Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 14923-14931 [2022-05483]

Download as PDF Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices jspears on DSK121TN23PROD with NOTICES1 Exchange Act—including the requirement under Section 6(b)(5) that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices—and it must disapprove the filing if it does not make such a finding.151 Thus, even if a proposed rule change purports to protect investors from a particular type of investment risk—such as the susceptibility of an asset to loss or theft—the proposed rule change may still fail to meet the requirements under the Exchange Act.152 Here, even if it were true that, compared to trading in unregulated bitcoin spot markets, trading a bitcoinbased ETP on a national securities exchange provides some additional protection to investors, the Commission must consider this potential benefit in the broader context of whether the proposal meets each of the applicable requirements of the Exchange Act.153 As explained above, for bitcoin-based ETPs, the Commission has consistently required that the listing exchange have a comprehensive surveillance-sharing agreement with a regulated market of significant size related to bitcoin, or demonstrate that other means to prevent fraudulent and manipulative acts and practices are sufficient to justify dispensing with the requisite surveillance-sharing agreement. The listing exchange has not met that requirement here. Therefore, the Commission is unable to find that the proposed rule change is consistent with the statutory standard. Pursuant to Section 19(b)(2) of the Exchange Act, the Commission must disapprove a proposed rule change filed by a national securities exchange if it does not find that the proposed rule change is consistent with the applicable requirements of the Exchange Act— including the requirement under Section 6(b)(5) that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices.154 For the reasons discussed above, BZX has not met its burden of demonstrating that the proposal is consistent with Exchange Act Section 6(b)(5),155 and, 151 See Exchange Act Section 19(b)(2)(C), 15 U.S.C. 78s(b)(2)(C). 152 See SolidX Order, 82 FR 16259; VanEck Order, 86 FR 54550–51; WisdomTree Order, 86 FR 69344; Kryptoin Order, 86 FR 74179; Valkyrie Order, 86 FR 74163; SkyBridge Order, 87 FR 3881; Wise Origin Order, 87 FR 5538. 153 See supra note 132. 154 See 15 U.S.C. 78s(b)(2)(C). 155 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 14923 accordingly, the Commission must disapprove the proposal.156 solicit comments on the proposed rule change from interested persons. D. Other Comments 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 March 1, 2022. The text of the proposed rule change is provided in Exhibit 5. One comment letter also addresses the general nature and uses of bitcoin.157 Ultimately, however, additional discussion of these topics is unnecessary, as they do not bear on the basis for the Commission’s decision to disapprove the proposal. IV. Conclusion For the reasons set forth above, the Commission does not find, pursuant to Section 19(b)(2) of the Exchange Act, that the proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, with Section 6(b)(5) of the Exchange Act. It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act, that proposed rule change SR– CboeBZX–2021–052 be, and hereby is, disapproved. By the Commission. Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2022–05500 Filed 3–15–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–94394; File No. SR–MEMX– 2022–01] Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange’s Fee Schedule March 10, 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 February 28, 2022, 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 156 In disapproving the proposed rule change, the Commission has considered its impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 157 See letter from Sam Ahn (Aug. 31, 2021). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend the Fee Schedule to: (i) Adopt a new NBBO Setter Tier that provides an additive 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’’) and that establish the national best bid or offer (‘‘NBBO’’); (ii) modify the Exchange’s pricing for executions of orders in securities priced at or above $1.00 per share that add non-displayed liquidity to the Exchange (such orders, ‘‘Added Non-Displayed Volume’’) by reducing the standard rebates for such executions and adopting tiered pricing under new Non-Display Add Tiers that provide enhanced rebates for such executions; (iii) modify the required criteria under Liquidity Provision Tier 3; (iv) reduce the standard rebate for executions of Added Displayed Volume; (v) reduce the standard rebate for executions of Retail Orders 4 in 3 See Exchange Rule 1.5(p). ‘‘Retail Order’’ means an agency or riskless principal order that meets the criteria of FINRA 4A E:\FR\FM\16MRN1.SGM Continued 16MRN1 14924 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices jspears on DSK121TN23PROD with NOTICES1 securities priced at or above $1.00 per share that add displayed liquidity to the Exchange (such orders, ‘‘Added Displayed Retail Volume’’); (vi) increase the standard 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’’); (vii) modify Liquidity Removal Tier 1 by increasing the fee for executions of Removed Volume and modifying the required criteria under such tier; (viii) eliminate the DLI Additive Rebate for DLI Tier 2; and (ix) eliminate the Targeted Step-Up Tier. The Exchange first notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 registered equities exchanges, as well as a number of alternative trading systems and other off-exchange venues, to which market participants may direct their order flow. Based on publicly available information, no single registered equities exchange currently has more than approximately 16.5% of the total market share of executed volume of equities trading.5 Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow, and the Exchange currently represents approximately 4% of the overall market share.6 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 Rule 5320.03 that originates from a natural person and is submitted to the Exchange by a Retail Member Organization (‘‘RMO’’), provided that no change is made to the terms of the order with respect to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. See Exchange Rule 11.21(a). 5 Market share percentage calculated as of February 25, 2022. The Exchange receives and processes data made available through consolidated data feeds (i.e., CTS and UTDF). 6 Id. VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. Adoption of NBBO Setter Tier The Exchange proposes to adopt a new volume-based tier, referred to by the Exchange as the NBBO Setter Tier, in which the Exchange will provide an additive rebate for executions of Added Displayed Volume (other than Retail Orders) that establish the NBBO (such orders, ‘‘Setter Volume’’).7 Under the proposed NBBO Setter Tier, the Exchange will provide an additive rebate of $0.0003 per share for executions of Setter Volume for a Member that qualifies for the NBBO Setter Tier by achieving an ADAV 8 with respect to orders with Fee Code ‘‘B’’ (as assigned on the execution reports provided by the Exchange 9) that is equal to or greater than 0.10% of the TCV.10 The $0.0003 per share additive rebate will be provided in addition to the rebate that is otherwise applicable to each of a qualifying Members’ orders that constitutes Setter Volume (including a rebate provided under another pricing tier/incentive).11 The 7 An order that is entered at the most aggressive price both on the Exchange’s order book and according to the then-current consolidated data from the applicable securities information processor and direct data feeds used by the Exchange will be determined to have established the NBBO for purposes of the NBBO Setter Tier without regard to whether a more aggressive order is entered prior to the original order being executed. 8 As set forth on the Fee Schedule, ‘‘ADAV’’ means the average daily added volume calculated as the number of shares added per day, which is calculated on a monthly basis. 9 The Exchange notes that all orders (other than Retail Orders, which are assigned a Fee Code of ‘‘Br’’) in securities priced below, at or above $1.00 per share that add displayed liquidity to the Exchange and that establish the NBBO are assigned a Fee Code of ‘‘B’’ on the execution reports provided by the Exchange. The Exchange further notes that the Fee Code assigned to any such order to indicate that such order also qualifies for a pricing tier/incentive (e.g., ‘‘B1’’, ‘‘B2’’, ‘‘B3’’, ‘‘Bq1’’ and ‘‘Bq2’’) is not provided on the execution reports but instead is provided on the monthly invoices after a determination of tier/incentive qualification for a particular month has been made; thus, any such order that also qualifies for a pricing tier/incentive would still be assigned a Fee Code of ‘‘B’’ (rather than the applicable tier/incentive Fee Code) on the execution reports and would therefore be counted in determining whether a Member qualifies for the NBBO Setter Tier. 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 The proposed pricing for the NBBO Setter Tier is referred to by the Exchange on the Fee Schedule under the new description ‘‘NBBO Setter Tier’’ with a Fee Code of ‘‘S’’ to be appended to the otherwise applicable Fee Code assigned by the Exchange on the monthly invoices for qualifying executions (including Fee Codes ‘‘B’’, ‘‘B1’’, ‘‘B2’’, ‘‘B3’’, ‘‘Bq1’’ and ‘‘Bq2’’). PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 Exchange notes that the additive rebate will not apply to executions of orders in securities priced below $1.00 per share. The proposed NBBO Setter Tier is designed to attract aggressively priced displayed liquidity to the Exchange by providing an additional rebate for executions of Setter Volume to Members that contribute to establishing the NBBO on the Exchange by achieving the Fee Code ‘‘B’’ volume threshold described above, thereby promoting price discovery and market quality on the Exchange. The Exchange notes that the proposed NBBO Setter Tier is comparable to other volume-based incentives and discounts, which have been widely adopted by exchanges (including the Exchange), including similar pricing incentives applicable to executions of orders that establish the NBBO.12 Modify Pricing for Added NonDisplayed Volume The Exchange proposes to modify its pricing for executions of Added NonDisplayed Volume by reducing the standard rebates for such executions and adopting tiered pricing under new Non-Display Add Tiers that provide enhanced rebates for such executions. Added Non-Displayed Volume includes both: (i) Pegged Orders 13 with a Midpoint Peg 14 instruction (such orders, ‘‘Midpoint Peg orders’’) in securities priced at or above $1.00 per share that add liquidity to the Exchange (such orders, ‘‘Added Midpoint Volume’’) and (ii) orders that are not Midpoint Peg orders in securities priced at or above $1.00 per share that add non-displayed liquidity to the Exchange (such orders, ‘‘Added Non-Midpoint Hidden Volume’’). Currently, the Exchange provides standard rebates of $0.0025 per share and $0.0020 per share for executions of Added Midpoint Volume and Added Non-Midpoint Hidden Volume, respectively. The Exchange now proposes to reduce each of these 12 See, e.g., Securities Exchange Act Release No. 73813 (December 11, 2014), 79 FR 75197 (December 17, 2014) (SR–BATS–2014–063) (notice of filing and immediate effectiveness of fee changes adopted by BATS, including the adoption of ‘‘NBBO Setter Tiers’’ that provide additive rebates for executions of orders that establish the NBBO to Members that qualify for such tiers by achieving a specified ADAV threshold with respect to orders that add displayed liquidity and that establish the NBBO). 13 Pegged Orders are described in Exchange Rules 11.6(h) and 11.8(c) and generally defined as an order that is pegged to a reference price and automatically re-prices in response to changes in the NBBO. 14 A Midpoint Peg instruction is an instruction that may be placed on a Pegged Order that instructs the Exchange to peg the order to midpoint of the NBBO. See Exchange Rule 11.6(h)(2). E:\FR\FM\16MRN1.SGM 16MRN1 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices jspears on DSK121TN23PROD with NOTICES1 standard rebates to $0.0018 per share.15 The purpose of reducing the standard rebates for executions of Added Midpoint Volume and Add NonMidpoint Hidden Volume is for business and competitive reasons, as the Exchange believes reducing such rebates as proposed 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 the proposed standard rebate for executions of Added Midpoint Volume remains higher than, and competitive with, the standard rebates provided by at least one other exchange for executions of similar orders.16 The Exchange also notes that the proposed standard rebate for executions of Added Non-Midpoint Hidden Volume remains higher than, and competitive with, the standard rebates provided by at least one other exchange for executions of similar orders.17 In connection with the proposed reduction of the standard rebates for executions of Added Non-Displayed Volume (i.e., both Added Midpoint Volume and Added Non-Midpoint Hidden Volume) described above, the Exchange is proposing to adopt new volume-based tiers applicable to such executions, referred to by the Exchange as Non-Display Add Tiers 1 and 2, in which the Exchange would provide enhanced rebates for executions of Added Non-Displayed Volume for Members that achieve the associated volume thresholds. Specifically, under proposed Non-Display Add Tier 1, the Exchange would provide a rebate of 15 The proposed standard pricing for executions of Added Midpoint Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added non-displayed volume, Midpoint Peg’’ and such orders will continue to receive a Fee Code of ‘‘M’’ on execution reports. The proposed standard pricing for executions of Added Non-Midpoint Hidden Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added non-displayed volume’’ and such orders will continue to receive a Fee Code of ‘‘H’’ on execution reports. 