97092 Federal Register / Vol. 89, No. 235 / Friday, December 6, 2024 / Notices 

18 15 U.S.C. 78s(b)(3)(A)(ii). 

19 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78f. The Form 1 is available on the 

Commission’s website at: https://www.sec.gov/ 

rules-regulations/other-commission-orders-noticesinformation/24x-form-1. 

2See Securities Exchange Act Release No. 99614 

(Feb. 27, 2024), 89 FR 15621 (Mar. 4, 2024) 

(‘‘Notice’’). 

3See letters from James J. Angel, Ph.D., CFP, CFA, 

Associate Professor of Finance, Georgetown 

University, McDonough School of Business, dated 

Apr. 5, 2024 (‘‘Angel Letter I’’) and dated May 13, 

2024 (‘‘Angel Letter II’’); Stan Sater, Senior Legal 

Counsel, Polygon.io, Inc., dated Apr. 25, 2024 

(‘‘Polygon Letter’’); Andrew Glover, University of 

Washington and Ed deHaan, Professor of 

Accounting, Stanford University, dated Apr. 22, 

2024 (‘‘Glover and deHaan Letter’’); Eun Ah Choi, 

Senior Vice President, Nasdaq, Inc., dated Apr. 25, 

2024 (‘‘Nasdaq Letter’’). The public comment file 

for 24X’s Form 1 (File No. 10–242) is available on 

the Commission’s website at: https://www.sec.gov/ 

comments/10-242/10-242.htm. 

4See letter from David Sassoon, General Counsel, 

24X, dated May 30, 2024 (‘‘24X Letter’’). 

5 15 U.S.C. 78s(a)(1)(B). 

6See Securities Exchange Act Release No. 100254 

(May 31, 2024), 89 FR 48466 (June 6, 2024). 

7See letters from Richard Montone, JD/MBA 

student, Hofstra University, dated June 26, 2024 

(‘‘Montone Letter’’); Ellen Greene, Managing 

Director, Equity and Options Market Structure, 

Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), dated June 27, 2024 

(‘‘SIFMA Letter’’); Benjamin L. Schiffrin, Director of 

Securities Policy, Better Markets, Inc., dated June 

27, 2024 (‘‘Better Markets Letter’’); Chris Nagy, 

Research Director, and Tyler Gellasch, President 

and Chief Executive Officer, Healthy Markets 

Association, dated June 28, 2024 (‘‘Healthy Markets 

Letter’’); Jeffrey M. Pasquerella, Chief Legal Officer, 

DriveWealth, LLC., dated June 28, 2024 

(‘‘DriveWealth Letter’’); Joanna Mallers, Secretary, 

FIA Principal Traders Group, dated July 26, 2024 

(‘‘FIA PTG Letter’’). 

8See letter from David Sassoon, General Counsel, 

24X, dated Aug. 21, 2024 (‘‘24X Letter II’’). 

9Amendment No. 1 is available on the 

Commission’s website at: https://www.sec.gov/ 

rules-regulations/other-commission-orders-noticesinformation/24x-form-1. In Amendment No. 1, 24X 

amended Exhibits B, B–1, C, C–2, D, D–1, D–2, D– 

3, D–4, E, E–1 and N. For purposes of this Order, 

references to Exhibits C, C–2, D, D–1, D–3, and N 

will be to the amended Exhibits filed with 

Amendment No. 1. See infra note 15 (describing 

references to Exhibits B, B–1, E and E–1 for 

purposes of this Order). 

10See Securities Exchange Act Release No. 

100839 (Aug. 27, 2024), 89 FR 71471 (Sept. 3, 

2024). 

under the same fees as any other 

customer, and any customer that wishes 

to order cabinets, power and PDUs in 

NY11–4 can do so on a nondiscriminatory basis. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.18 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: (i) 

necessary or appropriate in the public 

interest; (ii) for the protection of 

investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

ISE–2024–53 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–ISE–2024–53. 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 (https://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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–ISE–2024–53 and should be 

submitted on or before December 27, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–28545 Filed 12–5–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101777; File No. 10–242] 

In the Matter of the Application of 24X 

National Exchange LLC for 

Registration as a National Securities 

Exchange; Findings, Opinion, and 

Order of the Commission 

November 27, 2024. 

I. Introduction and Procedural History 

On February 6, 2024, 24X National 

Exchange LLC (‘‘24X’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) a Form 1 

application under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’) 

seeking registration as a national 

securities exchange under section 6 of 

the Exchange Act.1 Notice of the 

application was published for comment 

in the Federal Register on March 4, 

2024.2 The Commission received five 

comments on the Notice 3 and a letter 

responding to the comments from 24X.4

On May 31, 2024, the Commission 

instituted proceedings pursuant to 

section 19(a)(1)(B) of the Exchange Act 5

to determine whether to grant or deny 

24X’s application for registration as a 

national securities exchange under 

section 6 of the Exchange Act (the 

‘‘OIP’’).6 After issuance of the OIP, the 

Commission received six comment 

letters 7 and a letter responding to the 

comments from 24X.8 On August 21, 

2024, 24X filed an amendment to its 

Form 1 application (‘‘Amendment No. 

1’’),9 which was published for comment 

in the Federal Register on September 3, 

2024.10 On August 30, 2024, the 

Commission extended, pursuant to 

section 19(a)(1)(B) of the Exchange 


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11 15 U.S.C. 78s(a)(1)(B). 

12See Securities Exchange Act Release No. 

100884 (Aug. 30, 2024), 89 FR 72917 (Sept. 6, 

2024). 

13See letters from Patrick Blonien, Instructor of 

Finance, Carnegie Mellon University, and 

Alexander Ober, Ph.D. Candidate in Finance, Rice 

University, undated (‘‘Blonien and Ober Letter’’); 

John Ramsay, Chief Market Policy Officer, 

Investors’ Exchange LLC (‘IEX’’), dated Oct. 9, 2024 

(‘‘IEX Letter’’); Joanna Mallers, Secretary, FIA 

Principal Traders Group, dated Oct. 11, 2024 (‘‘FIA 

PTG Letter II’’). 

14See letter from David Sassoon, General 

Counsel, 24X, dated Nov. 1, 2024 (‘‘24X Letter III’’). 

15Amendment No. 2 is available on the 

Commission’s website at: https://www.sec.gov/ 

rules-regulations/other-commission-orders-noticesinformation/24x-form-1. In Amendment No. 2, 24X 

amended Exhibits B, B–1, E, and E–1. For purposes 

of this Order, references to these listed Exhibits will 

be to the amended Exhibits filed with Amendment 

No. 2. 

16See Securities Exchange Act Release No. 

101431 (Oct. 24, 2024), 89 FR 86400 (Oct. 30, 2024). 

17See letters from Ellen Green, Managing 

Director, Equities and Options Market Structure, 

SIFMA, dated Oct. 29, 2024 (‘‘SIFMA Letter II’’); 

Adrian Griffiths, Head of Market Structure, MEMX 

LLC (‘‘MEMX Letter’’), dated Oct. 29, 2024. 

18See letter from David Sassoon, General 

Counsel, 24X, dated Nov. 18, 2024 (‘‘24X Letter 

IV’’). 

19 15 U.S.C. 78f(b) and 15 U.S.C. 78s(a), 

respectively. 

20 15 U.S.C. 78f(b)(1). 

21See U.S.C. 78f(b)(3). 

22See U.S.C. 78f(b)(5). 

23See id. 

24See id. 

25See 15 U.S.C. 78k–1. 

26See 15 U.S.C. 78f(b)(8). 

27See Certificate of Formation of 24X National 

Exchange LLC. 

28See Certificate of Formation of 24X US 

Holdings LLC. 

29See Certificate of Formation of 24X Bermuda 

Holdings LLC. 

30See Second Amended and Restated Limited 

Liability Company Agreement of 24X US Holdings 

LLC (‘‘24X US LLC Agreement’’), Section VI(a). 

31 ‘‘Preferred Units’’ means ‘‘Series A Units and 

the Series Seed Units.’’ See Third Amended and 

Restated Limited Liability Company Agreement of 

24X Bermuda LLC (‘‘24X Bermuda LLC 

Agreement’’), Article 1, 1.45. See also id. at Article 

1, 1.55 and 1.60 defining Series A Units and Series 

Seed Units. 

32 ‘‘Common Units’’ means ‘‘[u]nits of common 

membership interests of the Company, or any other 

ownership interests of the Company into which 

such units are reclassified, reconstituted or 

exchanged.’’ See id. at Article 1, 1.16. 

33 ‘‘Non-Voting Units’’ means ‘‘units of nonvoting membership interests of the Company, or 

any other ownership interests of the Company into 

which such units are reclassified, reconstituted or 

exchanged.’’ See id. at Article 1, 1.38. A description 

of the members of 24X Bermuda and their 

respective ownership levels is set forth in Exhibit 

K. See also infra section III.B.1. 

34See 24X Bermuda LLC Agreement, Article 1, 

1.75. See also id. at Article 1, Section 1.64 defining 

Series Seed-2 Units. 

35See 24X Bermuda LLC Agreement, Article 1, 

1.75. 

36See Amended and Restated Limited Liability 

Company Agreement of 24X National Exchange LLC 

(‘‘24X LLC Agreement’’), Article I, (d). 

37See id., at Article I, (l). 

38See id., at Article VI, Section 6.1(b). 

39See id., at Article VI, Section 6.1(c)(i)(A). See 

also id. at Article I, (w). 

40See id., at Article VI, Section 6.1(c)(i)(B)(1). See 

also id. at Article I, (ee). 

41See id., at Article I, (v). 

42See id., at Article VI, Section 6.1(c)(i)(B)(1). See 

also id. at Article I, (bb). 

Act,11 the time period for granting or 

denying 24X’s Form 1 application for an 

additional 90 days, until November 29, 

2024.12 After issuance of Amendment 

No. 1, the Commission received three 

comment letters 13 and a letter 

responding to the comments from 

24X.14 On October 23, 2024, 24X filed 

a second amendment to its Form 1 

application (‘‘Amendment No. 2’’),15

which was published for comment in 

the Federal Register on October 30, 

2024.16 After issuance of Amendment 

No. 2, the Commission received two 

comment letters 17 and a letter 

responding to the comments from 

24X.18

The Commission has reviewed 24X’s 

Form 1 application, as amended, 

together with the comment letters 

received, in order to make a 

determination whether to grant such 

registration. For the reasons set forth 

below and based on the representations 

set forth in 24X’s Form 1 application, as 

amended, this order grants 24X’s Form 

1 application, as amended, for 

registration as a national securities 

exchange. 

II. Statutory Standards 

Pursuant to sections 6(b) and 19(a) of 

the Exchange Act,19 the Commission 

shall by order grant an application for 

registration as a national securities 

exchange if the Commission finds, 

among other things, that the proposed 

exchange is so organized and has the 

capacity to carry out the purposes of the 

Exchange Act and can comply, and can 

enforce compliance by its members and 

persons associated with its members, 

with the provisions of the Exchange Act, 

the rules and regulations thereunder, 

and the rules of the exchange.20

As discussed in greater detail below, 

the Commission finds that 24X’s 

application, as amended, for registration 

as a national securities exchange meets 

the requirements of the Exchange Act 

and the rules and regulations 

thereunder. Further, the Commission 

finds that the proposed rules of 24X are 

consistent with section 6 of the 

Exchange Act in that, among other 

things, they are designed to: (1) assure 

fair representation of the exchange’s 

members in the selection of its directors 

and administration of its affairs and 

provide that, among other things, one or 

more directors shall be representative of 

investors and not be associated with the 

exchange, or with a broker or dealer; 21

(2) prevent fraudulent and manipulative 

acts and practices, promote just and 

equitable principles of trade, foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities, and remove impediments 

to and perfect the mechanisms of a free 

and open market and a national market 

system; 22 (3) not permit unfair 

discrimination between customers, 

issuers, or dealers; 23 and (4) protect 

investors and the public interest.24 The 

Commission also finds that the 

proposed rules of 24X are consistent 

with section 11A of the Exchange Act.25

Finally, the Commission finds that 

24X’s proposed rules do not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act.26

III. Discussion 

A. Ownership and Governance of 24X 

24X is a Delaware limited liability 

company,27 which is wholly-owned by 

its sole member, 24X US Holdings LLC 

(‘‘24X US’’), which also is a Delaware 

limited liability company.28 24X US, in 

turn, is wholly-owned by 24X Bermuda 

Holdings LLC (‘‘24X Bermuda’’), which 

is a limited liability company formed 

under the laws of Bermuda.29 24X US 

will be managed by, and all decisions 

regarding 24X US will be made by, 24X 

Bermuda.30 Generally, the members of 

24X Bermuda include holders of 

‘‘Preferred Units,’’ 31 ‘‘Common 

Units’’ 32 and ‘‘Non-Voting Units.’’ 33

Common Units and Preferred Units 

except Series Seed-2 Units have general 

voting power, and are defined as 

‘‘Voting Units.’’ 34 Each Voting Unit has 

one vote.35

1. 24X Board of Directors 

24X proposed that its business and 

affairs as a national securities exchange 

will be managed by a Board 36

comprised of a minimum of seven 

Directors 37 (‘‘24X Board’’).38 The 24X 

Board will consist of: 

(A) one Director who is the Chief 

Executive Officer of the Exchange and 

who shall be deemed to be an Industry 

Director; 39

(B) Non-Industry Directors,40

including at least one (1) Independent 

Director,41 the number of which shall 

equal or exceed the sum of the number 

of Industry Directors and Member 

Representative Directors; 42


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43See id., at Article VI, Section 6.1(c)(1)(B)(2). If 

twenty percent of the Directors then serving on the 

24X Board is not a whole number, such minimum 

number of Member Representative Directors shall 

be rounded up to the next whole number. Id. 

44See id., at Article VI, Section 6.1(c)(1)(B)(3). 

45See 24X LLC Agreement, Article III, Section 

3.4(a). 

46See 24X LLC Agreement, Article VI, Section 

6.2(g)(ii). 

47 Id. 

48 ‘‘Exchange Member’’ means ‘‘any registered 

broker or dealer that has been admitted to 

membership in the national securities exchange 

operated by the Company. An Exchange Member is 

not a member of the Company by reason of being 

an Exchange Member. An Exchange Member will 

have the status of a ‘member’ of the Exchange as 

that term is defined in Section 3(a)(3) of the 

Exchange Act.’’ See 24X LLC Agreement, Article I, 

(o). 

49See 24X LLC Agreement, Article VI, Section 

6.1(d)(iii). 

50See 24X LLC Agreement, Article VI, Section 

6.1(d)(i). 

51 ‘‘Member Representative Committee or Panel 

Members’’ means a member of any Committee or 

hearing panel who is an officer, director, employee 

or agent of an Exchange Member that does not own, 

directly or indirectly, any Units. See 24X LLC 

Agreement, Article I (aa). 

52See 24X LLC Agreement, Article VI, Section 

6.1(d)(ii). 

53See 24X LLC Agreement, Article VI, Section 

6.1(d)(v). 

54 Id. 

55See 24X LLC Agreement, Article VI, Section 

6.1(d)(vi). 

56 15 U.S.C. 78f(b)(3). 

57See, e.g., Securities Exchange Act Release Nos. 

100539 (July 15, 2024), 89 FR 58848 (July 19, 2024) 

(File No. 10–240) (order granting registration of 

MIAX Sapphire, LLC) (‘‘Sapphire Order’’); 88806 

(May 4, 2020), 85 FR 27451 (May 8, 2020) (File No. 

10–237) (order granting registration of MEMX LLC 

(‘‘MEMX Exchange’’))(‘‘MEMX Order’’); 85828 (May 

10, 2019), 84 FR 21841 (May 15, 2019) (File No. 10– 

234) (order granting registration of Long Term Stock 

Exchange, Inc. (‘‘LTSE Exchange’’) (‘‘LTSE Order’’); 

79543 (Dec. 13, 2016), 81 FR 92901, 92903 (Dec. 20, 

2016) (File No. 10–227) (order granting registration 

of MIAX PEARL, LLC) (‘‘MIAX PEARL Order’’); 

68341 (Dec. 3, 2012), 77 FR 73065, 73067 (Dec. 7, 

2012) (File No. 10–207) (order granting the 

registration of Miami International Securities 

Exchange, LLC (‘‘MIAX Exchange’’)) (‘‘MIAX 

Order’’); 58375 (Aug. 18, 2008), 73 FR 49498, 49501 

(Aug. 21, 2008) (File No. 10–182) (order granting 

the registration of BATS Exchange, Inc.) (‘‘BATS 

Order’’); 53128 (Jan. 13, 2006), 71 FR 3550, 3553 

(Jan. 23, 2006) (File No. 10–131) (granting the 

exchange registration of Nasdaq Stock Market, Inc.) 

(‘‘Nasdaq Order’’). 

58 15 U.S.C. 78f(b)(3). 

59See, e.g., Sapphire Order, supra note 57, at 

58850; MEMX Order, supra note 57, at 27452; LTSE 

Order, supra note 57, at 21843, MIAX PEARL 

Order, supra note 57, at 92903; MIAX Order, supra 

note 57, at 73067; BATS Order, supra note 57, at 

49501; Nasdaq Order, supra note 57, at 3553. 

60See 24X LLC Agreement, Article VI, Section 

6.2(f). The Appeals Committee will preside over all 

appeals related to disciplinary and adverse action 

determinations in accordance with 24X rules. Id. 

61See 24X LLC Agreement, Article VI, Section 

6.2(h). The Regulatory Oversight Committee will be 

responsible for overseeing the adequacy and 

effectiveness of the Exchange’s regulatory and selfregulatory organization responsibilities, assessing 

the Exchange’s regulatory performance, and 

assisting the 24X Board and Committees in 

reviewing the regulatory plan and the overall 

effectiveness of the Exchange’s regulatory functions. 

Id. See also infra section III.B.3. 

62The 24X Board could also establish additional 

committees. See 24X LLC Agreement, Article VI, 

(C) Member Representative Directors, 

the number of which must be at least 

twenty percent of the 24X Board; 43 and 

(D) at least one of the Non-Industry 

Directors shall be representative of 

issuers and investors and not associated 

with an Exchange Member, a broker, or 

a dealer.44

The first annual meeting of 24X will 

be held within 90 days after the 

Commission grants 24X’s exchange 

registration.45

In addition, 24X US will appoint the 

initial Nominating Committee and 

Member Nominating Committee, 

consistent with each committee’s 

compositional requirements, to 

nominate candidates for election to the 

24X Board.46 The Nominating 

Committee and Member Nominating 

Committee, after completion of their 

respective duties for nominating 

directors for election to the 24X Board 

for that year, will recommend 

candidates to serve on the succeeding 

year’s Nominating Committee or 

Member Nominating Committee, as 

applicable.47 Exchange Members 48 will 

have rights to nominate and elect 

additional candidates for the Member 

Nominating Committee pursuant to a 

petition process.49

The Nominating Committee will 

nominate candidates for election to the 

24X Board.50 For the Member 

Representative Director positions, the 

Member Nominating Committee, 

composed solely of Member 

Representative Committee or Panel 

Members,51 shall consult with the 

Nominating Committee and the 

Chairman of the 24X Board and solicit 

comments from Exchange Members for 

the purpose of approving and 

submitting names of candidates for 

election to the position of Member 

Representative Director.52 If no 

candidates are nominated pursuant to a 

petition process, then the initial 

nominees approved and submitted by 

the Member Nominating Committee will 

be nominated as Member Representative 

Directors by the Nominating 

Committee.53 If a petition process 

produces additional candidates, then 

the candidates nominated pursuant to 

the petition process, together with those 

nominated by the Member Nominating 

Committee, will be presented to 

Exchange Members for election to 

determine the final designees for any 

open Member Representative Director 

positions.54 In the event of a contested 

election, the candidates who receive the 

most votes will be selected as the 

Member Representative Director 

designees by the Member Nominating 

Committee.55

The 24X governance provisions are 

consistent with the Exchange Act. In 

particular, the requirement that the 

number of Member Representative 

Directors must be at least 20% of the 

24X Board and the means by which they 

will be chosen by Exchange Members 

provides for the fair representation of 

members in the selection of directors 

and the administration of 24X and 

therefore are consistent with section 

6(b)(3) of the Exchange Act.56 This 

requirement helps to ensure that 

members of an exchange have a voice in 

an exchange’s self-regulatory program, 

and that an exchange is administered in 

a way that is equitable to all those who 

trade on its market or through its 

facilities.57

In addition, the requirements that the 

number of Non-Industry Directors equal 

or exceed the sum of the number of 

Industry Directors and Member 

Representative Directors, that at least 

one Non-Industry Director shall also 

qualify as an Independent Director, and 

that at least one of the Non-Industry 

Directors shall be representative of 

issuers and investors and not associated 

with an Exchange Member, a broker, or 

a dealer on the 24X Board satisfy the 

requirements in section 6(b)(3) of the 

Exchange Act,58 which requires in part 

that one or more directors be 

representative of issuers and investors 

and not be associated with a member of 

the exchange, or with a broker or dealer. 

The Commission previously has stated 

that the inclusion of public, nonindustry representatives on exchange 

oversight bodies is an important 

mechanism to support an exchange’s 

ability to protect the public interest.59

Further, the presence of public, nonindustry representatives can help to 

ensure that no single group of market 

participants has the ability to 

systematically disadvantage other 

market participants through the 

exchange governance process. Public 

directors can provide unbiased 

perspectives, which may enhance the 

ability of the 24X Board to address 

issues in a non-discriminatory fashion 

and foster the integrity of the Exchange. 

2. Exchange Committees 

24X has proposed to establish several 

named committees of the 24X Board, 

including an Appeals Committee 60 and 

a Regulatory Oversight Committee,61 as 

well as the Nominating Committee and 

Member Nominating Committee, 

discussed above.62 The Appeals 


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Section 6.2(a). All committees of the 24X Board will 

be subject to the control and supervision of the 24X 

Board. Id. 

63See 24X LLC Agreement, Article VI, Section 

6.2(f). 

64See 24X LLC Agreement Article VI, Section 

6.2(h)(v). 

65See, e.g., Securities Exchange Act Release No. 

78101 (June 17, 2016), 81 FR 41142 (June 23, 2016) 

(File No. 10–222) (order granting the registration of 

IEX (‘‘IEX Order’’)); Article IV, Section 4.1 of the 

Eleventh Amended and Restated Bylaws of Cboe 

Exchange, Inc. 

66 15 U.S.C. 78f(b)(1). 

67See Healthy Markets Letter at 2–6. 

68 Id. at 5. 

69 Id. at 5. 

70See 24X Letter II at 16–17. 

71For any individual that presently holds or has 

held their offices or positions during the previous 

year, Exhibit J requires their name, title, dates of 

commencement and termination of term of office or 

position, and type of business in which each is 

primarily engaged (e.g., floor broker, specialist, odd 

lot dealer, etc.). 

72See 17 CFR 240.6a–2. See also 24X LLC 

Agreement, Article VI, Section 6.2(b)(i). 

73Because 24X US is the sole member of 24X (see 

24X LLC Agreement), and 24X Bermuda is the sole 

member of 24X US (see 24X US LLC Agreement) 

and thus indirectly wholly owns and controls 24X, 

for purposes of this Order, the Commission bases 

its findings on provisions in the 24X Bermuda LLC 

Agreement, as the ultimate owner of 24X. 

74 ‘‘Unit’’ means ‘‘(i) any Common Units 

(including Profits Units), Non-Voting Units or 

Preferred Units purchased or otherwise acquired by 

any Member; (ii) any equity securities issued or 

issuable directly or indirectly with respect to any 

of the foregoing Units by way of Unit distribution 

or split or in connection with a combination of 

Units, recapitalization, merger, consolidation or 

other reorganization; and (iii) any other units of any 

class or series of ownership interests of the 

Company held by a Member, including with respect 

to Convertible Securities or Options.’’ See 24X 

Bermuda LLC Agreement, Article 1, 1.72 

75These provisions are consistent with ownership 

and voting limits approved by the Commission for 

other SROs. See, e.g., Sapphire Order, MEMX 

Order, LTSE Order, MIAX PEARL Order, MIAX 

Order, and BATS Order supra note 57; IEX Order, 

supra note 65, see also Securities Exchange Release 

Nos. 6068 (Feb. 4, 2016) (File No. 10–221) (order 

granting exchange registration of ISE Mercury, LLC) 

(‘‘ISE Mercury Order’’); 70050 (July 26, 2013), 78 FR 

46622, 46624 (Aug. 1, 2013) (File No. 10–209) 

(order granting the exchange registration of ISE 

Gemini, LLC) (‘‘ISE Gemini Order’’); 62158 (May 24, 

2010), 75 FR 30082 (May 28, 2010) (CBOE–2008– 

88) (Cboe demutualization order); 53963 (June 8, 

2006), 71 FR 34660 (June 15, 2006) (SR–NSX–2006– 

03) (NSX demutualization order); 51149 (Feb. 8, 

2005), 70 FR 7531 (Feb. 14, 2005) (SR–CHX–2004– 

26) (CHX demutualization order); 49098 (Jan. 16, 

2004), 69 FR 3974 (Jan. 27, 2004) (SR–Phlx–2003– 

73) (Phlx demutualization order). 

76 ‘‘Person’’ means ‘‘any individual, partnership, 

joint venture, company, limited liability company, 

trust, or other association or entity.’’ See 24X 

Bermuda LLC Agreement, Article 1, 1.41. 

77 ‘‘Related Persons’’ means ‘‘[with] respect to any 

Person: (a) any ‘affiliate’ of such Person (as such 

term is defined in Rule 12b–2 under the Exchange 

Act); (b) any other Person with which such first 

Person has any agreement, arrangement or 

understanding (whether or not in writing) to act 

together for the purpose of acquiring, voting, 

holding or disposing of Units; (c) in the case of a 

Person that is a company, corporation or similar 

entity, any executive officer (as defined under Rule 

3b–7 under the Exchange Act) or director of such 

Person and, in the case of a Person that is a 

partnership or limited liability company, any 

general partner, managing member or manager of 

such Person, as applicable; (d) in the case of any 

Person that is a registered broker or dealer that has 

been admitted to membership in the national 

securities exchange known as 24X National 

Exchange, any Person that is associated with such 

member (as determined using the definition of 

‘person associated with a member’ as defined under 

Section 3(a)(21) of the Exchange Act); (e) in the case 

of a Person that is a natural person and member of 

24X National Exchange, any broker or dealer that 

is also a member of 24X National Exchange with 

which such Person is associated; (f) in the case of 

Continued 

Committee will consist of two 

Independent Directors and one Member 

Representative Director.63 Each member 

of the Regulatory Oversight Committee 

must be an Independent Director.64

The named committees that 24X 

proposed, which are similar to the 

named committees maintained by other 

exchanges,65 are designed to help 

enable the Exchange to carry out its 

responsibilities under the Exchange Act 

and are consistent with the Exchange 

Act, including section 6(b)(1), which 

requires, in part, an exchange to be so 

organized and have the capacity to carry 

out the purposes of the Exchange Act.66

The Commission received one 

comment on Exhibit J of 24X’s Form 1.67

Regarding the proposed 24X Board and 

committees, this commenter stated that 

filling in the charts set forth in Exhibit 

J of 24X’s Form 1 with ‘‘TBD’’ and ‘‘TO 

BE PROVIDED’’ ‘‘does not provide the 

Commission with sufficient information 

with which to assess compliance with 

the law or Commission Rules.’’ 68 The 

commenter further stated that ‘‘[t]he 

Exchange failed to provide the names, 

classifications, terms, and types of 

businesses of the persons to fill the 

required roles. The point of the chart is 

to have those boxes filled in. They are 

‘to be provided’ now—not in the future. 

