[Federal Register Volume 88, Number 63 (Monday, April 3, 2023)]
[Notices]
[Pages 19694-19704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06783]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97210; File No. SR-MEMX-2023-06]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend and Restate 
the Limited Liability Company Agreement of MEMX Holdings LLC

March 28, 2023.
    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 March 17, 2023, 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 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 
to amend and restate the Sixth Amended and Restated Limited Liability 
Company Agreement (the ``Sixth Amended LLC Agreement'') of MEMX 
Holdings LLC (``Holdco'') as the Seventh Amended and Restated Limited 
Liability Company Agreement of Holdco (the ``Seventh Amended LLC 
Agreement'') to reflect certain amendments, as further described below. 
Holdco is the parent company of the Exchange and directly or indirectly 
owns all of the limited liability company membership interests in the 
Exchange. 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 amend and restate the Holdco LLC Agreement 
\5\ to reflect: (i) amendments related to the creation of the Class D 
Units \6\ in connection with the sale by Holdco of Class D Units to 
certain new and existing Members \7\ in a capital raise transaction 
(the ``Transaction''); (ii) amendments related to certain changes with 
respect to the Holdco Board in connection with the Transaction; (iii) 
an amendment to the definition of ``Company Related Party''; (iv) an 
amendment to the provision relating to the preparation and delivery of 
Holdco's annual budget; and (v) various clarifying, updating, 
conforming, and other non-substantive amendments. Each of these 
amendments is discussed below.
---------------------------------------------------------------------------

    \5\ References herein to the ``Holdco LLC Agreement'' refer to 
the Sixth Amended LLC Agreement or the Seventh Amended LLC 
Agreement, as appropriate in the context. All section references 
herein are to sections of the Holdco LLC Agreement unless indicated 
otherwise. Capitalized terms used but not defined herein shall have 
the meanings ascribed to such terms in the Holdco LLC Agreement.
    \6\ As proposed, the term ``Class D Units'' means the Class D-1 
Units and the Class D-2 Units; the term ``Class D-1 Units'' means 
the Units having the privileges, preference, duties, liabilities, 
obligations and rights specified with respect to ``Class D-1 Units'' 
in the Holdco LLC Agreement; and the term ``Class D-2 Units'' means 
the Units having the privileges, preference, duties, liabilities, 
obligations and rights specified with respect to ``Class D-2 Units'' 
in the Holdco LLC Agreement. The term ``Unit'' means a unit 
representing a fractional part of the membership interests of the 
members of Holdco. See Section 1.1 for the full definition of Unit.
    \7\ The term ``Member'' refers to a person (i.e., an individual 
or entity) that owns one or more Units and is admitted as a limited 
liability company member of Holdco.
---------------------------------------------------------------------------

Background
    The primary purpose of the Exchange's proposal to amend and restate 
the Holdco LLC Agreement is to create a new class of membership 
interest in Holdco, the Class D Units, which are the exact same type of 
membership interest (i.e., have the same privileges, preference, 
duties, liabilities, obligations and rights) as the existing Class C 
Units except for the original purchase price of such Units, and

[[Page 19695]]

effectuate the sale by Holdco of Class D Units to certain new and 
existing Members pursuant to the Transaction.
    The proceeds resulting from the sale of Class D Units pursuant to 
the Transaction will be paid to Holdco by the new and existing Members 
participating in the Transaction as purchasers of Class D Units (the 
``Participating Members''), and such proceeds will be used by Holdco 
for general corporate expenses, including to support the operations and 
regulation of the Exchange, which is a subsidiary of Holdco. Although 
each Member's proportionate ownership of Holdco will change as a result 
of the Transaction, no Member will exceed any ownership or voting 
limitations applicable to the Members set forth in the Holdco LLC 
Agreement after giving effect to the Transaction and the amendments to 
the Holdco LLC Agreement proposed herein.\8\
---------------------------------------------------------------------------

    \8\ See Section 3.5, which sets forth certain limitations with 
respect to the ownership and voting of Units. The Exchange notes 
that the proposal contains an amendment to Section 3.5, which is 
described below.
---------------------------------------------------------------------------

    Additionally, in connection with the Transaction, one new Member, 
Optiver PSI B1 LLC (``Optiver''), will receive the right to nominate a 
Director, thereby increasing the size of the Holdco Board from fourteen 
(14) to fifteen (15) Directors. Other than this change to the 
composition of the Holdco Board, a proposed change to the definition of 
``Supermajority Board Vote'' to maintain the current affirmative vote 
threshold and the addition of an ``Options Market Structure 
Committee,'' each as further described below, the governance of Holdco 
would continue under its existing structure. None of the amendments to 
the Holdco LLC Agreement proposed herein would impact the governance of 
the Exchange.
    The Transaction and all amendments to the Holdco LLC Agreement 
proposed herein were previously approved by the Holdco Board on March 
8, 2023, in accordance with the Holdco LLC Agreement. The Exchange 
expects the Transaction to be completed pursuant to one or more 
closings that would occur within ninety (90) days of the initial 
closing. The Exchange expects the initial closing to occur on or 
shortly after the date on which the amendments to the Holdco LLC 
Agreement proposed herein become effective.
Amendments Related to the Creation of the Class D Units
    In connection with the Transaction, the proposal would amend the 
Holdco LLC Agreement to create a new class of Units, the Class D Units, 
in order to effectuate the sale by Holdco of Class D Units to the 
Participating Members. As proposed, the Class D Units are the exact 
same type of membership interest (i.e., have the same privileges, 
preference, duties, liabilities, obligations and rights) as the 
existing Class C Units except that the Class D Units are being sold at 
a different price per Unit than which the Class C Units were previously 
sold, which results in the need for Holdco to create a new class of 
Units (i.e., the Class D Units) to facilitate the Transaction. Other 
than the original purchase price of such Units being different, the 
Class D Units are the exact same security in every respect and are 
functionally equivalent to the Class C Units.
Authorization and Issuance of the Class D Units
    Section 3.2 currently contains provisions related to the 
authorization and issuance of the Class A Units, the Class C Units, and 
the Common Units and that specify the voting rights associated with 
such Units. The proposal would amend Section 3.2 to similarly reflect 
the creation of the Class D Units, including to add new paragraph (f), 
which contains provisions related to the authorization and issuance of 
the Class D Units (comprised of the Class D-1 Units and the Class D-2 
Units, as described below) and that specifies the voting rights 
associated with such Units by reference to the applicable paragraphs of 
Section 4.7, which prescribes the actions on which holders of Units are 
entitled to vote.
Voting Construct Applicable to Class D Units
    The Exchange notes that previous amendments to the Holdco LLC 
Agreement changed the governance structure of Holdco from a construct 
in which the Members had no voting or management rights (except in very 
limited circumstances) and the authority to manage and control the 
business and affairs of Holdco was otherwise vested in the Holdco Board 
to a construct in which the Class A Units, the Class C Units, and the 
Common Units were divided into ``voting'' and ``non-voting'' series and 
the Members holding Class A Units, Class C Units and/or Common Units 
were granted certain voting rights associated with the ownership of 
such Units, with different voting rights associated with the ``voting'' 
series and the ``non-voting'' series of such classes of Units.\9\ The 
sole purpose of this prior change to Holdco's governance structure was 
to facilitate certain Members' compliance with requirements and 
restrictions under the United States Bank Holding Company Act of 1956, 
as amended (``BHCA''), in light of amendments to the BHCA regulations 
issued by the Board of Governors of the Federal Reserve System 
regarding the framework for determining ``control'' under the BHCA as 
well as interpretations of such amendments by certain Members that are 
subject to the BHCA.\10\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 93452 (October 28, 
2021), 86 FR 60683 (November 3, 2021) (SR-MEMX-2021-15). The 
Exchange notes that the voting rights of holders of Class A Units, 
Class C Units, and/or Common Units remain very limited and relate 
only to voting on significant corporate matters related to the 
administration, ownership, capital, or dissolution of Holdco or any 
Holdco subsidiary (other than the Exchange), and the authority to 
manage and control the business and affairs of Holdco, including the 
right to amend or modify the Holdco LLC Agreement, remains otherwise 
vested in the Holdco Board. See Section 4.6(a).
    \10\ Id.
---------------------------------------------------------------------------

