28064 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

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

2 17 CFR 240.19b–4. 

The Commission uses the information 

provided in the submissions filed 

pursuant to Rule 19h–1 to review 

decisions by SROs to permit the entry 

into or continuance in the securities 

business of persons who have 

committed serious misconduct. The 

filings submitted pursuant to the Rule 

also permit inclusion of an application 

to the Commission for consent to 

associate with a member of an SRO 

notwithstanding a Commission order 

barring such association. 

The Commission reviews filings made 

pursuant to the Rule to ascertain 

whether it is in the public interest to 

permit the employment in the securities 

business of persons subject to statutory 

disqualification. The filings contain 

information that is essential to the staff’s 

review and ultimate determination on 

whether an association or employment 

is in the public interest and consistent 

with investor protection. 

It is estimated that approximately 20 

respondents will make submissions 

pursuant to this Rule annually. With 

respect to submissions for Rule 19h–1(a) 

notices, and based upon past 

submissions, the staff estimates that 

respondents will make a total of 11 

submissions per year. The staff 

estimates that the average number of 

hours necessary to complete a 

submission pursuant to Rule 19h–1(a) 

notices is 80 hours (for a total annual 

burden for all respondents in the 

amount of 17,600 hours). With respect 

to submissions for Rule 19h–1(a)(4) 

notifications, and based upon past 

submissions, the staff estimates that 

respondents will make a total of 9 

submissions per year. The staff 

estimates that the average number of 

hours necessary to complete a 

submission pursuant to Rule 19h–1(a)(4) 

notifications is 80 hours (for a total 

annual burden for all respondents in the 

amount of 14,400 hours). With respect 

to submissions for Rule 19h–1(b), and 

based upon past submissions, the staff 

estimates that respondents will make a 

total of 28 submissions per year. The 

staff estimates that the average number 

of hours necessary to complete a 

submission pursuant to Rule 19h–1(b) is 

13 hours (for a total annual burden for 

all respondents in the amount of 7,280 

hours). With respect to submissions for 

Rule 19h–1(d), and based upon past 

submissions, the staff estimates that 

respondents will make a total of 5 

submissions per year. The staff 

estimates that the average number of 

hours necessary to complete a 

submission pursuant to Rule 19h–1(d) is 

80 hours (for a total annual burden for 

all respondents in the amount of 8,000 

hours). The aggregate annual burden for 

all respondents is thus approximately 

47,280 hours (17,600 +14,400 + 7,280 + 

8,000). 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

The public may view background 

documentation for this information 

collection at the following website: 

www.reginfo.gov. Find this particular 

information collection by selecting 

‘‘Currently under 30-day Review—Open 

for Public Comments’’ or by using the 

search function. Written comments and 

recommendations for the proposed 

information collection should be sent 

within 30 days of publication of this 

notice to (i) www.reginfo.gov/public/do/ 

PRAMain and (ii) David Bottom, 

Director/Chief Information Officer, 

Securities and Exchange Commission, c/ 

o John Pezzullo, 100 F Street NE, 

Washington, DC 20549, or by sending an 

email to: PRA_Mailbox@sec.gov. 

Dated: May 4, 2022. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–09951 Filed 5–9–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94847; File No. SR–MEMX– 

2022–10] 

Self-Regulatory Organizations; MEMX 

LLC; Notice of Filing of a Proposed 

Rule Change To Adopt Rules To 

Govern the Trading of Options on the 

Exchange for a New Facility Called 

MEMX Options 

May 4, 2022. 

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 April 21, 

2022, MEMX LLC (‘‘MEMX’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

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 is filing with the 

Commission a proposed rule change to 

adopt rules to govern the trading of 

options on the Exchange. The text of the 

proposed rule change is provided in 

Exhibit 5. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

Purpose 

The Exchange is proposing to adopt a 

series of rules in connection with 

MEMX Options, which will be a facility 

of the Exchange. MEMX Options will 

operate an electronic trading system 

developed to trade options (the 

‘‘System’’) leveraging the Exchange’s 

existing robust and resilient technology 

platform that it uses to operate its cash 

equities market today. The fundamental 

premise of the proposal is that the 

Exchange will operate its options 

market much as it operates its cash 

equities market today and in a manner 

similar to that of other options 

exchanges, with a simplified suite of 

conventional order types and 

functionality that is designed to provide 

for an efficient, robust, and transparent 

order matching process. Much of the 

proposed functionality for MEMX 

Options is substantially similar to that 

offered by other options exchanges, 

primarily Cboe BZX Exchange, Inc. 

(‘‘BZX’’). Thus, the Exchange proposes 

to adopt rules applicable to MEMX 

Options that are substantively identical 

or substantially similar to the approved 

rules of BZX applicable to the BZX 

options market (‘‘BZX Options’’), with 

certain proposed changes or omissions 

that are described below. 

The System will provide for the 

electronic display and execution of 

orders in price/time priority without 

regard to the status of the entities that 

are entering orders. All Exchange 

Members will be eligible to participate 

in MEMX Options provided that the 

Exchange specifically authorizes them 

to trade in the System. The System will 


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3The Exchange notes that it also proposes to 

adopt provisions that exclude from the calculation 

of continuous quoting those times that an Options 

Market Maker is experiencing a technical failure or 

limitation, during a trading halt, suspension or 

pause in the underlying security, or when the 

underlying security is in a limit up-limit down 

state. 

4 15 U.S.C. 78f(g). 

5 17 CFR 240.17d–2. 6See BZX Rules, Chapters XVII and XXII. 

provide a routing service for orders 

when trading interest is not present on 

MEMX Options and will comply with 

all applicable securities laws and 

regulations and the obligations of the 

Options Order Protection and Locked/ 

Crossed Market Plan. 

MEMX Options Members 

Pursuant to the proposed rules in 

Chapter 17 (Participation on MEMX 

Options), the Exchange will authorize 

any Exchange Member who meets 

certain enumerated qualification 

requirements (any such Member, an 

‘‘Options Member’’) and any Options 

Member’s Sponsored Participants to 

obtain access to, and transact business 

on, MEMX Options. 

There will be two types of Options 

Members—Options Order Entry Firms 

(‘‘OEFs’’) and Options Market Makers. 

OEFs will be those Options Members 

representing Customer Orders as agent 

on MEMX Options or trading as 

principal on MEMX Options. Options 

Market Makers will be those Options 

Members registered with the Exchange 

as Options Market Makers pursuant to 

proposed Rule 22.2. To become an 

Options Market Maker, an Options 

Member will be required to register by 

filing a written application. The 

Exchange will not place any limit on the 

number of entities that may become 

Options Market Makers, the number of 

appointments an Options Market Maker 

may have, or the number of Options 

Market Makers that may have 

appointments in a class unless the 

Exchange determines to impose any 

such limit based on system constraints, 

capacity restrictions, or other factors 

relevant to protecting the integrity of the 

System. The Exchange will not impose 

any such limitations until it has 

submitted objective standards for 

imposing the limits to the Commission 

for its review and approval. 

Options Market Makers will be 

required to electronically engage in a 

course of dealing reasonably calculated 

to contribute to the maintenance of fair 

and orderly markets. Among other 

things, an Options Market Maker would 

generally have to satisfy the following 

responsibilities and duties during 

trading: (1) On a daily basis maintain a 

two-sided market on a continuous basis 

in at least 60% of the cumulative 

number of seconds, or such higher 

percentage as the Exchange may 

announce in advance, for which that 

Options Market Maker’s appointed 

classes are open for trading, excluding 

any adjusted series, any intraday add-on 

series on the day during which such 

series are added for trading, any 

Quarterly Option Series, and any series 

with an expiration of greater than 270 

days; 3 (2) enter a size of at least one 

contract for its best bid and its best 

offer; and (3) maintain minimum net 

capital in accordance with Commission 

and Exchange rules. Substantial or 

continued failure by an Options Market 

Maker to meet any of its obligations and 

duties will subject the Options Market 

Maker to disciplinary action, 

suspension, or revocation of the Options 

Market Maker’s registration as such or 

its appointment in one or more of its 

appointed options classes. 

Options Market Makers receive 

certain benefits for carrying out their 

duties. For example, a lender may 

extend credit to a broker-dealer without 

regard to the restrictions in Regulation 

T of the Board of Governors of the 

Federal Reserve System if the credit is 

to be used to finance the broker-dealer’s 

activities as a specialist or market maker 

on a national securities exchange. Thus, 

an Options Market Maker has a 

corresponding obligation to hold itself 

out as willing to buy and sell options for 

its own account on a regular or 

continuous basis to justify this favorable 

treatment. 

Every Options Member shall at all 

times maintain membership in another 

registered options exchange that is not 

registered solely under Section 6(g) of 

the Exchange Act 4 or in FINRA. OEF’s 

that transact business with Public 

Customers must at all times be members 

of FINRA. Pursuant to proposed Rule 

17.2(g), every Options Member will be 

required to have at least one registered 

Options Principal who satisfies the 

criteria of that rule, including the 

satisfaction of a proper qualification 

examination. An OEF may only transact 

business with Public Customers if such 

Options Member also is an Options 

Member of another registered national 

securities exchange or association with 

which the Exchange has entered into an 

agreement under Rule 17d-2 under the 

Exchange Act 5 pursuant to which such 

other exchange or association shall be 

the designated options examining 

authority for the OEF. 

The proposed rules relating to 

qualification and participation on 

MEMX Options as an Options Member 

(including as an OEF and an Options 

Market Maker) are substantively 

identical to the relevant rules of BZX 

Options.6

As provided in proposed Rule 16.2, 

existing Exchange Rules applicable to 

the MEMX equities market contained in 

Chapters 1 through 15 of the Exchange 

Rules will apply to Options Members 

unless a specific Exchange Rule 

applicable to the MEMX Options market 

(proposed Chapters 16 through 29 of the 

Exchange Rules) governs or unless the 

context otherwise requires. Options 

Members can therefore provide 

sponsored access to the MEMX Options 

Exchange to a non-Member (i.e., a 

Sponsored Participant) pursuant to Rule 

11.3 of the Exchange Rules. 

Definitions 

The Exchange proposes to define a 

series of terms under proposed Rule 

16.1 (Definitions), which are to be used 

in proposed Chapters 16 to 29 relating 

to the trading of options contracts on the 

Exchange. Each of the terms defined in 

proposed Rule 16.1 is either identical or 

substantially similar to definitions 

included in BZX Rule 16.1. 

The definitions under proposed Rule 

16.1 are as follows: 

• ABBO. The term ‘‘ABBO’’ means 

the best bid(s) or offer(s) disseminated 

by other Eligible Exchanges (as defined 

in proposed Rule 27.1) and calculated 

by the Exchange based on market 

information the Exchange receives from 

OPRA. 

• Aggregate Exercise Price. The term 

‘‘aggregate exercise price’’ means the 

exercise price of an options contract 

multiplied by the number of units of the 

underlying security covered by the 

options contract. 

• American-Style Option. The term 

‘‘American-style option’’ means an 

options contract that, subject to the 

provisions of proposed Rule 23.1 

(relating to the cutoff time for exercise 

instructions) and to the Rules of the 

Clearing Corporation, may be exercised 

at any time from its commencement 

time until its expiration. 