What would be the basis for the 

Commission’s approval?’’ 69 24X stated 

that it has not commenced operations 

and that ‘‘[o]nce directors and 

committee members are determined,’’ 

24X will update its Form 1 as required 

under Rule 6a–2 under the Exchange 

Act.70

Exhibit J requires certain information 

for officers, governors, members of all 

standing committees, or persons 

performing similar functions, who 

‘‘presently hold or have held their 

offices or positions during the previous 

year.’’ 71 Exhibit J of 24X’s Form 1 

application indicates that Dmitri 

Galinov will be the ‘‘Industry/Chief 

Executive Officer’’ of 24X. Exhibit J also 

lists Dmitri Galinov as the Head of 

Equities for 24X, and other officers of 

24X including David Sassoon as General 

Counsel; Jeremy Sanchez as Chief 

Regulatory Officer; and Jason Woerz as 

Chief Operating Officer. 

24X has not yet commenced 

operations, and therefore, the 

nomination and election processes to 

fill the rest of 24X’s Board and 

committees, as set forth in the 24X LLC 

Agreement, have not been initiated. 

Upon approval of 24X’s Form 1 

application, however, 24X US, as the 

sole owner of 24X, is required to elect 

only those persons to the 24X Board and 

committees that meet the stated 

compositional requirements set forth in 

the 24X LLC Agreement, and pursuant 

to Rule 6a–2 of the Exchange Act, 24X 

must file an amendment to its Form 1 

providing the name, classification, term, 

and type of business of each person who 

will be on the 24X Board and 24X 

committees within 10 days after 24X US 

elects such persons to the 24X Board, or 

the Chairman of the 24X Board appoints 

individuals to the various 24X 

committees.72 The information provided 

by 24X in Exhibit J is consistent with 

the requirements of the form and the 

Exchange Act. 

B. 24X Bermuda and Regulation of the 

Exchange 

When 24X commences operations as 

a national securities exchange, it will 

have all of the attendant regulatory 

obligations under the Exchange Act. In 

particular, 24X will be responsible for 

the operation and regulation of its 

trading system and the regulation of its 

members. Certain provisions in both the 

24X and 24X Bermuda governing 

documents are designed to facilitate the 

ability of 24X to fulfill its regulatory 

obligations and to help facilitate 

Commission oversight of 24X. The 

discussion below summarizes some of 

these key provisions.73

1. Ownership Structure; Ownership and 

Voting Limitations 

As stated above, 24X will be owned 

indirectly by 24X Bermuda. The 24X 

Bermuda LLC Agreement includes 

restrictions on the ability to own and 

vote units representing a fractional part 

of the interest in 24X Bermuda 

(‘‘Units’’).74 These limitations are 

designed to prevent any party to the 24X 

Bermuda LLC Agreement from 

exercising undue control over the 

operation of the Exchange and to ensure 

that the Exchange and the Commission 

are able to carry out their regulatory 

obligations under the Exchange Act.75

In particular, for so long as 24X 

Bermuda shall control, directly or 

indirectly, 24X, no Person,76 either 

alone or together with its Related 

Persons,77 will be permitted to own, 


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a Person that is a natural person, any relative or 

spouse of such Person, or any relative of such 

spouse who has the same home as such Person or 

who is a manager or officer of the Company, any 

subsidiary of the Company, or any of the 

Company’s parent companies; (g) in the case of a 

Person that is an executive officer (as defined under 

Rule 3b–7 under the Exchange Act) or a director of 

a company, corporation or similar entity, such 

company, corporation or entity, as applicable; or (h) 

in the case of a Person that is a general partner, 

managing member or manager of a partnership or 

limited liability company, such partnership or 

limited liability company, as applicable.’’ See 24X 

Bermuda LLC Agreement, Article 1, 1.49. 

78See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(a)(i). There are limited exceptions to 

these prohibitions. See infra notes 84–85 and 

accompanying text. 

79See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(a)(ii). This restriction on ownership by 

Exchange Members cannot be waived. See id. at 

Article 9, Section 9.2(b)(ii). 

80 ‘‘Transfer’’ means ‘‘any sale, transfer, 

conveyance, exchange, pledge, gift, donation, 

assignment, or other disposition of Units, whether 

voluntary or involuntary, and whether during the 

lifetime of the Person involved or upon or after his 

death, including, but not limited to, any disposition 

by operation of law, by court order, by judicial 

process, or by foreclosure, levy, or attachment. 

‘Transfer’ when used as a verb shall have a 

correlative meaning. ‘Transferor’ and ‘Transferee’ 

mean a Person who makes or receives a Transfer, 

respectively.’’ See 24X Bermuda LLC Agreement, 

Article 1, Section 1.71. See also id. at Article 9, 

Section 9.2(f)(i). 

81See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(f)(iii). The price of the redeemed Units 

or Unit Equivalents is also prescribed in the 24X 

Bermuda LLC Agreement. See id. The number of 

Units or Unit Equivalents to be redeemed is to be 

calculated after taking into account that the 

redeemed Units or Unit Equivalents will become 

treasury shares and will no longer be deemed to be 

outstanding. See id. It is further provided in the 24X 

Bermuda LLC Agreement that any Units or Unit 

Equivalents that have been called for redemption 

may not be deemed outstanding Units or Unit 

Equivalents if a sum sufficient to redeem the Units 

or Unit Equivalents has been irrevocably deposited 

or set aside to pay the redemption price. From and 

after the redemption date (unless 24X Bermuda 

defaults in providing funds for the payment of the 

redemption price), the redeemed Units or Unit 

Equivalents that have been redeemed will become 

treasury shares, and all rights of the holder of the 

redeemed Units or Unit Equivalents in 24X 

Bermuda (except the right to receive from 24X 

Bermuda the redemption price against delivery to 

24X Bermuda of evidence of ownership of the 

shares) will cease. See id. In addition, in the event 

that any redemption has resulted in any person 

owning such number of Units or Unit Equivalents 

that is in violation of the ownership limits, 24X 

Bermuda will be required to redeem those Units or 

Unit Equivalents pursuant to the limitation 

provisions. See id. 

82See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(a)(iii). 

83See id. 

84See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(b)(ii). See also supra note 79 

(concerning the inability to waive restrictions for 

Exchange Members). The required determinations 

are that such waiver will not impair the ability of 

the Exchange to carry out its functions and 

responsibilities as an ‘‘exchange’’ under the 

Exchange Act and the rules and regulations 

promulgated thereunder; that such waiver is 

otherwise in the best interests of 24X Bermuda, its 

members, and the Exchange; that such waiver will 

not impair the ability of the Commission to enforce 

the Exchange Act and the rules and regulations 

promulgated thereunder; and that such Person and 

its Related Persons are not subject to any applicable 

‘‘statutory disqualification’’ within the meaning of 

Section 3(a)(39) of the Exchange Act. See id. See 

also 24X US LLC Agreement, Section III(b)(ii)(B). 

These provisions are consistent with ownership and 

voting limits approved by the Commission for other 

SROs. See, e.g., Sapphire Order, MEMX Order, 

LTSE Order, MIAX PEARL Order, MIAX Order, and 

BATS Order, supra note 57, IEX Order, supra note 

65, ISE Mercury Order and ISE Gemini Order, supra 

note 75; and Securities Exchange Act Release No. 

61698 (Mar. 12, 2010), 75 FR 13151 (Mar. 18, 2010) 

(File Nos. 10–194 and 10–196) (order approving 

DirectEdge exchanges) (‘‘DirectEdge Exchanges 

Order’’). 

85See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(b)(ii). 

86See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(d). 

87See id. 

88See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(e)(i). The notice will require the 

Person’s full legal name; the Person’s title or status 

and the date on which such title or status was 

acquired; the Person’s and its Related Person’s) 

approximate ownership interest in 24X Bermuda; 

and whether the person has power, directly or 

indirectly, to direct the management or policies of 

24X Bermuda, whether through ownership of 

securities, by contract or otherwise. See id. 

89See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(e)(ii). Changes of less than 1% must also 

be reported to 24X Bermuda if they result in such 

Person crossing a 20% or 40% ownership 

threshold. See id. In addition, the Exchange’s rules 

also impose limits on affiliation between the 

Exchange and a Member of the Exchange. See 24X 

Rule 2.10 (No Affiliation between Exchange and 

any Member). 

90See 24X LLC Agreement (introductory text) and 

Second Amended and Restated Limited Liability 

Company Agreement of 24X US (introductory text). 

directly or indirectly, of record or 

beneficially, more than 40% of the then 

issued and outstanding Units.78 A more 

restrictive condition will apply to 

Exchange Members, who either alone or 

together with their Related Persons, will 

be prohibited from owning, directly or 

indirectly, of record or beneficially, 

more than 20% of the then issued and 

outstanding Units.79 If any party to the 

24X Bermuda LLC Agreement purports 

to transfer 80 any Units in violation of 

these ownership limits, 24X Bermuda 

will be required (to the extent funds are 

legally available) to redeem the Units in 

excess of the applicable ownership 

limit.81

In addition, no Person, alone or 

together with its Related Persons, may, 

directly, indirectly, or pursuant to any 

voting trust, agreement, plan or other 

arrangement, vote or cause the voting of 

Units or give any consent or proxy with 

respect to Units representing more than 

20% of the voting power of the then 

issued and outstanding Units (‘‘Voting 

Limitation’’).82 Further, no Person, 

either alone or together with its Related 

Persons, under circumstances that 

would result in the Units that are 

subject to such agreement, plan, or other 

arrangement not being voted on any 

matter or matters or any proxy relating 

thereto being withheld, where the effect 

of such agreement, plan, or other 

arrangement would be to enable any 

Person, either alone or together with its 

Related Persons, to vote, possess the 

right to vote, or cause the voting of 

Units that would represent more than 

20% of such voting power.83

The 24X Bermuda Board of Managers 

will be permitted to waive the 40% 

ownership limitation and the 20% 

Voting Limitation pursuant to a 

resolution duly adopted by the 24X 

Bermuda Board of Managers if it makes 

certain determinations.84 Any such 

waiver will not be effective unless and 

until approved by the Commission.85

Any Person that proposes to own 

Units in excess of the 40% ownership 

limitation, or to vote or grant any 

proxies or consents with respect to 

Units constituting more than 20% of the 

voting power of the then outstanding 

Units, will be required to deliver written 

notice to the 24X Bermuda Board of 

Managers of its intention.86 The notice 

must be delivered to the 24X Bermuda 

Board of Managers not less than 45 days 

(or any shorter period to which the 

Board of Managers expressly consents) 

before the proposed ownership of such 

Units or the proposed vote.87

The 24X Bermuda LLC Agreement 

also contains provisions that are 

designed to further safeguard the 

ownership limitation and Voting 

Limitation described above or are 

otherwise related to direct and indirect 

changes in control. Specifically, any 

Person that, either alone or together 

with its Related Persons beneficially 

owns, directly or indirectly (whether by 

acquisition or a change in the number 

of Units outstanding), of record or 

beneficially 5% or more of the then 

outstanding Units will be required to 

notify the 24X Bermuda Board of 

Managers in writing of such 

ownership.88 Thereafter, such persons 

will be required to update 24X Bermuda 

of any increase or decrease of 1% or 

more in their previously reported 

ownership percentage.89

The 24X LLC Agreement does not 

include change of control provisions 

that are similar to those in the 24X 

Bermuda LLC Agreement and the 24X 

US LLC Agreement because the 24X 

LLC Agreement instead explicitly 

identifies its sole owner as 24X US, and 

in turn the 24X US LLC Agreement 

explicitly identifies 24X Bermuda as its 

sole owner.90 Thus, any changes in the 

ownership of 24X would require the 

24X LLC Agreement to be amended. 

Any amendment to the 24X LLC 

Agreement, including to ownership of 


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91 15 U.S.C. 78s(b). 92 17 CFR 240.19b–4. 93See 24X LLC Agreement, Article X, Section 

10.3. 

94See 24X LLC Agreement, Article V, Section 

5.2(a). 

95See, e.g., Sapphire Order, supra note 57, IEX 

Order, supra note 65. 

96See, e.g., Sapphire Order, MEMX Order, LTSE 

Order, MIAX PEARL Order, MIAX Order, and 

BATS Order, supra note 57, ISE Mercury Order, 

supra note 75, IEX Order, supra note 65; and 

DirectEdge Exchanges Order, supra note 84. 

97See Healthy Markets Letter at 2–6. 

98 Id. at 2. 

99 Id. 

100 24X Letter II at 16. 

101 Id. See also infra section III.B.1.a. 

102 15 U.S.C. 78f(b)(1). 

103See supra note 75. 

104See infra notes 108–110 and accompanying 

text for a description of the Related Persons of 

Dmitri Galinov. 

105See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(g)(i). While 24X Bermuda LLC 

Agreement, Article 9, Section 9.2(a)(ii) sets forth an 

ownership restriction that applies to 24X Exchange 

Members, this provision does not apply to Mr. 

Galinov; the ownership limitation that does apply 

to Dmitri Galinov and his Related Persons is set 

forth in 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(a)(i). 

106See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(g)(i). 

107See 24X Bermuda LLC Agreement, Article 9, 

Section 9.2(g)(ii). 

108See Exhibit K, footnote 2. 

24X, would constitute a proposed rule 

change under section 19(b) of the 

Exchange Act 91 and Rule 19b–4 92

thereunder that will be required to be 

filed with, or filed with and approved 

by, the Commission.93 Moreover, 

pursuant to the 24X LLC Agreement, 

any transfer of limited liability company 

interests of 24X will be subject to prior 

approval by the Commission pursuant 

to the rule filing procedure under 

section 19 of the Exchange Act.94

Although 24X Bermuda is not directly 

responsible for regulation, its activities 

with respect to the operation of 24X 

must be consistent with, and must not 

interfere with, the self-regulatory 

obligations of 24X.95 As described 

above, the provisions applicable to 

changes in control of 24X Bermuda 

(through changes in ownership of Units 

in 24X Bermuda) as well as the Voting 

Limitation imposed on owners of 24X 

Bermuda who also are Exchange 

Members, are designed to help prevent 

any owner of 24X Bermuda from 

exercising undue influence or control, 

either direct or indirect, over the 

operation of the Exchange and to help 

ensure that the Exchange retains a 

sufficient degree of independence to 

effectively carry out its regulatory 

obligations under the Exchange Act. 

In addition, these limitations are 

designed to address the conflicts of 

interests that might result from a 

member of a national securities 

exchange owning interests in the 

exchange. As the Commission has stated 

in the past, an exchange member’s 

ownership interest in an entity that 

controls an exchange could become so 

large as to cast doubt on whether the 

exchange may fairly and objectively 

exercise its self-regulatory 

responsibilities with respect to such 

member.96 An exchange member that is 

a controlling shareholder of an exchange 

could seek to exercise that controlling 

influence by directing the exchange to 

refrain from, or the exchange may 

hesitate to, diligently monitor and 

conduct surveillance of the member’s 

conduct or diligently enforce the 

exchange’s rules and the federal 

securities laws with respect to conduct 

by the member that violates such 

provisions. As such, these requirements 

are designed to minimize the potential 

that a person or entity can improperly 

interfere with or restrict the ability of 

the Exchange to effectively carry out its 

regulatory oversight responsibilities 

under the Exchange Act. 

The Commission received one 

comment addressing the governance 

structure proposed by 24X.97 This 

commenter stated 24X’s ownership and 

voting structure ‘‘facially violate 

Commission Rules and the law.’’ 98

According to this commenter ‘‘[24X] 

asserts that if the Commission approves 

its application, it has internal company 

documents that promise (to itself) that it 

will come into compliance with the law 

and Commission Rules within nine 

months of the approval. It is unclear 

whether or how this promise for future 

compliance would be enforceable, much 

less by whom.’’ 99

In response to the commenter’s 

concern about 24X’s ownership and 

voting structure, 24X explained that 

‘‘although the Exchange Act does not set 

forth any specific ownership and voting 

limitations applicable to exchanges, the 

Commission typically has expected 

exchanges to include in their governing 

documents certain limitations on 

ownership and voting. 24X’s application 

includes each of these typical 

limitations on ownership and 

voting.’’ 100 24X stated that ‘‘[t]he only 

exception to such limitations is a 

request for a very brief, temporary 

exemption from certain ownership and 

voting limitation[s].’’ 101

24X’s and 24X Bermuda’s proposed 

governance provisions are consistent 

with the Exchange Act, including 

section 6(b)(1), which requires, in part, 

an exchange to be so organized and have 

the capacity to carry out the purposes of 

the Exchange Act.102 In particular, these 

requirements are designed to minimize 

the potential that a person could 

improperly interfere with or restrict the 

ability of the Commission or 24X to 

effectively carry out their regulatory 

oversight responsibilities under the 

Exchange Act. 

24X has proposed ownership and 

voting limitations in Article 9, Section 

9.2 of the 24X Bermuda LLC Agreement 

that are consistent with the ownership 

and voting limitations in place across all 

other national securities exchanges,103

and thus are designed to enable 24X to 

meet its obligations under the Exchange 

Act. 

a. Temporary Exemption 

24X proposes that Dmitri Galinov and 

his Related Persons 104 have a temporary 

exemption from the ownership 

limitation set forth in Section 9.2 of the 

24X Bermuda LLC Agreement until nine 

(9) months after the Commission grants 

24X’s application for registration as a 

national securities exchange or until 

24X commences operation, if later than 

nine (9) months.105 Further, 24X 

proposes in the 24X Bermuda LLC 

Agreement that if Dmitri Galinov and 

his Related Persons do not comply with 

the ownership limitation in Section 9.2 

of the 24X Bermuda LLC Agreement 

within the applicable time period, then 

24X Bermuda shall redeem all of the 

Units the holding of which by Dmitri 

Galinov and/or his Related Persons 

results in a violation of Section 9.2 for 

a price per Unit, as applicable, equal to 

the lesser of (a) book value or (b) Fair 

Market Value of such Units.106 24X also 

proposes that Dmitri Galinov and his 

Related Persons shall have a temporary 

exemption from the Voting Limitation 

set forth in Section 9.2 of the 24X 

Bermuda LLC Agreement until nine (9) 

months after the Commission grants 

24X’s application for registration as a 

national securities exchange or until 

24X commences operation, if later than 

nine (9) months, but only with respect 

to any vote regarding any merger, 

consolidation or dissolution of the 24X 

Bermuda or any sale of all or 

substantially all of the assets of the 24X 

Bermuda.107

Exhibit K of 24X’s Form 1 application 

provides that ‘‘Dmitri Galinov owns 

7,000,000 Common Units and 179,215 

Seed-3 Preferred Units, for a total of 

7,179,215 Units for all classes 

outstanding,’’ 108 and that ‘‘Dmitri 

Galinov is a Related Person of KNG 

CAPITAL LLC, Tanya NazarovKenneally, and Vladimir Nazarov. KNG 

CAPITAL LLC owns 320,616 Seed-1 

Preferred Units, which represents 1.85% 

of all classes of outstanding Units. 


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109 Id. 

110 Id. 

111See 24X Letter II at 16. 

112 Id. 24X cited Securities Exchange Act Release 

No. 42455 (Feb. 24, 2000) as support for its 

statement. 

113See Exhibit K, footnote 2. The Commission has 

approved other temporary exemptions from the 

ownership or voting limitations included in the 

governance documents of owners of a national 

securities exchange. See Securities Exchange Act 

Release No. 49067 (Jan. 13, 2004), 69 FR 2761 (Jan. 

20, 2004) (order granting approval to a proposed 

rule change by the Boston Stock Exchange Inc. 

Relating to the LLC Operating Agreement of the 

Proposed New Exchange Facility to be Operated by 

the Boston Options Exchange Group LLC)(approval 

of an exemption from a voting limitation for a 

period of 10 years for an owner of the BOX facility). 

See also Securities Exchange Act Release No. 42455 

(Feb. 24, 2000), 65 FR 11388 (Mar. 2, 2000) (File 

No. 10–127) (order granting registration of the 

International Securities Exchange LLC)(approval of 

an exemption from an ownership limitation for 

period of 10 years for certain founders of the 

exchange). 

114See 24X Bermuda LLC Agreement, Article 3, 

Section 3.4(b). 

115See infra Section III.B.2. 

116See, e.g., Sapphire Order, MEMX Order, LTSE 

Order, MIAX Order, supra note 57, IEX Order, 

supra note 65; and DirectEdge Exchanges Order, 

supra note 84. 

117See 24X Bermuda LLC Agreement, Article 3, 

Section 3.4(a). Similarly, Article VI, Section 

6.1(a)(ii) of the 24X LLC Agreement requires the 

Exchange Board and each Director, when managing 

the business and affairs of 24X, to consider the 

requirements of Section 6(b) of the Exchange Act 

and requires each Director, officer, or employee of 

24X to comply with the federal securities laws and 

regulations thereunder and cooperate with the 

Commission, and 24X pursuant to its regulatory 

authority. Article VI, Section 6.1(a)(iii) of the 24X 

LLC Agreement also requires the Exchange Board, 

when evaluating any proposal to take into account 

all factors that the Exchange Board deems relevant, 

including, without limitation, to the extent deemed 

relevant: the potential impact on the integrity, 

continuity and stability of the national securities 

exchange operated by 24X and the other operations 

of 24X, on the ability to prevent fraudulent and 

manipulative acts and practices, and on investors 

and the public, and whether such proposal would 

promote just and equitable principles of trade, 

foster cooperation and coordination with Persons 

engaged in regulating, clearing, settling, processing 

information with respect to and facilitating 

transactions in securities or assist in the removal of 

impediments to or perfection of the mechanisms for 

a free and open market and a national market 

system. 

Tanya Nazarov-Kenneally owns 1794 

Seed-3 Preferred Units, which 

represents 0.01% of all classes of 

outstanding Units. Vladimir Nazarov 

owns 7176 Seed-3 Preferred Units, 

which represents 0.04% of all classes of 

outstanding Units.’’ 109 Accordingly, 

Exhibit K states that ‘‘on an aggregate 

basis, Dmitri Galinov, together with his 

Related Persons, owns 43.29% of the 

Units of all classes of outstanding 

Units.’’ 110

In a letter, 24X stated that the 

temporary exemption would provide it 

with a brief period to bring its 

ownership and voting structure in line 

with the ownership and voting 

restrictions upon SEC approval.111 24X 

also stated that the Commission had 

granted ‘‘prior exchange applications 

with such limited exceptions to the 

ownership and voting restrictions.’’ 112

The Commission finds that the 

limited temporary exemption in Article 

9, Section 9.2(g) of the 24X Bermuda 

LLC Agreement from the ownership 

limitation and Voting Limitation set 

forth in Article 9, Section 9.2 of the 24X 

Bermuda LLC Agreement for Dmitri 

Galinov and his Related Persons is 

consistent with the Exchange Act. As 

discussed above, the ownership 

limitation and Voting limitation are 

designed to prevent any party from 

exercising undue control over the 

operation of the 24X and ensure that 

24X is able to carry out its regulatory 

obligations under the Exchange Act. The 

exemption is designed to prevent Dmitri 

Galinov and his Related Persons from 

exercising undue control over 24X and 

minimize the possibility that 24X’s 

ability to carry out its self-regulatory 

responsibilities under the Exchange Act 

could be impaired. Specifically, the 

exemption is for a defined period of 

time that is based on 24X’s approval as 

a national securities exchange or 

commencement of its exchange 

operations. Thus, the exemption is 

designed to ensure that once 24X is a 

self-regulatory organization (‘‘SRO’’), 

the exemption will terminate within a 

specified period of time. In addition, the 

exemption from the Voting Limitation 

applies only with respect to the limited 

situations involving any merger, 

consolidation or dissolution of the 24X 

Bermuda or any sale of all or 

substantially all of the assets of the 24X 

Bermuda that will not permit undue 

control over 24X or impair the 

regulatory responsibilities of 24X. The 

temporary exemption is designed to 

afford Dmitri Galinov and his Related 

Persons the ability to protect the 

investment they have already made in 

the establishment of 24X that is over the 

current ownership limitation, 

represented by 24X to be 3.29% of the 

Units of all outstanding Units.113

As part of its Form 1 application, 24X 

also has included in the 24X Bermuda 

LLC Agreement a representation that 

24X Bermuda will redeem all of the 

Units the holding of which by Dmitri 

Galinov and/or his Related Persons 

results in a violation of the applicable 

40% ownership limitation for a price 

per Unit, as applicable, equal to the 

lesser of (a) book value or (b) Fair 

Market Value of such Units. The 24X 

Bermuda LLC Agreement further 

provides that such redemption shall 

occur nine (9) months after the date of 

approval by the Commission of 24X’s 

Form 1 application or until 

commencement of the operation of 24X, 

if later than nine (9) months. Thus, in 

response to the commenter, 24X has 

established a mechanism to ensure 

compliance with the ownership 

limitation and Voting Limitation set 

forth in the 24X Bermuda LLC 

Agreement upon expiration of the stated 

time period. 24X Bermuda’s Managers 

and officers must comply with the 

federal securities laws and the rules and 

regulations promulgated thereunder and 

are deemed to agree to cooperate with 

the Commission and 24X in respect of 

the Commission’s oversight 

responsibilities regarding 24X and the 

self-regulatory functions and 

responsibilities of 24X.114 Therefore, 

should there be a need to pursue 

enforcement of the redemption 

requirement required of 24X Bermuda, 

24X Bermuda’s Managers and officers 

must comply with the obligation and 

must cooperate with those efforts by the 

Commission and 24X to ensure that 

such redemption occurs. Finally, should 

24X Bermuda not redeem the Units 

owned by Dmitri Galinov and his 

Related Persons within the specified 

time period, the Commission may take 

action against 24X under section 19(h) 

of the Exchange Act.115

2. Regulatory Independence and 

Oversight 

Although 24X Bermuda will not itself 

carry out regulatory functions, its 

activities with respect to the operation 

of 24X must be consistent with, and 

must not interfere with, 24X’s selfregulatory obligations. In this regard, 

24X and 24X Bermuda propose to adopt 

certain provisions in their respective 

governing documents that are designed 

to help maintain the independence of 

the regulatory functions of 24X. These 

proposed provisions are substantially 

similar to those included in the 

governing documents of other 

exchanges that recently have been 

granted registration.116 Specifically: 

• the managers, officers, employees, 

and agents of 24X Bermuda must give 

due regard to the preservation of the 

independence of the self-regulatory 

function of 24X and to its obligations to 

investors and the general public and 

must not take actions which would 

interfere with the effectuation of 

decisions by the Exchange Board 

relating to its regulatory functions 

(including disciplinary matters) or 

which would interfere with 24X’s 

ability to carry out its responsibilities 

under the Exchange Act.117


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118See 24X Bermuda LLC Agreement, Article 3, 

Section 3.4(b). 

