Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 14427-14435 [2023-04688]
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Federal Register / Vol. 88, No. 45 / Wednesday, March 8, 2023 / Notices
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
[FR Doc. 2023–04689 Filed 3–7–23; 8:45 am]
• 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–
NYSEARCA–2023–16 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.
lotter on DSK11XQN23PROD with NOTICES1
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Sherry R. Haywood,
Assistant Secretary.
All submissions should refer to File
Number SR–NYSEARCA–2023–16. 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–NYSEARCA–2023–16 and
should be submitted on or before March
29, 2023.
16:48 Mar 07, 2023
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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
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97028; File No. SR–MEMX–
2023–05]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule
March 2, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
28, 2023, 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
March 1, 2023. The text of the proposed
rule change is provided in Exhibit 5.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
33 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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1. Purpose
The purpose of the proposed rule
change is to amend the Fee Schedule to:
(i) reduce the base rebate for executions
of orders in securities priced at or above
$1.00 per share that add displayed
liquidity to the Exchange (such orders,
‘‘Added Displayed Volume’’); (ii) reduce
the base rebate for executions of Retail
Orders 4 in securities priced at or above
$1.00 per share that add displayed
liquidity to the Exchange (such orders,
‘‘Added Displayed Retail Volume’’); (iii)
reduce the base 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’’); (iv)
modify the Liquidity Provision Tiers; (v)
modify the required criteria under
NBBO Setter/Joiner Tier 1; (vi) modify
the Non-Display Add Tiers; (vii) modify
Liquidity Removal Tier 1 and adopt a
new Liquidity Removal Tier 2; (viii)
modify the required criteria under the
Sub-Dollar Rebate Tier; and (ix)
eliminate the special pricing for
executions of Pegged Orders 5 with a
Midpoint Peg 6 instruction (such orders,
‘‘Midpoint Peg Orders’’) and a time-inforce (‘‘TIF’’) instruction of IOC 7 or
FOK 8 that execute at the midpoint of
the national best bid and offer
(‘‘NBBO’’) and remove liquidity from
the Exchange upon entry (such orders,
‘‘Midpoint Peg IOC/FOK Orders’’).
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
4 A ‘‘Retail Order’’ means an agency or riskless
principal order that meets the criteria of FINRA
Rule 5320.03 that originates from a natural person
and is submitted to the Exchange by a Retail
Member Organization (‘‘RMO’’), provided that no
change is made to the terms of the order with
respect to price or side of market and the order does
not originate from a trading algorithm or any other
computerized methodology. See Exchange Rule
11.21(a).
5 See Exchange Rule 11.6(h).
6 See Exchange Rule 11.6(h)(2).
7 See Exchange Rule 11.6(o)(1).
8 See Exchange Rule 11.6(o)(3).
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Federal Register / Vol. 88, No. 45 / Wednesday, March 8, 2023 / Notices
available information, no single
registered equities exchange currently
has more than approximately 15% of
the total market share of executed
volume of equities trading.9 Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow,
and the Exchange currently represents
approximately 3% of the overall market
share.10 The Exchange in particular
operates a ‘‘Maker-Taker’’ model
whereby it provides rebates to Members
that add liquidity to the Exchange and
charges fees to Members that remove
liquidity from the Exchange. The Fee
Schedule sets forth the standard rebates
and fees applied per share for orders
that add and remove liquidity,
respectively. Additionally, in response
to the competitive environment, the
Exchange also offers tiered pricing,
which provides Members with
opportunities to qualify for higher
rebates or lower fees where certain
volume criteria and thresholds are met.
Tiered pricing provides an incremental
incentive for Members to strive for
higher tier levels, which provides
increasingly higher benefits or discounts
for satisfying increasingly more
stringent criteria.
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Reduce Base Rebate for Added
Displayed Volume
Currently, the Exchange provides a
base rebate of $0.0020 per share for
executions of Added Displayed Volume.
The Exchange now proposes to reduce
the base rebate for executions of Added
Displayed Volume to $0.0018 per
share.11 The purpose of reducing the
base rebate for executions of Added
Displayed Volume is for business and
competitive reasons, as the Exchange
believes that reducing such rebate as
proposed would decrease the
Exchange’s expenditures with respect to
its transaction pricing in a manner that
is still consistent with the Exchange’s
overall pricing philosophy of
encouraging added displayed liquidity.
The Exchange notes that despite the
reduction proposed herein, the
proposed base rebate for executions of
Added Displayed Volume remains in
line with, or higher than, the base
rebates provided by other exchanges for
9 Market share percentage calculated as of
February 28, 2023. The Exchange receives and
processes data made available through consolidated
data feeds (i.e., CTS and UTDF).
10 Id.
11 The proposed base rebate for executions of
Added Displayed Volume is referred to by the
Exchange on the Fee Schedule under the existing
description ‘‘Added displayed volume’’ with a Fee
Code of ‘‘B’’, ‘‘D’’ or ‘‘J’’, as applicable, on execution
reports.
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executions of orders in securities priced
at or above $1.00 per share that add
displayed liquidity.12
Reduce Base Rebate for Added
Displayed Retail Volume
Currently, the Exchange provides a
base rebate of $0.0035 per share for
executions of Added Displayed Retail
Volume. The Exchange now proposes to
reduce the base rebate for executions of
Added Displayed Retail Volume to
$0.0034 per share.13 The purpose of
reducing the base rebate for executions
of Added Displayed Retail Volume is for
business and competitive reasons, as the
Exchange believes that reducing such
rebate as proposed would decrease the
Exchange’s expenditures with respect to
its transaction pricing in a manner that
is still consistent with the Exchange’s
overall pricing philosophy of
encouraging added displayed liquidity.
The Exchange notes that despite the
reduction proposed herein, the
proposed base rebate for executions of
Added Displayed Retail Volume
remains higher than, and competitive
with, the base rebates provided by other
exchanges for executions of attested
retail orders in securities priced at or
above $1.00 per share that add
displayed liquidity.14
Reduce Base Rebates for Added NonDisplayed Volume
The Exchange is proposing to
uniformly reduce the base rebates
12 See, e.g., the Nasdaq Stock Market LLC
(‘‘Nasdaq’’) Price List—Trading Connectivity
(available at https://nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2), which reflects a
base rebate of $0.0018 per share for executions of
orders in Tape A and Tape B securities priced at
or above $1.00 per share that add displayed
liquidity and a base rebate of $0.0013 per share for
executions of orders in Tape C securities priced at
or above $1.00 per share that add displayed
liquidity; the Cboe BZX Exchange, Inc. (‘‘Cboe
BZX’’) equities trading fee schedule on its public
website (available at https://www.cboe.com/us/
equities/membership/fee_schedule/bzx/), which
reflects a base rebate of $0.0016 per share for
executions of orders in securities priced at or above
$1.00 per share that add displayed liquidity.
13 The proposed base rebate for executions of
Added Displayed Retail Volume is referred to by
the Exchange on the Fee Schedule under the
existing description ‘‘Added displayed volume,
Retail Order’’ with a Fee Code of ‘‘Br’’, ‘‘Dr’’ or ‘‘Jr’’,
as applicable, on execution reports.
14 See, e.g., the Cboe BZX equities trading fee
schedule on its public website (available at https://
www.cboe.com/us/equities/membership/fee_
schedule/bzx/), which reflects a base rebate of
$0.0032 per share for executions of attested retail
orders in securities priced at or above $1.00 per
share that add displayed liquidity; the Cboe EDGX
Exchange, Inc. (‘‘Cboe EDGX’’) equities trading fee
schedule on its public website (available at https://
www.cboe.com/us/equities/membership/fee_
schedule/edgx/), which reflects a base rebate of
$0.0032 per share for executions of attested retail
orders in securities priced at or above $1.00 per
share that add displayed liquidity.
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provided for executions of Added NonDisplayed Volume, which is comprised
of the three following types of orders: (i)
Midpoint Peg Orders in securities
priced at or above $1.00 per share that
add liquidity to the Exchange (such
orders, ‘‘Added Midpoint Volume’’); (ii)
orders, which are not orders subject to
Display-Price Sliding that receive price
improvement when executed or
Midpoint Peg Orders, in securities
priced at or above $1.00 per share that
add non-displayed liquidity to the
Exchange (such orders, ‘‘Added NonMidpoint Hidden Volume’’); and (iii)
orders in securities priced at or above
$1.00 per share subject to Display-Price
Sliding that add liquidity to the
Exchange and receive price
improvement when executed (such
orders, ‘‘Added Price-Improved
Volume’’).
Currently, the Exchange provides base
rebates of $0.0015 per share for
executions of Added Midpoint Volume,
Added Non-Midpoint Hidden Volume,
and Added Price-Improved Volume.
The Exchange now proposes to reduce
each of these base rebates to $0.0010 per
share.15 The purpose of uniformly
reducing the standard rebates for
executions of Added Midpoint Volume,
Add Non-Midpoint Hidden Volume,
and Added Price-Improved Volume is
for business and competitive reasons, as
the Exchange believes reducing such
rebates as proposed would decrease the
Exchange’s expenditures with respect to
its transaction pricing in a manner that
is still consistent with the Exchange’s
overall pricing philosophy of
encouraging added displayed liquidity.
The Exchange notes that the proposed
base rebate for executions of Added
Midpoint Volume remains in line and
competitive with the base rebates
provided by at least one other exchange
for executions of similar orders.16 The
15 The proposed base rebate for executions of
Added Midpoint Volume is referred to by the
Exchange on the Fee Schedule under the existing
description ‘‘Added non-displayed volume,
Midpoint Peg’’ and such orders will continue to
receive a Fee Code of ‘‘M’’ on execution reports.
The proposed base rebate for executions of Added
Non-Midpoint Hidden Volume is referred to by the
Exchange on the Fee Schedule under the existing
description ‘‘Added non-displayed volume’’ and
such orders will continue to receive a Fee Code of
‘‘H’’ on execution reports. The proposed base rebate
for executions of Added Price-Improved Volume is
referred to by the Exchange on the Fee Schedule
under the existing description ‘‘Added volume,
order subject to Display-Price Sliding that receives
price improvement when executed’’ and such
orders will continue to receive a Fee Code of ‘‘P’’
on execution reports.