• Associated Person and Person 

Associated with an Options Member. 

The terms ‘‘associated person’’ and 

‘‘person associated with an Options 

Member’’ mean any partner, officer, 

director, or branch manager of an 

Options Member (or any person 

occupying a similar status or performing 

similar functions), any person directly 

or indirectly controlling, controlled by, 

or under common control with an 

Options Member or any employee of an 

Options Member. 


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• Bid. The term ‘‘bid’’ means a limit 

order to buy one or more options 

contracts. 

• Board. The term ‘‘Board’’ means the 

Board of Directors of MEMX LLC. 

• Call. The term ‘‘call’’ means an 

options contract under which the holder 

of the option has the right, in 

accordance with the terms of the option, 

to purchase from the Clearing 

Corporation the number of shares of the 

underlying security covered by the 

options contract. 

• Capacity. The term ‘‘Capacity’’ 

means the capacity in which a User 

submits an order, which the User 

specifies by applying the corresponding 

code to the order according to the 

specifications for MEMX Options. 

• Class of Options. The terms ‘‘class’’ 

or ‘‘class of options’’ mean all options 

contracts with the same unit of trading 

covering the same underlying security 

or index. 

• Clearing Corporation and OCC. The 

terms ‘‘Clearing Corporation’’ and 

‘‘OCC’’ mean The Options Clearing 

Corporation. 

• Clearing Member. The term 

‘‘Clearing Member’’ means an Options 

Member that is self-clearing or an 

Options Member that clears MEMX 

Options Transactions for other Members 

of MEMX Options. 

• Closing Purchase Transaction. The 

term ‘‘closing purchase transaction’’ 

means a MEMX Options Transaction 

that reduces or eliminates a short 

position in an options contract. 

• Closing Writing Transaction. The 

term ‘‘closing writing transaction’’ 

means a MEMX Options Transaction 

that reduces or eliminates a long 

position in an options contract. 

• Covered Short Position. The term 

‘‘covered short position’’ means (i) an 

options position where the obligation of 

the writer of a call option is secured by 

a ‘‘specific deposit’’ or an ‘‘escrow 

deposit’’ meeting the conditions of 

Rules 610(f) or 610(g), respectively, of 

the Rules of the Clearing Corporation, or 

the writer holds in the same account as 

the short position, on a share-for-share 

basis, a long position either in the 

underlying security or in an options 

contract of the same class of options 

where the exercise price of the options 

contract in such long position is equal 

to or less than the exercise price of the 

options contract in such short position; 

and (ii) an options position where the 

writer of a put option holds in the same 

account as the short position, on a 

share-for-share basis, a long position in 

an options contract of the same class of 

options where the exercise price of the 

options contract in such long position is 

equal to or greater than the exercise 

price of the options contract in such 

short position. 

• Customer. The term ‘‘Customer’’ 

means a Public Customer or a brokerdealer. 

• Customer Order. The term 

‘‘Customer Order’’ means an agency 

order for the account of a Customer. 

• Discretion. The term ‘‘discretion’’ 

means the authority of a broker or dealer 

to determine for a Customer the type of 

option, the class or series of options, the 

number of contracts, or whether options 

are to be bought or sold. 

• European-Style Option. The term 

‘‘European-style option’’ means an 

options contract that, subject to the 

provisions of proposed Rule 23.1 

(relating to the cutoff time for exercise 

instructions) and to the Rules of the 

Clearing Corporation, can be exercised 

only on its expiration date. 

• Exchange Act. The term ‘‘Exchange 

Act’’ means the Securities Exchange Act 

of 1934, as amended, or Rules 

thereunder. 

• Exercise Price. The term ‘‘exercise 

price’’ means the specified price per 

unit at which the underlying security 

may be purchased or sold upon the 

exercise of an options contract. 

• He, Him, and His. The terms ‘‘he,’’ 

‘‘him’’ and ‘‘his’’ are deemed to refer to 

persons of female as well as male 

gender, and to include organizations, as 

well as individuals, when the context so 

requires. 

• Index Option. The term ‘‘index 

option’’ means an options contract that 

is an option on a broad-based, narrowbased or micro narrow-based index of 

equity securities prices. 

• Individual Equity Option. The term 

‘‘individual equity option’’ means an 

options contract which is an option on 

an equity security. 

• Long Position. The term ‘‘long 

position’’ means a person’s interest as 

the holder of one or more options 

contracts. 

• MEMX Exchange and Exchange. 

The terms ‘‘MEMX Exchange’’ and 

‘‘Exchange’’ mean MEMX LLC. 

• MEMX Exchange Rules and 

Exchange Rules. The terms ‘‘MEMX 

Exchange Rules’’ and ‘‘Exchange Rules’’ 

mean the rules of the Exchange, 

including those for equities and options. 

• MEMX Options. The term ‘‘MEMX 

Options’’ means the MEMX LLC 

Options Market, an options trading 

facility of the Exchange under Section 

3(a)(2) of the Exchange Act. 

• MEMX Options Book. The term 

‘‘MEMX Options Book’’ means the 

electronic book of options orders 

maintained by the Trading System. 

• MEMX Options Transaction. The 

term ‘‘MEMX Options Transaction’’ 

means a transaction involving an 

options contract that is effected on or 

through MEMX Options or its facilities 

or systems. 

• NBB, NBO, and NBBO. The term 

‘‘NBB’’ means the national best bid, the 

term ‘‘NBO’’ means the national best 

offer, and the term ‘‘NBBO’’ means the 

national best bid or offer as calculated 

by MEMX Options based on market 

information received by MEMX Options 

from OPRA. 

• Offer. The term ‘‘offer’’ means a 

limit order to sell one or more options 

contracts. 

• OPRA. The term ‘‘OPRA’’ means 

the Options Price Reporting Authority. 

• Opening Purchase Transaction. The 

term ‘‘opening purchase transaction’’ 

means a MEMX Options Transaction 

that creates or increases a long position 

in an options contract. 

• Opening Writing Transaction. The 

term ‘‘opening writing transaction’’ 

means a MEMX Options Transaction 

that creates or increases a short position 

in an options contract. 

• Options Contracts. The term 

‘‘options contract’’ means a put or a call 

issued, or subject to issuance by the 

Clearing Corporation pursuant to the 

Rules of the Clearing Corporation. 

• Options Market Close and Market 

Close. The terms ‘‘options market close’’ 

and ‘‘market close’’ mean the time the 

Exchange specifies for the end of a 

trading session on the Exchange on that 

trading day. 

• Options Market-Maker and MarketMaker. The terms ‘‘Options MarketMaker’’ and ‘‘Market-Maker’’ mean an 

Options Member registered with the 

Exchange for the purpose of making 

markets in options contracts traded on 

the Exchange and that is vested with the 

rights and responsibilities specified in 

proposed Chapter 22. 

• Options Market Open and Market 

Open. The terms ‘‘options market open’’ 

and ‘‘market open’’ mean the time the 

Exchange specifies for the beginning of 

a trading session on the Exchange on 

that trading day. 

• Options Member. The term 

‘‘Options Member’’ means a firm, or 

organization that is registered with the 

Exchange pursuant to proposed Chapter 

17 for purposes of participating in 

options trading on MEMX Options as an 

‘‘Options Order Entry Firm’’ or 

‘‘Options Market-Maker.’’ 

• Options Member Agreement. The 

term ‘‘Options Member Agreement’’ 

means the agreement to be executed by 

Options Members to qualify to 

participate on MEMX Options. 

• Options Order Entry Firm, Order 

Entry Firm, and OEF. The terms 

‘‘Options Order Entry Firm’’ and ‘‘Order 


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7As defined in proposed Rule 27.1, the term 

‘‘Protected Quotation’’ refers to a Protected Bid or 

Protected Offer, and the terms ‘‘Protected Bid’’ and 

‘‘Protected Offer’’ refer to a Bid or Offer in an 

options series, respectively, that: (A) Is 

disseminated pursuant to the OPRA Plan; and (B) 

is the highest priced Bid or lowest priced Offer, 

respectively, displayed by an Eligible Exchange. 

Entry Firm’’ or ‘‘OEF’’ mean those 

Options Members representing as agent 

Customer Orders on MEMX Options and 

those non-Market-Maker Members 

conducting proprietary trading. 

• Options Principal. The term 

‘‘Options Principal’’ means a person 

engaged in the management and 

supervision of the Options Member’s 

business pertaining to options contracts 

that has responsibility for the overall 

oversight of the Options Member’s 

options related activities on the 

Exchange. 

• Order. The term ‘‘order’’ means a 

firm commitment to buy or sell options 

contracts as defined in proposed Rule 

21.1(c). 

• Outstanding. The term 

‘‘outstanding’’ means an options 

contract which has been issued by the 

Clearing Corporation and has neither 

been the subject of a closing writing 

transaction nor has reached its 

expiration date. 

• Primary Market. The term ‘‘primary 

market’’ means, in the case of securities 

listed on Nasdaq Stock Market, LLC 

(‘‘Nasdaq’’), the market that is identified 

as the listing market pursuant to Section 

X(d) of the approved national market 

system plan governing the trading of 

Nasdaq-listed securities, and, in the case 

of securities listed on another national 

securities exchange, the market that is 

identified as the listing market pursuant 

to Section XI of the Consolidated Tape 

Association Plan. 

• Priority Customer and Priority 

Customer Order. The term ‘‘Priority 

Customer’’ means any person or entity 

that is not: (A) A broker or dealer in 

securities; or (B) a Professional. The 

term ‘‘Priority Customer Order’’ means 

an order for the account of a Priority 

Customer. 

• Professional. The term 

‘‘Professional’’ means any person or 

entity that (A) is not a broker or dealer 

in securities; and (B) places more than 

390 orders in listed options per day on 

average during a calendar month for its 

own beneficial account(s). All 

Professional orders shall be 

appropriately marked by Options 

Members. 

• Protected Quotation. The term 

‘‘Protected Quotation’’ has the meaning 

provided in proposed Rule 27.1.7

• Public Customer. The term ‘‘Public 

Customer’’ means a person that is not a 

broker or dealer in securities. 

• Put. The term ‘‘put’’ means an 

options contract under which the holder 

of the option has the right, in 

accordance with the terms and 

provisions of the option and the Rules 

of the OCC, to sell to the Clearing 

Corporation the number of units of the 

underlying security covered by the 

options contract, at a price per unit 

equal to the exercise price, upon the 

timely exercise of such option. 

• Quarterly Options Series. The term 

‘‘Quarterly Options Series’’ means a 

series in an options class that is 

approved for listing and trading on the 

Exchange in which the series is opened 

for trading on any business day and 

expires at the close of business on the 

last business day of a calendar quarter. 

• Quote and Quotation. The terms 

‘‘quote’’ and ‘‘quotation’’ mean a bid or 

offer entered by a Market-Maker as a 

firm order that updates the MarketMaker’s previous bid or offer, if any. 

• Responsible Person. The term 

‘‘Responsible Person’’ means a U.S.- 

based officer, director, or managementlevel employee of an Options Member, 

who is registered with the Exchange as 

an Options Principal, responsible for the 

direct supervision and control of 

associated persons of that Options 

Member. 

