Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to the Handling of Displayed Odd Lot Orders and Non-Displayed Orders That Become Locked or Crossed, 24951-24956 [2021-09776]

Download as PDF Federal Register / Vol. 86, No. 88 / Monday, May 10, 2021 / Notices 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–Phlx–2021–25 and should be submitted on or before June 1, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.58 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–09778 Filed 5–7–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91748; File No. SR–MEMX– 2021–06] Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to the Handling of Displayed Odd Lot Orders and NonDisplayed Orders That Become Locked or Crossed khammond on DSKJM1Z7X2PROD with NOTICES May 4, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 30, 2021, MEMX LLC (‘‘MEMX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘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 58 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 19:05 May 07, 2021 Jkt 253001 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 related to: (1) The handling of a Limit Order of Odd Lot size with a Displayed instruction that is resting on the MEMX Book and subsequently becomes locked or crossed by an away Trading Center’s Protected Quotation; and (2) the handling of a Limit Order with a NonDisplayed instruction that is resting on the MEMX Book and subsequently becomes crossed by an away Trading Center’s Protected Quotation.5 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 Introduction The Exchange proposes to make changes to the Exchange’s Rules related to the handling of a Limit Order 6 of 3 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 5 All terms as further defined below. 6 Limit Orders are described in Exchange Rule 11.8(b) and generally defined as an order to buy or sell a stated amount of a security at a specified price or better. 4 17 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 24951 Odd Lot 7 size with a Displayed 8 instruction (a ‘‘Displayed Odd Lot Order’’) that is resting on the MEMX Book 9 and subsequently becomes locked or crossed by an away Trading Center’s 10 Protected Quotation.11 In addition, the Exchange proposes to make changes to the Exchange’s Rules related to the handling of a Limit Order with a Non-Displayed 12 instruction (a ‘‘Non-Displayed Order’’) that is resting on the MEMX Book and subsequently becomes crossed by an away Trading Center’s Protected Quotation. The Exchange’s Rules currently describe all functionality with respect to orders of Round Lot, Mixed Lot and Odd Lot size without distinction because the Exchange generally handles these orders the same. However, the Exchange’s System currently handles Displayed Odd Lot Orders differently than other orders in specific market circumstances, as described below. The Exchange proposes to codify this behavior as set forth in proposed Rules 11.6(j) and 11.8(b)(8). In addition, the Exchange proposes a change to current functionality with respect to orders with an Odd Lot size and orders with a NonDisplayed instruction that are eligible to be routed, as further described below. 7 The term ‘‘Odd Lot’’ refers to any amount less than a Round Lot. Orders of Odd Lot size are only eligible to be Protected Quotations if aggregated to form a Round Lot. The term ‘‘Round Lot’’ refers to one hundred (100) shares or any multiple thereof, unless an alternative number of shares is established as a Round Lot by the listing exchange for the security. Orders that are a Round Lot are eligible to be Protected Quotations. See Exchange Rule 11.6(q). 8 The term ‘‘Displayed’’ refers to an instruction a User may attach to an order stating that the order is to be displayed by the System on the MEMX Book. See Exchange Rule 11.6(c)(1). 9 The term ‘‘MEMX Book’’ refers to the System’s electronic file of orders. See Exchange Rule 1.5(q). The term ‘‘System’’ refers to 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. See Exchange Rule 1.5(gg). The term ‘‘User’’ refers to any Member or Sponsored Participant who is authorized to obtain access to the System. See Exchange Rule 1.5(jj). 10 The term ‘‘Trading Center’’ refers to other securities exchanges, facilities of securities exchanges, automated trading systems, electronic communications networks or other brokers or dealers. 11 The term ‘‘Protected Quotation’’ refers to a quotation that is a Protected Bid or Protected Offer. The term ‘‘Protected Bid’’ or ‘‘Protected Offer’’ refers to a bid or offer in a stock that is (i) displayed by an automated trading center; (ii) disseminated pursuant to an effective national market system plan; and (iii) an automated quotation that is the best bid or best offer of a national securities exchange or association. See Exchange Rule 1.5(z). 12 The term ‘‘Non-Displayed’’ refers to an instruction a User may attach to an order stating that the order is not to be displayed by the System on the MEMX Book. See Exchange Rule 11.6(c)(2). E:\FR\FM\10MYN1.SGM 10MYN1 khammond on DSKJM1Z7X2PROD with NOTICES 24952 Federal Register / Vol. 86, No. 88 / Monday, May 10, 2021 / Notices Displayed Odd Lot Orders Currently, when an away Trading Center publishes a Protected Quotation that locks or crosses the displayed price of a Displayed Odd Lot Order and the Exchange does not have a Protected Quotation displayed at such price, such order will be cancelled by the System unless such order contains a multiple price sliding instruction, in which case such order will be re-priced pursuant to Rule 11.6(j)(1)(A). The Exchange proposes to add language to this effect to Rule 11.8(b)(8), which currently addresses the handling of Limit Orders in certain circumstances where such orders would cross Protected Quotations of other Trading Centers. As proposed, under Rule 11.8(b)(8), when an away Trading Center publishes a Protected Quotation that locks or crosses the displayed price of a resting Limit Order of Odd Lot size with a Displayed instruction and the Exchange does not have a Protected Quotation displayed at such price, such order will be cancelled by the System unless such order contains a multiple price sliding instruction, in which case such order will be re-priced pursuant to Rule 11.6(j)(1)(A), or the order is routed, as described below. The Exchange also proposes to rename Rule 11.8(b)(8) as ‘‘Locked or Crossed Market.’’ In addition to the changes described above with respect to Rule 11.8(b)(8), the Exchange proposes to codify the repricing functionality applied to Displayed Odd Lot Orders with a multiple price sliding instruction that are subsequently locked or crossed by other Trading Centers. As background, the Exchange currently offers price sliding functionality that allows display-eligible orders to be permissibly ranked and displayed in accordance with Regulation NMS. Pursuant to this price sliding functionality, an order that would be a Locking or Crossing Quotation of an away Trading Center if displayed by the System on the MEMX Book at the time of entry will be ranked at the Locking Price in the MEMX Book (i.e., executable at that price but not displayed) and displayed by the System one Minimum Price Variation away (i.e., lower for a bid or higher for an offer).13 In turn, once an order has been permissibly displayed by the System, such order will generally only be reranked and re-displayed to the extent it achieves a more aggressive price.14 In other words, once an order is displayed on the MEMX Book it will stand its ground and not be re-priced to a less 13 See 14 See MEMX Rule 11.6(j)(1)(A)(i). MEMX Rule 11.6(j)(1)(A)(ii) (emphasis added). VerDate Sep<11>2014 19:05 May 07, 2021 Jkt 253001 aggressive price even if other Trading Centers publish Protected Quotations that lock or cross its displayed price, except in two circumstances described below; one of these circumstances is already described in MEMX Rule 11.6(j)(1)(A)(ii) and the other circumstance the Exchange proposes to codify in such Rule. As currently set forth in Rule 11.6(j)(1)(A)(ii), the Exchange will reprice an order resting on the MEMX Book that is subject to display-price sliding when an away Trading Center publishes a Protected Quotation at a price that locks or crosses such order’s displayed price. In such circumstance, the Exchange will re-rank the order subject to display-price sliding so that the order’s ranked price is the same price as the displayed price. The Exchange re-ranks an order to a less aggressive price in this circumstance to avoid potentially trading through a Protected Quotation displayed by another Trading Center (i.e., the ranked price, which is not displayed and not permitted to stand its ground, is changed to a less aggressive price to be the same price as the displayed price). In addition to the exception set forth in Rule 11.6(j)(1)(A)(ii) described above, the Exchange also