119See id. 

120See id. 

121See 24X Bermuda LLC Agreement, Article 3, 

Section 3.4(c). 

122See 24X LLC Agreement, Article IX, Section 

9.2. 

123The 24X Bermuda LLC Agreement provides 

that all books and records of 24X reflecting 

confidential information pertaining to the selfregulatory function of 24X that come into the 

possession of 24X Bermuda, and the information 

contained in those books and records, will be 

subject to confidentiality restrictions and will not 

be used for any non-regulatory purposes. See 24X 

Bermuda LLC Agreement, Article 12, Section 

12.2(c). The 24X and 24X Bermuda governing 

documents acknowledge that requirements to keep 

such information confidential shall not limit or 

impede the rights of the Commission to access and 

examine such information or limit the ability of 

Directors, Officers, employees, or agents of 24X to 

disclose such information to the Commission, or the 

manager, officers, employees or agents of 24X 

Bermuda to disclose such information to the 

Commission or 24X. See 24X LLC Agreement, 

Article IX, Section 9.2 and 24X Bermuda LLC 

Agreement, Article 12, Section 12.2(c). 

124See 24X LLC Agreement, Article IX, Section 

9.2; and 24X Bermuda LLC Agreement, Article 12, 

Section 12.2(b). 

125See 24X Bermuda LLC Agreement, Article 12, 

Section 12.2(b). 

126See 24X Bermuda LLC Agreement, Article 12, 

Section 12.2(a). 

127See 24X Bermuda LLC Agreement, Article 3, 

Section 3.2. 

128See 24X Bermuda LLC Agreement, Article 12, 

Section 12.10(b). 

129 15 U.S.C. 78f(b)(1). 

130See 15 U.S.C. 78s(h)(1). 

131 15 U.S.C. 78f(b)(1); 15 U.S.C. 78s(g)(1). 

132 15 U.S.C. 78s(h)(1). 

133 15 U.S.C. 78t(a). 

• 24X Bermuda must comply with the 

federal securities laws and the rules and 

regulations promulgated thereunder, 

and must cooperate with the 

Commission, 24X, Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’), 

and any other SRO of which any routing 

broker for 24X is a member, pursuant to 

and to the extent of their respective 

regulatory authority.118 In addition, 24X 

Bermuda’s managers, officers, 

employees, and agents must comply 

with the federal securities laws and the 

rules and regulations promulgated 

thereunder and are deemed to agree to 

cooperate with: (1) the Commission and 

24X in respect of the Commission’s 

oversight responsibilities regarding 24X 

and the self-regulatory functions and 

responsibilities of 24X; and (2) FINRA, 

any other SROs of which any routing 

broker of 24X is a member, and any 

routing broker of 24X in respect of 

FINRA’s and any such other SRO’s 

oversight responsibilities regarding any 

routing broker of 24X, as applicable.119

24X Bermuda shall take reasonable 

steps necessary to cause its managers, 

officers, employees and agents to so 

cooperate.120

• 24X Bermuda, and its managers, 

officers, employees, and agents must 

submit to the jurisdiction of the U.S. 

federal courts, the Commission, and 

24X, for purposes of any suit, action or 

proceeding pursuant to the U.S. federal 

securities laws, and the rules and 

regulations thereunder, arising out of, or 

relating to, 24X activities.121

• All books and records of 24X 

reflecting confidential information 

pertaining to the self-regulatory function 

of 24X (including but not limited to 

disciplinary matters, trading data, 

trading practices, and audit information) 

must be retained in confidence by 24X 

and its personnel, including its 

Directors, officers, employees, and 

agents, and will not be used by 24X for 

any non-regulatory purposes and shall 

not be made available to any person 

(including, without limitation, any 

Exchange Member) other than personnel 

of the SEC, and those personnel of 24X, 

members of Committees, members of the 

24X Board, hearing officers and other 

agents of 24X to the extent necessary or 

appropriate to properly discharge the 

self-regulatory responsibilities of 

24X.122 Similar provisions apply to 24X 

Bermuda and its personnel, managers, 

officers, employees, and agents.123

• The books and records of 24X and 

24X Bermuda must be maintained in the 

United States 124 and, to the extent they 

are related to the operation or 

administration of 24X, 24X Bermuda’s 

books and records will be subject at all 

times to inspection and copying by the 

Commission and 24X.125

• Furthermore, to the extent 24X 

Bermuda’s corporate, financial and 

similar records, reports and documents, 

including all financial statements, books 

and records and minutes of proceedings, 

are related to the activities of 24X, such 

corporate, financial and similar records, 

reports and documents, including all 

financial statements, books and records 

and minutes of proceedings, as well as 

premises, managers, officers, employees 

and agents of 24X Bermuda shall be 

deemed to be the corporate, financial 

and similar records, reports and 

documents, including all financial 

statements, books and records and 

minutes of proceedings, as well as 

premises, managers, officers, employees 

or agents, as applicable, of 24X for the 

purposes of, and subject to oversight 

pursuant to, the Exchange Act.126

• 24X Bermuda will take reasonable 

steps necessary to cause its manager, 

officers, employees, and agents, prior to 

accepting a position as a manager, 

officer, employee or agent (as 

applicable) with 24X Bermuda to 

consent in writing to the applicability of 

provisions regarding non-interference, 

confidentiality, books and records, 

compliance and cooperation, 

jurisdiction, and regulatory obligations, 

with respect to their activities related to 

24X.127

• The 24X Bermuda LLC Agreement 

requires that, so long as 24X Bermuda 

controls 24X, any changes to that 

document must be submitted to the 

Exchange Board for approval, and, if 

such change is required to be filed with 

the Commission pursuant to section 

19(b) of the Exchange Act and the rules 

and regulations thereunder, such change 

shall not be effective until filed with 

and effective by operation of law, or 

filed with, and approved by, the 

Commission.128

The provisions discussed in this 

section, which are designed to help 

ensure the independence of 24X’s 

regulatory function and facilitate the 

ability of 24X to carry out its regulatory 

responsibilities under, and operate in a 

manner consistent with, the Exchange 

Act, are appropriate and consistent with 

the requirements of the Exchange Act, 

particularly with Section 6(b)(1), which 

requires, in part, an exchange to be so 

organized and have the capacity to carry 

out the purposes of the Exchange Act.129

Further, section 19(h)(1) of the 

Exchange Act 130 provides the 

Commission with the authority ‘‘to 

suspend for a period not exceeding 

twelve months or revoke the registration 

of [an SRO], or to censure or impose 

limitations upon the activities, 

functions, and operations of [an SRO], if 

[the Commission] finds, on the record 

after notice and opportunity for hearing, 

that [the SRO] has violated or is unable 

to comply with any provision of the 

Exchange Act, the rules or regulations 

thereunder, or its own rules or without 

reasonable justification or excuse has 

failed to enforce compliance . . . ’’ with 

any such provision by its members 

(including associated persons thereof). If 

the Commission were to find, or become 

aware of, through staff review and 

inspection or otherwise, facts indicating 

any violations of the Exchange Act, 

including without limitation sections 

6(b)(1) and 19(g)(1),131 these matters 

could provide the basis for a 

disciplinary proceeding under section 

19(h)(1) of the Exchange Act.132

Even in the absence of the governance 

provisions described above, under 

section 20(a) of the Exchange Act,133

any person with a controlling interest in 

24X would be jointly and severally 


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134 15 U.S.C. 78t(e). 

135 15 U.S.C. 78u–3. 

136See supra note 61 and accompanying text. 

137See 24X LLC Agreement, Article VI, Section 

6.2(h)(i). 

138See 24X LLC Agreement, Article VIII, Section 

8.5. 

139See 24X LLC Agreement, Article VI, Section 

6.2(h)(iii). To the extent that the Chief Executive 

Officer of 24X has any indirect supervisory 

responsibility for the role or function of the CRO, 

including implementation of the budget for the 

regulatory function or regulatory personnel matters, 

the Regulatory Oversight Committee shall take all 

steps reasonably necessary to ensure that the Chief 

Executive Officer does not compromise the 

regulatory autonomy and independence of the Chief 

Regulatory Officer or the regulatory function. See 

24X LLC Agreement, Article VI, Section 6.2(h)(4). 

140See 15 U.S.C. 78f(b)(1). 

141See id. See also Section 19(g) of the Exchange 

Act, 15 U.S.C. 78s(g). 

142See Form 1, Exhibit I. 

143See id. 

144See id. 

145Under the 24X LLC Agreement, the Company 

Member is 24X US. 

146See 24X LLC Agreement, Article XI, Section 

11.4(b). ‘‘Regulatory Funds’’ in the 24X LLC 

Agreement means ‘‘fees, fines or penalties derived 

from the regulatory operations of the Company. 

‘‘Regulatory Funds’’ shall not be construed to 

include revenues derived from listing fees, market 

data revenues, transaction revenues, or any other 

aspect of the commercial operations of the 

Company, even if a portion of such revenues are 

used to pay costs associated with the regulatory 

operations of the Company.’’ Article I, ll of the 24X 

LLC Agreement. This definition is consistent with 

the rules of other SROs. See, e.g., LTSE Bylaws, 

Article I(bb); Amended and Restated By-Laws of 

MIAX Exchange, Article 1(ll); By-Laws of NASDAQ 

PHLX LLC, Article I(ii); By-Laws of NASDAQ BX, 

Inc., Article I(ii). See also 24X Rule 15.2. 

147See Form 1, Exhibit I. 

148See Healthy Markets Letter at 2. 

149See 24X Letter II at 16. 

150 Id. 

151 15 U.S.C. 78f(b)(1). 

liable with and to the same extent that 

24X is liable under any provision of the 

Exchange Act, unless the controlling 

person acted in good faith and did not 

directly or indirectly induce the act or 

acts constituting the violation or cause 

of action. In addition, section 20(e) of 

the Exchange Act 134 creates aiding and 

abetting liability for any person who 

knowingly provides substantial 

assistance to another person in violation 

of any provision of the Exchange Act or 

rule thereunder. Further, section 21C of 

the Exchange Act 135 authorizes the 

Commission to enter a cease-and-desist 

order against any person who has been 

‘‘a cause of’’ a violation of any provision 

of the Exchange Act through an act or 

omission that the person knew or 

should have known would contribute to 

the violation. These provisions are 

applicable to 24X Bermuda. 

3. Regulatory Oversight Committee 

The regulatory operations of 24X will 

be monitored by the Regulatory 

Oversight Committee of the Exchange 

Board. As mentioned above, the 

Regulatory Oversight Committee will 

consist only of Independent 

Directors.136 The Regulatory Oversight 

Committee will be responsible for 

overseeing the adequacy and 

effectiveness of 24X’s regulatory and 

SRO responsibilities, assessing 24X’s 

regulatory performance, and assisting 

the 24X Board (and committees of the 

24X Board) in reviewing 24X’s 

regulatory plan and the overall 

effectiveness of 24X’s regulatory 

functions.137

Further, the Chief Regulatory Officer 

(‘‘CRO’’) of 24X will have general 

supervision over 24X’s regulatory 

operations, including responsibility for 

overseeing 24X’s surveillance, 

examination, and enforcement functions 

and for administering any regulatory 

services agreements with another SRO 

to which 24X is a party.138 The 

Regulatory Oversight Committee, in 

consultation with the Chief Executive 

Officer of 24X, will be responsible for 

establishing the goals, assessing the 

performance, and fixing the 

compensation of the CRO and for 

recommending personnel actions 

involving the CRO and senior regulatory 

personnel.139

C. Regulatory Funding and Services 

As a prerequisite for the 

Commission’s granting of an exchange’s 

application for registration, an exchange 

must be organized and have the capacity 

to carry out the purposes of the 

Exchange Act.140 Specifically, an 

exchange must be able to enforce 

compliance by its members, and persons 

associated with its members, with the 

federal securities laws and rules 

thereunder and the rules of the 

exchange.141 The discussion below 

summarizes how 24X proposes to 

conduct and structure its regulatory 

operations. 

1. Regulatory Funding 

To help ensure that 24X has and will 

continue to have adequate funding to be 

able to meet its responsibilities under 

the Exchange Act, 24X stated that, if the 

Commission approves 24X’s application 

for registration as a national securities 

exchange, 24X Bermuda, through 24X 

US, will allocate sufficient assets to 24X 

to enable the Exchange’s operation.142

Specifically, 24X stated that 24X 

Bermuda shall make prior to the launch 

of the Exchange a cash contribution of 

$5 million (in addition to any 

previously provided in-kind 

contributions, such as legal, regulatory, 

and infrastructure-related services) to 

24X US. In turn, 24X US will make a 

corresponding cash contribution of $5 

million (in addition to any previously 

provided in-kind contributions, such as 

legal, regulatory, and infrastructurerelated services) to the Exchange. The 

Exchange represented that such cash 

and in-kind contributions will be 

adequate to operate the Exchange, 

including the regulation of the 

Exchange.143

24X also represented that there will 

be a written agreement among 24X 

Bermuda, 24X US and 24X that requires 

24X Bermuda and 24X US to provide 

adequate funding for the Exchange’s 

operations, including the regulation of 

the Exchange.144 Further, 24X stated 

that the agreement will provide that 24X 

will receive all fees, including 

regulatory fees and trading fees payable 

by the Exchange’s members as well as 

any funds received from any market 

data fees and tape revenue. In addition, 

the agreement will provide that 24X 

Bermuda and 24X US will reimburse 

24X for its costs and expenses to the 

extent that 24X’s assets are insufficient 

to meet its costs and expenses. 

Further, the 24X LLC Agreement 

requires that any Regulatory Funds 

received by 24X shall not be used for 

non-regulatory purposes or distributed, 

advanced or allocated to any Company 

Member,145 but rather, shall be applied 

to fund regulatory operations of the 24X 

(including surveillance and enforcement 

activities), or, as the case may be, shall 

be used to pay restitution and 

disgorgement of funds intended for 

customers.146 Excess non-regulatory 

funds, as solely determined by the 24X, 

will be remitted to 24X US in 

accordance with the 24X LLC 

Agreement.147

One commenter stated that 24X did 

not provide audited financial 

statements.148 24X stated that it 

believed that it complied with the 

requirements of Exhibit I regarding 

financial statements because while 24X 

has been formed it has not commenced 

operations and does not have audited 

financial statements for any fiscal 

year.149 24X also stated that the 

approach it has taken with regard to 

Exhibit I is consistent with prior 

exchange applications that have been 

approved by the SEC based on the same 

provided information.150

The 24X Form 1 provides the 

Commission with information necessary 

to make a finding that 24X will operate 

consistent with its obligations under the 

Exchange Act.151 24X has filed financial 

information about how it intends to 

fund its operations and has filed 

financial information in Exhibit D about 

its owners, 24X Bermuda and 24X US. 


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152 17 CFR 249.1. 153See Form 1, Exhibit I. 154 15 U.S.C. 78f. 155 15 U.S.C. 78s. 156 17 CFR 249.1. 157See e.g., Exhibit I for MIAX Sapphire, LLC 

Form 1 Application and Exhibits, available at 

https://www.sec.gov/files/rules/other/2023/exhibiti.pdf (stating that applicant MIAX Sapphire, LLC 

has been formed but has not commenced operations 

and does not yet have audited financial statements 

for any fiscal year); Exhibit I for MEMX LLC Form 

1 Application and Exhibits, available at https://

www.sec.gov/files/rules/other/2019/memx/exhibiti.pdf (stating that applicant MEMX LLC has been 

formed but has not commenced operations and so 

does not yet have audited financial statements for 

any fiscal year). 

158 17 CFR 240.6a–2(b)(1). 

159Form 1 filings are made available to the 

public. See Securities Exchange Act Release No. 

97182 (Mar. 22, 2023), 88 FR 23920, 23928 (Apr. 

18, 2023). 

160See Form 1, Exhibit L. See also 24X Rules 9.8 

and 13.7. 

161See Form 1, Exhibit L. 

162For example, LTSE, MEMX Exchange, IEX, 

MIAX Exchange, MIAX PEARL, LLC, Nasdaq MRX, 

LLC, Cboe EDGA Exchange, Inc., Cboe EDGX 

Exchange, Inc. (‘‘Cboe EDGX’’), and Cboe BZX 

Exchange, Inc. (‘‘Cboe BZX’’) have entered into 

RSAs with FINRA. 

163See, e.g., MEMX Order, supra note 57; LTSE 

Order, supra note 57; IEX Order, supra note 65; 

DirectEdge Exchanges Order, supra note 84; Nasdaq 

Order, supra note 57. The Commission is not 

approving the RSA or any of its specific terms. 

164See 15 U.S.C. 78s(g)(1). 

165For example, if failings by FINRA have the 

effect of leaving 24X in violation of any aspect of 

24X’s self-regulatory obligations, 24X would bear 

direct liability for the violation, while FINRA may 

bear liability for causing or aiding and abetting the 

violation. See, e.g., MEMX Order, supra note 57; 

LTSE Order, supra note 57; IEX Order, supra note 

65; Nasdaq Order, supra note 57; BATS Order, 

supra note 57; DirectEdge Exchanges Order, supra 

note 84. 

166See, e.g., MEMX Order, supra note 57; LTSE 

Order, supra note 57; IEX Order, supra note 65; and 

Nasdaq Order, supra note 57. 

167 15 U.S.C. 78s(g)(1). 

168 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), 

respectively. 

169See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d– 

2. Section 17(d)(1) of the Exchange Act allows the 

Commission to relieve an SRO of certain 

responsibilities with respect to members of the SRO 

who are also members of another SRO (‘‘common 

members’’). Specifically, Section 17(d)(1) allows the 

Commission to relieve an SRO of its responsibilities 

to: (i) receive regulatory reports from such 

members; (ii) examine such members for 

compliance with the Exchange Act and the rules 

and regulations thereunder, and the rules of the 

SRO; or (iii) carry out other specified regulatory 

responsibilities with respect to such members. 

170See Securities Exchange Act Release No. 

86587 (Aug. 7, 2019), 84 FR 39883 (Aug. 12, 2019) 

(File No. 4–747). See also, e.g., Securities Exchange 

Act Release Nos. 83696 (July 24, 2018), 83 FR 35682 

(July 27, 2018) (FINRA/MIAX Exchange/MIAX 

PEARL); 77321 (Mar. 8, 2016), 81 FR 13434 (Mar. 

14, 2016) (File No. 4–697) (FINRA/ISE Mercury, 

LLC); 73641 (Nov. 19, 2014), 79 FR 70230 (Nov. 25, 

2014) (File No. 4–678) (FINRA/MIAX Exchange); 

70053 (July 26, 2013), 78 FR 46656 (Aug. 1, 2013) 

(File No. 4–663) (FINRA/Topaz Exchange n/k/a ISE 

Gemini, LLC); 59218 (Jan. 8, 2009), 74 FR 2143 (Jan. 

14, 2009) (File No. 4–575) (FINRA/Boston Stock 

Exchange, Inc. (‘‘BSE’’)); 58818 (Oct. 20, 2008), 73 

Continued 

Exhibit I of Form 1 requires that the 

applicant submit ‘‘[f]or the latest fiscal 

year of the applicant, audited financial 

statements which are prepared in 

accordance with, or in the case of a 

foreign applicant, reconciled with, 

United States generally accepted 

accounting principles, and are covered 

by a report prepared by an independent 

public accountant.’’ 152 24X has not 

provided audited financial statements 

nor the report prepared by an 

independent public accountant because, 

as it stated in the Form 1, the ‘‘Exchange 

has been formed but has not 

commenced operations and does not yet 

have audited financial statements for 

any fiscal year.’’ 153 As stated in the 

instructions for Form 1, ‘‘Form 1 is 

designed to enable the Commission to 

determine whether an exchange 

applying for registration is in 

compliance with the provisions of 

sections 6 154 and 19 155 of the Exchange 

Act.’’ 156 In this case, the applicant 

exchange has no past operations or 

activity. Moreover, the Commission has 

approved prior Form 1 applications 

with similar circumstances.157 In 

addition, pursuant to Rule 6a–2(b)(1) of 

the Exchange Act,158 as a registered 

national securities exchange, 24X must 

file an amendment to its Form 1 

application. Exhibits D and I must be 

filed on or before June 30 of each year 

and include audited financial 

information as of the end of the latest 

fiscal year of the Exchange; thus, the 

Commission and the public will be 

informed of 24X’s financial activity 

going forward.159

2. Regulatory Contract With FINRA 

Although 24X will be an SRO with all 

of the attendant regulatory obligations 

under the Exchange Act, it has 

represented to the Commission that it 

intends to enter into a regulatory 

services agreement (‘‘RSA’’) with 

FINRA, under which FINRA as a 

regulatory services provider will 

perform certain regulatory functions on 

24X’s behalf.160 Specifically, 24X 

expects that such services will include 

the performance of investigation, 

disciplinary, and hearing services.161

Notwithstanding the RSA, 24X will 

retain legal responsibility for the 

regulation of its members and its market 

and the performance of FINRA as its 

regulatory services provider. Because 

24X anticipates entering into an RSA 

with FINRA, it has not made provisions 

to fulfill the regulatory services that will 

be undertaken by FINRA. Accordingly, 

the Commission is conditioning the 

operation of 24X on a final RSA that 

specifies the services that will be 

provided to 24X. 

It is consistent with the Exchange Act 

for 24X to contract with FINRA to 

perform certain examination, 

enforcement, and disciplinary 

functions.162 These functions are 

fundamental elements of a regulatory 

program and constitute core selfregulatory functions. FINRA has the 

expertise and experience to perform 

these functions for 24X.163 However, 

24X, unless relieved by the Commission 

of its responsibility, bears the selfregulatory responsibilities and primary 

liability for self-regulatory failures, not 

the SRO retained to perform regulatory 

functions on 24X’s behalf.164 In 

performing these regulatory functions, 

however, FINRA may nonetheless bear 

liability for causing or aiding and 

abetting the failure of 24X to perform its 

regulatory functions.165 Accordingly, 

although FINRA will not act on its own 

behalf under its SRO responsibilities in 

carrying out these regulatory services for 

24X, FINRA may have secondary 

liability if, for example, the Commission 

finds that the contracted functions are 

being performed so inadequately as to 

cause a violation of the federal 

securities laws or rules thereunder by 

24X.166

3. Rule 17d–2 Agreements 

Section 19(g)(1) of the Exchange 

Act,167 among other things, requires 

every SRO registered as either a national 

securities exchange or national 

securities association to comply with 

the Exchange Act, the rules and 

regulations thereunder, and the SRO’s 

own rules, and, absent reasonable 

justification or excuse, enforce 

compliance by its members and persons 

associated with its members.168 Rule 

17d–2 of the Exchange Act permits 

SROs to propose joint plans to allocate 

regulatory responsibilities amongst 

themselves for their common rules with 

respect to their common members.169

These agreements, which must be filed 

with and declared effective by the 

Commission, generally cover areas 

where each SRO’s rules substantively 

overlap, including such regulatory 

functions as personnel registration and 

sales practices. For example, the 

Commission declared effective a plan to 

allocate regulatory responsibilities 

between FINRA and LTSE pursuant to 

which FINRA assumes examination and 

enforcement responsibility for brokerdealers that are members of both FINRA 

and LTSE with respect to the rules of 

LTSE that are substantially similar to 

the applicable rules of FINRA, as well 

as certain specified provisions of the 

federal securities laws.170


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FR 63752 (Oct. 27, 2008) (File No. 4–569) (FINRA/ 

BATS Exchange, Inc.); 55755 (May 14, 2007), 72 FR 

28087 (May 18, 2007) (File No. 4–536) (National 

Association of Securities Dealers, Inc. (‘‘NASD’’) n/ 

k/a FINRA) and Chicago Board of Options 

Exchange, Inc. concerning the CBOE Stock 

Exchange, LLC); 55367 (Feb. 27, 2007), 72 FR 9983 

(Mar. 6, 2007) (File No. 4–529) (NASD/International 

Securities Exchange, LLC); 54136 (July 12, 2006), 71 

FR 40759 (July 18, 2006) (File No. 4–517) (NASD/ 

Nasdaq). 

171See supra notes 169–170 and accompanying 

text. 

172See Form 1, Exhibit E. 

173See Securities Exchange Act Release Nos. 

88366 (Mar. 12, 2020), 85 FR 15238 (Mar. 17, 2020) 

(File No. 4–618) (order approving and declaring 

effective a proposed amendment to the multi-party 

Rule 17d–2 plan relating to covered Regulation 

NMS and Consolidated Audit Trail Rules); 86542 

(Aug. 1, 2019), 84 FR 38679 (Aug. 7, 2019) (File No. 

4–566) (notice of filing and order approving and 

declaring effective an amendment to the multi-party 

Rule 17d–2 plan relating to the surveillance, 

investigation, and enforcement of insider trading 

rules). 

174For common members, the regulatory 

obligations will be covered by the Rule 17d–2 

agreements, and for 24X Exchange Members that are 

not also members of FINRA, the regulatory 

obligations will be covered by the RSA. 

175A more detailed description of the manner of 

operation of 24X’s trading system can be found in 

Form 1, Exhibit E. The proposed rulebook for 24X 

can be found in Exhibit B to 24X’s Form 1, and the 

governing documents for 24X, 24X US and 24X 

Bermuda can be found in Form 1, Exhibit A and 

Exhibit C. A complete set of forms concerning 

membership and access can be found in Form 1, 

Exhibit F. 

176See Form 1, Exhibit E. See also 24X Rule 

11.9(b). 

177See 17 CFR 242.600(b)(55) (defining ‘‘NMS 

Stock’’). 

178See 24X Rule 14.1. 

179As discussed below, 24X will pause trading 

from 7 p.m. until 8 p.m. Monday, Tuesday, 

Wednesday, and Thursday nights. See 24X Rule 

11.15(c)(2). Unless otherwise noted, all times 

referred to in this order are Eastern Time (‘‘ET’’). 

180See, e.g., 24X Rule 11.15(c); Form 1, Exhibit 

E–1 at 4. See also infra notes 329–338 (discussing 

24X’s trading pauses). 

181See 24X Rule 1.5(ll) defining ‘‘U.S. Business 

Day.’’ In addition, 24X proposes, among others, the 

following terms: ‘‘24X Trading Day’’ (see 24X Rule 

(1.5(b)); ‘‘Exchange Trading Hours other than the 

24X Market Session’’ (see 24X Rule 1.5(r)); 

‘‘Extended Hours Trading’’ (see 24X Rule 1.5(s)); 

‘‘Regular Trading Hours’’ (see 24X Rule 1.5(dd)). 

