Document ID: SEC-2020-1347-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MEMX, LLC
Posted Date: 2020-08-21T04:00Z

[Federal Register Volume 85, Number 163 (Friday, August 21, 2020)]
[Notices]
[Pages 51799-51807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18343]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89581; File No. SR-MEMX-2020-04]

Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend Various 
Exchange Rules To Make Changes To Proposed Exchange System 
Functionality Prior to the Launch of the Exchange

August 17, 2020.
    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 August 4, 2020, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The 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).
    \4\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 proposed rule change to amend various Exchange Rules to make changes 
to proposed Exchange System \5\ functionality prior to the launch of 
the Exchange.\6\ The text of the proposed rule change is provided in 
Exhibit 5.
---------------------------------------------------------------------------

    \5\ As defined in Rule 1.5(gg), the Exchange's ``System'' is the 
electronic communications and trading facility designated by the 
Board through which securities orders of Users are consolidated for 
ranking, execution and, when applicable, routing. As defined in Rule 
1.5(jj), a ``User'' is a member of the Exchange (``Member'') or 
sponsored participant of a Member who is authorized to obtain access 
to the System pursuant to Rule 11.3. The Exchange notes that it 
proposes to amend Rule 1.5 to designate the term ``Top of Book'' as 
paragraph (ii), as there are currently two paragraphs labeled (jj). 
As amended, the term User would continue to be labeled as paragraph 
(jj).
    \6\ The Exchange's application to register as a national 
securities exchange was approved in May of 2020. See Securities 
Exchange Act Release No. 88806 (May 4, 2020), 85 FR 27451 (May 8, 
2020). The Exchange currently anticipates launching in September of 
2020.
---------------------------------------------------------------------------

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

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

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

1. Purpose
    The purpose of this proposed rule change is to amend various 
Exchange Rules to make changes to proposed

[[Page 51800]]

functionality prior to the launch of the Exchange. Each change is based 
upon a final review of functionality that the Exchange would like to 
offer at the time of launch and is either intended to simplify the 
operation of the System, to align with functionality offered on other 
exchanges, or to make clear certain aspects of the operation of the 
System that are not clear based on the Exchange's current Rules. These 
changes are described in detail below and include amending: (i) Rules 
1.5, 11.1, 11.6, 11.7, 11.8, and 11.16 in connection with the 
elimination of the Exchange's Early Order Entry Session,\7\ Opening 
Process,\8\ and Re-Opening Process \9\ and a related modification to 
the operation of the System in the event of a trading halt; (ii) Rule 
11.8 regarding certain details applicable to Market Orders \10\ and 
Limit Orders; \11\ (iii) Rules 11.6 and 11.9 regarding the handling of 
orders with a Primary Peg instruction \12\ or a Midpoint Peg 
instruction; \13\ (iv) Rules 11.6 and 11.8 regarding the removal of 
certain ``default'' instructions applicable to order types and order 
type instructions; and (v) Rules 11.6, 11.8, 11.10 and 11.16 regarding 
the handling of orders with certain attributes (i.e., Displayed 
instruction,\14\ Non-Displayed instruction \15\ and Reserve Quantity 
\16\) in specific circumstances.
---------------------------------------------------------------------------

    \7\ As defined in Rule 1.5(i), the Early Order Entry Session is 
``the time between 6:00 a.m. and 7:00 a.m. Eastern Time.''
    \8\ As defined in Rule 1.5(t), the Opening Process is ``the 
computations performed by the System as defined in Rule 11.7, which 
begin at 9:30 a.m. Eastern Time.''
    \9\ As defined in Rule 1.5(cc), the Re-Opening Process is ``a 
computation performed by the System as defined in Rule 11.7(e) 
following a halt, suspension or pause.''
    \10\ Market Orders are the first of three primary order types 
offered by the Exchange. Market Orders are described in Exchange 
Rule 11.8(a) and generally defined as an order to buy or sell a 
stated amount of a security that is to be executed at the NBBO or 
better when the order reaches the Exchange.
    \11\ Limit Orders are the second of three primary order types 
offered by the Exchange. Limit Orders are described in Exchange Rule 
11.8(b) and generally defined as an order to buy or sell a stated 
amount of a security at a specified price or better.
    \12\ 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. See 
Exchange Rule 11.6(h)(1). Pegged Orders are the third of three 
primary order types offered by the Exchange. Pegged Orders are 
described in Exchange Rules 11.6(h) and 11.8(c). Pegged Orders are 
generally defined as an order that automatically re-prices in 
response to changes in the NBBO.
    \13\ A Midpoint Peg instruction is an instruction that may be 
placed on a Pegged Order that instructs the Exchange to peg the 
order to midpoint of the NBBO. See Exchange Rule 11.6(h)(2).
    \14\ A Displayed instruction is an instruction a User may attach 
to an order stating that the order is to be displayed by the System 
on the MEMX Book. See Exchange Rule 11.6(c)(1).
    \15\ A Non-Displayed instruction is an instruction a User may 
attach to an order stating that the order is not to be displayed by 
the System on the MEMX Book. See Exchange Rule 11.6(c)(2).
    \16\ A Reserve Quantity is the portion of an order that includes 
a Non-Displayed instruction in which a portion of that order is also 
displayed on the MEMX Book. See Exchange Rule 11.6(k).
---------------------------------------------------------------------------

Elimination of the Early Order Entry Session, Opening Process, Re-
Opening Process and Related Changes
    The Exchange is proposing to make various changes to simplify the 
way the Exchange opens for trading each day and re-opens in the event 
of a trading halt. Specifically, the Exchange proposes to eliminate the 
Early Order Entry Session, the Opening Process and the Re-Opening 
Process, and to modify the operation of the System in the event of a 
trading halt, each as further described below.
    Currently, the Early Order Entry Session is described as a trading 
session running from 6:00 a.m. to 7:00 a.m. during which certain types 
of orders could be submitted to and held by the Exchange but would not 
be executed.\17\ Such orders would queue until the beginning of the 
Pre-Market Session, at 7:00 a.m., at which time they would be handled 
in time sequence, beginning with the order with the oldest timestamp, 
and would be placed on the MEMX Book,\18\ routed, cancelled, or 
executed in accordance with the terms of the order. The Exchange is 
proposing to eliminate the Early Order Entry Session by deleting such 
term from Rule 1.5(i) and removing the description of the handling of 
orders during such trading session set forth in paragraphs (a) and 
(a)(1) of Rule 11.1. As proposed, rather than offering a pre-opening 
queuing session, the Exchange would instead commence operations each 
day beginning with the Pre-Market Session, which begins at 7:00 a.m. At 
the beginning of the Pre-Market Session, the Exchange would begin 
accepting all orders that are eligible for the Pre-Market Session.\19\ 
In connection with these changes, the Exchange also proposes to amend 
Rule 1.5(k), which presently defines Exchange Hours and Exchange 
Operating Hours as the time between 6:00 a.m. and 8:00 p.m. Eastern 
Time. As amended, because of the elimination of the Early Order Entry 
Session, the definition would refer instead to the time between 7:00 
a.m. and 8:00 p.m. Eastern Time.
---------------------------------------------------------------------------

