Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 9963-9968 [2021-03087]
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Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
To test the sensitivity of the FY 2019
base case combined monopoly estimate,
the value of the combined monopoly
estimate is shown below in Table 2 for
the full range of each parameter while
holding the other variables to their base
case values.
To the extent that the Commission’s
additional analysis and this information
may affect comments already filed in
this docket or create new areas of
interest for parties, the Commission is
opening up a second comment period.
Interested persons are invited to
comment on any or all aspects of
existing and potential methodology
changes. Comments are due March 26,
2021.
It is ordered:
1. The Commission provides notice of
filing its Analysis of the Value of the
Postal and Mailbox Monopolies in
Library Reference PRC–LR–PI2020–1–
NP1.
2. Interested persons may submit
written comments on any or all aspects
of the Commission’s estimation
methodology no later than March 26,
2021.
3. The Secretary shall arrange for
publication of this Order in the Federal
Register.
By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2021–03103 Filed 2–16–21; 8:45 am]
BILLING CODE 7710–FW–P
10 The parameters for the base case of the mailbox
monopoly model are that the entrant offers a 10
percent discount, has a 10 percent cost advantage,
delivers 1 day a week, and potentially skims 100
percent of the eligible contestable mail on profitable
routes.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91094; File No. SR–MEMX–
2021–02]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule
February 10, 2021.
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 January
29, 2021, 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
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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BILLING CODE 7710–FW–C
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Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
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
amend the Exchange’s fee schedule
applicable to Members 3 (the ‘‘Fee
Schedule’’) pursuant to Exchange Rules
15.1(a) and (c). The Exchange proposes
to implement the changes to the Fee
Schedule pursuant to this proposal on
February 1, 2021. The text of the
proposed rule change is provided in
Exhibit 5.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Fee Schedule to
(i) increase the standard rebate for
executions of orders (other than Retail
Orders 4) in securities priced at or above
$1.00 per share that add displayed
liquidity to the Exchange; (ii) increase
the standard rebate for executions of
Retail Orders in securities priced at or
above $1.00 per share that add
displayed liquidity to the Exchange; (iii)
increase the standard fee for executions
of orders in securities priced at or above
$1.00 per share that remove liquidity
from the Exchange; and (iv) adopt a fee
for executions of orders in securities
priced below $1.00 per share that are
routed to and executed on an away
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3 See
Exchange Rule 1.5(p).
‘‘Retail Order’’ means an agency or riskless
principal order that meets the criteria of FINRA
Rule 5320.03 that originates from a natural person
and is submitted to the Exchange by a Retail
Member Organization, provided that no change is
made to the terms of the order with respect to price
or side of market and the order does not originate
from a trading algorithm or any other computerized
methodology. See Exchange Rule 11.21(a).
4A
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market and that remove liquidity from
the market to which they are routed.
The Exchange first notes that it
operates 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
rebates/incentives to be insufficient.
More specifically, the Exchange is only
one of 16 registered equities exchanges,
as well as a number of alternative
trading systems and other off-exchange
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 15% of
the total market share of executed
volume of equities trading.5 Thus, in
such a low-concentrated and highly
competitive market, no single equities
trading venue possesses significant
pricing power in the execution of order
flow, and the Exchange currently
represents less than 1% of the overall
market share.6
Increased Standard Rebate for Added
Displayed Volume
The Exchange proposes to increase
the standard rebate provided for
executions of orders (other than Retail
Orders) in securities priced at or above
$1.00 per share that are displayed on the
MEMX Book 7 and add liquidity to the
Exchange (‘‘Added Displayed Volume’’).
Currently, the Exchange provides a
standard rebate of $0.0029 per share for
executions of Added Displayed Volume.
The Exchange now proposes to increase
the standard rebate provided for
executions of Added Displayed Volume
to $0.0034 per share.
Increased Standard Rebate for Added
Displayed Retail Volume
The Exchange also proposes to
increase the standard rebate provided
for executions of Retail Orders in
securities priced at or above $1.00 per
share that are displayed on the MEMX
Book and add liquidity to the Exchange
(‘‘Added Displayed Retail Volume’’).
Currently, the Exchange provides a
standard rebate of $0.0034 per share for
executions of Added Displayed Retail
Volume. The Exchange now proposes to
increase the standard rebate provided
for executions of Added Displayed
Retail Volume to $0.0037 per share. As
5 Market
share percentage calculated month-todate for January 2021 as of January 28, 2021. The
Exchange receives and processes data made
available through consolidated data feeds (i.e., CTS
and UTDF).
6 Id.
7 ‘‘MEMX Book’’ refers to the Exchange system’s
electronic file of orders. See Exchange Rule 1.5(q).
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a recent entrant in the equities market
and to attract additional order flow to
the Exchange to help it compete with
other equities trading venues, the
Exchange previously adopted a higher
standard rebate for executions of Added
Displayed Retail Volume relative to the
standard rebate for executions of Added
Displayed Volume to incentivize
Members to submit additional order
flow in the form of Retail Orders to the
Exchange.8 The proposed increase
rebate for executions of Added
Displayed Retail Volume is designed to
maintain a higher rebate for such orders
relative to the standard rebate for Added
Displayed Volume, which the Exchange
is proposing to increase from $0.0029
per share to $0.0034 per share, as
described above.
Increased Standard Fee for Removed
Volume
The Exchange also proposes to
increase the standard fee charged for
executions of orders in securities priced
at or above $1.00 per share that remove
liquidity from the Exchange (‘‘Removed
Volume’’). Currently, the Exchange
charges a standard fee of $0.0025 per
share for executions of Removed
Volume. The Exchange now proposes to
increase the standard fee charged for
executions of Removed Volume to
$0.0026 per share.
