[Federal Register Volume 86, Number 23 (Friday, February 5, 2021)]
[Notices]
[Pages 8453-8455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02395]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91027; File No. SR-MEMX-2021-01]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Add Interpretation 
and Policy .03 to Exchange Rule 4.2 Regarding the Provision of Members' 
Broker-Dealer Annual Reports

February 1, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 21, 2021, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder.\4\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to add proposed Interpretation and Policy .03 to Exchange Rule 4.2 that 
would provide a waiver of the requirement that members of the Exchange 
(``Members'') for which the Exchange is not the designated examining 
authority (``DEA'') provide the Exchange with copies of their broker-
dealer annual reports. 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
    SEC Rule 17a-5(d) \5\ generally requires each broker-dealer 
registered under Section 15 of the Act to file with the Commission and 
the broker-dealer's DEA certain financial-related reports described in 
that rule on an annual basis (such reports, ``Annual Reports''). SEC 
Rule 17a-5(d)(6) \6\ further requires each broker-dealer to provide all 
self-regulatory organizations (``SROs'') of which the broker-dealer is 
a member with copies of its Annual Reports. The Exchange proposes to 
add proposed

[[Page 8454]]

Interpretation and Policy .03 to Exchange Rule 4.2 to relieve Members 
for which the Exchange is not the DEA of the requirement of SEC Rule 
17a-5(d)(6) that a broker-dealer must provide copies of its Annual 
Reports to the Exchange.
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    \5\ 17 CFR 240.17a-5(d).
    \6\ 17 CFR 240.17a-5(d)(6).
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    In 2013 the Commission amended certain broker-dealer annual 
reporting, audit, and notification requirements.\7\ Among these 
amendments was an amendment to paragraph (d)(6) of Rule 17a-5 to allow 
an SRO that is not a broker-dealer's DEA to waive by rule the 
requirement that such broker-dealer provide its Annual Reports to that 
SRO.\8\ This amendment was proposed because in some cases SROs do not 
believe it is necessary to receive copies of a broker-dealer's Annual 
Reports, particularly when an SRO is not the broker-dealer's DEA.\9\
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    \7\ See Exchange Act Release No. 70073 (August 21, 2013), 78 FR 
51909 (August 21, 2013).
    \8\ See id. at 51923-24.
    \9\ See id. See also Exchange Act Release No. 64676 (June 15, 
2011), 76 FR 37572, 37592 (June 27, 2011).
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    The Exchange is not currently the DEA for any of its Members and 
does not expect to be the DEA for any of its Members.\10\ The Exchange 
does not believe it is necessary for it to receive copies of Annual 
Reports from its Members for which it is not the DEA, as the Exchange 
does not anticipate using any information contained therein in order to 
carry out its regulatory responsibilities. The Exchange believes that 
receiving such information is important for an SRO that is a broker-
dealer's DEA but not for an SRO that is not the broker-dealer's DEA, 
particularly as one of the key responsibilities of a broker-dealer's 
DEA is to oversee such broker-dealer's compliance with applicable 
financial responsibility rules. Furthermore, the Exchange notes that 
even with the proposed waiver in effect the Exchange would still be 
able to request the Annual Reports or any information contained therein 
from any Member pursuant to Exchange Rule 4.2, which requires a Member 
to furnish to the Exchange, upon request, current copies of any 
financial information filed with the Commission, which includes the 
Annual Reports and any information contained therein.\11\ As such, the 
Exchange believes that the proposed waiver would benefit Members for 
which it is not the DEA by eliminating an unnecessary requirement and 
facilitating a more efficient exchange of information between the 
Exchange and such Members in that they would only be required to 
furnish their Annual Reports or any information contained therein if 
and when the Exchange deems it necessary and requests such information. 
Therefore, the Exchange proposes the addition of proposed 
Interpretation and Policy .03 to Exchange Rule 4.2 in order to 
explicitly waive the requirement of SEC Rule 17a-5(d)(6) for such 
Members to file copies of their Annual Reports with the Exchange. The 
Exchange notes, however, that if and to the extent the Exchange is the 
DEA for any of its Members the Exchange's Rules would still require 
each such Member to provide it with copies of such Member's Annual 
Reports in accordance with the requirements of SEC Rule 17a-5(d)(6).
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    \10\ See Exchange Rule 2.3, which sets forth certain Member 
eligibility criteria and generally requires that a prospective 
Member be and remain a member of a national securities association 
registered under Section 15A(a) of the Act or a member of another 
national securities exchange registered under Section 6(a) of the 
Act in order to be eligible to be, and to remain, a Member. As such, 
the Exchange believes that each Member will already have an assigned 
DEA prior to joining the Exchange as a Member.
    \11\ See Exchange Rule 4.2.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ 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.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that it will be able to properly regulate 
Members for which it is not the DEA even without the information 
contained in the Annual Reports currently required to be provided to 
the Exchange by such Members under SEC Rule 17a-5(d)(6). Firstly, the 
Exchange is not currently the DEA for any of its Members and does not 
currently use the information contained in its Members' Annual Reports 
for any purpose. Additionally, if the Exchange was to determine that 
the information contained in the Annual Reports of a Member for which 
it is not the DEA was necessary for any reason, the Exchange can 
directly request those records from the Member pursuant to Exchange 
Rule 4.2, which requires a Member to furnish to the Exchange current 
copies of any financial information filed with the Commission, which 
includes the Annual Reports and any information contained therein.\14\ 
In this way, the Exchange could still obtain the information contained 
in the Annual Reports currently required to be provided by such Members 
under SEC Rule 17a-5(d)(6) even with the proposed waiver of such 
requirement.
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    \14\ See Exchange Rule 4.2.
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    Given that Members must furnish the Exchange with Annual Reports or 
the information contained therein if and when the Exchange so requests, 
the Exchange does not believe that it is necessary for it to separately 
receive copies of Annual Reports from its Members for which it is not 
the DEA pursuant to SEC Rule 17a-5(d)(6). Finally, the proposed 
Interpretation and Policy .03 of Rule 4.2 is consistent with the Act in 
that it is adopting a waiver explicitly provided for by the Commission 
in SEC Rule 17a-5(d)(6).

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

    The Exchange believes that the proposed rule change would not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, the 
proposed Interpretation and Policy .03 is not a competitive proposal as 
it is concerned solely with the administration of the Exchange and 
simply creates a more efficient exchange of information between the 
Exchange and its Members. The Exchange notes that the proposed 
Interpretation and Policy .03 would apply equally to all Members for 
which the Exchange is not the DEA, which currently includes all of the 
Exchange's Members. The Exchange notes that it still believes it is 
appropriate to require provision of the Annual Reports by any Member 
for which it is the DEA pursuant to SEC Rule 17a-5(d)(6) as the 
Exchange believes the information contained in the Annual Reports is 
important for an SRO that is a broker-dealer's DEA. Furthermore, the 
Exchange notes that the proposed Interpretation and Policy .03 would be 
directly implementing a permitted waiver adopted by the Commission in 
SEC Rule 17a-5(d)(6), and as such, any SRO can adopt such a waiver to 
the extent permitted by that rule. Consequently, the Exchange does not 
believe that the proposed rule change would impose any burden on 
intermarket or intramarket competition.

[[Page 8455]]

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 \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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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 to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MEMX-2021-01 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-2021-01. 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 such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MEMX-2021-01, and should be submitted on 
or before February 26, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02395 Filed 2-4-21; 8:45 am]
BILLING CODE 8011-01-P