    \17\ See Rule 1.5(i) and Rule 11.1(a).
    \18\ As defined in Rule 1.5(q), the MEMX Book is the System's 
electronic file of orders.
    \19\ See Rule 11.8(a)(4), which specifies that Market Orders are 
not eligible for any session other than the Market Session. The 
Market Session is the time between 9:30 a.m. and 4:00 p.m. Eastern 
Time. See also Rule 11.6(o)(5), which states that the TIF of RHO is 
an instruction a User may attach to an order designating it for 
execution only during Regular Trading Hours.
---------------------------------------------------------------------------

    The Exchange is proposing the elimination of the Early Order Entry 
Session because this change will reduce complexity with respect to the 
functionality used to open the Exchange each trading day. At least upon 
its initial launch, the Exchange does not anticipate having significant 
volume in its Early Order Entry Session. Because the Exchange will 
still offer the Pre-Market Session, Users will still be able to enter 
orders into the Exchange prior to the commencement of the Market 
Session. Further, not all exchanges offer a trading session equivalent 
to the Early Order Entry Session.\20\ For the reasons stated above, the 
Exchange does not believe the removal of the Early Order Entry Session 
is a significant departure from its originally proposed operations.
---------------------------------------------------------------------------

    \20\ See, e.g., IEX Rule 11.110, which lists the trading 
sessions available on IEX as a Pre-Market Session, a Regular Market 
Session and a Post-Market Session, which would be equivalent to the 
three trading sessions offered by the Exchange. The Exchange notes 
that its Pre-Market Session will begin one hour earlier than IEX, at 
7:00 a.m. Eastern Time instead of 8:00 a.m. Eastern Time.
---------------------------------------------------------------------------

    The Exchange proposes to further simplify the operations of the 
Exchange by eliminating the Opening Process and Re-Opening Process and 
making conforming changes throughout the Exchange's Rules. The Opening 
Process is described in Rule 11.7, which sets forth a variety of 
computations performed by the Exchange beginning at the start of the 
Market Session in order to match orders on the Exchange at the midpoint 
of the national best bid and offer (``NBBO'') following the opening of 
trading on the applicable primary listing market (i.e., the ``Opening 
Match'' described in Rule 11.7(b)). Rule 11.7 further defines the types 
of orders eligible to participate in the Opening Match, the methodology 
used by the Exchange to determine when to process the Opening Match and 
the methodology used by the Exchange to re-open a security that is 
subject to a halt, suspension, or pause in trading. The Exchange 
proposes to delete the definitions of Opening Match, Opening Process 
and Re-Opening Process contained in Rule 1.5(s), Rule 1.5(t) and Rule 
1.5(cc), respectively, as well as Rule 11.7 in its entirety. 
Accordingly, rather than using an Opening Process and opening the 
Market Session following a match of eligible orders at the midpoint of 
the NBBO, the Exchange would instead immediately transition to the 
Market Session at 9:30

[[Page 51801]]

a.m. Similarly, rather than using a Re-Opening Process to match 
eligible orders following a halt, suspension, or pause in trading, the 
Exchange would re-open and begin accepting and processing orders when 
such halt, suspension, or pause in trading has been lifted.
    As noted above, the Exchange believes these changes will reduce 
complexity with respect to the functionality used to open the Exchange 
each trading day and following a halt, suspension, or pause in trading. 
At least upon its initial launch, the Exchange does not anticipate 
having significant volume in either the Opening Process or the Re-
Opening Process. The Exchange instead anticipates that Users will 
participate in the applicable opening processes and re-opening 
processes on other exchanges where they currently participate today. 
For the reasons stated above, the Exchange does not believe the removal 
of the Opening Process or Re-Opening Process is a significant departure 
from its originally proposed operations.
    In connection with the changes described above, the Exchange 
proposes to delete Rule 11.16(e)(6), which describes the process to re-
open following a trading pause pursuant to the Limit Up-Limit Down Plan 
(``LULD Plan'') through a cross-reference to Rule 11.7(e) (as described 
above, the Exchange has proposed to delete such provision). In order to 
provide a general procedure for all types of trading halts, including 
but not limited to trading pauses pursuant to the LULD Plan, the 
Exchange also proposes to amend Rule 11.16(f). Rule 11.16(f) currently 
states that when any trading halt occurs, except where a User has 
designated that its orders be cancelled, all outstanding orders in the 
System will remain on the MEMX Book. The Exchange proposes to amend 
this Rule first by removing the optionality of the functionality (i.e., 
orders remain unless a User chooses to have them cancelled) and instead 
cancelling all orders on the MEMX Book in the event of any trading 
halt, including a trading pause pursuant to the LULD Plan. Thus, as 
amended, in the event of any trading halt, all orders will be 
cancelled. Further, the Exchange proposes to add language to Rule 
11.16(f) to state that the Exchange will not accept any orders during a 
halt, suspension, or pause in trading, and that it will begin accepting 
orders again when the halt, suspension, or pause in trading has ended.
    In connection with the elimination of the Opening Process and Re-
Opening Process the Exchange proposes additional conforming changes in 
Rules 11.6 and 11.8, as follows. First, the Exchange proposes to remove 
language referring to the Opening Process and Re-Opening Process from 
Rule 11.6(o)(5), which describes the Time-in-Force (``TIF'') of Regular 
Hours Only (``RHO'') as an order designated for execution only during 
Regular Trading Hours.\21\ Second, the Exchange proposes to modify Rule 
11.8(a)(1) by removing reference to the handling of a Market Order with 
a TIF of RHO following an Opening Process or Re-Opening Process. Third, 
the Exchange proposes to modify Rule 11.8(c) to remove a description of 
the System's handling of a Pegged Order with a Minimum Execution 
Quantity instruction \22\ during the Opening Process. Without an 
Opening Process or Re-Opening Process, none of these details are 
necessary.
---------------------------------------------------------------------------

