Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Corporate Documents of the Exchange's Parent Company, 55915-55919 [2020-19943]
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Federal Register / Vol. 85, No. 176 / Thursday, September 10, 2020 / Notices
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number SR–LCH SA–2020–004
and should be submitted on or before
October 1, 2020.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.15
October 1, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–19942 Filed 9–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89763; File No. SR–MEMX–
2020–05]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Corporate
Documents of the Exchange’s Parent
Company
September 3, 2020.
khammond on DSKJM1Z7X2PROD with NOTICES
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 August
28, 2020, MEMX LLC (‘‘MEMX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposed rule change to
proposed rule change to amend the
Fourth Amended and Restated Limited
Liability Company Agreement (the
‘‘Holdco LLC Agreement’’) of MEMX
Holdings LLC (‘‘Holdco’’), as further
discussed below. Holdco is the parent
company of the Exchange and directly
15 17
CFR 200.30–3(a)(12).
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.
1 15
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or indirectly owns all of the limited
liability company membership interests
in the Exchange. The text of the
proposed rule change is provided in
Exhibit 5.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Holdco LLC Agreement to: (i) Add
defined terms reflecting the admission
of each of BLK SMI, LLC (‘‘BlackRock’’)
and Wells Fargo Central Pacific
Holdings, Inc. (‘‘Wells Fargo’’) as a Class
A Member 5 of Holdco (a ‘‘Holdco Class
A Member’’), amend the definitions of
‘‘Excluded Class A Member’’ 6 and
‘‘Bank Class A Member’’ 7 to include
reference to Wells Fargo and make other
related conforming changes throughout
the Holdco LLC Agreement; (ii) provide
that the board of directors of Holdco
(the ‘‘Holdco Board’’) shall establish and
designate a market structure committee
of the Holdco Board (the ‘‘Holdco
Market Structure Committee’’) and that
a representative of BlackRock shall be a
member of such Committee and the
chairperson of such Committee if
BlackRock so requests; (iii) update the
compositional requirements of the
5 The term ‘‘Class A Member’’ refers to a Member
of Holdco holding Class A–1 Units or Class A–2
Units of Holdco. See Section 1.1 of the Holdco LLC
Agreement. The term ‘‘Member’’ refers to a person
admitted as a member of Holdco.
6 Presently, the term ‘‘Excluded Class A Member’’
refers to UBS Americas Inc. See Section 1.1 of the
Holdco LLC Agreement.
7 The term ‘‘Bank Class A Member’’ refers to each
of Banc of America Strategic Investments
Corporation, Strategic Investments I, Inc., UBS
Americas Inc., JPMC Strategic Investments I
Corporation, Goldman Sachs PSI Global Holdings,
LLC, and any other Member of Holdco that is
specifically designated as a Bank Class A Member
(which would include Wells Fargo pursuant to the
proposed amendments described herein), in each
case, together with each of their respective
Affiliates. See Section 1.1 of the Holdco LLC
Agreement.
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Industry Advisory Board 8 of Holdco
(the ‘‘Holdco Industry Advisory Board’’)
to reflect that BlackRock has been
admitted as a Holdco Class A Member,
and as such would be entitled to
appoint a representative to the Holdco
Industry Advisory Board, and to make
other clarifying changes to such
requirements and related provisions;
(iv) specify the compositional
requirements of any Holdco Subsidiary
Industry Advisory Board (as defined
below); and (v) clarify that Members of
Holdco which do not operate (or have
an Affiliate 9 that operates) a U.S.registered broker-dealer that executes
transactions directly on U.S. exchanges
are not required to cause any such
Member of Holdco (or its Affiliates, as
applicable) to use good faith efforts to
connect to the Exchange, and
specifically provide that such
requirement also does not apply to
BlackRock and its Affiliates.
Add ‘‘BlackRock’’ and ‘‘Wells Fargo’’ as
Defined Terms
On April 7, 2020, Wells Fargo
purchased Class A Units of Holdco and
was admitted as a Holdco Class A
Member, as previously approved by the
Holdco Board. On May 11, 2020,
BlackRock purchased Class A Units of
Holdco and was admitted as a Holdco
Class A Member, as previously
approved by the Holdco Board.
The Exchange now proposes to add
‘‘BlackRock’’ and ‘‘Wells Fargo’’ as
defined terms in the Holdco LLC
Agreement to reflect that each of
BlackRock and Wells Fargo has been
admitted as a Holdco Class A Member.
The proposed definitions of BlackRock
and Wells Fargo are consistent with the
definitions of other Holdco Class A
Members with similar rights and
preferences as BlackRock and Wells
Fargo, respectively. Related to the
addition of Wells Fargo as a defined
term in the Holdco LLC Agreement, the
Exchange also proposes to amend the
definition of the term ‘‘Excluded Class
A Member’’ to include reference to
Wells Fargo (in addition to UBS
Americas Inc.), as Wells Fargo was
granted the same rights under the
Holdco LLC Agreement as UBS
Americas Inc. by the Holdco Board, and
to make related conforming changes
throughout the Holdco LLC Agreement
8 The term ‘‘Industry Advisory Board’’ refers to an
advisory board of Holdco with industry
representation. See Section 8.19(a) of the Holdco
LLC Agreement.
9 The term ‘‘Affiliate’’ refers to, with respect to
any person, any other person who, directly or
indirectly (including through one or more
intermediaries), controls, is controlled by, or is
under common control with, such person. See
Section 1.1 of the Holdco LLC Agreement.
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to reflect that there would be two
Excluded Class A Members instead of
one as presently drafted (such as
changing references to ‘‘the Excluded
Class A Member’’ to ‘‘each Excluded
Class A Member’’). The Exchange also
proposes to amend the definition of
‘‘Bank Class A Member’’ to include
reference to Wells Fargo as a designated
Bank Class A Member. Presently, the
designation of Wells Fargo as a Bank
Class A Member under the Holdco LLC
Agreement does not impact the
governance of Holdco or any Holdco
Subsidiary, or have any other effect, but
is consistent with Holdco’s approach of
including an Excluded Class A Member
that is a bank within this definition. The
designation as a Bank Class A Member
would only have an effect to the extent
Wells Fargo becomes a Nominating
Class A Member 10 with the right to
appoint a director of Holdco at some
point in the future. The Exchange
believes these are non-substantive
changes to update the corporate
documents of Holdco to reflect the
recent admission of two new Holdco
Class A Members and to harmonize
other defined terms used in the Holdco
LLC Agreement.
