Notice2026-01523
Self-Regulatory Organizations; 24X National Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Allow Designation of Retail Orders
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Published
January 27, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 17 (Tuesday, January 27, 2026)</title>
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[Federal Register Volume 91, Number 17 (Tuesday, January 27, 2026)]
[Notices]
[Pages 3560-3563]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01523]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104657; File No. SR-24X-2026-01]
Self-Regulatory Organizations; 24X National Exchange LLC; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To Allow
Designation of Retail Orders
January 22, 2026.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on January 9, 2026, 24X National Exchange LLC (``24X'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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 proposes to adopt new Rule 11.24 to enable members of
the Exchange (``Members'') \4\ to designate certain orders they submit
to the Exchange on behalf of retail customers to be identified as
retail orders to the Exchange. The proposed rule change is available on
the Exchange's website at <a href="https://equities.24exchange.com/regulation">https://equities.24exchange.com/regulation</a>
and at the principal office of the Exchange.
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\4\ See 24X Rule 1.5(u).
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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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt new Rule 11.24 to enable Members to
designate certain orders they submit to the Exchange on behalf of
retail customers to be identified as retail orders to the Exchange.
Under the proposed rule change, the Exchange would create a new class
of market participant for any Member that satisfies the requirements
under proposed Rule 11.24 called a Retail Member Organization
(``RMO''), which would be eligible to submit certain retail order flow
(``Retail Orders'') to the Exchange. Specifically, proposed Rule 11.24
would: (i) define a Retail Order and RMO; (ii) set forth an RMO's
qualification and application requirements and the Exchange's approval
process; (iii) outline procedures for when an RMO fails to abide by the
Retail Order requirements; and (iv) outline the procedures under which
a Member may appeal the Exchange's decision to disapprove it or
disqualify it as an RMO. The Exchange notes that proposed Rule 11.24 is
substantially similar to and based on MEMX LLC (``MEMX'') Rule
11.21.\5\
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\5\ See MEMX Rule 11.21; see also Securities Exchange Act
Release No. 34-90278 (October 28, 2020), 85 FR 69671 (November 3,
2020) (SR-MEMX-2020-13).
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a. Definitions
The Exchange proposes to adopt the following definitions under
proposed Rule 11.24(a). First, the term ``Retail Member Organization''
or ``RMO'' would be defined as a Member (or a division thereof) that
has been approved by the Exchange to submit Retail Orders. Second, the
term ``Retail Order'' would be defined as an agency or riskless
principal order that meets the criteria of FINRA Rule 5320.03 that
originates from a natural person and is submitted to the Exchange by an
RMO, provided that no change is made to the terms of the order with
respect to price or side of market and the order does not originate
from a trading algorithm or any other computerized methodology.
b. RMO Qualifications and Approval Process
Under proposed Rule 11.24(b), any Member could qualify as an RMO if
it conducts a retail business or routes retail orders on behalf of
another broker-dealer. Proposed Rule 11.24(b)(1) makes clear that an
RMO that carries retail customer accounts on a fully disclosed basis
would be considered to conduct a retail business for purposes of the
rule. The qualification standards and approval process under proposed
Rule 11.24(b) are designed to ensure that Members are properly
qualified as an RMO and only designate as Retail Orders those orders
that meet the definition of Retail Orders under proposed Rule
11.24(a)(2) described above. Any Member that wishes to obtain RMO
status would be required to submit: (i) an application form; (ii)
supporting documentation sufficient to demonstrate the retail nature
and characteristics of the applicant's order flow; \6\ and (iii) an
attestation, in a form prescribed by the Exchange, that substantially
all orders submitted by the Member as a Retail Order will qualify as
such under proposed Rule 11.24(b).
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\6\ For example, a prospective RMO could be required to provide
sample marketing literature, website screenshots, other publicly
disclosed materials describing the retail nature of its order flow,
and such other documentation and information as the Exchange may
require to obtain reasonable assurance that the applicant's order
flow would meet the requirements of the Retail Order definition.
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An RMO would be required to have written policies and procedures
reasonably designed to ensure that it will only designate orders as
Retail Orders if all requirements of a Retail Order are met. Such
written policies and procedures must require the Member to (i) exercise
due diligence before entering a Retail Order to ensure that entry as a
Retail Order is in compliance with the requirements of proposed Rule
11.24, and (ii) monitor whether orders entered as Retail Orders meet
the applicable requirements. If the RMO does not itself conduct a
retail business but routes Retail Orders on behalf another broker-
dealer, the RMO's supervisory procedures must be reasonably designed to
ensure that the orders it receives from such other broker-dealer that
it designates as Retail Orders meet the definition of a Retail Order.