    \21\ The Exchange also proposes to update the description of the 
RHO TIF to more closely mirror other TIF instructions, such as the 
Day TIF instruction, and make clear that an order with a TIF of RHO 
will expire at the end of Regular Trading Hours if not executed. 
Further, the Exchange proposes to expressly state in Rule 11.6(o)(5) 
that any order with a TIF instruction of RHO entered into the System 
before the opening or after the closing of Regular Trading Hours 
will be rejected.
    \22\ The Minimum Execution Quantity instruction is described in 
Rule 11.6(f) and is generally defined as an instruction a User may 
attach to an order with a Non-Displayed instruction or a Time-in-
Force of Immediate-or-Cancel instruction requiring the System to 
execute the order only to the extent that a minimum quantity can be 
satisfied.
---------------------------------------------------------------------------

Market Order and Limit Order Functionality
    The Exchange also proposes minor changes to the current 
descriptions of Market Orders and Limit Orders as further described 
below.
    First, the Exchange proposes to make clear that a Market Order with 
a TIF of Immediate or Cancel (``IOC'') can be routed away from the 
Exchange to another Trading Center \23\ if the entering User instructs 
the Exchange accordingly. The Exchange's current rules conflict on this 
point. Current Rule 11.8(a)(1) states that a Market Order with a TIF 
instruction of IOC that is not executed upon return to the System after 
being routed to an away Trading Center will be cancelled. However, 
current Rule 11.8(a)(5) states that a Market Order with a TIF 
instruction of IOC is not eligible for routing. The Exchange proposes 
to modify Rule 11.8(a)(1) by removing the sentence related to routed 
orders with an IOC instruction and relocating it to Rule 11.8(a)(5), 
which relates to routing generally, but without direct reference to the 
TIF instruction of IOC. This new sentence would instead read that if a 
Market Order is routed, any portion of the Market Order not executed 
upon return to the System after being routed to an away Trading Center 
will be cancelled. The Exchange proposes to further amend Rule 
11.8(a)(5) by removing the reference to Market Orders with a TIF 
instruction of IOC from the list of orders not eligible for routing.
---------------------------------------------------------------------------

    \23\ As defined in Rule 11.6(p), the term Trading Center 
includes other securities exchanges, facilities of securities 
exchanges, automated trading systems, electronic communications 
networks or other brokers or dealers.
---------------------------------------------------------------------------

    Second, the Exchange proposes to add new provisions to the 
descriptions of both Market Orders and Limit Orders that state that if 
an order is received by the System when the NBBO is not available then 
such order will be rejected back to the entering User. The applicable 
provision would be added as Rule 11.8(a)(7) for Market Orders and Rule 
11.8(b)(9) for Limit Orders.\24\ The language is based on language 
applicable to Pegged Orders set forth in Rule 11.8(c)(7), which states 
that a Pegged Order received by the System when the NBBO is not 
available will be rejected or cancelled back to the entering User.
---------------------------------------------------------------------------

    \24\ Due to the addition of new paragraph (b)(9) to Rule 11.8, 
the Exchange proposes to re-number subsequent paragraphs of Rule 
11.8(b).
---------------------------------------------------------------------------

Orders With a Primary Peg Instruction or Midpoint Peg Instruction
    The Exchange proposes to modify paragraphs (a)(2)(A) and (a)(2)(B) 
of Rule 11.9 to separate orders with a Primary Peg instruction and 
orders with a Midpoint Peg instruction from a priority perspective. The 
Exchange currently has a single priority level for all Pegged Orders. 
The Exchange believes that separation of the two types of Pegged Orders 
will be more consistent with other exchanges \25\ and that orders with 
a Primary Peg instruction should be afforded higher priority than 
orders with a Midpoint Peg instruction because a Pegged Order with a 
Primary Peg instruction is a more aggressive order type. For an order 
with a Primary Peg instruction to be resting at the same price as an 
order with a Midpoint Peg instruction the order with a Primary Peg 
instruction must have an aggressive offset; depending on subsequent 
price movements, such an order with a Primary Peg instruction might 
provide price improvement from the applicable quote to which it is 
pegged of a full penny or multiple pennies whereas a Midpoint Peg can 
provide such price improvement under

[[Page 51802]]

certain circumstances but also may be executed in smaller increments of 
$0.005. The Exchange is seeking to reward more aggressive order types, 
even when not displayed, because such order types provide price 
improvement to incoming orders and thus promote the operation of a fair 
and orderly market.
---------------------------------------------------------------------------

    \25\ See, e.g., Cboe BZX Rule 11.12(a)(2), which places Non-
Displayed Pegged Orders above Mid-Point Peg Orders in the priority 
list; see also Cboe EDGX Rule 11.9(a)(2)(B), which places Orders 
with a Pegged instruction above MidPoint Peg Orders in the priority 
list when both orders are at the midpoint of the NBBO.
---------------------------------------------------------------------------

    In addition to the change described above, the Exchange proposes 
two minor changes to the description of the Primary Peg instruction set 
forth in Rule 11.6(h)(1). First, the current rule states that a User 
may, but is not required to, select an offset equal to or greater than 
one Minimum Price Variation \26\ above or below the NBB or NBO that the 
order is pegged to (``Primary Offset Amount''). The Exchange proposes 
to limit the Primary Offset Amount to a $0.01 minimum. While the 
Minimum Price Variation for securities priced below $1.00 is an 
increment of $0.0001, the Exchange does not believe that orders with a 
Primary Peg instruction will be commonly used in securities priced 
below $1.00 or that allowing a more granular offset is necessary when 
the Exchange could instead simplify its System's operation. The 
Exchange notes that Users that wish to submit orders with a Primary Peg 
instruction in a security priced below $1.00 can still submit such an 
order with an offset in an increment of $0.01. If such an offset is not 
sufficiently granular to meet the needs of a particular User, such User 
would be able to submit priced Limit Orders in the standard MPV for a 
security priced below $1.00 (i.e., in an increment of $0.0001). The 
Exchange notes that it already maintains other exceptions for 
securities trading below $1.00 to maintain the simplicity of the 
System.\27\ Second, the Exchange proposes to make clear that a User 
submitting a Pegged Order with a Primary Peg instruction may not 
include a limit price on such order. This limitation is already 
implied, as there is no language permitting the inclusion of a limit 
price (and instead the Rule permits inclusion of an offset, as 
described above). However, since the description of the Midpoint Peg 
instruction does explicitly address the inclusion of a limit price on 
such an order and such inclusion is permitted, the Exchange believes 
that expressly stating that a limit price is not permitted for an order 
with a Primary Peg instruction would help to avoid potential confusion 
with the Exchange's Rules.
---------------------------------------------------------------------------

