Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule To Adopt Market Data Fees, 16491-16504 [2023-05448]
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Federal Register / Vol. 88, No. 52 / Friday, March 17, 2023 / Notices
further believes that the proposed
amendments are consistent with the
protection of investors and the public
interest by imparting uniformity of the
exchanges’ rules on erroneously
awarded executive compensation, as
required by Rule 10D–1.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as modified by Amendment No.
1, is consistent with the Act. Comments
may be submitted by any of the
following methods:
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• 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–
LTSE–2023–01 on the subject line.
Paper Comments
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. In fact, as
discussed in the Statutory Basis section,
LTSE believes that the proposed
amendments will impose no burden on
competition in that every publicly
traded company will be required to
comply with the Rule 10D–1, and every
national securities exchange that lists
securities will be required to adopt
essentially the same rules regarding
erroneously awarded compensation as
part of their original and continued
listing requirements. Given these
factors, the Exchange does not believe
that there will be any burden on
competition.
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Electronic 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–LTSE–2023–01. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–LTSE–2023–01 and should
be submitted on or before April 7, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97130; File No. SR–MEMX–
2023–04]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule To Adopt Market Data Fees
March 13, 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 and nonMembers (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
the most significant aspects of such
statements.
[FR Doc. 2023–05442 Filed 3–16–23; 8:45 am]
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
2 17
18 17
PO 00000
CFR 200.30–3(a)(12).
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Federal Register / Vol. 88, No. 52 / Friday, March 17, 2023 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
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Background
The purpose of the proposed rule
change is to amend the Fee Schedule to
adopt fees the Exchange will charge to
Members and non-Members for each of
its three proprietary market data feeds,
namely MEMOIR Depth, MEMOIR Top,
and MEMOIR Last Sale (collectively, the
‘‘Exchange Data Feeds’’). The Exchange
is proposing to implement the proposed
fees immediately.
The Exchange previously filed the
proposal on March 24, 2022 (SR–
MEMX–2022–03) (the ‘‘Initial
Proposal’’). The Exchange withdrew the
Initial Proposal and replaced the
proposal with SR–MEMX–2022–14 (the
‘‘Second Proposal’’). The Exchange
withdrew the Second Proposal and
replaced the proposal with SR–MEMX–
2022–19 (the ‘‘Third Proposal’’). The
Exchange withdrew the Third Proposal
and replaced the proposal with SR–
MEMX–2022–28 (the ‘‘Fourth
Proposal’’). The Exchange withdrew the
Fourth Proposal and replaced the
proposal with SR–MEMX–2022–32 (the
‘‘Fifth Proposal’’). The Exchange
withdrew the Fifth Proposal and
replaced the proposal with SR–MEMX–
2023–02 (the ‘‘Sixth Proposal’’). The
Exchange recently withdrew the Sixth
Proposal and is replacing it with the
current proposal (SR–MEMX–2023–04).
The Exchange notes that it has
previously included a cost analysis in
connection with the proposed fees for
the Exchange Data Feeds, however, the
prior cost analysis coupled costs related
to operating its trading system, or
transaction services, with costs of
producing market data. As described
more fully below, in the Fifth Proposal,
the Sixth Proposal, and this filing, the
Exchange provides an updated cost
analysis that focuses solely on costs
related to the provision of the Exchange
Data Feeds (the ‘‘Cost Analysis’’).
Although the baseline Cost Analysis
used to justify the fees was made with
the Fifth Proposal, the fees themselves
have not changed since the Initial
Proposal and the Exchange still
proposes fees that are intended to cover
the Exchange’s cost of producing the
Exchange Data Feeds with a reasonable
mark-up over those costs. Before setting
forth the additional details regarding the
proposal as well as the updated Cost
Analysis conducted by the Exchange,
immediately below is a description of
the proposed fees.
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Proposed Market Data Pricing
The Exchange offers three separate
data feeds to subscribers—MEMOIR
Depth, MEMOIR Top and MEMOIR Last
Sale. The Exchange notes that there is
no requirement that any Firm subscribe
to a particular Exchange Data Feed or
any Exchange Data Feed whatsoever,
but instead, a Firm may choose to
maintain subscriptions to those
Exchange Data Feeds they deem
appropriate based on their business
model. The proposed fee will not apply
differently based upon the size or type
of Firm, but rather based upon the
subscriptions a Firm has to Exchange
Data Feeds and their use thereof, which
are in turn based upon factors deemed
relevant by each Firm. The proposed
pricing for each of the Exchange Data
Feeds is set forth below.
MEMOIR Depth
The MEMOIR Depth feed is a MEMXonly market data feed that contains all
displayed orders for securities trading
on the Exchange (i.e., top and depth-ofbook order data), order executions (i.e.,
last sale data), order cancellations, order
modifications, order identification
numbers, and administrative messages.4
The Exchange proposes to charge each
of the fees set forth below for MEMOIR
Depth.
1. Internal Distribution Fee. For the
receipt of access to the MEMOIR Depth
feed, the Exchange proposes to charge
$1,500 per month. This proposed access
fee would be charged to any data
recipient that receives a data feed of the
MEMOIR Depth feed for purposes of
internal distribution (i.e., an ‘‘Internal
Distributor’’). The Exchange proposes to
define an Internal Distributor as ‘‘a
Distributor that receives an Exchange
Data product and then distributes that
data to one or more data recipients
within the Distributor’s own
organization.’’ 5 The proposed access fee
for internal distribution will be charged
only once per month per subscribing
entity (‘‘Firm’’). The Exchange notes
that it has proposed to use the phrase
‘‘own organization’’ in the definition of
Internal Distributor and External
Distributor because a Firm will be
permitted to share data received from an
Exchange Data product to other legal
entities affiliated with the Firm that
have been disclosed to the Exchange
without such distribution being
4 See
MEMX Rule 13.8(a).
Market Data Definitions under the proposed
MEMX Fee Schedule. The Exchange also proposes
to adopt a definition for ‘‘Distributor’’, which would
mean any entity that receives an Exchange Data
product directly from the Exchange or indirectly
through another entity and then distributes
internally or externally to a third party.
5 See
PO 00000
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considered external to a third party. For
instance, if a company has multiple
affiliated broker-dealers under the same
holding company, that company could
have one of the broker-dealers or a nonbroker-dealer affiliate subscribe to an
Exchange Data product and then share
the data with other affiliates that have
a need for the data. This sharing with
affiliates would not be considered
external distribution to a third party but
instead would be considered internal
distribution to data recipients within
the Distributor’s own organization.
2. External Distribution Fee. For
redistribution of the MEMOIR Depth
feed, the Exchange proposes to establish
an access fee of $2,500 per month. The
proposed redistribution fee would be
charged to any External Distributor of
the MEMOIR Depth feed, which would
be defined to mean ‘‘a Distributor that
receives an Exchange Data product and
then distributes that data to a third party
or one or more data recipients outside
the Distributor’s own organization.’’ 6
The proposed access fee for external
distribution will be charged only once
per month per Firm. As noted above,
while a Firm will be permitted to share
data received from an Exchange Data
product to other legal entities affiliated
with the Firm that have been disclosed
to the Exchange without such
distribution being considered external
to a third party, if a Firm distributes
data received from an Exchange Data
product to an unaffiliated third party
that would be considered distribution to
data recipients outside the Distributor’s
own organization and the access fee for
external distribution would apply.
3. Non-Display Use Fees. The
Exchange proposes to establish separate
non-display fees for usage by Trading
Platforms and other Users (i.e., not by
Trading Platforms).7 Non-Display Usage
would be defined to mean ‘‘any method
of accessing an Exchange Data product
that involves access or use by a machine
or automated device without access or
use of a display by a natural person or
persons.’’ 8 For Non-Display Usage of
the MEMOIR Depth feed not by Trading
Platforms, the Exchange proposes to
6 See Market Data Definitions under the proposed
MEMX Fee Schedule.
7 The Exchange proposes to define a Trading
Platform as ‘‘any execution platform operated as or
by a registered National Securities Exchange (as
defined in Section 3(a)(1) of the Exchange Act), an
Alternative Trading System (as defined in Rule
300(a) of Regulation ATS), or an Electronic
Communications Network (as defined in Rule
600(b)(23) of Regulation NMS).’’ See Market Data
Definitions under the proposed MEMX Fee
Schedule.
8 See Market Data Definitions under the proposed
MEMX Fee Schedule.
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establish a fee of $2,500 per month.9 For
Non-Display Usage of the MEMOIR
Depth feed by Trading Platforms, the
Exchange proposes to establish a fee of
$2,500 per month. The proposed fees for
Non-Display Usage will be charged only
once per category per Firm.10 In other
words, with respect to Non-Display
Usage Fees, a Firm that uses MEMOIR
Depth for non-display purposes but
does not operate a Trading Platform
would pay $2,500 per month, a Firm
that uses MEMOIR Depth in connection
with the operation of one or more
Trading Platforms (but not for other
purposes) would pay $2,500 per month,
and a Firm that uses MEMOIR Depth for
non-display purposes other than
operating a Trading Platform and for the
operation of one or more Trading
Platforms would pay $5,000 per month.
The Exchange notes that while other
exchanges have different rates for nondisplay usage by Trading Platforms and
non-display usage not by Trading
Platforms, and the Exchange has been
operating with a similar structure, with
this filing the Exchange is proposing the
same flat fee (i.e., $2,500) for both NonDisplay Usage of the MEMOIR Depth by
Trading Platforms and Non-Display
Usage of the MEMOIR Depth feed not by
Trading Platforms. The Exchange notes
that, consistent with other exchanges, it
previously has proposed and charged a
lower fee for Non-Display Usage of the
MEMOIR Depth feed not by Trading
Platforms (i.e., $1,500 per month) than
the monthly fee for Non-Display Usage
of the MEMOIR Depth by Trading
Platforms (i.e., $4,000 per month). The
change to normalize the fee for both
categories at $2,500 is revenue neutral
to the Exchange, and thus, does not
materially alter any of the cost analysis
9 Non-Display Usage not by Trading Platforms
would include trading uses such as high frequency
or algorithmic trading as well as any trading in any
asset class, automated order or quote generation
and/or order pegging, price referencing for smart
order routing, operations control programs,
investment analysis, order verification, surveillance
programs, risk management, compliance, and
portfolio management.
10 The Exchange proposes to adopt note 1 to the
proposed Market Data fees table, which would
make clear to subscribers that use of the data for
multiple non-display purposes or operate more than
one Trading Platform would only be charged once
per category per month. Thus, the footnote makes
clear that each fee applicable to Non-Display Usage
is charged per subscriber (e.g., a Firm) and that each
of the fees represents the maximum charge per
month per subscriber regardless of the number of
non-display uses or Trading Platforms operated by
the subscriber, as applicable. The footnote further
makes clear that a subscriber that uses the data for
both Non-Display Usage by Trading Platforms and
Non-Display Usage not by Trading Platforms will be
charged the applicable fee for each category of NonDisplay Usage only once, and those combined fees
represent the maximum charge per subscriber with
respect to Non-Display Usage.
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17:04 Mar 16, 2023
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or revenue projections contained in this
proposal. The Exchange further notes
that while some firms who use the
MEMOIR Depth feed for purposes other
than operating a Trading Platform will
be charged $1,000 more per month,
firms operating Trading Platforms will
have a reduced fee (i.e., $1,500 less per
month) as will firms who use the
MEMOIR Depth feed for both types of
Non-Display Usage (i.e., $500 less per
month).
4. User Fees. The Exchange proposes
to charge a Professional User 11 Fee (per
User) of $30 per month and a NonProfessional User 12 Fee (per User) of $3
per month. The proposed User fees
would apply to each person that has
access to the MEMOIR Depth feed for
displayed usage. Thus, each
Distributor’s count will include every
individual that accesses the data
regardless of the purpose for which the
individual uses the data. Internal
Distributors and External Distributors of
the MEMX Depth feed must report all
Professional and Non-Professional Users
in accordance with the following:
• In connection with a Distributor’s
distribution of the MEMOIR Depth feed,
the Distributor must count as one User
each unique User that the Distributor
has entitled to have access to the
MEMOIR Depth feed.
• Distributors must report each
unique individual person who receives
access through multiple devices or
multiple methods (e.g., a single User has
multiple passwords and user
identifications) as one User.
• If a Distributor entitles one or more
individuals to use the same device, the
Distributor must include only the
individuals, and not the device, in the
count. Thus, Distributors would not be
required to report User device counts
11 As proposed, a Professional User is any User
other than a Non-Professional User. See infra note
12.
12 As proposed, a Non-Professional User is a
natural person or qualifying trust that uses
Exchange Data only for personal purposes and not
for any commercial purpose and, for a natural
person who works in the United States, is not: (i)
registered or qualified in any capacity with the
Securities and Exchange Commission, the
Commodities Futures Trading Commission, any
state securities agency, any securities exchange or
association, or any commodities or futures contract
market or association; (ii) engaged as an
‘‘investment adviser’’ as that term is defined in
Section 202(a)(11) of the Investment Advisors Act
of 1940 (whether or not registered or qualified
under that Act); or (iii) employed by a bank or other
organization exempt from registration under federal
or state securities laws to perform functions that
would require registration or qualification if such
functions were performed for an organization not so
exempt; or, for a natural person who works outside
of the United States, does not perform the same
functions as would disqualify such person as a
Non-Professional User if he or she worked in the
United States.
PO 00000
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16493
associated with a User’s display use of
the data feed.
5. Enterprise Fee. Other than the
Digital Media Enterprise Fee described
below, the Exchange is not proposing to
adopt an Enterprise Fee for the
MEMOIR Depth feed at this time.
6. Digital Media Enterprise Fee. As an
alternative to User fees, a recipient Firm
may purchase a monthly Digital Media
Enterprise license to receive MEMOIR
Depth for distribution to an unlimited
number of Users for viewing via
television, websites, and mobile devices
for informational and non-trading
purposes only. The Exchange proposes
to establish a fee of $5,000 per month
for a Digital Media Enterprise license to
the MEMOIR Depth feed.
MEMOIR Top
The MEMOIR Top feed is a MEMXonly market data feed that contains top
of book quotations based on equity
orders entered into the System as well
as administrative messages.13 The
Exchange proposes to charge each of the
fees set forth below for MEMOIR Top.
1. Internal Distribution Fee. For the
receipt of access to the MEMOIR Top
feed, the Exchange proposes to charge
$750 per month. This proposed access
fee would be charged to any data
recipient that receives a data feed of the
MEMOIR Top feed for purposes of
internal distribution (i.e., an Internal
Distributor). The proposed access fee for
internal distribution will be charged
only once per month per Firm.
2. External Distribution Fee. For
redistribution of the MEMOIR Top feed,
the Exchange proposes to establish an
access fee of $2,000 per month. The
proposed redistribution fee would be
charged to any External Distributor of
the MEMOIR Top feed. The proposed
access fee for external distribution will
be charged only once per month per
Firm.
3. Non-Display Use Fees. The
Exchange does not propose to establish
non-display fees for usage by Trading
Platforms or other Users with respect to
MEMOIR Top.
4. User Fees. The Exchange proposes
to charge a Professional User Fee (per
User) of $0.01 per month and a NonProfessional User Fee (per User) of $0.01
per month. The proposed User fees
would apply to each person that has
access to the MEMOIR Top feed that is
provided by an External Distributor for
displayed usage. The Exchange does not
propose any per User fees for internal
distribution of the MEMOIR Top feed.
Each External Distributor’s count will
include every individual that accesses
13 See
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MEMX Rule 13.8(b).
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Federal Register / Vol. 88, No. 52 / Friday, March 17, 2023 / Notices
the data regardless of the purpose for
which the individual uses the data.
External Distributors of the MEMOIR
Top feed must report all Professional
and Non-Professional Users 14 in
accordance with the following:
• In connection with an External
Distributor’s distribution of the
MEMOIR Top feed, the Distributor must
count as one User each unique User that
the Distributor has entitled to have
access to the MEMOIR Top feed.
• External Distributors must report
each unique individual person who
receives access through multiple
devices or multiple methods (e.g., a
single User has multiple passwords and
user identifications) as one User.
• If an External Distributor entitles
one or more individuals to use the same
device, the Distributor must include
only the individuals, and not the device,
in the count. Thus, Distributors would
not be required to report User device
counts associated with a User’s display
use of the data feed.
5. Enterprise Fee. As an alternative to
User fees, a recipient Firm may
purchase a monthly Enterprise license
to receive MEMOIR Top for distribution
to an unlimited number of Professional
and Non-Professional Users. The
Exchange proposes to establish a fee of
$10,000 per month for an Enterprise
license to the MEMOIR Top feed.
6. Digital Media Enterprise Fee. As an
alternative to User fees, a recipient Firm
may purchase a monthly Digital Media
Enterprise license to receive MEMOIR
Top for distribution to an unlimited
number of Users for viewing via
television, websites, and mobile devices
for informational and non-trading
purposes only. The Exchange proposes
to establish a fee of $2,000 per month
for a Digital Media Enterprise license to
the MEMOIR Top feed.
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MEMOIR Last Sale
The MEMOIR Last Sale feed is a
MEMX-only market data feed that
contains only execution information
based on equity orders entered into the
System as well as administrative
messages.15 The Exchange proposes to
charge each of the fees set forth below
for MEMOIR Last Sale.
1. Internal Distribution Fee. For the
receipt of access to the MEMOIR Last
Sale feed, the Exchange proposes to
charge $500 per month. This proposed
14 The
Exchange notes that while it is not
differentiating Professional and Non-Professional
Users based on fees (in that it is proposing the same
fee for such Users) for this data feed, and thus will
not audit Firms based on this distinction, it will
request reporting of each distinct category for
informational purposes.
15 See MEMX Rule 13.8(c).
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access fee would be charged to any data
recipient that receives a data feed of the
MEMOIR Last Sale feed for purposes of
internal distribution (i.e., an Internal
Distributor). The proposed access fee for
internal distribution will be charged
only once per month per Firm.
2. External Distribution Fee. For
redistribution of the MEMOIR Last Sale
feed, the Exchange proposes to establish
an access fee of $2,000 per month. The
proposed redistribution fee would be
charged to any External Distributor of
the MEMOIR Last Sale feed. The
proposed access fee for external
distribution will be charged only once
per month per Firm.
3. Non-Display Use Fees. The
Exchange does not propose to establish
separate non-display fees for usage by
Trading Platforms or other Users with
respect to MEMOIR Last Sale.
4. User Fees. The Exchange proposes
to charge a Professional User Fee (per
User) of $0.01 per month and a NonProfessional User Fee (per User) of $0.01
per month. The proposed User fees
would apply to each person that has
access to the MEMOIR Last Sale feed
that is provided by an External
Distributor for displayed usage. The
Exchange does not propose any per User
fees for internal distribution of the
MEMOIR Last Sale feed. Each External
Distributor’s count will include every
individual that accesses the data
regardless of the purpose for which the
individual uses the data. External
Distributors of the MEMOIR Last Sale
feed must report all Professional and
Non-Professional Users 16 in accordance
with the following:
• In connection with an External
Distributor’s distribution of the
MEMOIR Last Sale feed, the Distributor
must count as one User each unique
User that the Distributor has entitled to
have access to the MEMOIR Last Sale
feed.
• External Distributors must report
each unique individual person who
receives access through multiple
devices or multiple methods (e.g., a
single User has multiple passwords and
user identifications) as one User.
• If an External Distributor entitles
one or more individuals to use the same
device, the Distributor must include
only the individuals, and not the device,
in the count. Thus, Distributors would
not be required to report User device
counts associated with a User’s display
use of the data feed.
