Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 44110-44116 [2021-17085]
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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices
Executive Chairman. Finally, OCC
believes the proposed changes to its
Board Committee Charters would
provide OCC’s Board with appropriate
flexibility to more quickly adjust the
administrative reporting lines for, and
oversight of the performance of, OCC’s
Internal Audit and Compliance
functions and key OCC personnel, such
as the CAE, CCO, and CRO, taking into
account the specific qualifications,
experience, competence, character,
skills, incentives, integrity or other
relevant attributes of Board members
and senior officers at any given time.
OCC believes the proposed change
would provide an appropriate level of
clarity and transparency regarding the
limited set of officers to which the CAE,
CCO, and CRO may report to for
administrative purposes and the Board’s
responsibility for designating such
reporting lines. The proposed changes
to the Board Committee Charters would
not alter the responsibilities of the
Board generally or of any of its
individual committees or committee
members. These responsibilities would
continue to be specified in each of the
Board Committee Charters. As a result,
OCC believes the proposed rule change
is reasonably designed to provide for
governance arrangements that remain
clear and transparent and specify clear
and direct lines of responsibility in
accordance with Rule 17Ad–22(e)(2)(i)
and (v).25
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(B) Clearing Agency’s Statement on
Burden on Competition
Section 17A(b)(3)(I) of the Exchange
Act 26 requires that the rules of a
clearing agency not impose any burden
on competition not necessary or
appropriate in furtherance of the Act.
OCC does not believe that the proposed
rule change would have any impact or
impose any burden on competition. The
proposed rule change would provide
OCC’s Board with the discretion to elect
either an Executive Chairman or a NonExecutive Chairman to preside over the
Board and would clarify the roles and
responsibilities of an Executive versus a
Non-Executive Chairman. The proposed
rule change would also make changes to
OCC’s Board and Board Committee
Charters regarding the Board’s oversight
of the Chairman and other senior
officers of OCC. The proposed rule
change would not inhibit access to
OCC’s services or disadvantage of favor
any user in relationship to another. As
a result, OCC believes the proposed rule
25 Id.
26 15
U.S.C. 78q–1(b)(3)(I).
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change would not impact or impose a
burden on competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
Written comments on the proposed
rule change were not and are not
intended to be solicited with respect to
the proposed rule change and none have
been received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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–
OCC–2021–007 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–OCC–2021–007. 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
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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 OCC and on OCC’s website at
https://www.theocc.com/CompanyInformation/Documents-and-Archives/
By-Laws-and-Rules.
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–OCC–2021–007 and should
be submitted on or before September 1,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021–17088 Filed 8–10–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92579; File No. SR–MEMX–
2021–09]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule
August 5, 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 August 2,
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
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices
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
August 2, 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.
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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) Adopt a new Liquidity Removal Tier
applicable to the fees charged for
executions of orders in securities priced
at or above $1.00 per share that remove
liquidity from the Exchange (such
orders, ‘‘Removed Volume’’); (ii)
increase the standard fee for executions
of Removed Volume; and (iii) allow
affiliated Members to aggregate their
volume for purposes of the Exchange’s
pricing tiers with prior notice to the
Exchange.4
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
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
3 See
Exchange Rule 1.5(p).
Exchange initially filed the proposed Fee
Schedule changes on July 30, 2021 (SR–MEMX–
2021–08). On August 2, 2021, the Exchange
withdrew that filing and submitted this proposal.
4 The
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available information, no single
registered equities exchange currently
has more than approximately 16% 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
exchange possesses significant pricing
power in the execution of order flow,
and the Exchange currently represents
approximately 3% of the overall market
share.6
Adoption of Liquidity Removal Tier
The Exchange is proposing to
introduce a tiered pricing structure
applicable to the fees charged for
executions of Removed Volume, which
is similar to the Exchange’s existing
tiered pricing structure applicable to the
rebates provided for executions of
displayed orders in securities priced at
or above $1.00 per share that add
liquidity to the Exchange (‘‘Added
Displayed Volume’’).7 Specifically, the
Exchange proposes to adopt a new
volume-based tier, referred to by the
Exchange as the Liquidity Removal Tier,
in which the Exchange will charge a fee
that is lower than the standard fee for
executions of Removed Volume for
Members that meet at least one of two
specified volume thresholds on the
Exchange, as described below.
Currently, the Exchange charges a
standard fee of $0.00265 per share for
all executions of Removed Volume,
which the Exchange is proposing to
increase to $0.0028, as further described
below. The Exchange now proposes to
adopt the Liquidity Removal Tier in
which it will charge a lower fee of
$0.00265 per share for executions of
Removed Volume for Members that
qualify for the Liquidity Removal Tier
by achieving: (1) A Step-Up ADAV 8
from July 2021 that is equal to or greater
than 0.05% of the TCV; 9 or (2) an
5 Market share percentage calculated as of July 30,
2021. The Exchange receives and processes data
made available through consolidated data feeds
(i.e., CTS and UTDF).
6 Id.
7 The Exchange currently provides an enhanced
rebate for executions of Added Displayed Volume
to Members that meet a specified volume threshold
under the Exchange’s Liquidity Provision Tier. See
Securities Exchange Act Release No. 92150 (June
10, 2021), 86 FR 32090 (June 16, 2021) (SR–MEMX–
2021–07).
8 As proposed, the term ‘‘Step-Up ADAV’’ means
ADAV in the relevant baseline month subtracted
from current ADAV. As set forth on the Fee
Schedule, ‘‘ADAV’’ means the average daily added
volume calculated as the number of shares added
per day, which is calculated on a monthly basis.
9 As proposed, the term ‘‘TCV’’ means total
consolidated volume calculated as the volume
reported by all exchanges and trade reporting
facilities to a consolidated transaction reporting
plan for the month for which the fees apply.
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ADV 10 that is equal to or greater than
0.30% of the TCV.11 As proposed, ADV
and Step-Up ADAV will be calculated
on a monthly basis, and Members that
qualify for the Liquidity Removal Tier
by achieving at least one of the Step-Up
ADAV or ADV thresholds specified
above in a particular month will be
charged the proposed lower fee of
$0.00265 per share, instead of the
proposed standard fee of $0.0028 per
share, for all executions of Removed
Volume in that month.
The Exchange proposes to charge
Members that qualify for the Liquidity
Removal Tier a fee of 0.05% of the total
dollar value of the transaction for
executions of orders that remove
liquidity from the Exchange in
securities priced below $1.00 per share,
which is the same fee that would be
applicable to such executions for
Members that do not qualify for the
Liquidity Removal Tier. Thus, as under
the Exchange’s current pricing, the same
fee would be charged to all Members for
executions of orders that remove
liquidity from the Exchange in
securities priced below $1.00 per share.
The Exchange proposes to add
definitions of the terms ADV, Step-Up
ADAV, and TCV, which are consistent
with the definitions of those terms
above, under a new ‘‘Definitions’’
section of the Fee Schedule in
connection with the proposed Liquidity
Removal Tier.12 The Exchange notes
that the proposed definitions of ADV,
Step-Up ADAV, and TCV are
substantially similar to the definitions
of those terms used by other exchanges
on their fee schedules in connection
with similar volume-based pricing
tiers.13 Additionally, like the Exchange
10 As proposed, the term ‘‘ADV’’ means average
daily volume calculated as the number of shares
added or removed, combined, per day.
