Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt the Initial Fee Schedule and Other Fees for MEMX LLC, 63620-63626 [2020-22249]
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Federal Register / Vol. 85, No. 196 / Thursday, October 8, 2020 / Notices
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necessary or appropriate in furtherance
of the purposes of the Act. To the
contrary, IEX believes that the proposed
fees would enhance competition and
execution quality by increasing the
Exchange’s pool of both displayed and
non-displayed liquidity, and to the
extent that displayed liquidity
increases, would contribute to the
public price discovery process.
The Exchange does not believe that
the proposed fees will impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
since competing venues use various
pricing structures to incentivize market
participants to add liquidity to their
markets, including but not limited to
paying rebates to liquidity providers.36
The proposed fees are a means of
providing such incentives without the
use of rebates, as described in the
Purpose and Statutory Basis sections.
And, as noted in the Statutory Basis
section, other exchanges have adopted
similar pricing incentives for their
current offerings. Moreover, subject to
the SEC rule filing process, other
exchanges could adopt a similar order
type and fee incentive. Further, the
Exchange operates in a highly
competitive market in which market
participants can easily direct their
orders to competing venues, including
off-exchange venues, if its fees are
viewed as non-competitive.
The Exchange also does not believe
that the proposed rule change will
impose any burden on intramarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. While Members
that add liquidity using certain D-Limit
orders (as well as certain D-Peg and MPeg orders) will be subject to different
fees based on this usage, those
differences are not based on the type of
Member entering orders but on whether
the Member chose to submit certain
liquidity providing D-Limit orders. As
noted above, not only can any Member
submit certain liquidity adding D-Limit
orders, but every Member would benefit
from the availability of more liquidity
on the Exchange that the proposed fees
are designed to incentivize
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) 37 of the Act.
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
under Section 19(b)(2)(B) 38 of the Act 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2020–14 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–IEX–2020–14. 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 (https://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
supra note 19.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. R1–2020–21403 Filed 10–7–20; 8:45 am]
BILLING CODE 1301–00–D
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90076; File No. SR–MEMX–
2020–10]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Adopt the Initial Fee
Schedule and Other Fees for MEMX
LLC
October 2, 2020.
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
September 21, 2020, MEMX LLC
(‘‘MEMX’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
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
adopt (i) the initial fees and rebates
applicable to Members 3 of the Exchange
39 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
1 15
37 15
36 See
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
offices 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–IEX–2020–14, and should
be submitted on or before October 20,
2020.
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 85, No. 196 / Thursday, October 8, 2020 / Notices
pursuant to Exchange Rule 15.1(a) and
(c), and (ii) regulatory fees related to the
Central Registration Depository (‘‘CRD
system’’), which will be collected by the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) as set forth in
proposed Rule 15.1(e). 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
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1. Purpose
The Exchange proposes to implement
a fee schedule (the ‘‘Fee Schedule’’)
applicable to use of the Exchange. The
Exchange will commence operations as
a national securities exchange on
September 21, 2020, and thus, proposes
the fees to be effective as of the date of
this filing.
The Exchange first notes that upon
launch it will operate in a highly
competitive market in which market
participants can readily direct order
flow to competing venues if they deem
fee levels at a particular venue to be
excessive or incentives to be
insufficient. More specifically, the
Exchange will be only one of several
equities venues to which market
participants may direct their order flow.
Based on publicly available information,
no single registered equities exchange
currently has more than approximately
18% of total market share.4 Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow,
and as it commences operations the
Exchange anticipates representing a
small percentage of the overall market.
4 Market share percentage calculated as of
September 17, 2020. The Exchange receives and
processes data made available through consolidated
data feeds (i.e., CTS and UTDF).
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Transaction Fees
Below is a description of the fees and
rebates that the Exchange intends to
impose under the initial proposed Fee
Schedule, which will be applicable to
transactions executed in all trading
sessions. Under the proposed Fee
Schedule, the Exchange will operate a
‘‘Maker-Taker’’ model whereby it
provides rebates to Members that
provide liquidity and charges fees to
those that remove liquidity, as further
described below. The Exchange does not
initially propose to charge different fees
or provide different rebates depending
on the amount of orders submitted to,
and/or transactions executed on or
through, the Exchange. Accordingly, all
fees and rebates described below are
applicable to all Members, regardless of
the overall volume of a Member’s
trading activities on the Exchange.
(A) Standard Fee for Removed Volume
The Exchange proposes to charge a
standard fee of $0.0025 per share for
executions of orders that remove
liquidity from the MEMX Book 5
(‘‘Removed Volume’’) in all securities
traded on the Exchange priced at or
above $1.00 per share.6
(B) Standard Rebate for Added
Displayed Volume
The Exchange proposes to provide a
standard rebate of $0.0029 per share for
executions of orders that: (i) Are
displayed on the MEMX Book and (ii)
add liquidity to the Exchange (‘‘Added
Displayed Volume’’), in all securities
traded on the Exchange priced at or
above $1.00 per share.7 The proposed
standard rebate for Added Displayed
Volume would apply to the Reserve
Quantity 8 of an order such that any
replenishment amount of the Reserve
Quantity of an order that is executed
against would be treated as Added
Displayed Volume even though such
5 ‘‘MEMX Book’’ refers to the Exchange system’s
electronic file of orders. See Exchange Rule 1.5(q).
6 This pricing is referred to by the Exchange as
‘‘Removed volume from MEMX Book’’ on the
proposed Fee Schedule with a Fee Code of ‘‘R’’ to
be provided by the Exchange on execution reports.
The Exchange’s Fee Codes will assist both the
Exchange and Members with financial planning,
tracking, and reconciliation of invoices generated
by the Exchange. The Exchange notes that it will
also use a second character, either ‘‘A’’ or ‘‘B’’ to
indicate whether an execution occurred: (A) In a
security priced at or above $1.00 per share or (B)
below $1.00 per share.
7 This pricing is referred to by the Exchange as
‘‘Added displayed volume’’ on the proposed Fee
Schedule with a Fee Code of ‘‘B’’, ‘‘D’’ or ‘‘J’’ to be
provided by the Exchange on execution reports.
8 ‘‘Reserve Quantity’’ refers to the portion of an
order that includes a Non-Displayed instruction in
which a portion of that order is also displayed on
the MEMX Book. See Exchange Rule 11.6(k).
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portion of the order was not displayed
on the MEMX Book prior to the order
being replenished in accordance with
the Member’s instructions and the
Exchange’s rules. The entire portion of
the Reserve Quantity of an order would
be eligible for this rebate, however, a
Member would only receive such rebate
for any portion(s) of the Reserve
Quantity that is (are) executed against.
(C) Rebates for Added Displayed
Volume That Establishes or Matches the
National Best Bid or Offer (‘‘NBBO’’)
The Exchange proposes to provide an
identical rebate of $0.0029 per share for
executions of Added Displayed Volume
orders that either: (i) establish the NBBO
(‘‘Setter Volume’’) or (ii) establish a new
best bid or offer (‘‘BBO’’) on MEMX that
matches the NBBO first established on
an away market (‘‘Joiner Volume,’’ and
together with Setter Volume, ‘‘NBBO
Setter/Joiner Volume’’), in all securities
traded on the Exchange priced at or
above $1.00 per share. Because pricing
will be the same for all Added
Displayed Volume, the Exchange does
not propose to add separate rebates on
the Fee Schedule at this time for Setter
Volume or Joiner Volume or to define
these categories on the Fee Schedule.
However, the Exchange proposes to
provide separate Fee Codes to Members
for Setter Volume and Joiner Volume;
thus, in addition to the standard Fee
Code applicable to Added Displayed
Volume, or ‘‘D’’, the Exchange proposes
including Fee Codes of ‘‘B’’ for Setter
Volume and ‘‘J’’ for Joiner Volume on
the same row as ‘‘D’’ in the transaction
fees table of the Fee Schedule.
The purpose of including three
separate Fee Codes for Added Displayed
Volume is to reflect the fact that the
Exchange will provide distinct Fee
Codes on the execution reports provided
to Members. The Exchange believes this
information will be useful for Members
and the Exchange to track executions of
Added Displayed Volume that qualifies
as either Setter Volume or Joiner
Volume and may also be useful for the
Exchange in considering potential
pricing modifications to such orders as
it continues to evaluate its pricing
structure on an ongoing basis after its
exchange launch. In the meantime,
these Fee Codes will be provided to
Members on execution reports prior to
the introduction of any pricing
incentives for such liquidity, even
though the rebates to be provided are
the same as those provided as the
standard rebate for Added Displayed
Volume. The Exchange notes that its
technical specifications make clear the
different types of liquidity codes passed
back to Members on execution reports.