Adoption of Standard Fee for Routed
Removed Sub-Dollar Volume
Lastly, the Exchange proposes to
adopt a standard fee for executions of
orders in securities priced below $1.00
per share that are routed to and
executed on an away market and that
remove liquidity from the market to
which they are routed (‘‘Routed
Removed Sub-Dollar Volume’’).
Currently, the Exchange does not charge
a fee or provide a rebate for executions
of Routed Removed Sub-Dollar Volume.
The Exchange now proposes to charge a
standard fee of 0.30% of the total dollar
value of each execution of Routed
Removed Sub-Dollar Volume. The
Exchange notes that the 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.
Additional Discussion
The purpose of the proposed
increased standard rebates for
executions of Added Displayed Volume
8 See Securities Exchange Act Release No. 90555
(December 3, 2020), 85 FR 79244 (December 9,
2020) (SR–MEMX–2020–14).
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and Added Displayed Retail Volume is
for business and competitive reasons, as
the Exchange believes such increased
rebates would incentivize Members to
submit additional displayed liquidityadding order flow (including both Retail
Orders and non-retail orders) to the
Exchange, which the Exchange believes
would promote price discovery and
price formation, provide more trading
opportunities and tighter spreads, and
deepen liquidity that is subject to the
Exchange’s transparency, regulation and
oversight, thereby enhancing market
quality to the benefit of all Members and
investors.
The purpose of the proposed
increased standard fee for executions of
Removed Volume and the proposed
adoption of a standard fee for
executions of Routed Removed SubDollar Volume is also for business and
competitive reasons, as the Exchange
believes such fees would generate
additional revenue to offset some of the
costs associated with the proposed
increased rebates for executions of
Added Displayed Volume and Added
Displayed Retail Volume described
above, and the Exchange’s operations
generally, in a manner that is consistent
with the Exchange’s overall pricing
philosophy of encouraging added
displayed liquidity. The proposed
standard fee for executions of Routed
Removed Sub-Dollar Volume is also
intended to recoup some of the
Exchange’s costs associated with
handling such orders, including the
costs of operating the Exchange’s
affiliated routing broker-dealer and the
applicable fees charged by the away
market for removing liquidity, as the
current pricing structure would require
the Exchange to absorb all such costs.
The proposed rule change does not
include different fees or rebates that
depend on the amount of orders
submitted to, and/or transactions routed
or executed on or through, the Exchange
or its affiliated routing broker-dealer.
Accordingly, all fees and rebates
described above are applicable to all
Members, regardless of the overall
volume of a Member’s routing or trading
activities on or through the Exchange or
its affiliated routing broker-dealer.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,9
in general, and with Sections 6(b)(4) and
(5) of the Act,10 in particular, in that it
is designed to provide for the equitable
allocation of reasonable dues, fees and
9 15
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
11 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
10 15
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other charges among its Members and
other persons using its facilities and is
not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
As discussed above, the Exchange
operates in a highly fragmented and
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, and the Exchange
represents only a small percentage of
the overall market. 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,
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.’’ 11
The Exchange believes that the evershifting 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. The
Exchange also 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. Accordingly,
competitive forces constrain the
Exchange’s transaction fees and rebates
generally, including with respect to
Added Displayed Volume, Added
Displayed Retail Volume, Removed
Volume and Routed Removed SubDollar Volume, and market participants
can readily trade on and/or or utilize the
routing services of competing venues if
they deem pricing levels or product
offerings at those other venues to be
more favorable. The Exchange believes
the proposed rule change reflects a
reasonable 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
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9965
discovery and price formation, provide
more trading opportunities and tighter
spreads, and deepen liquidity that is
subject to the Exchange’s transparency,
regulation and oversight, thereby
enhancing market quality to the benefit
of all Members and investors.
Increased Standard Rebate for Added
Displayed Volume
The Exchange believes the proposed
increased standard rebate for executions
of Added Displayed Volume is
reasonable, equitable and consistent
with the Act because it is designed to
incentivize Members to submit
additional displayed liquidity-adding
orders to the Exchange, which would
enhance liquidity on the Exchange and
promote price discovery and price
formation. The Exchange further
believes the proposed increased
standard rebate is reasonable and
appropriate because it is comparable to,
and competitive with, the rebates
provided by other exchanges for
executions of liquidity-adding displayed
non-retail orders in securities priced at
or above $1.00 per share.12 However, the
Exchange notes that certain of these
exchanges provide a tiered pricing
structure that provides a comparable
rebate for executions of liquidity-adding
displayed non-retail orders in securities
priced at or above $1.00 per share only
when certain volume thresholds are
met.13 The Exchange believes that,
consistent with the Exchange’s existing
pricing structure, it is reasonable,
equitable and not unfairly
discriminatory to provide a higher
rebate for executions of displayed orders
that add liquidity than to non-displayed
orders as this rebate structure is
designed to incentivize Members to
submit displayed orders to the
Exchange, thereby contributing to price
discovery and price formation,
consistent with the overall goal of
enhancing market quality. The
12 See, e.g., the MIAX PEARL, LLC equities
trading fee schedule on its public website (available
at https://www.miaxoptions.com/sites/default/files/
fee_schedule-files/MIAX_PEARL_Equities_Fee_
Schedule_01012021.pdf), which reflects a standard
rebate of $0.0032 per share to add displayed
liquidity in Tape A and Tape C securities priced at
or above $1.00 per share and a standard rebate of
$0.0035 per share to add displayed liquidity in
Tape B securities priced at or above $1.00 per share;
the NYSE Arca, Inc. (‘‘NYSE Arca’’) equities trading
fee schedule on its public website (available at
https://www.nyse.com/publicdocs/nyse/markets/
nyse-arca/NYSE_Arca_Marketplace_Fees.pdf),
which reflects rebates up to $0.0033 per share to
add displayed liquidity in Tape A and Tape C
securities priced at or above $1.00 per share
depending on the applicable tier and rebates up to
$0.0034 per share to add displayed liquidity in
Tape B securities priced at or above $1.00 per share
depending on the applicable tier.
