Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule Concerning Transaction Fees, 80796-80803 [2023-25549]
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80796
Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98938; File No. SR–MEMX–
2023–30]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule Concerning Transaction
Fees
November 14, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
1, 2023, MEMX LLC (‘‘MEMX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposed rule change to
amend the Exchange’s fee schedule
applicable to Members 3 (the ‘‘Fee
Schedule’’) pursuant to Exchange Rules
15.1(a) and (c). The Exchange proposes
to implement the changes to the Fee
Schedule pursuant to this proposal on
November 1, 2023. The text of the
proposed rule change is provided in
Exhibit 5.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Fee Schedule to
(i) reduce the base rebate for executions
of Retail Orders 4 in securities priced at
or above $1.00 per share that add
displayed liquidity to the Exchange
(such orders, ‘‘Added Displayed Retail
Volume’’); (ii) modify the Liquidity
Provision Tiers by: modifying the
required criteria under Liquidity
Provision Tiers 1, 2, 3, 4, and 5;
decreasing the rebate for executions of
orders in securities priced at or above
$1.00 per share that add displayed
liquidity to the Exchange (such orders,
‘‘Added Displayed Volume’’) under
Liquidity Provision Tiers 2, 3, and 5;
modifying the method by which the
Exchange provides the rebate under
Liquidity Provision Tiers 4 and 5; and
eliminating Liquidity Provision Tier 6;
(iii) adopt a new Retail Tier that
provides an enhanced rebate for
executions of Added Displayed Retail
Volume priced at or above $1.00 per
share; (iv) modify the required criteria
under Liquidity Removal Tier 1; (v)
modify the required criteria under NonDisplay Add Tier 1; (vi) modify the
NBBO Setter/Joiner Tiers by reducing
the additive rebate per share under
NBBO Setter/Joiner Tier 1, renaming
such tier to ‘‘NBBO Setter Tier 1’’ and
eliminating NBBO Setter/Joiner Tier 2;
(vii) adopt a new Tape B Volume Tier
that provides an additive rebate for
executions of Added Displayed Volume
in Tape B securities priced at or above
$1.00 per share and add a corresponding
relevant defined term to the
‘‘Definitions’’ section of the Fee
Schedule; and (viii) adopt a new
additive rebate for executions of Added
Displayed Volume applicable to
Displayed Liquidity Incentive (‘‘DLI’’)
Tier 1 and Liquidity Provision Tier 1 or
Liquidity Provision Tier 2; as further
described below.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
4A
‘‘Retail Order’’ means an agency or riskless
principal order that meets the criteria of FINRA
Rule 5320.03 that originates from a natural person
and is submitted to the Exchange by a Retail
Member Organization (‘‘RMO’’), provided that no
change is made to the terms of the order with
respect to price or side of market and the order does
not originate from a trading algorithm or any other
computerized methodology. See Exchange Rule
11.21(a).
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incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues,
to which market participants may direct
their order flow. Based on publicly
available information, no single
registered equities exchange currently
has more than approximately 15.5% of
the total market share of executed
volume of equities trading.5 Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow,
and the Exchange currently represents
approximately 3% of the overall market
share.6 The Exchange in particular
operates a ‘‘Maker-Taker’’ model
whereby it provides rebates to Members
that add liquidity to the Exchange and
charges fees to Members that remove
liquidity from the Exchange. The Fee
Schedule sets forth the standard rebates
and fees applied per share for orders
that add and remove liquidity,
respectively. Additionally, in response
to the competitive environment, the
Exchange also offers tiered pricing,
which provides Members with
opportunities to qualify for higher
rebates or lower fees where certain
volume criteria and thresholds are met.
Tiered pricing provides an incremental
incentive for Members to strive for
higher tier levels, which provides
increasingly higher benefits or discounts
for satisfying increasingly more
stringent criteria.
Reduce Base Rebate for Added
Displayed Retail Volume
Currently, the Exchange provides a
base rebate of $0.0034 per share for
executions of Added Displayed Retail
Volume. The Exchange now proposes to
reduce the base rebate for executions of
Added Displayed Retail Volume to
$0.0032 per share.7 The purpose of
reducing the base rebate for executions
of Added Displayed Retail Volume is for
business and competitive reasons, as the
Exchange believes that reducing such
rebate as proposed would decrease the
Exchange’s expenditures with respect to
its transaction pricing in a manner that
is still consistent with the Exchange’s
overall pricing philosophy of
5 Market share percentage calculated as of
October 31, 2023. The Exchange receives and
processes data made available through consolidated
data feeds (i.e., CTS and UTDF).