5. Enterprise Fee. As an alternative to
User fees, a recipient Firm may
purchase a monthly Enterprise license
to receive MEMOIR Last Sale for
16 See
PO 00000
supra note 14.
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distribution to an unlimited number of
Professional and Non-Professional
Users. The Exchange proposes to
establish a fee of $10,000 per month per
Firm for an Enterprise license to the
MEMOIR Last Sale feed.
6. Digital Media Enterprise Fee. As an
alternative to User fees, a recipient Firm
may purchase a monthly Digital Media
Enterprise license to receive MEMOIR
Last Sale for distribution to an
unlimited number of Users for viewing
via television, websites, and mobile
devices for informational and nontrading purposes only. The Exchange
proposes to establish a fee of $2,000 per
month per Firm for a Digital Media
Enterprise license to the MEMOIR Last
Sale feed.
Additional Discussion—Background
In two years, MEMX has grown from
0% to monthly market share ranging
between 3–4% of consolidated trading
volume. During that same period, the
Exchange has had a steady increase in
the number of subscribers to Exchange
Data Feeds. Until April of 2022, MEMX
did not charge fees for market data
provided by the Exchange. The objective
of this approach was to eliminate any
fee-based barriers for Members when
MEMX launched as a national securities
exchange in 2020, which the Exchange
believes has been helpful in its ability
to attract order flow as a new exchange.
The Exchange also did not initially
charge for market data because MEMX
believes that any exchange should first
deliver meaningful value to Members
and other market participants before
charging fees for its products and
services. As discussed more fully below,
the Exchange recently calculated its
annual aggregate costs for providing the
Exchange Data Feeds at approximately
$3 million. In order to establish fees that
are designed to recover the aggregate
costs of providing the Exchange Data
Feeds plus a reasonable mark-up, the
Exchange is proposing to modify its Fee
Schedule, as described above. In
addition to the Cost Analysis, described
below, the Exchange believes that its
proposed approach to market data fees
is reasonable based on a comparison to
competitors.
Additional Discussion—Comparison
With Other Exchanges
The proposed fee structure is not
novel but is instead comparable to the
fee structure currently in place for the
equities exchanges operated by Cboe
Global Markets, Inc., in particular
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BZX.17 As noted above, in January 2022,
MEMX had 4.2% market share; for that
same month, BZX had 5.5% market
share.18 The Exchange is proposing fees
for its Exchange Data Feeds that are
similar in structure to BZX and rates
that are equal to, or in most cases lower,
than the rates data recipients pay for
comparable data feeds from BZX.19 The
Exchange notes that other competitors
maintain fees applicable to market data
that are considerably higher than those
proposed by the Exchange, including
NYSE Arca 20 and Nasdaq.21 However,
17 See BZX Fee Schedule, available at: https://
www.cboe.com/us/equities/membership/fee_
schedule/bzx/ (the ‘‘BZX Fee Schedule’’).
18 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
19 The Exchange notes that although no fee
proposed by the Exchange is higher than the fee
charged for BZX for a comparable data product,
under certain fact patterns a BZX data recipient
could pay a lower rate than that charged by the
Exchange. For instance, while the Exchange has
proposed to adopt identical fees to those charged
for internal distribution of MEMOIR Top as
compared to BZX Top ($750 per month) and for
internal distribution of MEMOIR Last Sale as
compared to BZX Last Sale ($500 per month), BZX
permits a data recipient who takes both feeds to pay
only one fee and, upon request, to receive the other
data feed free of charge. See BZX Fee Schedule,
supra note 17. Because the Exchange has not
proposed such a discount, a data recipient taking
both MEMOIR TOP and MEMOIR Last Sale would
pay more ($1,250 per month) than they would to
take comparable data feeds from BZX ($750 per
month).
20 Fees for the NYSE Arca Integrated Feed, which
is the comparable product to MEMOIR Depth, are
$3,000 for access (internal use) and $3,750 for
redistribution (external distribution), compared to
the Exchange’s proposed fees of $1,500 and $2,500,
respectively. In addition, for its Integrated Feed,
NYSE Arca charges for three different categories of
non-display usage, each of which is $10,500 and
each of which can be charged to the same firm more
than one time (e.g., a customer operating a Trading
Platform would pay $10,500 compared to the
Exchange’s proposed fee of $2,500 but would also
pay for each Trading Platform, up to three, if they
operate more than one, instead of the single fee
proposed by the Exchange; if that customer also
uses the data for the other categories of non-display
usage they would also pay $10,500 for each other
category of usage, whereas the Exchange would
only charge $2,500 for any non-display usage other
than operating a Trading Platform). Finally, the
NYSE Arca Integrated Feed user fee for pro devices
is $60 compared to the proposed Professional User
fee of $30 for MEMOIR Depth and the NYSE Arca
Integrated user fee for non-pro devices is $20
compared to the proposed Non-Professional User
fee of $3 for MEMOIR Depth. See NYSE Proprietary
Market Data Pricing list, available at: https://
www.nyse.com/publicdocs/nyse/data/NYSE_
Market_Data_Pricing.pdf.
21 Fees for the Nasdaq TotalView data feed, which
is the comparable product to MEMOIR Depth, are
$1,500 for access (internal use) and $3,750 for
redistribution (external distribution), compared to
the Exchange’s proposed fees of $1,500 and $2,500,
respectively. In addition, for TotalView, Nasdaq
charges Trading Platforms $5,000 compared to the
Exchange’s proposal of $2,500, and, like NYSE
Arca, charges customers per Trading Platform, up
to three, if they operate more than one, instead of
the single fee proposed by the Exchange. Nasdaq
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the Exchange has focused its
comparison on BZX because it is the
closest market in terms of market share
and offers market data at prices lower
than several other incumbent
exchanges.22
The fees for the BZX Depth feed—
which like the MEMOIR Depth feed,
includes top of book, depth of book,
trades, and security status messages—
consist of an internal distributor access
fee of $1,500 per month (the same as the
Exchange’s proposed rate), an external
distributor access fee of $5,000 per
month (two times the Exchange’s
proposed rate), a non-display usage fee
for non-Trading Platforms of $2,000 per
month ($500 less than the Exchange’s
proposed rate), a non-display usage fee
for Trading Platforms of $5,000 per
month ($2,500 more than the
Exchange’s proposed rate), a
Professional User fee (per User) of $40
per month ($10 more than the
Exchange’s proposed rate), and a NonProfessional User fee (per User) of $5
per month ($2 more than the Exchange’s
proposed rate).23
The comparisons of the MEMOIR Last
Sale feed and MEMOIR Top feed to the
BZX Last Sale feed and BZX Top feed,
respectively, are similar in that BZX
generally maintains the same fee
structure proposed by the Exchange and
BZX charges fees that are comparable to,
but in most cases higher than, the
Exchange’s proposed fees. Notably, the
User fees proposed by the Exchange for
External Distributors of MEMOIR Last
Sale and MEMOIR Top ($0.01 for both
Professional Users and Non-Professional
Users) are considerably lower than those
charged by BZX for BZX Top and BZX
also requires users to report and pay usage fees for
non-display access at levels of from $375 per
subscriber for smaller firms with 39 or fewer
subscribers to $75,000 per firm for a larger firm
with over 250 subscribers. The Exchange does not
require counting of devices or users for non-display
purposes and instead has proposed flat fee of
$2,500 for non-display usage not by Trading
Platforms. Finally, the Nasdaq TotalView user fee
for professional subscribers is $76 compared to the
proposed Professional User fee of $30 for MEMOIR
Depth and the Nasdaq TotalView user fee for nonprofessional subscribers is $15 compared to the
proposed Non-Professional User fee of $3 for
MEMOIR Depth. See Nasdaq Global Data Products
pricing list, available at: https://
www.nasdaqtrader.com/TraderB.aspx?id=
MDDPricingALLN.
22 See supra notes 20–21.
23 See BZX Fee Schedule, supra note 17. The
Exchange notes that there are differences between
the structure of BZX Depth fees and the proposed
fees for MEMOIR Depth, including that the
Exchange has proposed a Digital Media Enterprise
License for MEMOIR Depth but a comparable
license is not available from BZX. Additionally,
BZX maintains a general enterprise license for User
fees, similar to that proposed by the Exchange for
MEMOIR Top and MEMOIR Last Sale, but the
Exchange has not proposed adding a general
Enterprise license at this time.
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16495
Last Sale ($4 for Professional Users and
$0.10 for Non-Professional Users).
By charging the same low rate for all
Users of MEMOIR Top and MEMOIR
Last Sale the Exchange believes it is
proposing a structure that is not only
lower cost but that will also simplify
reporting for subscribers who externally
distribute these data feeds to Users, as
the Exchange believes that
categorization of Users as Professional
and Non-Professional is not meaningful
for these products and requiring such
categorization would expose Firms to
unnecessary audit risk of paying more
for mis-categorization. However, the
Exchange does not believe this is
equally true for MEMOIR Depth, as most
individual Users of MEMOIR Depth are
likely to be Professional Users and the
Exchange has proposed pricing for such
Users that the Exchange believes is
reasonable given the value to
Professional Users (i.e., since
Professional Users use data to
participate in the markets as part of
their full-time profession and earn
compensation based on their
employment). While the Exchange
would prefer the simplicity of a single
fee, similar to that imposed for
Professional Users and Non-Professional
Users of the MEMOIR Top and MEMOIR
Last Sale feeds, as that would reduce
audit risk and simplify reporting, the
proposed fee for Professional Users of
the MEMOIR Depth feed if also applied
to Non-Professional Users of such feed
would be significantly higher than other
exchanges charge. The Exchange
reiterates that it does not anticipate
many Non-Professional Users to
subscribe to MEMOIR Depth. In fact, the
Exchange is only aware of a single NonProfessional User (i.e., one User) that is
reported to receive MEMOIR Depth.
Additional Discussion—Cost Analysis
In general, the Exchange believes that
exchanges, in setting fees of all types,
should meet very high standards of
transparency to demonstrate why each
new fee or fee increase meets the
Exchange Act requirements that fees be
reasonable, equitably allocated, not
unfairly discriminatory, and not create
an undue burden on competition among
members and markets. In particular, the
Exchange believes that each exchange
should take extra care to be able to
demonstrate that these fees are based on
its costs and reasonable business needs.
Accordingly, in proposing to charge fees
for market data, the Exchange has
sought to be especially diligent in
assessing those fees in a transparent way
against its own aggregate costs of
providing the related service, and also
carefully and transparently assessing the
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impact on Members—both generally and
in relation to other Members, i.e., to
assure the fee will not create a financial
burden on any participant and will not
have an undue impact in particular on
smaller Members and competition
among Members in general. The
Exchange does not believe it needs to
otherwise address questions about
market competition in the context of
this filing because the proposed fees are
so clearly consistent with the Act based
on its Cost Analysis. The Exchange also
believes that this level of diligence and
transparency is called for by the
requirements of Section 19(b)(1) under
the Act,24 and Rule 19b–4 thereunder,25
with respect to the types of information
self-regulatory organizations (‘‘SROs’’)
should provide when filing fee changes,
and Section 6(b) of the Act,26 which
requires, among other things, that
exchange fees be reasonable and
equitably allocated,27 not designed to
permit unfair discrimination,28 and that
they not impose a burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.29 This rule change
proposal addresses those requirements,
and the analysis and data in this section
are designed to clearly and
comprehensively show how they are
met.30
As noted above, MEMX has
conducted and recently updated a study
of its aggregate costs to produce the
Exchange Data Feeds—the Cost
Analysis. The Cost Analysis required a
detailed analysis of MEMX’s aggregate
baseline costs, including a
determination and allocation of costs for
core services provided by the
Exchange—transactions, market data,
membership services, physical
connectivity, and application sessions
(which provide order entry, cancellation
and modification functionality, risk
functionality, ability to receive drop
copies, and other functionality). MEMX
separately divided its costs between
those costs necessary to deliver each of
these core services, including
infrastructure, software, human
resources (i.e., personnel), and certain
general and administrative expenses
(‘‘cost drivers’’). Next, MEMX adopted
an allocation methodology with various
principles to guide how much of a
particular cost should be allocated to
each core service. For instance, fixed
costs that are not driven by client
activity (e.g., message rates), such as
data center costs, were allocated more
heavily to the provision of physical
connectivity (75%), with smaller
allocations to logical ports (2.6%), and
the remainder to the provision of
transaction execution and market data
services (22.4%). The allocation
methodology was decided through
conversations with senior management
familiar with each area of the
Exchange’s operations. After adopting
this allocation methodology, the
Exchange then applied an estimated
allocation of each cost driver to each
core service, resulting in the cost
allocations described below.
By allocating segmented costs to each
core service, MEMX was able to
estimate by core service the potential
margin it might earn based on different
fee models. The Exchange notes that as
a non-listing venue it has four primary
sources of revenue that it can
potentially use to fund its operations:
transaction fees, fees for connectivity
services, membership and regulatory
fees, and market data fees. Accordingly,
the Exchange generally must cover its
expenses from these four primary
sources of revenue.
Through the Exchange’s extensive
Cost Analysis, which was again recently
updated to focus solely on the provision
of the Exchange Data Feeds, the
Exchange analyzed every expense item
in the Exchange’s general expense
ledger to determine whether each such
expense relates to the provision of the
Exchange Data Feeds, and, if such
expense did so relate, what portion (or
percentage) of such expense actually
supports the provision of the Exchange
Data Feeds, and thus bears a
relationship that is, ‘‘in nature and
closeness,’’ directly related to the
Exchange Data Feeds. Based on its
analysis, MEMX calculated its aggregate
annual costs for providing the Exchange
Data Feeds, at $3,014,348. This results
in an estimated monthly cost for
providing Exchange Data Feeds of
$251,196. In order to cover operating
costs and earn a reasonable profit on its
market data, the Exchange has
determined it necessary to charge fees
for its proprietary data products, and, as
such, the Exchange is proposing to
modify its Fee Schedule, pursuant to
MEMX Rules 15.1(a) and (c), as set forth
above.
Costs Related to Offering Exchange Data
Feeds
The following chart details the
individual line-item (annual) costs
considered by MEMX to be related to
offering the Exchange Data Feeds to its
Members and other customers as well as
the percentage of the Exchange’s overall
costs that such costs represent for such
area (e.g., as set forth below, the
Exchange allocated approximately 6.9%
of its overall Human Resources cost to
offering Exchange Data Feeds).
Costs drivers
Percent of all
Human Resources ...................................................................................................................................................
Network Infrastructure (e.g., servers, switches) ......................................................................................................
Data Center .............................................................................................................................................................
Hardware and Software Licenses ...........................................................................................................................
Depreciation .............................................................................................................................................................
Allocated Shared Expenses ....................................................................................................................................
$1,729,856
232,452
318,456
246,864
399,911
86,809
6.9
8.8
9.8
9.8
18.0
1.8
Total ..................................................................................................................................................................
3,014,348
6.5
Human Resources
lotter on DSK11XQN23PROD with NOTICES1
Costs
For personnel costs (Human
Resources), MEMX calculated an
24 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
26 15 U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(4).
28 15 U.S.C. 78f(b)(5).
29 15 U.S.C. 78f(b)(8).
25 17
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allocation of employee time for
employees whose functions include
directly providing services necessary to
offer the Exchange Data Feeds,
including performance thereof, as well
as personnel with ancillary functions
30 In 2019, Commission staff published guidance
suggesting the types of information that SROs may
use to demonstrate that their fee filings comply
with the standards of the Exchange Act (‘‘Fee
Guidance’’). While MEMX understands that the Fee
Guidance does not create new legal obligations on
SROs, the Fee Guidance is consistent with MEMX’s
view about the type and level of transparency that
exchanges should meet to demonstrate compliance
with their existing obligations when they seek to
charge new fees. See Staff Guidance on SRO Rule
Filings Relating to Fees (May 21, 2019) available at
https://www.sec.gov/tm/staff-guidancesro-rulefilings-fees.
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related to establishing and providing
such services (such as information
security and finance personnel). The
Exchange notes that it has fewer than
eighty (80) employees and each
department leader has direct knowledge
of the time spent by each employee with
respect to the various tasks necessary to
operate the Exchange. The estimates of
Human Resources cost were therefore
determined by consulting with such
department leaders, determining which
employees are involved in tasks related
to providing the Exchange Data Feeds,
and confirming that the proposed
allocations were reasonable based on an
understanding of the percentage of their
time such employees devote to tasks
related to providing the Exchange Data
Feeds. The Exchange notes that senior
level executives were allocated Human
Resources costs to the extent the
Exchange believed they are involved in
overseeing tasks related to providing the
Exchange Data Feeds. The Exchange’s
cost allocation for employees who
perform work in support of generating
and disseminating the Exchange Data
Feeds arrive at a full time equivalent
(‘‘FTE’’) of 5.2 FTEs. The Human
Resources cost was calculated using a
blended rate of compensation reflecting
salary, equity and bonus compensation,
benefits, payroll taxes, and 401(k)
matching contributions.
Network Infrastructure
The Network Infrastructure cost
includes cabling and switches required
to generate and disseminate the
Exchange Data Feeds. The Network
Infrastructure cost was narrowly
estimated by focusing on the servers
used at the Exchange’s primary and
back-up data centers specifically for the
Exchange Data Feeds. Further, as certain
servers are only partially utilized to
generate and disseminate the Exchange
Data Feeds, only the percentage of such
servers devoted to generating and
disseminating the Exchange Data Feeds
was included (i.e., the capacity of such
servers allocated to the Exchange Data
Feeds). From this analysis, the Exchange
determined that 9.8% of its servers are
used to generate and disseminate the
Exchange Data Feeds. When combined
with the applicable switches used for
Exchange Data Feeds, the Exchange has
determined that approximately 8.8% of
its overall Network Infrastructure costs
are attributable to the Exchange Data
Feeds.
Data Center
Data Center costs includes an
allocation of the costs the Exchange
incurs to provide the Exchange Data
Feeds in the third-party data centers
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where the Exchange maintains its
equipment as well as related costs (the
Exchange does not own the Primary
Data Center or the Secondary Data
Center, but instead, leases space in data
centers operated by third parties). As
the Data Center costs are primarily for
space, power, and cooling of servers, the
Exchange applied the same percentage
calculated above with respect to servers,
i.e. 9.8%, to allocate the applicable Data
Center costs for the Exchange Data
Feeds. The Exchange believes it is
reasonable to apply the same
proportionate percentage of Data Center
costs to that of Network Infrastructure.
Hardware and Software Licenses
Hardware and Software Licenses
includes hardware and software licenses
used to operate and monitor physical
assets necessary to offer the Exchange
Data Feeds. Because the hardware and
software license fees are correlated to
the servers used by the Exchange, the
Exchange again applied an allocation of
9.8% of its costs for Hardware and
Software Licenses to the Exchange Data
Feeds.
Depreciation
The vast majority of the software the
Exchange uses with respect to its
operations, including the software used
to generate and disseminate the
Exchange Data Feeds has been
developed in-house and the cost of such
development is depreciated over time.
Accordingly, the Exchange included
Depreciation cost related to depreciated
software used to generate and
disseminate the Exchange Data Feeds.
The Exchange also included in the
Depreciation costs certain budgeted
improvements that the Exchange
intends to capitalize and depreciate
with respect to the Exchange Data Feeds
in the near-term. As with the other
allocated costs in the Exchange’s
updated Cost Analysis, the Depreciation
cost was therefore narrowly tailored to
depreciation related to the Exchange
Data Feeds.
