[Federal Register Volume 89, Number 110 (Thursday, June 6, 2024)]
[Notices]
[Pages 48466-48473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12377]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100254; File No. 10-242]


In the Matter of the Application of 24X National Exchange LLC for 
Registration as a National Securities Exchange; Order Instituting 
Proceedings To Determine Whether To Grant or Deny an Application for 
Registration as a National Securities Exchange Under Section 6 of the 
Securities Exchange Act of 1934

May 31, 2024.

I. Introduction

    On February 6, 2024, 24X National Exchange LLC (``24X'') filed with 
the Securities and Exchange Commission (``Commission'') a Form 1 
application under the Securities Exchange Act of 1934 (``Act''), 
seeking registration as a national securities exchange under Section 6 
of the Act.\1\ Notice of the application was published for comment in 
the Federal Register on March 4, 2024.\2\ The Commission received five 
comments on the Form 1 \3\ and a letter responding to the comments from 
24X.\4\ Two commenters expressed support the 24X Form 1,\5\ one 
commenter suggested a ``cautious approach to expanding trading hours'' 
because their ``research indicates that increasing trading hours has 
negative consequences for retail investment performance'' \6\ and one 
commenter stated that it ``believe[s] there are several aspects of the 
Application that require careful review and analysis by the Commission, 
or additional information and clarification from 24X, before the 
Application is permitted to move forward.'' \7\
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    \1\ 15 U.S.C. 78f.
    \2\ See Securities Exchange Act Release No. 99614 (Feb. 27, 
2024), 89 FR 15621 (``Notice'').
    \3\ The public comment file for 24X's Form 1 (File No. 10-242) 
is available on the Commission's website at: https://www.sec.gov/comments/10-242/10-242.htm.
    \4\ See letter from David Sassoon, General Counsel, 24X, to 
Commission, dated May 30, 2024 (``24X Letter'').
    \5\ See letters from James J. Angel, Ph.D., CFP, CFA, Associate 
Professor of Finance, Georgetown University, McDonough School of 
Business, to Commission, dated Apr. 5, 2024 (``Angel Letter I'') 
(stating that ``[t]he 24X Application should be approved'' because 
it will ``provide additional convenience to investors and facilitate 
futures trading,'' promote innovation and competition, improve price 
discovery during regular trading hours, and reduce risks for market 
participants.) and dated May 13, 2024 (discussing the information 
provided in the Glover and deHaan Letter, infra note 6, and stating 
that ``[s]ince we already have 24-hour trading, it is best that it 
be on regulated national securities exchanges'' because it ``will 
create the highest level of investor protection.'') (``Angel Letter 
II''); letter from Stan Sater, Senior Legal Counsel, Polygon.io, 
Inc., to Commission, dated Apr. 25, 2024 (``Polygon Letter'').
    \6\ See Letter from Andrew Glover, University of Washington and 
Ed deHaan, Professor of Accounting, Stanford University, to 
Commission, dated Apr. 22, 2024 (``Glover and deHaan Letter'').
    \7\ See Letter from Eun Ah Choi, Senior Vice President, Nasdaq, 
Inc., to Commission, dated Apr. 25, 2024 (``Nasdaq Letter'') at 2.
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    Section 19(a)(1) of the Act \8\ requires the Commission, within 
ninety days of the date of publication of notice of an application for 
registration as a national securities exchange, or such longer period 
as to which the applicant consents, to, by order, grant such 
registration \9\ or institute proceedings to determine whether such 
registration should be denied.\10\ This order is instituting 
proceedings under Section 19(a)(1)(B) of the Act \11\ to determine 
whether 24X's application for registration as a national securities 
exchange should be granted or denied, and provides notice of the 
grounds for denial under consideration by the Commission, as set forth 
below.
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    \8\ 15 U.S.C. 78s(a)(1).
    \9\ 15 U.S.C. 78s(a)(1)(A).
    \10\ 15 U.S.C. 78a(a)(1)(B).
    \11\ 15 U.S.C. 78s(a)(1)(B).
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II. Description of 24X's Proposed Trading System

    24X proposes to operate a fully automated electronic trading 
platform for the trading of listed NMS stocks \12\ pursuant to unlisted 
trading privileges (``UTP'') 23 hours per day,\13\ 7 days per week, 
including certain holidays, subject to certain trading pauses, as

[[Page 48467]]

