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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices 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 name with DTC.26 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.27 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.28
Book-Entry Settlement at a Securities Depository
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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.29 Proposed BSTX Rule 26135 is based on the depository eligibility rules of other equities exchanges and Financial Industry 26 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.
27 Proposed BSTX Rule 26137 is based on current NYSE Rule 777.
28 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.
29 FINRA is currently the only national securities association registered with the SEC.

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Regulatory Authority FINRA.30
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 and thereby reduce settlement risk in the U.S. national market system.31
Participation in a Registered Clearing Agency That Uses a Continuous Net Settlement System Under proposed BSTX Rule 25140, each BSTX Participant would be required to either i be a member of a registered clearing agency that uses a continuous net settlement CNS
system, or ii clear transactions executed on BSTX through a member of such a registered clearing agency. The Exchange believes that today NSCC is the only registered clearing agency that uses a CNS system to clear equity securities, and proposed BSTX Rule 25140 further specifies that BSTX will maintain connectivity and access to the Universal Trade Capture system of NSCC to transmit confirmed trade details to NSCC regarding trades executed on BSTX. The proposed rule would also address the following: i A
requirement that each Security transaction executed through BSTX
must be executed on a locked-in basis for automatic clearance and settlement processing; ii the circumstances under which the identity of contra parties to a Security transaction that is executed through BSTX would be required to remain anonymous or may be revealed;
and iii certain circumstances under which a Security transaction may be cleared through arrangements with a member of a foreign clearing agency.
Proposed BSTX Rule 25140 is based on a substantially identical rule of the Investors Exchange, LLC IEX, which, in turn, is consistent with the rules of other equities exchanges.32
BSTX believes that the operation of its depository eligibility rule and its bookentry services rule would promote a 30 See e.g., FINRA Rule 11310. Book-Entry Settlement and NYSE Rule 776. Book-Entry Settlement of Transactions.
31 These coordinated depository eligibility rules resulted from proposed listing rules amendments developed by the Legal and Regulatory Subgroup of the U.S. Working Committee, Group of Thirty Clearance and Settlement Project. See Securities Exchange Act Release Nos 35774 May 26, 1995
SRNASD9524, 60 FR 28813 June 2, 1995;
35773 May 26, 1995, 60 FR 28817 June 2, 1995
SRNYSE9519.
32 See IEX Rule 11.250 Clearance and Settlement;
Anonymity, which was approved by the Commission in 2016 as part of its approval of IEXs application for registration as a national securities exchange. Exchange Act Release No. 78101 June 17, 2016; 81 FR 41142 June 23, 2016; see also Cboe BZX Rule 11.14 Clearance and Settlement;
Anonymity.

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framework in which Securities that would be eligible to be listed and traded on BSTX would be equity securities that have been made eligible for services by a registered clearing agency that operates as a securities depository and that are settled through the facilities of the securities depository by book-entry.
The Exchange believes that because DTC currently is the only clearing agency registered with the SEC that provides securities depository services, at the commencement of BSTXs operations, Securities would be securities that have been made eligible for services by DTC, including bookentry settlement services.
Settlement Cycle Proposed BSTX Rule 25100d would address settlement cycle considerations regarding trades in Securities. Security trades that result from orders matched against the electronic order book of BSTX would be required to clear and settle pursuant to the rules, policies and procedures of a registered clearing agency. As noted above in connection with the description of proposed BSTX
Rule 25140, the Exchange expects that at the commencement of operations by BSTX it would transmit confirmed trade details to NSCC regarding Security trades that occur on BSTX and that NSCC would be the registered clearing agency that clears Security trades for settlement at DTC.
As described in greater detail below in Part II.H, the Exchange is also proposing that BSTX Participants would be able to include parameters in orders submitted to BSTX to indicate a preference to use faster settlement cycles that are currently available through NSCC and DTC under certain circumstances. BSTX believes that allowing BSTX Participants to use these faster settlement cycles where consistent with the rules, policies and procedures of a registered clearing agency would mitigate settlement risk for transactions in such Securities due to faster settlement. BSTX believes that NSCC already has authority under its rules, policies and procedures to clear certain trades on a T+1 or T+0 basis, which are shorter settlement cycles than the longest settlement cycle of T+2 that is generally permitted under SEC Rule 15c61 for a security trade that involves a broker-dealer.33 Furthermore, BSTX
33 17 CFR 240.15c61. Under SEC Rule 15c61, with certain exceptions, a broker-dealer is not permitted to enter a contract for the purchase or sale of security that provides for payment of funds and delivery of securities later than the second business day after the date of the contract unless
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