The Securities and Exchange Commission released a notice on January 8, 2026, detailing a proposed rule change from 24X National Exchange LLC. The exchange seeks to extend a temporary exemption from ownership and voting restrictions in the operating agreement of its ultimate parent company, 24X Bermuda Holdings LLC. This exemption applies to Dmitri Galinov, the exchange's founder, and his related persons, whose current stake exceeds the standard 40 percent ownership cap. Filed on December 23, 2025, as a non-controversial proposal under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, the change aims to prevent undue redemption costs and support the exchange's growth. If approved, the exemption would last until December 14, 2030, providing five years from the exchange's operational start to dilute the concentrated ownership. This development highlights ongoing tensions between fostering new market entrants and enforcing governance rules designed to ensure fair oversight in securities trading.
Background on Ownership and Voting Limitations
The governance framework of 24X Bermuda Holdings LLC includes strict limits to prevent any single entity from dominating the exchange. Under Section 9.2(a)(i) of the company's operating agreement, no person or their related persons may own more than 40 percent of outstanding units. Voting rights are capped at 20 percent under Section 9.2(a)(iii), with additional prohibitions on arrangements that could indirectly exceed this threshold. These rules, as noted in the SEC's November 27, 2024, approval order for 24X's registration (Securities Exchange Act Release No. 101777), aim to safeguard the exchange's independence and its ability to meet regulatory duties under the Exchange Act.
Dmitri Galinov, a key figure in establishing 24X, holds approximately 43.07 percent of units alongside his related persons, including KNG CAPITAL LLC, Tanya Nazarov-Kenneally, and Vladimir Nazarov. This stake, detailed in Exhibit K of 24X's Form 1 application, exceeds the limit by 3.07 percent. Without an exemption, the company would need to redeem excess units at the lesser of book value or fair market value, potentially straining resources for the nascent exchange.
A temporary exemption was initially granted in the operating agreement, expiring on December 14, 2025—two months after 24X began operations on October 14, 2025. The SEC previously extended this to align with the launch (Securities Exchange Act Release No. 10453, September 25, 2025), recognizing the need to protect early investments without compromising oversight.
Key Players and Proposed Changes
At the center is 24X National Exchange LLC, a new national securities exchange focused on equities trading, wholly owned by 24X US Holdings LLC, which is in turn owned by 24X Bermuda Holdings LLC. Dmitri Galinov, as founder, has been instrumental in the exchange's development, with his ownership reflecting significant personal investment.
The proposal amends Sections 9.2(g)(i) and (ii) of the operating agreement to extend the exemption until December 14, 2030, conditional on the ownership not exceeding 43.07 percent. The voting exemption remains narrow, applying only to major corporate actions like mergers or asset sales. As stated in the filing, 'the proposed five-year extension would provide a reasonable accommodation to a new entrant in the exchange market by allowing 24X Bermuda Holdco to avoid the expense of redeeming' excess units. This would free up funds for operations and regulation.
The SEC's notice invites public comments, underscoring the collaborative process in exchange governance. No prior comments were received by 24X, but the filing emphasizes consistency with past approvals.
Legal Precedents and Political Context
This proposal aligns with SEC precedents for temporary exemptions in exchange governance. For instance, the Commission approved a 10-year exemption from voting limits for an owner of the Boston Options Exchange facility (Securities Exchange Act Release No. 49067, January 13, 2004) and a similar 10-year ownership exemption for founders of the International Securities Exchange (Securities Exchange Act Release No. 42455, February 24, 2000). These cases illustrate flexibility for new exchanges to stabilize without immediate dilution.
Politically, the push for such exemptions occurs amid broader discussions on market competition and innovation. Regulators balance promoting diverse exchanges against risks of concentrated control, which could undermine self-regulatory obligations. Perspectives vary: proponents argue it aids startups, while critics, including some investor advocates, warn of potential governance lapses. The Exchange Act's Section 6(b)(5) requires rules that protect investors and prevent unfair practices, a standard the proposal claims to meet by limiting the exemption's scope and duration.
Short-Term and Long-Term Implications
In the short term, approval could stabilize 24X's finances, avoiding redemption costs and enabling focus on market share growth. The exchange, having launched recently, might pursue capital raises to dilute Galinov's stake, potentially filing additional rule changes with the SEC.
Longer-term, the extension could influence how new exchanges structure ownership, setting a benchmark for balancing founder influence with regulatory compliance. If ownership remains concentrated beyond 2030, forced redemptions could disrupt operations. Different viewpoints emerge: exchange operators see it as essential for innovation, while regulators emphasize dilution to ensure impartiality. Investors might benefit from enhanced competition but face risks if governance weakens.
The proposal's non-controversial status under Rule 19b-4(f)(6) allowed immediate effectiveness upon filing, though the SEC may suspend it within 60 days if concerns arise.
Potential next steps include SEC review of public comments and possible approval, with 24X likely pursuing dilution strategies. Ongoing debates may center on whether five years suffices for compliance or if stricter timelines are needed to uphold market integrity. Challenges include attracting investors for dilution without diluting value, all while maintaining the exchange's self-regulatory role under the Exchange Act.