provided in 24X's proposed rules.\14\ 24X would not maintain a physical 
trading floor.\15\ Liquidity would be derived from quotes as well as 
orders to buy and orders to sell submitted to 24X electronically by 
exchange members.\16\ 24X proposes to operate a fully automated 
electronic limit order book with a continuous matching function \17\ 
and orders resting on the book would be ranked in price/time 
priority.\18\ 24X proposes to accept Market Orders,\19\ Limit Orders 
\20\ and Pegged Orders \21\ with various modifiers and time-in-force 
instructions, although subject to certain limitations \22\ during the 
24X Market Session.\23\ Specifically, Market Orders would be accepted 
only during the Core Market Session, Pegged Orders would be accepted 
only during the Pre-Market Session, the Core Market Session, and the 
Post-Market Session, and Limit Orders would be accepted during all 
sessions.\24\ Orders may be submitted in round lots, odd lots or mixed 
lots.\25\ 24X proposes to permit orders to be entered, cancelled, 
modified, executed on or routed away from 24X during the Pre-Market 
Session, the Core Market Session, and the Post-Market Session.\26\ 24X 
would also permit orders to be entered, canceled, modified or executed 
on the Exchange during the 24X Market Session.\27\ Market makers would 
be required to provide continuous two-sided quotes of at least 100 
shares during Regular Trading Hours.\28\
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    \12\ See 17 CFR 242.600(b)(55) (defining ``NMS Stock'').
    \13\ Unless otherwise noted, all times referred to in this order 
are Eastern Time (``ET''). As described further below, 24X proposes 
to define four different trading sessions. See proposed 24X Rules 
1.5(c) (defining the ``24X Market Session''); 1.5(l) (defining the 
``Core Market Session''); 1.5(x) (defining the ``Post-Market 
Session''); and 1.5(y) (defining the ``Pre-Market Session''). In 
addition, 24X proposes, among others, the following terms: ``24X 
Trading Day'' (see proposed 24X Rule (1.5(b)); ``Exchange Trading 
Hours other than the 24X Market Session'' (see proposed 24X Rule 
1.5(q)); ``Extended Hours Trading'' (see proposed 24X Rule 1.5(r)); 
``Regular Trading Hours'' (see proposed 24X Rule 1.5(cc)); and 
``U.S. Business Day'' (see proposed 24X Rule 1.5(kk)).
    \14\ See, e.g., proposed 24X Rule 11.15(c); Exhibit E-1 to 24X's 
Form 1 at 4. See also infra Section III.A.1. (discussing 24X's 
proposed trading pauses).
    \15\ See Exhibit E-1 of 24X's Form 1 at 2.
    \16\ 24X proposes to have one class of membership open to 
registered broker-dealers. See proposed 24X Rule 2.3 (stating, in 
part, that ``any registered broker or dealer that is and remains a 
member of a national securities association registered under Section 
15A(a) of the Act or a member of another national securities 
exchange registered under Section 6(a) of the Act or any person 
associated with such a registered broker or dealer shall be eligible 
to be, and to remain, a Member'').
    \17\ See Exhibit E-1 of 24X's Form 1 at 2.
    \18\ See proposed 24X Rule 11.8(a).
    \19\ 24X proposes to define the term ``Market Order,'' in part, 
as ``[a]n order to buy or sell a stated amount of a security that is 
to be executed at the NBBO or better when the order reaches the 
Exchange.'' See 24X proposed Rule 11.7(a).
    \20\ 24X proposes to define the term ``Limit Order'' as ``[a]n 
order to buy or sell a stated amount of a security at a specified 
price or better. A marketable Limit Order is a Limit Order to buy 
(sell) at or above (below) the lowest (highest) Protected Offer 
(Protected Bid) for the security.'' See proposed 24X Rule 11.7(b).
    \21\ 24X proposes to define the term ``Pegged Order,'' in part, 
as ``[a] User may indicate to peg an order to a reference price, 
including an instruction of Primary Peg (the NBB for buy orders and 
NBO for sell orders, with or without offsets) or an instruction of 
Midpoint Peg (the midpoint of the NBBO). The System's calculation of 
the NBBO would not take into account any Pegged Orders that are 
resting on the 24X Book. A new timestamp is created for a Pegged 
Order each time it is automatically re-priced.'' See proposed 24X 
Rule 11.7(c).
    \22\ See proposed 24X Rule 11.7 (describing, among other things, 
order types eligible for the various 24X trading sessions).
    \23\ See, e.g., proposed 24X Rule 11.7; Exhibit B of 24X's Form 
1; and proposed 24X Rule 1.5(c) (defining the term ``24X Market 
Session'' as ``(i) the time between 8:00 p.m. and 4:00 a.m. Eastern 
Time, (ii) any time that falls on a Saturday or a Sunday Eastern 
Time, (iii) any time that falls on one of the following U.S. 
holidays: New Year's Day, Martin Luther King Jr. Day, Presidents' 
Day, Good Friday, Memorial Day, Juneteenth National Independence 
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day 
Eastern Time, or such other U.S. holiday(s) as published by the 
Exchange from time to time; provided, however, it shall not include 
any trading pauses as described in Rule 11.15(c)'').
    \24\ See proposed 24X Rule 11.7(a)(4) for Market Orders, 
proposed 24X Rule 11.7(c)(4) for Pegged Orders, and proposed 24X 
Rule 11.7(b) for Limit Orders.
    \25\ See proposed 24X Rule 11.6(q). See also Exhibit E-1 of 
24X's Form 1 at 5.
    \26\ See proposed 24X Rule 11.1(b).
    \27\ See proposed 24X Rule 11.1(c) (providing, in part, that 
``to the extent that other Trading Centers are open during the 24X 
Market Session, orders may be routed away to such Trading Centers 
during the 24X Market Session'').
    \28\ See proposed 24X Rule 11.20(a)(1). The term ``Regular 
Trading Hours'' is defined as ``the time between 9:30 a.m. and 4:00 
p.m. Eastern Time each U.S. Business Day.'' See proposed 24X Rule 
1.5(cc).
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    24X proposes certain rules to govern trading during Exchange 
Trading Hours other than the 24X Market Session,\29\ while other rules 
and requirements would apply specifically to trading during the 24X 
Market Session.\30\
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    \29\ See proposed 24X Rule 11.1(a). 24X proposes to define the 
term ``Exchange Trading Hours other than the 24X Market Session'' as 
``the Pre-Market Session, Core Market Session and Post-Market 
Session.'' See proposed 24X Rule 1.5(q).
    \30\ See proposed 24X Rule 11.1(a). For example, the proposed 
rules make specific provisions for the 24X Market Session with 
respect to matters such as order types permitted and certain 
volatility moderators that would be in place. See, e.g., Exhibit E-1 
to 24X's Form 1; proposed 24X Rules 11.7, 11.15.
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    One novel feature of 24X's Form 1 is that 24X proposes to extend 
the hours of exchange trading of certain NMS stocks \31\ to include 
overnight and weekend trading and trading on certain holidays.\32\ As 
noted above, 24X proposes certain rules that would apply specifically 
during its proposed 24X Market Session. For example, 24X proposes to 
implement certain ``24X Price Bands'' to moderate risk and volatility 
during the 24X Market Session.\33\ As discussed below,\34\ 24X proposes 
certain trading pauses during the 24X Market Session.\35\ 24X also 
proposes to require that 24X Members make certain disclosures to 
investors concerning risks associated with trading during Extended 
Hours Trading, as discussed below.\36\ In its Form 1, 24X states that 
it will join and participate in any applicable plan that other national 
securities exchanges and/or market centers have joined, including, for 
example, the three Equity Data Plans \37\ that currently govern the 
collection, consolidation, processing, and dissemination of core 
data.\38\ 24X further states that it is ``working with such [Equity 
Data Plans] to expand their operation to include the 24X Market 
Session.'' \39\
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    \31\ See proposed 24X Rule 11.2 (describing securities eligible 
for trading on 24X).
    \32\ See proposed 24X Rule 11.1 (setting out the hours of 
trading and trading days for 24X).
    \33\ See, e.g., proposed 24X Rule 11.15; infra Section III 
(discussing proposed Rule 11.15 in greater detail); Exhibit E-1 to 
24X's Form 1. As proposed, trade executions occurring during times 
other than during Extended Hours Trading would be governed by the 
National Market System Plan to Address Extraordinary Market 
Volatility pursuant to Rule 608 of Regulation NMS. See, e.g., 
proposed 24X Rules 11.21, 11.22; Exhibit E-1 to 24X's Form 1. 24X 
proposes to define the term ``Extended Hours Trading'' as ``trading 
during the Pre-Market Session, Post-Market Session and 24X Market 
Session.'' See proposed 24X Rule 1.5(r).
    \34\ See infra Section III.
    \35\ See, e.g., infra Section III (discussing proposed 24X Rule 
11.15(c) in greater detail); proposed 24X Rule 11.15(c); Exhibit E-1 
to 24X's Form 1; and 24X proposed Rule 1.5(b) (defining the term 
``24X Trading Day,'' in part, as ``the 23-hour period commencing at 
8:00 p.m. on one calendar day and ending at 7:00 p.m. on the next 
calendar day . . . [s]ubject to any trading pauses, halts or 
suspensions as described in 24X's proposed rules.'').
    \36\ See proposed 24X Rule 3.21.
    \37\ The three equity data plans that currently govern the 
collection, consolidation, processing, and dissemination of 
exclusive Securities Information Processor (``SIP'') data are (1) 
the Consolidated Tape Association Plan (``CTA Plan''), (2) the 
Consolidated Quotation Plan (``CQ Plan''), and (3) 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 Privileges Basis (``UTP Plan'') (collectively, the 
``Equity Data Plans'').
    \38\ See Exhibit E to 24X's Form 1. See also proposed 24X Rule 
11.11 (providing, in part, that 24X proposes to report executions to 
the appropriate consolidated transaction reporting system ``to the 
extent required by the Act and the rules and regulations 
thereunder.''). On May 1, 2024, 24X submitted a request for 
temporary conditional exemptive relief from Rules 601 and 602 of 
Regulation NMS and the Equity Data Plans until such time as the 
Equity Data Plans can establish a mechanism to collect, consolidate 
and disseminate quotation and transaction information during the 24X 
Market Session. See letter from David Sassoon, General Counsel, 24X 
National Securities Exchange LLC, to Commission, dated May 1, 2024.
    \39\ See Exhibit E to 24X's Form 1. 24X further states that it 
would ``likewise join all other applicable Plans as deemed necessary 
and in the interest of its Users, including, but not limited to, the 
NMS Plan to Address Extraordinary Market Volatility, the NMS Plan 
Governing the Consolidated Audit Trail (the `CAT NMS Plan'), the NMS 
Plan for the Selection and Reservation of Securities Symbols, and 
the 17d-2 Plans for Allocation of Regulatory Responsibilities.'' See 
id.

