Voglio sapere a riguardo di…

Federal Register / Vol. 86, No. 18 / Friday, January 29, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES

provisions of the BOX Options LLC
Agreement or the BOX Holdings LLC
Agreement.34 The Exchange states that it will enter into a Facility Agreement with BSTX pursuant to which the Exchange will exercise regulatory oversight over BSTX.35 Furthermore, the Exchange has entered into an IP License and Services Agreement LSA with tZERO,36 under which tZERO will provide BSTX and the Exchange with a license to use its intellectual property that comprises the BSTX trading system and services related to, among other things, implementing and maintain the trading system.37
Pursuant to the BSTX LLC Agreement, a person that establishes an indirect ownership interest in BSTX that meets certain thresholds would be required to become a party to the BSTX LLC
Agreement, by executing an amendment to the BSTX LLC Agreement, and abide by its provisions to the same extent as if they were a BSTX LLC Member.38 The Exchange further proposes that any BSTX Participant 39 that directly or indirectly together with its Related Persons holds more than 20% of BSTX
would have its voting power capped at 20%.40
The Exchange states that the BSTX
LLC Agreement includes provisions designed to prevent any owner of BSTX
from having undue influence over regulatory actions and ensure that the Exchange has full regulatory control over BSTX and these provisions.41
34 See Notice, supra note 3, 85 FR at 33259, n.8
and accompanying text.
35 See id. at 33259. The Exchange will also provide certain business services to BSTX pursuant to an administrative services agreement. See id.
36 See id. at 33261.
37 See id. at 33266. The Facility Agreement, administrative services agreement, and LSA were not provided as exhibits to the proposal.
38 See Notice, supra note 3, 85 FR at 33260, 33267; BSTX LLC Agreement, supra note 14, Section 7.4g. The Exchange specifically identifies certain upstream owners that would be required to execute such an amendment. See Notice, supra note 3, 85 FR at 33260.
39 BSTX LLC Agreement defines BSTX
Participant as a firm or organization that is registered with the Exchange pursuant to Exchange rules for purposes of participating in trading on the BSTX Market as an order flow provider or market maker. See BSTX LLC Agreement, supra note 14, Section 1.1.
40 See Notice, supra note 3, 85 FR at 33260; BSTX
LLC Agreement, supra note 14, Section 7.4h.
According to the Exchange, this limitation is designed to prevent a market participant from exerting undue influence on an Exchange facility, and in particular is designed to minimize the ability of a BSTX Participant to improperly interfere with or restrict the ability of the Exchange to effectively carry out its regulatory oversight responsibilities under the Exchange Act. See Notice, supra note 3, 85 FR at 33260.
41 See e.g., Notice, supra note 3, 85 FR at 33261
62, 33268. Section 3.2ai of the proposed BSTX
LLC Agreement, for example, which according to
VerDate Sep<11>2014

17:43 Jan 28, 2021

Jkt 253001

These provisions, which according to the Exchange are the same provisions that are contained in the BOX Options LLC Agreement, include provisions that would require each of the BSTX LLC
Members and the directors, officers, employees and agents of BSTX to give due regard to the preservation of the independence of the self-regulatory function of the Exchange and cooperate with the Exchange pursuant to its regulatory authority and with the Commission.42 The Exchange also states that the Exchanges powers and authority under the Facility Agreement ensure that the Exchange has full regulatory control over BSTX, which is designed to prevent any owner of BSTX
from exercising undue influence over the regulated activities of BSTX.43
The BSTX LLC Agreement provides that the Exchange shall receive notice of planned or proposed changes to BSTX, with the exception of certain changes not related to the operation of the market, or to the BSTX Market, and that such changes will require affirmative approval by the Exchange before implementation.44 If the Exchange determines that planned or proposed changes could cause a Regulatory Deficiency, 45 the Exchange may direct the Exchange is identical in substance to a provision in the BOX Options LLC Agreement, provides that the Exchange has authority to act as the SRO for BSTX Market, will provide the regulatory framework for the BSTX Market and will have regulatory responsibility for the activities of the BSTX Market. See Notice, supra note 3, 85 FR at 33262; BSTX LLC Agreement, supra note 14, Section 3.2ai. It also provides that the Exchange will provide regulatory services to BSTX pursuant to the Facility Agreement, and that nothing in the LLC Agreement shall be construed to prevent the Exchange from allowing BSTX to perform activities that support the regulatory framework for the BSTX Market, subject to oversight by the Exchange. See Notice, supra note 3, 85 FR at 33262; BSTX LLC Agreement, supra note 14, Section 3.2ai.
42 See Notice, supra note 3, 85 FR at 3326162;
BSTX LLC Agreement, supra note 14, Sections 4.12a, c. The BSTX LLC Agreement also includes provisions, which the Exchange states are substantively similar to provisions in the BOX
Options LLC Agreement, that address the handling of confidential information, both pertaining to regulatory matters and otherwise see Notice, supra note 3, 85 FR at 3326869; BSTX LLC Agreement, supra note 14, Article 15; and provisions, which the Exchange states are substantially similar to those of the BOX Options LLC Agreement, related to regulatory jurisdiction over BSTX LLC Members;
the maintenance of books and records; and the independence of the self-regulatory function of the Exchange and compliance with federal securities laws. See Notice, supra note 3, 85 FR at 33269;
BSTX LLC Agreement, supra note 14, Sections 4.12, 11.1, 18.6a, and 18.6c.
43 See Notice, supra note 3, 85 FR at 33259.
44 See Notice, supra note 3, 85 FR at 33264; BSTX
LLC Agreement, supra note 14, Section 3.2aii.
45 The BSTX LLC Agreement defines Regulatory Deficiency as the operation of BSTX in connection with matters that are not Non-Market Matters or the BSTX Market including, but not
PO 00000