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Holdco Market Structure Committee
Section 8.9 of the Holdco LLC
Agreement presently provides that the
Holdco Board may designate one or
more committees, which shall be
comprised of one or more directors and
alternate directors of the Holdco Board,
and that such committees shall have the
authority to make recommendations to
the Holdco Board in an advisory role
only and shall not have the authority to
act for or on behalf of, or to bind,
Holdco or any of its subsidiaries
(including the Exchange) (each, a
‘‘Holdco Subsidiary’’ and, collectively,
the ‘‘Holdco Subsidiaries’’).
Pursuant to Section 8.9, on May 5,
2020, the Holdco Board established and
designated the Holdco Market Structure
Committee as a committee of the Holdco
Board and approved a charter directing
the Holdco Market Structure Committee
to consider and present to the Holdco
Board non-binding recommendations
regarding matters relating to market
structure applicable to Holdco and the
Holdco Subsidiaries, which matters may
include, but are not limited to,
regulatory proposals, infrastructure and
resiliency initiatives, transparency
initiatives, market and commercial
trends and market data issues, as the
10 The term ‘‘Nominating Class A Member’’ refers
to a Class A Member of Holdco which has the right
to nominate a director to the Holdco Board. See
Section 8.3(b) of the Holdco LLC Agreement.
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Holdco Board considers such market
structure matters in the course of its
duties. The charter of the Holdco Market
Structure Committee and the resolutions
of the Holdco Board related to the
designation of the Holdco Market
Structure Committee provide that, so
long as BlackRock remains a
Nominating Class A Member of Holdco
(a ‘‘Holdco Nominating Class A
Member’’), BlackRock shall have the
right, but not the obligation, to designate
one of its representatives to serve on the
Holdco Market Structure Committee at
all times and that, if BlackRock so
requests, a representative of BlackRock
shall be the chairperson of the Holdco
Market Structure Committee.
The Exchange now proposes to amend
Section 8.9 to, without deleting or
modifying any existing text, add a
provision requiring the Holdco Board to
establish the Holdco Market Structure
Committee and providing for the
foregoing rights of BlackRock related to
its representation on the Holdco Market
Structure Committee, as previously
approved by the Holdco Board. As
amended by the proposed change,
Section 8.9 would continue to permit
the Holdco Board to designate
representation on the Holdco Market
Structure Committee from among the
Holdco Nominating Class A Members by
appointing directors and alternate
directors on the Holdco Board to such
Committee and would additionally
provide for the specific rights of
BlackRock to appoint a representative to
serve on such Committee and for such
representative to serve as the
chairperson of such Committee, in each
case if BlackRock so requests. While
these specific rights apply only to
BlackRock, as noted above, the other
Holdco Nominating Class A Members
will have representation on the Holdco
Market Structure Committee as
designated by the Holdco Board, which
has generally agreed that each Holdco
Nominating Class A Member shall have
the right to appoint a representative to
serve on such Committee if such Holdco
Nominating Class A Member so
requests. Thus, each Holdco Nominating
Class A Members is presently entitled to
have representation on the Market
Structure Committee and, as noted
above, the Market Structure Committee
only considers matters in a non-binding
capacity and it is the Holdco Board,
with representation from all Holdco
Nominating Class A Members as
provided under the Holdco LLC
Agreement, that must ultimately take
action with respect to such matters.
Moreover, each Member of Holdco and
the Holdco Board has been advised of
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BlackRock’s specific rights with respect
to representation on the Holdco Market
Structure Committee, and such rights
were approved by the Holdco Board on
May 5, 2020, without any objection
raised by any Member of Holdco or the
Holdco Board. Accordingly, the
proposed change would update the
corporate documents of Holdco to
implement a requirement which was
already permitted under the Holdco LLC
Agreement and which the Holdco Board
has already agreed to and satisfied by
action taken on May 5, 2020. The
Exchange and the Holdco Board each
believes that amending the Holdco LLC
Agreement to include a requirement that
the Holdco Market Structure Committee
be established would ensure that the
Holdco Market Structure Committee
remains in place and further believes
that having the Holdco Market Structure
Committee in place (specifically with
BlackRock’s representation, including as
chairperson, if BlackRock so desires)
would meaningfully aid the Holdco
Board in considering market structurerelated matters and would ultimately
help Holdco and the Exchange to
promote a fair, transparent and efficient
experience for all investors.
Holdco Industry Advisory Board
Section 8.19 of the Holdco LLC
Agreement, which contains provisions
relating to the creation and functioning
of the Holdco Industry Advisory Board,
provides that, if established, the Holdco
Industry Advisory Board will provide
advice and guidance to the Holdco
Board and the management of Holdco
and the Exchange relating to, among
other things, technical and operational
matters relating to the Exchange, but it
will not be a committee of the Holdco
Board. Section 8.19(a) contains
provisions that specify the
compositional requirements of the
Holdco Industry Advisory Board and
presently provides that ‘‘Promptly after
the Effective Date,’’ 11 the Holdco Board
may, upon a determination to do so by
Supermajority Board Vote,12 establish
the Holdco Industry Advisory Board.
11 The term ‘‘Effective Date’’ refers to the effective
date of the Holdco LLC Agreement, which is
February 19, 2020.
12 The term ‘‘Supermajority Board Vote’’ means
the affirmative vote of at least seventy-seven
percent (77%) of the votes of all directors of Holdco
then entitled to vote on the matter under
consideration and who have not recused
themselves, whether or not present at the applicable
meeting of the Holdco Board; provided that if such
affirmative vote threshold results in the necessity of
the affirmative vote of all such directors of Holdco
with respect to such matter, an affirmative vote of
all but one of such directors of Holdco shall be
required instead with respect to such matter. See
Section 1.1 of the Holdco LLC Agreement.
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The Exchange now proposes to amend
Section 8.19(a) of the Holdco LLC
Agreement to (i) update the
compositional requirements of the
Holdco Industry Advisory Board to
reflect that BlackRock has been
admitted as a Holdco Class A Member,
and as such would be entitled to
appoint a representative to the Holdco
Industry Advisory Board if it so desires,
and to make other clarifying changes
relating to certain terms currently used
in that section, and (ii) delete the phrase
‘‘Promptly after the Effective Date,’’ as
such phrase is inapplicable and
confusing in the context given the
elective nature of the Holdco Board’s
ability to establish the Holdco Industry
Advisory Board.