6 Id.
7 The proposed base rebate for executions of
Added Displayed Retail Volume is referred to by
the Exchange on the Fee Schedule under the
existing description ‘‘Added displayed volume,
Retail Order’’ with a Fee Code of ‘‘Br’’, ‘‘Dr’’ or ‘‘Jr’’,
as applicable, on execution reports.
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Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices
encouraging added displayed liquidity.
The Exchange notes that despite the
reduction proposed herein, the
proposed base rebate for executions of
Added Displayed Retail Volume
remains competitive with the base
rebates provided by other exchanges for
executions of Retail Orders in securities
priced at or above $1.00 per share that
add displayed liquidity.8
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Liquidity Provision Tiers
The Exchange currently provides a
base rebate of $0.0015 per share for
executions of Added Displayed
Volume.9 The Exchange also currently
offers Liquidity Provision Tiers 1–6
under which a Member may receive an
enhanced rebate for executions of
Added Displayed Volume by achieving
the corresponding required volume
criteria for each such tier. The Exchange
now proposes to modify the Liquidity
Provision Tiers by modifying the
required criteria under Liquidity
Provision Tier 1 and Liquidity Provision
Tier 4, reducing the rebate for
executions of Added Displayed Volume
and modifying the required criteria
under Liquidity Provision Tier 2,
Liquidity Provision Tier 3, and
Liquidity Provision Tier 5, and
eliminating Liquidity Provision Tier 6,
as further described below.
First, with respect to Liquidity
Provision Tier 1, the Exchange currently
provides an enhanced rebate of $0.0033
per share for executions of Added
Displayed Volume for Members that
qualify for such tier by achieving an
ADAV 10 (excluding Retail Orders) that
is equal to or greater than 0.45% of the
TCV.11 Now, the Exchange proposes to
8 See, e.g., the Cboe BZX equities trading fee
schedule on its public website (available at https://
www.cboe.com/us/equities/membership/fee_
schedule/bzx/), which reflects a base rebate of
$0.0032 per share for executions of attested retail
orders in securities priced at or above $1.00 per
share that add displayed liquidity, and the Cboe
EDGX Exchange, Inc. (‘‘Cboe EDGX’’) equities
trading fee schedule on its public website (available
at https://www.cboe.com/us/equities/membership/
fee_schedule/edgx/), which reflects a base rebate of
$0.0032 per share for executions of attested retail
orders in securities priced at or above $1.00 per
share that add displayed liquidity.
9 The base rebate for executions of Added
Displayed Volume is referred to by the Exchange on
the Fee Schedule under the existing description
‘‘Added displayed volume’’ with a Fee Code of ‘‘B’’,
‘‘D’’ or ‘‘J’’, as applicable, on execution reports.
10 As set forth on the Fee Schedule, ‘‘ADAV’’
means the average daily added volume calculated
as the number of shares added per day, which is
calculated on a monthly basis, and ‘‘Displayed
ADAV’’ means ADAV with respect to displayed
orders.
11 As set forth on the Fee Schedule, ‘‘TCV’’ means
total consolidated volume calculated as the volume
reported by all exchanges and trade reporting
facilities to a consolidated transaction reporting
plan for the month for which the fees apply.
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modify the required criteria such that
Member would now qualify for
Liquidity Provision Tier 1 by achieving:
(1) an ADAV (excluding Retail Orders)
that is equal to or greater than 0.45% of
the TCV; or (2) a Step-Up ADAV 12
(excluding Retail Orders) of the TCV
from September 2023 that is equal to or
greater than .05%, an ADV 13 that is
equal to or greater than 0.50% of the
TCV, and a Non-Displayed ADAV 14 that
is equal to or greater than 5,000,000
shares; or (3) an ADAV that is equal to
or greater than 0.30% of the TCV and a
Non-Displayed ADAV that is equal to or
greater than 7,000,000 shares. Thus,
such proposed changes would keep the
existing criteria intact as the first
alternative, and add two additional
alternative criteria, the first involving a
combination of Step-Up ADAV, ADV,
and Non-Displayed ADAV thresholds,
and the second involving a combination
of ADAV and Non-Displayed ADAV
thresholds, all of which are designed to
encourage the submission of additional
liquidity-adding order flow to the
Exchange.15 Additionally, the Exchange
is proposing that criteria (2) of Liquidity
Provision Tier 1 will expire no later
than March 31, 2024, and the Exchange
will indicate this in a note under the
Liquidity Provision Tiers pricing table
on the Fee Schedule. The Exchange is
not proposing to change the rebate
provided under such tier.