Allocated Shared Expenses
Finally, certain general shared
expenses were allocated to the Exchange
Data Feeds. However, contrary to its
prior cost analysis, rather than taking
the whole amount of general shared
expenses and applying an allocated
percentage, the Exchange has narrowly
selected specific general shared
expenses relevant to the Exchange Data
Feeds. The costs included in general
shared expenses allocated to the
Exchange Data Feeds include office
space and office expenses (e.g.,
occupancy and overhead expenses),
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16497
utilities, recruiting and training,
marketing and advertising costs,
professional fees for legal, tax and
accounting services (including external
and internal audit expenses), and
telecommunications costs. The cost of
paying individuals to serve on the
Exchange’s Board of Directors or any
committee was not allocated to
providing Exchange Data Feeds.
Cost Analysis—Additional Discussion
In conducting its Cost Analysis, the
Exchange did not allocate any of its
expenses in full to any core service and
did not double-count any expenses.
Instead, as described above, the
Exchange identified and allocated
applicable cost drivers across its core
services and used the same approach to
analyzing costs to form the basis of a
separate proposal to adopt fees for
connectivity services (the ‘‘Connectivity
Filing’’) 31 and this filing proposing fees
for Exchange Data Feeds. Thus, the
Exchange’s allocations of cost across
core services were based on real costs of
operating the Exchange and were not
double-counted across the core services
or their associated revenue streams.
The Exchange anticipates that the
proposed fees for Exchange Data Feeds
will generate approximately $262,500
monthly ($3,150,000 annually) based on
billing and reporting that has taken
place since the Exchange commenced
billing for such data feeds. The
proposed fees for Exchange Data Feeds
are designed to permit the Exchange to
cover the costs allocated to providing
Exchange Data Feeds with a mark-up
that the Exchange believes is modest
(approximately 4%), which the
Exchange believes is fair and reasonable
after taking into account the costs
related to creating, generating, and
disseminating the Exchange Data Feeds
and the fact that the Exchange will need
to fund future expenditures (increased
costs, improvements, etc.). The
Exchange also reiterates that prior to
April of 2022 the Exchange has not
previously charged any fees for
Exchange Data Feeds and its allocation
of costs to Exchange Data Feeds was
part of a holistic allocation that also
allocated costs to other core services
without double-counting any expenses.
The Exchange like other exchanges is,
after all, a for-profit business.
Accordingly, while the Exchange
believes in transparency around costs
and potential margins, as well as
periodic review of revenues and
applicable costs (as discussed below),
31 See SR–MEMX–2022–26, filed September 15,
2022, available at: https://info.memxtrading.com/
rules-and-filings/.
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the Exchange does not believe that these
estimates should form the sole basis of
whether or not a proposed fee is
reasonable or can be adopted. Instead,
the Exchange believes that the
information should be used solely to
confirm that an Exchange is not earning
supra-competitive profits, and the
Exchange believes its Cost Analysis and
related projections demonstrate this
fact.
As a general matter, the Exchange
believes that its costs will remain
relatively similar in future years. It is
possible however that such costs will
either decrease or increase. To the
extent the Exchange sees growth in use
of Exchange Data Feeds it will receive
additional revenue to offset future cost
increases. However, if use of Exchange
Data Feeds is static or decreases, the
Exchange might not realize the revenue
that it anticipates or needs in order to
cover applicable costs. Accordingly, the
Exchange is committing to conduct a
one-year review after implementation of
these fees. The Exchange expects that it
may propose to adjust fees at that time,
to increase fees in the event that
revenues fail to cover costs and a
reasonable mark-up of such costs.32
Similarly, the Exchange expects that it
would propose to decrease fees in the
event that revenue materially exceeds
current projections. In addition, the
Exchange will periodically conduct a
review to inform its decision making on
whether a fee change is appropriate
(e.g., to monitor for costs increasing/
decreasing or subscribers increasing/
decreasing, etc. in ways that suggest the
then-current fees are becoming
dislocated from the prior cost-based
analysis) and expects that it would
propose to increase fees in the event
that revenues fail to cover its costs and
a reasonable mark-up, or decrease fees
in the event that revenue or the markup materially exceeds current
projections. In the event that the
Exchange determines to propose a fee
change, the results of a timely review,
including an updated cost estimate, will
be included in the rule filing proposing
the fee change. More generally, the
Exchange believes that it is appropriate
for an exchange to refresh and update
information about its relevant costs and
revenues in seeking any future changes
to fees, and the Exchange commits to do
so.
32 The Exchange notes that it does not believe that
a 4% mark-up is necessarily competitive, and
instead that this is likely significantly below the
mark-up many businesses place on their products
and services.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) 33 of the
Act in general, and furthers the
objectives of Section 6(b)(4) 34 of the
Act, in particular, in that it is designed
to provide for the equitable allocation of
reasonable dues, fees and other charges
among its Members and other persons
using its facilities. Additionally, the
Exchange believes that the proposed
fees are consistent with the objectives of
Section 6(b)(5) 35 of the Act in that they
are designed to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
a free and open market and national
market system, and, in general, to
protect investors and the public interest,
and, particularly, are not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange notes prior to
addressing the specific reasons the
Exchange believes the proposed fees
and fee structure are reasonable,
equitably allocated and not
unreasonably discriminatory, that the
proposed definitions and fee structure
described above are consistent with the
definitions and fee structure used by
most U.S. securities exchanges, and
Cboe BZX in particular. As such, the
Exchange believes it is adopting a model
that is easily understood by Members
and non-Members, most of which also
subscribe to market data products from
other exchanges. For this reason, the
Exchange believes that the proposed
definitions and fee structure described
above are consistent with the Act
generally, and Section 6(b)(5) 36 of the
Act in particular.
As noted above, the Exchange’s
executed trading volume has grown
from 0% market share to approximately
3–4% market share in two years and the
Exchange believes that it is reasonable
to begin charging fees for the Exchange
Data Feeds. One of the primary
objectives of MEMX is to provide
competition and to reduce fixed costs
imposed upon the industry. Consistent
with this objective, the Exchange
believes that this proposal reflects a
simple, competitive, reasonable, and
equitable pricing structure, with fees
that are discounted when compared to
33 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
35 15 U.S.C. 78f(b)(5).
36 15 U.S.C. 78f(b)(5).
comparable data products and services
offered by competitors.37
Reasonableness
Overall. With regard to
reasonableness, the Exchange
understands that the Commission has
traditionally taken a market-based
approach to examine whether the SRO
making the fee proposal was subject to
significant competitive forces in setting
the terms of the proposal. The Exchange
understands that in general the analysis
considers whether the SRO has
demonstrated in its filing that (i) there
are reasonable substitutes for the
product or service; (ii) ‘‘platform’’
competition constrains the ability to set
the fee; and/or (iii) revenue and cost
analysis shows the fee would not result
in the SRO taking supracompetitive
profits. If the SRO demonstrates that the
fee is subject to significant competitive
forces, the Exchange understands that in
general the analysis will next consider
whether there is any substantial
countervailing basis to suggest the fee’s
terms fail to meet one or more standards
under the Exchange Act. The Exchange
further understands that if the filing
fails to demonstrate that the fee is
constrained by competitive forces, the
SRO must provide a substantial basis,
other than competition, to show that it
is consistent with the Exchange Act,
which may include production of
relevant revenue and cost data
pertaining to the product or service.
The Exchange has not determined its
proposed overall market data fees based
on assumptions about market
competition, instead relying upon a
cost-plus model to determine a
reasonable fee structure that is informed
by the Exchange’s understanding of
different uses of the products by
different types of participants. In this
context, the Exchange believes the
proposed fees overall are fair and
reasonable as a form of cost recovery
plus the possibility of a reasonable
return for Exchange’s aggregate costs of
offering the Exchange Data Feeds. The
Exchange believes the proposed fees are
reasonable because they are designed to
generate annual revenue to recoup some
or all of Exchange’s annual costs of
providing market data with a reasonable
mark-up. As discussed in the Purpose
section, the Exchange estimates this fee
filing will result in annual revenue of
approximately $3.15 million,
representing a potential mark-up of just
4% over the cost of providing market
data. Accordingly, the Exchange
believes that this fee methodology is
34 15
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reasonable because it allows the
Exchange to recoup some or all of its
expenses for providing market data
products (with any additional revenue
representing no more than what the
Exchange believes to be a reasonable
rate of return). The Exchange also
believes that the proposed fees are
reasonable because they are generally
less than the fees charged by competing
equities exchanges for comparable
market data products, notwithstanding
that the competing exchanges may have
different system architectures that may
result in different cost structures for the
provision of market data.
The Exchange believes the proposed
fees for the Exchange Data Feeds are
reasonable when compared to fees for
comparable products, such as the BZX
Depth feed, BZX Top feed, and BZX
Last Sale feed, compared to which the
Exchange’s proposed fees are generally
lower, as well as other comparable data
feeds priced significantly higher than
the Exchange’s proposed fees for the
Exchange Data Feeds.38 Specifically
with respect to the MEMOIR Depth feed,
the Exchange believes that the proposed
fees for such feed are reasonable
because they represent not only the
value of the data available from the
MEMOIR Top and MEMOIR Last Sale
data feeds, which have lower proposed
fees, but also the value of receiving the
depth-of-book data on an order-by-order
basis. The Exchange believes it is
reasonable to have pricing based, in
part, upon the amount of information
contained in each data feed and the
value of that information to market
participants. The MEMOIR Top and Last
Sale data feeds, as described above, can
be utilized to trade on the Exchange but
contain less information than that is
available on the MEMOIR Depth feed
(i.e., even for a subscriber who takes
both feeds, such feeds do not contain
depth-of-book information). Thus, the
Exchange believes it reasonable for the
products to be priced as proposed, with
MEMOIR Last Sale having the lowest
price, MEMOIR Top the next lowest
price, and MEMOIR Depth the highest
price (and more than MEMOIR Last Sale
and MEMOIR Top combined).
Internal Distribution Fees. The
Exchange believes that it is reasonable
to charge Fees to access the Exchange
Data Feeds for Internal Distribution
because of the value of such data to
subscribers in their profit-generating
activities. The Exchange also believes
that the proposed monthly Internal
Distribution fees for MEMOIR Depth,
MEMOIR Top, and MEMOIR Last Sale
38 See supra notes 20–21; see supra note 23 and
accompanying text.
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are reasonable as they are the same
amounts charged by at least one other
exchange of comparable size for
comparable data products,39 and are
lower than the fees charged by several
other exchanges for comparable data
products.40
External Distribution Fees. The
Exchange believes that it is reasonable
to charge External Distribution fees for
the Exchange Data Feeds because
vendors receive value from
redistributing the data in their business
products provided to their customers.
The Exchange believes that charging
External Distribution fees is reasonable
because the vendors that would be
charged such fees profit by retransmitting the Exchange’s market data
to their customers. These fees would be
charged only once per month to each
vendor account that redistributes any
Exchange Data Feed, regardless of the
number of customers to which that
vendor redistributes the data. The
Exchange also believes the proposed
monthly External Distribution fee for
the MEMOIR Depth Feed is reasonable
because it is half the amount of the fee
charged by at least one other exchange
of comparable size for a comparable
data product,41 and significantly less
than the amount charged by several
other exchanges for comparable data
products.42 Similarly, the Exchange
believes the proposed monthly External
Distribution fees for the MEMOIR TOP
and MEMOIR Last Sale feeds are
reasonable because they are discounted
compared to same amounts charged by
at least one other exchange of
comparable size for comparable data
products,43 and significantly less than
the amount charged by several other
exchanges for comparable data
products.44
User Fees. The Exchange believes that
having separate Professional and NonProfessional User fees for the MEMOIR
Depth feed is reasonable because it will
make the product more affordable and
result in greater availability to
Professional and Non-Professional
Users. Setting a modest NonProfessional User fee is reasonable
because it provides an additional
39 See
BZX Fee Schedule, supra note 17.
e.g., NYSE Proprietary Market Data Pricing
list, available at: https://www.nyse.com/publicdocs/
nyse/data/NYSE_Market_Data_Pricing.pdf (‘‘NYSE
Fee Schedule’’); Nasdaq Global Data Products
pricing list, available at: https://www.nasdaqtrader.
com/TraderB.aspx?id=MDDPricingALLN (‘‘Nasdaq
Fee Schedule’’).
41 See BZX Fee Schedule, supra note 17.
42 See, e.g., NYSE Fee Schedule, supra note 40;
Nasdaq Fee Schedule, supra note 40.
43 See BZX Fee Schedule, supra note 17.
44 See, e.g., NYSE Fee Schedule, supra note 40;
Nasdaq Fee Schedule, supra note 40.
40 See,
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16499
method for Non-Professional Users to
access the Exchange Data Feeds by
providing the same data that is available
to Professional Users. The proposed
monthly Professional User fee and
monthly Non-Professional User fee are
reasonable because they are lower than
the fees charged by at least one other
exchange of comparable size for
comparable data products,45 and
significantly less than the amounts
charged by several other exchanges for
comparable data products.46
The Exchange also believes it is
reasonable to charge the same low per
User fee of $0.01 for both Professional
Users and Non-Professional Users
receiving the MEMOIR Top and
MEMOIR Last Sale feeds, as this is not
only pricing such data at a much lower
cost than other exchanges charge for
comparable data feeds 47 but doing so
will also simplify reporting for
subscribers who externally distribute
these data feeds to Users, as the
Exchange believes that categorization of
Users as Professional and NonProfessional is not meaningful for these
products and that requiring such
categorization would expose Firms to
unnecessary audit risk of paying more
for mis-categorization. The Exchange
also believes that the proposal to require
reporting of individual Users, but not
devices, is reasonable as this too will
eliminate unnecessary audit risk that
can arise when recipients are required
to apply complex counting rules such as
whether or not to count devices or
whether an individual accessing the
same data through multiple devices
should be counted once or multiple
times. In addition, the Exchange
believes it is reasonable to charge User
fees only for External Distribution of the
MEMOIR Top and MEMOIR Last Sale
feeds, and not charge User fees for
Internal Distribution of such market
data feeds, because vendors receive
additional value from being able to
redistribute such data to their customers
and can recoup associated expenses by
passing on such fees either directly to
those customers or indirectly by using
the data to facilitate other revenuegenerating activity.
The Exchange further believes that its
proposal to adopt a Digital Media
Enterprise Fee for each of the Exchange
Data Feeds is reasonable because it
would allow a market participant that
wishes to disseminate information from
the Exchange Data Feeds through a
digital media platform such as a public
45 See
BZX Fee Schedule, supra note 17.
e.g., NYSE Fee Schedule, supra note 40;
Nasdaq Fee Schedule, supra note 40.
47 See id.
46 See,
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website without determining the
number of Users, which would be
practically impossible. The Exchange
further believes it is reasonable for the
Digital Media Enterprise Fee to be
higher for MEMOIR Depth than
MEMOIR Top or MEMOIR Last Sale
because of the additional information
that is contained in MEMOIR Depth,
and in turn, the potential additional
value to data recipients.
The Exchange also believes it is
reasonable to adopt an Enterprise Fee
for MEMOIR Top and MEMOIR Last
Sale because this would allow a market
participant to disseminate such data
feeds to an unlimited number of Users
without the necessity of counting such
Users. As this is an optional
subscription, a data recipient is able to
determine whether it prefers to count
Users and report such Users to the
Exchange or not, and also whether it is
more economically advantageous to
count and pay for specific Users or to
subscribe to the Enterprise Fee. The
Exchange also notes that given the low
cost proposed per User, only a market
participant with a substantial number of
Users would likely choose to subscribe
for and pay the Enterprise Fee. The
Exchange also believes it is reasonable
not to adopt an Enterprise Fee for
MEMOIR Depth at this time as the
Exchange does not believe there is
sufficient demand for an Enterprise Fee
given relatively low User counts for
subscribers of MEMOIR Depth. While
MEMOIR Top and MEMOIR Last Sale
also currently have relatively low User
counts, the Exchange does believe that
there is potential demand for a market
data recipient that wishes to
disseminate top of book and last sale
information to a large subscriber base,
and thus again believes it is reasonable
to offer an Enterprise Fee option for
such a market data recipient.
Non-Display Use Fees. The Exchange
believes the proposed Non-Display
Usage fees for the MEMOIR Depth feed
are reasonable, because they reflect the
value of the data to the data recipients
in their profit-generating activities and
do not impose the burden of counting
non-display devices.
The Exchange believes that the
proposed Non-Display Usage fees for the
MEMOIR Depth feed reflect the
significant value of the non-display data
use to data recipients, most of whom
purchase such data on a voluntary basis.
Non-display data can be used by data
recipients for a wide variety of profitgenerating purposes, including
proprietary and agency trading and
smart order routing, as well as by data
recipients that operate Trading
Platforms that compete directly with the
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Exchange for order flow. The data also
can be used for a variety of non-trading
purposes that indirectly support trading,
such as risk management and
compliance. Although some of these
non-trading uses do not directly
generate revenues, they can nonetheless
substantially reduce a recipient’s costs
by automating such functions so that
they can be carried out in a more
efficient and accurate manner and
reduce errors and labor costs, thereby
benefiting recipients. The Exchange
believes that charging for non-trading
uses is reasonable because data
recipients can derive substantial value
from such uses, for example, by
automating tasks so that can be
performed more quickly and accurately
and less expensively than if they were
performed manually.
Previously, the non-display use data
pricing policies of many exchanges
required customers to count, and the
exchanges to audit the count of, the
number of non-display devices used by
a customer. As non-display use grew
more prevalent and varied, however,
exchanges received an increasing
number of complaints about the
impracticality and administrative
burden associated with that approach.
In response, several exchanges
developed a non-display use pricing
structure that does not require nondisplay devices to be counted or those
counts to be audited, and instead
categorizes different types of use. The
Exchange proposes to distinguish
between non-display use for the
operation of a Trading Platform and
other non-display use, which is similar
to exchanges such as BZX and EDGX,48
while other exchanges maintain
additional categories and in many cases
charge multiple times for different types
of non-display use or the operation of
multiple Trading Platforms.49
The Exchange believes that it is
reasonable to segment the fee for nondisplay use into these two categories. As
noted above, the uses to which
customers can put the MEMOIR Depth
feed are numerous and varied, and the
Exchange believes that charging
separate fees for these separate
categories of use is reasonable because
it reflects the actual value the customer
derives from the data, based upon how
the customer makes use of the data.
The Exchange believes that the
proposed fees for non-display use other
than operation of a Trading Platform are
reasonable. These fees are comparable to
48 See BZX Fee Schedule, supra note 17; EDGX
Fee Schedule, available at: https://www.cboe.com/
us/equities/membership/fee_schedule/edgx/.
49 See supra notes 20–21.
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the fees charged by at least one other
exchange of comparable size for a
comparable data product,50 and
significantly less than the amounts
charged by several other exchanges for
comparable data products.51 The
Exchange believes that the proposed
fees directly and appropriately reflect
the significant value of using data on a
non-display basis in a wide range of
computer-automated functions relating
to both trading and non-trading
activities and that the number and range
of these functions continue to grow
through innovation and technology
developments. Further, the Exchange
benefits from other non-display use by
market participants (including the fact
that the Exchange receives orders
resulting from algorithms and routers)
and both the Exchange and other
participants benefit from other nondisplay use by market participants when
such use is to support more broadly
beneficial functions such as risk
management and compliance. The
Exchange notes that with this filing it is
proposing the same flat fee (i.e., $2,500)
for both Non-Display Usage of the
MEMOIR Depth by Trading Platforms
and Non-Display Usage of the MEMOIR
Depth feed not by Trading Platforms.
