[Federal Register Volume 85, Number 198 (Tuesday, October 13, 2020)]
[Notices]
[Pages 64536-64539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22640]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90119; File No. SR-MEMX-2020-11)
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Shorten the
Exchange's Post-Market Session To End at 5:00 p.m. Eastern Time
October 7, 2020.
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 October 2, 2020, 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
[[Page 64537]]
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 to amend Exchange Rule 1.5(w) to shorten the
length of the Exchange's after-hours trading session (i.e., the Post-
Market Session \5\) to end at 5:00 p.m. Eastern Time \6\ rather 8:00
p.m., and to make conforming changes to Exchange Rules 1.5(k) and
11.1(a). The text of the proposed rule change is provided in Exhibit 5.
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\5\ ``Post-Market Session'' means the time between 4:00 p.m. and
8:00 p.m. Eastern Time. See Exchange Rule 1.5(w).
\6\ All time references in this filing are to Eastern Time
unless otherwise noted.
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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 offers three distinct trading sessions in which the
Exchange accepts orders from members of the Exchange (``Members'') for
potential execution: (1) The ``Pre-Market Session,'' which begins at
7:00 a.m. and continues until 9:30 a.m.,\7\ (2) ``Regular Trading
Hours,'' which begin at 9:30 a.m. and continue until 4:00 p.m.,\8\ and
(3) the ``Post-Market Session,'' which begins at 4:00 p.m. and
continues until 8:00 p.m.\9\ Members may designate when their orders
are eligible for execution by selecting their desired Time-in-Force
instruction.\10\
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\7\ ``Pre-Market Session'' means the time between 7:00 a.m. and
9:30 a.m. See Exchange Rule 1.5(x).
\8\ ``Regular Trading Hours'' means the time between 9:30 a.m.
and 4:00 p.m. See Exchange Rule 1.5(bb).
\9\ See supra note 5.
\10\ See Exchange Rule 11.6(o).
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The purpose of the proposed rule change is to shorten the length of
the Exchange's after-hours trading session by amending Exchange Rule
1.5(w), which defines Post-Market Session, to end the Post-Market
Session at 5:00 p.m. rather than 8:00 p.m. The Exchange submits that
shortening the Post-Market Session would allow the Exchange to utilize
its staff and resources in a more efficient manner while continuing to
provide Members with an after-hours trading session for one hour after
the close of the Regular Hours Session.
The Exchange believes the proposal to reduce the operating time of
its Post-Market Session to end at 5:00 p.m. rather than 8:00 p.m. is
reasonable and appropriate given that only a very small percentage
(approximately 0.65%) of daily trading volume in NMS stocks occurs
during those hours,\11\ and as such the Exchange believes that the
costs to the Exchange associated with operating during those hours
outweigh the benefits to Members and other market participants.
Moreover, since the Exchange commenced trading operations on September
21, 2020 (supporting trading in seven NMS stocks), the Exchange has
received very few orders in the Post-Market Session, and all such
orders were received between 4:00 p.m. and 5:00 p.m. The Exchange
expects that it will continue to receive very few orders in the Post-
Market Session even after the Exchange completes its rollout of
supporting trading in all NMS stocks, and that the large majority of
such orders would continue to be received between 4:00 p.m. and 5:00
p.m. rather than between 5:00 p.m. and 8:00 p.m. To the extent the
Exchange in the future believes there is adequate demand to justify
operating a longer after-hours trading session, it will consider again
extending its hours to accommodate such demand.
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\11\ Percentage calculated based on data from the week of
September 21, 2020. The Exchange receives and processes data made
available through consolidated data feeds (i.e., CTS and UTDF).
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The Exchange notes that other exchanges offer a longer after-hours
trading session after the close of Regular Trading Hours and that
Members and other market participants can choose to direct their orders
to those exchanges if they wish to participate in an after-hours
trading session extending beyond 5:00 p.m.\12\ The Exchange also notes
that other exchanges currently end their after-hours trading sessions
prior to 8 p.m., including three exchanges that close at 5:00 p.m.
consistent with the Exchange's proposal.\13\ Thus, the Exchange
believes that its proposal will adequately address the needs of Members
by providing for a one-hour Post-Market Session, which trade data show
is the period in which most of the after-hours trading activity occurs,
as described above, and would allow the Exchange to conserve resources
and staff time that would otherwise be dedicated to supporting the
Exchange's after-hours trading session for a four-hour period on every
trading day.