Section 8.19(a) presently provides,
among other things, that the Holdco
Industry Advisory Board shall be
comprised of: (i) One representative of
(a) each Market Maker Class A
Member 13 which is a Holdco
Nominating Class A Member, (b) each
Retail Broker Class A Member 14 which
is a Holdco Nominating Class A
Member, (c) each Bank Class A Member
which is a Holdco Nominating Class A
Member, and (d) the Excluded Class A
Member so long as it is entitled to
appoint an observer to the Holdco Board
(a ‘‘Holdco Board Observer’’), and (ii)
such members of the Exchange as
determined by the Holdco Board. The
proposed amendment would eliminate
the references in this section to certain
specific categories of Holdco Class A
Members, namely, Market Maker Class
A Member, Retail Broker Class A
Member, and Bank Class A Member and
would replace such references with a
single reference to Holdco Nominating
Class A Members, as all of the Holdco
Class A Members that make up such
categories, together with BlackRock,
13 The term ‘‘Market Maker Class A Member’’
refers to each of Citadel Securities Principal
Investments LLC, Virtu Getco Investments, LLC,
Jane Street Group, LLC, and any other Member of
Holdco that is specifically designated as a Market
Maker Class A Member (of which there are none as
of the date of this filing), in each case, together with
each of their respective Affiliates. See Section 1.1
of the Holdco LLC Agreement. On May 12, 2020,
Virtu Getco Investments, LLC changed its name to
Virtu Investments LLC.
14 The term ‘‘Retail Broker Class A Member’’
refers to each of E*TRADE Financial Corporation,
Devonshire Investors (Delaware) LLC, The Charles
Schwab Corporation, Datek Online Management
Corp., and any other Member of Holdco that is
specifically designated as a Retail Broker Class A
Member (of which there are none as of the date of
this filing) and which, or an Affiliate of which, is
a broker-dealer registered with the Financial
Industry Regulatory Authority, Inc. which provides
services to retail customers, in each case, together
with each of their respective Affiliates. See Section
1.1 of the Holdco LLC Agreement.
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now comprise all of the Holdco
Nominating Class A Members.
The effect of the proposed change is
to eliminate unnecessary references to
specific categories of Holdco Class A
Members and replace such references
with a single reference to Holdco
Nominating Class A Members, which
now includes BlackRock in addition to
the Holdco Class A Members that
comprise the categories of Holdco Class
A Members presently referenced, and to
provide that for so long as each Holdco
Nominating Class A Member remains a
Holdco Nominating Class A Member or
is entitled to appoint a Holdco Board
Observer pursuant to the terms of the
Holdco LLC Agreement, each such
Holdco Nominating Class A Member is
entitled to appoint a representative to
the Holdco Industry Advisory Board if
it so desires. The proposed change
would also update the reference to ‘‘the
Excluded Class A Member’’ in this
section to ‘‘each Excluded Class A
Member’’ to reflect Wells Fargo’s
inclusion in that defined term, but it
would not in any way affect any
Excluded Class A Member’s right to
appoint a representative to the Holdco
Industry Advisory Board, which are in
addition to the rights of each Holdco
Nominating Class A Member to appoint
a representative to the Holdco Industry
Advisory Board. In short, the proposed
amendment would add BlackRock to the
group of Holdco Class A Members that,
together with the Excluded Class A
Members, each have the right to appoint
a representative to the Holdco Industry
Advisory Board and would simplify the
language used to reflect this.
The Exchange also proposes to amend
Section 8.19(a) to delete the phrase
‘‘Promptly after the Effective Date,’’
with respect to the Holdco Board’s
ability to establish the Holdco Industry
Advisory Board. The ability granted to
the Holdco Board by Section 8.19(a) to
establish the Holdco Industry Advisory
Board is elective in nature, as the
existing language provides that Holdco
Board may establish the Holdco
Industry Advisory Board, and as such
was not intended by the Members of
Holdco to be required to be exercised at
any specific time (or at all). Instead, the
language was intended to, and does in
effect, provide that this ability may only
be exercised if and when the Holdco
Board determines to do so by
Supermajority Board Vote. The phrase
‘‘Promptly after the Effective Date,’’ is
therefore inapplicable and may cause
confusion in this context as it could be
read to imply an unintended and
undefined durational requirement with
respect to the Holdco Board’s ability
and discretion to establish the Holdco
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55917
Industry Advisory Board. Accordingly,
deleting this phrase would clarify the
provision to more accurately reflect the
intent of the Members of Holdco for the
Holdco Board to have the ability to
establish the Holdco Industry Advisory
Board at such time as determined by
Supermajority Board Vote (or not at all)
rather than within any specific amount
of time following the Effective Date. The
Holdco Industry Advisory Board has not
been established as of the date of this
filing.
Holdco Subsidiary Industry Advisory
Boards
The Exchange proposes to amend
Section 8.19 of the Holdco LLC
Agreement to add a new clause (c) to
specify the compositional requirements
of any Holdco Subsidiary Industry
Advisory Board. Specifically, the
proposed new Section 8.19(c) provides
that, with respect to any committee or
advisory board of any Holdco
Subsidiary which has functions similar
to the contemplated functions of the
Holdco Industry Advisory Board (any
such committee or advisory board, a
‘‘Holdco Subsidiary Industry Advisory
Board’’), (a) each Holdco Class A
Member which is a Holdco Nominating
Class A Member, for so long as it
remains a Holdco Nominating Class A
Member or is entitled to appoint a
Holdco Board Observer pursuant to the
terms of the Holdco LLC Agreement,
and (b) each Excluded Class A Member,
for so long as it is entitled to appoint a
Holdco Board Observer pursuant to the
terms of the Holdco LLC Agreement,
would have the right, but not the
obligation, to appoint a representative to
such Holdco Subsidiary Industry
Advisory Board.
The Exchange believes that the
proposed compositional requirements
relating to any Holdco Subsidiary
Industry Advisory Board are consistent
with the proposed updated
compositional requirements relating to
the Holdco Industry Advisory Board,
and as such would provide for a
uniform approach by Holdco and the
Holdco Subsidiaries to considering
matters within the scope of such
industry advisory boards. No Holdco
Subsidiary Industry Advisory Board has
been established as of the date of this
filing.
Connection to the Exchange by Certain
Members
Section 11.8 of the Holdco LLC
Agreement presently provides that each
Member of Holdco shall use (or shall
ensure that any of its Affiliates that it
determines are to be members of the
Exchange use) good faith efforts to take
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such actions as are necessary to enable
such Member (or its Affiliates, as
applicable) to connect to the Exchange
prior to the operational date of the
Exchange in a manner that would
permit such Member (or its Affiliates, as
applicable) to use the Exchange in a fair,
equitable and non-discriminatory
manner.