• Rules of MEMX Options. The term 

‘‘Rules of MEMX Options’’ mean the 

rules contained in proposed Chapters 16 

to 29 of the MEMX LLC Exchange Rules 

governing the trading of options on the 

Exchange. 

• Rules of the Clearing Corporation 

and Rules of the OCC. The terms ‘‘Rules 

of the Clearing Corporation’’ and ‘‘Rules 

of the OCC’’ mean the Certificate of 

Incorporation, the By-Laws and the 

Rules of the Clearing Corporation, and 

all written interpretations thereof, as 

may be in effect from time to time. 

• SEC and Commission. The terms 

‘‘SEC’’ and ‘‘Commission’’ mean the 

United States Securities and Exchange 

Commission. 

• Series of Options. The terms 

‘‘series’’ or ‘‘series of options’’ mean all 

options contracts of the same class that 

are the same type of options and have 

the same exercise price and expiration 

date. 

• Short Position. The term ‘‘short 

position’’ means a person’s interest as 

the writer of one or more options 

contracts. 

• Short Term Option Series. The term 

‘‘Short Term Option Series’’ means a 

series in an option class that is 

approved for listing and trading on the 

Exchange in which the series is opened 

for trading on any Monday, Tuesday, 

Wednesday, Thursday or Friday that is 

a business day and that expires on the 

Monday, Wednesday or Friday of the 

next business week, or, in the case of a 

series that is listed on a Friday and 

expires on a Monday, is listed one 

business week and one business day 

prior to that expiration. If a Tuesday, 

Wednesday, Thursday or Friday is not 

a business day, the series may be 

opened (or shall expire) on the first 

business day immediately prior to that 

Tuesday, Wednesday, Thursday or 

Friday, respectively. For a series listed 

pursuant to this section for Monday 

expiration, if a Monday is not a business 

day, the series shall expire on the first 

business day immediately following that 

Monday. 

• SRO. The term ‘‘SRO’’ means a selfregulatory organization as defined in 

Section 3(a)(26) of the Exchange Act. 

• Trading System and System. The 

terms ‘‘Trading System’’ and ‘‘System’’ 

mean the automated trading system 

used by MEMX Options for the trading 

of options contracts. 

• Type of Option. The term ‘‘type of 

option’’ means the classification of an 

options contract as either a put or a call. 

• Uncovered. The term ‘‘uncovered’’ 

means a short position in an options 

contract that is not covered. 

• Underlying Security. The term 

‘‘underlying security’’ means the 

security that the Clearing Corporation 

shall be obligated to sell (in the case of 

a call option) or purchase (in the case 

of a put option) upon the valid exercise 

of an options contract. 

• User. The term ‘‘User’’ means any 

Options Member or Sponsored 

Participant who is authorized to obtain 

access to the System pursuant to Rule 

11.3 (Access). 

Execution System 

The Exchange’s options System will 

leverage the Exchange’s current state-ofthe-art technology, including its 

customer connectivity, messaging 

protocols, quotation and execution 

engine, order router, data feeds, and 

network infrastructure. This approach 

minimizes the technical effort required 

for existing Exchange Members to begin 

trading options on MEMX Options. As 

a result, MEMX Options will closely 

resemble the Exchange’s equities 

market, as well as other options 

markets, such as BZX Options, that offer 

true price/time priority across all 

participants rather than differentiating 

between participant/trading interest. 

Like the Exchange’s system for 

equities, as well as the BZX Options 

market, all trading interest entered into 

the System will be automatically 

executable. Orders entered into the 

System will be displayed anonymously. 

Thus, the System will offer anonymous 


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8The Exchange shall also reveal a User’s identity: 

(i) When a registered clearing agency ceases to act 

for a participant, or the User’s clearing firm, and the 

registered clearing agency determines not to 

guarantee the settlement of the User’s trades; and 

(ii) for regulatory purposes or to comply with an 

order of an arbitrator or court. See proposed Rule 

21.10. The Exchange notes that proposed Rule 21.10 

is identical to BZX Rule 21.10. 

9The Exchange notes that other options 

exchanges offer functionality equivalent to the Post 

Only instruction that does not remove liquidity 

based on potential price improvement. See, e.g., 

NYSE Arca Rule 6.62–O.(t) and NYSE Arca Rule 

6.62P–O(e)(2), each of which defines an ALO Order, 

which is an order that does not remove liquidity 

from the NYSE Arca order book without any 

exception for removing liquidity when price 

improvement could be obtained. 

10The Exchange notes that the comparable 

description of Post Only Orders on BZX Options in 

BZX Rule 21.1(d)(8) does not specify that Market 

Orders cannot be designated as Post Only, however, 

the Exchange believes the proposed functionality is 

the same. 

trading, however, options trades are not 

currently anonymous through 

settlement. Accordingly, as set forth in 

proposed Rule 21.10, aggregated and 

individual transaction reports produced 

by the System will indicate the details 

of a User’s transactions, including the 

contra party’s executing firm ID 

(‘‘EFID’’), capacity, and clearing firm 

account number.8 The Exchange will 

become an exchange member of the 

Options Clearing Corporation (‘‘OCC’’). 

The System will be linked to OCC for 

the Exchange to transmit locked-in 

trades for clearance and settlement. 

Hours of Operation. As stated in 

proposed Rule 21.2, the MEMX Options 

System will begin accepting orders after 

9:30 a.m. Eastern Time pursuant to the 

market opening procedures described in 

proposed Rule 21.7. Orders and bids 

and offers shall be open and available 

until 4:00 p.m. Eastern Time except for 

option contracts on Fund Shares, as 

defined in proposed Rule 19.3(i), option 

contracts on exchange-traded notes 

including Index-Linked Securities, as 

defined in proposed Rule 19.3(l), and 

option contracts on broad-based 

indexes, as defined in proposed Rule 

29.1(j), which may close as of 4:15 p.m. 

Eastern Time. The proposed hours of 

operation on MEMX Options are the 

same as on BZX Options, except that 

BZX Options begins accepting orders at 

7:30 a.m. Eastern Time that are then 

processed in the BZX Options opening 

process beginning at 9:30 a.m. Eastern 

Time. 

Units of Trading. As stated in 

proposed Rule 21.3, the unit of trading 

in each series of options traded on 

MEMX Options will be the unit of 

trading established for that series by the 

OCC pursuant to the rules of the OCC 

and the agreements of the Exchange 

with the OCC. The proposed 

determination of the unit of trading for 

a series of options traded on MEMX 

Options is the same as on BZX Options 

pursuant to BZX Rule 21.3. 

Minimum Quotation and Trading 

Increments. As stated in proposed Rule 

21.5(a), the Exchange is proposing to 

apply the following quotation 

increments: (1) If the options series is 

trading at less than $3.00, five (5) cents; 

(2) if the options series is trading at 

$3.00 or higher, ten (10) cents; and (3) 

if the options series is trading pursuant 

to the Penny Interval Program one (1) 

cent if the options series is trading at 

less than $3.00, five (5) cents if the 

options series is trading at $3.00 or 

higher, unless for QQQQ, SPY, or IWM 

where the minimum quoting increment 

will be one (1) cent for all series. In 

addition, as stated in proposed Rule 

21.5(b), the Exchange is proposing that 

the minimum trading increment for 

options contracts traded on MEMX 

Options will be one (1) cent for all 

series. Such proposed minimum 

quotation and trading increments are 

the same as on BZX Options pursuant 

to BZX Rules 21.5(a) and (b). 

Penny Interval Program. As set forth 

in proposed Rule 21.5(d), the Exchange 

is proposing to adopt a Penny Interval 

Program that is substantially similar to 

the penny programs of other exchanges, 

including BZX Options pursuant to BZX 

Rule 21.5(d), which includes minimum 

quoting requirements for option classes 

listed under the Penny Interval Program. 

However, eligibility for inclusion in the 

Penny Interval Program will be limited 

to those classes already operating under 

penny programs of other options 

exchanges at the time MEMX Options is 

launched. The list of option classes 

included in the Penny Interval Program 

will be announced by the Exchange via 

circular distributed to Options Members 

and published by the Exchange on its 

website. 

Order Types and Handling 

Instructions. The System will make 

available to Users two Order Types (as 

defined in proposed Rule 21.1(d))— 

Limit Orders and Market Orders—as 

well as various other instructions and 

modifiers that can be appended to such 

orders. The characteristics and 

functionality of each Order Type is 

substantially similar to what is currently 

approved for use in the Exchange’s 

equities trading facility or on other 

options exchanges, including BZX 

Options, except where described below. 

MEMX Options will support bulk 

messages for Options Market Makers as 

specified in the description of each 

Order Type or other instruction. 

Proposed Rule 21.1(d) includes the 

following details with respect to Limit 

Orders and Market Orders: 

• Limit Order. Limit Orders are orders 

(including bulk messages) to buy or sell 

an option at a specified price or better. 

A Limit Order is marketable when, for 

a Limit Order to buy, at the time it is 

entered into the System, the order is 

priced at the current inside offer or 

higher, or for a Limit Order to sell, at the 

time it is entered into the System, the 

order is priced at the current inside bid 

or lower. 

• Market Order. Market Orders are 

orders to buy or sell at the best price 

available at the time of execution. 

Market Orders to buy or sell an option 

traded on MEMX Options will be 

rejected if they are received when the 

underlying security is subject to a 

‘‘Limit State’’ or ‘‘Straddle State’’ as 

defined in the Plan to Address 

Extraordinary Market Volatility 

Pursuant to Rule 608 of Regulation NMS 

under the Act (the ‘‘Limit Up-Limit 

Down Plan’’). Bulk messages may not be 

Market Orders. 

The System will also make available 

to Users several additional instructions 

that can be designated on an order 

(‘‘Handling Instructions’’). A Handling 

Instruction applied to a bulk message 

applies to each bid and offer within that 

bulk message. The Handling 

Instructions available on MEMX 

Options are described in proposed Rule 

21.1(e) and will include the following: 

• Book Only. Book Only is an 

instruction that an order is to be ranked 

and executed on the Exchange pursuant 

to proposed Rule 21.8 (Order Display 

and Book Processing) or cancelled, as 

appropriate, without routing away to 

another options exchange. Users may 

designate bulk messages as Book Only 

as set forth in proposed Rule 21.1(l). 

• Post Only. Post Only is an 

instruction that an order is to be ranked 

and executed on the Exchange pursuant 

to proposed Rule 21.8 (Order Display 

and Book Processing) or cancelled, as 

appropriate, without routing away to 

another options exchange except that 

the order will not remove liquidity from 

the MEMX Options Book. The Exchange 

notes that, unlike a Post Only Order on 

BZX Options, an order with a Post Only 

instruction on MEMX Options will not 

remove liquidity even if the value of 

price improvement associated with such 

execution equals or exceeds the sum of 

fees charged for such execution and the 

value of any rebate that would be 

provided if the order posted to the 

MEMX Options Book and subsequently 

provided liquidity.9 A Market Order 

cannot be designated as Post Only.10

Users may designate bulk messages as 


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11The Exchange notes that the comparable 

description of ISOs on BZX Options in BZX Rule 

21.1(d)(9) does not specify that Market Orders 

cannot be designated as ISOs, however, the 

Exchange believes the proposed functionality is the 

same. 