With respect to Liquidity Provision
Tier 2, the Exchange currently provides
an enhanced rebate of $0.00325 per
share for executions of Added Displayed
Volume for Members that qualify for
such tier by achieving: (1) an ADAV that
is equal to or greater than 0.25% of the
TCV; and (2) a Non-Displayed ADAV
that is equal to or greater than 4,000,000
shares. The Exchange now proposes to
reduce the rebate for executions of
Added Displayed Volume under
Liquidity Provision Tier 2 to $0.0032
per share and to modify the required
criteria such that a Member would
12 As set forth on the Fee Schedule, ‘‘Step-Up
ADAV’’ means ADAV in the relevant baseline
month subtracted from current ADAV.
13 As set forth on the Fee Schedule, ‘‘ADV’’ means
average daily volume calculated as the number of
shares added or removed, combined, per day. ADV
is calculated on a monthly basis.
14 As set forth on the Fee Schedule, ‘‘NonDisplayed ADAV’’ means ADAV with respect to
non-displayed orders (including orders subject to
Display-Price Sliding that receive price
improvement when executed and Midpoint Peg
orders).
15 The pricing for Liquidity Provision Tier 1 is
referred to by the Exchange on the Fee Schedule
under the existing description ‘‘Added displayed
volume, Liquidity Provision Tier 1’’ with a Fee
Code of ‘‘B1’’, ‘‘D1’’ or ‘‘J1’’, as applicable, to be
provided by the Exchange on the monthly invoices
provided to Members.
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80797
qualify for such tier by achieving: (1) an
ADAV that is equal to or greater than
0.25% of the TCV and a Non-Displayed
ADAV that is equal to or greater than
4,000,000 shares; or (2) a Step-Up
Displayed ADAV of the TCV from
September 2023 that is equal to or
greater than 0.10% and a Displayed
ADAV (excluding Retail Orders) that is
equal to or greater than 0.20% of the
TCV.16 Thus, such proposed changes
would keep the existing criteria intact
and add an alternative criteria (2) that
includes a Step-Up Displayed ADAV
threshold and a Displayed ADAV
(excluding Retail Orders) threshold,
which is designed to encourage the
submission of additional liquidityadding order flow to the Exchange.
Additionally, the Exchange is proposing
that criteria (2) of Liquidity Provision
Tier 2 will expire no later than March
31, 2024, and the Exchange will indicate
this in a note under the Liquidity
Provision Tiers pricing table on the Fee
Schedule.
With respect to Liquidity Provision
Tier 3, the Exchange currently provides
an enhanced rebate of $0.0031 per share
for executions of Added Displayed
Volume for Members that qualify for
such tier by achieving an ADAV that is
equal to or greater than 0.20% of the
TCV. The Exchange now proposes to
reduce the rebate for executions of
Added Displayed Volume under
Liquidity Provision Tier 3 to $0.0030
per share and to modify the required
criteria such that a Member would now
qualify for such tier by achieving an
ADAV that is equal to or greater than
0.175% of the TCV.17 Thus, such
proposed change reduces the TCV
threshold as well as the applicable
rebate.
With respect to Liquidity Provision
Tier 4, the Exchange currently provides
an enhanced rebate of $0.0029 per share
for executions of Added Displayed
Volume for Members that qualify for
such tier by achieving: (1) an ADAV that
is equal to or greater than 0.15% of the
TCV; or (2) a Displayed ADAV that is
equal to or greater than 0.02% of the
TCV and a Step-Up Displayed ADAV of
the TCV from April 2023 that is equal
16 The proposed pricing for Liquidity Provision
Tier 2 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
displayed volume, Liquidity Provision Tier 2’’ with
a Fee Code of ‘‘B2’’, ‘‘D2’’ or ‘‘J2’’, as applicable, to
be provided by the Exchange on the monthly
invoices provided to Members.
17 The proposed pricing for Liquidity Provision
Tier 3 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
displayed volume, Liquidity Provision Tier 3’’ with
a Fee Code of ‘‘B3’’, ‘‘D3’’ or ‘‘J3’’, as applicable, to
be provided by the Exchange on the monthly
invoices provided to Members.
