Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 69363-69368 [2022-25087]
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Federal Register / Vol. 87, No. 222 / Friday, November 18, 2022 / Notices
collection of information on
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DC 20549, or send an email to: PRA_
Mailbox@sec.gov.
Dated: November 14, 2022.
Sherry R. Haywood,
Assistant Secretary.
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
[FR Doc. 2022–25096 Filed 11–17–22; 8:45 am]
BILLING CODE 8011–01–P
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96306; File No. SR–MEMX–
2022–30]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule
November 14, 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 October
31, 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 Excchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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proposed rule change is provided in
Exhibit 5.
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
November 1, 2022. The text of the
The purpose of the proposed rule
change is to amend the Fee Schedule to:
(i) modify the Liquidity Provision Tiers
by adopting a new Liquidity Provision
Tier 4 and modifying the required
criteria under Liquidity Provision Tier
2; (ii) increase the fee and modify the
required criteria under Liquidity
Removal Tier 1; (iii) increase the fee for
certain executions of Pegged Orders 4
with a Midpoint Peg 5 instruction (such
orders, ‘‘Midpoint Peg Orders’’) and a
time-in-force (‘‘TIF’’) instruction of
IOC 6 or FOK 7 that execute at the
midpoint of the national best bid and
offer (‘‘NBBO’’); and (iv) modify the
pricing for certain executions of orders
in securities priced below $1.00 per
share (such orders, ‘‘Sub-Dollar
Volume’’), each as further described
below.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues,
to which market participants may direct
their order flow. Based on publicly
available information, no single
registered equities exchange currently
has more than approximately 16% of
the total market share of executed
4 See
Exchange Rule 11.6(h).
Exchange Rule 11.6(h)(2).
6 See Exchange Rule 11.6(o)(1).
7 See Exchange Rule 11.6(o)(3).
1 15
5 See
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
2 17
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69363
volume of equities trading.8 Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow,
and the Exchange currently represents
approximately 3.5% of the overall
market share.9 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.
Liquidity Provision Tiers
The Exchange currently provides 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 to the Exchange
(such orders, ‘‘Added Displayed
Volume’’). The Exchange also currently
offers Liquidity Provision Tiers 1–4
under which a Member may receive an
enhanced rebate for executions of
Added Displayed Volume by achieving
the corresponding required volume
criteria for each tier. The Exchange now
proposes to adopt a new tier under the
Liquidity Provision Tiers, which, as
proposed, would be the new Liquidity
Provision Tier 4, and the current
Liquidity Provision Tier 4 would be
renumbered as Liquidity Provision Tier
5 (hereinafter referred to as such). The
rebate for executions of Added
Displayed Volume and the required
criteria under Liquidity Provision Tier 5
would remain unchanged.
Under the proposed new Liquidity
Provision Tier 4, the Exchange would
provide an enhanced rebate of $0.0028
per share for executions of Added
Displayed Volume for Members that
qualify for such tier by achieving one of
the following two alternative criteria: (1)
8 Market share percentage calculated as of
October 31, 2022. The Exchange receives and
processes data made available through consolidated
data feeds (i.e., CTS and UTDF).
9 Id.
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an ADAV 10 that is equal to or greater
than 0.10% of the TCV; 11 or (2) a
Displayed ADAV 12 (excluding Retail
Orders) that is equal to or greater than
750,000 shares and a Step-Up Displayed
ADAV 13 (excluding Retail Orders) from
October 2022 that is equal to or greater
than 30% of the Member’s October 2022
Displayed ADAV (excluding Retail
Orders).14 The Exchange proposes to
provide Members that qualify for the
proposed new Liquidity Provision Tier
4 a rebate of 0.075% of the total dollar
volume of the transaction for executions
of orders in securities priced below
$1.00 per share that add displayed
liquidity to the Exchange, which is the
same rebate that will be applicable to
such executions for all Members after
giving effect to the Sub-Dollar Volume
pricing changes proposed below. The
proposed new Liquidity Provision Tier
4 is designed to encourage Members to
maintain or increase their order flow
that adds liquidity, including in the
form of displayed orders, to the
Exchange in order to qualify for the
proposed enhanced rebate for
executions of Added Displayed Volume,
thereby promoting price discovery and
contributing to a deeper and more liquid
market to the benefit of all market
participants.
Currently, under Liquidity Provision
Tier 2, the Exchange provides an
10 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.
11 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.
12 As set forth on the Fee Schedule, ‘‘Displayed
ADAV’’ means ADAV with respect to displayed
orders.
13 As set forth on the Fee Schedule, ‘‘Step-Up
Displayed ADAV’’ means Displayed ADAV in the
relevant baseline month subtracted from current
Displayed ADAV.
14 The pricing for Liquidity Provision Tier 4 is
referred to by the Exchange on the Fee Schedule
under the description ‘‘Added displayed volume,
Liquidity Provision Tier 4’’ with a Fee Code of
‘‘B4’’, ‘‘D4’’ or ‘‘J4’’, as applicable, to be provided
by the Exchange on the monthly invoices provided
to Members. The Exchange notes that because the
determination of whether a Member qualifies for a
certain pricing tier for a particular month will not
be made until after the month-end, the Exchange
will provide the Fee Codes otherwise applicable to
such transactions on the execution reports provided
to Members during the month and will only
designate the Fee Codes applicable to the achieved
pricing tier on the monthly invoices, which are
provided after such determination has been made,
as the Exchange does for its tier-based pricing
today. The Exchange also notes that the pricing for
Liquidity Provision Tier 5 is referred to by the
Exchange on the Fee Schedule under the
description ‘‘Added displayed volume, Liquidity
Provision Tier 5’’ with a Fee Code of ‘‘B5’’, ‘‘D5’’
or ‘‘J5’’, as applicable, to be provided by the
Exchange on the monthly invoices provided to
Members.
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enhanced rebate of $0.0032 per share for
executions of Added Displayed Volume
for Members that qualify for such tier by
achieving an ADAV that is that is equal
to or greater than 0.20% of the TCV.