Post Only as set forth in proposed Rule 

21.1(l). 

• Intermarket Sweep Order (‘‘ISO’’). 

ISOs are orders that shall have the 

meaning provided in proposed Rule 

27.1, which relates to intermarket 

trading. Such orders may be executed at 

one or multiple price levels in the 

System without regard to Protected 

Quotations at other options exchanges 

(i.e., may trade through such 

quotations). The Exchange relies on the 

marking of an order as an ISO order 

when handling such order, and thus, it 

is the entering Options Member’s 

responsibility, not the Exchange’s 

responsibility, to comply with the 

requirements relating to ISOs. ISOs are 

not eligible for routing pursuant to 

proposed Rule 21.9. A Market Order 

cannot be designated as an Intermarket 

Sweep Order.11 Users may not designate 

bulk messages as ISOs. 

The Exchange notes that, in contrast 

to BZX Options, it has proposed 

characterizing Book Only, Post Only, 

and ISO as Handling Instructions rather 

than Order Types, as each of these 

instructions represents an additional 

modifier that can be appended to a 

Market Order or Limit Order rather than 

a unique Order Type. The Exchange 

does not believe that this 

characterization changes anything with 

respect to the proposed operation of the 

Exchange but rather is a more accurate 

characterization of the proposed 

functionality. The Exchange notes that 

each of the proposed Order Types and 

Handling Instructions available on 

MEMX Options is substantially similar 

to the same order type available on BZX 

Options, except where described above 

or as relates to the display-price sliding 

process offered by BZX Options, which 

the Exchange is not proposing to adopt. 

The Exchange also notes that BZX 

Options offers additional order types, 

such as reserve orders, minimum 

quantity orders, price-improving orders, 

stop orders, and stop limit orders, none 

of which the Exchange proposes to 

adopt. 

Time-in-Force Designations. Users 

entering orders into the System may 

designate such orders to remain in force 

and available for display and/or 

potential execution for varying periods 

of time. Unless cancelled earlier, once 

these time periods expire, the order (or 

the unexecuted portion thereof) is 

returned to the entering party. A Timein-Force applied to a bulk message 

applies to each bid and offer within that 

bulk message. Unless otherwise 

specified in the Exchange Rules or the 

context indicates otherwise, the 

Exchange determines which of the 

following Times-in-Force are available 

on a class or system basis. The Time-inForce designations available on MEMX 

Options are described in proposed Rule 

21.1(f) and will include the following: 

• Immediate Or Cancel (‘‘IOC’’). IOC 

means, for an order so designated, an 

order that is to be executed in whole or 

in part as soon as such order is received. 

The portion not so executed 

immediately on the Exchange or another 

options exchange is cancelled and is not 

posted to the MEMX Options Book. IOC 

orders that are not designated as Book 

Only and that cannot be executed in 

accordance with proposed Rule 21.8 on 

the System when reaching the Exchange 

will be eligible for routing away 

pursuant to proposed Rule 21.9. Users 

may designate bulk messages as IOC. 

• Day. Day means, for an order so 

designated, an order to buy or sell 

which, if not executed expires at market 

close. Users may designate bulk 

messages as Day. 

The Exchange notes that each of the 

proposed Time-in-Force designations 

available on MEMX Options is identical 

to the same Time-in-Force designation 

available on BZX Options, except that 

BZX Options rules describe Time-inForce designations as applicable only to 

limit orders on BZX Options, whereas 

the Exchange has proposed allowing 

such designations to be placed on both 

Limit Orders and Market Orders. The 

Exchange also notes that BZX Options 

offers additional Times-in-Force, such 

as good til cancelled, fill-or-kill, at the 

open, limit-on-close, and market-onclose, none of which the Exchange 

proposes to adopt. 

Member Match Trade Prevention 

Modifiers. As with its equities market, 

the Exchange will allow Users to use 

certain Match Trade Prevention 

(‘‘MTP’’) modifiers, which are described 

in proposed Rule 21.1(g). Any incoming 

order designated with an MTP modifier 

will be prevented from executing 

against a resting opposite side order also 

designated with an MTP modifier and 

originating from the same EFID, 

Exchange Member identifier, trading 

group identifier, or Exchange Sponsored 

Participant identifier. The Exchange 

will offer the following MTP modifiers: 

MTP Cancel Newest, described in 

proposed Rule 21.1(g)(1); MTP Cancel 

Oldest, described in proposed Rule 

21.1(g)(2); and MTP Cancel Both, 

described in proposed Rule 21.1(g)(3). 

The Exchange notes that each of the 

proposed MTP modifiers available on 

MEMX Options is identical to the same 

MTP modifier available on BZX 

Options. The Exchange also notes that 

BZX Options offers additional MTP 

modifiers, such as MTP Decrement and 

Cancel and MTP Cancel Smallest, 

neither of which the Exchange proposes 

to adopt. 

Re-Pricing Mechanism. Like other 

options exchanges, the Exchange 

proposes to offer a re-pricing 

mechanism to Users to comply with the 

order protection and trade through 

restrictions of the Options Order 

Protection and Locked/Crossed Market 

Plan. This re-pricing mechanism, 

described in proposed Rule 21.1(i), is 

referred to by the Exchange as Price 

Adjust and is identical to the Price 

Adjust mechanism offered by BZX 

Options pursuant to BZX Rule 21.1(i), 

with the exception of the handling of an 

order with a Post Only instruction 

subject to the Price Adjust process. 

Whereas BZX Options applies the Price 

Adjust process when a Post Only Order 

locks or crosses a Protected Quotation 

displayed on BZX Options and re-prices 

such Post Only Order pursuant to BZX 

Rule 21.1(i)(4), the Exchange is not 

proposing to adopt this clause and 

instead would cancel a Post Only Order 

that locks or crosses a Protected 

Quotation displayed on MEMX Options. 

As noted above, the Exchange is not 

proposing to offer a re-pricing 

mechanism equivalent to the displayprice sliding process offered by BZX 

Options. 

EFIDs. As proposed in Rule 21.1(j), 

the term ‘‘EFIDs’’ means Executing Firm 

IDs and shall refer to what the System 

uses to identify the User and the 

clearing number for the execution of 

orders and quotes submitted to the 

System with that EFID. A User may 

obtain one or more EFIDs from the 

Exchange (in a form and manner 

determined by the Exchange). The 

Exchange assigns an EFID to its Users. 

Each EFID corresponds to a single User 

and a single clearing number of a 

Clearing Member with the Clearing 

Corporation. A User may obtain 

multiple EFIDs, which may be for the 

same or different clearing numbers. A 

User is able (in a form and manner 

determined by the Exchange) to 

designate which of its EFIDs may be 

used for each of its ports. If a User 

submits an order or quote through a port 

with an EFID not enabled for that port, 

the System cancels or rejects the order 

or quote. The Exchange notes that its 

proposed Rule 21.1(j) is identical to 

BZX Rule 21.1(k) other than the use of 

the term ‘‘User’’ instead of ‘‘Member.’’ 

Ports and Bulk Messages. Proposed 

Rule 21.1(k) defines two types of ports: 


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12The Exchange notes that BZX Options 

maintains the definition of bulk message in BZX 

Rule 16.1 whereas MEMX Options has proposed to 

include this language in proposed Rule 21.1(l), 

where bulk messages are further described. Despite 

this distinction, as noted above, the functionality is 

the same other than the fact the Exchange does not 

propose to require a separate bulk port to submit 

bulk messages. 13See supra note 9 and accompanying text. 

14See Securities Exchange Act Release No. 61419 

(January 26, 2010), 75 FR 5157 (February 1, 2010) 

(SR–BATS–2009–031) (Notice of Filing of 

Amendment No. 1 and Order Granting Accelerated 

Approval of a Proposed Rule Change, as Modified 

by Amendment No. 1 Thereto, To Establish Rules 

Governing the Trading of Options on the BATS 

Options Exchange). 

(1) A‘‘physical port,’’ which provides a 

physical connection to the System and 

may provide access to multiple logical 

ports; and (2) a ‘‘logical port’’ or 

‘‘application session,’’ which provides 

Users with the ability within the System 

to accomplish a specific function 

through a connection, such as order 

entry, data receipt, or access to 

information. The Exchange notes that 

each of the proposed types of ports 

available on MEMX Options is identical 

to the same types of ports on BZX 

Options, though instead of application 

session BZX Options also refers to 

logical ports as logical sessions. The 

Exchange also notes that BZX Options 

offers specific ports used for bulk 

messages whereas the Exchange 

proposes to offer bulk message 

functionality through the same logical 

ports as Users submit other messages to 

the Exchange. Other than this 

distinction, the Exchange proposes to 

adopt the same bulk message 

functionality as is offered by BZX 

Options. The term ‘‘bulk message’’ is 

proposed to mean a bid or offer 

included in a single electronic message 

a User submits with a Market Maker 

Capacity to the Exchange in which the 

User may enter, modify, or cancel up to 

an Exchange-specified number of bids 

and offers (which number the Exchange 

will announce via Exchange notice or 

publicly available technical 

specifications). The System handles a 

bulk message in the same manner as it 

handles an order or quote, unless the 

Exchange Rules specify otherwise.12

Users may submit bulk messages 

through a logical port, subject to the 

following: bulk messages must contain a 

Time-in-Force of Day or IOC; a Market 

Maker with an appointment in a class 

must designate a bulk message for that 

class as Post Only or Book Only, and a 

non-appointed Market Maker must 

designate a bulk message for that class 

as Post Only; the System cancels or 

rejects a Post Only bulk message bid 

(offer) with a price that locks or crosses 

the Exchange best offer (bid) or ABO 

(ABB); the System executes a Book Only 

bulk message bid (offer) that locks or 

crosses the ABO (ABB) against offers 

(bids) resting in the Book at prices the 

same as or better than the ABO (ABB) 

and then cancels the unexecuted 

portion of that bid (offer). 

Cancel Back. The term ‘‘Cancel Back’’ 

is proposed to mean an instruction a 

User designates on an order (including 

bulk messages) to not be subject to the 

Price Adjust process pursuant to 

proposed Rule 21.1(i). The System 

cancels or rejects an order with a Cancel 

Back instruction (immediately at the 

time the System receives the order or 

upon return to the System after being 

routed away) if displaying the order on 

the Book would create a violation of 

proposed Rule 27.3, or if the order 

cannot otherwise be executed or 

displayed in the Book at its limit price. 

The System executes a Book Only— 

Cancel Back order against resting orders. 

