Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 54699-54706 [2023-17209]

Download as PDF Federal Register / Vol. 88, No. 154 / Friday, August 11, 2023 / Notices operational risk at ICE Clear Europe. For example, a theft of ICE Clear Europe’s assets could threaten its ability to operate. The Commission therefore believes that by adding new categories of non-default losses and covering losses to additional categories of assets, as discussed above, the proposed rule change would identify plausible sources of operational risk. The Commission further believes that the proposed rule change would mitigate the impact of non-default losses by establishing appropriate procedures for categorizing, covering, and allocating such losses. For example, as discussed above, the proposed rule change would amend the existing framework for allocating non-default losses to cover Custodial Losses. The proposed rule change also would increase the amount of ICE Clear Europe’s resources available to cover Non-Default Losses, Custodial Losses, and Investment Losses, and enhance ICE Clear Europe’s ability to replenish those resources. Finally, as discussed above, the proposed rule change help ensure that ICE Clear Europe can enforce Clearing Members’ other financial obligations, including those related to the default of a Clearing Member, despite any nondefault losses. Taken together, the Commission believes the proposed rule change would identify non-default losses as a plausible source of operational risk and mitigate the impact of such losses through the use of appropriate procedures. Therefore, the Commission finds that the proposed rule change is consistent with Rule 17Ad–22(e)(17)(i).51 lotter on DSK11XQN23PROD with NOTICES1 IV. Accelerated Approval of the Proposed Rule Change as Modified by Amendment Nos. 1 and 2 The Commission finds good cause, pursuant to Section 19(b)(2) of the Act,52 to approve the proposed rule change, as modified by Amendment Nos. 1 and 2, prior to the 30th day after the date of publication of Amendment No. 2 in the Federal Register. As discussed above, Amendment No. 1 amended and restated in its entirety the Form 19b–4 and Exhibit 1A in order to correct the narrative description of the proposed rule change. Amendment No. 2 modified the Exhibit 5 to clarify when certain funds are considered available to ICE Clear Europe to be applied in accordance with the Rules as proposed to be amended. By so doing, Amendment Nos. 1 and 2 provide for a 51 17 52 15 CFR 240.17Ad–22(e)(17)(i). U.S.C. 78s(b)(2). VerDate Sep<11>2014 16:59 Aug 10, 2023 Jkt 259001 more clear and comprehensive understanding of the proposed changes. For the reasons discussed above, the Commission finds that the proposed rule change, as modified by Amendment Nos. 1 and 2, is consistent with the Act and the applicable rules thereunder. Accordingly, the Commission finds good cause for approving the proposed rule change, as modified by Amendment Nos. 1 and 2, on an accelerated basis, pursuant to Section 19(b)(2) of the Act.53 V. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change, as modified by Amendment No. 1 and Amendment No. 2, is consistent with the requirements of the Act, and in particular, with the requirements of Section 17A(b)(3)(D) of the Act,54 Section 17A(b)(3)(F) of the Act,55 and Rule 17Ad–22(e)(17)(i) thereunder.56 It is therefore ordered pursuant to Section 19(b)(2) of the Act 57 that the proposed rule change, as modified by Amendment Nos. 1 and 2 (SR–ICEEU– 2023–010), be, and hereby is, approved on an accelerated basis.58 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.59 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–17210 Filed 8–10–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98070; File No. SR–MEMX– 2023–16] Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange’s Fee Schedule August 7, 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 August 3, 2023, MEMX LLC (‘‘MEMX’’ or the 53 15 U.S.C. 78s(b)(2). U.S.C. 78q–1(b)(3)(D). 55 15 U.S.C. 78q–1(b)(3)(F). 56 17 CFR 240.17Ad–22(e)(17)(i). 57 15 U.S.C. 78s(b)(2). 58 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 59 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 54 15 PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 54699 ‘‘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 immediately. 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: (i) reduce the base rebate for executions of orders in securities priced at or above $1.00 per share that add displayed liquidity to the Exchange (such orders, ‘‘Added Displayed Volume’’); (ii) modify the Liquidity Provision Tiers by modifying the rebate for Liquidity Provision Tier 1 and the criteria for Liquidity Provision Tier 2; (iii) modify NBBO Set/Join Tier 2; (iv) modify the Displayed Liquidity Initiative Tiers by modifying the criteria for Displayed Liquidity Initiative Tier 1 and modifying the rebate for Displayed Liquidity Initiative Tier 2; (v) add a new Non-Display Add Tier 1 to the three existing Non-Display Add Tiers, which will be renamed Non-Display Add Tier 2, Non-Display Add Tier 3, and Non3 See E:\FR\FM\11AUN1.SGM Exchange Rule 1.5(p). 11AUN1 54700 Federal Register / Vol. 88, No. 154 / Friday, August 11, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 Display Add Tier 4, respectively; (vi) modify the required criteria under renamed Non-Display Add Tier 3 and renamed Non-Display Add Tier 4; (vii) reduce the base rebates for executions of orders in securities that add nondisplayed liquidity to the Exchange (such orders, ‘‘Added Non-Displayed Volume’’) in securities priced at or above $1.00 per share; and (viii) increase the base rebates for executions of Added Non-Displayed Volume in securities priced below $1.00 per share.4 The Exchange first notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 registered equities exchanges, as well as a number of alternative trading systems and other off-exchange venues, to which market participants may direct their order flow. Based on publicly available information, no single registered equities exchange currently has more than approximately 16% of the total market share of executed volume of equities trading.5 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.6 The Exchange in particular operates a ‘‘Maker-Taker’’ model whereby it provides rebates to Members that add liquidity to the Exchange and charges fees to Members that remove liquidity from the Exchange. The Fee Schedule sets forth the standard rebates and fees applied per share for orders that add and remove liquidity, respectively. Additionally, in response to the competitive environment, the Exchange also offers tiered pricing, which provides Members with opportunities to qualify for higher rebates or lower fees where certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. 4 The Exchange initially filed the proposed Fee Schedule changes on August 1, 2023 (SR–MEMX– 2023–15). On August 3, 2023, the Exchange withdrew that filing and submitted this proposal. 5 Market share percentage calculated as of July 31, 2023. The Exchange receives and processes data made available through consolidated data feeds (i.e., CTS and UTDF). 6 Id. VerDate Sep<11>2014 16:59 Aug 10, 2023 Jkt 259001 Reduce Base Rebate for Added Displayed Volume Currently, the Exchange provides a base rebate of $0.0018 per share for executions of Added Displayed Volume in securities priced at or above $1.00 per share. The Exchange now proposes to reduce the base rebate for executions of Added Displayed Volume to $0.0015 per share.7 The purpose of reducing the base rebate for executions of Added Displayed Volume is for business and competitive reasons, as the Exchange believes that reducing such rebate as proposed would decrease the Exchange’s expenditures with respect to its transaction pricing in a manner that is still consistent with the Exchange’s overall pricing philosophy of encouraging added displayed liquidity. The Exchange notes that despite the reduction proposed herein, the proposed base rebate for executions of Added Displayed Volume remains competitive with the base rebates provided by other exchanges for executions of orders in securities priced at or above $1.00 per share that add displayed liquidity.8 Liquidity Provision Tiers The Exchange currently provides a base rebate of $0.0018 per share for executions of Added Displayed Volume in securities priced at or above $1.00 per share, which the Exchange is proposing to reduce to $0.0015 per share, as described above. The Exchange also currently offers Liquidity Provision Tiers 1–6 under which a Member may receive an enhanced rebate for executions of Added Displayed Volume by achieving the corresponding required volume criteria for each such tier. The Exchange now proposes to modify the Liquidity Provision Tiers by reducing the rebate for executions of Added Displayed Volume under Liquidity 7 The proposed base rebate for executions of Added Displayed Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume’’ with a Fee Code of ‘‘B’’, ‘‘D’’ or ‘‘J’’, as applicable, on execution reports. 8 See, e.g., the Nasdaq Stock Market LLC (‘‘Nasdaq’’) Price List—Trading Connectivity (available at https://nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2), which reflects a base rebate of $0.0018 per share for executions of orders in Tape A and Tape B securities priced at or above $1.00 per share that add displayed liquidity and a base rebate of $0.0013 per share for executions of orders in Tape C securities priced at or above $1.00 per share that add displayed liquidity; the Cboe BZX Exchange, Inc. (‘‘Cboe BZX’’) equities trading fee schedule on its public website (available at https://www.cboe.com/us/ equities/membership/fee_schedule/bzx/), which reflects a base rebate of $0.0016 per share for executions of orders in securities priced at or above $1.00 per share that add displayed liquidity. PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 Provision Tier 1, as further described below. With respect to Liquidity Provision Tier 1,9 the Exchange currently provides an enhanced rebate of $0.00335 per share for executions of Added Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving an ADAV 10 (excluding Retail Orders 11) that is equal to or greater than 0.45% of the TCV.12 The Exchange now proposes to reduce the rebate for executions of Added Displayed Volume under Liquidity Provision Tier 1 to $0.0033 per share. The Exchange is not proposing to change the criteria required to qualify for Liquidity Provision Tier 1. The Exchange is also not proposing to change the rebate for executions of orders in securities priced below $1.00 per share under such tier. With respect to Liquidity Provision Tier 2,13 the Exchange currently provides an enhanced rebate of $0.00325 per share for executions of Added Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving (1) an ADAV (excluding Retail Orders) that is equal to or greater than 0.25% of the TCV and (2) a NonDisplayed ADAV that is equal to or greater than 4,000,000 shares. The Exchange now proposes to eliminate the retail exclusion under qualification (1) above for such tier. Specifically, the Exchange will offer an enhanced rebate of $0.00325 per share for executions of 9 The pricing for Liquidity Provision Tier 1 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume, Liquidity Provision Tier 1’’ with a Fee Code of ‘‘B1’’, ‘‘D1’’ or ‘‘J1’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. 