Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 76648-76657 [2022-27161]
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Federal Register / Vol. 87, No. 240 / Thursday, December 15, 2022 / Notices
19b–4(f)(2) 20 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
lotter on DSK11XQN23PROD with NOTICES1
Electronic Comments
b Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
b Send an email to rule-comments@
sec.gov. Please include File Number SR–
PEARL–2022–53 on the subject line.
Paper Comments
b Send paper comments in triplicate
to Vanessa Countryman, Secretary,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–1090.
All submissions should refer to File
Number SR–PEARL–2022–53. 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
20 17
CFR 240.19b–4(f)(2).
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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
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–PEARL–2022–53 and
should be submitted on or before
January 5, 2023. For the Commission, by
the Division of Trading and Markets,
pursuant to delegated authority.21
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–27162 Filed 12–14–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96471; File No. SR–MEMX–
2022–33]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule
December 9, 2022.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
1, 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.
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
December 1, 2022. The text of the
proposed rule change is provided in
Exhibit 5.
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
1 15
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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) modify the Liquidity Provision Tiers;
(ii) modify the Displayed Liquidity
Incentive (‘‘DLI’’) Tiers; (iii) modify the
NBBO Setter Tier to become the NBBO
Setter/Joiner Tiers; (iv) reduce the
rebates 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’’); (v) modify
the Non-Display Add Tiers; (vi) adopt
the Sub-Dollar Rebate Tier; (vii) add a
note to the Fee Schedule stating that to
the extent a single execution qualifies
for one or more additive rebates, the
maximum combined rebate per share
provided by the Exchange shall be
$0.0036; and (viii) eliminate the StepUp Additive Rebate, 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
volume of equities trading.4 Thus, in
such a low-concentrated and highly
competitive market, no single equities
4 Market share percentage calculated as of
November 30, 2022. The Exchange receives and
processes data made available through consolidated
data feeds (i.e., CTS and UTDF).
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exchange possesses significant pricing
power in the execution of order flow,
and the Exchange currently represents
approximately 3% of the overall market
share.5 The Exchange in particular
operates a ‘‘Maker-Taker’’ model
whereby it provides rebates to Members
that add liquidity to the Exchange and
charges fees to Members that remove
liquidity from the Exchange. The Fee
Schedule sets forth the standard rebates
and fees applied per share for orders
that add and remove liquidity,
respectively. Additionally, in response
to the competitive environment, the
Exchange also offers tiered pricing,
which provides Members with
opportunities to qualify for higher
rebates or lower fees where certain
volume criteria and thresholds are met.
Tiered pricing provides an incremental
incentive for Members to strive for
higher tier levels, which provides
increasingly higher benefits or discounts
for satisfying increasingly more
stringent criteria.
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 1–5
under which a Member may receive an
enhanced rebate for executions of
Added Displayed Volume by achieving
the corresponding required volume
criteria for each such tier. The Exchange
now proposes to modify the Liquidity
Provision Tiers by modifying the rebates
and required criteria under Liquidity
Provision Tiers 1, 3 and 5, and keeping
Liquidity Provision Tiers 2 and 4 intact
with no changes, as further described
below.
First, with respect to Liquidity
Provision Tier 1, the Exchange currently
provides an enhanced rebate of $0.0033
per share for executions of Added
Displayed Volume for Members that
qualify for such tier by achieving: (1) a
Displayed ADAV 6 that is equal to or
greater than 0.40% of the TCV; 7 or (2)
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5 Id.
6 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, and ‘‘Displayed
ADAV’’ means ADAV with respect to displayed
orders.
7 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.
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a Remove ADV 8 that is equal to or
greater than 0.20% of the TCV and a
Step-Up ADAV 9 from June 2022 that is
equal to or greater than 0.05% of the
TCV. The Exchange now proposes to
modify Liquidity Provision Tier 1 such
that the Exchange would provide an
enhanced rebate of $0.0034 per share for
executions of Added Displayed Volume
for Members that qualify for such tier by
achieving: (1) a Displayed ADAV that is
equal to or greater than 0.40% of the
TCV; or (2) an ADAV that is equal to or
greater than 0.30% of the TCV and a
Step-Up ADAV from November 2022
that is equal to or greater than 0.10% of
the TCV.10 Thus, such proposed
changes would increase the rebate for
executions of Added Displayed Volume
by $0.0001 per share and keep the first
of the two existing alternative criteria
(based on an overall Displayed ADAV
threshold) intact, eliminate the second
of the two existing alternative criteria
(based on a Remove ADV threshold and
a Step-Up ADAV from June 2022
threshold), and add a new second
alternative criteria (based on an overall
ADAV threshold and a Step-Up ADAV
from November 2022 threshold). The
Exchange is not proposing to change the
rebate for executions of orders in
securities priced below $1.00 per share
under this tier.
Second, with respect to Liquidity
Provision Tier 3, the Exchange currently
provides an enhanced rebate of $0.0029
per share for executions of Added
Displayed Volume for Members that
qualify for such tier by achieving: (1) an
ADAV that is equal to or greater than
0.12% of the TCV; or (2) a Step-Up
ADAV from April 2022 that is equal to
or greater than 0.04% of the TCV; or (3)
8 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, and
‘‘Remove ADV’’ means ADV with respect to orders
that remove liquidity.
9 As set forth on the Fee Schedule, ‘‘Step-Up
ADAV’’ means ADAV in the relevant baseline
month subtracted from current ADAV.
10 The pricing for Liquidity Provision Tier 1 is
referred to by the Exchange on the Fee Schedule
under the existing description ‘‘Added displayed
volume, Liquidity Provision Tier 1’’ with a Fee
Code of B1, D1 or J1, as applicable, to be provided
by the Exchange on the monthly invoices provided
to Members. The Exchange notes that because the
determination of whether a Member qualifies for a
certain pricing tier for a particular month will not
be made until after the month-end, the Exchange
will provide the Fee Codes otherwise applicable to
such transactions on the execution reports provided
to Members during the month and will only
designate the Fee Codes applicable to the achieved
pricing tier on the monthly invoices, which are
provided after such determination has been made,
as the Exchange does for its tier-based pricing
today.
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76649
a Step-Up Non-Displayed ADAV 11 from
April 2022 that is equal to or greater
than 2,000,000 shares. The Exchange
now proposes to modify Liquidity
Provision Tier 3 such that the Exchange
would provide an enhanced rebate of
$0.0030 per share for executions of
Added Displayed Volume for Members
that qualify for such tier by achieving:
(1) an ADAV that is equal to or greater
than 0.15% of the TCV; or (2) an ADAV
that is equal to or greater than
15,000,000 shares.12 Thus, such
proposed changes would increase the
rebate for executions of Added
Displayed Volume by $0.0001 per share
and would increase the overall ADAV
threshold that is expressed as a
percentage of the TCV in the first of the
three existing alternative criteria,
eliminate the second and third of the
three existing alternative criteria (based
on a Step-Up ADAV from April 2022
threshold and a Step-Up Non-Displayed
ADAV from April 2022 threshold), and
add a new alternative criteria based on
an overall ADAV threshold that is
expressed as a number of shares. The
Exchange is not proposing to change the
rebate for executions of orders in
securities priced below $1.00 per share
under such tier.
Third, with respect to Liquidity
Provision Tier 5, the Exchange currently
provides an enhanced rebate of $0.0026
per share for executions of Added
Displayed Volume for Members that
qualify for such tier by achieving: (1) an
ADAV that is equal to or greater than
0.075% of the TCV; or (2) a Step-Up
Displayed ADAV 13 from April 2022 that
is equal to or greater than 0.02% of the
TCV; or (3) a Midpoint ADAV 14 that is
equal to or greater than 1,000,000
shares. The Exchange now proposes to
modify Liquidity Provision Tier 5 such
that the Exchange would provide an
enhanced rebate of $0.0025 per share for
executions of Added Displayed Volume
for Members that qualify for such tier by
11 As set forth on the Fee Schedule, ‘‘NonDisplayed ADAV’’ means ADAV with respect to
non-displayed orders (including Midpoint Peg
orders), and ‘‘Step-Up Non-Displayed ADAV’’
means Non-Displayed ADAV in the relevant
baseline month subtracted from current NonDisplayed ADAV.
12 The pricing for Liquidity Provision Tier 3 is
referred to by the Exchange on the Fee Schedule
under the existing description ‘‘Added displayed
volume, Liquidity Provision Tier 3’’ with a Fee
Code of B3, D3 or J3, as applicable, to be provided
by the Exchange on the monthly invoices provided
to Members.
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 As set forth on the Fee Schedule, ‘‘Midpoint
ADAV’’ means ADAV with respect to Midpoint Peg
orders.
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achieving: (1) an ADAV that is equal to
or greater than 0.075% of the TCV; or
(2) a Midpoint ADAV 15 that is equal to
or greater than 1,000,000 shares.16 Thus,
such proposed changes would decrease
the rebate for executions of Added
Displayed Volume by $0.0001 per share
and would eliminate the second of the
three existing alternative criteria (based
on a Step-Up Displayed ADAV from
April 2022 threshold). The Exchange is
not proposing to change the rebate for
executions of orders in securities priced
below $1.00 per share under such tier.
As noted above, Liquidity Provision
Tiers 2 and 4 would remain intact with
no changes under this proposal.
The tiered pricing structure for
executions of Added Displayed Volume
under the Liquidity Provision Tiers
provides an incremental incentive for
Members to strive for higher volume
thresholds to receive higher enhanced
rebates for such executions and, as such,
is intended to encourage Members to
maintain or increase their order flow,
primarily in the form of liquidity-adding
volume, to the Exchange, thereby
contributing to a deeper and more liquid
market to the benefit of all Members and
market participants. The Exchange
believes that the Liquidity Provision
Tiers, as modified by the proposed
changes described above, reflect a
reasonable and competitive pricing
structure that is right-sized, updated to
reference more recent baseline months
with respect to the applicable Step-Up
ADAV thresholds, and consistent with
the Exchange’s overall pricing
philosophy of encouraging added and/
or displayed liquidity. Specifically, the
Exchange believes that, after giving
effect to the proposed changes described
above, the rebate for executions of
Added Displayed Volume provided
under each of the Liquidity Provision
Tiers 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.
DLI Tiers
The Exchange currently offers DLI
Tiers 1 and 2 under which a Member
may receive an enhanced rebate for
executions of Added Displayed Volume
by achieving the corresponding required
criteria for each such tier. The DLI Tiers
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15 As
set forth on the Fee Schedule, ‘‘Midpoint
ADAV’’ means ADAV with respect to Midpoint Peg
orders.
16 The pricing for Liquidity Provision Tier 5 is
referred to by the Exchange on the Fee Schedule
under the existing 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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are designed to encourage Members,
through the provision of an enhanced
rebate for executions of Added
Displayed Volume, to promote price
discovery and market quality by quoting
at the NBBO for a significant portion of
each day (i.e., through the applicable
quoting requirement 17) in a broad base
of securities (i.e., through the applicable
securities requirements 18), thereby
benefitting the Exchange and investors
by providing improved trading
conditions for all market participants
through narrower bid-ask spreads and
increased depth of liquidity available at
the NBBO in a broad base of securities
and committing capital to support the
execution of orders.19 Now, the
Exchange proposes to modify DLI Tiers
1 and 2 by reducing the rebates for
executions of Added Displayed Volume
under such tiers and modifying the
required criteria under DLI Tier 1.
Currently, a Member qualifies for DLI
Tier 1 by achieving an NBBO Time of
at least 25% in an average of at least
1,000 securities per trading day during
the month. The Exchange now proposes
to modify the required criteria under
DLI Tier 1 such that a Member would
now qualify for such tier by achieving:
(1) an NBBO Time of at least 25% in an
average of at least 1,000 securities per
trading day during the month; and (2)
an ADAV that is equal to or greater than
0.05% of the TCV. Thus, such proposed
change would add an overall ADAV
threshold into the required criteria,
which is intended to encourage
Members to maintain or increase their
overall order flow that adds liquidity to
the Exchange, thereby contributing to a
deeper and more liquid market to the
benefit of all Members and market
participants, in addition to the existing
quoting requirement designed to
promote price discovery and market
17 As set forth on the Fee Schedule, the term
‘‘quoting requirement’’ means the requirement that
a Member’s NBBO Time be at least 25%, and the
term ‘‘NBBO Time’’ means the aggregate of the
percentage of time during regular trading hours
during which one of a Member’s market participant
identifiers (‘‘MPIDs’’) has a displayed order of at
least one round lot at the national best bid or the
national best offer.