currently re-prices a Displayed Odd Lot Order with a multiple price sliding instruction to a less aggressive price when the Exchange is not displaying a Protected Quotation at the displayed price of such order and such order’s displayed price is locked or crossed by a Protected Quotation published by an away Trading Center. Specifically, when an away Trading Center publishes a Protected Quotation that locks or crosses the displayed price of a resting Displayed Odd Lot Order with a multiple price sliding instruction and the Exchange does not have a Protected Quotation displayed at such order’s displayed price, the resting Displayed Odd Lot Order is re-ranked at the Locking Price in the MEMX Book and re-displayed by the System at one Minimum Price Variation lower (higher) than the Locking Price for orders to buy (sell). The Exchange proposes to codify this behavior through both the proposed amendment to Rule 11.8(b)(8), discussed above, and a proposed amendment to Rule 11.6(j)(1)(A)(ii). The final codification of existing behavior proposed by the Exchange relates to the Exchange’s handling of a Displayed Odd Lot Order subject to Rule 201 of Regulation SHO that is subsequently locked or crossed. As set forth in Rule 11.6(j)(2)(A), the Exchange cancels any order with a Non-Displayed instruction subject to Rule 201 of Regulation SHO when the NBB changes PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 such that the order would be a Locking Quotation or Crossing Quotation. Because Displayed Odd Lot Orders are displayed on the Exchange’s proprietary data feed but not on the consolidated market data feeds, the Exchange applies this same logic to Displayed Odd Lot Orders when such orders are subject to Rule 201 of Regulation SHO (i.e., marked short and a Short Sale Circuit Breaker is in effect). Accordingly, the Exchange cancels any Displayed Odd Lot Order subject to Rule 201 of Regulation SHO when the NBB locks or crosses the price of such an order and proposes to add language to this effect to Rule 11.6(j)(2)(A) to codify this behavior. In addition to codifying the current functionality regarding the handling of Displayed Odd Lot Orders that are locked or crossed by other Trading Centers as described above, the Exchange proposes to add functionality to route such orders in this circumstance to the extent the orders are eligible to be routed. Based on the proposed amendment to Rule 11.8(b)(8), when a Displayed Odd Lot Order is locked or crossed by a Protected Quotation published by another Trading Center and such order is eligible for routing such order will be routed according to the User’s instructions. The Exchange believes that a User that has originally designated an order as a routable order (thus willing to remove liquidity from an away Trading Center on entry), instead of having an order of Odd Lot size canceled or price slid, would prefer to have such order routed if it is subsequently locked or crossed by a Protected Quotation published by another Trading Center. Examples The below examples illustrate the proposed behavior for a Displayed Odd Lot Order. Assume the National Best Bid and Offer (‘‘NBBO’’) is $10.00 by $10.10. An order to sell 5 shares of security ABC is displayed on the MEMX Book at $10.07 (‘‘Order 1’’). Order 1 has a Short Sale instruction, however, security ABC is not currently subject to a Short Sale Circuit Breaker pursuant to Rule 201 of Regulation SHO. There are no other orders to buy or sell security ABC resting on the MEMX Book. An away Trading Center publishes a Protected Bid to buy 100 shares of security ABC at $10.08, thus updating the NBBO to $10.08 by $10.10. The handling of Order 1 will depend on the User’s instructions for the order, with three potential outcomes: • If Order 1 has a multiple price sliding instruction, then the order will E:\FR\FM\10MYN1.SGM 10MYN1 Federal Register / Vol. 86, No. 88 / Monday, May 10, 2021 / Notices be re-priced and ranked to sell at $10.08 and re-displayed at $10.09. • If Order 1 is eligible for routing, then the order will be routed with a limit price of $10.07 to attempt to execute against the Protected Bid displayed at $10.08 by the away Trading Center. • If Order 1 does not have a multiple price sliding instruction and is ineligible for routing, then the order will be cancelled. Assume the same example as above, however, instead assume that security ABC is currently subject to a Short Sale Circuit Breaker pursuant to Rule 201 of Regulation SHO. If an away Trading Center publishes a Protected Bid to buy 100 shares of security ABC at $10.08, thus updating the NBBO to $10.08 by $10.10, Order 1 will be cancelled. This outcome is the same even if such order has a multiple price sliding instruction or was submitted as a routable order. khammond on DSKJM1Z7X2PROD with NOTICES Non-Displayed Orders As set forth in current Rule 11.8(b)(8), when a Non-Displayed Order would be a Crossing Quotation if displayed at the price at which it is ranked (i.e., when an away Trading Center publishes a Protected Quotation that crosses the ranked price of such an order), the Exchange cancels such order in order to prevent a trade-through that would occur if such order were instead executed at its ranked price. The Exchange proposes to maintain this behavior for Non-Displayed Orders (including orders of Round Lot, Mixed Lot and Odd Lot size) that are not routable; however, consistent with the proposed change above regarding routable Displayed Odd Lot Orders, the Exchange proposes to route a NonDisplayed Order in such circumstance if the order is routable. Accordingly, the Exchange proposes to amend Rule 11.8(b)(8) so that a Non-Displayed Order that is eligible for routing will route according to a User’s instructions when such order would be a Crossing Quotation of another Trading Center. As is the case today, if a Non-Displayed Order is not eligible for routing and an away Trading Center publishes a Protected Quotation that crosses the ranked price of such order, the order will be canceled. Examples The below examples illustrate the proposed behavior for a Non-Displayed Order. Again, assume the National Best Bid and Offer (‘‘NBBO’’) is $10.00 by $10.10. An order to sell 100 shares of security ABC is resting non-displayed on the MEMX Book at $10.07 (‘‘Order 2’’). VerDate Sep<11>2014 19:05 May 07, 2021 Jkt 253001 Order 2 has a Short Sale instruction, however, security ABC is not currently subject to a Short Sale Circuit Breaker pursuant to Rule 201 of Regulation SHO. There are no other orders to buy or sell security ABC resting on the MEMX Book. An away Trading Center publishes a Protected Bid to buy 100 shares of security ABC at $10.08, thus updating the NBBO to $10.08 by $10.10. The handling of Order 2 will depend on the User’s instructions for the order, with two potential outcomes: • If Order 2 is eligible for routing, then the order will be routed with a limit price of $10.07 to attempt to execute against the Protected Bid displayed at $10.08 by the away Trading Center. • If Order 2 is ineligible for routing, then the order will be cancelled. Assume the same example as above, however that security ABC is currently subject to a Short Sale Circuit Breaker pursuant to Rule 201 of Regulation SHO. If an away Trading Center publishes a Protected Bid to buy 100 shares of security ABC at $10.08, thus updating the NBBO to $10.08 by $10.10, Order 2 will be cancelled. This outcome is the same even if such order was submitted as a routable order. Additional Discussion The Exchange has implemented its System functionality in order to maintain compliance with Regulation NMS, Regulation SHO and other applicable regulations. The functionality described above, both current and proposed, is designed to ensure that the Exchange does not display quotations that would lock or cross Protected Quotations of other Trading Centers nor maintain orders at price levels at which, if executed, would trade through Protected Quotations (or at the NBB in the context of an order subject to Rule 201 of Regulation SHO). Although the exact treatment of orders of Odd Lot size described above is not explicitly required by these regulations, and indeed the Exchange could have adopted a different implementation with respect to certain points, the Exchange does believe that its implementation is consistent with such regulations and the Act, generally. In particular, although Displayed Odd Lot Orders are technically displayed by the System and thus can be accessed by market participants, such orders are not Protected Quotations and are not displayed on consolidated market data feeds. As such, the Exchange’s current implementation that it is proposing to codify treats such orders in certain ways similar to the manner in which the Exchange handles Non-Displayed PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 24953 Orders. Further, the Exchange believes that its