The proposed definition of Cancel Back 

in proposed Rule 21.1(m) is 

substantively identical to a Cancel Back 

Order defined in BZX Rule 21.1(m), 

except as relates to the display-price 

sliding process offered by BZX Options, 

which the Exchange is not proposing to 

adopt, and the fact that the Exchange 

has not proposed to execute an order 

with a Post Only instruction to the 

extent there is price improvement 

associated with such execution 

(including if such order also has a 

Cancel Back instruction).13

Market Opening Procedures. As stated 

in proposed Rule 21.7, the System shall 

open options, other than index options, 

for trading based on the first transaction 

after 9:30 a.m. Eastern Time in the 

securities underlying the options as 

reported on the first print disseminated 

pursuant to an effective national market 

system plan. With respect to index 

options, the System shall open for 

trading after a time period (which the 

Exchange determines for all classes) 

following the System’s observation after 

9:30 a.m. Eastern Time of the first 

disseminated index value for the index 

underlying an index option. Because the 

Exchange does not propose to adopt an 

opening cross or similar opening 

process, the opening trade that occurs 

on the Exchange will be a trade in the 

ordinary course of dealings on the 

Exchange. Accordingly, the System will 

ensure that the opening trade in an 

options series will not trade through a 

Protected Quotation at another options 

exchange, consistent with the general 

standard regarding trade throughs 

articulated in proposed Rule 21.6(e). 

The proposed market opening 

procedures for options other than index 

options are identical to the market 

opening procedures for such options 

that were initially adopted by BZX 

Options.14 The proposed market 

opening procedures for index options 

are substantially similar to the market 

opening procedures for index options 

on BZX Options under current BZX 

Rule 21.7(d)(2) with respect to when the 

System opens. However, once the BZX 

Options system observes that an index 

value has been disseminated for the 

applicable index BZX Options then 

commences an opening rotation (i.e., an 

opening process to match liquidity at a 

price determined by the BZX Options 

system) while the Exchange does not 

currently propose to adopt an opening 

process. Additionally, the Exchange 

proposes that it may delay the 

commencement of trading in any class 

of options in the interests of a fair and 

orderly market. As stated in proposed 

Rule 21.6(c), orders received prior to the 

opening of the System will be cancelled. 

The Exchange believes that it is 

appropriate to commence operations on 

MEMX Options with simplified 

procedures for when the System is open 

for trading because for a successful 

opening process to function, an 

exchange needs a critical mass of 

liquidity from market participants in 

order to price and execute opening 

transactions. In turn, as a new options 

exchange, MEMX Options does not 

know the amount of pre-opening 

interest it will have, and it will have to 

gain market share in order to 

accumulate such interest. MEMX 

Options will re-evaluate its opening 

procedures over time and may propose 

to add an opening process through a 

rule filing submitted to the Commission 

in the future. 

Order Display/Matching System. The 

System will be based upon functionality 

currently approved for use in the 

Exchange’s equities trading system. 

Specifically, the System will allow 

Users to enter Market Orders and priced 

Limit Orders to buy and sell MEMX 

Options-listed options. All orders 

(including bulk messages) will be 

designated for display (price and size) 

on an anonymous basis by the 

Exchange. 

Routing. The MEMX Options 

Exchange will support orders that are 

designated to be routed to the National 

Best Bid and Offer (‘‘NBBO’’) as well as 

orders that will execute only within 

MEMX Options. Orders that are 

designated to execute at the NBBO will 


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15See BZX Rule 21.9. 16 17 CFR 240.15c3–5. 

be routed to other options markets to be 

executed when the Exchange is not at 

the NBBO consistent with the Options 

Order Protection and Locked/Crossed 

Market Plan. Subject to the exceptions 

contained in proposed Rule 27.2(b), the 

System will ensure that an order will 

not be executed at a price that trades 

through another options exchange. An 

order that is designated by an Options 

Member as routable will be routed in 

compliance with applicable tradethrough restrictions. Any order entered 

with a price that would lock or cross a 

Protected Quotation that is not eligible 

for either routing or the price adjust 

process as defined in proposed Rule 

21.1(i) will be cancelled. Bulk messages 

are not eligible for routing. 

The proposed routing functionality 

for MEMX Options is designed to 

operate much like the routing 

functionality for the Exchange’s equities 

market, in that the Exchange offers a 

simple routing service to facilitate 

compliance with applicable regulations 

and does not currently offer other 

complex routing strategies. The 

Exchange notes that the proposed rules 

relating to the routing of orders on 

MEMX Options to away options markets 

are similar to the approved rules of BZX 

Options, except that the Exchange 

proposes to cancel any unexecuted 

portion of a Market Order after the 

System has routed to and received 

response from an away options market, 

whereas BZX Options offers additional 

handling instructions that may be 

chosen with respect to the unexecuted 

portion of an order after the System has 

routed to and received response from an 

away options market, and BZX Options 

offers various additional routing 

options, such as routing to a specific 

destination or at specified price levels.15

MEMX Options shall route orders in 

options via MEMX Execution Services 

LLC (‘‘MEMX Execution Services’’), 

which serves as the Outbound Router of 

the Exchange, as defined in Rule 2.11. 

The function of the Outbound Router 

will be to route orders in options listed 

and open for trading on MEMX Options 

to other options exchanges pursuant to 

the proposed rules of MEMX Options 

solely on behalf of MEMX Options. The 

Outbound Router is subject to regulation 

as a facility of the Exchange, including 

the requirement to file proposed rule 

changes under Section 19 of the Act. 

Use of MEMX Execution Services or 

Routing Services (as defined below) to 

route orders to other market centers is 

optional. In the event the Exchange is 

not able to provide order routing 

services through its affiliated brokerdealer, the Exchange will route orders to 

other options exchanges in conjunction 

with one or more routing brokers that 

are not affiliated with the Exchange 

(‘‘Routing Services’’). Parties that do not 

desire to use MEMX Execution Services 

or other Routing Services provided by 

the Exchange must designate orders as 

not available for routing. 

In connection with the proposed rules 

regarding routing to away options 

exchanges, proposed Rule 21.9(f) 

provides that MEMX Execution Services 

has, pursuant to Rule 15c3–5 under the 

Act,16 implemented certain tests 

designed to mitigate the financial and 

regulatory risks associated with 

providing the Exchange’s Users with 

access to such away options exchanges. 

Pursuant to the policies and procedures 

developed by MEMX Execution Services 

to comply with Rule 15c3–5, if an order 

or series of orders are deemed to be 

erroneous or duplicative, would cause 

the entering User’s credit exposure to 

exceed a preset credit threshold, or are 

non-compliant with applicable pre-trade 

regulatory requirements (as defined in 

Rule 15c3–5), MEMX Execution 

Services will reject such orders prior to 

routing and/or seek to cancel any orders 

that have been routed. This is consistent 

with the routing implementation of 

other options exchanges, and the 

Exchange notes that proposed Rule 

21.9(f) is substantively identical to BZX 

Rule 21.9(f). 

Order Priority. The System, like the 

Exchange’s equities facility, shall 

execute trading interest within the 

System in price/time priority, meaning 

it will execute all trading interest at the 

best price level within the System 

before executing trading interest at the 

next best price. Trading interest will be 

executed with the order clearly 

established as the first entered into the 

System at each price level having 

priority up to the number of contracts 

specified in the order. Any order 

entered with a price that would lock or 

cross a Protected Quotation that is not 

eligible for either routing or the price 

adjust process as defined in proposed 

Rule 21.1(i) will be cancelled. The 

Exchange notes that the proposed price/ 

time order priority and book processing 

is substantially similar to that on BZX 

Options. 

Data Feed. The System will include a 

proprietary data feed which will display 

without attribution to Users’ orders on 

both the bid and offer side of the market 

for price levels then within MEMX 

Options using the minimum price 

variation applicable to that security. 

Risk Controls. The Exchange also 

proposes to offer to all Users of MEMX 

Options the ability to establish certain 

risk control parameters and limits that 

are intended to assist Users in managing 

their market risk. The proposed risk 

controls are set forth in proposed Rules 

21.16 and 21.17 and are based, in part, 

on those of BZX Options, with certain 

additions and differences described 

below. The proposed risk controls are 

designed to offer Users protection from 

entering orders outside of certain size 

and price parameters, as well as certain 

standard or Exchange-established 

parameters based on order type and 

market conditions. 

The Exchange proposes to offer a Risk 

Monitor Mechanism described in 

proposed Rule 21.16 that features 

passive risk counter functionality, 

which is similar to the risk monitor 

mechanism functionality offered by 

other options exchanges, including BZX 

Options, as well as active risk counter 

functionality. Under the proposed Risk 

Monitor Mechanism, Users may 

configure risk limits for various 

parameters, including number of 

contracts executed (‘‘volume’’), notional 

value of executions (‘‘notional’’), 

number of executions (‘‘count’’), 

number of contracts executed as a 

percentage of number of contracts 

outstanding within an Exchangedesignated time period or during the 

trading day (‘‘percentage’’), and the 

number of times the limits on any of the 

foregoing parameters are reached (‘‘risk 

trips’’). The System will track each of 

the parameters within an underlying for 

an EFID (‘‘underlying limit’’), across all 

underlyings for an EFID (‘‘EFID limit’’), 

across all underlyings for a group of 

EFIDs (‘‘EFID Group’’) (‘‘EFID Group 

limit’’), and/or across a customized 

group of orders designated by the User 

(‘‘Custom Group Limit’’), over a Userestablished time period (‘‘interval’’) and 

on an absolute basis for a trading day 

(‘‘absolute limits’’). 

When the System determines that a 

specified parameter has reached the 

User-defined risk limit, depending on 

the User’s instructions and the 

applicable limit that has been reached, 

the Risk Monitor Mechanism either: (1) 

Cancels or rejects such User’s orders or 

quotes in all series of the applicable 

underlying(s) and cancels or rejects any 

additional orders or quotes from the 

User in the applicable underlying(s) 

until the counting program resets; or (2) 

suspends all of a User’s resting orders or 

quotes in all series of the applicable 

underlying(s) and cancels or rejects any 

additional orders or quotes from the 

User in the applicable underlying(s) 

until the Exchange is instructed to 


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reinstate such bids and offers. A User 

may also engage the Risk Monitor 

Mechanism to cancel resting bids and 

offers, as well as subsequent orders as 

set forth in proposed Rule 22.10 (‘‘mass 

cancellation’’) or to suspend all resting 

bids and offers until the Exchange is 

instructed to reinstate such bids and 

offers (‘‘mass suspension’’). 

The proposed Risk Monitor 

Mechanism functionality described 

above is substantially similar to the risk 

monitor mechanism offered on BZX 

Options, except that BZX Options does 

not permit Users to designate a Custom 

Group Limit to track risk parameters 

across a customized group of orders, nor 

does BZX Options permit Users to 

choose to suspend, rather than cancel or 

reject, resting orders when a risk limit 

has been reached or to engage the Risk 

Monitor Mechanism for mass 

suspension as an alternative to mass 

cancellation. The Exchange believes that 

these proposed additions to the Risk 

Monitor Mechanism functionality that is 

currently available on BZX Options 

would provide Users with greater 

optionality when managing their risk on 

MEMX Options. 

