission as set forth in Section 19 of the Act.
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    \107\ Although BX Rule 9400 references the BX Rule that
prohibits disruptive quoting and trading, the Exchange proposes to
substitute reference to its own analogous provision, Rule 403.
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    The BX Rule 9500 Series permits the Exchange to impose sanctions,
such as suspensions, cancellations of membership, bars of association
with Members, and prohibitions or restrictions on access to Exchange
services, as well as the adjudication of such sanction orders, for
actions or circumstances that include the following: (1) Failures to
provide information, reports, data, or testimony requested or required
by the Exchange or failures to keep membership applications or
supporting documentation current (BX Rule 9552); (2) failures to pay
Exchange dues, fees and other charges or to submit a required report or
information related to such payment (BX Rule 9553); (3) failures to
comply with arbitration awards or settlements or orders of restitution
(BX Rule 9554); (4) failures to meet the eligibility or qualification
standards or prerequisites for access to

services (BX Rule 9555); (5) failures to comply with temporary and
permanent cease and desist orders (BX Rule 9556); (6) financial or
operational difficulties that require limiting or ceasing certain
business activities (BX Rule 9557); and (7) actions authorized by
Section 6(d)(3) of the Act, including in part summary suspensions of or
limitations or prohibitions with respect to services offered by the
Exchange on Members, Associated Persons, or other persons subject to
the Exchange's jurisdiction, including those who have been suspended or
expelled from another SRO, barred or suspended from being associated
with a member of another SRO, or are experiencing severe financial or
operation [sic] difficulties threaten [sic] investors, creditors, other
Members, or the Exchange (BX Rule 9558). The BX Rule 9520 Series also
provides for adjudication of statutory disqualifications or
determinations of ineligibility to become or remain a Member or
associated with a Member. Generally, each of these provisions of the BX
Rules require [sic] the Exchange to serve written notice to the Member
or Associated Person, offer them an opportunity to request a hearing in
writing, and permit them to request termination of sanctions upon
achieving compliance.\108\ Meanwhile, BX Rule 9559 sets forth extensive
procedures governing hearings and it provides for appellate reviews by
the Exchange Review Council, upon its call for review, and by the
Commission, pursuant to Section 19 of the Act.
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    \108\ The BX Rule 9520 Series provides for a somewhat different
process from the BX Rule 9550 Series. BX Rule 9522 requires Members
and Associated Persons to file applications for relief from
statutory disqualifications or determinations of ineligibility. BX
Rule 9522(e) authorizes the Department of Member Regulation, to the
extent it deems consistent with the public interest and the
protection of investors, to approve a written request for relief
from the eligibility requirements by a disqualified Member with or
without the filing of an application by such disqualified Member,
under certain specified conditions. Pursuant to BX Rule 9523, the
Department of Member Regulation also may recommend membership or
association or continued membership or association pursuant to a
supervisory plan that is subject to approval by the Chair of the
Statutory Disqualification Committee (a Subcommittee of the Exchange
Review Council, as defined in BX Rule 9120(cc)) or the Exchange
Review Council. Pursuant to BX Rule 9523(a), the Member or
Associated Person may request a hearing before a New Hearing Panel
to seek relief from disqualification or conditions imposed upon
continued membership or association. In such instances, the Hearing
Panel shall issue a recommended decision to the Statutory
Disqualification Committee, which in turn shall issue a recommended
decision to the Exchange Review Council for ultimate determination.
The decision of the Exchange Review Council is subject to
discretionary review by the Board. See id. The BX Rule also provides
for the Exchange Review Council to conduct an expedited review of a
recommended decision of the Statutory Disqualification Committee.
See id. Finally, it provides for review by the Commission of any
action taken pursuant to the BX Rule 9520 Series. See id.
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The BX Rule 9600 Series
    The BX Rule 9600 Series provides procedures to be followed when a
Member seeks exemptive relief pursuant to any Rule that references the
BX Rule 9600 Series. As discussed below, the Exchange proposes to amend
the Supplementary Material to Existing Rule 303 to provide for the BX
Rule 9600 Series to govern requests to waive applicable qualification
examination requirements for applicants that apply to become associated
with Members of the Exchange.
    The BX Rule 9800 Series \109\
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    \109\ The BX Rule 9700 Series is reserved.
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    The BX Rule 9800 Series provides the process followed by the
Exchange in administering temporary cease and desist orders, including
the initiation of proceeding to issue such an order,\110\ service
thereof,\111\ subsequent review of the order by the Hearing Panel,\112\
the consequences of non-compliance,\113\ and the process for seeking
Commission review of the order.\114\
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    \110\ BX Rule 9810.
    \111\ Id.
    \112\ BX Rule 9850.
    \113\ BX Rule 9860.
    \114\ BX Rule 9870.
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    The BX Rule 9800 Series provides for temporary cease and desist
orders and a process for adjudicating them. BX Rule 9810 states that
with the prior written authorization of the CRO and FINRA's Chief
Executive Officer (or such other senior officers as he or she
designates), the Departments may initiate a temporary cease and desist
proceeding with respect to alleged violations of Section 10(b) of the
Act and SEC Rule 10b-5, SEC Rules 15g-1 through 15g-9, and BX Rules
2110, 2120, or 2150 (references to these BX Rules will be replaced with
references to Exchange Rules 400, 405, and Chapter 6, respectively).
The Departments must serve written notice upon Respondents of a
proposed temporary cease and desist order and file a copy of such
notice with the OHO. Additionally, if a complaint has not already been
issued against the Respondents, then the Departments must file and
serve a complaint together with the notice of the temporary cease and
desist order. BX Rule 9820 provides for the Chief Hearing Officer of
the OHO to assign a New Hearing Panel to adjudicate the proposed cease
and desist order. BX Rule 9830 provides for a hearing to be held,
generally speaking, not later than 15 days after service of the notice.
BX Rule 9840 states that the New Hearing Panel shall issue a written
decision as to whether to impose a temporary cease and desist order
within 10 days after receipt of the hearing transcript, unless such
deadline is extended for good cause. It states that the New Hearing
Panel should impose such an order if it finds that the Departments have
demonstrated a likelihood of success on the merits and that the alleged
misconduct or continuation thereof is likely to result in significant
dissipation or conversion of assets or other significant harm to
investors prior to the completion of disciplinary proceedings. BX Rule
9850 permits a Party to apply to the New Hearing Panel to modify, set
aside, limit, or suspend a temporary cease and desist order. BX Rule
9860 states that a Respondent that violates a temporary cease and
desist order may have its association or membership suspended or
cancelled or be subject to any fitting sanction, pursuant to BX Rule
9556. Finally, BX Rule 9870 states that a Respondent may apply to the
Commission to review the issuance of a temporary cease and desist
order, as set forth in Section 19 of the Act.