proposed new functionality with respect to routing proposes sufficient optionality for Users of the Exchange to determine how they wish to have their Displayed Odd Lot Orders handled in the event such orders are locked or crossed by a Protected Quotation published by an away Trading Center. In particular, by offering the ability to either be canceled, re-priced or routed away from the Exchange, the Exchange believes that Users will be able to select their preferred order handling. The Exchange similarly believes that its proposed new functionality with respect to routing Non-Displayed Orders would enable Users to select their preferred order handling with respect to such orders when an away Trading Center publishes a Protected Quotation that crosses the ranked price of such an order. Based on a review of the current rules of other exchanges, certain aspects of the Exchange’s current handling of Displayed Odd Lot Orders is unique and some exchanges allow such orders to stand their ground when an odd lot order is crossed by a Protected Quotation published by another Trading Center.15 However, other exchanges have previously maintained similar functionality to instead cancel, route or re-price odd lot orders in such a circumstance. For instance, the Chicago Stock Exchange (‘‘CHX’’) previously offered functionality approved by the Commission that, like the Exchange’s proposed functionality, treated odd lot orders and unexecuted odd lot remainders in a manner similar to nondisplayed orders when CHX had no displayed round lots at a particular price level and thus allowed such orders to be cancelled or routed away from CHX.16 Similarly, NYSE Arca, Inc. (‘‘Arca’’) previously maintained special functionality to re-price odd lot orders when such orders were resting on the Arca order book based on changes to the protected best bid and offer (‘‘PBBO’’).17 15 See, e.g., NYSE Rule 7.38, which states that round lot, mixed lot and odd lot orders are treated in the same manner on NYSE, and NYSE Rule 7.36(b)(4), which states that NYSE does not adjust the display price of limit orders on NYSE that have been locked or crossed. 16 See Securities Exchange Act Release No. 60353 (July 21, 2009), 74 FR 37076 (July 27, 2009) (SR– CHX–2009–02) (Order Granting Approval of Proposed Rule Change Related to the Rejection of Undisplayed Odd-lot Orders from the Exchange’s Matching System). 17 See Securities Exchange Act Release No. 85265 (March 7, 2019), 84 FR 9175 (March 13, 2019) (SR– NYSEARCA–2019–08) (Notice of Filing and Immediate Effectiveness of Proposed Changes to Amend Certain Trading Rules including 7.38–E, relating to Odd Lots). E:\FR\FM\10MYN1.SGM 10MYN1 24954 Federal Register / Vol. 86, No. 88 / Monday, May 10, 2021 / Notices While the Exchange is not aware of another exchange that currently cancels a Displayed Odd Lot Order subject to Rule 201 of Regulation SHO when the NBB locks or crosses the price of such order, other exchanges have implemented functionality to treat displayed odd lots the same way that non-displayed orders are treated in the context of functionality to comply with Regulation SHO.18 As described above, the Exchange cancels a Displayed Odd Lot Order subject to Rule 201 of Regulation SHO when the NBB locks or crosses the price of such an order to maintain consistent functionality with that used to handle orders resting on the MEMX Book with a Non-Displayed instruction. With respect to the proposed option to have a resting Displayed Odd Lot Order or Non-Displayed Order that is locked and/or crossed by another Trading Center, as applicable, routed to such Trading Center, the Exchange notes that similar behavior is available on other exchanges with a variety of options and other distinct implementations.19 Thus, the Exchange believes that its proposed implementation, allowing Displayed Odd Lot Orders and Non-Displayed Orders to route away from the Exchange when locked and/or crossed by a Protected Quotation published by an away Trading Center, is consistent with such features currently offered by other exchanges. khammond on DSKJM1Z7X2PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 20 in general, and furthers the objectives of Section 6(b)(5) of the Act 21 in particular, in that it is 18 See Securities Exchange Act Release No. 75467 (July 16, 2015), 80 FR 43515, 43521 (July 22, 2015) (SR–NYSEARCA–2015–58). In describing proposed functionality to re-price sell short orders of odd lot size in circumstances where round lot orders stand their ground, the following description was used: ‘‘because Rule 201 refers to displayed in the context of an order displayed via the public data feeds, for the purposes of proposed Rule 7.16P the Exchange proposes to process all sell short odd lot orders the same as sell short orders that are ranked Priority 3— Non-Display Orders. . . .’’ 19 See, e.g., Cboe EDGX Rule 11.6(n)(2), which defines the ‘‘Super Aggressive’’ instruction as an instruction that an EDGX user may use to direct EDGX to route an order if an away Trading Center locks or crosses the limit price of an order resting on EDGX; further, the Super Aggressive instruction may be applied to routable orders posted to the EDGX Book with remaining size of an Odd Lot. See also Nasdaq Rules 4758(a)(1)(A)(iii) and (viii), which describe two routing strategies that route orders (including displayed odd lot orders and nondisplayed orders) resting on the Nasdaq order book when such orders are locked or crossed by an away market center. 20 15 U.S.C. 78f(b). 21 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 19:05 May 07, 2021 Jkt 253001 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. The proposed changes to the Exchange’s Rules currently are 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. As set forth above, the Exchange’s Rules describe all functionality with respect to orders of Round Lot, Mixed Lot and Odd Lot size without distinction because the Exchange generally handles these orders the same. However, in the specific circumstances set forth above, namely when an away Trading Center has published a Protected Quotation that locks or crosses the displayed price of a Displayed Odd Lot Order and the Exchange does not have a Protected Quotation at such price, the Exchange’s implementation of logic to comply with Regulation NMS results in the cancellation of such orders unless a User has selected a multiple price sliding instruction, in which case an order is re-priced. The Exchange proposes to codify this behavior in its Rules and to adopt additional functionality that would route such an order that is eligible for routing. Thus, the Exchange will offer three options to Users with Displayed Odd Lot Orders on the MEMX Book. As is the case today, such orders can be repriced pursuant to the Exchange’s displayprice sliding logic (if entered with a multiple price sliding instruction) or cancelled when locked or crossed by an away Trading Center’s Protected Quotation. In addition, the Exchange will offer routing to such away Trading Center to the extent a User submitted a routable order in the first instance. The Exchange believes that this functionality enables Users to elect an order instruction consistent with their intent to execute their orders in the marketplace. The amended functionality would ensure executions at the best available price displayed on another Trading Center, for an order to be returned to a User or to remain on the MEMX Book pursuant to the Exchange’s display-price sliding functionality according to the User’s instructions. The PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 Exchange notes that other exchanges have previously maintained functionality specific to orders of odd lot size that resulted in such orders being routed, cancelled or their price adjusted.22 Finally, by limiting this aspect of the proposed change to Displayed Odd Lot Orders that are locked or crossed by the Protected Quotation published by an away Trading Center, the proposal retains existing functionality with respect to the handling of all other orders with a Displayed instruction and remains consistent with the Exchange’s general handling of Non-Displayed Orders. Although aspects of the Exchange’s implementation of order handling rules for odd lots that are subsequently locked or crossed by a Protected Quotation published by an away Trading Centers are unique compared to existing functionality on other exchanges and the because prohibitions against both locked and crossed markets and tradethroughs do not apply to odd lot orders, pursuant to guidance published by Commission staff, exchanges are permitted to establish their own rules for handling odd-lot orders and the oddlot portions of mixed-lot orders, and the Exchange believes its implementation is consistent with such guidance and the applicable regulations, generally.23 The Exchange further believes that routing orders away from the Exchange, whether Displayed Odd Lot Orders or Non-Displayed Orders, when such orders were routable upon initial entry to the Exchange and such orders would otherwise be cancelled is consistent with the Act, as it avoids unnecessary cancellations of orders that could instead be executed by away Trading Centers. Further, as described above, the Exchange notes that similar behavior is in place on other exchanges.24 For the reasons set forth above, the Exchange believes the proposal promotes just and equitable principles of trade, fosters cooperation and coordination with persons engaged in facilitating transactions in securities, removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in 22 See supra notes 16–18. Response No. 7.03 in ‘‘Responses to Frequently Asked Questions Concerning Rule 611 and Rule 610 of Regulation NMS,’’ Division of Trading and Markets, dated June 8, 2007. 