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(D) Standard Rebate for Added NonDisplayed Volume
(E) Standard Fee for Routed Removed
Volume
The Exchange proposes to provide a
standard rebate of $0.0020 per share for
executions of orders that: (i) Are not
displayed on the MEMX Book and (ii)
add liquidity to the Exchange (‘‘Added
Non-Displayed Volume’’), in all
securities traded on the Exchange priced
at or above $1.00 per share.9 Similar to
the proposal to add separate Fee Codes
for Setter Volume and Joiner Volume, as
described above, the proposed Fee
Schedule reflects two different Fee
Codes for Added Non-Displayed
Volume, specifically ‘‘H’’ and ‘‘M’’. The
Exchange will provide Fee Code ‘‘M’’
for the execution of an order that adds
non-displayed liquidity to the extent the
order that provides liquidity includes a
Midpoint Peg instruction and Fee Code
‘‘H’’ for the execution of an order that
adds non-displayed liquidity but does
not include a Midpoint Peg
instruction.10 The proposed standard
rebate for Added Non-Displayed
Volume would apply to each of these
the same. The purpose of including both
Fee Codes on the Fee Schedule is to
reflect the fact that the Exchange will
separately record these transactions
under distinct Fee Codes on the
execution reports provided to Members.
The Exchange believes this information
will be useful for Members and the
Exchange to track executions of Added
Non-Displayed Volume and may also be
useful for the Exchange in considering
potential pricing modifications to such
orders as it continues to evaluate its
pricing structure on an ongoing basis
after its exchange launch. The Exchange
again notes that its technical
specifications make clear the different
types of liquidity codes passed back to
Members on execution reports.
The Exchange proposes to provide a
higher rebate for executions of Added
Displayed Volume than for executions
of Added Non-Displayed Volume to
incentivize displayed liquidity over
non-displayed liquidity on the
Exchange, including orders with a
displayed component and a nondisplayed component (i.e., orders with a
Reserve Quantity), in order to encourage
and facilitate price discovery and price
formation, which the Exchange believes
benefits all Members and investors.
The Exchange proposes to charge a
standard fee of $0.0030 per share for all
orders routed to another market that (i)
are executed on an away market and (ii)
remove liquidity from the market to
which it was routed (‘‘Routed Removed
Volume’’), in all securities traded on the
Exchange priced at or above $1.00 per
share.11 All charges by the Exchange for
routing are applicable only in the event
that an order is executed; there is no
charge for orders that are routed away
from the Exchange but are not filled.
The Exchange notes that the fees for
routing relate to orders routed through
the Exchange’s affiliated broker-dealer,
MEMX Execution Services LLC. Routing
services offered by the Exchange and its
affiliated broker-dealer are completely
optional and market participants can
readily select between various providers
of routing services, including other
exchanges and broker-dealers.
9 This pricing is referred to by the Exchange on
the proposed Fee Schedule as ‘‘Added nondisplayed volume.’’
10 The term ‘‘Midpoint Peg’’ refers to a Pegged
Order with an instruction to peg to the midpoint of
the NBBO. See Exchange Rule 11.6(h)(2). The term
‘‘Pegged Order’’ refers to an order with instructions
to peg to the NBB, for a buy order, or the NBO, for
a sell order. See Exchange Rule 11.6(h).
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(F) Securities Priced Below $1.00 per
Share
The Exchange does not propose to
charge any fee or provide any rebate for
executions of orders in securities priced
below $1.00 per share, including where
an execution takes place on the
Exchange or at another market center if
the order was routed away from the
Exchange.
(G) Other Fees
Under the initial proposed Fee
Schedule, the Exchange proposes to
make clear that it does not charge any
fees for membership, market data
products, physical connectivity or
application sessions (e.g., trading ports,
market data ports, and/or drop copies).
In addition, because, as described
below, the Exchange is proposing to
include certain fees in Rule 15.1 rather
than on the Fee Schedule, the Exchange
proposes to state on the Fee Schedule
that additional fees are set forth in Rule
15.1 of the MEMX Rulebook, and
further, that such fees include
Regulatory Transaction Fees collected to
fund MEMX’s Section 31 obligations (as
set forth in MEMX Rule 15.1(b)) and
fees collected through the CRD
registration system for registration of
associated persons of Members that are
not also FINRA members (as proposed
to be added as MEMX Rule 15.1(e)).
11 This pricing is referred to by the Exchange as
‘‘Routed to another market, removed liquidity’’ on
the proposed Fee Schedule with a Fee Code of ‘‘Z’’
to be provided by the Exchange on execution
reports.
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Regulatory Fees
The Exchange proposes to adopt
certain regulatory fees as new paragraph
(e) to Exchange Rule 15.1 related to the
CRD system, which are collected by
FINRA.12 As proposed, FINRA will
collect and retain certain regulatory fees
via the CRD system for the registration
of persons associated with a Member
that is not also a FINRA member. The
CRD system fees are use-based and there
is no distinction in the cost incurred by
FINRA if the user is a FINRA member
or a member of an exchange but not a
FINRA member. Accordingly, the
Exchange proposes to adopt the
regulatory fees set forth in proposed
Rule 15.1(e) to mirror those assessed by
FINRA pursuant to Section 4 (Fees) of
Schedule A to the FINRA By-Laws. As
proposed, these fees are as follows: 13
(1) $100 for each initial Form U4 filed
for the registration of a representative or
principal;
(2) $110 for the additional processing
of each initial or amended Form U4,
Form U5 or Form BD that includes the
initial reporting, amendment, or
certification of one or more disclosure
events or proceedings;
(3) $45 annually for each of the
Member’s registered representatives and
principals for system processing;
(4) $15 for processing and posting to
the CRD system each set of fingerprints
submitted electronically by the Member,
plus a pass-through of any other charge
imposed by the United States
Department of Justice for processing
each set of fingerprints;
(5) $30 for processing and posting to
the CRD system each set of fingerprint
cards submitted in non-electronic
format by the Member, plus a passthrough of any other charge imposed by
the United States Department of Justice
for processing each set of fingerprints;
and
(6) $30 for processing and posting to
the CRD system each set of fingerprint
results and identifying information that
has been processed through a self12 The CRD system is the central licensing and
registration system for the U.S. securities industry.
The CRD system enables individuals and firms
seeking registration with multiple states and selfregulatory organizations to do so by submitting a
single form, fingerprint card and a combined
payment of fees to FINRA. Through the CRD
system, FINRA maintains the qualification,
employment and disciplinary histories of registered
associated persons of broker-dealers.
13 The Exchange has only adopted the CRD
system fees charged by FINRA to non-FINRA
members when such fees are applicable. In this
regard, certain FINRA CRD system fees and
requirements are specific to FINRA members, but
do not apply to Members that are not also FINRA
members. Members that are also FINRA members
are charged CRD system fees according to Section
4 (Fees) of Schedule A to the FINRA By-Laws.
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regulatory organization other than
FINRA.
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2. Statutory Basis
Transaction Fees
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) 14 of the
Act in general, and furthers the
objectives of Sections 6(b)(4) 15 of the
Act, in particular, in that it is designed
to provide for the equitable allocation of
reasonable dues, fees and other charges
among its Members and other persons
using its facilities. Additionally, the
Exchange believes that the proposed
fees and rebates are consistent with the
objectives of Section 6(b)(5) 16 of the Act
in that they are designed 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 a free and open
market and national market system, and,
in general, to protect investors and the
public interest, and, particularly, are not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
Upon its launch, the Exchange will
operate in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. The
Exchange believes that the proposed Fee
Schedule reflects a simple and
competitive pricing structure designed
to incentivize market participants to add
aggressively priced displayed liquidity
and direct their order flow to the
Exchange, which the Exchange believes
would promote price discovery and
price formation and deepen liquidity
that is subject to the Exchange’s
transparency, regulation, and oversight
as an exchange, thereby enhancing
market quality to the benefit of all
Members and investors.
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
14 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
16 15 U.S.C. 78f(b)(5).