16 See, e.g., the Nasdaq Price List—Trading
Connectivity (available at https://nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2), which reflects a
base rebate of $0.0014 per share for executions of
orders in Tape A and Tape B securities priced at
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Exchange also notes that the proposed
base rebate for executions of Added
Non-Midpoint Hidden Volume remains
in line and competitive with the base
rebate provided by at least one other
exchange for executions of similar
orders.17 Additionally, the Exchange
believes it is appropriate to also provide
the same base rebate for executions of
Added Price-Improved Volume as for
executions of Added Midpoint Volume
and Added Non-Midpoint Hidden
Volume, as all of these orders similarly
add liquidity to the Exchange and are
executed at prices that are not displayed
on the Exchange’s order book, and the
Exchange notes that all of these orders
are also currently subject to the same
base rebate and pricing structure today.
lotter on DSK11XQN23PROD with NOTICES1
Liquidity Provision Tiers
The Exchange currently provides a
base rebate of $0.0020 per share for
executions of Added Displayed Volume,
which the Exchange is proposing to
reduce to $0.0018 per share, as
described above. The Exchange also
currently offers Liquidity Provision
Tiers 1–6 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 reducing
the rebates for executions of Added
Displayed Volume and modifying the
required criteria under such tiers and
eliminating Liquidity Provision Tier 6,
as further described below.
With respect to Liquidity Provision
Tier 1, the Exchange currently provides
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 18 that is equal to or greater than
0.40% of the TCV; 19 or (2) an ADAV
that is equal to or greater than 0.30% of
or above $1.00 per share that add non-displayed
midpoint liquidity and a base rebate of $0.0010 per
share for executions of orders in Tape C securities
priced at or above $1.00 per share that add nondisplayed midpoint liquidity.
17 See, e.g., the Cboe BZX equities trading fee
schedule on its public website (available at https://
www.cboe.com/us/equities/membership/fee_
schedule/bzx/), which reflects a standard rebate of
$0.0010 per share for executions of orders in
securities priced at or above $1.00 per share that
add non-displayed liquidity.
18 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.
19 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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the TCV and a Step-Up ADAV 20 from
November 2022 that is equal to or
greater than 0.10% of the TCV. The
Exchange now proposes to reduce the
rebate for executions of Added
Displayed Volume under Liquidity
Provision Tier 1 to $0.00335 per share
and to modify the required criteria such
that a Member would now qualify for
such tier by achieving an ADAV
(excluding Retail Orders) that is equal to
or greater than 0.45% of the TCV.21 The
Exchange is not proposing to change the
rebate for executions of orders in
securities priced below $1.00 per share
under such tier.
With respect to Liquidity Provision
Tier 2, 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) an ADAV that
is equal to or greater than 0.25% of the
TCV; and (2) a Non-Displayed ADAV 22
that is equal to or greater than 5,000,000
shares. The Exchange now proposes to
reduce the rebate for executions of
Added Displayed Volume under
Liquidity Provision Tier 2 to $0.00325
per share and to modify the required
criteria such that a Member would
qualify for such tier by achieving: (1) an
ADAV that is equal to or greater than
0.25% of the TCV; and (2) a NonDisplayed ADAV that is equal to or
greater than 4,000,000 shares.23 Thus,
such proposed change would lower the
Non-Displayed ADAV threshold in the
second of the two existing alternative
criteria. The Exchange is not proposing
20 As set forth on the Fee Schedule, ‘‘Step-Up
ADAV’’ means ADAV in the relevant baseline
month subtracted from current ADAV.
21 The proposed pricing for Liquidity Provision
Tier 1 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
displayed volume, Liquidity Provision Tier 1’’ with
a Fee Code of ‘‘B1’’, ‘‘D1’’ or ‘‘J1’’, as applicable, to
be provided by the Exchange on the monthly
invoices provided to Members. The Exchange notes
that because the determination of whether a
Member qualifies for a certain pricing tier for a
particular month will not be made until after the
month-end, the Exchange will provide the Fee
Codes otherwise applicable to such transactions on
the execution reports provided to Members during
the month and will only designate the Fee Codes
applicable to the achieved pricing tier on the
monthly invoices, which are provided after such
determination has been made, as the Exchange does
for its tier-based pricing today.
22 As set forth on the Fee Schedule, ‘‘NonDisplayed ADAV’’ means ADAV with respect to
non-displayed orders (including orders subject to
Display-Price Sliding that receive price
improvement when executed and Midpoint Peg
orders).
23 The proposed pricing for Liquidity Provision
Tier 2 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
displayed volume, Liquidity Provision Tier 2’’ with
a Fee Code of ‘‘B2’’, ‘‘D2’’ or ‘‘J2’’, as applicable, to
be provided by the Exchange on the monthly
invoices provided to Members.
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to change the rebate for executions of
orders in securities priced below $1.00
per share under such tier.
With respect to Liquidity Provision
Tier 3, the Exchange currently provides
an enhanced rebate of $0.0032 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 0.20% of the
TCV; or (2) an ADAV that is equal to or
greater than 15,000,000 shares and a
Step-Up ADAV from October 2022 that
is equal to or greater than 0.10% of the
TCV. The Exchange now proposes to
reduce the rebate for executions of
Added Displayed Volume under
Liquidity Provision Tier 3 to $0.0031
per share and to modify the required
criteria such that a Member would now
qualify for such tier by achieving an
ADAV that is equal to or greater than
0.20% of the TCV.24 Thus, such
proposed change would keep the first of
the two existing alternative criteria
intact with no changes and eliminate
the second of the two existing
alternative criteria. The Exchange is not
proposing to change the rebate for
executions of orders in securities priced
below $1.00 per share under such tier.
With respect to Liquidity Provision
Tier 4, the Exchange currently provides
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. The
Exchange now proposes to reduce the
rebate for executions of Added
Displayed Volume under Liquidity
Provision Tier 4 to $0.0029 per share
and to modify the required criteria such
that a Member would now qualify for
such tier by achieving an ADAV that is
equal to or greater than 0.15% of the
TCV.25 Thus, such proposed change
would keep the first of the two existing
alternative criteria intact with no
changes and eliminate the second of the
two existing alternative criteria. The
Exchange is not proposing to change the
rebate for executions of orders in
24 The proposed 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.
25 The proposed pricing for Liquidity Provision
Tier 4 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
displayed volume, Liquidity Provision Tier 4’’ with
a Fee Code of ‘‘B4’’, ‘‘D4’’ or ‘‘J4’’, as applicable, to
be provided by the Exchange on the monthly
invoices provided to Members.
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securities priced below $1.00 per share
under such tier.
With respect to Liquidity Provision
Tier 5, the Exchange currently provides
an enhanced rebate of $0.0028 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 0.10% of the
TCV; or (2) a Displayed ADAV
(excluding Retail Orders) that is equal to
or greater than 750,000 shares and a
Step-Up Displayed ADAV 26 (excluding
Retail Orders) from October 2022 that is
equal to or greater than 30% of the
Member’s October 2022 Displayed
ADAV (excluding Retail Orders). The
Exchange now proposes to reduce the
rebate for executions of Added
Displayed Volume under Liquidity
Provision Tier 5 to $0.0027 per share
and to modify the required criteria such
that a Member would now qualify for
such tier by achieving: (1) an ADAV that
is equal to or greater than 0.075% of the
TCV; or (2) a Displayed ADAV
(excluding Retail Orders) that is equal to
or greater than 750,000 shares and a
Step-Up Displayed ADAV (excluding
Retail Orders) from October 2022 that is
equal to or greater than 30% of the
Member’s October 2022 Displayed
ADAV (excluding Retail Orders).27
Thus, such proposed change would
lower the overall ADAV threshold in the
first of the two existing alternative
criteria and keep the second of the two
existing alternative criteria intact with
no changes. The Exchange is not
proposing to change the rebate for
executions of orders in securities priced
below $1.00 per share under such tier.
With respect to Liquidity Provision
Tier 6, the Exchange currently provides
an enhanced rebate of $0.0025 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 Midpoint ADAV 28 that is
equal to or greater than 1,000,000
shares. The Exchange now proposes to
eliminate Liquidity Provision Tier 6, as
the Exchange no longer wishes to, nor
is it required to, maintain such tier, and
the Exchange would rather redirect the
26 As set forth on the Fee Schedule, ‘‘Step-Up
Displayed ADAV’’ means Displayed ADAV in the
relevant baseline month subtracted from current
Displayed ADAV.
27 The proposed 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.
28 As set forth on the Fee Schedule, ‘‘Midpoint
ADAV’’ means ADAV with respect to Midpoint Peg
orders.
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associated resources and funding into
other programs and tiers intended to
incentivize increased order flow or
enhance market quality.
The purpose of reducing the rebates
for executions of Added Displayed
Volume under Liquidity Provision Tiers
1–5 as proposed, which the Exchange
believes in each case represents a
modest reduction and remains
commensurate with the required criteria
as modified, and eliminating Liquidity
Provision Tier 6 is for business and
competitive reasons, as the Exchange
believes that such rebate reductions and
tier elimination 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 liquidity. 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 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 1–5 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.
NBBO Setter/Joiner Tier 1
The Exchange currently offers NBBO
Setter/Joiner Tiers 1–2 under which a
Member may receive an additive rebate
for a qualifying Member’s executions of
Added Displayed Volume (other than
Retail Orders) that establish the NBBO
(such orders, ‘‘Setter Volume’’) and
executions of Added Displayed Volume
(other than Retail Orders) that establish
a new best bid or offer on the Exchange
that matches the NBBO first established
on an away market (such orders, ‘‘Joiner
Volume’’). With respect to NBBO Setter/
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Joiner Tier 1, the Exchange currently
provides an additive rebate of $0.0004
per share for executions of Setter
Volume and Joiner Volume for Members
that qualify for such tier by achieving an
ADAV with respect to orders with Fee
Code B 29 that is equal to or greater than
0.10% of the TCV. The Exchange now
proposes to modify the required criteria
such that a Member would now qualify
for such tier by achieving: (1) an ADAV
with respect to orders with Fee Code B
that is equal to or greater than 0.10% of
the TCV; or (2) an ADAV with respect
to orders with Fee Code B that is equal
to or greater than 10,000,000 shares.30
Thus, such proposed change would
keep the existing criteria based on an
ADAV threshold that is expressed as a
percentage of TCV intact with no
changes and add a new alternative
criteria based on an ADAV threshold
that is expressed as a number of shares.