24 See supra note 19. 23 See E:\FR\FM\10MYN1.SGM 10MYN1 Federal Register / Vol. 86, No. 88 / Monday, May 10, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. On the contrary, certain of the proposed changes are intended to codify current behavior on the Exchange related to the Exchange’s implementation of applicable regulations and the other proposed changes are intended to provide additional optionality to the User, including the routing of orders that are already resting on the MEMX Book to away Trading Centers if such orders were routable upon initial entry to the Exchange. Thus, to the extent the change is intended to improve transparency regarding the Exchange’s handling of Displayed Odd Lot Orders, such proposal does not have any direct impact on the competitive environment. The proposed change to functionality on the Exchange that would route certain orders resting on the MEMX Book is designed to encourage Users to direct their orders to the Exchange, however, while the change is competitive, the Exchange does not believe the proposed change will result in any burden on intermarket competition as it is a minor change to already available functionality. Further, the proposed new functionality is similar to functionality offered by other exchanges and would also result in additional volume on away Trading Centers instead of the Exchange, to the extent such orders are executed when routed away from the Exchange. The proposed changes to the Exchange’s Rules also promote intramarket competition because they will facilitate the execution of orders that would otherwise remain unexecuted, thereby increasing the efficient functioning of the Exchange. All participants on the Exchange can utilize each of the potential features that will impact the handling of their Displayed Odd Lot Orders and Non-Displayed Orders in the event such orders are resting on the Exchange at a price that is subsequently locked or crossed by a Protected Quotation displayed by an away Trading Center. Therefore, the Exchange does not believe the proposed rule change will result in any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. 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. VerDate Sep<11>2014 19:05 May 07, 2021 Jkt 253001 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 25 and Rule 19b–4(f)(6) thereunder.26 Because the 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 27 and subparagraph (f)(6) of Rule 19b–4thereunder.28 A proposed rule change filed under Rule 19b–4(f)(6) 29 normally does not become operative prior to 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 30 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 so that the proposal may become operative upon filing. The Exchange believes a waiver is consistent with the protection of investors and the public interest because, among other things, it would allow the Exchange to route certain odd lot orders as soon as practicable, thus helping market participants to obtain timely executions even if not on the Exchange. 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 or novel issues. Among other things, the proposed order handing functionalities are similar to the past practices of other exchanges. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing so that the benefits of this 25 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 27 15 U.S.C. 78s(b–(3)(A). 28 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. 29 17 CFR 240.19b–4(f)(6). 30 17 CFR 240.19b–4(f)(6)(iii). 26 17 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 24955 proposed rule change can be realized immediately.31 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) 32 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MEMX–2021–06 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–2021–06. 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 (http://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 31 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). 32 15 U.S.C. 78s(b)(2)(B). E:\FR\FM\10MYN1.SGM 10MYN1 24956 Federal Register / Vol. 86, No. 88 / Monday, May 10, 2021 / Notices 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–2021–06 and should be submitted on or before June 1, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.33 [FR Doc. 2021–09776 Filed 5–7–21; 8:45 am] Sunshine Act Meetings khammond on DSKJM1Z7X2PROD with NOTICES 2:00 p.m. on Thursday, May 13, 2021. PLACE: The meeting will be held via remote means and/or at the Commission’s headquarters, 100 F Street NE, Washington, DC 20549. STATUS: This meeting will be closed to the public. MATTERS TO BE CONSIDERED: Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission’s website at https:// www.sec.gov. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matters at the closed meeting. The subject matter of the closed meeting will consist of the following topics: CFR 200.30–3(a)(12). 19:05 May 07, 2021 [FR Doc. 2021–09939 Filed 5–6–21; 4:15 pm] [Release No. 34–91759; File No. SRCboeEDGA–2021–010] SECURITIES AND EXCHANGE COMMISSION VerDate Sep<11>2014 Dated: May 6, 2021. Vanessa A. Countryman, Secretary. SECURITIES AND EXCHANGE COMMISSION BILLING CODE 8011–01–P 33 17 At times, changes in Commission priorities require alterations in the scheduling of meeting agenda items that may consist of adjudicatory, examination, litigation, or regulatory matters. CONTACT PERSON FOR MORE INFORMATION: For further information; please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551–5400. BILLING CODE 8011–01–P J. Matthew DeLesDernier, Assistant Secretary. TIME AND DATE: Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; Resolution of litigation claims; and Other matters relating to examinations and enforcement proceedings. Jkt 253001 Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a Fee Schedule To Establish Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail May 4, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 21, 2021, Cboe EDGA Exchange, Inc. (‘‘Exchange’’ or ‘‘EDGA’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. 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 Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe EDGA’’) proposes to adopt a fee schedule to establish fees for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).3 The text of the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Unless otherwise specified, capitalized terms used in this rule filing are defined as set forth in 2 17 PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (http://markets.cboe.com/us/ equities/regulation/rule_filings/edga/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. 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 Under the CAT NMS Plan, the Operating Committee of the Consolidated Audit Trail, LLC (‘‘Company’’) (‘‘Operating Committee’’) has discretion to establish funding for the Company to operate the CAT, including establishing fees that the Participants will pay, and establishing fees for Industry Members that will be implemented by the Participants.4 The Operating Committee has filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) a proposal to amend the CAT NMS Plan to implement a revised funding model for the CAT (‘‘CAT Funding Model’’) and to establish a fee schedule for Participant CAT fees (‘‘Proposed CAT Fee Plan Amendment’’).5 The Proposed CAT Fee Plan Amendment describes the CAT Funding Model in detail, including the proposal to charge Industry Members CAT fees. The Participants are required to file with the SEC under Section 19(b) of the Exchange Act any CAT fees applicable to Industry Members that the the CAT Compliance Rule. See Rules 4.5 through 4.17 of the Exchange’s Rulebook. The Exchange and each of its affiliated exchanges (Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., and Cboe EDGX Exchange, Inc.) are filing to adopt the CAT fee schedule. 4 Section 11.1(b) of the CAT NMS Plan. 5 See Securities Exchange Act Rel. No. 91555 (Apr. 14, 2021), 86 FR 21050 (April 21, 2021). E:\FR\FM\10MYN1.SGM 10MYN1

