Notice2026-19954
Self-Regulatory Organizations; MX2 LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish a Monthly Review of Professional Orders
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
September 30, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 188 (Wednesday, September 30, 2026)</title>
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[Federal Register Volume 91, Number 188 (Wednesday, September 30, 2026)]
[Notices]
[Pages 61901-61904]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19954]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106503; File No. SR-MX2-2026-07]
Self-Regulatory Organizations; MX2 LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Establish a
Monthly Review of Professional Orders
September 25, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the
[[Page 61902]]
``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 15, 2026, MX2 LLC (``MX2'' 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 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 Rule 16.1, (Definitions) to establish a monthly review of
Professional Orders.\3\ The text of the proposed rule change is
provided in Exhibit 5 and is available on the Exchange's website at
<a href="https://info.memxtrading.com/regulation/rules-and-filings/">https://info.memxtrading.com/regulation/rules-and-filings/</a>.
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\3\ See Exchange Rule 16.1. The term ``Professional'' means any
person or entity that (A) is not a broker or dealer in securities;
and (B) places more than 390 orders in listed options per day on
average during a calendar month for its own beneficial account(s).
All Professional orders shall be appropriately marked by Options
Members.
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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 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 Exchange proposes to amend Rule 16.1 (Definitions) to establish
a monthly review of Professional orders. This filing is based on a
proposal recently submitted by Nasdaq ISE, LLC (``ISE'').\4\
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\4\ See Securities Exchange Act No. 105218 (April 13, 2026) 91
FR 20542 (April 16, 2026) (SR-ISE-2026-16) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change to Amend the Review
of Professional Orders.)
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Today, per the definition of Professional under Rule 16.1, orders
for any Public Customer \5\ that averages more than 390 orders per day
during any month must be represented as Professional orders.
Historically, the requirement to review for accurate order marking was
done on a quarterly basis,\6\ however, other exchanges, including ISE
and the Exchange's affiliate, MEMX Options, have recently amended their
rules to a monthly review.\7\ In light of the recent launch of MX2
Options,\8\ the Exchange wishes to codify the timing of its Members'
\9\ review of Public Customers' activities in the rule in order to
align with the rules of these other exchanges. Specifically, the
Exchange wishes to amend its rule such that Members are required to
review their Public Customers' activity and designate orders as Public
Customer Orders or Professional orders on a monthly basis.
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\5\ See Exchange Rule 16.1. A ``Public Customer'' means a person
that is not a broker or dealer in securities.
\6\ The requirement to review Public Customers' activity on at
least a quarterly basis to determine whether orders that are not for
the account of a broker-dealer should be represented as Public
Customer Orders or Professional Orders is not in the current rule
text, however it was an industry requirement and was described in
the adopting proposals filed by the other options exchanges. See,
e.g., Securities Exchange Act Release Nos. 77853 (May 19, 2016), 81
FR 33301 (May 25, 2016) (SR-MIAX-2016-11) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change to Amend Exchange
Rule 100 Concerning Professional Customers); 78788 (September 8,
2016), 81 FR 63252 (September 14, 2016) (SR-ISE-2016-19) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Add
Specificity to the Definition of a Professional in the Exchange's
Rules); 77054 (February 4, 2016), 81 FR 7166 (February 10, 2016)
(SR-Phlx-2016-10) (Notice of Filing of Proposed Rule Change Relating
to Professional Customer Definition). The instant proposal seeks to
codify the timing for review of Public Customers' activities in
advance of the launch of MX2 Options.
\7\ See Securities Exchange Act Release No. 105878 (July 10,
2026), 91 FR 43442 (July 15, 2026) (SR-MEMX-2026-20).
\8\ MX2 Options launched on September 14, 2026. See: <a href="https://memx.com/insights/september-2026-go-live-date-for-mx2-options">https://memx.com/insights/september-2026-go-live-date-for-mx2-options</a>.
\9\ See Exchange Rule 1.5(p). The term ``Member'' means any
registered broker or dealer that has been admitted to membership in
the Exchange.
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In doing so, the Exchange proposes to state under the definition of
``Professional'' in Rule 16.1 that orders for any customer that had an
average of more than 390 orders per day during any calendar month must
be represented as Professional orders for the next calendar month.
As noted, current industry practice requires market participants to
monitor Public Customer Orders to determine if the Public Customer has
averaged more than 390 orders per day during a month. Determining
whether a Public Customer has executed more than 390 orders per day
during a month requires computing a daily average. As such, market
participants should be performing the workflow necessary to designate
orders on a daily basis. Therefore, the proposal will not require
market participants to change current workflow, rather, the proposal
establishes a specific timeframe in the Exchange's rules to change the
manner in which the customer's order is being represented five days
after the end of each calendar month.
The Exchange does not believe that this amendment is a significant
departure from the current rule, nor will it impose any burden on any
Member because each broker-dealer is required currently to perform the
necessary calculation daily to arrive at the requisite average, and
other exchanges have adopted the same requirement, including the
Exchange's affiliate, MEMX Options.\10\ Further, in addition to the
calculation, broker-dealers are subject to know-your-customer and
suitability requirements under FINRA Rules 2090 (Know Your Customer)
and 2111 (Suitability) and would need to consider whether a customer
meets the Professional designation for purposes of determining best
execution and making appropriate recommendations. Finally, it is the
Exchange's understanding that on other exchanges, some market
participants currently designate a Public Customer that has averaged
more than 390 orders per day during a month as a Professional on a more
expedited basis, not waiting until five days after the quarter.
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\10\ See supra note 9.
