[Federal Register Volume 88, Number 128 (Thursday, July 6, 2023)]
[Notices]
[Pages 43159-43166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14206]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97824; File No. SR-MEMX-2023-11]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Establish Common 
Criteria and Procedures for Halting and Resuming Trading in Equity 
Securities in the Event of Regulatory or Operational Issues, Reorganize 
the Text of the Current Relevant Rule, and Make Conforming Changes to 
Related Rules

June 29, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on June 23, 2023, MEMX LLC (``MEMX'' 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 Exchange. The Exchange filed the 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \4\ and Rule 19b-4(f)(6) 
thereunder.\5\ 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.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 17 CFR 240.19b-4(f)(6).

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[[Page 43160]]

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 to 
establish common criteria and procedures for halting and resuming 
trading in equity securities in the event of regulatory or operational 
issues, reorganize the text of the current relevant rule, and make 
conforming changes to related rules. The text of the proposed rule 
change is provided in Exhibit 5.

II. Self-Regulatory Organization's Statement of the Purpose of, and the 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In conjunction with adoption of an amended Nasdaq UTP Plan proposed 
by its participants (``Amended Nasdaq UTP Plan''),\6\ the Exchange is 
amending and re-locating its current Rule 11.16 to integrate several 
definitions and concepts from the Amended Nasdaq UTP Plan and to 
reorganize the rule in light of the Exchange's experience with applying 
the rule as a national securities exchange.\7\ The Exchange proposes to 
replace Rule 11.16, entitled Trading Halts Due to Extraordinary Market 
Volatility, with two new rules, Rules 11.22 and 11.23. The rules set 
forth the Exchange's authority to halt trading under various 
circumstances. The Exchange is a participant of the transaction 
reporting plan governing Tape C Securities (``Nasdaq UTP Plan'').\8\ As 
part of these changes, the Exchange will amend categories of regulatory 
and operational halts, adopt defined terms from the Amended Nasdaq UTP 
Plan and move current Rule 11.16 into Rules 11.22 and 11.23 for clarity 
and organizational purposes. Last, the Exchange is updating cross 
references in other rules that are affected by the proposed changes.
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    \6\ On February 11, 2021, the Nasdaq UTP Plan participants filed 
Amendment 50 to the Plan, to revise provisions governing regulatory 
and operational halts. See Letter from Robert Brooks, Chairman, UTP 
Operating Committee, Nasdaq UTP Plan, to Vanessa Countryman, 
Secretary, Securities and Exchange Commission, dated February 11, 
2021. The Nasdaq UTP Plan subsequently filed two partial amendments 
to the 50th Amendment, on March 31, 2021 and on April 7, 2021. The 
SEC approved the amendments on May 28, 2021. See Securities Exchange 
Act Release No. 34-92071 (May 28, 2021), 86 FR 29846 (June 3, 2021) 
(S7-24-89). The Amended Nasdaq UTP Plan includes provisions 
requiring participant self-regulatory organizations (``SROs'') to 
honor a Regulatory Halt declared by the Primary Listing Market. The 
provisions in the Nasdaq UTP Plan, and the plan for consolidation of 
data for non-Nasdaq-listed securities, the Consolidated Tape System 
and Consolidated Quotations System (collectively, the ``CTA/CQS 
Plan''), include provisions similar to the changes proposed by the 
Exchange in this filing.
    \7\ The Exchange notes that The Nasdaq Stock Market, LLC 
(``Nasdaq''), filed a similar proposed rule change with the 
Commission. See Securities Exchange Act Release No. 94370 (March 7, 
2022), 87 FR 14071 (March 11, 2022); Securities Exchange Act Release 
No. 94838 (May 3, 2022), 87 FR 27683 (May 9, 2022). The Commission 
approved the proposed rule change on June 8, 2022. See Securities 
Exchange Act Release No. 95069 (June 8, 2022), 87 FR 36018 (June 14, 
2022). The Exchange's proposal provides the Exchange with less 
authority to declare halts in the event of regulatory or operational 
issues than under Nasdaq's proposal because the Exchange, unlike 
Nasdaq, is not a Primary Listing Market. Given the Exchange's status 
as a non-Primary Listing Market, certain definitions and concepts 
from the Amended Nasdaq UTP Plan, integrated in Nasdaq's proposal, 
are not included herein.
    \8\ Each transaction reporting plan has a securities information 
processor (``SIP'') responsible for consolidation of information for 
the plan's securities, pursuant to Rule 603 of Regulation NMS. The 
transaction reporting plan for Nasdaq-listed securities is known as 
The Joint Self-Regulatory Organization Plan Governing the 
Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privilege Basis or the ``Nasdaq UTP 
Plan.'' Pursuant to the Nasdaq UTP Plan, the UTP SIP, which is 
Nasdaq, consolidates order and trade data from all markets trading 
Nasdaq-listed securities. The Exchange uses the term ``UTP SIP'' 
herein when referring specifically to the SIP responsible for 
consolidation of information in Nasdaq-listed securities.
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Background
    The Exchange has been working with other SROs to establish common 
criteria and procedures for halting and resuming trading in equity 
securities in the event of regulatory or operational issues. These 
common standards are designed to ensure that events which might impact 
multiple exchanges are handled in a consistent manner that is 
transparent. The Exchange believes that implementation of these common 
standards will assist the SROs in maintaining fair and orderly markets. 
Notwithstanding the development of these common standards, the Exchange 
will retain discretion in certain instances as to whether and how to 
handle halts, as is discussed below.
    Every U.S.-listed equity security has its primary listing on a 
specific stock exchange that is responsible for a number of regulatory 
functions.\9\ These include confirming that the security continues to 
meet the exchange's listing standards, monitoring trading in that 
security and taking action to halt trading in the security when 
necessary to protect investors and to ensure a fair and orderly market. 
While these core responsibilities remain with the primary listing 
venue, trading in the security can occur on multiple exchanges that 
have unlisted trading privileges for the security \10\ or in the over 
the-counter market, regulated by the Financial Industry Regulatory 
Authority, Inc. (``FINRA''). The exchanges and FINRA are responsible 
for monitoring activity on the markets over which they have oversight, 
but also must abide by the regulatory decisions made by the Primary 
Listing Market. For example, a venue trading a security pursuant to 
unlisted trading privileges must halt trading in that security during a 
Regulatory Halt, which is a defined term under the proposed rules,\11\ 
and may only trade the security once the Primary Listing Market has 
cleared the security to resume trading. While the Exchange and the 
other SROs intend to harmonize certain aspects of their trading halt 
rules, other elements of the rules will continue to be unique to each 
market. The Exchange believes that this is appropriate to reflect 
different products listed or traded on each market. In addition to 
establishing common criteria and procedures for halting and resuming 
trading in equity securities in the event of regulatory or operational 
issues, the Exchange is moving current Rule 11.16 into Rules 11.22 and 
Rule 11.23 in order to reorganize the rule to improve its overall 
clarity. The Exchange is also making a handful of non-substantive 
changes to rule text to improve its clarity. The Exchange will 
implement all of the changes proposed herein in conjunction with other 
SROs implementing the necessary rule changes. The Exchange will publish 
a trader alert at least 30 business days