10 As set forth on the Fee Schedule, ‘‘ADAV’’ means the average daily added volume calculated as the number of shares added per day, which is calculated on a monthly basis, and ‘‘Displayed ADAV’’ means ADAV with respect to displayed orders. 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. 12 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. 13 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 1’’ with a Fee Code of ‘‘B2’’, ‘‘D2’’ or ‘‘J2’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. E:\FR\FM\11AUN1.SGM 11AUN1 Federal Register / Vol. 88, No. 154 / Friday, August 11, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 Added Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving (1) an ADAV that is equal to or greater than 0.25% of the TCV and (2) a Non-Displayed ADAV that is equal to or greater than 4,000,000 shares. The purpose of reducing the rebates for executions of Added Displayed Volume under Liquidity Provision Tier 1 as proposed, which the Exchange believes in each case represents a modest reduction, is for business and competitive reasons, as the Exchange believes that such rebate reductions would decrease the Exchange’s expenditures with respect to its transaction pricing in a manner that is still consistent with the Exchange’s overall pricing philosophy of encouraging added liquidity. The purpose of removing the retail exclusion under Liquidity Provision Tier 2 as proposed is to allow Members to more easily reach Liquidity Provision Tier 2, which, in turn, the Exchange believes will encourage more Members to seek to qualify for 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 1–6 remains commensurate with the corresponding required criteria under each such tier and is reasonably related to the market quality benefits that each such tier is designed to achieve. NBBO Setter/Joiner Tier 2 The Exchange currently offers NBBO Setter/Joiner Tiers 1–2 under which a Member may receive an additive rebate for a qualifying Member’s executions of Added Displayed Volume (other than Retail Orders) that establish the NBBO VerDate Sep<11>2014 16:59 Aug 10, 2023 Jkt 259001 (such orders, ‘‘Setter Volume’’) and executions of Added Displayed Volume (other than Retail Orders) that establish a new best bid or offer on the Exchange that matches the NBBO first established on an away market (such orders, ‘‘Joiner Volume’’). With respect to NBBO Setter/ Joiner Tier 2, the Exchange currently provides an additive rebate of $0.0003 per share for executions of Setter Volume and Joiner Volume for Members that qualify for such tier by achieving an ADAV equal to or greater than 0.05% of the TCV and a Displayed ADAV with respect to orders with Fee Code B 14 or J 15 that is equal to or greater than 40% of the Member’s Displayed ADAV with respect to orders with Fee Code B, D or J.16 The Exchange proposes to reduce the rebate for NBBO Setter/Joiner Tier 2 to $0.0002 per share. The Exchange does not propose to change the criteria under NBBO Setter/Joiner Tier 2. The Exchange believes that the new additive rebate remains commensurate with the required criteria under such tier, as modified, and is reasonably related to the market quality benefits that such tier is designed to achieve. 54701 The Exchange currently offers DLI Tiers 1 and 2 under which a Member may receive an enhanced rebate for executions of Added Displayed Volume by achieving the corresponding required criteria for each such tier. The DLI Tiers are designed to encourage Members, through the provision of an enhanced rebate for executions of Added Displayed Volume, to promote price discovery and market quality by quoting at the NBBO for a significant portion of each day (i.e., through the applicable quoting requirement 17) in a broad base of securities (i.e., through the applicable securities requirement 18), thereby benefitting the Exchange and investors by providing improved trading conditions for all market participants through narrower bid-ask spreads and increased depth of liquidity available at the NBBO in a broad base of securities and committing capital to support the execution of orders.19 Now, the Exchange proposes to modify the required criteria under DLI Tier 1 and to modify the rebate under DLI Tier 2. With respect to DLI Tier 1, currently, a Member qualifies for DLI Tier 1 by achieving (1) an NBBO Time of at least 25% in an average of at least 1,000 securities per trading day during the month and (2) an ADAV equal to or greater than 0.05% of the TCV. The Exchange proposes to modify the second criteria under DLI Tier 1 by increasing the ADAV requirement such that a Member would now qualify for DLI Tier 1 by achieving an ADAV equal to or greater than 0.10% of the TCV. The purpose of increasing the ADAV requirement is to encourage Members to strive for higher displayed volume on the Exchange, encouraging an overall increase in liquidity on the Exchange. The Exchange is not proposing to change the rebate for executions under such tier.20 With respect to DLI Tier 2, currently, the Exchange provides a rebate of $0.0028 per share under such tier. Now, the Exchange is proposing to reduce this rebate to $0.0026.21 The Exchange is not proposing to change any of the criteria required to reach such tier. The purpose of reducing the rebate is for business and competitive reasons, as the Exchange believes the reduction of such rebates would decrease the Exchange’s expenditures with respect to its 14 The Exchange notes that orders with Fee Code B include orders, other than Retail Orders, that establish the NBBO. 15 The Exchange notes that orders with Fee Code J include orders, other than Retail Orders, that establish a new BBO on the Exchange that matches the NBBO first established on an away market. 16 The Exchange notes that orders with Fee Code D include orders that add displayed liquidity to the Exchange but that are not Fee Code B or J, and thus, orders with Fee Code B, D or J include all orders, other than Retail Orders, that add displayed liquidity to the Exchange. The pricing for NBBO Setter/Joiner Tier 2 is referred to by the Exchange on the Fee Schedule under the new description ‘‘NBBO Setter/Joiner Tier 2’’ with a Fee Code of S2 to be appended to the otherwise applicable Fee Code assigned by the Exchange on the monthly invoices for qualifying executions. 17 As set forth on the Fee Schedule, the term ‘‘quoting requirement’’ means the requirement that a Member’s NBBO Time be at least 25%, and the term ‘‘NBBO Time’’ means the aggregate of the percentage of time during regular trading hours during which one of a Member’s market participant identifiers (‘‘MPIDs’’) has a displayed order of at least one round lot at the national best bid or the national best offer. 18 As set forth on the Fee Schedule, the term ‘‘securities requirement’’ means the requirement that a Member meets the quoting requirement in the applicable number of securities per 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. 19 See the Exchange’s Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding the Exchange’s DLI Tiers. See also Securities Exchange Act Release No. 92150 (June 10, 2021), 86 FR 32090 (June 16, 2021) (SR–MEMX–2021–07) (notice of filing and immediate effectiveness of fee changes adopted by the Exchange, including the adoption of DLI). 20 The pricing for DLI Tier 1 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume, DLI Tier 1’’ with a Fee Code of Bq1, Bq1 or Jq1, as applicable. 21 The pricing for DLI Tier 2 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added displayed volume, DLI Tier 2’’ with a Fee Code of Bq2, Dq2 or Jq2, as applicable. Displayed Liquidity Incentive (‘‘DLI’’) Tiers PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 E:\FR\FM\11AUN1.SGM 11AUN1 54702 Federal Register / Vol. 88, No. 154 / Friday, August 11, 2023 / Notices transaction pricing in a manner that is still consistent with the Exchange’s overall pricing philosophy of encouraging added and/or displayed liquidity and promoting the price discovery and market quality objectives of the DLI Tiers described above. The Exchange believes that the proposed reduction by $0.0002 per share represents a modest reduction and that the proposed rebate under DLI Tier 2 remains commensurate with the required criteria under the tier. The Exchange is not proposing to change the rebates provided under such tiers for executions of orders in securities priced below $1.00 per share. Non-Display Add Tiers The Exchange currently offers NonDisplay Add Tiers 1–3 under which a Member may receive an enhanced rebate for executions of Added NonDisplayed Volume by achieving the corresponding required volume criteria for each such tier. The Exchange now proposes to modify the Non-Display Add Tiers by adding a new Non-Display Add Tier 1 to the three existing NonDisplay Add Tiers, which will be renamed Non-Display Add Tier 2, NonDisplay Add Tier 3, and Non-Display Add Tier 4, respectively. The Exchange also now proposes to modify the required criteria under renamed NonDisplay Add Tier 3 and renamed NonDisplay Add Tier 4. With respect to the proposed addition of a new Non-Display Add Tier 1, the Exchange currently provides three NonDisplay Add tiers. Currently, under Non-Display Add Tier 1, the Exchange provides an enhanced rebate of $0.0027 per share for executions of Added NonDisplayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving a Non-Displayed ADAV 22 that is equal to or greater than 5,000,000 shares.23 The Exchange also currently provides under Non-Display Add Tier 2 an enhanced rebate of $0.0024 per share for executions of Added Non-Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving a NonDisplayed ADAV that is equal to or lotter on DSK11XQN23PROD with NOTICES1 22 As set forth on the Fee Schedule, ‘‘NonDisplayed ADAV’’ means ADAV with respect to non-displayed orders (including orders subject to Display-Price Sliding that receive price improvement when executed and Midpoint Peg orders). 23 The pricing for Non-Display Add Tier 1 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added nondisplayed volume, Non-Display Add Tier 1’’ with a Fee Code of ‘‘H1’’, ‘‘M1’’ or ‘‘P1’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. VerDate Sep<11>2014 16:59 Aug 10, 2023 Jkt 259001 greater than 1,500,000 shares,24 and under Non-Display Add Tier 3 the Exchange currently provides an enhanced rebate of $0.0018 per share for executions of Added Non-Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving a NonDisplayed ADAV that is equal to or greater than 500,000 shares.25 The Exchange proposes to provide an enhanced rebate of $0.0028 per share for executions of Added Non-Displayed Volume in securities priced at or above $1.00 per share for Members that qualify for such tier by achieving a NonDisplayed ADAV that is equal to or greater than 8,000,000 shares or the Member has an ADAV (excluding Retail Orders) equal to or greater than 0.45% of the TCV. This additional rebate tier would become the new Non-Display Add Tier 1. With respect to the former NonDisplay Add Tier 1, as a result of the addition of a new Non-Display Add Tier 1 as described above, the former NonDisplay Add Tier 1 would be re-named Non-Display Add Tier 2. The Exchange does not propose any changes to the amount of the rebate ($0.0027 per share in securities priced at or above $1.00 per share) for this tier. The Exchange also does not propose any change to the criteria required to meet this tier. With respect to the former NonDisplay Add Tier 2, as a result of the addition of a new Non-Display Add Tier 1 as described above, the former NonDisplay Add Tier 2 would be renamed Non-Display Add Tier 3. The Exchange does not propose any changes to the amount of the rebate ($0.0024 per share in securities priced at or above $1.00 per share) for this tier. In addition to the name change, the Exchange proposes to modify the criteria required to meet this tier. Currently, in order to qualify for the rebate of $0.0024 per share (for the current Non-Display Add Tier 2, which the Exchange proposes to rename NonDisplay Add Tier 3) Members must achieve a Non-Display ADAV equal to or greater than 1,500,000 shares, as noted above. The Exchange proposes that a Member would qualify for such 24 The pricing for Non-Display Add Tier 2 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added nondisplayed volume, Non-Display Add Tier 2’’ with a Fee Code of ‘‘H2’’, ‘‘M2’’ or ‘‘P2’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. 