Such an RMO must (i) obtain an annual written representation, in a form
acceptable to the Exchange, from each other broker-dealer that sends it
orders to be designated as Retail Orders that
[[Page 3561]]
entry of such orders as Retail Orders will be in compliance with the
requirements of proposed Rule 11.24, and (ii) monitor whether Retail
Order flow routed on behalf of such other broker-dealers continues to
meet the applicable requirements.\7\
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\7\ The Exchange or another self-regulatory organization on
behalf of the Exchange will review an RMO's compliance with these
requirements through an exam-based review of the RMO's internal
controls.
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If the Exchange disapproves a Member's application to be an RMO,
the Exchange would provide a written notice to the Member. The
disapproved applicant could appeal the disapproval by the Exchange as
provided in proposed Rule 11.24(d) and/or reapply for RMO status 90
days after the disapproval notice is issued by the Exchange. An RMO
also could voluntarily withdraw from such status at any time by giving
written notice to the Exchange.
As described above, under proposed Rule 11.24(b), any Member could
qualify as an RMO if it conducts a retail business or routes retail
orders on behalf of another broker-dealer, and Proposed Rule
11.24(b)(1) makes clear that an RMO that carries retail customer
accounts on a fully disclosed basis would be considered to conduct a
retail business for purposes of the rule. The Exchange proposes to
distinguish an RMO's routing services on behalf of another broker-
dealer from services provided by an RMO that carries retail customer
accounts on a fully disclosed basis, as described below. As background
with respect to this aspect of the proposed change, the Exchange first
would like to describe the terms ``introducing broker-dealer,''
``carrying firm'' or ``carrying broker-dealer,'' and ``fully
disclosed,'' as such terms are commonly used in the securities
industry. An ``introducing'' broker-dealer is ``one that has a
contractual arrangement with another firm, known as the carrying or
clearing firm, under which the carrying firm agrees to perform certain
services for the introducing firm. Usually, the introducing firm
submits its customer accounts and customer orders to the carrying firm,
which executes the orders and carries the account. The carrying firm's
duties include the proper disposition of the customer funds and
securities after trade date, the custody of customer securities and
funds, and the recordkeeping associated with carrying customer
accounts.'' \8\ Further, a ``fully disclosed'' introducing arrangement
is ``distinguished from an omnibus clearing arrangement where the
clearing firm maintains one account for all the customer transactions
of the introducing firm. In an omnibus relationship, the clearing firm
does not know the identity of the customers of the introducing firm. In
a fully-disclosed clearing arrangement, the clearing firm knows the
names, addresses, securities positions and other relevant data as to
each customer.'' \9\
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\8\ See Securities Exchange Act Release No. 31511 (Nov. 24,
1992), 57 FR 56973 (December 2, 1992).
\9\ Id.
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With respect to a broker-dealer that is routing on behalf of
another broker-dealer, the Exchange does not believe that the routing
broker-dealer has sufficient information to assess whether orders are
truly retail in nature, and thus, requires an RMO routing on behalf of
other broker-dealers to maintain additional supervisory procedures and
obtain annual attestations, as described above, in order to submit
Retail Orders to the Exchange. In contrast, however, if a broker-dealer
is carrying a customer account on a fully disclosed basis, then such
carrying broker-dealer is required to perform certain diligence
regarding such account that the Exchange believes is sufficient to
assess whether a customer is a retail customer in order to submit
orders on behalf of such a customer to the Exchange as a Retail Order.
The carrying broker of an account typically handles orders from its
retail customers that are ``introduced'' by an introducing broker.
However, as noted above, in contrast to a typical routing relationship
on behalf of another broker-dealer, a carrying broker does obtain a
significant level of information regarding each customer introduced by
the introducing broker. Accordingly, the Exchange proposes to state in
Rule 11.24(b)(1) that for purposes of Rule 11.24, ``conducting a retail
business shall include carrying retail customer accounts on a fully
disclosed basis.''
c. Failure of RMO to Abide by Retail Order Requirements
Proposed Rule 11.24(c) addresses an RMO's failure to abide by
Retail Order requirements. If an RMO designates orders submitted to the
Exchange as Retail Orders and the Exchange determines, in its sole
discretion, that those orders fail to meet any of the requirements of
Retail Orders, the Exchange may disqualify a Member from its status as
an RMO. When disqualification determinations are made, the Exchange
would provide a written disqualification notice to the Member. A
disqualified RMO could appeal the disqualification provided in proposed
Rule 11.24(d) and/or reapply for RMO status 90 days after the
disqualification notice issued by the Exchange.