Now, the Exchange proposes to modify
the required criteria such that a Member
would now qualify for such tier by
achieving one of the following two
alternative criteria: (1) an ADAV that is
equal to or greater than 0.20% of the
TCV; or (2) an ADAV that is equal to or
greater than 15,000,000 shares and a
Step-Up ADAV from October 2022 that
is equal to or greater than 0.10% of the
Member’s October 2022 ADAV. Thus,
such proposed change would keep the
existing criteria intact and add an
alternative criteria that includes an
overall ADAV threshold and a Step-Up
ADAV threshold, which are designed to
encourage the submission of additional
order flow that adds liquidity to the
Exchange. The Exchange notes that, as
the proposed change to the required
criteria under Liquidity Provision Tier 2
simply provides an alternative criteria
and does not change the existing
criteria, the Exchange believes that such
change would make the tier 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 is not
proposing to change the rebate provided
for executions of Added Displayed
Volume under Liquidity Provision Tier
2.
Liquidity Removal Tier 1
The Exchange currently charges 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 from the Exchange (such
orders, ‘‘Removed Volume’’). The
Exchange also currently offers Liquidity
Removal Tier 1 under which qualifying
Members are charged a discounted fee
of $0.0029 per share for executions of
Removed Volume by achieving one of
the following two alternative criteria: (1)
an ADV 15 that is equal to or greater than
0.45% of the TCV and an ADAV that is
equal to or greater than 0.20% of the
TCV; or (2) an ADV that is equal to or
greater than 1.00% of the TCV.
Now, the Exchange proposes to
increase the fee charged for executions
15 As set forth on the Fee Schedule, ‘‘ADV’’ means
average daily volume calculated as the number of
shares added or removed, combined, per day,
which is calculated on a monthly basis.
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of Removed Volume under Liquidity
Removal Tier 1 to $0.00295 per share,
and to modify the required criteria such
that a Member would now qualify for
such tier by achieving one of the
following two alternative criteria: (1) an
ADV that is equal to or greater than
0.50% of the TCV and a Remove
ADAV 16 that is equal to or greater than
0.25% of the TCV; or (2) an ADV that
is equal to or greater than 1.00% of the
TCV.17 Thus, the proposed change to
the required criteria would increase the
ADV threshold by 0.05% (i.e., from
0.45% to 0.50%) of the TCV and replace
the ADAV threshold with a Remove
ADV threshold in the first of such
alternative criteria, and it would keep
the second of such alternative criteria
intact without any change. The
proposed changes to increase the ADV
threshold and include a Remove ADV
threshold in the first of such alternative
criteria are designed to encourage
Members to maintain or increase their
order flow, including in the form of
orders that remove liquidity, to the
Exchange in order to qualify for the
proposed discounted fee for executions
of Removed Volume. While the
Exchange’s overall pricing philosophy
generally encourages adding liquidity
over removing liquidity, the Exchange
believes that providing alternative
criteria that are based on different types
of volume that Members may choose to
achieve, such as the proposed new
criteria which includes a Remove ADV
threshold, contributes to a more robust
and well-balanced market ecosystem on
the Exchange to the benefit of all
Members.
The purpose of increasing the fee
charged for executions of Removed
Volume under such tier as proposed
(i.e., by $0.00005 per share), which the
Exchange believes is a modest increase
and remains commensurate with the
proposed new required criteria, is for
business and competitive reasons, as the
Exchange believes that increasing such
16 As set forth on the Fee Schedule, ‘‘Remove
ADV’’ means ADV with respect to orders that
remove liquidity.
17 The 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’’ to be provided by the Exchange
on the monthly invoices provided to Members. The
Exchange notes that because the determination of
whether a Member qualifies for a certain pricing tier
for a particular month will not be made until after
the month-end, the Exchange will provide the Fee
Codes otherwise applicable to such transactions on
the execution reports provided to Members during
the month and will only designate the Fee Codes
applicable to the achieved pricing tier on the
monthly invoices, which are provided after such
determination has been made, as the Exchange does
for its tier-based pricing today.
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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.
The Exchange notes that it is also
proposing to change the fee charged
under Liquidity Removal Tier 1 for
executions of Removed Sub-Dollar
Volume (as defined below), as further
described below.
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Midpoint Peg IOC/FOK Orders
As noted above, the Exchange
currently charges a standard fee of
$0.0030 per share for executions of
Removed Volume. The Exchange also
currently charges a discounted fee of
$0.0026 per share for executions of
Midpoint Peg Orders in securities
priced at or above $1.00 per share with
a TIF instruction of IOC or FOK that
execute at the midpoint of the NBBO
and remove liquidity from the Exchange
upon entry (such orders, ‘‘Midpoint Peg
IOC/FOK Orders’’). Charging a
discounted fee for executions of
Midpoint Peg IOC/FOK Orders is
intended to incentivize the submission
of such orders and, in turn, attract
additional contra-side orders designed
to execute at the midpoint to be posted
on the Exchange, and is therefore
designed to deepen liquidity and
increase execution opportunities at the
midpoint on the Exchange, thereby
improving the Exchange’s market
quality to the benefit of all Members and
enhancing its attractiveness as a trading
venue.
Now, the Exchange proposes to
increase the fee charged for executions
of Midpoint Peg IOC/FOK Orders to
$0.0027 per share.18 The purpose of
increasing the fee for executions of
Midpoint Peg IOC/FOK Orders as
proposed (i.e., by $0.0001 per share),
which the Exchange believes is a
modest increase and remains
commensurate with the market quality
benefits that such discounted fee is
intended to achieve, 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.
18 The pricing for executions of Midpoint Peg
IOC/FOK Orders is referred to by the Exchange on
the Fee Schedule under the description ‘‘Removed
volume from MEMX Book, Midpoint Peg (IOC/
FOK)’’ with a Fee Code of ‘‘Rm’’ assigned by the
Exchange.