16 See, e.g., the Nasdaq Price List—Trading Connectivity (available at https://nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2), which reflects a standard rebate of $0.0014 per share for executions of orders in Tape A and Tape B securities priced at or above $1.00 per share that add non-displayed midpoint liquidity and a standard rebate of $0.0010 per share for executions of orders in Tape C securities priced at or above $1.00 per share that add non-displayed midpoint liquidity. 17 See, e.g., 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 $0.0010 per share for executions of orders in securities priced at or above $1.00 per share that add non-displayed liquidity. VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 $0.0028 per share for executions of Added Non-Displayed Volume for Members that qualify for such tier by achieving a Non-Displayed ADAV 18 that is equal to or greater than 5,000,000 shares.19 Additionally, under proposed Non-Display Add Tier 2, the Exchange would provide a rebate of $0.0024 per share for executions of Added NonDisplayed Volume for Members that qualify for such tier by achieving a NonDisplayed ADAV that is equal to or greater than 1,000,000 shares (but less than 5,000,000 shares).20 The Exchange proposes to provide Members that qualify for Non-Display Add Tier 1 or Non-Display Add Tier 2 free executions of orders (including Midpoint Peg orders) in securities priced below $1.00 per share that add non-displayed liquidity to the Exchange, which is the same as the standard pricing that is currently applicable to such executions for all Members. The Exchange believes that the proposed Non-Display Add Tiers provide an incremental incentive for Members to maintain or strive for higher Non-Displayed ADAV on the Exchange in order to qualify for the enhanced rebates for executions of Added NonDisplayed Volume, and as such, are designed to encourage Members to maintain or increase their order flow (particularly in the form of liquidity adding non-displayed orders) to the Exchange, thereby contributing to a deeper and more liquid market to the benefit of all market participants. The 18 As proposed, the term ‘‘Non-Displayed ADAV’’ means ADAV with respect to non-displayed orders (including Midpoint Peg orders). The Exchange proposes to add this definition of Non-Displayed ADAV under the ‘‘Definitions’’ section of the Fee Schedule. 19 The proposed pricing for Non-Display Add Tier 1 is referred to by the Exchange on the Fee Schedule under the new description ‘‘Added nondisplayed volume, Non-Display Add Tier 1’’ with a Fee Code of ‘‘H1’’ for qualifying Added NonMidpoint Hidden Volume and a Fee Code of ‘‘M1’’ for qualifying Added Midpoint Volume assigned on the monthly invoices provided by the Exchange. The Exchange notes that because the determination of whether a Member qualifies for Non-Display Add Tier 1 for a particular month will not be made until after the month-end, the Exchange will provide the Fee Code otherwise applicable to such transactions (i.e., ‘‘H’’ or ‘‘M’’, as applicable) on the execution reports provided to Members during the month, and it will only designate the Fee Code applicable to the achieved pricing tier on the monthly invoices, which are provided after such determination has been made. The Exchange also notes that this is how it applies Fee Codes for its tier-based pricing today and how it will apply Fee Codes for any other tier-based pricing described herein. 20 The proposed pricing for Non-Display Add Tier 2 is referred to by the Exchange on the Fee Schedule under the new description ‘‘Added nondisplayed volume, Non-Display Add Tier 2’’ with a Fee Code of ‘‘H2’’ for qualifying Added NonMidpoint Hidden Volume and a Fee Code of ‘‘M2’’ for qualifying Added Midpoint Volume assigned on the monthly invoices provided by the Exchange. PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 14925 Exchange notes that the proposed NonDisplay Add Tiers are comparable to other volume-based incentives and discounts, which have been widely adopted by exchanges (including the Exchange), including pricing tiers that provide enhanced rebates for executions of Added Non-Displayed Volume.21 Modify Criteria Under Liquidity Provision Tier 3 The Exchange currently offers three Liquidity Provision Tiers in which the Exchange provides enhanced rebates for executions of Added Displayed Volume based on a Member achieving the corresponding volume-based threshold (i.e., the required criteria) for a particular tier. Currently, a Member qualifies for Liquidity Provision Tier 3, and thus receives an enhanced rebate of $0.0027 per share for executions of Added Displayed Volume under such tier, by achieving an ADAV that is equal to or greater than 0.05% of the TCV. Now, the Exchange proposes to modify the required criteria under Liquidity Provision Tier 3 such that a Member would now qualify for such tier by achieving any of the three following volume-based thresholds: (1) An ADAV that is equal to or greater than 0.05% of the TCV; (2) a Step-Up Displayed ADAV 22 from February 2022 that is equal to or greater than 0.02% of the TCV; or (3) a Midpoint ADAV 23 that is equal to or greater than 1,000,000 shares. Thus, such proposed changes would keep the existing ADAV threshold intact and also provide two alternative volume thresholds that a Member may choose to achieve in order to qualify for Liquidity Provision Tier 3, including one threshold based on a Member increasing its Displayed ADAV above its Displayed ADAV in February 2022, which is designed to encourage Members to increase their orders that add displayed liquidity to the Exchange, 21 For example, Cboe BZX currently offers ‘‘NonDisplay Add Volume Tiers’’ in which Cboe BZX provides enhanced rebates for executions of orders in securities priced at or above $1.00 per share that add non-displayed liquidity for members that qualify for such tiers by achieving certain specified volume thresholds. See the Cboe BZX equities trading fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/ fee_schedule/bzx/). 22 As proposed, the term ‘‘Step-Up Displayed ADAV’’ means Displayed ADAV in the relevant baseline month subtracted from current Displayed ADAV. As proposed, the term ‘‘Displayed ADAV’’ means ADAV with respect to displayed orders. The Exchange proposes to add these definitions of StepUp Displayed ADAV and Displayed ADAV under the ‘‘Definitions’’ section of the Fee Schedule. 23 As proposed, the term ‘‘Midpoint ADAV’’ means ADAV with respect to Midpoint Peg orders. The Exchange proposes to add this definition of Midpoint ADAV under the ‘‘Definitions’’ section of the Fee Schedule. E:\FR\FM\16MRN1.SGM 16MRN1 14926 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices and one threshold based on a Member maintaining or increasing its Midpoint ADAV above the specified amount, which is designed to encourage Members to maintain or increase their Midpoint Peg orders that add liquidity to the Exchange. The Exchange is not proposing to modify the pricing associated with Liquidity Provision Tier 3. The Exchange believes that Liquidity Provision Tier 3, as modified, would encourage the submission of more diverse types of order flow to the Exchange, as it provides two additional alternative thresholds based on different types of volume that Members may choose to achieve, thereby contributing to a more robust and well-balanced market ecosystem on the Exchange to the benefit of all Members. The Exchange notes that Liquidity Provision Tier 3, as modified, would continue to be available to all Members and, while the Exchange has no way of predicting with certainty how the proposed new criteria will impact Member activity, the Exchange expects that more Members will qualify for such tier than currently do under the proposed new criteria, as it is more expansive and provides two additional alternative thresholds that Members may choose to achieve. jspears on DSK121TN23PROD with NOTICES1 Reduce Standard Rebate for Added Displayed Volume Currently, the Exchange provides a standard rebate of $0.0022 per share for executions of Added Displayed Volume. The Exchange now proposes to reduce the standard rebate for executions of Added Displayed Volume to $0.0020 per share.24 The purpose of reducing the standard rebate for executions of Added Displayed Volume is for business and competitive reasons, as the Exchange believes that reducing such rebate as proposed 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 remains in line with, or higher than, the standard rebates provided by other exchanges for executions of orders in securities priced 24 The proposed standard rebate 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, on execution reports. VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 at or above $1.00 per share that add displayed liquidity.25 Reduce Standard Rebate for Added Displayed Retail Volume Currently, the Exchange provides a standard rebate of $0.0037 per share for executions of Added Displayed Retail Volume. The Exchange now proposes to reduce the standard rebate for executions of Added Displayed Retail Volume to $0.0035 per share.26 The purpose of reducing the standard rebate for executions of Added Displayed Retail Volume is for business and competitive reasons, as the Exchange believes that reducing such rebate as proposed 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 Retail Volume remains higher than, and competitive with, the standard rebates provided by other exchanges for executions of attested retail orders in securities priced at or above $1.00 per share that add displayed liquidity.27 25 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 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 $0.0016 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 (‘‘Nasdaq’’) 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. 26 The proposed standard rebate for executions of Added Displayed Retail Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume, Retail Order’’ with a Fee Code of ‘‘Br’’, ‘‘Dr’’ or ‘‘Jr’’, as applicable, on execution reports. 27 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 rebate of $0.0032 per share for executions of attested retail orders in securities priced at or above $1.00 per share that add displayed liquidity; the Cboe EDGX Exchange, Inc. (‘‘Cboe EDGX’’) equities trading fee schedule on its public website (available at https:// www.cboe.com/us/equities/membership/fee_ schedule/edgx/), which reflects a standard rebate of $0.0032 per share for executions of attested retail orders in securities priced at or above $1.00 per share that add displayed liquidity. PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 Increase Standard Fee for Removed Volume Currently, the Exchange charges a standard fee of $0.0029 per share for executions of Removed Volume. The Exchange now proposes to increase the standard fee for executions of Removed Volume to $0.0030 per share.28 The purpose of increasing the standard fee for executions of Removed Volume is for business and competitive reasons, as the Exchange believes that increasing such fee as proposed would generate additional revenue to offset some of the costs associated with the Exchange’s current pricing structure, which provides various rebates for liquidityadding 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 Volume remains in line with the standard fees charged by other exchanges for executions of orders in securities priced at or above $1.00 per share that remove liquidity.29 Modify Liquidity Removal Tier 1 The Exchange currently offers Liquidity Removal Tier 1 in which qualifying Members are charged a discounted fee of $0.0028 per share for executions of Removed Volume 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. Now, the Exchange proposes to modify Liquidity Removal Tier 1 by increasing the fee for executions of Removed Volume and modifying the required criteria under such tier. Specifically, the Exchange proposes to charge a fee of $0.00285 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 0.30% of the TCV; or (2) an ADV of at least 0.60% of the TCV.30 28 The proposed standard fee for executions of Removed Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Removed volume from MEMX Book’’ with a Fee Code of ‘‘R’’ on execution reports. 29 See, e.g., the Cboe EDGX equities trading fee schedule on its public website (available at https:// www.cboe.com/us/equities/membership/fee_ schedule/edgx/), which reflects a standard fee of $0.0030 per share for executions of orders in securities priced at or above $1.00 per share that remove liquidity; the Nasdaq Price List—Trading Connectivity (available at https://nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2), which reflects a standard fee of $0.0030 per share for executions of orders in securities priced at or above $1.00 per share that remove liquidity. 