    \26\ The Minimum Price Variation is defined in Rule 11.6(g) and 
provides the minimum increments for bids, offers, or orders in 
securities traded on the Exchange.
    \27\ See, e.g., Rule 11.6(l)(2), which provides that orders with 
a Post Only instruction priced below $1.00 will remove liquidity if 
there is contra-side liquidity (i.e., the Post Only instruction is 
effectively inapplicable). The Exchange also notes that other 
exchanges appear to offer offsets in $0.01 increments. See, e.g., 
NYSE Pillar Gateway FIX Protocol Specification, at pages 24-25, 
specifying the limit for a Market Peg order offset to a ``multiple 
of .01''; available at: https://www.nyse.com/publicdocs/NYSE_Pillar_Gateway_FIX_Protocol_Specification.pdf.
---------------------------------------------------------------------------

Removal of References to Default Instructions
    Next, the Exchange proposes to eliminate references throughout its 
Rules 11.6 and 11.8 to certain ``default'' instructions. As currently 
drafted, such default instructions are instructions that the Exchange 
will infer with respect to certain order types and order type 
instructions to the extent an order does not specify such details on 
the order. The Exchange has determined not to offer default settings 
for most order types and order type instructions, but rather, will 
require a User to specify attributes on an order when entered. The 
Exchange notes that its technical specifications delineate the required 
fields for entering orders into the Exchange as well as the applicable 
options for such fields.\28\ Accordingly, the Exchange proposes to 
delete the following references to default settings:
---------------------------------------------------------------------------

    \28\ While the Exchange is removing most references to default 
instructions, the Exchange notes that its specifications, in order 
to align with current industry protocols, do permit some fields to 
be left blank without rejecting an order. See infra notes 32 and 34-
36. While the Exchange may require certain fields to be completed on 
all orders at some point in the future following proper notice to 
Members and an update to its specifications, standard industry 
protocols (i.e., the FIX protocol) currently dictate the Exchange's 
implementation with respect to the certain instructions. The 
Exchange also notes that many of the defaults the Exchange is 
removing involve an optional functionality that, in turn, has 
multiple variations. For instance, while the Exchange does not 
require a User to submit an order with Reserve Quantity and thus, a 
User could leave all relevant fields blank, if a User does submit an 
order with a Reserve Quantity then the User must complete all of the 
fields relevant to the handling of an order with Reserve Quantity, 
as described below.
---------------------------------------------------------------------------

     Rule 11.6(c)(1) with respect to display instructions--
rather than defaulting to a Displayed instruction, a User will need to 
designate an order with either a Displayed or Non-Displayed 
instruction;
     Rule 11.6(j)(1)(A)(iii) with respect to Display-Price 
Sliding--rather than defaulting to Display-Price Sliding that only 
reprices an order one time following initial placement on the MEMX 
Book, a User will need to select either single or multiple price 
sliding; \29\
---------------------------------------------------------------------------

    \29\ The Exchange notes that it proposes to add the phrase 
``single price sliding process'' to Rule 11.6(j)(1)(A)(iii) to be 
consistent with an existing reference in such Rule to the Exchange's 
``multiple price sliding process'', and proposes to expressly state 
that a User that submits an order with a Display-Price Sliding 
instruction must select either single or multiple price sliding. The 
Exchange also proposes to eliminate the word ``optional'' from both 
Rule 11.6(j)(1)(A)(iii) and Rule 11.16(e)(5)(B)(i) when referring to 
the multiple price sliding process, as both the single price sliding 
process and the multiple price sliding process are ``optional'', and 
thus, the reference could be confusing.
---------------------------------------------------------------------------

     Rule 11.6(j)(2)(A) with respect to Re-Pricing Instructions 
to Comply with Rule 201 of Regulation SHO (``Short Sale Price 
Sliding'')--rather than defaulting to Short Sale Price Sliding that 
only reprices an order one time following initial placement on the MEMX 
Book, a User will need to select either single or multiple Short Sale 
Price Sliding; \30\
---------------------------------------------------------------------------

    \30\ Consistent with the proposed changes to Rule 
11.6(j)(1)(A)(iii) discussed immediately above, the Exchange 
proposes to expressly state that a User that submits an order with a 
short sale re-pricing instruction must select either single or 
multiple price sliding. The Exchange proposes to use this 
terminology throughout Rule 11.6(j)(2)(A) to describe the two 
different options for short sale re-pricing.
---------------------------------------------------------------------------

     Rule 11.6(k)(1)(A) with respect to the Random 
Replenishment instruction for orders with a Reserve Quantity 
instruction--rather than defaulting to the immediate re-load of an 
order with a Random Replenishment instruction, a User will need to 
either select immediate replenishment or to have the time interval of 
such re-load randomly set by the Exchange;
     Rule 11.8(a)(1) with respect to the TIF instruction for a 
Market Order--rather than defaulting to a TIF instruction of Day, a 
User will need to select the applicable TIF instruction; \31\
---------------------------------------------------------------------------

    \31\ In connection with this change, the Exchange proposes to 
use language consistent with that used with respect to the TIF 
options for a Limit Order, as set forth in Rule 11.8(b)(1), as 
amended. Specifically, the Exchange proposes to state that a Market 
order ``must have one of the following TIF instructions'', followed 
by a list of the possible instructions.
---------------------------------------------------------------------------

     Rule 11.8(b)(1) with respect to the TIF instruction for a 
Limit Order--rather than defaulting to a TIF instruction of Day, a User 
will need to select the applicable TIF instruction;
     Rule 11.8(b)(3) with respect to the display instruction 
for a Limit Order--rather than defaulting to a Limit Order with a 
Displayed instruction, a User may include either a Displayed 
instruction or a Non-Displayed instruction; \32\
---------------------------------------------------------------------------

    \32\ The Exchange notes that, as set forth in its 
specifications, Limit Orders without a Displayed instruction or Non-
Displayed instruction will not be rejected but instead, will be 
accepted and handled in accordance with other instructions on the 
applicable order. For instance, a Limit Order with a Minimum 
Quantity instruction but no display instruction will be treated as 
an order with a Non-Displayed instruction whereas a Limit Order with 
no other special handling instructions will be treated as an order 
with a Displayed instruction.

