Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 31077-31081 [2023-10246]

Download as PDF Federal Register / Vol. 88, No. 93 / Monday, May 15, 2023 / Notices 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 within such longer period 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 Exchange consents, the Commission will: A. by order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be 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 ddrumheller on DSK120RN23PROD with NOTICES1 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–CboeBZX–2023–028. 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 19:07 May 12, 2023 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.87 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–10244 Filed 5–12–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meetings Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold an Open Meeting on Wednesday, May 17, 2023 at 10:00 a.m. PLACE: The meeting will be webcast on the Commission’s website at www.sec.gov. STATUS: This meeting will begin at 10:00 a.m. (ET) and will be open to the public via webcast on the Commission’s website at www.sec.gov. MATTERS TO BE CONSIDERED: 1. The Commission will consider whether to propose a new rule under the Securities Exchange Act of 1934 regarding the contents of a covered clearing agency’s recovery and winddown plan and whether to amend Rule 17Ad–22(e)(6) under the Securities Exchange Act of 1934 regarding the margin requirements applicable to a covered clearing agency providing central counterparty services. CONTACT PERSON FOR MORE INFORMATION: For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551–5400. TIME AND DATE: • 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– CboeBZX–2023–028 on the subject line. VerDate Sep<11>2014 inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–CboeBZX–2023–028 and should be submitted on or before June 5, 2023. Jkt 259001 (Authority: 5 U.S.C. 552b.) Dated: May 10, 2023. Vanessa A. Countryman, Secretary. [FR Doc. 2023–10318 Filed 5–11–23; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97462; File No. SR–MEMX– 2023–08] Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange’s Fee Schedule May 9, 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 April 28, 2023, MEMX LLC (‘‘MEMX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing with the Commission a proposed rule change to amend the Exchange’s fee schedule applicable to Members 3 (the ‘‘Fee Schedule’’) pursuant to Exchange Rules 15.1(a) and (c). The Exchange proposes to implement the changes to the Fee Schedule pursuant to this proposal on May 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend the Fee Schedule to: 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Exchange Rule 1.5(p). 2 17 87 17 PO 00000 CFR 200.30–3(a)(12). Frm 00135 Fmt 4703 Sfmt 4703 31077 E:\FR\FM\15MYN1.SGM 15MYN1 31078 Federal Register / Vol. 88, No. 93 / Monday, May 15, 2023 / Notices (i) modify the Liquidity Provision Tiers; and (ii) modify the required criteria under the Displayed Liquidity Incentive (‘‘DLI’’) Tiers. 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 15% of the total market share of executed volume of equities trading.4 Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow, and the Exchange currently represents approximately 3% of the overall market share.5 The Exchange in particular operates a ‘‘Maker-Taker’’ model whereby it provides rebates to Members that add liquidity to the Exchange and charges fees to Members that remove liquidity from the Exchange. The Fee Schedule sets forth the standard rebates and fees applied per share for orders that add and remove liquidity, respectively. Additionally, in response to the competitive environment, the Exchange also offers tiered pricing, which provides Members with opportunities to qualify for higher rebates or lower fees where certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. Liquidity Provision Tiers ddrumheller on DSK120RN23PROD with NOTICES1 The Exchange currently provides a base rebate of $0.0018 per share for executions of Added Displayed Volume.6 The Exchange also currently offers Liquidity Provision Tiers 1–5 under which a Member may receive an enhanced rebate for executions of 4 Market share percentage calculated as of April 28, 2023. The Exchange receives and processes data made available through consolidated data feeds (i.e., CTS and UTDF). 5 Id. 6 The base rebate for executions of Added Displayed Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume’’ with a Fee Code of ‘‘B’’, ‘‘D’’ or ‘‘J’’, as applicable, on execution reports. VerDate Sep<11>2014 19:07 May 12, 2023 Jkt 259001 Added Displayed Volume by achieving the corresponding required volume criteria for each such tier. The Exchange now proposes to modify the Liquidity Provision Tiers by modifying the required criteria under such tiers, as further described below. With respect to Liquidity Provision Tier 2, the Exchange currently provides an enhanced rebate of $0.00325 per share for executions of Added Displayed Volume for Members that qualify for such tier by achieving: (1) an ADAV 7 that is equal to or greater than 0.25% of the TCV; 8 and (2) a Non-Displayed ADAV 9 that is equal to or greater than 4,000,000 shares.10 The Exchange now proposes to modify the required criteria such that a Member would now qualify for such tier by achieving: (1) an ADAV (excluding Retail Orders 11) that is equal to or greater than 0.25% of the TCV; and (2) a Non-Displayed ADAV that is equal to or greater than 4,000,000 shares. The Exchange is not proposing to change the rebate for executions under such tier but rather is proposing to exclude Retail Orders from the ADAV component of the first criteria. With respect to Liquidity Provision Tier 4, the Exchange currently provides an enhanced rebate of $0.0029 per share for executions of Added Displayed Volume for Members that qualify for such tier by achieving: (1) an ADAV that is equal to or greater than 0.15% of the TCV. The Exchange now proposes to modify the required criteria such that a Member would now qualify for such tier by achieving an ADAV that is equal to 7 As set forth on the Fee Schedule, ‘‘ADAV’’ means the average daily added volume calculated as the number of shares added per day, which is calculated on a monthly basis, and ‘‘Displayed ADAV’’ means ADAV with respect to displayed orders. 