[Federal Register Volume 85, Number 178 (Monday, September 14, 2020)]
[Notices]
[Pages 56672-56675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20129]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89784; File No. SR-MEMX-2020-06]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Adopt Rule 15.3, 
Collection of Exchange Fees and Other Claims and Billing Policy

September 8, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 28, 2020, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, and II below, which Items 
have been prepared by the Exchange. The Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to

[[Page 56673]]

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).
    \4\ 17 CFR 240.19b-4.
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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 
to proposed rule change to adopt Rule 15.3 and entitle it ``Collection 
of Exchange Fees and Other Claims and Billing Policy'' that (a) 
requires each member of the Exchange (``Member''), and all applicants 
for membership, to provide one or more clearing account numbers that 
correspond to an account(s) at the National Securities Clearing 
Corporation (``NSCC'') for purposes of permitting the Exchange to debit 
certain fees, fines, charges and/or other monetary sanctions or other 
monies due and owing to the Exchange; and (b) require Members to submit 
billing disputes within a certain time period. The text of the proposed 
rule change is provided in Exhibit 5.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adopt Rule 15.3 to (a) require each 
Member, and all applicants for membership, to provide one or more 
clearing account numbers that correspond to an account(s) at the NSCC 
for purposes of permitting the Exchange to debit certain fees, fines, 
charges, and/or other monetary sanctions or other monies due and owing 
to the Exchange; and (b) require Members to submit billing disputes 
within a certain time period.
Direct Debit Process
    Paragraph (a) of the proposed Rule 15.3 requires Members, and all 
applicants for membership, to provide one or more clearing account 
numbers that correspond to an account(s) at NSCC for purposes of 
permitting the Exchange to debit any undisputed or final fees, fines, 
charges, and/or other monetary sanctions or other monies due and owing 
to the Exchange or other charges pursuant to Rule 15.1, including the 
Exchange Fee Schedule thereto; Regulatory Transaction Fees pursuant to 
Rule 15.1(b); dues, assessments and other charges pursuant to Rule 2.9 
to the extent the Exchange were to determine to charge such fees; and 
fines, sanctions and other charges pursuant to Chapter 8 of the 
Exchange Rules \5\ which are due and owing to the Exchange 
(collectively ``Debit Amount''). The Exchange Fee Schedule specifies 
charges for transactions, routing and other services provided by the 
Exchange and certain fees that are collected by the Financial Industry 
Regulatory Authority (``FINRA''). Only the charges which require 
payment to the Exchange would be subject to direct debit. The Exchange 
does not currently charge fees for certain of the services listed on 
the Exchange Fee Schedule. The Exchange would entitle Rule 15.3 
``Collection of Exchange Fees and Other Claims and Billing Policy.''
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    \5\ This includes, among other things, fines which result from 
disciplinary proceedings or actions taken pursuant to Chapter 8 of 
the Exchange Rules, as specified in Rule 8.1(a). In addition, the 
Exchange notes that it also has the authority under Rules 7.1(b) to 
report to the Chief Regulatory Officer (``CRO'') any Member who does 
not pay any dues, fees, assessments, charges or other amounts due to 
the Exchange within 90 days after the same has become payable and 
the CRO may, after giving reasonable notice to the Member of such 
arrearages, suspend the Member until payment is made. While this 
direct debit process should minimize failures to pay, those rules 