24X Rule 1.5(s) defines ‘‘Extended Hours Trading’’ 

as ‘‘trading during the Pre-Market Session, PostMarket Session and 24X Market Session.’’ 

182See 24X Rule 1.5(l) defining the ‘‘Core Market 

Session.’’ 

183See 24X Rule 1.5(z) defining the ‘‘Pre-Market 

Session.’’ See, e.g., NYSE Arca, Inc., Cboe EDGX 

Exchange, Inc., The Nasdaq Stock Market LLC. 

184See 24X Rule 1.5(y) defining the ‘‘Post-Market 

Session.’’ See, also e.g., NYSE Arca, Inc., NYSE 

American LLC, NYSE Chicago, Inc., NYSE National, 

Inc., Cboe BZX Exchange, Inc., Cboe BYX Exchange, 

Inc., Cboe EDGA Exchange, Inc., Cboe EDGX 

Exchange, Inc., The Nasdaq Stock Market LLC. 

These national securities exchanges operate postmarket sessions until 8 p.m. As discussed above, 

24X will end its Post-Market Session at 7 p.m. 

185See 24X Rule 1.5(c) defining the ‘‘24X Market 

Session.’’ 

186See infra section III.D.2. 

187See 24X Rule 1.5(c). 24X initially proposed to 

operate the 24X Market Session on weekends and 

holidays as well as overnight. In Amendment No, 

2, 24X revised the 24X Rule 1.5(c) definition of 24X 

Market Session to include only overnight hours, as 

discussed above, and to remove its proposal to 

provide trading on weekends and holidays. 

188See Form 1, Exhibit E–1 at 2. 

189See Healthy Markets Letter at 6. 

190See 24X Letter II at 17. 

191 Id. See also Form 1, Execution Page (listing 

Stamford, Connecticut as its primary address); Form 

1, Exhibit E (describing the locations of its Systems 

and personnel); Form 1, Exhibit E–1 (describing the 

locations of the trading Systems). 

192See 24X Letter II at 17; see also Form 1, 

Exhibit E. 

193See also Form 1, Exhibit E. 

194See 24X Rule 1.5(mm) defining ‘‘User.’’ 

195To obtain authorized access to the 24X 

System, each User must enter into a User 

Agreement with 24X. See 24X Rule 11.3(a). See also 

24X Rule 1.5(hh) defining ‘‘System.’’ 

196See 24X Rule 1.5(g). 

197See 24X Rule 11.4. 

A Rule 17d–2 plan that is declared 

effective by the Commission relieves the 

specified SRO of those regulatory 

responsibilities allocated by the plan to 

another SRO.171 24X has represented to 

the Commission that it will join all 

applicable plans, including Rule 17d–2 

plans for the allocation of regulatory 

responsibilities.172 Similar to other 

exchanges, the Commission understands 

from 24X that it will enter into a 

bilateral Rule 17d–2 agreement covering 

common members of 24X and FINRA. 

This agreement will allocate to FINRA 

regulatory responsibility, with respect to 

common members, for specified 

regulatory and enforcement matters 

arising out of specified common rules 

and specified provisions of the 

Exchange Act and the rules and 

regulations thereunder. In addition, the 

Commission is conditioning operation 

of 24X as an exchange on 24X first 

joining the applicable multilateral Rule 

17d–2 plans, including the multi-party 

Rule 17d–2 plan for the allocation of 

regulatory responsibilities with respect 

to certain Regulation NMS and 

Consolidated Audit Trail Rules and the 

multi-party Rule 17d–2 plan for the 

surveillance, investigation, and 

enforcement of common insider trading 

rules.173

Because 24X anticipates entering into 

these Rule 17d–2 agreements, it has not 

made provision to fulfill the regulatory 

obligations that will be undertaken by 

FINRA and other SROs under these 

agreements with respect to common 

members.174 Accordingly, the 

Commission is conditioning the 

operation of 24X on approval by the 

Commission of a Rule 17d–2 agreement 

that allocates the above specified 

matters to FINRA, and the approval of 

an amendment to the existing multiparty Rule 17d–2 plans specified above 

to add 24X as a party. 

D. 24X Trading System 

1. Overview of Trading System 175

24X proposes to operate a fully 

automated electronic trading 

platform 176 for the trading of listed 

NMS stocks 177 pursuant to unlisted 

trading privileges (‘‘UTP’’) 178 23 hours 

per day,179 five (5) days per week, 

subject to certain trading pauses, as 

provided in the 24X rules.180 Similar to 

other U.S. national securities exchanges, 

24X will operate three different trading 

sessions that span from 4 a.m. to 7 p.m. 

on each U.S. Business Day: 181 (1) a 

‘‘Core Market Session’’ between 9:30 

a.m. and 4 p.m.,182 (2) a ‘‘Pre-Market 

Session’’ between 4 a.m. and 9:30 

a.m.,183 and (3) a ‘‘Post-Market Session’’ 

between 4 p.m. and 7 p.m.184 24X also 

will operate a fourth trading session, the 

24X Market Session,185 which, as 

discussed in greater detail below,186

will operate between 8 p.m. and 4 a.m. 

Sunday, Monday, Tuesday, Wednesday, 

and Thursday nights that precede a U.S. 

Business Day.187

24X will not maintain a physical 

trading floor.188 One commenter stated 

that the Form 1 was unclear about 24X’s 

physical locations.189 24X responded 

that it ‘‘clearly’’ provided information 

on the Form 1 execution page as well as 

Exhibit E.190 Specifically, 24X stated 

that its primary address is in 

Connecticut and that the Exchange will 

operate out of a third-party data center 

in New Jersey, with a secondary site 

located in Illinois.191 Further, 24X 

stated that 24X personnel will operate 

out of its New York office as well as its 

Connecticut office.192

The Form 1 and exhibits provide 

information about the location of 24X 

Systems and personnel. The Form 1 

Execution Page states that 24X’s primary 

address is in Stamford, Connecticut. 

Exhibit E states that 24X will operate 

out of data centers in New Jersey and 

Illinois and that its personnel will 

operate out of offices in Connecticut and 

New York. Exhibit E–1 states that 24X’s 

trading platform will be located in the 

Equinix data center in New Jersey (NY4) 

and that its secondary back-up data 

center will be located in Chicago, 

Illinois (CH4).193 24X has provided 

information about the location of its 

platform and its personnel. 

Only broker-dealer members of 24X 

and entities that enter into market 

access arrangements with members 

(collectively ‘‘Users’’ 194) will have 

access to the 24X System,195 and only 

Authorized Traders 196 may obtain 

access to the 24X System on behalf of 

Users.197 Liquidity will be derived from 

quotes and orders to buy and sell 


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198 24X proposes to have one class of membership 

open to registered broker-dealers. See 24X Rule 2.3 

(stating, in part, that ‘‘any registered broker or 

dealer that is and remains a member of a national 

securities association registered under Section 

15A(a) of the Exchange Act or a member of another 

national securities exchange registered under 

Section 6(a) of the Exchange Act or any person 

associated with such a registered broker or dealer 

shall be eligible to be, and to remain, a Member’’). 

199See Form 1, Exhibit E–1 at 2. 

200See 24X Rule 11.8(a) and 24X Rule 11.9(a)(4). 

201See 24X Rule 11.1(a). 

202See 24X Rule 11.16(a) (stating, ‘‘[e]xcept as 

explicitly set forth herein, each of the rules and 

requirements set forth in this Chapter 11 applies to 

trading activity during the 24X Market Session.’’). 

The 24X rules make specific provisions for the 24X 

Market Session with respect to, for example, 

matters such as order types permitted. See, e.g., 

Exhibit E–1 to 24X’s Form 1; 24X Rule 11.7. 

203 24X defines the term ‘‘Market Order,’’ in part, 

as ‘‘[a]n 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.’’ See 24X 

Rule 11.7(a). 

204 24X defines the term ‘‘Limit Order’’ as ‘‘[a]n 

order to buy or sell a stated amount of a security 

at a specified price or better. A marketable Limit 

Order is a Limit Order to buy (sell) at or above 

(below) the lowest (highest) Protected Offer 

(Protected Bid) for the security.’’ See 24X Rule 

11.7(b). 

205 24X defines the term ‘‘Pegged Order,’’ in part, 

as ‘‘[a] User may indicate to peg an order to a 

reference price, including an instruction of Primary 

Peg (the NBB for buy orders and NBO for sell 

orders, with or without offsets) or an instruction of 

Midpoint Peg (the midpoint of the NBBO). The 

System’s calculation of the NBBO would not take 

into account any Pegged Orders that are resting on 

the 24X Book. A new timestamp is created for a 

Pegged Order each time it is automatically repriced.’’ See 24X Rule 11.7(c). 

206See 24X Rule 11.7 (describing, among other 

things, order types eligible for the various 24X 

trading sessions). See also Form 1, Exhibit E–1 at 

7. 

207See, e.g., 24X Rule 11.7; Form 1, Exhibit B. 

208See 24X Rule 11.7(a)(4) for Market Orders, 24X 

Rule 11.7(c)(4) for Pegged Orders, and 24X Rule 

11.7(b) for Limit Orders. 

209See 24X Rule 11.6(q). See also Form 1, Exhibit 

E–1 at 5. 

210See 24X Rule 11.1(b). 

211See 24X Rule 11.1(c) (providing, in part, that 

‘‘to the extent that other Trading Centers are open 

during the 24X Market Session, orders may be 

routed away to such Trading Centers during the 

24X Market Session’’). 

212As discussed above, certain rules govern 

trading during Exchange Trading Hours other than 

the 24X Market Session, while other rules and 

requirements apply exclusively to trading during 

the 24X Market Session. See supra note 201 and 

accompanying text. See also 24X Rule 11.1(a). 

213See 24X Rule 11.9(a)(1). See also 24X Rule 

11.9(a)(5), 24X Rule 11.23, and 24X Rule 13.2. See 

also supra section III.D.2.f. 

214See 24X Rule 11.9(a)(2). 

215See 24X Rule 11.9(a)(3). See also section 

III.D.2.b. 

216See 24X Rule 11.9(d). 

217See 24X Rules 11.17 through 11.20. 

218See 24X Rule 11.20(a)(1). The term ‘‘Regular 

Trading Hours’’ is defined as ‘‘the time between 

9:30 a.m. and 4:00 p.m. Eastern Time each U.S. 

Business Day.’’ See 24X Rule 1.5(dd). 

219See, e.g., MEMX Exchange Rules 11.17 

through 11.20; Cboe EDGX Rules 11.17 through 

11.20. 

220The three equity data plans that currently 

govern the collection, consolidation, processing, 

and dissemination of national market system data 

by the exclusive Securities Information Processors 

(‘‘SIPs’’) are (1) the Consolidated Tape Association 

Plan (‘‘CTA Plan’’), (2) the Consolidated Quotation 

Plan (‘‘CQ Plan’’), and (3) the Joint Self-Regulatory 

Organization Plan Governing the Collection, 

Consolidation, and Dissemination of Quotation and 

Transaction Information for Nasdaq-Listed 

Securities Traded on Exchanges on an Unlisted 

Trading Privileges Basis (‘‘UTP Plan’’) (collectively, 

the ‘‘Equity Data Plans’’). See also 24X Rule 1.5(o). 

221See Form 1, Exhibit E. See also 24X Rule 11.11 

(providing, in part, that 24X will report executions 

to the appropriate consolidated transaction 

reporting system ‘‘to the extent required by the 

Exchange Act and the rules and regulations 

thereunder.’’). See also infra section III.D.2.a.i. 

(discussing the availability of the Equity Data Plans 

during the 24X Market Session). 

222See Form 1, Exhibit E (stating, ‘‘including, but 

not limited to, the NMS Plan to Address 

Extraordinary Market Volatility (‘‘Limit Up-Limit 

Down Plan’’), the NMS Plan Governing the 

Consolidated Audit Trail (the ‘CAT NMS Plan’), the 

NMS Plan for the Selection and Reservation of 

Securities Symbols, and the 17d–2 Plans for 

Allocation of Regulatory Responsibilities’’). 

223See Montone Letter at 9. 

224See 24X Letter II at 15. 

225See Form 1, Exhibit E (requiring a description 

of the manner of operation of the System and that 

the description should include proposed fees). 

submitted to 24X electronically by 

Exchange Members.198 24X proposes to 

operate a fully automated electronic 

limit order book with a continuous 

matching function 199 and orders resting 

on the book would be ranked and 

executed in price/time priority.200

24X proposes certain rules to govern 

trading during Exchange Trading Hours 

other than the 24X Market Session,201

while other rules and requirements 

would apply exclusively to trading 

during the 24X Market Session.202 For 

example, 24X proposes to accept Market 

Orders,203 Limit Orders 204 and Pegged 

Orders 205 with various modifiers and 

time-in-force instructions, although 

subject to certain limitations 206 during 

various trading sessions.207 Specifically, 

Market Orders would be accepted only 

during the Core Market Session; Pegged 

Orders would be accepted only during 

the Pre-Market Session, the Core Market 

Session, and the Post-Market Session; 

and Limit Orders would be accepted 

during all sessions.208 Further, pursuant 

to 24X Rule 11.16, Market Orders and 

Pegged Orders are not eligible for 

execution during the 24X Market 

Session. Orders may be submitted in 

round lots, odd lots, or mixed lots.209

24X will permit orders to be entered, 

canceled, modified, executed on or 

routed away from 24X during the PreMarket Session, the Core Market 

Session, and the Post-Market Session.210

24X would also permit orders to be 

entered, canceled, modified or executed 

on the Exchange during the 24X Market 

Session.211

With respect to the price of 

executions that would occur on the 

Exchange,212 the 24X rules are designed 

to comply with short sale price test 

restriction under Rule 201 of Regulation 

SHO,213 the order protection 

requirements of Rule 611 of Regulation 

NMS,214 and the National Market 

System Plan to Address Extraordinary 

Market Volatility pursuant to Rule 608 

of Regulation NMS (‘‘LULD Plan’’).215

24X will permit the use of self-trade 

protection (‘‘STP’’) modifiers to prevent 

an incoming order from executing 

against a resting order originating from 

the same market participant.216

In addition, 24X will permit firms to 

register as Market Makers with 

affirmative and negative market making 

obligations.217 In particular, Market 

Makers will be required to maintain 

continuous two-sided quotes of at least 

100 shares only during Regular Trading 

Hours.218 While Market Makers would 

have no such obligations during the PreMarket, Post-Market or 24X Market 

Sessions, 24X’s proposed rules relating 

to Market Makers are similar to the rules 

of other national securities exchanges, 

which do not extend Market Maker 

obligations to extended hours trading 

sessions.219

In its Form 1, 24X stated that it will 

join and participate in any applicable 

national market system plan that other 

national securities exchanges and/or 

market centers have joined, including, 

for example, the three Equity Data 

Plans 220 that currently govern the 

collection, consolidation, processing, 

and dissemination of core data.221 24X 

further states that it would ‘‘likewise 

join all other applicable Plans as 

deemed necessary and in the interest of 

its Users.’’ 222

One commenter stated that the 

Exchange proposal was ‘‘somewhat 

vague’’ with regard to transaction fees 

and that 24X ‘‘should give a range of 

where fees will land compared to other 

exchanges.’’ 223 24X responded that its 

approach to fees is ‘‘typical for exchange 

applications’’ and that Exhibit E states 

that it ‘‘intends to establish a Fee 

Schedule setting forth all applicable 

transaction and other fees . . . close to 

launch of the Exchange’’ so that the fees 

reflect the ‘‘competitive landscape at 

that time.’’ 224

Form 1 requires an applicant to 

provide a description of proposed 

fees.225 In its Exhibit E, 24X described 

its proposed fees, including transaction 

fees, membership fees, regulatory 

charges, permit application fees, market 


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226See Form 1, Exhibit E. 

227See 24X Rule 11.15(a). 

228See Form 1, Exhibit E. 

229 15 U.S.C. 78s(b). 

230 17 CFR 240.19b–4. 

231 15 U.S.C. 78f(b)(4), (b)(5). 

232See 24X Rule 11.2(a); see also section III.D.2.d. 

(discussing securities eligible for trading during the 

24X Market Session). See also supra notes 183 and 

184 (describing the existing exchanges’ extended 

hours sessions). 

233See 24X Rule 1.5(c). 

234See supra notes 183 and 184 and 

accompanying text. 

235See 24X Rule 11.15(c). See also infra section 

III.D.2.c. 

236For example, 24X will not accept Market 

Orders or Pegged Orders in the 24X Market Session 

and 24X will utilize the same clearly erroneous 

execution rules that apply on other venues that 

have extended hours sessions. 

237See 24X Rule 3.21. See also infra section 

III.D.2.e. 

238See, e.g., Polygon Letter; DriveWealth Letter; 

Angel Letter I; Angel Letter II; Montone Letter. 

239See Polygon Letter at 5. See also DriveWealth 

Letter at 1. 

240See Polygon Letter at 5. See also Angel Letter 

I. 

241See Angel Letter I at 2. 

242See Blonien and Ober Letter at 1. 

243According to the commenter, in the model, a 

market closure not only concentrates liquidity 

throughout the day but also helps coordinate 

liquidity, especially towards the end of the trading. 

Moreover, the commenters state that the cost of a 

closure, that a traders’ positions may deviate far 

from their desired positions, is, according to the 

commenter, outweighed by its benefits. See Blonien 

and Ober Letter at 1. 

244See Blonien and Ober Letter at 1. The 

commenter stated that these findings are based on 

a model of large and homogeneous traders, and that 

heterogeneous groups of traders, such as retail 

investors, market makers, and informed traders, 

may have asymmetric responses to market closures 

of differing lengths. See id. 

245See Better Markets Letter at 2; SIFMA Letter 

II at 2. 

246See IEX Letter at 2. 

247See SIFMA Letter II at 2. See infra notes 290– 

292 and accompanying text (discussing costs 

relating to the expansion of trading hours). 

248See Glover and deHaan Letter at 1. 

249See Angel Letter II at 3. 

250See Angel Letter II at 2. 

251See supra note 245 and accompanying text. 

252See 24X Letter II at 11. See also infra section 

III.D.2.e. (discussing customer disclosures relating 

to risks of the 24X Market Session). 

data fees, co-location fees, connectivity 

fees, and bandwidth fees.226 Further, 

24X Rule 15.1, which establishes the 

Exchange’s authority to impose fees, 

dues, assessments and other charges 

that 24X may prescribe, lists the 

following fees that 24X will impose: 

‘‘membership dues, transaction fees, 

communication and technology fees, 

regulatory charges, listing fees, and 

other fees and charges as the Exchange 

may determine.’’ 227 24X also stated that 

it intends to establish a fee schedule 

that sets forth all fees, and that the 

actual fee amounts and types will be 

determined at a time closer to launch.228

24X’s Form 1 satisfies the 

requirements of the Form 1 as it 

describes the fees that 24X may 

prescribe. However, any fees, dues or 

other charges that 24X intends to assess 

must be filed as a proposed rule change 

pursuant to section 19(b) of the 

Exchange Act 229 and Rule 19b–4 

thereunder.230 Exchange fees are subject 

to the requirements of the Exchange Act, 

including sections 6(b)(4) and 6(b)(5).231

2. 24X Market Session 

As discussed above, 24X will operate 

the 24X Market Session, a fourth trading 

session that will extend the hours of 

exchange trading for NMS stocks 

beyond the existing extended hours 

sessions.232 In Amendment No. 2, 24X 

modified its original proposal for the 

24X Market Session to include 

overnight trading only on certain nights 

of the week—Sunday through 

Thursday—that precede a U.S. Business 

Day.233 As discussed above,234 while 

several exchanges offer a pre-market 

trading session that may start as early as 

4 a.m. on each U.S. Business Day, and 

most exchanges offer a post-close 

trading session that ends at 8 p.m. on 

each U.S. Business Day, 24X’s model, as 

amended, will expand exchange trading 

hours such that trading on 24X will be 

conducted on a largely continuous basis 

during the week subject to a daily one 

hour trading pause.235 24X will operate 

the 24X Market Session, as amended, in 

a manner that is consistent with current 

extended hours sessions.236 Further, as 

discussed below, 24X will require that 

24X Members make disclosures to their 

customers concerning risks associated 

with trading during Extended Hours 

Trading, and has included tailored 

disclosures that 24X Members must 

provide to their customers to reflect the 

potential risks associated with the 24X 

Market Session, as amended.237

The Commission received several 

comment letters about the proposed 

operation of the 24X Market Session, 

which, as initially proposed, would 

have operated 8 p.m. until 4 a.m. during 

every U.S. Business Day as well as most 

of the day on weekends and holidays, 

subject to proposed trading pauses. 

Some commenters supported the 

originally proposed expansion of 

trading hours.238 For instance, two 

commenters stated that the originally 

proposed 24X Market Session would 

bring the ‘‘current practice of trading 

24/7 onto a lit exchange’’ 239 and that 

the market should be left to decide 

whether this is a valuable endeavor.240

One commenter stated that 24-hour 

trading already occurs and that ‘‘it is 

better that it be on a national securities 

exchange with higher regulatory 

protections afforded by an 

exchange.’’ 241

One commenter stated that its recent 

research ‘‘implies that 23/7 trading will 

likely improve the market’s allocative 

efficiency relative to the traditional 6.5/ 

5 trading schedule.’’ 242 This commenter 

stated that their research studied 

welfare, measured by the allocative 

efficiency of the market, in equilibria of 

two market designs: one with a daily 

closure, and another in which closure is 

eliminated. According to the 

commenter, the research showed that 

‘‘as long as there is a closure for some 

time, most of the benefits of a market 

closure are accrued.’’ 243 Thus, the 

commenter stated that it is likely that 

24X’s proposed 23/7 exchange will 

maintain the welfare benefits of a 

market closure, reduce the costs of a 

prolonged closure, and enhance 

allocative efficiency.244

Several commenters raised concerns 

about the original proposed expansion 

of trading hours. For instance, two 

commenters stated that the proposal 

would harm retail investors due to low 

volumes and wide spreads during the 

extended trading hours and a lack of 

liquidity would result in a wealth 

transfer from investors to 

professionals.245 Another commenter 

stated that although 24X suggests that 

retail investors would welcome 24-hour 

exchange trading, the demand for 

investors for overnight and weekend 

trading seems speculative because no 

information has been provided about 

the number of such investors or the 

relevance of the potential benefit.246

Another commenter stated that investor 

demand should be considered to assess 

whether the expansion of trading hours 

would justify the market-wide costs.247

One commenter suggested a ‘‘cautious 

approach to expanding hours’’ because 

its research indicated ‘‘negative 

consequences for retail investment.’’ 248

Another commenter, however, stated 

that the research cited did not examine 

overnight trading or expansion of 

trading hours but instead examined time 

zone differences.249 This commenter 

stated 24-hour trading ‘‘is already here 

on automated trading systems, so 

rejecting the 24X application would not 

restrict retail access to overnight trading 

at all.’’ 250

With respect to the commenter’s 

concern about retail investor 

participation in the 24X Market 

Session,251 24X stated that, as discussed 

below, the Commission has historically 

allowed retail participation in expanded 

trading hours with appropriate 

disclosures.252 In Amendment No. 1, 

24X amended its 24X Rule 3.21 to 


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253As discussed above, in Amendment No. 2, 24X 

scaled back the hours of operation of the 24X 

Market Session to 8 p.m. to 4 a.m. Sunday, Monday, 

Tuesday, Wednesday, and Thursday nights, so long 

as the next trading day is a U.S. Business Day. See 

supra note 233 and accompanying text. As part of 

Amendment No. 2, 24X also revised the disclosures 

that must be provided by 24X Members to their 

customers to reflect the revised operating hours of 

the 24X Market Session. See infra section III.D.2.e. 

254See 24X Letter III at 5. See also 24X Letter IV 

at 6 (stating that ‘‘the number of market participants 

interested in overnight trading continues to grow.’’). 

255See 24X Letter III at 2. 

256See 24X Letter III at 2. 

257See 24X Letter IV at 6. 

258See supra notes 183–184 and accompanying 

text. 

259See 24X Rule 3.21(f). 

260See 24X Rule 3.21(e). 

261See e.g., NYSEArca Rule 7.34–E(d) (stating 

that only limit orders are eligible to participate in 

the Early Trading Session and Late Trading 

Session). 

262See e.g., NYSEArca Rule 7.34–E(d)(3); Nasdaq 

Rule Equity 2, Section 20; MEMX Exchange Rule 

3.21; FINRA Rule 2265. 

263See 24X Rule 3.21(a) (describing the risk of 

lower liquidity); 24X Rule 3.21(f) (describing the 

risk of wider spreads). 

264See e.g., Blue Ocean ATS, LLC (‘‘BOATS’’). 

The operating hours for BOATS occur from 8 p.m. 

to 4 a.m. on days with the NYSE Trade Reporting 

Facility is open for trade reporting. See Form ATS– 

N, available at sec.gov/Archives/edgar/data/ 

1795131/000153949723000091/xslATS-N_X01/ 

primary_doc.xml. 

265 In a letter to the Commission, 24X stated that 

investor demand for overnight trading is growing 

and provided details of other market participants 

that have recently expressed interest in expanding 

the hours of trading on an exchange. See 24X Letter 

IV at 6 (citing a proposal by NYSE Arca to expand 

its trading hours and a notice by Schwab 

announcing an expansion to 24-hour trading for 

certain stocks). 

266See 24X Rule 1.5(c) and 24X Rule 11.16. 24X 

may begin operations of its other trading sessions 

once the conditions discussed below have been 

satisfied. 

267See 24X Rule 1.5(c). 

268As discussed above, the 24X will not start 

operating the 24X Market Session unless the Equity 

Data Plans have established a mechanism to collect, 

consolidate, process and disseminate quotation and 

transaction information at all times during the 24X 

Market Session that is equivalent to the mechanism 

established for Exchange Trading Hours other than 

the 24X Market Session, among other things. See 

24X Rule 1.5(c). 

269 15 U.S.C 78f(b)(5). 

provide additional disclosures designed 

to address the potential risks of the 24X 

Market Session.253 24X stated, in 

response to commenters questioning 

whether additional trading hours would 

benefit investors, that ‘‘there is 

substantial interest in expanded trading 

hours’’ and that the markets should be 

able to determine whether the 24X 

proposal will be successful.254 24X also 

stated that its amended rules for the 24X 

Market Session are a more incremental 

approach that will address the cost 

concerns raised by some commenters 

because it eliminates the potential costs 

related to weekend and holiday 

trading.255 24X further stated that it did 

not believe that ‘‘costs related to 

innovation should be the basis for the 

Commission to determine that an 

exchange application does not comply 

with the Exchange Act.’’ 256 24X also 

stated that the markets will determine 

whether ‘‘its innovative proposal’’ is 

successful.257

As discussed further below, the 

Commission finds that the 24X rules for 

the 24X Market Session, as amended, 

are consistent with the Exchange Act. 

