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Federal Register / Vol. 86, No. 104 / Wednesday, June 2, 2021 / Notices
as the BSTX Market Data Blockchain. 96
In addition to setting forth proposed definitions used throughout the proposed Rules, the Exchange proposes to specify in proposed Rule 17010
Applicability that the Rules set forth in the Rule 17000 Series to Rule 29000
Series apply to the trading, listing, and related matters pertaining to the trading of Securities. Proposed Rule 17010b provides that, unless specific Rules relating to Securities govern or unless the context otherwise requires, the provisions of any Exchange Rule i.e., including Exchange Rules in the Rule 100 through 16000 Series shall be applicable to BSTX Participants.97 This is intended to make clear that BSTX
Participants are subject to all of the Exchanges Rules that may be applicable to them, notwithstanding that their trading activity may be limited solely to trading Securities. The Exchange believes that the proposed definitions set forth in Rule 17000 are consistent with Section 6b5 of the Exchange Act 98 because they protect investors and the public interest by setting forth clear definitions that help BSTX
Participants understand and apply Exchange Rules. Without clearly defining terms used in the Exchanges Rules and providing clarity as to the Exchange Rules that may apply, market participants could be confused as to the application of certain rules, which could cause harm to investors.

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Participation on BSTX Rule 18000
Series The Exchange proposes to adopt as its Rule 18000 Series Participation on BSTX, three rules setting forth certain requirements relating to participation on BSTX. Proposed Rule 18000 BSTX
Participation establishes BSTX
Participants as a new category of Exchange participation for effecting transactions on the BSTX System, provided they: i Complete the BSTX
Participant Application, Participation Agreement, and User Agreement; 99 ii 96 Proposed Rule 17000a9 provides that the term BSTX Market Data Blockchain means the private, permissioned blockchain network through which a BSTX Participant may access certain order and transaction data related to trading activity on BSTX. See Part II.F for further discussion of the BSTX Market Data Blockchain.
97 Proposed Rule 17010 further specifies that to the extent the provisions of the Rules relating to the trading of Securities contained in Rule 17000 Series to Rule 29000 Series are inconsistent with any other provisions of the Exchange Rules, the Rules relating to Security trading shall control.
98 15 U.S.C. 78fb5.
99 The BSTX Participant Application, Participation Agreement, and User Agreement have been submitted as Exhibits 3A, 3B, and 3C to the proposal respectively.

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be an existing Options Participant or become a Participant of the Exchange pursuant to the Rule 2000 Series; and iii provide such other information as required by the Exchange.100 Proposed Rule 18010 Requirements for BSTX
Participants sets forth certain requirements for BSTX Participants including requirements that each BSTX
Participant comply with Rule 15c31
under the Exchange Act, comply with applicable books and records requirements, and be a member of a registered clearing agency or clear Security transactions through another BSTX Participant that is a member/
participant of a registered clearing agency.101 Finally, proposed Rule 18020
Associated Persons provides that associated persons of a BSTX
Participant are bound by the Rules of the Exchange to the same extent as each BSTX Participant.
The Exchange believes that the proposed Rule 18000 Series Participation on BSTX is consistent with Section 6b5 of the Exchange Act 102 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.103
100 Proposed Rule 18000 also sets forth the Exchanges review process regarding BSTX
Participation Agreements and certain limitations on the ability to transfer BSTX Participant status e.g., in the case of a change of control. In addition proposed Rule 18000b2 provides that a BSTX
Participant shall continue to abide by all applicable requirements of the Rule 2000 Series, which would include, for example, IM20405, which specifies continuing education requirements of Exchange Participants and their associated persons.
101 Proposed Rule 18010b is similar to the rules of existing exchanges. See e.g., IEX Rule 2.160c.
Proposed Rule 18010a is also similar to the rules of existing exchanges. See e.g., IEX Rule 1.160s and Cboe BZX Rule 17.2a.
102 15 U.S.C. 78fb5.
103 The 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.

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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.104
The proposed Rule 19000 Series would specify business conduct requirements with respect to: i Just and equitable principles of trade; 105 ii adherence to law; 106 iii use of fraudulent devices; 107 iv false statements; 108 v know your customer; 109 vi fair dealing with customers; 110 vii suitability; 111
viii the prompt receipt and delivery of securities; 112 ix charges for services performed; 113 x use of information obtained in a fiduciary capacity; 114 xi publication of transactions and quotations; 115 xii offers at stated 104 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.
105 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.
106 Proposed Rule 19010 Adherence to Law generally requires BSTX Participants to adhere to applicable laws and regulatory requirements.
107 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.
108 Proposed Rule 19030 False Statements generally prohibits BSTX Participants and their associated persons from making false statements or misrepresentations in communications with the Exchange.
109 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.
110 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.
111 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.
112 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.
113 Proposed Rule 19080 Charges for Services Performed generally requires that charges imposed on customers by broker-dealers shall be reasonable and not unfairly discriminatory.
114 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.
115 Proposed Rule 19100 Publication of Transactions and Quotations generally prohibits a BSTX Participant from disseminating a transaction
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