[Federal Register Volume 86, Number 65 (Wednesday, April 7, 2021)]
[Notices]
[Pages 18082-18084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07118]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91457; File No. SR-MEMX-2021-05]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Extend the Current 
Pilot Program Related to MEMX Rule 11.15, Clearly Erroneous Executions

April 1, 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 March 23, 2021, MEMX LLC (``MEMX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to extend the current pilot program related to MEMX Rule 11.15, 
``Clearly Erroneous Executions,'' to the close of business on October 
20, 2021. 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 extend the effectiveness of the Exchange's 
current rule applicable to Clearly Erroneous Executions to the close of 
business on October 20, 2021. Portions of Rule 11.15, explained in 
further detail below, are currently operating as a pilot program which 
is set to expire on April 20, 2021.\5\
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    \5\ See MEMX Rule 11.15.
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    On May 4, 2020, the Commission approved MEMX's Form 1 Application 
to register as a national securities exchange with rules including, on 
a pilot basis, MEMX Rule 11.15.\6\ Rule 11.15, among other things (i) 
provides for uniform treatment of clearly erroneous execution reviews 
in multi-stock events involving twenty or more securities; and (ii) 
reduces the ability of the Exchange to deviate from objective standards 
set forth in the rule. The rule further provides that: (i) a series of 
transactions in a particular security on one or more trading days may 
be viewed as one event if all such transactions were effected based on 
the same fundamentally incorrect or grossly misinterpreted issuance 
information resulting in a severe valuation error for

[[Page 18083]]

all such transactions; and (ii) in the event of any disruption or 
malfunction in the operation of the electronic communications and 
trading facilities of the Exchange, another SRO, or responsible single 
plan processor in connection with the transmittal or receipt of a 
trading halt, an Officer of the Exchange or senior level employee 
designee, acting on his or her own motion, shall nullify any 
transaction that occurs after a trading halt has been declared by the 
primary listing market for a security, and before such a trading halt 
has officially ended according to the primary listing market.\7\
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    \6\ See Securities Exchange Release No. 88806 (May 4, 2020), 85 
FR 27451 (May 8, 2020).
    \7\ See MEMX Rule 11.15.
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    Previously, the clearly erroneous pilot programs adopted by the 
national securities exchanges and the current Plan to Address 
Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS 
under the Act (the ``Limit Up-Limit Down Plan'' or the ``LULD Plan'') 
were a single pilot program. On April 17, 2019, the Commission approved 
the Eighteenth Amendment to the LULD Plan, allowing the LULD Plan to 
operate on a permanent, rather than pilot, basis.\8\ Accordingly, 
national securities exchanges filed with the Commission amendments to 
exchange rules to untie the pilot program's effectiveness from that of 
the LULD Plan in order to provide such exchanges additional time to 
consider further amendments, if any, to the clearly erroneous execution 
rules in light of the proposed Eighteenth Amendment to the LULD 
Plan.\9\
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    \8\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019) (File No. 4-631).
    \9\ See, e.g., Securities Exchange Act Release No. 85542 (April 
8, 2019), 84 FR 15009 (April 12, 2019) (SR-CboeBYX-2019-003).
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    Subsequently, national securities exchanges filed with the 
Commission amendments to exchange rules to extend the pilot's 
effectiveness to the close of business on April 20, 2021.\10\ 
Similarly, the Exchange amended MEMX Rule 11.15 to extend the pilot's 
effectiveness to the close of business on April 20, 2021.\11\
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    \10\ See, e.g., Securities Exchange Act Release No. 90231 
(October 20, 2020), 85 FR 67789 (October 26, 2020) (SR-CboeBZX-2020-
077).
    \11\ See Securities Exchange Act Release No. 90022 (September 
28, 2020), 85 FR 62340 (October 2, 2020) (SR-MEMX-2020-09).
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    The Exchange now proposes to amend MEMX Rule 11.15 to extend the 
pilot's effectiveness to the close of business on October 20, 2021. 
MEMX understands that certain other national securities exchanges and 
the Financial Industry Regulatory Authority (``FINRA'') also intend to 
file similar proposals to extend their respective clearly erroneous 
execution pilot programs, the substance of which are identical to MEMX 
Rule 11.15.
    The Exchange does not propose any additional changes to MEMX Rule 
11.15. By proposing to extend the pilot, the Exchange will avoid any 
discrepancy between its clearly erroneous pilot program and the pilot 
programs of other exchanges and FINRA, as the language of such rules 
are identical to MEMX Rule 11.15 and, as noted above, other exchanges 
and FINRA also intend to file proposals to extend their respective 
clearly erroneous execution pilot programs. The Exchange believes the 
benefits to market participants from the more objective clearly 
erroneous executions rule should continue on a limited six month pilot 
basis. As the LULD Plan was approved by the Commission to operate on a 
permanent, rather than pilot, basis the Exchange intends to assess 
whether additional changes should also be made to the operation of the 
clearly erroneous execution rules. Extending the effectiveness of MEMX 
Rule 11.15 for an additional six months should provide the Exchange and 
other national securities exchanges additional time to consider future 
amendments, if any, to the clearly erroneous execution rules.
2. Statutory Basis
    The Exchange believes that its proposal 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 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. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) requirement that the rules of an exchange not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that extending the clearly 
erroneous execution pilot under MEMX Rule 11.15 for an additional six 
months would help assure that the determination of whether a clearly 
erroneous trade has occurred will be based on clear and objective 
criteria, and that the resolution of the incident will occur promptly 
through a transparent process. The proposed extension would also help 
assure consistent results in handling erroneous trades across the U.S. 
equities markets, thus furthering fair and orderly markets, the 
protection of investors and the public interest. Based on the 
foregoing, the Exchange believes the clearly erroneous executions rule 
should continue to be in effect on a pilot basis while the Exchange and 
other national securities exchanges consider and develop a permanent 
proposal for clearly erroneous executions reviews.

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. To the contrary, the Exchange 
understands that FINRA and certain other national securities exchanges 
will also file similar proposals to extend their respective clearly 
erroneous execution pilot programs. Thus, the proposed rule change will 
help to ensure consistency across market centers without implicating 
any competitive issues.

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 under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule

[[Page 18084]]

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 so that the proposed rule change may become 
operative immediately upon filing. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest, as it will allow the current clearly 
erroneous execution pilot program to continue uninterrupted, without 
any changes, while the Exchange and the other national securities 
exchanges consider a permanent proposal for clearly erroneous execution 
reviews. For this reason, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change 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 has also 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 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-2021-05 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-2021-05. 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-2021-05 and should be submitted on 
or before April 28, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07118 Filed 4-6-21; 8:45 am]
BILLING CODE 8011-01-P


