Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 2655-2662 [2022-00750]
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Federal Register / Vol. 87, No. 11 / Tuesday, January 18, 2022 / Notices
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
Dated: January 13, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022–00773 Filed 1–14–22; 8:45 am]
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[FR Doc. 2022–00920 Filed 1–13–22; 4:15 pm]
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SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93949; File No. SR–MEMX–
2021–21]
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January 20, 2021.
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TIME AND DATE:
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule
January 11, 2022.
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 December
30, 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.
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
January 3, 2022. 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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
2 17
19 17
CFR 200.30–3(a)(12).
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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) Reduce the standard rebate for
executions of orders in securities priced
at or above $1.00 per share that add
displayed liquidity to the Exchange
(such orders, ‘‘Added Displayed
Volume’’); (ii) modify the Liquidity
Provision Tiers by reducing the rebate
for executions of Added Displayed
Volume and modifying the required
criteria under Liquidity Provision Tier
1, modifying the required criteria under
Liquidity Provision Tier 2, and adopting
a new Liquidity Provision Tier 3; (iii)
modify Liquidity Removal Tier 1 by
increasing the fee for executions of
orders in securities priced at or above
$1.00 per share that remove liquidity
from the Exchange (such orders,
‘‘Removed Volume’’) and modifying the
required criteria under such tier; (iv)
modify the Displayed Liquidity
Incentive (‘‘DLI’’) Tiers by reducing the
rebates for executions of Added
Displayed Volume under DLI Tiers 1
and 2 and adopting a new additive
rebate for executions of Added
Displayed Volume applicable to DLI
Tiers 1 and 2; and (v) modify the
Exchange’s pricing for executions of
orders in securities priced below $1.00
per share that remove liquidity from the
Exchange (such orders, ‘‘Removed SubDollar Volume’’) and orders in securities
priced below $1.00 per share that add
non-displayed liquidity to the Exchange
(such orders, ‘‘Added Non-Displayed
Sub-Dollar Volume’’).
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
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Federal Register / Vol. 87, No. 11 / Tuesday, January 18, 2022 / Notices
has more than approximately 17% of
the total market share of executed
volume of equities trading.4 Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow,
and the Exchange currently represents
approximately 4% of the overall market
share.5 The Exchange in particular
operates a ‘‘Maker-Taker’’ model
whereby it provides rebates to Members
that add liquidity to the Exchange and
charges fees to Members that remove
liquidity from the Exchange. The Fee
Schedule sets forth the standard rebates
and fees applied per share for orders
that add and remove liquidity,
respectively. Additionally, in response
to the competitive environment, the
Exchange also offers tiered pricing,
which provides Members with
opportunities to qualify for higher
rebates or lower fees where certain
volume criteria and thresholds are met.
Tiered pricing provides an incremental
incentive for Members to strive for
higher tier levels, which provides
increasingly higher benefits or discounts
for satisfying increasingly more
stringent criteria.
Reduced Standard Rebate for Added
Displayed Volume
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Currently, the Exchange provides a
standard rebate of $0.0028 per share for
executions of Added Displayed Volume.
The Exchange now proposes to reduce
the standard rebate for executions of
Added Displayed Volume to $0.0022
per share.6 The purpose of reducing the
standard rebate for executions of Added
Displayed Volume is for business and
competitive reasons, as the Exchange
believes that the reduction of such
rebate would decrease the Exchange’s
expenditures with respect to its
transaction pricing in a manner that is
still consistent with the Exchange’s
overall pricing philosophy of
encouraging added displayed liquidity.
The Exchange notes that despite the
reduction proposed herein, the
proposed standard rebate for executions
of Added Displayed Volume (i.e.,
$0.0022 per share) remains higher than,
and competitive with, the standard
rebates provided by other exchanges for
executions of orders in securities priced
4 Market
share percentage calculated as of
December 29, 2021. The Exchange receives and
processes data made available through consolidated
data feeds (i.e., CTS and UTDF).
5 Id.
6 This proposed standard pricing for executions of
Added Displayed Volume is referred to by the
Exchange on the Fee Schedule under the existing
description ‘‘Added displayed volume’’ with a Fee
Code of ‘‘B’’, ‘‘D’’ or ‘‘J’’, as applicable.
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at or above $1.00 per share that add
displayed liquidity.7
Liquidity Provision Tiers
The Exchange currently offers
Liquidity Provision Tiers in which
qualifying Members are provided an
enhanced rebate for executions of
Added Displayed Volume by achieving
certain specified volume criteria. Now,
the Exchange proposes to modify its
Liquidity Provision Tiers by reducing
the rebate for executions of Added
Displayed Volume and modifying the
required criteria under Liquidity
Provision Tier 1, modifying the required
criteria under Liquidity Provision Tier
2, and adopting a new Liquidity
Provision Tier 3.
First, the Exchange proposes to
reduce the rebate for executions of
Added Displayed Volume under
Liquidity Provision Tier 1 from
$0.00335 per share to $0.00325 per
share.8 The Exchange believes that the
proposed rebate represents only a
modest decrease from the current rebate
provided for executions of Added
Displayed Volume under Liquidity
Provision Tier 1. The purpose of
reducing the enhanced rebate for
executions of Added Displayed Volume
under Liquidity Provision Tier 1 is for
business and competitive reasons, as the
7 See, e.g., the NYSE Arca, Inc. equities trading
fee schedule on its public website (available at
https://www.nyse.com/publicdocs/nyse/markets/
nyse-arca/NYSE_Arca_Marketplace_Fees.pdf),
which reflects a standard rebate of $0.0020 per
share for executions of orders in securities priced
at or above $1.00 per share that add displayed
liquidity; the Cboe BZX Exchange, Inc. (‘‘Cboe
BZX’’) equities trading fee schedule on its public
website (available at https://www.cboe.com/us/
equities/membership/fee_schedule/bzx/), which
reflects a standard rebate of $0.0018 per share for
executions of orders in securities priced at or above
$1.00 per share that add displayed liquidity; the
Nasdaq Stock Market LLC Price List—Trading
Connectivity (available at https://nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2), which reflects a
standard rebate of $0.0020 per share for executions
of orders in Tape A and Tape B securities priced
at or above $1.00 per share that add displayed
liquidity and a standard rebate of $0.0015 per share
for executions of orders in Tape C securities priced
at or above $1.00 per share that add displayed
liquidity.
8 The proposed pricing for Liquidity Provision
Tier 1 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
displayed volume, Liquidity Provision Tier 1’’ with
a Fee Code of ‘‘B1’’, ‘‘D1’’ or ‘‘J1’’, as applicable, 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 a certain pricing tier for a
particular month will not be made until after the
month-end, the Exchange will provide the Fee
Codes otherwise applicable to such transactions on
the execution reports provided to Members during
the month and will only designate the Fee Codes
applicable to the achieved pricing tier on the
monthly invoices, which are provided after such
determination has been made, as the Exchange does
for its tier-based pricing today.
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Exchange believes the reduction of such
rebate would decrease the Exchange’s
expenditures with respect to its
transaction pricing in a manner that is
still consistent with the Exchange’s
overall pricing philosophy of
encouraging added displayed liquidity.
The Exchange also proposes to modify
the required criteria under Liquidity
Provision Tier 1. Currently, a Member
qualifies for Liquidity Provision Tier 1
by achieving an ADAV 9 of at least
0.20% of the TCV.10 Now, the Exchange
proposes to modify this required criteria
such that a Member would now qualify
for Liquidity Provision Tier 1 by
achieving an ADAV of at least 0.25% of
the TCV. Thus, such proposed change
would increase the ADAV threshold,
which is designed to encourage
Members to maintain or increase their
orders that add liquidity on the
Exchange. The Exchange believes that
the tier, as proposed, would further
incentivize increased order flow to the
Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market to the benefit of
all market participants.
Next, the Exchange proposes to
modify the required criteria under
Liquidity Provision Tier 2. Currently, a
Member qualifies for Liquidity
Provision Tier 2 by achieving an ADAV
that is greater than or equal to 0.10% of
the TCV. Now, the Exchange proposes
to modify this required criteria such that
a Member would now qualify for
Liquidity Provision Tier 2 by achieving
either: (1) An ADAV of at least 0.20%
of the TCV; or (2) a Step-Up ADAV 11
from December 2021 of at least 0.05%
of the TCV. Thus, such proposed
changes would increase the ADAV
threshold and provide an alternative
Step-Up ADAV threshold that a Member
may choose to achieve in order to
qualify for Liquidity Provision Tier 2
that is based on such Member increasing
its ADAV above its December 2021
ADAV, each of which is designed to
encourage Members to maintain or
increase their orders that add liquidity
on the Exchange. The Exchange believes
that the tier, as proposed, would further
incentivize increased order flow to the
Exchange, thereby promoting price
discovery and contributing to a deeper
9 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.
10 As set forth on the Fee Schedule, ‘‘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.
11 As set forth on the Fee Schedule, ‘‘Step-Up
ADAV’’ means ADAV in the relevant baseline
month subtracted from current ADAV.
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and more liquid market to the benefit of
all market participants. The Exchange
does not propose to change the pricing
under Liquidity Provision Tier 2.
Additionally, the Exchange is
proposing to adopt a new Liquidity
Provision Tier 3 in which it would
provide an enhanced rebate of $0.0027
per share for executions of Added
Displayed Volume for Members that
qualify by achieving an ADAV of at least
0.05% of the TCV.12 The Exchange
proposes to provide Members that
qualify for Liquidity Provision Tier 3 a
rebate of 0.05% of the total dollar value
of the transaction for executions of
orders in securities priced below $1.00
per share that add displayed liquidity to
the Exchange, which is the same rebate
that is applicable to such executions for
all Members. The proposed Liquidity
Provision Tier 3 is designed to
encourage Members to maintain or
increase their orders that add liquidity
on the Exchange in order to qualify for
an enhanced rebate for executions of
Added Displayed Volume, which, in
turn, the Exchange believes would
encourage the submission of additional
Added Displayed Volume to the
Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market to the benefit of
all market participants. Further, the
proposed new Liquidity Provision Tier
3 would provide Members that would
not qualify for Liquidity Provision Tiers
1 and 2 with an opportunity to still
qualify for an enhanced rebate for
executions of Added Displayed Volume
in a manner that, coupled with the
higher enhanced rebates provided under
Liquidity Provision Tiers 1 and 2, as
described above, provides increasingly
higher benefits for satisfying
increasingly more stringent criteria.