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

[[Page 51803]]

     Rule 11.8(b)(4) with respect to the replenishment 
instruction for a Limit Order with a Reserve Quantity--rather than 
defaulting to a Fixed Replenishment instruction, a User will need to 
select the applicable replenishment instruction; \33\
---------------------------------------------------------------------------

    \33\ The Exchange also proposes to make clear in Rule 11.8(b)(4) 
that a Reserve Quantity will not be displayed by the System. While 
this is already clear from Rule 11.6(k), the Exchange believes that 
it is helpful to re-iterate in Rule 11.8(b)(4).
---------------------------------------------------------------------------

     Rule 11.8(b)(5) with respect to the TIF instruction for a 
Limit Order with an Intermarket Sweep Order instruction--rather than 
defaulting to a TIF instruction of Day, a User will need to select the 
applicable TIF instruction;
     Rule 11.8(b)(10) with respect to the election of a 
Display-Price Sliding instruction for a Limit Order--rather than 
defaulting to a Display-Price Sliding instruction, a User may select 
either Display-Price Sliding (either single or multiple) or Cancel 
Back; \34\
---------------------------------------------------------------------------

    \34\ The Exchange notes that, as set forth in its 
specifications, Limit Orders without a Display-Price Sliding or 
Cancel Back instruction will be accepted by the Exchange, however, 
if a User wishes to use the Exchange's Display-Price Sliding 
functionality, such User will need to indicate such election on its 
orders and will need to specify the type of Display-Price Sliding 
(either single or multiple).
---------------------------------------------------------------------------

     Rule 11.8(b)(11) with respect to the election of a Short 
Sale Price Sliding instruction for a Limit Order--rather than 
defaulting to a Short Sale Price Sliding instruction, a User will need 
to select either Short Sale Price Sliding (either single or multiple) 
or Cancel Back; \35\
---------------------------------------------------------------------------

    \35\ The Exchange notes that, as set forth in its 
specifications, Limit Orders without a Short Sale Price Sliding or 
Cancel Back instruction will be accepted by the Exchange, however, 
if a User wishes to use the Exchange's Short Sale Price Sliding 
functionality, such User will need to indicate such election on its 
orders and will need to specify the type of Short Sale Price Sliding 
(either single or multiple).
---------------------------------------------------------------------------

     Rule 11.8(c)(3) with respect to the description of the 
display instruction of a Pegged Order--rather than defaulting to a Non-
Displayed instruction, the Exchange proposes to simply state that a 
Pegged Order is not eligible to have a Displayed instruction.\36\
---------------------------------------------------------------------------

    \36\ The Exchange notes that, as set forth in its 
specifications, Pegged Orders without a Displayed instruction or 
Non-Displayed instruction will not be rejected but instead, will be 
accepted and handled as orders with a Non-Displayed instruction.
---------------------------------------------------------------------------

    None of the changes proposed above alter the behavior of the System 
other than requiring applicable fields of an order to be specified 
rather than defaulting to certain attributes or instructions to the 
extent such fields are left blank.
Handling of Orders With Displayed, Non-Displayed and Reserve Quantity 
Instructions in Specific Situations
    Finally, the Exchange proposes to modify the behavior of orders 
with certain instructions in the situations specified below.
Orders With a Reserve Quantity When Replenished
    Current Rule 11.9(a)(6) states that the Reserve Quantity of an 
order retains its original timestamp but the Exchange has determined 
that the most efficient way to update orders with a Reserve Quantity 
when replenishing the displayed portion is to handle such orders as new 
orders, which will result in the displayed portion and the Reserve 
Quantity each receiving a new timestamp and being placed back on the 
MEMX Book. Accordingly, the Exchange proposes to amend Rule 11.9(a)(6) 
to state that the Reserve Quantity of an order receives a new timestamp 
for the displayed portion as well as the Reserve Quantity of an order 
each time it is replenished. The Exchange notes that this functionality 
is identical to the functionality offered by Cboe EDGX Exchange, Inc., 
which also assigns a new timestamp to both the displayed portion and 
Reserve Quantity each time an order is replenished.\37\ In connection 
with this change, the Exchange proposes to make clear in Rule 
11.6(k)(1) that when the System replenishes the displayed quantity of 
an order with a Reserve Quantity, the order will be handled by the 
System as a new order. Rule 11.6(k) already states that a new order 
identification number will be created each time a displayed quantity is 
replenished but the Exchange believes it is important to also 
explicitly state that the order will be handled as a new order given 
the implementation by the Exchange of the behavior necessary to 
replenish orders with a Reserve Quantity.
---------------------------------------------------------------------------

    \37\ See Cboe EDGX Rule 11.9(a)(6).
---------------------------------------------------------------------------

    The proposed change to provide new timestamps to both the displayed 
portion and the Reserve Quantity of an order when an order is 
replenished is intended to simplify the operation of the Exchange and 
does allow for fair treatment of orders with Reserve Quantity for the 
following reasons. The Exchange believes it will be rare for there to 
be multiple orders with a Reserve Quantity at the same price on the 
same side and in the same security, in which case, the proposed change 
will not impact the handling of an order with a Reserve Quantity--i.e., 
although it will receive a new timestamp, it will still maintain the 
same priority on the order book vis-[agrave]-vis other orders as it 
would if the Reserve Quantity did not receive a new timestamp. Even if 
there are multiple orders with a Reserve Quantity at the same price on 
the same side and in the same security, the Exchange believes it is 
fair to allow such orders to lose and regain queue position as they are 
each individually replenished. As set forth in current Rule 11.9(a)(2), 
the Reserve Quantity of Limit Orders is always last in the Exchange's 
priority list, and thus Reserve Quantity is least likely to be executed 
at any given time. As such, a User primarily concerned with queue 
position could instead send any other type of order and receive a 
higher position in the Exchange's priority queue than the Reserve 
Quantity of such order will receive.
Orders With a Non-Displayed Instruction at Prices That Cross External 
Quotations
    Exchange Rule 11.10(a)(2) currently states that to the extent an 
order with a Non-Displayed instruction is resting on the MEMX Book, 
such order will be cancelled if an incoming contra-side order that is 
eligible for display on the MEMX Book is entered and such incoming 
order would execute against the resting order with a Non-Displayed 
instruction at a price that would constitute a trade-through of a 
Protected Quotation \38\ displayed on another trading center. Thus, 
according to the Exchange's current Rules, the Exchange would maintain 
orders with a Non-Displayed instruction on its order book that cross 
the prices displayed on other trading centers unless and until 
execution of such an order would result in a trade-through.\39\ The 
Exchange's original proposal in this regard was made to reduce 
cancellations of orders with Non-Displayed instructions to the extent 
such orders would ultimately be again executable based on changes to 
the NBBO. However, as described below, the Exchange now proposes to 
instead cancel an order with a Non-Displayed instruction as soon as it 
is resting at a price that would be a trade-