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Pricing for Certain Sub-Dollar Volume
Currently, the Exchange charges a fee
of 0.25% of the total dollar value of the
transaction for executions of Sub-Dollar
Volume that remove liquidity from the
Exchange (such orders, ‘‘Removed SubDollar Volume’’). This fee is applicable
to all executions of Removed Sub-Dollar
Volume (except Retail Orders with a TIF
of Day, GTT or RHO that remove
liquidity from the Exchange upon
entry 19) and is applicable to all
Members (including those that qualify
for any of the Exchange’s volume tiers).
Now, the Exchange proposes to increase
the fee charged to all Members
(including those that qualify for any of
the Exchange’s volume tiers) for all
executions of Removed Sub-Dollar
Volume (except Retail Orders with a TIF
of Day, GTT or RHO that remove
liquidity from the Exchange upon entry)
to 0.28% of the total dollar value of the
transaction. The purpose of increasing
the fee for such executions of Removed
Sub-Dollar Volume is for business and
competitive reasons, as the Exchange
believes that increasing such fee would
generate additional revenue to offset
some of the costs associated with the
Exchange’s current transaction pricing
structure, which provides various
rebates for liquidity-adding orders, and
the Exchange’s operations generally.
The Exchange notes that despite the
increase proposed herein, which the
Exchange believes is modest, the
proposed fee for such executions of
Removed Sub-Dollar Volume (i.e.,
0.28% of the total dollar value of the
transaction) remains lower than, and
competitive with, the standard fee
charged by other equity exchanges for
executions of orders in securities priced
below $1.00 per share that remove
liquidity.20
Currently, the Exchange provides a
rebate of 0.10% of the total dollar value
of the transaction for executions of Sub19 Such orders have different pricing that is
referred to by the Exchange on the Fee Schedule
under the description ‘‘Removed volume from
MEMX Book upon entry, Retail Order (Day/GTT/
RHO)’’ with a Fee Code of ‘‘Rr0’’ assigned by the
Exchange.
20 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 fee of 0.30% of the total dollar
value of the transaction for executions of orders in
securities priced below $1.00 per share that remove
liquidity from Cboe BZX; 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 fee of
0.30% of the total dollar value of the transaction for
executions of orders in securities priced below
$1.00 per share that remove liquidity from Cboe
EDGX.
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69365
Dollar Volume that add displayed
liquidity to the Exchange (such orders,
‘‘Added Displayed Sub-Dollar
Volume’’). This fee is applicable to all
executions of Added Displayed SubDollar Volume and is applicable to all
Members (including those that qualify
for any of the Exchange’s volume tiers).
Now, the Exchange proposes to reduce
the rebate provided to all Members
(including those that qualify for any of
the Exchange’s volume tiers) for all
executions of Added Displayed SubDollar Volume to 0.075% of the total
dollar value of the transaction. The
purpose of reducing the rebate for
executions of Added Displayed SubDollar Volume is for business and
competitive reasons, as the Exchange
believes that reducing such rebate
would decrease the Exchange’s
expenditures with respect to its
transaction pricing in a manner that is
still consistent with the Exchange’s
overall pricing philosophy of
encouraging added displayed liquidity.
The Exchange notes that despite the
reduction proposed herein, which the
Exchange believes is modest, the
proposed rebate for executions of Added
Displayed Sub-Dollar Volume (i.e.,
0.075% of the total dollar value of the
transaction) remains higher than, and
competitive with, the rebates offered by
other equity exchanges for executions of
orders in securities priced below $1.00
per share that add displayed liquidity.21
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,22
in general, and with Sections 6(b)(4) and
6(b)(5) of the Act,23 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
21 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 that no rebate is
provided (i.e., a free execution) for executions of
orders in securities priced below $1.00 per share
that add displayed liquidity to Cboe BZX.
22 15 U.S.C. 78f.
23 15 U.S.C. 78f(b)(4) and (5).
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the overall market. The Commission and
the courts have repeatedly expressed
their preference for competition over
regulatory intervention in determining
prices, products, and services in the
securities markets. In Regulation NMS,
the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and also recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 24
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, including with respect
to Added Displayed Volume, Removed
Volume and Sub-Dollar Volume, and
market participants can readily trade on
competing venues if they deem pricing
levels at those other venues to be more
favorable. The Exchange believes the
proposal reflects a reasonable and
competitive pricing structure designed
to incentivize market participants to
direct additional order flow, including
displayed, liquidity-adding and/or
liquidity-removing orders, to the
Exchange, which the Exchange believes
would promote price discovery and
enhance liquidity and market quality on
the Exchange to the benefit of all
Members and market participants.
While the Exchange has proposed
increasing its fees for certain executions
of Removed Volume and Removed SubDollar Volume, and reducing its rebate
for executions of Added Displayed SubDollar Volume, as further discussed
below, the Exchange believes that each
of such changes represents a modest
increase (decrease) from the current fee
(rebate) applicable to such executions.
The Exchange notes that volumebased incentives and discounts have
been widely adopted by exchanges,
including the Exchange, and are
reasonable, equitable and not unfairly
discriminatory because they are open to
all members on an equal basis and
provide additional benefits or discounts
that are reasonably related to the value
to an exchange’s market quality
associated with higher levels of market
activity, such as higher levels of
24 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
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liquidity provision and/or growth
patterns, and the introduction of higher
volumes of orders into the price and
volume discovery process. The
Exchange believes that the proposed
new Liquidity Provision Tier 4, the
Liquidity Provision Tier 2 as modified
by the proposed change to the required
criteria under such tier, and the
Liquidity Removal Tier 1 as modified by
the proposed changes to the fee for
executions of Removed Volume and the
required criteria under such tier, are
reasonable, equitable and not unfairly
discriminatory for these same reasons,
as such tiers would provide Members
with an incremental incentive to
achieve certain volume thresholds on
the Exchange, are available to all
Members on an equal basis, and, as
described above, are designed to
encourage Members to maintain or
increase their order flow, including in
the form of displayed, liquidity-adding
and/or liquidity removing orders, to the
Exchange in order to qualify for an
enhanced rebate for executions of
Added Displayed Volume or a
discounted fee for executions of
Removed Volume, as applicable,
thereby contributing to a deeper, more
liquid and well balanced market
ecosystem on the Exchange to the
benefit of all Members and market
participants. The Exchange also believes
that such tiers reflect a reasonable and
equitable allocation of fees and rebates,
as the Exchange believes that the
enhanced rebate for executions of
Added Displayed Volume under the
proposed new Liquidity Provision Tier
4 and the modified Liquidity Provision
Tier 2, as well as the discounted fee for
executions of Removed Volume under
the modified Liquidity Removal Tier 1,
each remains commensurate with the
corresponding required criteria under
each such tier and is reasonably related
to the market quality benefits that each
such tier is designed to achieve, as
described above.