The Exchange notes that, as the
proposed change to the required criteria
under NBBO Setter/Joiner Tier 1 merely
provides an alternative criteria and does
not change the existing criteria, the
Exchange believes that such change
would make the tier easier for Members
to achieve, and, in turn, while the
Exchange has no way of predicting with
certainty how the proposed new criteria
will impact Member activity, the
Exchange expects that more Members
will qualify, or strive to qualify, for such
tier than currently do, resulting in the
submission of additional order flow to
the Exchange. The Exchange believes
that the additive rebate for executions of
Setter Volume and Joiner Volume
provided under NBBO Setter/Joiner Tier
1, which the Exchange is not proposing
to change with this proposal, remains
commensurate with the required criteria
under such tier, as modified, and is
reasonably related to the market quality
benefits that such tier is designed to
achieve.
Non-Display Add Tiers
The Exchange currently offers NonDisplay Add Tiers 1–3 under which a
Member may receive an enhanced
rebate for executions of Added NonDisplayed Volume by achieving the
corresponding required volume criteria
for each such tier. The Exchange now
proposes to modify the Non-Display
29 The Exchange notes that orders with Fee Code
B include orders, other than Retail Orders, that
establish the NBBO.
30 The pricing for NBBO Setter/Joiner Tier 1 is
referred to by the Exchange on the Fee Schedule
under the existing 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.
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Add Tiers by modifying the required
criteria under Non-Display Add Tier 2
and reducing the rebate for executions
of Added Non-Displayed Volume and
modifying the required criteria under
Non-Display Add Tier 3.
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
2,000,000 shares.31 The Exchange now
proposes to modify Non-Display Add
Tier 2 such that a Member would now
qualify for such tier by achieving a NonDisplayed ADAV that is equal to or
greater than 1,500,000 shares. Thus,
such proposed change would lower the
Non-Displayed ADAV threshold in the
required criteria, which the Exchange
believes would make the tier easier for
Members to achieve, and, in turn, while
the Exchange has no way of predicting
with certainty how the proposed new
criteria will impact Member activity, the
Exchange expects that more Members
will qualify, or strive to qualify, for such
tier than currently do, resulting in the
submission of additional order flow to
the Exchange. The Exchange is not
proposing to change the rebates
provided under this tier.
With respect to Non-Display Add Tier
3, the Exchange currently provides 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. The Exchange now
proposes to reduce the rebate for
executions of Added Non-Displayed
Volume under Non-Display Add Tier 3
to $0.0018 per share and to modify the
required criteria such that a Member
would now qualify for such tier by
achieving a Non-Displayed ADAV that
is equal to or greater than 500,000
shares.32 Thus, such proposed change
would lower the Non-Displayed ADAV
threshold in the required criteria, which
the Exchange believes would make the
tier easier for Members to achieve, and,
in turn, while the Exchange has no way
31 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’’, ‘‘M2’’ or ‘‘P2’’, as applicable,
to be provided by the Exchange on the monthly
invoices provided to Members.
32 The proposed pricing for Non-Display Add Tier
3 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
non-displayed volume, Non-Display Add Tier 3’’
with a Fee Code of ‘‘H3’’, ‘‘M3’’ or ‘‘P3’’, as
applicable, to be provided by the Exchange on the
monthly invoices provided to Members.
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of predicting with certainty how the
proposed new criteria will impact
Member activity, the Exchange expects
that more Members will qualify, or
strive to qualify, for such tier than
currently do, resulting in the
submission of additional order flow to
the Exchange.
The purpose of reducing the rebate for
executions of Added Non-Displayed
Volume under Non-Display Add Tier 3
as proposed, which the Exchange
believes represents a modest reduction
and remains commensurate with the
required criteria as modified to include
a lower Non-Displayed ADAV
threshold, is for business and
competitive reasons, as the Exchange
believes that such rebate reduction
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 liquidity. 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 volume, to the
Exchange, thereby contributing to a
deeper and more robust and wellbalanced market ecosystem to the
benefit of all Members and market
participants.
14431
Liquidity Removal Tiers
The Exchange currently charges a
base fee of $0.0030 per share for
executions of orders in securities priced
at or above $1.00 per share that remove
liquidity from the Exchange (such
orders, ‘‘Removed Volume’’). The
Exchange also currently offers Liquidity
Removal Tier 1 under which qualifying
Members are charged a discounted fee
of $0.00295 per share for executions of
Removed Volume by achieving (1) an
ADV 33 that is equal to or greater than
0.50% of the TCV and a Remove ADV 34
that is equal to or greater than 0.25% of
the TCV; or (2) an ADV that is equal to
or greater than 1.00% of the TCV. Now,
the Exchange proposes to reduce the fee
charged for executions of Removed
Volume under Liquidity Removal Tier 1
to $0.0029 per share and to modify the
required criteria such that a Member
would now qualify for such tier by
achieving: (1) an ADV that is equal to or
greater than 0.50% of the TCV and a
Remove ADAV that is equal to or greater
than 0.30% of the TCV; or (2) an ADV
that is equal to or greater than 1.00% of
the TCV.35 Thus, the proposed change
to the required criteria would increase
the Remove ADV threshold by 0.05%
(i.e., from 0.25% to 0.30%) of the TCV
in the first of the existing alternative
criteria and keep the second of the
existing alternative criteria intact with
no changes. The proposed change to
increase the Remove ADV threshold in
the first of such alternative criteria is
designed to encourage Members to
maintain or increase their order flow,
including in the form of orders that
remove liquidity, to the Exchange in
order to qualify for the discounted fee
for executions of Removed Volume
under such tier. While the Exchange’s
overall pricing philosophy generally
encourages adding liquidity over
removing liquidity, the Exchange
believes that providing criteria under
certain tiers that are based on different
types of volume that Members may
choose to achieve, such as the existing
criteria that includes a Remove ADV
threshold, contributes to a more robust
and well-balanced market ecosystem on
the Exchange to the benefit of all
Members. The reason the Exchange is
proposing to reduce the fee charged for
executions of Removed Volume under
such tier by $0.00005 per share, which
the Exchange believes represents a
modest reduction and remains
commensurate with the proposed new
required criteria, is because the
Exchange is increasing the Remove ADV
threshold in the alternative criteria, as
described above, and the Exchange is
also proposing to adopt a second
Liquidity Removal Tier under which a
qualifying Member may still qualify for
a discounted fee of $0.00295 per share
for executions of Removed Volume by
achieving a lower volume threshold, as
further described below.
The Exchange proposes to adopt a
new Liquidity Removal Tier 2 under
which the Exchange would charge a
discounted fee of $0.00295 per share for
executions of Remove Volume for
Members that qualify for such tier by
achieving an ADV that is equal to or
33 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.
34 As set forth on the Fee Schedule, ‘‘Remove
ADV’’ means ADV with respect to orders that
remove liquidity.
35 The proposed pricing for Liquidity Removal
Tier 1 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Removed
volume from MEMX Book, Liquidity Removal Tier
1’’ with a Fee Code of ‘‘R1’’ to be provided by the
Exchange on the monthly invoices provided to
Members.
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Federal Register / Vol. 88, No. 45 / Wednesday, March 8, 2023 / Notices
greater than 0.25% of the TCV.36 The
Exchange proposes to charge Members
that qualify for the proposed new
Liquidity Removal Tier 2 a fee of 0.28%
of the total dollar volume of the
transaction for executions of orders in
securities priced below $1.00 per share
that remove liquidity from the
Exchange, which is the current base fee
for such executions as well as the same
fee that is currently applicable to such
executions under the existing Liquidity
Removal Tier 1. The proposed new
Liquidity Removal Tier 2 is designed to
encourage Members to maintain or
increase their order flow to the
Exchange in order to qualify for the
proposed discounted fee for executions
of Removed Volume, which, in turn,
would encourage the submission of
additional Removed Volume, thereby
contributing to a deeper and more
robust and well-balanced market
ecosystem on the Exchange to the
benefit of all Members and market
participants.
Sub-Dollar Rebate Tier
lotter on DSK11XQN23PROD with NOTICES1
The Exchange currently provides a
base rebate of 0.075% of the total dollar
value of the transaction for executions
of orders in securities priced below
$1.00 per share that add displayed
liquidity to the Exchange (such orders,
‘‘Added Displayed Sub-Dollar
Volume’’). The Exchange also currently
offers the Sub-Dollar Rebate Tier under
which the Exchange provides 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: (1) an ADAV
that is equal to or greater than 0.15% of
the TCV; or (2) a Sub-Dollar ADAV 37
that is equal to or greater than 5,000,000
shares. Now, the Exchange proposes to
modify the required criteria under the
Sub-Dollar Rebate Tier such that a
Member would now qualify for such tier
by achieving a Sub-Dollar ADAV that is
equal to or greater than 5,000,000
shares. Thus, such proposed change
would eliminate the first of the two
existing alternative criteria and keep the
second of the two existing alternative
criteria intact with no changes. The
Exchange is not proposing to modify the
pricing associated with the Sub-Dollar
36 The proposed pricing for new Liquidity
Removal Tier 2 is referred to by the Exchange on
the Fee Schedule under the new description
‘‘Removed volume from MEMX Book, Liquidity
Removal Tier 1’’ with a Fee Code of ‘‘R2’’ to be
provided by the Exchange on the monthly invoices
provided to Members.
37 As set forth on the Fee Schedule, the term
‘‘Sub-Dollar ADAV’’ means ADAV with respect to
orders in securities priced below $1.00 per share.
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Rebate Tier, but the Exchange believes
the enhanced rebate for executions of
Added Displayed Sub-Dollar Volume
provided under the Sub-Dollar Rebate
Tier remains commensurate with the
required criteria as modified.
Midpoint Peg IOC/FOK Orders
As noted above, the Exchange
currently charges a standard fee of
$0.0030 per share for executions of
Removed Volume. The Exchange also
currently charges a discounted fee of
$0.0027 per share for executions of
Midpoint Peg Orders in securities
priced at or above $1.00 per share with
a TIF instruction of IOC or FOK that
execute at the midpoint of the NBBO
and remove liquidity from the Exchange
upon entry (i.e., Midpoint Peg IOC/FOK
Orders).38 The Exchange adopted this
special pricing for executions of
Midpoint Peg IOC/FOK Orders in
September 2022 for the purpose of
incentivizing the submission of such
orders and, in turn, attracting additional
contra-side orders designed to execute
at the midpoint to be posted on the
Exchange, thereby increasing execution
opportunities at the midpoint on the
Exchange.39
The Exchange now proposes to
eliminate this special pricing for
executions of Midpoint Peg IOC/FOK
Orders. Therefore, as proposed, such
executions would be treated the same as
other executions of Removed Volume,
as they were before the adoption of
special pricing in September 2022, and
thus would either be subject to the base
fee of $0.0030 per share or a discounted
fee under the Liquidity Removal Tiers.