[[Page 51804]]

through of a Protected Quotation--i.e., as soon as it is at a crossing 
price. The Exchange proposes to remove the existing language from Rule 
11.10(a)(2) regarding cancellation of an order when it would be a 
trade-through and to modify Rules 11.8(b), regarding Limit Orders and 
Rule 11.8(c), regarding Pegged Orders, as described below.
---------------------------------------------------------------------------

    \38\ As set forth in Rule 1.5(z), a Protected Quotation is a 
quotation that is a Protected Bid or Protected Offer. In turn, a 
Protected Bid or Protected Offer is a bid or offer in a stock that 
is (i) displayed by an automated trading center; (ii) disseminated 
pursuant to an effective national market system plan; and (iii) an 
automated quotation that is the best bid or best offer of a national 
securities exchange or association.
    \39\ The Exchange notes that when an order is not displayed, 
ranking such an order at a crossing price is permissible, however, 
execution of an order at such a price is generally not permissible 
as it would constitute a trade-through of the Protected Quotation 
that the order crosses.
---------------------------------------------------------------------------

    The Exchange proposes adopting new paragraph (b)(8) regarding Limit 
Orders to address the handling of orders with a Non-Displayed 
instruction received or resting on the MEMX Book when the Limit Price 
on such orders crosses the price of a Protected Quotation of another 
Trading Center. Proposed paragraph (b)(8), titled Crossed Market, would 
state that to the extent an incoming Limit Order with a Non-Displayed 
instruction would be a Crossing Quotation if displayed at its limit 
price, such order will execute against interest in the MEMX Book at 
prices up to and including the Locking Price and will then be cancelled 
by the System. Proposed paragraph (b)(8) would also state that a 
resting Limit Order with a Non-Displayed instruction that would be a 
Crossing Quotation if displayed at the price at which it is ranked will 
be cancelled by the System.\40\
---------------------------------------------------------------------------

    \40\ Due to the addition of new paragraph (b)(8) to Rule 11.8, 
the Exchange proposes to re-number subsequent paragraphs of Rule 
11.8(b).
---------------------------------------------------------------------------

    Similarly, the Exchange proposes to modify existing paragraph 
(c)(6) of Rule 11.8, which provides information regarding the handling 
of Pegged Orders when the market is locked or crossed. Current 
paragraph (c)(6) addresses the handling of Pegged Orders resting on the 
MEMX Book when a Locking or Crossing Quotation exists and makes clear 
that such orders are not executable at such times but again become 
eligible for execution when a Locking or Crossing Quotation no longer 
exists. The Exchange proposes to add language making clear that this 
behavior applies to orders resting on the MEMX Book and to add a 
provision addressing the handling of Pegged Orders that would be a 
Crossing Quotation when initially received by the Exchange. Similar to 
the handling of Limit Orders with a Non-Displayed instruction, the 
Exchange proposes to execute interest to the extent permissible upon 
receipt of a Pegged Order up to and including the Locking Price but 
then to cancel such order. In contrast to a Pegged Order that is 
already on the MEMX Book at a permissible price that is subsequently 
locked or crossed, which the Exchange proposes to allow to rest in a 
non-executable state while such condition exists, the Exchange does not 
believe a Pegged Order received at a price that would cross a Protected 
Quotation should be placed on the MEMX Book.
Orders With a Non-Displayed Instruction Subject to Rule 201 of 
Regulation SHO
    Under the Exchange's current rules as further amended by the 
proposals described above, the Exchange does not generally offer 
functionality that moves orders with a Non-Displayed instruction to a 
permissible price, instead opting to cancel such orders back to the 
entering Users if the orders with a Non-Displayed instruction would be 
ranked or are ranked at impermissible prices. Consistent with this 
approach, rather than re-pricing to a permissible price, the Exchange 
proposes to modify Rule 11.6(j)(2)(A) to state that in the event the 
NBB changes such that the price of an order with a Non-Displayed 
instruction subject to Rule 201 of Regulation SHO would be a Locking 
Quotation or Crossing Quotation, the order will be cancelled. While 
many other exchanges do offer re-pricing for non-displayed interest 
that, if executed, would be a violation of Regulation SHO, the Exchange 
does not believe it is required to do so and that, instead, 
cancellation of resting hidden interest is an equally permissible 
implementation in order to ensure that the Exchange does not execute 
orders at prices prohibited by Rule 201 of Regulation SHO. The Exchange 
notes other exchanges do cancel resting non-displayed interest under 
the same circumstances to the extent members of such exchanges have 
submitted orders that are ineligible for applicable price sliding 
functionality.\41\
---------------------------------------------------------------------------

    \41\ See, e.g., Cboe Exchange Regulation SHO Amendment FAQ, 
available at https://cdn.cboe.com/resources/membership/BATS_Exchange_Regulation_SHO_Amendment_FAQ.pdf (stating that if 
price sliding is disabled a resting hidden short sale order will be 
cancelled ``when a short sale circuit breaker goes into effect and 
the hidden order locks or crosses the prohibited bid price'').
---------------------------------------------------------------------------

Orders Priced Through Limit Up-Limit Down (``LULD'') Bands
    The Exchange proposes to make three changes to the description of 
orders that are priced through applicable price bands under the LULD 
Plan. First, the Exchange further proposes to modify Rule 11.16(e)(5) 
to state that orders that are repriced by the Exchange due to 
applicable LULD price bands will have priority behind resting interest 
that was originally less aggressively priced but that was not re-
priced, as such orders will retain their original timestamps. The 
Exchange originally proposed to maintain price priority for orders that 
have been re-priced due to applicable LULD price bands, i.e., placing 
such orders in front of orders that were originally less aggressively 
priced. The Exchange believes that the System behavior necessary to 
achieve this result is unnecessarily complicated as compared to the 
benefit received from adopting such behavior. The Exchange does not 
believe that market participants utilize LULD price bands, and 
placement of orders at or near such bands, as an opportunity to achieve 
queue position under normal conditions. Rather, the Exchange believes 
that orders resting at or near applicable price bands and the re-
pricing of orders priced through such price bands is evidence of 
unusual conditions and that the Exchange's functionality should be 
focused on reducing risk in handling such situations. The Exchange also 
notes that other exchanges have adopted similar order handling that 
would provide new timestamps to orders that are re-priced.\42\
---------------------------------------------------------------------------