The Exchange now proposes to amend
Section 11.8 to clarify that Members of
Holdco which do not operate (or have
an Affiliate that operates) a U.S.registered broker-dealer that executes
transactions directly on U.S. exchanges
are not required to use (or cause its
Affiliates, as applicable, to use) good
faith efforts to connect to the Exchange,
as connection to the Exchange by such
persons may not be permissible under
Exchange Rule 2.3, which requires,
among other things, that each member
of the Exchange be a registered broker
or dealer. The Exchange believes that
the proposed amendment clarifies the
existing language in Section 11.8, which
could be read to require Members of
Holdco (or their Affiliates, as
applicable) that are not registered as a
broker or dealer to use good faith efforts
to connect to the Exchange in a manner
inconsistent with Exchange Rule 2.3, to
more accurately reflect the intent of the
Members of Holdco to require only
those Members of Holdco (or their
Affiliates, as applicable) which operate
a U.S.-registered broker-dealer that
executes transactions directly on U.S.
exchanges to use good faith efforts to
connect to the Exchange in a manner
consistent with the Exchange’s rules
and the Act.
BlackRock is an asset manager, and its
business model does not involve acting
as a broker-dealer on behalf of third
parties on U.S. exchanges. For clarity’s
sake, BlackRock does have Affiliates
that are U.S.-registered broker-dealers
but these Affiliates do not execute
transactions directly on U.S. exchanges,
so out of an abundance of caution, the
Exchange also proposes to further
amend Section 11.8 to specifically
provide that the requirement to connect
to the Exchange shall not apply to
BlackRock and its Affiliates. If
BlackRock were to alter its business
model so that it or any broker-dealer
Affiliate did execute transactions
directly on a U.S. exchange and,
specifically, were to connect to the
Exchange, the Exchange would require
such connection to be conducted in a
manner that would permit such person
to use the Exchange in a fair, equitable
and non-discriminatory manner
consistent with the existing
requirements of Section 11.8.
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2. Statutory Basis
the consideration of matters within the
scope of such industry advisory boards,
The Exchange believes the proposed
which include technical and operational
rule change is consistent with Section
15
6(b) of the Act, in general, and furthers matters relating to the Exchange, and as
such would promote the maintenance of
the objectives of Section 6(b)(1),16 in
a fair and orderly market and the
particular, in that it enables the
protection of investors and the public
Exchange to be so organized as to have
interest.
the capacity to be able to carry out the
purposes of the Act and to comply, and
The Exchange believes the proposed
to enforce compliance by its members,
amendment to the Holdco LLC
with the provisions of the Act, the rules Agreement to not require Members of
and regulations thereunder, and the
Holdco (or their Affiliates, as
rules of the Exchange. The Exchange
applicable) which do not operate a U.S.also believes that the proposed rule
change is consistent with Section 6(b)(5) registered broker-dealer that executes
of the Act,17 which requires the rules of transactions directly on U.S. exchanges,
including BlackRock and its Affiliates,
an exchange to be designed to promote
just and equitable principles of trade, to to connect to the Exchange would add
clarity to the Holdco LLC Agreement in
foster cooperation and coordination
a manner that would enable the
with persons engaged in facilitating
Exchange to comply, and enforce
transactions in securities, to remove
compliance by its members, with the
impediments to and perfect the
mechanism of a free and open market
provisions of the Act and the rules of
and a national market system, and, in
the Exchange, which require each
general, to protect investors and the
member of the Exchange to be a
public interest.
registered broker or dealer (or person
The Exchange believes the proposed
associated with a registered broker or
amendments to the Holdco LLC
dealer), and as a result would foster
Agreement to add ‘‘BlackRock’’ and
cooperation and coordination with
‘‘Wells Fargo’’ as defined terms and
persons engaged in facilitating
make related conforming changes to
transactions in securities, remove
certain definitions and other provisions,
impediments to and perfect the
to update and clarify the compositional
mechanism of a free and open market
requirements of, and remove
and a national market system, and
inapplicable and confusing language
enable the Exchange to be so organized
relating to, the Holdco Industry
as to have the capacity to carry out the
Advisory Board, and to add a provision
purposes of the Act. The Exchange also
requiring the Holdco Board to establish
the Holdco Market Structure Committee believes that specifically stating that
BlackRock and its Affiliates are not
and providing for certain rights of
required to connect to the Exchange is
BlackRock relating to its representation
consistent with the Act and the rules of
on such Committee would update and
the Exchange for the reasons set forth
clarify the relevant provisions of the
Holdco LLC Agreement in a manner
above and to avoid potential confusion
consistent with actions already taken by because BlackRock does have Affiliates
the Holdco Board as currently permitted that are U.S.-registered broker-dealers
by the Holdco LLC Agreement, and as
but that do not execute transactions
such would enable the Exchange to be
directly on U.S. exchanges.
so organized as to have the capacity to
B. Self-Regulatory Organization’s
carry out the purposes of the Act,
Statement on Burden on Competition
remove impediments to and perfect the
mechanism of a free and open market,
Because the proposed rule change
and protect investors and the public
relates
to: (i) The compositional
interest.
requirements of certain non-binding
The Exchange believes the proposed
advisory committees and boards of the
amendment to the Holdco LLC
Exchange and its parent company and
Agreement to specify compositional
requirements for any Holdco Subsidiary (ii) clarifying and other non-substantive
changes to the corporate documents of
Industry Advisory Board consistent
with the proposed updated
the Exchange’s parent company, and not
compositional requirements relating to
the operations of the Exchange, the
the Holdco Industry Advisory Board
Exchange does not believe that the
would establish a uniform approach by
proposed rule change will impose any
Holdco and the Holdco Subsidiaries to
burden on competition not necessary or
appropriate in furtherance of the
15 15 U.S.C. 78f(b).
purposes of the Act.
16
15 U.S.C. 78f(b)(1).
U.S.C. 78f(b)(5).
17 15
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
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Federal Register / Vol. 85, No. 176 / Thursday, September 10, 2020 / Notices
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 18 and Rule 19b–
4(f)(6) thereunder.19
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 20 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 21
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay. The Commission
believes that waiver of the 30-day
operative delay is consistent with the
protection of investors and the public
interest because the proposed rule
change does not raise any new issues
with respect to the Exchange and is
concerned solely with updating the
corporate documents of the Exchange’s
parent company to reflect and
accommodate the addition of new
investors. Therefore, the Commission
hereby waives the operative delay and
designates the proposal as operative
upon filing.22
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
18 15
U.S.C. 78s(b)(3)(A).
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.
20 17 CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6)(iii).
22 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
khammond on DSKJM1Z7X2PROD with NOTICES
19 17
VerDate Sep<11>2014
16:38 Sep 09, 2020
Jkt 250001
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 23 of the Act 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 rule-comments@
sec.gov. Please include File Number SR–
MEMX–2020–05 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MEMX–2020–05. 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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
23 15
PO 00000
U.S.C. 78s(b)(2)(B).