13 Id.
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Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
Exchange further believes that this fee is
equitably allocated and not unfairly
discriminatory because it applies
equally to all Members and, when
coupled with lower fees for removing
liquidity, 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 notes that under this
proposal the Exchange will continue to
pay a higher rebate for Added Displayed
Volume than the fee it charges for
removing such volume, and as such the
Exchange will continue to have a
negative net capture (i.e., will lose
money) with respect to such
transactions. The Exchange notes that,
as a recent entrant in the equities
market, it will only utilize a pricing
structure whereby it maintains a
negative net capture with respect to
such transactions for a limited time in
an effort to encourage market
participants to join, connect to, and
participate on the Exchange. As noted
above, the Exchange operates in a highly
competitive market, and the Exchange
believes this 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 market participants
and market share for executions to
eliminate the negative net capture and
instead be profitable with respect to
such transactions.
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Increased Standard Rebate for Added
Displayed Retail Volume
Similarly, the Exchange believes the
proposed increased standard rebate for
executions of Added Displayed Retail
Volume is reasonable, equitable and
consistent with the Act because it is
designed to incentivize Members to
submit additional displayed liquidityadding Retail Orders to the Exchange,
which would enhance liquidity in Retail
Orders on the Exchange and promote
price discovery and price formation.
The Exchange further believes the
proposed increased standard rebate is
reasonable and appropriate because it is
comparable to, and competitive with,
the rebates provided by other exchanges
for executions of liquidity-adding
displayed retail orders in securities
priced at or above $1.00 per share.14
14 See e.g., the NYSE Arca equities trading fee
schedule on its public website (available at https://
www.nyse.com/publicdocs/nyse/markets/nyse-arca/
NYSE_Arca_Marketplace_Fees.pdf), which reflects
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However, the Exchange notes that these
exchanges provide a tiered pricing
structure that provides a comparable
rebate for executions of liquidity-adding
displayed retail orders in securities
priced at or above $1.00 per share only
when certain volume thresholds are
met.15 The Exchange believes that it is
reasonable, equitable and not unfairly
discriminatory to provide a higher
rebate for executions of displayed Retail
Orders that add liquidity than to nondisplayed Retail Orders as this rebate
structure is designed to incentivize
Members to submit displayed orders to
the Exchange, thereby contributing to
price discovery and price formation,
consistent with the overall goal of
enhancing market quality.
The Exchange understands that
Section 6(b)(5) of the Act 16 prohibits an
exchange from establishing rules that
are designed to permit unfair
discrimination between market
participants. However, Section 6(b)(5) of
the Act does not prohibit exchange
members or other broker-dealers from
discriminating, so long as their activities
are otherwise consistent with the federal
securities laws. While the Exchange
believes that markets and price
discovery optimally function through
the interactions of diverse flow types, it
also believes that growth in
internalization has required
differentiation of Retail Order flow from
other order flow types. The
differentiation proposed herein by the
Exchange to maintain a higher rebate for
Added Displayed Retail Volume relative
to the standard rebate for Added
Displayed Volume (i.e., non-retail
orders) is not designed to permit unfair
discrimination, but instead to promote a
competitive process around Retail Order
executions such that retail investors
would continue to receive better rebates
on the Exchange than comparable nonretail orders in order to encourage entry
of Retail Orders to the Exchange.
Accordingly, the Exchange believes the
proposed increased standard rebate for
executions of Added Displayed Retail
Volume is equitably allocated and not
unfairly discriminatory.
Increased Standard Fee for Removed
Volume
The Exchange believes the proposed
increased standard fee for executions of
Removed Volume is reasonable,
equitable and consistent with the Act
because it is designed to generate
additional revenue to offset some of the
costs associated with the proposed
increased standard rebates for
executions of Added Displayed Volume
and Added Displayed Retail Volume in
a manner that is consistent with the
Exchange’s overall pricing philosophy
of encouraging added displayed
liquidity. The Exchange further believes
this proposed standard fee is reasonable
and appropriate because it represents a
modest increase from the current fee
and remains lower than or comparable
to, and competitive with, the fees
charged by other exchanges for
executions of orders in securities priced
at or above $1.00 per share that remove
liquidity.17 The Exchange further
believes that this proposed standard fee
is equitably allocated and not unfairly
discriminatory because it will apply
equally to all Members.
rebates ranging from $0.0033–$0.0038 per share,
depending on the applicable tier, for retail orders
in securities priced at or above $1.00 per share that
add displayed liquidity; the Cboe EDGX Exchange,
Inc. (‘‘Cboe EDGX’’) equities trading fee schedule on
its public website (available at https://
markets.cboe.com/us/equities/membership/fee_
schedule/edgx/), which reflects rebates ranging
from $0.0032–$0.0037 per share, depending on the
applicable tier, for retail orders in securities priced
at or above $1.00 per share that add liquidity.
15 Id.
16 15 U.S.C. 78f(b)(5).
17 See, e.g., the Cboe EDGX equities trading fee
schedule on its public website (available at https://
markets.cboe.com/us/equities/membership/fee_
schedule/edgx/), which reflects a standard fee of
$0.0027 per share to remove liquidity in securities
priced at or above $1.00 per share; The Nasdaq
Stock Market LLC (‘‘Nasdaq’’) trading fee schedule
on its public website (available at https://
www.nasdaqtrader.com/
trader.aspx?id=pricelisttrading2), which reflects a
standard fee of $0.0030 per share to remove
liquidity in securities priced at or above $1.00 per
share.