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[[Page 48468]]

    Another novel feature of 24X's Form 1 is that 24X proposes to enter 
into a technology services agreement with MEMX Technologies, LLC 
(``MEMX Technologies'') to license the technology underlying 24X.\40\
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    \40\ See infra Section III (discussing the proposed technical 
services agreement between 24X and MEMX Technologies in greater 
detail). See also Exhibit E to 24X's Form 1.
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    A more detailed description of the manner of operation of 24X's 
proposed system can be found in Exhibit E to 24X's Form 1. The proposed 
rulebook for 24X can be found in Exhibit B to 24X's Form 1, and the 
governing documents for 24X, 24X US Holdings, LLC \41\ and 24X Bermuda 
Holdings, LLC \42\ can be found in Exhibit A and Exhibit C. A complete 
set of forms concerning membership and access can be found in Exhibit 
F.
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    \41\ 24X is wholly owned by its direct parent company, 24X US 
Holdings, LLC, which in turn is wholly-owned by 24X Bermuda Holdings 
LLC. See, e.g., Exhibits C, E, to 24X's Form 1.
    \42\ See supra note 41 and accompanying text.
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III. Proceedings To Determine Whether To Grant or Deny the Application 
and Grounds for Potential Denial Under Consideration

    As required by Section 19(a)(1)(B) of the Act,\43\ the Commission 
is hereby providing notice of grounds for denial under consideration, 
as set forth below. Institution of such proceedings is appropriate at 
this time in view of the issues raised by the application. Institution 
of proceedings does not indicate that the Commission has reached any 
conclusions with respect to any of the issues involved.
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    \43\ 15 U.S.C. 78s(a)(1)(B).
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    Under Section 19(a)(1) of the Act, the Commission shall grant an 
application for registration as a national securities exchange if the 
Commission finds that the requirements of the Act and the rules and 
regulations thereunder with respect to the applicant are satisfied. The 
Commission shall deny such application for registration if it does not 
make such a finding.\44\ Under Section 6(b) of the Act, an exchange 
shall not be registered as a national securities exchange unless the 
Commission determines that it has satisfied the relevant requirements 
of the Act.\45\ In particular, Section 6(b)(1) of the Act requires that 
the Commission find that an exchange is so organized and has the 
capacity to carry out the purposes of the Act.\46\ In addition, under 
Section 6(b)(3) of the Act, the Commission must find that the rules of 
the exchange assure a fair representation of its members in the 
selection of its directors and administration of its affairs and 
provide that one or more directors shall be representative of issuers 
and investors and not be associated with a member of the exchange, 
broker or dealer.\47\ Section 6(b)(5) of the Act requires that the 
rules of the exchange be designed, among other things, to prevent 
fraudulent and manipulative acts and practices, 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 mechanisms of a 
free and open market and a national market system, and in general to 
protect investors and the public interest.\48\ Finally, under Section 
6(b)(8) of the Act, the Commission must find that the rules of the 
exchange do not impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of Act.\49\
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    \44\ 15 U.S.C. 78s(a)(1).
    \45\ 15 U.S.C. 78f.
    \46\ 15 U.S.C. 78f(b)(1).
    \47\ 15 U.S.C. 78f(b)(3).
    \48\ 15 U.S.C. 78f(b)(5).
    \49\ 15 U.S.C. 78f(b)(8).
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    The Commission is particularly interested in commenters' views as 
to whether 24X's proposed rules that would extensively expand the hours 
of trading in NMS stocks, as described in more detail below, are 
consistent with Section 6(b)(5) of the Act such that the proposed rules 
are designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, remove impediments to and perfect the mechanisms of a 
free and open market and a national market system, and in general 
protect investors and the public interest. The Commission is also 
interested in commenters' views as to whether 24X's proposed technology 
services agreement is consistent with Section 6(b)(1) of the Act such 
that 24X would be so organized and have the capacity to be able to 
carry out the purposes of the Act.

