Document ID: SEC-2021-1494-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MEMX, LLC
Posted Date: 2021-10-25T04:00Z

[Federal Register Volume 86, Number 203 (Monday, October 25, 2021)]
[Notices]
[Pages 58972-58975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23139]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93381; File No. SR-MEMX-2021-12]

Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Adopt a Billing 
Errors Policy and Enable the Exchange To Agree to Alternative Payment 
Instructions for the Exchange's Direct Debit Collection Process

October 19, 2021.
    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 October 12, 2021, MEMX LLC (``MEMX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 15.3 to: (a) Adopt a policy relating to billing 
errors that is substantially similar to the policy adopted by another 
group of exchanges; (b) enable the Exchange, upon request, to permit a 
member of the Exchange (``Member'') or applicant for registration as 
such to provide alternative payment instructions (i.e., other than a 
National Securities Clearing Corporation (``NSCC'') clearing account 
number, as currently required by Exchange Rule 15.3(a)) for purposes of 
the Exchange's direct debit process for the collection of fees and 
other monies due and owing to the Exchange; and (c) add paragraph 
headings and relocate certain existing text within the Rule. The text 
of the proposed rule change is provided in Exhibit 5.

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

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

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

1. Purpose
Billing Errors Policy
    The Exchange is proposing to adopt a policy relating to billing 
errors. Specifically, the Exchange proposes to adopt a new paragraph 
(c) in Rule 15.3 entitled, ``Billing Errors,'' which would provide that 
all fees and rebates assessed by the Exchange prior to the three full 
calendar months before the month in which the Exchange becomes aware of 
a billing error shall be considered final. Particularly, the Exchange 
would resolve such an error by crediting or debiting affected Members 
and non-Member customers of the Exchange (``Non-Members'') based on the 
fees or rebates that should have been applied in the three full 
calendar months preceding the month in which the Exchange became aware 
of the error, including to all impacted transactions that occurred 
during those months.\3\ The Exchange would apply the three month look 
back regardless of whether the error was discovered by the Exchange or 
by a Member or Non-Member that submitted a pricing dispute.\4\
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    \3\ The Exchange notes that the current policy in Rule 15.3(b), 
which states that all pricing disputes must be submitted no later 
than sixty (60) days after receipt of a billing invoice, will remain 
in place.
    \4\ For example, if the Exchange becomes aware of a transaction 
fee billing error on June 4, 2021, the Exchange will resolve the 
error by crediting or debiting Members and Non-Members based on the 
fees or rebates that should have been applied to any impacted 
transactions during March, April and May 2021. The Exchange notes 
that because it bills in arrears, the Exchange would be able to 
correct the error in advance of issuing the June 2021 invoice, and 
therefore, transactions impacted after the end of the last full 
calendar month through the date of discovery (in this example, after 
May 31, 2021 through June 4, 2021), and thereafter, would be billed 
correctly.
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    The purpose of the proposed change is to provide both the Exchange 
and its Members and Non-Members finality with respect to fees and 
rebates previously assessed by the Exchange and the ability to close 
their books after a specified time period. The Exchange notes that Rule 
15.3(b) already requires that pricing disputes must be submitted to the 
Exchange in writing and accompanied by supporting documentation no 
later than 60 days after receipt of a billing invoice, which

[[Page 58973]]