    Under the current proposal, the Class D Units would similarly be 
divided into a ``voting'' series (i.e., the Class D-1 Units), with 
certain voting rights as prescribed in Section 4.7 that mirror those of 
the Class C-1 Units, and a ``non-voting'' series (i.e., the Class D-2 
Units), with more limited voting rights as prescribed in Section 4.7 
that mirror those of the Class C-2 Units. Like the creation of the 
``voting'' and ``non-voting'' series of the Class C Units, the Class A 
Units, and the Common Units, the sole purpose of the proposal to create 
separate ``voting'' and ``non-voting'' series of Class D Units is to 
maintain a voting construct that facilitates certain Members' 
compliance with the BHCA.
    Under the proposal, Section 4.7 would be amended to reflect the 
creation of the Class D Units and provide for the voting rights 
associated with the ownership of the Class D-1 Units and the Class D-2 
Units. Specifically, the Class D-1 Units and/or the Class D-2 Units, as 
applicable, would vote together with the Class C-1 Units and/or the 
Class C-2 Units, as applicable, on all matters on which the Class C-1 
and/or the Class C-2 Units are currently entitled to vote, subject to 
two exceptions set forth in amended Section 4.7(d) and proposed new 
Section 4.7(f), which are described below, and the voting construct 
applicable to the Class D Units would exactly mirror the voting 
construct applicable to the Class C Units since, as noted above, they 
are intended to be the exact same type of membership interest with all 
of the same privileges, preference, duties, liabilities,

[[Page 19696]]

obligations and rights under the Holdco LLC Agreement.
    The only actions on which the Class D Units would vote on their 
own, and not together with the Class C Units, are set forth in: (i) 
amended Section 4.7(d), which provides that any waiver or amendment of 
any provision of the Holdco LLC Agreement which would significantly and 
adversely affect the rights, preferences, powers or privileges of the 
Class D-1 Units shall not be effected without the approval of a 
majority of the then-outstanding Class D-1 Units; and (ii) proposed new 
Section 4.7(f), which provides that any exchange, reclassification or 
cancellation (whether by merger, consolidation or otherwise) or 
modification of the terms of all or part of the Class D Units which 
exchange, reclassification, cancellation or modification, as 
applicable, significantly and adversely affects the rights or 
preferences of the Class D Units shall not be effected without the 
approval of the majority of the then-outstanding Class D-1 Units and 
Class D-2 Units, voting together as a single class. These exceptions to 
the general principle that the Class D Units vote together with the 
Class C Units are rooted in common corporate law principles and are 
intended to safeguard the Class D Units against actions that 
significantly and adversely affect the Class D Units specifically, and 
such provisions mirror existing provisions that confer the same voting 
rights associated with the Class C Units with respect to actions that 
significantly and adversely affect the Class C Units specifically. In 
connection with these proposed amendments to Section 4.7, the proposal 
would further amend Section 4.7 to renumber the existing paragraphs 
after proposed new paragraph (g) and update relevant section references 
throughout the Holdco LLC Agreement accordingly.
    The proposal would also amend Section 4.6, which also relates to 
the voting rights of the Members, in a manner that conforms and is 
consistent with the proposed amendments to Section 4.7 providing for 
certain voting rights associated with the ownership of Class D Units, 
as described above, and to otherwise reflect the creation of the Class 
D Units.
    Additionally, the proposal would amend Section 3.10, which contains 
provisions that permit a Class A Member and/or Class C Member to elect 
to specify the maximum voting percentage that such Member may have with 
respect to its Voting Class A Units and/or Class C-1 Units (any such 
election, a ``Restricted Voting Election'') and that provide for the 
conversion of Voting Class A Units and/or Class C-1 Units into 
Nonvoting Class A Units and/or Class C-2 Units, respectively, and vice 
versa, in certain circumstances to maintain such Member's specified 
maximum voting percentage with respect to such Units. Section 3.10 is 
primarily in place in its current form to provide a mechanism for Class 
A Members and/or Class C Members to manage any potential deemed voting 
interests attributable to the Voting Class A Units and/or Class C-1 
Units for BHCA and/or other regulatory purposes, although any Member 
holding Voting Class A Units and/or Class C-1 Units is able to make a 
Restricted Voting Election with respect to such Units for any purpose.
    Currently, Section 3.10 provides that a Class A Member may notify 
Holdco of a Restricted Voting Election with respect to its Voting Class 
A Units (``Maximum Voting Class A Voting Percentage''), and a Class C 
Member may notify Holdco of a Restricted Voting Election with respect 
to its Class C-1 Units (``Maximum Class C-1 Voting Percentage''). The 
proposal would amend Section 3.10 to reflect the creation of the Class 
D Units and group the Class D-1 Units together with the Class C-1 Units 
for purposes of Section 3.10 in a manner consistent with the harmonized 
voting structure with respect to such Units described above, such that 
a Member holding Class C-1 Units and/or Class D-1 Units would now be 
permitted to notify Holdco of a Restricted Voting Election with respect 
to its Class C-1 Units and/or Class D-1 Units (``Maximum Class C-1/D-1 
Voting Percentage''). In connection with this change, the proposal 
would also amend the following defined terms to reflect that the Class 
D-1 Units are now grouped together with the Class C-1 Units for 
purposes of Section 3.10: ``Class C-1 Voting Percentage'' would become 
``Class C-1/D-1 Voting Percentage''; \11\ ``Maximum Class C-1 Voting 
Percentage'' would become ``Maximum Class C-1/D-1 Voting Percentage''; 
\12\ and ``Prior Class C-1 Voting Percentage'' would become ``Prior 
Class C-1/D-1 Voting Percentage.'' \13\ Similarly, the proposal would 
amend Exhibit F, which is a Restricted Voting Election Notice form used 
by Members to notify Holdco of a Restricted Voting Election, to reflect 
that a Class C Member and/or Class D Member would now elect to specify 
a Maximum Class C-1/D-1 Voting Percentage rather than a Maximum Class 
C-1 Voting Percentage. The provisions in Section 3.10 regarding the 
conversion of Voting Class A Units and/or Class C-1 Units into 
Nonvoting Class A Units and/or Class C-2 Units, respectively, and vice 
versa, in certain circumstances to maintain such Member's specified 
maximum voting percentage with respect to such Units would also be 
amended to include provisions relating to the conversion of Class D-1 
Units into Class D-2 Units, and vice versa, in the same circumstances 
and on the same terms that are currently specified with respect to the 
Class A Units and Class C Units. Additionally, the other provisions of 
Section 3.10 would similarly be amended to reflect the creation of the 
Class D Units, including to add references to Class D Units and Class 
D-1 Units, as applicable, alongside references to Class C Units and 
Class C-1 Units, as applicable.
---------------------------------------------------------------------------