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Adoption of Standard Fee for Routed
Removed Sub-Dollar Volume
The Exchange believes the proposed
adoption of a standard fee of 0.30% of
the total dollar value of executions of
Routed Removed Sub-Dollar Volume is
reasonable, equitable and consistent
with the Act because it is designed to
generate additional revenue to offset
some of the costs associated with the
proposed increased standard rebates for
executions of Added Displayed Volume
and Added Displayed Retail Volume, as
well as to recoup some of the
Exchange’s costs associated with
handling such orders, including the
costs of operating the Exchange’s
affiliated routing broker-dealer and the
applicable fees charged by the away
market for removing liquidity, as the
current pricing structure would require
the Exchange to absorb all such costs, in
a manner that is consistent with the
Exchange’s overall pricing philosophy
of encouraging added displayed
liquidity. The Exchange further believes
this proposed standard fee is reasonable
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and appropriate because it is identical
to the fees charged by several other
exchanges for executions of orders in
securities priced below $1.00 per share
that are routed to and executed on an
away market and that remove liquidity
from the market to which they are
routed.18 The Exchange further believes
that this proposed standard fee is
equitably allocated and not unfairly
discriminatory because it will apply
equally to all Members that choose to
use the Exchange’s routing services.
The Exchange also notes that the
proposal does not include different fees
or rebates that depend on the amount of
orders submitted to, and/or transactions
routed or executed on or through, the
Exchange or its affiliated routing brokerdealer. Accordingly, the Exchange
believes the proposed pricing changes
are reasonable, equitable, and nondiscriminatory as such changes are
applicable to all Members, regardless of
the overall volume of a Member’s
routing or trading activities on or
through the Exchange or its affiliated
broker-dealer.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
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. Instead, as
discussed above, the Exchange believes
that the proposed changes would
encourage the submission of additional
order flow to the Exchange, thereby
promoting market depth, enhanced
execution opportunities, as well as price
discovery and transparency for all
Members. Furthermore, the Exchange
believes that the proposed changes
would allow the Exchange to continue
to compete with other routing and
execution venues by providing
competitive pricing for transactions in
Added Displayed Volume, Added
18 See, e.g., the Cboe EDGX equities trading fee
schedule on its public website (available at https://
markets.cboe.com/us/equities/membership/fee_
schedule/edgx/), which reflects a standard fee of
0.30% of the total dollar value of executions of
routed orders in securities priced below $1.00 per
share that remove liquidity from the destination
venue; the Cboe EDGA Exchange, Inc. equities
trading fee schedule on its public website (available
at https://markets.cboe.com/us/equities/
membership/fee_schedule/edga/), which reflects a
standard fee of 0.30% of the total dollar value of
executions of routed orders in securities priced
below $1.00 per share that remove liquidity from
the destination venue; the Nasdaq equities trading
fee schedule on its public website (available at
https://www.nasdaqtrader.com/
trader.aspx?id=pricelisttrading2), which reflects a
standard fee of 0.30% of the total dollar value of
executions of routed orders in securities priced
below $1.00 per share that remove liquidity from
the destination venue.
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Displayed Retail Volume, Removed
Volume, and Routed Removed SubDollar Volume, thereby making it a
desirable destination venue for its
customers. 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.’’ 19
Intramarket Competition
The Exchange believes that the
proposed changes would continue to
incentivize market participants to direct
order flow to the Exchange. Greater
liquidity benefits all Members by
providing more trading opportunities
and encourages Members to send orders
to the Exchange, thereby contributing to
robust levels of liquidity, which benefits
all Members. The proposed fees and
rebates for transactions in Added
Displayed Volume, Added Displayed
Retail Volume, Removed Volume, and
Routed Removed Sub-Dollar Volume
would be available to all similarlysituated market participants, and, as
such, the proposed change would not
impose a disparate burden on
competition among market participants
on the Exchange. As such, the Exchange
believes the proposed changes would
not impose any burden on intramarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
Intermarket Competition
The Exchange operates in a highly
competitive market with respect to
execution and routing services.
Members have numerous alternative
venues that they may participate on and
direct their order flow to, including 15
other equities exchanges and numerous
alternative trading systems and other
off-exchange venues. As noted above, no
single registered equities exchange
currently has more than approximately
15% of the total market share of
executed volume of equities trading.
Thus, in such a low-concentrated and
highly competitive market, no single
equities trading venue possesses
significant pricing power in the
execution of order flow. Moreover, 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.
19 See
PO 00000
supra note 11.
Frm 00063
Fmt 4703
Sfmt 4703
9967
Additionally, market participants can
readily select between various providers
of routing services with different
product offerings and different pricing.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates generally, including
with respect to Added Displayed
Volume, Added Displayed Retail
Volume, Removed Volume, and Routed
Removed Sub-Dollar Volume, and
market participants can readily choose
to send their orders to other exchange
and off-exchange venues for execution
and/or routing services if they deem fee
levels or product offerings at those other
venues to be more favorable. As
described above, the proposed changes
are competitive proposals through
which the Exchange is seeking to
encourage certain order flow to be sent
to the Exchange.
Additionally, the Commission has
repeatedly expressed its preference for
competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, 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.’’ 20 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. SEC, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’.21 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
20 Id.
21 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSE–2006–21)).
E:\FR\FM\17FEN1.SGM
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Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
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 22 and Rule
19b–4(f)(2) 23 thereunder.