Agencies

[Federal Register Volume 86, Number 88 (Monday, May 10, 2021)]
[Notices]
[Pages 24951-24956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09776]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91748; File No. SR-MEMX-2021-06]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change Related to the 
Handling of Displayed Odd Lot Orders and Non-Displayed Orders That 
Become Locked or Crossed

May 4, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 30, 2021, MEMX LLC (``MEMX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``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.
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    \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).
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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 
related to: (1) The handling of a Limit Order of Odd Lot size with a 
Displayed instruction that is resting on the MEMX Book and subsequently 
becomes locked or crossed by an away Trading Center's Protected 
Quotation; and (2) the handling of a Limit Order with a Non-Displayed 
instruction that is resting on the MEMX Book and subsequently becomes 
crossed by an away Trading Center's Protected Quotation.\5\ The text of 
the proposed rule change is provided in Exhibit 5.
---------------------------------------------------------------------------

    \5\ All terms as further defined below.
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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
Introduction
    The Exchange proposes to make changes to the Exchange's Rules 
related to the handling of a Limit Order \6\ of Odd Lot \7\ size with a 
Displayed \8\ instruction (a ``Displayed Odd Lot Order'') that is 
resting on the MEMX Book \9\ and subsequently becomes locked or crossed 
by an away Trading Center's \10\ Protected Quotation.\11\ In addition, 
the Exchange proposes to make changes to the Exchange's Rules related 
to the handling of a Limit Order with a Non-Displayed \12\ instruction 
(a ``Non-Displayed Order'') that is resting on the MEMX Book and 
subsequently becomes crossed by an away Trading Center's Protected 
Quotation.
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    \6\ Limit Orders are described in Exchange Rule 11.8(b) and 
generally defined as an order to buy or sell a stated amount of a 
security at a specified price or better.
    \7\ The term ``Odd Lot'' refers to any amount less than a Round 
Lot. Orders of Odd Lot size are only eligible to be Protected 
Quotations if aggregated to form a Round Lot. The term ``Round Lot'' 
refers to one hundred (100) shares or any multiple thereof, unless 
an alternative number of shares is established as a Round Lot by the 
listing exchange for the security. Orders that are a Round Lot are 
eligible to be Protected Quotations. See Exchange Rule 11.6(q).
    \8\ The term ``Displayed'' refers to an instruction a User may 
attach to an order stating that the order is to be displayed by the 
System on the MEMX Book. See Exchange Rule 11.6(c)(1).
    \9\ The term ``MEMX Book'' refers to the System's electronic 
file of orders. See Exchange Rule 1.5(q). The term ``System'' refers 
to 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. See Exchange 
Rule 1.5(gg). The term ``User'' refers to any Member or Sponsored 
Participant who is authorized to obtain access to the System. See 
Exchange Rule 1.5(jj).
    \10\ The term ``Trading Center'' refers to other securities 
exchanges, facilities of securities exchanges, automated trading 
systems, electronic communications networks or other brokers or 
dealers.
    \11\ The term ``Protected Quotation'' refers to a quotation that 
is a Protected Bid or Protected Offer. The term ``Protected Bid'' or 
``Protected Offer'' refers to a bid or offer in a stock that is (i) 
displayed by an automated trading center; (ii) disseminated pursuant 
to an effective national market system plan; and (iii) an automated 
quotation that is the best bid or best offer of a national 
securities exchange or association. See Exchange Rule 1.5(z).
    \12\ The term ``Non-Displayed'' refers to an instruction a User 
may attach to an order stating that the order is not to be displayed 
by the System on the MEMX Book. See Exchange Rule 11.6(c)(2).
---------------------------------------------------------------------------

    The Exchange's Rules currently describe all functionality with 
respect to orders of Round Lot, Mixed Lot and Odd Lot size without 
distinction because the Exchange generally handles these orders the 
same. However, the Exchange's System currently handles Displayed Odd 
Lot Orders differently than other orders in specific market 
circumstances, as described below. The Exchange proposes to codify this 
behavior as set forth in proposed Rules 11.6(j) and 11.8(b)(8). In 
addition, the Exchange proposes a change to current functionality with 
respect to orders with an Odd Lot size and orders with a Non-Displayed 
instruction that are eligible to be routed, as further described below.

[[Page 24952]]

Displayed Odd Lot Orders
    Currently, when an away Trading Center publishes a Protected 
Quotation that locks or crosses the displayed price of a Displayed Odd 
Lot Order and the Exchange does not have a Protected Quotation 
displayed at such price, such order will be cancelled by the System 
unless such order contains a multiple price sliding instruction, in 
which case such order will be re-priced pursuant to Rule 11.6(j)(1)(A). 
The Exchange proposes to add language to this effect to Rule 
11.8(b)(8), which currently addresses the handling of Limit Orders in 
certain circumstances where such orders would cross Protected 
Quotations of other Trading Centers. As proposed, under Rule 
11.8(b)(8), when an away Trading Center publishes a Protected Quotation 
that locks or crosses the displayed price of a resting Limit Order of 
Odd Lot size with a Displayed instruction and the Exchange does not 
have a Protected Quotation displayed at such price, such order will be 
cancelled by the System unless such order contains a multiple price 
sliding instruction, in which case such order will be re-priced 
pursuant to Rule 11.6(j)(1)(A), or the order is routed, as described 
below. The Exchange also proposes to rename Rule 11.8(b)(8) as ``Locked 
or Crossed Market.''
    In addition to the changes described above with respect to Rule 
11.8(b)(8), the Exchange proposes to codify the re-pricing 
functionality applied to Displayed Odd Lot Orders with a multiple price 
sliding instruction that are subsequently locked or crossed by other 
Trading Centers. As background, the Exchange currently offers price 
sliding functionality that allows display-eligible orders to be 
permissibly ranked and displayed in accordance with Regulation NMS. 
Pursuant to this price sliding functionality, an order that would be a 
Locking or Crossing Quotation of an away Trading Center if displayed by 
the System on the MEMX Book at the time of entry will be ranked at the 
Locking Price in the MEMX Book (i.e., executable at that price but not 
displayed) and displayed by the System one Minimum Price Variation away 
(i.e., lower for a bid or higher for an offer).\13\ In turn, once an 
order has been permissibly displayed by the System, such order will 
generally only be re-ranked and re-displayed to the extent it achieves 
a more aggressive price.\14\ In other words, once an order is displayed 
on the MEMX Book it will stand its ground and not be re-priced to a 
less aggressive price even if other Trading Centers publish Protected 
Quotations that lock or cross its displayed price, except in two 
circumstances described below; one of these circumstances is already 
described in MEMX Rule 11.6(j)(1)(A)(ii) and the other circumstance the 
Exchange proposes to codify in such Rule.
---------------------------------------------------------------------------

