Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule and Adopt Membership Fees for MEMX Options, 68762-68768 [2023-22011]
Download as PDF
<![CDATA[
68762
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
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–NASDAQ–2023–038 and should be
submitted on or before October 25,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21931 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98648; File No. SR–MEMX–
2023–26]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule and Adopt Membership Fees
for MEMX Options
September 29, 2023.
lotter on DSK11XQN23PROD with NOTICES1
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 28, 2023, MEMX LLC
(‘‘MEMX’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘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) to establish membership
fees for Members of the Exchange’s
options platform and make a number of
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
1 15
VerDate Sep<11>2014
20:21 Oct 03, 2023
Jkt 262001
clarifying, organizational changes to its
Fee Schedule. 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
In connection with the Exchange’s
launch of MEMX Options,4 its options
trading platform, the Exchange proposes
to modify its fee schedule applicable to
use of the Exchange, effective
immediately, in order to: (i) establish
membership fees (‘‘Membership Fees’’)
for MEMX Options Members, and (ii)
make a number of clarifying,
organizational changes to its single
existing fee schedule, in order to create
three separate fee schedules for: (A)
executions that occur on the Exchange’s
pre-existing equities market (‘‘MEMX
Equities’’), (B) executions that occur on
MEMX Options, and (C) the Exchange’s
Membership Fees (for both MEMX
Equities and MEMX Options),
respectively.5 The Exchange believes
that these changes will provide greater
transparency to Members about how the
Exchange assesses fees and calculates
rebates, as well as allowing Members to
more easily validate their bills on a
monthly basis. The Exchange notes that
none of these changes amend any
existing fee or rebate for applicable to
4 On August 8, 2022, the Commission approved
SR–MEMX–2022–10, which proposed rules for the
trading of options on the Exchange. See Securities
Exchange Act Release No. 95445 (August 8, 2022),
87 FR 49894 (August 12, 2022) (SR–MEMX–2022–
010). The Exchange launched MEMX Options on
September 27, 2023.
5 The Exchange initially filed the proposed
changes on September 1, 2023 (SR–MEMX–2023–
22). On September 13, 2023, the Exchange
withdrew that filing and submitted SR–MEMX–
2023–23. On September 28, 2023, the Exchange
withdrew SR–MEMX–2023–23 and submitted this
filing.
PO 00000
Frm 00204
Fmt 4703
Sfmt 4703
MEMX Equities (including nontransaction fees such as membership,
connectivity, and market data).
Specifically, the Exchange is proposing
the following:
• To more clearly separate pricing
applicable to MEMX Options from the
Exchange’s current fee schedule, which
will remain applicable to MEMX
Equities. Although the Exchange has
always maintained a single fee schedule
applicable to trades on the Exchange, as
the Exchange has launched the MEMX
Options platform, the Exchange believes
that separating the fee schedules for
MEMX Options and MEMX Equities
will reduce potential confusion. The
Exchange currently intends to begin
charging for connectivity and market
data for MEMX Options in 2024 and
will file separately to adopt such fees.
The Exchange has also intentionally left
blank certain additional portions of the
MEMX Options fee schedule, including
‘‘Transaction Fees’’ and ‘‘Options
Regulatory Fee’’, and it has filed
separately to adopt those specific fees.
• To more clearly separate
Membership Fees from the Exchange’s
current fee schedule. Membership Fees
are applicable to Members of both
MEMX Equities and MEMX Options
platforms. Because the Membership
Fees section is applicable to members of
both platforms, the Exchange believes
that separating the fee schedule for
Membership Fees (such separate fee
schedule for Membership Fees, the
‘‘Membership Fee Schedule’’) will
reduce potential confusion (e.g., as to
which fees a Member that participates
on both MEMX Equities and MEMX
Options must pay on a monthly basis to
maintain membership with the
Exchange).
• To implement additional fees set
forth on the Membership Fee Schedule
that would be applicable to Options
Order Entry Firms (as defined in
Exchange Rule 16.1) and Options
Market Makers (i.e., those Options
Members that have registered as Market
Makers on the Exchange under
Exchange Rule 22.2.). Options Order
Entry Firms and Options Market Makers
would collectively be referred to on the
Membership Fee Schedule as ‘‘Options
Trading Members.’’ As proposed, the
Membership Fee Schedule will easily
identify the fees for membership that are
applicable to all Members of MEMX
(including Members of MEMX Equities
and MEMX Options) and the additional
fees for membership which are
applicable to all Options Trading
Members.
• To add a hyperlink within the
‘‘Additional Fees’’ sections of the
MEMX Equities Fee Schedule and the
E:\FR\FM\04OCN1.SGM
04OCN1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
MEMX Options Fee Schedule, which
will electronically hyperlink the reader
to the Membership Fee Schedule on the
Exchange’s website.
(i) MEMX Options Membership Fees
As the existing fee applicable to
Membership is not specific to
participation on a specific trading
platform, the Exchange will continue to
charge its current Membership Fee of
$200 per month to each Exchange
Member, other than those to whom a
waiver applies as set forth below (i.e.,
the Exchange will charge a single fee of
$200 to Members of MEMX Equities,
Members of MEMX Options, and
Members of both MEMX Equities and
MEMX Options). In addition, the
Exchange is proposing to charge an
additional $1,000 per month to Options
Order Entry Firms (as defined in
Exchange Rule 16.1), and an additional
$7,000 per month to Options Market
Makers, (i.e., those Options Members
that have registered as Market Makers
Exchange
Nasdaq PHLX LLC (‘‘PHLX’’) 6 ...........................
BOX Options Exchange LLC (‘‘BOX’’) 7 ..............
NYSE American, LLC (‘‘NYSE American’’) 8 ......
NYSE Arca, Inc. (‘‘NYSE Arca’’) 9 .......................
lotter on DSK11XQN23PROD with NOTICES1
MIAX Options Exchange (‘‘MIAX Options’’) 10 ....
6 See PHLX Fee Schedule Section 8A, 8B, and 8C,
available at https://listingcenter.nasdaq.com/
rulebook/phlx/rules/phlx-options-7 (last visited
September 27, 2023).
7 See BOX Options Fee Schedule Section I,
available at https://boxoptions.com/fee-schedule/
(last visited September 27, 2023).
20:21 Oct 03, 2023
on the Exchange under Exchange Rule
22.2.). The Exchange notes that the
proposed fees for Options Trading Firms
are competitive with and in several
cases significantly lower than the fees
for membership imposed by several
other options exchanges that charge
such fees. The Exchange provides the
below table for comparison purposes to
show how the Exchange’s proposed fees
for membership compare to fees for
membership currently charged by other
options exchanges.
Monthly membership trading permit fee
MEMX Options (as proposed) .............................
VerDate Sep<11>2014
68763
Jkt 262001
All Members: $200.
Options Order Entry Firm: $1,000.
Options Market Maker: $7,000.
Streaming Quote Trader (‘‘SQT’’) permit fees:
Tier 1 (up to 200 option classes): $0.00.
Tier 2 (up to 400 option classes): $2,200.
Tier 3 (up to 600 option classes): $3,200.
Tier 4 (up to 800 option classes): $4,200.
Tier 5 (up to 1,000 option classes): $5,200.
Tier 6 (up to 1,200 option classes): $6,200.
Tier 7 (all option classes): $7,200.
Remote Market Maker Organization (‘‘RMO’’) permit fees:
Tier 1 (less than 100 classes): $5,000.
Tier 2 (more than 100 and less than 999 classes): $8,000.
Tier 3 (1000 or more classes): $11,000.
Participant Fee: $1,500 per month (Electronic Market Makers are not charged the Participant
Fee).
Market Maker Trading Permit fees:
Up to and including 10 classes: $4,000.
Up to and including 40 classes: $6,000.
Up to and including 100 classes: $8,000.
Over 100 classes: $10,000.
Permit (‘‘ATP’’) Fees:
Floor Broker: $500.
Order Flow Provider: $1,000.
Clearing Member: $1,000.
Options Market Maker 1st ATP: $8,000.
Options Market Maker 2nd ATP: $6,000.
Options Market Maker 3rd ATP: $5,000.
Options Market Maker 4th ATP: $4,000.
Options Market Maker 5th ATP: $3,000.
Options Market Maker 6th to 9th ATP: $2,000.
Options Market Maker 10th or more ATPs: $500.
Permit (‘‘OTP’’) Fees:
Office or Clearing Firms: $1,000.
Floor Broker: $500.
Options Market Maker 1st ATP: $8,000.
Options Market Maker 2nd ATP: $6,000.
Options Market Maker 3rd ATP: $5,000.
Options Market Maker 4th ATP: $4,000.
Options Market Maker 5th ATP: $3,000.
Options Market Maker 6th to 9th ATP: $2,000.
Options Market Maker 10th or more ATPs: $500.