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to or greater than 50% of the Member’s
April 2023 Displayed ADAV of the TCV.
The Exchange now proposes modify the
required criteria such that a Member
would now qualify for such tier by
achieving (1) an ADAV (excluding
Retail Orders) that is equal to or greater
than 0.09% of the TCV; or (2) an ADAV
that is equal to or greater than 0.06% of
the TCV and a Step-Up ADAV from June
2023 that is equal to or greater than 40%
of the Member’s June 2023 Displayed
ADAV.18 Thus, such proposed change
would lower the ADAV threshold in the
first alternative criteria (and exclude
Retail Orders), and modify the
alternative ADAV and Step-Up ADAV
thresholds in criteria (2). Additionally,
the Exchange is proposing that criteria
(2) of Liquidity Provision Tier 4 will
expire no later than December 31, 2023.
The Exchange is not proposing to
change the rebate provided under such
tier.
With respect to Liquidity Provision
Tier 5, the Exchange currently provides
an enhanced rebate of $0.0027 per share
for executions of Added Displayed
Volume for Members that qualify for
such tier by achieving an ADAV that is
equal to or greater than 0.075% of the
TCV. The Exchange now proposes to
reduce the rebate for executions of
Added Displayed Volume under
Liquidity Provision Tier 5 to $0.0025
per share and to modify the required
criteria such that a Member would now
qualify for such tier by achieving: (1) an
ADAV that is equal to or greater than
0.06% of the TCV; or (2) a Displayed
ADAV that is equal to or greater than
0.007% of the TCV and a Step-Up
Displayed ADAV from May 2023 that is
equal to or greater than 50% of the
Member’s May 2023 Displayed ADAV of
the TCV.19 Thus, such proposed change
would lower the ADAV threshold in the
existing criteria and add an alternative
criteria (2) that includes a Displayed
ADAV and a Step-Up Displayed ADAV
threshold. Additionally, the Exchange is
proposing that criteria (2) of Liquidity
Provision Tier 5 will expire no later
than November 30, 2023, and the
Exchange will indicate this in a note
18 The proposed pricing for Liquidity Provision
Tier 4 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
displayed volume, Liquidity Provision Tier 4’’ with
a Fee Code of ‘‘B4’’, ‘‘D4’’ or ‘‘J4’’, as applicable, to
be provided by the Exchange on the monthly
invoices provided to Members.
19 The proposed pricing for Liquidity Provision
Tier 5 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Added
displayed volume, Liquidity Provision Tier 5’’ with
a Fee Code of ‘‘B5’’, ‘‘D5’’ or ‘‘J5’’, as applicable, to
be provided by the Exchange on the monthly
invoices provided to Members.
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under the Liquidity Provision Tiers
pricing table on the Fee Schedule.
With respect to Liquidity Provision
Tier 6, the Exchange currently provides
an enhanced rebate of $0.0024 per share
for executions of Added Displayed
Volume for Members that qualify for
such tier by achieving a Displayed
ADAV that is equal to or greater than
0.007% of the TCV and a Step-Up
Displayed ADAV of the TCV from May
2023 that is equal to or greater than 50%
of the Member’s May 2023 Displayed
ADAV of the TCV. As noted above, the
criteria under this Tier has been shifted
into criteria (2) of Liquidity Provision
Tier 5. As such, the Exchange now
proposes to eliminate Liquidity
Provision Tier 6, as the Exchange no
longer wishes to, nor is it required to,
maintain such tier.
Lastly, the Exchange is proposing to
delete the language on the Fee Schedule
that indicates Members that qualify for
Liquidity Provision Tiers 4, 5, or 6
based on activity in a given month will
also receive the associated Tier 4, 5 or
6 rebate during the following month.
This method of providing the rebate
under such Tiers was implemented on
June 1, 2023,20 and differed from the
previous practice applicable to those
tiers (and current practice with respect
to all incentives and pricing tiers on the
Exchange’s Fee Schedule) whereby a
Member receives the applicable rebate
at the end of the month if it achieved
the applicable criteria during that
month. The Exchange implemented this
method on a trial basis in an effort to
encourage Members to increase their
liquidity-adding order flow with an
added layer of certainty in the rebate
they would receive the next month, if
applicable. However, the Exchange does
not believe that the revised method
incentivized Members to achieve
Liquidity Provisions 4, 5, or 6 in a
manner that was material enough to
continue the trial further, and it would
rather redirect the associated resources
into other programs and tiers intended
to incentivize increased order flow or
enhance market quality. As such, the
Exchange proposes to discontinue this
method and provide the applicable
rebate under Liquidity Provision Tiers 4
and 5 (as noted above, it is proposing to
eliminate Liquidity Provision Tier 6) in
the same manner in which it provides
rebates under all other pricing tiers.