8 As set forth on the Fee Schedule, ‘‘TCV’’ means total consolidated volume calculated as the volume reported by all exchanges and trade reporting facilities to a consolidated transaction reporting plan for the month for which the fees apply. 9 As set forth on the Fee Schedule, ‘‘NonDisplayed ADAV’’ means ADAV with respect to non-displayed orders (including orders subject to Display-Price Sliding that receive price improvement when executed and Midpoint Peg orders). 10 The pricing for Liquidity Provision Tier 2 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume, Liquidity Provision Tier 2’’ with a Fee Code of ‘‘B2’’, ‘‘D2’’ or ‘‘J2’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. 11 As set forth in Exchange Rule 11.21(a), a ‘‘Retail Order’’ means an agency or riskless principal order that meets the criteria of FINRA Rule 5320.03 that originates from a natural person and is submitted to the Exchange by a Retail Member Organization, provided that no change is made to the terms of the order with respect to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 or greater than 0.15% of the TCV, or (2) a Displayed ADAV that is greater than or equal to 2,000,000 shares and a StepUp Displayed ADAV 12 from April 2023 that is greater than or equal to 50% of the Member’s April 2023 Displayed ADAV.13 Thus, such proposed change would keep the existing criteria intact and add an alternative criteria that includes a Displayed ADAV and a StepUp Displayed ADAV threshold, which are designed to encourage the submission of additional liquidityadding order flow to the Exchange. Additionally, the Exchange is proposing that criteria (2) of Liquidity Provision Tier 4 will expire no later than October 31, 2023, and the Exchange will indicate this in a note under the Liquidity Provision Tiers pricing table on the Fee Schedule. The Exchange is not proposing to change the rebate provided under such tier. With respect to Liquidity Provision Tier 5, the Exchange currently provides an enhanced rebate of $0.0027 per share for executions of Added Displayed Volume for Members that qualify for such tier by achieving: (1) an ADAV that is equal to or greater than 0.075% of the TCV; or (2) a Displayed ADAV (excluding Retail Orders) that is equal to or greater than 750,000 shares and a Step-Up Displayed ADAV (excluding Retail Orders) from October 2022 that is equal to or greater than 30% of the Member’s October 2022 Displayed ADAV (excluding Retail Orders).14 The Exchange now proposes to modify the required criteria under Liquidity Provision Tier 5 such that a Member would qualify for such tier only by achieving an ADAV that is equal to or greater than 0.075% of the TCV. Thus, such proposed change would keep the first of the two existing alternative criteria intact and eliminate the second of the two existing alternative criteria (based on a Displayed ADAV threshold and a Step-Up ADAV from October 2022 threshold). The Exchange is not 12 As set forth on the Fee Schedule, ‘‘Step-Up Displayed ADAV’’ means Displayed ADAV in the relevant baseline month subtracted from current Displayed ADAV. 13 The pricing for Liquidity Provision Tier 4 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume, Liquidity Provision Tier 4’’ with a Fee Code of ‘‘B4’’, ‘‘D4’’ or ‘‘J4’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. 14 The pricing for Liquidity Provision Tier 5 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume, Liquidity Provision Tier 5’’ with a Fee Code of ‘‘B5’’, ‘‘D5’’ or ‘‘J5’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. E:\FR\FM\15MYN1.SGM 15MYN1 Federal Register / Vol. 88, No. 93 / Monday, May 15, 2023 / Notices proposing to change the rebate provided under such tier. The tiered pricing structure for executions of Added Displayed Volume under the Liquidity Provision Tiers provides an incremental incentive for Members to strive for higher volume thresholds to receive higher enhanced rebates for such executions and, as such, is intended to encourage Members to maintain or increase their order flow, primarily in the form of liquidity-adding volume, to the Exchange, thereby contributing to a deeper and more liquid market to the benefit of all Members and market participants. The Exchange believes that the Liquidity Provision Tiers, as modified by the proposed changes described above, reflect a reasonable and competitive pricing structure that is right-sized and consistent with the Exchange’s overall pricing philosophy of encouraging added and/or displayed liquidity. Specifically, the Exchange believes that, after giving effect to the proposed changes described above, the rebate for executions of Added Displayed Volume provided under each of the Liquidity Provision Tiers 1–5 remains commensurate with the corresponding required criteria under each such tier and is reasonably related to the market quality benefits that each such tier is designed to achieve. ddrumheller on DSK120RN23PROD with NOTICES1 DLI Tiers The Exchange currently offers DLI Tiers 1 and 2 under which a Member may receive an enhanced rebate for executions of Added Displayed Volume by achieving the corresponding required criteria for each such tier. The DLI Tiers are designed to encourage Members, through the provision of an enhanced rebate for executions of Added Displayed Volume, to promote price discovery and market quality by quoting at the NBBO for a significant portion of each day (i.e., through the applicable quoting requirement 15) in a broad base of securities (i.e., through the applicable securities requirements 16), thereby benefitting the Exchange and investors 15 As set forth on the Fee Schedule, the term ‘‘quoting requirement’’ means the requirement that a Member’s NBBO Time be at least 25%, and the term ‘‘NBBO Time’’ means the aggregate of the percentage of time during regular trading hours during which one of a Member’s market participant identifiers (‘‘MPIDs’’) has a displayed order of at least one round lot at the national best bid or the national best offer. 