    \13\ See MEMX Rule 11.6(j)(1)(A)(i).
    \14\ See MEMX Rule 11.6(j)(1)(A)(ii) (emphasis added).
---------------------------------------------------------------------------

    As currently set forth in Rule 11.6(j)(1)(A)(ii), the Exchange will 
re-price an order resting on the MEMX Book that is subject to display-
price sliding when an away Trading Center publishes a Protected 
Quotation at a price that locks or crosses such order's displayed 
price. In such circumstance, the Exchange will re-rank the order 
subject to display-price sliding so that the order's ranked price is 
the same price as the displayed price. The Exchange re-ranks an order 
to a less aggressive price in this circumstance to avoid potentially 
trading through a Protected Quotation displayed by another Trading 
Center (i.e., the ranked price, which is not displayed and not 
permitted to stand its ground, is changed to a less aggressive price to 
be the same price as the displayed price).
    In addition to the exception set forth in Rule 11.6(j)(1)(A)(ii) 
described above, the Exchange also currently re-prices a Displayed Odd 
Lot Order with a multiple price sliding instruction to a less 
aggressive price when the Exchange is not displaying a Protected 
Quotation at the displayed price of such order and such order's 
displayed price is locked or crossed by a Protected Quotation published 
by an away Trading Center. Specifically, when an away Trading Center 
publishes a Protected Quotation that locks or crosses the displayed 
price of a resting Displayed Odd Lot Order with a multiple price 
sliding instruction and the Exchange does not have a Protected 
Quotation displayed at such order's displayed price, the resting 
Displayed Odd Lot Order is re-ranked at the Locking Price in the MEMX 
Book and re-displayed by the System at one Minimum Price Variation 
lower (higher) than the Locking Price for orders to buy (sell). The 
Exchange proposes to codify this behavior through both the proposed 
amendment to Rule 11.8(b)(8), discussed above, and a proposed amendment 
to Rule 11.6(j)(1)(A)(ii).
    The final codification of existing behavior proposed by the 
Exchange relates to the Exchange's handling of a Displayed Odd Lot 
Order subject to Rule 201 of Regulation SHO that is subsequently locked 
or crossed. As set forth in Rule 11.6(j)(2)(A), the Exchange cancels 
any order with a Non-Displayed instruction subject to Rule 201 of 
Regulation SHO when the NBB changes such that the order would be a 
Locking Quotation or Crossing Quotation. Because Displayed Odd Lot 
Orders are displayed on the Exchange's proprietary data feed but not on 
the consolidated market data feeds, the Exchange applies this same 
logic to Displayed Odd Lot Orders when such orders are subject to Rule 
201 of Regulation SHO (i.e., marked short and a Short Sale Circuit 
Breaker is in effect). Accordingly, the Exchange cancels any Displayed 
Odd Lot Order subject to Rule 201 of Regulation SHO when the NBB locks 
or crosses the price of such an order and proposes to add language to 
this effect to Rule 11.6(j)(2)(A) to codify this behavior.
    In addition to codifying the current functionality regarding the 
handling of Displayed Odd Lot Orders that are locked or crossed by 
other Trading Centers as described above, the Exchange proposes to add 
functionality to route such orders in this circumstance to the extent 
the orders are eligible to be routed. Based on the proposed amendment 
to Rule 11.8(b)(8), when a Displayed Odd Lot Order is locked or crossed 
by a Protected Quotation published by another Trading Center and such 
order is eligible for routing such order will be routed according to 
the User's instructions. The Exchange believes that a User that has 
originally designated an order as a routable order (thus willing to 
remove liquidity from an away Trading Center on entry), instead of 
having an order of Odd Lot size canceled or price slid, would prefer to 
have such order routed if it is subsequently locked or crossed by a 
Protected Quotation published by another Trading Center.
Examples
    The below examples illustrate the proposed behavior for a Displayed 
Odd Lot Order.
    Assume the National Best Bid and Offer (``NBBO'') is $10.00 by 
$10.10. An order to sell 5 shares of security ABC is displayed on the 
MEMX Book at $10.07 (``Order 1''). Order 1 has a Short Sale 
instruction, however, security ABC is not currently subject to a Short 
Sale Circuit Breaker pursuant to Rule 201 of Regulation SHO. There are 
no other orders to buy or sell security ABC resting on the MEMX Book. 
An away Trading Center publishes a Protected Bid to buy 100 shares of 
security ABC at $10.08, thus updating the NBBO to $10.08 by $10.10. The 
handling of Order 1 will depend on the User's instructions for the 
order, with three potential outcomes:
     If Order 1 has a multiple price sliding instruction, then 
the order will

[[Page 24953]]