    \11\ As proposed, the term ``Class C-1/D-1 Voting Percentage'' 
would be defined in Section 1.1 and would mean at any time of 
calculation, a fraction, expressed as a percentage, (i) the 
numerator of which is the number of then issued and outstanding 
Class C-1 Units and Class D-1 Units held by a Member and (ii) the 
denominator of which is the number of then issued and outstanding 
Class C-1 Units and Class D-1 Units held by all Members.
    \12\ As proposed, the term ``Maximum Class C-1/D-1 Voting 
Percentage'' would be defined in Section 3.10(a) and would refer to 
a Class C Member's or a Class D Member's maximum Class C-1/D-1 
Voting Percentage.
    \13\ As proposed, the term ``Prior Class C-1/D-1 Voting 
Percentage'' would be defined in Section 3.10(e)(ii) and would refer 
to a Class C Member's or a Class D Member's Class C-1/D-1 Voting 
Percentage immediately prior to the issuance of any new Units or 
Unit Equivalents.
---------------------------------------------------------------------------

Convertibility and Conversion of Class D Units
    As the Class D Units are the exact same type of membership interest 
as the Class C Units, which are convertible into Common Units as set 
forth in Section 3.11 (which references additional conversion terms set 
forth in Exhibit G--Conversion Rights of Class C Units), as proposed, 
the Class D Units are also convertible into Common Units under the same 
terms applicable to the Class C Units. Accordingly, the proposal would 
amend Section 3.11 and Exhibit G to reflect the creation of the Class D 
Units, include references to the Class D Units where appropriate, and 
include conversion provisions applicable to the Class D Units that 
mirror those applicable to the Class C Units. Proposed new Section 
3.11(d) provides that in the event of any conversion to Common Units of 
any Class D Units, Class D-1 Units shall be converted into Voting 
Common Units, and Class D-2 Units shall be converted into Nonvoting 
Common Units. This conversion structure mirrors that applicable to the

[[Page 19697]]

Class C Units (i.e., Class C-1 Units are convertible into Voting Common 
Units, and Class C-2 Units are convertible into Nonvoting Common Units) 
and is similarly designed to keep the same voting construct in place 
with respect to the Common Units that are issued upon the conversion of 
any Class D Units (i.e., Converted Common Units) in a manner consistent 
with the BHCA considerations described above. The Exchange notes that 
current Section 3.2(f), which would be renumbered as Section 3.2(g) to 
account for proposed new paragraph (f) described above, contains 
provisions relating to the Common Units and specifically provides that 
Common Units shall only be issuable in connection with an investment in 
the Company or upon conversion of Class C Units. As the Class D Units 
are also convertible into Common Units on the same terms as the Class C 
Units, as described above, the proposal would amend Section 3.2(g) to 
reflect that Common Units would also be issuable upon the conversion of 
Class D Units.
Amendment to Definitions and Other References To Reflect the Creation 
of the Class D Units
    In connection with the creation of the Class D Units, the proposal 
would add definitions of the following terms in Section 1.1 (i.e., the 
``Definitions'' section of the Holdco LLC Agreement): Class D Member; 
\14\ Class D-1 Units; \15\ Class D-2 Units; \16\ Class D Unit Original 
Purchase Price; \17\ and Class D Units.\18\ The proposal would also add 
references to Class D Units and/or Class D Members alongside references 
to Class C Units and/or Class C Members, as applicable, where 
appropriate throughout the Holdco LLC Agreement. Additionally, the 
proposal would amend the definitions of ``Converted Common Units''; 
``Pro Rata Portion''; and ``Units'' in Section 1.1 to reflect the 
creation of, and include references to, the Class D Units.
---------------------------------------------------------------------------

    \14\ As proposed, the term ``Class D Member'' means a Member 
holding Class D-1 Units or Class D-2 Units, as applicable, in its 
capacity as such, together with its Affiliates that hold Class D-1 
Units or Class D-2 Units, as applicable (for the sake of clarity, 
such Member and such Affiliates shall be considered to be one (1) 
Class D Member).
    \15\ See supra note 4 for the proposed definition of the term 
``Class D-1 Units''.
    \16\ See supra note 4 for the proposed definition of the term 
``Class D-2 Units''.
    \17\ As proposed, the term ``Class D Unit Original Purchase 
Price'' means the purchase price per Class D Unit set forth in the 
Members Schedule as of the Effective Date.
    \18\ See supra note 4 for the proposed definition of the term 
``Class D Units''.
---------------------------------------------------------------------------

Priority of Distributions of the Class D Units
    Like the Class C Units, the primary distinction between the Class D 
Units and the Common Units, as well as the primary purpose of providing 
for the convertibility of Class D Units into Common Units, is the 
respective priority of Distributions \19\ made to the Members with 
respect to such Units, which is the main economic consequence of a 
Member's ownership of such Units. The respective priority of 
Distributions made to the Members with respect to the different classes 
of Units is currently set forth in Section 7.3 with respect to 
Distributions other than of proceeds in the event of a liquidation of 
Holdco, and in Section 13.3 with respect to Distributions of proceeds 
in the event of a liquidation of Holdco. The proposal would amend 
Sections 7.3 and 13.3 to reflect the priority of Distributions with 
respect to the Class D Units, which, as the Class D Units are the exact 
same type of membership interest as the Class C Units, is the same in 
each case for the Class D Units as for the Class C Units (i.e., the 
Class D Units and the Class C Units are effectively treated as the same 
class of membership interest for such purposes and receive shares of 
Distributions together at the same times and on the same terms on a pro 
rata basis).
---------------------------------------------------------------------------

    \19\ See Section 1.1 for the definition of Distribution.
---------------------------------------------------------------------------

Rights and Obligations of the Class D Units
    There are currently several provisions in the Holdco LLC Agreement 
related to the rights and obligations associated with the Class C Units 
and the Class C Members, and thus, make specific reference to ``Class C 
Units'' and/or ``Class C Members.'' As noted above, under the proposal, 
the Class D Units are the exact same type of membership interest and 
therefore have the same rights and obligations as the Class C Units, 
and thus, a Member's ownership of Class D Units would confer the same 
rights and obligations with respect to such Units as a Member's 
ownership of Class C Units. Accordingly, the proposal would make 
several amendments throughout the Holdco LLC Agreement to reflect that 
the Class D Units have such rights and obligations and to otherwise 
reflect the creation of the Class D Units, including to add references 
to Class D Units and/or Class D Member alongside references to Class C 
Units and/or Class C Member, as applicable, where appropriate for this 
purpose. Such changes include amendments to reflect that the Class D 
Units are subject to the same terms as the Class C Units regarding the 
Member meeting rights set forth in Sections 4.7(j) and (o) (renumbered 
from (h) and (m) due to the other amendments to Section 4.7 described 
above), the pre-emptive rights set forth in Section 9.1, the Director 
nomination rights set forth in Section 8.10, the Board Observer 
appointment rights set forth in Section 8.13, the Exchange Board 
Observer appointment rights set forth in Section 8.18(g), the right of 
first offer set forth in Section 10.3, the drag-along rights set forth 
in Section 10.4, the tag-along rights set forth in Section 10.5, the 
regulatory hardship transfer and surrender rights set forth in Section 
10.6, the information rights set forth in Section 12.1, and the waiver 
consent rights set forth in Section 15.10.
Amendment to Section 3.5 Related to the Treatment of Class C Units, 
Class D Units, and Common Units as a Single Class for Purposes of 
Sections 3.5 and 3.8
    Section 3.5 sets forth certain limitations with respect to the 
ownership and voting of Units, which are intended to prevent the 
concentration of voting power and control of Holdco, and, in turn, the 
Exchange, above certain specified thresholds. Specifically, Section 
3.5(a) provides that for so long as Holdco controls the Exchange, 
subject to certain limited exceptions: (i) no Person, either alone or 
together with its Related Persons, may own, directly or indirectly, of 
record or beneficially, Units constituting more than forty percent 
(40%) of any class of Units; (ii) no Exchange Member, either alone or 
together with its Related Persons, may own, directly or indirectly, of 
record or beneficially, Units constituting more than twenty percent 
(20%) of any class of Units; and (iii) no Person, either alone or 
together with its Related Persons, at any time may, directly, 
indirectly or pursuant to any voting trust, agreement, plan or other 
arrangement, vote or cause the voting of Units or give any consent or 
proxy with respect to Units representing more than twenty percent (20%) 
of the voting power of the then issued and outstanding Units, nor may 
any Person, either alone or together with its Related Persons, enter 
into any agreement, plan or other arrangement with any other Person, 
either alone or together with its Related Persons, under circumstances 
that would result in the Units that are subject to such agreement, plan 
or other arrangement not being voted on any matter or matters or any 
proxy relating thereto being withheld, where the effect