[[Page 43161]]

prior to implementing the proposed changes.
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    \9\ The Exchange is proposing to adopt Primary Listing Market as 
a new term, defined in Nasdaq UTP Plan, Section X.A.8, as follows: 
``[T]he national securities exchange on which an Eligible Security 
is listed. If an Eligible Security is listed on more than one 
national securities exchange, Primary Listing Market means the 
exchange on which the security has been listed the longest.''
    \10\ In addition, securities may be listed on more than one 
listing exchange (``dually listed''). See, e.g., The Nasdaq Stock 
Market, LLC Rules 5005(a)(11), 5220 and IM5220.
    \11\ See proposed Rule 11.22(a)(9).
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Definitions
    The Exchange proposes adding a definitions section as Rule 11.22(a) 
to consolidate the various definitions that will be used in the Rules, 
some of which are taken from the Amended Nasdaq UTP Plan. The Exchange 
is adopting the following terms from the Amended Nasdaq UTP Plan: 
``Operating Committee,'' ``Operational Halt,'' ``Primary Listing 
Market,'' ``Processor,'' \12\ ``Regulatory Halt,'' ``Regular Trading 
Hours,'' ``SIP Halt,'' and ``SIP Halt Resume Time.'' The Exchange is 
adopting a modified form of the term ``Extraordinary Market Activity'' 
from the Amended Nasdaq UTP Plan, as described below. The definitions 
of ``UTP Exchange Traded Product'', ``Pre-Market Session'', and ``Post-
Market Session'' are included in the definitions section with cross 
references to their current definitions in the Exchange's Rulebook.\13\ 
The Exchange will add definitions of ``Trust Shares,'' ``Index Fund 
Shares,'' ``Managed Fund Shares,'' and ``Trust Issued Receipts'', as 
subcategories to the defined term ``UTP Exchange Traded Product'', and 
those terms will have the same meanings as those found currently in the 
rules of at least one other exchange.\14\
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    \12\ The Exchange proposes to also define the term ``SIP'' to 
have the same meaning as the term ``Processor'' as set forth in the 
Amended Nasdaq UTP Plan. Because the terms ``Processor'' and ``SIP'' 
are also used throughout the Rules, at times, to apply to processors 
of information furnished pursuant to the Consolidated Tape 
Association Plan (``CTA Plan''), the term ``Processor'' may, in 
those applicable circumstances, refer to the processor of 
transactions in Tape A and B securities, as set forth in the CTA 
Plan.
    \13\ ``UTP Exchange Traded Product'', is currently defined in 
Rule 1.5(kk). Post-Market Session is defined in Rule 1.5(w). Pre-
Market Session is currently defined in Rule 1.5(x).
    \14\ The Exchange notes that Nasdaq PHLX LLC (``PHLX''), filed a 
similar proposed rule change with the Commission. See Securities 
Exchange Act Release No. 96574 (December 22, 2022), 87 FR 80213 
(December 29, 2022) (the ``PHLX Proposal''). Accordingly, the 
Exchange referenced PHLX's current and proposed relevant rules and 
notes that the terms ``Trust Shares,'' ``Index Fund Shares,'' 
``Managed Fund Shares,'' and ``Trust Issued Receipts'' are currently 
defined in Rule 3100(b)(1)(A)-(D) of PHLX's rulebook.
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    First, the Exchange proposes to add the definition of ``Primary 
Listing Market'' \15\ to Rule 11.22(a), which will have the same 
meaning as in the Amended Nasdaq UTP Plan, Section X.A.8. As is 
currently the case under the Nasdaq UTP Plan, all Regulatory Halt 
decisions are made by the market on which the security has its primary 
listing. This reflects the regulatory responsibility that the Primary 
Listing Market has for fair and orderly trading in the securities that 
list on its market and its direct access to its listed companies, which 
are required to advise it of certain events and maintain lines of 
communication with the Primary Listing Market. The proposed definition 
makes clear that if a security is listed on more than one market (a 
dually-listed security), the Primary Listing Market means the exchange 
on which the security has been listed the longest. This provision 
matches language used in the definition of ``Primary Listing Exchange'' 
in the Limit-Up Limit-Down Plan and will avoid conflict in the event of 
dually-listed securities.
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    \15\ See proposed Rule 11.22(a)(7).
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    Second, the Exchange proposes to add the definition of 
``Extraordinary Market Activity'' to Rule 11.22,\16\ which would 
represent a modified version of the term defined in the Amended Nasdaq 
UTP Plan, Section X.A.1.\17\ Specifically, the Exchange proposes to 
remove the concept of a ``market-wide basis'' from the Amended Nasdaq 
UTP Plan's definition of Extraordinary Market Activity for purposes of 
the Exchange's Rules because the term ``Extraordinary Market Activity'' 
