2018 Federal Register / Vol. 86, No. 6 / Monday, January 11, 2021 / Notices 

74 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4. 

5As defined in Rule 1.5(gg), the Exchange’s 

‘‘System’’ is the electronic communications and 

trading facility designated by the Board through 

which securities orders of Users are consolidated 

for ranking, execution and, when applicable, 

routing. As defined in Rule 1.5(jj), a ‘‘User’’ is a 

member of the Exchange (‘‘Member’’) or sponsored 

participant of a Member who is authorized to obtain 

access to the System pursuant to Rule 11.3. 

6Limit Orders are described in Exchange Rule 

11.8(b) and generally defined as an order to buy or 

sell a stated amount of a security at a specified price 

or better. 

7See Securities Exchange Act Release No. 88806 

(May 4, 2020), 85 FR 27451 

(May 8, 2020) (the ‘‘Approval Order’’). 

8Market Orders are described in Exchange Rule 

11.8(a) and generally defined as an order to buy or 

sell a stated amount of a security that is to be 

executed at the NBBO or better when the order 

reaches the Exchange. 

9See Securities Exchange Act Release No. 89581 

(August 17, 2020), 85 FR 51799 (August 21, 2020) 

(SR–MEMX–2020–04). 

10 In addition to Market Orders and Limit Orders, 

Pegged Orders are the third of three primary order 

types offered by the Exchange. Pegged Orders are 

described in Exchange Rules 11.6(h) and 11.8(c) 

and generally defined as an order that is pegged to 

a reference price and automatically re-prices in 

response to changes in the NBBO. The two types 

of peg instructions for Pegged Orders are: (1) 

Primary Peg, which pegs to the NBB (NBO) for buy 

(sell) orders; and (2) Midpoint Peg, which pegs to 

the midpoint of the NBBO. 

11See Exchange Rule 11.8(c)(7). 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CBOE–2020–117 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2020–117. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CBOE–2020–117, and 

should be submitted on or before 

February 1, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.74

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–00199 Filed 1–8–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90849; File No. SR–MEMX– 

2020–17] 

Self-Regulatory Organizations; MEMX 

LLC; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend Exchange Rule 

11.8(b) Relating to the Handling of 

Limit Orders When the National Best 

Bid or Offer Is Not Available 

January 5, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

29, 2020, MEMX LLC (‘‘MEMX’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I, and II 

below, which Items have been prepared 

by the Exchange. The Exchange filed the 

proposal as a ‘‘non-controversial’’ 

proposed rule change pursuant to 

Section 19(b)(3)(A)(iii) of the Act 3 and 

Rule 19b–4(f)(6) thereunder.4 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing with the 

Commission a proposed rule change to 

amend Exchange Rule 11.8(b) as it 

relates to the System’s 5 handling of 

Limit Orders 6 when the national best 

bid or offer (‘‘NBBO’’) is not available. 

The text of the proposed rule change is 

provided in Exhibit 5. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On May 4, 2020, the Commission 

approved the Exchange’s Form 1 

application for registration as a national 

securities exchange, including the 

initial Rules of the Exchange.7 In 

preparation for the Exchange’s launch 

on September 21, 2020, the Exchange 

adopted in August 2020 certain 

additional Rules relating to the System’s 

handling of Market Orders 8 and Limit 

Orders when the NBBO is not 

available.9 Specifically, the Exchange 

adopted Exchange Rule 11.8(a)(7), 

which provides that a Market Order 

received by the System when the NBBO 

is not available will be rejected or 

cancelled back to the entering User, and 

Exchange Rule 11.8(b)(9), which 

similarly provides that a Limit Order 

received by the System when the NBBO 

is not available will be rejected or 

cancelled back to the entering User. 

These Rules were based on language 

applicable to Pegged Orders 10 set forth 

in Exchange Rule 11.8(c)(7) and were 

intended to match the handling of 

Market Orders and Limit Orders with 

the handling of Pegged Orders when the 

NBBO is not available under that Rule 

(i.e., that such orders will be rejected or 

cancelled back to the entering User).11

The Exchange noted in the proposal to 

adopt Exchange Rules 11.8(a)(7) and 

11.8(b)(9) that it believed that, at least 

in connection with the launch of the 


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12See supra note 9 at 51805. 

13See Exchange Rule 11.8(b)(9). 

