Notice2024-05367
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 21.17(e)
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Published
March 14, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 51 (Thursday, March 14, 2024)</title>
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[Federal Register Volume 89, Number 51 (Thursday, March 14, 2024)]
[Notices]
[Pages 18689-18691]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05367]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99700; File No. SR-MEMX-2024-09]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend Rule
21.17(e)
March 8, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on February 29, 2024, MEMX LLC (``MEMX'' or the ``Exchange'')
filed with the Securities and Exchange Commission (the ``Commission'')
the proposed rule change as described in Items I and II below, which
Items have been prepared by the Exchange. The Exchange filed the
proposal as a ``non-controversial'' proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6)
thereunder.\4\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\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.
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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 21.17(e) to modify the manner in which the
Exchange's System will handle Market Orders received in an option
series after it is open for trading with a National Best Bid (``NBB'')
of zero. 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 18690]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Rule 21.17(e)
regarding the description of how the System \5\ handles a Market Order
\6\ when there is no bid against which the order may execute.
Currently, Rule 21.17(e)(1)(A) states that if the System receives a
sell Market Order in a series after it is open for trading with an NBB
of zero, if the National Best Offer (``NBO'') in the series is less
than or equal to $0.50, then the System converts the Market Order to a
Limit Order with a limit price equal to the minimum trading (emphasis
added) increment applicable to the series and enters the order into the
MEMX Options Book with a timestamp based on the time it enters the
book. The Exchange proposes to modify this provision of the rule to
state that if the System receives a sell Market Order in a series after
it is open for trading with an NBB of zero, if the NBO in the series is
less than or equal to $0.50, then the System converts the Market Order
to a Limit Order with a limit price equal to the minimum quoting
(emphasis added) increment applicable to the series and enters the
order into the MEMX Options Book with a timestamp based on the time it
enters the book. The Exchange is not proposing to change any other
provisions of Rule 21.17(e).
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\5\ The Exchange's Rule 16.1 defines the terms ``Trading
System'' and ``System'' as the automated trading system used by MEMX
Options for the trading of options contracts.
\6\ A Market Order is an order to buy or sell at the best price
available at the time of execution. See Rule 21.1(d)(2).
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The proposed rule change maintains the functionality of converting
a Market Order to a Limit Order in an options series with an NBB of
zero, (if the NBO is less than or equal to $0.50), but in a manner
consistent with the Exchange's minimum quoting increments for options
on the Exchange, which are set forth under Rule 21.5(a). Specifically,
under Rule 21.5(a), the minimum quoting increments for options
contracts traded on MEMX Options are: (1) if the options series is
trading at less than $3.00, five (5) cents; (2) if the options series
is trading at $3.00 or higher, ten (10) cents; and (3) if the options
series is trading pursuant to the Penny Interval Program one (1) cent
if the options series is trading at less than $3.00, five (5) cents if
the options series is trading at $3.00 or higher, unless for QQQ, SPY,
or IWM where the minimum quoting increment will be one cent for all
series regardless of price.
As previously stated, currently, if a Member enters a Market Order
to sell in an options series with an NBB of zero, if the NBO is less
than or equal to $0.50, Rule 21.17(e) provides that the System will
convert this Market Order to a Limit Order to sell with a limit price
that is equal to the minimum trading increment for all options series,
which per Rule 21.5(b), is $0.01. While Rule 21.5(b) permits trading in
all options series at $0.01 intervals, Rule 21.5(a) above does not
permit quoting at $0.01 intervals in all options series, as any options
series not trading pursuant to the Penny Interval Program have minimum
quoting increments of either $0.05 or $0.10 depending on the price at
which the option is trading. Given this inconsistency, the Exchange is
proposing to modify Rule 21.17(e)(1)(A) so that the System will convert
a Market Order to sell in an options series with an NBB of zero and an
NBO that is less than or equal to $0.50 to a Limit Order to sell with a
limit price that conforms with the minimum quoting increments under
Rule 21.5(a) (i.e., the minimum quoting requirement applicable to the
series). The Exchange notes that the System currently operates
consistent with the modified Rule as described above, namely, by
converting a Market Order to sell in an options series with an NBB of
zero and an NBO that is less than or equal to $0.50 to a Limit Order to
sell with a limit price that conforms with the minimum quoting
increments, rather than at a price that could contradict the quoting
increments set forth in Rule 21.15.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\8\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes the proposed rule change
regarding the handling of sell Market Orders in no-bid series assists
with the maintenance of fair and orderly markets and protects investors
and the public interest because it eliminates the potential conflict
that exists within Rule 21.17(e) and the Exchange's minimum quoting
increments under Rule 21.5(a). The proposal considers the fact that
there are certain instances in which an options series cannot quote at
the minimum trading increment, and as such, modifies the rule such that
the System will not convert a Market Order to a Limit Order with a
limit price at which it cannot quote. The Exchange believes that its
proposal is consistent with the Act because it is in the interest of
market participants to have orders entered into the MEMX Options book
with limit prices that conform with the minimum quoting increments
defined under Rule 21.5(a), whether that price is equal to the minimum
trading increment of $0.01or higher based on the specific options
series.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposal will result in any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. More specifically, the Exchange
does not believe that the proposed rule change will impose any burden
on intramarket competition because it will be applicable to all Members
trading on the Exchange. In addition, the Exchange does not believe
that the proposed change will impose any intermarket burden because the
Exchange will provide the same type of functionality related to the
conversion of sell side Market Orders in no-bid options as other
exchanges, but will convert those Market Orders to Limit Orders with
limit prices that conform with its Rules in all instances.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(iii) \9\ of the Act and Rule 19b-4(f)(6) thereunder \10\ in
that it
[[Page 18691]]
effects a change that: (i) does not significantly affect the protection
of investors or the public interest; (ii) does not impose any
significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest.
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 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.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(ii), the Commission may 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 contained in Rule 19b-
4(f)(6)(iii).\11\ The Exchange stated that waiver of the 30-day
operative delay will permit the Exchange to immediately correct this
rule in a manner that does not conflict with its Rules. The Commission
believes that the correction of this typographical error does not raise
any novel issues and that waiver of the 30-day operative delay to
correct the error promptly to ensure MEMX's rules reflect how the
System currently operates is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the 30-day operative delay and designates the proposal operative
upon filing.\12\
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\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7b090e171e56181416161e150f083b081e18551c140d"><span class="__cf_email__" data-cfemail="f684839a93db95999b9b93988285b6859395d8919980">[email protected]</span></a>. Please include
file number SR-MEMX-2024-09 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-2024-09. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-MEMX-2024-09 and should be
submitted on or before April 4, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-05367 Filed 3-13-24; 8:45 am]
BILLING CODE 8011-01-P
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