The Exchange also believes the
proposed increased fee for executions of
Midpoint Peg IOC/FOK Orders is
reasonable, equitable and not unfairly
discriminatory because the Exchange
believes that the increase (i.e., $0.0001
per share) is modest and that the fee
remains commensurate with the market
quality benefits that such discounted fee
is intended to achieve, as described
above, and such fee would continue to
be charged uniformly to all executions
of such orders for all Members.
Regarding the proposed changes to
Sub-Dollar Volume pricing, the
Exchange believes the proposed changes
to increase the fee for executions of
Removed Sub-Dollar Volume (except
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Retail Orders with a TIF of Day, GTT or
RHO that remove liquidity from the
Exchange upon entry) and reduce the
rebate for executions of Added
Displayed Sub-Dollar Volume are
reasonable because, as described above,
the Exchange believes that each of such
changes represents a modest increase
(decrease) from the current fee (rebate)
applicable to such executions and that
such changes would decrease the
Exchange’s expenditures and generate
additional revenue, as applicable, 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
such proposed changes are reasonable,
as the proposed fee for executions of
Removed Sub-Dollar Volume (except
Retail Orders with a TIF of Day, GTT or
RHO that remove liquidity from the
Exchange upon entry) and the proposed
rebate for executions of Added
Displayed Sub-Dollar Volume are
competitive with the standard fees and
rebates, as applicable, assessed for such
executions on other equity exchanges.25
Additionally, the Exchange believes that
the proposed changes to these rates
represent an equitable allocation of fees
and are not unfairly discriminatory
because such rates will continue to
apply equally to all Members (including
those that qualify for any of the
Exchange’s volume tiers) for all such
executions.
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 26 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
25 See
26 15
E:\FR\FM\18NON1.SGM
supra notes 20–21.
U.S.C. 78f(b)(4) and (5).
18NON1
Federal Register / Vol. 87, No. 222 / Friday, November 18, 2022 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
intended to incentivize market
participants to direct additional order
flow, including displayed, liquidityadding and liquidity-removing orders,
to the Exchange, thereby enhancing
liquidity and market quality on the
Exchange to the benefit of all Members
and market participants, as well as to
generate additional revenue and
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. 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.’’ 27
Intramarket Competition
As discussed above, the Exchange
believes that the proposal would
incentivize Members to submit
additional order flow, including
displayed, liquidity-adding and
liquidity-removing orders, to the
Exchange, thereby enhancing liquidity
and market quality on the Exchange to
the benefit of all Members, as well as
enhancing the attractiveness of the
Exchange as a trading venue, which the
Exchange believes, in turn, would
continue to encourage market
participants to direct additional order
flow to the Exchange. Greater liquidity
benefits all Members by providing more
trading opportunities and encourages
Members to send additional orders to
the Exchange, thereby contributing to
robust levels of liquidity, which benefits
all market participants. The opportunity
to qualify for the proposed new
Liquidity Provision Tier 4, and thus
receive the proposed enhanced rebate
for executions of Added Displayed
Volume under such tier, would be
available to all Members that meet the
associated volume requirements in any
month. Similarly, the opportunity to
qualify for the proposed new alternative
criteria under Liquidity Provision Tier 2
and the proposed modified criteria
under Liquidity Removal Tier 1, and
thus receive the enhanced rebate for
executions of Added Displayed Volume
or be charged the discounted fee for
executions of Removed Volume,
respectively, would continue to be
27 See
supra note 24.
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16:46 Nov 17, 2022
Jkt 259001
available to all Members that meet the
associated volume requirements in any
month. Additionally, as described
above, the Exchange believes that the
proposed changes to the fee for
executions of Midpoint Peg IOC/FOK
Orders, the fee for executions of
Removed Sub-Dollar Volume (except
Retail Orders with a TIF of Day, GTT or
RHO that remove liquidity from the
Exchange upon entry) and the rebate for
executions of Added Displayed SubDollar Volume are modest, and such
fees and rebate will continue to apply to
all such executions for all Members as
they do today. 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% 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 Added Displayed Volume, Removed
Volume and Sub-Dollar Volume, and
market participants can readily choose
to send their orders to other exchange
and off-exchange venues if they deem
fee levels at those other venues to be
more favorable. As described above, the
proposed changes represent 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 the
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
69367
submission of additional order flow to
the Exchange through volume-based
tiers, which have been widely adopted
by exchanges, including the Exchange.
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 pricing
incentives to market participants.
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.’’ 28 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’. . . .’’.29 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
28 See
supra note 24.
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)).
29 NetCoalition
E:\FR\FM\18NON1.SGM
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Federal Register / Vol. 87, No. 222 / Friday, November 18, 2022 / Notices
19(b)(3)(A)(ii) of the Act 30 and Rule
19b–4(f)(2) 31 thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
khammond on DSKJM1Z7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MEMX–2022–30 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–2022–30. 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
U.S.C. 78s(b)(3)(A)(ii).
31 17 CFR 240.19b–4(f)(2).