The Exchange also believes that it is
reasonable to charge the proposed fees
for non-display use for operation of a
Trading Platform because the proposed
fees are comparable to, and lower than,
the fees charged at least one other
exchange of comparable size for a
comparable data product,52 and
significantly less than the amounts
charged by several other exchanges for
comparable data products, which also
charge per Trading Platform operated by
a data subscriber subject to a cap in
most cases, rather than charging per
Firm, as proposed by the Exchange.53
With respect to alternative trading
systems, or ATSs, such platforms can
utilize the Exchange Data Feeds to form
prices for trading on such platforms but
are not required to do so and can
instead utilize SIP data. Approximately
two-thirds of the ATSs approved to
trade NMS stocks do not currently
subscribe to the Exchange Data Feeds.54
With respect to other exchanges, which
may choose to use the Exchange Data
Feeds for Regulation NMS compliance
and order routing, the Exchange notes
50 See
BZX Fee Schedule, supra note 17.
e.g., NYSE Fee Schedule, supra note 40;
Nasdaq Fee Schedule, supra note 40.
52 See BZX Fee Schedule, supra note 17.
53 See supra notes 20–21.
54 MEMX internal data regarding non-display use
by Trading Platforms; as of December 31, 2022,
there were 33 ATSs that had filed an effective Form
ATS–N with the Commission to trade NMS stocks.
51 See,
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that several exchange competitors of the
Exchange have not subscribed to any
Exchange Data Feeds and instead utilize
SIP data for such purposes.55
Accordingly, both ATSs and other
exchanges clearly have a choice whether
to subscribe to the Exchange Data Feeds.
The proposed Non-Display Usage fees
for the MEMOIR Depth feed are also
reasonable because they take into
account the extra value of receiving the
data for Non-Display Usage that
includes a rich set of information
including top of book quotations, depthof-book quotations, executions and
other information. The Exchange
believes that the proposed fees directly
and appropriately reflect the significant
value of using the MEMOIR Depth feed
on a non-display basis in a wide range
of computer-automated functions
relating to both trading and non-trading
activities and that the number and range
of these functions continue to grow
through innovation and technology
developments.56 For the same reasons,
the Exchange believes it is reasonable to
provide other data feeds, namely
MEMOIR Top and MEMOIR Last Sale,
free of charge for Non-Display Usage.
The Exchange does not believe that
either MEMOIR Top or MEMOIR Last
Sale has the same value to market
participants with respect to non-display
usage as MEMOIR Depth, as neither of
MEMOIR Top or MEMOIR Last Sale
contains the amount of information that
the Exchange expects market
participants need for typical trading and
non-trading non-display applications.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the Exchange Data Feeds are
reasonable.
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Equitable Allocation
Overall. The Exchange believes that
its proposed fees are reasonable, fair,
and equitable, and not unfairly
discriminatory because they are
designed to align fees with services
provided. The Exchange believes the
proposed fees for the Exchange Data
55 See, e.g., NYSE Arca Rule 7.37–E.(d), Order
Execution and Routing, and BZX Rule 11.26, each
of which discloses the data feeds used by each
respective exchange and state that SIP products are
used with respect to MEMX.
56 See also Exchange Act Release No. 69157,
March 18, 2013, 78 FR 17946, 17949 (March 25,
2013) (SR–CTA/CQ–2013–01) (‘‘[D]ata feeds have
become more valuable, as recipients now use them
to perform a far larger array of non-display
functions. Some firms even base their business
models on the incorporation of data feeds into black
boxes and application programming interfaces that
apply trading algorithms to the data, but that do not
require widespread data access by the firm’s
employees. As a result, these firms pay little for
data usage beyond access fees, yet their data access
and usage is critical to their businesses.’’
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Feeds are allocated fairly and equitably
among the various categories of users of
the feeds, and any differences among
categories of users are justified and
appropriate.
The Exchange believes that the
proposed fees are equitably allocated
because they will apply uniformly to all
data recipients that choose to subscribe
to the Exchange Data Feeds. Any
subscriber or vendor that chooses to
subscribe to one or more Exchange Data
Feeds is subject to the same Fee
Schedule, regardless of what type of
business they operate, and the decision
to subscribe to one or more Exchange
Data Feeds is based on objective
differences in usage of Exchange Data
Feeds among different Firms, which are
still ultimately in the control of any
particular Firm. The Exchange believes
the proposed pricing between Exchange
Data Feeds is equitably allocated
because it is based, in part, upon the
amount of information contained in
each data feed and the value of that
information to market participants. The
MEMOIR Top and Last Sale data feeds,
as described above, can be utilized to
trade on the Exchange but contain less
information than that is available on the
MEMOIR Depth feed (i.e., even for a
subscriber who takes both feeds, such
feeds do not contain depth-of-book
information). Thus, the Exchange
believes it is an equitable allocation of
fees for the products to be priced as
proposed, with MEMOIR Last Sale
having the lowest price, MEMOIR Top
the next lowest price, and MEMOIR
Depth the highest price (and more than
MEMOIR Last Sale and MEMOIR Top
combined).
Internal Distribution Fee. The
Exchange believes the proposed
monthly fees for Internal Distribution of
the Exchange Data Feeds are equitably
allocated because they would be
charged on an equal basis to all data
recipients that receive the Exchange
Data Feeds for internal distribution,
regardless of what type of business they
operate.
External Distribution Fees. The
Exchange believes the proposed
monthly fees for External Distribution of
the Exchange Data Feeds are equitably
allocated because they would be
charged on an equal basis to all data
recipients that receive the Exchange
Data Feeds that choose to redistribute
the feeds externally. The Exchange also
believes that the proposed monthly fees
for External Distribution are equitably
allocated when compared to lower
proposed fees for Internal Distribution
because data recipients that are
externally distributing Exchange Data
Feeds are able to monetize such
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16501
distribution and spread such costs
amongst multiple third party data
recipients, whereas the Internal
Distribution fee is applicable to use by
a single data recipient (and its affiliates).
User Fees. The Exchange believes that
the fee structure differentiating
Professional User fees from NonProfessional User fees for display use of
the MEMOIR Depth feed is equitable.
This structure has long been used by
other exchanges and the SIPs to reduce
the price of data to Non-Professional
Users and make it more broadly
available.57 Offering the MEMOIR Depth
feed to Non-Professional Users at a
lower cost than Professional Users
results in greater equity among data
recipients, as Professional Users are
categorized as such based on their
employment and participation in
financial markets, and thus, are
compensated to participate in the
markets. While Non-Professional Users
too can receive significant financial
benefits through their participation in
the markets, the Exchange believes it is
reasonable to charge more to those Users
who are more directly engaged in the
markets. The Exchange also believes it
may be unreasonable to charge a NonProfessional User the same fee that it
has proposed for Professional Users, as
this fee would be higher than any other
U.S. equities exchange charges to NonProfessional Users for receipt of a
comparable data product. These User
fees would be charged uniformly to all
individuals that have access to the
MEMOIR Depth feed based on the
category of User.
The Exchange also believes the
proposed User fees for MEMOIR Top
and MEMOIR Last Sale are equitable
because the Exchange has proposed to
charge Professional Users and NonProfessional Users the same low rate of
$0.01 per month. In addition, the
Exchange believes it is equitable to
charge User fees only for External
Distribution of the MEMOIR Top and
MEMOIR Last Sale feeds, and not charge
User fees for Internal Distribution of
such market data feeds, because vendors
receive additional value from being able
to redistribute such data to their
customers and can recoup associated
expenses by passing on such fees either
directly to those customers or indirectly
57 See, e.g., Securities Exchange Act Release No.
59544 (March 9, 2009), 74 FR 11162 (March 16,
2009) (SR–NYSE–2008–131) (establishing the $15
Non-Professional User Fee (Per User) for NYSE
OpenBook); Securities Exchange Act Release No.
20002, File No. S7–433 (July 22, 1983), 48 FR 34552
(July 29, 1983) (establishing Non-Professional fees
for CTA data); NASDAQ BX Equity 7 Pricing
Schedule, Section 123.
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by using the data to facilitate other
revenue-generating activity.
Finally, the Exchange believes it is
equitable to adopt User fees for the
Memoir Depth feed that are significantly
higher than the User fees for the
MEMOIR Top and MEMOIR Last Sale
feeds because, as described above,
MEMOIR Depth contains significantly
more data than such data feeds. The
Exchange believes it is equitable to have
pricing based, in part, upon the amount
of information contained in each data
feed and the value of that information
to market participants.
The Exchange further believes that its
proposal to adopt a Digital Media
Enterprise Fee for each of the Exchange
Data Feeds is equitable because it would
allow a market participant that wishes
to disseminate information from the
Exchange Data Feeds through a digital
media platform such as a public website
without determining the number of
Users, which would be practically
impossible. The Exchange further
believes it is equitable for the Digital
Media Enterprise Fee to be higher for
MEMOIR Depth than MEMOIR Top or
MEMOIR Last Sale because of the
additional information that is contained
in MEMOIR Depth, and in turn, the
potential additional value to data
recipients.
The Exchange also believes it is
equitable to adopt an Enterprise Fee for
MEMOIR Top and MEMOIR Last Sale
because this would allow a market
participant to disseminate such data
feeds to an unlimited number of Users
without the necessity of counting such
Users. As this is an optional
subscription, a data recipient is able to
determine whether it prefers to count
Users and report such Users to the
Exchange or not, and also whether it is
more economically advantageous to
count and pay for specific Users or to
subscribe to the Enterprise Fee. The
Exchange also believes it is equitable
not to adopt an Enterprise Fee for
MEMOIR Depth at this time as the
Exchange does not believe there is
sufficient demand for an Enterprise Fee
given relatively low User counts for
subscribers of MEMOIR Depth, as
described above.
Non-Display Use Fees. The Exchange
believes the proposed Non-Display
Usage fees are equitably allocated
because they would require subscribers
to pay fees only for the uses they
actually make of the data. As noted
above, non-display data can be used by
data recipients for a wide variety of
profit-generating purposes (including
trading and order routing) as well as
purposes that do not directly generate
revenues (such as risk management and
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compliance) but nonetheless
substantially reduce the recipient’s costs
by automating certain functions. The
Exchange believes that it is equitable to
charge non-display data subscribers that
use MEMOIR Depth data for purposes
other than operation of a Trading
Platform as proposed because all such
subscribers would have the ability to
use such data for as many non-display
uses as they wish for one low fee. As
noted above, this structure is
comparable to that in place for the BZX
Depth feed but several other exchanges
charge multiple non-display fees to the
same client to the extent they use a data
feed in several different trading
platforms or for several types of nondisplay use.58
The Exchange further believes that the
fees for non-display use for operation of
a Trading Platform and for non-display
use other than operation of a Trading
Platform are equitable because the
Exchange is imposing the same flat fee
for each category of non-display use.
The Exchange believes that it is
equitable to charge a single fee per Firm
rather than multiple fees for a Firm that
operates more than one Trading
Platform because operators of Trading
Platforms are many times viewed as a
single competing venue or group, even
if there are multiple liquidity pools
operated by the same competitor.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the Exchange Data Feeds are
equitably allocated.
The Proposed Fees Are Not Unfairly
Discriminatory
The Exchange believes the proposed
fees for the Exchange Data Feeds are not
unfairly discriminatory because any
differences in the application of the fees
are based on meaningful distinctions
between customers, and those
meaningful distinctions are not unfairly
discriminatory between customers.
Overall. The Exchange believes that
the proposed fees are not unfairly
discriminatory because they would
apply to all data recipients that choose
to subscribe to the same Exchange Data
Feed(s). Any vendor or subscriber that
chooses to subscribe to the Exchange
Data Feeds is subject to the same Fee
Schedule, regardless of what type of
business they operate. Because the
proposed fees for MEMOIR Depth are
higher, vendors and subscribers seeking
lower cost options may instead choose
to receive data from the SIPs or through
the MEMOIR Top and/or MEMOIR Last
Sale feed for a lower cost. Alternatively,
vendors and subscribers can choose to
58 See
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pay for the MEMOIR Depth feed in
order to receive data in a single feed
with depth-of-book information if such
information is valuable to such vendors
or subscribers. The Exchange notes that
vendors or subscribers can also choose
to subscribe to a combination of data
feeds for redundancy purposes or to use
different feeds for different purposes. In
sum, each vendor or subscriber has the
ability to choose the best business
solution for itself. The Exchange does
not believe it is unfairly discriminatory
to base pricing upon the amount of
information contained in each data feed
and the value of that information to
market participants. As described above,
the MEMOIR Top and Last Sale data
feeds, can be utilized to trade on the
Exchange but contain less information
than that is available on the MEMOIR
Depth feed (i.e., even for a subscriber
who takes both feeds, such feeds do not
contain depth-of-book information).
Thus, the Exchange believes it is not
unfairly discriminatory for the products
to be priced as proposed, with MEMOIR
Last Sale having the lowest price,
MEMOIR Top the next lowest price, and
MEMOIR Depth the highest price (and
more than MEMOIR Last Sale and
MEMOIR Top combined).
Internal Distribution Fees. The
Exchange believes the proposed
monthly fees for Internal Distribution of
the Exchange Data Feeds are not
unfairly discriminatory because they
would be charged on an equal basis to
all data recipients that receive the same
Exchange Data Feed(s) for internal
distribution, regardless of what type of
business they operate.
External Distribution Fees. The
Exchange believes the proposed
monthly fees for redistributing the
Exchange Data Feeds are not unfairly
discriminatory because they would be
charged on an equal basis to all data
recipients that receive the same
Exchange Data Feed(s) that choose to
redistribute the feed(s) externally. The
Exchange also believes that having
higher monthly fees for External
Distribution than Internal Distribution is
not unfairly discriminatory because data
recipients that are externally
distributing Exchange Data Feeds are
able to monetize such distribution and
spread such costs amongst multiple
third party data recipients, whereas the
Internal Distribution fee is applicable to
use by a single data recipient (and its
affiliates).
User Fees. The Exchange believes that
the fee structure differentiating
Professional User fees from NonProfessional User fees for display use of
the MEMOIR Depth feed is not unfairly
discriminatory. This structure has long
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been used by other exchanges and the
SIPs to reduce the price of data to NonProfessional Users and make it more
broadly available.59 Offering the
Exchange Data Feeds to NonProfessional Users with the same data as
is available to Professional Users, albeit
at a lower cost, results in greater equity
among data recipients. These User fees
would be charged uniformly to all
individuals that have access to the
Exchange Data Feeds based on the
category of User. The Exchange also
believes the proposed User fees for
MEMOIR Depth are not unfairly
discriminatory, with higher fees for
Professional Users than NonProfessional Users, because NonProfessional Users may have less ability
to pay for such data than Professional
Users as well as less opportunity to
profit from their usage of such data. The
Exchange also believes the proposed
User fees for MEMOIR Depth are not
unfairly discriminatory, even though
substantially higher than the proposed
User fees for MEMOIR Top and
MEMOIR Last Sale, because, as
described above, MEMOIR Depth has
significantly more information than the
other Exchange Data Feeds and is thus
potentially more valuable to such Users.
The Exchange also believes the
proposed User fees for MEMOIR Top
and MEMOIR Last Sale are not unfairly
discriminatory because the Exchange
has proposed to charge Professional
Users and Non-Professional Users the
same low rate of $0.01 per month.
The Exchange further believes that its
proposal to adopt a Digital Media
Enterprise Fee for each of the Exchange
Data Feeds and an Enterprise Fee for
MEMOIR Top and MEMOIR Last Sale is
not unfairly discriminatory because
these optional alternatives to counting
and paying for specific Users will
provide market participants the ability
to provide information from the
Exchange Data Feeds to large numbers
of Users without counting and paying
for such Users. The Exchange also
believes it is not unfairly discriminatory
not to adopt an Enterprise Fee for
MEMOIR Depth at this time as the
Exchange does not believe there is
sufficient demand for an Enterprise Fee
given relatively low User counts for
subscribers of MEMOIR Depth, as
described above.
Non-Display Use Fees. The Exchange
believes the proposed Non-Display
Usage fees for the MEMOIR Depth feed
are not unfairly discriminatory because
they would require subscribers for nondisplay use to pay fees depending on
their use of the data, either for operation
of a Trading Platform or not, but would
not impose multiple fees to the extent
a Firm operates multiple Trading
Platforms or has multiple different types
of non-display use. As noted above,
non-display data can be used by data
recipients for a wide variety of profitgenerating purposes as well as purposes
that do not directly generate revenues
but nonetheless substantially reduce the
recipient’s costs by automating certain
functions. This segmented fee structure
is not unfairly discriminatory because
no subscriber of non-display data would
be charged a fee for a category of use in
which it did not actually engage.
The Exchange further believes that the
fees for non-display use for operation of
a Trading Platform and for non-display
use other than operation of a Trading
Platform are not unreasonably
discriminatory because the Exchange is
imposing the same flat fee for each
category of non-display use.
The Exchange believes that it is not
unreasonably discriminatory to charge a
single fee for an operator of Trading
Platforms that operates more than one
Trading Platform because operators of
Trading Platforms are many times
viewed as a single competing venue or
group, even if there a multiple liquidity
pools operated by the same competitor.
The Exchange again notes that certain
competitors to the Exchange charge for
non-display usage per Trading
Platform,60 in contrast to the Exchange’s
proposal. In turn, to the extent they
subscribe to Exchange Data Feeds, these
same competitors will benefit from the
Exchange’s pricing model to the extent
they operate multiple Trading Platforms
(as most do) by paying a single fee
rather than paying for each Trading
Platform that they operate that
consumes Exchange Data Feeds.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the Exchange Data Feeds are not
unfairly discriminatory.
above, the proposed fees are associated
with usage of Exchange Data Feeds by
each market participant based on the
type of business they operate, and the
decision to subscribe to one or more
Exchange Data Feeds is based on
objective differences in usage of
Exchange Data Feeds among different
Firms, which are still ultimately in the
control of any particular Firm, and such
fees do not impose a barrier to entry to
smaller participants. Accordingly, the
proposed fees for Exchange Data Feeds
do not favor certain categories of market
participants in a manner that would
impose a burden on competition; rather,
the allocation of the proposed fees
reflects the types of Exchange Data
Feeds consumed by various market
participants and their usage thereof.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,61 the Exchange does not believe
that the proposed rule change would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Intra-Market Competition
The Exchange does not believe that
the proposed fees for Exchange Data
Feeds place certain market participants
at a relative disadvantage to other
market participants because, as noted
60 See
59 See
supra note 57.
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U.S.C. 78f(b)(8).
Frm 00110
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Inter-Market Competition
The Exchange does not believe the
proposed fees place an undue burden on
competition on other SROs that is not
necessary or appropriate. In particular,
market participants are not forced to
subscribe to any of the Exchange Data
Feeds, as described above. Additionally,
other exchanges have similar market
data fees in place for their participants,
but with comparable and in many cases
higher rates for market data feeds.62 The
proposed fees are based on actual costs
and are designed to enable the Exchange
to recoup its applicable costs with the
possibility of a reasonable profit on its
investment as described in the Purpose
and Statutory Basis sections. Competing
equities exchanges are free to adopt
comparable fee structures subject to the
SEC rule filing process.
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.
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 63 and Rule
19b–4(f)(2) 64 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
62 See supra notes 20–21; see supra note 23 and
accompanying text.
63 15 U.S.C. 78s(b)(3)(A)(ii).
64 17 CFR 240.19b–4(f)(2).