18 As set forth on the Fee Schedule, the term
‘‘securities requirement’’ means the requirement
that a Member meets the quoting requirement in the
applicable number of securities per day. Currently,
each of DLI Tiers 1 and 2 has a securities
requirement that may be achieved by a Member
meeting the quoting requirement in the specified
number of securities traded on the Exchange.
19 See the Exchange’s Fee Schedule (available at
https://info.memxtrading.com/fee-schedule/) for
additional details regarding the Exchange’s DLI
Tiers. See also Securities Exchange Act Release No.
92150 (June 10, 2021), 86 FR 32090 (June 16, 2021)
(SR–MEMX–2021–07) (notice of filing and
immediate effectiveness of fee changes adopted by
the Exchange, including the adoption of DLI).
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quality in a broad base of securities on
the Exchange.
The Exchange also proposes to reduce
the rebates for executions of Added
Displayed Volume under DLI Tiers 1
and 2. Currently, the Exchange provides
enhanced rebates of $0.0032 per share
under DLI Tier 1 and $0.0029 per share
under DLI Tier 2 for a qualifying
Member’s executions of Added
Displayed Volume. Now, the Exchange
proposes to reduce such rebate provided
under DLI Tier 1 to $0.0031 per share
and reduce such rebate provided under
DLI Tier 2 to $0.0028 per share.20 The
Exchange believes that the proposed
reduction of such rebates (i.e., by
$0.0001 per share in each case)
represents a modest reduction in each
case and that each of the proposed
rebates under DLI Tiers 1 and 2 remains
commensurate with the required criteria
under each such tier. The purpose of
reducing the rebates for executions of
Added Displayed Volume provided
under DLI Tiers 1 and 2, as proposed,
is for business and competitive reasons,
as the Exchange believes the reduction
of such rebates 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 and/or displayed
liquidity and promoting the price
discovery and market quality objectives
of the DLI Tiers described above. The
Exchange is not proposing to change the
rebates provided under such tiers for
executions of orders in securities priced
below $1.00 per share.
NBBO Setter/Joiner Tiers
The Exchange currently offers the
NBBO Setter Tier under which a
Member may receive an additive rebate
of $0.0003 per share for executions of
Added Displayed Volume (other than
Retail Orders) that establish the NBBO
(such orders, ‘‘Setter Volume’’) by
achieving an ADAV with respect to
orders with Fee Code B 21 that is equal
to or greater than 0.10% of the TCV. The
Exchange now proposes to modify the
NBBO Setter Tier to become the NBBO
Setter/Joiner Tiers by renaming the
existing NBBO Setter Tier as NBBO
Setter/Joiner Tier 1, increasing the
additive rebate under such tier, making
20 The pricing for DLI Tier 1 is referred to by the
Exchange on the Fee Schedule under the existing
description ‘‘Added displayed volume, DLI Tier 1’’
with a Fee Code of Bq1, Bq1 or Jq1, as applicable,
and the pricing for DLI Tier 2 is referred to by the
Exchange on the Fee Schedule under the existing
description ‘‘Added displayed volume, DLI Tier 2’’
with a Fee Code of Bq2, Dq2 or Jq2, as applicable.
21 The Exchange notes that orders with Fee Code
B include orders, other than Retail Orders, that
establish the NBBO.
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the additive rebate under such tier also
applicable to a qualifying Member’s
executions of Added Displayed Volume
(other than Retail Orders) that establish
a new best bid or offer (‘‘BBO’’) on the
Exchange that matches the NBBO first
established on an away market (such
orders, ‘‘Joiner Volume’’), and
establishing an NBBO Setter/Joiner Tier
2.22 The additive rebate under each of
the NBBO Setter/Joiner Tiers will apply
to a qualifying Member’s executions of
Setter Volume, as it does today with
respect to the NBBO Setter Tier, as well
as Joiner Volume, and the Exchange will
indicate this in the note under the
NBBO Setter/Joiner Tiers pricing table
on the Fee Schedule.
First, with respect to NBBO Setter/
Joiner Tier 1, the Exchange proposes to
increase the additive rebate from
$0.0003 per share to $0.0004 per share
for a qualifying Member’s executions of
Setter Volume and Joiner Volume.23 As
noted above, the additive rebate under
such tier will now be provided in
addition to the otherwise applicable
rebate for a qualifying Member’s
executions of Setter Volume and Joiner
Volume, which the Exchange will
indicate in the note under the NBBO
Setter/Joiner Tier pricing table on the
Fee Schedule. The Exchange is not
proposing to modify the required
criteria under such tier.
Second, the Exchange proposes to
establish the NBBO Setter/Joiner Tier 2
under which the Exchange will provide
an additive rebate of $0.0003 per share
for executions of Setter Volume and
Joiner Volume for Members that qualify
for such tier by achieving an ADAV that
is equal to or greater than 0.05% of the
TCV and a Displayed ADAV with
respect to orders with Fee Code B or J 24
that is equal to or greater than 40% of
the Member’s Displayed ADAV with
respect to orders with Fee Code B, D or
J.25 The additive rebate under such tier
22 In connection with the proposed changes to
this tier, the Exchange is proposing to rename the
relevant heading on the Fee Schedule from ‘‘NBBO
Setter Tier’’ to ‘‘NBBO Setter/Joiner Tiers’’ and
revise the note under the NBBO Setter/Joiner Tiers
pricing table to reflect that the additive rebate under
each such tier is applicable to executions of Setter
Volume and Joiner Volume rather than being
limited to Fee Codes associated with Setter Volume.
23 The pricing for NBBO Setter/Joiner Tier 1 is
referred to by the Exchange on the Fee Schedule
under the new description ‘‘NBBO Setter/Joiner
Tier 1’’ with a Fee Code of S1 to be appended to
the otherwise applicable Fee Code assigned by the
Exchange on the monthly invoices for qualifying
executions.
24 The Exchange notes that orders with Fee Code
J include orders, other than Retail Orders, that
establish a new BBO on the Exchange that matches
the NBBO first established on an away market.
25 The Exchange notes that orders with Fee Code
D include orders that add displayed liquidity to the
Exchange but that are not Fee Code B or J, and thus,
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will not apply to executions of orders in
securities priced below $1.00 per share.
The Exchange notes that the inclusion
in the required criteria of a threshold
based on the amount of a Member’s
orders that establish the NBBO or
establish a new BBO on the Exchange
that matches the NBBO first established
on an away market (i.e., order with Fee
Code B or J), as a percentage of all such
Member’s orders that add displayed
liquidity to the Exchange (i.e., orders
with Fee Code B, D or J), is intended to
incentivize Members to submit such
aggressively priced displayed liquidity
to the Exchange.
The purpose of making the additive
rebate under the NBBO Setter/Joiner
Tiers applicable to a qualifying
Member’s executions of Joiner Volume
(in addition to Setter Volume) is, like
the original purpose of the NBBO Setter
Tier, to attract aggressively priced
displayed liquidity to the Exchange.
Specifically, the Exchange believes that
such change will encourage the
submission of orders that establish a
new BBO on the Exchange that matches
the NBBO first established on an away
market, both in order to receive the
additive rebate on such executions
under each of the NBBO Setter/Joiner
Tiers and, with respect to Members
seeking to qualify for NBBO Setter/
Joiner Tier 2, to meet the required
criteria under such tier, and the
Exchange believes that the resulting
increased submission of such
aggressively priced displayed liquidity
would enhance market quality by
increasing execution opportunities,
tightening spreads, and promoting price
discovery on the Exchange.
Additionally, the Exchange believes that
the additive rebate for executions of
Setter Volume and Joiner Volume
provided under each of the NBBO
Setter/Joiner Tiers is commensurate
with the corresponding required criteria
under each such tier and is reasonably
related to such market quality benefits
that each such tier is designed to
achieve. The Exchange notes that the
NBBO Setter/Joiner Tiers, as modified
by the changes proposed herein, are
comparable to other volume-based
incentives and discounts, which have
been widely adopted by exchanges
(including the Exchange), and that the
Exchange’s proposal to provide an
orders with Fee Code B, D or J include all orders,
other than Retail Orders, that add displayed
liquidity to the Exchange. The pricing for NBBO
Setter/Joiner Tier 2 is referred to by the Exchange
on the Fee Schedule under the new description
‘‘NBBO Setter/Joiner Tier 2’’ with a Fee Code of S2
to be appended to the otherwise applicable Fee
Code assigned by the Exchange on the monthly
invoices for qualifying executions.
PO 00000
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additive rebate for a qualifying
Member’s executions of Joiner Volume,
in addition to Setter Volume, under
such tiers is similar in construct to
pricing incentives that have been
adopted by other exchanges.26
Standard Rebates for Added NonDisplayed Volume
The Exchange proposes to reduce the
standard rebates for executions of
Added Non-Displayed Volume. Added
Non-Displayed Volume includes: (i)
Pegged Orders 27 with a Midpoint Peg 28
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 Peg Volume’’); and (ii) orders
in securities priced at or above $1.00 per
share that add non-displayed liquidity
to the Exchange, which are not
Midpoint Peg orders (such orders,
‘‘Added Non-Midpoint Peg Hidden
Volume’’).
Currently, the Exchange provides
standard rebates of $0.0018 per share for
executions of Added Midpoint Peg
Volume and Added Non-Midpoint Peg
Hidden Volume. The Exchange now
proposes to reduce each of these
standard rebates to $0.0015 per share.29
The purpose of reducing the standard
rebates for executions of Added
Midpoint Peg Volume and Add NonMidpoint Peg 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
26 See, e.g., Securities Exchange Act Release No.
70664 (October 11, 2013), 78 FR 62804 (October 22,
2013) (SR–BATS–2013–054) (notice of filing and
immediate effectiveness of fee changes adopted by
BATS, including the adoption of an ‘‘NBBO Joiner’’
additive rebate provided for executions of orders
that join the NBBO when BATS is not already at
the NBBO to members that qualify for such
incentive by achieving a specified volume
threshold).
27 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.
28 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).
29 The standard pricing for executions of Added
Midpoint Peg 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 standard pricing for
executions of Added Non-Midpoint Peg 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.
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encouraging added and/or displayed
liquidity. The Exchange notes that the
proposed standard rebate for executions
of Added Midpoint Peg Volume remains
higher than, and competitive with, the
standard rebates provided by at least
one other exchange for executions of
similar orders.30 The Exchange also
notes that the proposed standard rebate
for executions of Added Non-Midpoint
Peg Hidden Volume remains higher
than, and competitive with, the
standard rebates provided by at least
one other exchange for executions of
similar orders.31
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Non-Display Add Tiers
As noted above, the Exchange
currently provides a standard rebate of
$0.0018 per share for executions of
Added Non-Displayed Volume
(including both Added Midpoint Peg
Volume and Added Non-Midpoint Peg
Hidden Volume), which the Exchange is
proposing to reduce to $0.0015 per
share, as described above. The Exchange
also currently offers Non-Display Add
Tiers 1 and 2 under which a Member
may receive an enhanced rebate for
executions of Added Non-Displayed
Volume by achieving the corresponding
required volume criteria for each such
tier. The Exchange now proposes to
modify the Non-Display Add Tiers by
modifying the required criteria under
Non-Display Add Tiers 1 and 2, and
establishing a new Non-Display Add
Tier 3, as further described below.
First, with respect to Non-Display
Add Tier 1, the Exchange currently
provides an enhanced rebate of $0.0027
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 3,000,000 shares.32 The
Exchange now proposes to modify NonDisplay Add Tier 1 such that a Member
30 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.
31 See, e.g., the Cboe BZX Exchange, Inc. 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.
32 The pricing for Non-Display Add Tier 1 is
referred to by the Exchange on the Fee Schedule
under the existing description ‘‘Added nondisplayed volume, Non-Display Add Tier 1’’ with
a Fee Code of H1 or M1, as applicable, to be
provided by the Exchange on the monthly invoices
provided to Members.