    \42\ See, e.g., IEX Rule 11.280(e)(5), which states that resting 
orders that are re-priced due to applicable price bands receive new 
timestamps (but does not say that resting orders that are not re-
priced also receive new timestamps); see also Nasdaq PSX Rule 
3100(a)(2)(E).
---------------------------------------------------------------------------

    As noted in the sub-section immediately above, under the Exchange's 
current rules (as further amended by the proposals described above), 
the Exchange does not generally offer functionality that moves orders 
with a Non-Displayed instruction to a permissible price, instead opting 
to cancel such orders back to the entering Users if the orders with a 
Non-Displayed instruction would be booked or are resting at 
impermissible prices. The Exchange proposes to also adopt this logic in 
the context of the Exchange's order handling to comply with the LULD 
Plan (``LULD repricing''). Specifically, the Exchange proposes to 
modify Rule 11.16(e)(5)(B)(i) to make a clear distinction between 
orders with a Displayed instruction, which will continue to be eligible 
for LULD re-pricing, and orders with a Non-Displayed instruction or a 
portion of the order that is not displayed on the Exchange (i.e., 
orders with a Reserve Quantity), which will not be eligible for LULD 
re-pricing. The Exchange proposes to cancel orders resting on the MEMX 
Book with a Non-Displayed instruction or a Reserve Quantity that are 
ranked at prices more aggressive than the applicable LULD price bands. 
The Exchange believes this will further simplify the System and that 
the change is consistent with the general principle of cancelling non-
displayed interest

[[Page 51805]]

resting on the Exchange at impermissible prices.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act,\43\ which require, 
among other things, that the Exchange's rules must be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest, and Section 6(b)(8) of the Act,\44\ 
which requires that the Exchange's rules not impose any burden on 
competition that is not necessary or appropriate. The proposed changes 
are generally intended to simplify the operation of the System, to 
align the System with functionality offered on other exchanges, or to 
make clear certain aspects of the operation of the System that are not 
clear based on the Exchange's current Rules.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f(b)(6).
    \44\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    As noted above, removal of the Early Order Entry Session and 
Opening Process will reduce complexity with respect to the 
functionality used to open the Exchange each trading day. Similarly, 
cancelling orders in the event of a trading halt, not accepting orders 
during a trading halt and removing the Re-Opening Process will simplify 
the functionality used by the Exchange to re-open the market following 
a trading halt. The Exchange does not anticipate having significant 
volume that would be submitted during the Early Order Entry Session nor 
does the Exchange anticipate having significant volume that would match 
in its Opening Match or the corresponding match for the Re-Opening 
Process. Thus, allowing orders to queue at the beginning of the day 
through the Early Order Entry Session or leading up to the open of the 
Market Session or allowing orders to remain on the Exchange during a 
trading halt would complicate the market without much meaningful 
benefit, and instead the Exchange believes simplification of its System 
would be better, at least in connection with the initial launch of the 
Exchange. The Exchange believes that these changes would foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and would remove impediments to and perfect 
the mechanism of a free and open market and a national market system. 
With respect to the Early Order Entry Session, the Exchange also notes 
that the Exchange will still offer the Pre-Market Session, and thus, 
Users will be able to enter orders into the Exchange prior to the 
commencement of the Market Session. Further, not all exchanges offer a 
trading session equivalent to the Early Order Entry Session.\45\ The 
Exchange also believes that the minor proposed amendments to make 
conforming changes to other Exchange Rules that reference the deleted 
functionality will contribute to the protection of investors and the 
public interest by making the Exchange's rules easier to understand.
---------------------------------------------------------------------------

    \45\ See supra note 20.
---------------------------------------------------------------------------

    The Exchange also believes that the clarifying changes to the 
descriptions of Market Orders and Limit Orders are necessary and 
consistent with the Act in that they provide additional clarity by 
correcting the ambiguity in Exchange Rules that is already present with 
respect to routing of Market Orders with a TIF of IOC or add 
protections to the operation of the Exchange so that the Exchange is 
not accepting or processing orders (of any type) when there is no NBBO. 
The Exchange believes that the absence of an NBBO may be indicative of 
a potential market problem. Further, without an NBBO, many of the 
protections in place for the protection of investors would be absent, 
and thus the Exchange believes that, at least in connection with the 
launch of the Exchange, it should not accept orders when there is no 
available NBBO in the applicable security. Thus, the Exchange believes 
the proposed changes in this regard would promote just and equitable 
principles of trade, and, in general, would protect investors and the 
public interest.
    The proposed change to the Exchange's priority rule, Rule 11.9, to 
separate orders with a Primary Peg instruction and orders with a 
Midpoint Peg instruction and to afford a higher priority to orders with 
a Primary Peg instruction, are based on the rules of another exchange 
\46\ and are intended to provide higher priority to orders with a 
Primary Peg instruction, which are more aggressive orders than orders 
with a Midpoint Peg instruction, as described above. The Exchange is 
seeking to reward more aggressive order types, even when not displayed, 
because such order types provide price improvement to incoming orders 
and thus promote the operation of a fair and orderly market and protect 
investors and the public interest. With respect to the limitation of 
the offset for Primary Peg Orders to an increment of $0.01, the 
Exchange does not believe that orders with a Primary Peg instruction 
will be commonly used in securities priced below $1.00 or that allowing 
a more granular offset is necessary when the Exchange could instead 
simplify its System's operation. The Exchange notes that Users that 
wish to submit orders with a Primary Peg instruction in a security 
priced below $1.00 can still submit such an order with an offset in an 
increment of $0.01. If such an offset is not sufficiently granular to 
meet the needs of a particular User, such User would be able to submit 
its own priced Limit Orders in the standard MPV for a security priced 
below $1.00 (i.e., in an increment of $0.0001). The Exchange also notes 
that it already maintains other exceptions for securities trading below 
$1.00 to maintain the simplicity of the System and that other exchanges 
offer offsets in $0.01 increments.\47\
---------------------------------------------------------------------------

