[Federal Register Volume 89, Number 51 (Thursday, March 14, 2024)]
[Notices]
[Pages 18689-18691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05367]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99700; File No. SR-MEMX-2024-09]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend Rule 
21.17(e)

March 8, 2024.
    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 February 29, 2024, 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to amend Exchange Rule 21.17(e) to modify the manner in which the 
Exchange's System will handle Market Orders received in an option 
series after it is open for trading with a National Best Bid (``NBB'') 
of zero. 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.

[[Page 18690]]

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

1. Purpose
    The purpose of the proposed rule change is to amend Rule 21.17(e) 
regarding the description of how the System \5\ handles a Market Order 
\6\ when there is no bid against which the order may execute. 
Currently, Rule 21.17(e)(1)(A) states that if the System receives a 
sell Market Order in a series after it is open for trading with an NBB 
of zero, if the National Best Offer (``NBO'') in the series is less 
than or equal to $0.50, then the System converts the Market Order to a 
Limit Order with a limit price equal to the minimum trading (emphasis 
added) increment applicable to the series and enters the order into the 
MEMX Options Book with a timestamp based on the time it enters the 
book. The Exchange proposes to modify this provision of the rule to 
state that if the System receives a sell Market Order in a series after 
it is open for trading with an NBB of zero, if the NBO in the series is 
less than or equal to $0.50, then the System converts the Market Order 
to a Limit Order with a limit price equal to the minimum quoting 
(emphasis added) increment applicable to the series and enters the 
order into the MEMX Options Book with a timestamp based on the time it 
enters the book. The Exchange is not proposing to change any other 
provisions of Rule 21.17(e).
---------------------------------------------------------------------------

    \5\ The Exchange's Rule 16.1 defines the terms ``Trading 
System'' and ``System'' as the automated trading system used by MEMX 
Options for the trading of options contracts.
    \6\ A Market Order is an order to buy or sell at the best price 
available at the time of execution. See Rule 21.1(d)(2).
---------------------------------------------------------------------------

    The proposed rule change maintains the functionality of converting 
a Market Order to a Limit Order in an options series with an NBB of 
zero, (if the NBO is less than or equal to $0.50), but in a manner 
consistent with the Exchange's minimum quoting increments for options 
on the Exchange, which are set forth under Rule 21.5(a). Specifically, 
under Rule 21.5(a), the minimum quoting increments for options 
contracts traded on MEMX Options are: (1) if the options series is 
trading at less than $3.00, five (5) cents; (2) if the options series 
is trading at $3.00 or higher, ten (10) cents; and (3) if the options 
series is trading pursuant to the Penny Interval Program one (1) cent 
if the options series is trading at less than $3.00, five (5) cents if 
the options series is trading at $3.00 or higher, unless for QQQ, SPY, 
or IWM where the minimum quoting increment will be one cent for all 
series regardless of price.
    As previously stated, currently, if a Member enters a Market Order 
to sell in an options series with an NBB of zero, if the NBO is less 
than or equal to $0.50, Rule 21.17(e) provides that the System will 
convert this Market Order to a Limit Order to sell with a limit price 
that is equal to the minimum trading increment for all options series, 
which per Rule 21.5(b), is $0.01. While Rule 21.5(b) permits trading in 
all options series at $0.01 intervals, Rule 21.5(a) above does not 
permit quoting at $0.01 intervals in all options series, as any options 
series not trading pursuant to the Penny Interval Program have minimum 
quoting increments of either $0.05 or $0.10 depending on the price at 
which the option is trading. Given this inconsistency, the Exchange is 
proposing to modify Rule 21.17(e)(1)(A) so that the System will convert 
a Market Order to sell in an options series with an NBB of zero and an 
NBO that is less than or equal to $0.50 to a Limit Order to sell with a 
limit price that conforms with the minimum quoting increments under 
Rule 21.5(a) (i.e., the minimum quoting requirement applicable to the 
series). The Exchange notes that the System currently operates 
consistent with the modified Rule as described above, namely, by 
converting a Market Order to sell in an options series with an NBB of 
zero and an NBO that is less than or equal to $0.50 to a Limit Order to 
sell with a limit price that conforms with the minimum quoting 
increments, rather than at a price that could contradict the quoting 
increments set forth in Rule 21.15.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change 
regarding the handling of sell Market Orders in no-bid series assists 
with the maintenance of fair and orderly markets and protects investors 
and the public interest because it eliminates the potential conflict 
that exists within Rule 21.17(e) and the Exchange's minimum quoting 
increments under Rule 21.5(a). The proposal considers the fact that 
there are certain instances in which an options series cannot quote at 
the minimum trading increment, and as such, modifies the rule such that 
the System will not convert a Market Order to a Limit Order with a 
limit price at which it cannot quote. The Exchange believes that its 
proposal is consistent with the Act because it is in the interest of 
market participants to have orders entered into the MEMX Options book 
with limit prices that conform with the minimum quoting increments 
defined under Rule 21.5(a), whether that price is equal to the minimum 
trading increment of $0.01or higher based on the specific options 
series.

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

    The Exchange does not believe that the proposal will result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. More specifically, the Exchange 
does not believe that the proposed rule change will impose any burden 
on intramarket competition because it will be applicable to all Members 
trading on the Exchange. In addition, the Exchange does not believe 
that the proposed change will impose any intermarket burden because the 
Exchange will provide the same type of functionality related to the 
conversion of sell side Market Orders in no-bid options as other 
exchanges, but will convert those Market Orders to Limit Orders with 
limit prices that conform with its Rules in all instances.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) \9\ of the Act and Rule 19b-4(f)(6) thereunder \10\ in 
that it

[[Page 18691]]

effects a change that: (i) does not significantly affect the protection 
of investors or the public interest; (ii) does not impose any 
significant burden on competition; and (iii) by its terms, does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(ii), 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 contained in Rule 19b-
4(f)(6)(iii).\11\ The Exchange stated that waiver of the 30-day 
operative delay will permit the Exchange to immediately correct this 
rule in a manner that does not conflict with its Rules. The Commission 
believes that the correction of this typographical error does not raise 
any novel issues and that waiver of the 30-day operative delay to 
correct the error promptly to ensure MEMX's rules reflect how the 
System currently operates is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\12\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-MEMX-2024-09 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-2024-09. 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 (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 or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MEMX-2024-09 and should be 
submitted on or before April 4, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-05367 Filed 3-13-24; 8:45 am]
BILLING CODE 8011-01-P