Frm 00074

Fmt 4703

Sfmt 4703

7599

BSTX, subject to Board approval, to modify the proposal as necessary.46
Further, in the BSTX Governance Proposal the Exchange proposes how regulatory funds may be allocated and provisions regarding capital contributions and distributions.47 The Exchange also states that it submitted a separate filing to introduce structural changes to the Exchange to accommodate regulation of BSTX as well as BOX Options, which was approved by the Commission.48
According to the Exchange, BSTX
Participants will have the same representation, rights, and responsibilities as BOX Options Participants.49
Additionally, as described above, the Exchange proposes that without Commission approval of the BSTX
Trading Rules Proposal, it would not permit BSTX to commence operations of the BSTX Market.50 Pursuant to the BSTX Trading Rules Proposal, the Exchange proposed to operate a fully automated, price/time priority execution system for the listing and trading of securities BSTX
Securities.51 BSTX Securities would limited to, the BSTX System in a manner that is not consistent with the Exchange rules and/or the Commission rules governing the BSTX Market or BSTX Participants, or that otherwise impedes the Exchanges ability to regulate the BSTX Market or BSTX Participants or to fulfill its obligations under the Exchange Act as an SRO. See BSTX LLC
Agreement, supra note 14, Section 1.1. NonMarket Matters means changes related solely to one or more of the following: Marketing, administrative matters, personal matters, social or team-building events, meetings of the BSTX LLC
Members, communication with the BSTX LLC
Members, finance, location and timing of the Board meetings, market research, real property, equipment, furnishings, personal property, intellectual property, insurance, contracts unrelated to the operation of the BSTX Market and de minimis items. See BSTX LLC Agreement, supra note 14, Section 3.2aii. See also infra note 51
defining BSTX System.
46 See Notice, supra note 3, 85 FR at 33264; BSTX
LLC Agreement, supra note 14, Section 3.2aiii.
47 See, e.g., Notice, supra note 3, 85 FR at 33264
66; BSTX LLC Agreement, supra note 14, Sections 6.1, 6.2, and 8.1, and 8.2.
48 See Amendment No. 1 Form 19b-4, supra note 6, at 5 citing the BOX202004 Approval, see supra note 15.
49 See Notice, supra note 3, 85 FR at 33259.
50 See supra note 25 and accompanying text.
51 See BSTX Trading Rules Proposal, supra note 16, 85 FR 51251. The BSTX Rules would have defined the Securities that would be traded on BSTX as a facility of the Exchange as NMS stock, as defined in Rule 600b47 of the Exchange Act, trading on the BSTX System and for which ancillary Ethereum blockchain records are maintained under the BSTX Rules; and the BSTX
System as the the automated trading system used by BSTX for the trading of Securities. See BSTX
Rules, supra note 24, Rules 17000a30 and 14, respectively. Exchange Act Rule 600b47 defines NMS security as any security or class of securities for which transaction reports are
E:FRFM29JAN1.SGM

Continued
29JAN1