Specifically, the 24X Market Session 

rules are modeled on the rules of 

national securities exchanges that 

currently operate trading sessions 

during extended hours and are designed 

to address the potential differences in 

trading compared to Regular Trading 

Hours.258 For example, during the 24X 

Market Session, the only order type that 

may be submitted is a Limit Order, 

which requires market participants to 

set the prices at which they are willing 

to trade. Accepting only Limit Orders 

during extended hours sessions can 

help to address the potential risks that 

there may be wider spreads,259 or that 

prices may be affected by new 

announcements made by issuers.260

Other exchanges allow the submission 

of only limit orders during extended 

hours sessions.261

In addition, 24X Members are 

required to provide disclosures to 

customers that will provide information 

about potential risks of trading in 

extended hours, including the 24X 

Market Session. These disclosures are 

consistent with the rules of other SROs, 

which require customers to be provided 

with disclosures regarding the potential 

risks of extended hours trading.262

While two commenters stated that 

investors would be harmed by low 

liquidity, low volumes and wider 

spreads, these potential risks are 

included in the disclosures that must be 

provided to customers by 24X 

Members.263 Investors are provided 

information about these potential risks 

and are able to decide whether to 

participate in extended hours sessions, 

including the 24X Market Session. 

Further, the 24X Market Session will 

overlap with the extended hours trading 

that currently occurs in the over-thecounter (‘‘OTC’’) market.264

Accordingly, while the 24X Market 

Session represents a new trading session 

for exchange trading, market 

participants, including retail investors, 

are already able to trade during the 

times covered by the 24X Market 

Session. While commenters stated that 

investor demand should be considered 

to assess whether the expansion of 

trading hours would justify market-wide 

costs, the Commission is required to 

consider a Form 1 application for 

consistency with statutory standards.265

For the reasons discussed herein, the 

Commission has determined that the 

24X Form 1 is consistent with the 

Exchange Act and the rules thereunder. 

Finally, pursuant to this Form 1, as 

amended, 24X will not commence 

operation of the 24X Market Session 

prior to filing a proposed rule change. 

Specifically, 24X Rule 1.5(c) requires 

24X, prior to commencing operations 

during the 24X Market Session, to file 

a proposed rule change, pursuant to 

section 19(b) of the Exchange Act and 

the rules thereunder, to amend its rules 

confirming that 24X is able to comply 

with its obligations under the Exchange 

Act during the 24X Market Session and 

that the Equity Data Plans are prepared 

to collect, consolidate, process and 

disseminate quotation and transaction 

information at all times during the 24X 

Market Session (‘‘24X Market Session 

Proposed Rule Change’’). As discussed 

below, the 24X Market Session 

Proposed Rule Change must be filed 

with the Commission and approved, or 

otherwise become effective pursuant to 

Exchange Act section 19(b), before 24X 

can provide trading during the 24X 

Market Session.266 In the 24X Market 

Session Proposed Rule Change, 24X 

must confirm that it is able to comply 

with its obligations under the Exchange 

Act during the 24X Market Session and 

that the Equity Data Plans are prepared 

to collect, consolidate, process and 

disseminate quotation and transaction 

information at all times during the 24X 

Market Session that is equivalent to the 

mechanism established for Exchange 

Trading Hours other than the 24X 

Market Session.267 The 24X rule 

requiring the operation of the Equity 

Data Plans during the 24X Market 

Session is designed to ensure that 

consolidated quotation and transaction 

data are provided in a manner that is 

consistent with the existing extended 

hours sessions on exchanges.268

Accordingly, 24X rules are designed to 

prevent fraudulent and manipulative 

acts and practices, promote just and 

equitable principles of trade, foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to and facilitating transactions 

in NMS stocks, and perfect the 

mechanism of a free and open market 

and a national market system.269 24X 

rules are also designed to protect 


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270 Id. 

271See infra section III.D.2.a.i. 

272See e.g., supra note 264. 

273See e.g., supra section III.C; and infra section 

III.D.e; section III.E.2; section III.F. 

274See DriveWealth Letter at 2, SIFMA Letter at 

2, SIFMA Letter II at 3–4; FIA PTG Letter at 2; FIA 

PTG Letter II at 3. 

275See FIA PTG Letter at 1, 2; FIA PTG Letter II 

at 1. 

276See SIFMA Letter at 4–5 (stating that the 

Commission must consider a number of factors, 

including the public interests involved, the effect 

on exchange competition dynamics, interaction 

with existing and proposed regulations, and 

whether a fair and orderly market is possible where 

potentially different rules would apply to 

exchanges based on the hours they operate). This 

commenter also stated that the Commission must 

consider how the 24X Form 1 would interact with 

‘‘outstanding equity market structure proposals.’’ 

See SIFMA Letter at 6–7. The commenter asked 

interpretative questions about the proposal to 

amend Regulation NMS. See Securities Exchange 

Act Release No. 96494 (Dec. 14, 2022), 87 FR 80266 

(Dec. 29, 2022). After submission of the comment 

letter, the Commission adopted amendments to 

Regulation NMS on Sept. 18, 2024. See Securities 

Exchange Act Release No. 101070 (Sept. 18, 2024), 

89 FR 81620 (Oct. 8, 2024) (‘‘2024 Regulation NMS 

Adopting Release’’). The commenter also asked 

questions about proposed Regulation Best 

Execution, Securities Exchange Act Release No. 

96496 (Dec. 14, 2022), 88 FR 5540 (Jan. 27, 2023); 

and the proposed Order Competition Rule, 

Securities Exchange Act Release No. 96495 (Dec. 

14, 2022), 88 FR 128 (Jan. 3, 2023). 24X stated that 

‘‘addressing how such proposals may relate to 24X’s 

exchange application are outside of the scope of 

consideration of whether 24X’s exchange 

application complies with the requirements of the 

Exchange Act.’’ See 24X Letter II at 19. Proposed 

Regulation Best Execution and the proposed Order 

Competition Rule remain proposals. The 

commenter submitted a second letter requesting 

confirmation about the application of aspects of the 

2024 Regulation NMS Adopting Release during the 

24X Market Session. See SIFMA Letter II at 13. The 

questions posed by the commenter are addressed 

within the 2024 Regulation NMS Adopting Release 

and existing rules and regulations. The 2024 

Regulation NMS Adopting Release, as well as the 

definitions included in Rule 600 of Regulation NMS 

and the specific rules under Regulation NMS, 

define the application of the rules during different 

trading sessions. 

277For example, the commenter stated that 

certain aspects of Regulation NMS only apply 

during Regular Trading Hours, such as Rule 611 of 

Regulation NMS, and that certain definitions in 

Rule 600 of Regulation NMS specify Regular 

Trading Hours, such as ‘‘covered order.’’ See 

SIFMA Letter I at 4. 

278 Id. 

279See Healthy Markets Letter at 7. 

280See Nasdaq Letter at 3. 

281See 24X Letter II at 14. 24X further states that 

it will comply with all required rules and 

regulations applicable to national securities 

exchanges during its Core Market Session. Id. 

282See 24X Letter II at 14. 

283 Id. at 8. 

284 Id. at 4. 

285See 24X Letter III at 5. 

286 Id. 

287See also infra section III.D.2.b.i. 

288See supra note 274 and accompanying text. 

investors and the public interest.270 The 

24X rules governing the 24X Market 

Session will expand the hours of trading 

available on a national securities 

exchange, and such trading will be 

transparent because trading will not 

occur unless the Equity Data Plans are 

able to collect, consolidate, process and 

disseminate consolidated quotation and 

transaction data during the 24X Market 

Session (i.e., between 8 p.m. and 4 a.m. 

Sunday, Monday, Tuesday, Wednesday, 

and Thursday nights that precede a U.S. 

Business Day).271 The 24X rules for the 

24X Market Session will foster 

competition by introducing another 

trading venue during these trading 

hours.272 Finally, the 24X rules for the 

24X Market Session are designed to 

provide additional investor 

protections.273

a. Effect of 24X Market Session on 

Market Structure 

Several commenters raised questions 

about the potential impact of the 24X 

Market Session, as originally proposed, 

on current market structure because it 

would greatly expand exchange trading 

hours. Several commenters stated that 

the Commission should consider 

roundtable discussions about the market 

structure implications of 24-hour 

trading.274 One commenter stated that 

the 24X proposal ‘‘has serious 

implications for the regulatory, 

technological, and operational 

underpinnings of the equity securities 

markets and will result in significant 

costs for the industry.’’ 275 Another 

commenter stated that the 24X Market 

Session, as originally proposed, is 

‘‘incompatible’’ with current market 

structure and that a broader 

Commission engagement, outside of an 

exchange application, is needed to 

determine how U.S. equity market 

structure would be affected.276 This 

commenter further stated that the 24X 

Market Session as originally proposed 

‘‘could exacerbate a two-tiered system of 

regulation between core and extended 

trading hours’’ because certain 

Exchange Act rules apply only during 

Regular Trading Hours 277 and could 

make compliance with best execution 

obligations more challenging.278

Another commenter stated that the 24X 

Market Session, as originally proposed 

‘‘[r]aises significant, insufficiently 

addressed market policy concerns,’’ 279

while another stated that the proposal 

represents the ‘‘first occurrence of a 

national securities exchange that 

utilizes unlisted trading privileges to 

operate outside the trading hours of the 

primary listing exchanges.’’ 280

24X stated that ‘‘in today’s market, the 

regulatory requirements vary depending 

on the trading session’’ with greater 

protections required during Regular 

Trading Hours.281 24X stated that the 

Commission has allowed extended 

trading hours on other exchanges and 

the same rationale should be applied in 

this instance because the 24X rules for 

the 24X Market Session raise ‘‘no new 

issues.’’ 282 In response to the comment 

about trading NMS stocks pursuant to 

UTP outside of the hours of the primary 

listing exchanges, 24X stated that it 

would ‘‘coordinate with the primary 

listing markets with regard to their 

regulatory roles related to their listed 

companies (e.g., trading halts).’’ 283

Further, 24X stated that 24X Rule 

11.15(c)(5) requires 24X to halt trading 

if the primary listing exchange 

determines to halt trading.284 In 

response to comments about industry 

roundtables, 24X stated that ‘‘its 

exchange application has been subject 

to public comment by the industry and 

others . . . in accordance with the 

requirements of the Exchange Act.’’ 285

24X further stated that amending the 

rules governing the 24X Market Session 

to eliminate trading on weekends and 

holidays in response to comments is a 

‘‘significant adaption.’’ 286

The 24X rules for the 24X Market 

Session have been amended to increase 

transparency and enhance customer risk 

disclosures such that it will operate in 

a manner that is consistent with the 

regulatory framework of the extended 

hours sessions of other national 

securities exchanges.287 As discussed 

throughout this order, the 24X Market 

Session, as amended, will operate with 

rules that are designed to protect 

investors consistent with the 

requirements of the federal securities 

laws and the rules and regulations 

thereunder. 

Several commenters suggested that a 

broader study of expanded hours 

trading should be conducted prior to 

Commission action on the 24X exchange 

application.288 The continuing 

evolution of the equities market, 

including increasing investor interest in 

extended hours trading, may warrant 

consideration of the existing regulatory 

scheme that applies to expanded hours 

trading sessions. The Commission 

continually monitors the national 

market system and the operation of the 

Federal securities laws, and the 

Commission, consistent with its 

oversight of the national market system, 

will continue to monitor the 

developments of extended hours 

trading. However, the monitoring of 

new market developments does not 

foreclose Commission action on the 24X 

Form 1, which, for reasons discussed 

throughout, satisfies the requirements of 

the Exchange Act. 


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289 15 U.S.C 78s(a). 

290See infra section V. 

291See Polygon Letter; Nasdaq Letter, Montone 

Letter, IEX Letter, SIFMA Letter. Several 

commenters also stated that there should be a 

consideration of off-exchange trade reporting to the 

Equity Data Plans. See Nasdaq Letter at 3, SIFMA 

Letter at 3, DriveWealth Letter at 2, FIA PTG Letter 

at 2. The Commission agrees and believes that the 

Equity Data Plans and FINRA should consider 

accommodating real-time OTC trade reporting. 

292See Nasdaq Letter at 3. See also Montone 

Letter at 8. 

293See SIFMA Letter at 3. See also FIA PTG 

Letter at 2. 

294See IEX Letter at 1–2. See also DriveWealth 

Letter at 2. 

295See IEX Letter at 2. See also FIA PTG Letter 

at 2; FIA PTG Letter II at 3. 

296See IEX Letter at 2. 

297See IEX Letter at 2; FIA PTG Letter II at 3. 

298See SIFMA Letter at 3; FIA PTG Letter at 2; 

Nasdaq Letter at 3; Healthy Markets Letter at 10– 

11; but see Polygon Letter at 2–5 (stating that 

Commission should approve 24X and force the 

adoption of the competing consolidator model to 

allow for the dissemination of market data in real 

time). 24X stated that it has ‘‘fully addressed’’ 

commenter concerns about trading in the 24X 

Market Session occurring outside of the operating 

hours of the Equity Data Plans by the changes 

proposed in Amendment No. 2. See 24X Letter IV 

at 4–5. 

299See 24X Rule 1.5(c). 

300The approval of 24X’s application to register 

as a national securities exchange is separate and 

distinct from Commission consideration of any 

future amendments to the Equity Data Plans or 

proposed rule changes filed by 24X. As a matter of 

course, the Commission will consider any future 

amendments to the Equity Data Plans and any 

proposed rule changes filed by 24X upon filing, 

pursuant to the applicable statutory provisions and 

rules. 

301See 24X Letter II at 16. 

Further, the 24X Form 1 has been 

subject to the relevant notice and 

comment requirements. Public comment 

on the application has been solicited 

four separate times—with the 

publication of the Notice, the OIP, 

Amendment No. 1, and Amendment No. 

2. The public, including market 

participants, have been afforded 

adequate opportunity for comment, and 

interested persons have taken the 

opportunity to provide written data, 

views, and arguments concerning this 

application which has yielded a robust 

analysis of the relevant issues.289 24X 

has responded, by amending its Form 1, 

in part, to address the various concerns 

raised by certain commenters. Notably, 

24X has narrowed its hours of 

operation, added rules to increase 

operational transparency and relevant 

customer risk disclosures, and amended 

certain proposed rules to conform with 

the existing regulatory framework for 

extended hours trading of other national 

securities exchanges. In addition, as has 

been discussed throughout this order, 

the expansion of trading hours initially 

proposed by 24X is not entirely novel as 

off-exchange trading currently occurs 

during those hours. Accordingly, issues 

related to the 24X Market Session have 

been raised, analyzed, and addressed, 

and Commission action on the 24X 

Form 1 should not be delayed by, and 

is not dependent on, a broader study of 

equity market structure. 

While there will be costs to the 

industry related to implementing the 

expansion of exchange trading hours, 

the record does not support a denial of 

the 24X Form 1 application as 

inconsistent with the Exchange Act. The 

operation of the 24X Market Session 

will not commence until the conditions 

outlined in this order have been met.290

i. Equity Data Plans 

The Equity Data Plans do not operate 

during the time period that will cover 

the 24X Market Session, as amended. 

Several commenters raised concerns 

about the lack of consolidated data 

during the 24X Market Session, as 

originally proposed.291 One commenter 

stated that the 24X trading sessions 

should align with the operational hours 

of the Equity Data Plans.292 Another 

commenter stated that if 24X was 

approved without extending the 

exclusive SIP hours, quotes and trades 

would not be publicly disseminated in 

real time and that the delay would be 

inconsistent with the national market 

system and significantly reduce market 

transparency.293 One commenter stated, 

in response to the 24X Market Session 

as originally proposed, that moving to 

24-hour on-exchange trading requires 

deliberate consideration of the marketwide implications of such a move, 

including the cost and complexity of 

overhauling the market-wide 

infrastructure to allow for the 

publication of quote and trade data by 

the exclusive SIPs during the proposed 

overnight and weekend sessions, as 

measured against its potential 

benefits.294 The commenter stated that 

changing exclusive SIP operations to 

accommodate the original proposal 

would amount to a huge undertaking, 

and that the costs and timeline 

associated with these changes have not 

been determined.295 Moreover, the 

commenter stated that 24X has neither 

acknowledged responsibility for funding 

these changes, nor provided information 

on its ability to do so.296 The 

commenter further stated that the 

exclusive SIPs would likely incur 

substantial increased ongoing costs to 

maintain the originally proposed 

extended hours, and that neither these 

costs, which the commenter stated 

would likely be borne by all exclusive 

SIP subscribers regardless of whether 

they participate in overnight or 

weekend trading, nor their potential 

benefits, have been determined.297

In Amendment No. 2, in response to 

commenters’ concerns about the 

operation of the 24X Market Session 

during time periods when the Equity 

Data Plans are not in operation,298 24X 

modified its Rule 1.5(c) and Rule 11.16 

to require the concurrent operation of 

the Equity Data Plans before the 

operation of the 24X Market Session 

commences, and that 24X file the 24X 

Market Session Proposed Rule Change 

that would serve to provide notice to the 

Commission and the public of 24X’s 

intention to commence operation of the 

24X Market Session. Specifically, 24X 

Rule 1.5(c) states that 24X will not start 

operating the 24X Market Session unless 

the Equity Data Plans ‘‘(1) have 

established a mechanism to collect, 

consolidate, process and disseminate 

quotation and transaction information at 

all times during the 24X Market Session 

that is equivalent to the mechanism 

established for Exchange Trading Hours 

other than the 24X Market Session,’’ and 

(2) the Equity Data Plans have notified 

24X of their readiness.299

24X Rule 1.5(c) requires 24X, prior to 

commencing the 24X Market Session, to 

file the 24X Market Session Proposed 

Rule Change, pursuant to section 19(b) 

of the Exchange Act and the rules 

thereunder. The 24X Market Session 

Proposed Rule Change must be filed 

with the SEC within 18 months of the 

SEC’s approval of 24X’s application for 

registration as a national securities 

exchange. If the 24X Market Session 

Proposed Rule Change is not filed 

within 18 months of the SEC’s approval 

of 24X’s application for registration as a 

national securities exchange, the 

Exchange will promptly file a proposed 

rule change to remove the rules that 

apply to the 24X Market Session. In 

addition, 24X Rule 11.16 states that, 

‘‘24X will not commence operations of 

the 24X Market Session until a proposed 

rule change as required under 24X Rule 

1.5(c) has been approved, or has 

otherwise become effective, under 

section 19(b) of the Exchange Act and 

the rules thereunder.’’ 300

24X responded to commenters’ 

concerns about costs by stating that it 

recognized that innovations, such as the 

introduction of the 24X Market Session, 

‘‘may involve additional costs’’ but that 

increased costs should not ‘‘be the basis 

for the Commission to determine that an 

exchange application does not comply 

with the Exchange Act.’’ 301 24X stated 

that market participants ‘‘are already 

trading overnight on ATSs or 


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302 Id. 

303 Id. 

304See 24X Letter IV at 7. See supra notes 290– 

292 and accompanying text (discussing costs 

relating to the expansion of trading hours). 

305 15 U.S.C. 78f(b)(5) and 15 U.S.C. 78k–1. 

306 15 U.S.C. 78k–1(a)(1)(C). 

307Securities Exchange Act Release No. 90610 

(Dec. 11, 2020), 86 FR 18596 (Apr. 9, 2021) (‘‘MDI 

Rules Adopting Release’’). 

308See Polygon Letter at 4. 

309See 2024 Regulation NMS Adopting Release, 

supra note 276. 

310See, e.g., Proposed 24X Rule 11.15(a); Form 1, 

Exhibit E–1. As initially proposed, a 24X Price 

Band would be calculated for each relevant security 

by multiplying the ‘‘Reference Price,’’ as specified 

in 24X Rule 11.15(a)(2), by the applicable 

‘‘Percentage Parameter,’’ set out in 24X Rule 

11.15(a)(1). Under Rule 11.15(a)(1) as initially 

proposed, this figure (rounded to the nearest $0.01) 

would then be added to the Reference Price to 

calculate the ‘‘Upper 24X Price Band’’ and 

subtracted from the Reference Price to calculate the 

‘‘Lower 24X Price Band’’ and no trades would be 

allowed outside the 24X Price Bands. Proposed 24X 

Rule 11.15(a)(1). 

311See Healthy Markets Letter at 8; SIFMA Letter 

at 6; FIA PTG Letter at 2. 

312See SIFMA Letter at 6. 

313See Healthy Markets Letter at 8. 

314See Angel Letter I at 3. See also Montone 

Letter at 7. 

315See 24X Letter II at 5–6; Amendment No. 1; 

24X Rule 11.15(a) (now Reserved). 

316See 24X Letter II at 6. In Amendment No. 1, 

24X further proposed to make a conforming change 

to its clearly erroneous rule, 24X Rule 11.14, by 

deleting subparagraph (d)(4) regarding calculation 

of the reference price when the 24X Price Bands 

would have been in effect during the 24X Market 

Session. 

317See 24X Letter II at 6. 

318See 24X Letter II at 6. 

319See IEX Letter at 2. 

320See IEX Letter at 2. 

321See FIA PTG Letter II at 3 (stating, ‘‘[p]rice 

bands serve as an important investor protection, 

particularly during periods of extreme volatility, 

whereas busting trades under an Exchange’s clearly 

erroneous rules can give rise to increased risks and 

uncertainty.’’). 

322 Id. See also supra note 288 and accompanying 

text. The LULD Plan applies during Regular Trading 

Hours. See LULD Plan, available at https://

www.luldplan.com/. 

otherwise’’ and that new costs for 

exchange trading would be 

‘‘incremental.’’ 302 24X also stated that 

broker-dealers can decide whether to 

participate in the 24X Market 

Session.303 Finally, 24X stated with 

regard to the expansion of the exclusive 

SIPs’ hours that the Equity Data Plans 

have a process for determining the cost 

for new participants and for changes.304

The Commission agrees with 

commenters regarding consolidated 

quotation and transaction information 

during the 24X Market Session. 

Pursuant to its amended Form 1, 24X 

will not operate during the 24X Market 

Session until the Equity Data Plans are 

able to collect, consolidate, process and 

disseminate quotation and transaction 

information at all times during the 

session. The 24X rules for the 24X 

Market Session, as amended, are 

consistent with sections 6(b)(5) and 11A 

of the Exchange Act.305

24X Rules 1.5(c) and 11.16 provide 

that 24X will submit a proposed rule 

change within 18 months of the 

Commission’s approval of 24X’s 

application to operate as a national 

securities exchange with regard to the 

operation of the 24X Market Session. 

These provisions relating to the force 

and effect of the 24X Market Session 

rules set forth in 24X Rule 11.16 help to 

balance the interest in providing the 

time needed for 24X to be able to 

comply with 24X Rule 1.5(c) with the 

interest in ensuring that the rules of an 

Exchange are effective and can be 

enforced by the Exchange. 

The requirement contained in its rules 

that the 24X Market Session will not 

begin operation until the 24X Market 

Session Proposed Rule Change is 

approved or otherwise has become 

effective will enhance transparency 

during the 24X Market Session and 

promote the goals of the national market 

system. Specifically, the Commission 

finds that the 24X rules for the 24X 

Market Session, as amended, are 

consistent with section 11A(a)(1)(C) of 

the Exchange Act, in which Congress 

found that it is in the public interest and 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets to assure the 

availability to brokers, dealers, and 

investors of information with respect to 

quotations for and transactions in 

securities, and to assure the 

practicability of brokers executing 

investors’ orders in the best market.306

The requirement ensuring that 24X will 

not commence operation of its 24X 

Market Session until the availability of 

the concurrent operation of the Equity 

Data Plans accomplishes Exchange Act 

objectives by ensuring that there is 

transparency during these new, 

extended trading hours through the 

communication of quotations and 

transactions to market participants and 

investors. 

Finally, one commenter stated that 

the Market Data Infrastructure (‘‘MDI’’) 

Rules 307 should be implemented 

because competing consolidators would 

not be ‘‘time-bound’’ and would collect, 

consolidate and disseminate data ‘‘in 

real-time 24/7.’’ 308 The MDI Rules 

continue to be implemented, however, 

the MDI Rules will not be implemented 

before action is required on the 24X 

Form 1.309

b. Volatility Moderators in the 24X 

Market Session 

24X initially proposed to implement 

unique ‘‘24X Price Bands’’ to moderate 

risk and volatility during the 24X 

Market Session.310 Several commenters 

questioned the use of the proposed 

volatility moderators.311 In particular, 

one commenter asked why the proposed 

24X Price Bands differed from the 

existing Limit up-Limit down bands and 

stated that the proposed 24X Price 

Bands were ‘‘different from price bands 

used by ATSs that operate outside of 

core trading hours,’’ 312 while another 

commenter stated there was no basis to 

justify the 24X Price Bands.313 Another 

commenter, however, stated that the 

proposed 24X Price Bands ‘‘should be 

sufficient to prevent erroneous 

trades.’’ 314

24X proposed in Amendment No. 1 to 

remove proposed 24X Rule 11.15(a) 

from its rules, which removed all 

references to the proposed 24X Price 

Bands.315 In its letter responding to 

comments on the OIP, 24X stated that it 

‘‘would rely upon its clearly erroneous 

rule, [p]roposed 24X Rule 11.14, to 

address volatility and risk during the 

24X Market Session.’’ 316 24X stated that 

it would also ‘‘provide other additional 

protections to investors to address 

potential volatility and risk during the 

24X Market Session. For example, under 

Proposed 24X Rule 11.7(a)(4), 24X 

would not allow the use of market 

orders during the 24X Market 

Session.’’ 317 As a result, 24X stated that 

its rules designed ‘‘to address potential 

volatility in both regular and extended 

hours trading’’ are the same as those 

previously approved by the Commission 

for other exchanges.318

One commenter stated that given the 

significance of displayed quotations and 

transaction prices to stock valuations, 

many trading firms and other 

participants will need to monitor the 

prices published during overnight and 

weekend hours, regardless of whether 

they trade during those hours and that 

‘‘SIP subscribers’’ would experience 

‘‘costs.’’ 319 This commenter also stated 

that ‘‘[t]his is particularly the case’’ 

because 24X does not include volatility 

limits other than those that exist under 

its clearly erroneous execution rule.320

Another commenter opposed 24X’s plan 

to rely on its clearly erroneous 

execution rules instead of price bands, 

as initially proposed.321 This 

commenter stated that the Commission 

should consider ‘‘whether the regulatory 

framework and market functionality are 

in place to support 24x7 trading 

(including, for example, whether 

extending the LULD plan to cover noncore hours is appropriate).’’ 322


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323See e.g., CboeBZX Rule 11.17; Nasdaq Equity 

11, Rule 11890; NYSE Arca Rule 7.10–E. 