The Exchange notes that the Fee Code
‘‘Rm’’ associated with executions of
Midpoint Peg IOC/FOK Orders would
also be deleted (and such executions
would receive the otherwise applicable
Fee Code for Removed Volume), as such
executions no longer receive special
pricing, and therefore, the Exchange
does not believe it is appropriate to
designate such executions with a
different Fee Code. The purpose of
eliminating the special pricing for
executions of Midpoint Peg IOC/FOK
38 The pricing for executions of Midpoint Peg
IOC/FOK Orders is currently referred to by the
Exchange on the Fee Schedule under the
description ‘‘Removed volume from MEMX Book,
Midpoint Peg (IOC/FOK)’’ and such orders receive
a Fee Code of ‘‘Rm’’ assigned by the Exchange. The
Exchange notes that it proposes to delete this
description from the Fee Schedule in connection
with the elimination of special pricing for such
orders, as further described below.
39 See Securities Exchange Act Release No. 95688
(September 7, 2022), 87 FR 56132 (September 13,
2022) (SR–MEMX–2022–23) (notice of filing and
immediate effectiveness of fee changes adopted by
the Exchange, including the discounted fee for
executions of Midpoint Peg IOC/FOK Orders).
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Orders is for business and competitive
reasons, as the Exchange believes that
subjecting such orders to the base fee or
otherwise applicable fee for such
executions would generate additional
revenue to offset some of the costs
associated with the Exchange’s current
transaction pricing structure, which
provides various rebates for liquidityadding orders, and the Exchange’s
operations generally, in a manner that is
still consistent with the Exchange’s
overall pricing philosophy of
encouraging added and/or displayed
liquidity. The Exchange notes that it is
not required to maintain such
discounted fee (or any special pricing)
for executions of Midpoint Peg IOC/
FOK Orders, and the Exchange would
rather redirect the associated resources
and funding into other programs and
tiers intended to incentivize increased
order flow or enhance market quality.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,40
in general, and with Sections 6(b)(4) and
6(b)(5) of the Act,41 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
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.’’ 42
The Exchange believes that the evershifting market share among the
40 15
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
42 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499
(June 29, 2005).
41 15
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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
and generate additional revenue with
respect to its transaction pricing and
incentivize market participants to direct
additional order flow 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 believes that the
proposed changes to reduce the base
rebates provided for executions of
Added Displayed Volume and Added
Displayed Retail 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
liquidity, and the proposed new base
rebates for executions of Added
Displayed Volume and Added
Displayed Retail Volume remain in line
or higher than, and competitive with,
the base rebates provided by other
exchanges in each case for executions of
similar orders.43 The Exchange also
believes the proposed base rebates for
executions of Added Displayed Volume
and Added Displayed Retail Volume are
equitable and not unfairly
discriminatory, as such base rebates will
apply equally to all Members.
Similarly, the Exchange believes that
the proposed changes to reduce the base
rebates provided for executions of
Added Midpoint Volume, Added NonMidpoint Hidden Volume, and Added
Price-Improved 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
liquidity and the proposed new base
rebates for executions of Added
43 See
supra notes 12 and 14.
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16:48 Mar 07, 2023
Midpoint Volume and Added NonMidpoint Hidden Volume remain in
line and competitive with the base
rebates provided by other exchanges in
each case for executions of similar
orders.44 Additionally, as noted above,
and the Exchange believes that
providing the same base rebate for
executions of Added Price-Improved
Volume as for executions of Added
Midpoint Volume and Added NonMidpoint Hidden Volume is reasonable
and appropriate because all of these
orders similarly add liquidity to the
Exchange, are executed at prices that are
not displayed on the Exchange’s order
book, and are currently subject to the
same base rebate and pricing structure
today. The Exchange also believes the
proposed base rebates for executions of
Added Midpoint Volume, Added NonMidpoint Hidden Volume, and Added
Price-Improved Volume are equitable
and not unfairly discriminatory, as such
base rebates will apply equally to all
Members.
The Exchange notes that volumebased incentives and discounts (such as
tiers) 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 each of the
Liquidity Provision Tiers 1–5, NBBO
Setter/Joiner Tier 1, Non-Display Add
Tiers 2–3, Liquidity Removal Tier 1, and
the Sub-Dollar Rebate Tier, each as
modified by the changes proposed
herein, as well as the proposed new
Liquidity Removal Tier 2, 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 order flow,
including in the various forms of
liquidity-adding and liquidity-removing
volume under the required criteria, as
applicable, to the Exchange, which the
Exchange believes would promote price
discovery, enhance liquidity and market
quality, and contribute to a more robust
44 See
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14433
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 rebates for executions of
Added Displayed Volume, Added NonDisplayed Volume, and Added
Displayed Sub-Dollar Volume, as well
as the discounted fee for executions of
Removed 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.
With respect to the proposed change
to eliminate Liquidity Provision Tier 6,
the Exchange believes such change is
reasonable because, as noted above, it
would enable the Exchange to redirect
the associated resources and funding
into other programs and tiers intended
to incentivize increased order flow or
enhance market quality, and the
Exchange is not required to maintain
such tier or provide Members any
opportunities to receive additive
rebates. The Exchange believes the
proposal to eliminate such tier is also
equitable and not unfairly
discriminatory because it would apply
equally to all Members, in that the
incentive would no longer be available
for any Member.
Similarly, the Exchange also believes
the proposed change to eliminate the
special pricing for executions of
Midpoint Peg IOC/FOK Orders is
reasonable because, as noted above, the
Exchange believes that subjecting such
orders to the base fee or otherwise
applicable fee for such executions may
generate additional revenue to offset
some of the costs associated with the
Exchange’s current transaction pricing
structure, and the Exchange’s operations
generally, in a manner that is still
consistent with the Exchange’s overall
pricing philosophy of encouraging
added and/or displayed liquidity, the
Exchange is not required to maintain
such discounted fee (or any special
pricing) for executions of Midpoint Peg
IOC/FOK Orders, and the Exchange
would rather redirect the associated
resources and funding into other
programs and tiers intended to
incentivize increased order flow or
enhance market quality. The Exchange
believes the proposal to eliminate such
special pricing is also equitable and not
unfairly discriminatory because it
would apply equally to all Members, in
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that the special pricing 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 45 in that
it provides for the equitable allocation
of reasonable dues, fees and other
charges among its Members and other
persons using its facilities and is not
designed to unfairly discriminate
between customers, issuers, brokers, or
dealers. As described more fully below
in the Exchange’s statement regarding
the burden on competition, the
Exchange believes that its transaction
pricing is subject to significant
competitive forces, and that the
proposed fees and rebates described
herein are appropriate to address such
forces.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposal will result in any burden
on competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. Instead, as
discussed above, the proposal is
intended to decrease the Exchange’s
expenditures and generate additional
revenue with respect to its transaction
pricing and incentivize market
participants to direct additional order
flow 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. 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.’’ 46
Intramarket Competition
As discussed above, the Exchange
believes that the proposal would
decrease the Exchange’s expenditures
and generate additional revenue with
respect to its transaction pricing in a
manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added and/or displayed
liquidity and would incentivize market
participants to direct additional order
flow to the Exchange through volume45 15
U.S.C. 78f(b)(4) and (5).
supra note 42.
46 See
VerDate Sep<11>2014
16:48 Mar 07, 2023
Jkt 259001
based tiers, thereby enhancing liquidity
and market quality on the Exchange to
the benefit of all Members, as well as
enhancing the attractiveness of the
Exchange as a trading venue, which the
Exchange believes, in turn, would
continue to encourage market
participants to direct additional order
flow to the Exchange. Greater liquidity
benefits all Members by providing more
trading opportunities and encourages
Members to send additional orders to
the Exchange, thereby contributing to
robust levels of liquidity, which benefits
all market participants.
The Exchange does not believe that
the proposed changes to reduce the base
rebates for executions of Added
Displayed Volume, Add Displayed
Retail Volume, Added Midpoint
Volume, Added Non-Midpoint Hidden
Volume, and Added Price-Improved
Volume would impose any burden on
intramarket competition because such
changes will apply to all Members
uniformly, in that the proposed base
rebates for such executions would be
the base rebates applicable to all
Members, and the opportunity to qualify
for enhanced rebates or discounted fees,
as applicable, is available to all
Members. The opportunity to qualify for
each of the Liquidity Provision Tiers 1–
5, NBBO Setter/Joiner Tier 1, NonDisplay Add Tiers 2–3, Liquidity
Removal Tier 1, and the Sub-Dollar
Rebate Tier, each as modified by the
changes proposed herein, as well as the
proposed new Liquidity Removal Tier 2,
and thus receive the corresponding
enhanced rebates or discounted fees, as
applicable, would be available to all
Members that meet the associated
volume requirements in any month. As
described above, the Exchange believes
that the required criteria under each
such tier are commensurate with the
corresponding rebate under such tier
and are reasonably related to the
enhanced liquidity and market quality
that such tier is designed to promote.
Additionally, Exchange does not believe
that the proposed change to eliminate
special pricing for executions of
Midpoint Peg IOC/FOK Orders would
impose any burden on intramarket
competition because such change will
apply to all Members uniformly, in that
the special pricing would no longer be
available for any Member. 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
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
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
15% 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 and market participants
can readily choose to send their orders
to other exchange and off-exchange
venues if they deem fee levels at those
other venues to be more favorable. As
described above, the proposed changes
represent a competitive proposal
through which the Exchange is seeking
to decrease the Exchange’s expenditures
and generate additional revenue with
respect to its transaction pricing and
incentivize market participants to direct
additional order flow to the Exchange
through volume-based tiers, which have
been widely adopted by exchanges,
including the Exchange. Accordingly,
the Exchange believes the proposal
would not burden, but rather promote,
intermarket competition by enabling it
to better compete with other exchanges
that offer similar pricing structures and
incentives to market participants.
Additionally, the Commission has
repeatedly expressed its preference for
competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 47 The
47 See
E:\FR\FM\08MRN1.SGM
supra note 42.