[[Page 19698]]

of such agreement, plan or other arrangement would be to enable any 
Person, either alone or together with its Related Persons, to vote, 
possess the right to vote or cause the voting of Units which would 
represent more than twenty percent (20%) of such voting power.
    The Exchange notes that while the Class D Units and the Class C 
Units may be considered separate classes of Units due to the naming 
convention of such Units (i.e., being referred to as Class C vs. Class 
D) and for certain general corporate law purposes (i.e., entitled to 
vote separately on any matters that affect such Units specifically), as 
discussed above, the Class D Units are the exact same type of 
membership interest (i.e., have the same privileges, preference, 
duties, liabilities, obligations and rights) as the Class C Units and 
also vote together with, and in the same manner as, the Class C Units 
pursuant to Section 4.7 on all actions on which such Units are entitled 
to vote (other than actions that significantly and adversely affect the 
Class C Units or the Class D Units specifically). Thus, as noted above, 
such Units are functionally equivalent with the only difference between 
such Units being the original purchase price paid by the applicable 
purchasing Members, which difference is the sole reason for the 
creation of the new Class D Units. Therefore, the Exchange and the 
Holdco Board believe that the Class C Units and the Class D Units 
should generally be treated as a single class of Units for most 
purposes, as evidenced by the proposed amendments described above that 
reflect the identical treatment under the Holdco LLC Agreement. 
Additionally, as noted above, the Class C Units and the Class D Units 
are both convertible into Common Units on the same terms, and, once 
converted, such Common Units retain the same voting construct, rights, 
and obligations as the Class C Units and/or Class D Units from which 
they were converted (other than the priority of Distributions, as 
described above), and Common Units vote together with the Class C Units 
and the Class D Units and in the same manner pursuant to Sections 
4.7(c) and (j) on all actions on which Class C Units and Class D Units 
are entitled to vote (other than actions that significantly and 
adversely affect the Class C Units and/or the Class D Units 
specifically). As such, ownership of Class C Units, Class D Units, and/
or Common Units effectively confer the same ownership rights to the 
holders of any such Units as relates to voting and governance of Holdco 
(i.e., other than economic consequences resulting from priority of 
Distributions).
    Accordingly, the proposal would amend Section 3.5, which sets forth 
certain limitations with respect to the ownership and voting of Units, 
to include a new paragraph (e), which provides that notwithstanding 
anything in the Holdco LLC Agreement to the contrary, the provisions of 
the Holdco LLC Agreement shall be construed in a manner such that the 
Class C Units, the Class D Units, and the Common Units together shall 
be treated as a single class of securities for purposes of Sections 3.5 
and 3.8.
    The Exchange reiterates that Members have limited control through 
ownership of Units, which is comprised of voting power associated with 
Units with respect to the limited actions prescribed in Section 4.7 and 
a Nominating Member's ability to nominate a Director to the Holdco 
Board, and, accordingly, the authority to manage and control the 
business and affairs of Holdco remains generally vested in the Holdco 
Board.\20\ The Exchange further notes that Member representation on the 
Holdco Board is limited to one (1) Director per Nominating Member 
regardless of the amount/class of Units held by such Member, and the 
proposed change to treat the Class C Units, the Class D Units, and the 
Common Units together as a single class of securities for purposes of 
Sections 3.5 and 3.8 does not change this fact. In turn, Directors each 
have one vote, and thus, the general control of Holdco is widely 
dispersed (i.e., as amended, there will be fifteen (15) Directors with 
one vote each, so each Director (and each Member that they represent) 
has less than seven percent (7%) of the voting power on the majority of 
matters related to the governance of Holdco).
---------------------------------------------------------------------------

    \20\ See supra note 7.
---------------------------------------------------------------------------

    The Exchange also notes that combining Class C Units, Class D 
Units, and Common Units does not increase the relative voting power or 
control of any Members, including the holders of Class A Units, as 
holders of Class A Units still vote as a separate class pursuant to 
Section 4.7(a) in the same manner as today. Rather, the only impact to 
voting power or control is dilution to Members holding Class C Units 
because the Exchange is bringing in new investors that will have voting 
power due to their holding Class D Units that will vote together with 
such Class C Units, as well as dilution to Members holding Class A 
Units in the sole event that the Class A Units vote together with the 
Class C Units and Class D Units with respect to the liquidation, 
dissolution or winding up of Holdco pursuant to Section 4.7(j). The 
only impact to ownership values is similarly dilutive, for both Members 
holding Class A Units and those holding Class C Units. However, the 
Holdco LLC Agreement contains provisions that permit such Members 
holding Class A Units and/or Class C Units to purchase Class D Units in 
the Transaction to retain their current proportionate ownership (and, 
in turn, control and voting power) to the extent they are concerned 
about any such dilution, and none of the proposed changes will impair 
the ability of the Exchange to carry out its functions and 
responsibilities as an ``exchange'' under the Exchange Act, and the 
rules and regulations promulgated thereunder, nor does it impair the 
ability of the SEC to enforce the Exchange Act and the rules and 
regulations promulgated thereunder with respect to the Exchange.
    The Exchange notes that the proposed new Section 3.5(e) does not 
seek to treat Class A Units as a single class along with Class C Units, 
Class D Units, and Common Units for this purpose because Class A Units 
are economically distinct, as they are best characterized as 
participating preferred securities and are not convertible into Common 
Units, and because the Class A Units vote as a separate class (i.e., 
not together with the Class C Units and Common Units) pursuant to 
Section 4.7(a). However, the Exchange also notes that in connection 
with any investment in Holdco it reviews the ownership of Units in the 
aggregate (i.e., not based on class) and considers such aggregated 
ownership as the most meaningful way to consider the ownership and 
voting limitations for purposes of assessing relative control.
    The Exchange notes that Section 3.8, which would remain unchanged, 
contains provisions allowing an Exchange Member that (together with its 
Related Persons) owns, directly or indirectly, of record or 
beneficially, Units constituting more than twenty percent (20%) of any 
class of Units to transfer the number of Units which account for the 
excess over such twenty percent (20%) ownership limitation, so the 
proposed new Section 3.5(e) makes clear that the same rule applying to 
the treatment of ownership of Class C Units, Class D Units, and Common 
Units for purposes of Section 3.5 described above would also apply to 
Section 3.8, as such section also contains a provision related to an 
ownership threshold, for purposes of which the Exchange and the Holdco 
Board believes Class C Units, Class D Units, and Common Units are 
functionally equivalent and appropriately treated as a single class.