11 This proposed pricing is referred to by the
Exchange on the Fee Schedule under the new
description ‘‘Removed volume, Liquidity Removal
Tier’’ with a Fee Code of ‘‘R1’’ to be provided by
the Exchange on the monthly invoices provided to
Members. The Exchange notes that because the
determination of whether a Member qualifies for
the Liquidity Removal Tier for a particular month
will not be made until after the month-end, the
Exchange will provide the Fee Code otherwise
applicable to such transactions (i.e., ‘‘R’’) on the
execution reports provided to Members during the
month and will only designate the Fee Code of
‘‘R1’’ on the monthly invoices, which are provided
after such determination has been made.
12 The Exchange also proposes to relocate the
definition of ‘‘ADAV’’ from the ‘‘Notes’’ section to
the proposed new ‘‘Definitions’’ section of the Fee
Schedule for organization purposes.
13 See, e.g., the Cboe EDGX Exchange, Inc. (‘‘Cboe
EDGX’’) equities trading fee schedule on its public
website (available at https://www.cboe.com/us/
equities/membership/fee_schedule/edgx/); the Cboe
BZX Exchange, Inc. (‘‘Cboe BZX’’) equities trading
fee schedule on its public website (available at
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currently does with respect to its
calculation of ADAV and for purposes
of determining qualification for the
Exchange’s Displayed Liquidity
Incentive, the Exchange proposes to
exclude from its calculations of ADV
and TCV: (1) Any trading day that the
Exchange’s system experiences a
disruption that lasts for more than 60
minutes during regular trading hours
(‘‘Exchange System Disruption Days’’);
and (2) the day that Russell Investments
reconstitutes its family of indexes (the
‘‘Russell Reconstitution Day’’).14 The
Exchange also proposes to specify on
the Fee Schedule that routed shares are
not included in the calculation of ADAV
or ADV.15
The Exchange believes that the
proposed Liquidity Removal Tier
provides an incremental incentive for
Members to strive for higher ADAV on
the Exchange and/or maintain or strive
for higher ADV on the Exchange in
order to qualify for the proposed lower
fee for executions of Removed Volume.
As such, the proposed Liquidity
Removal Tier is designed to encourage
Members to maintain or increase their
order flow directed to the Exchange,
thereby contributing to a deeper and
more liquid market to the benefit of all
market participants and enhancing the
attractiveness of the Exchange as a
trading venue. The Exchange notes that
the proposed lower fee for executions of
Removed Volume applicable to
Members that qualify for the Liquidity
Removal Tier (i.e., $0.00265 per share)
is comparable to, and competitive with,
the fees charged for executions of
liquidity-removing orders charged by at
least one other exchange under similar
volume-based tiers.16
https://markets.cboe.com/us/equities/membership/
fee_schedule/bzx/).
14 The Exchange notes that excluding such days
from the calculations of ADV and TCV is also
consistent with the practice of other exchanges
when calculating ADV and TCV. See id.
15 The Exchange currently excludes routed shares
in the calculation of ADAV so this proposed change
is clarifying this practice and also adopting it for
the calculation of ADV. The Exchange notes that
excluding routed shares from the calculations of
ADAV and ADV is also consistent with the practice
of other exchanges when calculating ADAV and
ADV. See, e.g., the Cboe BZX equities trading fee
schedule on its public website (available at https://
markets.cboe.com/us/equities/membership/fee_
schedule/bzx/).
16 See the Cboe EDGX equities trading fee
schedule on its public website (available at https://
www.cboe.com/us/equities/membership/
feeschedule/edgx/), which reflects fees charged
under ‘‘Remove Volume Tiers’’—tiers based on a
member achieving certain step-up ADAV and ADV
volume thresholds—ranging from $0.0027 to
$0.00275 per share for removing volume from the
Cboe EDGX exchange.
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Increased Standard Fee for Removed
Volume
In connection with the proposed
adoption of the Liquidity Removal Tier,
the Exchange also proposes to increase
the standard fee charged for executions
Removed Volume. Currently, the
Exchange charges a standard fee of
$0.00265 per share for executions of
Removed Volume. The Exchange now
proposes to increase the standard fee
charged for executions of Removed
Volume to $0.0028 per share.17 The
Exchange notes that Members would
still be able to pay a fee of $0.00265 per
share for executions of Removed
Volume by qualifying for the proposed
Liquidity Removal Tier, as described
above.
The purpose of increasing the
standard fee for executions of Removed
Volume is for business and competitive
reasons, as the Exchange believes that
increasing such fee as proposed would
generate additional revenue to offset
some of the costs associated with the
Exchange’s current pricing structure,
which provides various rebates for
liquidity-adding orders, and the
Exchange’s operations generally, in a
manner that is consistent with the
Exchange’s overall pricing philosophy
of encouraging added liquidity. The
Exchange notes that despite the modest
increase proposed herein, the
Exchange’s standard fee for executions
of Removed Volume remains lower
than, and competitive with, the
standard fee to remove liquidity in
securities priced at or above $1.00 per
share charged by several other
exchanges.18
Allow Members To Aggregate Volume
for Pricing Tiers
Lastly, the Exchange proposes to add
a note to the Fee Schedule to allow
affiliated Members to aggregate their
volume for purposes of the Exchange’s
determination of ADAV and ADV with
17 This proposed pricing is referred to by the
Exchange on the Fee Schedule under the existing
description ‘‘Removed volume from MEMX Book’’
and such orders will continue to receive a Fee Code
of ‘‘R’’ assigned by the Exchange.
18 See, e.g., the Cboe BZX equities trading fee
schedule on its public website (available at https://
markets.cboe.com/us/equities/membership/fee_
schedule/bzx/), which reflects a standard fee of
$0.0030 per share to remove liquidity in securities
priced at or above $1.00 per share; 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 $0.00285 per share to remove
liquidity in securities priced at or above $1.00 per
share; the Nasdaq Price List—Trading Connectivity
(available at https://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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respect to pricing tiers if such Members
provide prior notice to the Exchange.
Specifically, to the extent that two or
more affiliated companies maintain
separate memberships with the
Exchange and can demonstrate their
affiliation by showing they control, are
controlled by, or are under common
control with each other, the Exchange
would permit such Members to count
aggregate volume of such affiliates in
calculating ADAV and ADV. As
proposed, the Exchange will verify such
affiliation using a Member’s Form BD,
which lists control affiliates. The
purpose of this proposed change is to
avoid disparate treatment of firms that
have divided their various business
activities between separate corporate
entities as compared to firms that
operate those business activities within
a single corporate entity, as allowing
affiliated Member firms to count their
aggregate volume in calculating ADAV
and ADV would produce the same
result for purposes of the Exchange’s
volume-based tier pricing as if such
affiliated Member firms were instead
organized as a single corporate entity.
The Exchange notes that this proposed
change is consistent with the practice of
other exchanges with respect to the
aggregation of affiliated member firms’
volume for purposes of ADAV and ADV
calculations with respect to pricing
tiers.19
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,20
in general, and with Sections 6(b)(4) and
6(b)(5) of the Act,21 in particular, in that
it provides 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.