08MRN1
Federal Register / Vol. 88, No. 45 / Wednesday, March 8, 2023 / Notices
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’. . . .’’.48 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 49 and Rule
19b–4(f)(2) 50 thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
lotter on DSK11XQN23PROD with NOTICES1
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:
48 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)).
49 15 U.S.C. 78s(b)(3)(A)(ii).
50 17 CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
16:48 Mar 07, 2023
Jkt 259001
14435
Electronic Comments
SOCIAL SECURITY ADMINISTRATION
• 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–2023–05 on the subject line.
[Docket No. SSA–2022–0023]
Paper Comments
records.
• 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–2023–05. 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–2023–05 and
should be submitted on or before March
29,2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.51
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–04688 Filed 3–7–23; 8:45 am]
BILLING CODE 8011–01–P
51 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00111
Fmt 4703
Sfmt 4703
Privacy Act of 1974; System of
Records
AGENCY:
Social Security Administration
(SSA).
ACTION:
Notice of a modified system of
In accordance with the
Privacy Act of 1974, we are issuing
public notice of our intent to modify an
existing system of records entitled,
Repository of Electronic Authentication
Data Master File (60–0373). This notice
publishes details of the system as set
forth below under the caption,
SUPPLEMENTARY INFORMATION.
DATES: The system of records notice
(SORN) is applicable upon its
publication in today’s Federal Register,
with the exception of the new routine
uses, which are effective April 7, 2023.
We invite public comment on the
routine uses or other aspects of this
SORN. In accordance with the Privacy
Act of 1974, we are providing the public
a 30-day period in which to submit
comments. Therefore, please submit any
comments by April 7, 2023.
ADDRESSES: The public, Office of
Management and Budget (OMB), and
Congress may comment on this
publication by writing to the Executive
Director, Office of Privacy and
Disclosure, Office of the General
Counsel, SSA, Room G–401 West High
Rise, 6401 Security Boulevard,
Baltimore, Maryland 21235–6401, or
through the Federal e-Rulemaking Portal
at https://www.regulations.gov. Please
reference docket number SSA–2022–
0023. All comments we receive will be
available for public inspection at the
above address and we will post them to
https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Melissa Bellitto, Government
Information Specialist, Privacy
Implementation Division, Office of
Privacy and Disclosure, Office of the
General Counsel, SSA, Room G–401
West High Rise, 6401 Security
Boulevard, Baltimore, Maryland 21235–
6401, telephone: (410) 966–5855, email:
Melissa.M.Bellitto@ssa.gov.
SUPPLEMENTARY INFORMATION: We are
modifying this SORN to accurately
reflect the information we collect and to
further support advancing our objectives
in continuing and expanding our digital
identity processes. We are modifying
the system of records name from
‘‘Repository of Electronic
Authentication Data Master File’’ to
‘‘Digital Identity File Record System.’’
SUMMARY:
E:\FR\FM\08MRN1.SGM
08MRN1
]]>Agencies
[Federal Register Volume 88, Number 45 (Wednesday, March 8, 2023)]
[Notices]
[Pages 14427-14435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04688]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97028; File No. SR-MEMX-2023-05]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule
March 2, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 28, 2023, 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 March 1, 2023. The text of the proposed rule change
is provided in Exhibit 5.
---------------------------------------------------------------------------
\3\ See Exchange Rule 1.5(p).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Fee
Schedule to: (i) reduce the base rebate for executions of orders in
securities priced at or above $1.00 per share that add displayed
liquidity to the Exchange (such orders, ``Added Displayed Volume'');
(ii) reduce the base rebate for executions of Retail Orders \4\ in
securities priced at or above $1.00 per share that add displayed
liquidity to the Exchange (such orders, ``Added Displayed Retail
Volume''); (iii) reduce the base 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''); (iv) modify the Liquidity Provision Tiers; (v) modify the
required criteria under NBBO Setter/Joiner Tier 1; (vi) modify the Non-
Display Add Tiers; (vii) modify Liquidity Removal Tier 1 and adopt a
new Liquidity Removal Tier 2; (viii) modify the required criteria under
the Sub-Dollar Rebate Tier; and (ix) eliminate the special pricing for
executions of Pegged Orders \5\ with a Midpoint Peg \6\ instruction
(such orders, ``Midpoint Peg Orders'') and a time-in-force (``TIF'')
instruction of IOC \7\ or FOK \8\ that execute at the midpoint of the
national best bid and offer (``NBBO'') and remove liquidity from the
Exchange upon entry (such orders, ``Midpoint Peg IOC/FOK Orders'').
---------------------------------------------------------------------------
\4\ A ``Retail Order'' means an agency or riskless principal
order that meets the criteria of FINRA Rule 5320.03 that originates
from a natural person and is submitted to the Exchange by a Retail
Member Organization (``RMO''), provided that no change is made to
the terms of the order with respect to price or side of market and
the order does not originate from a trading algorithm or any other
computerized methodology. See Exchange Rule 11.21(a).
\5\ See Exchange Rule 11.6(h).
\6\ See Exchange Rule 11.6(h)(2).
\7\ See Exchange Rule 11.6(o)(1).
\8\ See Exchange Rule 11.6(o)(3).
---------------------------------------------------------------------------
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues, to
which market participants may direct their order flow. Based on
publicly
[[Page 14428]]
available information, no single registered equities exchange currently
has more than approximately 15% of the total market share of executed
volume of equities trading.\9\ Thus, in such a low-concentrated and
highly competitive market, no single equities exchange possesses
significant pricing power in the execution of order flow, and the
Exchange currently represents approximately 3% of the overall market
share.\10\ 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.
---------------------------------------------------------------------------
\9\ Market share percentage calculated as of February 28, 2023.
The Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
\10\ Id.
---------------------------------------------------------------------------
Reduce Base Rebate for Added Displayed Volume
Currently, the Exchange provides a base rebate of $0.0020 per share
for executions of Added Displayed Volume. The Exchange now proposes to
reduce the base rebate for executions of Added Displayed Volume to
$0.0018 per share.\11\ The purpose of reducing the base rebate for
executions of Added Displayed Volume is for business and competitive
reasons, as the Exchange believes that reducing such rebate as proposed
would decrease the Exchange's expenditures with respect to its
transaction pricing in a manner that is still consistent with the
Exchange's overall pricing philosophy of encouraging added displayed
liquidity. The Exchange notes that despite the reduction proposed
herein, the proposed base rebate for executions of Added Displayed
Volume remains in line with, or higher than, the base rebates provided
by other exchanges for executions of orders in securities priced at or
above $1.00 per share that add displayed liquidity.\12\
---------------------------------------------------------------------------
\11\ The proposed base rebate for executions of Added Displayed
Volume is referred to by the Exchange on the Fee Schedule under the
existing description ``Added displayed volume'' with a Fee Code of
``B'', ``D'' or ``J'', as applicable, on execution reports.
\12\ See, e.g., the Nasdaq Stock Market LLC (``Nasdaq'') Price
List--Trading Connectivity (available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a base rebate of
$0.0018 per share for executions of orders in Tape A and Tape B
securities priced at or above $1.00 per share that add displayed
liquidity and a base rebate of $0.0013 per share for executions of
orders in Tape C securities priced at or above $1.00 per share that
add displayed liquidity; the Cboe BZX Exchange, Inc. (``Cboe BZX'')
equities trading fee schedule on its public website (available at
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/),
which reflects a base rebate of $0.0016 per share for executions of
orders in securities priced at or above $1.00 per share that add
displayed liquidity.
---------------------------------------------------------------------------
Reduce Base Rebate for Added Displayed Retail Volume
Currently, the Exchange provides a base rebate of $0.0035 per share
for executions of Added Displayed Retail Volume. The Exchange now
proposes to reduce the base rebate for executions of Added Displayed
Retail Volume to $0.0034 per share.\13\ The purpose of reducing the
base rebate for executions of Added Displayed Retail Volume is for
business and competitive reasons, as the Exchange believes that
reducing such rebate as proposed would decrease the Exchange's
expenditures with respect to its transaction pricing in a manner that
is still consistent with the Exchange's overall pricing philosophy of
encouraging added displayed liquidity. The Exchange notes that despite
the reduction proposed herein, the proposed base rebate for executions
of Added Displayed Retail Volume remains higher than, and competitive
with, the base rebates provided by other exchanges for executions of
attested retail orders in securities priced at or above $1.00 per share
that add displayed liquidity.\14\
---------------------------------------------------------------------------
\13\ The proposed base rebate for executions of Added Displayed
Retail Volume is referred to by the Exchange on the Fee Schedule
under the existing description ``Added displayed volume, Retail
Order'' with a Fee Code of ``Br'', ``Dr'' or ``Jr'', as applicable,
on execution reports.
\14\ See, e.g., the Cboe BZX equities trading fee schedule on
its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a base rebate of
$0.0032 per share for executions of attested retail orders in
securities priced at or above $1.00 per share that add displayed
liquidity; the Cboe EDGX Exchange, Inc. (``Cboe EDGX'') equities
trading fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/), which
reflects a base rebate of $0.0032 per share for executions of
attested retail orders in securities priced at or above $1.00 per
share that add displayed liquidity.
---------------------------------------------------------------------------
Reduce Base Rebates for Added Non-Displayed Volume
The Exchange is proposing to uniformly reduce the base rebates
provided for executions of Added Non-Displayed Volume, which is
comprised of the three following types of orders: (i) Midpoint Peg
Orders in securities priced at or above $1.00 per share that add
liquidity to the Exchange (such orders, ``Added Midpoint Volume'');
(ii) orders, which are not orders subject to Display-Price Sliding that
receive price improvement when executed or Midpoint Peg Orders, in
securities priced at or above $1.00 per share that add non-displayed
liquidity to the Exchange (such orders, ``Added Non-Midpoint Hidden
Volume''); and (iii) orders in securities priced at or above $1.00 per
share subject to Display-Price Sliding that add liquidity to the
Exchange and receive price improvement when executed (such orders,
``Added Price-Improved Volume'').