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:
jbell on DSKJLSW7X2PROD 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–2021–02 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MEMX–2021–02. 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
22 15
23 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
20:43 Feb 16, 2021
Jkt 253001
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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MEMX–2021–02, and
should be submitted on or before March
10, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–03087 Filed 2–16–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91098; File No. SR–DTC–
2021–001)]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Add New
Fees for DTC’s Money Market
Instrument Program
February 10, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
1, 2021, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by DTC. DTC filed
the proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(2) thereunder.4 The
Commission is publishing this notice to
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
1 15
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The purpose of the proposed rule
change is to amend the Guide to the
DTC Fee Schedule 5 (‘‘Fee Guide’’) to
add new fees within the Corporate
Actions section,6 and specifically as that
section relates to the DTC’s Money
Market Instrument program (‘‘MMI
Program’’),7 as described in greater
detail below.8
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency 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
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(1) Purpose
The proposed rule change would
amend the Fee Guide to add new fees
within the Corporate Actions section,9
and specifically as that section relates to
the MMI Program, as described below.
5 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/fee-guides/dtcfeeguide.pdf.
6 See id at 6–8.
7 Pursuant to the Rules, the term ‘‘MMI Program’’
means the Program for transactions in MMI
Securities, as provided in Rule 9(C) and as specified
in the Procedures. See Rule 1, supra note 1.
Pursuant to the Rules, the term ‘‘MMI Securities’’
means an Eligible Security described in the second
paragraph of Section 1 of Rule 5, that would, upon
a determination of eligibility by the Corporation, be
assigned an Acronym by DTC. Id. Under the Rules,
MMI Securities are processed differently than other
Securities. See Rule 9(C), supra note 1; and DTC
Operational Arrangements (Necessary for Securities
to Become and Remain Eligible for DTC Services),
at 3, available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/issue-eligibility/eligibility/
operational-arrangements.pdf. The Procedures
applicable to settlement processing of MMI
Securities are set forth in the DTC Settlement
Service Guide (‘‘Settlement Guide’’), available at
https://www.dtcc.com/∼/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
8 Each capitalized term not otherwise defined
herein has its respective meaning as set forth in the
Rules, By-Laws and Organization Certificate of DTC
(the ‘‘Rules’’), available at https://dtcc.com/∼/media/
Files/Downloads/legal/rules/dtc_rules.pdf.
9 See supra note 5.
E:\FR\FM\17FEN1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 30 (Wednesday, February 17, 2021)]
[Notices]
[Pages 9963-9968]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03087]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91094; File No. SR-MEMX-2021-02]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule
February 10, 2021.
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 January 29, 2021, 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
[[Page 9964]]
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 amend the Exchange's fee schedule applicable to Members \3\ (the
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The
Exchange proposes to implement the changes to the Fee Schedule pursuant
to this proposal on February 1, 2021. 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 purpose of the proposed rule change is to amend the Fee
Schedule to (i) increase the standard rebate for executions of orders
(other than Retail Orders \4\) in securities priced at or above $1.00
per share that add displayed liquidity to the Exchange; (ii) increase
the standard rebate for executions of Retail Orders in securities
priced at or above $1.00 per share that add displayed liquidity to the
Exchange; (iii) increase the standard fee for executions of orders in
securities priced at or above $1.00 per share that remove liquidity
from the Exchange; and (iv) adopt a fee for executions of orders in
securities priced below $1.00 per share that are routed to and executed
on an away market and that remove liquidity from the market to which
they are routed.
---------------------------------------------------------------------------
\4\ A ``Retail Order'' means an agency or riskless principal
order that meets the criteria of FINRA Rule 5320.03 that originates
from a natural person and is submitted to the Exchange by a Retail
Member Organization, provided that no change is made to the terms of
the order with respect to price or side of market and the order does
not originate from a trading algorithm or any other computerized
methodology. See Exchange Rule 11.21(a).
---------------------------------------------------------------------------
The Exchange first notes that it operates 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 rebates/incentives to be insufficient. More specifically,
the Exchange is only one of 16 registered equities exchanges, as well
as a number of alternative trading systems and other off-exchange
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 15% of the total market
share of executed volume of equities trading.\5\ Thus, in such a low-
concentrated and highly competitive market, no single equities trading
venue possesses significant pricing power in the execution of order
flow, and the Exchange currently represents less than 1% of the overall
market share.\6\
---------------------------------------------------------------------------
\5\ Market share percentage calculated month-to-date for January
2021 as of January 28, 2021. The Exchange receives and processes
data made available through consolidated data feeds (i.e., CTS and
UTDF).
\6\ Id.
---------------------------------------------------------------------------
Increased Standard Rebate for Added Displayed Volume
The Exchange proposes to increase the standard rebate provided for
executions of orders (other than Retail Orders) in securities priced at
or above $1.00 per share that are displayed on the MEMX Book \7\ and
add liquidity to the Exchange (``Added Displayed Volume''). Currently,
the Exchange provides a standard rebate of $0.0029 per share for
executions of Added Displayed Volume. The Exchange now proposes to
increase the standard rebate provided for executions of Added Displayed
Volume to $0.0034 per share.
---------------------------------------------------------------------------
\7\ ``MEMX Book'' refers to the Exchange system's electronic
file of orders. See Exchange Rule 1.5(q).
---------------------------------------------------------------------------
Increased Standard Rebate for Added Displayed Retail Volume
The Exchange also proposes to increase the standard rebate provided
for executions of Retail Orders in securities priced at or above $1.00
per share that are displayed on the MEMX Book and add liquidity to the
Exchange (``Added Displayed Retail Volume''). Currently, the Exchange
provides a standard rebate of $0.0034 per share for executions of Added
Displayed Retail Volume. The Exchange now proposes to increase the
standard rebate provided for executions of Added Displayed Retail
Volume to $0.0037 per share. As a recent entrant in the equities market
and to attract additional order flow to the Exchange to help it compete
with other equities trading venues, the Exchange previously adopted a
higher standard rebate for executions of Added Displayed Retail Volume
relative to the standard rebate for executions of Added Displayed
Volume to incentivize Members to submit additional order flow in the
form of Retail Orders to the Exchange.\8\ The proposed increase rebate
for executions of Added Displayed Retail Volume is designed to maintain
a higher rebate for such orders relative to the standard rebate for
Added Displayed Volume, which the Exchange is proposing to increase
from $0.0029 per share to $0.0034 per share, as described above.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 90555 (December 3,
2020), 85 FR 79244 (December 9, 2020) (SR-MEMX-2020-14).