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,
19 See
supra note 13.
U.S.C. 78f.
21 15 U.S.C. 78f(b)(4) and (5).
20 15
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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.’’ 22
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.
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. The Exchange believes the
proposal reflects a reasonable and
competitive pricing structure designed
to incentivize market participants to
direct their order flow to the Exchange,
which the Exchange believes would
enhance liquidity and market quality to
the benefit of all Members and market
participants.
Adoption of Liquidity Removal Tier
The Exchange believes that the
proposed Liquidity Removal Tier is
reasonable because it would provide
Members with an additional incentive
to achieve certain volume thresholds on
the Exchange. Volume-based incentives
and discounts have been widely
adopted by exchanges, including the
Exchange,23 and are equitable and not
unfairly discriminatory because they are
open to all Members on an equal basis
and provide additional benefits or
discounts that are reasonably related to
the value to an exchange’s market
quality associated with higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns and the introduction of higher
volumes of orders into the price and
volume discovery processes. The
Exchange believes the proposed
Liquidity Removal Tier is equitable and
not unfairly discriminatory for these
same reasons, as it is open to all
Members and is designed to encourage
Members to maintain or increase their
order flow directed to the Exchange,
thereby contributing to a deeper and
more liquid market to the benefit of all
market participants and enhancing the
22 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
23 See supra note 7.
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attractiveness of the Exchange as a
trading venue. Moreover, the Exchange
believes the proposed Liquidity
Removal Tier is a reasonable means to
incentivize such increased activity, as it
provides two different types of volume
thresholds that Members may choose to
achieve in order to receive the proposed
lower fee for executions of Removed
Volume—a Step-Up ADAV threshold,
which can be met by a Member
increasing their liquidity-adding volume
on the Exchange (i.e., ADAV) by at least
the specified threshold above their July
2021 ADAV, and an ADV threshold,
which can be met by a Member
maintaining or increasing their overall
(i.e., liquidity-adding and liquidityremoving) volume executed on the
Exchange to an amount equal to or
greater than the specified TCV
threshold. Thus, Members that do not
increase their ADAV above their July
2021 ADAV by at least 0.05% of the
TCV could still qualify for the Liquidity
Removal Tier by maintaining or
increasing their ADV at or above 0.30%
of the TCV, and vice versa.
Additionally, the Exchange believes
the proposed lower fee for executions of
Removed Volume for qualifying
Members (i.e., $0.00265 per share) is
reasonable, in that it represents only a
modest decrease from the proposed
standard fee for such executions (i.e.,
$0.0028 per share) and is the same as
the current standard fee for such
executions. The Exchange believes that
it is reasonable, consistent with an
equitable allocation of fees, and not
unfairly discriminatory to charge such
lower fee for executions of Removed
Volume to Members that qualify for the
Liquidity Removal Tier in comparison
with the standard fee in recognition of
the benefits that such Members provide
to the Exchange and market
participants, as described above,
particularly as the magnitude of the
lower fee is not unreasonably high and
is, instead, reasonably related to the
enhanced market quality it is designed
to achieve. Further, as noted above,
competing exchanges offer tiered
pricing structures similar to the
proposed Liquidity Removal Tier,
including schedules of rebates and fees
that apply based upon Members
achieving certain volume and/or growth
thresholds, and the Exchange believes
the proposed Liquidity Removal Tier’s
criteria are reasonable when compared
to such tiers provided for by other
exchanges. For example, Cboe EDGX
charges lower fees for removing volume
from the Cboe EDGX exchange under its
‘‘Remove Volume Tiers’’ ranging from
$0.0027 to $0.00275 per share, as
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44113
compared to its standard fee of $0.00285
per share, but requires different, but
similar, criteria than the Exchange’s
proposed Liquidity Removal Tier,
which are also based upon a member’s
volume and/or growth patterns.24
The Exchange further believes that it
is reasonable, consistent with an
equitable allocation of fees, and not
unfairly discriminatory to charge
Members that qualify for the Liquidity
Removal Tier a fee of 0.05% of the total
dollar value of the transaction for
executions of orders that remove
liquidity from the Exchange in
securities priced below $1.00 per share,
as this is the same fee that would be
applicable to such executions for all
Members (i.e., including those that do
not qualify for the Liquidity Removal
Tier), which is also the case under the
Exchange’s current pricing.
The Exchange also believes the
proposed Liquidity Removal Tier is fair,
equitable, and not unfairly
discriminatory because it is available to
all Members. Further, the proposed
Liquidity Removal Tier would provide a
way for Members to continue to pay the
same fee they currently do for
executions of Removed Volume (i.e.,
$0.00265 per share) even though the
Exchange is proposing to increase the
standard fee to $0.0028 per share.
Additionally, as noted above, such fee is
comparable to the fees charged for
executions of liquidity-removing orders
charged by Cboe EDGX under similar
volume-based tiers.25
The Exchange believes that adding the
proposed definitions for the terms ADV,
Step-Up ADAV, and TCV, as well as
relocating the definition of ADAV,
under a new ‘‘Definitions’’ section of the
Fee Schedule is reasonable, equitable,
and non-discriminatory because such
definitions are substantially similar to
the definitions of such terms used by
other exchanges in connection with
similar volume-based pricing tiers, as
described above,26 and their placement
on the Fee Schedule is designed to
ensure that the Fee Schedule is as clear
and understandable as possible with
respect to applicable pricing. Similarly,
the Exchange believes that adding notes
on the Fee Schedule specifying that
routed shares are not included in the
calculation of ADAV or ADV and that
Exchange System Disruption Days and
the Russell Reconstitution Day are
excluded from the calculations of ADV
and TCV is reasonable, equitable, and
24 See the Cboe EDGX equities trading fee
schedule on its public website (available at https://
www.cboe.com/us/equities/membership/fee_
schedule/edgx/).
25 Id.
26 See supra note 13.
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non-discriminatory as such notes are
intended to clarify the Exchange’s
calculation practices with respect to its
volume-based pricing tiers, and such
practices are consistent with the
practices of other exchanges in this
regard.27
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Increased Standard Fee for Removed
Volume
The Exchange believes that the
proposed change to increase the
standard fee for executions of Removed
Volume is reasonable, equitable, and
consistent with the Act because such
change is designed to generate
additional revenue and decrease the
Exchange’s expenditures with respect to
transaction pricing in order to offset
some of the costs associated with the
various rebates provided by the
Exchange for liquidity-adding orders
and the Exchange’s operations
generally, in a manner that is consistent
with the Exchange’s overall pricing
philosophy of encouraging added
liquidity, as described above. The
Exchange also believes the proposed
increased standard fee for executions of
Removed Volume is reasonable and
appropriate because it represents a
modest increase from the current
standard fee and, as noted above,
remains lower than, and competitive
with, the standard fee charged by
several other exchanges to remove
liquidity in securities priced at or above
$1.00 per share.28 The Exchange further
believes that the proposed increased
standard fee for executions of Removed
Volume is equitably allocated and not
unfairly discriminatory because it will
apply equally to all Members.