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would now qualify for such tier by
achieving a Non-Displayed ADAV that
is equal to or greater than 5,000,000
shares. Thus, such proposed change
would increase the Non-Displayed
ADAV threshold in the required criteria,
which is designed to encourage
Members to maintain or increase their
liquidity-adding non-displayed order
flow to the Exchange in order to qualify
for the enhanced rebate for executions
of Added Non-Displayed Volume
provided under such tier. The Exchange
is not proposing to change the rebates
provided under this tier.
Second, with respect to Non-Display
Add Tier 2, the Exchange currently
provides an enhanced 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.33 The
Exchange now proposes to modify NonDisplay Add Tier 2 such that a Member
would now qualify for such tier by
achieving a Non-Displayed ADAV that
is equal to or greater than 2,000,000
shares. Thus, such proposed change
would increase the Non-Displayed
ADAV threshold in the required criteria,
which is designed to encourage
Members to maintain or increase their
liquidity-adding non-displayed order
flow to the Exchange in order to qualify
for the enhanced rebate for executions
of Added Non-Displayed Volume
provided under such tier. The Exchange
is not proposing to change the rebates
provided under this tier.
Third, the Exchange is proposing to
establish a new tier under the NonDisplay Add Tiers, which, as proposed,
would be referred to by the Exchange as
Non-Display Add Tier 3. Under the
proposed new Non-Display Add Tier 3,
the Exchange would provide an
enhanced rebate of $0.0020 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.34 The Exchange
proposes to provide Members that
qualify for the proposed new NonDisplay Add Tier 3 free executions of
33 The pricing for Non-Display Add Tier 2 is
referred to by the Exchange on the Fee Schedule
under the existing description ‘‘Added nondisplayed volume, Non-Display Add Tier 2’’ with
a Fee Code of H2 or M2, as applicable, to be
provided by the Exchange on the monthly invoices
provided to Members.
34 The pricing for the proposed new Non-Display
Add Tier 3 is referred to by the Exchange on the
Fee Schedule under the new description ‘‘Added
non-displayed volume, Non-Display Add Tier 3’’
with a Fee Code of H3 or M3, as applicable, to be
provided by the Exchange on the monthly invoices
provided to Members.
PO 00000
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orders in securities priced below $1.00
per share that add non-displayed
liquidity to the Exchange, which is the
same rebate that is currently applicable
to such executions for all Members.
The tiered pricing structure for
executions of Added Non-Displayed
Volume under the Non-Display Add
Tiers provides an incremental incentive
for Members to strive for higher volume
thresholds to receive higher enhanced
rebates for such executions and, as such,
is intended to encourage Members to
maintain or increase their order flow,
particularly in the form of liquidityadding non-displayed orders, to the
Exchange, thereby contributing to a
deeper and more liquid market to the
benefit of all Members and market
participants. The Exchange believes that
the Non-Display Add Tiers, as modified
by the proposed changes described
above, reflect a reasonable and
competitive pricing structure that is
right-sized and consistent with the
Exchange’s overall pricing philosophy
of encouraging added and/or displayed
liquidity. Specifically, the Exchange
believes that, after giving effect to the
proposed changes described above, the
rebate for executions of Added NonDisplayed Volume provided under each
of the Non-Display Add Tiers is
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.
Sub-Dollar Rebate Tier
The Exchange proposes to adopt a
new volume-based tier, referred to by
the Exchange as the Sub-Dollar Rebate
Tier, under which the Exchange will
provide an enhanced rebate for
executions of orders in securities priced
below $1.00 per share that add
displayed liquidity to the Exchange
(such orders, ‘‘Added Displayed SubDollar Volume’’). Currently, the
Exchange provides a standard rebate of
0.075% of the total dollar value of the
transaction for executions of Added
Displayed Sub-Dollar Volume, and this
standard rebate is applicable to all such
executions for all Members (including
those that qualify for any of the
Exchange’s existing volume tiers). Now,
under the proposed Sub-Dollar Rebate
Tier, the Exchange will provide an
enhanced rebate of 0.15% of the total
dollar value of the transaction for
executions of Added Displayed SubDollar Volume for Members that qualify
for such tier by achieving an ADAV that
is equal to or greater than 0.15% of the
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TCV.35 The Exchange notes that the
Sub-Dollar Rebate Tier will not apply to
executions of orders in securities priced
at or above $1.00 per share.
The Exchange believes that the
proposed Sub-Dollar Rebate Tier
provides an incremental incentive for
Members to maintain or strive for higher
ADAV on the Exchange in order to
receive the proposed enhanced rebate
for executions of Added Displayed SubDollar Volume. As such, the proposed
Sub-Dollar Rebate Tier is designed to
incentivize Members that provide
liquidity on the Exchange to increase
their orders that add liquidity to the
Exchange in order to qualify for the
enhanced rebate for executions of
Added Displayed Sub-Dollar Volume,
which, in turn, the Exchange believes
would also encourage the submission by
qualifying Members of additional
Added Displayed Sub-Dollar Volume to
the Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market, including with
respect to sub-dollar securities. The
Exchange believes that this resulting
additional liquidity-adding volume,
including in the form of displayed
volume in sub-dollar securities, would
contribute to a more robust and wellbalanced market ecosystem on the
Exchange to the benefit of all Members
and market participants and, in turn,
enhance the attractiveness of the
Exchange as a trading venue. The
Exchange notes that the proposed new
Sub-Dollar Rebate Tier is comparable to
other volume-based incentives and
discounts, which have been widely
adopted by exchanges (including the
Exchange), including pricing incentives
that provide an enhanced rebate for
executions of liquidity-adding orders in
securities priced below $1.00 per share
for firms that achieve a specified
volume threshold that have been
adopted by other exchanges.36
35 The pricing for the proposed new Sub-Dollar
Rebate Tier is referred to by the Exchange on the
Fee Schedule under the new description ‘‘SubDollar Rebate Tier’’ with a Fee Code of ‘‘L’’ to be
appended to the otherwise applicable Fee Code
assigned by the Exchange on the monthly invoices
for qualifying executions.
36 See, e.g., the NYSE Arca Equities Fees and
Charges (available at https://www.nyse.com/
publicdocs/nyse/markets/nyse-arca/NYSE_Arca_
Marketplace_Fees.pdf), which reflects a standard
credit of 0.0% of the total dollar value for
executions of securities priced below $1.00 per
share, as well as the ‘‘Sub-Dollar Adding Step Up
Tier’’ pricing structure under which NYSE Arca
provides higher credits (ranging from 0.05% to
0.15% of the total dollar value) for executions of
orders in securities priced below $1.00 per share for
firms that qualify for any such tier by achieving
certain specified volume thresholds.
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Maximum Rebate per Share
As noted above, in response to the
competitive environment with respect
to order execution, the Exchange offers
tiered pricing, which provides Members
with opportunities to qualify for higher
rebates or lower fees where certain
volume criteria and thresholds are met.
In this regard, the Exchange offers
various volume-based tiers that provide
qualifying Members an enhanced rebate
or an additive rebate (which applies in
addition to the otherwise applicable
rebate) with respect to qualifying
executions. Under the Exchange’s
current pricing, the highest rebate per
share applicable to any execution is
$0.0036, and for business and
competitive reasons the Exchange does
not wish to introduce a higher rebate
per share with this proposal despite the
fact that a higher rebate for certain
executions would be possible after
giving effect to the pricing changes
described above. Thus, in order to
maintain the same maximum rebate per
share provided under the Exchange’s
current pricing, the Exchange proposes
to add a note on the Fee Schedule
stating that to the extent a single
execution qualifies for one or more
additive rebates, the maximum
combined rebate per share provided by
the Exchange shall be $0.0036. The
Exchange notes that since $0.0036 is the
highest rebate per share currently
provided by the Exchange, this
proposed change, by itself, will not
result in any Member receiving a lower
maximum rebate per share than it is
currently provided for any execution.
The Exchange also notes that other
exchanges limit the maximum rebate
per share in connection with the
provision of enhanced and/or additive
rebates.37
Eliminate Step-Up Additive Rebate
Finally, the Exchange proposes to
eliminate the Step-Up Additive Rebate.
The Exchange currently offers the StepUp Additive Rebate, which is a volumebased tier, under which the Exchange
provides an additive rebate of $0.0002
37 See, e.g., the Nasdaq Price List—Trading
Connectivity (available at https://nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2), which reflects
various maximum rebates in connection with the
provision of an additive rebate for executions of
certain midpoint liquidity; the NYSE Arca Equities
Fees and Charges (available at https://
www.nyse.com/publicdocs/nyse/markets/nyse-arca/
NYSE_Arca_Marketplace_Fees.pdf), which
provides that in connection with the ‘‘Tape B
Additional Credit’’ the credit shall be in addition
to the ETP Holder’s Tiered or Standard credit(s) and
such combined credit(s) in Tape B shall not exceed
$0.0032, subject to certain exceptions for Lead
Market Makers, which are subject to a higher, but
still limited, per share credit for the applicable
executions.
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76653
per share in addition to the otherwise
applicable rebate for executions of
Added Displayed Volume (other than
orders that establish the NBBO, if such
Member qualifies for the NBBO Setter
Tier, and Retail Orders) for Members
that qualify for such tier by achieving
one of the two specified alternative
criteria based on Step-Up ADAV and/or
ADAV thresholds. The Exchange
adopted the Step-Up Additive Rebate in
May 2022 for the purpose of
encouraging Members that provide
liquidity on the Exchange to increase
their liquidity-adding order flow in
order to achieve the applicable volume
thresholds, thereby providing greater
execution opportunities on the
Exchange.38 However, the Exchange no
longer wishes to, nor is it required to,
maintain such tier. Thus, the proposed
rule change removes such tier, as the
Exchange would rather redirect future
resources and funding into other
incentives and tiers designed to
incentivize increased order flow or
otherwise enhance market quality on
the Exchange.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of section 6 of the Act,39
in general, and with sections 6(b)(4) and
6(b)(5) of the Act,40 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
determining prices and SRO revenues
and also recognized that current
38 See Securities Exchange Act Release No. 94863
(May 6, 2022), 87 FR 29197 (May 12, 2022) (SR–
MEMX–2021–11) [sic] (notice of filing and
immediate effectiveness of fee changes adopted by
the Exchange, including the adoption of the StepUp Additive Rebate).
39 15 U.S.C. 78f.
40 15 U.S.C. 78f(b)(4) and (5).
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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.’’ 41
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 decrease the Exchange’s expenditures
with respect to its transaction pricing
and incentivize market participants to
direct additional order flow, including
various forms of liquidity-adding
volume and aggressively priced
displayed orders that establish the
NBBO or establish a new BBO on the
Exchange that matches the NBBO first
established on an away market, 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.
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
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 Liquidity
Provision Tiers 1, 3 and 5, the DLI Tiers
1 and 2, and the Non-Display Add Tiers
1 and 2, each as modified by the
changes proposed herein, as well as the
proposed new Non-Display Add Tier 3
and the proposed new Sub-Dollar
Rebate 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
41 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
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thresholds on the Exchange, are
available to all Members on an equal
basis, and, as described above, are
reasonably designed to encourage
Members to maintain or increase their
liquidity-adding order flow, including
in the forms of Added Displayed
Volume, Added Non-Displayed Volume
and Added Displayed Sub-Dollar
Volume, as applicable, to the Exchange,
which the Exchange believes would
promote price discovery, enhance
liquidity and market quality, and
contribute to a more robust and wellbalanced 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, after giving
effect to the changes proposed herein,
the enhanced rebate for executions of
Added Displayed Volume, Added NonDisplayed Volume, and Added
Displayed Sub-Dollar Volume, as
applicable, under each such tier is
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.