Liquidity Removal Tier 1
Currently, the Exchange charges a
standard fee of $0.0029 per share for
executions of Removed Volume. The
Exchange also currently offers Liquidity
Removal Tier 1 in which qualifying
Members are charged a lower fee of
$0.0027 per share for executions of
Removed Volume by achieving either:
(1) A Step-Up ADAV from October 2021
of at least 0.05% of the TCV; or (2) an
ADV of at least 0.55% of the TCV. Now,
the Exchange proposes to increase the
fee charged for executions of Removed
Volume under such tier and modify the
required criteria under such tier.
Specifically, the Exchange proposes to
12 The proposed pricing for Liquidity Provision
Tier 3 is referred to by the Exchange on the Fee
Schedule under the new description ‘‘Added
displayed volume, Liquidity Provision Tier 3’’ with
a Fee Code of ‘‘B3’’, ‘‘D3’’ or ‘‘J3’’, as applicable.
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charge a fee of $0.0028 per share for
executions of Removed Volume for
Members that qualify for Liquidity
Removal Tier 1 by achieving either: (1)
An ADAV of at least 0.50% of the TCV;
or (2) an ADV of at least 0.70% of the
TCV.
The Exchange believes that the
proposed fee represents only a modest
increase from the current fee charged for
executions of Removed Volume under
Liquidity Removal Tier 1. The purpose
of increasing such fee is for business
and competitive reasons, as the
Exchange believes that increasing such
fee would generate additional revenue
to offset some of the costs associated
with the Exchange’s current transaction
pricing structure, which provides
various rebates for liquidity-adding
orders, and the Exchange’s operations
generally, in a manner that is still
consistent with the Exchange’s overall
pricing philosophy of encouraging
added liquidity. The Exchange notes
that the proposed changes to the
required criteria under Liquidity
Removal Tier 1 would replace the
current Step-Up ADAV threshold with
an ADAV threshold that is not based on
a Member’s ADAV from a prior month
(but that is a higher percentage of the
TCV) and would increase the alternative
ADV threshold. Thus, the purpose of the
proposed changes to the required
criteria is to encourage Members to
maintain or increase their order flow to
the Exchange. The Exchange believes
that the tier, as proposed, would further
incentivize increased order flow to the
Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market to the benefit of
all market participants.
The Exchange notes that it is also
proposing to change the fee charged
under Liquidity Removal Tier 1 for
executions of Removed Sub-Dollar
Volume, as further described below.
DLI Tiers and DLI Additive Rebate
The Exchange currently offers DLI
Tiers 1 and 2 in which qualifying
Members are provided an enhanced
rebate for executions of Added
Displayed Volume. The DLI Tiers are
designed to encourage Members,
through the provision of such enhanced
rebates for executions of Added
Displayed Volume, to promote price
discovery and market quality by quoting
at the NBBO for a significant portion of
each day in a large number of securities,
generally, and in a targeted group of
securities (i.e., the DLI Target
Securities), in particular, thereby
benefitting the Exchange and investors
by providing improved trading
conditions for all market participants
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through narrower bid-ask spreads and
increased depth of liquidity available at
the NBBO in a broad base of securities,
including the DLI Target Securities
specifically, and committing capital to
support the execution of orders.13 Now,
the Exchange proposes to modify its DLI
Tiers by reducing the rebates for
executions of Added Displayed Volume
under DLI Tiers 1 and 2 and adopting
a new additive rebate for executions of
Added Displayed Volume applicable to
DLI Tiers 1 and 2.
First, the Exchange proposes to
reduce the rebates for executions of
Added Displayed Volume under DLI
Tiers 1 and 2. Currently, the Exchange
provides enhanced rebates of $0.0035
per share under DLI Tier 1 and $0.0034
per share under DLI Tier 2 for
executions of Added Displayed Volume
for Members that qualify for such
tiers.14 Now, the Exchange proposes to
reduce the rebate provided under DLI
Tier 1 to $0.0033 per share and the
rebate provided under DLI Tier 2 to
$0.0031 per share. The Exchange is not
proposing to modify the required
criteria for a Member to qualify for DLI
Tier 1 or DLI Tier 2, nor is the Exchange
proposing to change the rebates
provided under such tiers for executions
of orders in securities priced below
$1.00 per share that add displayed
liquidity to the Exchange. The purpose
of reducing the enhanced rebates
provided under DLI Tiers 1 and 2 for
executions of Added Displayed Volume
is for business and competitive reasons,
as the Exchange believes the reduction
of such rebates would decrease the
Exchange’s expenditures with respect to
the Exchange’s transaction pricing in a
manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added liquidity and
promoting the price discovery and
market quality objectives of the DLI
Tiers.
The Exchange also proposes to revise
the ‘‘Displayed Liquidity Incentive
Tiers’’ heading on the Fee Schedule to
read ‘‘Displayed Liquidity Incentive
13 See the Exchange’s Fee Schedule (available at
https://info.memxtrading.com/fee-schedule/) for
additional details regarding the Exchange’s DLI
Tiers and DLI Target Securities. See also Securities
Exchange Act Release No. 92150 (June 10, 2021), 86
FR 32090 (June 16, 2021) (SR–MEMX–2021–07)
(notice of filing and immediate effectiveness of fee
changes adopted by the Exchange, including the
adoption of DLI).
14 The pricing for DLI Tier 1 is referred to by the
Exchange on the Fee Schedule under the
description ‘‘Added displayed volume, DLI Tier 1’’
with a Fee Code of ‘‘Bq1’’, ‘‘Bq1’’ or ‘‘Jq1’’, as
applicable. The pricing for DLI Tier 2 is referred to
by the Exchange on the Fee Schedule under the
description ‘‘Added displayed volume, DLI Tier 2’’
with a Fee Code of ‘‘Bq2’’, ‘‘Dq2’’ or ‘‘Jq2’’, as
applicable.
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(DLI) Tiers’’ (i.e., to include the ‘‘DLI’’
abbreviation in a parenthetical) so that
it is clear that references to ‘‘DLI’’ on the
Fee Schedule are references to the
Displayed Liquidity Incentive.
Additionally, the Exchange is
proposing to adopt a new additive
rebate for executions of Added
Displayed Volume applicable to DLI
Tiers 1 and 2 (the ‘‘DLI Additive
Rebate’’). Specifically, the proposed DLI
Additive Rebate would provide an
additive rebate of $0.0001 per share that
is in addition the otherwise applicable
rebate under DLI Tier 1 or DLI Tier 2 for
a qualifying Member’s executions of
Added Displayed Volume.15 As
proposed, a Member that qualifies for
DLI Tier 1 would qualify for the DLI
Additive Rebate if such Member has an
ADAV of at least 0.30% of the TCV, and
a Member that qualifies for DLI Tier 2
would qualify for the DLI Additive
Rebate if such Member has an ADAV of
at least 0.10% of the TCV.16 The
Exchange notes that the DLI Additive
Rebate would only apply to executions
of Added Displayed Volume that would
otherwise receive the rebate applicable
under DLI Tier 1 or DLI Tier 2.17 The
purpose of the proposed DLI Additive
Rebate is to encourage Members that
consistently quote at the NBBO on the
Exchange (i.e., Members that qualify for
DLI Tier 1 or DLI Tier 2) to also
maintain or increase their orders that
add liquidity on the Exchange in order
to qualify for an additive rebate for
executions of Added Displayed Volume,
which, in turn, the Exchange believes
would encourage the submission of
additional Added Displayed Volume to
the Exchange, thereby promoting price
discovery and contributing to a deeper
15 This proposed pricing is referred to by the
Exchange on the Fee Schedule under the new
description ‘‘DLI Additive Rebate’’ with a Fee Code
of ‘‘Y’’ to be appended to the otherwise applicable
Fee Code for qualifying executions (which include
Fee Codes ‘‘Bq1’’, ‘‘Dq1’’, ‘‘Jq1’’, ‘‘Bq1X’’, ‘‘Dq1X’’,
‘‘Jq1X’’, ‘‘Bq2’’, ‘‘Dq2’’, ‘‘Jq2’’, ‘‘Bq2X’’, ‘‘Dq2X’’,
‘‘Jq2X’’).
16 Thus, a Member that qualifies for DLI Tier 1
and the DLI Additive Rebate applicable to DLI Tier
1 (by achieving an ADAV of at least 0.30% of the
TCV) would receive a rebate of $0.0034 per share
(which is the proposed $0.0033 per share rebate
under DLI Tier 1, as described above, plus the
$0.0001 per share DLI Additive Rebate) for
executions of Added Displayed Volume, and a
Member that qualifies for DLI Tier 2 and the DLI
Additive Rebate applicable to DLI Tier 2 (by
achieving an ADAV of at least 0.10% of the TCV)
would receive a rebate of $0.0032 per share (which
is the proposed $0.0031 per share rebate under DLI
Tier 2, as described above, plus the $0.0001 per
share DLI Additive Rebate) for executions of Added
Displayed Volume.
17 The Exchange notes that such executions are
also eligible to receive the $0.0002 per share
additive rebate under the existing Targeted Step-Up
Tier for Members that also qualify for such
incentive.