Frm 00108
Fmt 4703
Sfmt 4703
55919
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MEMX–2020–05 and
should be submitted on or before
October 1, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–19943 Filed 9–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33959A; 812–14997]
1WS Credit Income Fund, et al.
September 4, 2020.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of application for an order
under section 17(d) of the Investment
Company Act of 1940 (the ‘‘Act’’) and
rule 17d–1 under the Act permitting
certain joint transactions otherwise
prohibited by section 17(d) of the Act
and under rule 17d–1 under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit certain
closed-end management investment
companies to co-invest in portfolio
companies with each other and with
affiliated investment funds.
APPLICANTS: 1WS Credit Income Fund
(‘‘1WS’’ or the ‘‘Existing Regulated
Fund’’), 1WS Capital Advisors, LLC
(‘‘1WS Capital’’ or the ‘‘Existing 1WS
Adviser’’), the investment adviser to
1WS, on behalf of itself and its
successors,1 One William Street Capital
Master Fund, Ltd., OWS Credit
Opportunity Master Fund, Ltd., OWS
ABS Master Fund II, LP, OWS COF I
Master, L.P., OWS ABS IV, LP, OWS
Global Fixed Income Fund (USDHedged), Ltd., OWS Credit Opportunity
Fund, L.P., One William Street Capital
Partners, L.P., One William Street
Capital Partners II, L.P., One William
Street Capital Offshore Fund, Ltd., OWS
Capital Offshore Fund II, Ltd, One
William Street Capital Intermediate
Fund, L.P., OWS Credit Opportunity
Offshore Fund, Ltd., OWS Credit
Opportunity Offshore Fund II, Ltd, OWS
24 17
CFR 200.30–3(a)(12).
term ‘‘successor,’’ as applied to the Adviser,
means an entity that results from a reorganization
into another jurisdiction or change in the type of
business organization.
1 The
E:\FR\FM\10SEN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 176 (Thursday, September 10, 2020)]
[Notices]
[Pages 55915-55919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19943]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89763; File No. SR-MEMX-2020-05]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Corporate Documents of the Exchange's Parent Company
September 3, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on August 28, 2020, MEMX LLC (``MEMX'' or the ``Exchange'') filed
with the Securities and Exchange Commission (the ``Commission'') the
proposed rule change as described in Items I, and II below, which Items
have been prepared by the Exchange. The Exchange filed the proposal as
a ``non-controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
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 proposed rule change to amend the Fourth Amended and Restated
Limited Liability Company Agreement (the ``Holdco LLC Agreement'') of
MEMX Holdings LLC (``Holdco''), as further discussed below. Holdco is
the parent company of the Exchange and directly or indirectly owns all
of the limited liability company membership interests in the Exchange.
The text of the proposed rule change is provided in Exhibit 5.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Holdco LLC Agreement to: (i) Add
defined terms reflecting the admission of each of BLK SMI, LLC
(``BlackRock'') and Wells Fargo Central Pacific Holdings, Inc. (``Wells
Fargo'') as a Class A Member \5\ of Holdco (a ``Holdco Class A
Member''), amend the definitions of ``Excluded Class A Member'' \6\ and
``Bank Class A Member'' \7\ to include reference to Wells Fargo and
make other related conforming changes throughout the Holdco LLC
Agreement; (ii) provide that the board of directors of Holdco (the
``Holdco Board'') shall establish and designate a market structure
committee of the Holdco Board (the ``Holdco Market Structure
Committee'') and that a representative of BlackRock shall be a member
of such Committee and the chairperson of such Committee if BlackRock so
requests; (iii) update the compositional requirements of the Industry
Advisory Board \8\ of Holdco (the ``Holdco Industry Advisory Board'')
to reflect that BlackRock has been admitted as a Holdco Class A Member,
and as such would be entitled to appoint a representative to the Holdco
Industry Advisory Board, and to make other clarifying changes to such
requirements and related provisions; (iv) specify the compositional
requirements of any Holdco Subsidiary Industry Advisory Board (as
defined below); and (v) clarify that Members of Holdco which do not
operate (or have an Affiliate \9\ that operates) a U.S.-registered
broker-dealer that executes transactions directly on U.S. exchanges are
not required to cause any such Member of Holdco (or its Affiliates, as
applicable) to use good faith efforts to connect to the Exchange, and
specifically provide that such requirement also does not apply to
BlackRock and its Affiliates.
---------------------------------------------------------------------------
\5\ The term ``Class A Member'' refers to a Member of Holdco
holding Class A-1 Units or Class A-2 Units of Holdco. See Section
1.1 of the Holdco LLC Agreement. The term ``Member'' refers to a
person admitted as a member of Holdco.
\6\ Presently, the term ``Excluded Class A Member'' refers to
UBS Americas Inc. See Section 1.1 of the Holdco LLC Agreement.
\7\ The term ``Bank Class A Member'' refers to each of Banc of
America Strategic Investments Corporation, Strategic Investments I,
Inc., UBS Americas Inc., JPMC Strategic Investments I Corporation,
Goldman Sachs PSI Global Holdings, LLC, and any other Member of
Holdco that is specifically designated as a Bank Class A Member
(which would include Wells Fargo pursuant to the proposed amendments
described herein), in each case, together with each of their
respective Affiliates. See Section 1.1 of the Holdco LLC Agreement.
\8\ The term ``Industry Advisory Board'' refers to an advisory
board of Holdco with industry representation. See Section 8.19(a) of
the Holdco LLC Agreement.
\9\ The term ``Affiliate'' refers to, with respect to any
person, any other person who, directly or indirectly (including
through one or more intermediaries), controls, is controlled by, or
is under common control with, such person. See Section 1.1 of the
Holdco LLC Agreement.
---------------------------------------------------------------------------
Add ``BlackRock'' and ``Wells Fargo'' as Defined Terms
On April 7, 2020, Wells Fargo purchased Class A Units of Holdco and
was admitted as a Holdco Class A Member, as previously approved by the
Holdco Board. On May 11, 2020, BlackRock purchased Class A Units of
Holdco and was admitted as a Holdco Class A Member, as previously
approved by the Holdco Board.
The Exchange now proposes to add ``BlackRock'' and ``Wells Fargo''
as defined terms in the Holdco LLC Agreement to reflect that each of
BlackRock and Wells Fargo has been admitted as a Holdco Class A Member.
The proposed definitions of BlackRock and Wells Fargo are consistent
with the definitions of other Holdco Class A Members with similar
rights and preferences as BlackRock and Wells Fargo, respectively.