A. 24X Trading Sessions

    24X proposes to offer significantly expanded trading outside of 
regular trading hours for NMS stocks by operating a national securities 
exchange 23 hours a day,\50\ seven days a week, 365 days a year, 
including holidays, subject to certain trading pauses, as provided in 
24X's proposed rules.\51\ While several exchanges offer a pre-market 
trading session starting as early as 4:00 a.m. ET on each U.S. business 
day,\52\ and most exchanges offer a post-close trading session until 
8:00 p.m. ET on each U.S. business day,\53\ 24X's proposal would 
significantly expand exchange trading hours such that exchange trading 
would be conducted on a largely continuous basis.\54\
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    \50\ See supra note 14 and accompanying text.
    \51\ See id.
    \52\ See, e.g., NYSE Arca, Inc., Cboe EDGX Exchange, Inc. and 
The Nasdaq Stock Market LLC.
    \53\ See, e.g., NYSE Arca, Inc., NYSE American LLC, NYSE 
Chicago, Inc., NYSE National, Inc., Cboe BZX Exchange, Inc., Cboe 
BYX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, 
Inc., and The Nasdaq Stock Market LLC.
    \54\ See, e.g., proposed 24X Rule 11.1; Exhibit E-1 to 24X's 
Form 1.
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    24X proposes to offer four trading sessions as follows: a ``Core 
Market Session'' \55\ that corresponds with Regular Trading Hours each 
U.S. Business Day; \56\ a ``Post-Market Session'' \57\ that would run 
from 4:00 p.m. to 7:00 p.m. ET on each U.S. Business Day; a ``Pre-
Market Session'' \58\ that would run from 4:00 a.m. to 9:30 a.m. ET on 
each U.S. Business Day; and a ``24X Market Session'' \59\ that would 
run from 8:00 p.m. to 4:00 a.m. ET and any time that falls on weekends 
and certain holidays,\60\ not including any trading pauses as described 
in 24X's proposed rules.\61\
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    \55\ See proposed 24X Rule 1.5(l).
    \56\ See id. See also proposed 24X Rule 1.5(kk) (defining the 
term ``U.S. Business Day'' as ``any Monday, Tuesday, Wednesday, 
Thursday or Friday other than any of the following U.S. holidays if 
they are celebrated on a Monday, Tuesday, Wednesday, Thursday or 
Friday: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, 
Good Friday, Memorial Day, Juneteenth National Independence Day, 
Independence Day, Labor Day, Thanksgiving Day and Christmas Day 
Eastern Time, or such other U.S. holiday(s) as published by the 
Exchange from time to time'').
    \57\ See proposed 24X Rule 1.5(x).
    \58\ See proposed 24X Rule 1.5(y).
    \59\ See proposed 24X Rule 1.5(c).
    \60\ See id.
    \61\ See proposed 24X Rules 1.5(c), 11.15(c). See also infra 
Section III.A.1 (discussing proposed trading pauses during the 24X 
Market Session in greater detail).
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1. 24X Market Session
    24X proposes to apply some, but not all, of the rules that would 
apply during Exchange Trading Hours other than the 24X Market Session 
to trading that would occur during the 24X Market Session.\62\ Market 
Orders and Pegged Orders would not be eligible for execution during the 
24X Market

[[Page 48469]]

Session \63\ and only Limit Orders would be permitted during the 24X 
Market Session.\64\ The proposed rules further provide that, to the 
extent that other Trading Centers are open during the 24X Market 
Session, orders may be routed away to such Trading Centers during the 
24X Market Session.\65\
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    \62\ See, e.g., proposed 24X Rules 11.1, 11.16.
    \63\ See proposed 24X Rule 11.16(b). See also proposed 24X Rules 
11.7(a)(4), 11.7(c)(4).
    \64\ See proposed 24X Rules 11.7(b)(6), 11.16(b). 24X's proposed 
rules would permit orders to be entered, cancelled, modified or 
executed on 24X during the 24X Market Session. See proposed 24X Rule 
11.1(c).
    \65\ See proposed 24X Rule 11.1(c).
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    24X proposes that only certain NMS stocks would be eligible to 
trade during the 24X Market Session.\66\ Specifically, 24X proposes 
that ``[a]ny security in the Nasdaq-100[supreg] Index, S&P 500[supreg] 
Index, Russell 2000[supreg] Index and the top 50 exchange-traded funds 
by average daily volume during a given month'' \67\ would be eligible 
to become designated for trading on 24X during the 24X Market 
Session.\68\ 24X further proposes rules for allowing Members \69\ to 
request that 24X designate additional securities for trading during the 
24X Market Session.\70\
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    \66\ See proposed 24X Rule 11.2(a).
    \67\ See proposed 24X Rule 11.2. See also proposed 24X Rule 
11.2(g) (setting out, among other things, the proposed methodology 
for this calculation).
    \68\ See proposed 24X Rule 11.2(a).
    \69\ The term ``Member'' would be defined under the proposed 
rules as ``any registered broker or dealer that has been admitted to 
membership in the Exchange. A Member will have the status of a 
`member' of the Exchange as that term is defined in Section 3(a)(3) 
of the Act. Membership may be granted to a sole proprietor, 
partnership, corporation, limited liability company or other 
organization which is a registered broker or dealer pursuant to 
Section 15 of the Act, and which has been approved by the 
Exchange.'' See proposed 24X Rule 1.5(t).
    \70\ See proposed 24X Rule 11.2(h) (setting out, among other 
things, the proposed rules for such Member requests). One commenter 
stated that ``24X should provide more transparency on the minimum 
time frame that market participants will receive notice of 
securities that will be available for trading during the 24X Market 
Session.'' See Nasdaq Letter at 3. In response, 24X stated that 
proposed 24X Rule 11.2(f) would provide sufficient notice of 
securities that would be made available for trading or that would 
not be made available for trading in the 24X Market Session and that 
it ``does not anticipate that there would be substantial daily 
changes in the symbols traded during the 24X Market Session.'' See 
24X Letter at 3.
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    24X proposes certain pauses in trading during the 24X Market 
Session. Specifically, 24X proposes to pause trading at 8:00 a.m. ET 
each Saturday and resume trading at 11:00 a.m. ET each Saturday.\71\ 
Orders outstanding at 7:59:59 a.m. ET each Saturday would be 
automatically cancelled.\72\ 24X further proposes to pause trading at 
7:00 p.m. ET every day and resume trading at 8:00 p.m. ET every 
day.\73\ Orders outstanding at 6:59:59 p.m. ET every day would be 
automatically cancelled.\74\ 24X also proposes that it would have 
authority to pause trading during the 24X Market Session at such other 
times as 24X may determine is necessary for technological or other 
purposes.\75\ Furthermore, 24X proposes to provide that if there are 
any material corporate actions with respect to a particular security 
(i.e., corporate actions that may affect a stock price, stock additions 
and subtractions, and similar actions) during the 24X Market Session, 
24X would pause trading in the underlying security until trading 
resumes on the primary listing market for the security.\76\
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    \71\ See, e.g., proposed 24X Rule 11.15(c)(1); Exhibit E-1 to 
24X's Form 1. One commenter stated that the Form 1 ``does not 
sufficiently explain how 24X will coordinate with primary listing 
exchanges and the SIP to implement regulatory trading halts and 
pauses during the entirety of the 24X Market Session'' and further 
stated that the exclusive SIP for the UTP Plan conducts testing on 
weekends during a portion of the 24X Market Session. See Nasdaq 
Letter at 4. In response, 24X stated that proposed 24X Rule 
11.15(c)(3) addresses how industry-wide testing would be handled 
during the 24X Market Session. 24X also stated that proposed 24X 
Rule 11.15(c)(4) addresses other types of trading pauses and states 
that 24X would pause trading during the 24X Market Session at ``such 
other times as the Exchange may determine is necessary for 
technological or other purposes.'' See 24X Letter at 5.
    \72\ See proposed 24X Rule 11.15(c)(1).
    \73\ See, e.g., proposed 24X Rule 11.15(c)(2); Exhibit E-1 to 
24X's Form 1.
    \74\ See proposed 24X Rule 11.15(c)(2).
    \75\ See proposed 24X Rule 11.15(c)(4). 24X proposes to require 
that notice of such pause as well as notice of resumption of 
trading, will be provided. See, e.g., proposed 24X Rule 11.15(c)(4); 
Exhibit E-1 to 24X's Form 1.
    \76\ See proposed 24X Rule 11.15(c)(5); Exhibit E-1 to 24X's 
Form 1. 24X proposes other trading halts, pauses, and suspensions. 
See, e.g., proposed 24X Rule 11.1(e) (providing 24X's Chief 
Executive Office with power to halt or suspend trading in any and 
all securities, and to determine the duration of any such halt 
``when he deems such action necessary for the maintenance of fair 
and orderly markets, the protection of investors, or otherwise in 
the public interest.''); proposed 24X Rules 11.21, 11.22. One 
commenter stated that ``while 24X provides examples of corporate 
actions that would be deemed material, it does not explicitly define 
the term of material corporate action, nor does it provide details 
on how it would handle material corporate actions that are announced 
during the 24X Market Session.'' See Nasdaq Letter at 3. In 
response, 24X stated that ``material corporate action'' would 
include ``all actions that the primary listing markets would 
determine to require a trading halt under their rules.'' See 24X 
Letter at 4.
---------------------------------------------------------------------------