nevertheless will act as a backstop to the direct debit process. 
With respect to disciplinary proceedings, the Exchange would not 
debit any monies until such action is final. The Exchange would not 
consider an action final until all appeal periods have run and/or 
all appeal timeframes are exhausted. With respect to non-
disciplinary actions, the Exchange would similarly not take action 
to debit a Member account until all appeal periods have run and/or 
all appeal timeframes are exhausted. Any uncontested disciplinary or 
non-disciplinary actions will be debited, and the amount due will 
appear on the Member's invoice prior to the actual NSCC debit.
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    As proposed, the Exchange will send a monthly electronic invoice by 
email to each Member, generally by the 7th business day of each month 
for the Debit Amount due to the Exchange for the prior month. The 
Exchange will also send files to NSCC each month by the 17th business 
day of each month to initiate the debit of the Debit Amount due to the 
Exchange as stated on the Member's invoice for the prior month.
    The Exchange anticipates that NSCC will process the debits on the 
day it receives the file or the following business day. Because Members 
will be provided with an invoice approximately two weeks before the 
debit date, Members will have adequate time to contact Exchange staff 
with any questions concerning the invoice. If a Member disagrees with 
the invoice in whole or in part, the Exchange would not commence the 
debit for the disputed amount until the dispute is resolved. 
Specifically, the Exchange will not include the disputed amount (or the 
entire invoice if it is not feasible to identify the disputed amounts) 
in the NSCC debit amount if the Member has provided written 
notification of the dispute to the Finance Department of the Exchange 
by the later of the 16th business day of the month or ten days after 
the date the electronic invoice was sent to the Member, and the amount 
in dispute is at least $10,000 or greater.
    Once NSCC receives the file from the Exchange, NSCC would proceed 
to debit the amounts indicated from the account of the Member that 
clears the applicable transactions (``Clearing Member'', i.e., either a 
Member that is self-clearing or another Member that provides clearing 
services on behalf of the Member) and disburse such amounts to the 
Exchange. In the instance where the Member clears through another 
Member, the Exchange understands that the estimated transaction fees 
owed to the Exchange are typically debited by the Clearing Member on a 
daily basis using daily transaction detail reports provided by the 
Exchange to the Clearing Member in order to ensure adequate funds have 
been escrowed. The Exchange notes that it is proposing to permit a 
Member to designate one or more clearing account numbers that 
correspond to an account(s) at NSCC to permit Members that clear 
through multiple different clearing accounts to set up the billing 
process with the Exchange in a manner that is most efficient for 
internal reconciliation and billing purposes of the Member.
    The Exchange believes that the proposed debiting process for 
Members would create an efficient method of collecting undisputed or 
final fees, fines, charges and/or other monetary sanctions or monies 
due and owing to the Exchange. An alternative process could cause 
collection matters to divert staff resources away from the Exchange's 
regulatory and business purposes. Moreover, the Exchange believes that 
it is reasonable to provide for a $10,000 limitation on pre-debit 
billing disputes since it would be inefficient to delay a direct debit 
for a de minimis amount. Members will still be able to dispute billing 
amounts that are less than $10,000 pursuant to paragraph (b) of Rule 
15.3, as described below. The Exchange notes that a comparable debiting 
process is used by the Investors Exchange (``IEX''), the