is designed to encourage prompt review of Exchange invoices so that any 
pricing disputes can be addressed in a timely manner. The Exchange 
believes the proposed change would further the goal of addressing 
billing discrepancies in a timely manner while the information and data 
underlying those charges (e.g., applicable fees and order information) 
is still easily and readily available, without further limiting the 
timeframe in which a pricing dispute may be submitted. This practice 
would avoid issues that may arise when billing errors are discovered 
long after they occurred and the parties have already prepared, and in 
some cases published, their books, and would conserve Exchange 
resources that would have to be expended to resolve untimely billing 
disputes. As such, the proposed rule change would alleviate 
administrative burdens related to prior billing errors, which could 
divert Exchange staff resources away from the Exchange's regulatory and 
business purposes.
    The Exchange notes that the language of proposed Rule 15.3(c) is 
substantially similar to language included in the fee schedules of the 
four Cboe U.S. equities exchanges--Cboe BZX Exchange, Inc. (``Cboe 
BZX''),\5\ Cboe BYX Exchange, Inc. (``Cboe BYX''),\6\ Cboe EDGA 
Exchange, Inc. (``Cboe EDGA''),\7\ and Cboe EDGX Exchange, Inc. (``Cboe 
EDGX'').\8\ The Exchange also notes that a number of other exchanges 
have explicitly stated that they consider all fees to be final after a 
similar period of time.\9\ The proposed billing errors policy would 
apply to all fees and rebates assessed by the Exchange. Finally, the 
Exchange notes that the proposed billing errors policy is not intended 
to circumvent or supersede any audit process with respect to the 
Exchange's market data offering, which is intended to ensure that 
market data recipients are in compliance with the terms of the 
applicable market data subscriber agreement. Thus, the proposed billing 
errors policy would not apply to, or otherwise affect the Exchange's or 
any market data recipient's ability to take a position with respect to, 
any fees identified through any such audit conducted by the 
Exchange.\10\
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    \5\ See Cboe BZX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/). See also Securities Exchange Act Release No. 
90897 (January 11, 2021), 86 FR 4161 (January 15, 2021) (SR-CboeBZX-
2020-094).
    \6\ See Cboe BYX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/byx/). See also Securities Exchange Act Release No. 
90899 (January 11, 2021), 86 FR 4156 (January 15, 2021) (SR-CboeBYX-
2020-034).
    \7\ See Cboe EDGA equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edga/). See also Securities Exchange Act Release No. 
90897 (January 11, 2021), 86 FR 4161 (January 15, 2021) (SR-CboeBZX-
2020-094).
    \8\ See Cboe EDGX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/). See also Securities Exchange Act Release No. 
90901 (January 11, 2021), 86 FR 4137 (January 15, 2021) (SR-
CboeEDGX-2020-064).
    \9\ See, e.g., Securities Exchange Act Release No. 34-91836 (May 
11, 2021), 86 FR 26765 (May 17, 2021) (SR-BOX-2021-08); Securities 
Exchange Act Release No. 87650 (December 3, 2019), 84 FR 67304 
(December 9, 2019) (SR-NYSECHX-2019-024); Securities Exchange Act 
Release No. 84430 (October 16, 2018), 83 FR 53347 (October 22, 2018) 
(SRNYSENAT-2018-23); and Securities Exchange Act Release No. 79060 
(October 6, 2016), 81 FR 70716 (October 13, 2016) (SR-ISEGemini-
2016-11).
    \10\ The Exchange notes that it does not currently charge any 
fees for its market data, and therefore does not currently conduct 
audits of market data recipients, but may do so in the future.
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Alternative Payment Instructions for Direct Debit
    The Exchange is also proposing to amend Rule 15.3(a) to enable the 