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and more liquid market to the benefit of
all market participants. The Exchange
notes that the proposed DLI Additive
Rebate is comparable to other volumebased incentives and discounts, which
have been widely adopted by
exchanges, including the Exchange,
such as pricing tiers that provide a
supplemental incentive for firms that
achieve a specified volume threshold.18
Pricing for Certain Sub-Dollar Volume
Currently, the Exchange charges a
standard fee of 0.05% of the total dollar
value of the transaction for executions
of Removed Sub-Dollar Volume, which
is the same fee that is applicable to all
Members (including those that qualify
for Liquidity Removal Tier 1). Now, the
Exchange proposes to increase the
standard fee charged to all Members
(including those that qualify for
Liquidity Removal Tier 1) for executions
of Removed Sub-Dollar Volume to
0.25% of the total dollar value of the
transaction.19 The purpose of increasing
the standard fee for executions of
Removed Sub-Dollar Volume is for
business and competitive reasons, as the
Exchange believes that increasing such
fee would generate additional revenue
to offset some of the costs associated
with the Exchange’s current transaction
pricing structure, which provides
various rebates for liquidity-adding
orders, and the Exchange’s operations
generally, in a manner that is still
consistent with the Exchange’s overall
pricing philosophy of encouraging
added liquidity. The Exchange notes
that despite the increase proposed
herein, the proposed standard fee for
executions of Removed Sub-Dollar
Volume (i.e., 0.25% of the total dollar
value of the transaction) remains lower
than, and competitive with, the
standard fee charged by at least one
other equity exchange for executions of
18 The Exchange’s Targeted Step-Up Tier
currently provides an additive rebate of $0.0002 per
share for executions of added volume for Members
that qualify for the Targeted Step-Up Tier by
achieving one of two specified volume thresholds
in certain designated securities. See the Exchange’s
Fee Schedule (available at https://
info.memxtrading.com/fee-schedule/) for additional
details regarding the Targeted Step-Up Tier. See
also Securities Exchange Act Release No. 93554
(November 10, 2021), 86 FR 64248 (November 17,
2021) (SR–MEMX–2021–16) (notice of filing and
immediate effectiveness of fee changes adopted by
the Exchange, including the adoption of the
Targeted Step-Up Tier).
19 This proposed pricing for Removed Sub-Dollar
Volume is referred to by the Exchange on the Fee
Schedule under the existing descriptions ‘‘Removed
volume from MEMX Book’’ with a Fee Code of ‘‘R’’
and ‘‘Removed volume from MEMX Book, Liquidity
Removal Tier 1’’ with a Fee Code of ‘‘R1’’, as
applicable.
PO 00000
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Fmt 4703
Sfmt 4703
orders in securities priced below $1.00
per share that remove liquidity.20
Currently, the Exchange provides a
standard rebate of 0.05% of the total
dollar value of the transaction for
executions of orders (including
Midpoint Peg orders) of Added NonDisplayed Sub-Dollar Volume. Now, the
Exchange proposes to modify this
standard pricing to provide for free
executions of orders (including
Midpoint Peg orders) of Added NonDisplayed Sub-Dollar Volume.21 The
purpose of eliminating the standard
rebate for executions of orders
(including Midpoint Peg orders) of
Added Non-Displayed Sub-Dollar
Volume is for business and competitive
reasons, as the Exchange believes the
elimination of such rebate would
decrease the Exchange’s expenditures
with respect to the Exchange’s
transaction pricing in a manner that is
still consistent with the Exchange’s
overall pricing philosophy of
encouraging added displayed liquidity.
The Exchange notes that multiple other
equities exchanges currently provide
standard pricing of free executions of
orders in securities priced below $1.00
per share that add non-displayed
liquidity.22
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,23
in general, and with Sections 6(b)(4) and
6(b)(5) of the Act,24 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
20 See, e.g., the Cboe BZX equities trading fee
schedule on its public website (available at https://
www.cboe.com/us/equities/membership/fee_
schedule/bzx/), which reflects a standard fee of
0.30% of the total dollar value of the transaction for
executions of orders in securities priced below
$1.00 per share that remove liquidity.
21 This proposed pricing for Added NonDisplayed Sub-Dollar Volume is referred to by the
Exchange on the Fee Schedule under the existing
descriptions ‘‘Added non-displayed volume’’ with
a Fee Code of ‘‘H’’ and ‘‘Added non-displayed
volume, Midpoint Peg’’ with a Fee Code of ‘‘M’’, as
applicable.
22 See, e.g., the Cboe BZX equities trading fee
schedule on its public website (available at https://
www.cboe.com/us/equities/membership/fee_
schedule/bzx/), which reflects free executions as the
standard pricing for orders in securities priced
below $1.00 per share that add non-displayed
liquidity; the Cboe EDGA Exchange, Inc. equities
trading fee schedule on its public website (available
at https://www.cboe.com/us/equities/membership/
fee_schedule/edga/), which reflects free executions
as the standard pricing for orders in securities
priced below $1.00 per share that add nondisplayed liquidity.
23 15 U.S.C. 78f.
24 15 U.S.C. 78f(b)(4) and (5).
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discrimination between customers,
issuers, brokers, or dealers.
As discussed above, the Exchange
operates in a highly fragmented and
competitive market in which market
participants can readily direct order
flow to competing venues if they deem
fee levels at a particular venue to be
excessive or incentives to be
insufficient, and the Exchange
represents only a small percentage of
the overall market. The Commission and
the courts have repeatedly expressed
their preference for competition over
regulatory intervention in determining
prices, products, and services in the
securities markets. In Regulation NMS,
the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and also recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 25
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 additional order flow to the
Exchange, which the Exchange believes
would enhance liquidity and market
quality on the Exchange to the benefit
of all Members, as well as to decrease
the Exchange’s expenditures and
generate additional revenue with
respect to its transaction pricing in a
manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added displayed
liquidity.
Regarding the proposed changes to
the standard rates, the Exchange
believes that reducing the standard
rebate for executions of Added
Displayed Volume, increasing the
standard fee for executions of Removed
Sub-Dollar Volume (including for
Members that qualify for Liquidity
Removal Tier 1), and eliminating the
25 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
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Jkt 256001
standard rebate (i.e., to provide free
executions) for executions of orders
(including Midpoint Peg orders) of
Added Non-Displayed Sub-Dollar
Volume are reasonable because, as
indicated above, in order to operate in
the highly competitive equities markets,
the Exchange and its competing
exchanges seek to offer similar pricing
structures, including assessing
comparable standard fees and rebates, as
applicable, for executions of Added
Displayed Volume, Removed Sub-Dollar
Volume, and Added Non-Displayed
Sub-Dollar Volume. Thus, the Exchange
believes the proposed standard rate
changes for executions of Added
Displayed Volume, Removed Sub-Dollar
Volume, and Added Non-Displayed
Sub-Dollar Volume proposed herein are
reasonable, as such rates are comparable
to, and competitive with, the standard
fees and rebates, as applicable, assessed
for such executions on other equity
exchanges.26 Further, the Exchange
believes the proposed changes to reduce
the standard rebates for executions of
Added Displayed Volume and Added
Non-Displayed Sub-Dollar Volume, as
well as the proposed change to increase
the standard fee for executions of
Removed Sub-Dollar Volume, are
reasonable because, as noted above, the
Exchange believes such changes would
decrease the Exchange’s expenditures
and generate additional revenue with
respect to its transaction pricing in a
manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added displayed
liquidity. The Exchange also believes
that the proposed changes to these
standard rates represents an equitable
allocation of fees and are not unfairly
discriminatory because such standard
rates will continue to apply equally to
all Members.
As noted above, volume-based
incentives and discounts have been
widely adopted by exchanges, including
the Exchange, and are reasonable,
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: (i) The
value to an exchange’s market quality;
(ii) associated higher levels of market
activity, such as high levels of liquidity
provision and/or growth patterns; and
(iii) the introduction of higher volumes
of orders into the price and volume
discovery processes.
In particular, the Exchange believes
the proposed new Liquidity Provision
Tier 3 is reasonable, equitable, and not
unfairly discriminatory for these same
26 See
PO 00000
supra notes 7, 20, and 22.
Frm 00071
Fmt 4703
Sfmt 4703
2659
reasons, as it provides Members with an
additional incentive to achieve a certain
volume threshold on the Exchange, is
available to all Members and, as noted
above, is designed to encourage
Members to maintain or increase their
orders that add liquidity on the
Exchange in order to qualify for an
enhanced rebate for executions of
Added Displayed Volume, which, in
turn, the Exchange believes would
encourage the submission of additional
Added Displayed Volume to the
Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market to the benefit of
all market participants. Moreover, the
Exchange believes the proposed new
Liquidity Provision Tier 3 is a
reasonable means to incentivize such
increased activity, as it provides
Members with an additional
opportunity to qualify for an enhanced
rebate for executions of Added
Displayed Volume with less stringent
criteria than Liquidity Provision Tiers 1
and 2. The Exchange also believes that
providing a rebate of 0.05% of the total
dollar value of the transaction for
executions of orders in securities priced
below $1.00 per share that add
displayed liquidity to the Exchange
under proposed new Liquidity
Provision Tier 3 is reasonable, equitable,
and not unfairly discriminatory, as this
is the same rebate that is applicable to
such executions for all Members (i.e.,
including those that do not qualify for
any Liquidity Provision Tier), which is
also the case under the Exchange’s
current pricing.
The Exchange also believes the
proposed changes to Liquidity Provision
Tiers 1 and 2, including to reduce the
rebate for executions of Added
Displayed Volume and modify the
required criteria under Liquidity
Provision Tier 1 and to modify the
required criteria under Liquidity
Provision Tier 2, are reasonable,
equitable, and not unfairly
discriminatory for the same reasons
applicable to volume-based incentives
and discounts described above.
Specifically, the Exchange believes the
proposed new required criteria under
Liquidity Provision Tiers 1 and 2 is
reasonable, equitable, and not unfairly
discriminatory because all Members
will continue to be eligible to qualify for
such tiers and have the opportunity to
receive the corresponding enhanced
rebates for executions of Added
Displayed Volume if such criteria is
achieved and, as noted above, such
criteria is designed to encourage
Members to maintain or increase their
orders that add liquidity on the
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Exchange in order to qualify for an
enhanced rebate for executions of
Added Displayed Volume, which, in
turn, the Exchange believes would
encourage the submission of additional
Added Displayed Volume to the
Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market to the benefit of
all market participants. The Exchange
also believes the proposed reduced
rebate for executions of Added
Displayed Volume and proposed new
required criteria under Liquidity
Provision Tier 1 and the proposed new
required criteria under Liquidity
Provision Tier 2 are reasonable and
consistent with an equitable allocation
of fees and rebates, in that such reduced
rebate represents only a modest
decrease from the current rebate for
executions of Added Displayed Volume
under Liquidity Provision Tier 1 (i.e.,
from $0.00335 per share to $0.00325 per
share) and would decrease the
Exchange’s expenditures with respect to
its transaction pricing in a manner that
is still consistent with the Exchange’s
overall pricing philosophy of
encouraging added displayed liquidity,
and the more stringent criteria under
such tiers correlates to, and is
commensurate with, the corresponding
tier’s higher rebate.
