Notice2021-22933
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Pilot Related to Clearly Erroneous Transactions Until April 20, 2022
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 21, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 201 (Thursday, October 21, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 201 (Thursday, October 21, 2021)]
[Notices]
[Pages 58319-58321]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-22933]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93358; File No. SR-MEMX-2021-13]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Extend the Pilot
Related to Clearly Erroneous Transactions Until April 20, 2022
October 15, 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 14, 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 Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to extend the current pilot program related to MEMX Rule 11.15,
``Clearly Erroneous Executions,'' to the close of business on April 20,
2022. 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.
[[Page 58320]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to extend the effectiveness of the Exchange's
current rule applicable to Clearly Erroneous Executions to the close of
business on April 20, 2022. Portions of Rule 11.15, explained in
further detail below, are currently operating as a pilot program which
is set to expire on October 20, 2021.\5\
---------------------------------------------------------------------------
\5\ See MEMX Rule 11.15.
---------------------------------------------------------------------------
On May 4, 2020, the Commission approved MEMX's Form 1 Application
to register as a national securities exchange with rules including, on
a pilot basis, MEMX Rule 11.15.\6\ Rule 11.15, among other things (i)
provides for uniform treatment of clearly erroneous execution reviews
in multi-stock events involving twenty or more securities; and (ii)
reduces the ability of the Exchange to deviate from objective standards
set forth in the rule. The rule further provides that: (i) A series of
transactions in a particular security on one or more trading days may
be viewed as one event if all such transactions were effected based on
the same fundamentally incorrect or grossly misinterpreted issuance
information resulting in a severe valuation error for all such
transactions; and (ii) in the event of any disruption or malfunction in
the operation of the electronic communications and trading facilities
of the Exchange, another SRO, or responsible single plan processor in
connection with the transmittal or receipt of a trading halt, an
Officer of the Exchange or senior level employee designee, acting on
his or her own motion, shall nullify any transaction that occurs after
a trading halt has been declared by the primary listing market for a
security, and before such a trading halt has officially ended according
to the primary listing market.\7\
---------------------------------------------------------------------------
\6\ See Securities Exchange Release No. 88806 (May 4, 2020), 85
FR 27451 (May 8, 2020).
\7\ See MEMX Rule 11.15.
---------------------------------------------------------------------------
Previously, the clearly erroneous pilot programs adopted by the
national securities exchanges and the current Plan to Address
Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS
under the Act (the ``Limit Up-Limit Down Plan'' or the ``LULD Plan'')
were a single pilot program. On April 17, 2019, the Commission approved
the Eighteenth Amendment to the LULD Plan, allowing the LULD Plan to
operate on a permanent, rather than pilot, basis.\8\ Accordingly,
national securities exchanges filed with the Commission amendments to
exchange rules to untie the pilot program's effectiveness from that of
the LULD Plan in order to provide such exchanges additional time to
consider further amendments, if any, to the clearly erroneous execution
rules in light of the proposed Eighteenth Amendment to the LULD
Plan.\9\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019) (File No. 4-631).
\9\ See, e.g., Securities Exchange Act Release No. 85542 (April
8, 2019), 84 FR 15009 (April 12, 2019) (SR-CboeBYX-2019-003).
---------------------------------------------------------------------------
More recently, national securities exchanges filed with the
Commission amendments to exchange rules to extend the pilot's
effectiveness to the close of business on October 20, 2021.\10\
Similarly, the Exchange amended MEMX Rule 11.15 to extend the pilot's
effectiveness to the close of business on October 20, 2021.\11\
---------------------------------------------------------------------------
\10\ See, e.g., Securities Exchange Act Release No. 91558 (April
14, 2021), 86 FR 20580 (April 20, 2021) (SR-CboeBZX-2021-027).
\11\ See Securities Exchange Act Release No. 91457 (April 1,
2021), 86 FR 18082 (April 7, 2021) (SR-MEMX-2021-05).
---------------------------------------------------------------------------
The Exchange now proposes to amend MEMX Rule 11.15 to extend the
pilot's effectiveness to the close of business on April 20, 2022. MEMX
understands that certain other national securities exchanges and the
Financial Industry Regulatory Authority (``FINRA'') also intend to file
similar proposals to extend their respective clearly erroneous
execution pilot programs, the substance of which are identical to MEMX
Rule 11.15.
The Exchange does not propose any additional changes to MEMX Rule
11.15. By proposing to extend the pilot, the Exchange will avoid any
discrepancy between its clearly erroneous pilot program and the pilot
programs of other exchanges and FINRA, as the language of such rules
are identical to MEMX Rule 11.15 and, as noted above, other exchanges
and FINRA also intend to file proposals to extend their respective
clearly erroneous execution pilot programs. The Exchange believes the
benefits to market participants from the more objective clearly
erroneous executions rule should continue on a limited six month pilot
basis. As the LULD Plan was approved by the Commission to operate on a
permanent, rather than pilot, basis the Exchange intends to assess
whether additional changes should also be made to the operation of the
clearly erroneous execution rules. Extending the effectiveness of MEMX
Rule 11.15 for an additional six months should provide the Exchange and
other national securities exchanges additional time to consider future
amendments, if any, to the clearly erroneous execution rules.
2. Statutory Basis
The Exchange believes that its proposal 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 practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general to
protect investors and the public interest. Additionally, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) requirement that the rules of an exchange not be designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that extending the clearly
erroneous execution pilot under MEMX Rule 11.15 for an additional six
months would help assure that the determination of whether a clearly
erroneous trade has occurred will be based on clear and objective
criteria, and that the resolution of the incident will occur promptly
through a transparent process. The proposed extension would also help
assure consistent results in handling erroneous trades across the U.S.
equities markets, thus furthering fair and orderly markets, the
protection of investors and the public interest. Based on the
foregoing, the Exchange believes the clearly erroneous executions rule
should continue to be in effect on a pilot basis while the Exchange and
other national securities exchanges consider and develop a permanent
proposal for clearly erroneous executions reviews.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes its proposed rule change would not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, the Exchange
understands that FINRA and certain other national securities exchanges
will also file similar proposals to extend their respective clearly
erroneous execution pilot programs. Thus, the proposed rule
[[Page 58321]]
change will help to ensure consistency across market centers without
implicating any competitive issues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately upon filing. The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest, as
it will allow the current clearly erroneous execution pilot program to
continue uninterrupted, without any changes, while the Exchange and the
other national securities exchanges consider a permanent proposal for
clearly erroneous execution reviews. For this reason, the Commission
hereby waives the 30-day operative delay and designates the proposed
rule change as operative upon filing.\18\
---------------------------------------------------------------------------
\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#81f3f4ede4ace2eeecece4eff5f2c1f2e4e2afe6eef7"><span class="__cf_email__" data-cfemail="a4d6d1c8c189c7cbc9c9c1cad0d7e4d7c1c78ac3cbd2">[email protected]</span></a>. Please include
File Number SR-MEMX-2021-13 on the subject line.
Paper Comments
<bullet> 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-2021-13. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-13 and should be submitted on
or before November 12, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22933 Filed 10-20-21; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on October 21, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.