First announced at the start of 2019, the backers of the cash-equities Members Exchange have published the exchange’s Form-1 registration, which it filed with the US Securities and Exchange Commission on September 9. Markets Media reviewed the documents to see how much more the exchange operator needs to accomplish if it plans to open for trading during the first half of 2020. The short answer is “a lot.”

Governance & Leadership
The board of directors of the new exchange remains a work-in-progress as MEMX CEO Jonathan Kellner was the only one named to the 11-seat body. in the filing.

The SRO has reserved two seats for non-industry representatives, three seats for non-industry representatives, three seats for industry representatives, and two seats for industry/investor representatives who will be appointed at a later date.

On the day-to-day operations, MEMX hired Thomas Fay as COO and Dominik Paniscotti as CTO in June. Both come from Nasdaq, where they held roles of senior vice president, architecture, and vice president, respectively.

The exchange operator also hired Lindsay Gilliam as chief people officer and Anders Franzon as chief counsel and secretary in July.

Gilliam joined from Cerberus Capital Management, where she still is a senior vice president, HR business partners. Franzon left his position as senior vice president, deputy general counsel at Cboe Global Markets, to join the exchange.

The offices of chief financial officer, chief regulatory officer, and chief information security officer were vacant at the time of the SEC filing along with the memberships of its Appeals Committee, Nominating Committee, Member Nominating Committee, and Regulatory Oversight Committee at the time of its filing.

Trading
The exchange’s limit order book will support market, limit, and pegged order types. Traders can modify their orders by using Intermarket Sweep Orders, reserve quantity, non-displayed, minimum execution quantity, post-only, book-only, re-pricing designations, as well as a variety of time-in-force instructions.

MEMX’s matching engine will operate on a price-time priority in which it will prioritize portions of limit orders with displayed instructions, limit orders with non-displayed instructions, pegged orders, and reserve quantity of limit orders in that order.

The only exceptions would be when the matching engine ranks trading interest priced at the National Best Bid and Offer’s midpoint within the engine. When that occurs, it will prioritize limit orders to which the display-price sliding instruction has been applied, limit orders with a non-displayed instruction, pegged orders, and reserve quantity of limit orders.

Alternatively, when orders with instructions that cause them to be re-ranked due to a clearance of a locking quotation, the matching engine will prioritize based on limit orders to which ISO instructions have been applied and contain a time-in-force instruction of “Day,” when such orders establish a new NBBO at the Locked Price followed by limit orders with the display-price sliding instruction.

The exchange will open its regular trading day at 9:30 am ET, when it conducts a series of matching calculations for each symbol traded on the exchange, which will result in the midpoint of the NBBO.

MEMX did not include details on how the exchange plans to operate the closing of its market at 4 pm ET on trading days in its exchange rules nor its MEMX user manual.

The exchange operator also plans to offer a two-phase pre-trading day session that begins at 6 am ET with the Early Order Entry Session and whose orders are not eligible for execution before the start of the Pre-Market Session that starts at 7 am ET and ends at 8 am ET.

Market Data
MEMX’s SEC filings included its 12-page market data agreement but did not detail the initial rates it plans to charge its clients. The exchange operator noted that it intends to offer a depth-of-book and last sales feed; a top-of-book and last sales; a last sales feed; and the previous day’s depth-of-book, top-of-book, and last sale feed under its Member Order Information Record (MEMOIR) brand.

Connectivity
Clients will be able to access MEMX’s matching engine, which will be located in an un-named third-party data center in New Jersey, and its secondary matching engine, located in an un-named third-party data center in Chicago, via the exchange’s native binary order-entry protocol Member Orders (MEMO) or via the FIX messaging protocol.

Trading firms have the option to connect to the matching engine through a co-located cross-connection, an approved extranet provider, or a circuit extension from outside the data center provided by a telecommunications carrier.