Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 11.6(h)(1) To Enable Users To Include a Limit Price on a Pegged Order With a Primary Peg Instruction, 13778-13780 [2021-04910]
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Federal Register / Vol. 86, No. 45 / Wednesday, March 10, 2021 / Notices
should be submitted on or before March
31, 2021.
instruction.7 The text of the proposed
rule change is provided in Exhibit 5.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
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.
[FR Doc. 2021–04913 Filed 3–9–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91256; File No. SR–MEMX–
2021–03]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Exchange Rule
11.6(h)(1) To Enable Users To Include
a Limit Price on a Pegged Order With
a Primary Peg Instruction
March 4, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
24, 2021, 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
amend Exchange Rule 11.6(h)(1) to
enable Users 5 to include a limit price
on a Pegged Order 6 with a Primary Peg
11 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)(iii).
4 17 CFR 240.19b–4(f)(6).
5 As defined in Exchange Rule 1.5(jj), a ‘‘User’’ is
a member of the Exchange (‘‘Member’’) or
sponsored participant of a Member who is
authorized to obtain access to the System pursuant
to Exchange Rule 11.3. As defined in Exchange Rule
1.5(gg), the Exchange’s ‘‘System’’ is the electronic
communications and trading facility designated by
the Board through which securities orders of Users
are consolidated for ranking, execution and, when
applicable, routing.
6 Pegged Orders are described in Exchange Rules
11.6(h) and 11.8(c) and generally defined as an
order that is pegged to a reference price and
1 15
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Currently, Exchange Rule 11.6(h)(1)
provides that a User submitting a
Pegged Order with a Primary Peg
instruction may not include a limit
price on such order.8 In contrast,
Exchange Rule 11.6(h)(2) provides that
a User submitting a Pegged Order with
a Midpoint Peg instruction may, but is
not required to, include a limit price on
such order. The Exchange therefore
currently has different functionality
with respect to a User’s ability to
include a limit price on a Pegged Order
with a Primary Peg instruction and a
Pegged Order with a Midpoint Peg
automatically re-prices in response to changes in
the NBBO. The two types of peg instructions for
Pegged Orders are: (1) Primary Peg, which pegs to
the NBB (NBO) for buy (sell) orders; and (2)
Midpoint Peg, which pegs to the midpoint of the
NBBO.
7 A Primary Peg instruction is an instruction that
may be placed on a Pegged Order that instructs the
Exchange to peg the order to the NBB, for a buy
order, or the NBO, for a sell order. A User may, but
is not required to, select an offset equal to or greater
than $0.01 above or below the NBB or NBO that the
order is pegged to. See Exchange Rule 11.6(h)(1).
8 As initially adopted, Exchange Rule 11.6(h)(1)
was silent as to whether a User submitting a Pegged
Order with a Primary Peg instruction may include
a limit price on such order. The Exchange
interpreted the Rule’s silence in this regard to mean
that a limit price may not be included on such
orders, which was the intended functionality for
such orders at the time of the Exchange’s initial
launch. However, after receiving inquiries from
Users as to whether a limit price may be included
on such orders, prior to commencing operations the
Exchange adopted a change to Exchange Rule
11.6(h)(1) to expressly state that a User submitting
a Pegged Order with a Primary Peg instruction may
not include a limit price on such order. The
purpose of this change was therefore to make
Exchange Rule 11.6(h)(1) more clearly reflect the
intended and actual functionality. See Securities
Exchange Act Release No. 89581 (August 17, 2020),
85 FR 51799 (August 21, 2020) (SR–MEMX–2020–
04).
PO 00000
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instruction in that Users may only
include a limit price on the latter.