    24X proposes to require that Members make certain disclosures to 
investors concerning risks associated with trading during Extended 
Hours Trading, including the 24X Market Session.\77\ Specifically, 24X 
proposes to require that ``[n]o Member may accept an order from a 
customer for execution during Extended Hours Trading without disclosing 
to such customer that Extended Hours Trading involves material trading 
risks, including the possibility of lower liquidity, high volatility, 
changing prices, unlinked markets, an exaggerated effect from news 
announcements, wider spreads and any other relevant risk.'' \78\ 24X 
proposes to require that such investor disclosures provide information 
substantially similar to that provided under the proposed rule and 
address the following risks: (1) lower liquidity, (2) higher 
volatility, (3) changing prices, (4) unlinked markets, (5) news 
announcements, (6) wider spreads, (7) trading during hours in which 
financial market infrastructure companies are closed, and (8) lack of 
calculation or dissemination of underlying index value or intraday 
indicative value.\79\
---------------------------------------------------------------------------

    \77\ See proposed 24X Rule 3.21. One commenter stated, among 
other things that ``[their] research indicates that increasing 
trading hours has negative consequences for retail investment 
performance.'' See Glover and deHaan Letter. In the 24X Letter, 24X 
stated that retail trading ``outside of regular market hours is not 
a new phenomenon'' and that its proposed disclosures under proposed 
24X Rule 3.21 ``address the additional risks posed by the 24X Market 
Sessions.'' See 24X Letter at 6.
    \78\ See proposed 24X Rule 3.21; Exhibit E-1 to 24X's Form 1. 
24X further proposes the disclosures required pursuant to this 
proposed 24X Rule 3.21 may take the form provided in or that 
contains information substantially similar to that provided under 
proposed 24X Rule 3.21(a)-(h).
    \79\ See, e.g., proposed 24X Rule 3.21; Exhibit E-1 to 24X's 
Form 1.
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    The proposed 24X Market Session rules relating to risk and 
volatility moderators would, as noted above,\80\ differ from those 
applicable during the Core Market Session.\81\ During the Core Market 
Session, 24X would participate in the Plan to Address Extraordinary 
Market Volatility (``LULD Plan'').\82\ The LULD Plan, however, is 
currently not effective during the proposed 24X Market Session. 24X 
proposes a certain ``24X Price Band'' that would be in effect during 
the 24X Market Session.\83\ As proposed, during the 24X Market Session, 
a 24X Price Band would be calculated for each relevant security by 
multiplying the ``Reference Price,'' as specified in 24X proposed Rule 
11.15, by the applicable ``Percentage Parameter,'' also set out in 
proposed 24X Rule 11.15. This figure (rounded to the nearest $0.01) 
would then be added

[[Page 48470]]

to the Reference Price to calculate the ``Upper 24X Price Band'' and 
subtracted from the Reference Price to calculate the ``Lower 24X Price 
Band.'' \84\ No trades would be allowed outside the 24X Price Bands. As 
further proposed, the Reference Price of a given security would be 
defined as either the last sale price for the security in the 24X Post-
Market Session prior to the start of the 24X Market Session, or if such 
last sale price is not available, the primary listing market's most 
recent closing price for the security during Regular Trading Hours.\85\ 
Five minutes after the start of the 24X Market Session, the Reference 
Price would be required to be updated every 30 seconds to reflect the 
average price of the security over the last preceding five minute 
period of the 24X Market Session, but only if the new Reference Price 
would be at least 1% above or below the existing Reference Price.\86\ 
In addition, 24X proposes that 24X may set a new Reference Price under 
certain circumstances. Specifically, as proposed, 24X would set a new 
Reference Price as the Upper/Lower 24X Price Band if orders received 
from three separate and distinct Members are displayed for at least 100 
shares on the 24X Book at the Upper 24X Price Band or Lower 24X Price 
Band for 30 seconds.\87\ As proposed, any such adjustment could be made 
only once in any 30 second period. 24X proposes that trades executed 
during the 24X Market Session will only be reviewed under proposed 24X 
Rule 11.14, Clearly Erroneous Executions, if the trade was executed 
when the 24X Price Bands and/or Reference Prices under proposed 24X 
Rule 11.15 were not operating correctly due to technical or other 
circumstances.\88\
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    \80\ See supra Section II.
    \81\ See, e.g., proposed 24X Rule 11.22; Exhibit E-1 to 24X's 
Form 1. 24X also proposes a limit order price protection rule that 
would reject limit orders that are priced outside of specified 
thresholds. See proposed 24X Rule 11.9(g).
    \82\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019) (Order Approving the Eighteenth 
Amendment to the National Market System Plan to Address 
Extraordinary Market Volatility).
    \83\ See proposed 24X Rule 11.15. One commenter stated that 
24X's proposed Price Bands ``should be sufficient to prevent 
extremely erroneous trades.'' See Angel Letter I at 3.
    \84\ See, e.g., proposed 24X Rule 11.15; Exhibit E-1 to 24X's 
Form 1.
    \85\ Proposed 24X Rule 11.15(a)(2). As further proposed, if 
neither of those prices are available, the initial Reference Price 
for the 24X Price Band for the security would be the previous day's 
closing price for the security on the primary listing market for the 
security. If none of those prices are available, the initial 
Reference Price for the 24X Price Band for the security would be the 
previous day's last sale price for the security on the primary 
listing market for the security during Regular Trading Hours. See 
id.
    \86\ See, e.g., proposed 24X Rule 11.15(a)(2); Exhibit E-1 to 
24X's Form 1.
    \87\ See proposed 24X Rule 11.15(a)(4).
    \88\ See proposed 24X Rule 11.14(d)(4).
---------------------------------------------------------------------------