Allow Members To Aggregate Volume
for Pricing Tiers
As noted above, the proposed
language permitting aggregation of
volume amongst affiliated Members for
purposes of the ADAV and ADV
calculations is intended to avoid
disparate treatment of firms that have
divided their various business activities
between separate corporate entities as
compared to firms that operate those
business activities within a single
corporate entity, as allowing affiliated
Member firms to count their aggregate
volume in calculating ADAV and ADV
would produce the same result for
purposes of the Exchange’s volumebased tier pricing as if such affiliated
Member firms were instead organized as
a single corporate entity. By way of
example, subject to appropriate
information barriers, many firms that
27 See
28 See
supra notes 14–15.
supra note 18.
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23:05 Aug 10, 2021
are Members of the Exchange operate
both a market making desk and a public
customer business within the same
corporate entity. In contrast, other firms
may be part of a corporate structure that
separates those business lines into
different corporate affiliates, either for
business, compliance or historical
reasons. Those corporate affiliates, in
turn, are required to maintain separate
memberships with the Exchange.
Absent the proposed policy, such
corporate affiliates would not receive
the same treatment as firms operating
similar business lines within a single
entity that is a Member of the Exchange.
Accordingly, the Exchange believes that
its proposed policy is fair and equitable,
and not unreasonably discriminatory. In
addition to ensuring fair and equal
treatment of its Members, the Exchange
does not want to create incentives for its
Members to restructure their business
operations or compliance functions
simply due to the Exchange’s pricing
structure. Moreover, as noted above, this
proposed policy is consistent with the
practice of other exchanges with respect
to the aggregation of affiliated Members’
volume for purposes of determining
ADAV and ADV with respect to pricing
tiers.29
For the reasons discussed above, the
Exchange submits that the proposal
satisfies the requirements of Sections
6(b)(4) and 6(b)(5) of the Act in that it
provides 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
unfairly discriminate between
customers, issuers, brokers, or dealers.
As described more fully below in the
Exchange’s statement regarding the
burden on competition, the Exchange
believes that its transaction pricing is
subject to significant competitive forces,
and that the proposed fees and rebates
described herein are appropriate to
address such forces.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposal 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 proposal is
intended to encourage Members to
maintain or increase their order flow on
the Exchange, thereby contributing to a
deeper and more liquid market to the
benefit of all market participants and
enhancing the attractiveness of the
Exchange as a trading venue. As a
result, the Exchange believes the
29 See
Jkt 253001
PO 00000
supra note 13.
Frm 00127
Fmt 4703
proposal would enhance its
competitiveness as a market that attracts
actionable orders, thereby making it a
more desirable destination venue for its
customers. For these reasons, the
Exchange believes that the proposal
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.’’ 30
Intramarket Competition
The Exchange believes that the
proposal would incentivize Members to
maintain or increase their order flow on
the Exchange, thereby contributing to a
deeper and more liquid market to the
benefit of all market participants and
enhancing the attractiveness of the
Exchange as a trading venue, which the
Exchange believes, in turn, would
continue to encourage market
participants to direct additional order
flow to the Exchange. Greater liquidity
benefits all Members by providing more
trading opportunities and encourages
Members to send additional orders to
the Exchange, thereby contributing to
robust levels of liquidity, which benefits
all market participants. The opportunity
to qualify for the Liquidity Removal
Tier, and thus receive the proposed
lower fee for executions of Removed
Volume, would be available to all
Members that meet the associated
volume requirement in any month. The
Exchange believes that meeting the
volume requirement of the Liquidity
Removal Tier is attainable for several
market participants, as Members must
meet only one of two different types of
volume thresholds, as described above,
and the Exchange believes such
thresholds are relatively low and
reasonably related to the enhanced
liquidity and market quality that the
Liquidity Removal Tier is designed to
promote. Similarly, the proposed
increased standard fee for executions of
Removed Volume and the ability for
Members to aggregate volume amongst
affiliated Member firms for purposes of
the Exchange’s determination of ADAV
and ADV with respect to pricing tiers
would apply equally to all Members. 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
As noted above, the Exchange
operates in a highly competitive market
in which market participants can
30 See
Sfmt 4703
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supra note 22.
11AUN1
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readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. 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
16% of the total market share of
executed volume of equities trading.
Thus, in such a low-concentrated and
highly competitive market, no single
equities exchange 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.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates, including with respect
to executions of Removed Volume, and
market participants can readily choose
to send their orders to other exchange
and off-exchange venues if they deem
fee levels at those other venues to be
more favorable.
As described above, the proposed
Liquidity Removal Tier and the
proposed increased standard fee for
executions of Removed Volume are
competitive proposals through which
the Exchange is seeking to encourage
additional order flow to be sent to the
Exchange and generate additional
revenue to offset some of the costs
associated with the Exchange’s current
pricing structure and its operations
generally, and such proposed rates
applicable to executions of Removed
Volume are comparable to, and
competitive with, rates charged by other
exchanges.31 As noted above, the
proposed rate applicable to executions
of orders in securities priced at or above
$1.00 per share for Members that qualify
for the Liquidity Removal Tier would be
the same rate applicable to such
executions for all Members, as is the
case under the Exchange’s current
pricing. Additionally, the proposed
change to allow affiliated Members to
aggregate their volume for purposes of
the Exchange’s determination of ADAV
and ADV with respect to pricing tiers is
designed to avoid disparate treatment of
firms that have divided their various
business activities between separate
31 See
supra notes 18 and 24.
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23:05 Aug 10, 2021
Jkt 253001
corporate entities as compared to firms
that operate those business activities
within a single corporate entity, which
is consistent with the practice of other
exchanges, as discussed above.32
Accordingly, the Exchange believes the
proposal would not burden, but rather
promote, intermarket competition by
enabling it to better compete with other
exchanges that offer similar volumebased incentives and pricing with
respect to executions of Removed
Volume and volume aggregation
amongst affiliates with respect to
pricing tiers.
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.’’ 33 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’ . . . .’’.34 Accordingly, the
Exchange does not believe its proposed
pricing changes impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
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.
32 See
supra note 13.
supra note 22.
34 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)).
33 See
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
44115
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 35 and Rule
19b–4(f)(2) 36 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
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–
MEMX–2021–09 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–2021–09. 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
35 15
36 17
E:\FR\FM\11AUN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
11AUN1
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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–2021–09 and
should be submitted on or before
September 1, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021–17085 Filed 8–10–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92583; File No. SR–
NYSEArca–2021–52]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Suspension of and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Amend the
NYSE Arca Equities Fees and Charges
August 5, 2021.
I. Introduction
On June 14, 2021, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change (File No. SR–
NYSEArca–2021–52) to amend the
NYSE Arca Equities Fees and Charges
(‘‘Fee Schedule’’).3 The proposed rule
change was immediately effective upon
filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act.4 The
37 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. 92291
(June 29, 2021), 86 FR 35551 (July 6, 2021)
(‘‘Notice’’).
4 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
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1 15
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proposed rule change was published for
comment in the Federal Register on July
6, 2021.5 The Commission received no
comment letters regarding the proposed
rule change. Pursuant to Section
19(b)(3)(C) of the Act,6 the Commission
is hereby: (1) Temporarily suspending
File No. SR–NYSEArca–2021–52; and
(2) instituting proceedings to determine
whether to approve or disapprove File
No. SR–NYSEArca–2021–52.