be re-priced and ranked to sell at $10.08 and re-displayed at $10.09.
     If Order 1 is eligible for routing, then the order will be 
routed with a limit price of $10.07 to attempt to execute against the 
Protected Bid displayed at $10.08 by the away Trading Center.
     If Order 1 does not have a multiple price sliding 
instruction and is ineligible for routing, then the order will be 
cancelled.
    Assume the same example as above, however, instead assume that 
security ABC is currently subject to a Short Sale Circuit Breaker 
pursuant to Rule 201 of Regulation SHO. If an away Trading Center 
publishes a Protected Bid to buy 100 shares of security ABC at $10.08, 
thus updating the NBBO to $10.08 by $10.10, Order 1 will be cancelled. 
This outcome is the same even if such order has a multiple price 
sliding instruction or was submitted as a routable order.
Non-Displayed Orders
    As set forth in current Rule 11.8(b)(8), when a Non-Displayed Order 
would be a Crossing Quotation if displayed at the price at which it is 
ranked (i.e., when an away Trading Center publishes a Protected 
Quotation that crosses the ranked price of such an order), the Exchange 
cancels such order in order to prevent a trade-through that would occur 
if such order were instead executed at its ranked price. The Exchange 
proposes to maintain this behavior for Non-Displayed Orders (including 
orders of Round Lot, Mixed Lot and Odd Lot size) that are not routable; 
however, consistent with the proposed change above regarding routable 
Displayed Odd Lot Orders, the Exchange proposes to route a Non-
Displayed Order in such circumstance if the order is routable. 
Accordingly, the Exchange proposes to amend Rule 11.8(b)(8) so that a 
Non-Displayed Order that is eligible for routing will route according 
to a User's instructions when such order would be a Crossing Quotation 
of another Trading Center. As is the case today, if a Non-Displayed 
Order is not eligible for routing and an away Trading Center publishes 
a Protected Quotation that crosses the ranked price of such order, the 
order will be canceled.
Examples
    The below examples illustrate the proposed behavior for a Non-
Displayed Order.
    Again, assume the National Best Bid and Offer (``NBBO'') is $10.00 
by $10.10. An order to sell 100 shares of security ABC is resting non-
displayed on the MEMX Book at $10.07 (``Order 2''). Order 2 has a Short 
Sale instruction, however, security ABC is not currently subject to a 
Short Sale Circuit Breaker pursuant to Rule 201 of Regulation SHO. 
There are no other orders to buy or sell security ABC resting on the 
MEMX Book. An away Trading Center publishes a Protected Bid to buy 100 
shares of security ABC at $10.08, thus updating the NBBO to $10.08 by 
$10.10. The handling of Order 2 will depend on the User's instructions 
for the order, with two potential outcomes:
     If Order 2 is eligible for routing, then the order will be 
routed with a limit price of $10.07 to attempt to execute against the 
Protected Bid displayed at $10.08 by the away Trading Center.
     If Order 2 is ineligible for routing, then the order will 
be cancelled.
    Assume the same example as above, however that security ABC is 
currently subject to a Short Sale Circuit Breaker pursuant to Rule 201 
of Regulation SHO. If an away Trading Center publishes a Protected Bid 
to buy 100 shares of security ABC at $10.08, thus updating the NBBO to 
$10.08 by $10.10, Order 2 will be cancelled. This outcome is the same 
even if such order was submitted as a routable order.
Additional Discussion
    The Exchange has implemented its System functionality in order to 
maintain compliance with Regulation NMS, Regulation SHO and other 
applicable regulations. The functionality described above, both current 
and proposed, is designed to ensure that the Exchange does not display 
quotations that would lock or cross Protected Quotations of other 
Trading Centers nor maintain orders at price levels at which, if 
executed, would trade through Protected Quotations (or at the NBB in 
the context of an order subject to Rule 201 of Regulation SHO). 
Although the exact treatment of orders of Odd Lot size described above 
is not explicitly required by these regulations, and indeed the 
Exchange could have adopted a different implementation with respect to 
certain points, the Exchange does believe that its implementation is 
consistent with such regulations and the Act, generally. In particular, 
although Displayed Odd Lot Orders are technically displayed by the 
System and thus can be accessed by market participants, such orders are 
not Protected Quotations and are not displayed on consolidated market 
data feeds. As such, the Exchange's current implementation that it is 
proposing to codify treats such orders in certain ways similar to the 
manner in which the Exchange handles Non-Displayed Orders. Further, the 
Exchange believes that its proposed new functionality with respect to 
routing proposes sufficient optionality for Users of the Exchange to 
determine how they wish to have their Displayed Odd Lot Orders handled 
in the event such orders are locked or crossed by a Protected Quotation 
published by an away Trading Center. In particular, by offering the 
ability to either be canceled, re-priced or routed away from the 
Exchange, the Exchange believes that Users will be able to select their 
preferred order handling. The Exchange similarly believes that its 
proposed new functionality with respect to routing Non-Displayed Orders 
would enable Users to select their preferred order handling with 
respect to such orders when an away Trading Center publishes a 
Protected Quotation that crosses the ranked price of such an order.
    Based on a review of the current rules of other exchanges, certain 
aspects of the Exchange's current handling of Displayed Odd Lot Orders 
is unique and some exchanges allow such orders to stand their ground 
when an odd lot order is crossed by a Protected Quotation published by 
another Trading Center.\15\ However, other exchanges have previously 
maintained similar functionality to instead cancel, route or re-price 
odd lot orders in such a circumstance. For instance, the Chicago Stock 
Exchange (``CHX'') previously offered functionality approved by the 
Commission that, like the Exchange's proposed functionality, treated 
odd lot orders and unexecuted odd lot remainders in a manner similar to 
non-displayed orders when CHX had no displayed round lots at a 
particular price level and thus allowed such orders to be cancelled or 
routed away from CHX.\16\ Similarly, NYSE Arca, Inc. (``Arca'') 
previously maintained special functionality to re-price odd lot orders 
when such orders were resting on the Arca order book based on changes 
to the protected best bid and offer (``PBBO'').\17\

[[Page 24954]]