Currently, the Exchange provides base rebates of $0.0015 per share
for executions of Added Midpoint Volume, Added Non-Midpoint Hidden
Volume, and Added Price-Improved Volume. The Exchange now proposes to
reduce each of these base rebates to $0.0010 per share.\15\ The purpose
of uniformly reducing the standard rebates for executions of Added
Midpoint Volume, Add Non-Midpoint Hidden Volume, and Added Price-
Improved Volume is for business and competitive reasons, as the
Exchange believes reducing such rebates as proposed would decrease the
Exchange's expenditures with respect to its transaction pricing in a
manner that is still consistent with the Exchange's overall pricing
philosophy of encouraging added displayed liquidity. The Exchange notes
that the proposed base rebate for executions of Added Midpoint Volume
remains in line and competitive with the base rebates provided by at
least one other exchange for executions of similar orders.\16\ The
[[Page 14429]]
Exchange also notes that the proposed base rebate for executions of
Added Non-Midpoint Hidden Volume remains in line and competitive with
the base rebate provided by at least one other exchange for executions
of similar orders.\17\ Additionally, the Exchange believes it is
appropriate to also provide the same base rebate for executions of
Added Price-Improved Volume as for executions of Added Midpoint Volume
and Added Non-Midpoint Hidden Volume, as all of these orders similarly
add liquidity to the Exchange and are executed at prices that are not
displayed on the Exchange's order book, and the Exchange notes that all
of these orders are also currently subject to the same base rebate and
pricing structure today.
---------------------------------------------------------------------------
\15\ The proposed base rebate for executions of Added Midpoint
Volume is referred to by the Exchange on the Fee Schedule under the
existing description ``Added non-displayed volume, Midpoint Peg''
and such orders will continue to receive a Fee Code of ``M'' on
execution reports. The proposed base rebate for executions of Added
Non-Midpoint Hidden Volume is referred to by the Exchange on the Fee
Schedule under the existing description ``Added non-displayed
volume'' and such orders will continue to receive a Fee Code of
``H'' on execution reports. The proposed base rebate for executions
of Added Price-Improved Volume is referred to by the Exchange on the
Fee Schedule under the existing description ``Added volume, order
subject to Display-Price Sliding that receives price improvement
when executed'' and such orders will continue to receive a Fee Code
of ``P'' on execution reports.
\16\ See, e.g., the Nasdaq Price List--Trading Connectivity
(available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a base 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 base rebate of $0.0010 per share for
executions of orders in Tape C securities priced at or above $1.00
per share that add non-displayed midpoint liquidity.
\17\ See, e.g., the Cboe BZX 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.
---------------------------------------------------------------------------
Liquidity Provision Tiers
The Exchange currently provides a base rebate of $0.0020 per share
for executions of Added Displayed Volume, which the Exchange is
proposing to reduce to $0.0018 per share, as described above. The
Exchange also currently offers Liquidity Provision Tiers 1-6 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 reducing the rebates for executions of
Added Displayed Volume and modifying the required criteria under such
tiers and eliminating Liquidity Provision Tier 6, as further described
below.
With respect to Liquidity Provision Tier 1, the Exchange currently
provides 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 \18\ that is equal to or greater than
0.40% of the TCV; \19\ or (2) an ADAV that is equal to or greater than
0.30% of the TCV and a Step-Up ADAV \20\ from November 2022 that is
equal to or greater than 0.10% of the TCV. The Exchange now proposes to
reduce the rebate for executions of Added Displayed Volume under
Liquidity Provision Tier 1 to $0.00335 per share and to modify the
required criteria such that a Member would now qualify for such tier by
achieving an ADAV (excluding Retail Orders) that is equal to or greater
than 0.45% of the TCV.\21\ The Exchange is not proposing to change the
rebate for executions of orders in securities priced below $1.00 per
share under such tier.
---------------------------------------------------------------------------
\18\ 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.
\19\ 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.
\20\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means
ADAV in the relevant baseline month subtracted from current ADAV.
\21\ The proposed pricing for Liquidity Provision Tier 1 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 1''
with a Fee Code of ``B1'', ``D1'' or ``J1'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members. The Exchange notes that because the determination of
whether a Member qualifies for a certain pricing tier for a
particular month will not be made until after the month-end, the
Exchange will provide the Fee Codes otherwise applicable to such
transactions on the execution reports provided to Members during the
month and will only designate the Fee Codes applicable to the
achieved pricing tier on the monthly invoices, which are provided
after such determination has been made, as the Exchange does for its
tier-based pricing today.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 2, 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) an ADAV that is equal to or greater than 0.25% of the
TCV; and (2) a Non-Displayed ADAV \22\ that is equal to or greater than
5,000,000 shares. The Exchange now proposes to reduce the rebate for
executions of Added Displayed Volume under Liquidity Provision Tier 2
to $0.00325 per share and to modify the required criteria such that a
Member would qualify for such tier by achieving: (1) an ADAV that is
equal to or greater than 0.25% of the TCV; and (2) a Non-Displayed ADAV
that is equal to or greater than 4,000,000 shares.\23\ Thus, such
proposed change would lower the Non-Displayed ADAV threshold in the
second of the two existing alternative criteria. The Exchange is not
proposing to change the rebate for executions of orders in securities
priced below $1.00 per share under such tier.
---------------------------------------------------------------------------
\22\ As set forth on the Fee Schedule, ``Non-Displayed ADAV''
means ADAV with respect to non-displayed orders (including orders
subject to Display-Price Sliding that receive price improvement when
executed and Midpoint Peg orders).
\23\ The proposed pricing for Liquidity Provision Tier 2 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 2''
with a Fee Code of ``B2'', ``D2'' or ``J2'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
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With respect to Liquidity Provision Tier 3, the Exchange currently
provides an enhanced rebate of $0.0032 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 0.20% of the
TCV; or (2) an ADAV that is equal to or greater than 15,000,000 shares
and a Step-Up ADAV from October 2022 that is equal to or greater than
0.10% of the TCV. The Exchange now proposes to reduce the rebate for
executions of Added Displayed Volume under Liquidity Provision Tier 3
to $0.0031 per share and to modify the required criteria such that a
Member would now qualify for such tier by achieving an ADAV that is
equal to or greater than 0.20% of the TCV.\24\ Thus, such proposed
change would keep the first of the two existing alternative criteria
intact with no changes and eliminate the second of the two existing
alternative criteria. The Exchange is not proposing to change the
rebate for executions of orders in securities priced below $1.00 per
share under such tier.
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\24\ The proposed 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.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 4, the Exchange currently
provides 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.
The Exchange now proposes to reduce the rebate for executions of Added
Displayed Volume under Liquidity Provision Tier 4 to $0.0029 per share
and to modify the required criteria such that a Member would now
qualify for such tier by achieving an ADAV that is equal to or greater
than 0.15% of the TCV.\25\ Thus, such proposed change would keep the
first of the two existing alternative criteria intact with no changes
and eliminate the second of the two existing alternative criteria. The
Exchange is not proposing to change the rebate for executions of orders
in
[[Page 14430]]
securities priced below $1.00 per share under such tier.
---------------------------------------------------------------------------
\25\ The proposed pricing for Liquidity Provision Tier 4 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 4''
with a Fee Code of ``B4'', ``D4'' or ``J4'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 5, the Exchange currently
provides an enhanced rebate of $0.0028 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 0.10% of the
TCV; or (2) a Displayed ADAV (excluding Retail Orders) that is equal to
or greater than 750,000 shares and a Step-Up Displayed ADAV \26\
(excluding Retail Orders) from October 2022 that is equal to or greater
than 30% of the Member's October 2022 Displayed ADAV (excluding Retail
Orders). The Exchange now proposes to reduce the rebate for executions
of Added Displayed Volume under Liquidity Provision Tier 5 to $0.0027
per share and to modify the required criteria such that a Member would
now qualify for such tier by achieving: (1) an ADAV that is equal to or
greater than 0.075% of the TCV; or (2) a Displayed ADAV (excluding
Retail Orders) that is equal to or greater than 750,000 shares and a
Step-Up Displayed ADAV (excluding Retail Orders) from October 2022 that
is equal to or greater than 30% of the Member's October 2022 Displayed
ADAV (excluding Retail Orders).\27\ Thus, such proposed change would
lower the overall ADAV threshold in the first of the two existing
alternative criteria and keep the second of the two existing
alternative criteria intact with no changes. The Exchange is not
proposing to change the rebate for executions of orders in securities
priced below $1.00 per share under such tier.
---------------------------------------------------------------------------
\26\ As set forth on the Fee Schedule, ``Step-Up Displayed
ADAV'' means Displayed ADAV in the relevant baseline month
subtracted from current Displayed ADAV.
\27\ The proposed 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.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 6, the Exchange currently
provides an enhanced rebate of $0.0025 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 Midpoint ADAV \28\ that is equal to or greater than
1,000,000 shares. The Exchange now proposes to eliminate Liquidity
Provision Tier 6, as the Exchange no longer wishes to, nor is it
required to, maintain such tier, and the Exchange would rather redirect
the associated resources and funding into other programs and tiers
intended to incentivize increased order flow or enhance market quality.
---------------------------------------------------------------------------
\28\ As set forth on the Fee Schedule, ``Midpoint ADAV'' means
ADAV with respect to Midpoint Peg orders.
---------------------------------------------------------------------------
The purpose of reducing the rebates for executions of Added
Displayed Volume under Liquidity Provision Tiers 1-5 as proposed, which
the Exchange believes in each case represents a modest reduction and
remains commensurate with the required criteria as modified, and
eliminating Liquidity Provision Tier 6 is for business and competitive
reasons, as the Exchange believes that such rebate reductions and tier
elimination 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 liquidity.
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 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
1-5 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.