16 As set forth on the Fee Schedule, the term ‘‘securities requirement’’ means the requirement that a Member meets the quoting requirement in the applicable number of securities per trading day. Currently, each of DLI Tiers 1 and 2 has a securities requirement that may be achieved by a Member meeting the quoting requirement in the specified number of securities traded on the Exchange. VerDate Sep<11>2014 19:07 May 12, 2023 Jkt 259001 by providing improved trading conditions for all market participants through narrower bid-ask spreads and increased depth of liquidity available at the NBBO in a broad base of securities and committing capital to support the execution of orders.17 Now, the Exchange proposes to modify the required criteria under DLI Tier 2. Currently, a Member qualifies for DLI Tier 2 by achieving an NBBO Time of at least 25% in an average of least 400 securities per trading day during the month. Now, the Exchange proposes to increase the securities requirement under DLI Tier 2 such that a Member would now qualify for DLI Tier 2 by achieving an NBBO Time of at least 25% in an average of 500 (i.e., increased from 400) securities per trading day during the month. This proposed increase in the securities requirement under DLI Tier 2 is designed to achieve the DLI’s market quality benefits described above in a broader base of securities under such tier. The Exchange is not proposing to change the rebate for executions under such tier. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,18 in general, and with Sections 6(b)(4) and 6(b)(5) of the Act,19 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. As discussed above, the Exchange operates in a highly fragmented and competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient, and the Exchange represents only a small percentage of the overall market. The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in 17 See the Exchange’s Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding the Exchange’s DLI Tiers. See also Securities Exchange Act Release No. 92150 (June 10, 2021), 86 FR 32090 (June 16, 2021) (SR–MEMX–2021–07) (notice of filing and immediate effectiveness of fee changes adopted by the Exchange, including the adoption of DLI). 18 15 U.S.C. 78f. 19 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 31079 determining prices and SRO revenues and also recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 20 The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to new or different pricing structures being introduced into the market. Accordingly, competitive forces constrain the Exchange’s transaction fees and rebates, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. The Exchange believes the proposal reflects a reasonable and competitive pricing structure designed to incentivize market participants to direct additional order flow to the Exchange, which the Exchange believes would promote price discovery and enhance liquidity and market quality on the Exchange to the benefit of all Members and market participants. The Exchange notes that volumebased incentives and discounts (such as tiers) have been widely adopted by exchanges (including the Exchange), and are reasonable, equitable and not unfairly discriminatory because they are open to all members on an equal basis and provide additional benefits or discounts that are reasonably related to the value to an exchange’s market quality associated with higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns, and the introduction of higher volumes of orders into the price and volume discovery process. The Exchange believes that the Liquidity Provision Tiers 2, 4, and 5, and the DLI Tier 2, each as modified by the changes proposed herein, are reasonable, equitable and not unfairly discriminatory for these same reasons, as such tiers would provide Members with an incremental incentive to achieve certain volume thresholds on the Exchange, are available to all Members on an equal basis, and, as described above, are reasonably designed to encourage Members to maintain or increase their order flow, including in the various forms of liquidity-adding and liquidity-removing volume under the required criteria, as applicable, to the Exchange, which the 20 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). E:\FR\FM\15MYN1.SGM 15MYN1 31080 Federal Register / Vol. 88, No. 93 / Monday, May 15, 2023 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 Exchange believes would promote price discovery, enhance liquidity and market quality, and contribute to a more robust and well-balanced market ecosystem on the Exchange to the benefit of all Members and market participants. The Exchange also believes that such tiers reflect a reasonable and equitable allocation of fees and rebates, as the Exchange believes that, after giving effect to the changes proposed herein, the enhanced rebates for executions of Added Displayed Volume under each such tier is commensurate with the corresponding required criteria under each such tier and is reasonably related to the market quality benefits that each such tier is designed to achieve, as described above. With respect to the proposed change to increase the securities requirement under DLI Tier 2 from 400 securities to 500 securities, the Exchange believes the proposed change is reasonable, equitable and not unfairly discriminatory because it will apply to all Members equally, in that all Members will continue to have the opportunity to achieve the required criteria under such tier, and this proposed increase is intended to enhance market quality in a broader range of securities on the Exchange to the benefit of all Members. For the reasons discussed above, the Exchange submits that the proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of the Act 21 in that it provides for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities and is not designed to unfairly discriminate between customers, issuers, brokers, or dealers. As described more fully below in the Exchange’s statement regarding the burden on competition, the Exchange believes that its transaction pricing is subject to significant competitive forces, and that the proposed fees and rebates described herein are appropriate to address such forces. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposal will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the proposal is intended to incentivize market participants to direct additional order flow to the Exchange, which the Exchange believes would promote price discovery and enhance liquidity and 21 15 U.S.C. 78f(b)(4) and (5). VerDate Sep<11>2014 19:07 May 12, 2023 market quality on the Exchange to the benefit of all Members and market participants. As a result, the Exchange believes the proposal would enhance its competitiveness as a market that attracts actionable orders, thereby making it a more desirable destination venue for its customers. For these reasons, the Exchange believes that the proposal furthers the Commission’s goal in adopting Regulation NMS of fostering competition among orders, which promotes ‘‘more efficient pricing of individual stocks for all types of orders, large and small.’’ 22 Members that meet the associated volume requirements in any month. As described above, the Exchange believes that the required criteria under each such tier are commensurate with the corresponding rebate under such tier and are reasonably related to the enhanced liquidity and market quality that such tier is designed to promote. For the foregoing reasons, the Exchange believes the proposed changes would not impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. Intramarket Competition As discussed above, the Exchange believes that the proposal would maintain a tiered pricing structure that is still consistent with the Exchange’s overall pricing philosophy of encouraging added and/or displayed liquidity and would incentivize market participants to direct additional order flow to the Exchange through volumebased tiers, thereby enhancing liquidity and market quality on the Exchange to the benefit of all Members, as well as enhancing the attractiveness of the Exchange as a trading venue, which the Exchange believes, in turn, would continue to encourage market participants to direct additional order flow to the Exchange. Greater liquidity benefits all Members by providing more trading opportunities and encourages Members to send additional orders to the Exchange, thereby contributing to robust levels of liquidity, which benefits all market participants. The Exchange does not believe that the proposed changes would impose any burden on intramarket competition because such changes will incentivize members to submit additional order flow, thereby contributing to a more robust and well-balanced market ecosystem on the Exchange to the benefit of all Members as well as enhancing the attractiveness of the Exchange as a trading venue, which the Exchange believes, in turn, would continue to encourage market participants to direct additional order flow to the Exchange. Greater liquidity benefits all Members by providing more trading opportunities and encourages Members to send additional orders to the Exchange, thereby contributing to robust levels of liquidity, which benefits all market participants. The opportunity to qualify for the modified Liquidity Provision Tiers and the DLI Tiers, and thus receive the corresponding enhanced rebates or discounted fees, as applicable, would be available to all Intermarket Competition As noted above, the Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. Members have numerous alternative venues that they may participate on and direct their order flow to, including 15 other equities exchanges and numerous alternative trading systems and other off-exchange venues. As noted above, no single registered equities exchange currently has more than approximately 15% of the total market share of executed volume of equities trading. Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow. Moreover, the Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to new or different pricing structures being introduced into the market. Accordingly, competitive forces constrain the Exchange’s transaction fees and rebates and market participants can readily choose to send their orders to other exchange and off-exchange venues if they deem fee levels at those other venues to be more favorable. As described above, the proposed changes represent a competitive proposal through which the Exchange is seeking to incentivize market participants to direct additional order flow to the Exchange through volume-based tiers, which have been widely adopted by exchanges, including the Exchange. Accordingly, the Exchange believes the proposal would not burden, but rather promote, intermarket competition by enabling it to better compete with other exchanges that offer similar pricing structures and incentives to market participants. 22 See Jkt 259001 PO 00000 supra note 20. Frm 00138 Fmt 4703 Sfmt 4703 E:\FR\FM\15MYN1.SGM 15MYN1 Federal Register / Vol. 88, No. 93 / Monday, May 15, 2023 / Notices Additionally, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 23 The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. SEC, the D.C. Circuit stated as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’.24 Accordingly, the Exchange does not believe its proposed pricing changes impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. ddrumheller on DSK120RN23PROD with NOTICES1 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 25 and Rule 19b–4(f)(2) 26 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the 23 See supra note 20. v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782– 83 (December 9, 2008) (SR–NYSE–2006–21)). 25 15 U.S.C. 78s(b)(3)(A)(ii). 26 17 CFR 240.19b–4(f)(2). 