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]
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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
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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
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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).
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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).
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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
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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
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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’’).
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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
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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).
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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.
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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
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).
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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
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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
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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
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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 (https://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 (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
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).
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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
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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 (https://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
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]]>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]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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
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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\24\ See supra note 19.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-2021-06 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 (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
[[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