The Exchange now proposes to enable
a User submitting a Pegged Order with
a Primary Peg instruction to include a
limit price on such order. The purpose
of the proposed change is to align the
functionality with respect to a User’s
ability to include a limit price for the
two types of peg instructions for Pegged
Orders (i.e., Primary Peg and Midpoint
Peg), as the Exchange believes there
should be no distinction with respect to
this functionality for such orders. Thus,
the language of the proposed change is
based on and mirrors the relevant
language applicable to Pegged Orders
with a Midpoint Peg instruction set
forth in Exchange Rule 11.6(h)(2) and,
accordingly, provides that a User
submitting a Pegged Order with a
Primary Peg instruction may, but is not
required to, include a limit price on
such order.
The Exchange notes that by enabling
a User to include a limit price on a
Pegged Order with a Primary Peg
instruction, the User is able to establish
an additional risk protection in the form
of a specified price limitation, which
the Exchange believes would help to
minimize the risk of executions of such
orders at unintended price levels,
thereby promoting the operation of a fair
and orderly market. Accordingly, as
Users would have greater flexibility in
establishing a price limitation with
respect to such orders, the Exchange
believes that the proposed change
would result in Users sending
additional Pegged Orders with a
Primary Peg instruction to the
Exchange, which would deepen the
liquidity on the Exchange to the benefit
of all Users. The Exchange also notes
that the proposed change to enable
Users to include a limit price on a
Pegged Order with a Primary Peg
instruction is consistent with the
existing functionality of other
exchanges.9
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b)(5) of the Act,10 which
requires, among other things, that the
Exchange’s rules must be designed to
9 See, e.g., Cboe EDGX Exchange, Inc. (‘‘EDGX’’)
Rule 11.8(b)(9), which provides that pegged
functionality (including a primary peg instruction
similar to the Exchange’s Primary Peg instruction)
is available for limit orders that are posted to the
EDGX book; The Nasdaq Stock Market LLC
(‘‘Nasdaq’’) Rule 4703(d), which generally permits
an order with pegging (including primary pegging
similar to the Exchange’s Primary Peg instruction)
to specify a limit price beyond which the order may
not be executed.
10 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 86, No. 45 / Wednesday, March 10, 2021 / Notices
promote just and equitable principles of
trade and 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, and
Section 6(b)(8) of the Act,11 which
requires that the Exchange’s rules not
impose any burden on competition that
is not necessary or appropriate.
As noted above, the proposed change
is intended to align the functionality for
Pegged Orders with a Primary Peg
instruction with the functionality for
Pegged Orders with a Midpoint Peg
instruction with respect to enabling a
User to include a limit price on such
orders, as the Exchange believes there
should be no distinction with respect to
this functionality for such orders. The
Exchange believes that the proposed
change is appropriate and consistent
with the Act as the Exchange believes
that enabling Users to establish
additional risk protection in the form of
a specified price limitation for Pegged
Orders with a Primary Peg instruction
would help to minimize the risk of
executions of such orders at unintended
price levels, which the Exchange
believes would promote just and
equitable principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, protect investors and the public
interest. The Exchange further believes
that enabling Users to include a limit
price on a Pegged Order with a Primary
Peg instruction is appropriate and
consistent with the Act as the Exchange
believes that its Users would want to
utilize this functionality, thereby
resulting in additional liquidity in the
form of Pegged Orders with a Primary
Peg instruction being sent to the
Exchange, which would deepen the
liquidity on the Exchange to the benefit
of all Users.
Furthermore, the proposed change
would make the Exchange’s
functionality consistent with the
functionality of certain other exchanges
with respect to a User’s ability to
include a limit price on Pegged Orders
with a Primary Peg instruction,12 which
the Exchange believes would promote
just and equitable principles of trade,
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, would protect investors and the
public interest.
11 15
U.S.C. 78f(b)(8).
supra note 9.