24 NetCoalition VerDate Sep<11>2014 19:07 May 12, 2023 Jkt 259001 31081 Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Sherry R. Haywood, Assistant Secretary. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: [FR Doc. 2023–10246 Filed 5–12–23; 8:45 am] Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MEMX–2023–08 on the subject line. Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, Section 3(a)(1) 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–2023–08. 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. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–MEMX–2023–08 and should be submitted on or before June 5, 2023. PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97465; File No. SR–Phlx– 2023–16] May 9, 2023. Pursuant to 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 May 1, 2023, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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 proposes to amend Equity 7, Section 3(a)(1) to exclude certain days for purposes of calculating Consolidated Volume and trading activity, as described further below. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/phlx/rules, at the principal office of the Exchange, 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 places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of 27 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\15MYN1.SGM 15MYN1

Agencies

[Federal Register Volume 88, Number 93 (Monday, May 15, 2023)]
[Notices]
[Pages 31077-31081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10246]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97462; File No. SR-MEMX-2023-08]


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

May 9, 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 April 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to amend the Exchange's fee schedule applicable to Members \3\ (the 
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The 
Exchange proposes to implement the changes to the Fee Schedule pursuant 
to this proposal on May 1, 2023. The text of the proposed rule change 
is provided in Exhibit 5.
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    \3\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
    The purpose of the proposed rule change is to amend the Fee 
Schedule to:

[[Page 31078]]

(i) modify the Liquidity Provision Tiers; and (ii) modify the required 
criteria under the Displayed Liquidity Incentive (``DLI'') Tiers.
    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 15% of the total market share of 
executed volume of equities trading.\4\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange 
possesses significant pricing power in the execution of order flow, and 
the Exchange currently represents approximately 3% of the overall 
market share.\5\ The Exchange in particular operates a ``Maker-Taker'' 
model whereby it provides rebates to Members that add liquidity to the 
Exchange and charges fees to Members that remove liquidity from the 
Exchange. The Fee Schedule sets forth the standard rebates and fees 
applied per share for orders that add and remove liquidity, 
respectively. Additionally, in response to the competitive environment, 
the Exchange also offers tiered pricing, which provides Members with 
opportunities to qualify for higher rebates or lower fees where certain 
volume criteria and thresholds are met. Tiered pricing provides an 
incremental incentive for Members to strive for higher tier levels, 
which provides increasingly higher benefits or discounts for satisfying 
increasingly more stringent criteria.
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    \4\ Market share percentage calculated as of April 28, 2023. The 
Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \5\ Id.
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Liquidity Provision Tiers
    The Exchange currently provides a base rebate of $0.0018 per share 
for executions of Added Displayed Volume.\6\ The Exchange also 
currently offers Liquidity Provision Tiers 1-5 under which a Member may 
receive an enhanced rebate for executions of Added Displayed Volume by 
achieving the corresponding required volume criteria for each such 
tier. The Exchange now proposes to modify the Liquidity Provision Tiers 
by modifying the required criteria under such tiers, as further 
described below.
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    \6\ The base rebate for executions of Added Displayed Volume is 
referred to by the Exchange on the Fee Schedule under the existing 
description ``Added displayed volume'' with a Fee Code of ``B'', 
``D'' or ``J'', as applicable, on execution reports.
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    With respect to Liquidity Provision Tier 2, the Exchange currently 
provides an enhanced rebate of $0.00325 per share for executions of 
Added Displayed Volume for Members that qualify for such tier by 
achieving: (1) an ADAV \7\ that is equal to or greater than 0.25% of 
the TCV; \8\ and (2) a Non-Displayed ADAV \9\ that is equal to or 
greater than 4,000,000 shares.\10\ The Exchange now proposes to modify 
the required criteria such that a Member would now qualify for such 
tier by achieving: (1) an ADAV (excluding Retail Orders \11\) that is 
equal to or greater than 0.25% of the TCV; and (2) a Non-Displayed ADAV 
that is equal to or greater than 4,000,000 shares. The Exchange is not 
proposing to change the rebate for executions under such tier but 
rather is proposing to exclude Retail Orders from the ADAV component of 
the first criteria.
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    \7\ As set forth on the Fee Schedule, ``ADAV'' means the average 
daily added volume calculated as the number of shares added per day, 
which is calculated on a monthly basis, and ``Displayed ADAV'' means 
ADAV with respect to displayed orders.
    \8\ As set forth on the Fee Schedule, ``TCV'' means total 
consolidated volume calculated as the volume reported by all 
exchanges and trade reporting facilities to a consolidated 
transaction reporting plan for the month for which the fees apply.