The purpose of reducing the rebates
for executions of Added Displayed
Volume under Liquidity Provision Tiers
2, 3 and 5 as proposed, which the
20 See Securities Exchange Act Release No. 97724
(June 14, 2023), 88 FR 40361 (June 21, 2023) (SR–
MEMX–2023–10).
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Exchange believes in each case
represents a modest reduction and
remains commensurate with the
required criteria as modified, and
eliminating Liquidity Provision Tier 6 is
for business and competitive reasons, as
the Exchange believes that such rebate
reductions and tier elimination would
decrease the Exchange’s expenditures
with respect to its transaction pricing in
a manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added liquidity. The
purpose of modifying the required
criteria under Liquidity Provision Tiers
1–5 provides an incremental incentive
for Members to strive for higher volume
thresholds to receive higher enhanced
rebates for such executions and, as such,
is intended to encourage Members to
maintain or increase their order flow,
primarily in the form of liquidity-adding
volume, to the Exchange, thereby
contributing to a deeper and more liquid
market to the benefit of all Members and
market participants. The Exchange
believes that the Liquidity Provision
Tiers, as modified by the proposed
changes described above, reflect a
reasonable and competitive pricing
structure that is right-sized and
consistent with the Exchange’s overall
pricing philosophy of encouraging
added and/or displayed liquidity.
Specifically, the Exchange believes that,
after giving effect to the proposed
changes described above, the rebate for
executions of Added Displayed Volume
provided under each of the Liquidity
Provision Tiers 1–5 and the manner in
which it is provided remains
commensurate with the corresponding
required criteria under each such tier
and is reasonably related to the market
quality benefits that each such tier is
designed to achieve.
Retail Tier
As described above, the Exchange is
proposing to provide a base rebate of
$0.0032 per share for executions of
Added Displayed Retail Volume. In
addition, the Exchange is proposing to
adopt a new tiered pricing structure
applicable to the rebate provided for
executions of Added Displayed Retail
Volume. Specifically, the Exchange
proposes to adopt a new volume-based
tier, referred to by the Exchange as the
Retail Tier, in which the Exchange will
provide an enhanced rebate for
executions of Added Displayed Retail
Volume that meet a certain specified
volume threshold on the Exchange.
Under the proposed Retail Tier 1, the
Exchange will provide an enhanced
rebate of $0.0034 per share for
executions of Added Displayed Retail
Volume for a Member that qualifies for
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the Retail Tier 1 by achieving a Retail
Order ADAV that is equal to or greater
than 0.07% of the TCV. The $0.0003 per
share additive rebate will be provided in
addition to the rebate that is otherwise
applicable to each of a qualifying
Members’ orders that constitutes Setter
Volume (including a rebate provided
under another pricing tier/incentive).21
The Exchange proposes to provide
Members that qualify for the proposed
new Retail Tier 1 a rebate of 0.075% of
the total dollar volume of the
transaction for executions of orders in
securities priced below $1.00 per share
that add displayed liquidity to the
Exchange, which is the same rebate that
is currently applicable to such
executions for all Members.
The proposed Retail Tier is designed
to encourage growth in Retail Order
flow to the Exchange by providing an
additional rebate for executions of
Added Displayed Retail Volume,
thereby promoting increased liquidity
and providing for overall enhanced
price discovery and market quality on
the Exchange. The Exchange notes that
the proposed Retail Tier is comparable
to other volume-based incentives and
discounts, which have been widely
adopted by exchanges (including the
Exchange).22
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Liquidity Removal Tier
The Exchange currently charges a
standard fee of $0.0030 per share for
executions of orders in securities priced
at or above $1.00 per share that remove
liquidity from the Exchange (such
orders, ‘‘Removed Volume’’). The
Exchange also currently offers Liquidity
Removal Tier 1 under which qualifying
Members are charged a discounted fee
of $0.00295 per share for executions of
Removed Volume by achieving (1) an
ADV that is equal to or greater than
0.50% of the TCV; or (2) a Remove
ADV 23 that is equal to or greater than
0.30% of the TCV. Now, the Exchange
proposes to modify the required criteria
under Liquidity Removal Tier 1 such
that a Member would qualify for such
tier by achieving (1) an ADV that is
21 The proposed pricing for the Retail Tier is
referred to by the Exchange on the Fee Schedule
under the description ‘‘Added displayed volume,
Retail Tier 1’’ with a Fee Code of ‘‘Br1’’, ‘‘Dr1’’ or
‘‘Jr1’’, as applicable, to be provided by the Exchange
on the monthly invoices provided to Members.