Additionally, the Exchange believes the
proposed new Sub-Dollar Rebate Tier is
reasonable, in that it is comparable to
pricing incentives adopted by other
exchanges that provide an enhanced
rebate for executions of liquidity-adding
orders in securities priced below $1.00
per share for firms that achieve a
specified volume threshold.42
The Exchange believes that the
proposed NBBO Setter/Joiner Tiers are a
reasonable means to attract aggressively
priced displayed liquidity to the
Exchange. As noted above, the proposed
NBBO Setter/Joiner Tiers are
comparable to other volume-based tiers,
and the Exchange believes such tiers are
reasonable, equitable and not unfairly
discriminatory for the same reasons
described above with respect to volumebased tiers, as the proposed NBBO
Setter/Joiner 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 reasonably
designed to incentivize the entry of
aggressively priced displayed orders
that establish the NBBO or establish a
new BBO on the Exchange that matches
the NBBO first established on an away
market. As such, the Exchange believes
the additive rebates for executions of
Setter Volume and Joiner Volume
42 See
PO 00000
supra note 36.
Frm 00046
Fmt 4703
provided under the NBBO Setter/Joiner
Tiers are reasonably related to the
market quality benefits that such tiers
are designed to promote.
Specifically, the Exchange believes
that its proposal to make the additive
rebate under each of the NBBO Setter/
Joiner Tiers applicable to a qualifying
Member’s executions of Joiner Volume
(in addition to Setter Volume, as is the
case under the NBBO Setter Tier today)
is reasonable, equitable and not unfairly
discriminatory because, as described
above, the Exchange believes that doing
so would incentivize the submission of
additional orders that establish a new
BBO on the Exchange that matches the
NBBO first established on an away
market (in addition to orders that
establish the NBBO, which are currently
incentivized under the NBBO Setter
Tier and will continue to be
incentivized under the NBBO Setter/
Joiner Tiers), and the Exchange believes
that the resulting increased submission
of such aggressively priced displayed
liquidity would benefit all Members and
market participants, including public
investors, by increasing execution
opportunities, tightening spreads, and
promoting price discovery on the
Exchange. Moreover, the Exchange
believes such proposal is reasonable, in
that it is similar in construct to pricing
incentives that have been adopted by
other exchanges that provide an
additive rebate for executions of orders
that join the NBBO for members that
achieve certain specified volume
criteria.43
The Exchange further believes that the
proposed additive rebate for executions
of Setter Volume and Joiner Volume
under each of the NBBO Setter/Joiner
Tiers is reasonable and consistent with
an equitable allocation of fees because,
as described above, the Exchange
believes that each such rebate is
commensurate with the corresponding
required criteria under each such tier
and is reasonably related to such market
quality benefits that each such tier is
designed to achieve.
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 Peg
Volume and Added Non-Midpoint Peg
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 and/or displayed
43 See
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liquidity, and the proposed new
standard rebates for executions of
Added Midpoint Peg Volume and
Added Non-Midpoint Peg Hidden
Volume remain higher than, and
competitive with, the standard rebates
provided by at least one other exchange
in each case for executions of similar
orders.44 The Exchange also believes the
proposed standard rebates for
executions of Added Midpoint Peg
Volume and Added Non-Midpoint Peg
Hidden Volume are equitable and not
unfairly discriminatory, as such
standard rebates will apply equally to
all Members.
The Exchange believes that its
proposal to limit the maximum
combined rebate per share provided for
any execution on the Exchange that
qualifies for one or more additive
rebates to $0.0036 is reasonable,
equitable and not unfairly
discriminatory, as this limitation will
apply to all Members equally, in that no
Member may be eligible to receive such
a rebate that is greater than $0.0036.
Moreover, the highest rebate per share
applicable to any execution under the
Exchange’s current pricing is $0.0036,
so this proposed change, by itself, will
not result in any Member receiving a
lower maximum rebate per share than it
is currently provided for any execution.
The Exchange notes that it is not
required to provide Members any
opportunities to receive rebates or, to
the extent that it does provide rebates
under its transaction pricing, to
maintain any specific level of rebate
with respect to any type of transaction.
The Exchange further notes that other
exchanges also limit the maximum
rebate per share in connection with the
provision of enhanced and/or additive
rebates, and therefore, this aspect of the
proposal does not raise any new or
novel issues that have not previously
been considered by the Commission.45
The Exchange believes the proposed
change to eliminate the Step-Up
Additive Rebate is reasonable because,
as noted above, it would enable the
Exchange to redirect the associated
resources and funding into other
incentives and tiers designed to
incentivize increased order flow or
otherwise enhance market quality on
the Exchange, and the Exchange is not
required to maintain such incentive or
provide Members any opportunities to
receive additive rebates. The Exchange
believes the proposal to eliminate such
incentive is also equitable and not
unfairly discriminatory because it
applies equally to all Members, in that
44 See
45 See
supra notes 30–31.
supra note 37.
VerDate Sep<11>2014
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the incentive would no longer be
available for any Member.
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 46 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 changes to the
Exchange transaction pricing under this
proposal are intended to decrease the
Exchange’s expenditures with respect to
its transaction pricing and attract order
flow to the Exchange by continuing to
offer competitive pricing while also
incentivizing market participants to
submit various forms of liquidity-adding
volume and aggressively priced
displayed liquidity, thereby promoting
price discovery and enhancing liquidity
and market quality on the Exchange to
the benefit of all Members and 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.’’ 47
Intramarket Competition
As discussed above, the Exchange
believes that the proposal would
incentivize Members to submit
additional order flow, including various
forms of liquidity-adding volume and
aggressively priced displayed orders
that establish the NBBO or establish a
new BBO on the Exchange that matches
46 15
U.S.C. 78f(b)(4) and (5).
supra note 41.
47 See
Jkt 259001
PO 00000
Frm 00047
Fmt 4703
Sfmt 4703
76655
the NBBO first established on an away
market, to the Exchange, thereby
promoting price discovery and
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 criteria under the
Liquidity Provision Tiers 1, 3 and 5, the
DLI Tiers 1 and 2, and the Non-Display
Add Tiers 1 and 2, as well as the
proposed new Non-Display Add Tier 3
and the proposed new Sub-Dollar
Rebate Tier, and thus receive the
corresponding rebates for executions of
Added Displayed Volume, Added NonDisplayed Volume and Added
Displayed Sub-Dollar Volume, as
applicable, would be available to all
Members that meet the associated
volume requirements in any month.
Similarly, the opportunity to qualify for
the NBBO Setter/Joiner Tiers 1 and 2,
and thus receive the corresponding
additive rebates for executions of Setter
Volume and Joiner Volume, would be
available to all Members that meet the
associated volume requirements in any
month. The Exchange believes its
proposal to make the additive rebate
under the NBBO Setter/Joiner Tiers
applicable to a qualifying Member’s
executions of Joiner Volume will benefit
competition by rewarding Members that
help the Exchange to join other market
centers at the NBBO. As described
above, the Exchange believes that, after
giving effect to the changes proposed
herein, the required criteria under each
of the tiers described above is
commensurate with the corresponding
rebate under each such tier and is
reasonably related to the enhanced
liquidity and market quality that each
such tier is designed to promote.
Additionally, as noted above, the
proposed reduced standard rebates for
executions of Added Non-Displayed
Volume (including both Added
Midpoint Peg Volume and Added NonMidpoint Peg Hidden Volume) would
continue to apply equally to all
Members in the same manner that such
standard rates currently do today.
The Exchange does not believe the
proposed change to eliminate the StepUp Additive Rebate will impose any
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burden on intramarket competition
because such change will apply to all
Members uniformly, in that such
incentive will no longer be available to
any Member. Additionally, the
Exchange does not believe the proposed
change to limit the maximum combined
rebate per share provided for any
execution on the Exchange that qualifies
for one or more additive rebates will
impose any burden on intramarket
competition because, as described
above, such limitation will apply to all
Members equally, in that no Member
may be eligible to receive such a rebate
that is greater than $0.0036, and, as this
is the highest rebate per share
applicable to any execution under the
Exchange’s current pricing, no Member
will receive a lower maximum rebate
per share than it is currently provided
for any execution as a result of this
proposed change.
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 executions of Added Displayed
Volume, Added Non-Displayed Volume
(including both Added Midpoint Peg
Volume and Added Non-Midpoint Peg
Hidden Volume), Added Displayed Sub-
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16:51 Dec 14, 2022
Jkt 259001
Dollar Volume, Setter Volume and
Joiner 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 with respect to its
transaction pricing and attract
additional order flow to the Exchange
through the provision of certain
enhanced and additive rebates under
volume-based tiers, which have been
widely adopted by exchanges, and
standard pricing that is comparable to,
and competitive with, pricing for
similar executions in place at other
exchanges.48 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 Non-Displayed Volume
(including both Added Midpoint Peg
Volume and Added Non-Midpoint Peg
Hidden Volume), as well as similar
pricing incentives and discounts to
market participants that achieve certain
volume criteria and thresholds. With
respect to the Exchange’s proposal to
make the additive rebates provided
under the NBBO Setter/Joiner Tiers
applicable to executions of Joiner
Volume (in addition to Setter Volume,
as is the case under the NBBO Setter
Tier today), the Exchange believes that
the promotion of displayed liquidity at
the NBBO, whether through orders that
establish the NBBO or establish a new
BBO on the Exchange that matches the
NBBO first established on an away
market, enhances market quality for all
market participants and promotes
competition amongst market centers.
Additionally, as noted above,
eliminating the Step-Up Additive
Rebate would allow the Exchange to
redirect the associated resources and
funding into other incentives and tiers
designed to enhance market quality on
the Exchange, which would ultimately
enable the Exchange to better compete
with other market centers. The
Exchange does not believe that its
proposal to limit the maximum
combined rebate per share provided for
any execution on the Exchange that
qualifies for one or more additive
rebates will impose any burden on
intermarket competition, and the
Exchange notes that limiting the
maximum rebate per share in
connection with similar types of
48 See
PO 00000
supra notes 30–31.
Frm 00048
Fmt 4703
Sfmt 4703
incentives is consistent with the
practices of other exchanges.49
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.’’ 50 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’ . . . .’’.51 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 52 and Rule
19b–4(f)(2) 53 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
49 See
supra note 37.
supra note 41.
51 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)).
52 15 U.S.C. 78s(b)(3)(A)(ii).
53 17 CFR 240.19b–4(f)(2).
50 See
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lotter on DSK11XQN23PROD with NOTICES1
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.
Number SR–MEMX–2022–33 and
should be submitted on or before
January 5, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.54
Sherry R. Haywood,
Assistant Secretary.
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:
[FR Doc. 2022–27161 Filed 12–14–22; 8:45 am]
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–2022–33 on the subject line.
MidCap Financial Investment
Corporation, et al.
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–2022–33. 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
Notice of application for an order
(‘‘Order’’) under sections 17(d) and 57(i)
of the Investment Company Act of 1940
(the ‘‘Act’’) and rule 17d–1 under the
Act to permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to amend a previous
order granted by the Commission that
permits certain business development
companies (‘‘BDCs’’) and closed-end
management investment companies to
co-invest in portfolio companies with
each other and with certain affiliated
investment entities.
APPLICANTS: MidCap Financial
Investment Corporation, Apollo Senior
Floating Rate Fund Inc., Apollo Tactical
Income Fund Inc., Apollo Debt
Solutions BDC, Apollo Diversified
Credit Fund, Apollo Investment
Management, L.P., Apollo Credit
Management, LLC, Apollo Capital
Credit Adviser, LLC, AA Direct, L.P., A–
A European Senior Debt Fund, L.P., AA
Infrastructure Fund 1 Ltd., ACE Credit
Fund, L.P., AESI II, L.P., AGRE Debt
Fund I, L.P., AGRE U.S. Real Estate
Fund, L.P., ALM V, Ltd., ALM VI, Ltd.,
ALM VII (R), Ltd., ALM VII (R)-2, Ltd.,
ALM VII, Ltd., ALM VIII, Ltd., ALM XII,
Ltd., ALM XIX, Ltd., ALM XVI, Ltd.,
ALM XVII, Ltd., ALM XVIII, Ltd., ALME
Loan Funding IV B.V., Amissima
Diversified Income ICAV, AMN Loan
Fund, L.P., AP Kent Credit Master Fund,
L.P., Apollo Accord Master Fund II,
L.P., Apollo Accord Master Fund III,
L.P., Apollo Accord Fund III B, L.P.,
VerDate Sep<11>2014
16:51 Dec 14, 2022
Jkt 259001
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
34770; File No. 812–15382]
December 9, 2022.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’).