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–2022–30 and
should be submitted on or before
December 9, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–25087 Filed 11–17–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–340, OMB Control
No.3235–0375]
Proposed Collection; Comment
Request; Extension: Schedule 13E–4F
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Schedule 13E–4F (17 CFR 240.13e–
102) may be used by an issuer that is
incorporated or organized under the
laws of Canada to make a cash tender
or exchange offer for the issuer’s own
securities if less than 40 percent of the
class of such issuer’s securities
outstanding that are the subject of the
tender offer is held by U.S. holders. The
information collected must be filed with
the Commission and is publicly
available. We estimate that it takes
approximately 2 hours per response to
prepare Schedule 13E–4F and that the
information is filed by approximately 3
respondents for a total annual reporting
burden of 6 hours (2 hours per response
× 3 responses).
Written comments are invited on: (a)
whether this proposed collection of
30 15
VerDate Sep<11>2014
16:46 Nov 17, 2022
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden imposed by the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication by January 17, 2023.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Please direct your written comment to
David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: November 14, 2022.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–25105 Filed 11–17–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96321; File No. SR–NYSE–
2022–51]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Establish
Initial and Annual Fees for Exchange
Traded Products
November 15, 2022.
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 7, 2022, New York Stock
Exchange LLC (‘‘NYSE’’ 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 self-regulatory
organization. The Commission is
publishing this notice to solicit
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
32 17
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CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 87, Number 222 (Friday, November 18, 2022)]
[Notices]
[Pages 69363-69368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25087]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96306; File No. SR-MEMX-2022-30]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule
November 14, 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 October 31, 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 Excchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to amend the Exchange's fee schedule applicable to Members \3\ (the
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The
Exchange proposes to implement the changes to the Fee Schedule pursuant
to this proposal on November 1, 2022. The text of the proposed rule
change is provided in Exhibit 5.
---------------------------------------------------------------------------
\3\ See Exchange Rule 1.5(p).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Fee
Schedule to: (i) modify the Liquidity Provision Tiers by adopting a new
Liquidity Provision Tier 4 and modifying the required criteria under
Liquidity Provision Tier 2; (ii) increase the fee and modify the
required criteria under Liquidity Removal Tier 1; (iii) increase the
fee for certain executions of Pegged Orders \4\ with a Midpoint Peg \5\
instruction (such orders, ``Midpoint Peg Orders'') and a time-in-force
(``TIF'') instruction of IOC \6\ or FOK \7\ that execute at the
midpoint of the national best bid and offer (``NBBO''); and (iv) modify
the pricing for certain executions of orders in securities priced below
$1.00 per share (such orders, ``Sub-Dollar Volume''), each as further
described below.
---------------------------------------------------------------------------
\4\ See Exchange Rule 11.6(h).
\5\ See Exchange Rule 11.6(h)(2).
\6\ See Exchange Rule 11.6(o)(1).
\7\ See Exchange Rule 11.6(o)(3).
---------------------------------------------------------------------------
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues, to
which market participants may direct their order flow. Based on
publicly available information, no single registered equities exchange
currently has more than approximately 16% of the total market share of
executed volume of equities trading.\8\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange
possesses significant pricing power in the execution of order flow, and
the Exchange currently represents approximately 3.5% of the overall
market share.\9\ 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.
---------------------------------------------------------------------------
\8\ Market share percentage calculated as of October 31, 2022.
The Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
\9\ Id.
---------------------------------------------------------------------------
Liquidity Provision Tiers
The Exchange currently provides 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 to the Exchange (such orders,
``Added Displayed Volume''). The Exchange also currently offers
Liquidity Provision Tiers 1-4 under which a Member may receive an
enhanced rebate for executions of Added Displayed Volume by achieving
the corresponding required volume criteria for each tier. The Exchange
now proposes to adopt a new tier under the Liquidity Provision Tiers,
which, as proposed, would be the new Liquidity Provision Tier 4, and
the current Liquidity Provision Tier 4 would be renumbered as Liquidity
Provision Tier 5 (hereinafter referred to as such). The rebate for
executions of Added Displayed Volume and the required criteria under
Liquidity Provision Tier 5 would remain unchanged.
Under the proposed new Liquidity Provision Tier 4, the Exchange
would provide an enhanced rebate of $0.0028 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving one of the following two alternative criteria: (1)
[[Page 69364]]
an ADAV \10\ that is equal to or greater than 0.10% of the TCV; \11\ or
(2) a Displayed ADAV \12\ (excluding Retail Orders) that is equal to or
greater than 750,000 shares and a Step-Up Displayed ADAV \13\
(excluding Retail Orders) from October 2022 that is equal to or greater
than 30% of the Member's October 2022 Displayed ADAV (excluding Retail
Orders).\14\ The Exchange proposes to provide Members that qualify for
the proposed new Liquidity Provision Tier 4 a rebate of 0.075% of the
total dollar volume of the transaction for executions of orders in
securities priced below $1.00 per share that add displayed liquidity to
the Exchange, which is the same rebate that will be applicable to such
executions for all Members after giving effect to the Sub-Dollar Volume
pricing changes proposed below. The proposed new Liquidity Provision
Tier 4 is designed to encourage Members to maintain or increase their
order flow that adds liquidity, including in the form of displayed
orders, to the Exchange in order to qualify for the proposed enhanced
rebate for executions of Added Displayed Volume, thereby promoting
price discovery and contributing to a deeper and more liquid market to
the benefit of all market participants.
---------------------------------------------------------------------------
\10\ 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.
\11\ 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.
\12\ As set forth on the Fee Schedule, ``Displayed ADAV'' means
ADAV with respect to displayed orders.
\13\ As set forth on the Fee Schedule, ``Step-Up Displayed
ADAV'' means Displayed ADAV in the relevant baseline month
subtracted from current Displayed ADAV.