---------------------------------------------------------------------------
Increased Standard Fee for Removed Volume
The Exchange also proposes to increase the standard fee charged for
executions of orders in securities priced at or above $1.00 per share
that remove liquidity from the Exchange (``Removed Volume'').
Currently, the Exchange charges a standard fee of $0.0025 per share for
executions of Removed Volume. The Exchange now proposes to increase the
standard fee charged for executions of Removed Volume to $0.0026 per
share.
Adoption of Standard Fee for Routed Removed Sub-Dollar Volume
Lastly, the Exchange proposes to adopt a standard fee for
executions of orders in securities priced below $1.00 per share that
are routed to and executed on an away market and that remove liquidity
from the market to which they are routed (``Routed Removed Sub-Dollar
Volume''). Currently, the Exchange does not charge a fee or provide a
rebate for executions of Routed Removed Sub-Dollar Volume. The Exchange
now proposes to charge a standard fee of 0.30% of the total dollar
value of each execution of Routed Removed Sub-Dollar Volume. The
Exchange notes that the 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.
Additional Discussion
The purpose of the proposed increased standard rebates for
executions of Added Displayed Volume
[[Page 9965]]
and Added Displayed Retail Volume is for business and competitive
reasons, as the Exchange believes such increased rebates would
incentivize Members to submit additional displayed liquidity-adding
order flow (including both Retail Orders and non-retail orders) to the
Exchange, which the Exchange believes would promote price discovery and
price formation, provide more trading opportunities and tighter
spreads, and deepen liquidity that is subject to the Exchange's
transparency, regulation and oversight, thereby enhancing market
quality to the benefit of all Members and investors.
The purpose of the proposed increased standard fee for executions
of Removed Volume and the proposed adoption of a standard fee for
executions of Routed Removed Sub-Dollar Volume is also for business and
competitive reasons, as the Exchange believes such fees would generate
additional revenue to offset some of the costs associated with the
proposed increased rebates for executions of Added Displayed Volume and
Added Displayed Retail Volume described above, and the Exchange's
operations generally, in a manner that is consistent with the
Exchange's overall pricing philosophy of encouraging added displayed
liquidity. The proposed standard fee for executions of Routed Removed
Sub-Dollar Volume is also intended to recoup some of the Exchange's
costs associated with handling such orders, including the costs of
operating the Exchange's affiliated routing broker-dealer and the
applicable fees charged by the away market for removing liquidity, as
the current pricing structure would require the Exchange to absorb all
such costs.
The proposed rule change does not include different fees or rebates
that depend on the amount of orders submitted to, and/or transactions
routed or executed on or through, the Exchange or its affiliated
routing broker-dealer. Accordingly, all fees and rebates described
above are applicable to all Members, regardless of the overall volume
of a Member's routing or trading activities on or through the Exchange
or its affiliated routing broker-dealer.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\9\ in general, and with
Sections 6(b)(4) and (5) of the Act,\10\ 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 and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
As discussed above, the Exchange operates in a highly fragmented
and 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, and the
Exchange represents only a small percentage of the overall market. 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,
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.'' \11\
---------------------------------------------------------------------------
\11\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------
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. The Exchange also 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. Accordingly, competitive
forces constrain the Exchange's transaction fees and rebates generally,
including with respect to Added Displayed Volume, Added Displayed
Retail Volume, Removed Volume and Routed Removed Sub-Dollar Volume, and
market participants can readily trade on and/or or utilize the routing
services of competing venues if they deem pricing levels or product
offerings at those other venues to be more favorable. The Exchange
believes the proposed rule change reflects a reasonable 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, provide more trading opportunities and tighter
spreads, and deepen liquidity that is subject to the Exchange's
transparency, regulation and oversight, thereby enhancing market
quality to the benefit of all Members and investors.
Increased Standard Rebate for Added Displayed Volume
The Exchange believes the proposed increased standard rebate for
executions of Added Displayed Volume is reasonable, equitable and
consistent with the Act because it is designed to incentivize Members
to submit additional displayed liquidity-adding orders to the Exchange,
which would enhance liquidity on the Exchange and promote price
discovery and price formation. The Exchange further believes the
proposed increased standard rebate is reasonable and appropriate
because it is comparable to, and competitive with, the rebates provided
by other exchanges for executions of liquidity-adding displayed non-
retail orders in securities priced at or above $1.00 per share.\12\
However, the Exchange notes that certain of these exchanges provide a
tiered pricing structure that provides a comparable rebate for
executions of liquidity-adding displayed non-retail orders in
securities priced at or above $1.00 per share only when certain volume
thresholds are met.\13\ The Exchange believes that, consistent with the
Exchange's existing pricing structure, it is reasonable, equitable and
not unfairly discriminatory to provide a higher rebate for executions
of displayed orders that add liquidity than to non-displayed orders as
this rebate structure is designed to incentivize Members to submit
displayed orders to the Exchange, thereby contributing to price
discovery and price formation, consistent with the overall goal of
enhancing market quality. The
[[Page 9966]]
Exchange further believes that this fee is equitably allocated and not
unfairly discriminatory because it applies equally to all Members and,
when coupled with lower fees for removing liquidity, is designed to
facilitate increased activity on the Exchange to the benefit of all
Members by providing more trading opportunities and promoting price
discovery.