[[Page 19699]]

Amendments Related to Certain Changes With Respect to the Holdco Board 
in Connection With the Transaction
    In connection with the Transaction, Optiver will become a Member 
with the right to nominate a Director to the Holdco Board (i.e., a 
Nominating Member). Therefore, the size of the Holdco Board will 
increase from fourteen (14) to fifteen (15) Directors, as of the 
Effective Date. To reflect this change, the proposal would amend the 
Holdco LLC Agreement to add a definition of ``Optiver'' in Section 1.1 
that reflects Optiver as a Class D Member and is consistent with the 
definitions of other Nominating Members with similar rights as Optiver; 
amend the definition of ``Market Maker Member'' \21\ in Section 1.1 to 
include a reference to Optiver as a designated Market Maker Member; 
amend Section 8.3(a) to reflect the increased size of the Holdco Board 
at fifteen (15) Directors; and amend Section 8.3(b) to reference 
Optiver as a Member with the right to nominate a Director.
---------------------------------------------------------------------------

    \21\ The term ``Market Maker Member'' refers to each of Citadel, 
Virtu, Jane Street and any other Member that is specifically 
designated as a Market Maker Member, in each case, together with 
each of their respective Affiliates. See Section 1.1. The Exchange 
notes that the only consequence of designation as a Market Maker 
Member under the Holdco LLC Agreement is that at least one Director 
nominated by any Market Maker Member (i.e., a Market Maker Director) 
is generally required to establish a quorum for the transaction of 
business of the Holdco Board. See Section 8.6(a).
---------------------------------------------------------------------------

    In addition, the proposal would amend the definition of 
``Supermajority Board Vote'' in Section 1.1, as further described 
below. Currently, the term Supermajority Board Vote means the 
affirmative vote of at least seventy-seven percent (77%) of the votes 
of all Directors then entitled to vote on the matter under 
consideration and who have not recused themselves, whether or not 
present at the applicable meeting of the Board; provided that if such 
affirmative vote threshold results in the necessity of the affirmative 
vote of eight (8) such Directors or fewer, an affirmative vote of all 
but two (2) of such Directors shall be required instead with respect to 
such matter. As the size of the Holdco Board will increase as a result 
of the Transaction, as described above, the proposal seeks to amend the 
definition of ``Supermajority Board Vote'' in Section 1.1 to change the 
affirmative vote threshold from seventy-seven percent (77%) of the 
votes of all Directors then entitled to vote to seventy-three percent 
(73%) of the votes of all Directors then entitled to vote, which would 
maintain the current voting structure in that the affirmative vote of 
the same number of Directors would be required assuming that all 
Directors are entitled to vote on a matter and none have recused 
themselves. Specifically, under the current structure with fourteen 
(14) Directors, assuming all such Directors are entitled to vote on a 
matter and none have recused themselves, a matter would be approved as 
an affirmative Supermajority Board Vote if eleven (11) Directors vote 
in favor of a matter, and under the proposed structure with fifteen 
(15) Directors a matter would similarly be approved as an affirmative 
Supermajority Board Vote if eleven (11) Directors vote in favor of a 
matter. Accordingly, the Holdco Board and the Exchange believe it is 
appropriate to maintain this voting structure which results in an 
affirmative Supermajority Board Vote if eleven (11) Directors vote in 
favor of a particular matter. The proposal would not change any other 
aspect of the definition.
    The proposal also would amend Section 8.9 to establish an Options 
Market Structure Committee and to restructure such Section in 
connection with this addition. Currently, Section 8.9 addresses 
committees of the Holdco Board, including the right of the Holdco Board 
to establish one or more committees of the Holdco Board that have the 
authority to make recommendations to the Holdco Board, but not to act 
for or on behalf of, or to bind Holdco. Section 8.9 also states that 
the Holdco Board shall establish a market structure committee and that 
so long as BlackRock remains a Nominating Member, (a) BlackRock shall 
have the right, but not the obligation, to designate one of its 
representatives to serve on such market structure committee at all 
times, and (b) if BlackRock so requests, a representative of BlackRock 
shall be the chairperson of such market structure committee. The 
Exchange proposes to establish paragraph (a) to Section 8.9, which 
would maintain the existing general language regarding committees and 
to entitle such paragraph ``Board Advisory Committees'', and to 
establish paragraph (b) to Section 8.9, which would describe Market 
Structure Committees generally and restate much of the language from 
paragraph (a), including that such Market Structure Committees shall 
have the power to make recommendations to, but not act for or on behalf 
of, or to bind the Holdco Board.
    Proposed paragraph (b)(i) would describe the existing Market 
Structure Committee (which would be renamed as the Equities Market 
Structure Committee) and would provide that such committee shall be 
composed of Directors, Alternate Directors, Board Observers and/or 
other representatives of Nominating Members. Further, paragraph (b)(i) 
would include the existing language providing that so long as BlackRock 
remains a Nominating Member, (A) BlackRock shall have the right, but 
not the obligation, to designate one of its representatives to serve on 
the Equities Market Structure Committee at all times, and (B) if 
BlackRock so requests, a representative of BlackRock shall be the 
chairperson of the Equities Market Structure Committee.
    Proposed paragraph (b)(ii) would mirror paragraph (b)(i), as 
described above, and would describe the new Options Market Structure 
Committee. Paragraph (b)(ii) would provide that the Options Market 
Structure Committee shall be composed of Directors, Alternate 
Directors, Board Observers and/or other representatives of Members. 
Further, paragraph (b)(ii) would provide similar rights to Optiver as 
those currently provided to BlackRock, and state that so long as 
Optiver remains a Nominating Member, (A) Optiver shall have the right, 
but not the obligation, to designate one of its representatives to 
serve on the Options Market Structure Committee at all times, and (B) 
if Optiver so requests, a representative of Optiver shall be the 
chairperson of the Options Market Structure Committee.
    The Exchange notes that the Board currently has the right to 
establish committees by Supermajority Board Vote, and the codification 
of the existence, composition and details regarding the Market 
Structure Committees does not impact the governance of Holdco. Rather, 
the purpose of codifying the Market Structure Committees is in 
recognition of their importance to Holdco in providing advice to Holdco 
regarding developments in market structure applicable to these asset 
classes, namely equities and options. As noted above, neither Market 
Structure Committee will have the power to act for or on behalf of, or 
to bind, the Holdco Board. The Exchange also notes that it believes it 
is appropriate to make clear that it will allow other representatives 
of Nominating Members of Holdco (in the case of the Equities Market 
Structure Committee) and Members of Holdco (in the case of the Options 
Market Structure Committee), and not just Directors, Alternate 
Directors and Observers, to sit on such Market Structure Committees 
because many of Holdco's Members have representatives with particular 
expertise on market structure that can