ACTION: Notice.
AGENCY:
54 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00049
Fmt 4703
Sfmt 4703
76657
Apollo Accord Fund IV, L.P., Apollo A–
N Credit Fund, L.P., Apollo Asia Real
Estate Fund II, L.P., Apollo Atlas Master
Fund, LLC, Apollo Chiron Credit Fund,
L.P., Apollo Commercial Real Estate
Finance, Inc., Apollo Credit Master
Fund Ltd., Apollo Credit Opportunity
Fund III LP, Apollo Credit Strategies
Master Fund Ltd., Apollo European
Principal Finance Fund III (Dollar A),
L.P., Apollo Hybrid Value Fund, L.P.,
Apollo Hybrid Value Fund II, L.P.,
Apollo Humber Partners, L.P., Apollo
Humber Management, L.P., Apollo
Impact Mission Fund, L.P., Apollo
Infrastructure Opportunities Fund II,
L.P., Apollo Investment Fund IX, L.P.,
Apollo Investment Fund VII, L.P.,
Apollo Investment Fund VIII, L.P.,
Apollo Kings Alley Credit Fund, L.P.,
Apollo Lincoln Fixed Income Fund,
L.P., Apollo Lincoln Private Credit
Fund, L.P., Apollo Moultrie Credit
Fund, L.P., Apollo Natural Resources
Partners II, L.P., Apollo Natural
Resources Partners III, L.P., Apollo
Navigator Aviation Fund I, L.P., Apollo
Revolver Fund, L.P., Apollo Structured
Credit Recovery Master Fund IV LP,
Apollo Strategic Origination Partners,
L.P., Apollo Tactical Value SPN
Investments, L.P., Apollo Total Return
Master Fund Enhanced LP, Apollo Total
Return Master Fund L.P., Apollo Tower
Credit Fund, L.P., Apollo U.S. Real
Estate Fund II L.P., Apollo U.S. Real
Estate Fund III, L.P., Apollo Zeus
Strategic Investments, L.P., Apollo/
Cavenham European Managed Account
II, L.P., Athene Holding Ltd., Athora
Lux Invest S.C.Sp., Financial Credit
Investment II, L.P., Financial Credit
Investment III, L.P., Financial Credit
Investment IV, L.P., MidCap FinCo
Holdings Ltd, NNN Investor 1, L.P.,
Athora Lux Invest NL S.C.Sp., ACE
Credit Management, LLC, ACF Europe
Management, LLC, ACREFI
Management, LLC, Aegon Ireland plc,
AGRE—CRE Debt Manager, LLC, AGRE
NA Management, LLC, AP Kent
Management, LLC, Apollo Accord
Management II, LLC, Apollo Accord
Management III, LLC, Apollo Accord
Management III B, L.P., Apollo Accord
Management IV, L.P., Apollo A–N
Credit Management, LLC, Apollo Asia
Management II, L.P., Apollo Asset
Management Europe LLP, Apollo Atlas
Management, LLC, Apollo Capital
Management, L.P., Apollo Centre Street
Management, LLC, Apollo Centre Street
Partnership L.P., Apollo Chiron
Management, LLC, Apollo Credit
Management (CLO), LLC, Apollo Credit
Opportunity Management III, LLC,
Apollo EPF Management III, LLC,
Apollo Europe Management III, LLC,
E:\FR\FM\15DEN1.SGM
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]]>Agencies
[Federal Register Volume 87, Number 240 (Thursday, December 15, 2022)]
[Notices]
[Pages 76648-76657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27161]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96471; File No. SR-MEMX-2022-33]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule
December 9, 2022.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 1, 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.
---------------------------------------------------------------------------
\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 December 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; (ii) modify the
Displayed Liquidity Incentive (``DLI'') Tiers; (iii) modify the NBBO
Setter Tier to become the NBBO Setter/Joiner Tiers; (iv) reduce the
rebates 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''); (v) modify the Non-Display Add
Tiers; (vi) adopt the Sub-Dollar Rebate Tier; (vii) add a note to the
Fee Schedule stating that to the extent a single execution qualifies
for one or more additive rebates, the maximum combined rebate per share
provided by the Exchange shall be $0.0036; and (viii) eliminate the
Step-Up Additive Rebate, 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 volume of equities trading.\4\ Thus, in such a low-
concentrated and highly competitive market, no single equities
[[Page 76649]]
exchange possesses significant pricing power in the execution of order
flow, and the Exchange currently represents approximately 3% of the
overall market share.\5\ The Exchange in particular operates a ``Maker-
Taker'' model whereby it provides rebates to Members that add liquidity
to the Exchange and charges fees to Members that remove liquidity from
the Exchange. The Fee Schedule sets forth the standard rebates and fees
applied per share for orders that add and remove liquidity,
respectively. Additionally, in response to the competitive environment,
the Exchange also offers tiered pricing, which provides Members with
opportunities to qualify for higher rebates or lower fees where certain
volume criteria and thresholds are met. Tiered pricing provides an
incremental incentive for Members to strive for higher tier levels,
which provides increasingly higher benefits or discounts for satisfying
increasingly more stringent criteria.
---------------------------------------------------------------------------
\4\ Market share percentage calculated as of November 30, 2022.
The Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
\5\ 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 1-5 under which a Member may receive an
enhanced rebate for executions of Added Displayed Volume by achieving
the corresponding required volume criteria for each such tier. The
Exchange now proposes to modify the Liquidity Provision Tiers by
modifying the rebates and required criteria under Liquidity Provision
Tiers 1, 3 and 5, and keeping Liquidity Provision Tiers 2 and 4 intact
with no changes, as further described below.
First, with respect to Liquidity Provision Tier 1, the Exchange
currently provides an enhanced rebate of $0.0033 per share for
executions of Added Displayed Volume for Members that qualify for such
tier by achieving: (1) a Displayed ADAV \6\ that is equal to or greater
than 0.40% of the TCV; \7\ or (2) a Remove ADV \8\ that is equal to or
greater than 0.20% of the TCV and a Step-Up ADAV \9\ from June 2022
that is equal to or greater than 0.05% of the TCV. The Exchange now
proposes to modify Liquidity Provision Tier 1 such that the Exchange
would provide an enhanced rebate of $0.0034 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving: (1) a Displayed ADAV that is equal to or greater than 0.40%
of the TCV; or (2) an ADAV that is equal to or greater than 0.30% of
the TCV and a Step-Up ADAV from November 2022 that is equal to or
greater than 0.10% of the TCV.\10\ Thus, such proposed changes would
increase the rebate for executions of Added Displayed Volume by $0.0001
per share and keep the first of the two existing alternative criteria
(based on an overall Displayed ADAV threshold) intact, eliminate the
second of the two existing alternative criteria (based on a Remove ADV
threshold and a Step-Up ADAV from June 2022 threshold), and add a new
second alternative criteria (based on an overall ADAV threshold and a
Step-Up ADAV from November 2022 threshold). The Exchange is not
proposing to change the rebate for executions of orders in securities
priced below $1.00 per share under this tier.
---------------------------------------------------------------------------
\6\ 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, and ``Displayed ADAV'' means
ADAV with respect to displayed orders.
\7\ 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.
\8\ 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, and
``Remove ADV'' means ADV with respect to orders that remove
liquidity.
\9\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means
ADAV in the relevant baseline month subtracted from current ADAV.
\10\ The pricing for Liquidity Provision Tier 1 is referred to
by the Exchange on the Fee Schedule under the existing description
``Added displayed volume, Liquidity Provision Tier 1'' with a Fee
Code of B1, D1 or J1, as applicable, to be provided by the Exchange
on the monthly invoices provided to Members. The Exchange notes that
because the determination of whether a Member qualifies for a
certain pricing tier for a particular month will not be made until
after the month-end, the Exchange will provide the Fee Codes
otherwise applicable to such transactions on the execution reports
provided to Members during the month and will only designate the Fee
Codes applicable to the achieved pricing tier on the monthly
invoices, which are provided after such determination has been made,
as the Exchange does for its tier-based pricing today.
---------------------------------------------------------------------------
Second, with respect to Liquidity Provision Tier 3, the Exchange
currently provides an enhanced rebate of $0.0029 per share for
executions of Added Displayed Volume for Members that qualify for such
tier by achieving: (1) an ADAV that is equal to or greater than 0.12%
of the TCV; or (2) a Step-Up ADAV from April 2022 that is equal to or
greater than 0.04% of the TCV; or (3) a Step-Up Non-Displayed ADAV \11\
from April 2022 that is equal to or greater than 2,000,000 shares. The
Exchange now proposes to modify Liquidity Provision Tier 3 such that
the Exchange would provide an enhanced rebate of $0.0030 per share for
executions of Added Displayed Volume for Members that qualify for such
tier by achieving: (1) an ADAV that is equal to or greater than 0.15%
of the TCV; or (2) an ADAV that is equal to or greater than 15,000,000
shares.\12\ Thus, such proposed changes would increase the rebate for
executions of Added Displayed Volume by $0.0001 per share and would
increase the overall ADAV threshold that is expressed as a percentage
of the TCV in the first of the three existing alternative criteria,
eliminate the second and third of the three existing alternative
criteria (based on a Step-Up ADAV from April 2022 threshold and a Step-
Up Non-Displayed ADAV from April 2022 threshold), and add a new
alternative criteria based on an overall ADAV threshold that is
expressed as a number of shares. The Exchange is not proposing to
change the rebate for executions of orders in securities priced below
$1.00 per share under such tier.
---------------------------------------------------------------------------
\11\ As set forth on the Fee Schedule, ``Non-Displayed ADAV''
means ADAV with respect to non-displayed orders (including Midpoint
Peg orders), and ``Step-Up Non-Displayed ADAV'' means Non-Displayed
ADAV in the relevant baseline month subtracted from current Non-
Displayed ADAV.
\12\ The pricing for Liquidity Provision Tier 3 is referred to
by the Exchange on the Fee Schedule under the existing description
``Added displayed volume, Liquidity Provision Tier 3'' with a Fee
Code of B3, D3 or J3, as applicable, to be provided by the Exchange
on the monthly invoices provided to Members.
---------------------------------------------------------------------------
Third, with respect to Liquidity Provision Tier 5, the Exchange
currently provides an enhanced rebate of $0.0026 per share for
executions of Added Displayed Volume for Members that qualify for such
tier by achieving: (1) an ADAV that is equal to or greater than 0.075%
of the TCV; or (2) a Step-Up Displayed ADAV \13\ from April 2022 that
is equal to or greater than 0.02% of the TCV; or (3) a Midpoint ADAV
\14\ that is equal to or greater than 1,000,000 shares. The Exchange
now proposes to modify Liquidity Provision Tier 5 such that the
Exchange would provide an enhanced rebate of $0.0025 per share for
executions of Added Displayed Volume for Members that qualify for such
tier by
[[Page 76650]]
achieving: (1) an ADAV that is equal to or greater than 0.075% of the
TCV; or (2) a Midpoint ADAV \15\ that is equal to or greater than
1,000,000 shares.\16\ Thus, such proposed changes would decrease the
rebate for executions of Added Displayed Volume by $0.0001 per share
and would eliminate the second of the three existing alternative
criteria (based on a Step-Up Displayed ADAV from April 2022 threshold).
The Exchange is not proposing to change the rebate for executions of
orders in securities priced below $1.00 per share under such tier.
---------------------------------------------------------------------------
\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\ As set forth on the Fee Schedule, ``Midpoint ADAV'' means
ADAV with respect to Midpoint Peg orders.
\15\ As set forth on the Fee Schedule, ``Midpoint ADAV'' means
ADAV with respect to Midpoint Peg orders.
\16\ The pricing for Liquidity Provision Tier 5 is referred to
by the Exchange on the Fee Schedule under the existing 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.
---------------------------------------------------------------------------
As noted above, Liquidity Provision Tiers 2 and 4 would remain
intact with no changes under this proposal.