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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:
lotter on DSK11XQN23PROD with NOTICES1
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MEMX–2023–04 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–2023–04. 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
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–MEMX–
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17:04 Mar 16, 2023
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2023–04 and should be submitted on or
before April 7, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.65
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–05448 Filed 3–16–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97124; File No. SR–
PEARL–2023–10]
Self-Regulatory Organizations: Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by MIAX
PEARL, LLC To Amend the MIAX Pearl
Equities Fee Schedule
March 13, 2023.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on February 28, 2023, MIAX PEARL,
LLC (‘‘MIAX Pearl’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
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 a proposal to
amend the fee schedule (the ‘‘Fee
Schedule’’) applicable to MIAX Pearl
Equities, an equities trading facility of
the Exchange.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX Pearl’s principal
office, and at the Commission’s Public
Reference Room.
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
65 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
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 Exchange’s Fee
Schedule to: (i) reduce the Adding
Liquidity Non-Displayed Order rebate in
Section 1(a); (ii) increase the Removing
Liquidity fee in Section 1(a); (iii) make
conforming reductions to certain
associated rebates and increases in
certain associated fees in the Liquidity
Indicator Codes and Associated Fees
Table in Section 1(b); and (iv) amend
the Remove Volume Tiers for executions
of orders in securities priced at or above
$1.00 in Section 1(d).
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues,
to which market participants may direct
their order flow. Based on publicly
available information, no single
registered equities exchange currently
has more than approximately 18% of
the total market share of executed
volume of equities trading.3
Reduced Standard Rebate for Added
Liquidity Non-Displayed Volume
The Exchange proposes to reduce the
standard rebate for executions of Added
Non-Displayed Volume. Currently, the
Exchange provides a standard rebate of
($0.0021) per share for executions of
Added Non-Displayed Volume for
securities priced at or above $1.00. The
Exchange now proposes to reduce the
standard rebate for executions of Added
Non-Displayed Volume to ($0.00205)
per share.4 The Exchange notes that
executions of orders in securities priced
below $1.00 per share that add nondisplayed liquidity to the Exchange will
continue to receive the standard rebate
3 Market share percentage calculated as of
February 27, 2023. The Exchange receives and
processes data made available through consolidated
data feeds.
4 The standard pricing for executions of Added
Non-Displayed Volume is referred to by the
Exchange on its Fee Schedule in section 1(a)
Standard Rates.
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]]>Agencies
[Federal Register Volume 88, Number 52 (Friday, March 17, 2023)]
[Notices]
[Pages 16491-16504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05448]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97130; File No. SR-MEMX-2023-04]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule To Adopt Market Data Fees
March 13, 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\ and non-
Members (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.
---------------------------------------------------------------------------
\3\ See Exchange Rule 1.5(p).
---------------------------------------------------------------------------
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 the most significant aspects of such
statements.
[[Page 16492]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
The purpose of the proposed rule change is to amend the Fee
Schedule to adopt fees the Exchange will charge to Members and non-
Members for each of its three proprietary market data feeds, namely
MEMOIR Depth, MEMOIR Top, and MEMOIR Last Sale (collectively, the
``Exchange Data Feeds''). The Exchange is proposing to implement the
proposed fees immediately.
The Exchange previously filed the proposal on March 24, 2022 (SR-
MEMX-2022-03) (the ``Initial Proposal''). The Exchange withdrew the
Initial Proposal and replaced the proposal with SR-MEMX-2022-14 (the
``Second Proposal''). The Exchange withdrew the Second Proposal and
replaced the proposal with SR-MEMX-2022-19 (the ``Third Proposal'').
The Exchange withdrew the Third Proposal and replaced the proposal with
SR-MEMX-2022-28 (the ``Fourth Proposal''). The Exchange withdrew the
Fourth Proposal and replaced the proposal with SR-MEMX-2022-32 (the
``Fifth Proposal''). The Exchange withdrew the Fifth Proposal and
replaced the proposal with SR-MEMX-2023-02 (the ``Sixth Proposal'').
The Exchange recently withdrew the Sixth Proposal and is replacing it
with the current proposal (SR-MEMX-2023-04).
The Exchange notes that it has previously included a cost analysis
in connection with the proposed fees for the Exchange Data Feeds,
however, the prior cost analysis coupled costs related to operating its
trading system, or transaction services, with costs of producing market
data. As described more fully below, in the Fifth Proposal, the Sixth
Proposal, and this filing, the Exchange provides an updated cost
analysis that focuses solely on costs related to the provision of the
Exchange Data Feeds (the ``Cost Analysis''). Although the baseline Cost
Analysis used to justify the fees was made with the Fifth Proposal, the
fees themselves have not changed since the Initial Proposal and the
Exchange still proposes fees that are intended to cover the Exchange's
cost of producing the Exchange Data Feeds with a reasonable mark-up
over those costs. Before setting forth the additional details regarding
the proposal as well as the updated Cost Analysis conducted by the
Exchange, immediately below is a description of the proposed fees.
Proposed Market Data Pricing
The Exchange offers three separate data feeds to subscribers--
MEMOIR Depth, MEMOIR Top and MEMOIR Last Sale. The Exchange notes that
there is no requirement that any Firm subscribe to a particular
Exchange Data Feed or any Exchange Data Feed whatsoever, but instead, a
Firm may choose to maintain subscriptions to those Exchange Data Feeds
they deem appropriate based on their business model. The proposed fee
will not apply differently based upon the size or type of Firm, but
rather based upon the subscriptions a Firm has to Exchange Data Feeds
and their use thereof, which are in turn based upon factors deemed
relevant by each Firm. The proposed pricing for each of the Exchange
Data Feeds is set forth below.
MEMOIR Depth
The MEMOIR Depth feed is a MEMX-only market data feed that contains
all displayed orders for securities trading on the Exchange (i.e., top
and depth-of-book order data), order executions (i.e., last sale data),
order cancellations, order modifications, order identification numbers,
and administrative messages.\4\ The Exchange proposes to charge each of
the fees set forth below for MEMOIR Depth.
---------------------------------------------------------------------------
\4\ See MEMX Rule 13.8(a).
---------------------------------------------------------------------------
1. Internal Distribution Fee. For the receipt of access to the
MEMOIR Depth feed, the Exchange proposes to charge $1,500 per month.
This proposed access fee would be charged to any data recipient that
receives a data feed of the MEMOIR Depth feed for purposes of internal
distribution (i.e., an ``Internal Distributor''). The Exchange proposes
to define an Internal Distributor as ``a Distributor that receives an
Exchange Data product and then distributes that data to one or more
data recipients within the Distributor's own organization.'' \5\ The
proposed access fee for internal distribution will be charged only once
per month per subscribing entity (``Firm''). The Exchange notes that it
has proposed to use the phrase ``own organization'' in the definition
of Internal Distributor and External Distributor because a Firm will be
permitted to share data received from an Exchange Data product to other
legal entities affiliated with the Firm that have been disclosed to the
Exchange without such distribution being considered external to a third
party. For instance, if a company has multiple affiliated broker-
dealers under the same holding company, that company could have one of
the broker-dealers or a non-broker-dealer affiliate subscribe to an
Exchange Data product and then share the data with other affiliates
that have a need for the data. This sharing with affiliates would not
be considered external distribution to a third party but instead would
be considered internal distribution to data recipients within the
Distributor's own organization.
---------------------------------------------------------------------------
\5\ See Market Data Definitions under the proposed MEMX Fee
Schedule. The Exchange also proposes to adopt a definition for
``Distributor'', which would mean any entity that receives an
Exchange Data product directly from the Exchange or indirectly
through another entity and then distributes internally or externally
to a third party.
---------------------------------------------------------------------------
2. External Distribution Fee. For redistribution of the MEMOIR
Depth feed, the Exchange proposes to establish an access fee of $2,500
per month. The proposed redistribution fee would be charged to any
External Distributor of the MEMOIR Depth feed, which would be defined
to mean ``a Distributor that receives an Exchange Data product and then
distributes that data to a third party or one or more data recipients
outside the Distributor's own organization.'' \6\ The proposed access
fee for external distribution will be charged only once per month per
Firm. As noted above, while a Firm will be permitted to share data
received from an Exchange Data product to other legal entities
affiliated with the Firm that have been disclosed to the Exchange
without such distribution being considered external to a third party,
if a Firm distributes data received from an Exchange Data product to an
unaffiliated third party that would be considered distribution to data
recipients outside the Distributor's own organization and the access
fee for external distribution would apply.
---------------------------------------------------------------------------
\6\ See Market Data Definitions under the proposed MEMX Fee
Schedule.
---------------------------------------------------------------------------
3. Non-Display Use Fees. The Exchange proposes to establish
separate non-display fees for usage by Trading Platforms and other
Users (i.e., not by Trading Platforms).\7\ Non-Display Usage would be
defined to mean ``any method of accessing an Exchange Data product that
involves access or use by a machine or automated device without access
or use of a display by a natural person or persons.'' \8\ For Non-
Display Usage of the MEMOIR Depth feed not by Trading Platforms, the
Exchange proposes to
[[Page 16493]]
establish a fee of $2,500 per month.\9\ For Non-Display Usage of the
MEMOIR Depth feed by Trading Platforms, the Exchange proposes to
establish a fee of $2,500 per month. The proposed fees for Non-Display
Usage will be charged only once per category per Firm.\10\ In other
words, with respect to Non-Display Usage Fees, a Firm that uses MEMOIR
Depth for non-display purposes but does not operate a Trading Platform
would pay $2,500 per month, a Firm that uses MEMOIR Depth in connection
with the operation of one or more Trading Platforms (but not for other
purposes) would pay $2,500 per month, and a Firm that uses MEMOIR Depth
for non-display purposes other than operating a Trading Platform and
for the operation of one or more Trading Platforms would pay $5,000 per
month. The Exchange notes that while other exchanges have different
rates for non-display usage by Trading Platforms and non-display usage
not by Trading Platforms, and the Exchange has been operating with a
similar structure, with this filing the Exchange is proposing the same
flat fee (i.e., $2,500) for both Non-Display Usage of the MEMOIR Depth
by Trading Platforms and Non-Display Usage of the MEMOIR Depth feed not
by Trading Platforms. The Exchange notes that, consistent with other
exchanges, it previously has proposed and charged a lower fee for Non-
Display Usage of the MEMOIR Depth feed not by Trading Platforms (i.e.,
$1,500 per month) than the monthly fee for Non-Display Usage of the
MEMOIR Depth by Trading Platforms (i.e., $4,000 per month). The change
to normalize the fee for both categories at $2,500 is revenue neutral
to the Exchange, and thus, does not materially alter any of the cost
analysis or revenue projections contained in this proposal. The
Exchange further notes that while some firms who use the MEMOIR Depth
feed for purposes other than operating a Trading Platform will be
charged $1,000 more per month, firms operating Trading Platforms will
have a reduced fee (i.e., $1,500 less per month) as will firms who use
the MEMOIR Depth feed for both types of Non-Display Usage (i.e., $500
less per month).
---------------------------------------------------------------------------
\7\ The Exchange proposes to define a Trading Platform as ``any
execution platform operated as or by a registered National
Securities Exchange (as defined in Section 3(a)(1) of the Exchange
Act), an Alternative Trading System (as defined in Rule 300(a) of
Regulation ATS), or an Electronic Communications Network (as defined
in Rule 600(b)(23) of Regulation NMS).'' See Market Data Definitions
under the proposed MEMX Fee Schedule.
\8\ See Market Data Definitions under the proposed MEMX Fee
Schedule.
\9\ Non-Display Usage not by Trading Platforms would include
trading uses such as high frequency or algorithmic trading as well
as any trading in any asset class, automated order or quote
generation and/or order pegging, price referencing for smart order
routing, operations control programs, investment analysis, order
verification, surveillance programs, risk management, compliance,
and portfolio management.
\10\ The Exchange proposes to adopt note 1 to the proposed
Market Data fees table, which would make clear to subscribers that
use of the data for multiple non-display purposes or operate more
than one Trading Platform would only be charged once per category
per month. Thus, the footnote makes clear that each fee applicable
to Non-Display Usage is charged per subscriber (e.g., a Firm) and
that each of the fees represents the maximum charge per month per
subscriber regardless of the number of non-display uses or Trading
Platforms operated by the subscriber, as applicable. The footnote
further makes clear that a subscriber that uses the data for both
Non-Display Usage by Trading Platforms and Non-Display Usage not by
Trading Platforms will be charged the applicable fee for each
category of Non-Display Usage only once, and those combined fees
represent the maximum charge per subscriber with respect to Non-
Display Usage.
---------------------------------------------------------------------------
4. User Fees. The Exchange proposes to charge a Professional User
\11\ Fee (per User) of $30 per month and a Non-Professional User \12\
Fee (per User) of $3 per month. The proposed User fees would apply to
each person that has access to the MEMOIR Depth feed for displayed
usage. Thus, each Distributor's count will include every individual
that accesses the data regardless of the purpose for which the
individual uses the data. Internal Distributors and External
Distributors of the MEMX Depth feed must report all Professional and
Non-Professional Users in accordance with the following:
---------------------------------------------------------------------------
\11\ As proposed, a Professional User is any User other than a
Non-Professional User. See infra note 12.
\12\ As proposed, a Non-Professional User is a natural person or
qualifying trust that uses Exchange Data only for personal purposes
and not for any commercial purpose and, for a natural person who
works in the United States, is not: (i) registered or qualified in
any capacity with the Securities and Exchange Commission, the
Commodities Futures Trading Commission, any state securities agency,
any securities exchange or association, or any commodities or
futures contract market or association; (ii) engaged as an
``investment adviser'' as that term is defined in Section 202(a)(11)
of the Investment Advisors Act of 1940 (whether or not registered or
qualified under that Act); or (iii) employed by a bank or other
organization exempt from registration under federal or state
securities laws to perform functions that would require registration
or qualification if such functions were performed for an
organization not so exempt; or, for a natural person who works
outside of the United States, does not perform the same functions as
would disqualify such person as a Non-Professional User if he or she
worked in the United States.
---------------------------------------------------------------------------
In connection with a Distributor's distribution of the
MEMOIR Depth feed, the Distributor must count as one User each unique
User that the Distributor has entitled to have access to the MEMOIR
Depth feed.
Distributors must report each unique individual person who
receives access through multiple devices or multiple methods (e.g., a
single User has multiple passwords and user identifications) as one
User.
If a Distributor entitles one or more individuals to use
the same device, the Distributor must include only the individuals, and
not the device, in the count. Thus, Distributors would not be required
to report User device counts associated with a User's display use of
the data feed.
5. Enterprise Fee. Other than the Digital Media Enterprise Fee
described below, the Exchange is not proposing to adopt an Enterprise
Fee for the MEMOIR Depth feed at this time.
6. Digital Media Enterprise Fee. As an alternative to User fees, a
recipient Firm may purchase a monthly Digital Media Enterprise license
to receive MEMOIR Depth for distribution to an unlimited number of
Users for viewing via television, websites, and mobile devices for
informational and non-trading purposes only. The Exchange proposes to
establish a fee of $5,000 per month for a Digital Media Enterprise
license to the MEMOIR Depth feed.
MEMOIR Top
The MEMOIR Top feed is a MEMX-only market data feed that contains
top of book quotations based on equity orders entered into the System
as well as administrative messages.\13\ The Exchange proposes to charge
each of the fees set forth below for MEMOIR Top.
---------------------------------------------------------------------------
\13\ See MEMX Rule 13.8(b).
---------------------------------------------------------------------------
1. Internal Distribution Fee. For the receipt of access to the
MEMOIR Top feed, the Exchange proposes to charge $750 per month. This
proposed access fee would be charged to any data recipient that
receives a data feed of the MEMOIR Top feed for purposes of internal
distribution (i.e., an Internal Distributor). The proposed access fee
for internal distribution will be charged only once per month per Firm.
2. External Distribution Fee. For redistribution of the MEMOIR Top
feed, the Exchange proposes to establish an access fee of $2,000 per
month. The proposed redistribution fee would be charged to any External
Distributor of the MEMOIR Top feed. The proposed access fee for
external distribution will be charged only once per month per Firm.
3. Non-Display Use Fees. The Exchange does not propose to establish
non-display fees for usage by Trading Platforms or other Users with
respect to MEMOIR Top.
4. User Fees. The Exchange proposes to charge a Professional User
Fee (per User) of $0.01 per month and a Non-Professional User Fee (per
User) of $0.01 per month. The proposed User fees would apply to each
person that has access to the MEMOIR Top feed that is provided by an
External Distributor for displayed usage. The Exchange does not propose
any per User fees for internal distribution of the MEMOIR Top feed.
Each External Distributor's count will include every individual that
accesses
[[Page 16494]]
the data regardless of the purpose for which the individual uses the
data. External Distributors of the MEMOIR Top feed must report all
Professional and Non-Professional Users \14\ in accordance with the
following:
---------------------------------------------------------------------------
\14\ The Exchange notes that while it is not differentiating
Professional and Non-Professional Users based on fees (in that it is
proposing the same fee for such Users) for this data feed, and thus
will not audit Firms based on this distinction, it will request
reporting of each distinct category for informational purposes.
---------------------------------------------------------------------------
In connection with an External Distributor's distribution
of the MEMOIR Top feed, the Distributor must count as one User each
unique User that the Distributor has entitled to have access to the
MEMOIR Top feed.
External Distributors must report each unique individual
person who receives access through multiple devices or multiple methods
(e.g., a single User has multiple passwords and user identifications)
as one User.
If an External Distributor entitles one or more
individuals to use the same device, the Distributor must include only
the individuals, and not the device, in the count. Thus, Distributors
would not be required to report User device counts associated with a
User's display use of the data feed.
5. Enterprise Fee. As an alternative to User fees, a recipient Firm
may purchase a monthly Enterprise license to receive MEMOIR Top for
distribution to an unlimited number of Professional and Non-
Professional Users. The Exchange proposes to establish a fee of $10,000
per month for an Enterprise license to the MEMOIR Top feed.
6. Digital Media Enterprise Fee. As an alternative to User fees, a
recipient Firm may purchase a monthly Digital Media Enterprise license
to receive MEMOIR Top for distribution to an unlimited number of Users
for viewing via television, websites, and mobile devices for
informational and non-trading purposes only. The Exchange proposes to
establish a fee of $2,000 per month for a Digital Media Enterprise
license to the MEMOIR Top feed.
MEMOIR Last Sale
The MEMOIR Last Sale feed is a MEMX-only market data feed that
contains only execution information based on equity orders entered into
the System as well as administrative messages.\15\ The Exchange
proposes to charge each of the fees set forth below for MEMOIR Last
Sale.
---------------------------------------------------------------------------
\15\ See MEMX Rule 13.8(c).
---------------------------------------------------------------------------
1. Internal Distribution Fee. For the receipt of access to the
MEMOIR Last Sale feed, the Exchange proposes to charge $500 per month.
This proposed access fee would be charged to any data recipient that
receives a data feed of the MEMOIR Last Sale feed for purposes of
internal distribution (i.e., an Internal Distributor). The proposed
access fee for internal distribution will be charged only once per
month per Firm.
2. External Distribution Fee. For redistribution of the MEMOIR Last
Sale feed, the Exchange proposes to establish an access fee of $2,000
per month. The proposed redistribution fee would be charged to any
External Distributor of the MEMOIR Last Sale feed. The proposed access
fee for external distribution will be charged only once per month per
Firm.
3. Non-Display Use Fees. The Exchange does not propose to establish
separate non-display fees for usage by Trading Platforms or other Users
with respect to MEMOIR Last Sale.