II. Description of the Proposed Rule
Change
The Exchange proposes to establish a
new category of Retail Order executions
for purposes of the Fee Schedule.
Specifically, the Exchange proposes that
no fees or credits would apply for Retail
Order executions that are denoted
‘‘internalized’’ executions under certain
circumstances.7 The Exchange proposes
that no fees will be charged nor credits
paid for Retail Orders where (i) each
side of the executed order shares the
same MPID, (ii) each side of the
executed order is a Retail Order with a
time-in-force of Day, and (iii) the above
executed orders have an Average Daily
Volume (‘‘ADV’’) of at least 150,000
shares.
Prior to the proposed rule change,
Retail Orders that were internalized 8 on
the Exchange were not identified in the
Fee Schedule and were treated the like
other Retail Orders, regardless of
whether they were internalized
executions, and regardless of ADV.
Specifically, the Exchange provides a
credit ranging from $0.0035 to $0.0038,
depending on the step-up tier, to Retail
Orders that provide liquidity, and
charges no fee for Retail Orders that
remove liquidity. Therefore, the
proposal carves out a particular group of
Retail Orders—internalized orders when
such orders have an ADV of at least
150,000 shares—and eliminates the
credits for those Retail Orders that
provide liquidity. ETP Holders with an
ADV under 150,000 of internalized
Retail Orders would continue to receive
the relevant credit for Retail Orders that
provide liquidity.
III. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,9 at any time within 60 days of the
5 See
Notice, supra note 3.
U.S.C. 78s(b)(3)(C).
7 The Exchange defines internalized executions as
an execution where two orders presented to the
Exchange from the same ETP Holder (i.e., MPID) are
presented separately and not in a paired manner,
but nonetheless inadvertently match with one
another. See Notice, supra note 3, at 35552 note 13.
8 See id.
9 15 U.S.C. 78s(b)(3)(C).
6 15
PO 00000
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Fmt 4703
Sfmt 4703
date of filing of an immediately effective
proposed rule change pursuant to
Section 19(b)(1) of the Act,10 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) 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. As discussed below, the
Commission believes a temporary
suspension of the proposed rule change
is necessary and appropriate to allow for
additional analysis of the proposed rule
change’s consistency with the Act and
the rules thereunder.
When exchanges file their proposed
rule changes with the Commission,
including fee filings like the Exchange’s
present proposal, they are required to
provide a statement supporting the
proposal’s basis under the Act and the
rules and regulations thereunder
applicable to the exchange.11 The
instructions to Form 19b–4, on which
exchanges file their proposed rule
changes, specify that such statement
‘‘should be sufficiently detailed and
specific to support a finding that the
proposed rule change is consistent with
[those] requirements.’’ 12
Section 6 of the Act, including
Sections 6(b)(4), (5), and (8), require the
rules of an exchange to: (1) Provide for
the equitable allocation of reasonable
fees among members, issuers, and other
persons using the exchange’s
facilities; 13 (2) perfect the mechanism of
a free and open market and a national
market system, protect investors and the
public interest, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers; 14 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.15
In justifying its proposal, the
Exchange stated in its filing that its
proposal is reasonable because it ‘‘is a
reasonable attempt to increase liquidity
on the Exchange and improve the
Exchange’s market share relative to its
competitors.’’ 16 The Exchange also
states that the proposal is an equitable
allocation of fees and credits because
‘‘all ETP Holder that participate on the
10 15
U.S.C. 78s(b)(1).
17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
12 See id.
13 15 U.S.C. 78f(b)(4).
14 15 U.S.C. 78f(b)(5).
15 15 U.S.C. 78f(b)(8).
16 See Notice, supra note 3, at 35552.
11 See
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]]>Agencies
[Federal Register Volume 86, Number 152 (Wednesday, August 11, 2021)]
[Notices]
[Pages 44110-44116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17085]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92579; File No. SR-MEMX-2021-09]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee
Schedule
August 5, 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 August 2, 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 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.
---------------------------------------------------------------------------
[[Page 44111]]
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 August 2, 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) Adopt a new Liquidity Removal Tier applicable to the
fees charged for executions of orders in securities priced at or above
$1.00 per share that remove liquidity from the Exchange (such orders,
``Removed Volume''); (ii) increase the standard fee for executions of
Removed Volume; and (iii) allow affiliated Members to aggregate their
volume for purposes of the Exchange's pricing tiers with prior notice
to the Exchange.\4\
---------------------------------------------------------------------------
\4\ The Exchange initially filed the proposed Fee Schedule
changes on July 30, 2021 (SR-MEMX-2021-08). On August 2, 2021, the
Exchange withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------
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 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 16% 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 exchange
possesses significant pricing power in the execution of order flow, and
the Exchange currently represents approximately 3% of the overall
market share.\6\
---------------------------------------------------------------------------
\5\ Market share percentage calculated as of July 30, 2021. The
Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
\6\ Id.
---------------------------------------------------------------------------
Adoption of Liquidity Removal Tier
The Exchange is proposing to introduce a tiered pricing structure
applicable to the fees charged for executions of Removed Volume, which
is similar to the Exchange's existing tiered pricing structure
applicable to the rebates provided for executions of displayed orders
in securities priced at or above $1.00 per share that add liquidity to
the Exchange (``Added Displayed Volume'').\7\ Specifically, the
Exchange proposes to adopt a new volume-based tier, referred to by the
Exchange as the Liquidity Removal Tier, in which the Exchange will
charge a fee that is lower than the standard fee for executions of
Removed Volume for Members that meet at least one of two specified
volume thresholds on the Exchange, as described below.
---------------------------------------------------------------------------
\7\ The Exchange currently provides an enhanced rebate for
executions of Added Displayed Volume to Members that meet a
specified volume threshold under the Exchange's Liquidity Provision
Tier. See Securities Exchange Act Release No. 92150 (June 10, 2021),
86 FR 32090 (June 16, 2021) (SR-MEMX-2021-07).
---------------------------------------------------------------------------
Currently, the Exchange charges a standard fee of $0.00265 per
share for all executions of Removed Volume, which the Exchange is
proposing to increase to $0.0028, as further described below. The
Exchange now proposes to adopt the Liquidity Removal Tier in which it
will charge a lower fee of $0.00265 per share for executions of Removed
Volume for Members that qualify for the Liquidity Removal Tier by
achieving: (1) A Step-Up ADAV \8\ from July 2021 that is equal to or
greater than 0.05% of the TCV; \9\ or (2) an ADV \10\ that is equal to
or greater than 0.30% of the TCV.\11\ As proposed, ADV and Step-Up ADAV
will be calculated on a monthly basis, and Members that qualify for the
Liquidity Removal Tier by achieving at least one of the Step-Up ADAV or
ADV thresholds specified above in a particular month will be charged
the proposed lower fee of $0.00265 per share, instead of the proposed
standard fee of $0.0028 per share, for all executions of Removed Volume
in that month.
---------------------------------------------------------------------------
\8\ As proposed, the term ``Step-Up ADAV'' means ADAV in the
relevant baseline month subtracted from current ADAV. As set forth
on the Fee Schedule, ``ADAV'' means the average daily added volume
calculated as the number of shares added per day, which is
calculated on a monthly basis.