\14\ The pricing for Liquidity Provision Tier 4 is referred to
by the Exchange on the Fee Schedule under the description ``Added
displayed volume, Liquidity Provision Tier 4'' with a Fee Code of
``B4'', ``D4'' or ``J4'', as applicable, to be provided by the
Exchange on the monthly invoices provided to Members. The Exchange
notes that because the determination of whether a Member qualifies
for a certain pricing tier for a particular month will not be made
until after the month-end, the Exchange will provide the Fee Codes
otherwise applicable to such transactions on the execution reports
provided to Members during the month and will only designate the Fee
Codes applicable to the achieved pricing tier on the monthly
invoices, which are provided after such determination has been made,
as the Exchange does for its tier-based pricing today. The Exchange
also notes that the pricing for Liquidity Provision Tier 5 is
referred to by the Exchange on the Fee Schedule under the
description ``Added displayed volume, Liquidity Provision Tier 5''
with a Fee Code of ``B5'', ``D5'' or ``J5'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
---------------------------------------------------------------------------
Currently, under Liquidity Provision Tier 2, the Exchange provides
an enhanced rebate of $0.0032 per share for executions of Added
Displayed Volume for Members that qualify for such tier by achieving an
ADAV that is that is equal to or greater than 0.20% of the TCV. Now,
the Exchange proposes to modify the required criteria such that a
Member would now qualify for such tier by achieving one of the
following two alternative criteria: (1) an ADAV that is equal to or
greater than 0.20% of the TCV; or (2) an ADAV that is equal to or
greater than 15,000,000 shares and a Step-Up ADAV from October 2022
that is equal to or greater than 0.10% of the Member's October 2022
ADAV. Thus, such proposed change would keep the existing criteria
intact and add an alternative criteria that includes an overall ADAV
threshold and a Step-Up ADAV threshold, which are designed to encourage
the submission of additional order flow that adds liquidity to the
Exchange. The Exchange notes that, as the proposed change to the
required criteria under Liquidity Provision Tier 2 simply provides an
alternative criteria and does not change the existing criteria, the
Exchange believes that such change would make the tier 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 is not proposing to
change the rebate provided for executions of Added Displayed Volume
under Liquidity Provision Tier 2.
Liquidity Removal Tier 1
The Exchange currently charges 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 from the Exchange (such orders, ``Removed
Volume''). The Exchange also currently offers Liquidity Removal Tier 1
under which qualifying Members are charged a discounted fee of $0.0029
per share for executions of Removed Volume by achieving one of the
following two alternative criteria: (1) an ADV \15\ that is equal to or
greater than 0.45% of the TCV and an ADAV that is equal to or greater
than 0.20% of the TCV; or (2) an ADV that is equal to or greater than
1.00% of the TCV.
---------------------------------------------------------------------------
\15\ As set forth on the Fee Schedule, ``ADV'' means average
daily volume calculated as the number of shares added or removed,
combined, per day, which is calculated on a monthly basis.
---------------------------------------------------------------------------
Now, the Exchange proposes to increase the fee charged for
executions of Removed Volume under Liquidity Removal Tier 1 to $0.00295
per share, and to modify the required criteria such that a Member would
now qualify for such tier by achieving one of the following two
alternative criteria: (1) an ADV that is equal to or greater than 0.50%
of the TCV and a Remove ADAV \16\ that is equal to or greater than
0.25% of the TCV; or (2) an ADV that is equal to or greater than 1.00%
of the TCV.\17\ Thus, the proposed change to the required criteria
would increase the ADV threshold by 0.05% (i.e., from 0.45% to 0.50%)
of the TCV and replace the ADAV threshold with a Remove ADV threshold
in the first of such alternative criteria, and it would keep the second
of such alternative criteria intact without any change. The proposed
changes to increase the ADV threshold and include a Remove ADV
threshold in the first of such alternative criteria are designed to
encourage Members to maintain or increase their order flow, including
in the form of orders that remove liquidity, to the Exchange in order
to qualify for the proposed discounted fee for executions of Removed
Volume. While the Exchange's overall pricing philosophy generally
encourages adding liquidity over removing liquidity, the Exchange
believes that providing alternative criteria that are based on
different types of volume that Members may choose to achieve, such as
the proposed new criteria which includes a Remove ADV threshold,
contributes to a more robust and well-balanced market ecosystem on the
Exchange to the benefit of all Members.
---------------------------------------------------------------------------
\16\ As set forth on the Fee Schedule, ``Remove ADV'' means ADV
with respect to orders that remove liquidity.
\17\ The 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'' to be provided by the Exchange on the monthly
invoices provided to Members. The Exchange notes that because the
determination of whether a Member qualifies for a certain pricing
tier for a particular month will not be made until after the month-
end, the Exchange will provide the Fee Codes otherwise applicable to
such transactions on the execution reports provided to Members
during the month and will only designate the Fee Codes applicable to
the achieved pricing tier on the monthly invoices, which are
provided after such determination has been made, as the Exchange
does for its tier-based pricing today.
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The purpose of increasing the fee charged for executions of Removed
Volume under such tier as proposed (i.e., by $0.00005 per share), which
the Exchange believes is a modest increase and remains commensurate
with the proposed new required criteria, is for business and
competitive reasons, as the Exchange believes that increasing such
[[Page 69365]]
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.
The Exchange notes that it is also proposing to change the fee
charged under Liquidity Removal Tier 1 for executions of Removed Sub-
Dollar Volume (as defined below), as further described below.
Midpoint Peg IOC/FOK Orders
As noted above, the Exchange currently charges a standard fee of
$0.0030 per share for executions of Removed Volume. The Exchange also
currently charges a discounted fee of $0.0026 per share for executions
of Midpoint Peg Orders in securities priced at or above $1.00 per share
with a TIF instruction of IOC or FOK that execute at the midpoint of
the NBBO and remove liquidity from the Exchange upon entry (such
orders, ``Midpoint Peg IOC/FOK Orders''). Charging a discounted fee for
executions of Midpoint Peg IOC/FOK Orders is intended to incentivize
the submission of such orders and, in turn, attract additional contra-
side orders designed to execute at the midpoint to be posted on the
Exchange, and is therefore designed to deepen liquidity and increase
execution opportunities at the midpoint on the Exchange, thereby
improving the Exchange's market quality to the benefit of all Members
and enhancing its attractiveness as a trading venue.