---------------------------------------------------------------------------
\12\ See, e.g., the MIAX PEARL, LLC equities trading fee
schedule on its public website (available at https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_PEARL_Equities_Fee_Schedule_01012021.pdf), which reflects a
standard rebate of $0.0032 per share to add displayed liquidity in
Tape A and Tape C securities priced at or above $1.00 per share and
a standard rebate of $0.0035 per share to add displayed liquidity in
Tape B securities priced at or above $1.00 per share; the NYSE Arca,
Inc. (``NYSE Arca'') equities trading fee schedule on its public
website (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf), which reflects rebates up
to $0.0033 per share to add displayed liquidity in Tape A and Tape C
securities priced at or above $1.00 per share depending on the
applicable tier and rebates up to $0.0034 per share to add displayed
liquidity in Tape B securities priced at or above $1.00 per share
depending on the applicable tier.
\13\ Id.
---------------------------------------------------------------------------
The Exchange notes that under this proposal the Exchange will
continue to pay a higher rebate for Added Displayed Volume than the fee
it charges for removing such volume, and as such the Exchange will
continue to have a negative net capture (i.e., will lose money) with
respect to such transactions. The Exchange notes that, as a recent
entrant in the equities market, it will only utilize a pricing
structure whereby it maintains a negative net capture with respect to
such transactions for a limited time in an effort to encourage market
participants to join, connect to, and participate on the Exchange. As
noted above, the Exchange operates in a highly competitive market, and
the Exchange believes this 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 market
participants and market share for executions to eliminate the negative
net capture and instead be profitable with respect to such
transactions.
Increased Standard Rebate for Added Displayed Retail Volume
Similarly, the Exchange believes the proposed increased standard
rebate for executions of Added Displayed Retail Volume is reasonable,
equitable and consistent with the Act because it is designed to
incentivize Members to submit additional displayed liquidity-adding
Retail Orders to the Exchange, which would enhance liquidity in Retail
Orders on the Exchange and promote price discovery and price formation.
The Exchange further believes the proposed increased standard rebate is
reasonable and appropriate because it is comparable to, and competitive
with, the rebates provided by other exchanges for executions of
liquidity-adding displayed retail orders in securities priced at or
above $1.00 per share.\14\ However, the Exchange notes that these
exchanges provide a tiered pricing structure that provides a comparable
rebate for executions of liquidity-adding displayed retail orders in
securities priced at or above $1.00 per share only when certain volume
thresholds are met.\15\ The Exchange believes that it is reasonable,
equitable and not unfairly discriminatory to provide a higher rebate
for executions of displayed Retail Orders that add liquidity than to
non-displayed Retail Orders as this rebate structure is designed to
incentivize Members to submit displayed orders to the Exchange, thereby
contributing to price discovery and price formation, consistent with
the overall goal of enhancing market quality.
---------------------------------------------------------------------------
\14\ See e.g., the NYSE Arca equities trading fee schedule on
its public website (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf), which
reflects rebates ranging from $0.0033-$0.0038 per share, depending
on the applicable tier, for retail orders in securities priced at or
above $1.00 per share that add displayed liquidity; the Cboe EDGX
Exchange, Inc. (``Cboe EDGX'') equities trading fee schedule on its
public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/), which reflects rebates ranging from
$0.0032-$0.0037 per share, depending on the applicable tier, for
retail orders in securities priced at or above $1.00 per share that
add liquidity.
\15\ Id.
---------------------------------------------------------------------------
The Exchange understands that Section 6(b)(5) of the Act \16\
prohibits an exchange from establishing rules that are designed to
permit unfair discrimination between market participants. However,
Section 6(b)(5) of the Act does not prohibit exchange members or other
broker-dealers from discriminating, so long as their activities are
otherwise consistent with the federal securities laws. While the
Exchange believes that markets and price discovery optimally function
through the interactions of diverse flow types, it also believes that
growth in internalization has required differentiation of Retail Order
flow from other order flow types. The differentiation proposed herein
by the Exchange to maintain a higher rebate for Added Displayed Retail
Volume relative to the standard rebate for Added Displayed Volume
(i.e., non-retail orders) is not designed to permit unfair
discrimination, but instead to promote a competitive process around
Retail Order executions such that retail investors would continue to
receive better rebates on the Exchange than comparable non-retail
orders in order to encourage entry of Retail Orders to the Exchange.
Accordingly, the Exchange believes the proposed increased standard
rebate for executions of Added Displayed Retail Volume is equitably
allocated and not unfairly discriminatory.
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\16\ 15 U.S.C. 78f(b)(5).
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Increased Standard Fee for Removed Volume
The Exchange believes the proposed increased standard fee for
executions of Removed Volume is reasonable, equitable and consistent
with the Act because it is designed to generate additional revenue to
offset some of the costs associated with the proposed increased
standard rebates for executions of Added Displayed Volume and Added
Displayed Retail Volume in a manner that is consistent with the
Exchange's overall pricing philosophy of encouraging added displayed
liquidity. The Exchange further believes this proposed standard fee is
reasonable and appropriate because it represents a modest increase from
the current fee and remains lower than or comparable to, and
competitive with, the fees charged by other exchanges for executions of
orders in securities priced at or above $1.00 per share that remove
liquidity.\17\ The Exchange further believes that this proposed
standard fee is equitably allocated and not unfairly discriminatory
because it will apply equally to all Members.
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\17\ See, e.g., the Cboe EDGX equities trading fee schedule on
its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/), which reflects a standard
fee of $0.0027 per share to remove liquidity in securities priced at
or above $1.00 per share; The Nasdaq Stock Market LLC (``Nasdaq'')
trading fee schedule on its public website (available at https://www.nasdaqtrader.com/trader.aspx?id=pricelisttrading2), which
reflects a standard fee of $0.0030 per share to remove liquidity in
securities priced at or above $1.00 per share.