25 The pricing for Non-Display Add Tier 3 is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added nondisplayed volume, Non-Display Add Tier 3’’ with a Fee Code of ‘‘H3’’, ‘‘M3’’ or ‘‘P3’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 tier by achieving a Non-Display ADAV equal to or greater than 2,000,000 shares. In summary, the Exchange proposes that in order to qualify for the renamed Non-Display Add Tier 3, Members must achieve a Non-Display ADAV equal to or greater than 2,000,000 shares. With respect to the former NonDisplay Add Tier 3, as a result of the addition of a new Non-Display Add Tier 1 as described above, the former NonDisplay Add Tier 3 would be renamed Non-Display Add Tier 4. The Exchange does not propose any changes to the amount of the rebate ($0.0018 per share in securities priced at or above $1.00 per share) for this tier. In addition to the name change, the Exchange proposes to modify the criteria required to meet this tier. The Exchange currently provides an enhanced rebate of $0.0018 per share for executions of Added Non-Displayed Volume for Members that qualify for such tier by achieving a Non-Displayed ADAV that is equal to or greater than 500,000 shares, as noted above. The Exchange now proposes that a Member would now qualify for such tier by achieving a Non-Displayed ADAV that is equal to or greater than 1,000,000 shares. In summary, the Exchange proposes that in order to qualify for the renamed Non-Display Add Tier 4, Members must achieve a Non-Display ADAV equal to or greater than 1,000,000 shares.26 As described in further detail below, the Exchange is also proposing to increase the rebate for all Added NonDisplayed Volume in securities priced below $1.00 per share. The Exchange proposed to adopt this same rebate for each of the Non-Display Add Tiers, Tiers 1 through 4, in order to maintain consistency across all executions of Added Non-Displayed Volume. The purpose of adding a new NonDisplay Add Tier 1 is for business and competitive reasons. The proposed new Non-Display Add Tier 1 is designed to encourage Members to maintain or increase their order flow to the Exchange in order to qualify for the proposed enhanced rebate for executions of Added Non-Displayed Volume. The purpose of re-naming the currently existing tiers is to present the fee schedule in a way that is easy for Members to understand, starting with the largest rebate. The purpose of raising the Non-Display ADAV required to 26 The pricing for Non-Display Add Tier 4 would be referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added nondisplayed volume, Non-Display Add Tier 4’’ with a Fee Code of ‘‘H4’’, ‘‘M4’’ or ‘‘P4’’, as applicable, to be provided by the Exchange on the monthly invoices provided to Members. E:\FR\FM\11AUN1.SGM 11AUN1 Federal Register / Vol. 88, No. 154 / Friday, August 11, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 achieve Non-Display Add Tier 3 as proposed, which the Exchange believes represents a modest increase, is for business and competitive reasons. The purpose of raising the Non-Displayed ADAV required to achieve Non-Display Add Tier 4 as proposed, which the Exchange believes represents a modest increase, is also for business and competitive reasons. The modest increase in the Non-Displayed ADAV required to achieve Tiers 3 and 4 will encourage Members to strive for higher non-displayed added volume on the Exchange, encouraging an overall increase in liquidity on the Exchange. The tiered pricing structure for executions of Added Non-Displayed Volume under the Non-Display Add Tiers provides an incremental incentive for Members to strive for higher volume thresholds to receive higher enhanced rebates for such executions and, as such, is intended to encourage Members to maintain or increase their order flow, particularly in the form of liquidityadding non-displayed volume, to the Exchange, thereby contributing to a deeper and more robust and wellbalanced market ecosystem to the benefit of all Members and market participants. The Exchange believes that the Non-Display Add Tiers, as modified by the proposed changes described above, reflect a reasonable and competitive pricing structure that is right-sized and consistent with the Exchange’s overall pricing philosophy of encouraging added and/or displayed liquidity. Specifically, the Exchange believes that, after giving effect to the proposed changes described above, the rebate for executions of Added NonDisplayed Volume provided under each of the Non-Display Add Tiers is commensurate with the corresponding required criteria under each such tier and is reasonably related to the market quality benefits that each such tier is designed to achieve. Reduce Base Rebates for Added NonDisplayed Volume The Exchange is also proposing to uniformly reduce the base rebates provided for executions of Added NonDisplayed Volume in securities priced at or above $1.00 per share. Added NonDisplayed Volume is comprised of the three following types of orders: (i) Midpoint Peg Orders in securities that add liquidity to the Exchange (such orders, ‘‘Added Midpoint Volume’’); (ii) orders, which are not orders subject to Display-Price Sliding that receive price improvement when executed or Midpoint Peg Orders, that add nondisplayed liquidity to the Exchange (such orders, ‘‘Added Non-Midpoint VerDate Sep<11>2014 16:59 Aug 10, 2023 Jkt 259001 Hidden Volume’’); and (iii) orders in securities subject to Display-Price Sliding that add liquidity to the Exchange and receive price improvement when executed (such orders, ‘‘Added Price-Improved Volume’’). Currently, the Exchange provides base rebates of $0.0010 per share for executions of Added Midpoint Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved Volume in securities priced at or above $1.00 per share. The Exchange now proposes to reduce each of these base rebates to $0.0008 per share.27 The purpose of uniformly reducing the standard rebates for executions of Added Midpoint Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved Volume is for business and competitive reasons, as the Exchange believes reducing such rebates as proposed would decrease the Exchange’s expenditures with respect to its transaction pricing in a manner that is still consistent with the Exchange’s overall pricing philosophy of encouraging added displayed liquidity. The Exchange notes that the proposed base rebate for executions of Added Non-Midpoint Hidden Volume remains in line and competitive with the base rebates provided by at least one other exchange for executions of similar orders.28 Additionally, the Exchange believes it is appropriate to also provide the same base rebate for executions of Added Price-Improved Volume and Added Midpoint Volume as for Added Non-Midpoint Hidden Volume, as all of these orders similarly add liquidity to the Exchange and are executed at prices that are not displayed on the Exchange’s order book, and the Exchange notes that all of these orders are also currently 27 The proposed base rebate for executions of Added Midpoint Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added non-displayed volume, Midpoint Peg’’ and such orders will continue to receive a Fee Code of ‘‘M’’ on execution reports. The proposed base rebate for executions of Added Non-Midpoint Hidden Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added non-displayed volume’’ and such orders will continue to receive a Fee Code of ‘‘H’’ on execution reports. The proposed base rebate for executions of Added Price-Improved Volume is referred to by the Exchange on the Fee Schedule under the existing description ‘‘Added volume, order subject to Display-Price Sliding that receives price improvement when executed’’ and such orders will continue to receive a Fee Code of ‘‘P’’ on execution reports. 28 See, e.g., the Cboe BZX equities trading fee schedule on its public website (available at https:// www.cboe.com/us/equities/membership/fee_ schedule/bzx/), which reflects a standard rebate of $0.0008 per share for executions of orders in securities priced at or above $1.00 per share that add non-displayed liquidity. PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 54703 subject to the same base rebate and pricing structure today. Increase Rebates for Sub-Dollar NonDisplayed Volume The Exchange is also proposing to increase the rebates provided for all subdollar executions of Added NonDisplayed Volume. As noted above, Added Non-Displayed Volume is comprised of the three following types of orders: (i) Added Midpoint Volume; (ii) Added Non-Midpoint Hidden Volume; and (iii) Added Price-Improved Volume. Currently, the Exchange provides no rebate and charges no fees for Added Midpoint Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved Volume in securities priced below $1.00 per share. This pricing structure is similarly applied to all executions of Added NonDisplayed Volume by Members that qualify for enhanced rebates in securities priced at or above $1.00 per share pursuant to the Non-Display Add Tiers. The Exchange now proposes to increase the rebate for all Added NonDisplayed Volume to 0.075% of total dollar value. Specifically, the Exchange will provide a rebate of 0.075% of total dollar value for each of Added Midpoint Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved Volume in securities priced below $1.00 per share. The Exchange is similarly proposing to provide a rebate of 0.075% of total dollar value to Members that qualify for enhanced rebates pursuant to the Non-Display Add Tiers in securities priced below $1.00 per share. Thus, all Added Non-Displayed Volume will qualify for the same rebate for executions in securities priced below $1.00 per share. The purpose of the rebate increase for sub-dollar executions in Added NonDisplayed Volume is to encourage participants to add sub-dollar liquidity on the Exchange. The increase to 0.075% of total dollar value is the same rebate provided to sub-dollar executions which provide displayed liquidity on the Exchange. The Exchange believes by offering the same rebate for sub-dollar non-displayed liquidity as for displayed liquidity, the resulting pricing structure will encourage the provision of subdollar liquidity on the Exchange. Additionally, the Exchange believes it is appropriate to provide the same rebate for sub-dollar executions of Added Price-Improved Volume and Added Midpoint Volume as for Added NonMidpoint Hidden Volume, as all of these orders similarly add liquidity to the Exchange and are executed at prices that are not displayed on the Exchange’s order book, and the Exchange notes that E:\FR\FM\11AUN1.SGM 11AUN1 54704 Federal Register / Vol. 88, No. 154 / Friday, August 11, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 all of these orders are also currently subject to the same sub-dollar rebate and pricing structure today. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,29 in general, and with Sections 6(b)(4) and 6(b)(5) of the Act,30 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. As discussed above, the Exchange operates in a highly fragmented and competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient, and the Exchange represents only a small percentage of the overall market. The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and also recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 31 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 encourage market participants to strive for higher volume on the Exchange, which the Exchange believes would promote price discovery and enhance liquidity and market quality on 29 15 U.S.C. 78f. U.S.C. 78f(b)(4) and (5). 31 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 30 15 VerDate Sep<11>2014 16:59 Aug 10, 2023 Jkt 259001 the Exchange to the benefit of all Members and market participants. The Exchange notes that volumebased incentives (such as Liquidity Provision Tiers, NBBO Setter/Joiner Tiers, Non-Display Add Tiers, and DLI 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 discount 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 the proposal to reduce the base rebate for Added Displayed Volume is reasonable because, as described above, it is designed to decrease the Exchange’s expenditures with respect to its transaction pricing in a manner that is still consistent with the Exchange’s overall pricing philosophy of encouraging added and/or displayed liquidity, and the proposed new base rebate remains competitive with the base rebates provided by other exchanges in each case for executions of similar orders.32 The Exchange also believes the proposed change to the base rebate is equitable and not unfairly discriminatory because it will apply equally to all Members and because the opportunity to qualify for enhanced rebates is open to all members on an equal basis, as described above. The Exchange believes that the proposed changes to reduce the rebates provided pursuant to Liquidity Provision Tier 1, NBBO Setter/Joiner Tier 2, and DLI Tier 2 are reasonable, because the change in rebate for each is a modest decrease and consistent with an equitable allocation of fees. The Exchange believes the proposed change are 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 tiers. The Exchange believes that each such rebate is commensurate with the corresponding required criteria under such tiers and are reasonably related to such market quality benefits that such tiers are designed to achieve. The Exchange believes that the proposed change to the criteria in Liquidity Provision Tier 2 is reasonable, equitable, and not unfairly discriminatory because it will apply 32 See PO 00000 supra note 8. Frm 00140 Fmt 4703 Sfmt 4703 equally to all Members and allow all Members to more easily reach Liquidity Provision Tier 2, which, in turn, the Exchange believes will encourage more Members to seek to qualify for such Tier. The Exchange believes that the proposed change is reasonably related to such market quality benefits that the tier is designed to achieve. The Exchange believes that the proposed changes to the DLI Tier 1 criteria would continue to provide Members with an incremental incentive to achieve certain volume thresholds on the Exchange. The proposed new DLI Tier 1 criteria would provide Members with an incremental incentive to achieve certain volume thresholds on the Exchange, is available to all Members on an equal basis, and, as described above, is reasonably designed to encourage Members to maintain or increase their order flow by displaying liquidity, which the Exchange believes would promote price discovery, enhance liquidity and market quality, and contribute to a more robust and well-balanced market ecosystem on the Exchange to the benefit of all Members and market participants. The Exchange believes the proposed change is 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. The Exchange believes that the proposed changes to add Non-Display Add Tier 1, increase the Non-Displayed ADAV requirement under Non-Display Add Tier 3 to 2,000,000 shares, and to increase the Non-Displayed ADAV requirement under Non-Display Add Tier 3 to 1,000,000 shares are reasonable, because each change is a modest increase designed to increase non-displayed liquidity on the Exchange for the benefit of all market participants. The Exchange believes the proposed changes are equitable and not unfairly discriminatory because they will apply to all Members equally, in that all Members will continue to have the opportunity to achieve the required criteria under such tier. The Exchange believes that the proposed changes to reduce the base rebates provided for executions of Added Non-Displayed Volume are reasonable because, as described above, such changes are designed to decrease the Exchange’s expenditures with respect to its transaction pricing in a manner that is still consistent with the E:\FR\FM\11AUN1.SGM 11AUN1 lotter on DSK11XQN23PROD with NOTICES1 Federal Register / Vol. 88, No. 154 / Friday, August 11, 2023 / Notices Exchange’s overall pricing philosophy of encouraging added and/or displayed liquidity and the proposed new base rebates for Added Non-Displayed Volume remain in line and competitive with the base rebates provided by other exchanges for executions of similar orders.33 Additionally, as noted above, the Exchange believes that providing the same base rebate for executions of Added Price-Improved Volume and Added Midpoint Volume as for Added Non-Midpoint Hidden Volume is reasonable and appropriate because all of these orders similarly add liquidity to the Exchange, are executed at prices that are not displayed on the Exchange’s order book, and are currently subject to the same base rebate and pricing structure today. The Exchange also believes the proposed base rebates for executions of Added Non-Displayed Volume are equitable and not unfairly discriminatory, as such base rebates will apply equally to all Members. The Exchange believes that the proposed change to increase the subdollar rebate for executions of Added Non-Displayed Volume is reasonable because an increase in rebate will encourage more Members to place executions increasing Added NonDisplayed Volume on the Exchange. The Exchange believes that the proposed changes to increase the Added NonDisplayed Volume rebate are equitable and not unfairly discriminatory as these rebates will apply equally to all Members of the Exchange. The Exchange believes that the proposed base rebate, Liquidity Provision Tiers, NBBO Setter/Joiner Tiers, Non-Display Add Tiers, DLI Tiers, and Added Non-Display Volume rebates, 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 form of Added Displayed Volume and Added NonDisplayed Volume to the Exchange, which the Exchange believes would promote price discovery, enhance liquidity and market quality, and contribute to a more robust and wellbalanced market ecosystem on the Exchange to the benefit of all Members and market participants. 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 34 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 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.’’ 35 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 34 15 33 See supra note 28. VerDate Sep<11>2014 16:59 Aug 10, 2023 U.S.C. 78f(b)(4) and (5). supra note 31. 35 See Jkt 259001 PO 00000 Frm 00141 Fmt 4703 Sfmt 4703 54705 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, NBBO Setter/Joiner Tiers, Non-Displayed Add Tiers and 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. The Exchange does not believe that the proposed changes to reduce the base rebates for executions of Added Displayed Volume and Added NonDisplayed volume would impose any burden on intramarket competition because such changes will apply to all Members uniformly, in that the proposed base rebates for such executions would be the base rebates applicable to all Members, and the opportunity to qualify for enhanced rebates or discounted fees, as applicable, is available to all Members. The Exchange does not believe that the proposed changes to provide a rebate for sub-dollar executions of Added NonDisplayed Volume would impose any burden on intramarket competition because such changes will apply to all Members uniformly. For the foregoing reasons, the Exchange believes the proposed changes would not impose E:\FR\FM\11AUN1.SGM 11AUN1 54706 Federal Register / Vol. 88, No. 154 / Friday, August 11, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. Intermarket Competition As noted above, the Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. Members have numerous alternative venues that they may participate on and direct their order flow to, including 15 other equities exchanges and numerous alternative trading systems and other off-exchange venues. As noted above, no single registered equities exchange currently has more than approximately 16% of the total market share of executed volume of equities trading. Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow. Moreover, the Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to new or different pricing structures being introduced into the market. Accordingly, competitive forces constrain the Exchange’s transaction fees and rebates 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. 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 VerDate Sep<11>2014 16:59 Aug 10, 2023 Jkt 259001 promoting market competition in its broader forms that are most important to investors and listed companies.’’ 36 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’ . . . .’’.37 Accordingly, the Exchange does not believe its proposed pricing changes impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 38 and Rule 19b–4(f)(2) 39 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. 36 See supra note 31. 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)). 38 15 U.S.C. 78s(b)(3)(A)(ii). 39 17 CFR 240.19b–4(f)(2). 37 NetCoalition PO 00000 Frm 00142 Fmt 4703 Sfmt 9990 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 rule-comments@ sec.gov. Please include file number SR– MEMX–2023–16 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–MEMX–2023–16. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 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–2023–16 and should be submitted on or before September 1, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.40 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–17209 Filed 8–10–23; 8:45 am] BILLING CODE 8011–01–P 40 17 E:\FR\FM\11AUN1.SGM CFR 200.30–3(a)(12). 11AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 154 (Friday, August 11, 2023)]
[Notices]
[Pages 54699-54706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17209]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98070; File No. SR-MEMX-2023-16]