15 15
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‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 17
The Exchange believes that it is
appropriate, reasonable, and consistent
with the Act to charge a standard fee of
$0.0025 per share for Removed Volume
from the MEMX Book because it is
comparable to the transaction fee
charged by other exchanges to remove
liquidity.18 The Exchange further
believes that this fee is equitably
allocated and not unfairly
discriminatory because it applies
equally to all Members and, when
coupled with higher rebates for adding
displayed liquidity, as described below,
is designed to facilitate increased
activity on the Exchange to the benefit
of all Members by providing more
trading opportunities and promoting
price discovery.
The Exchange believes that it is
appropriate, reasonable, and consistent
with the Act to provide a standard
rebate of $0.0029 per share for Added
Displayed Volume in all securities
traded on the Exchange priced at or
above $1.00 per share because this
rebate is consistent with transaction
rebates provided by other exchanges.19
17 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
18 For example, the New York Stock Exchange
trading fee schedule on its public website reflects
fees to ‘‘take’’ liquidity ranging from $0.0024–
$0.00275 depending on the type of market
participant, order and execution; see https://
www.nyse.com/markets/nyse/trading-info/fees. The
Nasdaq Stock Market trading fee schedule on its
public website reflects standard fees to ‘‘remove’’
liquidity of $0.0030 per share for shares executed
at or above $1.00 or 0.30% of total dollar volume
for shares executed below $1.00; see https://
nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2. The Cboe BZX
trading fee schedule on its public website reflects
standard fees for ‘‘removing’’ liquidity of $0.0030
for shares executed at or above $1.00 or 0.30% of
total dollar volume for shares executed below $1.00;
see https://markets.cboe.com/us/equities/
membership/fee_schedule/bzx/.
19 For example, the New York Stock Exchange
trading fee schedule on its public website reflects
a standard rebate for ‘‘adding’’ liquidity of $0.0012
for shares executed at or above $1.00, with various
tiers that provide the ability of a firm to receive a
rebate of $0.0029 per share or higher; see https://
www.nyse.com/markets/nyse/trading-info/fees. The
Nasdaq Stock Market trading fee schedule on its
public website reflects a standard rebate for
‘‘adding’’ liquidity for shares executed at or above
$1.00 of $0.0020 in Tape A and B securities and
$0.0015 in Tape C securities, with various tiers that
provide the ability of a firm to receive a rebate of
$0.0029 per share or higher; see https://
nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2. The Cboe BZX
trading fee schedule on its public website reflects
a standard rebate for ‘‘adding’’ liquidity of $0.0020
for shares executed at or above $1.00, with various
tiers that provide the ability of a firm to receive a
rebate of $0.0029 per share or higher; see https://
markets.cboe.com/us/equities/membership/fee_
schedule/bzx/.
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63623
The Exchange further believes that this
rebate structure is equitably allocated
and not unfairly discriminatory because
it applies equally to all Members.
The Exchange believes that charging a
fee to the liquidity remover, and
providing a rebate to the liquidity adder,
is reasonable, equitable and not unfairly
discriminatory because it incentivizes
liquidity provision on the Exchange.
The Exchange also notes that several
other exchanges charge fees for
removing liquidity and provide rebates
for adding liquidity, and that this aspect
of the Exchange’s proposed Fee
Schedule does not raise any new or
novel issues that have not previously
been considered by the Commission in
connection with the fees and rebates of
other exchanges.20
The Exchange also believes that it is
reasonable, equitable and not unfairly
discriminatory to provide a higher
rebate for executions of Added
Displayed Volume (including NBBO
Setter/Joiner Volume) than for
executions of Added Non-Displayed
Volume as this rebate structure is
designed to incentivize Members to
send the Exchange displayable orders,
thereby contributing to price discovery
and price formation, consistent with the
overall goal of enhancing market
quality. Moreover, the Exchange notes
that there are precedents for exchanges
to provide rebates that distinguish
between displayed and non-displayed
volume to incentivize displayed orders
and facilitate price discovery.21
The Exchange notes that under the
initial proposed Fee Schedule it will
pay a higher rebate for Added Displayed
Volume than the fee it charges for
removing such volume, and as such the
Exchange will have a negative net
capture (i.e., will lose money) with
respect to such transactions. The
Exchange notes that it will only utilize
a pricing structure whereby it maintains
a negative net capture with respect to
such transactions initially upon its
launch and for a limited time thereafter
in an effort to encourage market
participants to join, connect to, and
participate on the Exchange. As noted
above, the Exchange will operate in a
highly competitive market, and the
Exchange believes this initial pricing
structure will enable it to effectively
compete with other exchanges by
attracting Members and order flow to
the Exchange, which will help the
Exchange to gain market share for
executions. The Exchange expects to
modify its pricing structure after it has
gained sufficient participation from
20 See
supra notes 18 and 19.
21 Id.
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khammond on DSKJM1Z7X2PROD with NOTICES
market participants to eliminate the
negative net capture and instead be
profitable with respect to such
transactions. The Exchange believes the
initial pricing structure, including the
negative net capture for Added
Displayed Volume transactions, is
designed to incentivize market
participants to add aggressively priced
displayed liquidity and direct their
order flow to the Exchange, which the
Exchange believes would promote price
discovery and price formation and
deepen liquidity that is subject to the
Exchange’s transparency, regulation,
and oversight as an exchange, thereby
enhancing market quality to the benefit
of all Members and investors. The
Exchange does not believe that the
negative net capture with respect to
Added Displayed Volume transactions
will materially impact the capitalization
of the Exchange or otherwise impair the
Exchange’s ability to operate or regulate
itself. The Exchange is well-capitalized
and able to absorb losses resulting from
a negative net capture, particularly
given the Exchange’s intention to
operate in this fashion on a temporary
basis. Moreover, the Exchange’s parent
company, MEMX Holdings LLC, has
agreed to provide adequate funding for
the Exchange’s operations, including the
regulation of the Exchange, and to
reimburse the Exchange for its costs and
expenses to the extent the Exchange’s
assets are insufficient to meets its costs
and expenses.
With respect to orders routed to other
markets, the Exchange also believes that
it is appropriate, reasonable, and
consistent with the Act to charge a
standard fee of $0.0030 for Routed
Removed Volume because this fee is
similar to the fees charged by other
exchanges for routed orders that remove
liquidity from the destination market.22
The Exchange’s initial fee for routing is
intended to be a simple and transparent
fee for Members that wish to use routing
services provided by the Exchange. The
Exchange reiterates that the routing
services offered by the Exchange and its
affiliated broker-dealer are completely
optional and that the Exchange operates
in a highly competitive market in which
22 For example, the New York Stock Exchange
trading fee schedule on its public website reflects
a standard fee for routing of $0.0035, with a tier that
provides a firm the ability to pay a reduced routing
fee of $0.0030; see https://www.nyse.com/markets/
nyse/trading-info/fees. The Nasdaq Stock Market
trading fee schedule on its public website reflects
a standard routing fee of $0.0030; see https://
nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2. The Cboe BZX
trading fee schedule on its public website reflects
a standard fee for routing of $0.0030; see https://
markets.cboe.com/us/equities/membership/fee_
schedule/bzx/.
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market participants can readily select
between various providers of routing
services with different product offerings
and different pricing. The Exchange
believes that its flat fee structure for
orders routed to all away venues is a fair
and equitable approach to pricing, as it
will provide certainty with respect to
execution fees. As a general matter, the
Exchange believes that the proposed
fees will allow it to recoup and cover its
costs of providing routing services and
to make some additional profit in
exchange for the services it provides.
The Exchange also believes the standard
fee for Routed Removed Volume is an
equitable and not an unfairly
discriminatory allocation of fees
because it applies equally to all
Members.
The Exchange also believes that not
charging a fee for membership, market
data products, physical connectivity
and application sessions is appropriate,
reasonable, and consistent with the Act
because it may incentivize brokerdealers to become Members of the
Exchange and to therefore direct order
flow to the Exchange, and such orders
will have the benefit of exchange
transparency, regulation, and oversight.
One of the primary objectives of MEMX
is to provide competition and to reduce
fixed costs imposed upon the industry.
As such, while MEMX does intend to
adopt fees other than transaction fees
and such other fees as set forth in Rule
15.1 in the future, MEMX is not doing
so at this time and, when it does, it
intends to do so in a fair and transparent
manner. As noted above, MEMX will
operate in a highly competitive
environment, and not charging fees for
such services and access is designed to
enable it to compete effectively and to
encourage market participants to
connect to the Exchange.