324See 24X Rule 1.5(c). Under the rule, 24X will 

not begin operation of the 24X Market Session until 

the 24X Market Session Proposed Rule Change has 

been approved or otherwise become effective. See 

also supra section III.D.b.i. 

325See supra note 323. 

326See 24X Rule 11.15(c)(2). 

327See 24X Rule 11.15(c)(4). 

328See 24X Rule 11.15(c)(5). 

329See Nasdaq Letter at 3, 4; Montone Letter at 

6–7; SIFMA Letter at 8–9; Healthy Markets Letter 

at 7. 

330See Nasdaq Letter at 3. This commenter 

further stated in response to the initial Form 1, 

‘‘pauses in the trading day allow for the SIPs to 

make certain technical changes with little to no 

disruption to the markets. We believe the 

Commission should consider whether 24X’s 

proposed trading pauses are sufficient to address 

the technical implications of 23-hour trading 

sessions.’’ Id. See also Healthy Markets Letter at 7. 

331See SIFMA Letter at 8–9; Healthy Markets 

Letter at 7. 

332See SIFMA Letter at 8. 

333See Montone Letter at 6–7. 

334See supra notes 329–330 and accompanying 

text. 

335See 24X Letter II at 8. 

336See 24X Letter II at 8. 

337See 24X Rule 11.15(c)(5) 

338See 24X Rule 11.15(c). 

339See 24X Rule 3.21(e) (stating, ‘‘[n]ormally, 

issuers make news announcements that may affect 

the price of their securities after Regular Trading 

Hours. Similarly, important financial information is 

frequently announced outside of Regular Trading 

Hours. In Extended Hours Trading, these 

announcements may occur during trading, and if 

combined with lower liquidity and higher 

volatility, may cause an exaggerated and 

unsustainable effect on the price of a security.’’). 

340See 24X Rule 3.21(i)(1) through (6). 

341See infra section III.D.2.e. (discussing 

customer disclosures relating to risks of the 24X 

Market Session). 

24X’s proposed use of its clearly 

erroneous execution rule during the 24X 

Market Session addresses commenters’ 

concerns about its initially proposed 

24X Price Bands. The use of clearly 

erroneous execution rules in the 24X 

Market Session, instead of the unique, 

market-specific 24X Price Bands, will 

help to ensure there is a consistent, 

market-wide regulatory approach across 

the extended hours trading sessions of 

all national securities exchanges.323

Accordingly, 24X Rule 11.14 is designed 

to facilitate transactions in securities 

and remove impediments to and perfect 

the mechanism of a free and open 

market and a national market system, 

consistent with section 6(b)(5) of the 

Exchange Act. 

While one commenter suggested that 

‘‘SIP subscribers’’ may experience 

increased costs due to the need to 

monitor prices during the 24X Market 

Session, the commenter did not provide 

information as to how this differs from 

other extended hour trading sessions 

and the commenter was commenting on 

the 24X Market Session as originally 

proposed. As amended by Amendment 

No. 2, the 24X Market Session would 

cover hours that are currently available 

for OTC trading and 24X may not begin 

operating its 24X Market Session at least 

until the Equity Data Plans are able to 

collect, process, consolidate and 

disseminate quotation and transaction 

data during the 24X Market Session,324

which will help to facilitate monitoring 

of price valuations. Further, as stated 

above, the use of clearly erroneous 

execution rules in extended hours 

sessions is consistent with the 

regulatory framework applied to other 

national securities exchanges.325

c. Trading Halts and Pauses 

24X proposed rules governing trading 

halts and pauses for technology updates 

and regulatory purposes. As originally 

proposed, 24X Rules 11.15(c)(1), (c)(2), 

(c)(3), (c)(4) and (c)(5) would have 

paused trading for: (i) three hours each 

Saturday morning, from 8 a.m. until 11 

a.m.; (ii) an hour at 7 p.m. daily; (iii) 

industry-wide testing; (iv) technological 

or other purposes; and (v) material 

corporate actions with respect to a 

particular security during the 24X 

Market Session, respectively. In 

Amendment No. 2, 24X deleted 24X 

Rules 11.15(c)(1) and 11.15(c)(3) and 

amended 24X Rule 11.15(c)(2), all to 

reflect the amended hours for the 24X 

Market Session. Pursuant to 24X Rule 

11.15(c), 24X will pause trading on 

Monday, Tuesday, Wednesday and 

Thursday at 7 p.m.,326 during the 24X 

Market Session at such other times that 

the Exchange determines is necessary 

for technological or other purposes,327

and if the primary listing exchange 

determines to halt trading or delay the 

start of trading in one of its listed 

securities.328

With respect to regulatory halts, 

several commenters questioned how 

market surveillance and trading halts, 

including regulatory trading halts, 

would be handled in the 24X Market 

Session.329 Specifically, one commenter 

stated that 24X’s proposal raised a series 

of surveillance questions, including (i) 

how 24X will manage real-time 

surveillance during the 24X Market 

Session, (ii) how the existing 

surveillance, trading halt, and trade 

review infrastructure—one in which 

primary listing markets perform realtime surveillance of securities listed on 

their markets and implement trading 

halts and pauses for those securities 

during their hours of operation—will 

intersect with the proposed 24X Market 

Session, including how 24X would 

coordinate with other exchanges, and 

(iii) the impact that such trading will 

have on investors, listed companies, and 

other market participants.330 Similarly, 

other commenters expressed concerns 

about regulatory halts, including 

possible unanticipated or unintended 

effects on primary listing markets and 

issuers.331 One of these commenters 

stated that the expanded trading hours 

would interfere with exclusive SIPs’ 

‘‘periodic testing and maintenance, 

which currently occur at times when the 

exchanges are closed.’’ 332 Another 

commenter generally supported the 

proposed trading halts but 

recommended that 24X ‘‘revisit trading 

halts around key disclosures from 

companies’’ if ‘‘they find they can 

adequately secure the markets around 

the key disclosure periods.’’ 333

In response to commenters’ concerns 

about regulatory halts,334 24X stated 

that it intends to surveil all of its trading 

sessions, including the 24X Market 

Session, in the same manner.335 24X 

stated that it will coordinate with the 

primary listing markets to halt trading 

in a security when the primary listing 

market halts trading in the security.336

In addition, in Amendment No. 1, 24X 

proposed to revise its trading halt rules 

related to the primary listing market to 

clarify that Rule 11.15(c)(5) will apply 

during all of its trading sessions.337

Specifically, 24X proposed to add 

language to 24X Rule 11.15(c)(5) that if 

trading in a security is halted by the 

primary listing market before the 24X 

Market Session and continuing into the 

24X Market Session, or during the 24X 

Market Session, the Exchange will halt 

trading in the security until trading 

resumes on the primary listing market 

for the security.338

24X’s rules, as amended, governing 

trading halts related to corporate news 

and announcements will track the 

trading halts imposed by the primary 

listing markets. To the extent that 

material corporate news is released 

during the 24X Market Session and the 

primary listing market does not impose 

trading halts, the requirements of 24X 

Rule 3.21(e) 339 and 24X Rule 3.21(i) 340

that disclosures be provided to investors 

relating to the risks associated with 

news announcements and the additional 

risks of trading in the 24X Market 

Session, respectively, will help to 

ensure that market participants, 

including investors, are informed about 

the potential risks associated with 

trading during that time period. 24X’s 

rules governing trading pauses, coupled 

with its Rule 3.21,341 are consistent with 

the Exchange Act and, in particular, the 

section 6(b)(5) requirement that an 

exchange’s rules be designed to promote 


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342See Nasdaq Letter at 4; see also SIFMA Letter 

at 8. 

343As discussed above, 24X proposed in 

Amendment No. 2 to limit the hours of operation 

of the 24X Market Session and, because the 24X 

Market Session will not operate on Saturdays, 24X 

further proposed in Amendment No. 2 to remove 

24X Rule 11.15(c)(1) to delete the proposed 

Saturday morning trading pauses. 

344One commenter stated that proposed 24X Rule 

11.2 describes how exchange-traded funds will be 

‘‘addressed in terms of listing,’’ but that ‘‘24X 

should give a similar explanation of how mutual 

funds will be handled in terms of listing and 

pricing.’’ Montone Letter at 8. As discussed above, 

24X will not be a listing market. See 24X Rule 14.1. 

The commenter also stated that mutual funds may 

need to be priced at a different time of day if trading 

evolved into a 23-hour format. See Montone Letter 

at 8. In response, 24X stated, and the Commission 

agrees, that ‘‘the determination of how and when 

pricing decisions for mutual funds would be made 

by the mutual funds in accordance with relevant 

legal requirements, not by 24X.’’ 24X Letter II at 19. 

24X further stated, and the Commission agrees, that 

the ‘‘24X Market Session does not present new 

issues regarding the timing of the pricing of mutual 

funds’’ because ‘‘trading already takes place on 

exchange today during pre-market sessions and 

post-market sessions (including overnight in the 

OTC market)’’ and ‘‘mutual funds have already 

faced such timing decisions.’’ Id. 

345See Montone Letter at 6. 

346See SIFMA Letter at 8. 

347See Nasdaq Letter at 3. See also SIFMA Letter 

at 8; Healthy Markets Letter at 10. 

348See 24X Letter II at 11. 

349See id. 

350See id. 

351See supra note 345 and accompanying text. 

352See 24X Rule 3.21. 

353See, e.g., MEMX Exchange Rule 3.21; Cboe 

EDGX Rule 3.21; NYSE Arca Rule 7.34–E(d)(3); 

Nasdaq Section 20; FINRA Rule 2265. 

354See 24X Rule 3.21. See also, e.g., MEMX 

Exchange Rule 3.21, Cboe EDGX Rule 3.21, NYSE 

Arca Rule 7.34–E(d)(3), Nasdaq, Equity 2, Section 

20; FINRA Rule 2265. 

just and equitable principles of trade, 

remove impediments to and perfect the 

mechanisms of a free and open market 

and a national market system, and 

protect investors and the public interest. 

Regarding technology halts, one 

commenter on the 24X Market Session, 

as originally proposed, stated that 

testing for the exclusive SIP of the UTP 

Plan currently occurs at times which 

would overlap ‘‘with a portion of the 

24X Market Session, and 24X has not 

explained how it will operate during the 

overlapping time.’’ 342 In Amendment 

No. 2, 24X has amended the 24X rules 

for the 24X Market Session to exclude 

trading on weekends. This amendment 

addresses concerns about conflicts with 

industry-wide testing, ‘‘which currently 

occur[s] at times when the exchanges 

are closed.’’ The trading pauses 

provided in 24X Rule 11.15(c), as 

amended 343 should be sufficient to 

permit 24X to address the technical 

implications of a 23-hour trading day 

and will facilitate industry-wide testing, 

and internal market testing and systems 

updates and improvements. 

d. Securities Eligible for Trading During 

the 24X Market Session 

In its initial Form 1, 24X proposed to 

limit the securities that would be 

available for trading during the 24X 

Market Session. Specifically, proposed 

24X Rule 11.2 specified that any class 

of securities listed or admitted to 

unlisted trading privileges on the 

Exchange would be eligible to be traded 

during the Pre-Market Session, Core 

Market Session and Post-Market 

Session, while in the 24X Market 

Session, trading would be limited to any 

security in the Nasdaq–100 Index, S&P 

500 Index, Russell 2000 Index and the 

top 50 exchange-traded funds by 

average daily volume during a given 

month, as determined by the Exchange. 

Proposed 24X Rule 11.2 also included a 

notice provision for securities that 

might be added to, or removed from, 

being eligible to trade during the 24X 

Market Session. Finally, proposed 24X 

Rule 11.2 initially would have allowed 

Exchange members to request that 

securities be made eligible for trading 

during the 24X Market Session.344

One commenter stated that the 

proposal was ‘‘wise in limiting the 

trading to certain well-known NMS 

stocks.’’ 345 Another commenter stated 

that 24X did not adequately justify its 

proposal to limit the securities eligible 

for trading in the 24X Market 

Session.346 Another commenter stated 

that 24X should provide more 

transparency about the proposed notice 

of securities that would be available to 

trade because the commenter stated that 

a ‘‘lack of timely information’’ about the 

securities available to trade ‘‘runs the 

risk of material trading risks, including 

higher volatility and lower 

liquidity.’’ 347

In Amendment No. 1, 24X amended 

24X Rule 11.2 to remove the limit on the 

securities eligible for trading during the 

24X Market Session. As amended, 24X 

Rule 11.2 will allow any securities 

listed or admitted to trading pursuant to 

UTP to be eligible to trade on 24X. In 

other words, 24X Rule 11.2 was 

amended to make the eligibility 

requirements for the trading of 

securities during the 24X Market 

Session the same as the other three 

market sessions (i.e., Pre-Market 

Session, Core Market Session and PostMarket Session). According to 24X, 

expanding the securities eligible to trade 

during the 24X Market Session will 

allow 24X Members and their customers 

to manage their security lists, and 

ensure continuity of eligible securities 

across trading sessions, which will 

reduce potential trading complexities 

and investor inquiries about eligible 

securities.348 24X also stated that 

expanding the securities eligible to trade 

will allow it to compete with ATSs and 

other markets that operate in the 

overnight hours.349 Finally, 24X stated 

that the amended rule will prevent the 

exclusion of securities that may be 

appropriate for trading in the 24X 

Market Session, such as international 

ETFs.350

24X Rule 11.2 as amended, is 

consistent with section 6(b)(5) of the 

Exchange Act in that it will promote just 

and equitable principles of trade, 

facilitate transactions in NMS stocks, 

remove impediments to, and facilitate 

transactions in NMS stocks and remove 

impediments to and prefect the 

mechanism of a free and open market 

and a national market system. While 

one commenter supported limiting the 

securities eligible for trading in the 24X 

Market Session,351 24X’s market 

structure choice not to limit the 

securities eligible for trading in the 24X 

Market Session will reduce the 

complexity of the 24X market structure, 

compared to the original proposal, by 

allowing securities to be eligible 

continuously throughout the four 24X 

trading sessions. In addition, 24X 

Members and their customers will have 

control over the trading strategies they 

may choose to implement. Finally, 

expanding the number of securities that 

are eligible to be traded during the 24X 

Market Session should help to promote 

competition between trading venues 

that may be operating during the times 

covered by the 24X Market Session, 

which will ultimately benefit investors. 

e. Customer Disclosures Pertaining to 

Extended Hours Trading, Including the 

24X Market Session 

24X proposed to require that 24X 

Members make certain disclosures to 

investors concerning risks associated 

with trading during Extended Hours 

Trading.352 In 24X Rule 3.21, 24X 

proposed to require the same 

disclosures as those required by other 

SROs relating to extended hours 

trading.353 Specifically, SRO rules 

require firms to provide disclosures to 

customers that extended hours trading 

‘‘involves material trading risks, 

including the possibility of lower 

liquidity, high volatility, changing 

prices, unlinked markets, an 

exaggerated effect from news 

announcements, wider spreads.’’ 354

While one commenter stated, in 

response to a question posed by the 

Commission in the OIP, that the 

proposed disclosures would be 


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355See Montone Letter at 6 (further stating, ‘‘[a]ny 

person looking to trade during the 24X Market 

Session will be aware of the numerous risks they 

face in trading during this period.’’). 

356See SIFMA Letter at 4; Healthy Markets Letter 

at 9. 

357See SIFMA Letter at 4. 

358See Healthy Markets Letter at 9. 

359See 24X Letter II at 2. 

360See 24X Rule 3.21(i). 

361 Id. 

362See 24X Rule 1.5(c). Under the rule, 24X will 

not operate the 24X Market Session until the 24X 

Market Session Proposed Rule Change has been 

approved or has otherwise become effective. 

363See SIFMA Letter at 8. Specifically, the 

commenter stated that for certain transactions on 

Fridays, Saturdays, Sundays, and holidays, the day 

after the trade might not be a business day and thus 

the settlement periods would be longer than T+1. 

As noted above, in Amendment No. 2, 24X 

amended the 24X rules for the 24X Market Session 

so that 24X will not offer trading on weekends and 

holidays. The commenter submitted a second 

comment that raised questions about clearance and 

settlement of trades in the amended 24X Market 

Session, as well as the 24X Market Session as 

originally proposed. See SIFMA Letter II. 

364See SIFMA Letter at 8. 

365 Id. The Depository Trust and Clearing 

Corporation (‘‘DTCC’’) is the holding company for 

the three registered clearing agencies, including 

NSCC and the Depository Trust Company (‘‘DTC’’), 

each of which provides clearance and settlement 

services for U.S. equities. The commenter further 

questioned whether the NSCC (1) would require an 

additional deposit to support overnight activity; (2) 

would process trades that occur on Saturday on the 

following Monday or Tuesday; (3) require Monday 

morning stock loan delivery or margin calls for 

weekend trades. The commenter also questioned 

whether clearing firms would be able to opt-out of 

clearing extended hours (pre-, post-, and overnight) 

activity. Id. These interpretative questions about 

NSCC rules should be directed to the NSCC, an 

SRO. As discussed throughout, trading of NMS 

stocks occurs overnight in the OTC market on 

ATSs. The commenter did not detail how the 24X 

proposal, as amended, raises new or novel concerns 

as compared to existing overnight trading sessions. 

366See SIFMA Letter II at 5. 

367See id. 

368See SIFMA Letter II at 6. 

369See 24X Letter II at 17. 

370See 24X Letter II at 18. 

371See 24X Letter IV at 5. 

sufficient to highlight the unique risks 

posed to investors during the 24X 

Market Session, as originally 

proposed,355 others disagreed.356 One of 

these commenters stated that existing 

customer disclosures would not provide 

the necessary protection for investors 

given the heightened risks associated 

with the 24X Market Session.357

Similarly, another commenter stated 

that it cannot ‘‘comprehend how any 

disclosure that would be sufficiently 

short and clear to be comprehensible 

would adequately capture the sheer 

volume of potential new risks or 

regulatory gaps in which such trading 

would occur.’’ 358

In response, 24X stated that it agreed 

with commenters that it is appropriate 

to require customer disclosures relating 

to the ‘‘heightened’’ risks inherent in 

Extended Hours Trading.359 In 

Amendment No. 1, 24X proposed 

‘‘expanded’’ investor disclosures 

relating to additional potential risks of 

its 24X Market Session.360 Specifically, 

the new paragraph (i) added to 24X Rule 

3.21 will highlight the following 

additional potential risks related to 

trading during the 24X Market Session, 

including the risks that: (1) the primary 

listing markets may not be open; (2) 

consolidated market data may not be 

available; (3) there may be limited or 

different regulatory protections during 

the 24X Market Session; (4) there may 

be limited trading alternatives during 

the 24X Market Session; (5) with near 

continuous trading, there may be greater 

risk related to system maintenance, 

testing and pauses and resumption in 

trading; and (6) the 24X Market Session 

is novel and may present additional 

unforeseen risks in addition to those 

discussed above.361 In Amendment No. 

2, 24X amended 24X Rule 3.21 to 

remove the disclosure related to the risk 

that consolidated data may not be 

available because pursuant to amended 

24X Rule 1.5(c), 24X will not begin 

operation of its 24X Market Session 

unless the exclusive SIPs are able to 

concurrently collect, consolidate, 

process and disseminate consolidated 

data.362 Thus, the proposed disclosure 

stating the risk that there might not be 

information disseminated by the 

exclusive SIPs during the 24X Market 

Session is no longer necessary. 

The expanded proposed customer 

disclosures set forth in 24X Rule 3.21, 

as amended, should address 

commenters’ concerns because these 

disclosures will provide investors with 

important information that should help 

to inform their decisions as to whether 

trading during extended hours, 

including the 24X Market Session, is 

suitable for them. In addition, the 

expanded customer disclosures set forth 

in 24X Rule 3.21, as amended, are 

consistent with the Exchange Act and, 

in particular, the section 6(b)(5) 

requirement that an exchange’s rules be 

designed to promote just and equitable 

principles of trade, remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system, and 

protect investors and the public interest. 

The disclosures will help provide notice 

to market participants, including 

investors, about the specific risks 

associated with Extended Hours 

Trading. 

f. Other Comments 

24X proposed 24X Rule 11.12 related 

to the clearance and settlement of 

trades. Under this rule, 24X will require 

that all transactions through the 

facilities of the Exchange be 

automatically cleared and settled 

through a registered clearing agency 

using a continuous net settlement 

system when the continuous net 

settlement system is open. When the 

continuous net settlement system is 

closed, 24X will require trades to be 

processed for clearing and settlement as 

soon as the relevant clearing agency 

reopens the continuous net settlement 

system. 

One commenter questioned the 

settlement cycle of trades in the context 

of the 24X Market Session, as originally 

proposed.363 The commenter stated that 

a trade executed at 11:59 p.m. would 

settle the next day and a trade that 

executed just two minutes later, at 12:01 

a.m., would not settle until the 

following day (assuming consecutive 

settlement dates).364 The commenter 

also stated that the 24X Market Session, 

as originally proposed, raises additional 

operational and risk management 

questions related to the clearance and 

settlement processes for trades that 

occur overnight and on non-business 

days operated by registered clearing 

agencies, including the National 

Securities Clearing Corporation 

(‘‘NSCC’’).365 In its second letter, the 

commenter stated that all default risks 

and related clearance, settlement, 

payment and delivery risks would be 

borne by broker-dealers until trades 

were transferred to DTCC for novation, 

which would impose significant 

counterparty risk on broker-dealers.366

The commenter stated that retail 

investors ‘‘would be unaware’’ that 

trades executed during the 24X Market 

Session would be excluded from the 

NSCC and DTCC’s real-time guarantee 

model.367 The commenter stated that 

delays in reporting overnight trades to 

NSCC also impact margin requirements, 

including margin calculations.368

24X responded that the commenter’s 

concerns related to the clearance and 

settlement of trades ‘‘have long existed 

and are contemplated within existing 

NSCC/DTCC rules.’’ 369 24X also stated 

that it understood, from the DTCC, that 

the operational and clearance and 

settlement risks related to its proposed 

overnight and weekend trading are 

manageable using existing risk 

management rules and protocols,370 and 

that ‘‘DTCC plans to implement 

additional changes to its processes going 

forward to further narrow the risks 

presented by extended trading 

hours.’’ 371 Further, 24X stated that 

trades occurring within a matter of 


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372See 24X Letter II at 18. 

373See 24X Letter IV at 5. 

374 15 U.S.C. 78f(b)(5). 

375As discussed above, the 24X Market Session 

will not operate until the 24X Market Session 

Proposed Rule Change has been approved or 

otherwise become effective. Market participants 

should direct their interpretative questions about 

the rules of other SROs, including NSCC or DTC, 

to those SROs. 

376See SIFMA Letter at 5. 

377See id. 

378See 24X Letter II at 14. 

379See supra notes 376–377 and accompanying 

text. 

380See 24X Rule 1.5(c), which requires 24X to file 

the 24X Market Session Proposed Rule Change. 

381See 24X Rule 11.13. 

382See FIA PTG Letter II and SIFMA Letter II. 

383See FIA PTG Letter II at 1–3. 

384 Id. at 2–3; see also SIFMA Letter II at 8–9. 

385FIA PTG Letter II at 2 (stating, as an example, 

‘‘in the event of a technological error during the 

24X Market Session, there may be limited staff 

available to quickly resolve a critical issue, 

increasing the likelihood a malfunction will cause 

harm and persist over an extended period of 

time.’’). 

minutes that could settle on different 

days is a ‘‘natural outgrowth’’ of the T+1 

settlement process because there must 

be a time that delineates the end of a 

trading day.372 Finally, 24X stated that, 

‘‘as with overnight trading on ATSs 

today, broker-dealers concerned about 

potential operational and clearance and 

settlement risks related to such trading 

are not required to trade in the 24X 

Market Session.’’ 373

The 24X rules related to clearance and 

settlement of transactions on 24X are 

consistent with the requirements of 

section 6(b)(5) of the Exchange Act that 

provides, among other things, that the 

rules of an exchange must foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities.374 Further, the 

Commission concludes that while risk 

cannot be eliminated, it can be 

appropriately managed as it relates to: 

(1) the proposed operation of the 24X 

Market Session and (2) the ability of the 

relevant clearing agencies for equities, 

NSCC and the DTC, to address any 

potential credit, market, and liquidity 

risks associated with trades submitted 

by the Exchange. While one commenter 

submitted several interpretative 

questions related to how clearance and 

settlement of trades will occur during 

the 24X Market Session, the commenter 

did not explain how the clearance and 

settlement of 24X Market Session trades 

would be different from trades that 

occur in the overnight sessions in the 

OTC market.375 Further, the commenter 

stated that broker-dealers will carry all 

default risks and related clearance, 

settlement, payment and delivery risks 

until trades are reported. Broker-dealers 

may assess the risks and benefits of 

participating in the 24X Market Session. 

Although a commenter stated that 

investors would be unaware of the risks 

held by broker-dealers, 24X Rule 3.21(g) 

requires disclosure of the risk that 

certain financial market infrastructure, 

including ‘‘the relevant clearing agency’’ 

and ‘‘certain other providers of 

settlement services,’’ may be closed for 

business during the Extended Hours 

Trading sessions. Finally, the concerns 

of certain commenters about weekend 

trading are no longer relevant because 

24X has amended its rules to eliminate 

weekend trading. 

24X proposed several rules that are 

reasonably designed to ensure 

compliance with Regulation SHO. 24X 

Rule 11.9(a)(1) requires the execution 

price of an order with short sale 

instruction to be above the current 

national best bid if a short sale price test 

restriction under Rule 201 is in effect, 

unless the order is marked short 

exempt; and 24X Rule 11.9(a)(5) 

requires all orders to sell short to 

include a short sale instruction. 24X 

Rule 11.23 relates to Short Sale Circuit 

Breakers and sets forth that once a Short 

Sale Circuit Breaker pursuant to Rule 

201 of Regulation SHO has been 

triggered during Regular Trading Hours, 

the price test restriction of Rule 201 will 

be in place for the applicable covered 

security for the remainder of the trading 

day on which the Short Sale Circuit 

Breaker is triggered, through the next 

U.S. Business Day after the trading day 

on which the Short Sale Circuit Breaker 

is triggered, and until 4 a.m. on the U.S. 

Business Day after the next U.S. 

Business Day after the trading day on 

which the Short Sale Circuit Breaker is 

triggered, unless the listing market for 

the covered security provides a 

notification via the exclusive SIPs 

indicating that the price test restriction 

is no longer in effect at a time earlier 

than 4 a.m. on the U.S. Business Day 

after the next U.S. Business Day after 

the trading day on which the Short Sale 

Circuit Breaker is triggered. 24X Rule 

13.2 requires borrowing and deliveries 

to be effected in accordance with Rule 

203 of Regulation SHO and provides 

that the 24X incorporates by reference 

Rules 200 and 203 of Regulation SHO. 

