Document ID: SEC-2021-0336-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MEMX LLC
Posted Date: 2021-03-10T05:00Z

[Federal Register Volume 86, Number 45 (Wednesday, March 10, 2021)]
[Notices]
[Pages 13778-13780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04910]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91256; File No. SR-MEMX-2021-03]

Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend Exchange 
Rule 11.6(h)(1) To Enable Users To Include a Limit Price on a Pegged 
Order With a Primary Peg Instruction

March 4, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 24, 2021, MEMX LLC (``MEMX'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (the ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder.\4\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to amend Exchange Rule 11.6(h)(1) to enable Users \5\ to include a 
limit price on a Pegged Order \6\ with a Primary Peg instruction.\7\ 
The text of the proposed rule change is provided in Exhibit 5.
---------------------------------------------------------------------------

    \5\ As defined in Exchange Rule 1.5(jj), a ``User'' is a member 
of the Exchange (``Member'') or sponsored participant of a Member 
who is authorized to obtain access to the System pursuant to 
Exchange Rule 11.3. As defined in Exchange Rule 1.5(gg), the 
Exchange's ``System'' is the electronic communications and trading 
facility designated by the Board through which securities orders of 
Users are consolidated for ranking, execution and, when applicable, 
routing.
    \6\ Pegged Orders are described in Exchange Rules 11.6(h) and 
11.8(c) and generally defined as an order that is pegged to a 
reference price and automatically re-prices in response to changes 
in the NBBO. The two types of peg instructions for Pegged Orders 
are: (1) Primary Peg, which pegs to the NBB (NBO) for buy (sell) 
orders; and (2) Midpoint Peg, which pegs to the midpoint of the 
NBBO.
    \7\ A Primary Peg instruction is an instruction that may be 
placed on a Pegged Order that instructs the Exchange to peg the 
order to the NBB, for a buy order, or the NBO, for a sell order. A 
User may, but is not required to, select an offset equal to or 
greater than $0.01 above or below the NBB or NBO that the order is 
pegged to. See Exchange Rule 11.6(h)(1).
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, Exchange Rule 11.6(h)(1) provides that a User submitting 
a Pegged Order with a Primary Peg instruction may not include a limit 
price on such order.\8\ In contrast, Exchange Rule 11.6(h)(2) provides 
that a User submitting a Pegged Order with a Midpoint Peg instruction 
may, but is not required to, include a limit price on such order. The 
Exchange therefore currently has different functionality with respect 
to a User's ability to include a limit price on a Pegged Order with a 
Primary Peg instruction and a Pegged Order with a Midpoint Peg 
instruction in that Users may only include a limit price on the latter.
---------------------------------------------------------------------------

    \8\ As initially adopted, Exchange Rule 11.6(h)(1) was silent as 
to whether a User submitting a Pegged Order with a Primary Peg 
instruction may include a limit price on such order. The Exchange 
interpreted the Rule's silence in this regard to mean that a limit 
price may not be included on such orders, which was the intended 
functionality for such orders at the time of the Exchange's initial 
launch. However, after receiving inquiries from Users as to whether 
a limit price may be included on such orders, prior to commencing 
operations the Exchange adopted a change to Exchange Rule 11.6(h)(1) 
to expressly state that a User submitting a Pegged Order with a 
Primary Peg instruction may not include a limit price on such order. 
The purpose of this change was therefore to make Exchange Rule 
11.6(h)(1) more clearly reflect the intended and actual 
functionality. See Securities Exchange Act Release No. 89581 (August 
17, 2020), 85 FR 51799 (August 21, 2020) (SR-MEMX-2020-04).
---------------------------------------------------------------------------

    The Exchange now proposes to enable a User submitting a Pegged 
Order with a Primary Peg instruction to include a limit price on such 
order. The purpose of the proposed change is to align the functionality 
with respect to a User's ability to include a limit price for the two 
types of peg instructions for Pegged Orders (i.e., Primary Peg and 
Midpoint Peg), as the Exchange believes there should be no distinction 
with respect to this functionality for such orders. Thus, the language 
of the proposed change is based on and mirrors the relevant language 
applicable to Pegged Orders with a Midpoint Peg instruction set forth 
in Exchange Rule 11.6(h)(2) and, accordingly, provides that a User 
submitting a Pegged Order with a Primary Peg instruction may, but is 
not required to, include a limit price on such order.
    The Exchange notes that by enabling a User to include a limit price 
on a Pegged Order with a Primary Peg instruction, the User is able to 
establish an additional risk protection in the form of a specified 
price limitation, which the Exchange believes would help to minimize 
the risk of executions of such orders at unintended price levels, 
thereby promoting the operation of a fair and orderly market. 
Accordingly, as Users would have greater flexibility in establishing a 
price limitation with respect to such orders, the Exchange believes 
that the proposed change would result in Users sending additional 
Pegged Orders with a Primary Peg instruction to the Exchange, which 
would deepen the liquidity on the Exchange to the benefit of all Users. 
The Exchange also notes that the proposed change to enable Users to 
include a limit price on a Pegged Order with a Primary Peg instruction 
is consistent with the existing functionality of other exchanges.\9\
---------------------------------------------------------------------------