In conclusion, the Exchange also
submits that its proposed fee structure
satisfies the requirements of Sections
6(b)(4) and 6(b)(5) of the Act for the
reasons discussed above in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among its Members and other persons
using its facilities, does not permit
unfair discrimination between
customers, issuers, brokers, or dealers,
and is 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, particularly as the
proposal neither targets nor will it have
a disparate impact on any particular
category of market participant. As
described more fully below in the
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
Exchange’s statement regarding the
burden on competition, the Exchange
believes that it is subject to significant
competitive forces, and that its
proposed fee and rebate structure is an
appropriate effort to address such
forces.
Regulatory Fees
The Exchange believes that proposed
Rule 15.1(e) is consistent with the
provisions of Section 6(b) 23 of the Act
in general, and furthers the objectives of
Section 6(b)(4) 24 of the Act, in
particular, in that it provides for the
equitable allocation of reasonable fees
and other charges among its Members,
and does not unfairly discriminate
between customers, issuers, brokers and
dealers. All similarly situated Members
are subject to the same fee structure, and
every Member firm must use the CRD
system for registration and disclosure.
The proposed fees are reasonable
because they are identical to those
adopted by FINRA for use of the CRD
system for disclosure and the
registration of associated persons of
FINRA members.25 As FINRA noted in
its filing adopting its existing fees, it
believes the fees are reasonable based on
the increased costs associated with
operating and maintaining the CRD
system, and listed a number of
enhancements made to the CRD system
since the last fee increase, including: (1)
Incorporation of various uniform
registration form changes; (2) electronic
fingerprint processing; (3) Web EFTTM,
which allows subscribing firms to
submit batch filings to the CRD system;
(4) increases in the number and types of
reports available through the CRD
system; and (5) significant changes to
BrokerCheck, including making
BrokerCheck easier to use and
expanding the amount of information
made available through the system.26
These increased costs are similarly
borne by FINRA when a Member that is
not a member of FINRA uses the CRD
system, so the fees collected for such
use should mirror the fees assessed on
FINRA members, as is proposed by the
Exchange. FINRA further noted its belief
that the proposed fees are reasonable
because they help to ensure the integrity
of the information in the CRD system,
which is important because the
Commission, FINRA, other selfregulatory organizations and state
securities regulators use the CRD system
23 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
25 See Securities Exchange Act Release No. 67247
(June 25, 2012), 77 FR 38866 (June 29, 2012) (SR–
FINRA–2012–30).
26 See id. at 77 FR 38866, 38868.
24 15
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Federal Register / Vol. 85, No. 196 / Thursday, October 8, 2020 / Notices
to make licensing and registration
decisions, among other things.27
The Exchange also believes that the
proposed fees, like FINRA’s fees, are
consistent with an equitable allocation
of fees because the fees will apply
equally to all individuals and Members
required to report information to the
CRD system. Thus, those members that
register more individuals or submit
more filings through the CRD system
will generally pay more in fees than
those members that use the CRD system
to a lesser extent. In addition, the
proposed fees, like FINRA’s fees, are
equitable and not unfairly
discriminatory because they will result
in the same regulatory fees being
charged to all Members required to
report information to the CRD system
and for services performed by FINRA,
regardless of whether or not such
Member is a FINRA member.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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Transaction Fees
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Rather, as
discussed above, the Exchange believes
that the proposed change would
encourage the submission of additional
order flow to a public exchange, thereby
promoting market depth, execution
incentives and enhanced execution
opportunities, as well as price discovery
and transparency for all Members. As a
result, the Exchange believes that the
proposed change furthers the
Commission’s goal in adopting
Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 28
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
To the contrary, the Exchange believes
that the proposed pricing structure will
increase competition and is intended to
draw volume to the Exchange as it
commences operations. The Exchange
believes that the ever-shifting market
share among the exchanges from month
to month demonstrates that market
participants can shift order flow or
discontinue to reduce use of certain
categories of products, in response to
new or different pricing structures being
27 See
28 See
id.
supra note 17, at 70 FR 37496, 37499.
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17:48 Oct 07, 2020
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63625
introduced into the market.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates, and market
participants can readily trade on
competing venues if they deem pricing
levels at those other venues to be more
favorable. As a new exchange, the
Exchange expects to face intense
competition from existing exchanges
and other non-exchange venues that
provide markets for equities trading.
With respect to the Exchange’s initial
pricing whereby it will operate with a
negative net capture with respect to
transactions involving Added Displayed
Volume, the Exchange is proposing this
pricing initially upon its launch and for
a limited time thereafter in an effort to
encourage market participants to join,
connect to, and participate on the
Exchange. The Exchange expects to
modify its pricing structure after it has
gained sufficient participation from
market participants to eliminate the
negative net capture and instead be
profitable with respect to such
transactions. Although this pricing
incentive is intended to attract liquidity
to the Exchange, most other exchanges
in operation today already offer
multiple incentives to their participants,
including tiered pricing that provides
higher rebates or discounted executions,
and other exchanges will be able to
modify such incentives in order to
compete with the Exchange. With
respect to the specific pricing resulting
in the negative net capture, the
Exchange also notes that the proposed
fee for Removed Volume is neither the
lowest fee in the market today 29 nor is
the proposed rebate provided to Added
Displayed Volume the highest rebate in
the market today.30 Accordingly, with
respect to a participant deciding to
either submit an order to add liquidity
or seeking to remove liquidity, there are
multiple exchanges that will continue to
be competitively priced for such orders
when compared to the Exchange’s
pricing. Further, while pricing
incentives do cause shifts of liquidity
between trading centers, market
participants make determinations on
where to provide liquidity or route
orders to take liquidity based on factors
other than pricing, including
technology, functionality, and other
considerations. Consequently, the
Exchange believes that the degree to
which its fees and rebates could impose
any burden on competition is extremely
limited, and does not believe that such
fees would burden competition of
Members or competing venues in a
manner that is not necessary or
appropriate in furtherance of the
purposes of the Act.
The Exchange does not believe that
the proposed rule change will impose
any burden on intramarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed fees and rebates
apply equally to all Members. The
proposed pricing structure is intended
to encourage market participants to add
displayed and non-displayed liquidity
to the Exchange by providing rebates
that are comparable to those offered by
other exchanges as well as to provide a
competitive rate charged for removing
liquidity, which the Exchange believes
will help to encourage Members to send
orders to the Exchange to the benefit of
all Exchange participants. As the
proposed rates are equally applicable to
all market participants, the Exchange
does not believe there is any burden on
intramarket competition.
29 For example, the Investors Exchange fee
schedule on its public website reflects standard fees
for matched liquidity of $0.0009 for shares executed
at or above $1.00, which would apply to all orders
removing liquidity; see https://iextrading.com/
trading/fees/. Other markets offering ‘‘taker/maker’’
pricing provide rebates to provide liquidity; see,
e.g., Nasdaq BX fee schedule, at https://
www.nasdaqtrader.com/Trader.aspx?id=bx_pricing;
Cboe BYX fee schedule at https://
markets.cboe.com/us/equities/membership/fee_
schedule/byx/.
30 See supra note 19.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
Regulatory Fees
The Exchange does not believe that
proposed Rule 15.1(e) will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Specifically,
the Exchange believes that the proposed
fees in this Rule will result in the same
regulatory fees being charged to all
Members required to report information
to the CRD system and for services
performed by FINRA, regardless of
whether or not such Members are
FINRA members.
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.
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 31 and Rule
19b–4(f)(2) 32 thereunder.
31 15
32 17
E:\FR\FM\08OCN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
08OCN1
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Federal Register / Vol. 85, No. 196 / Thursday, October 8, 2020 / Notices
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
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:
khammond on DSKJM1Z7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MEMX–2020–10 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–2020–10. 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 (https://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
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17:48 Oct 07, 2020
Jkt 253001
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–2020–10 and
should be submitted on or before
October 29, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22249 Filed 10–7–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90081; File No. SR–
CboeEDGX–2020–037]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Amend the Fifth
Amended and Restated Bylaws of the
Exchange’s Parent Corporation, Cboe
Global Markets, Inc.
October 2, 2020.
I. Introduction
On July 30, 2020, Cboe EDGX
Exchange, Inc. (the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend the Fifth
Amended and Restated Bylaws (the
‘‘Parent Bylaws’’) of its parent
corporation, Cboe Global Markets, Inc.