One commenter questioned how 

would compliance with the circuit 

breaker requirements set forth in Rule 

201(b)(1)(ii) of Regulation SHO be 

achieved if the exclusive SIPs were not 

in operation during the 24X Market 

Session.376 The commenter also stated 

that the close-out requirement for the 

failure to deliver, set forth in Rule 204 

of Regulation SHO, could be delayed 

due to the extension of trading hours to 

non-business days.377 24X responded 

that it would comply with Rule 201 of 

Regulation SHO whenever it is deemed 

to apply.378

The 24X rules are consistent with the 

Exchange Act as they incorporate 

Regulation SHO requirements. 

Accordingly, 24X rules are consistent 

with section 6(b)(5) of the Exchange Act 

because they are designed to prevent 

fraudulent and manipulative acts and 

practices and promote just and equitable 

principles of trade. Further, in response 

to commenter’s concerns about potential 

delays in the close out requirement due 

to the initially proposed 24X Market 

Session operating during non-business 

days,379 the 24X Market Session, as 

amended, will not provide for trading 

on non-U.S. Business Days. In response 

to the question raised by the commenter 

about compliance with the circuit 

breaker requirements if the exclusive 

SIPs were not in operation, in 

Amendment No. 2, 24X amended the 

rules governing the 24X Market Session 

so that 24X will not commence 

operations of the 24X Market Session 

until the Equity Data Plans are able to 

collect, consolidate, process and 

disseminate consolidated data during 

the 24X Market Session designated 

hours.380

24X proposed 24X Rule 11.13 

governing 24X’s limitation of liability 

arising from use of Exchange systems or 

facilities.381 Two commenters 

commented on 24X’s rule.382 One 

commenter stated that 24X failed to 

appropriately justify its proposed 

limitation of liability.383 This 

commenter stated that 24X’s limitation 

of liability provision is modeled on a 

similar provision adopted in 2005 and 

that subsequent significant equity 

market structure changes have rendered 

the proposed provision inadequate, 

particularly given the 24X Market 

Session, as originally proposed.384 One 

of these commenters further stated that 

24X provides no support for the 

Commission to find the limitation of 

liability provisions consistent with the 

Exchange Act or the public interest, and 

that ‘‘[a]n even greater level of scrutiny 

regarding the proposed 24X limitation 

of liability is warranted due to the 

additional operational risks associated 

with operating a near 24x7 market 

center.’’ 385 The other commenter stated 

that ‘‘[n]otably, 24X intends to operate 

for significantly more trading hours and 

trading days than other national 

securities exchanges, and it has not 

explained why the liability caps 


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386See SIFMA Letter II at 9. 

387See 24X Letter III at 5. 

388 Id. 

389See 24X Letter IV at 5. 

390 15 U.S.C. 78f(b)(5) and (8). 

391See e.g., MEMX Exchange Rule 11.14; LTSE 

Exchange Rule 11.260. 

392See section III.E.2. 

393See SIFMA Letter II at 13. This commenter 

posed a number of questions that were interpretive 

in nature or technical and related to 

implementation of extended hours trading. As 

discussed throughout, there are existing extended 

hours trading sessions on other exchanges and the 

rules that are applicable during extended hours 

sessions are clear. The commenter stated that a 

broader consideration of extended hours trading in 

the national market system should be conducted. 

See supra section III.D.2.a (discussing comments 

requesting a roundtable or broader consideration of 

extended hours trading). As discussed above, the 

Commission continues to monitor the national 

market system, including the expansion of trading 

hours in the equity market. 

394 24X does not own the Technology and System 

but states that it has obtained all necessary licenses 

and authorizations from MEMX Technologies in 

order for 24X and its Members and Users to fully 

utilize the Technology and System. See Form 1, 

Exhibit E. 

395See Form 1, Exhibit E. Among other things, 

the DLSA sets forth a multi-year term with 

automatic renewal provisions that requires MEMX 

Technologies to deliver the Technology and System 

and run industry connectivity testing and other 

functional-based testing. See id. The DLSA also 

provides for transition services to the extent either 

party decides to terminate the arrangement. See id. 

396See Form 1, Exhibit C. 

397See id. 

398See id. 

399See id. 

400See Form 1, Exhibit E. 

401See id. 

402See Form 1, Exhibit C. 

403See id. 

included in its proposed rule are 

reasonable or appropriately tailored to 

address the risk of system errors or 

malfunctions on its market across these 

longer periods.’’ 386

In response to the commenter’s 

concerns, 24X stated that it believes that 

the 24X rule complies with the 

Exchange Act.387 24X continued that 

other exchanges operate pursuant to the 

‘‘same rule’’ and that ‘‘there is no basis 

for reaching a different conclusion in 

the context of 24X’s Form 1 

application.’’ 388 24X also stated that 

‘‘the liability caps were not established 

based on the number of trading hours on 

the exchange.’’ 389

The limitation of liability provisions 

of 24X Rule 11.13 are consistent with 

the Exchange Act requirement that the 

rules of an exchange be designed to 

promote just and equitable principles of 

trade and not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act.390 24X 

Rule 11.13 is substantively similar to 

other exchanges’ limitation of liability 

provisions previously approved by the 

Commission and applicable to other 

exchanges that have extended hours 

trading sessions.391 In addition, with 

respect to the commenters’ statements 

that greater exchange liability would be 

appropriate given the ‘‘additional 

operational risks associated with 

operating a near 24x7 market center,’’ 

24X will be required to comply with its 

obligations under the Exchange Act 

during all hours that it is operating. 

While 24X has more hours of operations 

as compared to other exchanges, 24X 

will have SRO obligations during the 

24X Market Session as it does during its 

other trading sessions. Further, as 

discussed below, 24X will be an SCI 

entity that must comply with Regulation 

SCI.392 While commenters submitted 

comments on the 24X Form 1, both 

commenters stated that the limitation of 

liability caps on all exchanges should be 

reevaluated. As stated above, the 

Commission, consistent with its 

oversight of the national market system, 

will continue to monitor the national 

market system. However, the monitoring 

of market developments does not 

foreclose Commission action on the 24X 

Form 1, which for reasons discussed 

throughout, satisfies the requirements of 

the Exchange Act. 

One commenter requested 

interpretative guidance on the 

application of Commission Rule 605 

and Rule 610(d) and FINRA Rule 

5320.08 to the proposed 24X trading 

sessions (i.e., Pre-Market Session, PostMarket Session, 24X Market Session and 

Core Market Session).393 These rules are 

clear as to their application during 

different sessions and the commenter 

did not state why the 24X Form 1 raised 

unique interpretative questions 

compared to the extended hours 

sessions on other national securities 

exchanges that have operated for several 

years. 

E. Technology Agreement With MEMX 

Technology 

1. Delivery, Licenses and Services 

Agreement (‘‘DLSA’’) 

The Exchange will utilize trading 

technology and systems (collectively, 

the ‘‘Technology and System’’) 

developed by MEMX Technologies, LLC 

(‘‘MEMX Technologies’’),394 a 

subsidiary of MEMX Holdings LLC, and 

provided to the Exchange pursuant to a 

DLSA between MEMX Technologies 

and the Exchange.395 Specifically, 

pursuant to the DLSA, MEMX 

Technologies will provide technology 

support services to 24X, which will 

include ‘‘(1) the development and 

testing of software and hardware 

necessary to operate the matching 

engine and connectivity to other 

exchanges via a third-party routing 

broker(s) and third party-developed 

functions (including clearing, custody, 

and client connectivity), (2) the 

provision of technical support in order 

for the Exchange to operate and monitor 

the Exchange; and (3) the provision of 

ongoing system availability 

commitments, updates, fixes, and 

technology support.’’ 396 MEMX 

Technologies will support intra-day 

compliance monitoring by 24X and 

provide timely reporting to 24X of any 

potential Regulation SCI events or other 

operational issues with the System.397

All services provided to the Exchange 

by MEMX Technologies will be based 

upon requirements and instructions 

determined by the Exchange.398

Although MEMX Technologies would 

provide the technology support services, 

24X will be responsible for operating 

and monitoring its Exchange-related 

Technology and System and 

administering the rules of the Exchange 

and other rules and regulations 

applicable to the Exchange.399 To 

ensure logical and physical separation 

from MEMX Technologies and its 

affiliates, the Technology and System 

will operate a separate instance of 

MEMX Technologies’ core matching 

engine technology and software, 

utilizing separate servers from the 

MEMX Exchange system and separate 

connections for 24X Members to 

connect to 24X.400 Under the terms of 

the DLSA, 24X may request MEMX 

Technologies to develop and implement 

(for a fee to be determined by the 

parties) technology changes that change 

the operation of the 24X Technology 

and System. 24X is not obligated to 

agree to, accept, or adopt changes to the 

Technology and System that are not 

essential to the operation of its instance 

of the Technology and System.401

Additionally, 24X stated that the 

‘‘trading platforms operated by MEMX 

Technologies (including 24X National 

Exchange, LLC, MEMX Exchange, and 

any other exchanges or trading 

platforms operated by MEMX 

Technologies) currently are and will be 

segregated to ensure that 24X is not 

deemed to be a facility of MEMX 

Exchange.’’ 402 MEMX Technologies will 

not use or disclose information or data 

(i) about or originating with 24X in its 

dealings with MEMX Exchange or any 

other platform or (ii) about or 

originating with MEMX Exchange or 

any other platform in its dealing with 

24X.403


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404See IEX Letter at 2. 

405See IEX Letter at 3. 

406See MEMX Letter at 2. The commenter further 

stated, that as an example, ‘‘Nasdaq technology is 

also used to operate at least one ATS that is meets 

the volume threshold for compliance with 

Regulation SCI; the securities information processor 

(‘‘SIP’’) for Tape C stocks; and two of three trade 

reporting facilities (‘TRFs’).’’ 24X agreed with this 

statement. See 24X Letter IV at 2–3. 

407See MEMX Letter at 4. 

408See 24X Letter III at 4. 

409See Securities Exchange Act Release No. 

100783 (Aug. 20, 2024), 89 FR 68481 (Aug. 26, 

2024) (SR–LTSE–2024–03) (‘‘LTSE—MEMX 

Technologies Approval Order’’) (approval of 

proposed rule change by the Long-Term Stock 

Exchange to transition from its current trading 

platform to a new trading platform that uses 

technology provided by MEMX Technologies). One 

commenter had stated that arguments regarding the 

use of MEMX’s technology have been substantively 

addressed by the Commission in the LTSE—MEMX 

Technologies Approval Order and that ‘‘the 

Commission’s order addresses the pertinent legal 

questions and concludes that this arrangement 

[between LTSE and MEMX Technologies] ‘is 

consistent with the Exchange Act.’ ’’ See MEMX 

Letter at 5. 24X agreed with this commenter’s 

statement. See 24X Letter IV at 3. 

410See Healthy Markets Letter at 9–10; Montone 

Letter at 5. 

411See IEX Letter. 

412See Healthy Markets Letter at 9. The 

commenter also stated that the arrangement 

between 24X and MEMX Technologies ‘‘would 

need to be public, so that the Commission and 

public could assess the conflicts of interests and 

risks posed by it to the operations of 24X.’’ Healthy 

Markets Letter at 10. A description of the DLSA and 

its terms may be found in 24X’s Form 1 at Exhibits 

C and E and have been subject to notice and public 

comment. Exhibits C and E to the Form 1 do not 

require these contracts to be filed. See Exhibit C 

(requiring, among other things, information relating 

to any entity with whom the applicant has a 

contractual or other arrangement relating to the 

operation of an electronic trading system to be used 

to effect transactions on the exchange) and Exhibit 

E (requiring a description of the operation of the 

exchange). These exhibits provide sufficient 

information to assess the proposed arrangement. 

413See Form 1, Exhibit C. 

414See Form 1, Exhibit E. 

415See IEX Letter at 2. Although MEMX 

Technologies will develop and maintain the 

Technology and System pursuant to the DLSA, it 

is 24X market operations staff that will be 

responsible for the daily operations of 24X’s market. 

See Form 1, Exhibit E. 

416Montone Letter at 5. One commenter asked 

whether in the event of a potentially serious cyber 

breach of its systems, 24X would ’’be in a position 

to promptly identify such a breach if it is entirely 

reliant on a third party for security and other 

technology’’ and, once aware, what assistance it 

would ‘‘require from its supplier to be able to 

respond in a timely way that protects exchange 

systems and user information.’’ See Heathy Markets 

Letter at 9. The Commission reiterates that the 

ultimate responsibility for regulatory compliance 

with the Exchange Act and rules thereunder falls 

on 24X and should 24X require, the DLSA provides 

that 24X may request technology changes from 

MEMX Technologies to change the operation of the 

System. See Form 1, Exhibit E. 

417See Montone Letter at 5. 

418 24X Letter III at 4. 24X also agreed with a 

commenter that stated that ‘‘the strength of MEMX’s 

technology platform is the primary reason that 24X, 

LTSE, and several other trading venues have 

contracted with MEMX Technologies to power their 

trading systems. MEMX has shown that its 

technology platform is robust and resilient day in 

and day out for the past four years.’’ See 24X Letter 

IV at 2–3 (quoting from MEMX Letter at 2). 

419See IEX Letter at 2–3. 

420See IEX Letter at 3. 

One commenter stated that the 

proposal by 24X to outsource its 

technology needs, along with the 

maintenance and remediation of 

technology issues, to MEMX 

Technologies ‘‘is distinct from the 

existing common practice of exchanges 

and other venues to outsource discrete 

technology elements to individual 

vendors based on the expertise provide 

by each vendor, subject to oversight of 

the vendors by the exchange as required 

by Regulation SCI.’’ 404 The commenter 

further stated that other ‘‘existing 

examples do not involve exclusive 

reliance on a single technology provider 

(affiliated with one exchange) for 

multiple U.S. registered 

exchange[s].’’ 405

This commenter’s statements were 

disputed by another commenter, who 

stated that ‘‘having a common 

technology platform underlying 

multiple registered exchanges is hardly 

a new phenomenon. Of the sixteen 

currently licensed U.S. equities 

exchanges, twelve are operated by just 

three exchange groups that each operate 

several independently-registered 

exchanges using a common technology 

platform.’’ 406 The commenter further 

stated that use of vendors ‘‘allows 

competitors of all sorts to focus on their 

core business, whether that’s facilitating 

the move to a 24-hour trading model, 

. . . or in attracting listings from 

corporate issuers.’’ 407 24X responded 

that ‘‘the use of a common technology 

platform for multiple registered 

exchanges is a common practice. 24X 

understands that three existing 

exchange groups operate several 

independently-registered national 

securities exchanges using a common 

technology platform.’’ 408 The 

Commission agrees that the outsourcing 

of an exchange’s technology platform to 

another entity is not novel.409

Two commenters stated that there 

should be greater clarification on the 

relationship between 24X and MEMX 

Technologies.410 A third commenter 

expressed concerns about the proposed 

agreement between 24X and MEMX 

Technologies.411 One of these 

commenters stated that the Exchange 

would be heavily dependent on MEMX 

Technologies, and asked whether 

MEMX Technologies would be more 

properly viewed as an owner or control 

person for its technology needs.412 As 

the Commission stated above, MEMX 

Technologies is a vendor that will 

provide technology support services to 

24X, to meet requirements established 

by 24X; MEMX Technologies has no 

ownership interest in 24X.413 The 

ultimate responsibility for regulatory 

compliance with the Exchange Act and 

rules thereunder falls on 24X as the 

SRO. Nor will MEMX Technologies be 

able to assert control over 24X regarding 

operation of the Technology and 

System. Under the terms of the DLSA, 

as described in the Form 1, 24X is not 

obligated to agree to, accept, or adopt 

changes to the Technology and System 

that are not essential to the operation of 

its instance of the Technology and 

System.414

Another commenter stated that the 

‘‘exclusive reliance on a single vendor 

raises questions about the availability of 

resources by [MEMX Technologies] to 

fill that role.’’ 415 Similarly, one 

commenter asked for clarification as to 

whether MEMX Technologies ‘‘has the 

staff and infrastructure to facilitate 23- 

hour continuous trading’’ 416 and stated 

that there should be ‘‘a detailed 

reassurance that the technology 

underlying the exchange will not 

breakdown due to a high user rate and 

further if the technology does fail, what 

the procedures will be to protect the 

exchange while also safeguarding 

investors information and 

portfolios.’’ 417 24X in response stated 

that the technology it will utilize ‘‘has 

a proven track record for resiliency, a 

track record that should give the SEC 

and market participants comfort 

regarding the reliability of 24X’s market 

offering.’’ 418

Another of the commenters stated that 

24X’s potential use of MEMX 

Technologies for operational support 

raises conflicts concerns and that the 

Form 1 ‘‘contains little if any 

information about management of 

conflicts more generally.’’ 419 This 

commenter stated that there are no 

statements or information about the 

‘‘nature and extent’’ of the segregation 

between 24X and MEMX Technologies 

or the ‘‘financial terms of 24X’s 

agreement with [MEMX Technologies] 

and about what type of separation may 

exist between [MEMX Technologies] 

and MEMX.’’ 420 The commenter further 

stated that its concerns ‘‘may be 

magnified to the extent that other 

exchanges propose to make use of this 

same exclusive ‘white label’ technology 

solution by the same vendor to meet 

their technology needs, as has been 

widely reported. Under that 

construction, [MEMX Technologies] 

would appear to be performing in effect 

a technology utility function for 

multiple regulated exchanges, but it 


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421See id. 

422See supra note 412. 

423See Form 1, Exhibit E. See also 24X Letter II 

at 15. 

424See Form 1, Exhibit C. 

425See Form 1, Exhibit E. 

426See id. 

427See id. 

428See Form 1, Exhibit E. 

429 15 U.S.C. 78f(b)(1). 

430See e.g., LTSE—MEMX Technologies 

Approval Order, supra note 409. 

431See Form 1, Exhibit E. 

432 24X may automatically route orders to other 

exchanges through the use of one or more routing 

brokers that are not affiliated with 24X. See Form 

1, Exhibit E. See also 24X Rules 2.11 and 11.10. 

433See Form 1, Exhibit E. 

434See id. 

435See supra section III.C.2. (discussing 24X’s 

RSA with FINRA). 

436See Securities Exchange Act Release No. 

73639 (Nov. 19, 2014), 79 FR 72252 (Dec. 5, 2014) 

(‘‘Regulation SCI 2014 Adopting Release’’). 

437See 17 CFR 242.1001. 

438See 17 CFR 242.1002. See also 17 CFR 

242.1000 and 17 CFR 242.1006. 

439See 17 CFR 242.1003. See also 17 CFR 

242.1000. 

440See 17 CFR 242.1005. See also 17 CFR 

242.1007. 

would not be a regulated entity itself, 

and the Commission would have 

limited ability to evaluate, and no 

ability to control, how it performs that 

critical function.’’ 421

24X, not MEMX Technologies, has 

regulatory responsibility over the 24X 

System, and therefore 24X as a SRO is 

fully responsible for discharging its 

obligations as a registered national 

securities exchange. The Commission 

disagrees with the commenter that the 

Form 1 contains little information about 

these matters.422 24X has provided 

sufficient detail in the Form 1 regarding 

the relationship between 24X and 

MEMX Technologies.423 MEMX 

Technologies will not use or disclose 

information or data (i) about or 

originating with 24X in its dealings with 

MEMX Exchange or any other platform 

or (ii) about or originating with the 

MEMX Exchange or any other platform 

in its dealings with 24X.424 Also, the 

DLSA, among other things, enforces 

logical and physical separation from 

MEMX Technologies and its affiliates in 

that the Technology and System will 

operate a separate instance of MEMX 

Technologies’ core matching engine 

technology and software, utilizing 

separate servers from MEMX Exchange 

system and separate connections for 

Members to connect to 24X.425 Further, 

24X will interact with the MEMX 

Exchange, including MEMX Exchange’s 

routing broker-dealer, on the same armslength commercial terms as 24X 

interacts with other registered national 

securities exchanges and their routing 

broker-dealers.426 Membership in the 

MEMX Exchange will not confer any 

advantages when trading on 24X (or 

vice versa), such as faster connections, 

lower fees, or preferential treatment of 

orders on the 24X System.427

Membership in the MEMX Exchange 

will also not be a requirement for 

membership in or connection to 24X (or 

vice versa).428

After consideration of the disclosures 

24X made in its Form 1 application and 

review of the comments, the 

Commission finds that 24X’s proposal to 

utilize technology provided and 

maintained by MEMX Technologies is 

consistent with the Exchange Act, in 

particular with section 6(b)(1) of the 

Exchange Act,429 which requires an 

exchange to be so organized and have 

the capacity to carry out the purposes of 

the Exchange Act and to comply and 

enforce compliance by its members and 

persons associated with its members 

with the Exchange Act and the rules 

thereunder. The arrangement between 

24X and MEMX Technologies, as 

described in the 24X Form 1, will 

enable the Exchange to utilize trading 

platform technology that is already in 

use with an experienced operator.430

However, the terms of the DLSA 

between 24X and MEMX Technologies, 

as described in the Form 1, are 

reasonably designed not to confer upon 

either MEMX Exchange or 24X Members 

any advantages when trading on 24X, or 

vice versa, such as faster connections, 

lower fees, or preferential treatment of 

orders on the 24X System.431 Further, as 

described in the Form 1, the DLSA will 

not include the technology or systems to 

route orders to the MEMX Exchange or 

any other exchange.432 24X will retain 

responsibility for overseeing the daily 

market operations of its trading system; 

MEMX Technologies will be responsible 

for performing all necessary 

maintenance and remediation of 

problems relating to the logical and 

physical infrastructure, in accordance 

with the DLSA.433 Therefore, 24X will 

be capable of exercising sufficient 

control over the operation of its 

Technology and System, and will be 

sufficiently independent from MEMX 

Technologies, to enable 24X to comply 

with the requirements under the 

Exchange Act and the rules thereunder. 

The provisions of the DLSA described 

above demonstrate that the support 

services provided by MEMX Technology 

are adequate to enable 24X to meet its 

self-regulatory obligations. In order for 

24X to perform its regulatory 

obligations, the DLSA provides 24X 

with enumerated audit rights to review 

books and records of MEMX 

Technologies related to the provision of 

services under the DLSA, and the ability 

either to produce itself, or direct MEMX 

Technologies to produce, MEMX 

Technologies documents and 

information related to the operation of 

the Technology and System to the 

Commission or other regulators or 

parties upon request, subject to 

appropriate due process.434

Finally, 24X will have regulatory 

responsibility for its trading Technology 

and System and will be responsible to 

fully discharge its obligations as a 

national securities exchange. 24X will 

also be responsible for its market and 

cross-market surveillance through the 

RSA, described above,435 and maintain 

its independent regulatory function to 

oversee the RSA and will not rely on or 

utilize MEMX Exchange or its personnel 

to fulfill any aspect of those obligations 

on 24X’s behalf. 

2. Regulation SCI 

As a registered national securities 

exchange, 24X will be an ‘‘SCI entity’’ 

responsible for compliance with the 

requirements of Regulation Systems 

Compliance and Integrity (‘‘Regulation 

SCI’’).436 Regulation SCI requires SCI 

entities to establish written policies and 

procedures reasonably designed to 

ensure that their applicable systems 

have levels of capacity, integrity, 

resiliency, availability, and security 

adequate to maintain their operational 

capability and promote the maintenance 

of fair and orderly markets, and that 

they operate in a manner that complies 

with the Exchange Act.437 In addition, 

Regulation SCI requires SCI entities to 

take corrective action with respect to 

SCI events (defined to include systems 

disruptions, systems compliance issues, 

and systems intrusions), notify the 

Commission of such events, and 

disseminate information about certain 

SCI events to affected members or 

participants (and, for certain major SCI 

events, to all members or participants of 

the SCI entity).438 Moreover, Regulation 

SCI requires SCI entities to conduct a 

review of their systems by objective 

personnel at least annually, submit 

quarterly reports regarding completed, 

ongoing, and planned material changes 

to their SCI systems to the 

Commission,439 and maintain certain 

books and records.440 It also requires 

SCI entities to mandate participation by 

designated members or participants in 

scheduled testing of the operation of 

their business continuity and disaster 

recovery plans, including backup 

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441See 17 CFR 242.1004. 

442See 17 CFR 242.1000 (definitions of ‘‘SCI 

systems,’’ ‘‘indirect SCI systems,’’ and ‘‘critical SCI 

systems’’). 

443See Form 1, Exhibit E. 

444See id. 

445See id. 

446See Healthy Markets Letter at 9. 

447See, e.g., Rule 1000 (definitions of SCI 

systems, critical SCI systems and indirect SCI 

systems, each of which contains ‘‘any. . .systems 

of, or operated by or on behalf of. . .’’). See also 

Regulation SCI 2014 Adopting Release, supra note 

436 at 72276 (discussing the utilization of third 

parties by SCI entities for applicable systems). 

448See id. (‘‘The Commission agrees with the 

comment that an SCI entity should be responsible 

for managing its relationship with third parties 

operating systems on behalf of the SCI entity 

through due diligence, contract terms, and 

monitoring of third party performance. However, 

the Commission believes that these methods may 

not be sufficient in all cases to ensure that the 

requirements of Regulation SCI are met for SCI 

systems operated by third parties. . . . . Instead, if 

an SCI entity determines to utilize a third party for 

an applicable system, it is responsible for having in 

place processes and requirements to ensure that it 

is able to satisfy the requirements of Regulation SCI 

for systems operated on behalf of the SCI entity by 

a third party. The Commission believes that it 

would be appropriate for an SCI entity to evaluate 

the challenges associated with oversight of thirdparty vendors that provide or support its applicable 

systems subject to Regulation SCI. If an SCI entity 

is uncertain of its ability to manage a third-party 

relationship (whether through due diligence, 

contract terms, monitoring, or other methods) to 

satisfy the requirements of Regulation SCI, then it 

would need to reassess its decision to outsource the 

applicable system to such third party.’’). 

449See SIFMA Letter at 8. 

450See 24X Letter II at 5. 

451See id. 

452See 15 U.S.C. 78f(b)(1). 

453See id. 

454See supra notes 119–120 and accompanying 

text. See also 24X Rule 9.8 (stating that 24X and 

FINRA are parties to a regulatory services 

agreement, pursuant to which FINRA will perform 

certain functions described in Chapter 9 on behalf 

of 24X). 

455See 24X Rule 8.10(b). 

456See id. 

457See 24X Rule 8.10(c). 

458See supra note 48. 

459See generally 24X LLC Agreement, Article XI 

and 24X Rules Chapters 7 and 8. 

on an industry- or sector-wide basis 

with other SCI entities.441

Regulation SCI applies to an SCI 

entity’s ‘‘SCI systems,’’ which are 

systems that directly support any one of 

six key securities market functions— 

trading, clearance and settlement, order 

routing, market data, market regulation, 

and market surveillance (‘‘SCI 

systems’’). Regulation SCI also applies 

to ‘‘indirect SCI systems,’’ which are 

any systems that, if breached, are likely 

to pose a security threat to SCI systems. 