d. Appeal of Disapproval or Disqualification
Proposed Rule 11.24(d) provides appeal rights to Members. If a
Member disputes the Exchange's decision to disapprove it as an RMO
under proposed Rule 11.24(b) or disqualify it under proposed Rule
11.24(c), such Member may request, within five business days after
notice of the decision is issued by the Exchange, that the Retail
Member Organization Panel (the ``RMO Panel'') review the decision to
determine if it was correct. The RMO Panel would consist of the
Exchange's Chief Regulatory Officer (``CRO''), or a designee of the
CRO, and two officers of the Exchange designated by the Exchange's
Chief Executive Officer. The RMO Panel would review the facts and
render a decision within the time frame prescribed by the Exchange. The
RMO Panel could overturn or modify an action taken by the Exchange and
all determinations by the RMO Panel would constitute final action by
the Exchange on the matter at issue.
e. Implementation
The Exchange notes that, under the proposed rule change, an order
involving any Regulation NMS security traded on the Exchange that meets
the definition of Retail Order would be eligible to be designated as
such by an RMO. The Exchange also notes that orders designated as
Retail Orders would only be designated as such to the Exchange and
would not be designated as such on the Exchange's market data feeds or
otherwise identifiable as Retail Orders by any market participants or
the public. Further, the Exchange notes that orders designated as
Retail Orders would be handled in the exact same way under the
Exchange's rules as if such orders were not designated as Retail
Orders. In other words, the designation of an order as a Retail Order
would not in any way affect the priority or other handling procedures
applicable to such order under the Exchange's rules.
The purpose of enabling RMOs to designate orders as Retail Orders
to the Exchange under the proposed rule change is so the Exchange may
identify and track orders designated as such, which the Exchange
believes will be useful for it in considering potential pricing
modifications to such orders as it continues to evaluate its pricing
structure following the recent commencement of its operations as a
national securities exchange. The
[[Page 3562]]
Exchange further believes that the proposed rule change would enable
the Exchange to have the appropriate mechanisms and processes in place
to implement any differentiated pricing for Retail Orders if and when
the Exchange proposes to do so in the future. The Exchange notes that,
at some point following the adoption and implementation of proposed
Rule 11.24 as described in this proposed rule change, the Exchange may
separately propose to amend its fee schedule to adopt a specific fee
code for Retail Orders to be provided on an RMO's execution reports
and/or to provide differentiated pricing for Retail Orders, which the
Exchange believes would attract additional retail order flow to the
Exchange, thereby providing the benefits of exchange transparency,
regulation, and oversight to more retail orders. The Exchange believes
that the proposed rule change would allow it to be organized with the
appropriate infrastructure (i.e., mechanisms and processes) in advance
of any such proposal, and as such, would allow the Exchange to more
quickly implement any such differentiated pricing.
f. Comparison to Existing Rules of Other Equity Exchanges
As noted above, proposed Rule 11.24 is substantially similar to
MEMX Rule 11.21.\10\ The Exchange further notes that proposed Rule
11.24 is also substantially similar to the existing rules of several
other equity exchanges.\11\ Certain of these exchanges include these
rules as part of a retail attribution program,\12\ retail liquidity
program \13\ or retail price improvement program.\14\ However, unlike
those programs, the Exchange does not propose to attribute retail
orders in its market data feeds, to adopt any special order handling
for Retail Orders or orders intended to provide liquidity to Retail
Orders, or to adopt any mechanics for price improvement for Retail
Orders. Instead, as described above, the proposed rule change would
only enable an RMO to designate that their Retail Orders be identified
as such to the Exchange.
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\10\ See supra note 4.
\11\ See, e.g., Cboe BZX Exchange, Inc. (``Cboe BZX'') Rule
11.25; Cboe EDGX Exchange, Inc. (``Cboe EDGX'') Rule 11.21; Cboe BYX
Exchange, Inc. (``Cboe BYX'') Rule 11.24; Nasdaq BX, Inc. (``Nasdaq
BX'') Rule 4780; NYSE Arca, Inc. (``NYSE Arca'') Rule 7.44-E.
\12\ See, e.g., Cboe EDGX Rule 11.21.
\13\ See, e.g., NYSE Arca Rule 7.44-E.
\14\ See, e.g., Nasdaq BX Rule 4780.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act \15\ in general, and with
Section 6(b)(5) of the Act \16\ in particular, because 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 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; and it is not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is consistent
with these principles because it would increase competition among
execution venues and enable the Exchange to implement future pricing
changes to encourage the submission of additional Retail Orders to the
Exchange. The Exchange notes that a significant percentage of the
orders of retail investors are executed over-the-counter.\17\ The
Exchange believes that it is appropriate to put in place the mechanisms
and processes to enable the Exchange to subsequently offer any
differentiated pricing for Retail Orders as the Exchange believes that
such pricing could incentivize market participants to bring more retail
order flow to the Exchange, thereby providing the benefits of exchange
transparency, regulation, and oversight to more retail orders.