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

August 7, 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 August 3, 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 immediately. 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: (i) reduce the base rebate for executions of orders in 
securities priced at or above $1.00 per share that add displayed 
liquidity to the Exchange (such orders, ``Added Displayed Volume''); 
(ii) modify the Liquidity Provision Tiers by modifying the rebate for 
Liquidity Provision Tier 1 and the criteria for Liquidity Provision 
Tier 2; (iii) modify NBBO Set/Join Tier 2; (iv) modify the Displayed 
Liquidity Initiative Tiers by modifying the criteria for Displayed 
Liquidity Initiative Tier 1 and modifying the rebate for Displayed 
Liquidity Initiative Tier 2; (v) add a new Non-Display Add Tier 1 to 
the three existing Non-Display Add Tiers, which will be renamed Non-
Display Add Tier 2, Non-Display Add Tier 3, and Non-

[[Page 54700]]

Display Add Tier 4, respectively; (vi) modify the required criteria 
under renamed Non-Display Add Tier 3 and renamed Non-Display Add Tier 
4; (vii) reduce the base rebates for executions of orders in securities 
that add non-displayed liquidity to the Exchange (such orders, ``Added 
Non-Displayed Volume'') in securities priced at or above $1.00 per 
share; and (viii) increase the base rebates for executions of Added 
Non-Displayed Volume in securities priced below $1.00 per share.\4\
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    \4\ The Exchange initially filed the proposed Fee Schedule 
changes on August 1, 2023 (SR-MEMX-2023-15). On August 3, 2023, the 
Exchange withdrew that filing and submitted this proposal.
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 16% of the total market share of 
executed volume of equities trading.\5\ 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.\6\ 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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    \5\ Market share percentage calculated as of July 31, 2023. The 
Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \6\ Id.
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Reduce Base Rebate for Added Displayed Volume
    Currently, the Exchange provides a base rebate of $0.0018 per share 
for executions of Added Displayed Volume in securities priced at or 
above $1.00 per share. The Exchange now proposes to reduce the base 
rebate for executions of Added Displayed Volume to $0.0015 per 
share.\7\ The purpose of reducing the base rebate for executions of 
Added Displayed Volume is for business and competitive reasons, as the 
Exchange believes that reducing such rebate as proposed would decrease 
the Exchange's expenditures with respect to its transaction pricing in 
a manner that is still consistent with the Exchange's overall pricing 
philosophy of encouraging added displayed liquidity. The Exchange notes 
that despite the reduction proposed herein, the proposed base rebate 
for executions of Added Displayed Volume remains competitive with the 
base rebates provided by other exchanges for executions of orders in 
securities priced at or above $1.00 per share that add displayed 
liquidity.\8\
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    \7\ The proposed base rebate for executions of Added Displayed 
Volume is referred to by the Exchange on the Fee Schedule under the 
existing description ``Added displayed volume'' with a Fee Code of 
``B'', ``D'' or ``J'', as applicable, on execution reports.
    \8\ See, e.g., the Nasdaq Stock Market LLC (``Nasdaq'') Price 
List--Trading Connectivity (available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a base rebate of 
$0.0018 per share for executions of orders in Tape A and Tape B 
securities priced at or above $1.00 per share that add displayed 
liquidity and a base rebate of $0.0013 per share for executions of 
orders in Tape C securities priced at or above $1.00 per share that 
add displayed liquidity; the Cboe BZX Exchange, Inc. (``Cboe BZX'') 
equities trading fee schedule on its public website (available at 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), 
which reflects a base rebate of $0.0016 per share for executions of 
orders in securities priced at or above $1.00 per share that add 
displayed liquidity.
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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 in securities priced at or 
above $1.00 per share, which the Exchange is proposing to reduce to 
$0.0015 per share, as described above. The Exchange also currently 
offers Liquidity Provision Tiers 1-6 under which a Member may receive 
an enhanced rebate for executions of Added Displayed Volume by 
achieving the corresponding required volume criteria for each such 
tier. The Exchange now proposes to modify the Liquidity Provision Tiers 
by reducing the rebate for executions of Added Displayed Volume under 
Liquidity Provision Tier 1, as further described below.
    With respect to Liquidity Provision Tier 1,\9\ the Exchange 
currently provides an enhanced rebate of $0.00335 per share for 
executions of Added Displayed Volume in securities priced at or above 
$1.00 per share for Members that qualify for such tier by achieving an 
ADAV \10\ (excluding Retail Orders \11\) that is equal to or greater 
than 0.45% of the TCV.\12\ The Exchange now proposes to reduce the 
rebate for executions of Added Displayed Volume under Liquidity 
Provision Tier 1 to $0.0033 per share. The Exchange is not proposing to 
change the criteria required to qualify for Liquidity Provision Tier 1. 
The Exchange is also not proposing to change the rebate for executions 
of orders in securities priced below $1.00 per share under such tier.
---------------------------------------------------------------------------

    \9\ The pricing for Liquidity Provision Tier 1 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Added displayed volume, Liquidity Provision Tier 1'' with a Fee 
Code of ``B1'', ``D1'' or ``J1'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
    \10\ As set forth on the Fee Schedule, ``ADAV'' means the 
average daily added volume calculated as the number of shares added 
per day, which is calculated on a monthly basis, and ``Displayed 
ADAV'' means ADAV with respect to displayed orders.
    \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.
    \12\ 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.
---------------------------------------------------------------------------

    With respect to Liquidity Provision Tier 2,\13\ the Exchange 
currently provides an enhanced rebate of $0.00325 per share for 
executions of Added Displayed Volume in securities priced at or above 
$1.00 per share for Members that qualify for such tier by achieving (1) 
an ADAV (excluding Retail Orders) 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 now proposes to eliminate 
the retail exclusion under qualification (1) above for such tier. 
Specifically, the Exchange will offer an enhanced rebate of $0.00325 
per share for executions of

[[Page 54701]]

Added Displayed Volume in securities priced at or above $1.00 per share 
for Members that qualify for such tier by achieving (1) an ADAV that is 
equal to or greater than 0.25% of the TCV and (2) a Non-Displayed ADAV 
that is equal to or greater than 4,000,000 shares.
---------------------------------------------------------------------------

    \13\ 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 1'' with a Fee 
Code of ``B2'', ``D2'' or ``J2'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------