    \46\ See supra note 25.
    \47\ See supra note 27.
---------------------------------------------------------------------------

    The Exchange's proposal to remove certain default instructions 
under which the Exchange would assume instructions for order entry 
fields that have not been completed does not change any of the actual 
functionality of the Exchange once orders are received, but rather, 
modifies the order entry protocols required by the Exchange. As 
proposed, all Users will need to complete most applicable order entry 
fields when sending an order to the Exchange, rather than some fields 
carrying particular meaning if such fields are left blank. The Exchange 
believes that requiring most fields to be completed by a User rather 
than applying Exchange-determined defaults to these fields will also 
simplify the System and will help to ensure that Users have instructed 
the Exchange with respect to order handling in a manner that directly 
matches their intention. As these changes do not alter the ultimate 
handling of orders with respect to matching engine handling, execution 
or other processing by the Exchange, and instead provide Users with 
more control and engagement with respect to their order handling, the 
Exchange believes such changes promote just and equitable principles of 
trade, and, in general, protect investors and the public interest.
    The Exchange believes that its handling of an order with a Reserve 
Quantity as a new order when replenishing the displayed portion of such 
an order is the most efficient way to operate the System. Also, the 
Exchange's proposal to provide a new timestamp to both the displayed 
portion and the Reserve Quantity is based on the rules of another 
exchange.\48\ As described above, the Exchange believes that it will be 
rare for there to be

[[Page 51806]]

multiple orders with a Reserve Quantity at the same price on the same 
side and in the same security, in which case, the proposed change will 
not impact the handling of an order with a Reserve Quantity. Even if 
there are multiple orders with a Reserve Quantity at the same price on 
the same side and in the same security, the Exchange believes it is 
fair to allow such orders to lose and regain queue position as they are 
each individually replenished. The Exchange also reiterates that the 
Reserve Quantity of Limit Orders is always last in the Exchange's 
priority list, and thus the purpose of such Reserve Quantity is not to 
achieve the highest possible queue position, but instead, to have 
sufficient interest that can be replenished and displayed by the 
Exchange. Based on the foregoing, the Exchange believes that these 
changes would foster cooperation and coordination with persons engaged 
in facilitating transactions in securities and would remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system.
---------------------------------------------------------------------------

    \48\ See supra note 37.
---------------------------------------------------------------------------

    The Exchange's proposal to reject on entry any order with a Non-
Displayed instruction or any Pegged Order or to cancel any order with a 
Non-Displayed instruction when an order is resting at a crossing price 
is consistent with Regulation NMS, particularly Rule 611 thereof,\49\ 
which would prohibit execution of orders with a Non-Displayed 
instruction on the Exchange as an impermissible trade-through to the 
extent a Protected Quotation was being displayed by another market at a 
crossing price. The Exchange also notes that its proposal is consistent 
with the Exchange's current Rules, which would provide such 
cancellation if the Exchange received an incoming order and sought to 
execute against orders resting at a price that crosses a Protected 
Quotation. The Exchange has also proposed to cancel resting orders with 
a Short Sale instruction and Non-Displayed instruction if such order is 
subject to Rule 201 of Regulation SHO,\50\ and would lock or cross the 
price of the NBB. This change is consistent with Rule 201's prohibition 
of executing an order with a Short Sale instruction at the price of the 
NBB. The Exchange has also proposed to cancel rather than re-price any 
resting interest with a Non-Displayed instruction or a Reserve Quantity 
to the extent such interest is resting at a price that is through the 
applicable LULD price bands. The Exchange believes this will further 
simplify the System and that the change is consistent with the general 
principle of cancelling non-displayed interest resting on the Exchange 
at impermissible prices.
---------------------------------------------------------------------------

    \49\ 17 CFR 242.611.
    \50\ 17 CFR 242.201.
---------------------------------------------------------------------------

    The Exchange's Rules on each of the points described above would 
have allowed additional interest to remain on the Exchange's book for 
potential execution depending on later events. However, by instead 
cancelling such orders in each of the scenarios described above the 
Exchange will further simplify and reduce risk in connection with the 
operation of the System. Users who have their orders cancelled will 
receive immediate notification of such event and will be able to 
determine the best way to re-enter their interest onto the Exchange if 
they choose to do so. Thus, the Exchange also believes the proposal 
promotes just and equitable principles of trade, and, in general, 
protects investors and the public interest.
    Finally, as proposed the Exchange will not seek to maintain price 
priority for orders that have been re-priced due to applicable LULD 
price bands or re-price orders with a Non-Displayed instruction or 
Reserve Quantity to permissible prices when such orders are priced 
through a LULD price band. As noted above, the Exchange believes that 
orders resting at or near applicable price bands and the re-pricing of 
orders priced through such price bands is evidence of unusual 
conditions and that the Exchange's functionality should be focused on 
reducing risk in handling such situations. This change does reduce the 
complexity of the System in connection with LULD repricing and thus, 
the Exchange believes the proposal promotes just and equitable 
principles of trade, and, in general, protects investors and the public 
interest. The Exchange also notes that other exchanges have adopted 
similar order handling that would provide new timestamps to orders that 
are re-priced.\51\
---------------------------------------------------------------------------

    \51\ See supra note 42.
---------------------------------------------------------------------------

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 
reiterates that the proposed rule change is being proposed in the 
context of the launch of the Exchange and focuses on changes to the 
proposed operation of the Exchange that further reduce complexity of 
the System and/or the Exchange's Rules. The changes will allow the 
Exchange to launch its platform with minor changes to the 
implementation of certain Exchange operations, but without major 
distinction from its proposed Rules or the rules of other national 
securities exchanges already in operation today. Thus, the Exchange 
believes this proposed rule change is necessary to permit fair 
competition among national securities exchanges. In addition, the 
Exchange believes the proposed rule change will benefit Exchange 
participants in that the changes will reduce complexity of the System 
and/or the Exchange's Rules.

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:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. 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 \52\ and 
Rule 19b-4(f)(6) \53\ thereunder. 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 will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \52\ 15 U.S.C. 78s(b)(3)(A).
    \53\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

[[Page 51807]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MEMX-2020-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-MEMX-2020-04. 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; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.
    All submissions should refer to File Number SR-MEMX-2020-04 and 
should be submitted on or before September 11, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\54\
---------------------------------------------------------------------------

    \54\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18343 Filed 8-20-20; 8:45 am]
BILLING CODE 8011-01-P