30 The proposed pricing for Liquidity Removal Tier 1 is referred to by the Exchange on the Fee E:\FR\FM\16MRN1.SGM 16MRN1 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices jspears on DSK121TN23PROD with NOTICES1 The Exchange believes that the proposed fee for executions of Removed Volume under Liquidity Removal Tier 1 represents only a modest increase from the current fee charged for such executions under such tier. The purpose of increasing such fee as proposed 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 lower both the ADAV threshold and the ADV threshold such that each threshold would be easier for Members to achieve and, in turn, while the Exchange has no way of predicting with certainty how the proposed new criteria will impact Member activity, the Exchange expects that more Members will strive to qualify for such tier than currently do, resulting in the submission of additional order flow to the Exchange. The Exchange also notes that Liquidity Removal Tier 1, as modified, would continue to be available to all Members. Eliminate DLI Additive Rebate for DLI Tier 2 The Exchange proposes to eliminate the DLI Additive Rebate for DLI Tier 2. Currently, the Exchange offers DLI Tiers 1 and 2 in which qualifying Members are provided a corresponding enhanced rebate for executions of Added Displayed Volume by quoting at the NBBO for a significant portion of each day in a specified number of securities, including a specified number of DLI Target Securities, with DLI Tier 1 providing a higher rebate than DLI Tier 2 commensurate with NBBO quoting requirements in a larger number of securities. Additionally, the Exchange currently offers a DLI Additive Rebate incentive that is applicable to DLI Tiers 1 and 2, which provides an additive rebate of $0.0001 per share for executions of Added Displayed Volume where: (1) For a Member that qualifies for DLI Tier 1, such Member has an ADAV that is equal to or greater than Schedule under the existing description ‘‘Removed volume from MEMX Book, Liquidity Removal Tier 1’’ with a Fee Code of ‘‘R1’’ assigned on the monthly invoices provided by the Exchange. The Exchange is not proposing to change the fee charged under Liquidity Removal Tier 1 for executions of securities priced below $1.00 per share. VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 0.30% of the TCV; and (2) for a Member that qualifies for DLI Tier 2, such Member has an ADAV that is equal to or greater than 0.10% of the TCV. The Exchange now proposes to eliminate the DLI Additive Rebate for DLI Tier 2, but keep the DLI Additive Rebate for DLI Tier 1. The reason for eliminating the DLI Additive Rebate for DLI Tier 2 is that the incentive is not achieving the level of participation that the Exchange expected, and thus, is not accomplishing the goal that the Exchange had when initially adopting this incentive. Due to the lower-thanexpected level of participation, the Exchange does not believe the proposed elimination of Targeted Step-Up Tier [sic] will have a significant impact on any Member’s trading behavior on the Exchange. The Exchange therefore no longer wishes to, nor is it required to, maintain such tier. More specifically, the proposed change removes such incentive, as the Exchange would rather redirect future resources and funding into other incentives and tiers intended to incentivize increased order flow. The Exchange notes that several Members currently qualify for the DLI Additive Rebate for DLI Tier 1, which is why the Exchange is not proposing to eliminate that incentive since it has achieved the expected level of participation. 14927 well-balanced market ecosystem on the Exchange to the benefit of all Members.33 The Exchange now proposes to eliminate the Targeted StepUp Tier, as the incentive is not achieving the level of participation that the Exchange expected, and thus, is not accomplishing the goal that the Exchange had when initially adopting this incentive. Due to the lower-thanexpected level of participation, the Exchange does not believe the proposed elimination of Targeted Step-Up Tier will have a significant impact on any Member’s trading behavior on the Exchange. The Exchange therefore no longer wishes to, nor is it required to, maintain such tier. More specifically, the proposed rule change removes such tier, as the Exchange would rather redirect future resources and funding into other programs and tiers intended to incentivize increased order flow. In connection with the elimination of the Targeted Step-Up Tier, the Exchange also proposes to delete the definition of the term ‘‘Targeted Step-Up Securities’’ from the ‘‘Definitions’’ section of the Fee Schedule, as such term would no longer be used on the Fee Schedule. Eliminate Targeted Step-Up Tier Finally, the Exchange proposes to eliminate the Targeted Step-Up Tier. The Exchange currently offers the Targeted Step-Up Tier in which it provides an additive rebate of $0.0002 per share to executions of orders (other than displayed Retail Orders) in securities priced at or above $1.00 per share that add liquidity to the Exchange (such orders, ‘‘Added Volume’’) for Members that qualify for such tier by achieving: (1) A Step-Up ADAV 31 from October 2021 that is equal to or greater than 0.05% of the TCV in the Targeted Step-Up Securities; 32 or (2) an ADAV that is equal to or greater than 0.08% of the TCV in the Targeted Step-Up Securities. The Exchange adopted the Targeted Step-Up Tier in November 2021 for the purpose of encouraging Members to increase their volume on the Exchange in the Targeted Step-Up Securities, thereby improving its market quality with respect to such securities and contributing to a more robust and 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,34 in general, and with Sections 6(b)(4) and 6(b)(5) of the Act,35 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. As discussed above, the Exchange operates in a highly fragmented and competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient, and the Exchange represents only a small percentage of the overall market. The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in 31 As set forth on the Fee Schedule, ‘‘Step-Up ADAV’’ means ADAV in the relevant baseline month subtracted from current ADAV. 32 As set forth on the Fee Schedule, ‘‘Targeted Step-Up Securities’’ means a list of securities designated as such, the universe of which will be determined by the Exchange and published on the Exchange’s website. 33 See 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). 34 15 U.S.C. 78f. 35 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1 jspears on DSK121TN23PROD with NOTICES1 14928 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices 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.’’ 36 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 aggressively priced liquidity and more diverse types of 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. The Exchange believes that the proposed NBBO Setter Tier is a reasonable means to encourage Members to not only increase their order flow to the Exchange but also to contribute to price discovery and market quality on the Exchange by submitting aggressively priced displayed liquidity. As noted above, the proposed NBBO Setter Tier is comparable to other volume-based incentives and discounts, which have been widely adopted by exchanges (including the Exchange) and are equitable and not unfairly discriminatory because they are open to all Members on an equal basis and provide additional benefits or discounts that are reasonably related to the value to an exchange’s market quality associated with higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns and the introduction of higher volumes of orders into the price and volume discovery process. The Exchange believes the proposed NBBO Setter Tier is equitable and not unfairly 36 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 discriminatory for these same reasons, as it is available to all Members and is designed to incentivize the entry of aggressively priced displayed liquidity that will create tighter spreads, thereby promoting price discovery and market quality on the Exchange to the benefit of all Members and public investors. As such, the Exchange believes the additive rebate for executions of Setter Volume provided under the NBBO Setter Tier for qualifying Members is reasonably related to the market quality benefits that such tier is designed to promote. Additionally, as noted above, at least one other U.S. equity exchange has adopted a similar pricing incentive applicable to executions of orders that establish the NBBO.37 The Exchange believes that the proposed changes to reduce the standard rebates provided for executions of Added Non-Displayed Volume (i.e., both Added Midpoint Volume and Added Non-Midpoint Hidden Volume) are reasonable because, as described above, such changes 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 the proposed new standard rebates for executions of Added Midpoint Volume and Added Non-Midpoint Hidden Volume remain higher than, and competitive with, the standard rebates provided by other exchanges for executions of similar orders.38 The Exchange also believes the proposed standard rebates for executions of Added Midpoint Volume and Added Non-Midpoint Hidden Volume are equitable and not unfairly discriminatory, as such standard rebates will apply equally to all Members. The Exchange believes that the proposed Non-Display Add Tiers 1 and 2 are reasonable because such tiers would provide Members with an additional incentive to achieve certain volume thresholds on the Exchange and, in return, receive enhanced rebates for Added Non-Displayed Volume commensurate with the benefits of increased activity. The Exchange also believes that the proposed Non-Display Add Tiers 1 and 2 are reasonable, equitable, and not unfairly discriminatory for the same reasons applicable to other volume-based incentives and discounts described above, in that such tiers would be available to all Members and are designed to encourage Members to 37 See 38 See PO 00000 supra note 12. supra notes 16–17. Frm 00109 Fmt 4703 Sfmt 4703 maintain or increase their order flow (particularly in the form of liquidity adding non-displayed orders) to the Exchange, thereby contributing to a deeper and more liquid market to the benefit of all market participants. Further, the proposed new Non-Display Add Tiers 1 and 2 are reasonable as such tiers would provide Members with opportunities to qualify for enhanced rebates for executions of Added NonDisplayed Volume in a manner that provides increasingly higher benefits for satisfying increasingly more stringent criteria. The Exchange also believes it is reasonable, equitable and not unfairly discriminatory to provide Members that qualify for Non-Display Add Tier 1 or Non-Display Add Tier 2 free executions of orders (including Midpoint Peg orders) in securities priced below $1.00 per share that add non-displayed liquidity to the Exchange, as this is the same as the standard pricing that is currently applicable to such executions for all Members. The Exchange believes that the proposed change to modify the required criteria under Liquidity Provision Tier 3 is reasonable because, as noted above, such change would keep the existing ADAV threshold intact and also provide two additional alternative volume thresholds that a Member may choose to achieve that are based on different types of volume, which would incentivize the submission of different types of order flow, thereby contributing to a more robust and well-balanced market ecosystem on the Exchange to the benefit of all Members. The Exchange also believes the proposed new criteria are equitable and not unfairly discriminatory because all Members will continue to be eligible to meet such criteria, including the Members that currently meet the existing ADAV threshold that is not changing. Further, as noted above, while the Exchange has no way of predicting with certainty how the proposed new criteria will impact Member activity, the Exchange expects that more Members will be able to qualify for such tier under the proposed new criteria, which is more expansive. The Exchange believes that the proposed reduced standard rebate provided for executions of Added Displayed Volume (i.e., $0.0020 per share) is reasonable because the Exchange believes it represents only a modest decrease (i.e., $0.0002 per share) from the current standard rebate provided for executions of Added Displayed Volume (i.e., $0.0022 per share) and, as noted above, it remains in line with, or higher than, the standard rebates provided by other exchanges for E:\FR\FM\16MRN1.SGM 16MRN1 jspears on DSK121TN23PROD with NOTICES1 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices executions of orders in securities priced at or above $1.00 per share that add displayed liquidity.39 Similarly, Exchange believes that the proposed reduced standard rebate provided for executions of Added Displayed Retail Volume (i.e., $0.0035 per share) is reasonable because the Exchange believes it represents only a modest decrease (i.e., $0.0002 per share) from the current standard rebate provided for executions of Added Displayed Retail Volume (i.e., $0.0037 per share) and, as noted above, it remains higher than, and competitive with, the standard rebates provided by other exchanges for executions of attested retail orders in securities priced at or above $1.00 per share that add displayed liquidity.40 The Exchange also believes that the proposed increased standard fee charged for executions of Removed Volume (i.e., $0.0030 per share) is reasonable because the Exchange believes it represents only a modest increase (i.e., $0.0001 per share) from the current standard fee charged for executions of Removed Volume (i.e., $0.0029 per share) and, as noted above, it remains in line with the standard fees charged by other exchanges for executions of orders in securities priced at or above $1.00 per share that remove liquidity.41 The Exchange believes the proposed changes to reduce the standard rebate for executions of Added Displayed Volume, reduce the standard rebate for executions of Added Displayed Retail Volume, and increase the standard fee for executions of Removed Volume are reasonable because, as noted above, the Exchange believes such changes would act together 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. 