    The purpose of reducing the rebates for executions of Added 
Displayed Volume under Liquidity Provision Tier 1 as proposed, which 
the Exchange believes in each case represents a modest reduction, is 
for business and competitive reasons, as the Exchange believes that 
such rebate reductions would decrease the Exchange's expenditures with 
respect to its transaction pricing in a manner that is still consistent 
with the Exchange's overall pricing philosophy of encouraging added 
liquidity. The purpose of removing the retail exclusion under Liquidity 
Provision Tier 2 as proposed is to allow Members to more easily reach 
Liquidity Provision Tier 2, which, in turn, the Exchange believes will 
encourage more Members to seek to qualify for 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 
1-6 remains commensurate with the corresponding required criteria under 
each such tier and is reasonably related to the market quality benefits 
that each such tier is designed to achieve.
NBBO Setter/Joiner Tier 2
    The Exchange currently offers NBBO Setter/Joiner Tiers 1-2 under 
which a Member may receive an additive rebate for a qualifying Member's 
executions of Added Displayed Volume (other than Retail Orders) that 
establish the NBBO (such orders, ``Setter Volume'') and executions of 
Added Displayed Volume (other than Retail Orders) that establish a new 
best bid or offer on the Exchange that matches the NBBO first 
established on an away market (such orders, ``Joiner Volume''). With 
respect to NBBO Setter/Joiner Tier 2, the Exchange currently provides 
an additive rebate of $0.0003 per share for executions of Setter Volume 
and Joiner Volume for Members that qualify for such tier by achieving 
an ADAV equal to or greater than 0.05% of the TCV and a Displayed ADAV 
with respect to orders with Fee Code B \14\ or J \15\ that is equal to 
or greater than 40% of the Member's Displayed ADAV with respect to 
orders with Fee Code B, D or J.\16\ The Exchange proposes to reduce the 
rebate for NBBO Setter/Joiner Tier 2 to $0.0002 per share. The Exchange 
does not propose to change the criteria under NBBO Setter/Joiner Tier 
2. The Exchange believes that the new additive rebate remains 
commensurate with the required criteria under such tier, as modified, 
and is reasonably related to the market quality benefits that such tier 
is designed to achieve.
---------------------------------------------------------------------------

    \14\ The Exchange notes that orders with Fee Code B include 
orders, other than Retail Orders, that establish the NBBO.
    \15\ The Exchange notes that orders with Fee Code J include 
orders, other than Retail Orders, that establish a new BBO on the 
Exchange that matches the NBBO first established on an away market.
    \16\ The Exchange notes that orders with Fee Code D include 
orders that add displayed liquidity to the Exchange but that are not 
Fee Code B or J, and thus, orders with Fee Code B, D or J include 
all orders, other than Retail Orders, that add displayed liquidity 
to the Exchange. The pricing for NBBO Setter/Joiner Tier 2 is 
referred to by the Exchange on the Fee Schedule under the new 
description ``NBBO Setter/Joiner Tier 2'' with a Fee Code of S2 to 
be appended to the otherwise applicable Fee Code assigned by the 
Exchange on the monthly invoices for qualifying executions.
---------------------------------------------------------------------------

Displayed Liquidity Incentive (``DLI'') Tiers
    The Exchange currently offers DLI Tiers 1 and 2 under which a 
Member may receive an enhanced rebate for executions of Added Displayed 
Volume by achieving the corresponding required criteria for each such 
tier. The DLI Tiers are designed to encourage Members, through the 
provision of an enhanced rebate for executions of Added Displayed 
Volume, to promote price discovery and market quality by quoting at the 
NBBO for a significant portion of each day (i.e., through the 
applicable quoting requirement \17\) in a broad base of securities 
(i.e., through the applicable securities requirement \18\), thereby 
benefitting the Exchange and investors by providing improved trading 
conditions for all market participants through narrower bid-ask spreads 
and increased depth of liquidity available at the NBBO in a broad base 
of securities and committing capital to support the execution of 
orders.\19\ Now, the Exchange proposes to modify the required criteria 
under DLI Tier 1 and to modify the rebate under DLI Tier 2.
---------------------------------------------------------------------------

    \17\ As set forth on the Fee Schedule, the term ``quoting 
requirement'' means the requirement that a Member's NBBO Time be at 
least 25%, and the term ``NBBO Time'' means the aggregate of the 
percentage of time during regular trading hours during which one of 
a Member's market participant identifiers (``MPIDs'') has a 
displayed order of at least one round lot at the national best bid 
or the national best offer.
    \18\ As set forth on the Fee Schedule, the term ``securities 
requirement'' means the requirement that a Member meets the quoting 
requirement in the applicable number of securities per 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.
    \19\ See the Exchange's Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding 
the Exchange's DLI Tiers. See also Securities Exchange Act Release 
No. 92150 (June 10, 2021), 86 FR 32090 (June 16, 2021) (SR-MEMX-
2021-07) (notice of filing and immediate effectiveness of fee 
changes adopted by the Exchange, including the adoption of DLI).
---------------------------------------------------------------------------

    With respect to DLI Tier 1, currently, a Member qualifies for DLI 
Tier 1 by achieving (1) an NBBO Time of at least 25% in an average of 
at least 1,000 securities per trading day during the month and (2) an 
ADAV equal to or greater than 0.05% of the TCV. The Exchange proposes 
to modify the second criteria under DLI Tier 1 by increasing the ADAV 
requirement such that a Member would now qualify for DLI Tier 1 by 
achieving an ADAV equal to or greater than 0.10% of the TCV. The 
purpose of increasing the ADAV requirement is to encourage Members to 
strive for higher displayed volume on the Exchange, encouraging an 
overall increase in liquidity on the Exchange. The Exchange is not 
proposing to change the rebate for executions under such tier.\20\
---------------------------------------------------------------------------

    \20\ The pricing for DLI Tier 1 is referred to by the Exchange 
on the Fee Schedule under the existing description ``Added displayed 
volume, DLI Tier 1'' with a Fee Code of Bq1, Bq1 or Jq1, as 
applicable.
---------------------------------------------------------------------------

    With respect to DLI Tier 2, currently, the Exchange provides a 
rebate of $0.0028 per share under such tier. Now, the Exchange is 
proposing to reduce this rebate to $0.0026.\21\ The Exchange is not 
proposing to change any of the criteria required to reach such tier. 
The purpose of reducing the rebate is for business and competitive 
reasons, as the Exchange believes the reduction of such rebates would 
decrease the Exchange's expenditures with respect to its

[[Page 54702]]

transaction pricing in a manner that is still consistent with the 
Exchange's overall pricing philosophy of encouraging added and/or 
displayed liquidity and promoting the price discovery and market 
quality objectives of the DLI Tiers described above. The Exchange 
believes that the proposed reduction by $0.0002 per share represents a 
modest reduction and that the proposed rebate under DLI Tier 2 remains 
commensurate with the required criteria under the tier. The Exchange is 
not proposing to change the rebates provided under such tiers for 
executions of orders in securities priced below $1.00 per share.
---------------------------------------------------------------------------

    \21\ The pricing for DLI Tier 2 is referred to by the Exchange 
on the Fee Schedule under the existing description ``Added displayed 
volume, DLI Tier 2'' with a Fee Code of Bq2, Dq2 or Jq2, as 
applicable.
---------------------------------------------------------------------------

Non-Display Add Tiers
    The Exchange currently offers Non-Display Add Tiers 1-3 under which 
a Member may receive an enhanced rebate for executions of Added Non-
Displayed Volume by achieving the corresponding required volume 
criteria for each such tier. The Exchange now proposes to modify the 
Non-Display Add Tiers by adding a new Non-Display Add Tier 1 to the 
three existing Non-Display Add Tiers, which will be renamed Non-Display 
Add Tier 2, Non-Display Add Tier 3, and Non-Display Add Tier 4, 
respectively. The Exchange also now proposes to modify the required 
criteria under renamed Non-Display Add Tier 3 and renamed Non-Display 
Add Tier 4.
    With respect to the proposed addition of a new Non-Display Add Tier 
1, the Exchange currently provides three Non-Display Add tiers. 
Currently, under Non-Display Add Tier 1, the Exchange provides an 
enhanced rebate of $0.0027 per share for executions of Added Non-
Displayed Volume in securities priced at or above $1.00 per share for 
Members that qualify for such tier by achieving a Non-Displayed ADAV 
\22\ that is equal to or greater than 5,000,000 shares.\23\ The 
Exchange also currently provides under Non-Display Add Tier 2 an 
enhanced rebate of $0.0024 per share for executions of Added Non-
Displayed Volume in securities priced at or above $1.00 per share for 
Members that qualify for such tier by achieving a Non-Displayed ADAV 
that is equal to or greater than 1,500,000 shares,\24\ and under Non-
Display Add Tier 3 the Exchange currently provides an enhanced rebate 
of $0.0018 per share for executions of Added Non-Displayed Volume in 
securities priced at or above $1.00 per share for Members that qualify 
for such tier by achieving a Non-Displayed ADAV that is equal to or 
greater than 500,000 shares.\25\ The Exchange proposes to provide an 
enhanced rebate of $0.0028 per share for executions of Added Non-
Displayed Volume in securities priced at or above $1.00 per share for 
Members that qualify for such tier by achieving a Non-Displayed ADAV 
that is equal to or greater than 8,000,000 shares or the Member has an 
ADAV (excluding Retail Orders) equal to or greater than 0.45% of the 
TCV. This additional rebate tier would become the new Non-Display Add 
Tier 1.
---------------------------------------------------------------------------

    \22\ As set forth on the Fee Schedule, ``Non-Displayed ADAV'' 
means ADAV with respect to non-displayed orders (including orders 
subject to Display-Price Sliding that receive price improvement when 
executed and Midpoint Peg orders).
    \23\ The pricing for Non-Display Add Tier 1 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Added non-displayed volume, Non-Display Add Tier 1'' with a Fee 
Code of ``H1'', ``M1'' or ``P1'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
    \24\ The pricing for Non-Display Add Tier 2 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Added non-displayed volume, Non-Display Add Tier 2'' with a Fee 
Code of ``H2'', ``M2'' or ``P2'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
    \25\ The pricing for Non-Display Add Tier 3 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Added non-displayed volume, Non-Display Add Tier 3'' with a Fee 
Code of ``H3'', ``M3'' or ``P3'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------