[[Page 19700]]

be valuable to Holdco but who do not sit on the Holdco Board.
Amendment to the Definition of ``Company Related Party''
    The proposal seeks to amend the definition of ``Company Related 
Party'' in the Holdco LLC Agreement.\22\ Specifically, the proposal 
would amend this term to also include any Person Controlled \23\ by one 
or more Persons already listed in the current definition. The Exchange 
and the Holdco Board believe it is appropriate to designate any such 
Person as a Company Related Party, and therefore subject any contract, 
arrangement or transaction between such Person, on the one hand, and 
Holdco or any Holdco subsidiary, on the other hand (i.e., a Company 
Related Party Transaction \24\), to the Holdco LLC Agreement's specific 
procedures for the Holdco Board's evaluation and approval of a Company 
Related Party Transaction, as the Exchange and the Holdco Board believe 
such Persons have a sufficient affiliation with Holdco to warrant the 
applicability of the Company Related Party Transaction procedures, 
which are designed to mitigate the potential conflicts of interest 
inherent in such transactions.\25\
---------------------------------------------------------------------------

    \22\ As set forth in Section 1.1, the term ``Company Related 
Party'' currently means (a) any manager, officer, director, 
employee, independent contractor and/or consultant of Holdco or any 
Holdco subsidiary, (b) (i) any Member or holder of equity interests 
of Holdco or any Holdco subsidiary, (ii) any Affiliate or any 
manager, officer, director, employee, independent contractor and/or 
consultant of any Member or holder of equity interests of Holdco or 
any Holdco subsidiary or (iii) any manager, officer, director, 
employee, independent contractor and/or consultant of any Affiliate 
of a Member or holder of equity interests of Holdco or any Holdco 
subsidiary, and (c) any Immediate Family Member of any Person 
specified in clause (a).
    \23\ The term ``Control'' means, when used with respect to any 
specified Person, the power, direct or indirect, to direct or cause 
the direction of the management and policies of such Person, whether 
through ownership of voting securities or partnership or other 
ownership interests, by contract or otherwise. See Section 1.1.
    \24\ See Section 1.1 for the definition of Company Related Party 
Transaction.
    \25\ See Section 8.16 for the procedures relating to the Holdco 
Board's evaluation and approval of Company Related Party 
Transactions.
---------------------------------------------------------------------------

Amendment to the Provision Relating to the Preparation and Delivery of 
the Annual Budget
    The proposal seeks to amend the Holdco LLC Agreement's provision 
relating to the preparation and delivery of Holdco's annual budget. 
Currently, Section 12.4(a) provides that at least forty-five (45) 
calendar days prior to the start of any fiscal year (beginning with the 
fiscal year starting on January 1, 2020), Holdco shall prepare and 
deliver to the Holdco Board an annual budget setting forth all 
reasonably anticipated expenses of Holdco and its subsidiaries on a 
consolidated basis during the course of the upcoming Fiscal Year (the 
``Annual Budget''). The proposal would amend Section 12.4(a) to delete 
the requirement that the Annual Budget must be prepared and delivered 
to the Holdco Board at least forty-five (45) calendar days prior to the 
start of the fiscal year. Instead, as proposed, Holdco would be 
required to prepare and deliver the Annual Budget to the Holdco Board 
on any date prior to the start of the fiscal year. The Exchange and the 
Holdco Board believe this change is appropriate because it would permit 
Holdco to deliver the Annual Budget, and seek the Holdco Board's 
approval of such Annual Budget, at the Holdco Board's fourth quarter 
meeting, which is typically scheduled on a date in December that is 
within forty-five (45) calendar days of the start of the fiscal year. 
The Annual Budget would therefore still be required to be prepared and 
delivered before the start of the fiscal year, but with greater 
flexibility on the timing.
Clarifying, Updating, Conforming, and Other Non-Substantive Amendments
    Finally, the proposal would make various clarifying, updating, 
conforming, and other non-substantive amendments to the Holdco LLC 
Agreement, each of which is discussed below.
Amendments To Delete Obsolete Provisions and Language
    The proposal would make the following amendments to the Holdco LLC 
Agreement to delete provisions and language that are now obsolete due 
to the passage of time:
     Deletion of Sections 10.1(a)(ii) and (iii). The proposal 
would amend Section 10.1(a) to delete paragraphs (ii) and (iii) 
thereunder, as such paragraphs contain provisions relating to certain 
restrictions on the transfer of Units, which by their terms only apply 
prior to September 5, 2022. As this date has already passed, these 
provisions are now obsolete, and the proposal would therefore delete 
such provisions and replace such provisions with a ``Reserved.'' 
placeholder to maintain the paragraph numbering.
     Deletion of certain defined terms in Section 1.1. The 
proposal would delete the following defined terms ``Released Class A 
Member''; ``Released Class A Units''; ``Released Class C Member''; and 
``Released Class C Units'' in Section 1.1, as such terms are only used 
in Section 10.1(a)(ii), which section would itself be entirely deleted 
under the proposal as it is now obsolete, as described immediately 
above.
     Deletion of language in Section 2.5(a). The proposal would 
delete language in Section 2.5(a) that requires prior approval of the 
Holdco Board by Supermajority Board Vote of any expansion of the 
business of Holdco or any Holdco subsidiary into an options exchange 
and/or global equities exchange prior to December 14, 2021, as such 
date has already passed, and therefore, this language is now obsolete.
Clarifying Amendment to Section 4.6(b)
    Currently, Section 4.6(b) provides that if applicable law requires 
that the Members vote on a particular matter, Members shall vote 
together as a single class (other than the Class B Members, the Class A 
Members (including the holders of Class A-1 Units and the holders of 
Class A-2 Units), the holders of Class C-2 Units, and the holders of 
Nonvoting Common Units (if any) which shall nevertheless not vote 
unless applicable law, as applicable, requires that they also vote). 
This provision is intended to reflect the ``voting'' and ``non-voting'' 
Units distinction under Holdco's governance structure, as described 
above, and as such, the ``non-voting'' Units are intended to not vote 
even if the Members are required to vote together as a single class 
under applicable law unless applicable law requires that such non-
voting Units vote. However, the reference in this section to ``the 
Class A Members (including the holders of Class A-1 Units and the 
holders of Class A-2 Units)'' was made inadvertently, and instead, this 
section should only reference the ``non-voting'' series of the Class A 
Units (i.e., the Nonvoting Class A-1 Units and the Nonvoting Class A-2 
Units). Thus, the proposal would correct this inadvertent drafting 
error and make clear that the ``holders of Nonvoting Class A Units'' 
(which includes the Nonvoting Class A-1 Units and the Nonvoting Class 
A-2 Units) are included in this provision rather than all of the Class 
A Members. The Exchange notes that this proposed change is intended to 
merely correct an inadvertent drafting error and clarify the original 
intent of this provision rather than to make a substantive change.
Technical and Conforming Amendments To Reflect the Amendment and 
Restatement of the Holdco LLC Agreement
    The proposal would make various technical and conforming amendments 
to the cover page, table of contents,