Exchange, upon request, to permit a Member or applicant for 
registration as such to provide alternative payment instructions (i.e., 
other than an NSCC clearing account number, as currently required by 
Rule 15.3(a)) for purposes of the Exchange's direct debit process for 
the collection of fees and other monies due and owing to the Exchange. 
Specifically, the proposed rule change would provide that the Exchange 
will, upon request, waive the current requirement in Rule 15.3(a) for a 
Member or applicant for registration as such to provide an NSCC 
clearing account number and instead require such Member or applicant to 
provide alternative payment instructions as agreed to by the Exchange 
for purposes of permitting the Exchange to debit any of the fees, 
fines, charges and/or other monetary sanctions or other monies due and 
owing to the Exchange listed in Rule 15.3(a). The proposed rule change 
would further provide that the Exchange reserves the right to require 
any such Member or applicant to provide an NSCC clearing account number 
for such purposes if the Exchange encounters repeated failed collection 
attempts using the alternative payment instructions.
    The purpose of the proposed change is to provide the Exchange with 
the flexibility to agree to an alternative payment arrangement with a 
Member or applicant for registration as such, if such Member or 
applicant so requests, as the Exchange understands that certain Members 
or applicants may have an operational burden associated with remitting 
payment to the Exchange through an NSCC clearing account. Under the 
proposed rule change, any such alternative payment instructions must: 
(i) Be agreed to by the Exchange; and (ii) permit the Exchange to 
initiate the debit of any fees and other monies due and owing to the 
Exchange in a manner similar to the current requirement with respect to 
an NSCC clearing account (i.e., a direct debit process).\11\ The 
requirement that such alternative payment instructions must be agreed 
to by the Exchange is intended to be an objective standard, and the 
Exchange's ability to agree to such alternative payment instructions 
would be exercised uniformly with respect to any Member or applicant 
that so requests to the extent such alternative payment instructions 
reasonably appear to permit the Exchange to utilize a direct debit 
process.
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    \11\ See Securities Exchange Act Release No. 89784 (September 8, 
2020), 85 FR 56672 (September 14, 2020) (SR-MEMX-2020-06) for 
additional details regarding the Exchange's direct debit process.
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Addition of Paragraph Headings and Relocation of Existing Rule Text
    Lastly, the Exchange proposes to add paragraph headings and 
relocate certain existing text within Rule 15.3 for organization 
purposes. Specifically, the Exchange is proposing to add paragraph 
headings to entitle paragraph (a) as ``Collection Through Direct 
Debit''; paragraph (b) as ``Pricing Disputes''; and proposed new 
paragraph (c) as ``Billing Errors''. Additionally, the Exchange is 
proposing to relocate existing Rule text related to pricing dispute 
procedures that is currently located in paragraph (a), which otherwise 
addresses procedures related to the Exchange's direct debit process for 
the collection of fees and other monies due and owing to the Exchange, 
to paragraph (b), which contains procedures related to pricing 
disputes, as the Exchange believes that including such Rule text in 
paragraph (b) is more appropriate. The Exchange is not proposing to 
amend any of the Rule text being relocated. These proposed changes are 
non-substantive and are intended to provide greater context and 
organization within Rule 15.3 and make such Rule easier to navigate and 
understand.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to