would only be used in the Exchange's Rules as a basis for the Exchange 
to initiate an Operational Halt, which would only occur on the market 
declaring the halt (i.e., the Exchange).\18\ The current rule does not 
include a definition for Extraordinary Market Activity. The third set 
of new proposed definitions would be specific to events involving the 
SIP. While the Exchange recognizes that many events involving the SIP 
would also meet the definition of ``Extraordinary Market Activity'' (as 
defined in the Amended Nasdaq UTP Plan), the Exchange believes that the 
critical role of the SIPs in market infrastructure factors in favor of 
additional guidance on how such events will be handled. The definitions 
of ``SIP Halt Resume Time'' and ``SIP Halt'' are intended to provide 
additional guidance to address this subset of potential market 
issues.\19\ In addition, the Exchange is proposing to define terms 
related to SIP governance needed in order to understand these 
definitions:
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    \16\ See proposed Rule 11.22(a)(2).
    \17\ In the Amended Nasdaq UTP Plan, ``Extraordinary Market 
Activity'' means a disruption or malfunction of any electronic 
quotation, communication, reporting, or execution system operated 
by, or linked to, the Processor or a Trading Center or a member of 
such Trading Center that has a severe and continuing negative 
impact, on a market-wide basis, on quoting, order, or trading 
activity or on the availability of market information necessary to 
maintain a fair and orderly market. For purposes of this definition, 
a severe and continuing negative impact on quoting, order, or 
trading activity includes (i) a series of quotes, orders, or 
transactions at prices substantially unrelated to the current market 
for the security or securities; (ii) duplicative or erroneous 
quoting, order, trade reporting, or other related message traffic 
between one or more Trading Centers or their members; or (iii) the 
unavailability of quoting, order, or transaction information for a 
sustained period.
    \18\ The Exchange proposes to define ``Extraordinary Market 
Activity'' to mean a disruption or malfunction of any electronic 
quotation, communication, reporting, or execution system operated 
by, or linked to, the Processor or a Trading Center or a member of 
such Trading Center that has a severe and continuing negative impact 
on quoting, order, or trading activity or on the availability of 
market information necessary to maintain a fair and orderly market. 
For purposes of this definition, a severe and continuing negative 
impact on quoting, order, or trading activity includes (i) a series 
of quotes, orders, or transactions at prices substantially unrelated 
to the current market for the security or securities; (ii) 
duplicative or erroneous quoting, order, trade reporting, or other 
related message traffic between one or more Trading Centers or their 
members; or (iii) the unavailability of quoting, order, or 
transaction information for a sustained period.
    \19\ The Exchange proposes to define the terms ``SIP Halt Resume 
Time'' and ``SIP Halt'' to have the same meaning as in the Amended 
Nasdaq UTP Plan.
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     ``Processor'' or ``SIP'' \20\ have the same meaning as the 
term ``Processor'' set forth in the Nasdaq UTP Plan, namely the entity 
selected by the Participants to perform the processing functions set 
forth in the Plan.
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    \20\ See proposed Rule 11.22(a)(8).
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    Because the terms ``Processor'' and ``SIP'' are also used 
throughout the Rules, at times, to apply to processors of information 
furnished pursuant to the CTA Plan, the term ``Processor'' and ``SIP'' 
may, in those applicable circumstances, refer to the processor of 
transactions in Tape A and B securities, as set forth in the CTA Plan.
     ``SIP Plan'' \21\ is defined as the national market system 
plan governing the SIP.
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    \21\ See proposed Rule 11.22(a)(13).
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     ``Operating Committee'' \22\ is defined as having the same 
meaning as in the Nasdaq UTP Plan, namely the committee charged with 
administering the Nasdaq UTP Plan.
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    \22\ See proposed Rule 11.22(a)(3).
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    The Exchange is proposing to adopt a category of Regulatory Halt, 
called a ``SIP Halt,'' \23\ which will have the same meaning as that 
term is defined in Section X.A.11. of the Nasdaq UTP Plan, namely ``a 
Regulatory Halt to trading in one or more securities that a Primary 
Listing Market declares in the event of a SIP Outage or Material SIP 
Latency.'' This new category of Regulatory Halt will address situations 
where the Primary Listing Market declares a Regulatory Halt in one or 
more