    \9\ As set forth on the Fee Schedule, ``Non-Displayed ADAV'' 
means ADAV with respect to non-displayed orders (including orders 
subject to Display-Price Sliding that receive price improvement when 
executed and Midpoint Peg orders).
    \10\ The pricing for Liquidity Provision Tier 2 is referred to 
by the Exchange on the Fee Schedule under the existing description 
``Added displayed volume, Liquidity Provision Tier 2'' with a Fee 
Code of ``B2'', ``D2'' or ``J2'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
    \11\ As set forth in Exchange Rule 11.21(a), a ``Retail Order'' 
means an agency or riskless principal order that meets the criteria 
of FINRA Rule 5320.03 that originates from a natural person and is 
submitted to the Exchange by a Retail Member Organization, provided 
that no change is made to the terms of the order with respect to 
price or side of market and the order does not originate from a 
trading algorithm or any other computerized methodology.
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    With respect to Liquidity Provision Tier 4, the Exchange currently 
provides an enhanced rebate of $0.0029 per share for executions of 
Added Displayed Volume for Members that qualify for such tier by 
achieving: (1) an ADAV that is equal to or greater than 0.15% of the 
TCV. The Exchange now proposes to modify the required criteria such 
that a Member would now qualify for such tier by achieving an ADAV that 
is equal to or greater than 0.15% of the TCV, or (2) a Displayed ADAV 
that is greater than or equal to 2,000,000 shares and a Step-Up 
Displayed ADAV \12\ from April 2023 that is greater than or equal to 
50% of the Member's April 2023 Displayed ADAV.\13\ Thus, such proposed 
change would keep the existing criteria intact and add an alternative 
criteria that includes a Displayed ADAV and a Step-Up Displayed ADAV 
threshold, which are designed to encourage the submission of additional 
liquidity-adding order flow to the Exchange. Additionally, the Exchange 
is proposing that criteria (2) of Liquidity Provision Tier 4 will 
expire no later than October 31, 2023, and the Exchange will indicate 
this in a note under the Liquidity Provision Tiers pricing table on the 
Fee Schedule. The Exchange is not proposing to change the rebate 
provided under such tier.
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    \12\ As set forth on the Fee Schedule, ``Step-Up Displayed 
ADAV'' means Displayed ADAV in the relevant baseline month 
subtracted from current Displayed ADAV.
    \13\ The pricing for Liquidity Provision Tier 4 is referred to 
by the Exchange on the Fee Schedule under the existing description 
``Added displayed volume, Liquidity Provision Tier 4'' with a Fee 
Code of ``B4'', ``D4'' or ``J4'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
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    With respect to Liquidity Provision Tier 5, the Exchange currently 
provides an enhanced rebate of $0.0027 per share for executions of 
Added Displayed Volume for Members that qualify for such tier by 
achieving: (1) an ADAV that is equal to or greater than 0.075% of the 
TCV; or (2) a Displayed ADAV (excluding Retail Orders) that is equal to 
or greater than 750,000 shares and a Step-Up Displayed ADAV (excluding 
Retail Orders) from October 2022 that is equal to or greater than 30% 
of the Member's October 2022 Displayed ADAV (excluding Retail 
Orders).\14\ The Exchange now proposes to modify the required criteria 
under Liquidity Provision Tier 5 such that a Member would qualify for 
such tier only by achieving an ADAV that is equal to or greater than 
0.075% of the TCV. Thus, such proposed change would keep the first of 
the two existing alternative criteria intact and eliminate the second 
of the two existing alternative criteria (based on a Displayed ADAV 
threshold and a Step-Up ADAV from October 2022 threshold). The Exchange 
is not

[[Page 31079]]

proposing to change the rebate provided under such tier.
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    \14\ The pricing for Liquidity Provision Tier 5 is referred to 
by the Exchange on the Fee Schedule under the existing description 
``Added displayed volume, Liquidity Provision Tier 5'' with a Fee 
Code of ``B5'', ``D5'' or ``J5'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
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    The tiered pricing structure for executions of Added Displayed 
Volume under the Liquidity Provision Tiers provides an incremental 
incentive for Members to strive for higher volume thresholds to receive 
higher enhanced rebates for such executions and, as such, is intended 
to encourage Members to maintain or increase their order flow, 
primarily in the form of liquidity-adding volume, to the Exchange, 
thereby contributing to a deeper and more liquid market to the benefit 
of all Members and market participants. The Exchange believes that the 
Liquidity Provision Tiers, as modified by the proposed changes 
described above, reflect a reasonable and competitive pricing structure 
that is right-sized and consistent with the Exchange's overall pricing 
philosophy of encouraging added and/or displayed liquidity. 