Related to the addition of Wells Fargo as a defined term in the Holdco
LLC Agreement, the Exchange also proposes to amend the definition of
the term ``Excluded Class A Member'' to include reference to Wells
Fargo (in addition to UBS Americas Inc.), as Wells Fargo was granted
the same rights under the Holdco LLC Agreement as UBS Americas Inc. by
the Holdco Board, and to make related conforming changes throughout the
Holdco LLC Agreement
[[Page 55916]]
to reflect that there would be two Excluded Class A Members instead of
one as presently drafted (such as changing references to ``the Excluded
Class A Member'' to ``each Excluded Class A Member''). The Exchange
also proposes to amend the definition of ``Bank Class A Member'' to
include reference to Wells Fargo as a designated Bank Class A Member.
Presently, the designation of Wells Fargo as a Bank Class A Member
under the Holdco LLC Agreement does not impact the governance of Holdco
or any Holdco Subsidiary, or have any other effect, but is consistent
with Holdco's approach of including an Excluded Class A Member that is
a bank within this definition. The designation as a Bank Class A Member
would only have an effect to the extent Wells Fargo becomes a
Nominating Class A Member \10\ with the right to appoint a director of
Holdco at some point in the future. The Exchange believes these are
non-substantive changes to update the corporate documents of Holdco to
reflect the recent admission of two new Holdco Class A Members and to
harmonize other defined terms used in the Holdco LLC Agreement.
---------------------------------------------------------------------------
\10\ The term ``Nominating Class A Member'' refers to a Class A
Member of Holdco which has the right to nominate a director to the
Holdco Board. See Section 8.3(b) of the Holdco LLC Agreement.
---------------------------------------------------------------------------
Holdco Market Structure Committee
Section 8.9 of the Holdco LLC Agreement presently provides that the
Holdco Board may designate one or more committees, which shall be
comprised of one or more directors and alternate directors of the
Holdco Board, and that such committees shall have the authority to make
recommendations to the Holdco Board in an advisory role only and shall
not have the authority to act for or on behalf of, or to bind, Holdco
or any of its subsidiaries (including the Exchange) (each, a ``Holdco
Subsidiary'' and, collectively, the ``Holdco Subsidiaries'').
Pursuant to Section 8.9, on May 5, 2020, the Holdco Board
established and designated the Holdco Market Structure Committee as a
committee of the Holdco Board and approved a charter directing the
Holdco Market Structure Committee to consider and present to the Holdco
Board non-binding recommendations regarding matters relating to market
structure applicable to Holdco and the Holdco Subsidiaries, which
matters may include, but are not limited to, regulatory proposals,
infrastructure and resiliency initiatives, transparency initiatives,
market and commercial trends and market data issues, as the Holdco
Board considers such market structure matters in the course of its
duties. The charter of the Holdco Market Structure Committee and the
resolutions of the Holdco Board related to the designation of the
Holdco Market Structure Committee provide that, so long as BlackRock
remains a Nominating Class A Member of Holdco (a ``Holdco Nominating
Class A Member''), BlackRock shall have the right, but not the
obligation, to designate one of its representatives to serve on the
Holdco Market Structure Committee at all times and that, if BlackRock
so requests, a representative of BlackRock shall be the chairperson of
the Holdco Market Structure Committee.
The Exchange now proposes to amend Section 8.9 to, without deleting
or modifying any existing text, add a provision requiring the Holdco
Board to establish the Holdco Market Structure Committee and providing
for the foregoing rights of BlackRock related to its representation on
the Holdco Market Structure Committee, as previously approved by the
Holdco Board. As amended by the proposed change, Section 8.9 would
continue to permit the Holdco Board to designate representation on the
Holdco Market Structure Committee from among the Holdco Nominating
Class A Members by appointing directors and alternate directors on the
Holdco Board to such Committee and would additionally provide for the
specific rights of BlackRock to appoint a representative to serve on
such Committee and for such representative to serve as the chairperson
of such Committee, in each case if BlackRock so requests. While these
specific rights apply only to BlackRock, as noted above, the other
Holdco Nominating Class A Members will have representation on the
Holdco Market Structure Committee as designated by the Holdco Board,
which has generally agreed that each Holdco Nominating Class A Member
shall have the right to appoint a representative to serve on such
Committee if such Holdco Nominating Class A Member so requests. Thus,
each Holdco Nominating Class A Members is presently entitled to have
representation on the Market Structure Committee and, as noted above,
the Market Structure Committee only considers matters in a non-binding
capacity and it is the Holdco Board, with representation from all
Holdco Nominating Class A Members as provided under the Holdco LLC
Agreement, that must ultimately take action with respect to such
matters. Moreover, each Member of Holdco and the Holdco Board has been
advised of BlackRock's specific rights with respect to representation
on the Holdco Market Structure Committee, and such rights were approved
by the Holdco Board on May 5, 2020, without any objection raised by any
Member of Holdco or the Holdco Board. Accordingly, the proposed change
would update the corporate documents of Holdco to implement a
requirement which was already permitted under the Holdco LLC Agreement
and which the Holdco Board has already agreed to and satisfied by
action taken on May 5, 2020. The Exchange and the Holdco Board each
believes that amending the Holdco LLC Agreement to include a
requirement that the Holdco Market Structure Committee be established
would ensure that the Holdco Market Structure Committee remains in
place and further believes that having the Holdco Market Structure
Committee in place (specifically with BlackRock's representation,
including as chairperson, if BlackRock so desires) would meaningfully
aid the Holdco Board in considering market structure-related matters
and would ultimately help Holdco and the Exchange to promote a fair,
transparent and efficient experience for all investors.
Holdco Industry Advisory Board
Section 8.19 of the Holdco LLC Agreement, which contains provisions
relating to the creation and functioning of the Holdco Industry
Advisory Board, provides that, if established, the Holdco Industry
Advisory Board will provide advice and guidance to the Holdco Board and
the management of Holdco and the Exchange relating to, among other
things, technical and operational matters relating to the Exchange, but
it will not be a committee of the Holdco Board. Section 8.19(a)
contains provisions that specify the compositional requirements of the
Holdco Industry Advisory Board and presently provides that ``Promptly
after the Effective Date,'' \11\ the Holdco Board may, upon a
determination to do so by Supermajority Board Vote,\12\ establish the
Holdco Industry Advisory Board.
---------------------------------------------------------------------------
\11\ The term ``Effective Date'' refers to the effective date of
the Holdco LLC Agreement, which is February 19, 2020.