Now, the Exchange proposes to increase the fee charged for
executions of Midpoint Peg IOC/FOK Orders to $0.0027 per share.\18\ The
purpose of increasing the fee for executions of Midpoint Peg IOC/FOK
Orders as proposed (i.e., by $0.0001 per share), which the Exchange
believes is a modest increase and remains commensurate with the market
quality benefits that such discounted fee is intended to achieve, 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.
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\18\ The pricing for executions of Midpoint Peg IOC/FOK Orders
is referred to by the Exchange on the Fee Schedule under the
description ``Removed volume from MEMX Book, Midpoint Peg (IOC/
FOK)'' with a Fee Code of ``Rm'' assigned by the Exchange.
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Pricing for Certain Sub-Dollar Volume
Currently, the Exchange charges a fee of 0.25% of the total dollar
value of the transaction for executions of Sub-Dollar Volume that
remove liquidity from the Exchange (such orders, ``Removed Sub-Dollar
Volume''). This fee is applicable to all executions of Removed Sub-
Dollar Volume (except Retail Orders with a TIF of Day, GTT or RHO that
remove liquidity from the Exchange upon entry \19\) and is applicable
to all Members (including those that qualify for any of the Exchange's
volume tiers). Now, the Exchange proposes to increase the fee charged
to all Members (including those that qualify for any of the Exchange's
volume tiers) for all executions of Removed Sub-Dollar Volume (except
Retail Orders with a TIF of Day, GTT or RHO that remove liquidity from
the Exchange upon entry) to 0.28% of the total dollar value of the
transaction. The purpose of increasing the fee for such executions of
Removed Sub-Dollar Volume is for business and competitive reasons, as
the Exchange believes that increasing such fee would generate
additional revenue to offset some of the costs associated with the
Exchange's current transaction pricing structure, which provides
various rebates for liquidity-adding orders, and the Exchange's
operations generally. The Exchange notes that despite the increase
proposed herein, which the Exchange believes is modest, the proposed
fee for such executions of Removed Sub-Dollar Volume (i.e., 0.28% of
the total dollar value of the transaction) remains lower than, and
competitive with, the standard fee charged by other equity exchanges
for executions of orders in securities priced below $1.00 per share
that remove liquidity.\20\
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\19\ Such orders have different pricing that is referred to by
the Exchange on the Fee Schedule under the description ``Removed
volume from MEMX Book upon entry, Retail Order (Day/GTT/RHO)'' with
a Fee Code of ``Rr0'' assigned by the Exchange.
\20\ 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 fee of 0.30% of the total dollar value of
the transaction for executions of orders in securities priced below
$1.00 per share that remove liquidity from Cboe BZX; 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 fee of
0.30% of the total dollar value of the transaction for executions of
orders in securities priced below $1.00 per share that remove
liquidity from Cboe EDGX.
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Currently, the Exchange provides a rebate of 0.10% of the total
dollar value of the transaction for executions of Sub-Dollar Volume
that add displayed liquidity to the Exchange (such orders, ``Added
Displayed Sub-Dollar Volume''). This fee is applicable to all
executions of Added Displayed Sub-Dollar Volume and is applicable to
all Members (including those that qualify for any of the Exchange's
volume tiers). Now, the Exchange proposes to reduce the rebate provided
to all Members (including those that qualify for any of the Exchange's
volume tiers) for all executions of Added Displayed Sub-Dollar Volume
to 0.075% of the total dollar value of the transaction. The purpose of
reducing the rebate for executions of Added Displayed Sub-Dollar Volume
is for business and competitive reasons, as the Exchange believes that
reducing such rebate would decrease the Exchange's expenditures with
respect to its transaction pricing in a manner that is still consistent
with the Exchange's overall pricing philosophy of encouraging added
displayed liquidity. The Exchange notes that despite the reduction
proposed herein, which the Exchange believes is modest, the proposed
rebate for executions of Added Displayed Sub-Dollar Volume (i.e.,
0.075% of the total dollar value of the transaction) remains higher
than, and competitive with, the rebates offered by other equity
exchanges for executions of orders in securities priced below $1.00 per
share that add displayed liquidity.\21\
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\21\ 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 that no rebate is
provided (i.e., a free execution) for executions of orders in
securities priced below $1.00 per share that add displayed liquidity
to Cboe BZX.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\22\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\23\ 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.
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\22\ 15 U.S.C. 78f.
\23\ 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
[[Page 69366]]
the overall market. The Commission and the courts have repeatedly
expressed their preference for competition over regulatory intervention
in determining prices, products, and services in the securities
markets. In Regulation NMS, the Commission highlighted the importance
of market forces in determining prices and SRO revenues and also
recognized that current regulation of the market system ``has been
remarkably successful in promoting market competition in its broader
forms that are most important to investors and listed companies.'' \24\
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\24\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005).
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue to reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, including with respect to
Added Displayed Volume, Removed Volume and Sub-Dollar Volume, and
market participants can readily trade on competing venues if they deem
pricing levels at those other venues to be more favorable. The Exchange
believes the proposal reflects a reasonable and competitive pricing
structure designed to incentivize market participants to direct
additional order flow, including displayed, liquidity-adding and/or
liquidity-removing orders, to the Exchange, which the Exchange believes
would promote price discovery and enhance liquidity and market quality
on the Exchange to the benefit of all Members and market participants.
While the Exchange has proposed increasing its fees for certain
executions of Removed Volume and Removed Sub-Dollar Volume, and
reducing its rebate for executions of Added Displayed Sub-Dollar
Volume, as further discussed below, the Exchange believes that each of
such changes represents a modest increase (decrease) from the current
fee (rebate) applicable to such executions.
