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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices with Section 6b5 of the Exchange Act 88 because these proposed rules are designed to promote just and equitable principles of trade, and protect investors and the public interest by setting forth the requirements to become a BSTX
Participant and specifying that associated persons of a BSTX
Participant are bound by Exchange Rules. Under proposed Rule 18000, a BSTX Participant must first become an Exchange Participant pursuant to the Exchange Rule 2000 Series which the Exchange believes would help assure that BSTX Participants meet the appropriate standards for trading on BSTX in furtherance of the protection of investors.89
Business Conduct for BSTX Participants Rule 19000 Series The Exchange proposes to adopt as its Rule 19000 Series Business Conduct for BSTX Participants, twenty two rules relating to business conduct requirements for BSTX Participants that are substantially similar to business conduct rules of other exchanges.90 The proposed Rule 19000 Series would specify business conduct requirements with respect to: i Just and equitable principles of trade; 91 ii adherence to law; 92 iii use of fraudulent devices; 93
iv false statements; 94 v know your customer; 95 vi fair dealing with 88 15

U.S.C. 78fb5.
Exchange notes that the approach of requiring members of a facility of an exchange to first become members of the exchange is consistent with the approach used by another national securities exchange. See Cboe BZX Rule 17.1b3
requiring that a Cboe BZX options member be an existing member or become a member of the Cboe BZX equities exchange pursuant to the Cboe BZX
Chapter II Series.
90 See Cboe BZX Chapter 5 rules. See also IEX
Rule 5.150 with respect to proposed Rule 21040
Prevention of the Misuse of Material, Non-Public Information.
91 Proposed Rule 19000 Just and Equitable Principles of Trade provides that no BSTX
Participant, including its associated persons, shall engage in acts or practices inconsistent with just and equitable principles of trade.
92 Proposed Rule 19010 Adherence to Law generally requires BSTX Participants to adhere to applicable laws and regulatory requirements.
93 Proposed Rule 19020 Use of Fraudulent Devices generally prohibits BSTX Participants from effecting a transaction in any security by means of a manipulative, deceptive or other fraudulent device or contrivance.
94 Proposed Rule 19030 False Statements generally prohibits BSTX Participants and their associated persons from making false statements or misrepresentations in communications with the Exchange.
95 Proposed Rule 19040 Know Your Customer requires BSTX Participants to comply with FINRA
Rule 2090 as if such rule were part of the Exchange Rules.

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customers; 96 vii suitability; 97 viii the prompt receipt and delivery of securities; 98 ix charges for services performed; 99 x use of information obtained in a fiduciary capacity; 100 xi publication of transactions and quotations; 101 xii offers at stated prices; 102 xiii payments involving publications that influence the market price of a security; 103 xiv customer confirmations; 104 xv disclosure of a control relationship with an issuer of Securities; 105 xvi discretionary accounts; 106 xvii improper use of customers securities or funds and a prohibition against guarantees and sharing in accounts; 107 xviii the extent to which sharing in accounts is 96 Proposed Rule 19050 Fair Dealing with Customers generally requires BSTX Participants to deal fairly with customers and specifies certain activities that would violate the duty of fair dealing e.g., churning or overtrading in relation to the objectives and financial situation of a customer.
97 Proposed Rule 19060 Suitability provides that BSTX Participants and their associated persons shall comply with FINRA Rule 2111 as if such rule were part of the Exchange Rules.
98 Proposed Rule 19070 Prompt Receipt and Delivery of Securities would generally prohibit a BSTX Participant from accepting a customers purchase order for a security until it can determine that the customer agrees to receive the securities against payment.
99 Proposed Rule 19080 Charges for Services Performed generally requires that charges imposed on customers by broker-dealers shall be reasonable and not unfairly discriminatory.
100 Proposed Rule 19090 Use of Information Obtained in a Fiduciary Capacity generally restricts the use of information as to the ownership of securities when acting in certain capacities e.g., as a trustee.
101 Proposed Rule 19100 Publication of Transactions and Quotations generally prohibits a BSTX Participant from disseminating a transaction or quotation information unless the BSTX
Participant believes it to be bona fide.
102 Proposed Rule 19110 Offers at Stated Prices generally prohibits a BSTX Participant from offering to transact in a security at a stated price unless it is in fact prepared to do so.
103 Proposed Rule 19120 Payments Involving Publications that Influence the Market Price of a Security generally prohibits direct or indirect payments with the aim of disseminating information that is intended to effect the price of a security.
104 Proposed Rule 19130 Customer Confirmations requires that BSTX Participants comply with Rule 10b10 of the Exchange Act. 17
CFR 240.10b10.
105 Proposed Rule 19140 Disclosure of Control Relationship with Issuer generally requires BSTX
Participants to disclose any control relationship with an issuer of a security before effecting a transaction in that security for the customer.
106 Proposed Rule 19150 Discretionary Accounts generally provides certain restrictions on BSTX
Participants handling of discretionary accounts, such as by effecting excessive transactions or obtained authorization to exercise discretionary powers.
107 Proposed Rule 19160 Improper Use of Customers Securities or Funds and Prohibition against Guarantees and Sharing in Accounts generally prohibits BSTX Participants from making improper use of customers securities or funds and prohibits guarantees to customers against losses.

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permissible; 108 xix communications with customers and the public; 109 xx gratuities; 110 xxi telemarketing; 111
and xxii mandatory systems testing.112
The Exchange notes that the proposed financial responsibility rules are virtually identical to those of other national securities exchanges other than changes to defined terms and certain other provisions that would not apply to the trading of Securities on the BSTX
System.113
The Exchange believes that the proposed Rule 19000 Series Business Conduct is consistent with Section 6b5 of the Exchange Act 114 because these proposed rules are designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and protect investors and the public interest by setting forth appropriate standards of conduct applicable to BSTX Participants in carrying out their business activities.
For example, proposed Rule 19000 Just and Equitable Principles of Trade and 19010 Adherence to Law would prohibit BSTX Participants from engaging in acts or practices inconsistent with just and equitable principles of trade or that would violate applicable laws and regulations.
Similarly, proposed Rule 19050 Fair Dealing with Customers would require that BSTX Participants deal fairly with their customers and proposed Rule 19030 False Statements would generally prohibit BSTX Participants, or 108 Proposed Rule 19170 Sharing in Accounts;
Extent Permissible generally prohibits BSTX
Participants and their associated persons from sharing directly or indirectly in the profit or losses of the account of a customer unless certain exceptions apply such as where an associated person receives prior written authorization from the BSTX Participant with which he or she is associated.
109 Proposed Rule 19180 Communications with Customers and the Public generally provides that BSTX Participants and their associated persons shall comply with FINRA Rule 2210 as if such rule were part of the Exchange Rules.
110 Proposed Rule 19190 Gratuities requires BSTX Participants to comply with the requirements set forth in BOX Exchange Rule 3060 Gratuities.
111 Proposed Rule 19200 Telemarketing requires that BSTX Participants and their associated persons comply with FINRA Rule 3230 as if such rule were part of the Exchanges Rules.
112 Proposed Rule 19210 Mandatory Systems Testing requires that BSTX Participants comply with Exchange Rule 3180 Mandatory Systems Testing.
113 For example, the Exchange is not proposing to adopt a rule contained in other exchanges business conduct rules relating to disclosures that brokerdealers give to their customers regarding the risks of effecting securities transactions during times other than during regular trading hours e.g., higher volatility, possibly lower liquidity because executions may only occur during regular trading hours on the BSTX System. See e.g., IEX Rule 3.290, Cboe BZX Rule 3.21.
114 15 U.S.C. 78fb5.

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