[Federal Register Volume 87, Number 188 (Thursday, September 29, 2022)]
[Notices]
[Pages 59148-59150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-21069]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95903; File No. SR-MEMX-2022-27]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Update Exchange 
Rule 13.4(a) Regarding the Exchange's Usage of Data Feeds

September 23, 2022.
    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 September 19, 2022, 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 update Exchange Rule 13.4(a) regarding the sources of data that the 
Exchange utilizes for the handling, execution and routing of orders, as 
well as for surveillance necessary to monitor compliance with 
applicable securities laws and Exchange rules, with respect to certain 
market centers. 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 update Exchange Rule 13.4(a) regarding the 
sources of data that the Exchange utilizes for the handling, execution 
and routing of orders, as well as for surveillance necessary to monitor 
compliance with applicable securities laws and Exchange rules, with 
respect to certain market centers. Specifically, the Exchange proposes 
to amend Exchange Rule 13.4(a) to reflect that it no longer utilizes 
direct data feeds and instead will utilize market data from the 
Consolidated Quotation System (``CQS'')/UTP Quotation Data Feed 
(``UQDF'') for such purposes with respect to the following markets 
centers: Cboe BYX, Cboe EDGA, Nasdaq BX, Nasdaq PSX, NYSE American, 
NYSE Chicago, and NYSE National.\5\ The Exchange does not have a 
secondary source for data for these market centers.
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    \5\ The Exchange previously filed the proposal, which was 
effective on filing prior to August 1, 2022, the date that the 
Exchange transitioned over to use CQS/UQDF for the market centers 
listed above. See Securities Exchange Act Release No. 95395 (July 
29, 2022), 87 FR 47799 (August 4, 2022) (SR-MEMX-2022-20) (the 
``Original Proposal''). The Exchange withdrew the Original Proposal 
and re-filed this proposal in order to provide additional 
transparency and respond to a comment letter received on the 
Original Proposal. See Letter from Christopher Nagy, Research 
Director, Healthy Markets Association, to Vanessa Countryman, 
Secretary, Securities and Exchange Commission dated August 16, 2022.
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    By making the changes set forth above, the Exchange anticipates 
saving approximately $30,000 per month, or $360,000 annually, by 
discontinuing receipt of direct data feeds from the markets listed 
above. The Exchange determined the list of markets from which to 
discontinue direct data feeds because such markets represent the U.S. 
national securities exchanges that charge for market data but have less

[[Page 59149]]

than 2% market share (the majority of these exchanges have less than 1% 
market share). In addition, the Exchange notes that it does not 
anticipate that the change will negatively impact its operations or 
negatively impact investors. To the contrary, given the relative size 
of these markets and quality of quoting on such markets as compared to 
size and quality of quoting on the Exchange and the markets from which 
it continues to receive direct data feeds,\6\ the Exchange does not 
anticipate a significant difference with respect to its implementation 
of applicable requirements of Regulation NMS, including SEC Rule 611 
(i.e., the Order Protection Rule).\7\ Furthermore, with respect to the 
Exchange's routing services, the Exchange does not route to the markets 
from which it has discontinued direct data feeds nearly as much as it 
does to larger markets, again likely due to differences in quote 
quality and available liquidity at such markets. Furthermore, the 
Exchange's routing services are completely optional. Finally, the 
Exchange notes that other exchanges have made similar determinations to 
use direct data feeds from some markets, primarily larger markets or 
their own affiliates, and market data from the CQS/UQDF data feeds for 
other markets.\8\
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    \6\ Based on publicly available information, the Exchange 
maintained quotations at the national best bid or offer (``NBBO'') 
over 25% of the time, which is third amongst all exchanges and only 
behind the Nasdaq Stock Market and NYSE Arca Equities. In contrast, 
none of the markets from which the Exchange has discontinued direct 
data feeds maintained a quotation at the NBBO more than 10% of the 
time. See Cboe Global Markets NBBO Quote Quality Statistics, 
available at: https://www.cboe.com/us/equities/market_statistics/.
    \7\ 17 CFR 242.611.
    \8\ See, e.g., Cboe BZX Exchange, Inc. (``BZX'') Rule 11.26 
(listing IEX, MEMX, MIAX Pearl, NYSE American, NYSE Chicago, and 
NYSE National as exchanges for which BZX uses CQS/UQDF data even 
though such markets offer direct data feeds); see also NYSE Arca 
Equities (``Arca'') Rule 7.37-E.(d) (listing IEX, MEMX, and MIAX 
Pearl as exchanges for which Arca uses CQS/UQDF data even though 
such markets offer direct data feeds).
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    The Exchange proposes for this proposed rule change to become 
operative on filing with the Commission.\9\
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    \9\ See supra note 5.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal to update Exchange Rule 
13.4(a) to reflect that it will utilize market data from the CQS/UQDF 
with respect to Cboe BYX, Cboe EDGA, Nasdaq BX, Nasdaq PSX, NYSE 
American, NYSE Chicago, and NYSE National is consistent with the Act 
because it will ensure that the Rule correctly identifies and publicly 
states on a market-by-market basis all of the specific network 
processor and proprietary data feeds that the Exchange utilizes for the 
handling, routing, and execution of orders, and for performing the 
regulatory compliance checks related to each of those functions. As 
noted above, the Exchange does not anticipate that the change will 
negatively impact its operations or negatively impact investors. The 
proposed rule change also removes impediments to and perfects the 
mechanism of a free and open market and protects investors and the 
public interest because it provides additional specificity, clarity and 
transparency.

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 
believes the proposal would enhance competition because disclosing the 
primary and secondary data sources utilized by the Exchange with 
respect to all of the exchanges enhances transparency and enables 
investors to better assess the quality of the Exchange's execution and 
routing services.

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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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 pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ 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.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The proposed rule change updates the sources of data the Exchange 
utilizes when performing: (i) order handling; (ii) order routing; (iii) 
order execution; and (iv) related compliance processes to reflect the 
use of CQS/UQDF rather than direct data feeds with respect to the 
market centers identified above. The Exchange states that the proposed 
change will ensure that the Rule correctly identifies and publicly 
states on a market-by-market basis all of the specific network 
processor and proprietary data feeds that the Exchange utilizes for the 
handling, routing, and execution of orders, and for performing the 
regulatory compliance checks related to each of those functions. The 
Exchange states that the proposed rule change is similar to the rules 
of other exchanges.\16\
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    \16\ See supra note 8.
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    The Commission believes that waiver of the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because the proposed rule change does not raise any novel issues. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal as operative upon filing.\17\
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    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission also 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

[[Page 59150]]

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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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-2022-27 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-2022-27. 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-2022-27 and should be submitted on 
or before October 20, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-21069 Filed 9-28-22; 8:45 am]
BILLING CODE 8011-01-P