Further, certain SCI systems that are 

‘‘critical SCI systems’’ are held to 

certain heightened requirements under 

Regulation SCI.442

The Exchange has obtained 

commitments from MEMX Technologies 

in connection with the Exchange’s 

engagement of MEMX Technologies to 

develop, license, and operate the 

Technology and System on behalf of the 

Exchange to, among other things, 

address how this arrangement is 

consistent with the requirements of 

Regulation SCI.443 The Exchange 

acknowledges that as the SCI entity 

contracting with MEMX Technologies to 

provide software and hardware to 

operate both SCI systems and indirect 

SCI systems, 24X will have full 

responsibility for ensuring that it is in 

compliance with all aspects of 

Regulation SCI, including the 

requirements for its backup and 

recovery capabilities.444 In addition, the 

DLSA includes commitments from 

MEMX Technologies as developer, 

licensor, and operator of the Technology 

and System to cooperate with the 

Exchange and provide the Exchange 

with the information and access that the 

Exchange reasonably believes will allow 

the Exchange to satisfy its obligations 

under Regulation SCI.445

One commenter stated that it does 

‘‘not see how 24X would be able to 

comply with Regulation SCI when it 

would not be in control of its own 

systems. . . . The introduction of 

another essential business partner 

creates previously unprecedented 

conflicts of interest for a registered 

exchange and complications for 

ownership and governance.’’ 446

Contrary to the commenter’s statements, 

Regulation SCI contemplates the 

possibility of an SCI entity’s SCI 

systems and indirect SCI systems being 

operated on its behalf by another 

entity.447 In fact, because SCI entities 

engage in outsourcing to varying 

degrees, the Commission stated when it 

adopted Regulation SCI, ‘‘if an SCI 

entity determines to utilize a third party 

for an applicable system, it is 

responsible for having in place 

processes and requirements to ensure 

that it is able to satisfy the requirements 

of Regulation SCI for systems operated 

on behalf of the SCI entity by a third 

party.’’ 448

Another commenter questioned how 

exchanges that are operating Regulation 

SCI systems ‘‘in production mode at all 

hours’’ would be able to comply with 

Regulation SCI, including requirements 

for systems testing.449 In its response, 

24X set forth a description of how its 

policies and procedures comply with 

the requirements of Regulation SCI.450

The periodic capacity stress testing, 

testing of system changes and testing in 

conjunction with the annual SCI review 

will be coordinated by 24X technology 

operations with MEMX Technologies 

personnel, and that vulnerability and 

threat testing will be coordinated by 

24X with an outside vendor who will 

perform the tests, and with MEMX 

Technologies personnel as necessary.451

Finally, as discussed above, in 

Amendment No. 2, 24X has modified 

the 24X Market System so that trading 

will not occur on weekends. 

Accordingly, the concerns raised about 

systems testing when Regulation SCI 

systems would be ‘‘in production mode 

at all hours’’ are no longer germane. 

Based on the statements 24X has made 

in the Form 1, as amended, and 24X’s 

response to commenters with respect to 

its obligations under Regulation SCI, as 

well as the provisions in the DLSA as 

described by 24X in the Form 1, 24X’s 

proposal regarding the engagement of a 

third party to develop, license, and 

operate the Technology and System is 

designed to support the Exchange’s 

ability to comply with its regulatory 

obligations under Regulation SCI. 

F. Discipline and Oversight of Members 

As stated above, one prerequisite for 

the Commission’s grant of an exchange’s 

application for registration is that a 

proposed exchange must be so 

organized and have the capacity to be 

able to carry out the purposes of the 

Exchange Act.452 Specifically, an 

exchange must be able to enforce 

compliance by its members and persons 

associated with its members with the 

federal securities laws and rules 

thereunder and the rules of the 

exchange.453 Pursuant to an RSA with 

FINRA, FINRA will perform many of the 

initial disciplinary processes on behalf 

of 24X.454 For example, FINRA will 

investigate potential securities laws 

violations, issue complaints, and 

conduct hearings pursuant to 24X rules. 

Appeals from disciplinary decisions 

will be heard by the 24X Appeals 

Committee,455 and the 24X Appeals 

Committee’s decision shall be final.456

In addition, the 24X Board on its own 

initiative may order review of a 

disciplinary decision.457

The 24X LLC Agreement and 24X 

rules provide that the Exchange has 

disciplinary jurisdiction over its 

Members 458 so that it can enforce its 

Members’ compliance with its rules and 

the federal securities laws and rules.459

The Exchange’s rules also permit 24X to 

sanction Members for violations of its 

rules and violations of the federal 

securities laws and rules by, among 

other things, expelling or suspending 

Members, limiting Members’ activities, 

functions, or operations, fining or 

censuring Members, or suspending or 

barring a person from being associated 


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460See 24X Rule 8.1(a). 

461See 24X Rule 8.15. 

462 17 CFR 240.19d–1(c)(2). 

463 15 U.S.C. 78f(b)(6) and (b)(7). 

464See 15 U.S.C. 78f(b)(1). 

465See Form 1, Exhibit H. 

466 15 U.S.C. 78l(f). 

467Pursuant to 24X Rule 1.5(nn), the term ‘‘UTP 

Exchange Traded Products’’ means ‘‘derivative 

securities products that are not listed on the 

Exchange but that trade on the Exchange pursuant 

to unlisted trading privileges, including the 

following: equity linked notes, investment company 

units, index-linked exchangeable notes, equity gold 

shares, equity index-linked securities, commoditylinked securities, currency-linked securities, fixedincome index-linked securities, futures linked 

securities, multifactor-index-linked securities, trust 

certificates, currency and index warrants, portfolio 

depository receipts, trust issued receipts, 

commodity-based trust shares, currency trust 

shares, commodity index trust shares, commodity 

futures trust shares, partnership units, paired trust 

shares, trust units, managed fund shares, and 

managed trust securities.’’ 

468 24X Rule 14.1(b)(2)(A) states that 24X Rule 

14.1(b)(2) applies to UTP Exchange Traded 

Products that are the subject of an order by the 

Commission exempting the series from certain 

prospectus delivery requirements under Section 

24(d) of the Investment Company Act of 1940 and 

are not otherwise subject to prospectus delivery 

requirements under the Securities Act of 1933. 24X 

Rule 14.1(b)(2)(B) requires members to provide a 

written description of the terms and characteristics 

of UTP Exchange Traded Products to purchasers of 

such securities, not later than the time of 

confirmation of the first transaction, and with any 

sales materials relating to UTP Exchange Traded 

Products. 24X Rule 14.1(b)(2)(C) requires members 

to provide a prospectus to a customer requesting a 

prospectus. 

469 15 U.S.C. 78l(f); 17 CFR 240.12f–5. 

470See 17 CFR 240.12f–5. See also Securities 

Exchange Act Release No. 35737 (Apr. 21, 1995), 60 

FR 20891 (Apr. 28, 1995) (File No. S7–4–95) 

(adopting Rule 12f–5 under the Exchange Act). 

471See 24X Rule 14.1(a). 

472See MEMX Exchange Rule 14.1. 

473 15 U.S.C. 78k(a)(1). 

474 17 CFR 240.11a2–2(T). 

475This prohibition also applies to associated 

persons. Rule 11a2–2(T)(a)(2)(iii), 17 CFR 240.11a2– 

2(T)(a)(2)(iii). The member may, however, 

participate in clearing and settling the transaction. 

Rule 11a2–2(T)(b)(3), 17 CFR 240.11a2–2(T)(b)(3). 

with a Member, or any other fitting 

sanction.460 24X’s rules also provide for 

the imposition of fines for certain minor 

rule violations in lieu of commencing 

disciplinary proceedings.461

Accordingly, as a condition to the 

operation of 24X, a Minor Rule 

Violation Plan (‘‘MRVP’’) filed by 24X 

under Exchange Act Rule 19d-1(c)(2) 

must be declared effective by the 

Commission.462

The Commission finds that the 24X 

LLC Agreement and 24X rules 

concerning its disciplinary and 

oversight programs are consistent with 

the requirements of sections 6(b)(6) and 

6(b)(7) of the Exchange Act 463 in that 

they provide fair procedures for the 

disciplining of members and persons 

associated with members. The 

Commission further finds that the rules 

of 24X provide it with the ability to 

comply, and with the ability to enforce 

compliance by its Members and persons 

associated with its Members, with the 

provisions of the Exchange Act, the 

rules and regulations thereunder, and 

the rules of 24X.464

G. Trading on 24X Pursuant to Unlisted 

Trading Privileges 

24X does not intend to be a primary 

listing market for securities.465

Accordingly, 24X has not proposed 

rules that would allow it to primarily 

list any securities at this time. Instead, 

24X has proposed to trade securities 

pursuant to UTP. 24X Rule 14.1 

establishes the Exchange’s authority to 

trade securities on a UTP basis. 24X 

Rule 14.1(a) provides that 24X may 

extend UTP to any security that is an 

NMS stock that is listed on another 

national securities exchange or with 

respect to which UTP may otherwise be 

extended in accordance with section 

12(f) of the Exchange Act.466 24X Rule 

14.1(a) further provides that any such 

security would be subject to all 24X 

rules applicable to trading on 24X, 

unless otherwise noted. 

24X Rule 14.1(b) establishes 

additional rules for trading of UTP 

Exchange Traded Products, which are 

defined in 24X Rule 1.5(nn).467 24X 

Rule 14.1(b) provides that 24X will 

distribute an information circular prior 

to the commencement of trading in a 

UTP Exchange Traded Product that 

generally would include the same 

information as the information circular 

provided by the listing exchange, 

including (a) the special risks of trading 

the Exchange Traded Product, (b) the 

Exchange’s rules that would apply to 

the Exchange Traded Product, and (c) 

information about the dissemination of 

value of the underlying assets or 

indices. 24X Rule 14.1(b)(2) establishes 

certain requirements for Members that 

have customers that trade UTP 

Exchange Traded Products.468 24X Rule 

14.1(b)(4) also establishes certain 

requirements for any Member registered 

as a Market Maker in a UTP Exchange 

Traded Product that derives its value 

from one or more currencies, 

commodities, or derivatives based on 

one or more currencies or commodities, 

or is based on a basket or index 

composed of currencies or commodities. 

24X Rule 14.1(b)(5) provides that the 

Exchange’s surveillance procedures for 

Exchange Traded Products traded on the 

Exchange pursuant to UTP would be 

similar to the procedures used for equity 

securities traded on the Exchange and 

would incorporate and rely upon 

existing Exchange surveillance systems. 

The Commission finds that the 

Exchange’s proposed approach to the 

trading of securities on a UTP basis, as 

set forth in 24X Rule 14.1, is consistent 

with section 12(f) of the Exchange Act 

and Rule 12f-5 thereunder.469 Rule 12f5 under the Exchange Act requires an 

exchange that extends unlisted trading 

privileges to securities to have in effect 

a rule or rules providing for transactions 

in the class or type of security to which 

the exchange extends unlisted trading 

privileges.470 24X Rule 14.1 includes a 

provision that any security traded UTP 

on the Exchange ‘‘shall be subject to all 

Exchange rules applicable to trading on 

the Exchange, unless otherwise 

noted.’’ 471 The provisions in 24X Rule 

14.1 are substantively the same as the 

existing rules of the MEMX 

Exchange.472 Accordingly, pursuant to 

section 12(f) of the Exchange Act and 

Rule 12f-5 thereunder, 24X will be 

permitted to extend unlisted trading 

privileges to securities of the same class, 

subject to the trading rules of the 

Exchange. 

H. Section 11(a) of the Exchange Act 

Section 11(a)(1) of the Exchange 

Act 473 prohibits a member of a national 

securities exchange from effecting 

transactions on that exchange for its 

own account, the account of an 

associated person, or an account over 

which it or its associated person 

exercises investment discretion 

(collectively, ‘‘covered accounts’’) 

unless an exception applies. Rule 11a2– 

2(T) under the Exchange Act,474 known 

as the ‘‘effect versus execute’’ rule, 

provides exchange members with an 

exemption from the section 11(a)(1) 

prohibition. Rule 11a2–2(T) permits an 

exchange member, subject to certain 

conditions, to effect transactions for 

covered accounts by arranging for an 

unaffiliated member to execute 

transactions on the exchange. To 

comply with Rule 11a2–2(T)’s 

conditions, a member: (i) must transmit 

the order from off the exchange floor; 

(ii) may not participate in the execution 

of the transaction once it has been 

transmitted to the member performing 

the execution; 475 (iii) may not be 

affiliated with the executing member; 

and (iv) with respect to an account over 

which the member or an associated 

person has investment discretion, 

neither the member nor its associated 

person may retain any compensation in 

connection with effecting the 

transaction except as provided in the 

Rule. 

In a letter to the Commission, 24X 

requested that the Commission concur 

with 24X’s conclusion that 24X 


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476See letter from David Sassoon, General 

Counsel, 24X, to Vanessa Countryman, Secretary, 

Commission, dated Feb. 6, 2024 (‘‘24X 11(a) 

Letter’’). 

477See, e.g., Nasdaq Order, supra note 57; 

Securities Exchange Act Release Nos. 61419 (Jan. 

26, 2010), 75 FR 5157 (Feb. 1, 2010) (SR–BATS– 

2009–031) (approving BATS options trading); 59154 

(Dec. 23, 2008), 73 FR 80468 (Dec. 31, 2008) (SR– 

BSE–2008–48) (approving equity securities listing 

and trading on BSE); 57478 (Mar. 12, 2008), 73 FR 

14521 (Mar. 18, 2008) (SR–NASDAQ–2007–004 and 

SR–NASDAQ–2007–080) (approving Nasdaq 

Options Market options trading); 29237 (May 24, 

1991), 56 FR 24853 (May 31, 1991) (SR–NYSE–90– 

52 and SR–NYSE–90–53) (approving NYSE’s OffHours Trading Facility); and 15533 (Jan. 29, 1979), 

44 FR 6084 (Jan. 31, 1979) (‘‘1979 Release’’). 

478See 24X 11(a) Letter, supra note 476 at 2. 

479See id. at 3. 24X states that a member may 

cancel or modify the order, or modify the 

instructions for executing the order, after the order 

has been transmitted, provided that such 

cancellations or modifications are transmitted from 

off an exchange floor. The Commission has stated 

that the non-participation condition is satisfied 

under such circumstances so long as such 

modifications or cancellations are also transmitted 

from off the floor. See Securities Exchange Act 

Release No. 14563 (Mar. 14, 1978), 43 FR 11542 

(Mar. 17, 1978) (‘‘1978 Release’’) (stating that the 

‘‘non-participation requirement does not prevent 

initiating members from canceling or modifying 

orders (or the instructions pursuant to which the 

initiating member wishes orders to be executed) 

after the orders have been transmitted to the 

executing member, provided that any such 

instructions are also transmitted from off the 

floor’’). 

480See 24X 11(a) Letter, supra note 476, at 3. 

481See, e.g., BATS Order, supra note 57, at 49505; 

DirectEdge Exchanges Order, supra note 84, at 

13164. 

482See, e.g., BATS Order, supra note 57 at 49505; 

DirectEdge Exchanges Order, supra note 84, at 

13164. In considering the operation of automated 

execution systems operated by an exchange, the 

Commission stated that, while there is not an 

independent executing exchange member, the 

execution of an order is automatic once it has been 

transmitted into the system. Because the design of 

these systems ensures that members do not possess 

any special or unique trading advantages in 

handling their orders after transmitting them to the 

exchange, the Commission has stated that 

executions obtained through these systems satisfy 

the independent execution condition of Rule 11a2– 

2(T). See 1979 Release, supra note 477. 

483See 24X 11(a) Letter, supra note 476, at 3. 

484See, e.g., BATS Order, supra note 57, at 49505; 

DirectEdge Exchanges Order, supra note 84, at 

13164. In addition, Rule 11a2–2(T)(d) requires a 

member or associated person authorized by written 

contract to retain compensation, in connection with 

effecting transactions for covered accounts over 

which such member or associated persons thereof 

exercises investment discretion, to furnish at least 

annually to the person authorized to transact 

business for the account a statement setting forth 

the total amount of compensation retained by the 

member or any associated person thereof in 

connection with effecting transactions for the 

account during the period covered by the statement. 

See 17 CFR 240.11a2–2(T)(d). See also 1978 

Release, supra note 479 (stating ‘‘[t]he contractual 

and disclosure requirements are designed to assure 

that accounts electing to permit transaction-related 

compensation do so only after deciding that such 

arrangements are suitable to their interests’’). 

485 24X represents that it will advise its 

membership through the issuance of an Information 

Circular that those Members trading for covered 

accounts over which they exercise investment 

discretion must comply with this condition in order 

to rely on the rule’s exemption. See 24X 11(a) 

Letter, supra note 476, at 4. 

486See letter from David Sassoon, General 

Counsel, 24X, to Vanessa Countryman, Secretary, 

Commission, dated Feb. 6, 2024 (‘‘24X Exemption 

Request Letter’’). 24X proposes to incorporate by 

reference the following FINRA rules: (1) FINRA 

Rule 2210 (Communications with the Public), via 

24X Rule 3.5 (Communications with the Public); (2) 

the definition of a research report in FINRA Rule 

2241, via 24X Rule 3.13(b)(3); (3) the 12000 and 

13000 Series of the FINRA Manual (Code of 

Arbitration Procedures for Customer Disputes and 

Code of Arbitration Procedures for Industry 

Disputes), via 24X Rules 9.1, 9.2, 9.4, 9.5 and 9.8; 

(4) FINRA Rule 2268 (Requirements When Using 

Pre-dispute Arbitration Agreements for Customer 

Accounts), via 24X Rule 9.3 (Pre-dispute 

Arbitration Agreements); (5) the 14000 Series of the 

FINRA Manual (Code of Mediation Procedures), via 

24X Rule 9.7 (Mediation); and (6) FINRA Rule 5270 

(Frontrunning of Block Transactions), via 24X Rule 

12.14 (Frontrunning of Block Transactions). 

487See 17 CFR 240.0–12. 

488See 24X Exemption Request Letter, supra note 

486. 

489See 24X Exemption Request Letter, supra note 

486. 24X will provide such notice through a posting 

on the same website location where 24X posts its 

Members that enter orders into the 24X 

trading system satisfy the conditions of 

Rule 11a2–2(T).476 For the reasons set 

forth below, 24X Members entering 

orders into the 24X trading system 

could satisfy the requirements of Rule 

11a2–2(T). 

Rule 11a2–2(T)’s first condition is that 

orders for covered accounts be 

transmitted from off the exchange floor. 

In the context of automated trading 

systems, the Commission has found that 

the off-floor transmission condition is 

met if a covered account order is 

transmitted from a remote location 

directly to an exchange’s floor by 

electronic means.477 24X represents that 

24X does not have a physical trading 

floor, and the 24X trading system will 

receive orders from members 

electronically through remote terminals 

or computer-to-computer interfaces.478

The 24X trading system satisfies this offfloor transmission condition. 

The second condition requires that 

the member and any associated person 

not participate in the execution of its 

order after the order has been 

transmitted. 24X represents that at no 

time following the submission of an 

order is a member or an associated 

person of the member able to acquire 

control or influence over the result or 

timing of the order’s execution.479

According to 24X, the execution of a 

member’s order is determined solely by 

what quotes and orders are present in 

the system at the time the member 

submits the order, and the order priority 

based on the 24X rules.480 Accordingly, 

a 24X member and its associated 

persons do not participate in the 

execution of an order submitted to the 

24X trading system.481

The third condition states that the 

order be executed by an exchange 

member who is unaffiliated with the 

member initiating the order. The 

Commission has stated that this 

condition is satisfied when automated 

exchange facilities, such as the 24X 

trading system, are used, as long as the 

design of these systems ensures that 

members do not possess any special or 

unique trading advantages in handling 

their orders after transmitting them to 

the exchange.482 24X represents that the 

design of the 24X trading system 

ensures that no member has any special 

or unique trading advantage in the 

handling of its orders after transmitting 

its orders to 24X.483 Based on 24X’s 

representation, the 24X trading system 

satisfies this condition. 

Fourth, in the case of a transaction 

effected for an account with respect to 

which the initiating member or an 

associated person thereof exercises 

investment discretion, neither the 

initiating member nor any associated 

person thereof may retain any 

compensation in connection with 

effecting the transaction, unless the 

person authorized to transact business 

for the account has expressly provided 

otherwise by written contract that refers 

to section 11(a) of the Exchange Act and 

Rule 11a2–2(T) thereunder.484 24X 

members trading for covered accounts 

over which they exercise investment 

discretion must comply with this 

condition in order to rely on the rule’s 

exemption.485

IV. Exemption from Section 19(b) of the 

Exchange Act With Regard to FINRA 

Rules Incorporated by Reference 

24X proposes to incorporate by 

reference certain FINRA rules as 24X 

rules.486 Thus, for those 24X rules, 

Exchange Members will comply with 

the 24X rule by complying with the 

FINRA rule referenced therein. In 

connection with its proposal to 

incorporate FINRA rules by reference, 

24X requests, pursuant to Rule 240.0– 

12,487 an exemption under Section 36 of 

the Exchange Act from the rule filing 

requirements of section 19(b) of the 

Exchange Act for changes to those 24X 

rules that are effected solely by virtue of 

a change to a cross-referenced FINRA 

rule.488 24X represents in its letter that, 

as a condition to the exemption, it will 

provide written notice to its Members 

whenever a proposed rule change to a 

FINRA rule that is incorporated by 

reference is proposed and whenever any 

such proposed change is approved by 

the Commission or otherwise becomes 

effective.489


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own rule filings pursuant to Rule 19b-4 under the 

Exchange Act, within the required time frame. The 

website posting will include a link to the location 

on the FINRA website where FINRA’s proposed 

rule change is posted. See id. 

490 15 U.S.C. 78mm. 

491The Commission previously exempted other 

exchanges from the requirement to file proposed 

rule changes under Section 19(b) of the Exchange 

Act. See, e.g., IEX Order, supra note 65; ISE 

Mercury Order, supra note 75; Securities Exchange 

Act Release No. 68341 (Dec. 3, 2012), 77 FR 73065, 

73067 (Dec. 7, 2012) (File No. 10–207) (order 

granting the registration of Miami International 

Securities Exchange, LLC (‘‘MIAX Exchange’’)) 

(‘‘MIAX Order’’); Securities Exchange Act Release 

No. 79543 (Dec. 13, 2016), 81 FR 92901, 92903 (Dec. 

20, 2016) (File No. 10–227) (order granting 

registration of MIAX PEARL, LLC) (‘‘MIAX PEARL 

Order’’), BATS Order, supra note 57; DirectEdge 

Exchanges Order, supra note 84. 

492 17 CFR 240.19d–1(c)(2). 

493 17 CFR 240.17d–2. 

494See supra section III.C.3. (discussing Rule 

17d–2 agreements). 

495See supra section III.C.2. (discussing 24X’s 

RSA with FINRA). 

496 15 U.S.C. 78mm. 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 34– 

101078 (September 5, 2024), 89 FR 77937 

(September 24, 2024) (SR–NASDAQ–2024–054). 

Using its authority under section 36 of 

the Exchange Act,490 the Commission is 

hereby granting 24X’s request for an 

exemption, pursuant to section 36 of the 

Exchange Act, from the rule filing 

requirements of section 19(b) of the 

Exchange Act with respect to the rules 

that 24X proposes to incorporate by 

reference.491 This exemption is 

conditioned upon 24X providing 

written notice to its Members whenever 

FINRA proposes to change a rule that 

24X has incorporated by reference. This 

exemption is appropriate, in the public 

interest and consistent with the 

protection of investors because it will 

promote more efficient use of 

Commission and SRO resources by 

avoiding duplicative rule filings based 

on simultaneous changes to identical 

rules of more than one SRO. 

V. Conclusion 

It is ordered that the application of 

24X for registration as a national 

securities exchange be, and it hereby is, 

granted. 

It is furthered ordered that operation 

of 24X is conditioned on the satisfaction 

of the requirements below: 

A. Participation in National Market 

System Plans. 24X must join the 

Consolidated Tape Association Plan, the 

Consolidated Quotation Plan, and the 

Nasdaq UTP Plan (or any successors 

thereto); the National Market System 

Plan Establishing Procedures Under 

Rule 605 of Regulation NMS; the 

Regulation NMS Plan to Address 

Extraordinary Market Volatility; the 

Plan for the Selection and Reservation 

of Securities Symbols; and the National 

Market System Plan Governing the 

Consolidated Audit Trail. 

B. Intermarket Surveillance Group. 

24X must join the Intermarket 

Surveillance Group. 

C. Minor Rule Violation Plan. A 

Minor Rule Violation Plan filed by 24X 

under Rule 19d–1(c)(2) 492 must be 

declared effective by the Commission. 

D. Rule 17d–2 Agreement. An 

agreement pursuant to Rule 17d–2 493

that allocates regulatory responsibility 

for those matters specified above 494

must be declared effective by the 

Commission, or 24X must demonstrate 

that it independently has the ability to 

fulfill all of its regulatory obligations. 

E. Participation in Multi-Party Rule 

17d–2 Plans. 24X must become a party 

to the multi-party Rule 17d–2 agreement 

concerning the surveillance, 

investigation, and enforcement of 

common insider trading rules and the 

agreement concerning certain 

Regulation NMS and Consolidated 

Audit Trail rules. 

F. RSA. 24X must finalize the 

provisions of the RSA with its 

regulatory services provider, as 

described above,495 that will specify the 

24X and Commission rules for which 

the regulatory services provider will 

provide certain regulatory functions, or 

24X must demonstrate that it 

independently has the ability to fulfill 

all of its regulatory obligations. 

It is further ordered, pursuant to 

section 36 of the Exchange Act,496 that 

24X shall be exempted from the rule 

filing requirements of section 19(b) of 

the Exchange Act with respect to the 

FINRA rules that 24X proposes to 

incorporate by reference into its rules, 

subject to the conditions specified in 

this Order. 

By the Commission. 

Stephanie J. Fouse, 

Assistant Secretary. 

[FR Doc. 2024–28551 Filed 12–5–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101793; File No. SR– 

NASDAQ–2024–071] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Establish 

Fees for Its Expanded Co-Location 

Services 

December 2, 2024. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on November 

18, 2024, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, below, which Items have been 

prepared by the Exchange. 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 proposes to a proposal 

to establish fees for its expanded colocation services, as described further 

below. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/nasdaq/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

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 

The Exchange filed a proposal to 

expand its co-location services by 

offering new cabinet, power, and power 

distribution unit options in the 

Exchange’s expanded data center.3 As 

described in that filing, the Exchange’s 

current data center (‘‘NY11’’) in 

Carteret, NJ is undergoing an expansion 

(‘‘NY11–4’’) in response to demand for 

power and cabinets. The purpose of this 

proposed rule change is to establish fees 

for the expanded co-location services. 

Specifically, the Exchange proposes to 

establish (i) a monthly fee for Ultra High 


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