Additional Conforming Rule Changes

    As discussed above, the Exchange is amending its By-Laws to conform
to the BX by-laws, largely deleting the Existing Rule 1500, 1600, and
1700 Series,\115\ and adopting in their place the BX Rule 8000 and 9000
Series. As a consequence of these changes, the Exchange proposes to
amend or delete certain other Existing Rules, which are either not
needed, duplicated elsewhere, or reference the deleted Existing Rules.
Below is a description of the specific changes the Exchange proposes to
make to its Existing Rules.
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    \115\ As noted elsewhere, the Exchange proposes to retain
Existing Rules 1600 and 1614(a) and (d) in their current form (and
to renumber Rule 1614(d) as 1614(b)).
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    Existing Rule 100 provides definitions for purposes of the Existing
Rules. The Exchange is proposing to amend this Existing Rule to include
definitions for several new terms. For example, the proposed Rules will
define the new term ``Code of Procedure'' as the procedural rules
contained in Chapter 90. The Exchange also defines the new term
``Exchange Review Council,'' which is largely copied from BX Rule
0120(m). The Exchange notes that item (6) of the new definition differs
from the BX item (6) in that it cites the analogous rules of the
Exchange, which have different rule numbers. Finally, the Exchange
proposes to amend the

definition of ``SEC'' so that it also includes the word ``Commission.''
    Existing Rule 210 concerns the consequences of a Member's or an
Associated Person's failure to pay dues, fees and other charges. The
Exchange proposes to delete this Existing Rule in favor of BX Rule
9553, which is more comprehensive than the Existing Rule and differs
from it in several respects. Existing Rule 210 provides that instances
of nonpayment shall be reported to the Exchange President when they are
30 days past due, and that the President thereafter shall provide
reasonable notice to the delinquent Member that continued non-payment
will result in suspension of trading privileges. An Associated Person
that fails to pay may be suspended from association with a Member.
Moreover, although Existing Rule 210(a) does not specify a time period
for a reasonable notice that precedes suspension, it nevertheless
provides that the Exchange shall dispose of the memberships of Members
who are more than six months delinquent. By contrast, BX Rule 9553
states that the Regulation Department, within an unspecified period of
time period [sic] after the onset of a delinquency, may issue a written
notice to the delinquent Member or Associated Person that failure to
comply within 21 days of service of the notice will result in
suspension or cancellation of membership or suspension or bar of
association with a Member, as applicable. BX Rule 9553 also provides
for detailed provisions for serving such notice, a provision for
requesting a hearing with respect to such a notice, a provision
declaring the effectiveness of such notices (21 days after service)
when no hearing is requested, and a means to request termination of a
suspension, which may be granted for good cause shown.
    Existing Rule 302 sets forth circumstances in which the Exchange
may deny or condition approval of membership applications or
applications to associate with Members. Existing Rule 302(c) also sets
forth circumstances in which the Exchange may determine not to permit a
Member or Associated Person from continuing their [sic] membership or
association with a Member, including because they become [sic] subject
to [sic] statutory disqualification under the Act. Existing Rule 302(f)
furthermore permits a Member or Associated Person that becomes subject
to [sic] statutory disqualification under the Act to apply to the
Exchange to continue as a Member or as an Associated Person, within 30