(the ‘‘Parent’’). The proposed rule
change was published for comment in
the Federal Register on August 19,
2020.3 The Commission received no
comment letters regarding the proposed
rule change. On September 24, 2020, the
Exchange filed Amendment No. 1 to the
proposal.4 The Commission is
33 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 89542
(August 13, 2020), 85 FR 51132 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange provided
additional detail and clarity on a few points
without materially changing the proposal or the
proposed rule text. Specifically, in Amendment No.
1, the Exchange: (i) Provided additional support for
its proposed restrictions on the use of audio, video,
and cell phones during stockholder meetings,
including information on past practice by the
Exchange, underlying authority for such restrictions
in the current Parent Bylaws, and comparison to the
practices of other Delaware-incorporated public
1 15
PO 00000
Frm 00127
Fmt 4703
Sfmt 4703
publishing this notice to solicit
comments on Amendment No. 1 from
interested persons and is approving the
proposed rule change, as modified by
Amendment No. 1, on an accelerated
basis.
II. Description
The Exchange proposed certain
amendments to the Parent Bylaws that,
according to the Exchange, would
‘‘improve the governance processes’’ of
the Parent and ‘‘make certain provisions
more consistent with the Delaware
General Corporation Law (‘‘DGCL’’).’’ 5
According to the Exchange, many of the
proposed changes reflect corporate
governance best practices and, in some
instances, provide clarity and flexibility
to the Parent Bylaws.6
Proposed Changes to Article 2—
Stockholders 7
The majority of the proposed changes
amend Section 2.11 (Nomination of
Directors) and Section 2.12 (Notice of
Business at Annual Meetings).
According to the Exchange, the changes
are designed to reflect the most up-todate practices under the DGCL and
provide the Board with additional
information and advance notice in
connection with nominations and the
conduct of business at annual and
special meetings. In particular, the
Exchange combines current Section 2.12
into Section 2.11 and amends
provisions that govern notice
requirements for annual and special
meetings, as well as provisions that
provide general procedures and
practices in connection with notices.
The proposed delineation does not alter
the process or definition of either type
companies; (ii) clarified that the provisions of
proposed Section 3.15 are subject to existing
Section 10.2, including a representation that
emergency Bylaw amendments made pursuant to
proposed Section 3.15(g) may need to be filed
pursuant to Section 19 of the Exchange Act; (iii)
clarified that proposed Section 3.15 is meant to
provide short-term flexibility to continue operations
during the initial stage of an emergency situation,
and that proposed paragraph (f) makes clear that,
as soon as it is practicable for a majority of the
elected directors to reconvene, they would be
expected to do so; and (iv) added further
explanation of the provision in proposed Section
4.1 regarding the limitation of the power and
authority vested in a Board committee in the
management of the business and affairs of the
Parent. To promote transparency of its proposed
amendment, when the Exchange filed Amendment
No. 1 with the Commission, it also submitted
Amendment No. 1 as a comment letter to the filing,
which then became publicly available on the
Commission’s website.
5 See Notice, supra note 3, at 51132.
6 See Notice, supra note 3.
7 See Notice, supra note 3, for a discussion of the
detailed proposed changes to Article 2 and the
DGCL provisions and/or rules of other exchanges on
which they are modeled.
E:\FR\FM\08OCN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 196 (Thursday, October 8, 2020)]
[Notices]
[Pages 63620-63626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22249]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90076; File No. SR-MEMX-2020-10]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Adopt the Initial
Fee Schedule and Other Fees for MEMX LLC
October 2, 2020.
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 September 21, 2020, MEMX LLC (``MEMX'' or the ``Exchange'')
filed with the Securities and Exchange Commission (the ``Commission'')
the proposed rule change as described in Items I, II, and III below,
which Items have been prepared by the Exchange. The 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.
---------------------------------------------------------------------------
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 adopt (i) the initial fees and rebates applicable to Members \3\ of
the Exchange
[[Page 63621]]
pursuant to Exchange Rule 15.1(a) and (c), and (ii) regulatory fees
related to the Central Registration Depository (``CRD system''), which
will be collected by the Financial Industry Regulatory Authority, Inc.
(``FINRA'') as set forth in proposed Rule 15.1(e). The text of the
proposed rule change is provided in Exhibit 5.
---------------------------------------------------------------------------
\3\ See Exchange Rule 1.5(p).
---------------------------------------------------------------------------
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 implement a fee schedule (the ``Fee
Schedule'') applicable to use of the Exchange. The Exchange will
commence operations as a national securities exchange on September 21,
2020, and thus, proposes the fees to be effective as of the date of
this filing.
The Exchange first notes that upon launch it will operate in a
highly competitive market in which market participants can readily
direct order flow to competing venues if they deem fee levels at a
particular venue to be excessive or incentives to be insufficient. More
specifically, the Exchange will be only one of several equities venues
to which market participants may direct their order flow. Based on
publicly available information, no single registered equities exchange
currently has more than approximately 18% of total market share.\4\
Thus, in such a low-concentrated and highly competitive market, no
single equities exchange possesses significant pricing power in the
execution of order flow, and as it commences operations the Exchange
anticipates representing a small percentage of the overall market.
---------------------------------------------------------------------------
\4\ Market share percentage calculated as of September 17, 2020.
The Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
---------------------------------------------------------------------------
Transaction Fees
Below is a description of the fees and rebates that the Exchange
intends to impose under the initial proposed Fee Schedule, which will
be applicable to transactions executed in all trading sessions. Under
the proposed Fee Schedule, the Exchange will operate a ``Maker-Taker''
model whereby it provides rebates to Members that provide liquidity and
charges fees to those that remove liquidity, as further described
below. The Exchange does not initially propose to charge different fees
or provide different rebates depending on the amount of orders
submitted to, and/or transactions executed on or through, the Exchange.
Accordingly, all fees and rebates described below are applicable to all
Members, regardless of the overall volume of a Member's trading
activities on the Exchange.
(A) Standard Fee for Removed Volume
The Exchange proposes to charge a standard fee of $0.0025 per share
for executions of orders that remove liquidity from the MEMX Book \5\
(``Removed Volume'') in all securities traded on the Exchange priced at
or above $1.00 per share.\6\
---------------------------------------------------------------------------
\5\ ``MEMX Book'' refers to the Exchange system's electronic
file of orders. See Exchange Rule 1.5(q).
\6\ This pricing is referred to by the Exchange as ``Removed
volume from MEMX Book'' on the proposed Fee Schedule with a Fee Code
of ``R'' to be provided by the Exchange on execution reports. The
Exchange's Fee Codes will assist both the Exchange and Members with
financial planning, tracking, and reconciliation of invoices
generated by the Exchange. The Exchange notes that it will also use
a second character, either ``A'' or ``B'' to indicate whether an
execution occurred: (A) In a security priced at or above $1.00 per
share or (B) below $1.00 per share.
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(B) Standard Rebate for Added Displayed Volume
The Exchange proposes to provide a standard rebate of $0.0029 per
share for executions of orders that: (i) Are displayed on the MEMX Book
and (ii) add liquidity to the Exchange (``Added Displayed Volume''), in
all securities traded on the Exchange priced at or above $1.00 per
share.\7\ The proposed standard rebate for Added Displayed Volume would
apply to the Reserve Quantity \8\ of an order such that any
replenishment amount of the Reserve Quantity of an order that is
executed against would be treated as Added Displayed Volume even though
such portion of the order was not displayed on the MEMX Book prior to
the order being replenished in accordance with the Member's
instructions and the Exchange's rules. The entire portion of the
Reserve Quantity of an order would be eligible for this rebate,
however, a Member would only receive such rebate for any portion(s) of
the Reserve Quantity that is (are) executed against.
---------------------------------------------------------------------------
\7\ This pricing is referred to by the Exchange as ``Added
displayed volume'' on the proposed Fee Schedule with a Fee Code of
``B'', ``D'' or ``J'' to be provided by the Exchange on execution
reports.
\8\ ``Reserve Quantity'' refers to the portion of an order that
includes a Non-Displayed instruction in which a portion of that
order is also displayed on the MEMX Book. See Exchange Rule 11.6(k).