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. The Exchange believes that the proposed increased fee charged for executions of Removed Volume under Liquidity Removal Tier 1 (i.e., $0.00285 per share) is reasonable because the Exchange believes it represents only a modest increase (i.e., $0.00005 per 39 See supra note 25. supra note 27. 41 See supra note 29. 40 See VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 share) from the current fee charged for executions of Removed Volume under Liquidity Removal Tier 1 (i.e., $0.0028 per share), and the Exchange is also proposing to lower both of the volume thresholds under such tier such that each threshold would be easier to achieve. Thus, while the Exchange is modestly increasing the fee under such tier, as noted above, it expects that more Members will strive to qualify for such tier due to the proposed lower criteria and, in turn, receive the corresponding discounted fee for executions of Removed Volume. The Exchange also believes this proposed change is reasonable, as it believes the proposed increased fee continues to be commensurate with the proposed lower criteria. The Exchange also believes the proposed increased fee and new criteria are equitable and not unfairly discriminatory because all Members will continue to be eligible to meet such criteria and qualify for Liquidity Removal Tier 1, and therefore, have the opportunity to pay a discounted fee for executions of Removed Volume. The Exchange believes the proposed rule changes to eliminate the DLI Additive Rebate for DLI Tier 2 and the Targeted Step-Up Tier are reasonable because the Exchange is not required to maintain such incentives or provide Members any opportunities to receive additive rebates. The Exchange believes the proposal to eliminate such incentives is also equitable and not unfairly discriminatory because it applies equally to all Members (i.e., the incentives will not be available for any Member). As noted above, neither of these incentives has achieved the level of participation the Exchange expected, and thus, such incentives are not accomplishing the goals that the Exchange had when initially adopting them. As the additional rebates offered under these incentives are not affecting Members’ behavior in the manner originally conceived by the Exchange in that there are lower-than-expected levels of participation, the Exchange does not believe the proposed elimination of such incentives will have a significant impact on any Member’s trading behavior on the Exchange. Furthermore, the proposed rule change to eliminate both the DLI Additive Rebate for DLI Tier 2 and the Targeted Step-Up Tier enables the Exchange to redirect resources and funding into other pricing incentives and tiers intended to incentivize increased order flow and enhance market quality for all Members. For the reasons discussed above, the Exchange submits that the proposal satisfies the requirements of Sections PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 14929 6(b)(4) and 6(b)(5) of the Act 42 in that it provides for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities and is not designed to unfairly discriminate between customers, issuers, brokers, or dealers. As described more fully below in the Exchange’s statement regarding the burden on competition, the Exchange believes that its transaction pricing is subject to significant competitive forces, and that the proposed fees and rebates described herein are appropriate to address such forces. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposal will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the proposal is intended to decrease the Exchange’s expenditures and generate additional revenue with respect to its transaction pricing, as well as to incentivize market participants to direct additional aggressively priced liquidity and more diverse types of order flow to the Exchange, thereby deepening liquidity and promoting market quality on the Exchange to the benefit of all market participants. 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.’’ 43 Intramarket Competition As discussed above, the Exchange believes that the proposal would incentivize Members to submit additional aggressively priced displayed liquidity (including liquidity that establishes the NBBO) to the Exchange, and to maintain or increase their order flow on the Exchange generally, thereby contributing to a deeper and more liquid market and promoting price discovery and market quality on the Exchange 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 42 15 U.S.C. 78f(b)(4) and (5). supra note 25. 43 See E:\FR\FM\16MRN1.SGM 16MRN1 jspears on DSK121TN23PROD with NOTICES1 14930 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices 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 proposed new NBBO Setter Tier and Non-Display Add Volume Tiers, and thus receive the proposed additive rebate for executions of Setter Volume or the proposed enhanced rebates for executions of Added Non-Displayed Volume, respectively, would be available to all Members that meet the associated volume requirements in any month. Similarly, as described above, Liquidity Provision Tier 3 and Liquidity Removal Tier 1 continue to be available to all Members that meet the associated volume criteria and, as noted above, the proposed new volume criteria under Liquidity Provision Tier 3 and Liquidity Removal Tier 1 include more expansive or lower volume thresholds, respectively, which the Exchange believes would enable more Members to possibly qualify for such tiers without impacting the ability of Members that currently qualify to continue to do so, and the Exchange believes the respective enhanced rebate and discounted fee provided under such tiers are reasonably related to the enhanced market quality that such tiers are designed to promote. Additionally, as noted above, the proposed reduced standard rebates for executions of Added Displayed Volume and Added Displayed Retail Volume, as well as the proposed increased standard fees for executions of Added Midpoint Volume, Add Non-Midpoint Hidden Volume and Removed Volume, would continue to apply equally to all Members in the same manner that such standard rates currently do today. Lastly, the Exchange does not believe the proposed changes to eliminate the DLI Additive Rebate for DLI Tier 2 and the Targeted Step-Up Tier will impose any burden on intramarket competition because such changes will apply to all Members uniformly, as in, such incentives will no longer be available to any Member, and, as described above, the Exchange does not believe the proposed elimination of such incentives will have a significant impact on any Member’s trading behavior on the Exchange. 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. VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 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 16.5% of the total market share of executed volume of equities trading. Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow. Moreover, the Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to new or different pricing structures being introduced into the market. Accordingly, competitive forces constrain the Exchange’s transaction fees and rebates, including with respect to executions of Added Displayed Volume, Added Displayed Retail Volume, Added Midpoint Volume, Added Non-Midpoint Hidden Volume, Removed Volume, and Setter 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 is comparable to, and/or competitive with, pricing for similar executions in place at other exchanges.44 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, Added Displayed Retail Volume, Added Midpoint Volume, Added Non44 See PO 00000 supra notes 12, 16, 17, 21, 25, 27 and 29. Frm 00111 Fmt 4703 Sfmt 4703 Midpoint Hidden Volume, and Removed Volume, as well as 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.’’ 45 The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. SEC, the D.C. Circuit stated as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’.46 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 47 and Rule 19b–4(f)(2) 48 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 45 See supra note 36. 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)). 47 15 U.S.C. 78s(b)(3)(A)(ii). 48 17 CFR 240.19b–4(f)(2). 46 NetCoalition E:\FR\FM\16MRN1.SGM 16MRN1 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Notices 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: jspears on DSK121TN23PROD with NOTICES1 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–2022–01 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–2022–01. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish VerDate Sep<11>2014 17:16 Mar 15, 2022 Jkt 256001 to make available publicly. All submissions should refer to File Number SR–MEMX–2022–01 and should be submitted on or before April≤ 6, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.49 Eduardo Aleman, Assistant Secretary. [FR Doc. 2022–05483 Filed 3–15–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–774, OMB Control No. 3235–0727] Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736. Extension: Rules 400–404 of Regulation Crowdfunding (Intermediaries) Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the collection of information provided for Rule 17Ab2–1 (17 CFR 240.17Ab2–1) and Form CA–1: Registration of Clearing Agencies (17 CFR 249b.200) under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) (15 U.S.C. 78a et seq.). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. The collections of information required under Rules 400 through 404 is mandatory for all funding portals. Form Funding Portal helps ensure that the Commission can make information about funding portals transparent and easily accessible to the investing public, including issuers and obligated persons who engage funding portals; investors who may purchase securities through offerings on funding portals; and other regulators. Further, the information provided on Form Funding Portal expands the amount of publicly available information about funding portals, including disciplinary history. Consequently, the rules and forms allows issuers and the investing public, as well as others, to become more fully 49 17 PO 00000 informed about funding portals in a more efficient manner. Rule 400 requires each person applying for registration with the Commission as a funding portal to file electronically with the Commission Form Funding Portal. Rule 400(a) requires a funding portal to become a member of a national securities association registered under Section 15A of the Exchange Act. Rule 400(b) requires a funding portal to file an amendment to Form Funding Portal if any information previously submitted on Form Funding Portal becomes inaccurate for any reason. Rule 400(c) provides that a funding portal can succeed to the business of a predecessor funding portal upon the successor filing a registration on Form Funding Portal and the predecessor filing a withdrawal on Form Funding Portal. Rule 400(d) requires a funding portal to promptly file a withdrawal of registration on Form Funding Portal upon ceasing to operate as a funding portal. Rule 400(e) states that duplicate originals of the applications and reports provided for in this section must be filed with surveillance personnel designated by any registered national securities association of which the funding portal is a member. Rule 400(f) requires a nonresident funding portal to: (1) Obtain a written consent and power of attorney appointing an agent for service of process in the United States; (2) furnish the Commission with the name and address of its agent for services of process on Schedule C of Form Funding Portal; (3) certify that it can, as a matter of law, and will provide the Commission and any registered national securities association of which it becomes a member with prompt access to its books and records and can, as a matter of law, and will submit to onsite inspection and examination by the Commission and any registered national securities association of which it becomes a member; and (4) provide the Commission with an opinion of counsel and certify on Schedule C on Form Funding Portal that the firm can, as a matter of law, provide the Commission and registered national securities association of which it becomes a member with prompt access to its books and records and can, as a matter of law, submit to onsite inspection and examination by the Commission and any registered national securities association of which it becomes a member.1 1 Exchange Act Section 3(h)(1)(C) permits us to impose, as part of our authority to exempt funding portals from broker registration, ‘‘such other CFR 200.30–3(a)(12). Frm 00112 Fmt 4703 Sfmt 4703 14931 Continued E:\FR\FM\16MRN1.SGM 16MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 87, Number 51 (Wednesday, March 16, 2022)]
[Notices]
[Pages 14923-14931]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05483]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94394; File No. SR-MEMX-2022-01]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend the 
Exchange's Fee Schedule