The tiered pricing structure for executions of Added Displayed
Volume under the Liquidity Provision Tiers provides an incremental
incentive for Members to strive for higher volume thresholds to receive
higher enhanced rebates for such executions and, as such, is intended
to encourage Members to maintain or increase their order flow,
primarily in the form of liquidity-adding volume, to the Exchange,
thereby contributing to a deeper and more liquid market to the benefit
of all Members and market participants. The Exchange believes that the
Liquidity Provision Tiers, as modified by the proposed changes
described above, reflect a reasonable and competitive pricing structure
that is right-sized, updated to reference more recent baseline months
with respect to the applicable Step-Up ADAV thresholds, and consistent
with the Exchange's overall pricing philosophy of encouraging added
and/or displayed liquidity. Specifically, the Exchange believes that,
after giving effect to the proposed changes described above, the rebate
for executions of Added Displayed Volume provided under each of the
Liquidity Provision Tiers 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.
DLI Tiers
The Exchange currently offers DLI Tiers 1 and 2 under which a
Member may receive an enhanced rebate for executions of Added Displayed
Volume by achieving the corresponding required criteria for each such
tier. The DLI Tiers are designed to encourage Members, through the
provision of an enhanced rebate for executions of Added Displayed
Volume, to promote price discovery and market quality by quoting at the
NBBO for a significant portion of each day (i.e., through the
applicable quoting requirement \17\) in a broad base of securities
(i.e., through the applicable securities requirements \18\), thereby
benefitting the Exchange and investors by providing improved trading
conditions for all market participants through narrower bid-ask spreads
and increased depth of liquidity available at the NBBO in a broad base
of securities and committing capital to support the execution of
orders.\19\ Now, the Exchange proposes to modify DLI Tiers 1 and 2 by
reducing the rebates for executions of Added Displayed Volume under
such tiers and modifying the required criteria under DLI Tier 1.
---------------------------------------------------------------------------
\17\ As set forth on the Fee Schedule, the term ``quoting
requirement'' means the requirement that a Member's NBBO Time be at
least 25%, and the term ``NBBO Time'' means the aggregate of the
percentage of time during regular trading hours during which one of
a Member's market participant identifiers (``MPIDs'') has a
displayed order of at least one round lot at the national best bid
or the national best offer.
\18\ As set forth on the Fee Schedule, the term ``securities
requirement'' means the requirement that a Member meets the quoting
requirement in the applicable number of securities per day.
Currently, each of DLI Tiers 1 and 2 has a securities requirement
that may be achieved by a Member meeting the quoting requirement in
the specified number of securities traded on the Exchange.
\19\ See the Exchange's Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding
the Exchange's DLI Tiers. See also Securities Exchange Act Release
No. 92150 (June 10, 2021), 86 FR 32090 (June 16, 2021) (SR-MEMX-
2021-07) (notice of filing and immediate effectiveness of fee
changes adopted by the Exchange, including the adoption of DLI).
---------------------------------------------------------------------------
Currently, a Member qualifies for DLI Tier 1 by achieving an NBBO
Time of at least 25% in an average of at least 1,000 securities per
trading day during the month. The Exchange now proposes to modify the
required criteria under DLI Tier 1 such that a Member would now qualify
for such tier by achieving: (1) an NBBO Time of at least 25% in an
average of at least 1,000 securities per trading day during the month;
and (2) an ADAV that is equal to or greater than 0.05% of the TCV.
Thus, such proposed change would add an overall ADAV threshold into the
required criteria, which is intended to encourage Members to maintain
or increase their overall order flow that adds liquidity to the
Exchange, thereby contributing to a deeper and more liquid market to
the benefit of all Members and market participants, in addition to the
existing quoting requirement designed to promote price discovery and
market quality in a broad base of securities on the Exchange.
The Exchange also proposes to reduce the rebates for executions of
Added Displayed Volume under DLI Tiers 1 and 2. Currently, the Exchange
provides enhanced rebates of $0.0032 per share under DLI Tier 1 and
$0.0029 per share under DLI Tier 2 for a qualifying Member's executions
of Added Displayed Volume. Now, the Exchange proposes to reduce such
rebate provided under DLI Tier 1 to $0.0031 per share and reduce such
rebate provided under DLI Tier 2 to $0.0028 per share.\20\ The Exchange
believes that the proposed reduction of such rebates (i.e., by $0.0001
per share in each case) represents a modest reduction in each case and
that each of the proposed rebates under DLI Tiers 1 and 2 remains
commensurate with the required criteria under each such tier. The
purpose of reducing the rebates for executions of Added Displayed
Volume provided under DLI Tiers 1 and 2, as proposed, is for business
and competitive reasons, as the Exchange believes the reduction of such
rebates 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 and/or
displayed liquidity and promoting the price discovery and market
quality objectives of the DLI Tiers described above. The Exchange is
not proposing to change the rebates provided under such tiers for
executions of orders in securities priced below $1.00 per share.
---------------------------------------------------------------------------
\20\ The pricing for DLI Tier 1 is referred to by the Exchange
on the Fee Schedule under the existing description ``Added displayed
volume, DLI Tier 1'' with a Fee Code of Bq1, Bq1 or Jq1, as
applicable, and the pricing for DLI Tier 2 is referred to by the
Exchange on the Fee Schedule under the existing description ``Added
displayed volume, DLI Tier 2'' with a Fee Code of Bq2, Dq2 or Jq2,
as applicable.
---------------------------------------------------------------------------
NBBO Setter/Joiner Tiers
The Exchange currently offers the NBBO Setter Tier under which a
Member may receive an additive rebate of $0.0003 per share for
executions of Added Displayed Volume (other than Retail Orders) that
establish the NBBO (such orders, ``Setter Volume'') by achieving an
ADAV with respect to orders with Fee Code B \21\ that is equal to or
greater than 0.10% of the TCV. The Exchange now proposes to modify the
NBBO Setter Tier to become the NBBO Setter/Joiner Tiers by renaming the
existing NBBO Setter Tier as NBBO Setter/Joiner Tier 1, increasing the
additive rebate under such tier, making
[[Page 76651]]
the additive rebate under such tier also applicable to a qualifying
Member's executions of Added Displayed Volume (other than Retail
Orders) that establish a new best bid or offer (``BBO'') on the
Exchange that matches the NBBO first established on an away market
(such orders, ``Joiner Volume''), and establishing an NBBO Setter/
Joiner Tier 2.\22\ The additive rebate under each of the NBBO Setter/
Joiner Tiers will apply to a qualifying Member's executions of Setter
Volume, as it does today with respect to the NBBO Setter Tier, as well
as Joiner Volume, and the Exchange will indicate this in the note under
the NBBO Setter/Joiner Tiers pricing table on the Fee Schedule.
---------------------------------------------------------------------------
\21\ The Exchange notes that orders with Fee Code B include
orders, other than Retail Orders, that establish the NBBO.
\22\ In connection with the proposed changes to this tier, the
Exchange is proposing to rename the relevant heading on the Fee
Schedule from ``NBBO Setter Tier'' to ``NBBO Setter/Joiner Tiers''
and revise the note under the NBBO Setter/Joiner Tiers pricing table
to reflect that the additive rebate under each such tier is
applicable to executions of Setter Volume and Joiner Volume rather
than being limited to Fee Codes associated with Setter Volume.
---------------------------------------------------------------------------
First, with respect to NBBO Setter/Joiner Tier 1, the Exchange
proposes to increase the additive rebate from $0.0003 per share to
$0.0004 per share for a qualifying Member's executions of Setter Volume
and Joiner Volume.\23\ As noted above, the additive rebate under such
tier will now be provided in addition to the otherwise applicable
rebate for a qualifying Member's executions of Setter Volume and Joiner
Volume, which the Exchange will indicate in the note under the NBBO
Setter/Joiner Tier pricing table on the Fee Schedule. The Exchange is
not proposing to modify the required criteria under such tier.
---------------------------------------------------------------------------
\23\ The pricing for NBBO Setter/Joiner Tier 1 is referred to by
the Exchange on the Fee Schedule under the new description ``NBBO
Setter/Joiner Tier 1'' with a Fee Code of S1 to be appended to the
otherwise applicable Fee Code assigned by the Exchange on the
monthly invoices for qualifying executions.
---------------------------------------------------------------------------
Second, the Exchange proposes to establish the NBBO Setter/Joiner
Tier 2 under which the Exchange will provide an additive rebate of
$0.0003 per share for executions of Setter Volume and Joiner Volume for
Members that qualify for such tier by achieving an ADAV that is equal
to or greater than 0.05% of the TCV and a Displayed ADAV with respect
to orders with Fee Code B or J \24\ that is equal to or greater than
40% of the Member's Displayed ADAV with respect to orders with Fee Code
B, D or J.\25\ The additive rebate under such tier will not apply to
executions of orders in securities priced below $1.00 per share. The
Exchange notes that the inclusion in the required criteria of a
threshold based on the amount of a Member's orders that establish the
NBBO or establish a new BBO on the Exchange that matches the NBBO first
established on an away market (i.e., order with Fee Code B or J), as a
percentage of all such Member's orders that add displayed liquidity to
the Exchange (i.e., orders with Fee Code B, D or J), is intended to
incentivize Members to submit such aggressively priced displayed
liquidity to the Exchange.
---------------------------------------------------------------------------
\24\ The Exchange notes that orders with Fee Code J include
orders, other than Retail Orders, that establish a new BBO on the
Exchange that matches the NBBO first established on an away market.
\25\ The Exchange notes that orders with Fee Code D include
orders that add displayed liquidity to the Exchange but that are not
Fee Code B or J, and thus, orders with Fee Code B, D or J include
all orders, other than Retail Orders, that add displayed liquidity
to the Exchange. The pricing for NBBO Setter/Joiner Tier 2 is
referred to by the Exchange on the Fee Schedule under the new
description ``NBBO Setter/Joiner Tier 2'' with a Fee Code of S2 to
be appended to the otherwise applicable Fee Code assigned by the
Exchange on the monthly invoices for qualifying executions.
---------------------------------------------------------------------------
The purpose of making the additive rebate under the NBBO Setter/
Joiner Tiers applicable to a qualifying Member's executions of Joiner
Volume (in addition to Setter Volume) is, like the original purpose of
the NBBO Setter Tier, to attract aggressively priced displayed
liquidity to the Exchange. Specifically, the Exchange believes that
such change will encourage the submission of orders that establish a
new BBO on the Exchange that matches the NBBO first established on an
away market, both in order to receive the additive rebate on such
executions under each of the NBBO Setter/Joiner Tiers and, with respect
to Members seeking to qualify for NBBO Setter/Joiner Tier 2, to meet
the required criteria under such tier, and the Exchange believes that
the resulting increased submission of such aggressively priced
displayed liquidity would enhance market quality by increasing
execution opportunities, tightening spreads, and promoting price
discovery on the Exchange. Additionally, the Exchange believes that the
additive rebate for executions of Setter Volume and Joiner Volume
provided under each of the NBBO Setter/Joiner Tiers is commensurate
with the corresponding required criteria under each such tier and is
reasonably related to such market quality benefits that each such tier
is designed to achieve. The Exchange notes that the NBBO Setter/Joiner
Tiers, as modified by the changes proposed herein, are comparable to
other volume-based incentives and discounts, which have been widely
adopted by exchanges (including the Exchange), and that the Exchange's
proposal to provide an additive rebate for a qualifying Member's
executions of Joiner Volume, in addition to Setter Volume, under such
tiers is similar in construct to pricing incentives that have been
adopted by other exchanges.\26\
---------------------------------------------------------------------------
\26\ See, e.g., Securities Exchange Act Release No. 70664
(October 11, 2013), 78 FR 62804 (October 22, 2013) (SR-BATS-2013-
054) (notice of filing and immediate effectiveness of fee changes
adopted by BATS, including the adoption of an ``NBBO Joiner''
additive rebate provided for executions of orders that join the NBBO
when BATS is not already at the NBBO to members that qualify for
such incentive by achieving a specified volume threshold).
---------------------------------------------------------------------------
Standard Rebates for Added Non-Displayed Volume
The Exchange proposes to reduce the standard rebates for executions
of Added Non-Displayed Volume. Added Non-Displayed Volume includes: (i)
Pegged Orders \27\ with a Midpoint Peg \28\ 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
Peg Volume''); and (ii) orders in securities priced at or above $1.00
per share that add non-displayed liquidity to the Exchange, which are
not Midpoint Peg orders (such orders, ``Added Non-Midpoint Peg Hidden
Volume'').