While the Exchange is not aware of another exchange that currently 
cancels a Displayed Odd Lot Order subject to Rule 201 of Regulation SHO 
when the NBB locks or crosses the price of such order, other exchanges 
have implemented functionality to treat displayed odd lots the same way 
that non-displayed orders are treated in the context of functionality 
to comply with Regulation SHO.\18\ As described above, the Exchange 
cancels a Displayed Odd Lot Order subject to Rule 201 of Regulation SHO 
when the NBB locks or crosses the price of such an order to maintain 
consistent functionality with that used to handle orders resting on the 
MEMX Book with a Non-Displayed instruction.
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    \15\ See, e.g., NYSE Rule 7.38, which states that round lot, 
mixed lot and odd lot orders are treated in the same manner on NYSE, 
and NYSE Rule 7.36(b)(4), which states that NYSE does not adjust the 
display price of limit orders on NYSE that have been locked or 
crossed.
    \16\ See Securities Exchange Act Release No. 60353 (July 21, 
2009), 74 FR 37076 (July 27, 2009) (SR-CHX-2009-02) (Order Granting 
Approval of Proposed Rule Change Related to the Rejection of 
Undisplayed Odd-lot Orders from the Exchange's Matching System).
    \17\ See Securities Exchange Act Release No. 85265 (March 7, 
2019), 84 FR 9175 (March 13, 2019) (SR-NYSEARCA-2019-08) (Notice of 
Filing and Immediate Effectiveness of Proposed Changes to Amend 
Certain Trading Rules including 7.38-E, relating to Odd Lots).
    \18\ See Securities Exchange Act Release No. 75467 (July 16, 
2015), 80 FR 43515, 43521 (July 22, 2015) (SR-NYSEARCA-2015-58). In 
describing proposed functionality to re-price sell short orders of 
odd lot size in circumstances where round lot orders stand their 
ground, the following description was used: ``because Rule 201 
refers to displayed in the context of an order displayed via the 
public data feeds, for the purposes of proposed Rule 7.16P the 
Exchange proposes to process all sell short odd lot orders the same 
as sell short orders that are ranked Priority 3--Non-Display Orders. 
. . .''
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    With respect to the proposed option to have a resting Displayed Odd 
Lot Order or Non-Displayed Order that is locked and/or crossed by 
another Trading Center, as applicable, routed to such Trading Center, 
the Exchange notes that similar behavior is available on other 
exchanges with a variety of options and other distinct 
implementations.\19\ Thus, the Exchange believes that its proposed 
implementation, allowing Displayed Odd Lot Orders and Non-Displayed 
Orders to route away from the Exchange when locked and/or crossed by a 
Protected Quotation published by an away Trading Center, is consistent 
with such features currently offered by other exchanges.
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    \19\ See, e.g., Cboe EDGX Rule 11.6(n)(2), which defines the 
``Super Aggressive'' instruction as an instruction that an EDGX user 
may use to direct EDGX to route an order if an away Trading Center 
locks or crosses the limit price of an order resting on EDGX; 
further, the Super Aggressive instruction may be applied to routable 
orders posted to the EDGX Book with remaining size of an Odd Lot. 
See also Nasdaq Rules 4758(a)(1)(A)(iii) and (viii), which describe 
two routing strategies that route orders (including displayed odd 
lot orders and non-displayed orders) resting on the Nasdaq order 
book when such orders are locked or crossed by an away market 
center.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \20\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \21\ in particular, in that it 
is 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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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
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    The proposed changes to the Exchange's Rules currently are 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. As set forth 
above, the Exchange's Rules describe all functionality with respect to 
orders of Round Lot, Mixed Lot and Odd Lot size without distinction 
because the Exchange generally handles these orders the same. However, 
in the specific circumstances set forth above, namely when an away 
Trading Center has published a Protected Quotation that locks or 
crosses the displayed price of a Displayed Odd Lot Order and the 
Exchange does not have a Protected Quotation at such price, the 
Exchange's implementation of logic to comply with Regulation NMS 
results in the cancellation of such orders unless a User has selected a 
multiple price sliding instruction, in which case an order is re-
priced. The Exchange proposes to codify this behavior in its Rules and 
to adopt additional functionality that would route such an order that 
is eligible for routing. Thus, the Exchange will offer three options to 
Users with Displayed Odd Lot Orders on the MEMX Book. As is the case 
today, such orders can be repriced pursuant to the Exchange's display-
price sliding logic (if entered with a multiple price sliding 
instruction) or cancelled when locked or crossed by an away Trading 
Center's Protected Quotation. In addition, the Exchange will offer 
routing to such away Trading Center to the extent a User submitted a 
routable order in the first instance. The Exchange believes that this 
functionality enables Users to elect an order instruction consistent 
with their intent to execute their orders in the marketplace. The 
amended functionality would ensure executions at the best available 
price displayed on another Trading Center, for an order to be returned 
to a User or to remain on the MEMX Book pursuant to the Exchange's 
display-price sliding functionality according to the User's 
instructions. The Exchange notes that other exchanges have previously 
maintained functionality specific to orders of odd lot size that 
resulted in such orders being routed, cancelled or their price 
adjusted.\22\ Finally, by limiting this aspect of the proposed change 
to Displayed Odd Lot Orders that are locked or crossed by the Protected 
Quotation published by an away Trading Center, the proposal retains 
existing functionality with respect to the handling of all other orders 
with a Displayed instruction and remains consistent with the Exchange's 
general handling of Non-Displayed Orders. Although aspects of the 
Exchange's implementation of order handling rules for odd lots that are 
subsequently locked or crossed by a Protected Quotation published by an 
away Trading Centers are unique compared to existing functionality on 
other exchanges and the because prohibitions against both locked and 
crossed markets and trade-throughs do not apply to odd lot orders, 
pursuant to guidance published by Commission staff, exchanges are 
permitted to establish their own rules for handling odd-lot orders and 
the odd-lot portions of mixed-lot orders, and the Exchange believes its 
implementation is consistent with such guidance and the applicable 
regulations, generally.\23\
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    \22\ See supra notes 16-18.
    \23\ See Response No. 7.03 in ``Responses to Frequently Asked 
Questions Concerning Rule 611 and Rule 610 of Regulation NMS,'' 
Division of Trading and Markets, dated June 8, 2007.
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    The Exchange further believes that routing orders away from the 
Exchange, whether Displayed Odd Lot Orders or Non-Displayed Orders, 
when such orders were routable upon initial entry to the Exchange and 
such orders would otherwise be cancelled is consistent with the Act, as 
it avoids unnecessary cancellations of orders that could instead be 
executed by away Trading Centers. Further, as described above, the 
Exchange notes that similar behavior is in place on other 
exchanges.\24\
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    \24\ See supra note 19.
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    For the reasons set forth above, the Exchange believes the proposal 
promotes just and equitable principles of trade, fosters cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, removes impediments to and perfects the mechanism of a free 
and open market and a national market system, and, in general, protects 
investors and the public interest.

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

    The Exchange does not believe that the proposed rule change will 
result in

[[Page 24955]]

any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. On the contrary, 
certain of the proposed changes are intended to codify current behavior 
on the Exchange related to the Exchange's implementation of applicable 
regulations and the other proposed changes are intended to provide 
additional optionality to the User, including the routing of orders 
that are already resting on the MEMX Book to away Trading Centers if 
such orders were routable upon initial entry to the Exchange. Thus, to 
the extent the change is intended to improve transparency regarding the 
Exchange's handling of Displayed Odd Lot Orders, such proposal does not 
have any direct impact on the competitive environment. The proposed 
change to functionality on the Exchange that would route certain orders 
resting on the MEMX Book is designed to encourage Users to direct their 
orders to the Exchange, however, while the change is competitive, the 
Exchange does not believe the proposed change will result in any burden 
on intermarket competition as it is a minor change to already available 
functionality. Further, the proposed new functionality is similar to 
functionality offered by other exchanges and would also result in 
additional volume on away Trading Centers instead of the Exchange, to 
the extent such orders are executed when routed away from the Exchange. 
The proposed changes to the Exchange's Rules also promote intramarket 
competition because they will facilitate the execution of orders that 
would otherwise remain unexecuted, thereby increasing the efficient 
functioning of the Exchange. All participants on the Exchange can 
utilize each of the potential features that will impact the handling of 
their Displayed Odd Lot Orders and Non-Displayed Orders in the event 
such orders are resting on the Exchange at a price that is subsequently 
locked or crossed by a Protected Quotation displayed by an away Trading 
Center. Therefore, the Exchange does not believe the proposed rule 
change will result in any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \25\ and Rule 19b-4(f)(6) thereunder.\26\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \27\ and 
subparagraph (f)(6) of Rule 19b-4thereunder.\28\
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    \25\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \26\ 17 CFR 240.19b-4(f)(6).
    \27\ 15 U.S.C. 78s(b-(3)(A).
    \28\ 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 under Rule 19b-4(f)(6) \29\ normally 
does not become operative prior to 30 days after the date of its 
filing. However, Rule 19b-4(f)(6)(iii) \30\ 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 so that the proposal 
may become operative upon filing. The Exchange believes a waiver is 
consistent with the protection of investors and the public interest 
because, among other things, it would allow the Exchange to route 
certain odd lot orders as soon as practicable, thus helping market 
participants to obtain timely executions even if not on the Exchange. 
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 or novel 
issues. Among other things, the proposed order handing functionalities 
are similar to the past practices of other exchanges. Accordingly, the 
Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing so that the benefits of this 
proposed rule change can be realized immediately.\31\
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    \29\ 17 CFR 240.19b-4(f)(6).
    \30\ 17 CFR 240.19b-4(f)(6)(iii).
    \31\ 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) \32\ to determine whether the proposed rule change 
should be approved or disapproved.
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    \32\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MEMX-2021-06 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-2021-06. 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 (http://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

[[Page 24956]]

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-2021-06 and should be submitted on or before June 1, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\

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    \33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09776 Filed 5-7-21; 8:45 am]
BILLING CODE 8011-01-P