March 10, 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 February 28, 2022, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 March 1, 2022. The text of the proposed rule change 
is provided in Exhibit 5.
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    \3\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Fee 
Schedule to: (i) Adopt a new NBBO Setter Tier that provides an additive 
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'') and that establish the national best bid or 
offer (``NBBO''); (ii) modify the Exchange's pricing for executions of 
orders in securities priced at or above $1.00 per share that add non-
displayed liquidity to the Exchange (such orders, ``Added Non-Displayed 
Volume'') by reducing the standard rebates for such executions and 
adopting tiered pricing under new Non-Display Add Tiers that provide 
enhanced rebates for such executions; (iii) modify the required 
criteria under Liquidity Provision Tier 3; (iv) reduce the standard 
rebate for executions of Added Displayed Volume; (v) reduce the 
standard rebate for executions of Retail Orders \4\ in

[[Page 14924]]

securities priced at or above $1.00 per share that add displayed 
liquidity to the Exchange (such orders, ``Added Displayed Retail 
Volume''); (vi) increase the standard 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''); (vii) modify 
Liquidity Removal Tier 1 by increasing the fee for executions of 
Removed Volume and modifying the required criteria under such tier; 
(viii) eliminate the DLI Additive Rebate for DLI Tier 2; and (ix) 
eliminate the Targeted Step-Up Tier.
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    \4\ A ``Retail Order'' means an agency or riskless principal 
order that meets the criteria of FINRA Rule 5320.03 that originates 
from a natural person and is submitted to the Exchange by a Retail 
Member Organization (``RMO''), provided that no change is made to 
the terms of the order with respect to price or side of market and 
the order does not originate from a trading algorithm or any other 
computerized methodology. See Exchange Rule 11.21(a).
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 16.5% of the total market share 
of executed volume of equities trading.\5\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange 
possesses significant pricing power in the execution of order flow, and 
the Exchange currently represents approximately 4% of the overall 
market share.\6\ 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.
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    \5\ Market share percentage calculated as of February 25, 2022. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \6\ Id.
---------------------------------------------------------------------------

Adoption of NBBO Setter Tier
    The Exchange proposes to adopt a new volume-based tier, referred to 
by the Exchange as the NBBO Setter Tier, in which the Exchange will 
provide an additive rebate for executions of Added Displayed Volume 
(other than Retail Orders) that establish the NBBO (such orders, 
``Setter Volume'').\7\ Under the proposed NBBO Setter Tier, the 
Exchange will provide an additive rebate of $0.0003 per share for 
executions of Setter Volume for a Member that qualifies for the NBBO 
Setter Tier by achieving an ADAV \8\ with respect to orders with Fee 
Code ``B'' (as assigned on the execution reports provided by the 
Exchange \9\) that is equal to or greater than 0.10% of the TCV.\10\ 
The $0.0003 per share additive rebate will be provided in addition to 
the rebate that is otherwise applicable to each of a qualifying 
Members' orders that constitutes Setter Volume (including a rebate 
provided under another pricing tier/incentive).\11\ The Exchange notes 
that the additive rebate will not apply to executions of orders in 
securities priced below $1.00 per share.
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    \7\ An order that is entered at the most aggressive price both 
on the Exchange's order book and according to the then-current 
consolidated data from the applicable securities information 
processor and direct data feeds used by the Exchange will be 
determined to have established the NBBO for purposes of the NBBO 
Setter Tier without regard to whether a more aggressive order is 
entered prior to the original order being executed.
    \8\ As set forth on the Fee Schedule, ``ADAV'' means the average 
daily added volume calculated as the number of shares added per day, 
which is calculated on a monthly basis.
    \9\ The Exchange notes that all orders (other than Retail 
Orders, which are assigned a Fee Code of ``Br'') in securities 
priced below, at or above $1.00 per share that add displayed 
liquidity to the Exchange and that establish the NBBO are assigned a 
Fee Code of ``B'' on the execution reports provided by the Exchange. 
The Exchange further notes that the Fee Code assigned to any such 
order to indicate that such order also qualifies for a pricing tier/
incentive (e.g., ``B1'', ``B2'', ``B3'', ``Bq1'' and ``Bq2'') is not 
provided on the execution reports but instead is provided on the 
monthly invoices after a determination of tier/incentive 
qualification for a particular month has been made; thus, any such 
order that also qualifies for a pricing tier/incentive would still 
be assigned a Fee Code of ``B'' (rather than the applicable tier/
incentive Fee Code) on the execution reports and would therefore be 
counted in determining whether a Member qualifies for the NBBO 
Setter Tier.
    \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\ The proposed pricing for the NBBO Setter Tier is referred 
to by the Exchange on the Fee Schedule under the new description 
``NBBO Setter Tier'' with a Fee Code of ``S'' to be appended to the 
otherwise applicable Fee Code assigned by the Exchange on the 
monthly invoices for qualifying executions (including Fee Codes 
``B'', ``B1'', ``B2'', ``B3'', ``Bq1'' and ``Bq2'').
---------------------------------------------------------------------------

    The proposed NBBO Setter Tier is designed to attract aggressively 
priced displayed liquidity to the Exchange by providing an additional 
rebate for executions of Setter Volume to Members that contribute to 
establishing the NBBO on the Exchange by achieving the Fee Code ``B'' 
volume threshold described above, thereby promoting price discovery and 
market quality on the Exchange. The Exchange notes that the proposed 
NBBO Setter Tier is comparable to other volume-based incentives and 
discounts, which have been widely adopted by exchanges (including the 
Exchange), including similar pricing incentives applicable to 
executions of orders that establish the NBBO.\12\
---------------------------------------------------------------------------

    \12\ See, e.g., Securities Exchange Act Release No. 73813 
(December 11, 2014), 79 FR 75197 (December 17, 2014) (SR-BATS-2014-
063) (notice of filing and immediate effectiveness of fee changes 
adopted by BATS, including the adoption of ``NBBO Setter Tiers'' 
that provide additive rebates for executions of orders that 
establish the NBBO to Members that qualify for such tiers by 
achieving a specified ADAV threshold with respect to orders that add 
displayed liquidity and that establish the NBBO).
---------------------------------------------------------------------------

Modify Pricing for Added Non-Displayed Volume
    The Exchange proposes to modify its pricing for executions of Added 
Non-Displayed Volume by reducing the standard rebates for such 
executions and adopting tiered pricing under new Non-Display Add Tiers 
that provide enhanced rebates for such executions. Added Non-Displayed 
Volume includes both: (i) Pegged Orders \13\ with a Midpoint Peg \14\ 
instruction (such orders, ``Midpoint Peg orders'') in securities priced 
at or above $1.00 per share that add liquidity to the Exchange (such 
orders, ``Added Midpoint Volume'') and (ii) orders that are not 
Midpoint Peg orders in securities priced at or above $1.00 per share 
that add non-displayed liquidity to the Exchange (such orders, ``Added 
Non-Midpoint Hidden Volume'').
---------------------------------------------------------------------------

    \13\ Pegged Orders are described in Exchange Rules 11.6(h) and 
11.8(c) and generally defined as an order that is pegged to a 
reference price and automatically re-prices in response to changes 
in the NBBO.
    \14\ A Midpoint Peg instruction is an instruction that may be 
placed on a Pegged Order that instructs the Exchange to peg the 
order to midpoint of the NBBO. See Exchange Rule 11.6(h)(2).
---------------------------------------------------------------------------

    Currently, the Exchange provides standard rebates of $0.0025 per 
share and $0.0020 per share for executions of Added Midpoint Volume and 
Added Non-Midpoint Hidden Volume, respectively. The Exchange now 
proposes to reduce each of these