Without having a view of activity on
other markets and off-exchange venues,
the Exchange has no way of knowing
whether this proposed rule change
would definitely result in any Members
qualifying for the proposed Liquidity
Provision Tiers. While the Exchange has
no way of predicting with certainty how
the proposed tiers will impact Member
activity, the Exchange anticipates that
multiple Members that currently qualify
for Liquidity Provision Tiers 1 and 2
would be able to satisfy the proposed
new required criteria under such tiers,
which the Exchange believes continues
to be commensurate with the fees under
such tiers, and that multiple additional
Members would be able to satisfy the
required criteria under proposed new
Liquidity Provision Tier 3. The
Exchange also notes that the proposed
tiers will not adversely impact any
Member’s ability to qualify for reduced
fees or enhanced rebates offered under
other pricing tiers. Should a Member
not meet the proposed new criteria, the
Member will merely not receive that
corresponding enhanced rebate.
The Exchange also believes the
proposed changes to Liquidity Removal
Tier 1, including to increase the fee
charged for executions of Removed
Volume and modify the required criteria
under such tier, are reasonable,
equitable, and not unfairly
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discriminatory for the same reasons
applicable to volume-based incentives
and discounts described above.
Specifically, the Exchange believes the
proposed new required criteria under
Liquidity Removal Tier 1 is reasonable,
equitable, and not unfairly
discriminatory because all Members
will continue to be eligible to qualify for
such tier and have the opportunity to
receive the corresponding lower fee for
executions of Removed Volume if such
criteria is achieved and, as noted above,
such criteria is designed to encourage
Members to maintain or increase their
order flow to the Exchange, thereby
promoting price discovery and
contributing to a deeper and more liquid
market to the benefit of all market
participants. The Exchange also believes
the proposed increased fee for
executions of Removed Volume and
proposed new required criteria under
Liquidity Removal Tier 1 are reasonable
and consistent with an equitable
allocation of fees and rebates, in that
such proposed fee represents only a
modest increase from the current fee
charged for executions of Removed
Volume under Liquidity Removal Tier 1
(i.e., from $0.0027 per share to $0.0028
per share) and would generate
additional revenue to offset some of the
costs associated with the Exchange’s
current transaction pricing in a manner
that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added displayed
liquidity.
Additionally, while the Exchange has
no way of predicting with certainty how
the proposed new required criteria
under such tier will impact Member
activity, the Exchange anticipates that
most, if not all, of the Members that
currently qualify for Liquidity Removal
Tier 1 would continue to qualify under
the proposed new criteria, which the
Exchange believes continues to be
commensurate with the proposed new
fee under such tier. The Exchange also
notes that the proposed tier will not
adversely impact any Member’s ability
to qualify for reduced fees or enhanced
rebates offered under other pricing tiers.
Should a Member not meet the
proposed new criteria, the Member will
merely not be charged the
corresponding lower fee.
The Exchange believes the proposed
changes to reduce the rebates for
executions of Added Displayed Volume
under DLI Tiers 1 and 2 are reasonable,
equitable, and not unfairly
discriminatory for the same reasons
applicable to volume-based incentives
and discounts described above, as such
rebates would continue to apply equally
to all Members, in that all Members
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
would continue to have the opportunity
to achieve the required criteria under
such tiers, which the Exchange is not
proposing to modify with this proposal,
and in turn, qualify for an enhanced
rebate for executions of Added
Displayed Volume, and the rebate
provided under DLI Tier 1 will remain
higher than the rebate provided under
DLI Tier 2 commensurate with the more
stringent criteria of DLI Tier 1 than of
DLI Tier 2. The Exchange further
believes that such proposed changes are
reasonable and consistent with an
equitable allocation of fees and rebates,
as such reduced rebates are designed to
decrease the Exchange’s expenditures
with respect to its transaction pricing in
a manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added displayed
liquidity and promoting the price
discovery and market quality objectives
of the DLI Tiers described above.
The Exchange also believes the
proposed change to revise the
‘‘Displayed Liquidity Incentive Tiers’’
heading on the Fee Schedule to read
‘‘Displayed Liquidity Incentive (DLI)
Tiers’’ (i.e., to include the ‘‘DLI’’
abbreviation in a parenthetical) is
reasonable, equitable, and not unfairly
discriminatory in that it is designed to
make clear for all Members that
references to ‘‘DLI’’ on the Fee Schedule
are references to the Displayed Liquidity
Incentive.
As noted above, the Exchange
believes that the proposed DLI Additive
Rebate is similar to other volume-based
incentives and discounts, which have
been widely adopted by exchanges,
including the Exchange,27 and thus, the
Exchange believes the proposed new
DLI Additive Rebate is reasonable,
equitable, and not unfairly
discriminatory for the same reasons
applicable to volume-based incentives
and discounts described above.
Specifically, the Exchange believes the
proposed DLI Additive Rebate is
reasonable, equitable, and not unfairly
discriminatory, as it provides Members
that consistently quote at the NBBO on
the Exchange (i.e., Members that qualify
for DLI Tier 1 or DLI Tier 2) with an
additional incentive to achieve a certain
volume threshold on the Exchange, is
available to all such Members, and, as
noted above, is designed to encourage
such Members to maintain or increase
their orders that add liquidity on the
Exchange in order to qualify for an
additive rebate for executions of Added
Displayed Volume, which, in turn, the
Exchange believes would encourage the
submission of additional Added
27 See
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Displayed Volume to the Exchange,
thereby promoting price discovery and
contributing to a deeper and more liquid
market to the benefit of all market
participants.
The Exchange also believes the
proposed additive rebate for executions
of Added Displayed Volume under the
proposed DLI Additive Rebate (i.e.,
$0.0001 per share) is reasonable, in that
it represents only a modest addition to
the rebates otherwise applicable to
executions of Added Displayed Volume
for Members that qualify for DLI Tiers
1 or 2 and, in conjunction with the other
changes proposed herein, would not
provide for a rebate that is higher than
the current maximum rebate provided
by the Exchange. While the proposed
DLI Additive Rebate is only available to
Members that also qualify for DLI Tiers
1 or 2, the Exchange believes that it is
reasonable, consistent with an equitable
allocation of fees, and not unfairly
discriminatory to provide such additive
rebate only to such Members in
recognition of the benefits that such
Members provide to the Exchange and
market participants by consistently
quoting at the NBBO on the Exchange,
as described above, particularly as the
magnitude of the additive rebate is not
unreasonably high and is, instead,
reasonably related to the enhanced
liquidity and market quality that such
additive rebate is designed to achieve.
Additionally, while the Exchange has
no way of predicting with certainty how
the proposed new DLI Additive Rebate
will impact Member activity, the
Exchange anticipates that several of the
Members that currently qualify for DLI
Tiers 1 or 2 would also satisfy the
required criteria for the corresponding
DLI Additive Rebate, which the
Exchange believes to be commensurate
with the proposed additive rebate in
each case. The Exchange also notes that
the proposed DLI Additive Rebate will
not adversely impact any Member’s
ability to qualify for reduced fees or
enhanced rebates offered under other
pricing tiers or incentives. Should a
Member not meet the proposed required
criteria, the Member will merely not
receive the additive rebate.
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 28 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
28 15
U.S.C. 78f(b)(4) and (5).
VerDate Sep<11>2014
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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 decrease the Exchange’s
expenditures and generate additional
revenue with respect to its transaction
pricing and 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.’’ 29
Intramarket Competition
As discussed above, 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 Provision
Tiers, the DLI Tiers, and Liquidity
Removal Tier 1, and thus receive the
proposed enhanced rebates for
executions of Added Displayed Volume
or be charged the proposed lower fee for
29 See
Jkt 256001
PO 00000
supra note 25.
Frm 00073
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2661
executions of Removed Volume, as
applicable, would be available to all
Members that meet the associated
volume requirements in any month. As
noted above, the Exchange believes that
meeting the proposed new volume
requirements of the Liquidity Provision
Tiers and Liquidity Removal Tier 1 is
attainable for several market
participants, and the Exchange believes
such thresholds are reasonably related
to the enhanced liquidity and market
quality that such tiers are designed to
promote. Similarly, as described above,
the Exchange anticipates that several of
the Members that currently qualify for
DLI Tiers 1 or 2 would also satisfy the
required criteria for the corresponding
DLI Additive Rebate, which the
Exchange believes to be commensurate
with the proposed additive rebate in
each case, and the Exchange believes
that it is appropriate for the proposed
DLI Additive Rebate to be available only
to Members that qualify for DLI Tier 1
or DLI Tier 2 in recognition of the
benefits that such Members provide to
the Exchange and market participants,
particularly as the magnitude of the
additive rebate is not unreasonably high
and is, instead, reasonably related to the
enhanced liquidity and market quality
that such additive rebate is designed to
achieve. Lastly, as noted above, the
proposed reduced standard rebates for
executions of Added Displayed Volume
and Added Non-Displayed Sub-Dollar
Volume, as well as the proposed
increased standard fee for executions of
Removed Volume, would apply equally
to all Members. For the foregoing
reasons, 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
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
17% 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
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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 Added Displayed
Volume, Removed Volume, Removed
Sub-Dollar Volume, and Added NonDisplayed Sub-Dollar 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 change is a competitive
proposal through which the Exchange is
seeking to decrease the Exchange’s
expenditures and generate additional
revenue with respect to its transaction
pricing and to encourage additional
order flow to the Exchange through
volume-based incentives and discounts,
which have been widely adopted by
exchanges, and standard pricing that are
comparable to, and competitive with,
pricing for similar executions in place at
other exchanges.30 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 standard pricing for
executions of Added Displayed Volume,
Removed Sub-Dollar Volume, and
Added Non-Displayed Sub-Dollar
Volume and similar pricing incentives
and discounts to market participants
that achieve certain volume criteria and
thresholds.