\9\ As proposed, the term ``TCV'' means total consolidated
volume calculated as the volume reported by all exchanges and trade
reporting facilities to a consolidated transaction reporting plan
for the month for which the fees apply.
\10\ As proposed, the term ``ADV'' means average daily volume
calculated as the number of shares added or removed, combined, per
day.
\11\ This proposed pricing is referred to by the Exchange on the
Fee Schedule under the new description ``Removed volume, Liquidity
Removal Tier'' with a Fee Code of ``R1'' to be provided by the
Exchange on the monthly invoices provided to Members. The Exchange
notes that because the determination of whether a Member qualifies
for the Liquidity Removal Tier for a particular month will not be
made until after the month-end, the Exchange will provide the Fee
Code otherwise applicable to such transactions (i.e., ``R'') on the
execution reports provided to Members during the month and will only
designate the Fee Code of ``R1'' on the monthly invoices, which are
provided after such determination has been made.
---------------------------------------------------------------------------
The Exchange proposes to charge Members that qualify for the
Liquidity Removal Tier a fee of 0.05% of the total dollar value of the
transaction for executions of orders that remove liquidity from the
Exchange in securities priced below $1.00 per share, which is the same
fee that would be applicable to such executions for Members that do not
qualify for the Liquidity Removal Tier. Thus, as under the Exchange's
current pricing, the same fee would be charged to all Members for
executions of orders that remove liquidity from the Exchange in
securities priced below $1.00 per share.
The Exchange proposes to add definitions of the terms ADV, Step-Up
ADAV, and TCV, which are consistent with the definitions of those terms
above, under a new ``Definitions'' section of the Fee Schedule in
connection with the proposed Liquidity Removal Tier.\12\ The Exchange
notes that the proposed definitions of ADV, Step-Up ADAV, and TCV are
substantially similar to the definitions of those terms used by other
exchanges on their fee schedules in connection with similar volume-
based pricing tiers.\13\ Additionally, like the Exchange
[[Page 44112]]
currently does with respect to its calculation of ADAV and for purposes
of determining qualification for the Exchange's Displayed Liquidity
Incentive, the Exchange proposes to exclude from its calculations of
ADV and TCV: (1) Any trading day that the Exchange's system experiences
a disruption that lasts for more than 60 minutes during regular trading
hours (``Exchange System Disruption Days''); and (2) the day that
Russell Investments reconstitutes its family of indexes (the ``Russell
Reconstitution Day'').\14\ The Exchange also proposes to specify on the
Fee Schedule that routed shares are not included in the calculation of
ADAV or ADV.\15\
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\12\ The Exchange also proposes to relocate the definition of
``ADAV'' from the ``Notes'' section to the proposed new
``Definitions'' section of the Fee Schedule for organization
purposes.
\13\ See, e.g., the Cboe EDGX Exchange, Inc. (``Cboe EDGX'')
equities trading fee schedule on its public website (available at
https://www.cboe.com/us/equities/membership/fee_schedule/edgx/); the
Cboe BZX Exchange, Inc. (``Cboe BZX'') equities trading fee schedule
on its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/).
\14\ The Exchange notes that excluding such days from the
calculations of ADV and TCV is also consistent with the practice of
other exchanges when calculating ADV and TCV. See id.
\15\ The Exchange currently excludes routed shares in the
calculation of ADAV so this proposed change is clarifying this
practice and also adopting it for the calculation of ADV. The
Exchange notes that excluding routed shares from the calculations of
ADAV and ADV is also consistent with the practice of other exchanges
when calculating ADAV and ADV. See, e.g., the Cboe BZX equities
trading fee schedule on its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/).
---------------------------------------------------------------------------
The Exchange believes that the proposed Liquidity Removal Tier
provides an incremental incentive for Members to strive for higher ADAV
on the Exchange and/or maintain or strive for higher ADV on the
Exchange in order to qualify for the proposed lower fee for executions
of Removed Volume. As such, the proposed Liquidity Removal Tier is
designed to encourage Members to maintain or increase their order flow
directed to the Exchange, thereby contributing to a deeper and more
liquid market to the benefit of all market participants and enhancing
the attractiveness of the Exchange as a trading venue. The Exchange
notes that the proposed lower fee for executions of Removed Volume
applicable to Members that qualify for the Liquidity Removal Tier
(i.e., $0.00265 per share) is comparable to, and competitive with, the
fees charged for executions of liquidity-removing orders charged by at
least one other exchange under similar volume-based tiers.\16\
---------------------------------------------------------------------------
\16\ See the Cboe EDGX equities trading fee schedule on its
public website (available at https://www.cboe.com/us/equities/membership/feeschedule/edgx/), which reflects fees charged under
``Remove Volume Tiers''--tiers based on a member achieving certain
step-up ADAV and ADV volume thresholds--ranging from $0.0027 to
$0.00275 per share for removing volume from the Cboe EDGX exchange.
---------------------------------------------------------------------------
Increased Standard Fee for Removed Volume
In connection with the proposed adoption of the Liquidity Removal
Tier, the Exchange also proposes to increase the standard fee charged
for executions Removed Volume. Currently, the Exchange charges a
standard fee of $0.00265 per share for executions of Removed Volume.
The Exchange now proposes to increase the standard fee charged for
executions of Removed Volume to $0.0028 per share.\17\ The Exchange
notes that Members would still be able to pay a fee of $0.00265 per
share for executions of Removed Volume by qualifying for the proposed
Liquidity Removal Tier, as described above.
---------------------------------------------------------------------------
\17\ This proposed pricing is referred to by the Exchange on the
Fee Schedule under the existing description ``Removed volume from
MEMX Book'' and such orders will continue to receive a Fee Code of
``R'' assigned by the Exchange.
---------------------------------------------------------------------------
The purpose of increasing the standard fee for executions of
Removed Volume is for business and competitive reasons, as the Exchange
believes that increasing such fee as proposed would generate additional
revenue to offset some of the costs associated with the Exchange's
current pricing structure, which provides various rebates for
liquidity-adding orders, and the Exchange's operations generally, in a
manner that is consistent with the Exchange's overall pricing
philosophy of encouraging added liquidity. The Exchange notes that
despite the modest increase proposed herein, the Exchange's standard
fee for executions of Removed Volume remains lower than, and
competitive with, the standard fee to remove liquidity in securities
priced at or above $1.00 per share charged by several other
exchanges.\18\
---------------------------------------------------------------------------
\18\ See, e.g., the Cboe BZX equities trading fee schedule on
its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a standard
fee of $0.0030 per share to remove liquidity in securities priced at
or above $1.00 per share; 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 $0.00285 per share to remove liquidity in
securities priced at or above $1.00 per share; the Nasdaq Price
List--Trading Connectivity (available at https://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.