14See, e.g., Cboe EDGX Exchange, Inc. Rule 

11.8(b) regarding limit orders, which does not have 

a comparable provision to Exchange Rule 11.8(b)(9); 

Cboe EDGA Exchange, Inc. Rule 11.8(b) regarding 

limit orders, which does not have a comparable 

provision to Exchange Rule 11.8(b)(9). 

15 15 U.S.C. 78f(b)(5). 

16 15 U.S.C. 78f(b)(8). 

17See supra note 14. 

18See supra note 14. 

Exchange, it should not accept orders 

(of any type) when there is no available 

NBBO in the applicable security, as the 

Exchange believed that the absence of 

an NBBO may be indicative of a 

potential market problem and that many 

of the protections in place for the 

protection of investors may be absent 

when there is no NBBO.12

The Exchange now proposes to delete 

Exchange Rule 11.8(b)(9) to allow the 

System to accept Limit Orders when the 

NBBO is not available and handle such 

orders in accordance with the User’s 

instructions and the Rules of the 

Exchange. Since its launch, the 

Exchange has had direct experience 

with handling orders when the NBBO is 

not available, and the Exchange believes 

that potential problems applicable to 

Market Orders and Pegged Orders when 

the NBBO is not available are not 

applicable to Limit Orders. For instance, 

with respect to Market Orders, the 

Exchange believes that the absence of an 

NBBO may be problematic because such 

orders must, by definition, be executed 

at the NBBO or better when the order 

reaches the Exchange, and thus when no 

NBBO is available the System is not able 

to execute at the NBBO and does not 

have a price to reference for determining 

what constitutes an appropriate price.13

Moreover, because Market Orders are 

not subject to any further price 

limitations entered by the User, the 

System could execute an accepted 

Market Order when no NBBO is 

available against a marketable contraside order resting on the Exchange that 

is priced far away from the last sale 

price or last disseminated NBBO, which 

the Exchange believes would rarely be 

intended. Therefore, to protect against 

executions of Market Orders at 

unintended price levels, the Exchange 

believes that rejecting or cancelling such 

orders is still appropriate. With respect 

to Pegged Orders, the Exchange believes 

that the absence of an NBBO may be 

problematic because such orders, by 

definition, must be pegged to (i) the 

NBB (NBO) for buy (sell) orders for a 

Primary Peg instruction, or (ii) the 

midpoint of the NBBO for a Midpoint 

Peg instruction, and thus when no 

NBBO is available there is no reference 

price to which such orders can be 

pegged. Therefore, the Exchange 

believes that rejecting or cancelling such 

orders is still appropriate. Accordingly, 

the Exchange believes the protection 

afforded by Exchange Rules 11.8(a)(7) 

and 11.8(c)(7) for Market Orders and 

Pegged Orders when the NBBO is not 

available (i.e., that such orders will be 

rejected or cancelled back to the 

entering User) is still appropriate and 

the Exchange does not propose to delete 

or amend these Rules. 

Unlike Market Orders and Pegged 

Orders, a Limit Order requires the 

entering User to specify a dollar price 

that the System must execute the order 

at or better than instead of execution of 

the order being based on the NBBO. 

Therefore, for Limit Orders, the entering 

User is able to establish its own 

protection in the form of a specified 

price limitation. Thus, even when the 

NBBO is not available, the possibility of 

executing at an unintended price is not 

present for a Limit Order because the 

User must specify the most aggressive 

price at which it is willing to execute. 

Additionally, the Exchange believes that 

the proposed change would result in 

Members sending additional liquidity in 

the form of Limit Orders to the 

Exchange when there is otherwise no 

available NBBO, which would deepen 

the liquidity on the Exchange and 

potentially establish the NBBO to the 

benefit of all Members and the market 

generally. 

The Exchange also notes that its 

initial Rules previously approved by the 

Commission in the Approval Order did 

not contain Exchange Rule 11.8(b)(9). 

Rather, as noted above, this provision 

was subsequently adopted by the 

Exchange in connection with the 

Exchange’s initial launch so the 

Exchange could evaluate the necessity 

of this functionality while gaining 

operational experience and data. The 

Exchange now believes that the 

rejection of Limit Orders when no 

NBBO is available pursuant to Exchange 

Rule 11.8(b)(9) is unnecessary for the 

reasons stated above. The Exchange also 

notes that deletion of Exchange Rule 

11.8(b)(9) is consistent with the existing 

rules and functionality of other 

exchanges.14

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b)(5) of the Act,15 which 

requires, among other things, that the 

Exchange’s rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest, and Section 6(b)(8) of 

the Act,16 which requires that the 

Exchange’s rules not impose any burden 

on competition that is not necessary or 

appropriate. 