The proposed Risk Monitor 

Mechanism functionality described 

above is similar to the Risk Monitor 

Mechanism functionality offered by 

other options exchanges, including BZX 

Options, in that it provides for the 

System to track specified risk 

parameters across designated 

underlyings and/or order groups until 

the counting program is reset by the 

User (such functionality, the ‘‘passive 

risk counter’’). In addition to the Risk 

Monitor Mechanism’s passive risk 

counter functionality, which is similar 

to the Risk Monitor Mechanism 

functionality offered by BZX Options in 

BZX Rule 21.16, the Exchange also 

proposes to enable a User to optionally 

manage their risk limits actively using 

the Exchange’s proposed active risk 

counter functionality within the Risk 

Monitor Mechanism. As proposed, for a 

User using the active risk counter, the 

System will increment the active risk 

counter associated with a defined 

parameter when such parameter 

increments, and the System will 

decrement the active risk counter upon 

positive confirmation from the User via 

an electronic instruction that the User 

has acknowledged a change in the active 

risk counter. A User would also be able 

to specify the value by which each 

parameter increments and decrements 

in the active risk counter. The proposed 

active risk counter therefore enables a 

User to interact with the Risk Monitor 

Mechanism dynamically such that the 

User may actively acknowledge 

executions and decrement the counting 

program by a specified amount as such 

executions occur (or at any time), rather 

than waiting until a risk limit is reached 

or the User otherwise sends a specific 

instruction to the Exchange to 

completely reset the counting program. 

The following examples illustrate the 

proposed behavior of the passive risk 

counter and the active risk counter 

within the Risk Monitor Mechanism. In 

each case, assume a User configures a 

risk limit of 10,000 contracts executed 

with respect to options contracts on 

underlying security ABC for a single 

EFID. 

Passive Risk Counter: 

• The System executes User’s order to 

purchase 5,000 call options on ABC 

(‘‘Transaction 1’’). The System’s 

counting program would increment to a 

total of 5,000 executed options contracts 

on ABC for the User. 

• The System then executes User’s 

order to purchase 3,000 call options on 

ABC (‘‘Transaction 2’’). The System’s 

counting program would increment an 

additional 3,000 executed options 

contracts for Transaction 2 to a total of 

8,000 executed options contracts on 

ABC for the User. 

• The System then executes User’s 

order to purchase 3,000 call options on 

ABC (‘‘Transaction 3’’). The System’s 

counting program would increment an 

additional 3,000 executed options 

contracts for Transaction 3 to a total of 

11,000 executed options contracts on 

ABC for the User. As Transaction 3 

results in executions in excess of the 

User’s risk limit with respect to the 

number of options contracts executed, 

the Risk Monitor Mechanism is 

triggered, and the System will cancel, 

reject or suspend, as applicable in 

accordance with the User’s instructions, 

the User’s orders and quotes in all series 

of options contracts on ABC for the 

User. 

• The User then submits an electronic 

instruction to the System to reset the 

counting program, and the counting 

program is decremented to zero. The 

System will now accept new orders or 

quotes from the User in a series of 

options contracts on ABC. 

Active Risk Counter: 

• The System executes a transaction 

to purchase 5,000 call options on ABC 

(‘‘Transaction 1’’). The System’s 

counting program would increment to a 

total of 5,000 executed options contracts 

on ABC for the User. 

• The User then submits an electronic 

instruction to the System 

acknowledging a change in the active 

risk counter due to Transaction 1. Upon 

the System’s receipt of such instruction, 

the counting program decrements the 

active risk counter by 5,000 options 

contracts for Transaction 1 to a total of 

zero with respect to the number of 

executed options contracts on ABC for 

the User. 

• The System then executes two 

separate transactions to purchase 3,000 

call options on ABC per transaction 

(‘‘Transaction 2’’ and ‘‘Transaction 3’’ 

respectively), and the User does not 

acknowledge a change in the active risk 

counter due to either of these 

executions. The System’s counting 

program would increment 3,000 

executed options contracts at the time of 

execution for each of Transaction 2 and 

Transaction 3, for a total of 6,000 

executed options contracts on ABC for 

the User. 

• The User then submits an electronic 

instruction to the System 

acknowledging a change in the active 

risk counter due Transaction 3, but not 

Transaction 2. Upon the System’s 

receipt of such instruction, the counting 

program would decrement the active 

risk counter by the 3,000 executed 

options contracts for Transaction 3 to a 

total of 3,000 executed options contracts 

on ABC for the User. 

• The User then executes a 

transaction to purchase 10,000 call 

options on ABC (‘‘Transaction 4’’). The 

System’s counting program would 

increment an additional 10,000 

executed options contracts for 

Transaction 4 to a total of 13,000 

options contracts on ABC for the User. 

As Transaction 4 results in executions 

in excess of the User’s risk limit with 

respect to the number of options 

contracts executed, the Risk Monitor 

Mechanism is triggered, and the System 

will cancel, reject or suspend, as 

applicable in accordance with the User’s 

instructions, the User’s orders and 

quotes in all series of options contracts 

on ABC for the User. 

• The User then submits an electronic 

instruction to the System 

acknowledging a change in the active 

risk counter due to Transaction 4. Upon 

the System’s receipt of such instruction, 

the counting program would decrement 

the active risk counter by the 10,000 

executed options contracts for 

Transaction 4 to a total of 3,000 

executed options contracts on ABC for 

the User. The System will now accept 

new orders or quotes from the User in 

a series of options contracts on ABC. 

In addition to the Risk Monitor 

Mechanism functionality described 

above, the Exchange also proposes to 

offer additional price protection 

mechanisms and risk controls that relate 

to certain standard or Exchangeestablished parameters based on order 

type and market conditions, which are 


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17See, e.g., BZX Rule 22.12; CBOE Rule 5.9; 

MIAX Options Rule 520(b); BOX Rule IM–7140–3. 18See BZX Rules, Chapter XXVII. 

19See BZX Rules, Chapters XIX and XXIX. The 

Exchange notes that it is initially proposing to 

adopt rules applicable to listing and trading of 

index options but has not proposed inclusion of 

references to any specific index options products or 

indices at this time and therefore has included a 

placeholder with the rule text ‘‘(Reserved.)’’ where 

such references would otherwise be. To the extent 

the Exchange does propose to list and trade certain 

index products in the future, the Exchange will file 

a proposed rule change with the Commission with 

respect to such products. 

20See BZX Rules, Chapters XXIII, XXIV, XXV, 

XXVI and XXVIII. 

21 15 U.S.C. 78k–1. 

described in proposed Rule 21.17. These 

additional price protection mechanisms 

and risk controls are substantially 

similar to those offered on BZX Options 

pursuant to BZX Rule 21.17, with slight 

modifications to align with the 

Exchange’s proposed market opening 

procedures and available order types 

and instructions on MEMX Options, 

except that the Exchange is proposing a 

simplified version of the drill-through 

price protection mechanism described 

in proposed Rule 21.17(d). Whereas the 

drill-through price protection 

mechanism offered on BZX Options 

pursuant to BZX Rule 21.17(d) executes 

an incoming order to a determined 

‘‘Drill-Through Price’’ and then displays 

the remainder of the order on BZX 

Options at that price for a brief period 

of time, the Exchange has proposed to 

simply cancel the remainder of an 

incoming order after executing the order 

to the Drill-Through Price. 

One Second Exposure Period. 

Proposed Rule 22.11 would require 

Options Members to expose their 

customers’ orders on the Exchange for at 

least one second under certain 

circumstances. During this one second 

exposure period, other Options 

Members will be able to enter orders to 

trade against the exposed order. In 

adopting a one second order exposure 

period, the Exchange is proposing a 

requirement that is consistent with the 

rules of other options exchanges.17

Thus, the exposure period will allow 

Options Members that are members of 

other options exchanges to comply with 

proposed Rule 22.11 without 

programming separate time parameters 

into their systems for order entry or 

compliance purposes. The Exchange 

believes that market participants are 

sufficiently automated that a one second 

exposure period allows an adequate 

time for market participants to 

electronically respond to an order. Also, 

it is possible that market participants 

might wait until the end of the exposure 

period, no matter how long, before 

responding. Thus, the Exchange 

believes that any longer than one second 

would not further the protection of 

investors or market participants, but 

rather, would potentially increase 

market risk to investors and other 

market participants by creating a longer 

period of time for the exposed order to 

be subject to market risk. 

Options Order Protection and Locked/ 

Crossed Market Plan Rules 

The Exchange will participate in the 

Options Order Protection and Locked/ 

Crossed Market Plan (the ‘‘Plan’’), and 

therefore will be required to comply 

with the obligations of Participants 

under the Plan. The Exchange proposes 

to adopt rules relating to the Plan that 

are substantially similar to the rules in 

place on all of the options exchanges 

that are Participants to the Plan. The 

Plan essentially applies the Regulation 

NMS price-protection provisions to the 

options markets. Similar to Regulation 

NMS, the Plan requires the Plan 

Participants to adopt rules ‘‘reasonably 

designed to prevent Trade-Throughs’’, 

while exempting ISOs from that 

prohibition. The Plan’s definition of an 

ISO is essentially the same as under 

Regulation NMS. The remaining 

exceptions to the trade-through 

prohibition, discussed more specifically 

below, either track those under 

Regulation NMS or correspond to 

unique aspects of the options market, or 

both. 

The proposed rules in Chapter 27 

(Options Order Protection and Locked 

and Crossed Markets Rules) conform to 

the requirements of the Plan. Proposed 

Rule 27.1 sets forth the defined terms 

for use under the Plan. Proposed Rule 

27.2 prohibits trade-throughs and 

exempts ISOs from that prohibition. 

Proposed Rule 27.2 also contains 

additional exceptions to the tradethrough prohibition that track the 

exceptions under Regulation NMS or 

correspond to unique aspects of the 

options market, or both. 

Proposed Rule 27.3 sets forth the 

general prohibition against locking/ 

crossing other eligible exchanges as well 

as certain enumerated exceptions that 

permit locked markets in limited 

circumstances; such exceptions have 

been approved by the Commission for 

inclusion in the rules of other options 

exchanges. Specifically, the exceptions 

to the general prohibition on locking 

and crossing occur when: (1) The 

locking or crossing quotation was 

displayed at a time when the Exchange 

was experiencing a failure, material 

delay, or malfunction of its systems or 

equipment; (2) the locking or crossing 

quotation was displayed at a time when 

there is a Crossed Market; or (3) the 

Options Member simultaneously routed 

an ISO to execute against the full 

displayed size of any locked or crossed 

Protected Bid or Protected Offer. 

The Exchange notes that the proposed 

rules in Chapter 27 (Options Order 

Protection and Locked and Crossed 

Markets Rules) are substantively 

identical to the rules of BZX Options.18

Securities Traded on MEMX Options 

General Listing Standards. The 

Exchange proposes to adopt listing 

standards for options traded on MEMX 

Options as described in Chapter 19 

(Securities Traded on MEMX Options), 

as well as for index options as described 

in Chapter 29 (Index Rules), which are 

substantively identical to the approved 

rules of BZX Options.19 The Exchange 

will join the Options Listings 

Procedures Plan and will list and trade 

options already listed on other options 

exchanges. The Exchange will gradually 

phase-in its trading of options, 

beginning with a selection of actively 

traded options. At least initially, the 

Exchange does not plan to develop new 

options products or listing standards. 