Reserve Market Maker OTP: $175.
Electronic Exchange Members Trading Permit: $1,500.
Market Maker Trading Permit (up to 10 classes): $7,000.
Market Maker Trading Permit (up to 40 classes): $12,000.
Market Maker Trading Permit (up to 100 classes): $17,000.
Market Maker Trading Permit (over 100 classes): $22,000.
8 See NYSE American Options Fees Schedule
Section III(A), available at https://www.nyse.com/
publicdocs/nyse/markets/american-options/NYSE_
American_Options_Fee_Schedule.pdf (last visited
September 27, 2023).
9 See NYSE Arca Options Fees and Charges,
available at https://www.nyse.com/publicdocs/
PO 00000
Frm 00205
Fmt 4703
Sfmt 4703
nyse/markets/arca-options/NYSE_Arca_Options_
Fee_Schedule.pdf (last visited September 27, 2023).
10 See MIAX Options Fee Schedule, Section 3,
available at https://www.miaxglobal.com/markets/
us-options/miax-options/fees (last visited
September 27, 2023).
E:\FR\FM\04OCN1.SGM
04OCN1
68764
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
The Exchange proposes to maintain
its existing billing practices for all
Membership Fees, including the newly
proposed Options Membership Fees. As
is current practice, Members will be
assessed their monthly Membership
Fees at the close of business on the first
day of each month. The Exchange will
also maintain the current practice such
that if a Member is pending a voluntary
termination of rights as a Member
pursuant to Exchange Rule 2.8 prior to
its monthly Membership Fee being
assessed and the Member does not
utilize the facilities of the Exchange
while such voluntary termination of
rights is pending, then the Member will
not be obligated to pay the monthly
Membership Fee. Additionally, the
Membership Fees will not be prorated if
a membership is not active for an entire
month, which the Exchange believes is
reasonable based on the frequency that
the fee is assessed (i.e., monthly instead
of applying to a longer period).
Lastly, to encourage new participants
to join MEMX Options, effective June
30, 2023, the Exchange implemented a
Membership Fee Waiver until January 1,
2024.11 The Exchange is proposing to
maintain this language on the new
Membership Fee Schedule, and as such,
will apply this waiver to the additional
proposed Membership Fees for new
Members of MEMX Options as well.
lotter on DSK11XQN23PROD with NOTICES1
2. Statutory Basis
The Exchange believes that the
proposed rule change to reorganize the
fee schedule as described above is
consistent with the provisions of
Section 6 of the Act,12 in general, and
furthers the objective of Section 6(b)(1)
of the Act,13 in particular, in that the
proposed rule change enables the
Exchange to be so organized as to have
the capacity to be able to carry out the
purposes of the Act and to comply with
the provisions of the Act, the rules and
regulations thereunder, and the rules of
the Exchange. The proposed
reorganization of the Exchange’s fee
schedule is designed to make the fee
schedule easier to read and for Members
to validate the bills they receive from
the Exchange. The Exchange believes
the proposed fee schedules, and the
division thereof, will be clearer and less
confusing for Members of the Exchange
and will eliminate potential Member
confusion.
The Exchange believes that the
proposed Membership Fee changes are
Securities Exchange Act Release No. 97893
(July 13, 2023), 88 FR 46285 (July 19, 2023) (SR–
MEMX–2023–13).
12 15 U.S.C. 78f.
13 15 U.S.C. 78f(b)(1).
consistent with the provisions of
Section 6 of the Act,14 in general, and
with Sections 6(b)(4) and 6(b)(5) of the
Act,15 in particular, in that they provide
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 further discussed below.
MEMX believes that its $200
Membership Fee which is assessed to all
Members (Members of MEMX Options
and Members of MEMX Equities alike)
is consistent with the Act, as the
Exchange assesses the same fee to all
Members of the Exchange on all
platforms. The Exchange believes that it
is reasonable and consistent with the
Act to assess this Membership Fee to all
Members because there are technical,
regulatory, and administrative services
associated with a market participant
being a Member of the Exchange. As a
self-regulatory organization, MEMX’s
membership team reviews applicants to
ensure that each applicant for
membership meets the Exchange’s
qualification criteria prior to approval.
The membership team, in conjunction
with the Regulatory Department,
reviews the registration and
qualification of an applicant’s
associated persons, the applicant’s
financial health, the validity of its
clearing relationship, and its
disciplinary history. The membership
team also provides ongoing support to
Members with respect to membership
changes, registration, and other
questions that commonly arise from
Members regarding such matters. The
Exchange believes that it is consistent
with the Act to charge the $200
Membership Fee as it is reasonable to
cover costs of administering its
membership program.
The Exchange believes that charging a
$1,000 Membership Fee for Order Entry
Firms is consistent with the Act,
because this fee is in line with what
other options exchanges charge
members of their options platform who
are not Market Makers.16 For example,
MEMX would charge $1,200 after
January 1, 2024, to an Order Entry Firm.
If the same market participant (i.e., not
a market maker) wanted to join to trade
on the BOX Options Exchange, they
would be charged $1,500 monthly.17
The Exchange anticipates that Order
Entry Firms will require more resources
than Members of the Exchange’s
11 See
VerDate Sep<11>2014
20:21 Oct 03, 2023
Jkt 262001
14 See
supra note 12.
15 15 U.S.C. 78f(b)(4) and (5).
16 See supra notes 6 through 10.
17 See supra note 7.
PO 00000
Frm 00206
Fmt 4703
Sfmt 4703
equities platform due to various
complexities inherent to the options
markets, such as the process for Clearing
Member Give Ups described in
Exchange Rule 21.12 and the process for
listing classes and strikes made
available for trading on MEMX Options
described in Rules 19.3 through 19.5.
The Exchange also anticipates that
Order Entry Firms that are proprietary
trading firms will generate a high
volume of message traffic, which will
result in additional costs to the
Exchange.
The Exchange believes that charging a
higher $7,000 Membership Fee for
Market Makers on MEMX Options is
consistent with the Act, because it is
also in line with what other options
exchanges charge members of their
options platform who are Market
Makers.18 As an example, MEMX would
charge $7,200 monthly after January 1,
2024, to a new Options Member who is
a Market Maker. If the same market
participant wanted to join NYSE Arca
Options Exchange, they would be
charged $8,000 monthly.19 Based upon
the Exchange’s projections, the
Exchange anticipates that Market
Makers will consume the most
bandwidth and Exchange resources and
produce the highest volume of message
traffic on the Exchange. The Exchange
anticipates the volume of message traffic
which is generated by Options Market
Makers to be higher than the volume of
message traffic generated by Options
Order Entry Firms and additional
functionality is offered: (i) to Market
Makers only (e.g., bulk messages
described in Exchange Rule 21.1(l)), or
(ii) with Market Makers as the most
likely market participants to employ
such functionality (e.g., the Risk
Monitor Mechanism described in
Exchange Rule 21.16). The MEMX
Options functionality for bulk messages
allows Market Makers to submit up to
20 two-sided quotes in a single bulk
quote message and is only available to
Market Makers registered with the
Exchange.20 The Risk Monitor
Mechanism is available to all Options
Members but the Exchange anticipates
that this functionality will be primarily
used by Market Makers to manage their
risk. Market Makers also require high
touch network support services as
provided by the Exchange and its staff.
The Exchange anticipates that Order
18 See
id.
supra note 9.
20 See MEMX U.S. Options FAQ, available at
https://info.memxtrading.com/us-options-tradingresources/us-options-faq/ (last visited September
27, 2023).
19 See
E:\FR\FM\04OCN1.SGM
04OCN1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
Entry Firms 21 will consume less
Exchange resources and generate fewer
costs to the Exchange.
The Exchange notes that, while it
anticipates that Market Makers will
account for a vast majority of the costs
and resources placed on the Exchange
and its systems (as discussed herein),
Market Makers continue to be valuable
market participants on the exchanges as
the options market is a quote-driven
industry. The Exchange recognizes the
value that Market Makers bring to the
Exchange and particularly to the MEMX
Options platform. The Exchange
believes that incentivizing Market
Makers to direct order flow to the
Exchange will benefit all market
participants by increasing liquidity on
the Exchange. The Membership Fees
proposed herein are meant to strike a
balance between offsetting the costs
which Market Makers will place on the
Exchange and continuing to incentivize
Market Makers to access and make
markets on the Exchange. As such, the
Exchange proposes to establish higher,
separate Membership Fees for Market
Makers that are more aligned with the
costs and resources that Market Makers
will place on the Exchange and its
systems and will align the Membership
Fees with those of the majority of other
options exchanges.22
The Exchange proposes to charge a
flat fee for Market Makers because it
expects most Market Makers who trade
on the Exchange to quote in many of the
options classes available, and the
Exchange wishes to structure the
Membership Fee in order to incentivize
these Market Makers to quote more.