[[Page 43162]]

securities as a result of a SIP outage \24\ or material SIP 
latency.\25\
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    \23\ See proposed Rule 11.22(a)(11).
    \24\ SIP outage means a situation in which the Processor has 
ceased, or anticipates being unable, to provide updated and/or 
accurate quotation or last sale price information in one or more 
securities for a material period that exceeds the time thresholds 
for an orderly failover to backup facilities established by mutual 
agreement among the Processor, the Primary Listing Market for the 
affected securities, and the Operating Committee unless the Primary 
Listing Market, in consultation with the Processor and the Operating 
Committee, determines that resumption of accurate data is expected 
in the near future. See Amended Nasdaq UTP Plan, Section X.A.13.
    \25\ Material SIP latency means a delay of quotation or last 
sale price information in one or more securities between the time 
data is received by the Processor and the time the Processor 
disseminates the data over the Processor's vendor lines, which delay 
the Primary Listing Market determines, in consultation with, and in 
accordance with, publicly disclosed guidelines established by the 
Operating Committee, to be (a) material and (b) unlikely to be 
resolved in the near future. See Amended Nasdaq UTP Plan, Section 
X.A.5.
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    The Exchange proposes to add a definition of ``Regulatory Halt'' 
\26\ as having the same meaning as in the Amended Nasdaq UTP Plan. 
Specifically, the Exchange has proposed to define Regulatory Halt to 
mean a halt declared by the Primary Listing Market in trading in one or 
more securities on all Trading Centers for regulatory purposes, 
including for the dissemination of material news, news pending, 
suspensions, or where otherwise necessary to maintain a fair and 
orderly market. A Regulatory Halt includes a trading pause triggered by 
Limit Up-Limit Down, a halt based on Extraordinary Market Activity (as 
defined in the Amended Nasdaq UTP Plan), a trading halt triggered by a 
Market-Wide Circuit Breaker, and a SIP Halt.
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    \26\ See proposed Rule 11.22(a)(9).
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    The Exchange proposes to add a definition of ``Operational Halt,'' 
\27\ which is defined as having the same meaning as in the Amended 
Nasdaq UTP Plan. Specifically, the Exchange is proposing to define 
Operational Halt to mean a halt in trading in one or more securities 
only on the market declaring the halt and is not a Regulatory Halt. An 
Operational Halt is effective only on the Exchange; other markets are 
not required to halt trading in the impacted securities. In practice, 
the Exchange has always had the capacity to implement operational halts 
in specified circumstances.\28\ The proposed change would provide 
greater clarity on when an Operational Halt may be implemented and the 
process for halting and resuming trading in the event of an Operational 
Halt. An Operational Halt is not a Regulatory Halt.
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    \27\ See proposed Rule 11.22(a)(4).
    \28\ See Exchange Rules 11.1(c) and 11.16(d).
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Regulatory Halt
    Proposed Rule 11.22(b)(1)(A)(i)-(iii) includes four situations in 
which the Exchange must halt trading pursuant to a Regulatory Halt: 
under the Limit Up-Limit Down Plan, pursuant to Extraordinary Market 
Volatility (Market-Wide Circuit Breakers), when the Primary Listing 
Market declares a SIP halt, or when the Primary Listing Market declares 
a trading halt based on Extraordinary Market Activity, as defined in 
the Nasdaq UTP Plan. Proposed Rule 11.22(b)(1)(A)(i) retains without 
substantive modification the existing rule with respect to the Limit 
Up-Limit Down Plan (current Rule 11.16(e)). The Exchange, as a non-
Primary Listing Market, does not itself declare trading pauses pursuant 
to the Limit Up-Limit Down Plan, but rather implements such pauses 
declared by Primary Listing Markets. The Exchange proposes to make 
clear in Rule 11.22(b)(1)(A)(ii) that a trading halt pursuant to 
Extraordinary Market Volatility (Market-Wide Circuit Breakers), as is 
described in proposed Rule 11.23, constitutes a Regulatory Halt. The 
Exchange would also add subsections concerning Regulatory Halts 
declared by Primary Listing Markets based on a SIP halt or 
Extraordinary Market Activity in Rule 11.22(b)(1)(A)(iii). As is the 
case under the current Rule 11.16, the Exchange would honor a 
Regulatory Halt. The Exchange proposes to add Rule 11.22(b)(1)(A)(iv), 
which states that the Exchange will halt trading for any security 
traded on the Exchange when the Primary Listing Market declares a 
Regulatory Halt for any such security. The Exchange also proposes to 
add Rule 11.22(b)(1)(A)(iv)(a), which makes clear that the start time 
of a Regulatory Halt is the time the Primary Listing Market declares 
the Regulatory Halt, regardless of whether communications issues impact 
the dissemination of notice of the Halt.\29\ This proposal would 
provide market participants with certainty on the official start time 
of the Regulatory Halt. Under the proposed rule, the start time is 
fixed by the Primary Listing Market; it is not dependent on whether 
notice is disseminated immediately. This will avoid possible 
disagreement if the Regulatory Halt time were tied to dissemination or 
receipt of notification, which may occur at different times. The 
Exchange recognizes that in situations where communication is 
interrupted, trades may continue to occur until news of the Regulatory 
Halt reaches all trading centers. However, a fixed ``official'' 
Regulatory Halt time will allow SROs to revisit trades after the fact 
and determine in a consistent manner whether specific trades should 
stand.
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    \29\ This is consistent with the Amended Nasdaq UTP Plan. See 
Amended Nasdaq UTP Plan, Section X.D.1.
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Resumption of Trading After a Regulatory Halt
    The SROs have jointly developed processes to govern the resumption 
of trading in the event of a Regulatory Halt. While the actual process 
of re-launching trading will remain unique to each exchange, the 
proposed rule would harmonize certain common elements of the reopening 
process that would benefit from consistency across markets. These 
common elements include the primacy of the Primary Listing Market in 
resumption decisions, the requirement that the Primary Listing Market 
make its determination to resume trading in good faith,\30\ and certain 
parts of the complex process of reopening trading after a SIP Halt. 
With respect to a SIP Halt, common elements of the reopening process 
include the interaction among SROs (including the Primary Listing 
Market with the SIP), the requirement that the Primary Listing Market 
terminate a SIP Halt with a notification that specifies a SIP Halt 
Resume Time, the minimum quoting times before resumption of trading, 
the cutoff time after which trading would not resume during Regular 
Trading Hours, and the time when trading may resume if the Primary 
Listing Market does not open a security within the amount of time 
specified in its rules after the SIP Halt Resume Time. Proposed Rule 
11.22(b)(2) provides the process to be followed when resuming trading 
upon the conclusion of a Regulatory Halt. The new rule, which 
incorporates Section X.E.1 and X.F.3 of the Amended Nasdaq UTP Plan, is 
divided into the following two subsections concerning resumption of 
trading: (A) after a Regulatory Halt other than a SIP Halt; and (B) 
after a SIP Halt. Proposed Rule 11.22(b)(2)(A)(i) provides that, for a 
Regulatory Halt other than a SIP Halt, the Exchange may resume trading 
subject to the Regulatory Halt after the Exchange receives notification 
from the Primary Listing Market that the Regulatory Halt has been 
terminated. The Exchange does not conduct halt crosses and, therefore, 
the resumption of trading in these securities will occur