12 See
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would result
in any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange reiterates that the proposed
rule change would make the
functionality with respect to a User’s
ability to include a limit price on
Pegged Orders with a Primary Peg
instruction consistent with the
functionality of other exchanges.13 The
Exchange believes that the proposed
rule change would not burden
intramarket competition because the
ability to include a limit price on
Pegged Orders with a Primary Peg
instruction would be applicable to all
Users. The Exchange also believes that
the proposed rule change would not
burden, but rather increase, intermarket
competition as the Exchange believes
that enabling Users to include a limit
price on Pegged Orders with a Primary
Peg instruction would ultimately enable
the Exchange to better compete with
other exchanges that offer this same
functionality. Thus, the Exchange
believes that the proposed rule change
would facilitate fair competition among
national securities exchanges.
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 14 and Rule 19b–
4(f)(6) 15 thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 16 normally does not
13 See
supra note 9.
U.S.C. 78s(b)(3)(A).
15 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 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 complied with this requirement.
16 17 CFR 240.19b–4(f)(6).
14 15
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
13779
become operative for 30 days after the
date of its filing. However, Rule 19b–
4(f)(6)(iii) 17 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
Exchange states that waiver of the
operative delay would allow the
Exchange to begin accepting Pegged
Orders with a Primary Peg instruction
that include a limit price as soon as
practicable,18 thus benefitting Users and
investors by sooner offering
functionality that enables Users to
establish an additional risk protection in
the form of a specified price limitation
for such orders. The Exchange believes
this would help to minimize the risk of
executions of such orders at unintended
price levels, thereby promoting the
operation of a fair and orderly market.
In addition, the Exchange states that the
proposed rule change merely seeks to
align the functionality for Pegged Orders
with a Primary Peg instruction with the
functionality for Pegged Orders with a
Midpoint Peg instruction with respect to
a User’s ability to include a limit price
on such orders. The Commission
believes waiver of the operative delay
will provide Users with an optional
additional risk protection tool,
permitting them to set a limit price for
Pegged Orders with a Primary Peg
instruction if they choose, without
unnecessary delay. The Commission
further believes that the proposed
functionality is consistent with the
functionality of other exchanges 19 and
thus does not raise any new or novel
issues. For these reasons, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission waives the operative delay
and designates the proposed rule change
operative upon filing.20
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
17 17
CFR 240.19b–4(f)(6)(iii).
its filing, the Exchange stated that it plans
to implement the proposed rule change on or about
March 15, 2021.
19 See, e.g., supra note 9.
20 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).
18 In
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Federal Register / Vol. 86, No. 45 / Wednesday, March 10, 2021 / Notices
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MEMX–2021–03 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–2021–03. 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 such
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–2021–03, and
VerDate Sep<11>2014
17:22 Mar 09, 2021
Jkt 253001
should be submitted on or before March
31, 2021.
whether to approve or disapprove the
proposed rule change.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
II. Description of the Proposed Rule
Change
The proposed rule change would: (1)
Adopt FINRA Rule 4111 (Restricted
Firm Obligations) to require member
firms that are identified as ‘‘Restricted
Firms’’ to maintain a deposit in a
segregated account with withdrawals
requiring FINRA’s approval, adhere to
specified conditions or restrictions, or
comply with a combination of such
obligations; and (2) adopt FINRA Rule
9561 (Procedures for Regulating
Activities Under Rule 4111), and amend
FINRA Rule 9559 (Hearing Procedures
for Expedited Proceedings Under the
Rule 9550 Series), to create a new
expedited proceeding to implement
proposed Rule 4111.6
[FR Doc. 2021–04910 Filed 3–9–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91258; File No. SR–FINRA–
2020–041]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove the Proposed
Rule Change To Adopt FINRA Rule
4111 (Restricted Firm Obligations) and
FINRA Rule 9561 (Procedures for
Regulating Activities Under Rule 4111)
March 4, 2021.