While some other exchanges have
ranges of membership fees depending
on the number of classes in which a
Market Maker quotes, the Exchange
believes that assessing a single
Membership Fee for all Market Makers
on MEMX Options will incentivize
those Market Makers who already quote
in a large number of classes to route
more order flow to the Exchange. The
Exchange believes that the proposed
Membership Fees are consistent with
the Act and will improve market quality
and improve competitiveness for all
market participants.
The Exchange notes that there are
material costs associated with providing
21 An Order Entry Firm means those Options
Members representing as agent Customer Orders on
MEMX Options, and non-Market Maker Members
conducting proprietary trading. Customer Orders
are any orders for the account of a Priority
Customer. ‘‘Priority Customer’’ means any person or
entity that is neither a broker or dealer in securities
nor a Professional. See Rule 16.1 of the MEMX
Rulebook.
22 See supra notes 6 to 10.
VerDate Sep<11>2014
20:21 Oct 03, 2023
Jkt 262001
the infrastructure, System functionality,
and headcount to fully support access to
the Exchange. The Exchange incurs
technology expenses related to
establishing and maintaining
Information Security services, System
upkeep, and regulatory services. While
some of the expenses are fixed, much of
the expenses are not fixed and increase
as the expenses associated with access
for Market Makers increase. For
example, new Market Makers to the
Exchange may require additional
resources of the Exchange due to the
volume of their activities (i.e., quote
volumes, which are significantly higher
on average than Order Entry Firms, thus
leading to increased storage and
capacity costs of the Exchange) and
automatically will have access to
additional features offered by the
Exchange only to Market Makers free of
charge (i.e., bulk message functionality
as described above). As the total number
of Market Makers increases, the
Exchange may need to increase its data
center footprint and consume additional
power, resulting in increased costs
charged by its third-party data center
provider. As the cost to the Exchange to
provide access to Market Makers will
increase with the number of Market
Makers, the Exchange believes the
proposed Membership Fees are
reasonable and consistent with the Act,
in order to offset a portion of the costs
to the Exchange associated with
providing Market Makers access to the
Exchange’s quote and order
infrastructure.
The Exchange proposes higher,
separate fees for Market Makers that are
more aligned with the costs and
resource requirements which the
Exchange anticipates Market Makers
will place on the Exchange and its
systems. As previously stated, while the
Exchange anticipates that Market
Makers will account for the majority of
the System usage on the Exchange,
because the options market is a quotedriven industry, the Exchange
recognizes the value that Market Makers
bring to the Exchange and wishes to
attract Market Makers to join the
Exchange as Members. As the options
market is quote-driven, attracting
Market Makers to the Exchange will
create additional liquidity on the
Exchange by encouraging Market
Makers to quote in option classes. A
market making firm does not need to be
a member of the Exchange in order to
route orders to the Exchange.23 The
23 For example, a market making firm could use
a third-party connectivity service (where such
third-party service is a Member of the Exchange) to
route orders to the Exchange.
PO 00000
Frm 00207
Fmt 4703
Sfmt 4703
68765
Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem the fees
on any particular venue to be excessive.
The Exchange’s Membership Fees are
restrained by competition. Many firms
that actively trade on options markets
are not currently Members of MEMX
Options.24 No market makers are
required by rule, regulation, or
competitive forces to be a Market Maker
on the Exchange and can choose not to
access the Exchange if it is determined
that the Exchange’s Membership Fees
do not make business or economic sense
for such market maker. In such an
environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges. The
Exchange believes that the proposed
Membership Fees reflect this
competitive environment. If the
Exchange is incorrect in this
assessment, that error will be reflected
in the Exchange’s ability to compete
with other options exchanges.
There is ample evidence that the
Exchange is subject to competitive
constraints on the amount it can charge
for Membership Fees. Of the 16 other
operating options exchanges, none
currently has more than a 19.2% market
share.25 High levels of market share
enhance the value of trading and
membership. Market participants will
distribute their transactions across
exchanges according to their business
needs. Market participants can and will
choose where to become Members, as
market participants do not need to
become members of all exchanges and
may utilize a third party to route their
orders to the Exchange. Rather than
becoming a Member of the exchange, a
market participant could elect to have
their orders routed to MEMX Options as
nothing in the Options Order Protection
and Locked/Crossed Market Plan 26
requires any market participant to
become a member of any exchange.
These competitive forces ensure that the
Exchange cannot charge supracompetitive fees for membership. The
Exchange expects that market
participants will evaluate the
Exchange’s ability to meet market
24 See
infra note 27.
U.S. Options Market Volume Summary,
available at https://www.cboe.com/us/options/
market_statistics/market/2023-09-27/ (last visited
September 27, 2023). Market share is the percentage
of volume on a particular exchange relative to the
total volume across all exchanges and indicates the
amount of order flow directed to that exchange.
26 See Options Order Protection and Locked/
Crossed Market Plan (August 14, 2009), available at
https://www.theocc.com/getmedia/7fc629d9-4e544b99-9f11-c0e4db1a2266/options_order_protection_
plan.pdf (last visited September 28, 2023).
25 See
E:\FR\FM\04OCN1.SGM
04OCN1
68766
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
participants’ needs through technology,
functionality, and liquidity to determine
whether such market participant will
route flow to the Exchange. In fact, as
a new entrant to the options industry,
the Exchange is particularly subject to
competitive forces and has carefully
crafted its proposed Membership Fees
with the goal of attracting order flow to
the Exchange. In this environment, the
Exchange has no ability to set
Membership Fees at levels that would
be deemed supra-competitive, as doing
so would limit the Exchange’s ability to
compete with larger, established
competitors in the options market.
At launch, the Exchange expects to
have only around 30 Members of MEMX
Options, which is lower than several
other options exchanges.27 Competitive
forces constrain what the Exchange can
charge, because if the Exchange charges
Membership Fees which market
participants deem to be excessive,
market participants would simply not
become Members.
As noted above, the proposed fees are
also competitive with and in several
cases significantly lower than the fees
for membership imposed by several
other options exchanges.28 The
Exchange also does not charge and does
not have any plan to charge several
types of fees that are charged by other
exchanges with respect to membership
or participation on the exchange—for
example, the Exchange does not charge
an application fee for Membership or
any testing or certification fees—further
highlighting the reasonableness of the
proposed Options Membership Fees.29
27 For example, in an August 2023 filing, MIAX
Pearl noted that MIAX Pearl and its affiliated
options markets, MIAX and MIAX Emerald, have a
total of 47 members. See Securities Exchange Act
Release No. 98180 (August 21, 2023), 88 FR 58404
(August 25, 2023) (SR–PEARL–2023–35). In a July
2023 filing, BZX Exchange noted that it has 61
members who trade options, Cboe EDGX Exchange
has 51 members who trade options, and Cboe C2
has 52 Trading Permit Holders. See Securities
Exchange Act Release No. 97928 (July 17, 2023), 88
FR 47209 (August 21, 2023) (SR–CboeBZX–2023–
047). Based on publicly available information,
NYSE American Options has 71 members. See
NYSE American Options Membership Directory,
available at https://www.nyse.com/markets/
american-options/membership#directory (last
visited September 27, 2023). Lastly, based on
publicly available information, NYSE Arca Options
has 68 members. See NYSE Arca Options
Membership Directory, available at https://
www.nyse.com/markets/arca-options/
membership#directory (last visited September 27,
2023).
28 See supra notes 6 to 10.
29 In contrast, for example, MIAX Options charges
a $2,500.00 one-time application fee for Electronic
Exchange Members and a $3,000 one-time
application fee for Market Makers. In addition,
MIAX Options charges a $1,000 testing and
certification fee for Electronic Exchange Members
and a $2,500 testing and certification fee for Market
Makers. See MIAX Options Fee Schedule, Section
VerDate Sep<11>2014
20:21 Oct 03, 2023
Jkt 262001
The Exchange believes that the
proposed Options Membership Fees are
equitably allocated and not unfairly
discriminatory because they would be
assessed uniformly across all firms that
seek to become Members. Additionally,
the Exchange believes that the proposed
fees are not unfairly discriminatory
because no broker-dealer is required to
become a Member of the Exchange or to
register as a Market Maker with the
Exchange. Even if a broker dealer does
become a Member of the Exchange, the
proposed fees are not unfairly
discriminatory because the proposed
Membership Fees are designed to
account for the costs to MEMX of
providing support for the Member
trading on MEMX Options and, in the
case of Market Makers, to provide
additional support which the Exchange
anticipates Market Makers would
require on MEMX Options. As between
Order Entry Firms and Market Makers,
the Exchange believes that the higher
fee for Market Makers is reasonable,
equitably allocated and not unfairly
discriminatory because the Exchange
notes that other options exchanges
currently charge Market Makers higher
monthly fees for membership than are
charged to other members of their
options platform.30
The vigorous competition among
national securities exchanges provides
many alternatives for firms to
voluntarily decide whether membership
to the Exchange is appropriate and
worthwhile. At the time of launch,
MEMX Options was the 17th national
registered options exchange, and as
noted above, no broker-dealer is
required to become a Member of the
Exchange. Notwithstanding the
foregoing, the Exchange still believes
that the proposed Membership Fee for
Options Order Entry Firms of $1,000 per
month and the proposed Membership
Fee for Options Market Makers of
$7,000 per month are reasonable,
equitably allocated and not unfairly
discriminatory, even for a broker-dealer
that determines it should join the
Exchange for business purposes, as
those business reasons should
presumably result in revenue capable of
covering the proposed fee.