[[Page 43163]]

once notice from the Primary Listing Market is received. Proposed Rule 
11.22(b)(2)(B)(i) provides that, for securities subject to a SIP Halt 
initiated by another exchange that is the Primary Listing Market, 
during Regular Trading Hours, the Exchange may resume trading after 
trading has resumed on the Primary Listing Market or notice has been 
received from the Primary Listing Market that trading may resume. 
During Regular Trading Hours, if the Primary Listing Market does not 
open a security within the amount of time specified by the rules of the 
Primary Listing Market after the SIP Halt Resume Time, the Exchange may 
resume trading in that security. Outside Regular Trading Hours, the 
Exchange may resume trading immediately after the SIP Halt Resume 
Time.\31\ Proposed Rule 11.22(b)(2) is consistent with current 
practice. Proposed Rule 11.22(b)(3) retains without substantive 
modification existing Rule 11.16(f). Proposed Rule 11.22(b)(3) states 
that on the occurrence of any Regulatory Halt pursuant to this Rule all 
outstanding orders in the System will be cancelled, the Exchange will 
not accept new orders, and at the end of the Regulatory Halt, the 
Exchange shall re-open the security and again begin accepting orders. 
Last, consistent with Section X.G of the Nasdaq UTP Plan, the Exchange 
is proposes to add Rule 11.22(c), which will more broadly require the 
Exchange to halt trading of a UTP security if the Primary Listing 
Market declares a Regulatory Halt in that security, and more 
specifically, governs trading halts in certain Exchange Traded Products 
traded on the Exchange pursuant to unlisted trading privileges during 
pre-market, regular trading hours, and post-market sessions.
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    \30\ See Partial Amendment No. 1 of Trading Halt Amendments to 
the UTP Plan, dated March 31, 2021.
    \31\ See Partial Amendment No. 2 of Trading Halt Amendments to 
the UTP Plan, dated April 7, 2021.
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Operational Halt
    The Exchange proposes in Rule 11.22(d) to address Operational 
Halts, which are non-regulatory in nature and apply only to the 
exchange that calls the halt. The ability to call an Operational Halt 
has existed for a long time. As part of the Exchange's assessment with 
the other SROs of the halting and resumption of trading, the Exchange 
believes that the markets would benefit from greater clarity regarding 
when an Operational Halt may be appropriate.\32\ In part, the proposed 
change is designed to cover situations similar to those that might 
constitute a Regulatory Halt, but where the impact is limited to a 
single market. For example, just as a market disruption might trigger a 
Regulatory Halt for Extraordinary Market Activity (as defined in the 
Amended Nasdaq UTP Plan) if it affects multiple markets, so too a 
disruption at the Exchange, such as a technical issue affecting trading 
in one or more securities, could impact trading on the Exchange so 
significantly that an Operational Halt is appropriate in one or more 
securities. In such an instance, it would be in the public interest to 
institute an Operational Halt to minimize the impact of a disruption 
that, if trading were allowed to continue, might negatively affect a 
greater number of market participants. An Operational Halt does not 
implicate other trading centers. Proposed Rule 11.22(d) would authorize 
the Exchange to implement an Operational Halt for any security trading 
on the Exchange:
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    \32\ Differences between Nasdaq and the Exchange's proposals as 
it relates to Operational Halts stem from Nasdaq's status as a 
Primary Listing Market, unlike the Exchange.
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     if it is experiencing Extraordinary Market Activity \33\ 
on the Exchange; or
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    \33\ ``Extraordinary Market Activity'' in proposed Rule 11.22(d) 
would have the meaning proposed by the Exchange, which is a modified 
form of the term from the Amended Nasdaq UTP Plan, as described 
above.
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     when otherwise necessary to maintain a fair and orderly 