I. Introduction
On November 16, 2020, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change SR–FINRA–
2020–041 pursuant to Section 19(b)(1)
of the Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–4 2
thereunder to address the risks that can
be posed to investors and the broader
market by broker-dealers that have a
history of misconduct. The proposed
rule change was published for public
comment in the Federal Register on
December 4, 2020.3 On January 12,
2021, FINRA consented to extend, until
March 4, 2021, the time period in which
the Commission must approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
approve or disapprove the proposed
rule change.4 The Commission is
publishing this order pursuant to
Section 19(b)(2)(B) of the Exchange Act 5
to institute proceedings to determine
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Exchange Act Release No. 90527 (Nov. 27,
2020), 85 FR 78540 (Dec. 4, 2020) (File No. SR–
FINRA–2020–041) (‘‘Notice’’).
4 See letter from Michael Garawski, Associate
General Counsel, OGC Regulatory Practice and
Policy, FINRA, to Daniel Fisher, Branch Chief,
Division of Trading and Markets, Commission,
dated January 12, 2021.
5 15 U.S.C. 78s(b)(2)(B).
1 15
PO 00000
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Proposed Rule 4111 (Restricted Firm
Obligations)
Proposed Rule 4111 would establish
numeric thresholds based on firm-level
and individual-level disclosure events
to identify member firms with a
significantly higher level of risk-related
disclosures as compared to similarlysized peers.7 Following a multi-step
process of evaluating a member firm,
FINRA’s Department of Member
Regulation (‘‘Department’’) would be
permitted to impose on member firms it
determines pose a high risk to the
investing public a ‘‘Restricted Deposit
Requirement,’’ 8 conditions or
restrictions on the member firm’s
operations that are necessary or
appropriate to protect investors and the
public interest, or both.9
FINRA would conduct the process
annually for each member firm,
determining whether it should be
designated (or re-designated) as a
Restricted Firm and whether it should
be subject to any obligations.10 Each
member firm that is preliminarily
identified based on its firm-level and
individual-level disclosure events
would have several ways to affect
outcomes during subsequent steps in
the evaluative process, including a onetime opportunity to terminate registered
representatives with relevant disclosure
events so as to no longer trigger the
numeric thresholds.11 The member firm
would also be able to explain to the
Department why it should not be subject
to a Restricted Deposit Requirement or
6 See
Notice at 78541–78550.
Notice at 78541.
8 See proposed Rule 4111(i)(15) (defining
‘‘Restricted Deposit Requirement’’).
9 See Notice at 78542.
10 Id.
11 Id.
7 See
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]]>Agencies
[Federal Register Volume 86, Number 45 (Wednesday, March 10, 2021)]
[Notices]
[Pages 13778-13780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04910]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91256; File No. SR-MEMX-2021-03]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend Exchange
Rule 11.6(h)(1) To Enable Users To Include a Limit Price on a Pegged
Order With a Primary Peg Instruction
March 4, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 24, 2021, 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)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to amend Exchange Rule 11.6(h)(1) to enable Users \5\ to include a
limit price on a Pegged Order \6\ with a Primary Peg instruction.\7\
The text of the proposed rule change is provided in Exhibit 5.
---------------------------------------------------------------------------
\5\ As defined in Exchange Rule 1.5(jj), a ``User'' is a member
of the Exchange (``Member'') or sponsored participant of a Member
who is authorized to obtain access to the System pursuant to
Exchange Rule 11.3. As defined in Exchange Rule 1.5(gg), the
Exchange's ``System'' is the electronic communications and trading
facility designated by the Board through which securities orders of
Users are consolidated for ranking, execution and, when applicable,
routing.
\6\ Pegged Orders are described in Exchange Rules 11.6(h) and
11.8(c) and generally defined as an order that is pegged to a
reference price and automatically re-prices in response to changes
in the NBBO. The two types of peg instructions for Pegged Orders
are: (1) Primary Peg, which pegs to the NBB (NBO) for buy (sell)
orders; and (2) Midpoint Peg, which pegs to the midpoint of the
NBBO.
\7\ A Primary Peg instruction is an instruction that may be
placed on a Pegged Order that instructs the Exchange to peg the
order to the NBB, for a buy order, or the NBO, for a sell order. A
User may, but is not required to, select an offset equal to or
greater than $0.01 above or below the NBB or NBO that the order is
pegged to. See Exchange Rule 11.6(h)(1).