22 See, e.g., the Retail Volume Tiers reflected on
the Cboe BZX equities trading fee schedule
(available at https://www.cboe.com/us/equities/
membership/fee_schedule/bzx/), and the Retail
Volume Tiers reflected on the Cboe EDGX equities
trading fee schedule (available at https://
www.cboe.com/us/equities/membership/fee_
schedule/edgx/).
23 As set forth on the Fee Schedule, ‘‘Remove
ADV’’ means ADV with respect to orders that
remove liquidity.
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equal to or greater than 0.60% of the
TCV; and (2) a Remove ADV that is
equal to or greater than 0.30% of the
TCV.24 Thus, such proposed change
would increase the ADV threshold in
the first required criteria and keep the
second required criteria intact with no
changes except that, as proposed, a
Member would be required to achieve
both criteria, rather than one or the
other. The Exchange is not proposing to
change the rebate provided under such
tier.
The proposed change to the Liquidity
Removal Tier 1 is designed to encourage
Members to maintain or increase their
order flow, including in the form of
orders that remove liquidity, to the
Exchange in order to qualify for the
discounted fee for executions of
Removed Volume. While the Exchange’s
overall pricing philosophy generally
encourages adding liquidity over
removing liquidity, the Exchange
believes that providing alternative
criteria that are based on different types
of volume that Members may choose to
achieve, such as the proposed new
criteria under Liquidity Removal Tier 1,
contributes to a more robust and wellbalanced market ecosystem on the
Exchange to the benefit of all Members.
Non-Display Add Tier 1
The Exchange currently offers NonDisplay Add Tiers 1–4 under which a
Member may receive an enhanced
rebate for executions of Added NonDisplayed Volume by achieving the
corresponding required volume criteria
for each such tier. Currently, a Member
qualifies for Non-Display Add Tier 1,
and thus receives an enhanced rebate of
$0.0028 per share for executions of
Added Non-Displayed Volume under
such tier, by achieving: (1) a NonDisplayed ADAV that is equal to or
greater than 8,000,000 shares; or (2) an
ADAV (excluding Retail Orders) that is
equal to or greater than 0.45% of the
TCV.25 The Exchange now proposes to
modify Non-Display Add Tier 1 such
that a Member would now qualify for
such tier by achieving a Non-Displayed
ADAV that is equal to or greater than
24 The proposed pricing for Liquidity Removal
Tier 1 is referred to by the Exchange on the Fee
Schedule under the existing description ‘‘Removed
volume from MEMX Book, Liquidity Removal Tier
1’’ with a Fee Code of ‘‘R1’’ assigned on the
monthly invoices provided by the Exchange. The
Exchange is not proposing to change the fee charged
under Liquidity Removal Tier 1 for executions of
securities priced below $1.00 per share.
25 The pricing for Non-Display Add Tier 1 is
referred to by the Exchange on the Fee Schedule
under the existing description ‘‘Added nondisplayed volume, Non-Display Add Tier 1’’ with
a Fee Code of ‘‘H1’’, ‘‘M1’’ or ‘‘P1’’, as applicable,
to be provided by the Exchange on the monthly
invoices provided to Members.
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80799
8,000,000 shares. Thus, such proposed
change would keep the first existing
criteria intact without changes and
eliminate the second alternative criteria,
which the Exchange believes would
make the tier easier for Members to
achieve, and, in turn, while the
Exchange has no way of predicting with
certainty how the proposed new criteria
will impact Member activity, the
Exchange expects that more Members
will qualify, or strive to qualify, for such
tier than currently do, resulting in the
submission of additional order flow to
the Exchange. The Exchange is not
proposing to change the rebate provided
under this tier.
The tiered pricing structure for
executions of Added Non-Displayed
Volume under the Non-Display Add
Tiers provides an incremental incentive
for Members to strive for higher volume
thresholds to receive higher enhanced
rebates for such executions and, as such,
is intended to encourage Members to
maintain or increase their order flow,
particularly in the form of liquidityadding non-displayed volume, to the
Exchange, thereby contributing to a
deeper and more robust and wellbalanced market ecosystem to the
benefit of all Members and market
participants.