[[Page 14925]]

standard rebates to $0.0018 per share.\15\ The purpose of reducing the 
standard rebates for executions of Added Midpoint Volume and Add Non-
Midpoint Hidden Volume is for business and competitive reasons, as the 
Exchange believes reducing such rebates as proposed 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 the proposed standard rebate for executions of Added Midpoint 
Volume remains higher than, and competitive with, the standard rebates 
provided by at least one other exchange for executions of similar 
orders.\16\ The Exchange also notes that the proposed standard rebate 
for executions of Added Non-Midpoint Hidden Volume remains higher than, 
and competitive with, the standard rebates provided by at least one 
other exchange for executions of similar orders.\17\
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    \15\ The proposed standard pricing for executions of Added 
Midpoint Volume is referred to by the Exchange on the Fee Schedule 
under the existing description ``Added non-displayed volume, 
Midpoint Peg'' and such orders will continue to receive a Fee Code 
of ``M'' on execution reports. The proposed standard pricing for 
executions of Added Non-Midpoint Hidden Volume is referred to by the 
Exchange on the Fee Schedule under the existing description ``Added 
non-displayed volume'' and such orders will continue to receive a 
Fee Code of ``H'' on execution reports.
    \16\ See, e.g., the Nasdaq Price List--Trading Connectivity 
(available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a standard rebate 
of $0.0014 per share for executions of orders in Tape A and Tape B 
securities priced at or above $1.00 per share that add non-displayed 
midpoint liquidity and a standard rebate of $0.0010 per share for 
executions of orders in Tape C securities priced at or above $1.00 
per share that add non-displayed midpoint liquidity.
    \17\ See, e.g., 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 $0.0010 per share for executions 
of orders in securities priced at or above $1.00 per share that add 
non-displayed liquidity.
---------------------------------------------------------------------------

    In connection with the proposed reduction of the standard rebates 
for executions of Added Non-Displayed Volume (i.e., both Added Midpoint 
Volume and Added Non-Midpoint Hidden Volume) described above, the 
Exchange is proposing to adopt new volume-based tiers applicable to 
such executions, referred to by the Exchange as Non-Display Add Tiers 1 
and 2, in which the Exchange would provide enhanced rebates for 
executions of Added Non-Displayed Volume for Members that achieve the 
associated volume thresholds. Specifically, under proposed Non-Display 
Add Tier 1, the Exchange would provide a rebate of $0.0028 per share 
for executions of Added Non-Displayed Volume for Members that qualify 
for such tier by achieving a Non-Displayed ADAV \18\ that is equal to 
or greater than 5,000,000 shares.\19\ Additionally, under proposed Non-
Display Add Tier 2, the Exchange would provide a rebate of $0.0024 per 
share for executions of Added Non-Displayed Volume for Members that 
qualify for such tier by achieving a Non-Displayed ADAV that is equal 
to or greater than 1,000,000 shares (but less than 5,000,000 
shares).\20\ The Exchange proposes to provide Members that qualify for 
Non-Display Add Tier 1 or Non-Display Add Tier 2 free executions of 
orders (including Midpoint Peg orders) in securities priced below $1.00 
per share that add non-displayed liquidity to the Exchange, which is 
the same as the standard pricing that is currently applicable to such 
executions for all Members.
---------------------------------------------------------------------------

    \18\ As proposed, the term ``Non-Displayed ADAV'' means ADAV 
with respect to non-displayed orders (including Midpoint Peg 
orders). The Exchange proposes to add this definition of Non-
Displayed ADAV under the ``Definitions'' section of the Fee 
Schedule.
    \19\ The proposed pricing for Non-Display Add Tier 1 is referred 
to by the Exchange on the Fee Schedule under the new description 
``Added non-displayed volume, Non-Display Add Tier 1'' with a Fee 
Code of ``H1'' for qualifying Added Non-Midpoint Hidden Volume and a 
Fee Code of ``M1'' for qualifying Added Midpoint Volume assigned on 
the monthly invoices provided by the Exchange. The Exchange notes 
that because the determination of whether a Member qualifies for 
Non-Display Add Tier 1 for a particular month will not be made until 
after the month-end, the Exchange will provide the Fee Code 
otherwise applicable to such transactions (i.e., ``H'' or ``M'', as 
applicable) on the execution reports provided to Members during the 
month, and it will only designate the Fee Code applicable to the 
achieved pricing tier on the monthly invoices, which are provided 
after such determination has been made. The Exchange also notes that 
this is how it applies Fee Codes for its tier-based pricing today 
and how it will apply Fee Codes for any other tier-based pricing 
described herein.
    \20\ The proposed pricing for Non-Display Add Tier 2 is referred 
to by the Exchange on the Fee Schedule under the new description 
``Added non-displayed volume, Non-Display Add Tier 2'' with a Fee 
Code of ``H2'' for qualifying Added Non-Midpoint Hidden Volume and a 
Fee Code of ``M2'' for qualifying Added Midpoint Volume assigned on 
the monthly invoices provided by the Exchange.
---------------------------------------------------------------------------

    The Exchange believes that the proposed Non-Display Add Tiers 
provide an incremental incentive for Members to maintain or strive for 
higher Non-Displayed ADAV on the Exchange in order to qualify for the 
enhanced rebates for executions of Added Non-Displayed Volume, and as 
such, are designed to encourage Members to maintain or increase their 
order flow (particularly in the form of liquidity adding non-displayed 
orders) to the Exchange, thereby contributing to a deeper and more 
liquid market to the benefit of all market participants. The Exchange 
notes that the proposed Non-Display Add Tiers are comparable to other 
volume-based incentives and discounts, which have been widely adopted 
by exchanges (including the Exchange), including pricing tiers that 
provide enhanced rebates for executions of Added Non-Displayed 
Volume.\21\
---------------------------------------------------------------------------

    \21\ For example, Cboe BZX currently offers ``Non-Display Add 
Volume Tiers'' in which Cboe BZX provides enhanced rebates for 
executions of orders in securities priced at or above $1.00 per 
share that add non-displayed liquidity for members that qualify for 
such tiers by achieving certain specified volume thresholds. See the 
Cboe BZX equities trading fee schedule on its public website 
(available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/).
---------------------------------------------------------------------------

Modify Criteria Under Liquidity Provision Tier 3
    The Exchange currently offers three Liquidity Provision Tiers in 
which the Exchange provides enhanced rebates for executions of Added 
Displayed Volume based on a Member achieving the corresponding volume-
based threshold (i.e., the required criteria) for a particular tier. 
Currently, a Member qualifies for Liquidity Provision Tier 3, and thus 
receives an enhanced rebate of $0.0027 per share for executions of 
Added Displayed Volume under such tier, by achieving an ADAV that is 
equal to or greater than 0.05% of the TCV. Now, the Exchange proposes 
to modify the required criteria under Liquidity Provision Tier 3 such 
that a Member would now qualify for such tier by achieving any of the 
three following volume-based thresholds: (1) An ADAV that is equal to 
or greater than 0.05% of the TCV; (2) a Step-Up Displayed ADAV \22\ 
from February 2022 that is equal to or greater than 0.02% of the TCV; 
or (3) a Midpoint ADAV \23\ that is equal to or greater than 1,000,000 
shares. Thus, such proposed changes would keep the existing ADAV 
threshold intact and also provide two alternative volume thresholds 
that a Member may choose to achieve in order to qualify for Liquidity 
Provision Tier 3, including one threshold based on a Member increasing 
its Displayed ADAV above its Displayed ADAV in February 2022, which is 
designed to encourage Members to increase their orders that add 
displayed liquidity to the Exchange,

[[Page 14926]]

and one threshold based on a Member maintaining or increasing its 
Midpoint ADAV above the specified amount, which is designed to 
encourage Members to maintain or increase their Midpoint Peg orders 
that add liquidity to the Exchange. The Exchange is not proposing to 
modify the pricing associated with Liquidity Provision Tier 3.
---------------------------------------------------------------------------

    \22\ As proposed, the term ``Step-Up Displayed ADAV'' means 
Displayed ADAV in the relevant baseline month subtracted from 
current Displayed ADAV. As proposed, the term ``Displayed ADAV'' 
means ADAV with respect to displayed orders. The Exchange proposes 
to add these definitions of Step-Up Displayed ADAV and Displayed 
ADAV under the ``Definitions'' section of the Fee Schedule.
    \23\ As proposed, the term ``Midpoint ADAV'' means ADAV with 
respect to Midpoint Peg orders. The Exchange proposes to add this 
definition of Midpoint ADAV under the ``Definitions'' section of the 
Fee Schedule.
---------------------------------------------------------------------------

    The Exchange believes that Liquidity Provision Tier 3, as modified, 
would encourage the submission of more diverse types of order flow to 
the Exchange, as it provides two additional alternative thresholds 
based on different types of volume that Members may choose to achieve, 
thereby contributing to a more robust and well-balanced market 
ecosystem on the Exchange to the benefit of all Members. The Exchange 
notes that Liquidity Provision Tier 3, as modified, would continue to 
be available to all Members and, while the Exchange has no way of 
predicting with certainty how the proposed new criteria will impact 
Member activity, the Exchange expects that more Members will qualify 
for such tier than currently do under the proposed new criteria, as it 
is more expansive and provides two additional alternative thresholds 
that Members may choose to achieve.
Reduce Standard Rebate for Added Displayed Volume
    Currently, the Exchange provides a standard rebate of $0.0022 per 
share for executions of Added Displayed Volume. The Exchange now 
proposes to reduce the standard rebate for executions of Added 
Displayed Volume to $0.0020 per share.\24\ The purpose of reducing the 
standard rebate for executions of Added Displayed Volume is for 
business and competitive reasons, as the Exchange believes that 
reducing such rebate as proposed 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 remains in line with, or higher 
than, 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.\25\
---------------------------------------------------------------------------

    \24\ The proposed standard rebate 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, on execution reports.
    \25\ 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 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 
$0.0016 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 (``Nasdaq'') 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.
---------------------------------------------------------------------------

Reduce Standard Rebate for Added Displayed Retail Volume
    Currently, the Exchange provides a standard rebate of $0.0037 per 
share for executions of Added Displayed Retail Volume. The Exchange now 
proposes to reduce the standard rebate for executions of Added 
Displayed Retail Volume to $0.0035 per share.\26\ The purpose of 
reducing the standard rebate for executions of Added Displayed Retail 
Volume is for business and competitive reasons, as the Exchange 
believes that reducing such rebate as proposed 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 Retail Volume remains higher 
than, and competitive with, the standard rebates provided by other 
exchanges for executions of attested retail orders in securities priced 
at or above $1.00 per share that add displayed liquidity.\27\
---------------------------------------------------------------------------

    \26\ The proposed standard rebate for executions of Added 
Displayed Retail Volume is referred to by the Exchange on the Fee 
Schedule under the existing description ``Added displayed volume, 
Retail Order'' with a Fee Code of ``Br'', ``Dr'' or ``Jr'', as 
applicable, on execution reports.
    \27\ 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 rebate of 
$0.0032 per share for executions of attested retail orders in 
securities priced at or above $1.00 per share that add displayed 
liquidity; the Cboe EDGX Exchange, Inc. (``Cboe EDGX'') equities 
trading fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/), which 
reflects a standard rebate of $0.0032 per share for executions of 
attested retail orders in securities priced at or above $1.00 per 
share that add displayed liquidity.
---------------------------------------------------------------------------