Specifically, the Exchange believes that, after giving effect to the 
proposed changes described above, the rebate for executions of Added 
Displayed Volume provided under each of the Liquidity Provision Tiers 
1-5 remains commensurate with the corresponding required criteria under 
each such tier and is reasonably related to the market quality benefits 
that each such tier is designed to achieve.
DLI Tiers
    The Exchange currently offers DLI Tiers 1 and 2 under which a 
Member may receive an enhanced rebate for executions of Added Displayed 
Volume by achieving the corresponding required criteria for each such 
tier. The DLI Tiers are designed to encourage Members, through the 
provision of an enhanced rebate for executions of Added Displayed 
Volume, to promote price discovery and market quality by quoting at the 
NBBO for a significant portion of each day (i.e., through the 
applicable quoting requirement \15\) in a broad base of securities 
(i.e., through the applicable securities requirements \16\), thereby 
benefitting the Exchange and investors by providing improved trading 
conditions for all market participants through narrower bid-ask spreads 
and increased depth of liquidity available at the NBBO in a broad base 
of securities and committing capital to support the execution of 
orders.\17\ Now, the Exchange proposes to modify the required criteria 
under DLI Tier 2.
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    \15\ As set forth on the Fee Schedule, the term ``quoting 
requirement'' means the requirement that a Member's NBBO Time be at 
least 25%, and the term ``NBBO Time'' means the aggregate of the 
percentage of time during regular trading hours during which one of 
a Member's market participant identifiers (``MPIDs'') has a 
displayed order of at least one round lot at the national best bid 
or the national best offer.
    \16\ As set forth on the Fee Schedule, the term ``securities 
requirement'' means the requirement that a Member meets the quoting 
requirement in the applicable number of securities per trading day. 
Currently, each of DLI Tiers 1 and 2 has a securities requirement 
that may be achieved by a Member meeting the quoting requirement in 
the specified number of securities traded on the Exchange.
    \17\ See the Exchange's Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding 
the Exchange's DLI Tiers. See also Securities Exchange Act Release 
No. 92150 (June 10, 2021), 86 FR 32090 (June 16, 2021) (SR-MEMX-
2021-07) (notice of filing and immediate effectiveness of fee 
changes adopted by the Exchange, including the adoption of DLI).
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    Currently, a Member qualifies for DLI Tier 2 by achieving an NBBO 
Time of at least 25% in an average of least 400 securities per trading 
day during the month. Now, the Exchange proposes to increase the 
securities requirement under DLI Tier 2 such that a Member would now 
qualify for DLI Tier 2 by achieving an NBBO Time of at least 25% in an 
average of 500 (i.e., increased from 400) securities per trading day 
during the month. This proposed increase in the securities requirement 
under DLI Tier 2 is designed to achieve the DLI's market quality 
benefits described above in a broader base of securities under such 
tier. The Exchange is not proposing to change the rebate for executions 
under such tier.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\18\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its Members and other persons using its facilities 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    As discussed above, the Exchange operates in a highly fragmented 
and competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive or incentives to be insufficient, and the 
Exchange represents only a small percentage of the overall market. The 
Commission and the courts have repeatedly expressed their preference 
for competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \20\
---------------------------------------------------------------------------

    \20\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal reflects a reasonable and competitive pricing structure 
designed to incentivize market participants to direct additional order 
flow to the Exchange, which the Exchange believes would promote price 
discovery and enhance liquidity and market quality on the Exchange to 
the benefit of all Members and market participants.
    The Exchange notes that volume-based incentives and discounts (such 
as tiers) have been widely adopted by exchanges (including the 
Exchange), and are reasonable, equitable and not unfairly 
discriminatory because they are open to all members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to the value to an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and/or growth patterns, and the introduction of higher 
volumes of orders into the price and volume discovery process. The 
Exchange believes that the Liquidity Provision Tiers 2, 4, and 5, and 
the DLI Tier 2, each as modified by the changes proposed herein, are 
reasonable, equitable and not unfairly discriminatory for these same 
reasons, as such tiers would provide Members with an incremental 
incentive to achieve certain volume thresholds on the Exchange, are 
available to all Members on an equal basis, and, as described above, 
are reasonably designed to encourage Members to maintain or increase 
their order flow, including in the various forms of liquidity-adding 
and liquidity-removing volume under the required criteria, as 
applicable, to the Exchange, which the

[[Page 31080]]

Exchange believes would promote price discovery, enhance liquidity and 
market quality, and contribute to a more robust and well-balanced 
market ecosystem on the Exchange to the benefit of all Members and 
market participants.
    The Exchange also believes that such tiers reflect a reasonable and 
equitable allocation of fees and rebates, as the Exchange believes 
that, after giving effect to the changes proposed herein, the enhanced 
rebates for executions of Added Displayed Volume under each such tier 
is commensurate with the corresponding required criteria under each 
such tier and is reasonably related to the market quality benefits that 
each such tier is designed to achieve, as described above.