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The Exchange notes that the trading behavior of a Public Customer
can be distinguished from that of a Professional which is the purpose
of the separate designations. The Exchange believes that identifying
Professional orders based upon the average number of orders entered in
qualified accounts is an appropriately objective approach to reasonably
distinguish such persons and entities from retail investors or market
participants.
2. Statutory Basis
The Exchange believes the proposal is consistent with the Act and
the rules and regulations thereunder applicable to the Exchange and, in
particular, the requirements of Section 6(b) of the Act.\11\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \12\ requirements that the rules of
an exchange be designed to prevent
[[Page 61903]]
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.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange's proposal to codify and establish a
monthly look-back is consistent with the Act because it will ensure
that its rules align with those of other options exchanges. Further,
the Exchange believes that the codified time period will promote
consistency in the treatment of orders as Professional orders while
also preventing Members with high volume from receiving benefits
reserved for Public Customer Orders.
As noted, current industry practice requires market participants to
monitor Public Customer Orders to determine if the Public Customer has
averaged more than 390 orders per day during a month. Determining
whether a Public Customer has executed more than 390 orders per day
during a month requires computing a daily average. As such,
participants should be performing the workflow necessary to designate
orders on a daily basis. Therefore, the proposal does not amend the
current workflow, rather, the proposal establishes a specific timeframe
to change the manner in which the customer's order is being represented
five days after the end of each calendar month.
The Exchange does not believe that this amendment is a significant
departure from the current rule, nor does it impose any burden on any
Member because each broker-dealer is required currently to perform the
necessary calculation daily to arrive at the requisite average.
Further, in addition to the calculation, broker-dealers are subject to
know-your-customer and suitability requirements under FINRA Rules 2090
(Know Your Customer) and 2111 (Suitability) and would need to consider
whether a customer meets the Professional designation for purposes of
determining best execution and making appropriate recommendations.
Finally, it is the Exchange's understanding that on other exchanges,
some market participants currently designate a Public Customer that has
averaged more than 390 orders per day during a month as a Professional
on a more expedited basis, not waiting until five days after the
quarter.
The Exchange notes that the trading behavior of a Public Customer
can be distinguished from that of a Professional which is the purpose
of the separate designations. The Exchange continues to believe that
identifying Professional orders based upon the average number of orders
entered in qualified accounts is an appropriately objective approach to
reasonably distinguish such persons and entities from retail investors
or market participants. Priority is one of the marketplace advantages
provided to Public Customer orders on the Exchange. Priority Customer
Orders \13\ are given execution priority over non-Customer orders and
quotations of market makers at the same price. Another marketplace
advantage afforded to Priority Customer orders on the Exchange is that
Members are generally not assessed transaction fees for the execution
of Priority Customer orders. The purpose of these marketplace
advantages is to attract retail order flow to the Exchange by leveling
the playing field for retail investors over market Professionals. This
proposal will continue to provide Priority Customer accounts with
marketplace advantages and distinguish the accounts of non-Professional
retail investors from Professional accounts. The Exchange notes that
some non-broker-dealer individuals and entities have access to
information and technology that enables them to Professionally trade
listed options in the same manner as a broker or dealer in securities.
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\13\ The term ``Priority Customer'' means any person or entity
that is not: (A) a broker or dealer in securities; or (B) a
Professional. The term ``Priority Customer Order'' means an order
for the account of a Priority Customer. See Rule 16.1.
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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. In this regard and as
indicated above, the Exchange notes that the rule change is
substantially similar to a filing recently submitted by ISE and the
Exchange's affiliate, MEMX Options.\14\
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\14\ See supra notes 6 and 9.
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Specifically, the Exchange does not believe that the proposed rule
change will impose any burden on intra-market competition because
market participants have begun the monthly lookback on other exchanges,
and the proposal does not amend the current workflow, rather, it
establishes a timeframe to change the manner in which the customer's
order is being represented to five days at the end of each calendar
month.
Further, the designation of Professional orders would not result in
any different treatment of such orders for purposes of compliance with
the Exchange's Rules. Priority Customers have been granted certain
priority over other non-broker-dealer individuals and entities that
have access to information and technology that enables them to
Professionally trade listed options in the same manner as a broker or
dealer in securities. Further, the Priority Customer designation allows
the Exchange to attract order flow or create more competitive markets.
Also, the Exchange does not believe that the proposed rule change
will impose any burden on inter-market competition because other
exchanges have adopted the same rule, and this proposal is being
submitted in order to align MX2's rulebook with other exchanges,
including its affiliate, MEMX Options.\15\
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\15\ Id.
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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 \16\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 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) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requested
that the Commission waive the 30-day operative delay so that the
proposal may become operative immediately upon
[[Page 61904]]
filing. The Exchange states that waiver of the operative delay would
allow the Exchange to immediately adopt new language to establish a
monthly review for Members to determine whether the activity of a
customer meets the criteria for the orders to be designated as
Professional Orders upon launch of MX2 Options. Furthermore, the
proposed rule change raises no new or novel legal or regulatory issues.
For these reasons, the Commission finds that waiver of the operative
delay is consistent with the protection of investors and the public
interest. Accordingly, the Commission waives the 30-day operative delay
and designates the proposed rule change to be operative upon
filing.\20\
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\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule'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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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#0c7e796069216f6361616962787f4c7f696f226b637a"><span class="__cf_email__" data-cfemail="d1a3a4bdb4fcb2bebcbcb4bfa5a291a2b4b2ffb6bea7">[email protected]</span></a>. Please include
file number SR-MX2-2026-07 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-MX2-2026-07. 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 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-MX2-2026-07 and should be submitted on
or before October 21, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-19954 Filed 9-29-26; 8:45 am]
BILLING CODE 8011-01-P
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