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Adoption of Standard Fee for Routed Removed Sub-Dollar Volume
The Exchange believes the proposed adoption of a standard fee of
0.30% of the total dollar value of executions of Routed Removed Sub-
Dollar Volume is reasonable, equitable and consistent with the Act
because it is designed to generate additional revenue to offset some of
the costs associated with the proposed increased standard rebates for
executions of Added Displayed Volume and Added Displayed Retail Volume,
as well as to recoup some of the Exchange's costs associated with
handling such orders, including the costs of operating the Exchange's
affiliated routing broker-dealer and the applicable fees charged by the
away market for removing liquidity, as the current pricing structure
would require the Exchange to absorb all such costs, in a manner that
is consistent with the Exchange's overall pricing philosophy of
encouraging added displayed liquidity. The Exchange further believes
this proposed standard fee is reasonable
[[Page 9967]]
and appropriate because it is identical to the fees charged by several
other exchanges for executions of orders in securities priced below
$1.00 per share that are routed to and executed on an away market and
that remove liquidity from the market to which they are routed.\18\ The
Exchange further believes that this proposed standard fee is equitably
allocated and not unfairly discriminatory because it will apply equally
to all Members that choose to use the Exchange's routing services.
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\18\ See, e.g., the Cboe EDGX equities trading fee schedule on
its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/), which reflects a standard
fee of 0.30% of the total dollar value of executions of routed
orders in securities priced below $1.00 per share that remove
liquidity from the destination venue; the Cboe EDGA Exchange, Inc.
equities trading fee schedule on its public website (available at
https://markets.cboe.com/us/equities/membership/fee_schedule/edga/),
which reflects a standard fee of 0.30% of the total dollar value of
executions of routed orders in securities priced below $1.00 per
share that remove liquidity from the destination venue; the Nasdaq
equities trading fee schedule on its public website (available at
https://www.nasdaqtrader.com/trader.aspx?id=pricelisttrading2), which
reflects a standard fee of 0.30% of the total dollar value of
executions of routed orders in securities priced below $1.00 per
share that remove liquidity from the destination venue.
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The Exchange also notes that the proposal does not include
different fees or rebates that depend on the amount of orders submitted
to, and/or transactions routed or executed on or through, the Exchange
or its affiliated routing broker-dealer. Accordingly, the Exchange
believes the proposed pricing changes are reasonable, equitable, and
non-discriminatory as such changes are applicable to all Members,
regardless of the overall volume of a Member's routing or trading
activities on or through the Exchange or its affiliated broker-dealer.
B. Self-Regulatory Organization's Statement on Burden on Competition
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. Instead, as
discussed above, the Exchange believes that the proposed changes would
encourage the submission of additional order flow to the Exchange,
thereby promoting market depth, enhanced execution opportunities, as
well as price discovery and transparency for all Members. Furthermore,
the Exchange believes that the proposed changes would allow the
Exchange to continue to compete with other routing and execution venues
by providing competitive pricing for transactions in Added Displayed
Volume, Added Displayed Retail Volume, Removed Volume, and Routed
Removed Sub-Dollar Volume, thereby making it a desirable destination
venue for its customers. 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.'' \19\
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\19\ See supra note 11.
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Intramarket Competition
The Exchange believes that the proposed changes would continue to
incentivize market participants to direct order flow to the Exchange.
Greater liquidity benefits all Members by providing more trading
opportunities and encourages Members to send orders to the Exchange,
thereby contributing to robust levels of liquidity, which benefits all
Members. The proposed fees and rebates for transactions in Added
Displayed Volume, Added Displayed Retail Volume, Removed Volume, and
Routed Removed Sub-Dollar Volume would be available to all similarly-
situated market participants, and, as such, the proposed change would
not impose a disparate burden on competition among market participants
on the Exchange. As such, the Exchange believes the proposed changes
would not impose any burden on intramarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Intermarket Competition
The Exchange operates in a highly competitive market with respect
to execution and routing services. Members have numerous alternative
venues that they may participate on and direct their order flow to,
including 15 other equities exchanges and numerous alternative trading
systems and other off-exchange venues. As noted above, no single
registered equities exchange currently has more than approximately 15%
of the total market share of executed volume of equities trading. Thus,
in such a low-concentrated and highly competitive market, no single
equities trading venue possesses significant pricing power in the
execution of order flow. Moreover, 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. Additionally, market participants can readily select
between various providers of routing services with different product
offerings and different pricing. Accordingly, competitive forces
constrain the Exchange's transaction fees and rebates generally,
including with respect to Added Displayed Volume, Added Displayed
Retail Volume, Removed Volume, and Routed Removed Sub-Dollar Volume,
and market participants can readily choose to send their orders to
other exchange and off-exchange venues for execution and/or routing
services if they deem fee levels or product offerings at those other
venues to be more favorable. As described above, the proposed changes
are competitive proposals through which the Exchange is seeking to
encourage certain order flow to be sent to the Exchange.
Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, 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.'' \20\ The fact
that this market is competitive has also long been recognized by the
courts. In NetCoalition v. SEC, the D.C. Circuit stated as follows:
``[n]o one disputes that competition for order flow is `fierce.' . . .
As the SEC explained, `[i]n the U.S. national market system, buyers and
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders
for execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .''.\21\ Accordingly, the Exchange does not believe its
proposed fee change imposes any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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\20\ Id.
\21\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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[[Page 9968]]
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 \22\ and Rule 19b-4(f)(2) \23\ thereunder.
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\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule 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-2021-02 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MEMX-2021-02. 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 such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MEMX-2021-02, and should be submitted on
or before March 10, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-03087 Filed 2-16-21; 8:45 am]
BILLING CODE 8011-01-P