    Further, 24X states that it would join and participate in the three 
Equity Data Plans \89\ that currently govern the collection, 
consolidation, processing, and dissemination of core data.\90\ The 
Equity Data Plans do not operate during the times that cover the 24X 
Market Session.\91\ 24X states that it is ``working with such [Equity 
Data Plans] plans to expand their operation to include the 24X Market 
Session.'' \92\
---------------------------------------------------------------------------

    \89\ See supra note 3737 and accompanying text.
    \90\ See Exhibit E to 24X's Form 1. See also proposed 24X Rule 
11.11 (providing that 24X proposes to report executions to the 
appropriate consolidated transaction reporting system ``to the 
extent required by the Act and the rules and regulations 
thereunder.'').
    \91\ One commenter stated that stated that ``the SIPs and the 
other SROs should evolve. Because of the SIPs' hours . . . 24X 
[would] transmit quotation and transaction information to the SIPs 
when the SIPs are not open and, therefore, [could not] transmit this 
data in real-time to those consuming the SIP Feed.'' See Polygon 
Letter at 2.
    \92\ See Exhibit E to 24X's Form 1. See also supra notes 36-38 
and accompanying text.
---------------------------------------------------------------------------

    24X's proposal to provide for continuous trading on an exchange 
outside of Regular Trading Hours, subject to certain trading pauses, 
raises several issues, many of which have been considered previously in 
the context of trading in the pre-market and post-market trading 
sessions. These issues include the need for heightened investor 
disclosures and consolidated last sale and quotation information in the 
after-hours market, as well as the potential risks associated with 
trading outside of regular hours, including, among others, the risk of 
greater price volatility, reduced liquidity, wider spreads, and fewer 
investor protections.\93\ As other exchanges have proposed expanded 
trading hours to include pre-market and post-market sessions, the 
Commission has approved such expansion where certain safeguards were 
implemented to mitigate these concerns.\94\ Such safeguards include, 
among other things, requiring specific disclosures to investors 
regarding the heightened risks of after-hours trading,\95\ establishing 
risk and volatility moderators, and implementing a corresponding 
expansion of the operational hours of the exclusive SIPs \96\ to help 
ensure the availability of consolidated last sale and quotation 
information.
---------------------------------------------------------------------------

    \93\ See, e.g., Special Study: Electronic Communication Networks 
and Afterhours Trading, Division of Market Regulation, Commission 
(June 2000), https://www.sec.gov/news/studies/ecnafter.htm; Investor 
Bulletin: After-Hours Trading, Office of Investor Education and 
Advocacy, Commission (May 2011), https://www.sec.gov/files/afterhourtrading.pdf; and Investor Publications, Commission, After-
Hours Trading: Understanding the Risks (Nov. 8, 2008), https://www.sec.gov/reportspubs/investor-publications/investorpubsafterhourshtm.html; Investor Bulletin: Extended Hours 
Trading (June 6, 2022), https://www.sec.gov/oiea/investor-alerts-and-bulletins/extended-hours-trading-investor-bulletin. Staff 
reports, Investor Bulletins, and other staff documents (including 
those cited herein) represent the views of Commission staff and are 
not a rule, regulation, or statement of the Commission. The 
Commission has neither approved nor disapproved the content of these 
documents and, like all staff statements, they have no legal force 
or effect, do not alter or amend applicable law, and create no new 
or additional obligations for any person. The Commission has 
expressed no view regarding the analysis, findings, or conclusions 
contained herein.
    \94\ See, e.g., Securities and Exchange Act Nos. 77607 (Apr. 13, 
2016), 81 FR 23032 (Apr. 19, 2016) (Order Approving Proposed Rule 
Change, as Modified by Amendment No. 1 Thereto, To Adopt an Early 
Trading Session and Three New Time-In-Force Instructions), at 23034; 
42003 (Oct. 13, 1999), 64 FR 56554 (Oct. 20, 1999) (Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change and 
Amendment No. 1 by National Association of Securities Dealers, Inc. 
Relating to the Extension of Certain Nasdaq Services and Facilities 
Until 6:30 p.m. Eastern Time); 42004 (Oct. 13, 1999), 64 FR 56548 
(Oct. 20,1999) (Notice of Filing of Proposed Rule Change and 
Amendment Nos. 1 and 2 and Order Granting Accelerated Approval of 
Proposed Rules Change and Amendment Nos. 1 and 2 by the Chicago 
Stock Exchange Relating to the Implementation of an Extended Hours 
Trading Session).
    \95\ See, e.g., FINRA Rule 2265; Investors Exchange Rule 3.290; 
NYSE American Exchange Rule 7.34E; Cboe BYX Exchange Rule 3.21.
    \96\ The exclusive SIPs, which collect, consolidate, and 
disseminate consolidated data, including the NBBO, in the equity 
markets are currently governed by the Equity Data Plans. See supra 
note 37 and accompanying text.
---------------------------------------------------------------------------

a. Extended Hours Investor Disclosures
    The Commission is considering whether 24X's application to operate 
as an exchange that permits continuous trading, subject to certain 
proposed trading pauses, is consistent with Section 6(b)(5) of the Act, 
which requires, among other things, that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, remove impediments to and perfect the mechanisms of a 
free and open market and a national market system, and in general 
protect investors and the public interest, particularly during the 24X 
Market Session. One commenter suggested a ``cautious approach to 
expanding trading hours'' because their research ``indicates that 
increasing trading hours has negative consequences for retail 
investment performance.'' \97\ In response, 24X stated that the 
proposed disclosures ``provide investors with the information to 
understand the potential risks of trading in the 24X Market Session.'' 
\98\ The Commission is considering and requests comment on whether 
24X's proposed investor disclosures \99\ are sufficient to highlight 
what appear to be the unique risks associated with continuous trading, 
subject to certain trading pauses, during the 24X Market Session.