The Exchange commenced operation
of MEMX Options in September 2023.
The Exchange notes that on June 30,
2023, it filed to waive Membership Fees
for all new Members of the Exchange
until January 1, 2024, and it intends to
keep this language in its fee schedule,
3, available at https://www.miaxglobal.com/
markets/us-options/miax-options/fees (last visited
September 27, 2023).
30 See id.
PO 00000
Frm 00208
Fmt 4703
Sfmt 4703
thus any new Members of the Exchange
will not be charged Membership Fees
until January 1, 2024.31 The Exchange
believes it is reasonable to similarly
waive the proposed Options
Membership Fees for new Members of
the Exchange to provide an incentive for
Options Trading Firms to apply for
Exchange membership in connection
with the launch of MEMX Options. The
Exchange believes waiving the
additional Options Membership Fees in
addition to waiving the existing
Membership Fees that apply to both
Equities and Options is reasonable,
equitable and not unfairly
discriminatory in that it will apply
uniformly to all new Members of the
Exchange, and because the majority of
the Exchange’s current Members joined
at a time when the Exchange did not
impose Membership Fees (also to
incentivize such participants to join)
and thus already received this benefit.
Although the Exchange will not
charge Membership Fees for new
Members until January 2024, the
Exchange proposes the Membership Fee
structure to communicate its intent to
charge Membership Fees beginning
January 2024. As a new exchange
entrant, the Exchange chooses not to
charge for new Members to join the
Exchange until January 2024 to
encourage market participants to trade
on the Exchange and experience the
quality of the Exchange’s technology
and trading functionality. This practice
is not uncommon. New exchanges often
do not charge fees or charge lower fees
for certain services such as
memberships/trading permits to attract
order flow to an exchange, and later,
once there is sufficient depth and
breadth of liquidity, amend their fees to
reflect the true value of those services,
absorbing all costs to provide those
services in the meantime. Allowing new
exchange entrants time to build and
sustain market share through various
pricing incentives, before increasing
non-transaction fees, encourages market
entry and promotes competition. It also
enables new exchanges to mature their
markets and allow market participants
to trade on the new exchanges without
membership fees serving as a potential
barrier to attracting memberships and
order flow.32
31 See
supra note 11.
Securities Exchange Act Release No. 94894
(May 11, 2022), 87 FR 29987 (May 17, 2022) (SR–
BOX–2022–17) (stating, ‘‘[t]he Exchange established
this lower (when compared to other options
exchanges in the industry) Participant Fee in order
to encourage market participants to become
Participants of BOX . . .’’). See also, e.g., Securities
Exchange Act Release No. 88211 (February 14,
2020), 85 FR 9847 (February 20, 2020) (SR–
32 See
E:\FR\FM\04OCN1.SGM
04OCN1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
The waiver is also a protection to new
Members. If new Members join the
Exchange in order to participate on
MEMX Options and subsequently
decide that they do not want to continue
trading on MEMX Options prior to
January 2024, they can cancel their
membership with the Exchange prior to
such date.
lotter on DSK11XQN23PROD with NOTICES1
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes its proposed
amendments would not result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition
As it relates to the reorganization of
the fee schedule and the Membership
Fee waiver, as discussed above, the
Exchange does not believe that the
proposed changes would impose any
burden on intramarket competition
because such changes would encourage
new participants to apply for Exchange
membership, thereby enhancing
liquidity and market quality on the
Exchange, as well as enhancing the
attractiveness of the Exchange as a
trading venue. The proposed
Membership Fees do not place certain
market participants at a relative
disadvantage to other market
participants to impose a burden on
competition. As noted above, all
Members trading on any of the
Exchange’s platforms will be assessed a
$200 fee applicable to all Members, all
Order Entry Firms trading on the
Exchange’s options platform will be
assessed the same $1,000 Membership
Fee, and all Market Makers trading on
the Exchange’s options platform will be
assessed the same $7,000 Membership
Fee. Also as previously noted, the
Exchange anticipates that Market
Makers will consume the most
bandwidth and resources of the
Exchange’s Systems, will transact the
vast majority of the volume on the
Exchange, and will require the most
support services provided by Exchange
staff. As opposed to Options Order
Entry Firms, the Exchange anticipates
that Market Makers will take up more
Exchange resources than Order Entry
Firms. As such, the Exchange does not
believe charging Market Makers higher
Membership Fees will impose a burden
on intramarket competition.
The Exchange does not believe that
the proposed changes would impose
any burden on intramarket competition
NYSENAT–2020–05) (initiating market data fees for
the NYSE National exchange after initially setting
such fees at zero).
VerDate Sep<11>2014
20:21 Oct 03, 2023
Jkt 262001
because such changes will incentivize
new participants to join the Exchange
and the majority of the Exchange’s
current members joined at a time when
the Exchange did not impose
Membership Fees (also to incentivize
such participants to join), and thus have
already received this benefit. The
options markets are quote-driven
markets and are dependent on liquidity
providers for liquidity and price
discovery. The proposal will be of
particular importance in encouraging
liquidity providers to become members
of the Exchange, which may result in
more trading opportunities, enhanced
competition, and improved overall
market quality on the Exchange. For the
foregoing reasons, the Exchange believes
the proposed changes would not impose
any burden on intramarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intermarket Competition
As described above, the proposed
reorganization of the fee schedule and
Membership Fee waiver will incentive
market participants to join the Exchange
during the fee waiver period.
Accordingly, the Exchange believes the
proposal would not burden, but rather
promote, intermarket competition by
enabling it to better compete with other
options exchanges at the time MEMX
Options launches.
The Exchange believes that adopting
specific Membership Fees applicable to
Options Trading Members does not
place an undue burden on competition
on other SROs that is not necessary or
appropriate. As has been previously
noted, other options exchanges have
similar fees for their participants and
several charge even higher rates.33 As a
new entrant in an already highly
competitive environment for equity
options trading, MEMX does not have
the market power necessary to set prices
for services that are unreasonable or
unfairly discriminatory in violation of
the Exchange Act. The Exchange
operates in a highly competitive market
in which market participants can
determine whether to join the Exchange
based on the value compared to the cost
of joining and maintain membership on
the Exchange.
As noted above, market making firms
have no obligation to become market
makers on all options exchanges. As a
new options platform, the Exchange
seeks to attract market making firms to
become Members on the MEMX Options
platform. If the Membership Fees
charged are deemed too high by a
market making firm, such market
making firm can elect not to become a
Member of the Exchange. The Exchange
operates in a highly competitive market
where market participants can favor an
alternate venue if they deem the
Exchange’s Membership Fees to be
excessive. In such an environment the
Exchange must continually review and
adjust its fees and credits to remain
competitive with other exchanges and to
attract order flow. For the reasons
described above, the Exchange believes
that the proposed rule change reflects
this competitive environment.
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 34 and Rule
19b–4(f)(2) 35 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.
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–2023–26 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.
34 15
33 See
PO 00000
supra notes 6 to 10.
Frm 00209
Fmt 4703
Sfmt 4703
68767
35 17
E:\FR\FM\04OCN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
04OCN1
68768
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
All submissions should refer to file
number SR–MEMX–2023–26. 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–2023–26 and should be
submitted on or before October 25,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–22011 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98610; File No. SR–
NASDAQ–2023–016]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To List and
Trade Shares of the iShares Bitcoin
Trust Under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares
September 28, 2023.
On June 29, 2023, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the iShares Bitcoin Trust
(‘‘Trust’’) under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares. The
proposed rule change was published for
comment in the Federal Register on July
19, 2023.3
On August 31, 2023, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 This order
institutes proceedings under Section
19(b)(2)(B) of the Act 6 to determine
whether to approve or disapprove the
proposed rule change.
I. Summary of the Proposal
As described in more detail in the
Notice,7 the Exchange proposes to list
and trade the Shares of the Trust under
Nasdaq Rule 5711(d), which governs the
listing and trading of Commodity-Based
Trust Shares on the Exchange.