    With respect to the proposed change to increase the securities 
requirement under DLI Tier 2 from 400 securities to 500 securities, the 
Exchange believes the proposed change is reasonable, equitable and not 
unfairly discriminatory because it will apply to all Members equally, 
in that all Members will continue to have the opportunity to achieve 
the required criteria under such tier, and this proposed increase is 
intended to enhance market quality in a broader range of securities on 
the Exchange to the benefit of all Members.
    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of 
the Act \21\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities and is not designed to unfairly 
discriminate between customers, issuers, brokers, or dealers. As 
described more fully below in the Exchange's statement regarding the 
burden on competition, the Exchange believes that its transaction 
pricing is subject to significant competitive forces, and that the 
proposed fees and rebates described herein are appropriate to address 
such forces.
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    \21\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposal will result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Instead, as discussed above, 
the proposal is intended to incentivize market participants to direct 
additional order flow to the Exchange, which the Exchange believes 
would promote price discovery and enhance liquidity and market quality 
on the Exchange to the benefit of all Members and market participants. 
As a result, the Exchange believes the proposal would enhance its 
competitiveness as a market that attracts actionable orders, thereby 
making it a more desirable destination venue for its customers. For 
these reasons, the Exchange believes that the proposal furthers the 
Commission's goal in adopting Regulation NMS of fostering competition 
among orders, which promotes ``more efficient pricing of individual 
stocks for all types of orders, large and small.'' \22\
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    \22\ See supra note 20.
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Intramarket Competition
    As discussed above, the Exchange believes that the proposal would 
maintain a tiered pricing structure that is still consistent with the 
Exchange's overall pricing philosophy of encouraging added and/or 
displayed liquidity and would incentivize market participants to direct 
additional order flow to the Exchange through volume-based tiers, 
thereby enhancing liquidity and market quality on the Exchange to the 
benefit of all Members, as well as enhancing the attractiveness of the 
Exchange as a trading venue, which the Exchange believes, in turn, 
would continue to encourage market participants to direct additional 
order flow to the Exchange. Greater liquidity benefits all Members by 
providing more trading opportunities and encourages Members to send 
additional orders to the Exchange, thereby contributing to robust 
levels of liquidity, which benefits all market participants.
    The Exchange does not believe that the proposed changes would 
impose any burden on intramarket competition because such changes will 
incentivize members to submit additional order flow, thereby 
contributing to a more robust and well-balanced market ecosystem on the 
Exchange to the benefit of all Members as well as enhancing the 
attractiveness of the Exchange as a trading venue, which the Exchange 
believes, in turn, would continue to encourage market participants to 
direct additional order flow to the Exchange. Greater liquidity 
benefits all Members by providing more trading opportunities and 
encourages Members to send additional orders to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market 
participants. The opportunity to qualify for the modified Liquidity 
Provision Tiers and the DLI Tiers, and thus receive the corresponding 
enhanced rebates or discounted fees, as applicable, would be available 
to all Members that meet the associated volume requirements in any 
month. As described above, the Exchange believes that the required 
criteria under each such tier are commensurate with the corresponding 
rebate under such tier and are reasonably related to the enhanced 
liquidity and market quality that such tier is designed to promote. For 
the foregoing reasons, the Exchange believes the proposed changes would 
not impose any burden on intramarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act.
Intermarket Competition
    As noted above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. Members have numerous 
alternative venues that they may participate on and direct their order 
flow to, including 15 other equities exchanges and numerous alternative 
trading systems and other off-exchange venues. As noted above, no 
single registered equities exchange currently has more than 
approximately 15% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates and market participants can readily choose 
to send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As 
described above, the proposed changes represent a competitive proposal 
through which the Exchange is seeking to incentivize market 
participants to direct additional order flow to the Exchange through 
volume-based tiers, which have been widely adopted by exchanges, 
including the Exchange. Accordingly, the Exchange believes the proposal 
would not burden, but rather promote, intermarket competition by 
enabling it to better compete with other exchanges that offer similar 
pricing structures and incentives to market participants.

[[Page 31081]]

    Additionally, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \23\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. SEC, the D.C. Circuit stated as follows: 
``[n]o one disputes that competition for order flow is `fierce.' . . . 
As the SEC explained, `[i]n the U.S. national market system, buyers and 
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders 
for execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .''.\24\ Accordingly, the Exchange does not believe its 
proposed pricing changes impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \23\ See supra note 20.
    \24\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \25\ and Rule 19b-4(f)(2) \26\ thereunder.
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    \25\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \26\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MEMX-2023-08 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-2023-08. 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. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-MEMX-2023-08 and should 
be submitted on or before June 5, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10246 Filed 5-12-23; 8:45 am]
BILLING CODE 8011-01-P
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