    With respect to the former Non-Display Add Tier 1, as a result of 
the addition of a new Non-Display Add Tier 1 as described above, the 
former Non-Display Add Tier 1 would be re-named Non-Display Add Tier 2. 
The Exchange does not propose any changes to the amount of the rebate 
($0.0027 per share in securities priced at or above $1.00 per share) 
for this tier. The Exchange also does not propose any change to the 
criteria required to meet this tier.
    With respect to the former Non-Display Add Tier 2, as a result of 
the addition of a new Non-Display Add Tier 1 as described above, the 
former Non-Display Add Tier 2 would be renamed Non-Display Add Tier 3. 
The Exchange does not propose any changes to the amount of the rebate 
($0.0024 per share in securities priced at or above $1.00 per share) 
for this tier. In addition to the name change, the Exchange proposes to 
modify the criteria required to meet this tier. Currently, in order to 
qualify for the rebate of $0.0024 per share (for the current Non-
Display Add Tier 2, which the Exchange proposes to rename Non-Display 
Add Tier 3) Members must achieve a Non-Display ADAV equal to or greater 
than 1,500,000 shares, as noted above. The Exchange proposes that a 
Member would qualify for such tier by achieving a Non-Display ADAV 
equal to or greater than 2,000,000 shares. In summary, the Exchange 
proposes that in order to qualify for the renamed Non-Display Add Tier 
3, Members must achieve a Non-Display ADAV equal to or greater than 
2,000,000 shares.
    With respect to the former Non-Display Add Tier 3, as a result of 
the addition of a new Non-Display Add Tier 1 as described above, the 
former Non-Display Add Tier 3 would be renamed Non-Display Add Tier 4. 
The Exchange does not propose any changes to the amount of the rebate 
($0.0018 per share in securities priced at or above $1.00 per share) 
for this tier. In addition to the name change, the Exchange proposes to 
modify the criteria required to meet this tier. The Exchange currently 
provides an enhanced rebate of $0.0018 per share for executions of 
Added Non-Displayed Volume for Members that qualify for such tier by 
achieving a Non-Displayed ADAV that is equal to or greater than 500,000 
shares, as noted above. The Exchange now proposes that a Member would 
now qualify for such tier by achieving a Non-Displayed ADAV that is 
equal to or greater than 1,000,000 shares. In summary, the Exchange 
proposes that in order to qualify for the renamed Non-Display Add Tier 
4, Members must achieve a Non-Display ADAV equal to or greater than 
1,000,000 shares.\26\
---------------------------------------------------------------------------

    \26\ The pricing for Non-Display Add Tier 4 would be referred to 
by the Exchange on the Fee Schedule under the existing description 
``Added non-displayed volume, Non-Display Add Tier 4'' with a Fee 
Code of ``H4'', ``M4'' or ``P4'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------

    As described in further detail below, the Exchange is also 
proposing to increase the rebate for all Added Non-Displayed Volume in 
securities priced below $1.00 per share. The Exchange proposed to adopt 
this same rebate for each of the Non-Display Add Tiers, Tiers 1 through 
4, in order to maintain consistency across all executions of Added Non-
Displayed Volume.
    The purpose of adding a new Non-Display Add Tier 1 is for business 
and competitive reasons. The proposed new Non-Display Add Tier 1 is 
designed to encourage Members to maintain or increase their order flow 
to the Exchange in order to qualify for the proposed enhanced rebate 
for executions of Added Non-Displayed Volume. The purpose of re-naming 
the currently existing tiers is to present the fee schedule in a way 
that is easy for Members to understand, starting with the largest 
rebate. The purpose of raising the Non-Display ADAV required to

[[Page 54703]]

achieve Non-Display Add Tier 3 as proposed, which the Exchange believes 
represents a modest increase, is for business and competitive reasons. 
The purpose of raising the Non-Displayed ADAV required to achieve Non-
Display Add Tier 4 as proposed, which the Exchange believes represents 
a modest increase, is also for business and competitive reasons. The 
modest increase in the Non-Displayed ADAV required to achieve Tiers 3 
and 4 will encourage Members to strive for higher non-displayed added 
volume on the Exchange, encouraging an overall increase in liquidity on 
the Exchange.
    The tiered pricing structure for executions of Added Non-Displayed 
Volume under the Non-Display Add Tiers provides an incremental 
incentive for Members to strive for higher volume thresholds to receive 
higher enhanced rebates for such executions and, as such, is intended 
to encourage Members to maintain or increase their order flow, 
particularly in the form of liquidity-adding non-displayed volume, to 
the Exchange, thereby contributing to a deeper and more robust and 
well-balanced market ecosystem to the benefit of all Members and market 
participants. The Exchange believes that the Non-Display Add Tiers, as 
modified by the proposed changes described above, reflect a reasonable 
and competitive pricing structure that is right-sized and consistent 
with the Exchange's overall pricing philosophy of encouraging added 
and/or displayed liquidity. Specifically, the Exchange believes that, 
after giving effect to the proposed changes described above, the rebate 
for executions of Added Non-Displayed Volume provided under each of the 
Non-Display Add Tiers is commensurate with the corresponding required 
criteria under each such tier and is reasonably related to the market 
quality benefits that each such tier is designed to achieve.
Reduce Base Rebates for Added Non-Displayed Volume
    The Exchange is also proposing to uniformly reduce the base rebates 
provided for executions of Added Non-Displayed Volume in securities 
priced at or above $1.00 per share. Added Non-Displayed Volume is 
comprised of the three following types of orders: (i) Midpoint Peg 
Orders in securities that add liquidity to the Exchange (such orders, 
``Added Midpoint Volume''); (ii) orders, which are not orders subject 
to Display-Price Sliding that receive price improvement when executed 
or Midpoint Peg Orders, that add non-displayed liquidity to the 
Exchange (such orders, ``Added Non-Midpoint Hidden Volume''); and (iii) 
orders in securities subject to Display-Price Sliding that add 
liquidity to the Exchange and receive price improvement when executed 
(such orders, ``Added Price-Improved Volume'').
    Currently, the Exchange provides base rebates of $0.0010 per share 
for executions of Added Midpoint Volume, Added Non-Midpoint Hidden 
Volume, and Added Price-Improved Volume in securities priced at or 
above $1.00 per share. The Exchange now proposes to reduce each of 
these base rebates to $0.0008 per share.\27\ The purpose of uniformly 
reducing the standard rebates for executions of Added Midpoint Volume, 
Added Non-Midpoint Hidden Volume, and Added Price-Improved Volume is 
for business and competitive reasons, as the Exchange believes reducing 
such rebates as proposed would decrease the Exchange's expenditures 
with respect to its transaction pricing in a manner that is still 
consistent with the Exchange's overall pricing philosophy of 
encouraging added displayed liquidity. The Exchange notes that the 
proposed base rebate for executions of Added Non-Midpoint Hidden Volume 
remains in line and competitive with the base rebates provided by at 
least one other exchange for executions of similar orders.\28\ 
Additionally, the Exchange believes it is appropriate to also provide 
the same base rebate for executions of Added Price-Improved Volume and 
Added Midpoint Volume as for Added Non-Midpoint Hidden Volume, as all 
of these orders similarly add liquidity to the Exchange and are 
executed at prices that are not displayed on the Exchange's order book, 
and the Exchange notes that all of these orders are also currently 
subject to the same base rebate and pricing structure today.
---------------------------------------------------------------------------

    \27\ The proposed base rebate for executions of Added Midpoint 
Volume is referred to by the Exchange on the Fee Schedule under the 
existing description ``Added non-displayed volume, Midpoint Peg'' 
and such orders will continue to receive a Fee Code of ``M'' on 
execution reports. The proposed base rebate for executions of Added 
Non-Midpoint Hidden Volume is referred to by the Exchange on the Fee 
Schedule under the existing description ``Added non-displayed 
volume'' and such orders will continue to receive a Fee Code of 
``H'' on execution reports. The proposed base rebate for executions 
of Added Price-Improved Volume is referred to by the Exchange on the 
Fee Schedule under the existing description ``Added volume, order 
subject to Display-Price Sliding that receives price improvement 
when executed'' and such orders will continue to receive a Fee Code 
of ``P'' on execution reports.
    \28\ See, e.g., the Cboe BZX equities trading fee schedule on 
its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a standard rebate of 
$0.0008 per share for executions of orders in securities priced at 
or above $1.00 per share that add non-displayed liquidity.
---------------------------------------------------------------------------