---------------------------------------------------------------------------
(C) Rebates for Added Displayed Volume That Establishes or Matches the
National Best Bid or Offer (``NBBO'')
The Exchange proposes to provide an identical rebate of $0.0029 per
share for executions of Added Displayed Volume orders that either: (i)
establish the NBBO (``Setter Volume'') or (ii) establish a new best bid
or offer (``BBO'') on MEMX that matches the NBBO first established on
an away market (``Joiner Volume,'' and together with Setter Volume,
``NBBO Setter/Joiner Volume''), in all securities traded on the
Exchange priced at or above $1.00 per share. Because pricing will be
the same for all Added Displayed Volume, the Exchange does not propose
to add separate rebates on the Fee Schedule at this time for Setter
Volume or Joiner Volume or to define these categories on the Fee
Schedule. However, the Exchange proposes to provide separate Fee Codes
to Members for Setter Volume and Joiner Volume; thus, in addition to
the standard Fee Code applicable to Added Displayed Volume, or ``D'',
the Exchange proposes including Fee Codes of ``B'' for Setter Volume
and ``J'' for Joiner Volume on the same row as ``D'' in the transaction
fees table of the Fee Schedule.
The purpose of including three separate Fee Codes for Added
Displayed Volume is to reflect the fact that the Exchange will provide
distinct Fee Codes on the execution reports provided to Members. The
Exchange believes this information will be useful for Members and the
Exchange to track executions of Added Displayed Volume that qualifies
as either Setter Volume or Joiner Volume and may also be useful for the
Exchange in considering potential pricing modifications to such orders
as it continues to evaluate its pricing structure on an ongoing basis
after its exchange launch. In the meantime, these Fee Codes will be
provided to Members on execution reports prior to the introduction of
any pricing incentives for such liquidity, even though the rebates to
be provided are the same as those provided as the standard rebate for
Added Displayed Volume. The Exchange notes that its technical
specifications make clear the different types of liquidity codes passed
back to Members on execution reports.
[[Page 63622]]
(D) Standard Rebate for Added Non-Displayed Volume
The Exchange proposes to provide a standard rebate of $0.0020 per
share for executions of orders that: (i) Are not displayed on the MEMX
Book and (ii) add liquidity to the Exchange (``Added Non-Displayed
Volume''), in all securities traded on the Exchange priced at or above
$1.00 per share.\9\ Similar to the proposal to add separate Fee Codes
for Setter Volume and Joiner Volume, as described above, the proposed
Fee Schedule reflects two different Fee Codes for Added Non-Displayed
Volume, specifically ``H'' and ``M''. The Exchange will provide Fee
Code ``M'' for the execution of an order that adds non-displayed
liquidity to the extent the order that provides liquidity includes a
Midpoint Peg instruction and Fee Code ``H'' for the execution of an
order that adds non-displayed liquidity but does not include a Midpoint
Peg instruction.\10\ The proposed standard rebate for Added Non-
Displayed Volume would apply to each of these the same. The purpose of
including both Fee Codes on the Fee Schedule is to reflect the fact
that the Exchange will separately record these transactions under
distinct Fee Codes on the execution reports provided to Members. The
Exchange believes this information will be useful for Members and the
Exchange to track executions of Added Non-Displayed Volume and may also
be useful for the Exchange in considering potential pricing
modifications to such orders as it continues to evaluate its pricing
structure on an ongoing basis after its exchange launch. The Exchange
again notes that its technical specifications make clear the different
types of liquidity codes passed back to Members on execution reports.
---------------------------------------------------------------------------
\9\ This pricing is referred to by the Exchange on the proposed
Fee Schedule as ``Added non-displayed volume.''
\10\ The term ``Midpoint Peg'' refers to a Pegged Order with an
instruction to peg to the midpoint of the NBBO. See Exchange Rule
11.6(h)(2). The term ``Pegged Order'' refers to an order with
instructions to peg to the NBB, for a buy order, or the NBO, for a
sell order. See Exchange Rule 11.6(h).
---------------------------------------------------------------------------
The Exchange proposes to provide a higher rebate for executions of
Added Displayed Volume than for executions of Added Non-Displayed
Volume to incentivize displayed liquidity over non-displayed liquidity
on the Exchange, including orders with a displayed component and a non-
displayed component (i.e., orders with a Reserve Quantity), in order to
encourage and facilitate price discovery and price formation, which the
Exchange believes benefits all Members and investors.
(E) Standard Fee for Routed Removed Volume
The Exchange proposes to charge a standard fee of $0.0030 per share
for all orders routed to another market that (i) are executed on an
away market and (ii) remove liquidity from the market to which it was
routed (``Routed Removed Volume''), in all securities traded on the
Exchange priced at or above $1.00 per share.\11\ All charges by the
Exchange for routing are applicable only in the event that an order is
executed; there is no charge for orders that are routed away from the
Exchange but are not filled. The Exchange notes that the fees for
routing relate to orders routed through the Exchange's affiliated
broker-dealer, MEMX Execution Services LLC. Routing services offered by
the Exchange and its affiliated broker-dealer are completely optional
and market participants can readily select between various providers of
routing services, including other exchanges and broker-dealers.
---------------------------------------------------------------------------
\11\ This pricing is referred to by the Exchange as ``Routed to
another market, removed liquidity'' on the proposed Fee Schedule
with a Fee Code of ``Z'' to be provided by the Exchange on execution
reports.
---------------------------------------------------------------------------
(F) Securities Priced Below $1.00 per Share
The Exchange does not propose to charge any fee or provide any
rebate for executions of orders in securities priced below $1.00 per
share, including where an execution takes place on the Exchange or at
another market center if the order was routed away from the Exchange.
(G) Other Fees
Under the initial proposed Fee Schedule, the Exchange proposes to
make clear that it does not charge any fees for membership, market data
products, physical connectivity or application sessions (e.g., trading
ports, market data ports, and/or drop copies). In addition, because, as
described below, the Exchange is proposing to include certain fees in
Rule 15.1 rather than on the Fee Schedule, the Exchange proposes to
state on the Fee Schedule that additional fees are set forth in Rule
15.1 of the MEMX Rulebook, and further, that such fees include
Regulatory Transaction Fees collected to fund MEMX's Section 31
obligations (as set forth in MEMX Rule 15.1(b)) and fees collected
through the CRD registration system for registration of associated
persons of Members that are not also FINRA members (as proposed to be
added as MEMX Rule 15.1(e)).
Regulatory Fees
The Exchange proposes to adopt certain regulatory fees as new
paragraph (e) to Exchange Rule 15.1 related to the CRD system, which
are collected by FINRA.\12\ As proposed, FINRA will collect and retain
certain regulatory fees via the CRD system for the registration of
persons associated with a Member that is not also a FINRA member. The
CRD system fees are use-based and there is no distinction in the cost
incurred by FINRA if the user is a FINRA member or a member of an
exchange but not a FINRA member. Accordingly, the Exchange proposes to
adopt the regulatory fees set forth in proposed Rule 15.1(e) to mirror
those assessed by FINRA pursuant to Section 4 (Fees) of Schedule A to
the FINRA By-Laws. As proposed, these fees are as follows: \13\
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\12\ The CRD system is the central licensing and registration
system for the U.S. securities industry. The CRD system enables
individuals and firms seeking registration with multiple states and
self-regulatory organizations to do so by submitting a single form,
fingerprint card and a combined payment of fees to FINRA. Through
the CRD system, FINRA maintains the qualification, employment and
disciplinary histories of registered associated persons of broker-
dealers.
\13\ The Exchange has only adopted the CRD system fees charged
by FINRA to non-FINRA members when such fees are applicable. In this
regard, certain FINRA CRD system fees and requirements are specific
to FINRA members, but do not apply to Members that are not also
FINRA members. Members that are also FINRA members are charged CRD
system fees according to Section 4 (Fees) of Schedule A to the FINRA
By-Laws.
---------------------------------------------------------------------------
(1) $100 for each initial Form U4 filed for the registration of a
representative or principal;
(2) $110 for the additional processing of each initial or amended
Form U4, Form U5 or Form BD that includes the initial reporting,
amendment, or certification of one or more disclosure events or
proceedings;
(3) $45 annually for each of the Member's registered
representatives and principals for system processing;
(4) $15 for processing and posting to the CRD system each set of
fingerprints submitted electronically by the Member, plus a pass-
through of any other charge imposed by the United States Department of
Justice for processing each set of fingerprints;
(5) $30 for processing and posting to the CRD system each set of
fingerprint cards submitted in non-electronic format by the Member,
plus a pass-through of any other charge imposed by the United States
Department of Justice for processing each set of fingerprints; and
(6) $30 for processing and posting to the CRD system each set of
fingerprint results and identifying information that has been processed
through a self-
[[Page 63623]]
regulatory organization other than FINRA.
