Notice2021-23139
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
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Published
October 25, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 203 (Monday, October 25, 2021)</title>
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[Federal Register Volume 86, Number 203 (Monday, October 25, 2021)]
[Notices]
[Pages 58972-58975]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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 <a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a>). 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 <a href="https://www.cboe.com/us/equities/membership/fee_schedule/byx/">https://www.cboe.com/us/equities/membership/fee_schedule/byx/</a>). 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 <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edga/">https://www.cboe.com/us/equities/membership/fee_schedule/edga/</a>). 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 <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edgx/">https://www.cboe.com/us/equities/membership/fee_schedule/edgx/</a>). 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
<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#d6a4a3bab3fbb5b9bbbbb3b8a2a596a5b3b5f8b1b9a0"><span class="__cf_email__" data-cfemail="3a484f565f17595557575f544e497a495f59145d554c">[email protected]</span></a>. Please include
File Number SR-MEMX-2021-12 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-2021-12. 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 (<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-2021-12 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
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