4. User Fees. The Exchange proposes to charge a Professional User
Fee (per User) of $0.01 per month and a Non-Professional User Fee (per
User) of $0.01 per month. The proposed User fees would apply to each
person that has access to the MEMOIR Last Sale feed that is provided by
an External Distributor for displayed usage. The Exchange does not
propose any per User fees for internal distribution of the MEMOIR Last
Sale feed. Each External Distributor's count will include every
individual that accesses the data regardless of the purpose for which
the individual uses the data. External Distributors of the MEMOIR Last
Sale feed must report all Professional and Non-Professional Users \16\
in accordance with the following:
---------------------------------------------------------------------------
\16\ See supra note 14.
---------------------------------------------------------------------------
In connection with an External Distributor's distribution
of the MEMOIR Last Sale feed, the Distributor must count as one User
each unique User that the Distributor has entitled to have access to
the MEMOIR Last Sale feed.
External Distributors must report each unique individual
person who receives access through multiple devices or multiple methods
(e.g., a single User has multiple passwords and user identifications)
as one User.
If an External Distributor entitles one or more
individuals to use the same device, the Distributor must include only
the individuals, and not the device, in the count. Thus, Distributors
would not be required to report User device counts associated with a
User's display use of the data feed.
5. Enterprise Fee. As an alternative to User fees, a recipient Firm
may purchase a monthly Enterprise license to receive MEMOIR Last Sale
for distribution to an unlimited number of Professional and Non-
Professional Users. The Exchange proposes to establish a fee of $10,000
per month per Firm for an Enterprise license to the MEMOIR Last Sale
feed.
6. Digital Media Enterprise Fee. As an alternative to User fees, a
recipient Firm may purchase a monthly Digital Media Enterprise license
to receive MEMOIR Last Sale for distribution to an unlimited number of
Users for viewing via television, websites, and mobile devices for
informational and non-trading purposes only. The Exchange proposes to
establish a fee of $2,000 per month per Firm for a Digital Media
Enterprise license to the MEMOIR Last Sale feed.
Additional Discussion--Background
In two years, MEMX has grown from 0% to monthly market share
ranging between 3-4% of consolidated trading volume. During that same
period, the Exchange has had a steady increase in the number of
subscribers to Exchange Data Feeds. Until April of 2022, MEMX did not
charge fees for market data provided by the Exchange. The objective of
this approach was to eliminate any fee-based barriers for Members when
MEMX launched as a national securities exchange in 2020, which the
Exchange believes has been helpful in its ability to attract order flow
as a new exchange. The Exchange also did not initially charge for
market data because MEMX believes that any exchange should first
deliver meaningful value to Members and other market participants
before charging fees for its products and services. As discussed more
fully below, the Exchange recently calculated its annual aggregate
costs for providing the Exchange Data Feeds at approximately $3
million. In order to establish fees that are designed to recover the
aggregate costs of providing the Exchange Data Feeds plus a reasonable
mark-up, the Exchange is proposing to modify its Fee Schedule, as
described above. In addition to the Cost Analysis, described below, the
Exchange believes that its proposed approach to market data fees is
reasonable based on a comparison to competitors.
Additional Discussion--Comparison With Other Exchanges
The proposed fee structure is not novel but is instead comparable
to the fee structure currently in place for the equities exchanges
operated by Cboe Global Markets, Inc., in particular
[[Page 16495]]
BZX.\17\ As noted above, in January 2022, MEMX had 4.2% market share;
for that same month, BZX had 5.5% market share.\18\ The Exchange is
proposing fees for its Exchange Data Feeds that are similar in
structure to BZX and rates that are equal to, or in most cases lower,
than the rates data recipients pay for comparable data feeds from
BZX.\19\ The Exchange notes that other competitors maintain fees
applicable to market data that are considerably higher than those
proposed by the Exchange, including NYSE Arca \20\ and Nasdaq.\21\
However, the Exchange has focused its comparison on BZX because it is
the closest market in terms of market share and offers market data at
prices lower than several other incumbent exchanges.\22\
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\17\ See BZX Fee Schedule, available at: https://www.cboe.com/us/equities/membership/fee_schedule/bzx/ (the ``BZX Fee Schedule'').
\18\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/.
\19\ The Exchange notes that although no fee proposed by the
Exchange is higher than the fee charged for BZX for a comparable
data product, under certain fact patterns a BZX data recipient could
pay a lower rate than that charged by the Exchange. For instance,
while the Exchange has proposed to adopt identical fees to those
charged for internal distribution of MEMOIR Top as compared to BZX
Top ($750 per month) and for internal distribution of MEMOIR Last
Sale as compared to BZX Last Sale ($500 per month), BZX permits a
data recipient who takes both feeds to pay only one fee and, upon
request, to receive the other data feed free of charge. See BZX Fee
Schedule, supra note 17. Because the Exchange has not proposed such
a discount, a data recipient taking both MEMOIR TOP and MEMOIR Last
Sale would pay more ($1,250 per month) than they would to take
comparable data feeds from BZX ($750 per month).
\20\ Fees for the NYSE Arca Integrated Feed, which is the
comparable product to MEMOIR Depth, are $3,000 for access (internal
use) and $3,750 for redistribution (external distribution), compared
to the Exchange's proposed fees of $1,500 and $2,500, respectively.
In addition, for its Integrated Feed, NYSE Arca charges for three
different categories of non-display usage, each of which is $10,500
and each of which can be charged to the same firm more than one time
(e.g., a customer operating a Trading Platform would pay $10,500
compared to the Exchange's proposed fee of $2,500 but would also pay
for each Trading Platform, up to three, if they operate more than
one, instead of the single fee proposed by the Exchange; if that
customer also uses the data for the other categories of non-display
usage they would also pay $10,500 for each other category of usage,
whereas the Exchange would only charge $2,500 for any non-display
usage other than operating a Trading Platform). Finally, the NYSE
Arca Integrated Feed user fee for pro devices is $60 compared to the
proposed Professional User fee of $30 for MEMOIR Depth and the NYSE
Arca Integrated user fee for non-pro devices is $20 compared to the
proposed Non-Professional User fee of $3 for MEMOIR Depth. See NYSE
Proprietary Market Data Pricing list, available at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf.
\21\ Fees for the Nasdaq TotalView data feed, which is the
comparable product to MEMOIR Depth, are $1,500 for access (internal
use) and $3,750 for redistribution (external distribution), compared
to the Exchange's proposed fees of $1,500 and $2,500, respectively.
In addition, for TotalView, Nasdaq charges Trading Platforms $5,000
compared to the Exchange's proposal of $2,500, and, like NYSE Arca,
charges customers per Trading Platform, up to three, if they operate
more than one, instead of the single fee proposed by the Exchange.
Nasdaq also requires users to report and pay usage fees for non-
display access at levels of from $375 per subscriber for smaller
firms with 39 or fewer subscribers to $75,000 per firm for a larger
firm with over 250 subscribers. The Exchange does not require
counting of devices or users for non-display purposes and instead
has proposed flat fee of $2,500 for non-display usage not by Trading
Platforms. Finally, the Nasdaq TotalView user fee for professional
subscribers is $76 compared to the proposed Professional User fee of
$30 for MEMOIR Depth and the Nasdaq TotalView user fee for non-
professional subscribers is $15 compared to the proposed Non-
Professional User fee of $3 for MEMOIR Depth. See Nasdaq Global Data
Products pricing list, available at: https://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN.
\22\ See supra notes 20-21.
---------------------------------------------------------------------------
The fees for the BZX Depth feed--which like the MEMOIR Depth feed,
includes top of book, depth of book, trades, and security status
messages--consist of an internal distributor access fee of $1,500 per
month (the same as the Exchange's proposed rate), an external
distributor access fee of $5,000 per month (two times the Exchange's
proposed rate), a non-display usage fee for non-Trading Platforms of
$2,000 per month ($500 less than the Exchange's proposed rate), a non-
display usage fee for Trading Platforms of $5,000 per month ($2,500
more than the Exchange's proposed rate), a Professional User fee (per
User) of $40 per month ($10 more than the Exchange's proposed rate),
and a Non-Professional User fee (per User) of $5 per month ($2 more
than the Exchange's proposed rate).\23\
---------------------------------------------------------------------------
\23\ See BZX Fee Schedule, supra note 17. The Exchange notes
that there are differences between the structure of BZX Depth fees
and the proposed fees for MEMOIR Depth, including that the Exchange
has proposed a Digital Media Enterprise License for MEMOIR Depth but
a comparable license is not available from BZX. Additionally, BZX
maintains a general enterprise license for User fees, similar to
that proposed by the Exchange for MEMOIR Top and MEMOIR Last Sale,
but the Exchange has not proposed adding a general Enterprise
license at this time.
---------------------------------------------------------------------------
The comparisons of the MEMOIR Last Sale feed and MEMOIR Top feed to
the BZX Last Sale feed and BZX Top feed, respectively, are similar in
that BZX generally maintains the same fee structure proposed by the
Exchange and BZX charges fees that are comparable to, but in most cases
higher than, the Exchange's proposed fees. Notably, the User fees
proposed by the Exchange for External Distributors of MEMOIR Last Sale
and MEMOIR Top ($0.01 for both Professional Users and Non-Professional
Users) are considerably lower than those charged by BZX for BZX Top and
BZX Last Sale ($4 for Professional Users and $0.10 for Non-Professional
Users).
By charging the same low rate for all Users of MEMOIR Top and
MEMOIR Last Sale the Exchange believes it is proposing a structure that
is not only lower cost but that will also simplify reporting for
subscribers who externally distribute these data feeds to Users, as the
Exchange believes that categorization of Users as Professional and Non-
Professional is not meaningful for these products and requiring such
categorization would expose Firms to unnecessary audit risk of paying
more for mis-categorization. However, the Exchange does not believe
this is equally true for MEMOIR Depth, as most individual Users of
MEMOIR Depth are likely to be Professional Users and the Exchange has
proposed pricing for such Users that the Exchange believes is
reasonable given the value to Professional Users (i.e., since
Professional Users use data to participate in the markets as part of
their full-time profession and earn compensation based on their
employment). While the Exchange would prefer the simplicity of a single
fee, similar to that imposed for Professional Users and Non-
Professional Users of the MEMOIR Top and MEMOIR Last Sale feeds, as
that would reduce audit risk and simplify reporting, the proposed fee
for Professional Users of the MEMOIR Depth feed if also applied to Non-
Professional Users of such feed would be significantly higher than
other exchanges charge. The Exchange reiterates that it does not
anticipate many Non-Professional Users to subscribe to MEMOIR Depth. In
fact, the Exchange is only aware of a single Non-Professional User
(i.e., one User) that is reported to receive MEMOIR Depth.
Additional Discussion--Cost Analysis
In general, the Exchange believes that exchanges, in setting fees
of all types, should meet very high standards of transparency to
demonstrate why each new fee or fee increase meets the Exchange Act
requirements that fees be reasonable, equitably allocated, not unfairly
discriminatory, and not create an undue burden on competition among
members and markets. In particular, the Exchange believes that each
exchange should take extra care to be able to demonstrate that these
fees are based on its costs and reasonable business needs. Accordingly,
in proposing to charge fees for market data, the Exchange has sought to
be especially diligent in assessing those fees in a transparent way
against its own aggregate costs of providing the related service, and
also carefully and transparently assessing the
[[Page 16496]]
impact on Members--both generally and in relation to other Members,
i.e., to assure the fee will not create a financial burden on any
participant and will not have an undue impact in particular on smaller
Members and competition among Members in general. The Exchange does not
believe it needs to otherwise address questions about market
competition in the context of this filing because the proposed fees are
so clearly consistent with the Act based on its Cost Analysis. The
Exchange also believes that this level of diligence and transparency is
called for by the requirements of Section 19(b)(1) under the Act,\24\
and Rule 19b-4 thereunder,\25\ with respect to the types of information
self-regulatory organizations (``SROs'') should provide when filing fee
changes, and Section 6(b) of the Act,\26\ which requires, among other
things, that exchange fees be reasonable and equitably allocated,\27\
not designed to permit unfair discrimination,\28\ and that they not
impose a burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.\29\ This rule change proposal
addresses those requirements, and the analysis and data in this section
are designed to clearly and comprehensively show how they are met.\30\
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\24\ 15 U.S.C. 78s(b)(1).
\25\ 17 CFR 240.19b-4.
\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(4).
\28\ 15 U.S.C. 78f(b)(5).
\29\ 15 U.S.C. 78f(b)(8).
\30\ In 2019, Commission staff published guidance suggesting the
types of information that SROs may use to demonstrate that their fee
filings comply with the standards of the Exchange Act (``Fee
Guidance''). While MEMX understands that the Fee Guidance does not
create new legal obligations on SROs, the Fee Guidance is consistent
with MEMX's view about the type and level of transparency that
exchanges should meet to demonstrate compliance with their existing
obligations when they seek to charge new fees. See Staff Guidance on
SRO Rule Filings Relating to Fees (May 21, 2019) available at
https://www.sec.gov/tm/staff-guidancesro-rule-filings-fees.
---------------------------------------------------------------------------
As noted above, MEMX has conducted and recently updated a study of
its aggregate costs to produce the Exchange Data Feeds--the Cost
Analysis. The Cost Analysis required a detailed analysis of MEMX's
aggregate baseline costs, including a determination and allocation of
costs for core services provided by the Exchange--transactions, market
data, membership services, physical connectivity, and application
sessions (which provide order entry, cancellation and modification
functionality, risk functionality, ability to receive drop copies, and
other functionality). MEMX separately divided its costs between those
costs necessary to deliver each of these core services, including
infrastructure, software, human resources (i.e., personnel), and
certain general and administrative expenses (``cost drivers''). Next,
MEMX adopted an allocation methodology with various principles to guide
how much of a particular cost should be allocated to each core service.
For instance, fixed costs that are not driven by client activity (e.g.,
message rates), such as data center costs, were allocated more heavily
to the provision of physical connectivity (75%), with smaller
allocations to logical ports (2.6%), and the remainder to the provision
of transaction execution and market data services (22.4%). The
allocation methodology was decided through conversations with senior
management familiar with each area of the Exchange's operations. After
adopting this allocation methodology, the Exchange then applied an
estimated allocation of each cost driver to each core service,
resulting in the cost allocations described below.
By allocating segmented costs to each core service, MEMX was able
to estimate by core service the potential margin it might earn based on
different fee models. The Exchange notes that as a non-listing venue it
has four primary sources of revenue that it can potentially use to fund
its operations: transaction fees, fees for connectivity services,
membership and regulatory fees, and market data fees. Accordingly, the
Exchange generally must cover its expenses from these four primary
sources of revenue.
Through the Exchange's extensive Cost Analysis, which was again
recently updated to focus solely on the provision of the Exchange Data
Feeds, the Exchange analyzed every expense item in the Exchange's
general expense ledger to determine whether each such expense relates
to the provision of the Exchange Data Feeds, and, if such expense did
so relate, what portion (or percentage) of such expense actually
supports the provision of the Exchange Data Feeds, and thus bears a
relationship that is, ``in nature and closeness,'' directly related to
the Exchange Data Feeds. Based on its analysis, MEMX calculated its
aggregate annual costs for providing the Exchange Data Feeds, at
$3,014,348. This results in an estimated monthly cost for providing
Exchange Data Feeds of $251,196. In order to cover operating costs and
earn a reasonable profit on its market data, the Exchange has
determined it necessary to charge fees for its proprietary data
products, and, as such, the Exchange is proposing to modify its Fee
Schedule, pursuant to MEMX Rules 15.1(a) and (c), as set forth above.
Costs Related to Offering Exchange Data Feeds
The following chart details the individual line-item (annual) costs
considered by MEMX to be related to offering the Exchange Data Feeds to
its Members and other customers as well as the percentage of the
Exchange's overall costs that such costs represent for such area (e.g.,
as set forth below, the Exchange allocated approximately 6.9% of its
overall Human Resources cost to offering Exchange Data Feeds).
------------------------------------------------------------------------
Costs drivers Costs Percent of all
------------------------------------------------------------------------
Human Resources......................... $1,729,856 6.9
Network Infrastructure (e.g., servers, 232,452 8.8
switches)..............................
Data Center............................. 318,456 9.8
Hardware and Software Licenses.......... 246,864 9.8
Depreciation............................ 399,911 18.0
Allocated Shared Expenses............... 86,809 1.8
-------------------------------
Total............................... 3,014,348 6.5
------------------------------------------------------------------------
Human Resources
For personnel costs (Human Resources), MEMX calculated an
allocation of employee time for employees whose functions include
directly providing services necessary to offer the Exchange Data Feeds,
including performance thereof, as well as personnel with ancillary
functions
[[Page 16497]]
related to establishing and providing such services (such as
information security and finance personnel). The Exchange notes that it
has fewer than eighty (80) employees and each department leader has
direct knowledge of the time spent by each employee with respect to the
various tasks necessary to operate the Exchange. The estimates of Human
Resources cost were therefore determined by consulting with such
department leaders, determining which employees are involved in tasks
related to providing the Exchange Data Feeds, and confirming that the
proposed allocations were reasonable based on an understanding of the
percentage of their time such employees devote to tasks related to
providing the Exchange Data Feeds. The Exchange notes that senior level
executives were allocated Human Resources costs to the extent the
Exchange believed they are involved in overseeing tasks related to
providing the Exchange Data Feeds. The Exchange's cost allocation for
employees who perform work in support of generating and disseminating
the Exchange Data Feeds arrive at a full time equivalent (``FTE'') of
5.2 FTEs. The Human Resources cost was calculated using a blended rate
of compensation reflecting salary, equity and bonus compensation,
benefits, payroll taxes, and 401(k) matching contributions.
Network Infrastructure
The Network Infrastructure cost includes cabling and switches
required to generate and disseminate the Exchange Data Feeds. The
Network Infrastructure cost was narrowly estimated by focusing on the
servers used at the Exchange's primary and back-up data centers
specifically for the Exchange Data Feeds. Further, as certain servers
are only partially utilized to generate and disseminate the Exchange
Data Feeds, only the percentage of such servers devoted to generating
and disseminating the Exchange Data Feeds was included (i.e., the
capacity of such servers allocated to the Exchange Data Feeds). From
this analysis, the Exchange determined that 9.8% of its servers are
used to generate and disseminate the Exchange Data Feeds. When combined
with the applicable switches used for Exchange Data Feeds, the Exchange
has determined that approximately 8.8% of its overall Network
Infrastructure costs are attributable to the Exchange Data Feeds.
Data Center
Data Center costs includes an allocation of the costs the Exchange
incurs to provide the Exchange Data Feeds in the third-party data
centers where the Exchange maintains its equipment as well as related
costs (the Exchange does not own the Primary Data Center or the
Secondary Data Center, but instead, leases space in data centers
operated by third parties). As the Data Center costs are primarily for
space, power, and cooling of servers, the Exchange applied the same
percentage calculated above with respect to servers, i.e. 9.8%, to
allocate the applicable Data Center costs for the Exchange Data Feeds.
The Exchange believes it is reasonable to apply the same proportionate
percentage of Data Center costs to that of Network Infrastructure.
Hardware and Software Licenses
Hardware and Software Licenses includes hardware and software
licenses used to operate and monitor physical assets necessary to offer
the Exchange Data Feeds. Because the hardware and software license fees
are correlated to the servers used by the Exchange, the Exchange again
applied an allocation of 9.8% of its costs for Hardware and Software
Licenses to the Exchange Data Feeds.