\12\ The term ``Supermajority Board Vote'' means the affirmative
vote of at least seventy-seven percent (77%) of the votes of all
directors of Holdco then entitled to vote on the matter under
consideration and who have not recused themselves, whether or not
present at the applicable meeting of the Holdco Board; provided that
if such affirmative vote threshold results in the necessity of the
affirmative vote of all such directors of Holdco with respect to
such matter, an affirmative vote of all but one of such directors of
Holdco shall be required instead with respect to such matter. See
Section 1.1 of the Holdco LLC Agreement.
---------------------------------------------------------------------------
[[Page 55917]]
The Exchange now proposes to amend Section 8.19(a) of the Holdco
LLC Agreement to (i) update the compositional requirements of the
Holdco Industry Advisory Board to reflect that BlackRock has been
admitted as a Holdco Class A Member, and as such would be entitled to
appoint a representative to the Holdco Industry Advisory Board if it so
desires, and to make other clarifying changes relating to certain terms
currently used in that section, and (ii) delete the phrase ``Promptly
after the Effective Date,'' as such phrase is inapplicable and
confusing in the context given the elective nature of the Holdco
Board's ability to establish the Holdco Industry Advisory Board.
Section 8.19(a) presently provides, among other things, that the
Holdco Industry Advisory Board shall be comprised of: (i) One
representative of (a) each Market Maker Class A Member \13\ which is a
Holdco Nominating Class A Member, (b) each Retail Broker Class A Member
\14\ which is a Holdco Nominating Class A Member, (c) each Bank Class A
Member which is a Holdco Nominating Class A Member, and (d) the
Excluded Class A Member so long as it is entitled to appoint an
observer to the Holdco Board (a ``Holdco Board Observer''), and (ii)
such members of the Exchange as determined by the Holdco Board. The
proposed amendment would eliminate the references in this section to
certain specific categories of Holdco Class A Members, namely, Market
Maker Class A Member, Retail Broker Class A Member, and Bank Class A
Member and would replace such references with a single reference to
Holdco Nominating Class A Members, as all of the Holdco Class A Members
that make up such categories, together with BlackRock, now comprise all
of the Holdco Nominating Class A Members.
---------------------------------------------------------------------------
\13\ The term ``Market Maker Class A Member'' refers to each of
Citadel Securities Principal Investments LLC, Virtu Getco
Investments, LLC, Jane Street Group, LLC, and any other Member of
Holdco that is specifically designated as a Market Maker Class A
Member (of which there are none as of the date of this filing), in
each case, together with each of their respective Affiliates. See
Section 1.1 of the Holdco LLC Agreement. On May 12, 2020, Virtu
Getco Investments, LLC changed its name to Virtu Investments LLC.
\14\ The term ``Retail Broker Class A Member'' refers to each of
E*TRADE Financial Corporation, Devonshire Investors (Delaware) LLC,
The Charles Schwab Corporation, Datek Online Management Corp., and
any other Member of Holdco that is specifically designated as a
Retail Broker Class A Member (of which there are none as of the date
of this filing) and which, or an Affiliate of which, is a broker-
dealer registered with the Financial Industry Regulatory Authority,
Inc. which provides services to retail customers, in each case,
together with each of their respective Affiliates. See Section 1.1
of the Holdco LLC Agreement.
---------------------------------------------------------------------------
The effect of the proposed change is to eliminate unnecessary
references to specific categories of Holdco Class A Members and replace
such references with a single reference to Holdco Nominating Class A
Members, which now includes BlackRock in addition to the Holdco Class A
Members that comprise the categories of Holdco Class A Members
presently referenced, and to provide that for so long as each Holdco
Nominating Class A Member remains a Holdco Nominating Class A Member or
is entitled to appoint a Holdco Board Observer pursuant to the terms of
the Holdco LLC Agreement, each such Holdco Nominating Class A Member is
entitled to appoint a representative to the Holdco Industry Advisory
Board if it so desires. The proposed change would also update the
reference to ``the Excluded Class A Member'' in this section to ``each
Excluded Class A Member'' to reflect Wells Fargo's inclusion in that
defined term, but it would not in any way affect any Excluded Class A
Member's right to appoint a representative to the Holdco Industry
Advisory Board, which are in addition to the rights of each Holdco
Nominating Class A Member to appoint a representative to the Holdco
Industry Advisory Board. In short, the proposed amendment would add
BlackRock to the group of Holdco Class A Members that, together with
the Excluded Class A Members, each have the right to appoint a
representative to the Holdco Industry Advisory Board and would simplify
the language used to reflect this.
The Exchange also proposes to amend Section 8.19(a) to delete the
phrase ``Promptly after the Effective Date,'' with respect to the
Holdco Board's ability to establish the Holdco Industry Advisory Board.
The ability granted to the Holdco Board by Section 8.19(a) to establish
the Holdco Industry Advisory Board is elective in nature, as the
existing language provides that Holdco Board may establish the Holdco
Industry Advisory Board, and as such was not intended by the Members of
Holdco to be required to be exercised at any specific time (or at all).
Instead, the language was intended to, and does in effect, provide that
this ability may only be exercised if and when the Holdco Board
determines to do so by Supermajority Board Vote. The phrase ``Promptly
after the Effective Date,'' is therefore inapplicable and may cause
confusion in this context as it could be read to imply an unintended
and undefined durational requirement with respect to the Holdco Board's
ability and discretion to establish the Holdco Industry Advisory Board.
Accordingly, deleting this phrase would clarify the provision to more
accurately reflect the intent of the Members of Holdco for the Holdco
Board to have the ability to establish the Holdco Industry Advisory
Board at such time as determined by Supermajority Board Vote (or not at
all) rather than within any specific amount of time following the
Effective Date. The Holdco Industry Advisory Board has not been
established as of the date of this filing.
Holdco Subsidiary Industry Advisory Boards
The Exchange proposes to amend Section 8.19 of the Holdco LLC
Agreement to add a new clause (c) to specify the compositional
requirements of any Holdco Subsidiary Industry Advisory Board.
Specifically, the proposed new Section 8.19(c) provides that, with
respect to any committee or advisory board of any Holdco Subsidiary
which has functions similar to the contemplated functions of the Holdco
Industry Advisory Board (any such committee or advisory board, a
``Holdco Subsidiary Industry Advisory Board''), (a) each Holdco Class A
Member which is a Holdco Nominating Class A Member, for so long as it
remains a Holdco Nominating Class A Member or is entitled to appoint a
Holdco Board Observer pursuant to the terms of the Holdco LLC
Agreement, and (b) each Excluded Class A Member, for so long as it is
entitled to appoint a Holdco Board Observer pursuant to the terms of
the Holdco LLC Agreement, would have the right, but not the obligation,
to appoint a representative to such Holdco Subsidiary Industry Advisory
Board.
