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Federal Register / Vol. 86, No. 104 / Wednesday, June 2, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES2

Securities. It is also expected that confirmed trades in Securities on BSTX
would be transmitted to National Securities Clearing Corporation NSCC for clearing such that NSCC
would clear the trades through its systems to produce settlement obligations that would be due for settlement between participants at DTC.
BSTX believes that this custody, clearance and settlement structure is the same general structure that exists today for other exchange-traded equity securities. Importantly, for purposes of NSCCs clearing activities and DTCs settlement activities in respect of the Securities, the relevant Securities would be cleared and settled by NSCC and DTC in exactly the same manner as those activities are performed by NSCC
and DTC currently regarding a class of NMS Stock.
The operation of the BSTX Market Data Blockchain will have no impact or effect on the manner in which a Security clears and settles. The BSTX
Market Data Blockchain would be implemented through the operation of the proposed BSTX Rules and would occur separate and apart from the clearance and settlement process. The Security would be an ordinary equity security for NSCCs and DTCs purposes. The BSTX Market Data Blockchain would be a separate set of market data that uses distributed ledger technology to record certain order and transaction information regarding orders and transactions in Securities on BSTX.
Issuance of Equity Securities Eligible To Become a Security With the exception of certain offerings under Regulation A that meet the proposed BSTX listing standards, all Securities traded on BSTX will have been offered and sold in registered offerings under the Securities Act, which means that purchasers of the Securities will benefit from all of the protections of registration. The Division of Corporation Finance will need to make a public interest finding in order to accelerate the effectiveness of the registration statements for these offerings. Because BSTX would be a facility of a national securities exchange, all Securities would be registered under Section 12b of the Exchange Act, thereby subjecting all of these issuers to the reporting regime in Section 13a of the Exchange Act.
All offerings of securities that are intended to be listed as Securities on physical delivery of securities certificates, or ii otherwise permits or facilitates the settlement of securities transactions or the hypothecation or lending of securities without physical delivery of securities certificates.

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BSTX would be conducted in the same general manner in which offerings of exchange-listed equity securities are conducted today under the federal securities laws. An issuer will enter into a firm commitment or best efforts underwriting agreement with a sole underwriter or underwriting syndicate;
the underwriters will market the securities and distribute them to purchasers; and secondary trading in the securities that are intended to trade on BSTX as Securities will thereafter commence on BSTX.
Issuers on BSTX could include both 1 new issuers who do not currently have any class of securities registered on a national securities exchange, and 2
issuers who currently have securities registered on a national securities exchange and who are seeking registration of a separate class of equity securities for listing on BSTX as Securities. BSTX does not intend for Securities listed, or intended to be listed, on BSTX to be fungible with any other class of securities from the same issuer.20 If an issuer sought to list securities on BSTX that are not a separate class of an issuers securities, BSTX does not intend to approve such a class of security for listing on BSTX
as a Security, pursuant to BSTXs authority under BSTX Rule 26101. At the commencement of BSTXs operations, certain equities including ETPs would be eligible for listing as Securities. This would be addressed by BSTX Rules 26102 Equity Issues, 26103 Preferred Securities, 26105
Warrant Securities and the Rule 28000
Series Trading and Listing of Exchange Traded Products, which would be part of BSTXs listing rules and would contemplate that only those specified types of equity securities would be eligible for listing.
Securities Depository Eligibility BSTX would maintain rules that would promote a structure in which Securities would be held in street 20 The Exchange notes that distinct classes of securities issued by an issuer that are Securities would not be fungible with another class of securities of the same issuer because no class of an issuers securities is fungible with a separate class of its securitiesotherwise they would be the same class of security. To the extent that two classes of an issuers shares had identical voting and economic rights but were registered with the Commission as separate classes e.g., Class A shares and Class B shares, the two classes of shares could be economically fungible with one another insofar as they convey the same economic and beneficial rights and interests to investors, but this would not mean that ownership of a Class A share is the same as ownership of a Class B share notwithstanding that each class provides the same economic benefits. In any case, nothing herein proposes any change to the existing framework for different classes of securities.

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name with DTC.21 BSTX Rule 26137
would require that for an issuers security to be eligible to be a Security, BSTX must have received a representation from the issuer that a CUSIP number that identifies the security is included in a file of eligible issues maintained by a securities depository that is registered with the SEC as a clearing agency. This is based on rules that are currently maintained by other equities exchanges.22 In practice, BSTX Rule 26137 requires the Security to have a CUSIP number that is included in a file of eligible securities that is maintained by DTC because the Exchange believes that DTC currently is the only clearing agency registered with the SEC that provides securities depository services.23
Book-Entry Settlement at a Securities Depository BSTX would also maintain Proposed BSTX Rule 26135 regarding uniform book-entry settlement. The rule would require each BSTX Participant to use the facilities of a securities depository for the book-entry settlement of all transactions in depository eligible securities with another BSTX
Participant or a member of a national securities exchange that is not BSTX or a member of a national securities association.24 Proposed BSTX Rule 26135 is based on the depository eligibility rules of other equities exchanges and Financial Industry Regulatory Authority FINRA.25
Those rules were first adopted as part of a coordinated industry effort in 1995 to promote book-entry settlement for the vast majority of initial public offerings 21 The term street name refers to a securities holding structure in which DTC, through its nominee Cede & Co., would be the registered holder of the securities and, in turn, DTC would grant security entitlements in such securities to relevant accounts of its participants. Proposed BSTX Rule 26136 would also provide, with certain exceptions, that securities listed on BSTX must be eligible for a direct registration program operated by a clearing agency registered under Section 17A of the Exchange Act. DTC operates the only such program today, known as the Direct Registration System, which permits an investor to hold a security as the registered owner in electronic form on the books of the issuer.
22 Proposed BSTX Rule 26137 is based on current NYSE Rule 777.
23 See Exchange Act Release No. 78963
September 28, 2016, 81 FR 70744, 70748 October 13, 2016 footnote 46 and the accompanying text acknowledge that DTC is the only registered clearing agency that provides securities depository services for the U.S. securities markets.
24 FINRA is currently the only national securities association registered with the SEC.
25 See e.g., FINRA Rule 11310. Book-Entry Settlement and NYSE Rule 776. Book-Entry Settlement of Transactions.

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