[[Page 19701]]

lead-in, recitals, and exhibits of the Holdco LLC Agreement to reflect 
that it is being amended and restated as the Seventh Amended LLC 
Agreement. Additionally, the proposal would amend the definition of 
``Agreement'' to reference the Seventh Amended LLC Agreement; add 
``Sixth Amended LLC Agreement'' as a defined term; replace references 
to ``Fifth Amended LLC Agreement'' with references to ``Sixth Amended 
LLC Agreement'' throughout the Holdco LLC Agreement where appropriate 
(i.e., when referencing the prior version of the Holdco LLC Agreement); 
and update the certificate legend set forth in Section 3.12(b) to 
include a reference to the Seventh Amended LLC Agreement. Each of these 
proposed amendments is a conforming change intended to reflect the 
amendment and restatement of the Holdco LLC Agreement.
Clean-Up Amendments
    Lastly, the proposal would make various non-substantive ``clean-
up'' amendments throughout the Holdco LLC Agreement to correct minor 
drafting errors, update section references (i.e., to reflect 
appropriate sections/paragraphs that were renumbered as a result of the 
proposed changes described herein), make minor grammatical and 
punctuational edits, and make other clarification and ministerial 
changes to clarify existing language or modify such language to conform 
with the other proposed amendments described above.
2. Statutory Basis
    The Exchange believes that the proposed amendments to the Holdco 
LLC Agreement are consistent with Section 6(b) of the Act,\26\ in 
general, and further the objectives of Section 6(b)(1) of the Act,\27\ 
in particular, in that such amendments enable the Exchange to be so 
organized as to have the capacity to be able to carry out the purposes 
of the Act and to comply with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the Exchange. The Exchange 
also believes that the proposed amendments are consistent with Section 
6(b)(5) of the Act,\28\ which requires the rules of an exchange to be 
designed to promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(1).
    \28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Amendments Related to the Creation of the Class D Units
    The Exchange believes that the creation of the Class D Units is 
consistent with the Act, as it would facilitate additional investment 
and funding into Holdco resulting from the sale of Class D Units 
pursuant to the Transaction, and such proceeds could be used by Holdco 
for general corporate expenses, including to support the operations and 
regulation of the Exchange, which would enable the Exchange to be 
organized as to have the capacity to carry out the purposes of the Act 
and to comply with the provisions of the Act, the rules and regulations 
thereunder, and the rules of the Exchange, and, in turn, would protect 
investors and the public interest. Further, the Exchange believes that 
the proposal for the Class D Units to be the exact same type of 
membership interest as the existing Class C Units (only with a 
different purchase price for such Units, as described above) is 
consistent with the Act because, as described above, the Class D Units 
would have the same privileges, preference, duties, liabilities, 
obligations and rights, and be subject to the same voting construct, as 
the Class C Units under the current Holdco LLC Agreement, which 
facilitates certain Members' compliance with the BHCA and provides for 
a governance structure of Holdco that is consistent with the structure 
currently in place, which was previously approved by the 
Commission.\29\ As the Class D Units are the same type of membership 
interest as the Class C Units and do not otherwise impact the 
governance of Holdco or any Holdco subsidiary (including the Exchange), 
the Exchange believes that the creation of the Class D Units and 
related amendments to the Holdco LLC Agreement associated with the 
Class D Units relate solely to the administration of Holdco and the 
Transaction, and that such amendments would not impact the governance 
or operations of the Exchange. Accordingly, the Exchange does not 
believe the creation of the Class D Units or the Transaction would in 
any way restrict the Exchange's ability to be organized as to have the 
capacity to carry out the purposes of the Act and to comply with the 
provisions of the Act, the rules and regulations thereunder, and the 
rules of the Exchange.
---------------------------------------------------------------------------

    \29\ See supra note 7.
---------------------------------------------------------------------------

    As noted above, although each Member's proportionate ownership of 
Holdco will change as a result of the Transaction, no Member will 
exceed any ownership or voting limitations applicable to the Members 
set forth in the Holdco LLC Agreement after giving effect to the 
Transaction and the proposed amendments to the Holdco LLC Agreement 
(including the amendment to Section 3.5 to treat the Class C Units, the 
Class D Units, and the Common Units as a single class of securities for 
purposes of such section). As described above, while the Class D Units 
and the Class C Units may be considered separate classes of Units due 
to the naming convention of such Units (i.e., being referred to as 
Class C vs. Class D) and for certain general corporate law purposes 
(i.e., entitled to vote separately on any matters that affect such 
Units specifically), the Class D Units are the exact same type of 
membership interest (i.e., have the same privileges, preference, 
duties, liabilities, obligations and rights) as the Class C Units and 
also vote together with, and in the same manner as, the Class C Units 
pursuant to Section 4.7 on all actions on which such Units are entitled 
to vote (other than actions that significantly and adversely affect the 
Class C Units or the Class D Units specifically), and thus, such Units 
are functionally equivalent with the only difference between such Units 
being the original purchase price paid by the applicable purchasing 
Members, which difference is the sole reason for the creation of the 
new Class D Units. Additionally, as noted above, the Class C Units and 
the Class D Units are both convertible into Common Units on the same 
terms, and, once converted, such Common Units retain the same voting 
construct, rights, and obligations as the Class C Units and/or Class D 
Units from which they were converted (other than the priority of 
Distributions, as described above), and Common Units vote together with 
the Class C Units and the Class D Units and in the same manner pursuant 
to Section 4.7 on all actions on which Class C Units and Class D Units 
are entitled to vote (other than actions that significantly and 
adversely affect the Class C Units and/or the Class D Units 
specifically). As such, as noted above, ownership of Class C Units, 
Class D Units, and/or Common Units effectively confer the same 
ownership rights to the holders of any such Units as relates to voting 
and governance of Holdco (i.e., other than economic consequences 
resulting from priority of Distributions).
    Additionally, as discussed above, the proposal to treat the Class C 
Units, the Class D Units, and the Common Units as a single class for 
purposes of Sections

[[Page 19702]]

3.5 and 3.8 does not impact a Member's representation on the Holdco 
Board (which is limited to one (1) Director per Nominating Director 
regardless of the amount/class of Units held by such Member), does not 
increase the relative voting power or control of any Members, and is in 
fact dilutive to all Members' voting power and control to the extent 
that Class D Units now vote together with Class C Units generally and 
also with Class A Units solely with respect to the liquidation, 
dissolution or winding up of Holdco pursuant to Section 4.7(j). 
Therefore, the Exchange believes the amendment to treat the Class C 
Units, the Class D Units, and the Common Units together as a single 
class of securities for purposes of the ownership limitations and 
related provisions set forth in Sections 3.5 and 3.8 is appropriate and 
consistent Section 6(b)(1) of the Act,\30\ in that such amendments 
enable the Exchange to be so organized as to have the capacity to be 
able to carry out the purposes of the Act and to comply with the 
provisions of the Act, the rules and regulations thereunder, and the 
rules of the Exchange, and because such amendments will not impair the 
ability of the Exchange to carry out its functions and responsibilities 
as an ``exchange'' under the Exchange Act, and the rules and 
regulations promulgated thereunder, nor do such amendments impair the 
ability of the SEC to enforce the Exchange Act and the rules and 
regulations promulgated thereunder with respect to the Exchange.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