    \9\ See, e.g., Cboe EDGX Exchange, Inc. (``EDGX'') Rule 
11.8(b)(9), which provides that pegged functionality (including a 
primary peg instruction similar to the Exchange's Primary Peg 
instruction) is available for limit orders that are posted to the 
EDGX book; The Nasdaq Stock Market LLC (``Nasdaq'') Rule 4703(d), 
which generally permits an order with pegging (including primary 
pegging similar to the Exchange's Primary Peg instruction) to 
specify a limit price beyond which the order may not be executed.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\10\ which requires, among other 
things, that the Exchange's rules must be designed to

[[Page 13779]]

promote just and equitable principles of trade and remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest, and Section 6(b)(8) of the Act,\11\ which requires that the 
Exchange's rules not impose any burden on competition that is not 
necessary or appropriate.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    As noted above, the proposed change is intended to align the 
functionality for Pegged Orders with a Primary Peg instruction with the 
functionality for Pegged Orders with a Midpoint Peg instruction with 
respect to enabling a User to include a limit price on such orders, as 
the Exchange believes there should be no distinction with respect to 
this functionality for such orders. The Exchange believes that the 
proposed change is appropriate and consistent with the Act as the 
Exchange believes that enabling Users to establish additional risk 
protection in the form of a specified price limitation for Pegged 
Orders with a Primary Peg instruction would help to minimize the risk 
of executions of such orders at unintended price levels, which the 
Exchange believes would promote just and equitable principles of trade, 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, protect investors 
and the public interest. The Exchange further believes that enabling 
Users to include a limit price on a Pegged Order with a Primary Peg 
instruction is appropriate and consistent with the Act as the Exchange 
believes that its Users would want to utilize this functionality, 
thereby resulting in additional liquidity in the form of Pegged Orders 
with a Primary Peg instruction being sent to the Exchange, which would 
deepen the liquidity on the Exchange to the benefit of all Users.
    Furthermore, the proposed change would make the Exchange's 
functionality consistent with the functionality of certain other 
exchanges with respect to a User's ability to include a limit price on 
Pegged Orders with a Primary Peg instruction,\12\ which the Exchange 
believes would promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, would protect investors and 
the public interest.
---------------------------------------------------------------------------

    \12\ See supra note 9.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
reiterates that the proposed rule change would make the functionality 
with respect to a User's ability to include a limit price on Pegged 
Orders with a Primary Peg instruction consistent with the functionality 
of other exchanges.\13\ The Exchange believes that the proposed rule 
change would not burden intramarket competition because the ability to 
include a limit price on Pegged Orders with a Primary Peg instruction 
would be applicable to all Users. The Exchange also believes that the 
proposed rule change would not burden, but rather increase, intermarket 
competition as the Exchange believes that enabling Users to include a 
limit price on Pegged Orders with a Primary Peg instruction would 
ultimately enable the Exchange to better compete with other exchanges 
that offer this same functionality. Thus, the Exchange believes that 
the proposed rule change would facilitate fair competition among 
national securities exchanges.
---------------------------------------------------------------------------

    \13\ See supra note 9.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) \15\ thereunder.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has complied with this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative for 30 days after the date of its filing. 
However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay. The Exchange states 
that waiver of the operative delay would allow the Exchange to begin 
accepting Pegged Orders with a Primary Peg instruction that include a 
limit price as soon as practicable,\18\ thus benefitting Users and 
investors by sooner offering functionality that enables Users to 
establish an additional risk protection in the form of a specified 
price limitation for such orders. The Exchange believes this would help 
to minimize the risk of executions of such orders at unintended price 
levels, thereby promoting the operation of a fair and orderly market. 
In addition, the Exchange states that the proposed rule change merely 
seeks to align the functionality for Pegged Orders with a Primary Peg 
instruction with the functionality for Pegged Orders with a Midpoint 
Peg instruction with respect to a User's ability to include a limit 
price on such orders. The Commission believes waiver of the operative 
delay will provide Users with an optional additional risk protection 
tool, permitting them to set a limit price for Pegged Orders with a 
Primary Peg instruction if they choose, without unnecessary delay. The 
Commission further believes that the proposed functionality is 
consistent with the functionality of other exchanges \19\ and thus does 
not raise any new or novel issues. For these reasons, the Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. Accordingly, the 
Commission waives the operative delay and designates the proposed rule 
change operative upon filing.\20\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ In its filing, the Exchange stated that it plans to 
implement the proposed rule change on or about March 15, 2021.
    \19\ See, e.g., supra note 9.
    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the

[[Page 13780]]

Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MEMX-2021-03 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-2021-03. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MEMX-2021-03, and should be submitted on 
or before March 31, 2021.
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04910 Filed 3-9-21; 8:45 am]
BILLING CODE 8011-01-P