The Exchange notes that volume-based incentives and discounts have
been widely adopted by exchanges, including the Exchange, and are
reasonable, equitable and not unfairly discriminatory because they are
open to all members on an equal basis and provide additional benefits
or discounts that are reasonably related to 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 that the proposed new
Liquidity Provision Tier 4, the Liquidity Provision Tier 2 as modified
by the proposed change to the required criteria under such tier, and
the Liquidity Removal Tier 1 as modified by the proposed changes to the
fee for executions of Removed Volume and the required criteria under
such tier, are reasonable, equitable and not unfairly discriminatory
for these same reasons, as such tiers would provide Members with an
incremental incentive to achieve certain volume thresholds on the
Exchange, are available to all Members on an equal basis, and, as
described above, are designed to encourage Members to maintain or
increase their order flow, including in the form of displayed,
liquidity-adding and/or liquidity removing orders, to the Exchange in
order to qualify for an enhanced rebate for executions of Added
Displayed Volume or a discounted fee for executions of Removed Volume,
as applicable, thereby contributing to a deeper, more liquid and well
balanced market ecosystem on the Exchange to the benefit of all Members
and market participants. The Exchange also believes that such tiers
reflect a reasonable and equitable allocation of fees and rebates, as
the Exchange believes that the enhanced rebate for executions of Added
Displayed Volume under the proposed new Liquidity Provision Tier 4 and
the modified Liquidity Provision Tier 2, as well as the discounted fee
for executions of Removed Volume under the modified Liquidity Removal
Tier 1, each remains commensurate with the corresponding required
criteria under each such tier and is reasonably related to the market
quality benefits that each such tier is designed to achieve, as
described above.
The Exchange also believes the proposed increased fee for
executions of Midpoint Peg IOC/FOK Orders is reasonable, equitable and
not unfairly discriminatory because the Exchange believes that the
increase (i.e., $0.0001 per share) is modest and that the fee remains
commensurate with the market quality benefits that such discounted fee
is intended to achieve, as described above, and such fee would continue
to be charged uniformly to all executions of such orders for all
Members.
Regarding the proposed changes to Sub-Dollar Volume pricing, the
Exchange believes the proposed changes to increase the fee for
executions of Removed Sub-Dollar Volume (except Retail Orders with a
TIF of Day, GTT or RHO that remove liquidity from the Exchange upon
entry) and reduce the rebate for executions of Added Displayed Sub-
Dollar Volume are reasonable because, as described above, the Exchange
believes that each of such changes represents a modest increase
(decrease) from the current fee (rebate) applicable to such executions
and that such changes would decrease the Exchange's expenditures and
generate additional revenue, as applicable, 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 such proposed changes are
reasonable, as the proposed fee for executions of Removed Sub-Dollar
Volume (except Retail Orders with a TIF of Day, GTT or RHO that remove
liquidity from the Exchange upon entry) and the proposed rebate for
executions of Added Displayed Sub-Dollar Volume are competitive with
the standard fees and rebates, as applicable, assessed for such
executions on other equity exchanges.\25\ Additionally, the Exchange
believes that the proposed changes to these rates represent an
equitable allocation of fees and are not unfairly discriminatory
because such rates will continue to apply equally to all Members
(including those that qualify for any of the Exchange's volume tiers)
for all such executions.
---------------------------------------------------------------------------
\25\ See supra notes 20-21.
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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 \26\ 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.
---------------------------------------------------------------------------
\26\ 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
[[Page 69367]]
intended to incentivize market participants to direct additional order
flow, including displayed, liquidity-adding and liquidity-removing
orders, to the Exchange, thereby enhancing liquidity and market quality
on the Exchange to the benefit of all Members and market participants,
as well as to generate additional revenue and 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. 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.'' \27\
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\27\ See supra note 24.
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Intramarket Competition
As discussed above, the Exchange believes that the proposal would
incentivize Members to submit additional order flow, including
displayed, liquidity-adding and liquidity-removing orders, to the
Exchange, thereby enhancing liquidity and market quality on the
Exchange to the benefit of all Members, as well as enhancing the
attractiveness of the Exchange as a trading venue, which the Exchange
believes, in turn, would continue to encourage market participants to
direct additional order flow to the Exchange. Greater liquidity
benefits all Members by providing more trading opportunities and
encourages Members to send additional orders to the Exchange, thereby
contributing to robust levels of liquidity, which benefits all market
participants. The opportunity to qualify for the proposed new Liquidity
Provision Tier 4, and thus receive the proposed enhanced rebate for
executions of Added Displayed Volume under such tier, would be
available to all Members that meet the associated volume requirements
in any month. Similarly, the opportunity to qualify for the proposed
new alternative criteria under Liquidity Provision Tier 2 and the
proposed modified criteria under Liquidity Removal Tier 1, and thus
receive the enhanced rebate for executions of Added Displayed Volume or
be charged the discounted fee for executions of Removed Volume,
respectively, would continue to be available to all Members that meet
the associated volume requirements in any month. Additionally, as
described above, the Exchange believes that the proposed changes to the
fee for executions of Midpoint Peg IOC/FOK Orders, the fee for
executions of Removed Sub-Dollar Volume (except Retail Orders with a
TIF of Day, GTT or RHO that remove liquidity from the Exchange upon
entry) and the rebate for executions of Added Displayed Sub-Dollar
Volume are modest, and such fees and rebate will continue to apply to
all such executions for all Members as they do today. 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% 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 Added Displayed
Volume, Removed Volume and Sub-Dollar Volume, and market participants
can readily choose to send their orders to other exchange and off-
exchange venues if they deem fee levels at those other venues to be
more favorable. As described above, the proposed changes represent 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 the submission of
additional order flow to the Exchange through volume-based tiers, which
have been widely adopted by exchanges, including the Exchange.
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 pricing incentives to
market participants.
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.'' \28\ 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'. . . .''.\29\ Accordingly, the Exchange does not believe its
proposed pricing changes impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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\28\ See supra note 24.
\29\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
[[Page 69368]]
19(b)(3)(A)(ii) of the Act \30\ and Rule 19b-4(f)(2) \31\ thereunder.
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\30\ 15 U.S.C. 78s(b)(3)(A)(ii).
\31\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MEMX-2022-30 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-2022-30. 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-2022-30 and should be submitted on
or before December 9, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25087 Filed 11-17-22; 8:45 am]
BILLING CODE 8011-01-P