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\17\ See MEMX Retail Trading Insights (September 5, 2025),
available at <a href="https://memx.com/insights/retail-trading-insights">https://memx.com/insights/retail-trading-insights</a>
(``off-exchange market share included 34% from retail
wholesalers'').
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The Exchange notes that the proposed rule change is substantially
similar to MEMX Rule 11.21 and the existing rules of several other
equity exchanges, as described in more detail above.\18\ Specifically,
proposed Rule 11.24 contains nearly identical definitions, standards
and qualification procedures as MEMX Rule 11.21 and the comparable
retail order rules of Cboe BZX, Cboe EDGX, Cboe BYX, Nasdaq BX, and
NYSE Arca.\19\ However, unlike certain of these exchanges' rules, the
proposed rule change does not propose to attribute retail orders in the
Exchange's market data feeds, to adopt any special order handling for
Retail Orders or orders intended to provide liquidity to Retail Orders,
or to adopt any mechanics for price improvement for Retail Orders, as
described above.
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\18\ See supra note 10.
\19\ Id.
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The Exchange also believes its proposed qualification standards and
review process under proposed Rule 11.24 promote just and equitable
principles and are not unfairly discriminatory because they are
designed to ensure that Members are properly qualified as RMOs and only
designate as Retail Orders those orders that meet the definition of
Retail Orders under proposed Rule 11.24(a)(1) described above. The
qualification process proposed herein by the Exchange is not designed
to permit unfair discrimination, but rather ensure that orders that are
designated as Retail Orders are, in fact, orders submitted by a retail
customer that satisfy the proposed definition of Retail Order. Lastly,
the Exchange notes that these qualification and review provisions are
nearly identical to those included in the rules of MEMX, Cboe BZX, Cboe
EDGX, Cboe BYX, Nasdaq BX, and NYSE Arca.\20\
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\20\ Id.
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The Exchange further believes that distinguishing an RMO's routing
services on behalf of another broker-dealer from services provided by
an RMO that carries retail customer accounts on a fully disclosed basis
in proposed Rule 11.24(b)(1) is designed to prevent fraudulent and
manipulative acts and practices because it highlights the parties for
whom additional procedures are required because they do not maintain
relationships with the end customer (i.e., routing brokers) and still
requires the RMO to follow such procedures to ensure that such orders
qualify as Retail Orders. As proposed, however, an RMO would not be
required to follow such procedures, including obtaining annual
attestations, to the extent such RMO actually knows the end customer
and carries the account of such customer and thus can itself confirm
that the orders qualify as Retail Orders. The Exchange believes that
this aspect of the proposed rule change will remove impediments to and
perfect the mechanism of a free and open market and a national market
system because it will allow RMOs that carry retail customer accounts
to designate Retail Orders as such without imposing additional
attestation requirements that the Exchange believes are not necessary
for such RMOs, as described above.
[[Page 3563]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed amendment would not burden intramarket competition because
the ability to designate Retail Orders to be identified as such to the
Exchange would be open to all Members that wish to send Retail Orders
to the Exchange. The Exchange believes the proposed rule change would
not burden, but rather increase, intermarket competition by permitting
RMOs to identify orders as Retail Orders when submitted to the
Exchange, which would ultimately enable the Exchange to better compete
with other exchanges that offer retail order programs.\21\ As noted
above, at this time the Exchange is not proposing to attribute retail
orders in the Exchange's market data feeds, to adopt any special order
handling for Retail Orders or orders intended to provide liquidity to
Retail Orders, or to adopt any mechanics for price improvement for
Retail Orders. Rather, adoption of the proposed rule will enable the
Exchange to have the appropriate mechanisms and processes in place to
implement differentiated pricing for Retail Orders if and when the
Exchange proposes to do so in the future.
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\21\ See supra note 10.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) \22\ of the Act and Rule 19b-
4(f)(6) thereunder.\23\
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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such 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 under
Section 19(b)(2)(B) \24\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\24\ 15 U.S.C. 78s(b)(2)(B).
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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#6b191e070e46080406060e051f182b180e08450c041d"><span class="__cf_email__" data-cfemail="8cfef9e0e9a1efe3e1e1e9e2f8ffccffe9efa2ebe3fa">[email protected]</span></a>. Please include
file number SR-24X-2026-01 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-24X-2026-01. 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 filing 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-24X-2026-01 and should be submitted on
or before February 17, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-01523 Filed 1-26-26; 8:45 am]
BILLING CODE 8011-01-P
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