NBBO Setter/Joiner Tier 1
The Exchange currently offers NBBO Setter/Joiner Tiers 1-2 under
which a Member may receive an additive rebate for a qualifying Member's
executions of Added Displayed Volume (other than Retail Orders) that
establish the NBBO (such orders, ``Setter Volume'') and executions of
Added Displayed Volume (other than Retail Orders) that establish a new
best bid or offer on the Exchange that matches the NBBO first
established on an away market (such orders, ``Joiner Volume''). With
respect to NBBO Setter/Joiner Tier 1, the Exchange currently provides
an additive rebate of $0.0004 per share for executions of Setter Volume
and Joiner Volume for Members that qualify for such tier by achieving
an ADAV with respect to orders with Fee Code B \29\ that is equal to or
greater than 0.10% of the TCV. The Exchange now proposes to modify the
required criteria such that a Member would now qualify for such tier by
achieving: (1) an ADAV with respect to orders with Fee Code B that is
equal to or greater than 0.10% of the TCV; or (2) an ADAV with respect
to orders with Fee Code B that is equal to or greater than 10,000,000
shares.\30\ Thus, such proposed change would keep the existing criteria
based on an ADAV threshold that is expressed as a percentage of TCV
intact with no changes and add a new alternative criteria based on an
ADAV threshold that is expressed as a number of shares. The Exchange
notes that, as the proposed change to the required criteria under NBBO
Setter/Joiner Tier 1 merely provides an alternative criteria and does
not change the existing criteria, the Exchange believes that such
change would make the tier easier for Members to achieve, and, in turn,
while the Exchange has no way of predicting with certainty how the
proposed new criteria will impact Member activity, the Exchange expects
that more Members will qualify, or strive to qualify, for such tier
than currently do, resulting in the submission of additional order flow
to the Exchange. The Exchange believes that the additive rebate for
executions of Setter Volume and Joiner Volume provided under NBBO
Setter/Joiner Tier 1, which the Exchange is not proposing to change
with this proposal, remains commensurate with the required criteria
under such tier, as modified, and is reasonably related to the market
quality benefits that such tier is designed to achieve.
---------------------------------------------------------------------------
\29\ The Exchange notes that orders with Fee Code B include
orders, other than Retail Orders, that establish the NBBO.
\30\ The pricing for NBBO Setter/Joiner Tier 1 is referred to by
the Exchange on the Fee Schedule under the existing 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.
---------------------------------------------------------------------------
Non-Display Add Tiers
The Exchange currently offers Non-Display Add Tiers 1-3 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
[[Page 14431]]
Add Tiers by modifying the required criteria under Non-Display Add Tier
2 and reducing the rebate for executions of Added Non-Displayed Volume
and modifying the required criteria under Non-Display Add Tier 3.
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
2,000,000 shares.\31\ 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
1,500,000 shares. Thus, such proposed change would lower the Non-
Displayed ADAV threshold in the required criteria, which the Exchange
believes would make the tier easier for Members to achieve, and, in
turn, while the Exchange has no way of predicting with certainty how
the proposed new criteria will impact Member activity, the Exchange
expects that more Members will qualify, or strive to qualify, for such
tier than currently do, resulting in the submission of additional order
flow to the Exchange. The Exchange is not proposing to change the
rebates provided under this tier.
---------------------------------------------------------------------------
\31\ 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'', ``M2'' or ``P2'', as applicable, to be provided by
the Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------
With respect to Non-Display Add Tier 3, the Exchange currently
provides 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. The Exchange now proposes to reduce the rebate for
executions of Added Non-Displayed Volume under Non-Display Add Tier 3
to $0.0018 per share and to modify the required criteria such that a
Member would now qualify for such tier by achieving a Non-Displayed
ADAV that is equal to or greater than 500,000 shares.\32\ Thus, such
proposed change would lower the Non-Displayed ADAV threshold in the
required criteria, which the Exchange believes would make the tier
easier for Members to achieve, and, in turn, while the Exchange has no
way of predicting with certainty how the proposed new criteria will
impact Member activity, the Exchange expects that more Members will
qualify, or strive to qualify, for such tier than currently do,
resulting in the submission of additional order flow to the Exchange.
---------------------------------------------------------------------------
\32\ The proposed pricing for Non-Display Add Tier 3 is referred
to by the Exchange on the Fee Schedule under the existing
description ``Added non-displayed volume, Non-Display Add Tier 3''
with a Fee Code of ``H3'', ``M3'' or ``P3'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
---------------------------------------------------------------------------
The purpose of reducing the rebate for executions of Added Non-
Displayed Volume under Non-Display Add Tier 3 as proposed, which the
Exchange believes represents a modest reduction and remains
commensurate with the required criteria as modified to include a lower
Non-Displayed ADAV threshold, is for business and competitive reasons,
as the Exchange believes that such rebate reduction 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 liquidity. 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 volume, to the Exchange, thereby contributing to a
deeper and more robust and well-balanced market ecosystem to the
benefit of all Members and market participants.
Liquidity Removal Tiers
The Exchange currently charges a base fee of $0.0030 per share for
executions of orders in securities priced at or above $1.00 per share
that remove liquidity from the Exchange (such orders, ``Removed
Volume''). The Exchange also currently offers Liquidity Removal Tier 1
under which qualifying Members are charged a discounted fee of $0.00295
per share for executions of Removed Volume by achieving (1) an ADV \33\
that is equal to or greater than 0.50% of the TCV and a Remove ADV \34\
that is equal to or greater than 0.25% of the TCV; or (2) an ADV that
is equal to or greater than 1.00% of the TCV. Now, the Exchange
proposes to reduce the fee charged for executions of Removed Volume
under Liquidity Removal Tier 1 to $0.0029 per share and to modify the
required criteria such that a Member would now qualify for such tier by
achieving: (1) an ADV that is equal to or greater than 0.50% of the TCV
and a Remove ADAV that is equal to or greater than 0.30% of the TCV; or
(2) an ADV that is equal to or greater than 1.00% of the TCV.\35\ Thus,
the proposed change to the required criteria would increase the Remove
ADV threshold by 0.05% (i.e., from 0.25% to 0.30%) of the TCV in the
first of the existing alternative criteria and keep the second of the
existing alternative criteria intact with no changes. The proposed
change to increase the Remove ADV threshold in the first of such
alternative criteria is designed to encourage Members to maintain or
increase their order flow, including in the form of orders that remove
liquidity, to the Exchange in order to qualify for the discounted fee
for executions of Removed Volume under such tier. While the Exchange's
overall pricing philosophy generally encourages adding liquidity over
removing liquidity, the Exchange believes that providing criteria under
certain tiers that are based on different types of volume that Members
may choose to achieve, such as the existing criteria that includes a
Remove ADV threshold, contributes to a more robust and well-balanced
market ecosystem on the Exchange to the benefit of all Members. The
reason the Exchange is proposing to reduce the fee charged for
executions of Removed Volume under such tier by $0.00005 per share,
which the Exchange believes represents a modest reduction and remains
commensurate with the proposed new required criteria, is because the
Exchange is increasing the Remove ADV threshold in the alternative
criteria, as described above, and the Exchange is also proposing to
adopt a second Liquidity Removal Tier under which a qualifying Member
may still qualify for a discounted fee of $0.00295 per share for
executions of Removed Volume by achieving a lower volume threshold, as
further described below.
---------------------------------------------------------------------------
\33\ 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.
\34\ As set forth on the Fee Schedule, ``Remove ADV'' means ADV
with respect to orders that remove liquidity.
\35\ The proposed pricing for Liquidity Removal Tier 1 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Removed volume from MEMX Book, Liquidity Removal Tier
1'' with a Fee Code of ``R1'' to be provided by the Exchange on the
monthly invoices provided to Members.
---------------------------------------------------------------------------
The Exchange proposes to adopt a new Liquidity Removal Tier 2 under
which the Exchange would charge a discounted fee of $0.00295 per share
for executions of Remove Volume for Members that qualify for such tier
by achieving an ADV that is equal to or
[[Page 14432]]
greater than 0.25% of the TCV.\36\ The Exchange proposes to charge
Members that qualify for the proposed new Liquidity Removal Tier 2 a
fee of 0.28% of the total dollar volume of the transaction for
executions of orders in securities priced below $1.00 per share that
remove liquidity from the Exchange, which is the current base fee for
such executions as well as the same fee that is currently applicable to
such executions under the existing Liquidity Removal Tier 1. The
proposed new Liquidity Removal Tier 2 is designed to encourage Members
to maintain or increase their order flow to the Exchange in order to
qualify for the proposed discounted fee for executions of Removed
Volume, which, in turn, would encourage the submission of additional
Removed Volume, thereby contributing to a deeper and more robust and
well-balanced market ecosystem on the Exchange to the benefit of all
Members and market participants.
---------------------------------------------------------------------------
\36\ The proposed pricing for new Liquidity Removal Tier 2 is
referred to by the Exchange on the Fee Schedule under the new
description ``Removed volume from MEMX Book, Liquidity Removal Tier
1'' with a Fee Code of ``R2'' to be provided by the Exchange on the
monthly invoices provided to Members.
---------------------------------------------------------------------------
Sub-Dollar Rebate Tier
The Exchange currently provides a base rebate of 0.075% of the
total dollar value of the transaction for executions of orders in
securities priced below $1.00 per share that add displayed liquidity to
the Exchange (such orders, ``Added Displayed Sub-Dollar Volume''). The
Exchange also currently offers the Sub-Dollar Rebate Tier under which
the Exchange provides 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: (1) an ADAV
that is equal to or greater than 0.15% of the TCV; or (2) a Sub-Dollar
ADAV \37\ that is equal to or greater than 5,000,000 shares. Now, the
Exchange proposes to modify the required criteria under the Sub-Dollar
Rebate Tier such that a Member would now qualify for such tier by
achieving a Sub-Dollar ADAV that is equal to or greater than 5,000,000
shares. Thus, such proposed change would eliminate the first of the two
existing alternative criteria and keep the second of the two existing
alternative criteria intact with no changes. The Exchange is not
proposing to modify the pricing associated with the Sub-Dollar Rebate
Tier, but the Exchange believes the enhanced rebate for executions of
Added Displayed Sub-Dollar Volume provided under the Sub-Dollar Rebate
Tier remains commensurate with the required criteria as modified.
---------------------------------------------------------------------------
\37\ As set forth on the Fee Schedule, the term ``Sub-Dollar
ADAV'' means ADAV with respect to orders in securities priced below
$1.00 per share.
---------------------------------------------------------------------------
Midpoint Peg IOC/FOK Orders
As noted above, the Exchange currently charges a standard fee of
$0.0030 per share for executions of Removed Volume. The Exchange also
currently charges a discounted fee of $0.0027 per share for executions
of Midpoint Peg Orders in securities priced at or above $1.00 per share
with a TIF instruction of IOC or FOK that execute at the midpoint of
the NBBO and remove liquidity from the Exchange upon entry (i.e.,
Midpoint Peg IOC/FOK Orders).\38\ The Exchange adopted this special
pricing for executions of Midpoint Peg IOC/FOK Orders in September 2022
for the purpose of incentivizing the submission of such orders and, in
turn, attracting additional contra-side orders designed to execute at
the midpoint to be posted on the Exchange, thereby increasing execution
opportunities at the midpoint on the Exchange.\39\
---------------------------------------------------------------------------
\38\ The pricing for executions of Midpoint Peg IOC/FOK Orders
is currently referred to by the Exchange on the Fee Schedule under
the description ``Removed volume from MEMX Book, Midpoint Peg (IOC/
FOK)'' and such orders receive a Fee Code of ``Rm'' assigned by the
Exchange. The Exchange notes that it proposes to delete this
description from the Fee Schedule in connection with the elimination
of special pricing for such orders, as further described below.