---------------------------------------------------------------------------
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
Currently, Exchange Rule 11.6(h)(1) provides that a User submitting
a Pegged Order with a Primary Peg instruction may not include a limit
price on such order.\8\ In contrast, Exchange Rule 11.6(h)(2) provides
that a User submitting a Pegged Order with a Midpoint Peg instruction
may, but is not required to, include a limit price on such order. The
Exchange therefore currently has different functionality with respect
to a User's ability to include a limit price on a Pegged Order with a
Primary Peg instruction and a Pegged Order with a Midpoint Peg
instruction in that Users may only include a limit price on the latter.
---------------------------------------------------------------------------
\8\ As initially adopted, Exchange Rule 11.6(h)(1) was silent as
to whether a User submitting a Pegged Order with a Primary Peg
instruction may include a limit price on such order. The Exchange
interpreted the Rule's silence in this regard to mean that a limit
price may not be included on such orders, which was the intended
functionality for such orders at the time of the Exchange's initial
launch. However, after receiving inquiries from Users as to whether
a limit price may be included on such orders, prior to commencing
operations the Exchange adopted a change to Exchange Rule 11.6(h)(1)
to expressly state that a User submitting a Pegged Order with a
Primary Peg instruction may not include a limit price on such order.
The purpose of this change was therefore to make Exchange Rule
11.6(h)(1) more clearly reflect the intended and actual
functionality. See Securities Exchange Act Release No. 89581 (August
17, 2020), 85 FR 51799 (August 21, 2020) (SR-MEMX-2020-04).
---------------------------------------------------------------------------
The Exchange now proposes to enable a User submitting a Pegged
Order with a Primary Peg instruction to include a limit price on such
order. The purpose of the proposed change is to align the functionality
with respect to a User's ability to include a limit price for the two
types of peg instructions for Pegged Orders (i.e., Primary Peg and
Midpoint Peg), as the Exchange believes there should be no distinction
with respect to this functionality for such orders. Thus, the language
of the proposed change is based on and mirrors the relevant language
applicable to Pegged Orders with a Midpoint Peg instruction set forth
in Exchange Rule 11.6(h)(2) and, accordingly, provides that a User
submitting a Pegged Order with a Primary Peg instruction may, but is
not required to, include a limit price on such order.
The Exchange notes that by enabling a User to include a limit price
on a Pegged Order with a Primary Peg instruction, the User is able to
establish an additional risk protection in the form of a specified
price limitation, which the Exchange believes would help to minimize
the risk of executions of such orders at unintended price levels,
thereby promoting the operation of a fair and orderly market.
Accordingly, as Users would have greater flexibility in establishing a
price limitation with respect to such orders, the Exchange believes
that the proposed change would result in Users sending additional
Pegged Orders with a Primary Peg instruction to the Exchange, which
would deepen the liquidity on the Exchange to the benefit of all Users.
The Exchange also notes that the proposed change to enable Users to
include a limit price on a Pegged Order with a Primary Peg instruction
is consistent with the existing functionality of other exchanges.\9\
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\9\ See, e.g., Cboe EDGX Exchange, Inc. (``EDGX'') Rule
11.8(b)(9), which provides that pegged functionality (including a
primary peg instruction similar to the Exchange's Primary Peg
instruction) is available for limit orders that are posted to the
EDGX book; The Nasdaq Stock Market LLC (``Nasdaq'') Rule 4703(d),
which generally permits an order with pegging (including primary
pegging similar to the Exchange's Primary Peg instruction) to
specify a limit price beyond which the order may not be executed.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(5) of the Act,\10\ which requires, among other
things, that the Exchange's rules must be designed to
[[Page 13779]]
promote just and equitable principles of trade and 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, and Section 6(b)(8) of the Act,\11\ which requires that the
Exchange's rules not impose any burden on competition that is not
necessary or appropriate.
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\10\ 15 U.S.C. 78f(b)(5).