[[Page 58974]]

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. The Exchange 
also believes the proposed rule change is consistent with the Section 
6(b)(5) \14\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers. Additionally, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(1) \15\ requirement that it be so 
organized and have the capacity to be able to carry out the purposes of 
the Act and to comply, and to enforce compliance by its Members and 
persons associated with its Members, with the provisions of the Act, 
the rules and regulations thereunder, and the Exchange's Rules.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
    \15\ 15 U.S.C. 78(b)(1).
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    With respect to the proposed policy relating to billing errors, the 
Exchange believes that providing that all fees and rebates are final 
after three months (i.e., resolving billing errors only for the three 
full calendar months preceding the month in which the Exchange became 
aware of the error) is reasonable and consistent with the Act as both 
the Exchange and its Members and Non-Members have an interest in 
knowing when its fee assessments are final and when reliance can be 
placed on those assessments. Indeed, without some deadline on billing 
errors, the Exchange and its Members and Non-Members would never be 
able to close their books with any confidence. As noted above, the 
Exchange believes this proposed change would conserve Exchange 
resources that would have to be expended to resolve untimely billing 
disputes, which could divert Exchange staff resources away from the 
Exchange's regulatory and business purposes. For these reasons, the 
Exchange believes this proposed change promotes just and equitable 
principles of trade, fosters cooperation and coordination with persons 
engaged in regulating, clearing, settling, processing information with 
respect to, and facilitating transactions in securities, removes 
impediments to and perfects the mechanism of a free and open market and 
a national market system, and, in general, protects investors and the 
public interest. Furthermore, as noted above, the language of proposed 
Rule 15.3(c) is substantially similar to language included in the fee 
schedules of the four Cboe U.S. equities exchanges,\16\ and a number of 
other exchanges similarly consider their fees final after a similar 
period of time.\17\ As such, this proposed change does not raise any 
new or novel issues that have not been previously considered by the 
Commission. This proposed change is also equitable and not unfairly 
discriminatory because it would apply equally to all Members (and Non-
Members that pay Exchange fees) and would apply in cases where either 
the Member (or Non-Member) discovers the error or the Exchange 
discovers the error.
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    \16\ See supra notes 7-10.
    \17\ See supra note 11.
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    The Exchange believes the proposed change to enable the Exchange, 
upon request, to permit a Member or applicant for registration as such 
to provide alternative payment instructions (i.e., other than an NSCC 
clearing account number, as currently required by Rule 15.3) for 
purposes of the Exchange's direct debit collection process is 
appropriate and consistent with Section 6(b)(1) of the Act,\18\ as such 
change would provide the Exchange with the flexibility to agree to an 
alternative payment arrangement with a Member or applicant that has an 
operational burden associated with remitting payment to the Exchange 
through an NSCC clearing account, thereby enabling it to be so 
organized and have the capacity to be able to carry out the purposes of 
the Act and to comply, and to enforce compliance by its Members and 
persons associated with its Members, with the Exchange's Rules relating 
to payment of fees and other monies due and owing to the Exchange. The 
Exchange also believes that reserving the right to revert to the 
general rule (i.e., to require an NSCC clearing account number for 
direct debit purposes) with respect to any such Member or applicant if 
the Exchange encounters repeated failed collection attempts using such 
alternative payment instructions is appropriately designed to ensure 
that it is able to collect the fees and other monies due and owing to 
the Exchange through its standard collection process if warranted, and 
is thus consistent with the Act for similar reasons.
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    \18\ 15 U.S.C. 78(b)(1).
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    Additionally, as this proposed change is designed to give the 
Exchange and its Members flexibility regarding their payment 
arrangements while providing a safeguard by which the Exchange may 
revert to its standard collection process, the Exchange believes it 
would promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
This proposed change is also equitable and not unfairly discriminatory 
because it is based on objective standards and would apply equally to 
all Members and applicants for registration as such, as described 
above.
    Finally, the Exchange believes the proposed changes to add 
paragraph headings and relocate certain existing Rule text related to 
pricing disputes to the appropriate paragraph within Rule 15.3 would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, as such changes would provide 
greater context and organization within the Rule, which would assist 
Members in locating the relevant text within the Rule and therefore 
make the Rule easier to navigate and understand. As noted above, the 
Rule text being relocated is not being amended by this proposal. For 
the foregoing reasons, the Exchange believes these proposed changes are 
non-substantive and consistent with the Act.

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

    The Exchange does not believe that the proposal will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. With respect to the proposed 
billing errors policy, the proposal would establish a clearly defined 
timeframe for fees and rebates to be considered final that would apply 
equally to all Members and Non-Members. Additionally, as noted above, 
this proposed change is similar to rules of other exchanges and 
therefore does not raise any new or novel issues that have not been 
previously considered by the Commission.\19\ The proposed change to 
enable the Exchange to agree to alternative payment instructions for 
the Exchange's direct debit collection process would also apply equally 
to all Members and applicants for registration as such, as the 
opportunity to request that the Exchange agree to alternative payment 
instructions is available to any such Member or applicant and the

[[Page 58975]]

Exchange's ability to agree to such alternative payment instructions 
would be exercised uniformly on an objective basis. Such change, as 
well as the non-substantive changes to add paragraph headings and 
relocate existing Rule text within Rule 15.3, do not address 
competitive issues but are concerned solely with the administration of 
the Exchange. For these reasons, the Exchange does not believe such 
proposed changes would impair the ability of Members or competing order 
execution venues to maintain their competitive standing in the 
financial markets, and therefore, the Exchange does not believe the 
proposal will impose any burden on intermarket competition. Moreover, 
because the proposed changes would apply equally to all Members and 
Non-Members, as applicable, the Exchange does not believe the proposal 
would impose any burden on intramarket competition.
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    \19\ See supra notes 7-11.
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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)(iii) of the Act \20\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4. In addition, Rule 19b-4(f)(6) requires a 
self-regulatory organization to give the Commission written notice 
of its intent to file the proposed rule change at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings 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 [email protected]. Please include 
File Number SR-MEMX-2021-12 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-2021-12. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MEMX-2021-12 and should be submitted on 
or before November 15, 2021.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23139 Filed 10-22-21; 8:45 am]
BILLING CODE 8011-01-P