Depreciation
The vast majority of the software the Exchange uses with respect to
its operations, including the software used to generate and disseminate
the Exchange Data Feeds has been developed in-house and the cost of
such development is depreciated over time. Accordingly, the Exchange
included Depreciation cost related to depreciated software used to
generate and disseminate the Exchange Data Feeds. The Exchange also
included in the Depreciation costs certain budgeted improvements that
the Exchange intends to capitalize and depreciate with respect to the
Exchange Data Feeds in the near-term. As with the other allocated costs
in the Exchange's updated Cost Analysis, the Depreciation cost was
therefore narrowly tailored to depreciation related to the Exchange
Data Feeds.
Allocated Shared Expenses
Finally, certain general shared expenses were allocated to the
Exchange Data Feeds. However, contrary to its prior cost analysis,
rather than taking the whole amount of general shared expenses and
applying an allocated percentage, the Exchange has narrowly selected
specific general shared expenses relevant to the Exchange Data Feeds.
The costs included in general shared expenses allocated to the Exchange
Data Feeds include office space and office expenses (e.g., occupancy
and overhead expenses), utilities, recruiting and training, marketing
and advertising costs, professional fees for legal, tax and accounting
services (including external and internal audit expenses), and
telecommunications costs. The cost of paying individuals to serve on
the Exchange's Board of Directors or any committee was not allocated to
providing Exchange Data Feeds.
Cost Analysis--Additional Discussion
In conducting its Cost Analysis, the Exchange did not allocate any
of its expenses in full to any core service and did not double-count
any expenses. Instead, as described above, the Exchange identified and
allocated applicable cost drivers across its core services and used the
same approach to analyzing costs to form the basis of a separate
proposal to adopt fees for connectivity services (the ``Connectivity
Filing'') \31\ and this filing proposing fees for Exchange Data Feeds.
Thus, the Exchange's allocations of cost across core services were
based on real costs of operating the Exchange and were not double-
counted across the core services or their associated revenue streams.
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\31\ See SR-MEMX-2022-26, filed September 15, 2022, available
at: https://info.memxtrading.com/rules-and-filings/.
---------------------------------------------------------------------------
The Exchange anticipates that the proposed fees for Exchange Data
Feeds will generate approximately $262,500 monthly ($3,150,000
annually) based on billing and reporting that has taken place since the
Exchange commenced billing for such data feeds. The proposed fees for
Exchange Data Feeds are designed to permit the Exchange to cover the
costs allocated to providing Exchange Data Feeds with a mark-up that
the Exchange believes is modest (approximately 4%), which the Exchange
believes is fair and reasonable after taking into account the costs
related to creating, generating, and disseminating the Exchange Data
Feeds and the fact that the Exchange will need to fund future
expenditures (increased costs, improvements, etc.). The Exchange also
reiterates that prior to April of 2022 the Exchange has not previously
charged any fees for Exchange Data Feeds and its allocation of costs to
Exchange Data Feeds was part of a holistic allocation that also
allocated costs to other core services without double-counting any
expenses.
The Exchange like other exchanges is, after all, a for-profit
business. Accordingly, while the Exchange believes in transparency
around costs and potential margins, as well as periodic review of
revenues and applicable costs (as discussed below),
[[Page 16498]]
the Exchange does not believe that these estimates should form the sole
basis of whether or not a proposed fee is reasonable or can be adopted.
Instead, the Exchange believes that the information should be used
solely to confirm that an Exchange is not earning supra-competitive
profits, and the Exchange believes its Cost Analysis and related
projections demonstrate this fact.
As a general matter, the Exchange believes that its costs will
remain relatively similar in future years. It is possible however that
such costs will either decrease or increase. To the extent the Exchange
sees growth in use of Exchange Data Feeds it will receive additional
revenue to offset future cost increases. However, if use of Exchange
Data Feeds is static or decreases, the Exchange might not realize the
revenue that it anticipates or needs in order to cover applicable
costs. Accordingly, the Exchange is committing to conduct a one-year
review after implementation of these fees. The Exchange expects that it
may propose to adjust fees at that time, to increase fees in the event
that revenues fail to cover costs and a reasonable mark-up of such
costs.\32\ Similarly, the Exchange expects that it would propose to
decrease fees in the event that revenue materially exceeds current
projections. In addition, the Exchange will periodically conduct a
review to inform its decision making on whether a fee change is
appropriate (e.g., to monitor for costs increasing/decreasing or
subscribers increasing/decreasing, etc. in ways that suggest the then-
current fees are becoming dislocated from the prior cost-based
analysis) and expects that it would propose to increase fees in the
event that revenues fail to cover its costs and a reasonable mark-up,
or decrease fees in the event that revenue or the mark-up materially
exceeds current projections. In the event that the Exchange determines
to propose a fee change, the results of a timely review, including an
updated cost estimate, will be included in the rule filing proposing
the fee change. More generally, the Exchange believes that it is
appropriate for an exchange to refresh and update information about its
relevant costs and revenues in seeking any future changes to fees, and
the Exchange commits to do so.
---------------------------------------------------------------------------
\32\ The Exchange notes that it does not believe that a 4% mark-
up is necessarily competitive, and instead that this is likely
significantly below the mark-up many businesses place on their
products and services.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \33\ of the Act in general, and
furthers the objectives of Section 6(b)(4) \34\ of the Act, in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees and other charges among its Members
and other persons using its facilities. Additionally, the Exchange
believes that the proposed fees are consistent with the objectives of
Section 6(b)(5) \35\ of the Act in that they are designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to a free and open market and
national market system, and, in general, to protect investors and the
public interest, and, particularly, are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\33\ 15 U.S.C. 78f.
\34\ 15 U.S.C. 78f(b)(4).
\35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange notes prior to addressing the specific reasons the
Exchange believes the proposed fees and fee structure are reasonable,
equitably allocated and not unreasonably discriminatory, that the
proposed definitions and fee structure described above are consistent
with the definitions and fee structure used by most U.S. securities
exchanges, and Cboe BZX in particular. As such, the Exchange believes
it is adopting a model that is easily understood by Members and non-
Members, most of which also subscribe to market data products from
other exchanges. For this reason, the Exchange believes that the
proposed definitions and fee structure described above are consistent
with the Act generally, and Section 6(b)(5) \36\ of the Act in
particular.
---------------------------------------------------------------------------
\36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
As noted above, the Exchange's executed trading volume has grown
from 0% market share to approximately 3-4% market share in two years
and the Exchange believes that it is reasonable to begin charging fees
for the Exchange Data Feeds. One of the primary objectives of MEMX is
to provide competition and to reduce fixed costs imposed upon the
industry. Consistent with this objective, the Exchange believes that
this proposal reflects a simple, competitive, reasonable, and equitable
pricing structure, with fees that are discounted when compared to
comparable data products and services offered by competitors.\37\
---------------------------------------------------------------------------
\37\ See supra notes 20-21; see supra note 23 and accompanying
text.
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Reasonableness
Overall. With regard to reasonableness, the Exchange understands
that the Commission has traditionally taken a market-based approach to
examine whether the SRO making the fee proposal was subject to
significant competitive forces in setting the terms of the proposal.
The Exchange understands that in general the analysis considers whether
the SRO has demonstrated in its filing that (i) there are reasonable
substitutes for the product or service; (ii) ``platform'' competition
constrains the ability to set the fee; and/or (iii) revenue and cost
analysis shows the fee would not result in the SRO taking
supracompetitive profits. If the SRO demonstrates that the fee is
subject to significant competitive forces, the Exchange understands
that in general the analysis will next consider whether there is any
substantial countervailing basis to suggest the fee's terms fail to
meet one or more standards under the Exchange Act. The Exchange further
understands that if the filing fails to demonstrate that the fee is
constrained by competitive forces, the SRO must provide a substantial
basis, other than competition, to show that it is consistent with the
Exchange Act, which may include production of relevant revenue and cost
data pertaining to the product or service.
The Exchange has not determined its proposed overall market data
fees based on assumptions about market competition, instead relying
upon a cost-plus model to determine a reasonable fee structure that is
informed by the Exchange's understanding of different uses of the
products by different types of participants. In this context, the
Exchange believes the proposed fees overall are fair and reasonable as
a form of cost recovery plus the possibility of a reasonable return for
Exchange's aggregate costs of offering the Exchange Data Feeds. The
Exchange believes the proposed fees are reasonable because they are
designed to generate annual revenue to recoup some or all of Exchange's
annual costs of providing market data with a reasonable mark-up. As
discussed in the Purpose section, the Exchange estimates this fee
filing will result in annual revenue of approximately $3.15 million,
representing a potential mark-up of just 4% over the cost of providing
market data. Accordingly, the Exchange believes that this fee
methodology is
[[Page 16499]]
reasonable because it allows the Exchange to recoup some or all of its
expenses for providing market data products (with any additional
revenue representing no more than what the Exchange believes to be a
reasonable rate of return). The Exchange also believes that the
proposed fees are reasonable because they are generally less than the
fees charged by competing equities exchanges for comparable market data
products, notwithstanding that the competing exchanges may have
different system architectures that may result in different cost
structures for the provision of market data.
The Exchange believes the proposed fees for the Exchange Data Feeds
are reasonable when compared to fees for comparable products, such as
the BZX Depth feed, BZX Top feed, and BZX Last Sale feed, compared to
which the Exchange's proposed fees are generally lower, as well as
other comparable data feeds priced significantly higher than the
Exchange's proposed fees for the Exchange Data Feeds.\38\ Specifically
with respect to the MEMOIR Depth feed, the Exchange believes that the
proposed fees for such feed are reasonable because they represent not
only the value of the data available from the MEMOIR Top and MEMOIR
Last Sale data feeds, which have lower proposed fees, but also the
value of receiving the depth-of-book data on an order-by-order basis.
The Exchange believes it is reasonable to have pricing based, in part,
upon the amount of information contained in each data feed and the
value of that information to market participants. The MEMOIR Top and
Last Sale data feeds, as described above, can be utilized to trade on
the Exchange but contain less information than that is available on the
MEMOIR Depth feed (i.e., even for a subscriber who takes both feeds,
such feeds do not contain depth-of-book information). Thus, the
Exchange believes it reasonable for the products to be priced as
proposed, with MEMOIR Last Sale having the lowest price, MEMOIR Top the
next lowest price, and MEMOIR Depth the highest price (and more than
MEMOIR Last Sale and MEMOIR Top combined).
---------------------------------------------------------------------------
\38\ See supra notes 20-21; see supra note 23 and accompanying
text.
---------------------------------------------------------------------------
Internal Distribution Fees. The Exchange believes that it is
reasonable to charge Fees to access the Exchange Data Feeds for
Internal Distribution because of the value of such data to subscribers
in their profit-generating activities. The Exchange also believes that
the proposed monthly Internal Distribution fees for MEMOIR Depth,
MEMOIR Top, and MEMOIR Last Sale are reasonable as they are the same
amounts charged by at least one other exchange of comparable size for
comparable data products,\39\ and are lower than the fees charged by
several other exchanges for comparable data products.\40\
---------------------------------------------------------------------------
\39\ See BZX Fee Schedule, supra note 17.
\40\ See, e.g., NYSE Proprietary Market Data Pricing list,
available at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf (``NYSE Fee Schedule''); Nasdaq Global
Data Products pricing list, available at: https://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN (``Nasdaq Fee
Schedule'').
---------------------------------------------------------------------------
External Distribution Fees. The Exchange believes that it is
reasonable to charge External Distribution fees for the Exchange Data
Feeds because vendors receive value from redistributing the data in
their business products provided to their customers. The Exchange
believes that charging External Distribution fees is reasonable because
the vendors that would be charged such fees profit by re-transmitting
the Exchange's market data to their customers. These fees would be
charged only once per month to each vendor account that redistributes
any Exchange Data Feed, regardless of the number of customers to which
that vendor redistributes the data. The Exchange also believes the
proposed monthly External Distribution fee for the MEMOIR Depth Feed is
reasonable because it is half the amount of the fee charged by at least
one other exchange of comparable size for a comparable data
product,\41\ and significantly less than the amount charged by several
other exchanges for comparable data products.\42\ Similarly, the
Exchange believes the proposed monthly External Distribution fees for
the MEMOIR TOP and MEMOIR Last Sale feeds are reasonable because they
are discounted compared to same amounts charged by at least one other
exchange of comparable size for comparable data products,\43\ and
significantly less than the amount charged by several other exchanges
for comparable data products.\44\
---------------------------------------------------------------------------
\41\ See BZX Fee Schedule, supra note 17.
\42\ See, e.g., NYSE Fee Schedule, supra note 40; Nasdaq Fee
Schedule, supra note 40.
\43\ See BZX Fee Schedule, supra note 17.
\44\ See, e.g., NYSE Fee Schedule, supra note 40; Nasdaq Fee
Schedule, supra note 40.
---------------------------------------------------------------------------
User Fees. The Exchange believes that having separate Professional
and Non-Professional User fees for the MEMOIR Depth feed is reasonable
because it will make the product more affordable and result in greater
availability to Professional and Non-Professional Users. Setting a
modest Non-Professional User fee is reasonable because it provides an
additional method for Non-Professional Users to access the Exchange
Data Feeds by providing the same data that is available to Professional
Users. The proposed monthly Professional User fee and monthly Non-
Professional User fee are reasonable because they are lower than the
fees charged by at least one other exchange of comparable size for
comparable data products,\45\ and significantly less than the amounts
charged by several other exchanges for comparable data products.\46\
---------------------------------------------------------------------------
\45\ See BZX Fee Schedule, supra note 17.
\46\ See, e.g., NYSE Fee Schedule, supra note 40; Nasdaq Fee
Schedule, supra note 40.
---------------------------------------------------------------------------
The Exchange also believes it is reasonable to charge the same low
per User fee of $0.01 for both Professional Users and Non-Professional
Users receiving the MEMOIR Top and MEMOIR Last Sale feeds, as this is
not only pricing such data at a much lower cost than other exchanges
charge for comparable data feeds \47\ but doing so will also simplify
reporting for subscribers who externally distribute these data feeds to
Users, as the Exchange believes that categorization of Users as
Professional and Non-Professional is not meaningful for these products
and that requiring such categorization would expose Firms to
unnecessary audit risk of paying more for mis-categorization. The
Exchange also believes that the proposal to require reporting of
individual Users, but not devices, is reasonable as this too will
eliminate unnecessary audit risk that can arise when recipients are
required to apply complex counting rules such as whether or not to
count devices or whether an individual accessing the same data through
multiple devices should be counted once or multiple times. In addition,
the Exchange believes it is reasonable to charge User fees only for
External Distribution of the MEMOIR Top and MEMOIR Last Sale feeds, and
not charge User fees for Internal Distribution of such market data
feeds, because vendors receive additional value from being able to
redistribute such data to their customers and can recoup associated
expenses by passing on such fees either directly to those customers or
indirectly by using the data to facilitate other revenue-generating
activity.
---------------------------------------------------------------------------
\47\ See id.
---------------------------------------------------------------------------
The Exchange further believes that its proposal to adopt a Digital
Media Enterprise Fee for each of the Exchange Data Feeds is reasonable
because it would allow a market participant that wishes to disseminate
information from the Exchange Data Feeds through a digital media
platform such as a public
[[Page 16500]]
website without determining the number of Users, which would be
practically impossible. The Exchange further believes it is reasonable
for the Digital Media Enterprise Fee to be higher for MEMOIR Depth than
MEMOIR Top or MEMOIR Last Sale because of the additional information
that is contained in MEMOIR Depth, and in turn, the potential
additional value to data recipients.
The Exchange also believes it is reasonable to adopt an Enterprise
Fee for MEMOIR Top and MEMOIR Last Sale because this would allow a
market participant to disseminate such data feeds to an unlimited
number of Users without the necessity of counting such Users. As this
is an optional subscription, a data recipient is able to determine
whether it prefers to count Users and report such Users to the Exchange
or not, and also whether it is more economically advantageous to count
and pay for specific Users or to subscribe to the Enterprise Fee. The
Exchange also notes that given the low cost proposed per User, only a
market participant with a substantial number of Users would likely
choose to subscribe for and pay the Enterprise Fee. The Exchange also
believes it is reasonable not to adopt an Enterprise Fee for MEMOIR
Depth at this time as the Exchange does not believe there is sufficient
demand for an Enterprise Fee given relatively low User counts for
subscribers of MEMOIR Depth. While MEMOIR Top and MEMOIR Last Sale also
currently have relatively low User counts, the Exchange does believe
that there is potential demand for a market data recipient that wishes
to disseminate top of book and last sale information to a large
subscriber base, and thus again believes it is reasonable to offer an
Enterprise Fee option for such a market data recipient.
Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees for the MEMOIR Depth feed are reasonable, because
they reflect the value of the data to the data recipients in their
profit-generating activities and do not impose the burden of counting
non-display devices.
The Exchange believes that the proposed Non-Display Usage fees for
the MEMOIR Depth feed reflect the significant value of the non-display
data use to data recipients, most of whom purchase such data on a
voluntary basis. Non-display data can be used by data recipients for a
wide variety of profit-generating purposes, including proprietary and
agency trading and smart order routing, as well as by data recipients
that operate Trading Platforms that compete directly with the Exchange
for order flow. The data also can be used for a variety of non-trading
purposes that indirectly support trading, such as risk management and
compliance. Although some of these non-trading uses do not directly
generate revenues, they can nonetheless substantially reduce a
recipient's costs by automating such functions so that they can be
carried out in a more efficient and accurate manner and reduce errors
and labor costs, thereby benefiting recipients. The Exchange believes
that charging for non-trading uses is reasonable because data
recipients can derive substantial value from such uses, for example, by
automating tasks so that can be performed more quickly and accurately
and less expensively than if they were performed manually.
Previously, the non-display use data pricing policies of many
exchanges required customers to count, and the exchanges to audit the
count of, the number of non-display devices used by a customer. As non-
display use grew more prevalent and varied, however, exchanges received
an increasing number of complaints about the impracticality and
administrative burden associated with that approach. In response,
several exchanges developed a non-display use pricing structure that
does not require non-display devices to be counted or those counts to
be audited, and instead categorizes different types of use. The
Exchange proposes to distinguish between non-display use for the
operation of a Trading Platform and other non-display use, which is
similar to exchanges such as BZX and EDGX,\48\ while other exchanges
maintain additional categories and in many cases charge multiple times
for different types of non-display use or the operation of multiple
Trading Platforms.\49\
---------------------------------------------------------------------------
\48\ See BZX Fee Schedule, supra note 17; EDGX Fee Schedule,
available at: https://www.cboe.com/us/equities/membership/fee_schedule/edgx/.
\49\ See supra notes 20-21.
---------------------------------------------------------------------------
The Exchange believes that it is reasonable to segment the fee for
non-display use into these two categories. As noted above, the uses to
which customers can put the MEMOIR Depth feed are numerous and varied,
and the Exchange believes that charging separate fees for these
separate categories of use is reasonable because it reflects the actual
value the customer derives from the data, based upon how the customer
makes use of the data.
The Exchange believes that the proposed fees for non-display use
other than operation of a Trading Platform are reasonable. These fees
are comparable to the fees charged by at least one other exchange of
comparable size for a comparable data product,\50\ and significantly
less than the amounts charged by several other exchanges for comparable
data products.\51\ The Exchange believes that the proposed fees
directly and appropriately reflect the significant value of using data
on a non-display basis in a wide range of computer-automated functions
relating to both trading and non-trading activities and that the number
and range of these functions continue to grow through innovation and
technology developments. Further, the Exchange benefits from other non-
display use by market participants (including the fact that the
Exchange receives orders resulting from algorithms and routers) and
both the Exchange and other participants benefit from other non-display
use by market participants when such use is to support more broadly
beneficial functions such as risk management and compliance. The
Exchange notes that with this filing it is proposing the same flat fee
(i.e., $2,500) for both Non-Display Usage of the MEMOIR Depth by
Trading Platforms and Non-Display Usage of the MEMOIR Depth feed not by
Trading Platforms.