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.’’ 31 The
fact that this market is competitive has
30 See
supra notes 7, 20, and 22.
31 See supra note 25.
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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’. . . .’’.32 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.
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 33 and Rule
19b–4(f)(2) 34 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.
32 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 15 U.S.C. 78s(b)(3)(A)(ii).
34 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
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–2021–21 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–2021–21. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. All submissions
should refer to File Number SR–MEMX–
2021–21 and should be submitted on or
before February 8, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–00750 Filed 1–14–22; 8:45 am]
BILLING CODE 8011–01–P
35 17
E:\FR\FM\18JAN1.SGM
CFR 200.30–3(a)(12).
18JAN1
]]>Agencies
[Federal Register Volume 87, Number 11 (Tuesday, January 18, 2022)]
[Notices]
[Pages 2655-2662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00750]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93949; File No. SR-MEMX-2021-21]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule
January 11, 2022.
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 December 30, 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.
---------------------------------------------------------------------------
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 January 3, 2022. 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) Reduce the standard rebate for executions of orders in
securities priced at or above $1.00 per share that add displayed
liquidity to the Exchange (such orders, ``Added Displayed Volume'');
(ii) modify the Liquidity Provision Tiers by reducing the rebate for
executions of Added Displayed Volume and modifying the required
criteria under Liquidity Provision Tier 1, modifying the required
criteria under Liquidity Provision Tier 2, and adopting a new Liquidity
Provision Tier 3; (iii) modify Liquidity Removal Tier 1 by increasing
the fee for executions of orders in securities priced at or above $1.00
per share that remove liquidity from the Exchange (such orders,
``Removed Volume'') and modifying the required criteria under such
tier; (iv) modify the Displayed Liquidity Incentive (``DLI'') Tiers by
reducing the rebates for executions of Added Displayed Volume under DLI
Tiers 1 and 2 and adopting a new additive rebate for executions of
Added Displayed Volume applicable to DLI Tiers 1 and 2; and (v) modify
the Exchange's pricing for executions of orders in securities priced
below $1.00 per share that remove liquidity from the Exchange (such
orders, ``Removed Sub-Dollar Volume'') and orders in securities priced
below $1.00 per share that add non-displayed liquidity to the Exchange
(such orders, ``Added Non-Displayed Sub-Dollar Volume'').
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
[[Page 2656]]
has more than approximately 17% of the total market share of executed
volume of equities trading.\4\ Thus, in such a low-concentrated and
highly competitive market, no single equities exchange possesses
significant pricing power in the execution of order flow, and the
Exchange currently represents approximately 4% of the overall market
share.\5\ The Exchange in particular operates a ``Maker-Taker'' model
whereby it provides rebates to Members that add liquidity to the
Exchange and charges fees to Members that remove liquidity from the
Exchange. The Fee Schedule sets forth the standard rebates and fees
applied per share for orders that add and remove liquidity,
respectively. Additionally, in response to the competitive environment,
the Exchange also offers tiered pricing, which provides Members with
opportunities to qualify for higher rebates or lower fees where certain
volume criteria and thresholds are met. Tiered pricing provides an
incremental incentive for Members to strive for higher tier levels,
which provides increasingly higher benefits or discounts for satisfying
increasingly more stringent criteria.
---------------------------------------------------------------------------
\4\ Market share percentage calculated as of December 29, 2021.
The Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
\5\ Id.
---------------------------------------------------------------------------
Reduced Standard Rebate for Added Displayed Volume
Currently, the Exchange provides a standard rebate of $0.0028 per
share for executions of Added Displayed Volume. The Exchange now
proposes to reduce the standard rebate for executions of Added
Displayed Volume to $0.0022 per share.\6\ The purpose of reducing the
standard rebate for executions of Added Displayed Volume is for
business and competitive reasons, as the Exchange believes that the
reduction of such rebate would decrease the Exchange's expenditures
with respect to its transaction pricing in a manner that is still
consistent with the Exchange's overall pricing philosophy of
encouraging added displayed liquidity. The Exchange notes that despite
the reduction proposed herein, the proposed standard rebate for
executions of Added Displayed Volume (i.e., $0.0022 per share) remains
higher than, and competitive with, the standard rebates provided by
other exchanges for executions of orders in securities priced at or
above $1.00 per share that add displayed liquidity.\7\
---------------------------------------------------------------------------
\6\ This proposed standard pricing for executions of Added
Displayed Volume is referred to by the Exchange on the Fee Schedule
under the existing description ``Added displayed volume'' with a Fee
Code of ``B'', ``D'' or ``J'', as applicable.
\7\ See, e.g., the NYSE Arca, Inc. equities trading fee schedule
on its public website (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf), which
reflects a standard rebate of $0.0020 per share for executions of
orders in securities priced at or above $1.00 per share that add
displayed liquidity; the Cboe BZX Exchange, Inc. (``Cboe BZX'')
equities trading fee schedule on its public website (available at
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/),
which reflects a standard rebate of $0.0018 per share for executions
of orders in securities priced at or above $1.00 per share that add
displayed liquidity; the Nasdaq Stock Market LLC Price List--Trading
Connectivity (available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a standard rebate
of $0.0020 per share for executions of orders in Tape A and Tape B
securities priced at or above $1.00 per share that add displayed
liquidity and a standard rebate of $0.0015 per share for executions
of orders in Tape C securities priced at or above $1.00 per share
that add displayed liquidity.
---------------------------------------------------------------------------
Liquidity Provision Tiers
The Exchange currently offers Liquidity Provision Tiers in which
qualifying Members are provided an enhanced rebate for executions of
Added Displayed Volume by achieving certain specified volume criteria.
Now, the Exchange proposes to modify its Liquidity Provision Tiers by
reducing the rebate for executions of Added Displayed Volume and
modifying the required criteria under Liquidity Provision Tier 1,
modifying the required criteria under Liquidity Provision Tier 2, and
adopting a new Liquidity Provision Tier 3.
First, the Exchange proposes to reduce the rebate for executions of
Added Displayed Volume under Liquidity Provision Tier 1 from $0.00335
per share to $0.00325 per share.\8\ The Exchange believes that the
proposed rebate represents only a modest decrease from the current
rebate provided for executions of Added Displayed Volume under
Liquidity Provision Tier 1. The purpose of reducing the enhanced rebate
for executions of Added Displayed Volume under Liquidity Provision Tier
1 is for business and competitive reasons, as the Exchange believes the
reduction of such rebate would decrease the Exchange's expenditures
with respect to its transaction pricing in a manner that is still
consistent with the Exchange's overall pricing philosophy of
encouraging added displayed liquidity. The Exchange also proposes to
modify the required criteria under Liquidity Provision Tier 1.
Currently, a Member qualifies for Liquidity Provision Tier 1 by
achieving an ADAV \9\ of at least 0.20% of the TCV.\10\ Now, the
Exchange proposes to modify this required criteria such that a Member
would now qualify for Liquidity Provision Tier 1 by achieving an ADAV
of at least 0.25% of the TCV. Thus, such proposed change would increase
the ADAV threshold, which is designed to encourage Members to maintain
or increase their orders that add liquidity on the Exchange. The
Exchange believes that the tier, as proposed, would further incentivize
increased order flow to the Exchange, thereby promoting price discovery
and contributing to a deeper and more liquid market to the benefit of
all market participants.
---------------------------------------------------------------------------
\8\ The proposed pricing for Liquidity Provision Tier 1 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 1''
with a Fee Code of ``B1'', ``D1'' or ``J1'', as applicable, 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 a certain pricing tier for a
particular month will not be made until after the month-end, the
Exchange will provide the Fee Codes otherwise applicable to such
transactions on the execution reports provided to Members during the
month and will only designate the Fee Codes applicable to the
achieved pricing tier on the monthly invoices, which are provided
after such determination has been made, as the Exchange does for its
tier-based pricing today.
\9\ 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.
\10\ As set forth on the Fee Schedule, ``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.
---------------------------------------------------------------------------
Next, the Exchange proposes to modify the required criteria under
Liquidity Provision Tier 2. Currently, a Member qualifies for Liquidity
Provision Tier 2 by achieving an ADAV that is greater than or equal to
0.10% of the TCV. Now, the Exchange proposes to modify this required
criteria such that a Member would now qualify for Liquidity Provision
Tier 2 by achieving either: (1) An ADAV of at least 0.20% of the TCV;
or (2) a Step-Up ADAV \11\ from December 2021 of at least 0.05% of the
TCV. Thus, such proposed changes would increase the ADAV threshold and
provide an alternative Step-Up ADAV threshold that a Member may choose
to achieve in order to qualify for Liquidity Provision Tier 2 that is
based on such Member increasing its ADAV above its December 2021 ADAV,
each of which is designed to encourage Members to maintain or increase
their orders that add liquidity on the Exchange. The Exchange believes
that the tier, as proposed, would further incentivize increased order
flow to the Exchange, thereby promoting price discovery and
contributing to a deeper
[[Page 2657]]
and more liquid market to the benefit of all market participants. The
Exchange does not propose to change the pricing under Liquidity
Provision Tier 2.
---------------------------------------------------------------------------
\11\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means
ADAV in the relevant baseline month subtracted from current ADAV.
---------------------------------------------------------------------------
Additionally, the Exchange is proposing to adopt a new Liquidity
Provision Tier 3 in which it would provide an enhanced rebate of
$0.0027 per share for executions of Added Displayed Volume for Members
that qualify by achieving an ADAV of at least 0.05% of the TCV.\12\ The
Exchange proposes to provide Members that qualify for Liquidity
Provision Tier 3 a rebate of 0.05% of the total dollar value of the
transaction for executions of orders in securities priced below $1.00
per share that add displayed liquidity to the Exchange, which is the
same rebate that is applicable to such executions for all Members. The
proposed Liquidity Provision Tier 3 is designed to encourage Members to
maintain or increase their orders that add liquidity on the Exchange in
order to qualify for an enhanced rebate for executions of Added
Displayed Volume, which, in turn, the Exchange believes would encourage
the submission of additional Added Displayed Volume to the Exchange,
thereby promoting price discovery and contributing to a deeper and more
liquid market to the benefit of all market participants. Further, the
proposed new Liquidity Provision Tier 3 would provide Members that
would not qualify for Liquidity Provision Tiers 1 and 2 with an
opportunity to still qualify for an enhanced rebate for executions of
Added Displayed Volume in a manner that, coupled with the higher
enhanced rebates provided under Liquidity Provision Tiers 1 and 2, as
described above, provides increasingly higher benefits for satisfying
increasingly more stringent criteria.