---------------------------------------------------------------------------
Allow Members To Aggregate Volume for Pricing Tiers
Lastly, the Exchange proposes to add a note to the Fee Schedule to
allow affiliated Members to aggregate their volume for purposes of the
Exchange's determination of ADAV and ADV with respect to pricing tiers
if such Members provide prior notice to the Exchange. Specifically, to
the extent that two or more affiliated companies maintain separate
memberships with the Exchange and can demonstrate their affiliation by
showing they control, are controlled by, or are under common control
with each other, the Exchange would permit such Members to count
aggregate volume of such affiliates in calculating ADAV and ADV. As
proposed, the Exchange will verify such affiliation using a Member's
Form BD, which lists control affiliates. The purpose of this proposed
change is to avoid disparate treatment of firms that have divided their
various business activities between separate corporate entities as
compared to firms that operate those business activities within a
single corporate entity, as allowing affiliated Member firms to count
their aggregate volume in calculating ADAV and ADV would produce the
same result for purposes of the Exchange's volume-based tier pricing as
if such affiliated Member firms were instead organized as a single
corporate entity. The Exchange notes that this proposed change is
consistent with the practice of other exchanges with respect to the
aggregation of affiliated member firms' volume for purposes of ADAV and
ADV calculations with respect to pricing tiers.\19\
---------------------------------------------------------------------------
\19\ See supra note 13.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\20\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\21\ in particular, in that it
provides 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.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78f.
\21\ 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,
[[Page 44113]]
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.'' \22\
---------------------------------------------------------------------------
\22\ 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. 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. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to incentivize market participants to direct their order flow
to the Exchange, which the Exchange believes would enhance liquidity
and market quality to the benefit of all Members and market
participants.
Adoption of Liquidity Removal Tier
The Exchange believes that the proposed Liquidity Removal Tier is
reasonable because it would provide Members with an additional
incentive to achieve certain volume thresholds on the Exchange. Volume-
based incentives and discounts have been widely adopted by exchanges,
including the Exchange,\23\ and are equitable and not unfairly
discriminatory because they are open to all Members on an equal basis
and provide additional benefits or discounts that are reasonably
related to the value to an exchange's market quality associated with
higher levels of market activity, such as higher levels of liquidity
provision and/or growth patterns and the introduction of higher volumes
of orders into the price and volume discovery processes. The Exchange
believes the proposed Liquidity Removal Tier is equitable and not
unfairly discriminatory for these same reasons, as it is open to all
Members and is designed to encourage Members to maintain or increase
their order flow directed to the Exchange, thereby contributing to a
deeper and more liquid market to the benefit of all market participants
and enhancing the attractiveness of the Exchange as a trading venue.
Moreover, the Exchange believes the proposed Liquidity Removal Tier is
a reasonable means to incentivize such increased activity, as it
provides two different types of volume thresholds that Members may
choose to achieve in order to receive the proposed lower fee for
executions of Removed Volume--a Step-Up ADAV threshold, which can be
met by a Member increasing their liquidity-adding volume on the
Exchange (i.e., ADAV) by at least the specified threshold above their
July 2021 ADAV, and an ADV threshold, which can be met by a Member
maintaining or increasing their overall (i.e., liquidity-adding and
liquidity-removing) volume executed on the Exchange to an amount equal
to or greater than the specified TCV threshold. Thus, Members that do
not increase their ADAV above their July 2021 ADAV by at least 0.05% of
the TCV could still qualify for the Liquidity Removal Tier by
maintaining or increasing their ADV at or above 0.30% of the TCV, and
vice versa.
---------------------------------------------------------------------------
\23\ See supra note 7.
---------------------------------------------------------------------------
Additionally, the Exchange believes the proposed lower fee for
executions of Removed Volume for qualifying Members (i.e., $0.00265 per
share) is reasonable, in that it represents only a modest decrease from
the proposed standard fee for such executions (i.e., $0.0028 per share)
and is the same as the current standard fee for such executions. The
Exchange believes that it is reasonable, consistent with an equitable
allocation of fees, and not unfairly discriminatory to charge such
lower fee for executions of Removed Volume to Members that qualify for
the Liquidity Removal Tier in comparison with the standard fee in
recognition of the benefits that such Members provide to the Exchange
and market participants, as described above, particularly as the
magnitude of the lower fee is not unreasonably high and is, instead,
reasonably related to the enhanced market quality it is designed to
achieve. Further, as noted above, competing exchanges offer tiered
pricing structures similar to the proposed Liquidity Removal Tier,
including schedules of rebates and fees that apply based upon Members
achieving certain volume and/or growth thresholds, and the Exchange
believes the proposed Liquidity Removal Tier's criteria are reasonable
when compared to such tiers provided for by other exchanges. For
example, Cboe EDGX charges lower fees for removing volume from the Cboe
EDGX exchange under its ``Remove Volume Tiers'' ranging from $0.0027 to
$0.00275 per share, as compared to its standard fee of $0.00285 per
share, but requires different, but similar, criteria than the
Exchange's proposed Liquidity Removal Tier, which are also based upon a
member's volume and/or growth patterns.\24\
---------------------------------------------------------------------------
\24\ See the Cboe EDGX equities trading fee schedule on its
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
---------------------------------------------------------------------------
The Exchange further believes that it is reasonable, consistent
with an equitable allocation of fees, and not unfairly discriminatory
to charge Members that qualify for the Liquidity Removal Tier a fee of
0.05% of the total dollar value of the transaction for executions of
orders that remove liquidity from the Exchange in securities priced
below $1.00 per share, as this is the same fee that would be applicable
to such executions for all Members (i.e., including those that do not
qualify for the Liquidity Removal Tier), which is also the case under
the Exchange's current pricing.
The Exchange also believes the proposed Liquidity Removal Tier is
fair, equitable, and not unfairly discriminatory because it is
available to all Members. Further, the proposed Liquidity Removal Tier
would provide a way for Members to continue to pay the same fee they
currently do for executions of Removed Volume (i.e., $0.00265 per
share) even though the Exchange is proposing to increase the standard
fee to $0.0028 per share. Additionally, as noted above, such fee is
comparable to the fees charged for executions of liquidity-removing
orders charged by Cboe EDGX under similar volume-based tiers.\25\
---------------------------------------------------------------------------
\25\ Id.
---------------------------------------------------------------------------
The Exchange believes that adding the proposed definitions for the
terms ADV, Step-Up ADAV, and TCV, as well as relocating the definition
of ADAV, under a new ``Definitions'' section of the Fee Schedule is
reasonable, equitable, and non-discriminatory because such definitions
are substantially similar to the definitions of such terms used by
other exchanges in connection with similar volume-based pricing tiers,
as described above,\26\ and their placement on the Fee Schedule is
designed to ensure that the Fee Schedule is as clear and understandable
as possible with respect to applicable pricing. Similarly, the Exchange
believes that adding notes on the Fee Schedule specifying that routed
shares are not included in the calculation of ADAV or ADV and that
Exchange System Disruption Days and the Russell Reconstitution Day are
excluded from the calculations of ADV and TCV is reasonable, equitable,
and
[[Page 44114]]
non-discriminatory as such notes are intended to clarify the Exchange's
calculation practices with respect to its volume-based pricing tiers,
and such practices are consistent with the practices of other exchanges
in this regard.\27\
---------------------------------------------------------------------------
\26\ See supra note 13.
\27\ See supra notes 14-15.