NBBO Setter/Joiner Tiers
The Exchange currently offers NBBO
Setter/Joiner Tiers 1–2 under which a
Member may receive an additive rebate
for a qualifying Member’s executions of
Added Displayed Volume (other than
Retail Orders) that establish the NBBO
(such orders, ‘‘Setter Volume’’) and
executions of Added Displayed Volume
(other than Retail Orders) that establish
a new best bid or offer on the Exchange
that matches the NBBO first established
on an away market (such orders, ‘‘Joiner
Volume’’). The Exchange now proposes
to modify the NBBO Setter/Joiner Tiers
by decreasing the additive rebate
provided for executions of Setter and
Joiner Volume under NBBO Setter/
Joiner Tier 1 and renaming such tier
‘‘NBBO Setter Tier 1’’ and eliminating
NBBO Setter/Joiner Tier 2, as further
described below.
With respect to NBBO Setter/Joiner
Tier 1, the Exchange currently provides
an additive rebate of $0.0004 per share
for executions of Setter Volume for
Members that qualify for such tier by
achieving an ADAV equal to or greater
than 0.10% of the TCV with respect to
orders with Fee Code B.26 Now, the
Exchange proposes to reduce the rebate
26 The Exchange notes that orders with Fee Code
B include orders, other than Retail Orders, that
establish the NBBO.
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for NBBO Setter/Joiner Tier 1 to $0.0002
per share. The Exchange believes that
the additive rebate remains
commensurate with the required criteria
under such tier, as modified, and is
reasonably related to the market quality
benefits that such tier is designed to
achieve.
With respect to NBBO/Setter Joiner
Tier 2, the Exchange currently provides
an additive rebate of $0.0002 per share
for executions of Setter Volume and
Joiner Volume for Members that qualify
for such tier by achieving an ADAV that
is equal to or greater than 0.05% of the
TCV and a Displayed ADAV with
respect to orders with Fee Code B or J 27
that is equal to or greater than 40% of
the Member’s Displayed ADAV with
respect to orders with Fee Code B, D or
J.28 The Exchange now proposes to
eliminate NBBO Setter/Joiner Tier 2, as
the Exchange no longer wishes to, nor
is it required to, maintain such tier.
Finally, after the proposed
elimination of NBBO Setter/Joiner Tier
2, only one relevant Tier remains, and
that tier only applies to orders with a
Fee Code B that establish the NBBO. As
such, the Exchange proposes to rename
this tier category ‘‘NBBO Setter Tier’’,
and the relevant Tier 1 ‘‘NBBO Setter
Tier 1’’.
(excluding Retail Orders). The $0.0001
per share additive rebate will be
provided in addition to the rebate that
is otherwise applicable to each of a
qualifying Members’ orders that
constitutes Tape B Volume (including a
rebate provided under another pricing
tier/incentive).30 Additionally, the
Exchange is proposing Tape B Volume
Tier 1 will expire no later than April 30,
2024, and the Exchange will indicate
this in a note under the Tape B Volume
Tier pricing table on the Fee Schedule.
The Exchange notes that the additive
rebate will not apply to executions of
orders in Tape B securities priced below
$1.00 per share.
The proposed Tape B Volume Tier is
designed to attract displayed liquidity to
the Exchange in Tape B securities by
providing an additional rebate for
executions of Tape B Volume to
Members, thereby promoting price
discovery and market quality on the
Exchange. The Exchange notes that the
proposed Tape B Volume Tier is
comparable to other volume-based
incentives and discounts, which have
been widely adopted by exchanges
(including the Exchange), including
similar pricing incentives applicable to
Tape B securities.31
Adoption of Tape B Volume Tier
The Exchange proposes to adopt a
new volume-based tier, referred to by
the Exchange as the Tape B Volume
Tier, in which the Exchange will
provide an additive rebate for
executions of Added Displayed Volume
(excluding Retail Orders) in Tape B
Securities (such orders, ‘‘Tape B
Volume’’). Under the proposed Tape B
Volume Tier 1, the Exchange will
provide an additive rebate of $0.0001
per share for executions of Tape B
Volume for a Member that qualifies for
the Tape B Volume Tier 1 by achieving:
(1) a Step-Up Tape B ADAV 29 of the
Tape B TCV from October 2023 that is
equal to or greater than
0.10%(excluding Retail Orders); and (2)
a Tape B ADAV that is equal to or
greater than 0.25% of the Tape B TCV
DLI Additive Rebate
ddrumheller on DSK120RN23PROD with NOTICES1
27 The
Exchange notes that orders with Fee Code
J include orders, other than Retail Orders, that
establish a new BBO on the Exchange that matches
the NBBO first established on an away market.