The investment objective of the Trust
is to reflect generally the performance of
the price of bitcoin before payment of
the Trust’s expenses and liabilities.8
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 97905
(July 13, 2023), 88 FR 46342 (‘‘Notice’’). Comments
on the proposed rule change are available at:
https://www.sec.gov/comments/sr-nasdaq-2023016/srnasdaq2023016.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 98267,
88 FR 61652 (Sept. 7, 2023). The Commission
designated October 17, 2023, as the date by which
the Commission shall approve or disapprove, or
institute proceedings to determine whether to
disapprove, the proposed rule change.
6 15 U.S.C. 78s(b)(2)(B).
7 See Notice, supra note 3.
8 See id. at 46342. iShares Delaware Trust
Sponsor LLC (‘‘Sponsor’’), a Delaware limited
lotter on DSK11XQN23PROD with NOTICES1
2 17
36 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
20:21 Oct 03, 2023
Jkt 262001
PO 00000
Frm 00210
Fmt 4703
Sfmt 4703
The assets of the Trust will consist
primarily of bitcoin held by a custodian
on behalf of the Trust.9 On each
Business Day, as soon as practicable
after 4:00 p.m. Eastern Time, the
administrator of the Trust will evaluate
the bitcoin held by the Trust as reflected
by the CF Benchmarks Index and
determine the net asset value of the
Trust.10 The Trust will issue and
redeem baskets of Shares on a
continuous basis only in exchange for
an amount of bitcoin determined by the
trustee of the Trust.11
II. Proceedings To Determine Whether
To Approve or Disapprove SR–
NASDAQ–2023–016 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 12 to determine
whether the proposed rule change
should be approved or disapproved.
Institution of proceedings is appropriate
at this time in view of the legal and
policy issues raised by the proposed
rule change, as discussed below.
Institution of proceedings does not
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described below, the Commission seeks
and encourages interested persons to
provide comments on the proposed rule
change.
Pursuant to Section 19(b)(2)(B) of the
Act,13 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of the proposed rule
change’s consistency with Section
6(b)(5) of the Act, which requires,
among other things, that the rules of a
national securities exchange be
‘‘designed to prevent fraudulent and
manipulative acts and practices’’ and
‘‘to protect investors and the public
interest.’’ 14
The Commission asks that
commenters address the sufficiency of
the Exchange’s statements in support of
the proposal, which are set forth in the
Notice, in addition to any other
comments they may wish to submit
about the proposed rule change. In
particular, the Commission seeks
comment on the following questions
and asks commenters to submit data
liability company and an indirect subsidiary of
BlackRock, Inc., is the sponsor of the Trust.
9 See id.
10 See id. at 46343.
11 See id.
12 15 U.S.C. 78s(b)(2)(B).
13 Id.
14 15 U.S.C. 78f(b)(5).
E:\FR\FM\04OCN1.SGM
04OCN1
]]>Agencies
[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68762-68768]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-22011]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98648; File No. SR-MEMX-2023-26]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule and Adopt Membership Fees for MEMX Options
September 29, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 28, 2023, MEMX LLC (``MEMX'' or the ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to amend the Exchange's fee schedule applicable to Members \3\ (the
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c) to
establish membership fees for Members of the Exchange's options
platform and make a number of clarifying, organizational changes to its
Fee Schedule. 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.
---------------------------------------------------------------------------
\3\ See Exchange Rule 1.5(p).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In connection with the Exchange's launch of MEMX Options,\4\ its
options trading platform, the Exchange proposes to modify its fee
schedule applicable to use of the Exchange, effective immediately, in
order to: (i) establish membership fees (``Membership Fees'') for MEMX
Options Members, and (ii) make a number of clarifying, organizational
changes to its single existing fee schedule, in order to create three
separate fee schedules for: (A) executions that occur on the Exchange's
pre-existing equities market (``MEMX Equities''), (B) executions that
occur on MEMX Options, and (C) the Exchange's Membership Fees (for both
MEMX Equities and MEMX Options), respectively.\5\ The Exchange believes
that these changes will provide greater transparency to Members about
how the Exchange assesses fees and calculates rebates, as well as
allowing Members to more easily validate their bills on a monthly
basis. The Exchange notes that none of these changes amend any existing
fee or rebate for applicable to MEMX Equities (including non-
transaction fees such as membership, connectivity, and market data).
Specifically, the Exchange is proposing the following:
---------------------------------------------------------------------------
\4\ On August 8, 2022, the Commission approved SR-MEMX-2022-10,
which proposed rules for the trading of options on the Exchange. See
Securities Exchange Act Release No. 95445 (August 8, 2022), 87 FR
49894 (August 12, 2022) (SR-MEMX-2022-010). The Exchange launched
MEMX Options on September 27, 2023.
\5\ The Exchange initially filed the proposed changes on
September 1, 2023 (SR-MEMX-2023-22). On September 13, 2023, the
Exchange withdrew that filing and submitted SR-MEMX-2023-23. On
September 28, 2023, the Exchange withdrew SR-MEMX-2023-23 and
submitted this filing.
---------------------------------------------------------------------------
To more clearly separate pricing applicable to MEMX
Options from the Exchange's current fee schedule, which will remain
applicable to MEMX Equities. Although the Exchange has always
maintained a single fee schedule applicable to trades on the Exchange,
as the Exchange has launched the MEMX Options platform, the Exchange
believes that separating the fee schedules for MEMX Options and MEMX
Equities will reduce potential confusion. The Exchange currently
intends to begin charging for connectivity and market data for MEMX
Options in 2024 and will file separately to adopt such fees. The
Exchange has also intentionally left blank certain additional portions
of the MEMX Options fee schedule, including ``Transaction Fees'' and
``Options Regulatory Fee'', and it has filed separately to adopt those
specific fees.
To more clearly separate Membership Fees from the
Exchange's current fee schedule. Membership Fees are applicable to
Members of both MEMX Equities and MEMX Options platforms. Because the
Membership Fees section is applicable to members of both platforms, the
Exchange believes that separating the fee schedule for Membership Fees
(such separate fee schedule for Membership Fees, the ``Membership Fee
Schedule'') will reduce potential confusion (e.g., as to which fees a
Member that participates on both MEMX Equities and MEMX Options must
pay on a monthly basis to maintain membership with the Exchange).
To implement additional fees set forth on the Membership
Fee Schedule that would be applicable to Options Order Entry Firms (as
defined in Exchange Rule 16.1) and Options Market Makers (i.e., those
Options Members that have registered as Market Makers on the Exchange
under Exchange Rule 22.2.). Options Order Entry Firms and Options
Market Makers would collectively be referred to on the Membership Fee
Schedule as ``Options Trading Members.'' As proposed, the Membership
Fee Schedule will easily identify the fees for membership that are
applicable to all Members of MEMX (including Members of MEMX Equities
and MEMX Options) and the additional fees for membership which are
applicable to all Options Trading Members.
To add a hyperlink within the ``Additional Fees'' sections
of the MEMX Equities Fee Schedule and the
[[Page 68763]]
MEMX Options Fee Schedule, which will electronically hyperlink the
reader to the Membership Fee Schedule on the Exchange's website.
(i) MEMX Options Membership Fees
As the existing fee applicable to Membership is not specific to
participation on a specific trading platform, the Exchange will
continue to charge its current Membership Fee of $200 per month to each
Exchange Member, other than those to whom a waiver applies as set forth
below (i.e., the Exchange will charge a single fee of $200 to Members
of MEMX Equities, Members of MEMX Options, and Members of both MEMX
Equities and MEMX Options). In addition, the Exchange is proposing to
charge an additional $1,000 per month to Options Order Entry Firms (as
defined in Exchange Rule 16.1), and an additional $7,000 per month to
Options Market Makers, (i.e., those Options Members that have
registered as Market Makers on the Exchange under Exchange Rule 22.2.).
The Exchange notes that the proposed fees for Options Trading Firms are
competitive with and in several cases significantly lower than the fees
for membership imposed by several other options exchanges that charge
such fees. The Exchange provides the below table for comparison
purposes to show how the Exchange's proposed fees for membership
compare to fees for membership currently charged by other options
exchanges.
---------------------------------------------------------------------------
\6\ See PHLX Fee Schedule Section 8A, 8B, and 8C, available at
https://listingcenter.nasdaq.com/rulebook/phlx/rules/phlx-options-7
(last visited September 27, 2023).
\7\ See BOX Options Fee Schedule Section I, available at https://boxoptions.com/fee-schedule/ (last visited September 27, 2023).
\8\ See NYSE American Options Fees Schedule Section III(A),
available at https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf (last visited
September 27, 2023).
\9\ See NYSE Arca Options Fees and Charges, available at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (last visited September 27,
2023).
\10\ See MIAX Options Fee Schedule, Section 3, available at
https://www.miaxglobal.com/markets/us-options/miax-options/fees
(last visited September 27, 2023).