---------------------------------------------------------------------------
Increased Standard Fee for Removed Volume
The Exchange believes that the proposed change to increase the
standard fee for executions of Removed Volume is reasonable, equitable,
and consistent with the Act because such change is designed to generate
additional revenue and decrease the Exchange's expenditures with
respect to transaction pricing in order to offset some of the costs
associated with the various rebates provided by the Exchange for
liquidity-adding orders and the Exchange's operations generally, in a
manner that is consistent with the Exchange's overall pricing
philosophy of encouraging added liquidity, as described above. The
Exchange also believes the proposed increased standard fee for
executions of Removed Volume is reasonable and appropriate because it
represents a modest increase from the current standard fee and, as
noted above, remains lower than, and competitive with, the standard fee
charged by several other exchanges to remove liquidity in securities
priced at or above $1.00 per share.\28\ The Exchange further believes
that the proposed increased standard fee for executions of Removed
Volume is equitably allocated and not unfairly discriminatory because
it will apply equally to all Members.
---------------------------------------------------------------------------
\28\ See supra note 18.
---------------------------------------------------------------------------
Allow Members To Aggregate Volume for Pricing Tiers
As noted above, the proposed language permitting aggregation of
volume amongst affiliated Members for purposes of the ADAV and ADV
calculations is intended to avoid disparate treatment of firms that
have divided their various business activities between separate
corporate entities as compared to firms that operate those business
activities within a single corporate entity, as allowing affiliated
Member firms to count their aggregate volume in calculating ADAV and
ADV would produce the same result for purposes of the Exchange's
volume-based tier pricing as if such affiliated Member firms were
instead organized as a single corporate entity. By way of example,
subject to appropriate information barriers, many firms that are
Members of the Exchange operate both a market making desk and a public
customer business within the same corporate entity. In contrast, other
firms may be part of a corporate structure that separates those
business lines into different corporate affiliates, either for
business, compliance or historical reasons. Those corporate affiliates,
in turn, are required to maintain separate memberships with the
Exchange. Absent the proposed policy, such corporate affiliates would
not receive the same treatment as firms operating similar business
lines within a single entity that is a Member of the Exchange.
Accordingly, the Exchange believes that its proposed policy is fair and
equitable, and not unreasonably discriminatory. In addition to ensuring
fair and equal treatment of its Members, the Exchange does not want to
create incentives for its Members to restructure their business
operations or compliance functions simply due to the Exchange's pricing
structure. Moreover, as noted above, this proposed policy is consistent
with the practice of other exchanges with respect to the aggregation of
affiliated Members' volume for purposes of determining ADAV and ADV
with respect to pricing tiers.\29\
---------------------------------------------------------------------------
\29\ See supra note 13.
---------------------------------------------------------------------------
For the reasons discussed above, the Exchange submits that the
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act in that it provides 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 unfairly discriminate between
customers, issuers, brokers, or dealers. As described more fully below
in the Exchange's statement regarding the burden on competition, the
Exchange believes that its transaction pricing is subject to
significant competitive forces, and that the proposed fees and rebates
described herein are appropriate to address such forces.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposal 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 proposal is intended to encourage Members to maintain or increase
their order flow on the Exchange, thereby contributing to a deeper and
more liquid market to the benefit of all market participants and
enhancing the attractiveness of the Exchange as a trading venue. As a
result, the Exchange believes the proposal would enhance its
competitiveness as a market that attracts actionable orders, thereby
making it a more desirable destination venue for its customers. For
these reasons, the Exchange believes that the proposal 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.'' \30\
---------------------------------------------------------------------------
\30\ See supra note 22.
---------------------------------------------------------------------------
Intramarket Competition
The Exchange believes that the proposal would incentivize Members
to maintain or increase their order flow on the Exchange, thereby
contributing to a deeper and more liquid market to the benefit of all
market participants and enhancing the attractiveness of the Exchange as
a trading venue, which the Exchange believes, in turn, would continue
to encourage market participants to direct additional order flow to the
Exchange. Greater liquidity benefits all Members by providing more
trading opportunities and encourages Members to send additional orders
to the Exchange, thereby contributing to robust levels of liquidity,
which benefits all market participants. The opportunity to qualify for
the Liquidity Removal Tier, and thus receive the proposed lower fee for
executions of Removed Volume, would be available to all Members that
meet the associated volume requirement in any month. The Exchange
believes that meeting the volume requirement of the Liquidity Removal
Tier is attainable for several market participants, as Members must
meet only one of two different types of volume thresholds, as described
above, and the Exchange believes such thresholds are relatively low and
reasonably related to the enhanced liquidity and market quality that
the Liquidity Removal Tier is designed to promote. Similarly, the
proposed increased standard fee for executions of Removed Volume and
the ability for Members to aggregate volume amongst affiliated Member
firms for purposes of the Exchange's determination of ADAV and ADV with
respect to pricing tiers would apply equally to all Members. 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
As noted above, the Exchange operates in a highly competitive
market in which market participants can
[[Page 44115]]
readily direct order flow to competing venues if they deem fee levels
at a particular venue to be excessive or incentives to be insufficient.
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 16% of the total market share of executed
volume of equities trading. Thus, in such a low-concentrated and highly
competitive market, no single equities exchange 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. Accordingly, competitive forces constrain the Exchange's
transaction fees and rebates, including with respect to executions of
Removed Volume, and market participants can readily choose to send
their orders to other exchange and off-exchange venues if they deem fee
levels at those other venues to be more favorable.
As described above, the proposed Liquidity Removal Tier and the
proposed increased standard fee for executions of Removed Volume are
competitive proposals through which the Exchange is seeking to
encourage additional order flow to be sent to the Exchange and generate
additional revenue to offset some of the costs associated with the
Exchange's current pricing structure and its operations generally, and
such proposed rates applicable to executions of Removed Volume are
comparable to, and competitive with, rates charged by other
exchanges.\31\ As noted above, the proposed rate applicable to
executions of orders in securities priced at or above $1.00 per share
for Members that qualify for the Liquidity Removal Tier would be the
same rate applicable to such executions for all Members, as is the case
under the Exchange's current pricing. Additionally, the proposed change
to allow affiliated Members to aggregate their volume for purposes of
the Exchange's determination of ADAV and ADV with respect to pricing
tiers is designed to avoid disparate treatment of firms that have
divided their various business activities between separate corporate
entities as compared to firms that operate those business activities
within a single corporate entity, which is consistent with the practice
of other exchanges, as discussed above.\32\ Accordingly, the Exchange
believes the proposal would not burden, but rather promote, intermarket
competition by enabling it to better compete with other exchanges that
offer similar volume-based incentives and pricing with respect to
executions of Removed Volume and volume aggregation amongst affiliates
with respect to pricing tiers.
---------------------------------------------------------------------------
\31\ See supra notes 18 and 24.
\32\ See supra note 13.
---------------------------------------------------------------------------
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.'' \33\ 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' . . . .''.\34\ Accordingly, the Exchange does not believe its
proposed pricing changes impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\33\ See supra note 22.
\34\ 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)).
---------------------------------------------------------------------------
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 \35\ and Rule 19b-4(f)(2) \36\ thereunder.
---------------------------------------------------------------------------
\35\ 15 U.S.C. 78s(b)(3)(A)(ii).
\36\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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 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 [email protected]. Please include
File Number SR-MEMX-2021-09 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-2021-09. 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
[[Page 44116]]
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-2021-09 and should be
submitted on or before September 1, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-17085 Filed 8-10-21; 8:45 am]
BILLING CODE 8011-01-P