---------------------------------------------------------------------------
\27\ 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.
\28\ 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 $0.0018 per
share for executions of Added Midpoint Peg Volume and Added Non-
Midpoint Peg Hidden Volume. The Exchange now proposes to reduce each of
these standard rebates to $0.0015 per share.\29\ The purpose of
reducing the standard rebates for executions of Added Midpoint Peg
Volume and Add Non-Midpoint Peg 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
[[Page 76652]]
encouraging added and/or displayed liquidity. The Exchange notes that
the proposed standard rebate for executions of Added Midpoint Peg
Volume remains higher than, and competitive with, the standard rebates
provided by at least one other exchange for executions of similar
orders.\30\ The Exchange also notes that the proposed standard rebate
for executions of Added Non-Midpoint Peg Hidden Volume remains higher
than, and competitive with, the standard rebates provided by at least
one other exchange for executions of similar orders.\31\
---------------------------------------------------------------------------
\29\ The standard pricing for executions of Added Midpoint Peg
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 standard pricing for executions of Added Non-
Midpoint Peg 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.
\30\ 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.
\31\ See, e.g., the Cboe BZX Exchange, Inc. 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.
---------------------------------------------------------------------------
Non-Display Add Tiers
As noted above, the Exchange currently provides a standard rebate
of $0.0018 per share for executions of Added Non-Displayed Volume
(including both Added Midpoint Peg Volume and Added Non-Midpoint Peg
Hidden Volume), which the Exchange is proposing to reduce to $0.0015
per share, as described above. The Exchange also currently offers Non-
Display Add Tiers 1 and 2 under which a Member may receive an enhanced
rebate for executions of Added Non-Displayed Volume by achieving the
corresponding required volume criteria for each such tier. The Exchange
now proposes to modify the Non-Display Add Tiers by modifying the
required criteria under Non-Display Add Tiers 1 and 2, and establishing
a new Non-Display Add Tier 3, as further described below.
First, with respect to Non-Display Add Tier 1, the Exchange
currently provides an enhanced rebate of $0.0027 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 3,000,000 shares.\32\ The Exchange now proposes to modify Non-
Display Add Tier 1 such that a Member would now qualify for such tier
by achieving a Non-Displayed ADAV that is equal to or greater than
5,000,000 shares. Thus, such proposed change would increase the Non-
Displayed ADAV threshold in the required criteria, which is designed to
encourage Members to maintain or increase their liquidity-adding non-
displayed order flow to the Exchange in order to qualify for the
enhanced rebate for executions of Added Non-Displayed Volume provided
under such tier. The Exchange is not proposing to change the rebates
provided under this tier.
---------------------------------------------------------------------------
\32\ The pricing for Non-Display Add Tier 1 is referred to by
the Exchange on the Fee Schedule under the existing description
``Added non-displayed volume, Non-Display Add Tier 1'' with a Fee
Code of H1 or M1, as applicable, to be provided by the Exchange on
the monthly invoices provided to Members.
---------------------------------------------------------------------------
Second, with respect to Non-Display Add Tier 2, the Exchange
currently provides an enhanced 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.\33\ The Exchange now proposes to modify Non-
Display Add Tier 2 such that a Member would now qualify for such tier
by achieving a Non-Displayed ADAV that is equal to or greater than
2,000,000 shares. Thus, such proposed change would increase the Non-
Displayed ADAV threshold in the required criteria, which is designed to
encourage Members to maintain or increase their liquidity-adding non-
displayed order flow to the Exchange in order to qualify for the
enhanced rebate for executions of Added Non-Displayed Volume provided
under such tier. The Exchange is not proposing to change the rebates
provided under this tier.
---------------------------------------------------------------------------
\33\ The pricing for Non-Display Add Tier 2 is referred to by
the Exchange on the Fee Schedule under the existing description
``Added non-displayed volume, Non-Display Add Tier 2'' with a Fee
Code of H2 or M2, as applicable, to be provided by the Exchange on
the monthly invoices provided to Members.
---------------------------------------------------------------------------
Third, the Exchange is proposing to establish a new tier under the
Non-Display Add Tiers, which, as proposed, would be referred to by the
Exchange as Non-Display Add Tier 3. Under the proposed new Non-Display
Add Tier 3, the Exchange would provide an enhanced rebate of $0.0020
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.\34\ The Exchange proposes to
provide Members that qualify for the proposed new Non-Display Add Tier
3 free executions of orders in securities priced below $1.00 per share
that add non-displayed liquidity to the Exchange, which is the same
rebate that is currently applicable to such executions for all Members.
---------------------------------------------------------------------------
\34\ The pricing for the proposed new Non-Display Add Tier 3 is
referred to by the Exchange on the Fee Schedule under the new
description ``Added non-displayed volume, Non-Display Add Tier 3''
with a Fee Code of H3 or M3, as applicable, to be provided by the
Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------
The tiered pricing structure for executions of Added Non-Displayed
Volume under the Non-Display Add Tiers provides an incremental
incentive for Members to strive for higher volume thresholds to receive
higher enhanced rebates for such executions and, as such, is intended
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 Members and market participants. The Exchange
believes that the Non-Display Add Tiers, as modified by the proposed
changes described above, reflect a reasonable and competitive pricing
structure that is right-sized and consistent with the Exchange's
overall pricing philosophy of encouraging added and/or displayed
liquidity. Specifically, the Exchange believes that, after giving
effect to the proposed changes described above, the rebate for
executions of Added Non-Displayed Volume provided under each of the
Non-Display Add Tiers is 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.
Sub-Dollar Rebate Tier
The Exchange proposes to adopt a new volume-based tier, referred to
by the Exchange as the Sub-Dollar Rebate Tier, under which the Exchange
will provide an enhanced rebate for executions of orders in securities
priced below $1.00 per share that add displayed liquidity to the
Exchange (such orders, ``Added Displayed Sub-Dollar Volume'').
Currently, the Exchange provides a standard rebate of 0.075% of the
total dollar value of the transaction for executions of Added Displayed
Sub-Dollar Volume, and this standard rebate is applicable to all such
executions for all Members (including those that qualify for any of the
Exchange's existing volume tiers). Now, under the proposed Sub-Dollar
Rebate Tier, the Exchange will provide an enhanced rebate of 0.15% of
the total dollar value of the transaction for executions of Added
Displayed Sub-Dollar Volume for Members that qualify for such tier by
achieving an ADAV that is equal to or greater than 0.15% of the
[[Page 76653]]
TCV.\35\ The Exchange notes that the Sub-Dollar Rebate Tier will not
apply to executions of orders in securities priced at or above $1.00
per share.
---------------------------------------------------------------------------
\35\ The pricing for the proposed new Sub-Dollar Rebate Tier is
referred to by the Exchange on the Fee Schedule under the new
description ``Sub-Dollar Rebate Tier'' with a Fee Code of ``L'' to
be appended to the otherwise applicable Fee Code assigned by the
Exchange on the monthly invoices for qualifying executions.
---------------------------------------------------------------------------
The Exchange believes that the proposed Sub-Dollar Rebate Tier
provides an incremental incentive for Members to maintain or strive for
higher ADAV on the Exchange in order to receive the proposed enhanced
rebate for executions of Added Displayed Sub-Dollar Volume. As such,
the proposed Sub-Dollar Rebate Tier is designed to incentivize Members
that provide liquidity on the Exchange to increase their orders that
add liquidity to the Exchange in order to qualify for the enhanced
rebate for executions of Added Displayed Sub-Dollar Volume, which, in
turn, the Exchange believes would also encourage the submission by
qualifying Members of additional Added Displayed Sub-Dollar Volume to
the Exchange, thereby promoting price discovery and contributing to a
deeper and more liquid market, including with respect to sub-dollar
securities. The Exchange believes that this resulting additional
liquidity-adding volume, including in the form of displayed volume in
sub-dollar securities, would contribute to a more robust and well-
balanced market ecosystem on the Exchange to the benefit of all Members
and market participants and, in turn, enhance the attractiveness of the
Exchange as a trading venue. The Exchange notes that the proposed new
Sub-Dollar Rebate Tier is comparable to other volume-based incentives
and discounts, which have been widely adopted by exchanges (including
the Exchange), including pricing incentives that provide an enhanced
rebate for executions of liquidity-adding orders in securities priced
below $1.00 per share for firms that achieve a specified volume
threshold that have been adopted by other exchanges.\36\
---------------------------------------------------------------------------
\36\ See, e.g., the NYSE Arca Equities Fees and Charges
(available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf), which reflects a standard
credit of 0.0% of the total dollar value for executions of
securities priced below $1.00 per share, as well as the ``Sub-Dollar
Adding Step Up Tier'' pricing structure under which NYSE Arca
provides higher credits (ranging from 0.05% to 0.15% of the total
dollar value) for executions of orders in securities priced below
$1.00 per share for firms that qualify for any such tier by
achieving certain specified volume thresholds.
---------------------------------------------------------------------------
Maximum Rebate per Share
As noted above, in response to the competitive environment with
respect to order execution, the Exchange offers tiered pricing, which
provides Members with opportunities to qualify for higher rebates or
lower fees where certain volume criteria and thresholds are met. In
this regard, the Exchange offers various volume-based tiers that
provide qualifying Members an enhanced rebate or an additive rebate
(which applies in addition to the otherwise applicable rebate) with
respect to qualifying executions. Under the Exchange's current pricing,
the highest rebate per share applicable to any execution is $0.0036,
and for business and competitive reasons the Exchange does not wish to
introduce a higher rebate per share with this proposal despite the fact
that a higher rebate for certain executions would be possible after
giving effect to the pricing changes described above. Thus, in order to
maintain the same maximum rebate per share provided under the
Exchange's current pricing, the Exchange proposes to add a note on the
Fee Schedule stating that to the extent a single execution qualifies
for one or more additive rebates, the maximum combined rebate per share
provided by the Exchange shall be $0.0036. The Exchange notes that
since $0.0036 is the highest rebate per share currently provided by the
Exchange, this proposed change, by itself, will not result in any
Member receiving a lower maximum rebate per share than it is currently
provided for any execution. The Exchange also notes that other
exchanges limit the maximum rebate per share in connection with the
provision of enhanced and/or additive rebates.\37\
---------------------------------------------------------------------------
\37\ See, e.g., the Nasdaq Price List--Trading Connectivity
(available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects various maximum
rebates in connection with the provision of an additive rebate for
executions of certain midpoint liquidity; the NYSE Arca Equities
Fees and Charges (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf), which provides
that in connection with the ``Tape B Additional Credit'' the credit
shall be in addition to the ETP Holder's Tiered or Standard
credit(s) and such combined credit(s) in Tape B shall not exceed
$0.0032, subject to certain exceptions for Lead Market Makers, which
are subject to a higher, but still limited, per share credit for the
applicable executions.
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Eliminate Step-Up Additive Rebate
Finally, the Exchange proposes to eliminate the Step-Up Additive
Rebate. The Exchange currently offers the Step-Up Additive Rebate,
which is a volume-based tier, under which the Exchange provides an
additive rebate of $0.0002 per share in addition to the otherwise
applicable rebate for executions of Added Displayed Volume (other than
orders that establish the NBBO, if such Member qualifies for the NBBO
Setter Tier, and Retail Orders) for Members that qualify for such tier
by achieving one of the two specified alternative criteria based on
Step-Up ADAV and/or ADAV thresholds. The Exchange adopted the Step-Up
Additive Rebate in May 2022 for the purpose of encouraging Members that
provide liquidity on the Exchange to increase their liquidity-adding
order flow in order to achieve the applicable volume thresholds,
thereby providing greater execution opportunities on the Exchange.\38\
However, the Exchange no longer wishes to, nor is it required to,
maintain such tier. Thus, the proposed rule change removes such tier,
as the Exchange would rather redirect future resources and funding into
other incentives and tiers designed to incentivize increased order flow
or otherwise enhance market quality on the Exchange.