Increase Standard Fee for Removed Volume
    Currently, the Exchange charges a standard fee of $0.0029 per share 
for executions of Removed Volume. The Exchange now proposes to increase 
the standard fee for executions of Removed Volume to $0.0030 per 
share.\28\ The purpose of increasing the standard fee for executions of 
Removed Volume is for business and competitive reasons, as the Exchange 
believes that increasing such fee as proposed would generate additional 
revenue to offset some of the costs associated with the Exchange's 
current pricing structure, which provides various rebates for 
liquidity-adding orders, and the Exchange's operations generally, in a 
manner that is 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 Volume remains in line with the standard fees 
charged by other exchanges for executions of orders in securities 
priced at or above $1.00 per share that remove liquidity.\29\
---------------------------------------------------------------------------

    \28\ The proposed standard fee for executions of Removed Volume 
is referred to by the Exchange on the Fee Schedule under the 
existing description ``Removed volume from MEMX Book'' with a Fee 
Code of ``R'' on execution reports.
    \29\ See, e.g., the Cboe EDGX equities trading fee schedule on 
its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/), which reflects a standard fee of 
$0.0030 per share for executions of orders in securities priced at 
or above $1.00 per share that remove liquidity; the Nasdaq Price 
List--Trading Connectivity (available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a standard fee of 
$0.0030 per share for executions of orders in securities priced at 
or above $1.00 per share that remove liquidity.
---------------------------------------------------------------------------

Modify Liquidity Removal Tier 1
    The Exchange currently offers Liquidity Removal Tier 1 in which 
qualifying Members are charged a discounted fee of $0.0028 per share 
for executions of Removed Volume 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. 
Now, the Exchange proposes to modify Liquidity Removal Tier 1 by 
increasing the fee for executions of Removed Volume and modifying the 
required criteria under such tier. Specifically, the Exchange proposes 
to charge a fee of $0.00285 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 0.30% of the TCV; or (2) an ADV of at 
least 0.60% of the TCV.\30\
---------------------------------------------------------------------------

    \30\ The proposed pricing for Liquidity Removal Tier 1 is 
referred to by the Exchange on the Fee Schedule under the existing 
description ``Removed volume from MEMX Book, Liquidity Removal Tier 
1'' with a Fee Code of ``R1'' assigned on the monthly invoices 
provided by the Exchange. The Exchange is not proposing to change 
the fee charged under Liquidity Removal Tier 1 for executions of 
securities priced below $1.00 per share.

---------------------------------------------------------------------------

[[Page 14927]]

    The Exchange believes that the proposed fee for executions of 
Removed Volume under Liquidity Removal Tier 1 represents only a modest 
increase from the current fee charged for such executions under such 
tier. The purpose of increasing such fee as proposed 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 lower both the ADAV 
threshold and the ADV threshold such that each threshold would be 
easier for Members to achieve and, in turn, while the Exchange has no 
way of predicting with certainty how the proposed new criteria will 
impact Member activity, the Exchange expects that more Members will 
strive to qualify for such tier than currently do, resulting in the 
submission of additional order flow to the Exchange. The Exchange also 
notes that Liquidity Removal Tier 1, as modified, would continue to be 
available to all Members.
Eliminate DLI Additive Rebate for DLI Tier 2
    The Exchange proposes to eliminate the DLI Additive Rebate for DLI 
Tier 2. Currently, the Exchange offers DLI Tiers 1 and 2 in which 
qualifying Members are provided a corresponding enhanced rebate for 
executions of Added Displayed Volume by quoting at the NBBO for a 
significant portion of each day in a specified number of securities, 
including a specified number of DLI Target Securities, with DLI Tier 1 
providing a higher rebate than DLI Tier 2 commensurate with NBBO 
quoting requirements in a larger number of securities. Additionally, 
the Exchange currently offers a DLI Additive Rebate incentive that is 
applicable to DLI Tiers 1 and 2, which provides an additive rebate of 
$0.0001 per share for executions of Added Displayed Volume where: (1) 
For a Member that qualifies for DLI Tier 1, such Member has an ADAV 
that is equal to or greater than 0.30% of the TCV; and (2) for a Member 
that qualifies for DLI Tier 2, such Member has an ADAV that is equal to 
or greater than 0.10% of the TCV. The Exchange now proposes to 
eliminate the DLI Additive Rebate for DLI Tier 2, but keep the DLI 
Additive Rebate for DLI Tier 1. The reason for eliminating the DLI 
Additive Rebate for DLI Tier 2 is that the incentive is not achieving 
the level of participation that the Exchange expected, and thus, is not 
accomplishing the goal that the Exchange had when initially adopting 
this incentive. Due to the lower-than-expected level of participation, 
the Exchange does not believe the proposed elimination of Targeted 
Step-Up Tier [sic] will have a significant impact on any Member's 
trading behavior on the Exchange. The Exchange therefore no longer 
wishes to, nor is it required to, maintain such tier. More 
specifically, the proposed change removes such incentive, as the 
Exchange would rather redirect future resources and funding into other 
incentives and tiers intended to incentivize increased order flow. The 
Exchange notes that several Members currently qualify for the DLI 
Additive Rebate for DLI Tier 1, which is why the Exchange is not 
proposing to eliminate that incentive since it has achieved the 
expected level of participation.
Eliminate Targeted Step-Up Tier
    Finally, the Exchange proposes to eliminate the Targeted Step-Up 
Tier. The Exchange currently offers the Targeted Step-Up Tier in which 
it provides an additive rebate of $0.0002 per share to executions of 
orders (other than displayed Retail Orders) in securities priced at or 
above $1.00 per share that add liquidity to the Exchange (such orders, 
``Added Volume'') for Members that qualify for such tier by achieving: 
(1) A Step-Up ADAV \31\ from October 2021 that is equal to or greater 
than 0.05% of the TCV in the Targeted Step-Up Securities; \32\ or (2) 
an ADAV that is equal to or greater than 0.08% of the TCV in the 
Targeted Step-Up Securities. The Exchange adopted the Targeted Step-Up 
Tier in November 2021 for the purpose of encouraging Members to 
increase their volume on the Exchange in the Targeted Step-Up 
Securities, thereby improving its market quality with respect to such 
securities and contributing to a more robust and well-balanced market 
ecosystem on the Exchange to the benefit of all Members.\33\ The 
Exchange now proposes to eliminate the Targeted Step-Up Tier, as the 
incentive is not achieving the level of participation that the Exchange 
expected, and thus, is not accomplishing the goal that the Exchange had 
when initially adopting this incentive. Due to the lower-than-expected 
level of participation, the Exchange does not believe the proposed 
elimination of Targeted Step-Up Tier will have a significant impact on 
any Member's trading behavior on the Exchange. The Exchange therefore 
no longer wishes to, nor is it required to, maintain such tier. More 
specifically, the proposed rule change removes such tier, as the 
Exchange would rather redirect future resources and funding into other 
programs and tiers intended to incentivize increased order flow.
---------------------------------------------------------------------------

    \31\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means 
ADAV in the relevant baseline month subtracted from current ADAV.
    \32\ As set forth on the Fee Schedule, ``Targeted Step-Up 
Securities'' means a list of securities designated as such, the 
universe of which will be determined by the Exchange and published 
on the Exchange's website.
    \33\ See 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).
---------------------------------------------------------------------------

    In connection with the elimination of the Targeted Step-Up Tier, 
the Exchange also proposes to delete the definition of the term 
``Targeted Step-Up Securities'' from the ``Definitions'' section of the 
Fee Schedule, as such term would no longer be used on the Fee Schedule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\34\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\35\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its Members and other persons using its facilities 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f.
    \35\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    As discussed above, the Exchange operates in a highly fragmented 
and competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive or incentives to be insufficient, and the 
Exchange represents only a small percentage of the overall market. The 
Commission and the courts have repeatedly expressed their preference 
for competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in

[[Page 14928]]

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.'' \36\
---------------------------------------------------------------------------

    \36\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal reflects a reasonable and competitive pricing structure 
designed to incentivize market participants to direct additional 
aggressively priced liquidity and more diverse types of 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.
    The Exchange believes that the proposed NBBO Setter Tier is a 
reasonable means to encourage Members to not only increase their order 
flow to the Exchange but also to contribute to price discovery and 
market quality on the Exchange by submitting aggressively priced 
displayed liquidity. As noted above, the proposed NBBO Setter Tier is 
comparable to other volume-based incentives and discounts, which have 
been widely adopted by exchanges (including the Exchange) and are 
equitable and not unfairly discriminatory because they are open to all 
Members on an equal basis and provide additional benefits or discounts 
that are reasonably related to the value to an exchange's market 
quality associated with higher levels of market activity, such as 
higher levels of liquidity provision and/or growth patterns and the 
introduction of higher volumes of orders into the price and volume 
discovery process. The Exchange believes the proposed NBBO Setter Tier 
is equitable and not unfairly discriminatory for these same reasons, as 
it is available to all Members and is designed to incentivize the entry 
of aggressively priced displayed liquidity that will create tighter 
spreads, thereby promoting price discovery and market quality on the 
Exchange to the benefit of all Members and public investors. As such, 
the Exchange believes the additive rebate for executions of Setter 
Volume provided under the NBBO Setter Tier for qualifying Members is 
reasonably related to the market quality benefits that such tier is 
designed to promote. Additionally, as noted above, at least one other 
U.S. equity exchange has adopted a similar pricing incentive applicable 
to executions of orders that establish the NBBO.\37\
---------------------------------------------------------------------------

    \37\ See supra note 12.
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to reduce the 
standard rebates provided for executions of Added Non-Displayed Volume 
(i.e., both Added Midpoint Volume and Added Non-Midpoint Hidden Volume) 
are reasonable because, as described above, such changes 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 the proposed new standard rebates for executions of Added Midpoint 
Volume and Added Non-Midpoint Hidden Volume remain higher than, and 
competitive with, the standard rebates provided by other exchanges for 
executions of similar orders.\38\ The Exchange also believes the 
proposed standard rebates for executions of Added Midpoint Volume and 
Added Non-Midpoint Hidden Volume are equitable and not unfairly 
discriminatory, as such standard rebates will apply equally to all 
Members.
---------------------------------------------------------------------------