------------------------------------------------------------------------
Monthly membership trading permit
Exchange fee
------------------------------------------------------------------------
MEMX Options (as proposed)........ All Members: $200.
Options Order Entry Firm: $1,000.
Options Market Maker: $7,000.
Nasdaq PHLX LLC (``PHLX'') \6\.... Streaming Quote Trader (``SQT'')
permit fees:
Tier 1 (up to 200 option classes):
$0.00.
Tier 2 (up to 400 option classes):
$2,200.
Tier 3 (up to 600 option classes):
$3,200.
Tier 4 (up to 800 option classes):
$4,200.
Tier 5 (up to 1,000 option classes):
$5,200.
Tier 6 (up to 1,200 option classes):
$6,200.
Tier 7 (all option classes): $7,200.
Remote Market Maker Organization
(``RMO'') permit fees:
Tier 1 (less than 100 classes):
$5,000.
Tier 2 (more than 100 and less than
999 classes): $8,000.
Tier 3 (1000 or more classes):
$11,000.
BOX Options Exchange LLC (``BOX'') Participant Fee: $1,500 per month
\7\. (Electronic Market Makers are not
charged the Participant Fee).
Market Maker Trading Permit fees:
Up to and including 10 classes:
$4,000.
Up to and including 40 classes:
$6,000.
Up to and including 100 classes:
$8,000.
Over 100 classes: $10,000.
NYSE American, LLC (``NYSE Permit (``ATP'') Fees:
American'') \8\. Floor Broker: $500.
Order Flow Provider: $1,000.
Clearing Member: $1,000.
Options Market Maker 1st ATP:
$8,000.
Options Market Maker 2nd ATP:
$6,000.
Options Market Maker 3rd ATP:
$5,000.
Options Market Maker 4th ATP:
$4,000.
Options Market Maker 5th ATP:
$3,000.
Options Market Maker 6th to 9th ATP:
$2,000.
Options Market Maker 10th or more
ATPs: $500.
NYSE Arca, Inc. (``NYSE Arca'') Permit (``OTP'') Fees:
\9\. Office or Clearing Firms: $1,000.
Floor Broker: $500.
Options Market Maker 1st ATP:
$8,000.
Options Market Maker 2nd ATP:
$6,000.
Options Market Maker 3rd ATP:
$5,000.
Options Market Maker 4th ATP:
$4,000.
Options Market Maker 5th ATP:
$3,000.
Options Market Maker 6th to 9th ATP:
$2,000.
Options Market Maker 10th or more
ATPs: $500.
Reserve Market Maker OTP: $175.
MIAX Options Exchange (``MIAX Electronic Exchange Members Trading
Options'') \10\. Permit: $1,500.
Market Maker Trading Permit (up to
10 classes): $7,000.
Market Maker Trading Permit (up to
40 classes): $12,000.
Market Maker Trading Permit (up to
100 classes): $17,000.
Market Maker Trading Permit (over
100 classes): $22,000.
------------------------------------------------------------------------
[[Page 68764]]
The Exchange proposes to maintain its existing billing practices
for all Membership Fees, including the newly proposed Options
Membership Fees. As is current practice, Members will be assessed their
monthly Membership Fees at the close of business on the first day of
each month. The Exchange will also maintain the current practice such
that if a Member is pending a voluntary termination of rights as a
Member pursuant to Exchange Rule 2.8 prior to its monthly Membership
Fee being assessed and the Member does not utilize the facilities of
the Exchange while such voluntary termination of rights is pending,
then the Member will not be obligated to pay the monthly Membership
Fee. Additionally, the Membership Fees will not be prorated if a
membership is not active for an entire month, which the Exchange
believes is reasonable based on the frequency that the fee is assessed
(i.e., monthly instead of applying to a longer period).
Lastly, to encourage new participants to join MEMX Options,
effective June 30, 2023, the Exchange implemented a Membership Fee
Waiver until January 1, 2024.\11\ The Exchange is proposing to maintain
this language on the new Membership Fee Schedule, and as such, will
apply this waiver to the additional proposed Membership Fees for new
Members of MEMX Options as well.
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 97893 (July 13,
2023), 88 FR 46285 (July 19, 2023) (SR-MEMX-2023-13).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change to reorganize
the fee schedule as described above is consistent with the provisions
of Section 6 of the Act,\12\ in general, and furthers the objective of
Section 6(b)(1) of the Act,\13\ in particular, in that the proposed
rule change enables the Exchange to be so organized as to have the
capacity to be able to carry out the purposes of the Act and to comply
with the provisions of the Act, the rules and regulations thereunder,
and the rules of the Exchange. The proposed reorganization of the
Exchange's fee schedule is designed to make the fee schedule easier to
read and for Members to validate the bills they receive from the
Exchange. The Exchange believes the proposed fee schedules, and the
division thereof, will be clearer and less confusing for Members of the
Exchange and will eliminate potential Member confusion.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------
The Exchange believes that the proposed Membership Fee changes are
consistent with the provisions of Section 6 of the Act,\14\ in general,
and with Sections 6(b)(4) and 6(b)(5) of the Act,\15\ in particular, in
that they provide 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 further discussed below.
---------------------------------------------------------------------------
\14\ See supra note 12.
\15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
MEMX believes that its $200 Membership Fee which is assessed to all
Members (Members of MEMX Options and Members of MEMX Equities alike) is
consistent with the Act, as the Exchange assesses the same fee to all
Members of the Exchange on all platforms. The Exchange believes that it
is reasonable and consistent with the Act to assess this Membership Fee
to all Members because there are technical, regulatory, and
administrative services associated with a market participant being a
Member of the Exchange. As a self-regulatory organization, MEMX's
membership team reviews applicants to ensure that each applicant for
membership meets the Exchange's qualification criteria prior to
approval. The membership team, in conjunction with the Regulatory
Department, reviews the registration and qualification of an
applicant's associated persons, the applicant's financial health, the
validity of its clearing relationship, and its disciplinary history.
The membership team also provides ongoing support to Members with
respect to membership changes, registration, and other questions that
commonly arise from Members regarding such matters. The Exchange
believes that it is consistent with the Act to charge the $200
Membership Fee as it is reasonable to cover costs of administering its
membership program.
The Exchange believes that charging a $1,000 Membership Fee for
Order Entry Firms is consistent with the Act, because this fee is in
line with what other options exchanges charge members of their options
platform who are not Market Makers.\16\ For example, MEMX would charge
$1,200 after January 1, 2024, to an Order Entry Firm. If the same
market participant (i.e., not a market maker) wanted to join to trade
on the BOX Options Exchange, they would be charged $1,500 monthly.\17\
The Exchange anticipates that Order Entry Firms will require more
resources than Members of the Exchange's equities platform due to
various complexities inherent to the options markets, such as the
process for Clearing Member Give Ups described in Exchange Rule 21.12
and the process for listing classes and strikes made available for
trading on MEMX Options described in Rules 19.3 through 19.5. The
Exchange also anticipates that Order Entry Firms that are proprietary
trading firms will generate a high volume of message traffic, which
will result in additional costs to the Exchange.
---------------------------------------------------------------------------
\16\ See supra notes 6 through 10.
\17\ See supra note 7.
---------------------------------------------------------------------------
The Exchange believes that charging a higher $7,000 Membership Fee
for Market Makers on MEMX Options is consistent with the Act, because
it is also in line with what other options exchanges charge members of
their options platform who are Market Makers.\18\ As an example, MEMX
would charge $7,200 monthly after January 1, 2024, to a new Options
Member who is a Market Maker. If the same market participant wanted to
join NYSE Arca Options Exchange, they would be charged $8,000
monthly.\19\ Based upon the Exchange's projections, the Exchange
anticipates that Market Makers will consume the most bandwidth and
Exchange resources and produce the highest volume of message traffic on
the Exchange. The Exchange anticipates the volume of message traffic
which is generated by Options Market Makers to be higher than the
volume of message traffic generated by Options Order Entry Firms and
additional functionality is offered: (i) to Market Makers only (e.g.,
bulk messages described in Exchange Rule 21.1(l)), or (ii) with Market
Makers as the most likely market participants to employ such
functionality (e.g., the Risk Monitor Mechanism described in Exchange
Rule 21.16). The MEMX Options functionality for bulk messages allows
Market Makers to submit up to 20 two-sided quotes in a single bulk
quote message and is only available to Market Makers registered with
the Exchange.\20\ The Risk Monitor Mechanism is available to all
Options Members but the Exchange anticipates that this functionality
will be primarily used by Market Makers to manage their risk. Market
Makers also require high touch network support services as provided by
the Exchange and its staff. The Exchange anticipates that Order
[[Page 68765]]
Entry Firms \21\ will consume less Exchange resources and generate
fewer costs to the Exchange.
---------------------------------------------------------------------------
\18\ See id.
\19\ See supra note 9.