market or in the public interest.
    Proposed Rule 11.22(d)(2) provides the process for initiating an 
Operational Halt. Under the proposed rule, on the occurrence of any 
Operational Halt all outstanding orders in the System will be 
cancelled. Further, the Exchange must notify the SIP if it has concerns 
about its ability to collect and transmit Quotation Information or 
Transaction Reports, or if it has declared an Operational Halt or 
suspension of trading in one or more Eligible Securities, pursuant to 
the procedures adopted by the Operating Committee. Proposed Rule 
11.22(d)(3) will clarify how the Exchange resumes trading after an 
Operational Halt. Proposed Rule 11.22(d)(3)(A) provides that the 
Exchange would resume trading when it determines that trading may 
resume in a fair and orderly manner consistent with the Exchange's 
rules. Proposed Rule 11.22(d)(3)(B) provides that orders entered during 
the Operational Halt will not be accepted. Proposed Rule 11.22(d)(3)(C) 
provides that trading in a halted security shall resume at the time 
specified by the Exchange in a notice. Proposed Rule 11.22(d)(3)(C) 
also specifies that Exchange will notify all other Plan participants 
and the SIP of such an Operational Halt as well as provide notice that 
an Operational Halt has been lifted using such protocols and other 
emergency procedures as may be mutually agreed to between the Operating 
Committee and the Exchange. If the SIP is unable to disseminate notice 
of an Operational Halt or the Exchange is not open for trading, the 
Exchange will take reasonable steps to provide notice of an Operational 
Halt, which shall include both the type and start time of the 
Operational Halt. Each Plan participant shall continuously monitor 
communication protocols established by the Operating Committee and the 
Processor during market hours to disseminate notice of an Operational 
Halt, and the failure of a participant to do so shall not prevent the 
Exchange from initiating an Operational Halt.
Trading Halts Due to Extraordinary Market Volatility
    Lastly, as stated above, the Exchange proposes moving a large 
portion of current Rule 11.16 into a new proposed Rule 11.23, in order 
to separate out the previously established rules related to Trading 
Halts Due to Extraordinary Market Volatility (i.e. Market-Wide Circuit 
Breakers). These halts, which fall under the category of Regulatory 
Halts, are cross referenced in proposed Rule 11.22(b)(i)(A)(ii). The 
text of the proposed Rule 11.23 does not materially differ from what is 
currently in place under Rule 11.16(a)-(d) \34\ and Rule 11.16(h)-
(j).\35\ The Exchange believes separating this text from Rule 11.22 is 
appropriate in order to remain consistent with similar rule filings 
proposed by other Exchanges.\36\
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    \34\ These provisions outline the processes related to Market-
Wide Circuit Breaker halts.
    \35\ These provisions outline the processes related to Market-
Wide Circuit Breaker testing.
    \36\ PHLX's current Rule 3101, ``Trading Halts Due to 
Extraordinary Market Volatility'' sets forth similar provisions 
related to Market-Wide Circuit Breakers and Market-Wide Circuit 
Breaker Testing. In turn, in its recent rule filing, PHLX's proposed 
Rule 3100(b)(ii), which would state: ``The Exchange shall implement 
a trading halt due to extraordinary market volatility, as set forth 
in Rule 3101.'' See PHLX Proposal, supra note 13. Accordingly, the 
Exchange believes it consistent to include the full text of these 
relevant provisions in a separate rule (proposed Rule 11.23), with a 
cross reference to such in its proposed Rule 11.22.
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Conforming Changes to Other Rules
    The Exchange is proposing to modify Rule 11.10(a)(3), Rule 
11.11(b), Rules 11.20(d)(2)(D) and (E), and Rule 14.1(b)(3) that cross 
reference current Rules 11.16(e), 11.16(e), 11.16(b), 11.16(b), and 
11.16, respectively. In light of the proposed deletion of Rule 11.16, 
the Exchange proposes to modify the cross references in Rule 
11.10(a)(3) and Rule 11.11(b) to cross reference proposed Rule 
11.22(b)(1)(A)(i), which contains the same text as current Rule