As noted above, the proposed change 

is intended to revert the System’s 

handling of Limit Orders when there is 

no available NBBO to the functionality 

contemplated by the Exchange’s initial 

Rules previously approved by the 

Commission in the Approval Order. The 

Exchange believes that permitting 

Members to submit Limit Orders to the 

Exchange when the NBBO is not 

available is appropriate and consistent 

with the Act as the Exchange believes 

that its Members would want to utilize 

this functionality, thereby resulting in 

additional liquidity in the form of Limit 

Orders being sent to the Exchange when 

there is otherwise no available NBBO, 

which would deepen the liquidity on 

the Exchange and potentially establish 

the NBBO to the benefit of all Members 

and the market generally. Furthermore, 

the proposed change would make the 

System’s functionality consistent with 

the functionality offered by certain other 

exchanges with respect to accepting 

Limit Orders when no NBBO is 

available.17 Thus, the Exchange believes 

the proposed changes in this regard 

would promote just and equitable 

principles of trade, remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, would protect investors and the 

public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change would result 

in any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange reiterates that the proposed 

rule change would revert the System’s 

functionality to that contemplated by 

the Exchange’s initial Rules previously 

approved by the Commission in the 

Approval Order, which is also 

consistent with the functionality offered 

by other exchanges.18 The Exchange 

believes that the proposed rule change 

would not burden intramarket 

competition because the ability to 

submit Limit Orders to the Exchange 

when the NBBO is not available would 

be open to all Members. The Exchange 

believes that the proposed rule change 

would not burden, but rather increase, 


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2020 Federal Register / Vol. 86, No. 6 / Monday, January 11, 2021 / Notices 

19 15 U.S.C. 78s(b)(3)(A). 

20 17 CFR 240.19b–4(f)(6). In addition, Rule 19b4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

21 17 CFR 240.19b–4(f)(6). 

22 17 CFR 240.19b–4(f)(6)(iii). 

23See supra note 14. In its filing, the Exchange 

stated that it proposes to implement the proposed 

rule change on or about January 15, 2021. 

24For purposes only of waiving the 30-day 

operative delay, the Commission also has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

25 15 U.S.C. 78s(b)(2)(B). 26 17 CFR 200.30–3(a)(12). 

intermarket competition as the 

Exchange belives [sic] that permitting 

Members to submit Limit Orders to the 

Exchange when the NBBO is not 

available would ultimately enable the 

Exchange to better compete with other 

exchanges that offer this same 

functionality. Thus, the Exchange 

believes this proposed rule change will 

facilitate fair competition among 

national securities exchanges. In 

addition, the Exchange believes the 

proposed rule change will all benefit 

Members and market participants in 

that the change would allow for 

additional orders, particularly when 

there is not already an active market in 

a particular security, to be sent to the 

Exchange, thereby deepening the 

Exchange’s liquidity and possibly 

establishing the NBBO when it is not 

otherwise available. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 19 and Rule 19b– 

4(f)(6) thereunder.20

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 21 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii) 22

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. 

The proposed change will allow the 

Exchange to accept Limit Orders when 

the NBBO is not available, in which 

case the Exchange will handle such 

orders in accordance with the User’s 

instructions and the Rules of the 

Exchange. The Exchange believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposed functionality will 

allow market participants to submit 

limit orders to MEMX when the NBBO 

is not available, just as they can do to 

other exchanges, which can provide 

additional liquidity on MEMX and 

contribute to the formation of two-sided 

quotes that are publicly available. In 

addition, the Exchange states in its 

filing that its proposal is consistent with 

the initial applicable rule for the 

Exchange that was previously approved 

by the Commission in connection with 

its initial exchange registration, and also 

is consistent with existing rules and 

functionality offered by other 

exchanges.23 The Commission believes 

that waiver of the 30-day operative 

delay is consistent with the protection 

of investors and the public interest 

because the proposed rule change does 

not raise any new or novel issues. 

Therefore, the Commission hereby 

waives the operative delay and 

designates the proposal as operative 

upon filing.24

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 25 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number 

SR–MEMX–2020–17 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–MEMX–2020–17. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–MEMX–2020–17 and 

should be submitted on or before 

February 1, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.26

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–00196 Filed 1–8–21; 8:45 am] 

BILLING CODE 8011–01–P 


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