---------------------------------------------------------------------------
\12\ The proposed pricing for Liquidity Provision Tier 3 is
referred to by the Exchange on the Fee Schedule under the new
description ``Added displayed volume, Liquidity Provision Tier 3''
with a Fee Code of ``B3'', ``D3'' or ``J3'', as applicable.
---------------------------------------------------------------------------
Liquidity Removal Tier 1
Currently, the Exchange charges a standard fee of $0.0029 per share
for executions of Removed Volume. The Exchange also currently offers
Liquidity Removal Tier 1 in which qualifying Members are charged a
lower fee of $0.0027 per share for executions of Removed Volume by
achieving either: (1) A Step-Up ADAV from October 2021 of at least
0.05% of the TCV; or (2) an ADV of at least 0.55% of the TCV. Now, the
Exchange proposes to increase the fee charged for executions of Removed
Volume under such tier and modify the required criteria under such
tier. Specifically, the Exchange proposes to charge a fee of $0.0028
per share for executions of Removed Volume for Members that qualify for
Liquidity Removal Tier 1 by achieving either: (1) An ADAV of at least
0.50% of the TCV; or (2) an ADV of at least 0.70% of the TCV.
The Exchange believes that the proposed fee represents only a
modest increase from the current fee charged for executions of Removed
Volume under Liquidity Removal Tier 1. The purpose of increasing such
fee is for business and competitive reasons, as the Exchange believes
that increasing such fee would generate additional revenue to offset
some of the costs associated with the Exchange's current transaction
pricing structure, which provides various rebates for liquidity-adding
orders, and the Exchange's operations generally, in a manner that is
still consistent with the Exchange's overall pricing philosophy of
encouraging added liquidity. The Exchange notes that the proposed
changes to the required criteria under Liquidity Removal Tier 1 would
replace the current Step-Up ADAV threshold with an ADAV threshold that
is not based on a Member's ADAV from a prior month (but that is a
higher percentage of the TCV) and would increase the alternative ADV
threshold. Thus, the purpose of the proposed changes to the required
criteria is to encourage Members to maintain or increase their order
flow to the Exchange. The Exchange believes that the tier, as proposed,
would further incentivize increased order flow to the Exchange, thereby
promoting price discovery and contributing to a deeper and more liquid
market to the benefit of all market participants.
The Exchange notes that it is also proposing to change the fee
charged under Liquidity Removal Tier 1 for executions of Removed Sub-
Dollar Volume, as further described below.
DLI Tiers and DLI Additive Rebate
The Exchange currently offers DLI Tiers 1 and 2 in which qualifying
Members are provided an enhanced rebate for executions of Added
Displayed Volume. The DLI Tiers are designed to encourage Members,
through the provision of such enhanced rebates for executions of Added
Displayed Volume, to promote price discovery and market quality by
quoting at the NBBO for a significant portion of each day in a large
number of securities, generally, and in a targeted group of securities
(i.e., the DLI Target Securities), in particular, thereby benefitting
the Exchange and investors by providing improved trading conditions for
all market participants through narrower bid-ask spreads and increased
depth of liquidity available at the NBBO in a broad base of securities,
including the DLI Target Securities specifically, and committing
capital to support the execution of orders.\13\ Now, the Exchange
proposes to modify its DLI Tiers by reducing the rebates for executions
of Added Displayed Volume under DLI Tiers 1 and 2 and adopting a new
additive rebate for executions of Added Displayed Volume applicable to
DLI Tiers 1 and 2.
---------------------------------------------------------------------------
\13\ See the Exchange's Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding
the Exchange's DLI Tiers and DLI Target Securities. See also
Securities Exchange Act Release No. 92150 (June 10, 2021), 86 FR
32090 (June 16, 2021) (SR-MEMX-2021-07) (notice of filing and
immediate effectiveness of fee changes adopted by the Exchange,
including the adoption of DLI).
---------------------------------------------------------------------------
First, the Exchange proposes to reduce the rebates for executions
of Added Displayed Volume under DLI Tiers 1 and 2. Currently, the
Exchange provides enhanced rebates of $0.0035 per share under DLI Tier
1 and $0.0034 per share under DLI Tier 2 for executions of Added
Displayed Volume for Members that qualify for such tiers.\14\ Now, the
Exchange proposes to reduce the rebate provided under DLI Tier 1 to
$0.0033 per share and the rebate provided under DLI Tier 2 to $0.0031
per share. The Exchange is not proposing to modify the required
criteria for a Member to qualify for DLI Tier 1 or DLI Tier 2, nor is
the Exchange proposing to change the rebates provided under such tiers
for executions of orders in securities priced below $1.00 per share
that add displayed liquidity to the Exchange. The purpose of reducing
the enhanced rebates provided under DLI Tiers 1 and 2 for executions of
Added Displayed Volume is for business and competitive reasons, as the
Exchange believes the reduction of such rebates would decrease the
Exchange's expenditures with respect to the Exchange's transaction
pricing in a manner that is still consistent with the Exchange's
overall pricing philosophy of encouraging added liquidity and promoting
the price discovery and market quality objectives of the DLI Tiers.
---------------------------------------------------------------------------
\14\ The pricing for DLI Tier 1 is referred to by the Exchange
on the Fee Schedule under the description ``Added displayed volume,
DLI Tier 1'' with a Fee Code of ``Bq1'', ``Bq1'' or ``Jq1'', as
applicable. The pricing for DLI Tier 2 is referred to by the
Exchange on the Fee Schedule under the description ``Added displayed
volume, DLI Tier 2'' with a Fee Code of ``Bq2'', ``Dq2'' or ``Jq2'',
as applicable.
---------------------------------------------------------------------------
The Exchange also proposes to revise the ``Displayed Liquidity
Incentive Tiers'' heading on the Fee Schedule to read ``Displayed
Liquidity Incentive
[[Page 2658]]
(DLI) Tiers'' (i.e., to include the ``DLI'' abbreviation in a
parenthetical) so that it is clear that references to ``DLI'' on the
Fee Schedule are references to the Displayed Liquidity Incentive.
Additionally, the Exchange is proposing to adopt a new additive
rebate for executions of Added Displayed Volume applicable to DLI Tiers
1 and 2 (the ``DLI Additive Rebate''). Specifically, the proposed DLI
Additive Rebate would provide an additive rebate of $0.0001 per share
that is in addition the otherwise applicable rebate under DLI Tier 1 or
DLI Tier 2 for a qualifying Member's executions of Added Displayed
Volume.\15\ As proposed, a Member that qualifies for DLI Tier 1 would
qualify for the DLI Additive Rebate if such Member has an ADAV of at
least 0.30% of the TCV, and a Member that qualifies for DLI Tier 2
would qualify for the DLI Additive Rebate if such Member has an ADAV of
at least 0.10% of the TCV.\16\ The Exchange notes that the DLI Additive
Rebate would only apply to executions of Added Displayed Volume that
would otherwise receive the rebate applicable under DLI Tier 1 or DLI
Tier 2.\17\ The purpose of the proposed DLI Additive Rebate is to
encourage Members that consistently quote at the NBBO on the Exchange
(i.e., Members that qualify for DLI Tier 1 or DLI Tier 2) to also
maintain or increase their orders that add liquidity on the Exchange in
order to qualify for an additive rebate for executions of Added
Displayed Volume, which, in turn, the Exchange believes would encourage
the submission of additional Added Displayed Volume to the Exchange,
thereby promoting price discovery and contributing to a deeper and more
liquid market to the benefit of all market participants. The Exchange
notes that the proposed DLI Additive Rebate is comparable to other
volume-based incentives and discounts, which have been widely adopted
by exchanges, including the Exchange, such as pricing tiers that
provide a supplemental incentive for firms that achieve a specified
volume threshold.\18\
---------------------------------------------------------------------------
\15\ This proposed pricing is referred to by the Exchange on the
Fee Schedule under the new description ``DLI Additive Rebate'' with
a Fee Code of ``Y'' to be appended to the otherwise applicable Fee
Code for qualifying executions (which include Fee Codes ``Bq1'',
``Dq1'', ``Jq1'', ``Bq1X'', ``Dq1X'', ``Jq1X'', ``Bq2'', ``Dq2'',
``Jq2'', ``Bq2X'', ``Dq2X'', ``Jq2X'').
\16\ Thus, a Member that qualifies for DLI Tier 1 and the DLI
Additive Rebate applicable to DLI Tier 1 (by achieving an ADAV of at
least 0.30% of the TCV) would receive a rebate of $0.0034 per share
(which is the proposed $0.0033 per share rebate under DLI Tier 1, as
described above, plus the $0.0001 per share DLI Additive Rebate) for
executions of Added Displayed Volume, and a Member that qualifies
for DLI Tier 2 and the DLI Additive Rebate applicable to DLI Tier 2
(by achieving an ADAV of at least 0.10% of the TCV) would receive a
rebate of $0.0032 per share (which is the proposed $0.0031 per share
rebate under DLI Tier 2, as described above, plus the $0.0001 per
share DLI Additive Rebate) for executions of Added Displayed Volume.
\17\ The Exchange notes that such executions are also eligible
to receive the $0.0002 per share additive rebate under the existing
Targeted Step-Up Tier for Members that also qualify for such
incentive.
\18\ The Exchange's Targeted Step-Up Tier currently provides an
additive rebate of $0.0002 per share for executions of added volume
for Members that qualify for the Targeted Step-Up Tier by achieving
one of two specified volume thresholds in certain designated
securities. See the Exchange's Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding
the Targeted Step-Up Tier. See also Securities Exchange Act Release
No. 93554 (November 10, 2021), 86 FR 64248 (November 17, 2021) (SR-
MEMX-2021-16) (notice of filing and immediate effectiveness of fee
changes adopted by the Exchange, including the adoption of the
Targeted Step-Up Tier).