[[Page 56674]]

Nasdaq Stock Market LLC (``Nasdaq''), Nasdaq BX, Inc. (``Nasdaq BX''), 
and Nasdaq PHLX LLC (``Nasdaq Phlx'').\6\
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    \6\ See IEX Rule 15.120, Nasdaq Rule Equity 7, Section 70, 
Nasdaq BX Rule Equity 7, Section 111, and Nasdaq Phlx Rule Equity 7, 
Section 2.
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Billing Dispute Process
    In addition to, and separate from the pre-debit dispute process 
described above, the Exchange also proposes to adopt a billing policy, 
pursuant to paragraph (b) of Rule 15.3, to require all pricing 
disputes, with respect to fees payable to the Exchange,\7\ to be 
submitted to the Exchange in writing \8\ and accompanied by supporting 
documentation within sixty days of receipt of an invoice. The Exchange 
believes that this policy will conserve Exchange resources, which are 
expended when untimely billing disputes require staff to research 
applicable fees and order information beyond two months after the 
invoice was issued. The sixty-day limitation would be applicable to all 
fees specified in paragraph (a) of Rule 15.3.
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    \7\ Fees that are collected by FINRA would not be subject to the 
billing policy, and any disputes would need to be raised by the 
Member directly with FINRA.
    \8\ The Exchange invoice will specify the email address where 
billing disputes must be submitted.
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    The Exchange expects that the proposed policy will provide a 
potential cost savings to the Exchange in that it would alleviate 
administrative burdens related to belated billing disputes, which could 
divert staff resources away from the Exchange's regulatory and business 
purposes. A similar policy is in place today at IEX, Nasdaq, Nasdaq BX, 
and Nasdaq Phlx.\9\
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    \9\ See supra note 6.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general to 
protect investors and the public interest. Specifically, the Exchange 
believes that the direct debit process will provide Members with an 
efficient process to pay undisputed or final fees, fines, charges and/
or monetary sanctions or monies due and owing to the Exchange. 
Similarly, the billing policy will create an objective process and will 
be fair to Members. Further, both aspects of the proposal are expected 
to result in lower administrative costs for the Exchange.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposal to debit NSCC accounts is 
reasonable because it would ease the Member's administrative burden in 
paying monthly invoices, avoid overdue balances and provide efficient 
collection from all Members who owe monies to the Exchange. Moreover, 
the Exchange believes that the 10-day minimum time frame provided to 
Members to dispute invoices is reasonable and adequate to enable 
Members to identify potentially erroneous charges. In addition, the 
Exchange believes that the $10,000 limitation on pre-debit billing 
disputes is reasonable because it would be inefficient to delay a 
direct debit for a de minimis amount. Members will still be able to 
dispute billing amounts that are less than $10,000 pursuant to 
paragraph (b) of Rule 15.3.
    Further, the Exchange believes that the requirement that billing 
disputes for specified fees be submitted to the Exchange within sixty 
days from receipt of the invoice will set objective standards, will be 
fair to Members, and that sixty days is ample time to review an invoice 
and dispute any pricing related to the transactions for that time 
period. It is also expected to lower the Exchange's administrative 
costs. An identical provision is applicable to IEX, Nasdaq, Nasdaq BX, 
and Nasdaq Phlx.\12\
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    \12\ See supra note 6.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes its proposed rule change would not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed debit process and 
billing policy would apply uniformly to all Members and will not 
disproportionately burden or otherwise impact any single Member.
    The Exchange does not believe that the proposal will create an 
intermarket burden on competition since the Exchange will only debit 
fees (other than de minimis fees below $10,000) that are undisputed by 
the Member and Members will have a reasonable opportunity to dispute 
fees both before and after the direct debit process. The Exchange also 
does not believe that the proposal will create an intramarket burden on 
competition, since the proposed direct debit process and billing policy 
will be applied equally to all Members. Moreover, other exchanges use a 
comparable process which the Exchange believes is generally familiar to 
Members. Consequently, the Exchange does not believe that the proposal 
raises any new or novel issues that have not been previously considered 
by the Commission in connection with direct debit and billing policies 
of other exchanges.\13\
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    \13\ See supra note 6.
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    Further, this proposal is expected to provide a cost savings to the 
Exchange in that it would alleviate administrative processes related to 
the collection of monies owed to the Exchange by Members. Collection 
matters divert staff resources away from the Exchange's regulatory and 
business purposes. In addition, the debiting process would mitigate 
against Member accounts becoming overdue.

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

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

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \16\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay. The 
Exchange believes that waiver of the operative delay is

[[Page 56675]]

consistent with the protection of investors and the public interest 
because it will allow the Exchange to provide a consistent process from 
the inception of the Exchange's operations for Members to pay 
undisputed or final fees, fines, charges and/or monetary sanctions or 
monies due and owing to 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 novel issues and is based on the rules of several 
other exchanges discussed above. Further, the proposal does not limit 
or relieve the Exchange from its responsibility to accurately assess 
fees and apply its fee schedule at all times. Therefore, the Commission 
hereby waives the operative delay and designates the proposal as 
operative upon filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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 rule-comments@sec.gov. Please include 
File Number SR-MEMX-2020-06 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-2020-06. 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 Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MEMX-2020-06 and should be submitted on 
or before October 5, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20129 Filed 9-11-20; 8:45 am]
BILLING CODE 8011-01-P