Conduct and Operational Rules for 

Options Members 

The Exchange proposes to adopt rules 

for MEMX Options that are 

substantively identical to the rules of 

BZX Options regarding: Exercises and 

deliveries as described in Chapter 23 

(Exercises and Deliveries); records, 

reports and audits as described in 

Chapter 24 (Records, Reports and 

Audits); minor rule violations as 

described in Chapter 25 (Discipline and 

Summary Suspensions); doing business 

with the public as described in Chapter 

26 (Doing Business With the Public); 

and margin as described in Chapter 28 

(Margin Requirements).20

National Market System 

MEMX Options will operate as a full 

and equal participant in the national 

market system for options trading 

established under Section 11A of the 

Exchange Act,21 just as its equities 

market participates today. MEMX 

Options will become a member of the 

Options Price Reporting Authority 

(‘‘OPRA’’), the Options Linkage 

Authority (‘‘OLA’’), the Options 

Regulatory Surveillance Authority 

(‘‘ORSA’’), and the Options Listing 

Procedures Plan (‘‘OLPP’’). The 

Exchange expects to participate in those 

plans on the same terms currently 

applicable to current members of those 


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22 15 U.S.C. 78f. 

23 15 U.S.C. 78q(d). 

24 17 CFR 240.17d–1. 

25 17 CFR 240.17d–2. 

26See BZX Rules, Chapter XX. 

27See Release No. 34–89836 (September 11, 

2020), 85 FR 58081 (September 17, 2020) (Order 

Declaring Effective a Minor Rule Violation Plan) 

(‘‘MRVP Order’’). 

28 17 CFR 240.19d–1(c)(1). 

29The Commission adopted amendments to 

paragraph (c) of Rule 19d–1 to allow SROs to 

submit for Commission approval plans for the 

abbreviated reporting of minor disciplinary 

infractions. See Release No. 34–21013 (June 1, 

1984), 49 FR 23828 (June 8, 1984). Any disciplinary 

action taken by an SRO against any person for 

violation of a rule of the SRO which has been 

designated as a minor rule violation pursuant to 

such a plan filed with and declared effective by the 

Commission will not be considered ‘‘final’’ for 

purposes of Section 19(d)(1) of the Act if the 

sanction imposed consists of a fine not exceeding 

$2,500 and the sanctioned person has not sought an 

adjudication, including a hearing, or otherwise 

exhausted his administrative remedies. 

30 In its proposal to adopt the MRVP, the 

Exchange requested that, going forward, to the 

extent that there are any changes to the rules 

applicable to the Exchange’s MRVP, the Exchange 

requests that the Commission deem such changes 

to be modifications to the Exchange’s MRVP. 

plans. The Exchange has contacted the 

leadership of each options-related 

national market system plan to begin the 

membership process. 

Regulation 

The Exchange will leverage many of 

the structures it established to operate a 

national securities exchange in 

compliance with Section 6 of the 

Exchange Act.22 As described in more 

detail below, there will be three 

elements of that regulation: (1) The 

Exchange will join the existing options 

industry agreements pursuant to Section 

17(d) of the Exchange Act,23 as it did 

with respect to equities; (2) the 

Exchange’s Regulatory Services 

Agreement with FINRA will govern 

many aspects of the regulation and 

discipline of Members that participate 

in options trading, just as it does for 

equities regulation; and (3) the 

Exchange will perform options listing 

regulation, as well as authorize Options 

Members to trade on MEMX Options, 

and conduct surveillance of options 

trading as it does today for equities. 

Section 17(d) of the Exchange Act and 

the related Exchange Act rules permit 

SROs to allocate certain regulatory 

responsibilities to avoid duplicative 

oversight and regulation. Under 

Exchange Act Rule 17d–1,24 the SEC 

designates one SRO to be the Designated 

Examining Authority, or DEA, for each 

broker-dealer that is a member of more 

than one SRO. The DEA is responsible 

for the financial aspects of that brokerdealer’s regulatory oversight. Because 

MEMX Options Members also must be 

members of at least one other SRO, the 

Exchange would generally not be 

designated as the DEA for any of its 

members. 

Exchange Act Rule 17d–2 25 permits 

SROs to file with the Commission plans 

under which the SROs allocate among 

each other the responsibility to receive 

regulatory reports from, and examine 

and enforce compliance with specified 

provisions of the Exchange Act and 

rules thereunder and SRO rules by, 

firms that are members of more than one 

SRO (‘‘common members’’). If such a 

plan is declared effective by the 

Commission, an SRO that is a party to 

the plan is relieved of regulatory 

responsibility as to any common 

member for whom responsibility is 

allocated under the plan to another 

SRO. 

All of the options exchanges, FINRA, 

and NYSE have entered into the Options 

Sales Practices Agreement, a Rule 17d– 

2 agreement. Under this Agreement, the 

examining SROs will examine firms that 

are common members of the Exchange 

and the particular examining SRO for 

compliance with certain provisions of 

the Exchange Act, certain of the rules 

and regulations adopted thereunder, 

certain examining SRO rules, and 

certain proposed MEMX Options rules. 

In addition, the proposed MEMX 

Options rules contemplate participation 

in this Agreement by requiring that any 

Options Member also be a member of at 

least one of the examining SROs. 

For those regulatory responsibilities 

that fall outside the scope of any Rule 

17d–2 agreements, the Exchange will 

retain full regulatory responsibility 

under the Exchange Act. However, the 

Exchange has entered into a Regulatory 

Services Agreement with FINRA, 

pursuant to which FINRA personnel 

operate as agents for the Exchange in 

performing certain of these functions. 

As is the case with the Exchange’s 

equities market, the Exchange will 

supervise FINRA and continue to bear 

ultimate regulatory responsibility for the 

MEMX Options Exchange. 

Consistent with the Exchange’s 

existing regulatory structure, the 

Exchange’s Chief Regulatory Officer 

shall have general supervision of the 

regulatory operations of MEMX Options, 

including responsibility for overseeing 

the surveillance, examination, and 

enforcement functions and for 

administering all regulatory services 

agreements applicable to MEMX 

Options. Similarly, the Exchange’s 

existing Regulatory Oversight 

Committee will be responsible for 

overseeing the adequacy and 

effectiveness of Exchange’s regulatory 

and self-regulatory organization 

responsibilities, including those 

applicable to MEMX Options. 

Finally, as it does with equities, the 

Exchange will perform automated 

surveillance of trading on MEMX 

Options for the purpose of maintaining 

a fair and orderly market at all times. As 

it does with its equities trading, the 

Exchange will monitor MEMX Options 

to identify unusual trading patterns and 

determine whether particular trading 

activity requires further regulatory 

investigation by FINRA. 

In addition, the Exchange will oversee 

the process for determining and 

implementing trade halts, identifying 

and responding to unusual market 

conditions, and administering the 

Exchange’s process for identifying and 

remediating ‘‘obvious errors’’ by and 

among its Options Members. The 

proposed rules in Chapter 20 

(Regulation of Trading on MEMX 

Options) regarding halts, unusual 

market conditions, extraordinary market 

volatility, obvious errors, and audit trail 

are substantively identical to the 

approved rules of BZX Options, with 

the exception that Exchange does not 

propose to include rules permitting 

certain off-floor transfers of options 

traded on MEMX Options.26

Minor Rule Violation Plan 

The Exchange’s disciplinary rules, 

including Exchange Rules applicable to 

‘‘minor rule violations,’’ are set forth in 

Chapter 8 of the Exchange’s current 

Rules. Such disciplinary rules will 

apply to Options Members and their 

associated persons. 

The Commission approved the 

Exchange’s Minor Rule Violation Plan 

(‘‘MRVP’’) in 2020.27 The Exchange’s 

MRVP specifies those uncontested 

minor rule violations with sanctions not 

exceeding $2,500 that would not be 

subject to the provisions of Rule 19d– 

1(c)(1) under the Act 28 requiring that an 

SRO promptly file notice with the 

Commission of any final disciplinary 

action taken with respect to any person 

or organization.29 The Exchange’s 

MRVP includes the policies and 

procedures included in Exchange Rule 

8.15 (Imposition of Fines for Minor 

Violation(s) of Rules) and in Exchange 

Rule 8.15, Interpretations and Policy 

.01. 

The Exchange proposes to amend its 

MRVP and Exchange Rule 8.15, 

Interpretation and Policy .01 to include 

proposed Rule 25.3 (Penalty for Minor 

Rule Violations).30 The rules included 

in proposed Rule 25.3 as appropriate for 

disposition under the Exchange’s MRVP 

are: (a) Position limit and exercise limit 

violations; (b) violations regarding the 


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31See, e.g., BZX Rules, Chapter XXV. 

32 15 U.S.C. 78f(b)(1), 78f(b)(5) and 78f(b)(6). 

33 15 U.S.C. 78f(b)(7). 

34 17 CFR 240.19d–1(c)(2). 

35 15 U.S.C. 78f(b). 

36 15 U.S.C. 78f(b)(5). 

failure to accurately report position and 

account information; (c) Market Maker 

quoting obligations; (d) violations 

regarding expiring exercise declarations; 

(e) violations relating to the failure to 

respond to the Exchange’s requests for 

the submission of trade data; and (f) 

violations relating to noncompliance 

with the Consolidated Audit Trail 

Compliance Rule requirements. The 

rules included in proposed Rule 25.3 

are the same as the rules included in the 

MRVPs of other options exchanges.31

Upon implementation of this 

proposal, the Exchange will include the 

enumerated options trading rule 

violations in the Exchange’s standard 

quarterly report of actions taken on 

minor rule violations under the MRVP. 

The quarterly report includes: The 

Exchange’s internal file number for the 

case, the name of the individual and/or 

organization, the nature of the violation, 

the specific rule provision violated, the 

fine imposed, the number of times the 

rule violation has occurred, and the date 

of disposition. The Exchange’s MRVP, 

as proposed to be amended, is 

consistent with Sections 6(b)(1), 6(b)(5) 

and 6(b)(6) of the Act, which require, in 

part, that an exchange have the capacity 

to enforce compliance with, and provide 

appropriate discipline for, violations of 

the rules of the Commission and of the 

exchange.32 In addition, because 

amended Rule 8.15 will offer procedural 

rights to a person sanctioned for a 

violation listed in proposed Rule 25.3, 

the Exchange will provide a fair 

procedure for the disciplining of 

members and associated persons, 

consistent with Section 6(b)(7) of the 

Act.33

This proposal to include the rules 

listed in proposed Rule 25.3 in the 

Exchange’s MRVP is consistent with the 

public interest, the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act, as required by 

Rule 19d–1(c)(2) under the Act,34

because it should strengthen the 

Exchange’s ability to carry out its 

oversight and enforcement 

responsibilities as an SRO in cases 

where full disciplinary proceedings are 

unsuitable in view of the minor nature 

of the particular violation. In requesting 

the proposed change to the MRVP, the 

Exchange in no way minimizes the 

importance of compliance with 

Exchange Rules and all other rules 

subject to the imposition of fines under 

the MRVP. However, the MRVP 

provides a reasonable means of 

addressing rule violations that do not 

rise to the level of requiring formal 

disciplinary proceedings, while 

providing greater flexibility in handling 

certain violations. The Exchange will 

continue to conduct surveillance with 

due diligence and make a determination 

based on its findings, on a case-by-case 

basis, whether a fine of more or less 

than the recommended amount is 

appropriate for a violation under the 

MRVP or whether a violation requires a 

formal disciplinary action. 