---------------------------------------------------------------------------
Pricing for Certain Sub-Dollar Volume
Currently, the Exchange charges a standard fee of 0.05% of the
total dollar value of the transaction for executions of Removed Sub-
Dollar Volume, which is the same fee that is applicable to all Members
(including those that qualify for Liquidity Removal Tier 1). Now, the
Exchange proposes to increase the standard fee charged to all Members
(including those that qualify for Liquidity Removal Tier 1) for
executions of Removed Sub-Dollar Volume to 0.25% of the total dollar
value of the transaction.\19\ The purpose of increasing the standard
fee for executions of Removed Sub-Dollar Volume is for business and
competitive reasons, as the Exchange believes that increasing such fee
would generate additional revenue to offset some of the costs
associated with the Exchange's current transaction pricing structure,
which provides various rebates for liquidity-adding orders, and the
Exchange's operations generally, in a manner that is still consistent
with the Exchange's overall pricing philosophy of encouraging added
liquidity. The Exchange notes that despite the increase proposed
herein, the proposed standard fee for executions of Removed Sub-Dollar
Volume (i.e., 0.25% of the total dollar value of the transaction)
remains lower than, and competitive with, the standard fee charged by
at least one other equity exchange for executions of orders in
securities priced below $1.00 per share that remove liquidity.\20\
---------------------------------------------------------------------------
\19\ This proposed pricing for Removed Sub-Dollar Volume is
referred to by the Exchange on the Fee Schedule under the existing
descriptions ``Removed volume from MEMX Book'' with a Fee Code of
``R'' and ``Removed volume from MEMX Book, Liquidity Removal Tier
1'' with a Fee Code of ``R1'', as applicable.
\20\ See, e.g., the Cboe BZX equities trading fee schedule on
its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a standard fee of
0.30% of the total dollar value of the transaction for executions of
orders in securities priced below $1.00 per share that remove
liquidity.
---------------------------------------------------------------------------
Currently, the Exchange provides a standard rebate of 0.05% of the
total dollar value of the transaction for executions of orders
(including Midpoint Peg orders) of Added Non-Displayed Sub-Dollar
Volume. Now, the Exchange proposes to modify this standard pricing to
provide for free executions of orders (including Midpoint Peg orders)
of Added Non-Displayed Sub-Dollar Volume.\21\ The purpose of
eliminating the standard rebate for executions of orders (including
Midpoint Peg orders) of Added Non-Displayed Sub-Dollar Volume is for
business and competitive reasons, as the Exchange believes the
elimination of such rebate would decrease the Exchange's expenditures
with respect to the Exchange's transaction pricing in a manner that is
still consistent with the Exchange's overall pricing philosophy of
encouraging added displayed liquidity. The Exchange notes that multiple
other equities exchanges currently provide standard pricing of free
executions of orders in securities priced below $1.00 per share that
add non-displayed liquidity.\22\
---------------------------------------------------------------------------
\21\ This proposed pricing for Added Non-Displayed Sub-Dollar
Volume is referred to by the Exchange on the Fee Schedule under the
existing descriptions ``Added non-displayed volume'' with a Fee Code
of ``H'' and ``Added non-displayed volume, Midpoint Peg'' with a Fee
Code of ``M'', as applicable.
\22\ See, e.g., the Cboe BZX equities trading fee schedule on
its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects free executions as the
standard pricing for orders in securities priced below $1.00 per
share that add non-displayed liquidity; the Cboe EDGA Exchange, Inc.
equities trading fee schedule on its public website (available at
https://www.cboe.com/us/equities/membership/fee_schedule/edga/),
which reflects free executions as the standard pricing for orders in
securities priced below $1.00 per share that add non-displayed
liquidity.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\23\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\24\ 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
[[Page 2659]]
discrimination between customers, issuers, brokers, or dealers.
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\23\ 15 U.S.C. 78f.
\24\ 15 U.S.C. 78f(b)(4) and (5).
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As discussed above, the Exchange operates in a highly fragmented
and competitive market in which market participants can readily direct
order flow to competing venues if they deem fee levels at a particular
venue to be excessive or incentives to be insufficient, and the
Exchange represents only a small percentage of the overall market. The
Commission and the courts have repeatedly expressed their preference
for competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \25\
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\25\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005).
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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 additional order
flow to the Exchange, which the Exchange believes would enhance
liquidity and market quality on the Exchange to the benefit of all
Members, as well as to decrease the Exchange's expenditures and
generate additional revenue with respect to its transaction pricing in
a manner that is still consistent with the Exchange's overall pricing
philosophy of encouraging added displayed liquidity.
Regarding the proposed changes to the standard rates, the Exchange
believes that reducing the standard rebate for executions of Added
Displayed Volume, increasing the standard fee for executions of Removed
Sub-Dollar Volume (including for Members that qualify for Liquidity
Removal Tier 1), and eliminating the standard rebate (i.e., to provide
free executions) for executions of orders (including Midpoint Peg
orders) of Added Non-Displayed Sub-Dollar Volume are reasonable
because, as indicated above, in order to operate in the highly
competitive equities markets, the Exchange and its competing exchanges
seek to offer similar pricing structures, including assessing
comparable standard fees and rebates, as applicable, for executions of
Added Displayed Volume, Removed Sub-Dollar Volume, and Added Non-
Displayed Sub-Dollar Volume. Thus, the Exchange believes the proposed
standard rate changes for executions of Added Displayed Volume, Removed
Sub-Dollar Volume, and Added Non-Displayed Sub-Dollar Volume proposed
herein are reasonable, as such rates are comparable to, and competitive
with, the standard fees and rebates, as applicable, assessed for such
executions on other equity exchanges.\26\ Further, the Exchange
believes the proposed changes to reduce the standard rebates for
executions of Added Displayed Volume and Added Non-Displayed Sub-Dollar
Volume, as well as the proposed change to increase the standard fee for
executions of Removed Sub-Dollar Volume, are reasonable because, as
noted above, the Exchange believes such changes would decrease the
Exchange's expenditures and generate additional revenue with respect to
its transaction pricing in a manner that is still consistent with the
Exchange's overall pricing philosophy of encouraging added displayed
liquidity. The Exchange also believes that the proposed changes to
these standard rates represents an equitable allocation of fees and are
not unfairly discriminatory because such standard rates will continue
to apply equally to all Members.
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\26\ See supra notes 7, 20, and 22.
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As noted above, volume-based incentives and discounts have been
widely adopted by exchanges, including the Exchange, and are
reasonable, 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: (i) The value to an
exchange's market quality; (ii) associated higher levels of market
activity, such as high levels of liquidity provision and/or growth
patterns; and (iii) the introduction of higher volumes of orders into
the price and volume discovery processes.
In particular, the Exchange believes the proposed new Liquidity
Provision Tier 3 is reasonable, equitable, and not unfairly
discriminatory for these same reasons, as it provides Members with an
additional incentive to achieve a certain volume threshold on the
Exchange, is available to all Members and, as noted above, is designed
to encourage Members to maintain or increase their orders that add
liquidity on the Exchange in order to qualify for an enhanced rebate
for executions of Added Displayed Volume, which, in turn, the Exchange
believes would encourage the submission of additional Added Displayed
Volume to the Exchange, thereby promoting price discovery and
contributing to a deeper and more liquid market to the benefit of all
market participants. Moreover, the Exchange believes the proposed new
Liquidity Provision Tier 3 is a reasonable means to incentivize such
increased activity, as it provides Members with an additional
opportunity to qualify for an enhanced rebate for executions of Added
Displayed Volume with less stringent criteria than Liquidity Provision
Tiers 1 and 2. The Exchange also believes that providing a rebate of
0.05% of the total dollar value of the transaction for executions of
orders in securities priced below $1.00 per share that add displayed
liquidity to the Exchange under proposed new Liquidity Provision Tier 3
is reasonable, equitable, and not unfairly discriminatory, as this is
the same rebate that is applicable to such executions for all Members
(i.e., including those that do not qualify for any Liquidity Provision
Tier), which is also the case under the Exchange's current pricing.
The Exchange also believes the proposed changes to Liquidity
Provision Tiers 1 and 2, including to reduce the rebate for executions
of Added Displayed Volume and modify the required criteria under
Liquidity Provision Tier 1 and to modify the required criteria under
Liquidity Provision Tier 2, are reasonable, equitable, and not unfairly
discriminatory for the same reasons applicable to volume-based
incentives and discounts described above. Specifically, the Exchange
believes the proposed new required criteria under Liquidity Provision
Tiers 1 and 2 is reasonable, equitable, and not unfairly discriminatory
because all Members will continue to be eligible to qualify for such
tiers and have the opportunity to receive the corresponding enhanced
rebates for executions of Added Displayed Volume if such criteria is
achieved and, as noted above, such criteria is designed to encourage
Members to maintain or increase their orders that add liquidity on the
[[Page 2660]]
Exchange in order to qualify for an enhanced rebate for executions of
Added Displayed Volume, which, in turn, the Exchange believes would
encourage the submission of additional Added Displayed Volume to the
Exchange, thereby promoting price discovery and contributing to a
deeper and more liquid market to the benefit of all market
participants. The Exchange also believes the proposed reduced rebate
for executions of Added Displayed Volume and proposed new required
criteria under Liquidity Provision Tier 1 and the proposed new required
criteria under Liquidity Provision Tier 2 are reasonable and consistent
with an equitable allocation of fees and rebates, in that such reduced
rebate represents only a modest decrease from the current rebate for
executions of Added Displayed Volume under Liquidity Provision Tier 1
(i.e., from $0.00335 per share to $0.00325 per share) and would
decrease the Exchange's expenditures with respect to its transaction
pricing in a manner that is still consistent with the Exchange's
overall pricing philosophy of encouraging added displayed liquidity,
and the more stringent criteria under such tiers correlates to, and is
commensurate with, the corresponding tier's higher rebate.