2. Statutory Basis
Transaction Fees
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \14\ of the Act in general, and
furthers the objectives of Sections 6(b)(4) \15\ of the Act, in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees and other charges among its Members
and other persons using its facilities. Additionally, the Exchange
believes that the proposed fees and rebates are consistent with the
objectives of Section 6(b)(5) \16\ of the Act in that they are designed
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 a
free and open market and national market system, and, in general, to
protect investors and the public interest, and, particularly, are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(4).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Upon its launch, the Exchange will operate in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. The Exchange believes that
the proposed Fee Schedule reflects a simple and competitive pricing
structure designed to incentivize market participants to add
aggressively priced displayed liquidity and direct their order flow to
the Exchange, which the Exchange believes would promote price discovery
and price formation and deepen liquidity that is subject to the
Exchange's transparency, regulation, and oversight as an exchange,
thereby enhancing market quality to the benefit of all Members and
investors.
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \17\
---------------------------------------------------------------------------
\17\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to charge a standard fee of $0.0025 per share
for Removed Volume from the MEMX Book because it is comparable to the
transaction fee charged by other exchanges to remove liquidity.\18\ The
Exchange further believes that this fee is equitably allocated and not
unfairly discriminatory because it applies equally to all Members and,
when coupled with higher rebates for adding displayed liquidity, as
described below, is designed to facilitate increased activity on the
Exchange to the benefit of all Members by providing more trading
opportunities and promoting price discovery.
---------------------------------------------------------------------------
\18\ For example, the New York Stock Exchange trading fee
schedule on its public website reflects fees to ``take'' liquidity
ranging from $0.0024-$0.00275 depending on the type of market
participant, order and execution; see https://www.nyse.com/markets/nyse/trading-info/fees. The Nasdaq Stock Market trading fee schedule
on its public website reflects standard fees to ``remove'' liquidity
of $0.0030 per share for shares executed at or above $1.00 or 0.30%
of total dollar volume for shares executed below $1.00; see https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The Cboe BZX
trading fee schedule on its public website reflects standard fees
for ``removing'' liquidity of $0.0030 for shares executed at or
above $1.00 or 0.30% of total dollar volume for shares executed
below $1.00; see https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a standard rebate of $0.0029 per
share for Added Displayed Volume in all securities traded on the
Exchange priced at or above $1.00 per share because this rebate is
consistent with transaction rebates provided by other exchanges.\19\
The Exchange further believes that this rebate structure is equitably
allocated and not unfairly discriminatory because it applies equally to
all Members.
---------------------------------------------------------------------------
\19\ For example, the New York Stock Exchange trading fee
schedule on its public website reflects a standard rebate for
``adding'' liquidity of $0.0012 for shares executed at or above
$1.00, with various tiers that provide the ability of a firm to
receive a rebate of $0.0029 per share or higher; see https://www.nyse.com/markets/nyse/trading-info/fees. The Nasdaq Stock Market
trading fee schedule on its public website reflects a standard
rebate for ``adding'' liquidity for shares executed at or above
$1.00 of $0.0020 in Tape A and B securities and $0.0015 in Tape C
securities, with various tiers that provide the ability of a firm to
receive a rebate of $0.0029 per share or higher; see https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The Cboe BZX
trading fee schedule on its public website reflects a standard
rebate for ``adding'' liquidity of $0.0020 for shares executed at or
above $1.00, with various tiers that provide the ability of a firm
to receive a rebate of $0.0029 per share or higher; see https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
The Exchange believes that charging a fee to the liquidity remover,
and providing a rebate to the liquidity adder, is reasonable, equitable
and not unfairly discriminatory because it incentivizes liquidity
provision on the Exchange. The Exchange also notes that several other
exchanges charge fees for removing liquidity and provide rebates for
adding liquidity, and that this aspect of the Exchange's proposed Fee
Schedule does not raise any new or novel issues that have not
previously been considered by the Commission in connection with the
fees and rebates of other exchanges.\20\
---------------------------------------------------------------------------
\20\ See supra notes 18 and 19.
---------------------------------------------------------------------------
The Exchange also believes that it is reasonable, equitable and not
unfairly discriminatory to provide a higher rebate for executions of
Added Displayed Volume (including NBBO Setter/Joiner Volume) than for
executions of Added Non-Displayed Volume as this rebate structure is
designed to incentivize Members to send the Exchange displayable
orders, thereby contributing to price discovery and price formation,
consistent with the overall goal of enhancing market quality. Moreover,
the Exchange notes that there are precedents for exchanges to provide
rebates that distinguish between displayed and non-displayed volume to
incentivize displayed orders and facilitate price discovery.\21\
---------------------------------------------------------------------------
\21\ Id.
---------------------------------------------------------------------------
The Exchange notes that under the initial proposed Fee Schedule it
will pay a higher rebate for Added Displayed Volume than the fee it
charges for removing such volume, and as such the Exchange will have a
negative net capture (i.e., will lose money) with respect to such
transactions. The Exchange notes that it will only utilize a pricing
structure whereby it maintains a negative net capture with respect to
such transactions initially upon its launch and for a limited time
thereafter in an effort to encourage market participants to join,
connect to, and participate on the Exchange. As noted above, the
Exchange will operate in a highly competitive market, and the Exchange
believes this initial pricing structure will enable it to effectively
compete with other exchanges by attracting Members and order flow to
the Exchange, which will help the Exchange to gain market share for
executions. The Exchange expects to modify its pricing structure after
it has gained sufficient participation from
[[Page 63624]]
market participants to eliminate the negative net capture and instead
be profitable with respect to such transactions. The Exchange believes
the initial pricing structure, including the negative net capture for
Added Displayed Volume transactions, is designed to incentivize market
participants to add aggressively priced displayed liquidity and direct
their order flow to the Exchange, which the Exchange believes would
promote price discovery and price formation and deepen liquidity that
is subject to the Exchange's transparency, regulation, and oversight as
an exchange, thereby enhancing market quality to the benefit of all
Members and investors. The Exchange does not believe that the negative
net capture with respect to Added Displayed Volume transactions will
materially impact the capitalization of the Exchange or otherwise
impair the Exchange's ability to operate or regulate itself. The
Exchange is well-capitalized and able to absorb losses resulting from a
negative net capture, particularly given the Exchange's intention to
operate in this fashion on a temporary basis. Moreover, the Exchange's
parent company, MEMX Holdings LLC, has agreed to provide adequate
funding for the Exchange's operations, including the regulation of the
Exchange, and to reimburse the Exchange for its costs and expenses to
the extent the Exchange's assets are insufficient to meets its costs
and expenses.
With respect to orders routed to other markets, the Exchange also
believes that it is appropriate, reasonable, and consistent with the
Act to charge a standard fee of $0.0030 for Routed Removed Volume
because this fee is similar to the fees charged by other exchanges for
routed orders that remove liquidity from the destination market.\22\
The Exchange's initial fee for routing is intended to be a simple and
transparent fee for Members that wish to use routing services provided
by the Exchange. The Exchange reiterates that the routing services
offered by the Exchange and its affiliated broker-dealer are completely
optional and that the Exchange operates in a highly competitive market
in which market participants can readily select between various
providers of routing services with different product offerings and
different pricing. The Exchange believes that its flat fee structure
for orders routed to all away venues is a fair and equitable approach
to pricing, as it will provide certainty with respect to execution
fees. As a general matter, the Exchange believes that the proposed fees
will allow it to recoup and cover its costs of providing routing
services and to make some additional profit in exchange for the
services it provides. The Exchange also believes the standard fee for
Routed Removed Volume is an equitable and not an unfairly
discriminatory allocation of fees because it applies equally to all
Members.
---------------------------------------------------------------------------
\22\ For example, the New York Stock Exchange trading fee
schedule on its public website reflects a standard fee for routing
of $0.0035, with a tier that provides a firm the ability to pay a
reduced routing fee of $0.0030; see https://www.nyse.com/markets/nyse/trading-info/fees. The Nasdaq Stock Market trading fee schedule
on its public website reflects a standard routing fee of $0.0030;
see https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The
Cboe BZX trading fee schedule on its public website reflects a
standard fee for routing of $0.0030; see https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
The Exchange also believes that not charging a fee for membership,
market data products, physical connectivity and application sessions is
appropriate, reasonable, and consistent with the Act because it may
incentivize broker-dealers to become Members of the Exchange and to
therefore direct order flow to the Exchange, and such orders will have
the benefit of exchange transparency, regulation, and oversight. One of
the primary objectives of MEMX is to provide competition and to reduce
fixed costs imposed upon the industry. As such, while MEMX does intend
to adopt fees other than transaction fees and such other fees as set
forth in Rule 15.1 in the future, MEMX is not doing so at this time
and, when it does, it intends to do so in a fair and transparent
manner. As noted above, MEMX will operate in a highly competitive
environment, and not charging fees for such services and access is
designed to enable it to compete effectively and to encourage market
participants to connect to the Exchange.