Amendments to Existing Exchange 

Rules 

In addition to the rules of MEMX 

Options proposed above, the Exchange 

proposes to amend certain of its existing 

Exchange Rules that currently apply to 

the Exchange’s equities market in order 

to reflect the Exchange’s proposed 

operation of MEMX Options. 

First, the Exchange proposes to 

amend paragraph (d) of Interpretations 

and Policies .01 to Rule 2.5 

(Restrictions), which generally requires 

each Member to register at least two 

Principals with the Exchange subject to 

certain exceptions described therein, to 

provide that such paragraph (d) shall 

not apply to a Member that solely 

conducts business on the Exchange as 

an Options Member, however, Options 

Members must comply with the 

registration requirements set forth in 

proposed Rule 17.2(g). The Exchange 

notes that proposed Rule 17.2(g), which 

provides that every Options Member 

shall have at least one Options Principal 

and sets forth the Exchange’s Options 

Principal registration requirements, is 

identical to BZX Rule 17.2(g). In 

connection with this proposed change, 

the Exchange also proposes to amend 

paragraph (i) of Interpretations and 

Policies .01 to Rule 2.5 to include 

Options Principal as a registration 

category and to set forth the Exchange’s 

qualification requirements for an 

Options Principal, which are the same 

as those for an Options Principal on 

BZX Options. 

The Exchange also proposes to delete 

the word ‘‘equities’’ in the first sentence 

of Rule 2.7 (Revocation of Membership 

or Association with a Member), which 

currently provides that Members or 

associated persons of Members may 

effect approved equities securities 

transactions on the Exchange’s trading 

facilities only so long as they possess all 

the qualifications set forth in the 

Exchange Rules. Thus, such proposed 

change is intended to make this 

statement no longer limited to equities 

securities transactions, as options 

transactions may also be effected on the 

Exchange pursuant to this proposal. 

Lastly, the Exchange proposes to 

amend Interpretations and Policies .01 

Rule 8.15 (Imposition of Fines for Minor 

Violation(s) of Rules), which contains 

the list of Exchange Rule violations and 

recommended fine schedule pursuant to 

Rule 8.15, to include a new paragraph 

(i) referencing proposed Rule 25.3 for 

the recommended fines for minor rule 

violations of the Exchange Rules 

appliable [sic] to MEMX Options, which 

the Exchange notes are the same as 

those of BZX Options. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act 35 in general, and 

furthers the objectives of Section 6(b)(5) 

of the Act 36 in particular, in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest; and is not designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

As described above, the fundamental 

premise of the proposal is that the 

Exchange will operate its options 

market much as it operates its cash 

equities market today and in a manner 

similar to that of other options 

exchanges, with a simplified suite of 

order types and deterministic 

functionality leveraging the Exchange’s 

existing robust and resilient technology 

platform. The Exchange believes MEMX 

Options will benefit individual 

investors, options trading firms, and the 

options market generally by providing 

an additional competitive dynamic to 

the options landscape, thereby 

promoting further initiative and 

innovation among market centers and 

market participants. The entry of an 

innovative, cost competitive market 

such as MEMX Options will promote 

competition, spurring existing 

exchanges to improve their own 

executions systems and reduce trading 

costs. 

The Exchange proposes to offer a 

simplified suite of conventional order 

types and order type modifiers and 

other instructions that are designed to 

provide for an efficient, robust, and 

transparent order matching process. The 


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37 In its filing, MEMX consented to an extension 

of time for Commission action to ninety (90) days 

after the date of publication of the proposal. 

basis for a majority of the proposed 

rules of MEMX Options are the 

approved rules of other options 

exchanges, primarily BZX Options, 

which have already been found 

consistent with the Exchange Act. 

Therefore, the Exchange does not 

believe that any of the proposed order 

types and order type functionality raise 

any new or novel issues that have not 

been previously considered by the 

Commission. 

In few instances where the Exchange 

proposes functionality that differs from 

that of other options exchanges, it has 

done so to simplify and/or to improve 

upon an existing process. For instance, 

the Exchange believes the proposed 

operation of the Exchange’s Risk 

Monitor Mechanism described in Rule 

21.16, including the proposed 

functionality in addition to that 

provided under BZX Rule 21.16, 

removes impediments to and perfects 

the mechanism of a free and open 

market and a national market system by 

offering Users additional ways to 

establish and monitor risk parameters 

consistent with their overall approach to 

risk management. Specifically, the 

following additional proposed features 

with respect to its Risk Monitor 

Mechanism would provide Users with 

greater optionality when managing their 

risk on MEMX Options: (i) The ability 

to designate a Custom Group Limit to 

track risk parameters across a 

customized group of orders, (ii) the 

ability to suspend, rather than cancel or 

reject, resting orders when a risk limit 

has been reached, (iii) the ability to 

engage the Risk Monitor Mechanism for 

mass suspension as an alternative to 

mass cancellation, and (iv) the ability to 

utilize the proposed active risk counter 

to actively acknowledge executions, 

rather than waiting until a risk limit is 

reached or the counting program is 

completely reset. Additionally, the 

Exchange believes proposed Rule 21.17, 

which contains standard and Exchangedetermined risk controls based on order 

type and market conditions that are the 

same as other options exchanges, as 

well as a simplified version of the drillthrough price protection mechanism, 

removes impediments to and perfects 

the mechanism of a free and open 

market and a national market system by 

imposing risk controls that are designed 

to prevent orders from executing at 

prices inconsistent with the current 

market. 

The Exchange further believes that the 

functionality that it proposes to offer is 

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

Act because the System is designed to 

be efficient and its operation 

transparent, thereby facilitating 

transactions in securities, removing 

impediments to and perfecting the 

mechanisms of a free and open national 

market system. As described above, the 

Exchange’s proposed rules, including 

the proposed Order Types and Handling 

Instructions, opening procedures, 

routing services, and order matching 

process are designed to provide a 

simplified suite of conventional features 

and to comply with all applicable 

regulatory requirements, including the 

obligations of the Options Order 

Protection and Locked/Crossed Market 

Plan. 

The Exchange believes that the 

proposed rules of MEMX Options, as 

well as the proposed method of 

monitoring for compliance with and 

enforcing such rules is also consistent 

with the Exchange Act, particularly 

Sections 6(b)(1), 6(b)(5) and 6(b)(6) of 

the Exchange Act, which require, in 

part, that an exchange have the capacity 

to enforce compliance with, and provide 

appropriate discipline for, violations of 

the rules of the Commission and of the 

exchange. The Exchange has proposed 

to adopt rules necessary to regulate 

Options Members that are nearly 

identical to the approved rules of other 

options exchanges, as described above. 

The Exchange proposes to regulate 

activity on MEMX Options in the same 

way it regulates activity on its equities 

market, specifically through various 

Exchange specific functions, an RSA 

with FINRA, as well as participation in 

industry plans, including plans 

pursuant to Rule 17d–2 under the 

Exchange Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange operates in an intensely 

competitive global marketplace for 

transaction services. Relying on its array 

of services and benefits, the Exchange 

competes for the privilege of providing 

market services to broker-dealers. The 

Exchange’s ability to compete in this 

environment is based in large part on 

the quality of its trading systems, the 

overall quality of its market and its 

attractiveness to the largest number of 

investors, as measured by speed, 

likelihood and cost of executions, as 

well as spreads, fairness, and 

transparency. 

Consolidation amongst U.S. options 

exchanges has led to concentration of 

ownership by certain exchange groups, 

thereby diminishing the competitive 

landscape among options exchanges. 

This proposal will enhance competition 

by allowing the Exchange to leverage its 

existing robust technology platform to 

provide a resilient, deterministic, and 

transparent execution platform for 

options. The proposed rule change will 

insert an additional competitive 

dynamic to the options landscape by 

allowing the Exchange to compete with 

existing options exchanges and will 

promote further initiative and 

innovation among market centers and 

market participants. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 90 days of the date of 

publication of this notice in the Federal 

Register, the Commission shall: (a) By 

order approve or disapprove such 

proposed rule change, or (b) institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved.37

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

MEMX–2022–10 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–MEMX–2022–10. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28077 

38 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE, 

Washington, DC 20549 on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

offices of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–MEMX–2022–10, and 

should be submitted on or before May 

31, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–09958 Filed 5–9–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–497, OMB Control No. 

3235–0555] 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Rule 6h–1 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the 

Securities and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the existing collection of information 

provided for in Rule 6h–1 (17 CFR 

240.6h–1) under the Securities 

Exchange Act of 1934 (‘‘Act’’) (15 U.S.C. 

78a et seq.). The Commission plans to 

submit this existing collection of 

information to the Office of 

Management and Budget (‘‘OMB’’) for 

extension and approval. 

Section 6(h) of the Act (15 U.S.C. 

78f(h)) requires national securities 

exchanges and national securities 

associations that trade security futures 

products to establish listing standards 

that, among other things, require that: (i) 

Trading in such products not be readily 

susceptible to price manipulation; and 

(ii) the market on which the security 

futures product trades has in place 

procedures to coordinate trading halts 

with the listing market for the security 

or securities underlying the security 

futures product. Rule 6h–1 implements 

these statutory requirements and 

requires that (1) the final settlement 

price for each cash-settled security 

futures product fairly reflect the 

opening price of the underlying security 

or securities, and (2) the exchanges and 

associations trading security futures 

products halt trading in any security 

futures product for as long as trading in 

the underlying security for trading of a 

security futures product based on a 

single security, or trading in 50% or 

more of the underlying securities for 

trading of a security futures product 

based on a narrow-based security index, 

is halted on the listing market. 

It is estimated that approximately 1 

respondent will incur an average burden 

of 10 hours per year to comply with this 

rule, for a total burden of 10 hours. At 

an average internal cost per hour of 

approximately $428, the resultant total 

internal cost of compliance for the 

respondents is $4,280 per year (1 

respondent × 10 hours/respondent × 

$428/hour). 

Written comments are invited on: (a) 

Whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information shall have practical utility; 

(b) the accuracy of the Commission’s 

estimates of the burden of the proposed 

collection of information; (c) ways to 

enhance the quality, utility, and clarity 

of the information collected; and (d) 

ways to minimize the burden of the 

collection of information on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology. 

Consideration will be given to 

comments and suggestions submitted by 

July 11, 2022. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

Please direct your written comments 

to: David Bottom, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o John 

Pezzullo, 100 F Street NE, Washington, 

DC 20549, or send an email to: PRA_

Mailbox@sec.gov. 

Dated: May 4, 2022. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–09952 Filed 5–9–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94851; File No. SR– 

PEARL–2022–15] 

Self-Regulatory Organizations; MIAX 

PEARL, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Adopt Exchange Rule 

532, Order Price Protection 

Mechanisms and Risk Controls 

May 4, 2022. 

Pursuant to the provisions of 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 April 21, 2022 MIAX PEARL, LLC 

(‘‘MIAX Pearl’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) a 

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 adopt new 

Exchange Rule 532, Order Price 

Protection Mechanisms and Risk 

Controls, and a new Max Put Price 

Protection feature in new proposed Rule 

532. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal 

office, 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 


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