Increase Rebates for Sub-Dollar Non-Displayed Volume
    The Exchange is also proposing to increase the rebates provided for 
all sub-dollar executions of Added Non-Displayed Volume. As noted 
above, Added Non-Displayed Volume is comprised of the three following 
types of orders: (i) Added Midpoint Volume; (ii) Added Non-Midpoint 
Hidden Volume; and (iii) Added Price-Improved Volume. Currently, the 
Exchange provides no rebate and charges no fees for Added Midpoint 
Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved 
Volume in securities priced below $1.00 per share. This pricing 
structure is similarly applied to all executions of Added Non-Displayed 
Volume by Members that qualify for enhanced rebates in securities 
priced at or above $1.00 per share pursuant to the Non-Display Add 
Tiers. The Exchange now proposes to increase the rebate for all Added 
Non-Displayed Volume to 0.075% of total dollar value. Specifically, the 
Exchange will provide a rebate of 0.075% of total dollar value for each 
of Added Midpoint Volume, Added Non-Midpoint Hidden Volume, and Added 
Price-Improved Volume in securities priced below $1.00 per share. The 
Exchange is similarly proposing to provide a rebate of 0.075% of total 
dollar value to Members that qualify for enhanced rebates pursuant to 
the Non-Display Add Tiers in securities priced below $1.00 per share. 
Thus, all Added Non-Displayed Volume will qualify for the same rebate 
for executions in securities priced below $1.00 per share.
    The purpose of the rebate increase for sub-dollar executions in 
Added Non-Displayed Volume is to encourage participants to add sub-
dollar liquidity on the Exchange. The increase to 0.075% of total 
dollar value is the same rebate provided to sub-dollar executions which 
provide displayed liquidity on the Exchange. The Exchange believes by 
offering the same rebate for sub-dollar non-displayed liquidity as for 
displayed liquidity, the resulting pricing structure will encourage the 
provision of sub-dollar liquidity on the Exchange. Additionally, the 
Exchange believes it is appropriate to provide the same rebate for sub-
dollar executions of Added Price-Improved Volume and Added Midpoint 
Volume as for Added Non-Midpoint Hidden Volume, as all of these orders 
similarly add liquidity to the Exchange and are executed at prices that 
are not displayed on the Exchange's order book, and the Exchange notes 
that

[[Page 54704]]

all of these orders are also currently subject to the same sub-dollar 
rebate and pricing structure today.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\29\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\30\ 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.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f.
    \30\ 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.'' \31\
---------------------------------------------------------------------------

    \31\ 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 encourage market participants to strive for higher volume 
on 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 (such as Liquidity 
Provision Tiers, NBBO Setter/Joiner Tiers, Non-Display Add Tiers, and 
DLI 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 discount 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 the proposal to reduce the base rebate for 
Added Displayed Volume is reasonable because, as described above, it is 
designed to decrease the Exchange's expenditures with respect to its 
transaction pricing in a manner that is still consistent with the 
Exchange's overall pricing philosophy of encouraging added and/or 
displayed liquidity, and the proposed new base rebate remains 
competitive with the base rebates provided by other exchanges in each 
case for executions of similar orders.\32\ The Exchange also believes 
the proposed change to the base rebate is equitable and not unfairly 
discriminatory because it will apply equally to all Members and because 
the opportunity to qualify for enhanced rebates is open to all members 
on an equal basis, as described above.
---------------------------------------------------------------------------

    \32\ See supra note 8.
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to reduce the 
rebates provided pursuant to Liquidity Provision Tier 1, NBBO Setter/
Joiner Tier 2, and DLI Tier 2 are reasonable, because the change in 
rebate for each is a modest decrease and consistent with an equitable 
allocation of fees. The Exchange believes the proposed change are 
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 tiers. The 
Exchange believes that each such rebate is commensurate with the 
corresponding required criteria under such tiers and are reasonably 
related to such market quality benefits that such tiers are designed to 
achieve. The Exchange believes that the proposed change to the criteria 
in Liquidity Provision Tier 2 is reasonable, equitable, and not 
unfairly discriminatory because it will apply equally to all Members 
and allow all Members to more easily reach Liquidity Provision Tier 2, 
which, in turn, the Exchange believes will encourage more Members to 
seek to qualify for such Tier. The Exchange believes that the proposed 
change is reasonably related to such market quality benefits that the 
tier is designed to achieve.
    The Exchange believes that the proposed changes to the DLI Tier 1 
criteria would continue to provide Members with an incremental 
incentive to achieve certain volume thresholds on the Exchange. The 
proposed new DLI Tier 1 criteria would provide Members with an 
incremental incentive to achieve certain volume thresholds on the 
Exchange, is available to all Members on an equal basis, and, as 
described above, is reasonably designed to encourage Members to 
maintain or increase their order flow by displaying liquidity, which 
the Exchange believes would promote price discovery, enhance liquidity 
and market quality, and contribute to a more robust and well-balanced 
market ecosystem on the Exchange to the benefit of all Members and 
market participants. The Exchange believes the proposed change is 
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.
    The Exchange believes that the proposed changes to add Non-Display 
Add Tier 1, increase the Non-Displayed ADAV requirement under Non-
Display Add Tier 3 to 2,000,000 shares, and to increase the Non-
Displayed ADAV requirement under Non-Display Add Tier 3 to 1,000,000 
shares are reasonable, because each change is a modest increase 
designed to increase non-displayed liquidity on the Exchange for the 
benefit of all market participants. The Exchange believes the proposed 
changes are equitable and not unfairly discriminatory because they will 
apply to all Members equally, in that all Members will continue to have 
the opportunity to achieve the required criteria under such tier.
    The Exchange believes that the proposed changes to reduce the base 
rebates provided for executions of Added Non-Displayed Volume are 
reasonable because, as described above, such changes are designed to 
decrease the Exchange's expenditures with respect to its transaction 
pricing in a manner that is still consistent with the

[[Page 54705]]

Exchange's overall pricing philosophy of encouraging added and/or 
displayed liquidity and the proposed new base rebates for Added Non-
Displayed Volume remain in line and competitive with the base rebates 
provided by other exchanges for executions of similar orders.\33\ 
Additionally, as noted above, the Exchange believes that providing the 
same base rebate for executions of Added Price-Improved Volume and 
Added Midpoint Volume as for Added Non-Midpoint Hidden Volume is 
reasonable and appropriate because all of these orders similarly add 
liquidity to the Exchange, are executed at prices that are not 
displayed on the Exchange's order book, and are currently subject to 
the same base rebate and pricing structure today. The Exchange also 
believes the proposed base rebates for executions of Added Non-
Displayed Volume are equitable and not unfairly discriminatory, as such 
base rebates will apply equally to all Members.
---------------------------------------------------------------------------

    \33\ See supra note 28.
---------------------------------------------------------------------------

    The Exchange believes that the proposed change to increase the sub-
dollar rebate for executions of Added Non-Displayed Volume is 
reasonable because an increase in rebate will encourage more Members to 
place executions increasing Added Non-Displayed Volume on the Exchange. 
The Exchange believes that the proposed changes to increase the Added 
Non-Displayed Volume rebate are equitable and not unfairly 
discriminatory as these rebates will apply equally to all Members of 
the Exchange.
    The Exchange believes that the proposed base rebate, Liquidity 
Provision Tiers, NBBO Setter/Joiner Tiers, Non-Display Add Tiers, DLI 
Tiers, and Added Non-Display Volume rebates, 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 form 
of Added Displayed Volume and Added Non-Displayed Volume to the 
Exchange, which the Exchange believes would promote price discovery, 
enhance liquidity and market quality, and contribute to a more robust 
and well-balanced market ecosystem on the Exchange to the benefit of 
all Members and market participants.
    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 \34\ 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.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposal will result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Instead, as discussed above, 
the proposal is 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.'' \35\
---------------------------------------------------------------------------

    \35\ See supra note 31.
---------------------------------------------------------------------------

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, NBBO Setter/Joiner Tiers, Non-Displayed Add Tiers and 
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. The Exchange does not believe 
that the proposed changes to reduce the base rebates for executions of 
Added Displayed Volume and Added Non-Displayed volume would impose any 
burden on intramarket competition because such changes will apply to 
all Members uniformly, in that the proposed base rebates for such 
executions would be the base rebates applicable to all Members, and the 
opportunity to qualify for enhanced rebates or discounted fees, as 
applicable, is available to all Members. The Exchange does not believe 
that the proposed changes to provide a rebate for sub-dollar executions 
of Added Non-Displayed Volume would impose any burden on intramarket 
competition because such changes will apply to all Members uniformly. 
For the foregoing reasons, the Exchange believes the proposed changes 
would not impose

[[Page 54706]]

any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
Intermarket Competition
    As noted above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. Members have numerous 
alternative venues that they may participate on and direct their order 
flow to, including 15 other equities exchanges and numerous alternative 
trading systems and other off-exchange venues. As noted above, no 
single registered equities exchange currently has more than 
approximately 16% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates 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.
    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.'' \36\ 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' . . . .''.\37\ 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.
---------------------------------------------------------------------------

    \36\ See supra note 31.
    \37\ 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)).
---------------------------------------------------------------------------

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 \38\ and Rule 19b-4(f)(2) \39\ thereunder.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \39\ 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-2023-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-MEMX-2023-16. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 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-2023-16 and should be 
submitted on or before September 1, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
---------------------------------------------------------------------------

    \40\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17209 Filed 8-10-23; 8:45 am]
BILLING CODE 8011-01-P

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