\20\ See MEMX U.S. Options FAQ, available at https://info.memxtrading.com/us-options-trading-resources/us-options-faq/
(last visited September 27, 2023).
\21\ An Order Entry Firm means those Options Members
representing as agent Customer Orders on MEMX Options, and non-
Market Maker Members conducting proprietary trading. Customer Orders
are any orders for the account of a Priority Customer. ``Priority
Customer'' means any person or entity that is neither a broker or
dealer in securities nor a Professional. See Rule 16.1 of the MEMX
Rulebook.
---------------------------------------------------------------------------
The Exchange notes that, while it anticipates that Market Makers
will account for a vast majority of the costs and resources placed on
the Exchange and its systems (as discussed herein), Market Makers
continue to be valuable market participants on the exchanges as the
options market is a quote-driven industry. The Exchange recognizes the
value that Market Makers bring to the Exchange and particularly to the
MEMX Options platform. The Exchange believes that incentivizing Market
Makers to direct order flow to the Exchange will benefit all market
participants by increasing liquidity on the Exchange. The Membership
Fees proposed herein are meant to strike a balance between offsetting
the costs which Market Makers will place on the Exchange and continuing
to incentivize Market Makers to access and make markets on the
Exchange. As such, the Exchange proposes to establish higher, separate
Membership Fees for Market Makers that are more aligned with the costs
and resources that Market Makers will place on the Exchange and its
systems and will align the Membership Fees with those of the majority
of other options exchanges.\22\
---------------------------------------------------------------------------
\22\ See supra notes 6 to 10.
---------------------------------------------------------------------------
The Exchange proposes to charge a flat fee for Market Makers
because it expects most Market Makers who trade on the Exchange to
quote in many of the options classes available, and the Exchange wishes
to structure the Membership Fee in order to incentivize these Market
Makers to quote more. While some other exchanges have ranges of
membership fees depending on the number of classes in which a Market
Maker quotes, the Exchange believes that assessing a single Membership
Fee for all Market Makers on MEMX Options will incentivize those Market
Makers who already quote in a large number of classes to route more
order flow to the Exchange. The Exchange believes that the proposed
Membership Fees are consistent with the Act and will improve market
quality and improve competitiveness for all market participants.
The Exchange notes that there are material costs associated with
providing the infrastructure, System functionality, and headcount to
fully support access to the Exchange. The Exchange incurs technology
expenses related to establishing and maintaining Information Security
services, System upkeep, and regulatory services. While some of the
expenses are fixed, much of the expenses are not fixed and increase as
the expenses associated with access for Market Makers increase. For
example, new Market Makers to the Exchange may require additional
resources of the Exchange due to the volume of their activities (i.e.,
quote volumes, which are significantly higher on average than Order
Entry Firms, thus leading to increased storage and capacity costs of
the Exchange) and automatically will have access to additional features
offered by the Exchange only to Market Makers free of charge (i.e.,
bulk message functionality as described above). As the total number of
Market Makers increases, the Exchange may need to increase its data
center footprint and consume additional power, resulting in increased
costs charged by its third-party data center provider. As the cost to
the Exchange to provide access to Market Makers will increase with the
number of Market Makers, the Exchange believes the proposed Membership
Fees are reasonable and consistent with the Act, in order to offset a
portion of the costs to the Exchange associated with providing Market
Makers access to the Exchange's quote and order infrastructure.
The Exchange proposes higher, separate fees for Market Makers that
are more aligned with the costs and resource requirements which the
Exchange anticipates Market Makers will place on the Exchange and its
systems. As previously stated, while the Exchange anticipates that
Market Makers will account for the majority of the System usage on the
Exchange, because the options market is a quote-driven industry, the
Exchange recognizes the value that Market Makers bring to the Exchange
and wishes to attract Market Makers to join the Exchange as Members. As
the options market is quote-driven, attracting Market Makers to the
Exchange will create additional liquidity on the Exchange by
encouraging Market Makers to quote in option classes. A market making
firm does not need to be a member of the Exchange in order to route
orders to the Exchange.\23\ The Exchange notes that it operates in a
highly competitive market in which market participants can readily
favor competing venues if they deem the fees on any particular venue to
be excessive. The Exchange's Membership Fees are restrained by
competition. Many firms that actively trade on options markets are not
currently Members of MEMX Options.\24\ No market makers are required by
rule, regulation, or competitive forces to be a Market Maker on the
Exchange and can choose not to access the Exchange if it is determined
that the Exchange's Membership Fees do not make business or economic
sense for such market maker. In such an environment, the Exchange must
continually adjust its fees to remain competitive with other exchanges.
The Exchange believes that the proposed Membership Fees reflect this
competitive environment. If the Exchange is incorrect in this
assessment, that error will be reflected in the Exchange's ability to
compete with other options exchanges.
---------------------------------------------------------------------------
\23\ For example, a market making firm could use a third-party
connectivity service (where such third-party service is a Member of
the Exchange) to route orders to the Exchange.
\24\ See infra note 27.
---------------------------------------------------------------------------
There is ample evidence that the Exchange is subject to competitive
constraints on the amount it can charge for Membership Fees. Of the 16
other operating options exchanges, none currently has more than a 19.2%
market share.\25\ High levels of market share enhance the value of
trading and membership. Market participants will distribute their
transactions across exchanges according to their business needs. Market
participants can and will choose where to become Members, as market
participants do not need to become members of all exchanges and may
utilize a third party to route their orders to the Exchange. Rather
than becoming a Member of the exchange, a market participant could
elect to have their orders routed to MEMX Options as nothing in the
Options Order Protection and Locked/Crossed Market Plan \26\ requires
any market participant to become a member of any exchange. These
competitive forces ensure that the Exchange cannot charge supra-
competitive fees for membership. The Exchange expects that market
participants will evaluate the Exchange's ability to meet market
[[Page 68766]]
participants' needs through technology, functionality, and liquidity to
determine whether such market participant will route flow to the
Exchange. In fact, as a new entrant to the options industry, the
Exchange is particularly subject to competitive forces and has
carefully crafted its proposed Membership Fees with the goal of
attracting order flow to the Exchange. In this environment, the
Exchange has no ability to set Membership Fees at levels that would be
deemed supra-competitive, as doing so would limit the Exchange's
ability to compete with larger, established competitors in the options
market.
---------------------------------------------------------------------------
\25\ See U.S. Options Market Volume Summary, available at
https://www.cboe.com/us/options/market_statistics/market/2023-09-27/
(last visited September 27, 2023). Market share is the percentage of
volume on a particular exchange relative to the total volume across
all exchanges and indicates the amount of order flow directed to
that exchange.
\26\ See Options Order Protection and Locked/Crossed Market Plan
(August 14, 2009), available at https://www.theocc.com/getmedia/7fc629d9-4e54-4b99-9f11-c0e4db1a2266/options_order_protection_plan.pdf (last visited September 28, 2023).
---------------------------------------------------------------------------
At launch, the Exchange expects to have only around 30 Members of
MEMX Options, which is lower than several other options exchanges.\27\
Competitive forces constrain what the Exchange can charge, because if
the Exchange charges Membership Fees which market participants deem to
be excessive, market participants would simply not become Members.
---------------------------------------------------------------------------
\27\ For example, in an August 2023 filing, MIAX Pearl noted
that MIAX Pearl and its affiliated options markets, MIAX and MIAX
Emerald, have a total of 47 members. See Securities Exchange Act
Release No. 98180 (August 21, 2023), 88 FR 58404 (August 25, 2023)
(SR-PEARL-2023-35). In a July 2023 filing, BZX Exchange noted that
it has 61 members who trade options, Cboe EDGX Exchange has 51
members who trade options, and Cboe C2 has 52 Trading Permit
Holders. See Securities Exchange Act Release No. 97928 (July 17,
2023), 88 FR 47209 (August 21, 2023) (SR-CboeBZX-2023-047). Based on
publicly available information, NYSE American Options has 71
members. See NYSE American Options Membership Directory, available
at https://www.nyse.com/markets/american-options/membership#directory (last visited September 27, 2023). Lastly,
based on publicly available information, NYSE Arca Options has 68
members. See NYSE Arca Options Membership Directory, available at
https://www.nyse.com/markets/arca-options/membership#directory (last
visited September 27, 2023).
