[Federal Register Volume 85, Number 192 (Friday, October 2, 2020)]
[Notices]
[Pages 62340-62342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21768]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90022; File No. SR-MEMX-2020-09]


Self-Regulatory Organizations; MEMX, LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change to Extend the Current 
Pilot Program Related to MEMX Rule 11.15, Clearly Erroneous Executions

September 28, 2020.
    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 September 17, 2020, MEMX LLC (``MEMX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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 proposed rule change [sic] to extend the current pilot program 
related to MEMX Rule 11.15, ``Clearly Erroneous Executions,'' to the 
close of business on April 20, 2021. 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
    The Exchange proposes to extend the effectiveness of the Exchange's 
current rule applicable to Clearly Erroneous Executions to the close of 
business on April 20, 2021. Portions of Rule 11.15, explained in 
further detail below, are currently operating as a pilot program which 
expired on April 20, 2020.\5\
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    \5\ See MEMX Rule 11.15.
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    On May 4, 2020, the Commission approved MEMX's Form 1 Application 
to register as a national securities exchange with rules including, on 
a pilot basis, MEMX Rule 11.15.\6\ Rule 11.15, among other things (i) 
provides for uniform treatment of clearly erroneous execution reviews 
in multi-stock events involving twenty or more securities; and (ii) 
reduces the ability of the Exchange to deviate from objective standards 
set forth in the rule. The rule further provides that: (i) A series of 
transactions in a particular security on one or more trading days may 
be viewed as one event if all such transactions were effected based on 
the same fundamentally incorrect or grossly misinterpreted issuance 
information resulting in a severe valuation error for all such 
transactions; and (ii) in the event of any disruption or malfunction in 
the operation of the electronic communications and trading facilities 
of the Exchange, another SRO, or responsible single plan processor in 
connection with the transmittal or receipt of a trading halt, an 
Officer of the Exchange or senior level employee designee, acting on 
his or her own motion, shall nullify any transaction that occurs after 
a trading halt has been declared by the primary listing market for a 
security, and before such a trading halt has officially ended according 
to the primary listing market.\7\
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    \6\ See Securities Exchange Release No. 88806 (May 4, 2020), 85 
FR 27451 (May 8, 2020).
    \7\ See MEMX Rule 11.15.
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    Previously, the pilot program and the current Plan to Address 
Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS 
under the Act (the ``Limit Up-Limit Down Plan'' or the ``LULD Plan'') 
were a single pilot program. On December 26, 2018, the Commission 
published the proposed Eighteenth Amendment to the LULD Plan to allow 
the LULD Plan to operate on a permanent, rather than pilot, basis.\8\ 
On April 17, 2019, the Commission published an approval of the 
Eighteenth Amendment.\9\ Accordingly, national securities exchanges 
filed with the Commission amendments to exchange rules to untie the 
pilot program's effectiveness from that of the LULD Plan in order to 
provide such exchanges additional time to consider further amendments, 
if any, to the clearly erroneous execution rules in light of the 
proposed Eighteenth Amendment to the LULD Plan.\10\
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    \8\ See Securities Exchange Release Act No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \9\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019) (File No. 4-631).
    \10\ See, e.g., Securities Exchange Act Release No. 85542 (April 
8, 2019), 84 FR 15009 (April 12, 2019) (SR-CboeBYX-2019-003).
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    On July 6, 2020, MEMX executed and filed with the Commission an 
amended copy of the LULD Plan.\11\ An amended and executed copy of the 
LULD Plan, with MEMX included as a Party, was provided to each then 
current Party to the Plan, in accordance with the requirements for the 
addition of a new member to the LULD Plan. Accordingly, MEMX is now a 
Participant pursuant to the LULD Plan.\12\
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    \11\ See Securities Exchange Act Release No. 89420 (July 29, 
2020), 85 FR 46762 (August 3, 2020).
    \12\ See id.
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    The Exchange now proposes to amend MEMX Rule 11.15 to extend the 
pilot's effectiveness to the close of business on April 20, 2021. MEMX 
understands that the other national securities exchanges and the 
Financial Industry Regulatory Authority (``FINRA'') also intend to file 
similar proposals to extend their respective clearly erroneous 
execution pilot programs, the substance of which are identical to MEMX 
Rule 11.15.
    The Exchange does not propose any additional changes to MEMX Rule 
11.15. By proposing to extent the pilot, the Exchange will avoid any 
discrepancy between its clearly erroneous pilot program and the pilot 
programs of other exchanges and

[[Page 62341]]

FINRA, as the language of such rules are identical to MEMX Rule 11.15 
and, as noted above, other exchanges and FINRA also intend to file 
proposals to extend their respective clearly erroneous execution pilot 
programs. The Exchange believes the benefits to market participants 
from the more objective clearly erroneous executions rule should 
continue on a limited pilot basis. As the LULD Plan was approved by the 
Commission to operate on a permanent, rather than pilot, basis the 
Exchange intends to assess whether additional changes should also be 
made to the operation of the clearly erroneous execution rules. 
Extending the effectiveness of MEMX Rule 11.15 on a limited basis 
should provide the Exchange and other national securities exchanges 
additional time to consider future amendments, if any, to the clearly 
erroneous execution rules.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\14\ in particular, in that it is designed to 
prevent fraudulent and manipulative practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general to 
protect investors and the public interest. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) requirement that the rules of an exchange not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that the proposed extension to 
the pilot rule addressing clearly erroneous extensions would help 
assure that the determination of whether a clearly erroneous trade has 
occurred will be based on clear and objective criteria, and that the 
resolution of the incident will occur promptly through a transparent 
process. The proposed extension would also help assure consistent 
results in handling erroneous trades across the U.S. equities markets, 
thus furthering fair and orderly markets, the protection of investors 
and the public interest. Based on the foregoing, the Exchange believes 
the clearly erroneous executions rule should continue to be in effect 
on a pilot basis while the Exchange and the other national securities 
exchanges consider and develop a permanent proposal for clearly 
erroneous executions reviews.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes its proposed rule change would not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the Exchange 
understands that FINRA and other national securities exchanges will 
also file similar proposals to extend their respective clearly 
erroneous execution pilot programs. Thus, the proposed extension will 
help to ensure consistency across market centers without implicating 
any competitive issues.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \18\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately upon filing. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, as 
it will allow the proposed rule change to become operative prior to the 
launch of the Exchange's operation as a national securities exchange 
and permit the current clearly erroneous execution pilot program to 
continue uninterrupted, without any changes, while the Exchange and the 
other national securities exchanges consider a permanent proposal for 
clearly erroneous execution reviews. For this reason, the Commission 
hereby waives the 30-day operative delay and designates the proposed 
rule change as operative upon filing.\19\
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MEMX-2020-09 on the subject line.

Paper Comments

     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-2020-09. 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 (http://www.sec.gov/

[[Page 62342]]

rules/sro.shtml). 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-2020-09 and should be 
submitted on or before October 23, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-21768 Filed 10-1-20; 8:45 am]
BILLING CODE 8011-01-P