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\12\ See, e.g., Cboe BZX Exchange, Inc. Rule 1.5(c), which
provides for an ``After Hours Trading Session'' from 4:00 p.m. to
8:00 p.m.; Cboe EDGX Exchange, Inc. Rule 1.5(r), which provides for
a ``Post-Closing Session'' from 4:00 p.m. to 8:00 p.m.; NYSE Arca
Equities, Inc. Rule 7.34-E.(a)(3), which provides for a ``Late
Trading Session'' that concludes at 8:00 p.m. Eastern Time; Nasdaq
Rule 4701(g), which provides for ``Post-Market Hours'' that end at
8:00 p.m. Eastern Time.
\13\ See, e.g., New York Stock Exchange LLC Rule 51, which
provides that the trading session concludes at 4:00 p.m.; MIAX
PEARL, LLC Equities Rule 2600(a), which provides that orders may be
entered on such exchange until 4:00 p.m.; Investors Exchange LLC
Rule 1.160(aa), which provides for a ``Post-Market Session'' that
concludes at 5:00 p.m.; Long-Term Stock Exchange, Inc. Rule
1.160(ee), which provides for a ``Post-Market Session'' that
concludes at 5:00 p.m.; Nasdaq PHLX LLC Rule 3301(g), which provides
for ``Post-Market Hours'' that end at 5:00 p.m. Eastern Time.
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The Exchange also proposes to make conforming changes to Exchange
Rules 1.5(k) and 11.1(a) to reflect the Post-Market Session ending at
5:00 p.m. Specifically, the Exchange proposes to amend Exchange Rule
1.5(k), which defines ``Exchange Operating Hours'' or ``Exchange
Hours,'' to reflect that the Exchange's daily trading hours, comprised
of all three trading sessions offered by the Exchange, would begin at
7:00 a.m. and continue until 5:00 p.m.\14\ The Exchange also proposes
to amend Exchange Rule 11.1(a) to update the hours of operations
referenced in that Rule consistent with the changes described above.
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\14\ ``Exchange Operating Hours'' or ``Exchange Hours''
currently means the time between 7:00 a.m. and 8:00 p.m. See
Exchange Rule 1.5(k).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \15\ of the Act, in general, and
furthers the objectives of Sections and 6(b)(5) \16\ of the Act, in
particular, in that it is designed to promote just and equitable
principles of trade and, in general, to protect investors and the
public interest; furthermore, the proposed rule change 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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Specifically, the Exchange believes its proposal to amend Rule
1.5(w) to shorten the length of its Post-Market
[[Page 64538]]
Session to end at 5:00 p.m. rather than 8:00 p.m. would allow the
Exchange to conserve its resources and staff time and focus these on
the Exchange's core business, which is providing an efficient and cost-
effective marketplace for trading in equity securities during Regular
Trading Hours, and other aspects of the Exchange's operations,
including its regulatory function, while maintaining a facility for
Members to execute trades for one hour after Regular Trading Hours.
Reducing the time during which the Post-Market Session operates would
allow the Exchange to maximize efficiencies and eliminate costs that
are associated with supporting trading operations during the longer
after-hours trading session but are not expected to yield a sufficient
economic return. The Exchange believes that the proposed rule change is
therefore consistent with Section 6(b)(5) of the Act in that, by
seeking to operate in a more efficient manner that focuses on trading
during Regular Trading Hours and other aspects of the Exchange's
operations, including its regulatory function, it will operate to
promote just and equitable principles of trade and, in general, protect
investors and the public interest. The Exchange also believes that the
proposed rule change would not permit unfair discrimination between
customers, issuers, brokers, or dealers because it would affect all
Members and market participants in the same way and to the same extent,
and is therefore consistent with Section 6(b)(5) of the Act. Moreover,
the Exchange notes that there is precedent for an exchange shortening
the hours of its after-hours trading session (also changing from 8:00
p.m. to 5:00 p.m.) to allow it to utilize its staff time and resources
in a more efficient manner and focus these on other aspects of its
operations, so this aspect of the proposed rule change does not raise
any new or novel issues that have not previously been considered by the
Commission.\17\
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\17\ See Securities Exchange Act Release No. 72215 (May 21,
2014), 79 FR 30678 (May 28, 2014) (rule change of National Stock
Exchange, Inc. shortening its after-hours trading session from 8:00
p.m. to 5:00 p.m.).