The Exchange believes that the proposed compositional requirements
relating to any Holdco Subsidiary Industry Advisory Board are
consistent with the proposed updated compositional requirements
relating to the Holdco Industry Advisory Board, and as such would
provide for a uniform approach by Holdco and the Holdco Subsidiaries to
considering matters within the scope of such industry advisory boards.
No Holdco Subsidiary Industry Advisory Board has been established as of
the date of this filing.
Connection to the Exchange by Certain Members
Section 11.8 of the Holdco LLC Agreement presently provides that
each Member of Holdco shall use (or shall ensure that any of its
Affiliates that it determines are to be members of the Exchange use)
good faith efforts to take
[[Page 55918]]
such actions as are necessary to enable such Member (or its Affiliates,
as applicable) to connect to the Exchange prior to the operational date
of the Exchange in a manner that would permit such Member (or its
Affiliates, as applicable) to use the Exchange in a fair, equitable and
non-discriminatory manner.
The Exchange now proposes to amend Section 11.8 to clarify that
Members of Holdco which do not operate (or have an Affiliate that
operates) a U.S.-registered broker-dealer that executes transactions
directly on U.S. exchanges are not required to use (or cause its
Affiliates, as applicable, to use) good faith efforts to connect to the
Exchange, as connection to the Exchange by such persons may not be
permissible under Exchange Rule 2.3, which requires, among other
things, that each member of the Exchange be a registered broker or
dealer. The Exchange believes that the proposed amendment clarifies the
existing language in Section 11.8, which could be read to require
Members of Holdco (or their Affiliates, as applicable) that are not
registered as a broker or dealer to use good faith efforts to connect
to the Exchange in a manner inconsistent with Exchange Rule 2.3, to
more accurately reflect the intent of the Members of Holdco to require
only those Members of Holdco (or their Affiliates, as applicable) which
operate a U.S.-registered broker-dealer that executes transactions
directly on U.S. exchanges to use good faith efforts to connect to the
Exchange in a manner consistent with the Exchange's rules and the Act.
BlackRock is an asset manager, and its business model does not
involve acting as a broker-dealer on behalf of third parties on U.S.
exchanges. For clarity's sake, BlackRock does have Affiliates that are
U.S.-registered broker-dealers but these Affiliates do not execute
transactions directly on U.S. exchanges, so out of an abundance of
caution, the Exchange also proposes to further amend Section 11.8 to
specifically provide that the requirement to connect to the Exchange
shall not apply to BlackRock and its Affiliates. If BlackRock were to
alter its business model so that it or any broker-dealer Affiliate did
execute transactions directly on a U.S. exchange and, specifically,
were to connect to the Exchange, the Exchange would require such
connection to be conducted in a manner that would permit such person to
use the Exchange in a fair, equitable and non-discriminatory manner
consistent with the existing requirements of Section 11.8.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act,\15\ in general, and furthers the objectives of
Section 6(b)(1),\16\ in particular, in that it enables the Exchange to
be so organized as to have the capacity to be able to carry out the
purposes of the Act and to comply, and to enforce compliance by its
members, with the provisions of the Act, the rules and regulations
thereunder, and the rules of the Exchange. The Exchange also believes
that the proposed rule change is consistent with Section 6(b)(5) of the
Act,\17\ which requires the rules of an exchange to be designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(1).
\17\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed amendments to the Holdco LLC
Agreement to add ``BlackRock'' and ``Wells Fargo'' as defined terms and
make related conforming changes to certain definitions and other
provisions, to update and clarify the compositional requirements of,
and remove inapplicable and confusing language relating to, the Holdco
Industry Advisory Board, and to add a provision requiring the Holdco
Board to establish the Holdco Market Structure Committee and providing
for certain rights of BlackRock relating to its representation on such
Committee would update and clarify the relevant provisions of the
Holdco LLC Agreement in a manner consistent with actions already taken
by the Holdco Board as currently permitted by the Holdco LLC Agreement,
and as such would enable the Exchange to be so organized as to have the
capacity to carry out the purposes of the Act, remove impediments to
and perfect the mechanism of a free and open market, and protect
investors and the public interest.
The Exchange believes the proposed amendment to the Holdco LLC
Agreement to specify compositional requirements for any Holdco
Subsidiary Industry Advisory Board consistent with the proposed updated
compositional requirements relating to the Holdco Industry Advisory
Board would establish a uniform approach by Holdco and the Holdco
Subsidiaries to the consideration of matters within the scope of such
industry advisory boards, which include technical and operational
matters relating to the Exchange, and as such would promote the
maintenance of a fair and orderly market and the protection of
investors and the public interest.
The Exchange believes the proposed amendment to the Holdco LLC
Agreement to not require Members of Holdco (or their Affiliates, as
applicable) which do not operate a U.S.-registered broker-dealer that
executes transactions directly on U.S. exchanges, including BlackRock
and its Affiliates, to connect to the Exchange would add clarity to the
Holdco LLC Agreement in a manner that would enable the Exchange to
comply, and enforce compliance by its members, with the provisions of
the Act and the rules of the Exchange, which require each member of the
Exchange to be a registered broker or dealer (or person associated with
a registered broker or dealer), and as a result would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
enable the Exchange to be so organized as to have the capacity to carry
out the purposes of the Act. The Exchange also believes that
specifically stating that BlackRock and its Affiliates are not required
to connect to the Exchange is consistent with the Act and the rules of
the Exchange for the reasons set forth above and to avoid potential
confusion because BlackRock does have Affiliates that are U.S.-
registered broker-dealers but that do not execute transactions directly
on U.S. exchanges.
B. Self-Regulatory Organization's Statement on Burden on Competition
Because the proposed rule change relates to: (i) The compositional
requirements of certain non-binding advisory committees and boards of
the Exchange and its parent company and (ii) clarifying and other non-
substantive changes to the corporate documents of the Exchange's parent
company, and not the operations of the Exchange, the Exchange does not
believe that the proposed rule change will impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act.
[[Page 55919]]
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 \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \20\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \21\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay. The
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest
because the proposed rule change does not raise any new issues with
respect to the Exchange and is concerned solely with updating the
corporate documents of the Exchange's parent company to reflect and
accommodate the addition of new investors. Therefore, the Commission
hereby waives the operative delay and designates the proposal as
operative upon filing.\22\
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\23\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MEMX-2020-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MEMX-2020-05. 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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MEMX-2020-05 and should be submitted on
or before October 1, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-19943 Filed 9-9-20; 8:45 am]
BILLING CODE 8011-01-P