---------------------------------------------------------------------------
\50\ See BZX Fee Schedule, supra note 17.
\51\ See, e.g., NYSE Fee Schedule, supra note 40; Nasdaq Fee
Schedule, supra note 40.
---------------------------------------------------------------------------
The Exchange also believes that it is reasonable to charge the
proposed fees for non-display use for operation of a Trading Platform
because the proposed fees are comparable to, and lower than, the fees
charged at least one other exchange of comparable size for a comparable
data product,\52\ and significantly less than the amounts charged by
several other exchanges for comparable data products, which also charge
per Trading Platform operated by a data subscriber subject to a cap in
most cases, rather than charging per Firm, as proposed by the
Exchange.\53\ With respect to alternative trading systems, or ATSs,
such platforms can utilize the Exchange Data Feeds to form prices for
trading on such platforms but are not required to do so and can instead
utilize SIP data. Approximately two-thirds of the ATSs approved to
trade NMS stocks do not currently subscribe to the Exchange Data
Feeds.\54\ With respect to other exchanges, which may choose to use the
Exchange Data Feeds for Regulation NMS compliance and order routing,
the Exchange notes
[[Page 16501]]
that several exchange competitors of the Exchange have not subscribed
to any Exchange Data Feeds and instead utilize SIP data for such
purposes.\55\ Accordingly, both ATSs and other exchanges clearly have a
choice whether to subscribe to the Exchange Data Feeds.
---------------------------------------------------------------------------
\52\ See BZX Fee Schedule, supra note 17.
\53\ See supra notes 20-21.
\54\ MEMX internal data regarding non-display use by Trading
Platforms; as of December 31, 2022, there were 33 ATSs that had
filed an effective Form ATS-N with the Commission to trade NMS
stocks.
\55\ See, e.g., NYSE Arca Rule 7.37-E.(d), Order Execution and
Routing, and BZX Rule 11.26, each of which discloses the data feeds
used by each respective exchange and state that SIP products are
used with respect to MEMX.
---------------------------------------------------------------------------
The proposed Non-Display Usage fees for the MEMOIR Depth feed are
also reasonable because they take into account the extra value of
receiving the data for Non-Display Usage that includes a rich set of
information including top of book quotations, depth-of-book quotations,
executions and other information. The Exchange believes that the
proposed fees directly and appropriately reflect the significant value
of using the MEMOIR Depth feed on a non-display basis in a wide range
of computer-automated functions relating to both trading and non-
trading activities and that the number and range of these functions
continue to grow through innovation and technology developments.\56\
For the same reasons, the Exchange believes it is reasonable to provide
other data feeds, namely MEMOIR Top and MEMOIR Last Sale, free of
charge for Non-Display Usage. The Exchange does not believe that either
MEMOIR Top or MEMOIR Last Sale has the same value to market
participants with respect to non-display usage as MEMOIR Depth, as
neither of MEMOIR Top or MEMOIR Last Sale contains the amount of
information that the Exchange expects market participants need for
typical trading and non-trading non-display applications.
---------------------------------------------------------------------------
\56\ See also Exchange Act Release No. 69157, March 18, 2013, 78
FR 17946, 17949 (March 25, 2013) (SR-CTA/CQ-2013-01) (``[D]ata feeds
have become more valuable, as recipients now use them to perform a
far larger array of non-display functions. Some firms even base
their business models on the incorporation of data feeds into black
boxes and application programming interfaces that apply trading
algorithms to the data, but that do not require widespread data
access by the firm's employees. As a result, these firms pay little
for data usage beyond access fees, yet their data access and usage
is critical to their businesses.''
---------------------------------------------------------------------------
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the Exchange Data Feeds are reasonable.
Equitable Allocation
Overall. The Exchange believes that its proposed fees are
reasonable, fair, and equitable, and not unfairly discriminatory
because they are designed to align fees with services provided. The
Exchange believes the proposed fees for the Exchange Data Feeds are
allocated fairly and equitably among the various categories of users of
the feeds, and any differences among categories of users are justified
and appropriate.
The Exchange believes that the proposed fees are equitably
allocated because they will apply uniformly to all data recipients that
choose to subscribe to the Exchange Data Feeds. Any subscriber or
vendor that chooses to subscribe to one or more Exchange Data Feeds is
subject to the same Fee Schedule, regardless of what type of business
they operate, and the decision to subscribe to one or more Exchange
Data Feeds is based on objective differences in usage of Exchange Data
Feeds among different Firms, which are still ultimately in the control
of any particular Firm. The Exchange believes the proposed pricing
between Exchange Data Feeds is equitably allocated because it is based,
in part, upon the amount of information contained in each data feed and
the value of that information to market participants. The MEMOIR Top
and Last Sale data feeds, as described above, can be utilized to trade
on the Exchange but contain less information than that is available on
the MEMOIR Depth feed (i.e., even for a subscriber who takes both
feeds, such feeds do not contain depth-of-book information). Thus, the
Exchange believes it is an equitable allocation of fees for the
products to be priced as proposed, with MEMOIR Last Sale having the
lowest price, MEMOIR Top the next lowest price, and MEMOIR Depth the
highest price (and more than MEMOIR Last Sale and MEMOIR Top combined).
Internal Distribution Fee. The Exchange believes the proposed
monthly fees for Internal Distribution of the Exchange Data Feeds are
equitably allocated because they would be charged on an equal basis to
all data recipients that receive the Exchange Data Feeds for internal
distribution, regardless of what type of business they operate.
External Distribution Fees. The Exchange believes the proposed
monthly fees for External Distribution of the Exchange Data Feeds are
equitably allocated because they would be charged on an equal basis to
all data recipients that receive the Exchange Data Feeds that choose to
redistribute the feeds externally. The Exchange also believes that the
proposed monthly fees for External Distribution are equitably allocated
when compared to lower proposed fees for Internal Distribution because
data recipients that are externally distributing Exchange Data Feeds
are able to monetize such distribution and spread such costs amongst
multiple third party data recipients, whereas the Internal Distribution
fee is applicable to use by a single data recipient (and its
affiliates).
User Fees. The Exchange believes that the fee structure
differentiating Professional User fees from Non-Professional User fees
for display use of the MEMOIR Depth feed is equitable. This structure
has long been used by other exchanges and the SIPs to reduce the price
of data to Non-Professional Users and make it more broadly
available.\57\ Offering the MEMOIR Depth feed to Non-Professional Users
at a lower cost than Professional Users results in greater equity among
data recipients, as Professional Users are categorized as such based on
their employment and participation in financial markets, and thus, are
compensated to participate in the markets. While Non-Professional Users
too can receive significant financial benefits through their
participation in the markets, the Exchange believes it is reasonable to
charge more to those Users who are more directly engaged in the
markets. The Exchange also believes it may be unreasonable to charge a
Non-Professional User the same fee that it has proposed for
Professional Users, as this fee would be higher than any other U.S.
equities exchange charges to Non-Professional Users for receipt of a
comparable data product. These User fees would be charged uniformly to
all individuals that have access to the MEMOIR Depth feed based on the
category of User.
---------------------------------------------------------------------------
\57\ See, e.g., Securities Exchange Act Release No. 59544 (March
9, 2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131)
(establishing the $15 Non-Professional User Fee (Per User) for NYSE
OpenBook); Securities Exchange Act Release No. 20002, File No. S7-
433 (July 22, 1983), 48 FR 34552 (July 29, 1983) (establishing Non-
Professional fees for CTA data); NASDAQ BX Equity 7 Pricing
Schedule, Section 123.
---------------------------------------------------------------------------
The Exchange also believes the proposed User fees for MEMOIR Top
and MEMOIR Last Sale are equitable because the Exchange has proposed to
charge Professional Users and Non-Professional Users the same low rate
of $0.01 per month. In addition, the Exchange believes it is equitable
to charge User fees only for External Distribution of the MEMOIR Top
and MEMOIR Last Sale feeds, and not charge User fees for Internal
Distribution of such market data feeds, because vendors receive
additional value from being able to redistribute such data to their
customers and can recoup associated expenses by passing on such fees
either directly to those customers or indirectly
[[Page 16502]]
by using the data to facilitate other revenue-generating activity.
Finally, the Exchange believes it is equitable to adopt User fees
for the Memoir Depth feed that are significantly higher than the User
fees for the MEMOIR Top and MEMOIR Last Sale feeds because, as
described above, MEMOIR Depth contains significantly more data than
such data feeds. The Exchange believes it is equitable to have pricing
based, in part, upon the amount of information contained in each data
feed and the value of that information to market participants.
The Exchange further believes that its proposal to adopt a Digital
Media Enterprise Fee for each of the Exchange Data Feeds is equitable
because it would allow a market participant that wishes to disseminate
information from the Exchange Data Feeds through a digital media
platform such as a public website without determining the number of
Users, which would be practically impossible. The Exchange further
believes it is equitable for the Digital Media Enterprise Fee to be
higher for MEMOIR Depth than MEMOIR Top or MEMOIR Last Sale because of
the additional information that is contained in MEMOIR Depth, and in
turn, the potential additional value to data recipients.
The Exchange also believes it is equitable to adopt an Enterprise
Fee for MEMOIR Top and MEMOIR Last Sale because this would allow a
market participant to disseminate such data feeds to an unlimited
number of Users without the necessity of counting such Users. As this
is an optional subscription, a data recipient is able to determine
whether it prefers to count Users and report such Users to the Exchange
or not, and also whether it is more economically advantageous to count
and pay for specific Users or to subscribe to the Enterprise Fee. The
Exchange also believes it is equitable not to adopt an Enterprise Fee
for MEMOIR Depth at this time as the Exchange does not believe there is
sufficient demand for an Enterprise Fee given relatively low User
counts for subscribers of MEMOIR Depth, as described above.
Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees are equitably allocated because they would require
subscribers to pay fees only for the uses they actually make of the
data. As noted above, non-display data can be used by data recipients
for a wide variety of profit-generating purposes (including trading and
order routing) as well as purposes that do not directly generate
revenues (such as risk management and compliance) but nonetheless
substantially reduce the recipient's costs by automating certain
functions. The Exchange believes that it is equitable to charge non-
display data subscribers that use MEMOIR Depth data for purposes other
than operation of a Trading Platform as proposed because all such
subscribers would have the ability to use such data for as many non-
display uses as they wish for one low fee. As noted above, this
structure is comparable to that in place for the BZX Depth feed but
several other exchanges charge multiple non-display fees to the same
client to the extent they use a data feed in several different trading
platforms or for several types of non-display use.\58\
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\58\ See supra notes 20-21.
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The Exchange further believes that the fees for non-display use for
operation of a Trading Platform and for non-display use other than
operation of a Trading Platform are equitable because the Exchange is
imposing the same flat fee for each category of non-display use.
The Exchange believes that it is equitable to charge a single fee
per Firm rather than multiple fees for a Firm that operates more than
one Trading Platform because operators of Trading Platforms are many
times viewed as a single competing venue or group, even if there are
multiple liquidity pools operated by the same competitor.
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the Exchange Data Feeds are equitably allocated.
The Proposed Fees Are Not Unfairly Discriminatory
The Exchange believes the proposed fees for the Exchange Data Feeds
are not unfairly discriminatory because any differences in the
application of the fees are based on meaningful distinctions between
customers, and those meaningful distinctions are not unfairly
discriminatory between customers.
Overall. The Exchange believes that the proposed fees are not
unfairly discriminatory because they would apply to all data recipients
that choose to subscribe to the same Exchange Data Feed(s). Any vendor
or subscriber that chooses to subscribe to the Exchange Data Feeds is
subject to the same Fee Schedule, regardless of what type of business
they operate. Because the proposed fees for MEMOIR Depth are higher,
vendors and subscribers seeking lower cost options may instead choose
to receive data from the SIPs or through the MEMOIR Top and/or MEMOIR
Last Sale feed for a lower cost. Alternatively, vendors and subscribers
can choose to pay for the MEMOIR Depth feed in order to receive data in
a single feed with depth-of-book information if such information is
valuable to such vendors or subscribers. The Exchange notes that
vendors or subscribers can also choose to subscribe to a combination of
data feeds for redundancy purposes or to use different feeds for
different purposes. In sum, each vendor or subscriber has the ability
to choose the best business solution for itself. The Exchange does not
believe it is unfairly discriminatory to base pricing upon the amount
of information contained in each data feed and the value of that
information to market participants. As described above, the MEMOIR Top
and Last Sale data feeds, can be utilized to trade on the Exchange but
contain less information than that is available on the MEMOIR Depth
feed (i.e., even for a subscriber who takes both feeds, such feeds do
not contain depth-of-book information). Thus, the Exchange believes it
is not unfairly discriminatory for the products to be priced as
proposed, with MEMOIR Last Sale having the lowest price, MEMOIR Top the
next lowest price, and MEMOIR Depth the highest price (and more than
MEMOIR Last Sale and MEMOIR Top combined).
Internal Distribution Fees. The Exchange believes the proposed
monthly fees for Internal Distribution of the Exchange Data Feeds are
not unfairly discriminatory because they would be charged on an equal
basis to all data recipients that receive the same Exchange Data
Feed(s) for internal distribution, regardless of what type of business
they operate.
External Distribution Fees. The Exchange believes the proposed
monthly fees for redistributing the Exchange Data Feeds are not
unfairly discriminatory because they would be charged on an equal basis
to all data recipients that receive the same Exchange Data Feed(s) that
choose to redistribute the feed(s) externally. The Exchange also
believes that having higher monthly fees for External Distribution than
Internal Distribution is not unfairly discriminatory because data
recipients that are externally distributing Exchange Data Feeds are
able to monetize such distribution and spread such costs amongst
multiple third party data recipients, whereas the Internal Distribution
fee is applicable to use by a single data recipient (and its
affiliates).
User Fees. The Exchange believes that the fee structure
differentiating Professional User fees from Non-Professional User fees
for display use of the MEMOIR Depth feed is not unfairly
discriminatory. This structure has long
[[Page 16503]]
been used by other exchanges and the SIPs to reduce the price of data
to Non-Professional Users and make it more broadly available.\59\
Offering the Exchange Data Feeds to Non-Professional Users with the
same data as is available to Professional Users, albeit at a lower
cost, results in greater equity among data recipients. These User fees
would be charged uniformly to all individuals that have access to the
Exchange Data Feeds based on the category of User. The Exchange also
believes the proposed User fees for MEMOIR Depth are not unfairly
discriminatory, with higher fees for Professional Users than Non-
Professional Users, because Non-Professional Users may have less
ability to pay for such data than Professional Users as well as less
opportunity to profit from their usage of such data. The Exchange also
believes the proposed User fees for MEMOIR Depth are not unfairly
discriminatory, even though substantially higher than the proposed User
fees for MEMOIR Top and MEMOIR Last Sale, because, as described above,
MEMOIR Depth has significantly more information than the other Exchange
Data Feeds and is thus potentially more valuable to such Users. The
Exchange also believes the proposed User fees for MEMOIR Top and MEMOIR
Last Sale are not unfairly discriminatory because the Exchange has
proposed to charge Professional Users and Non-Professional Users the
same low rate of $0.01 per month.
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\59\ See supra note 57.
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The Exchange further believes that its proposal to adopt a Digital
Media Enterprise Fee for each of the Exchange Data Feeds and an
Enterprise Fee for MEMOIR Top and MEMOIR Last Sale is not unfairly
discriminatory because these optional alternatives to counting and
paying for specific Users will provide market participants the ability
to provide information from the Exchange Data Feeds to large numbers of
Users without counting and paying for such Users. The Exchange also
believes it is not unfairly discriminatory not to adopt an Enterprise
Fee for MEMOIR Depth at this time as the Exchange does not believe
there is sufficient demand for an Enterprise Fee given relatively low
User counts for subscribers of MEMOIR Depth, as described above.
Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees for the MEMOIR Depth feed are not unfairly
discriminatory because they would require subscribers for non-display
use to pay fees depending on their use of the data, either for
operation of a Trading Platform or not, but would not impose multiple
fees to the extent a Firm operates multiple Trading Platforms or has
multiple different types of non-display use. As noted above, non-
display data can be used by data recipients for a wide variety of
profit-generating purposes as well as purposes that do not directly
generate revenues but nonetheless substantially reduce the recipient's
costs by automating certain functions. This segmented fee structure is
not unfairly discriminatory because no subscriber of non-display data
would be charged a fee for a category of use in which it did not
actually engage.
The Exchange further believes that the fees for non-display use for
operation of a Trading Platform and for non-display use other than
operation of a Trading Platform are not unreasonably discriminatory
because the Exchange is imposing the same flat fee for each category of
non-display use.
The Exchange believes that it is not unreasonably discriminatory to
charge a single fee for an operator of Trading Platforms that operates
more than one Trading Platform because operators of Trading Platforms
are many times viewed as a single competing venue or group, even if
there a multiple liquidity pools operated by the same competitor. The
Exchange again notes that certain competitors to the Exchange charge
for non-display usage per Trading Platform,\60\ in contrast to the
Exchange's proposal. In turn, to the extent they subscribe to Exchange
Data Feeds, these same competitors will benefit from the Exchange's
pricing model to the extent they operate multiple Trading Platforms (as
most do) by paying a single fee rather than paying for each Trading
Platform that they operate that consumes Exchange Data Feeds.
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\60\ See supra notes 20-21.
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For all of the foregoing reasons, the Exchange believes that the
proposed fees for the Exchange Data Feeds are not unfairly
discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\61\ the Exchange
does not believe that the proposed rule change would impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act.
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\61\ 15 U.S.C. 78f(b)(8).
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Intra-Market Competition
The Exchange does not believe that the proposed fees for Exchange
Data Feeds place certain market participants at a relative disadvantage
to other market participants because, as noted above, the proposed fees
are associated with usage of Exchange Data Feeds by each market
participant based on the type of business they operate, and the
decision to subscribe to one or more Exchange Data Feeds is based on
objective differences in usage of Exchange Data Feeds among different
Firms, which are still ultimately in the control of any particular
Firm, and such fees do not impose a barrier to entry to smaller
participants. Accordingly, the proposed fees for Exchange Data Feeds do
not favor certain categories of market participants in a manner that
would impose a burden on competition; rather, the allocation of the
proposed fees reflects the types of Exchange Data Feeds consumed by
various market participants and their usage thereof.
Inter-Market Competition
The Exchange does not believe the proposed fees place an undue
burden on competition on other SROs that is not necessary or
appropriate. In particular, market participants are not forced to
subscribe to any of the Exchange Data Feeds, as described above.
Additionally, other exchanges have similar market data fees in place
for their participants, but with comparable and in many cases higher
rates for market data feeds.\62\ The proposed fees are based on actual
costs and are designed to enable the Exchange to recoup its applicable
costs with the possibility of a reasonable profit on its investment as
described in the Purpose and Statutory Basis sections. Competing
equities exchanges are free to adopt comparable fee structures subject
to the SEC rule filing process.
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\62\ See supra notes 20-21; see supra note 23 and accompanying
text.
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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 \63\ and Rule 19b-4(f)(2) \64\ thereunder.
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\63\ 15 U.S.C. 78s(b)(3)(A)(ii).
\64\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the
[[Page 16504]]
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-2023-04 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-2023-04. 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 submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-MEMX-2023-04 and should be submitted on or before April
7, 2023.
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\65\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\65\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05448 Filed 3-16-23; 8:45 am]
BILLING CODE 8011-01-P