[[Page 43164]]

11.16(e).\37\ The Exchange proposes to modify the cross references in 
Rules 11.20(d)(D) and (E) to cross reference proposed Rule 11.23(b), 
which also contains the same text as current Rule 11.16(b) \38\. 
Lastly, the Exchange proposes to modify the cross references in Rule 
14.1(b)(3) to cross reference proposed Rules 11.22 and 11.23, which 
collectively will replace the current Rule 11.16.
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    \37\ Current Rule 11.16(e) and proposed Rule 11.22(b)(1)(A)(i) 
govern Limit Up-Limit Down procedures.
    \38\ Current Rule 11.16(b) and proposed Rule 11.23(b) speak to 
Market-Wide Circuit Breaker halts.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\39\ in general, and 
furthers the objectives of Sections and 6(b)(5) of the Act,\40\ in 
particular, in that it is designed to promote just and equitable 
principles of trade, 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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    \39\ 15 U.S.C. 78f(b).
    \40\ 15 U.S.C. 78f(b)(5).
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    As described above, the Exchange and other SROs are seeking to 
adopt harmonized rules related to halting and resuming trading in U.S.-
listed equity securities. The Exchange believes that the proposed rules 
will provide greater transparency and clarity with respect to the 
situations in which trading will be halted and the process through 
which that halt will be implemented and terminated. Particularly, the 
proposed changes seek to achieve consistent results for participants 
across U.S. equities exchanges while maintaining a fair and orderly 
market, protecting investors and protecting the public interest. Based 
on the foregoing, the Exchange believes that the proposed rules are 
consistent with Section 6(b)(5) of the Act \41\ because they will 
foster cooperation and coordination with persons engaged in regulating 
and facilitating transactions in securities.
---------------------------------------------------------------------------

    \41\ Id.
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    As discussed previously, the Exchange believes that the various 
provisions of the proposed rules that will apply to all SROs are 
focused on the type of cross-market event where a consistent approach 
will assist market participants and reduce confusion during a crisis. 
Because market participants often trade the same security across 
multiple venues and trade securities listed on different exchanges as 
part of a common strategy, the Exchange believes that the proposed 
rules will lessen the risk that market participants holding a basket of 
securities will have to deal with divergent outcomes depending on where 
the securities are listed or traded. Conversely, the proposed rules 
would still allow individual SROs to react differently to events that 
impact various securities or markets in different ways. This avoids the 
``brittle market'' risk where an isolated event at a single market 
forces all markets trading equities securities to halt or halts trading 
in all securities where the issue impacted only a subset of securities. 
By addressing both concerns, the Exchange believes that the proposed 
rules further the Act's goal of maintaining fair and orderly markets. 
The Exchange believes that the proposed rules' focus of responsibility 
on the Primary Listing Market for decisions related to a Regulatory 
Halt and the resumption of trading is consistent with the Act, which 
itself imposes obligations on exchanges with respect to issuers that 
are listed. As is currently the case, the Primary Listing Market would 
be responsible for the many regulatory functions related to its 
listings, including the determination of when to declare a Regulatory 
Halt. While these core responsibilities remain with the Primary Listing 
Market, trading in the security can occur on multiple exchanges that 
have unlisted trading privileges for the security, such as on the 
Exchange, or in the over-the-counter market, regulated by FINRA. The 
Exchange is responsible for monitoring activity on its own markets, but 
also must honor a Regulatory Halt. The proposed changes relating to 
Regulatory Halts would ensure that all SROs handle the situations 
covered therein in a consistent manner that would prevent conflicting 
outcomes in cross-market events and ensure that all trading centers 
recognize a Regulatory Halt declared by the Primary Listing Market. The 
changes are consistent with and implement the Amended Nasdaq UTP Plan.
    The Exchange believes that the definitions in the proposed rules 
are also consistent with the Act. The Exchange proposes adding a 
definitions section as Rule 11.22(a) to consolidate the various 
definitions that will be used in the Rule, some of which are taken from 
the Amended Nasdaq UTP Plan. The Exchange is adopting a modified form 
of the term ``Extraordinary Market Activity'' from the Amended Nasdaq 
UTP Plan, as described above. In addition, several other definitions 
have been moved into the definitions section from elsewhere in the 
current rule without changes in the definitions. As noted, certain 
definitions are consistent with the definitions in the Amended Nasdaq 
UTP Plan, furthering the Act's goal of promoting fair and orderly 
markets. For example, the Exchange is proposing to adopt a definition 
of ``SIP Halt,'' to explicitly address a situation that may disrupt the 
markets, and this definition is identical to the definition in the 
Amended Nasdaq UTP Plan. In addition to ``SIP Halt,'' the Exchange is 
adopting the following terms from the Amended Nasdaq UTP Plan: 
``Operating Committee,'' ``Operational Halt,'' ``Primary Listing 
Market,'' ``Processor,'' ``Regulatory Halt,'' ``Regular Trading 
Hours,'' and ``SIP Halt Resume Time,'' as discussed above.
    The Exchange believes that the proposed rules, which make halts 
more consistent across exchange rules, are consistent with the Act in 
that they will foster cooperation and coordination with persons engaged 
in regulating the equities markets. In particular, the Exchange 
believes it is important for SROs to coordinate when there is a 
widespread and significant event, as multiple trading centers are 
impacted in such an event. Further, while the Exchange recognizes that 
the proposed rule will not guarantee a consistent result on every 
market in all situations, the Exchange does believe that it will assist 
in that outcome. While the proposed rules relating to Regulatory Halts 
focus primarily on the kinds of cross-market events that would likely 
impact multiple markets, individual SROs will still retain flexibility 
to deal with unique products or smaller situations confined to a 
particular market. Also consistent with the Act, and with the Amended 
Nasdaq UTP Plan, is the Exchange's proposal in Rule 11.22(d) to address 
Operational Halts, which are nonregulatory in nature and apply only to 
the exchange that calls the halt. As noted earlier, the Exchange 
presently has the ability to call an Operational Halt. The Exchange 
believes that the markets would benefit from greater clarity regarding 
when an Operational Halt may be appropriate. The proposed change is 
designed to cover situations where the impact is limited to a single 
market. For example, a disruption at the Exchange, such as a technical 
issue affecting trading in one or more securities, could impact trading 
on the Exchange so significantly that an Operational Halt is 
appropriate in one or more securities. In such an instance, it would be 
in the public interest to institute an Operational Halt to minimize the 
impact of a disruption