    \38\ See supra notes 16-17.
---------------------------------------------------------------------------

    The Exchange believes that the proposed Non-Display Add Tiers 1 and 
2 are reasonable because such tiers would provide Members with an 
additional incentive to achieve certain volume thresholds on the 
Exchange and, in return, receive enhanced rebates for Added Non-
Displayed Volume commensurate with the benefits of increased activity. 
The Exchange also believes that the proposed Non-Display Add Tiers 1 
and 2 are reasonable, equitable, and not unfairly discriminatory for 
the same reasons applicable to other volume-based incentives and 
discounts described above, in that such tiers would be available to all 
Members and are designed to encourage Members to maintain or increase 
their order flow (particularly in the form of liquidity adding non-
displayed orders) to the Exchange, thereby contributing to a deeper and 
more liquid market to the benefit of all market participants. Further, 
the proposed new Non-Display Add Tiers 1 and 2 are reasonable as such 
tiers would provide Members with opportunities to qualify for enhanced 
rebates for executions of Added Non-Displayed Volume in a manner that 
provides increasingly higher benefits for satisfying increasingly more 
stringent criteria.
    The Exchange also believes it is reasonable, equitable and not 
unfairly discriminatory to provide Members that qualify for Non-Display 
Add Tier 1 or Non-Display Add Tier 2 free executions of orders 
(including Midpoint Peg orders) in securities priced below $1.00 per 
share that add non-displayed liquidity to the Exchange, as this is the 
same as the standard pricing that is currently applicable to such 
executions for all Members.
    The Exchange believes that the proposed change to modify the 
required criteria under Liquidity Provision Tier 3 is reasonable 
because, as noted above, such change would keep the existing ADAV 
threshold intact and also provide two additional alternative volume 
thresholds that a Member may choose to achieve that are based on 
different types of volume, which would incentivize the submission of 
different types of order flow, thereby contributing to a more robust 
and well-balanced market ecosystem on the Exchange to the benefit of 
all Members. The Exchange also believes the proposed new criteria are 
equitable and not unfairly discriminatory because all Members will 
continue to be eligible to meet such criteria, including the Members 
that currently meet the existing ADAV threshold that is not changing. 
Further, as noted above, while the Exchange has no way of predicting 
with certainty how the proposed new criteria will impact Member 
activity, the Exchange expects that more Members will be able to 
qualify for such tier under the proposed new criteria, which is more 
expansive.
    The Exchange believes that the proposed reduced standard rebate 
provided for executions of Added Displayed Volume (i.e., $0.0020 per 
share) is reasonable because the Exchange believes it represents only a 
modest decrease (i.e., $0.0002 per share) from the current standard 
rebate provided for executions of Added Displayed Volume (i.e., $0.0022 
per share) and, as noted above, it remains in line with, or higher 
than, the standard rebates provided by other exchanges for

[[Page 14929]]

executions of orders in securities priced at or above $1.00 per share 
that add displayed liquidity.\39\
---------------------------------------------------------------------------

    \39\ See supra note 25.
---------------------------------------------------------------------------

    Similarly, Exchange believes that the proposed reduced standard 
rebate provided for executions of Added Displayed Retail Volume (i.e., 
$0.0035 per share) is reasonable because the Exchange believes it 
represents only a modest decrease (i.e., $0.0002 per share) from the 
current standard rebate provided for executions of Added Displayed 
Retail Volume (i.e., $0.0037 per share) and, as noted above, it remains 
higher than, and competitive with, the standard rebates provided by 
other exchanges for executions of attested retail orders in securities 
priced at or above $1.00 per share that add displayed liquidity.\40\
---------------------------------------------------------------------------

    \40\ See supra note 27.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed increased standard fee 
charged for executions of Removed Volume (i.e., $0.0030 per share) is 
reasonable because the Exchange believes it represents only a modest 
increase (i.e., $0.0001 per share) from the current standard fee 
charged for executions of Removed Volume (i.e., $0.0029 per share) and, 
as noted above, it remains in line with the standard fees charged by 
other exchanges for executions of orders in securities priced at or 
above $1.00 per share that remove liquidity.\41\
---------------------------------------------------------------------------

    \41\ See supra note 29.
---------------------------------------------------------------------------

    The Exchange believes the proposed changes to reduce the standard 
rebate for executions of Added Displayed Volume, reduce the standard 
rebate for executions of Added Displayed Retail Volume, and increase 
the standard fee for executions of Removed Volume are reasonable 
because, as noted above, the Exchange believes such changes would act 
together 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. 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.
    The Exchange believes that the proposed increased fee charged for 
executions of Removed Volume under Liquidity Removal Tier 1 (i.e., 
$0.00285 per share) is reasonable because the Exchange believes it 
represents only a modest increase (i.e., $0.00005 per share) from the 
current fee charged for executions of Removed Volume under Liquidity 
Removal Tier 1 (i.e., $0.0028 per share), and the Exchange is also 
proposing to lower both of the volume thresholds under such tier such 
that each threshold would be easier to achieve. Thus, while the 
Exchange is modestly increasing the fee under such tier, as noted 
above, it expects that more Members will strive to qualify for such 
tier due to the proposed lower criteria and, in turn, receive the 
corresponding discounted fee for executions of Removed Volume. The 
Exchange also believes this proposed change is reasonable, as it 
believes the proposed increased fee continues to be commensurate with 
the proposed lower criteria. The Exchange also believes the proposed 
increased fee and new criteria are equitable and not unfairly 
discriminatory because all Members will continue to be eligible to meet 
such criteria and qualify for Liquidity Removal Tier 1, and therefore, 
have the opportunity to pay a discounted fee for executions of Removed 
Volume.
    The Exchange believes the proposed rule changes to eliminate the 
DLI Additive Rebate for DLI Tier 2 and the Targeted Step-Up Tier are 
reasonable because the Exchange is not required to maintain such 
incentives or provide Members any opportunities to receive additive 
rebates. The Exchange believes the proposal to eliminate such 
incentives is also equitable and not unfairly discriminatory because it 
applies equally to all Members (i.e., the incentives will not be 
available for any Member). As noted above, neither of these incentives 
has achieved the level of participation the Exchange expected, and 
thus, such incentives are not accomplishing the goals that the Exchange 
had when initially adopting them. As the additional rebates offered 
under these incentives are not affecting Members' behavior in the 
manner originally conceived by the Exchange in that there are lower-
than-expected levels of participation, the Exchange does not believe 
the proposed elimination of such incentives will have a significant 
impact on any Member's trading behavior on the Exchange. Furthermore, 
the proposed rule change to eliminate both the DLI Additive Rebate for 
DLI Tier 2 and the Targeted Step-Up Tier enables the Exchange to 
redirect resources and funding into other pricing incentives and tiers 
intended to incentivize increased order flow and enhance market quality 
for all Members.
    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 \42\ 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.
---------------------------------------------------------------------------

    \42\ 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, as 
well as to incentivize market participants to direct additional 
aggressively priced liquidity and more diverse types of order flow to 
the Exchange, thereby deepening liquidity and promoting market quality 
on the Exchange to the benefit of all market participants. 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.'' \43\
---------------------------------------------------------------------------

    \43\ See supra note 25.
---------------------------------------------------------------------------

Intramarket Competition
    As discussed above, the Exchange believes that the proposal would 
incentivize Members to submit additional aggressively priced displayed 
liquidity (including liquidity that establishes the NBBO) to the 
Exchange, and to maintain or increase their order flow on the Exchange 
generally, thereby contributing to a deeper and more liquid market and 
promoting price discovery and market quality on the Exchange 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

[[Page 14930]]

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 proposed new 
NBBO Setter Tier and Non-Display Add Volume Tiers, and thus receive the 
proposed additive rebate for executions of Setter Volume or the 
proposed enhanced rebates for executions of Added Non-Displayed Volume, 
respectively, would be available to all Members that meet the 
associated volume requirements in any month. Similarly, as described 
above, Liquidity Provision Tier 3 and Liquidity Removal Tier 1 continue 
to be available to all Members that meet the associated volume criteria 
and, as noted above, the proposed new volume criteria under Liquidity 
Provision Tier 3 and Liquidity Removal Tier 1 include more expansive or 
lower volume thresholds, respectively, which the Exchange believes 
would enable more Members to possibly qualify for such tiers without 
impacting the ability of Members that currently qualify to continue to 
do so, and the Exchange believes the respective enhanced rebate and 
discounted fee provided under such tiers are reasonably related to the 
enhanced market quality that such tiers are designed to promote. 
Additionally, as noted above, the proposed reduced standard rebates for 
executions of Added Displayed Volume and Added Displayed Retail Volume, 
as well as the proposed increased standard fees for executions of Added 
Midpoint Volume, Add Non-Midpoint Hidden Volume and Removed Volume, 
would continue to apply equally to all Members in the same manner that 
such standard rates currently do today. Lastly, the Exchange does not 
believe the proposed changes to eliminate the DLI Additive Rebate for 
DLI Tier 2 and the Targeted Step-Up Tier will impose any burden on 
intramarket competition because such changes will apply to all Members 
uniformly, as in, such incentives will no longer be available to any 
Member, and, as described above, the Exchange does not believe the 
proposed elimination of such incentives will have a significant impact 
on any Member's trading behavior on the Exchange. 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 16.5% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates, including with respect to executions of 
Added Displayed Volume, Added Displayed Retail Volume, Added Midpoint 
Volume, Added Non-Midpoint Hidden Volume, Removed Volume, and Setter 
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 is comparable to, and/or competitive with, 
pricing for similar executions in place at other exchanges.\44\ 
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, Added Displayed Retail Volume, 
Added Midpoint Volume, Added Non-Midpoint Hidden Volume, and Removed 
Volume, as well as similar pricing incentives and discounts to market 
participants that achieve certain volume criteria and thresholds.
---------------------------------------------------------------------------

    \44\ See supra notes 12, 16, 17, 21, 25, 27 and 29.
---------------------------------------------------------------------------

    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.'' \45\ 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'. . . .''.\46\ 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.
---------------------------------------------------------------------------

    \45\ See supra note 36.
    \46\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \47\ and Rule 19b-4(f)(2) \48\ thereunder.
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \48\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if

[[Page 14931]]

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-2022-01 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-2022-01. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MEMX-2022-01 and should be submitted on 
or before April> 6, 2022.
---------------------------------------------------------------------------

    \49\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2022-05483 Filed 3-15-22; 8:45 am]
BILLING CODE 8011-01-P

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