[[Page 48471]]

Specifically, the Commission is evaluating whether these disclosures 
are sufficient to inform investors of the potentially greater risks 
associated with what would constitute a significant expansion of 
afterhours trading during the proposed 24X Market Session.
---------------------------------------------------------------------------

    \97\ See Glover and deHaan Letter.
    \98\ See 24X Letter at 5.
    \99\ See proposed 24X Rule 3.21.
---------------------------------------------------------------------------

b. Trading Pauses, Halts, Suspensions
    In addition, the Commission is considering whether 24X's proposal 
to implement certain trading pauses during the 24X Trading Day,\100\ in 
light of 24X's proposed model for trading 23 hours a day, including 
weekends and holidays, subject to certain trading pauses,\101\ is 
consistent with 6(b)(5) of the Act, which requires, among other things, 
that the rules of an exchange be designed to prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, remove impediments to and 
perfect the mechanisms of a free and open market and a national market 
system, and in general protect investors and the public interest, 
particularly during the 24X Market Session. One commenter stated that 
the 24X Form 1 did not explain how 24X would coordinate with the 
primary listing exchanges and the exclusive SIPs with regard to 
implementing regulatory trading halts and pauses during the 24X Market 
Session.\102\ In response, 24X stated that its proposed rules address 
trading halts and pauses, including those that may occur during the 24X 
Market Session.\103\ Among other things, the Commission is evaluating 
whether the proposed pauses and resumption of trading would be 
conducted in a manner that would both further the objectives of the 
proposed rule with respect to system maintenance and participation in 
industry-wide testing, as well as facilitate transactions in securities 
and promote the maintenance of fair and orderly markets and the 
protection of investors, consistent with Section 6(b)(5) of the Act. 
The Commission requests commenters' views on 24X's proposed rules on 
trading pauses and resumptions of trading during the 24X Market 
Session.
---------------------------------------------------------------------------

    \100\ See supra note 14 and accompanying text.
    \101\ See id.
    \102\ See Nasdaq Letter at 4.
    \103\ See 24X Letter at 4 and 5.
---------------------------------------------------------------------------

c. Volatility Moderators, Risk Controls
    The Commission is also considering whether the proposed 24X rules 
to address certain risks associated with trading during the 24X Market 
Session--and, specifically, the proposed risk and volatility 
moderators--are consistent with the Act. Certain mechanisms that 
address volatility in individual symbols and the equities market are 
not available during the after-hours sessions.\104\ Currently, the 
exchanges have adopted rules to determine whether an execution is 
clearly erroneous that apply to their after-hours sessions.\105\ As 
noted above, subject to certain exceptions, 24X proposes to utilize its 
volatility moderator in place of the clearly erroneous execution rules 
in the 24X Market Session.\106\ The Commission is considering whether 
the risk and volatility moderators proposed \107\ for use during the 
24X Market Session only on 24X, are consistent with Section 6(b)(5) of 
the Act which requires that an exchange's rules be designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, remove impediments to and perfect the mechanisms of a free 
and open market and a national market system, and, in general protect 
investors and the public interest. The Commission requests commenters' 
views on 24X's proposed risk and volatility moderators during the 24X 
Market Session.
---------------------------------------------------------------------------

    \104\ Specifically, LULD trading pauses and market wide circuit 
breakers are unavailable during after-hours trading.
    \105\ See, e.g., MEMX Rule 11.15; Nasdaq Rule 11890; NYSE Rule 
7.10; CboeEDGX Rule 11.15.
    \106\ One commenter stated that 24X's proposed system ``should 
be sufficient to prevent extremely erroneous executions.'' See Angel 
Letter I at 3.
    \107\ See, e.g., proposed 24X Rule 11.15 (setting out rules 
governing, among other things, operation of the proposed ``24X Price 
Band''); Exhibit E-1 to 24X's Form 1.
---------------------------------------------------------------------------

d. Equity Data Plans, Consolidated Data
    The Commission also is considering whether 24X's application to 
operate as an exchange during the 24X Market Session, in light of the 
fact that the Equity Data Plans currently do not operate during this 
time, is consistent with Section 6(b)(5) of the Act, which requires 
among other things, that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices, promote just 
and equitable principles of trade, foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, remove impediments to and perfect the mechanisms of a free 
and open market and a national market system, and in general protect 
investors and the public interest. While 24X commits to ``working with 
such [Equity Data Plans] to expand their operation to include the 24X 
Market Session,'' \108\ at this time, the Equity Data Plans do not 
operate during the times that cover the 24X Market Session. One 
commenter stated that the 24X trading sessions should align with the 
operational hours for the exclusive SIPs to avoid potential risks 
related to a lack of transparency.\109\ In response, 24X stated that it 
has been actively working with the exclusive SIPs to effect changes 
necessary to accommodate the 24X Market Session, and that it has 
requested temporary exemptive relief with regard to the reporting of 
certain quoting and transaction activity during the 24X Market Session 
until the exclusive SIPs are ready.\110\ 24X stated that it would 
publish the same information that would be required to be reported to 
the exclusive SIPs during the 24X Market Session at no cost to 
investors during the time any such exemption were in effect.\111\ The 
Commission requests commenters' views on 24X's proposed operation 
during the 24X Market Session when the Equity Data Plans are not 
operating.
---------------------------------------------------------------------------

    \108\ See Exhibit E to 24X's Form 1.
    \109\ See Nasdaq Letter at 3. See also Polygon Letter at 2.
    \110\ See 24X Letter at 2-3. 24X stated that such relief would 
facilitate competition ``without adversely affecting the regulatory 
goals of Rule [sic] 601 and 602.'' See id.
    \111\ See id.
---------------------------------------------------------------------------

e. Market Surveillance
    Further, the Commission is considering and requests comment on 
other issues raised by commenters about 24X's proposal to substantially 
extend trading hours. Commenters raise concerns about whether 24X's 
proposal is consistent with the requirements of Section 6(b)(5) of the 
Act that an exchange's rules be designed to prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, remove impediments to and 
perfect the mechanisms of a free and open market and a national market 
system, and, in general protect investors and the public interest. 
Specifically, one commenter questioned the impact that proposal may 
have on market surveillance and stated that 24X's Form