Without having a view of activity on other markets and off-exchange
venues, the Exchange has no way of knowing whether this proposed rule
change would definitely result in any Members qualifying for the
proposed Liquidity Provision Tiers. While the Exchange has no way of
predicting with certainty how the proposed tiers will impact Member
activity, the Exchange anticipates that multiple Members that currently
qualify for Liquidity Provision Tiers 1 and 2 would be able to satisfy
the proposed new required criteria under such tiers, which the Exchange
believes continues to be commensurate with the fees under such tiers,
and that multiple additional Members would be able to satisfy the
required criteria under proposed new Liquidity Provision Tier 3. The
Exchange also notes that the proposed tiers will not adversely impact
any Member's ability to qualify for reduced fees or enhanced rebates
offered under other pricing tiers. Should a Member not meet the
proposed new criteria, the Member will merely not receive that
corresponding enhanced rebate.
The Exchange also believes the proposed changes to Liquidity
Removal Tier 1, including to increase the fee charged for executions of
Removed Volume and modify the required criteria under such tier, are
reasonable, equitable, and not unfairly discriminatory for the same
reasons applicable to volume-based incentives and discounts described
above. Specifically, the Exchange believes the proposed new required
criteria under Liquidity Removal Tier 1 is reasonable, equitable, and
not unfairly discriminatory because all Members will continue to be
eligible to qualify for such tier and have the opportunity to receive
the corresponding lower fee for executions of Removed Volume if such
criteria is achieved and, as noted above, such criteria is designed to
encourage Members to maintain or increase their order flow to the
Exchange, thereby promoting price discovery and contributing to a
deeper and more liquid market to the benefit of all market
participants. The Exchange also believes the proposed increased fee for
executions of Removed Volume and proposed new required criteria under
Liquidity Removal Tier 1 are reasonable and consistent with an
equitable allocation of fees and rebates, in that such proposed fee
represents only a modest increase from the current fee charged for
executions of Removed Volume under Liquidity Removal Tier 1 (i.e., from
$0.0027 per share to $0.0028 per share) and would generate additional
revenue to offset some of the costs associated with the Exchange's
current transaction pricing in a manner that is still consistent with
the Exchange's overall pricing philosophy of encouraging added
displayed liquidity.
Additionally, while the Exchange has no way of predicting with
certainty how the proposed new required criteria under such tier will
impact Member activity, the Exchange anticipates that most, if not all,
of the Members that currently qualify for Liquidity Removal Tier 1
would continue to qualify under the proposed new criteria, which the
Exchange believes continues to be commensurate with the proposed new
fee under such tier. The Exchange also notes that the proposed tier
will not adversely impact any Member's ability to qualify for reduced
fees or enhanced rebates offered under other pricing tiers. Should a
Member not meet the proposed new criteria, the Member will merely not
be charged the corresponding lower fee.
The Exchange believes the proposed changes to reduce the rebates
for executions of Added Displayed Volume under DLI Tiers 1 and 2 are
reasonable, equitable, and not unfairly discriminatory for the same
reasons applicable to volume-based incentives and discounts described
above, as such rebates would continue to apply equally to all Members,
in that all Members would continue to have the opportunity to achieve
the required criteria under such tiers, which the Exchange is not
proposing to modify with this proposal, and in turn, qualify for an
enhanced rebate for executions of Added Displayed Volume, and the
rebate provided under DLI Tier 1 will remain higher than the rebate
provided under DLI Tier 2 commensurate with the more stringent criteria
of DLI Tier 1 than of DLI Tier 2. The Exchange further believes that
such proposed changes are reasonable and consistent with an equitable
allocation of fees and rebates, as such reduced rebates are designed to
decrease the Exchange's expenditures with respect to its transaction
pricing in a manner that is still consistent with the Exchange's
overall pricing philosophy of encouraging added displayed liquidity and
promoting the price discovery and market quality objectives of the DLI
Tiers described above.
The Exchange also believes the proposed change to revise the
``Displayed Liquidity Incentive Tiers'' heading on the Fee Schedule to
read ``Displayed Liquidity Incentive (DLI) Tiers'' (i.e., to include
the ``DLI'' abbreviation in a parenthetical) is reasonable, equitable,
and not unfairly discriminatory in that it is designed to make clear
for all Members that references to ``DLI'' on the Fee Schedule are
references to the Displayed Liquidity Incentive.
As noted above, the Exchange believes that the proposed DLI
Additive Rebate is similar to other volume-based incentives and
discounts, which have been widely adopted by exchanges, including the
Exchange,\27\ and thus, the Exchange believes the proposed new DLI
Additive Rebate is reasonable, equitable, and not unfairly
discriminatory for the same reasons applicable to volume-based
incentives and discounts described above. Specifically, the Exchange
believes the proposed DLI Additive Rebate is reasonable, equitable, and
not unfairly discriminatory, as it provides Members that consistently
quote at the NBBO on the Exchange (i.e., Members that qualify for DLI
Tier 1 or DLI Tier 2) with an additional incentive to achieve a certain
volume threshold on the Exchange, is available to all such Members,
and, as noted above, is designed to encourage such Members to maintain
or increase their orders that add liquidity on the Exchange in order to
qualify for an additive rebate for executions of Added Displayed
Volume, which, in turn, the Exchange believes would encourage the
submission of additional Added
[[Page 2661]]
Displayed Volume to the Exchange, thereby promoting price discovery and
contributing to a deeper and more liquid market to the benefit of all
market participants.
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\27\ See supra note 18.
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The Exchange also believes the proposed additive rebate for
executions of Added Displayed Volume under the proposed DLI Additive
Rebate (i.e., $0.0001 per share) is reasonable, in that it represents
only a modest addition to the rebates otherwise applicable to
executions of Added Displayed Volume for Members that qualify for DLI
Tiers 1 or 2 and, in conjunction with the other changes proposed
herein, would not provide for a rebate that is higher than the current
maximum rebate provided by the Exchange. While the proposed DLI
Additive Rebate is only available to Members that also qualify for DLI
Tiers 1 or 2, the Exchange believes that it is reasonable, consistent
with an equitable allocation of fees, and not unfairly discriminatory
to provide such additive rebate only to such Members in recognition of
the benefits that such Members provide to the Exchange and market
participants by consistently quoting at the NBBO on the Exchange, as
described above, particularly as the magnitude of the additive rebate
is not unreasonably high and is, instead, reasonably related to the
enhanced liquidity and market quality that such additive rebate is
designed to achieve.
Additionally, while the Exchange has no way of predicting with
certainty how the proposed new DLI Additive Rebate will impact Member
activity, the Exchange anticipates that several of the Members that
currently qualify for DLI Tiers 1 or 2 would also satisfy the required
criteria for the corresponding DLI Additive Rebate, which the Exchange
believes to be commensurate with the proposed additive rebate in each
case. The Exchange also notes that the proposed DLI Additive Rebate
will not adversely impact any Member's ability to qualify for reduced
fees or enhanced rebates offered under other pricing tiers or
incentives. Should a Member not meet the proposed required criteria,
the Member will merely not receive the additive rebate.
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 \28\ 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.
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\28\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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 decrease the Exchange's expenditures and
generate additional revenue with respect to its transaction pricing and
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.'' \29\
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\29\ See supra note 25.
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Intramarket Competition
As discussed above, 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 Provision Tiers, the DLI
Tiers, and Liquidity Removal Tier 1, and thus receive the proposed
enhanced rebates for executions of Added Displayed Volume or be charged
the proposed lower fee for executions of Removed Volume, as applicable,
would be available to all Members that meet the associated volume
requirements in any month. As noted above, the Exchange believes that
meeting the proposed new volume requirements of the Liquidity Provision
Tiers and Liquidity Removal Tier 1 is attainable for several market
participants, and the Exchange believes such thresholds are reasonably
related to the enhanced liquidity and market quality that such tiers
are designed to promote. Similarly, as described above, the Exchange
anticipates that several of the Members that currently qualify for DLI
Tiers 1 or 2 would also satisfy the required criteria for the
corresponding DLI Additive Rebate, which the Exchange believes to be
commensurate with the proposed additive rebate in each case, and the
Exchange believes that it is appropriate for the proposed DLI Additive
Rebate to be available only to Members that qualify for DLI Tier 1 or
DLI Tier 2 in recognition of the benefits that such Members provide to
the Exchange and market participants, particularly as the magnitude of
the additive rebate is not unreasonably high and is, instead,
reasonably related to the enhanced liquidity and market quality that
such additive rebate is designed to achieve. Lastly, as noted above,
the proposed reduced standard rebates for executions of Added Displayed
Volume and Added Non-Displayed Sub-Dollar Volume, as well as the
proposed increased standard fee for executions of Removed Volume, would
apply equally to all Members. For the foregoing reasons, 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 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 17% 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
[[Page 2662]]
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 Added Displayed Volume, Removed Volume,
Removed Sub-Dollar Volume, and Added Non-Displayed Sub-Dollar 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
change is a competitive proposal through which the Exchange is seeking
to decrease the Exchange's expenditures and generate additional revenue
with respect to its transaction pricing and to encourage additional
order flow to the Exchange through volume-based incentives and
discounts, which have been widely adopted by exchanges, and standard
pricing that are comparable to, and competitive with, pricing for
similar executions in place at other exchanges.\30\ 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 standard pricing for executions of Added
Displayed Volume, Removed Sub-Dollar Volume, and Added Non-Displayed
Sub-Dollar Volume and similar pricing incentives and discounts to
market participants that achieve certain volume criteria and
thresholds.
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\30\ See supra notes 7, 20, and 22.
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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.'' \31\ 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'. . . .''.\32\ 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.
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\31\ See supra note 25.
\32\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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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 \33\ and Rule 19b-4(f)(2) \34\ thereunder.
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\33\ 15 U.S.C. 78s(b)(3)(A)(ii).
\34\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule 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-2021-21 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-2021-21. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. All submissions should refer to
File Number SR-MEMX-2021-21 and should be submitted on or before
February 8, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00750 Filed 1-14-22; 8:45 am]
BILLING CODE 8011-01-P