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In addition, the Exchange believes that the proposed amendment to
Exchange Rule 1.5(w) furthers the objectives of Sections 6(b)(1) \18\
of the Act in that it would conserve Exchange resources, which are
expended to support trading operations during the Exchange's trading
hours, and would allow the Exchange to utilize these resources for
other purposes, including the Exchange's regulatory function, thereby
enabling it to be so organized as to have the capacity to be able to
carry out the purposes of the Act and to comply, and to enforce
compliance by its members, with the provisions of the Act, the rules
and regulations thereunder, and the rules of the Exchange.
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\18\ 15 U.S.C. 78(f)(b)(1).
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The Exchange also believes that the proposed amendments to Exchange
Rules 1.5(k) and 11.1(a) are consistent with the Act because the
amendments update those Rules to reference the proposed 5:00 p.m. time
as the time until which the Exchange would accept orders in the Post-
Market Session. No further substantive changes to those Rules are
proposed. The Exchange believes that it is appropriate to update all of
its rules that specifically reference the Exchange's operating hours so
that the Exchange's rules properly reflect the change to the Post-
Market Session being implemented in this proposed rule change.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the Act. By shortening the time period
during which its Post-Market Session operates, the Exchange is reducing
the number of equity exchanges offering an after-hours trading session
extending from after the close of Regular Trading Hours until 8:00 p.m.
However, the Exchange does not believe that this will inappropriately
burden competition in that, as proposed, the Exchange will continue to
offer a Post-Market Session until 5:00 p.m. and other exchanges offer
an after-hours trading session extending until 8:00 p.m.\19\ The
Exchange therefore believes that the availability of an after-hours
trading facility at other exchanges will provide Members and other
market participants with venues to which they can direct their after-
hours activity after the Exchange's proposed 5:00 p.m. Post-Market
Session end time and the reduction in the time frame during which the
Exchange's after-hours facility operates will not impair competition.
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\19\ See supra note 12.
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Furthermore, the Exchange does not believe that the proposed rule
change would have any significant impact on inter-market competition as
there are other exchanges that already end their after-hours trading
sessions prior to 8:00 p.m., including at 5:00 p.m.,\20\ and other
marketplaces are free to provide similar trading hours. The Exchange
also does not believe that the proposed rule change would have any
significant impact on intra-market competition as all Members would be
subject to the modified hours of the Post-Market Session.
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\20\ See supra note 13.
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \21\ and Rule 19b-4(f)(6) thereunder.\22\
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 \23\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\24\
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\21\ 15 U.S.C. 78s(b)(3)(A)(iii).
\22\ 17 CFR 240.19b-4(f)(6).
\23\ 15 U.S.C. 78s(b)(3)(A)(iii).
\24\ 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 fulfilled this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\26\ 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 so that the proposal
may take effect immediately. The Exchange states that waiver of the 30-
day operative delay would allow the Exchange to immediately implement
the proposed change to the Post-Market Session, which would better
align the expenses of operating the Post-Market Session with the
expected volume and revenue associated with that trading session,
thereby allowing the Exchange to conserve resources and staff time and
[[Page 64539]]
focus these on the Exchange's core business and other aspects of the
Exchange's operations, including the Exchange's regulatory function.
The Commission believes that the proposed rule change raises no new or
novel issues and that waiver of the operative delay is consistent with
the protection of investors and the public interest. Therefore, the
Commission hereby waives the operative delay and designates the
proposal operative upon filing.\27\
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\25\ 17 CFR 240.19b-4(f)(6).
\26\ 17 CFR 240.19b-4(f)(6)(iii).
\27\ 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 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) \28\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\28\ 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
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-2020-11 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-2020-11. 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/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-2020-11 and should be submitted on
or before November 3, 2020.
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\29\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22640 Filed 10-9-20; 8:45 am]
BILLING CODE 8011-01-P