\11\ 15 U.S.C. 78f(b)(8).
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As noted above, the proposed change is intended to align the
functionality for Pegged Orders with a Primary Peg instruction with the
functionality for Pegged Orders with a Midpoint Peg instruction with
respect to enabling a User to include a limit price on such orders, as
the Exchange believes there should be no distinction with respect to
this functionality for such orders. The Exchange believes that the
proposed change is appropriate and consistent with the Act as the
Exchange believes that enabling Users to establish additional risk
protection in the form of a specified price limitation for Pegged
Orders with a Primary Peg instruction would help to minimize the risk
of executions of such orders at unintended price levels, which the
Exchange believes would promote just and equitable principles of trade,
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, protect investors
and the public interest. The Exchange further believes that enabling
Users to include a limit price on a Pegged Order with a Primary Peg
instruction is appropriate and consistent with the Act as the Exchange
believes that its Users would want to utilize this functionality,
thereby resulting in additional liquidity in the form of Pegged Orders
with a Primary Peg instruction being sent to the Exchange, which would
deepen the liquidity on the Exchange to the benefit of all Users.
Furthermore, the proposed change would make the Exchange's
functionality consistent with the functionality of certain other
exchanges with respect to a User's ability to include a limit price on
Pegged Orders with a Primary Peg instruction,\12\ which the Exchange
believes would promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, would protect investors and
the public interest.
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\12\ See supra note 9.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
reiterates that the proposed rule change would make the functionality
with respect to a User's ability to include a limit price on Pegged
Orders with a Primary Peg instruction consistent with the functionality
of other exchanges.\13\ The Exchange believes that the proposed rule
change would not burden intramarket competition because the ability to
include a limit price on Pegged Orders with a Primary Peg instruction
would be applicable to all Users. The Exchange also believes that the
proposed rule change would not burden, but rather increase, intermarket
competition as the Exchange believes that enabling Users to include a
limit price on Pegged Orders with a Primary Peg instruction would
ultimately enable the Exchange to better compete with other exchanges
that offer this same functionality. Thus, the Exchange believes that
the proposed rule change would facilitate fair competition among
national securities exchanges.
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\13\ See supra note 9.
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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 \14\ and Rule 19b-
4(f)(6) \15\ thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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 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 complied with this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative for 30 days after the date of its filing.
However, Rule 19b-4(f)(6)(iii) \17\ 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 Exchange states
that waiver of the operative delay would allow the Exchange to begin
accepting Pegged Orders with a Primary Peg instruction that include a
limit price as soon as practicable,\18\ thus benefitting Users and
investors by sooner offering functionality that enables Users to
establish an additional risk protection in the form of a specified
price limitation for such orders. The Exchange believes this would help
to minimize the risk of executions of such orders at unintended price
levels, thereby promoting the operation of a fair and orderly market.
In addition, the Exchange states that the proposed rule change merely
seeks to align the functionality for Pegged Orders with a Primary Peg
instruction with the functionality for Pegged Orders with a Midpoint
Peg instruction with respect to a User's ability to include a limit
price on such orders. The Commission believes waiver of the operative
delay will provide Users with an optional additional risk protection
tool, permitting them to set a limit price for Pegged Orders with a
Primary Peg instruction if they choose, without unnecessary delay. The
Commission further believes that the proposed functionality is
consistent with the functionality of other exchanges \19\ and thus does
not raise any new or novel issues. For these reasons, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission waives the operative delay and designates the proposed rule
change operative upon filing.\20\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ In its filing, the Exchange stated that it plans to
implement the proposed rule change on or about March 15, 2021.
\19\ See, e.g., supra note 9.
\20\ 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
[[Page 13780]]
Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule change should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MEMX-2021-03 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-2021-03. 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 such 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-2021-03, and should be submitted on
or before March 31, 2021.
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\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04910 Filed 3-9-21; 8:45 am]
BILLING CODE 8011-01-P