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\38\ See Securities Exchange Act Release No. 94863 (May 6,
2022), 87 FR 29197 (May 12, 2022) (SR-MEMX-2021-11) [sic] (notice of
filing and immediate effectiveness of fee changes adopted by the
Exchange, including the adoption of the Step-Up Additive Rebate).
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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,\39\ in general, and with
sections 6(b)(4) and 6(b)(5) of the Act,\40\ 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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\39\ 15 U.S.C. 78f.
\40\ 15 U.S.C. 78f(b)(4) and (5).
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As discussed above, the Exchange operates in a highly fragmented
and competitive market in which market participants can readily direct
order flow to competing venues if they deem fee levels at a particular
venue to be excessive or incentives to be insufficient, and the
Exchange represents only a small percentage of the overall market. The
Commission and the courts have repeatedly expressed their preference
for competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and also recognized that current
[[Page 76654]]
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.'' \41\
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\41\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005).
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue to reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, and market participants
can readily trade on competing venues if they deem pricing levels at
those other venues to be more favorable. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to decrease the Exchange's expenditures with respect to its
transaction pricing and incentivize market participants to direct
additional order flow, including various forms of liquidity-adding
volume and aggressively priced displayed orders that establish the NBBO
or establish a new BBO on the Exchange that matches the NBBO first
established on an away market, 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.
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 Liquidity Provision
Tiers 1, 3 and 5, the DLI Tiers 1 and 2, and the Non-Display Add Tiers
1 and 2, each as modified by the changes proposed herein, as well as
the proposed new Non-Display Add Tier 3 and the proposed new Sub-Dollar
Rebate 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 reasonably designed to encourage Members to
maintain or increase their liquidity-adding order flow, including in
the forms of Added Displayed Volume, Added Non-Displayed Volume and
Added Displayed Sub-Dollar Volume, as applicable, to the Exchange,
which the Exchange believes would promote price discovery, enhance
liquidity and market quality, and contribute to a more robust 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, after giving effect to the changes proposed herein, the enhanced
rebate for executions of Added Displayed Volume, Added Non-Displayed
Volume, and Added Displayed Sub-Dollar Volume, as applicable, under
each such tier is 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. Additionally, the Exchange believes the proposed new Sub-Dollar
Rebate Tier is reasonable, in that it is comparable to pricing
incentives adopted by other exchanges that provide an enhanced rebate
for executions of liquidity-adding orders in securities priced below
$1.00 per share for firms that achieve a specified volume
threshold.\42\
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\42\ See supra note 36.
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The Exchange believes that the proposed NBBO Setter/Joiner Tiers
are a reasonable means to attract aggressively priced displayed
liquidity to the Exchange. As noted above, the proposed NBBO Setter/
Joiner Tiers are comparable to other volume-based tiers, and the
Exchange believes such tiers are reasonable, equitable and not unfairly
discriminatory for the same reasons described above with respect to
volume-based tiers, as the proposed NBBO Setter/Joiner 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 reasonably designed to incentivize
the entry of aggressively priced displayed orders that establish the
NBBO or establish a new BBO on the Exchange that matches the NBBO first
established on an away market. As such, the Exchange believes the
additive rebates for executions of Setter Volume and Joiner Volume
provided under the NBBO Setter/Joiner Tiers are reasonably related to
the market quality benefits that such tiers are designed to promote.
Specifically, the Exchange believes that its proposal to make the
additive rebate under each of the NBBO Setter/Joiner Tiers applicable
to a qualifying Member's executions of Joiner Volume (in addition to
Setter Volume, as is the case under the NBBO Setter Tier today) is
reasonable, equitable and not unfairly discriminatory because, as
described above, the Exchange believes that doing so would incentivize
the submission of additional orders that establish a new BBO on the
Exchange that matches the NBBO first established on an away market (in
addition to orders that establish the NBBO, which are currently
incentivized under the NBBO Setter Tier and will continue to be
incentivized under the NBBO Setter/Joiner Tiers), and the Exchange
believes that the resulting increased submission of such aggressively
priced displayed liquidity would benefit all Members and market
participants, including public investors, by increasing execution
opportunities, tightening spreads, and promoting price discovery on the
Exchange. Moreover, the Exchange believes such proposal is reasonable,
in that it is similar in construct to pricing incentives that have been
adopted by other exchanges that provide an additive rebate for
executions of orders that join the NBBO for members that achieve
certain specified volume criteria.\43\
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\43\ See supra note 26.
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The Exchange further believes that the proposed additive rebate for
executions of Setter Volume and Joiner Volume under each of the NBBO
Setter/Joiner Tiers is reasonable and consistent with an equitable
allocation of fees because, as described above, the Exchange believes
that each such rebate is commensurate with the corresponding required
criteria under each such tier and is reasonably related to such market
quality benefits that each such tier is designed to achieve.
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 Peg Volume and Added Non-Midpoint Peg 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 and/or
displayed
[[Page 76655]]
liquidity, and the proposed new standard rebates for executions of
Added Midpoint Peg Volume and Added Non-Midpoint Peg Hidden Volume
remain higher than, and competitive with, the standard rebates provided
by at least one other exchange in each case for executions of similar
orders.\44\ The Exchange also believes the proposed standard rebates
for executions of Added Midpoint Peg Volume and Added Non-Midpoint Peg
Hidden Volume are equitable and not unfairly discriminatory, as such
standard rebates will apply equally to all Members.
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\44\ See supra notes 30-31.
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The Exchange believes that its proposal to limit the maximum
combined rebate per share provided for any execution on the Exchange
that qualifies for one or more additive rebates to $0.0036 is
reasonable, equitable and not unfairly discriminatory, as this
limitation will apply to all Members equally, in that no Member may be
eligible to receive such a rebate that is greater than $0.0036.
Moreover, the highest rebate per share applicable to any execution
under the Exchange's current pricing is $0.0036, so this proposed
change, by itself, will not result in any Member receiving a lower
maximum rebate per share than it is currently provided for any
execution. The Exchange notes that it is not required to provide
Members any opportunities to receive rebates or, to the extent that it
does provide rebates under its transaction pricing, to maintain any
specific level of rebate with respect to any type of transaction. The
Exchange further notes that other exchanges also limit the maximum
rebate per share in connection with the provision of enhanced and/or
additive rebates, and therefore, this aspect of the proposal does not
raise any new or novel issues that have not previously been considered
by the Commission.\45\
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\45\ See supra note 37.
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The Exchange believes the proposed change to eliminate the Step-Up
Additive Rebate is reasonable because, as noted above, it would enable
the Exchange to redirect the associated resources and funding into
other incentives and tiers designed to incentivize increased order flow
or otherwise enhance market quality on the Exchange, and the Exchange
is not required to maintain such incentive or provide Members any
opportunities to receive additive rebates. The Exchange believes the
proposal to eliminate such incentive is also equitable and not unfairly
discriminatory because it applies equally to all Members, in that the
incentive would no longer be available for any Member.
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 \46\ 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.
---------------------------------------------------------------------------
\46\ 15 U.S.C. 78f(b)(4) and (5).
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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 changes to the Exchange transaction pricing under this proposal are
intended to decrease the Exchange's expenditures with respect to its
transaction pricing and attract order flow to the Exchange by
continuing to offer competitive pricing while also incentivizing market
participants to submit various forms of liquidity-adding volume and
aggressively priced displayed liquidity, thereby promoting price
discovery and enhancing liquidity and market quality on the Exchange to
the benefit of all Members and 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.'' \47\
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\47\ See supra note 41.
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Intramarket Competition
As discussed above, the Exchange believes that the proposal would
incentivize Members to submit additional order flow, including various
forms of liquidity-adding volume and aggressively priced displayed
orders that establish the NBBO or establish a new BBO on the Exchange
that matches the NBBO first established on an away market, to the
Exchange, thereby promoting price discovery and 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 criteria under the
Liquidity Provision Tiers 1, 3 and 5, the DLI Tiers 1 and 2, and the
Non-Display Add Tiers 1 and 2, as well as the proposed new Non-Display
Add Tier 3 and the proposed new Sub-Dollar Rebate Tier, and thus
receive the corresponding rebates for executions of Added Displayed
Volume, Added Non-Displayed Volume and Added Displayed Sub-Dollar
Volume, as applicable, would be available to all Members that meet the
associated volume requirements in any month. Similarly, the opportunity
to qualify for the NBBO Setter/Joiner Tiers 1 and 2, and thus receive
the corresponding additive rebates for executions of Setter Volume and
Joiner Volume, would be available to all Members that meet the
associated volume requirements in any month. The Exchange believes its
proposal to make the additive rebate under the NBBO Setter/Joiner Tiers
applicable to a qualifying Member's executions of Joiner Volume will
benefit competition by rewarding Members that help the Exchange to join
other market centers at the NBBO. As described above, the Exchange
believes that, after giving effect to the changes proposed herein, the
required criteria under each of the tiers described above is
commensurate with the corresponding rebate under each such tier and is
reasonably related to the enhanced liquidity and market quality that
each such tier is designed to promote. Additionally, as noted above,
the proposed reduced standard rebates for executions of Added Non-
Displayed Volume (including both Added Midpoint Peg Volume and Added
Non-Midpoint Peg Hidden Volume) would continue to apply equally to all
Members in the same manner that such standard rates currently do today.
The Exchange does not believe the proposed change to eliminate the
Step-Up Additive Rebate will impose any
[[Page 76656]]
burden on intramarket competition because such change will apply to all
Members uniformly, in that such incentive will no longer be available
to any Member. Additionally, the Exchange does not believe the proposed
change to limit the maximum combined rebate per share provided for any
execution on the Exchange that qualifies for one or more additive
rebates will impose any burden on intramarket competition because, as
described above, such limitation will apply to all Members equally, in
that no Member may be eligible to receive such a rebate that is greater
than $0.0036, and, as this is the highest rebate per share applicable
to any execution under the Exchange's current pricing, no Member will
receive a lower maximum rebate per share than it is currently provided
for any execution as a result of this proposed change.
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 executions of
Added Displayed Volume, Added Non-Displayed Volume (including both
Added Midpoint Peg Volume and Added Non-Midpoint Peg Hidden Volume),
Added Displayed Sub-Dollar Volume, Setter Volume and Joiner 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 with respect to its transaction pricing and
attract additional order flow to the Exchange through the provision of
certain enhanced and additive rebates under volume-based tiers, which
have been widely adopted by exchanges, and standard pricing that is
comparable to, and competitive with, pricing for similar executions in
place at other exchanges.\48\ 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 Non-Displayed Volume
(including both Added Midpoint Peg Volume and Added Non-Midpoint Peg
Hidden Volume), as well as similar pricing incentives and discounts to
market participants that achieve certain volume criteria and
thresholds. With respect to the Exchange's proposal to make the
additive rebates provided under the NBBO Setter/Joiner Tiers applicable
to executions of Joiner Volume (in addition to Setter Volume, as is the
case under the NBBO Setter Tier today), the Exchange believes that the
promotion of displayed liquidity at the NBBO, whether through orders
that establish the NBBO or establish a new BBO on the Exchange that
matches the NBBO first established on an away market, enhances market
quality for all market participants and promotes competition amongst
market centers. Additionally, as noted above, eliminating the Step-Up
Additive Rebate would allow the Exchange to redirect the associated
resources and funding into other incentives and tiers designed to
enhance market quality on the Exchange, which would ultimately enable
the Exchange to better compete with other market centers. The Exchange
does not believe that its proposal to limit the maximum combined rebate
per share provided for any execution on the Exchange that qualifies for
one or more additive rebates will impose any burden on intermarket
competition, and the Exchange notes that limiting the maximum rebate
per share in connection with similar types of incentives is consistent
with the practices of other exchanges.\49\
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\48\ See supra notes 30-31.
\49\ See supra note 37.
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Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \50\ 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' . . . .''.\51\ 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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\50\ See supra note 41.
\51\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Act \52\ and Rule 19b-4(f)(2) \53\ thereunder.
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\52\ 15 U.S.C. 78s(b)(3)(A)(ii).
\53\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the
[[Page 76657]]
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-2022-33 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-2022-33. 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-2022-33 and should be submitted on
or before January 5, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\54\
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\54\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-27161 Filed 12-14-22; 8:45 am]
BILLING CODE 8011-01-P