[[Page 48472]]

1 is unclear with respect to (1) how 24X will manage real-time 
surveillance during the 24X Market Session, (2) how the existing 
surveillance, trading halt and trade review infrastructure will work in 
the context of the 24X Market Session, including how 24X will 
coordinate with self-regulatory organizations (``SROs''), and (3) the 
impact such extended trading would have on investors, listed companies, 
and other market participants.\112\ The commenter also raised concerns 
in connection with market-wide surveillance more broadly, including how 
24X would proposes to integrate itself into the national market system 
and coordinate with primary listing exchanges to perform its regulatory 
surveillance obligations during the 24X Market Session.\113\ In 
response, 24X stated that it ``will surveil the trading in the 24X 
Market Session as it does with the other 24X trading sessions.'' \114\ 
24X further stated that it expects that listed companies will continue 
to follow applicable requirements of the primary listing market, 
including those of significant events, and that 24X will coordinate 
with the primary listing markets with regard to their regulatory roles 
to their listed companies.\115\
---------------------------------------------------------------------------

    \112\ See Nasdaq Letter at 3. The commenter further stated that 
24X's Form 1 would be the first occurrence of a national securities 
exchange that utilizes unlisted trading privileges to operate 
outside the trading hours of the primary listing exchanges, which 
proposal ``poses a series of surveillance questions and a burden on 
listing exchange.'' See id.
    \113\ See Nasdaq Letter at 2.
    \114\ See 24X Letter at 4.
    \115\ 24X stated that, for example, in recognition of the 
primary listing market's role, 24X proposes to pause trading in the 
event of a material corporate action that occurs during the 24X 
Market Session and only resume trading once trading resumes on the 
primary listing market, as described in 24X proposed Rule 11.15(c). 
See 24X Letter at 4.
---------------------------------------------------------------------------

f. Issuer Disclosures
    A commenter stated that listed companies disclose material 
information outside of Regular Trading Hours and questioned how the 24X 
Market Session would affect the current processes for listed companies 
to disclose, and for investors to consider, material information.\116\ 
The commenter also stated that the proposed 24X rules did not provide 
details on how material corporate actions announced during the 24X 
Market Session would be handled.\117\ 24X stated that proposed 24X Rule 
11.15(c) would address those circumstances in which a listed company 
may have significant events during the 24X Market Session, and that, as 
provided under that rule, 24X proposes to pause trading in the relevant 
security until trading resumes on the primary listing market.\118\ 24X 
stated that ``material corporate action'' would include all actions 
that the primary listing markets would determine to require a trading 
halt under their rules.\119\
---------------------------------------------------------------------------

    \116\ See Nasdaq Letter at 4.
    \117\ Id.
    \118\ See 24X Letter at 4-5.
    \119\ Id.
---------------------------------------------------------------------------

B. Technology Services Agreement With MEMX Technologies, LLC

    24X proposes to enter into an technology services agreement with 
MEMX Technologies, to license the technology underlying 24X.\120\ 
Specifically, 24X states that, pursuant to this agreement, MEMX 
Technologies would provide technology support services to 24X, 
including ``(1) the development and testing of software and hardware 
necessary to operate the matching engine and connectivity to other 
exchanges via a third-party routing broker(s) and third party-developed 
functions (including clearing, custody and client connectivity); (2) 
the provision of technical support in order for [24X] to operate and 
monitor the [exchange]; and (3) the provision of ongoing system 
availability commitments, updates, fixes, and technology support.'' 
\121\
---------------------------------------------------------------------------

    \120\ See Exhibit E to 24X's Form 1.
    \121\ 24X's Form 1 further provides, in part, that ``[a]ll 
services provided to the Exchange by MEMX Technologies will be based 
upon requirements and instructions determined by the Exchange.'' 24X 
further states that, although MEMX Technologies would provide the 
technology support services, the Exchange would be responsible for 
operating and monitoring its Exchange-related systems and 
administering Exchange Rules and other rules and regulations 
applicable to the Exchange. See Exhibit E to 24X's Form 1.
---------------------------------------------------------------------------

    The Commission is evaluating whether the proposed technical 
services agreement between 24X and MEMX Technologies would raise 
concerns under Section 6(b)(1) of the Act,\122\ including Regulation 
SCI thereunder.\123\ The Commission is considering whether, under the 
terms of the technology services agreement between 24X and MEMX 
Technologies, as described in the 24X Form 1, 24X would be so organized 
and have the capacity to be able to carry out the purposes of the Act 
and to comply and enforce compliance by its members and persons 
associated with its members with the Act and the rules thereunder. 
Specifically, the Commission is considering, and requests commenters' 
views on, whether 24X would be capable of exercising sufficient control 
over the operation of 24X, and be sufficiently independent from MEMX 
Technologies, to enable 24X to comply with requirements under the Act 
and applicable rules, including, among other things, Regulation SCI, 
which requires an SCI entity to have written policies and procedures 
reasonably designed to ensure that its SCI systems have levels of 
capacity, integrity, resilience, availability and security adequate to 
maintain the SCI entity's operation capability.\124\
---------------------------------------------------------------------------

    \122\ 15 U.S.C. 78f(b)(1).
    \123\ 17 CFR 242.1000-1007; Securities Exchange Act Release No. 
73639 (Nov. 19, 2014), 79 FR 72252 (Dec. 5, 2014) (``SCI Adopting 
Release'').
    \124\ 17 CFR. 242.1000-1007. An SCI entity is responsible for 
having in place policies and procedures to ensure that it is able to 
satisfy the requirements of Regulation SCI for SCI systems operated 
on its behalf by a third party. See SCI Adopting Release, 79 FR at 
72275-76.
---------------------------------------------------------------------------

IV. Request for Written Comment

    The Commission requests that interested persons provide written 
views and data with respect to 24X's Form 1 and the questions included 
above or other relevant issues. 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 No. 10-242 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 No. 10-242. 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/other). Copies 
of the submission, all subsequent amendments, all written statements 
with respect to 24X's Form 1 filed with the Commission, and all written 
communications relating to the application 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. Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish

[[Page 48473]]

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 No. 10-242 
and should be submitted on or before June 27, 2024.

    By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12377 Filed 6-5-24; 8:45 am]
BILLING CODE 8011-01-P