Amendments Related to Certain Changes With Respect to the Holdco Board 
in Connection With the Transaction
    As described above, in connection with the Transaction, Optiver 
will receive the right to nominate a Director and the size of the 
Holdco Board will increase from fourteen (14) to fifteen (15) 
Directors, as of the Effective Date. The Exchange believes the proposed 
amendments to reflect these changes are appropriate and consistent with 
the Act, as such amendments would update and clarify the relevant 
provisions of the Holdco LLC Agreement to reflect changes with respect 
to the Holdco Board that will result from the Transaction, as described 
above.
    Similarly, the Exchange believes the proposed amendment to the 
definition of Supermajority Board Vote to change the affirmative vote 
threshold from seventy-seven percent (77%) of the votes of all 
Directors then entitled to vote to seventy-three percent (73%) of the 
votes of all Directors then entitled to vote is appropriate and 
consistent with the Act, as the resulting voting structure is 
consistent with the current voting structure which results in an 
affirmative Supermajority Board Vote if eleven (11) Directors vote in 
favor of a particular matter assuming that all Directors are entitled 
to vote on a matter and none have recused themselves, as described 
above. The Exchange believes that updating the Holdco LLC Agreement to 
reflect these changes with respect to the Holdco Board would ensure 
clarity with respect to the corporate documents of the Exchange's 
parent company, thereby enabling the Exchange to be so organized as to 
have the capacity to carry out the purposes of the Act and to comply 
with the provisions of the Act, the rules and regulations thereunder, 
and the rules of the Exchange, promoting just and equitable principles 
of trade, removing impediments to and perfect the mechanism of a free 
and open market, and protecting investors and the public interest.
    Lastly, the Exchange believes the proposed amendment to the Section 
8.9 to separate Board Advisory Committees generally from Market 
Structure Committees and establish the Options Market Structure 
Committee is appropriate and consistent with the Act, as the 
codification of these committees does not impact the governance of 
Holdco, as described above, but rather reflects the existence of such 
committees and their importance to Holdco in providing advice to Holdco 
regarding developments in market structure applicable to each asset 
class. As noted above, neither Market Structure Committee has the power 
to act for or on behalf of, or to bind, Holdco. The Exchange believes 
that updating the Holdco LLC Agreement to reflect these changes with 
respect to the Holdco Board would ensure clarity with respect to the 
corporate documents of the Exchange's parent company, thereby enabling 
the Exchange to be so organized as to have the capacity to carry out 
the purposes of the Act and to comply with the provisions of the Act, 
the rules and regulations thereunder, and the rules of the Exchange, 
promoting just and equitable principles of trade, removing impediments 
to and perfect the mechanism of a free and open market, and protecting 
investors and the public interest.
Amendment to the Definition of ``Company Related Party''
    The Exchange believes the proposed amendment to the definition of 
``Company Related Party'' is consistent with the Act, as it would 
broaden the definition of such term and designate additional Persons 
that have an affiliation with Holdco (i.e., Persons that are Controlled 
by one or more Persons that are currently deemed Company Related 
Parties) as Company Related Parties, thereby subjecting any contract, 
arrangement or transaction between any such Person, on the one hand, 
and Holdco or any Holdco subsidiary, on the other hand (i.e., a Company 
Related Party Transaction), to the Holdco LLC Agreement's specific 
procedures for the Holdco Board's evaluation and approval of a Company 
Related Party Transaction. The Exchange notes that the proposed 
amendment would not remove any Person currently included in the 
definition of Company Related Party from such definition. As the Holdco 
LLC Agreement's Company Related Party Transaction procedures are 
designed to mitigate the potential conflicts of interest inherent in 
such transactions, the Exchange believes the proposed amendment to 
broaden the definition of Company Related Party and thereby subject 
transactions with additional Persons that have an affiliation with 
Holdco to such procedures would enable the Exchange and its parent 
company to be so organized as to have the capacity to be able to carry 
out the purposes of the Act and to comply with the provisions of the 
Act, the rules and regulations thereunder, and the rules of the 
Exchange, promote just and equitable principles of trade, and protect 
investors and the public interest.
Amendment to the Provision Relating to the Preparation and Delivery of 
the Annual Budget
    As described above, the proposal would amend Section 12.4(a) to 
delete the requirement that the Annual Budget must be prepared and 
delivered to the Holdco Board at least forty-five (45) calendar days 
prior to the start of the fiscal year. Instead, as proposed, Holdco 
would be required to prepare and deliver the Annual Budget to the 
Holdco Board on any date prior to the start of the fiscal year. The 
Exchange believes the proposed amendment to the Annual Budget provision 
is appropriate and consistent with the Act, as such amendment would 
permit Holdco to deliver the Annual Budget, and seek the Holdco Board's 
approval of such Annual Budget, at the Holdco Board's fourth quarter 
meeting, which is typically scheduled on a date in December that is 
within forty-five (45) calendar days of the start of the fiscal year. 
The Annual Budget would therefore still be required to be prepared

[[Page 19703]]

and delivered before the start of the fiscal year, but with greater 
flexibility on the timing, as described above. The Exchange believes 
that such change is related solely to the administration of Holdco and 
thus would not have any impact on the Exchange's ability to be so 
organized as to have the capacity to carry out the purposes of the Act 
and to comply with the provisions of the Act, the rules and regulations 
thereunder, and the rules of the Exchange, and therefore, such change 
is consistent with the Act.
Clarifying, Updating, Conforming, and Other Non-Substantive Amendments
    The Exchange believes the proposed amendments to make 
clarifications, correct inadvertent drafting errors, delete obsolete 
language, make conforming changes consistent with the other proposed 
amendments to the Holdco LLC Agreement described above, and make other 
technical and conforming changes to reflect that the Holdco LLC 
Agreement is being amended and restated from the Sixth Amended LLC 
Agreement to the Seventh Amended LLC Agreement are consistent with the 
Act, as such amendments would update and clarify the Holdco LLC 
Agreement, thereby increasing transparency and helping to avoid any 
potential confusion resulting from retaining outdated, obsolete, or 
unclear provisions.
    The Exchange believes the proposed amendments to the Holdco LLC 
Agreement described in this proposal are consistent with, and will not 
interfere with, the self-regulatory obligations of the Exchange. The 
Exchange importantly notes that it is not proposing to amend any of the 
provisions within the Holdco LLC Agreement or the Exchange's LLC 
Agreement dealing with the availability or protection of information, 
books and records, undue influence, conflicts of interest (other than 
to broaden the definition of Company Related Party and subject 
additional transactions to the Holdco LLC Agreement's procedures 
designed to mitigate conflicts of interest), unfair control by an 
affiliate, or regulatory independence of the Exchange.
    For these reasons, the Exchange believes such amendments would 
enable the Exchange to be so organized as to have the capacity to carry 
out the purposes of the Act and to comply with the provisions of the 
Act, the rules and regulations thereunder, and the rules of the 
Exchange, promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market, and 
protect investors and the public interest.

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

    The Exchange does not believe that the proposal will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposal is not intended to 
address competitive issues but rather is concerned with the creation of 
an additional class of Units in connection with the Transaction as well 
as updates and other changes to the corporate documents of Holdco 
related to the administration and governance of Holdco, as described 
above.

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)(iii) of the Act \31\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\32\
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \32\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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) normally does 
not become operative prior to 30 days after the date of filing. Rule 
19b-4(f)(6)(iii), however, 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 requested that the 
Commission waive the 30-day operative delay contained in Rule 19b-
4(f)(6)(iii) so that the Exchange may amend the Holdco LLC Agreement to 
create an additional class of Units in order to facilitate the closing 
of the Transaction as soon as possible. The Commission finds that 
waiver of the operative delay is consistent with the protection of 
investors and the public interest because the proposed changes to the 
Holdco LLC Agreement do not materially alter Holdco's existing 
governance framework or raise novel issues as the new Class D Units are 
functionally equivalent to the Class C Units other than the original 
purchase price of such Units being different. Accordingly, the 
Commission hereby waives the operative delay and designates the 
proposal operative upon filing. 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: (i) necessary or appropriate in the public 
interest; (ii) for the protection of investors; or (iii) otherwise in 
furtherance of the purposes of the Act.\33\ If the Commission takes 
such action, the Commission shall institute proceedings to determine 
whether the proposed rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \33\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MEMX-2023-06 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-2023-06. 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

[[Page 19704]]

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-2023-06 and should be 
submitted on or before April 24, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-06783 Filed 3-31-23; 8:45 am]
BILLING CODE 8011-01-P