---------------------------------------------------------------------------
As noted above, the proposed fees are also competitive with and in
several cases significantly lower than the fees for membership imposed
by several other options exchanges.\28\ The Exchange also does not
charge and does not have any plan to charge several types of fees that
are charged by other exchanges with respect to membership or
participation on the exchange--for example, the Exchange does not
charge an application fee for Membership or any testing or
certification fees--further highlighting the reasonableness of the
proposed Options Membership Fees.\29\ The Exchange believes that the
proposed Options Membership Fees are equitably allocated and not
unfairly discriminatory because they would be assessed uniformly across
all firms that seek to become Members. Additionally, the Exchange
believes that the proposed fees are not unfairly discriminatory because
no broker-dealer is required to become a Member of the Exchange or to
register as a Market Maker with the Exchange. Even if a broker dealer
does become a Member of the Exchange, the proposed fees are not
unfairly discriminatory because the proposed Membership Fees are
designed to account for the costs to MEMX of providing support for the
Member trading on MEMX Options and, in the case of Market Makers, to
provide additional support which the Exchange anticipates Market Makers
would require on MEMX Options. As between Order Entry Firms and Market
Makers, the Exchange believes that the higher fee for Market Makers is
reasonable, equitably allocated and not unfairly discriminatory because
the Exchange notes that other options exchanges currently charge Market
Makers higher monthly fees for membership than are charged to other
members of their options platform.\30\
---------------------------------------------------------------------------
\28\ See supra notes 6 to 10.
\29\ In contrast, for example, MIAX Options charges a $2,500.00
one-time application fee for Electronic Exchange Members and a
$3,000 one-time application fee for Market Makers. In addition, MIAX
Options charges a $1,000 testing and certification fee for
Electronic Exchange Members and a $2,500 testing and certification
fee for Market Makers. See MIAX Options Fee Schedule, Section 3,
available at https://www.miaxglobal.com/markets/us-options/miax-options/fees (last visited September 27, 2023).
\30\ See id.
---------------------------------------------------------------------------
The vigorous competition among national securities exchanges
provides many alternatives for firms to voluntarily decide whether
membership to the Exchange is appropriate and worthwhile. At the time
of launch, MEMX Options was the 17th national registered options
exchange, and as noted above, no broker-dealer is required to become a
Member of the Exchange. Notwithstanding the foregoing, the Exchange
still believes that the proposed Membership Fee for Options Order Entry
Firms of $1,000 per month and the proposed Membership Fee for Options
Market Makers of $7,000 per month are reasonable, equitably allocated
and not unfairly discriminatory, even for a broker-dealer that
determines it should join the Exchange for business purposes, as those
business reasons should presumably result in revenue capable of
covering the proposed fee.
The Exchange commenced operation of MEMX Options in September 2023.
The Exchange notes that on June 30, 2023, it filed to waive Membership
Fees for all new Members of the Exchange until January 1, 2024, and it
intends to keep this language in its fee schedule, thus any new Members
of the Exchange will not be charged Membership Fees until January 1,
2024.\31\ The Exchange believes it is reasonable to similarly waive the
proposed Options Membership Fees for new Members of the Exchange to
provide an incentive for Options Trading Firms to apply for Exchange
membership in connection with the launch of MEMX Options. The Exchange
believes waiving the additional Options Membership Fees in addition to
waiving the existing Membership Fees that apply to both Equities and
Options is reasonable, equitable and not unfairly discriminatory in
that it will apply uniformly to all new Members of the Exchange, and
because the majority of the Exchange's current Members joined at a time
when the Exchange did not impose Membership Fees (also to incentivize
such participants to join) and thus already received this benefit.
---------------------------------------------------------------------------
\31\ See supra note 11.
---------------------------------------------------------------------------
Although the Exchange will not charge Membership Fees for new
Members until January 2024, the Exchange proposes the Membership Fee
structure to communicate its intent to charge Membership Fees beginning
January 2024. As a new exchange entrant, the Exchange chooses not to
charge for new Members to join the Exchange until January 2024 to
encourage market participants to trade on the Exchange and experience
the quality of the Exchange's technology and trading functionality.
This practice is not uncommon. New exchanges often do not charge fees
or charge lower fees for certain services such as memberships/trading
permits to attract order flow to an exchange, and later, once there is
sufficient depth and breadth of liquidity, amend their fees to reflect
the true value of those services, absorbing all costs to provide those
services in the meantime. Allowing new exchange entrants time to build
and sustain market share through various pricing incentives, before
increasing non-transaction fees, encourages market entry and promotes
competition. It also enables new exchanges to mature their markets and
allow market participants to trade on the new exchanges without
membership fees serving as a potential barrier to attracting
memberships and order flow.\32\
---------------------------------------------------------------------------
\32\ See Securities Exchange Act Release No. 94894 (May 11,
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17) (stating, ``[t]he
Exchange established this lower (when compared to other options
exchanges in the industry) Participant Fee in order to encourage
market participants to become Participants of BOX . . .''). See
also, e.g., Securities Exchange Act Release No. 88211 (February 14,
2020), 85 FR 9847 (February 20, 2020) (SR-NYSENAT-2020-05)
(initiating market data fees for the NYSE National exchange after
initially setting such fees at zero).
---------------------------------------------------------------------------
[[Page 68767]]
The waiver is also a protection to new Members. If new Members join
the Exchange in order to participate on MEMX Options and subsequently
decide that they do not want to continue trading on MEMX Options prior
to January 2024, they can cancel their membership with the Exchange
prior to such date.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes its proposed amendments would not result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intramarket Competition
As it relates to the reorganization of the fee schedule and the
Membership Fee waiver, as discussed above, the Exchange does not
believe that the proposed changes would impose any burden on
intramarket competition because such changes would encourage new
participants to apply for Exchange membership, thereby enhancing
liquidity and market quality on the Exchange, as well as enhancing the
attractiveness of the Exchange as a trading venue. The proposed
Membership Fees do not place certain market participants at a relative
disadvantage to other market participants to impose a burden on
competition. As noted above, all Members trading on any of the
Exchange's platforms will be assessed a $200 fee applicable to all
Members, all Order Entry Firms trading on the Exchange's options
platform will be assessed the same $1,000 Membership Fee, and all
Market Makers trading on the Exchange's options platform will be
assessed the same $7,000 Membership Fee. Also as previously noted, the
Exchange anticipates that Market Makers will consume the most bandwidth
and resources of the Exchange's Systems, will transact the vast
majority of the volume on the Exchange, and will require the most
support services provided by Exchange staff. As opposed to Options
Order Entry Firms, the Exchange anticipates that Market Makers will
take up more Exchange resources than Order Entry Firms. As such, the
Exchange does not believe charging Market Makers higher Membership Fees
will impose a burden on intramarket competition.
The Exchange does not believe that the proposed changes would
impose any burden on intramarket competition because such changes will
incentivize new participants to join the Exchange and the majority of
the Exchange's current members joined at a time when the Exchange did
not impose Membership Fees (also to incentivize such participants to
join), and thus have already received this benefit. The options markets
are quote-driven markets and are dependent on liquidity providers for
liquidity and price discovery. The proposal will be of particular
importance in encouraging liquidity providers to become members of the
Exchange, which may result in more trading opportunities, enhanced
competition, and improved overall market quality on the Exchange. For
the foregoing reasons, the Exchange believes the proposed changes would
not impose any burden on intramarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act.
Intermarket Competition
As described above, the proposed reorganization of the fee schedule
and Membership Fee waiver will incentive market participants to join
the Exchange during the fee waiver period. Accordingly, the Exchange
believes the proposal would not burden, but rather promote, intermarket
competition by enabling it to better compete with other options
exchanges at the time MEMX Options launches.
The Exchange believes that adopting specific Membership Fees
applicable to Options Trading Members does not place an undue burden on
competition on other SROs that is not necessary or appropriate. As has
been previously noted, other options exchanges have similar fees for
their participants and several charge even higher rates.\33\ As a new
entrant in an already highly competitive environment for equity options
trading, MEMX does not have the market power necessary to set prices
for services that are unreasonable or unfairly discriminatory in
violation of the Exchange Act. The Exchange operates in a highly
competitive market in which market participants can determine whether
to join the Exchange based on the value compared to the cost of joining
and maintain membership on the Exchange.
---------------------------------------------------------------------------
\33\ See supra notes 6 to 10.
---------------------------------------------------------------------------
As noted above, market making firms have no obligation to become
market makers on all options exchanges. As a new options platform, the
Exchange seeks to attract market making firms to become Members on the
MEMX Options platform. If the Membership Fees charged are deemed too
high by a market making firm, such market making firm can elect not to
become a Member of the Exchange. The Exchange operates in a highly
competitive market where market participants can favor an alternate
venue if they deem the Exchange's Membership Fees to be excessive. In
such an environment the Exchange must continually review and adjust its
fees and credits to remain competitive with other exchanges and to
attract order flow. For the reasons described above, the Exchange
believes that the proposed rule change reflects this competitive
environment.
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 \34\ and Rule 19b-4(f)(2) \35\ thereunder.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78s(b)(3)(A)(ii).
\35\ 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-2023-26 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.
[[Page 68768]]
All submissions should refer to file number SR-MEMX-2023-26. 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-2023-26 and should be
submitted on or before October 25, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
---------------------------------------------------------------------------
\36\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-22011 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P