[[Page 43165]]

that, if trading were allowed to continue, might negatively affect a 
greater number of market participants. An Operational Halt does not 
implicate other trading centers. Proposed Rule 11.22(d) would authorize 
the Exchange to implement an Operational Halt for any security trading 
on the Exchange: (i) if it is experiencing Extraordinary Market 
Activity on the Exchange; or (ii) when otherwise necessary to maintain 
a fair and orderly market or in the public interest. The Exchange 
believes that the broader language provided by the definition of 
Extraordinary Market Activity in proposed Rule 11.22(d) will better 
serve the interests of investors by allowing the Exchange to act where 
appropriate. Other sections of current Rule 11.16 are reorganized and 
retained without substantive modifications into proposed Rule 11.23, as 
described above.

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

    The Exchange believes the proposal is consistent with Section 
6(b)(8) of the Act \42\ in that it does not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act as explained below. Importantly, the Exchange 
believes the proposal will not impose a burden on intermarket 
competition but will rather alleviate any burden on competition because 
it is the result of a collaborative effort by all SROs to harmonize and 
improve the process related to the halting and resumption of trading in 
U.S.-listed equity securities, consistent with the Amended Nasdaq UTP 
Plan. In this area, the Exchange believes that all SROs should have 
consistent rules to the extent possible in order to provide additional 
transparency and certainty to market participants and to avoid 
inconsistent outcomes that could cause confusion and erode market 
confidence. The proposed changes would ensure that all SROs handle the 
situations covered therein in a consistent manner and ensure that all 
trading centers handle a Regulatory Halt consistently. The Exchange 
understands that all other non-Primary Listing Markets intend to file 
proposals that are substantially similar to this proposal. The Exchange 
does not believe that its proposals concerning Operational Halts impose 
an undue burden on competition. Under the existing Rules, the Exchange 
already possesses discretionary authority to impose Operational Halts 
for various reasons and, as described earlier, the proposed Rule change 
clarifies the circumstances in which the Exchange may impose such 
Halts, and specifies procedures for both imposing and lifting them. The 
Exchange does not intend for these proposals to have any competitive 
impact whatsoever. Indeed, the Exchange expects that other exchanges 
will adopt similar rules and procedures to govern operational halts, to 
the extent that they have not done so already. The Exchange does not 
believe that the proposed rule change imposes a burden on intramarket 
competition because the provisions apply to all market participants 
equally. In addition, information regarding the halting and resumption 
of trading will be disseminated using several freely accessible sources 
to ensure broad availability of information in addition to the SIP data 
and proprietary data feeds offered by the Exchange and other SROs that 
are available to subscribers. In addition, the declaration and timing 
of trading halts and the resumption of trading is designed to avoid any 
advantage to those who can react more quickly than other participants. 
The proposals encourage early and frequent communication among the 
SROs, SIPs and market participants to enable the dissemination of 
timely and accurate information concerning the market to market 
participants.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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 \43\ and Rule 19b-
4(f)(6) \44\ thereunder.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(A).
    \44\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    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 change 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-MEMX-2023-11 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-2023-11. This file 
number should be included in 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 (https://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 
a.m. and 3 p.m. 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 of withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MEMX-2023-11 and should be 
submitted on or before July 27, 2023.


[[Page 43166]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
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    \45\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2023-14206 Filed 7-5-23; 8:45 am]
BILLING CODE 8011-01-P