\39\ See Securities Exchange Act Release No. 95688 (September 7,
2022), 87 FR 56132 (September 13, 2022) (SR-MEMX-2022-23) (notice of
filing and immediate effectiveness of fee changes adopted by the
Exchange, including the discounted fee for executions of Midpoint
Peg IOC/FOK Orders).
---------------------------------------------------------------------------
The Exchange now proposes to eliminate this special pricing for
executions of Midpoint Peg IOC/FOK Orders. Therefore, as proposed, such
executions would be treated the same as other executions of Removed
Volume, as they were before the adoption of special pricing in
September 2022, and thus would either be subject to the base fee of
$0.0030 per share or a discounted fee under the Liquidity Removal
Tiers. The Exchange notes that the Fee Code ``Rm'' associated with
executions of Midpoint Peg IOC/FOK Orders would also be deleted (and
such executions would receive the otherwise applicable Fee Code for
Removed Volume), as such executions no longer receive special pricing,
and therefore, the Exchange does not believe it is appropriate to
designate such executions with a different Fee Code. The purpose of
eliminating the special pricing for executions of Midpoint Peg IOC/FOK
Orders is for business and competitive reasons, as the Exchange
believes that subjecting such orders to the base fee or otherwise
applicable fee for such executions would generate additional revenue to
offset some of the costs associated with the Exchange's current
transaction pricing structure, which provides various rebates for
liquidity-adding orders, and the Exchange's operations generally, in a
manner that is still consistent with the Exchange's overall pricing
philosophy of encouraging added and/or displayed liquidity. The
Exchange notes that it is not required to maintain such discounted fee
(or any special pricing) for executions of Midpoint Peg IOC/FOK Orders,
and the Exchange would rather redirect the associated resources and
funding into other programs and tiers intended to incentivize increased
order flow or enhance market quality.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\40\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\41\ 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.
---------------------------------------------------------------------------
\40\ 15 U.S.C. 78f.
\41\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
As discussed above, the Exchange operates in a highly fragmented
and competitive market in which market participants can readily direct
order flow to competing venues if they deem fee levels at a particular
venue to be excessive or incentives to be insufficient, and the
Exchange represents only a small percentage of the overall market. The
Commission and the courts have repeatedly expressed their preference
for competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
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.'' \42\
---------------------------------------------------------------------------
\42\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499
(June 29, 2005).
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
[[Page 14433]]
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 and generate
additional revenue with respect to its transaction pricing and
incentivize market participants to direct additional order flow 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 believes that the proposed changes to reduce the base
rebates provided for executions of Added Displayed Volume and Added
Displayed Retail 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 liquidity, and the proposed new base rebates for
executions of Added Displayed Volume and Added Displayed Retail Volume
remain in line or higher than, and competitive with, the base rebates
provided by other exchanges in each case for executions of similar
orders.\43\ The Exchange also believes the proposed base rebates for
executions of Added Displayed Volume and Added Displayed Retail Volume
are equitable and not unfairly discriminatory, as such base rebates
will apply equally to all Members.
---------------------------------------------------------------------------
\43\ See supra notes 12 and 14.
---------------------------------------------------------------------------
Similarly, the Exchange believes that the proposed changes to
reduce the base rebates provided for executions of Added Midpoint
Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved
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 liquidity and the proposed new base rebates for executions of
Added Midpoint Volume and Added Non-Midpoint Hidden Volume remain in
line and competitive with the base rebates provided by other exchanges
in each case for executions of similar orders.\44\ Additionally, as
noted above, and the Exchange believes that providing the same base
rebate for executions of Added Price-Improved Volume as for executions
of Added Midpoint Volume and Added Non-Midpoint Hidden Volume is
reasonable and appropriate because all of these orders similarly add
liquidity to the Exchange, are executed at prices that are not
displayed on the Exchange's order book, and are currently subject to
the same base rebate and pricing structure today. The Exchange also
believes the proposed base rebates for executions of Added Midpoint
Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved
Volume are equitable and not unfairly discriminatory, as such base
rebates will apply equally to all Members.
---------------------------------------------------------------------------
\44\ See supra notes 16 and 17.
---------------------------------------------------------------------------
The Exchange notes that volume-based incentives and discounts (such
as tiers) 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 each of the Liquidity Provision Tiers 1-5, NBBO
Setter/Joiner Tier 1, Non-Display Add Tiers 2-3, Liquidity Removal Tier
1, and the Sub-Dollar Rebate Tier, each as modified by the changes
proposed herein, as well as the proposed new Liquidity Removal Tier 2,
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 order flow, including in the various forms of liquidity-adding
and liquidity-removing volume under the required criteria, 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
rebates for executions of Added Displayed Volume, Added Non-Displayed
Volume, and Added Displayed Sub-Dollar Volume, as well as the
discounted fee for executions of Removed 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.
With respect to the proposed change to eliminate Liquidity
Provision Tier 6, the Exchange believes such change is reasonable
because, as noted above, it would enable the Exchange to redirect the
associated resources and funding into other programs and tiers intended
to incentivize increased order flow or enhance market quality, and the
Exchange is not required to maintain such tier or provide Members any
opportunities to receive additive rebates. The Exchange believes the
proposal to eliminate such tier is also equitable and not unfairly
discriminatory because it would apply equally to all Members, in that
the incentive would no longer be available for any Member.
Similarly, the Exchange also believes the proposed change to
eliminate the special pricing for executions of Midpoint Peg IOC/FOK
Orders is reasonable because, as noted above, the Exchange believes
that subjecting such orders to the base fee or otherwise applicable fee
for such executions may generate additional revenue to offset some of
the costs associated with the Exchange's current transaction pricing
structure, and the Exchange's operations generally, in a manner that is
still consistent with the Exchange's overall pricing philosophy of
encouraging added and/or displayed liquidity, the Exchange is not
required to maintain such discounted fee (or any special pricing) for
executions of Midpoint Peg IOC/FOK Orders, and the Exchange would
rather redirect the associated resources and funding into other
programs and tiers intended to incentivize increased order flow or
enhance market quality. The Exchange believes the proposal to eliminate
such special pricing is also equitable and not unfairly discriminatory
because it would apply equally to all Members, in
[[Page 14434]]
that the special pricing 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 \45\ in that it provides for the equitable allocation of
reasonable dues, fees and other charges among its Members and other
persons using its facilities and is not designed to unfairly
discriminate between customers, issuers, brokers, or dealers. As
described more fully below in the Exchange's statement regarding the
burden on competition, the Exchange believes that its transaction
pricing is subject to significant competitive forces, and that the
proposed fees and rebates described herein are appropriate to address
such forces.
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\45\ 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 proposal is intended to decrease the Exchange's expenditures and
generate additional revenue with respect to its transaction pricing and
incentivize market participants to direct additional order flow 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. 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.'' \46\
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\46\ See supra note 42.
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Intramarket Competition
As discussed above, the Exchange believes that the proposal would
decrease the Exchange's expenditures and generate additional revenue
with respect to its transaction pricing in a manner that is still
consistent with the Exchange's overall pricing philosophy of
encouraging added and/or displayed liquidity and would incentivize
market participants to direct additional order flow to the Exchange
through volume-based tiers, thereby enhancing liquidity and market
quality on the Exchange to the benefit of all Members, as well as
enhancing the attractiveness of the Exchange as a trading venue, which
the Exchange believes, in turn, would continue to encourage market
participants to direct additional order flow to the Exchange. Greater
liquidity benefits all Members by providing more trading opportunities
and encourages Members to send additional orders to the Exchange,
thereby contributing to robust levels of liquidity, which benefits all
market participants.
The Exchange does not believe that the proposed changes to reduce
the base rebates for executions of Added Displayed Volume, Add
Displayed Retail Volume, Added Midpoint Volume, Added Non-Midpoint
Hidden Volume, and Added Price-Improved Volume would impose any burden
on intramarket competition because such changes will apply to all
Members uniformly, in that the proposed base rebates for such
executions would be the base rebates applicable to all Members, and the
opportunity to qualify for enhanced rebates or discounted fees, as
applicable, is available to all Members. The opportunity to qualify for
each of the Liquidity Provision Tiers 1-5, NBBO Setter/Joiner Tier 1,
Non-Display Add Tiers 2-3, Liquidity Removal Tier 1, and the Sub-Dollar
Rebate Tier, each as modified by the changes proposed herein, as well
as the proposed new Liquidity Removal Tier 2, and thus receive the
corresponding enhanced rebates or discounted fees, as applicable, would
be available to all Members that meet the associated volume
requirements in any month. As described above, the Exchange believes
that the required criteria under each such tier are commensurate with
the corresponding rebate under such tier and are reasonably related to
the enhanced liquidity and market quality that such tier is designed to
promote. Additionally, Exchange does not believe that the proposed
change to eliminate special pricing for executions of Midpoint Peg IOC/
FOK Orders would impose any burden on intramarket competition because
such change will apply to all Members uniformly, in that the special
pricing would no longer be available for any Member. 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 15% 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 and market participants can readily choose
to send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As
described above, the proposed changes represent a competitive proposal
through which the Exchange is seeking to decrease the Exchange's
expenditures and generate additional revenue with respect to its
transaction pricing and incentivize market participants to direct
additional order flow to the Exchange through volume-based tiers, which
have been widely adopted by exchanges, including the Exchange.
Accordingly, the Exchange believes the proposal would not burden, but
rather promote, intermarket competition by enabling it to better
compete with other exchanges that offer similar pricing structures and
incentives to market participants.
Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \47\ The
[[Page 14435]]
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'. . . .''.\48\ 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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\47\ See supra note 42.
\48\ 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 \49\ and Rule 19b-4(f)(2) \50\ thereunder.
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\49\ 15 U.S.C. 78s(b)(3)(A)(ii).
\50\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MEMX-2023-05 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-2023-05. 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-2023-05 and should be submitted on
or before March 29, 2023.
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\51\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\51\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04688 Filed 3-7-23; 8:45 am]
BILLING CODE 8011-01-P