In conclusion, the Exchange also submits that its proposed fee
structure satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act for the reasons discussed above in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
its Members and other persons using its facilities, does not permit
unfair discrimination between customers, issuers, brokers, or dealers,
and is 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, particularly as the proposal neither targets
nor will it have a disparate impact on any particular category of
market participant. As described more fully below in the Exchange's
statement regarding the burden on competition, the Exchange believes
that it is subject to significant competitive forces, and that its
proposed fee and rebate structure is an appropriate effort to address
such forces.
Regulatory Fees
The Exchange believes that proposed Rule 15.1(e) is consistent with
the provisions of Section 6(b) \23\ of the Act in general, and furthers
the objectives of Section 6(b)(4) \24\ of the Act, in particular, in
that it provides for the equitable allocation of reasonable fees and
other charges among its Members, and does not unfairly discriminate
between customers, issuers, brokers and dealers. All similarly situated
Members are subject to the same fee structure, and every Member firm
must use the CRD system for registration and disclosure.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f.
\24\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The proposed fees are reasonable because they are identical to
those adopted by FINRA for use of the CRD system for disclosure and the
registration of associated persons of FINRA members.\25\ As FINRA noted
in its filing adopting its existing fees, it believes the fees are
reasonable based on the increased costs associated with operating and
maintaining the CRD system, and listed a number of enhancements made to
the CRD system since the last fee increase, including: (1)
Incorporation of various uniform registration form changes; (2)
electronic fingerprint processing; (3) Web EFTTM, which
allows subscribing firms to submit batch filings to the CRD system; (4)
increases in the number and types of reports available through the CRD
system; and (5) significant changes to BrokerCheck, including making
BrokerCheck easier to use and expanding the amount of information made
available through the system.\26\ These increased costs are similarly
borne by FINRA when a Member that is not a member of FINRA uses the CRD
system, so the fees collected for such use should mirror the fees
assessed on FINRA members, as is proposed by the Exchange. FINRA
further noted its belief that the proposed fees are reasonable because
they help to ensure the integrity of the information in the CRD system,
which is important because the Commission, FINRA, other self-regulatory
organizations and state securities regulators use the CRD system
[[Page 63625]]
to make licensing and registration decisions, among other things.\27\
---------------------------------------------------------------------------
\25\ See Securities Exchange Act Release No. 67247 (June 25,
2012), 77 FR 38866 (June 29, 2012) (SR-FINRA-2012-30).
\26\ See id. at 77 FR 38866, 38868.
\27\ See id.
---------------------------------------------------------------------------
The Exchange also believes that the proposed fees, like FINRA's
fees, are consistent with an equitable allocation of fees because the
fees will apply equally to all individuals and Members required to
report information to the CRD system. Thus, those members that register
more individuals or submit more filings through the CRD system will
generally pay more in fees than those members that use the CRD system
to a lesser extent. In addition, the proposed fees, like FINRA's fees,
are equitable and not unfairly discriminatory because they will result
in the same regulatory fees being charged to all Members required to
report information to the CRD system and for services performed by
FINRA, regardless of whether or not such Member is a FINRA member.
B. Self-Regulatory Organization's Statement on Burden on Competition
Transaction Fees
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Rather, as
discussed above, the Exchange believes that the proposed change would
encourage the submission of additional order flow to a public exchange,
thereby promoting market depth, execution incentives and enhanced
execution opportunities, as well as price discovery and transparency
for all Members. As a result, the Exchange believes that the proposed
change furthers the Commission's goal in adopting Regulation NMS of
fostering competition among orders, which promotes ``more efficient
pricing of individual stocks for all types of orders, large and
small.'' \28\
---------------------------------------------------------------------------
\28\ See supra note 17, at 70 FR 37496, 37499.
---------------------------------------------------------------------------
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. To the contrary,
the Exchange believes that the proposed pricing structure will increase
competition and is intended to draw volume to the Exchange as it
commences operations. The Exchange believes that the ever-shifting
market share among the exchanges from month to month demonstrates that
market participants can shift order flow or discontinue to reduce use
of certain categories of products, in response to new or different
pricing structures being introduced into the market. Accordingly,
competitive forces constrain the Exchange's transaction fees and
rebates, and market participants can readily trade on competing venues
if they deem pricing levels at those other venues to be more favorable.
As a new exchange, the Exchange expects to face intense competition
from existing exchanges and other non-exchange venues that provide
markets for equities trading. With respect to the Exchange's initial
pricing whereby it will operate with a negative net capture with
respect to transactions involving Added Displayed Volume, the Exchange
is proposing this pricing initially upon its launch and for a limited
time thereafter in an effort to encourage market participants to join,
connect to, and participate on the Exchange. The Exchange expects to
modify its pricing structure after it has gained sufficient
participation from market participants to eliminate the negative net
capture and instead be profitable with respect to such transactions.
Although this pricing incentive is intended to attract liquidity to the
Exchange, most other exchanges in operation today already offer
multiple incentives to their participants, including tiered pricing
that provides higher rebates or discounted executions, and other
exchanges will be able to modify such incentives in order to compete
with the Exchange. With respect to the specific pricing resulting in
the negative net capture, the Exchange also notes that the proposed fee
for Removed Volume is neither the lowest fee in the market today \29\
nor is the proposed rebate provided to Added Displayed Volume the
highest rebate in the market today.\30\ Accordingly, with respect to a
participant deciding to either submit an order to add liquidity or
seeking to remove liquidity, there are multiple exchanges that will
continue to be competitively priced for such orders when compared to
the Exchange's pricing. Further, while pricing incentives do cause
shifts of liquidity between trading centers, market participants make
determinations on where to provide liquidity or route orders to take
liquidity based on factors other than pricing, including technology,
functionality, and other considerations. Consequently, the Exchange
believes that the degree to which its fees and rebates could impose any
burden on competition is extremely limited, and does not believe that
such fees would burden competition of Members or competing venues in a
manner that is not necessary or appropriate in furtherance of the
purposes of the Act.
---------------------------------------------------------------------------
\29\ For example, the Investors Exchange fee schedule on its
public website reflects standard fees for matched liquidity of
$0.0009 for shares executed at or above $1.00, which would apply to
all orders removing liquidity; see https://iextrading.com/trading/fees/. Other markets offering ``taker/maker'' pricing provide
rebates to provide liquidity; see, e.g., Nasdaq BX fee schedule, at
https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing; Cboe BYX fee
schedule at https://markets.cboe.com/us/equities/membership/fee_schedule/byx/.
\30\ See supra note 19.
---------------------------------------------------------------------------
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed fees and rebates apply equally to all Members. The proposed
pricing structure is intended to encourage market participants to add
displayed and non-displayed liquidity to the Exchange by providing
rebates that are comparable to those offered by other exchanges as well
as to provide a competitive rate charged for removing liquidity, which
the Exchange believes will help to encourage Members to send orders to
the Exchange to the benefit of all Exchange participants. As the
proposed rates are equally applicable to all market participants, the
Exchange does not believe there is any burden on intramarket
competition.
Regulatory Fees
The Exchange does not believe that proposed Rule 15.1(e) will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Specifically,
the Exchange believes that the proposed fees in this Rule will result
in the same regulatory fees being charged to all Members required to
report information to the CRD system and for services performed by
FINRA, regardless of whether or not such Members are FINRA members.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \31\ and Rule 19b-4(f)(2) \32\ thereunder.
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\31\ 15 U.S.C. 78s(b)(3)(A)(ii).
\32\ 17 CFR 240.19b-4(f)(2).
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[[Page 63626]]
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 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MEMX-2020-10 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-2020-10. 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 (https://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-2020-10 and should be submitted on
or before October 29, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22249 Filed 10-7-20; 8:45 am]
BILLING CODE 8011-01-P