28 The Exchange notes that orders with Fee Code
D include orders that add displayed liquidity to the
Exchange but that are not Fee Code B or J, and thus,
orders with Fee Code B, D or J include all orders,
other than Retail Orders, that add displayed
liquidity to the Exchange.
29 The Exchange proposes to define ‘‘Step-Up
Tape B ADAV’’ in the Fee Schedule as the ADAV
in Tape B securities as a percentage of the TCV in
the relevant baseline month subtracted from the
current ADAV in Tape B securities as a percentage
of the TCV.
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The Exchange currently offers DLI
Tiers 1 and 2 in which qualifying
Members are provided an enhanced
rebate for executions of Added
Displayed Volume. The DLI Tiers are
designed to encourage Members,
through the provision of such enhanced
rebates for executions of Added
Displayed Volume, to promote price
discovery and market quality by quoting
at the NBBO for a significant portion of
each day in a large number of securities,
thereby benefitting the Exchange and
investors by providing improved trading
conditions for all market participants
through narrower bid-ask spreads and
increased depth of liquidity available at
the NBBO in a broad base of securities,
and committing capital to support the
30 The proposed pricing for the Tape B Volume
Tier is referred to by the Exchange on the Fee
Schedule under the new description ‘‘Tape B
Volume Tier’’ with a Fee Code of ‘‘b’’ to be
appended to the otherwise applicable Fee Code
assigned by the Exchange on the monthly invoices
for qualifying executions.
31 See, e.g., Securities Exchange Act Release No.
73813 (September 11, 2015), 80 FR 55882
(September 17, 2015) (SR–BATS–2015–74) (notice
of filing and immediate effectiveness of a proposed
rule change related to fees to adopt a Tape B
Volume Tier that provides an enhanced rebates for
executions of orders in Tape B Securities to BZX
(formerly BATS Exchange, Inc.) members that
qualify for such tiers by achieving a specified Tape
B ADAV threshold).
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execution of orders.32 The Exchange is
not proposing to modify the DLI Tiers
at this time, however, the Exchange is
proposing to adopt a new additive
rebate for executions of Added
Displayed Volume applicable to DLI
Tier 1 and Liquidity Provision Tier 1 or
Liquidity Provision Tier 2 (the ‘‘DLI
Additive Rebate’’). Specifically, the
proposed DLI Additive Rebate would
provide an additive rebate of $0.0001
per share for executions of Added
Displayed Volume that otherwise
qualify for the applicable rebate under
Liquidity Provision Tier 1 or Liquidity
Provision Tier 2 as well as the
applicable criteria under DLI Tier 1,33 as
described more fully below.
First, a Member qualifies for DLI Tier
1 by having (1) an NBBO time of at least
25% in an average of at least 1,000
securities per trading day during the
month; and (2) an ADAV that is equal
to or greater than 0.10% of the TCV.34
Under Liquidity Provision Tier 1, the
Exchange is proposing (as described
above) to provide an enhanced rebate of
$0.0033 per share for executions of
Added Displayed Volume for Members
that qualify for such tier by achieving:
(1) an ADAV (excluding Retail Orders)
that is equal to or greater than 0.45% of
the TCV; or (2) a Step-Up ADAV from
September 2023 that is equal to or
greater than 0.05% of the TCV, an ADV
that is equal to or greater than 0.50% of
the TCV, and a Non-Displayed ADAV
that is equal to or greater than 5,000,000
shares; or (3) an ADAV that is equal to
or greater than 0.30% of the TCV and a
Non-Displayed ADAV that is equal to or
greater than 7,000,000 shares. Under
Liquidity Provision Tier 2, the Exchange
is proposing (as described above) to
provide an enhanced rebate of $0.0032
for executions of Added Displayed
Volume for Members that qualify for
such tier by having: (1) an ADAV that
is greater than or equal to 0.25% of the
TCV and a Non-Displayed ADAV that is
equal to or greater than 4,000,000
shares; or (2) a Step-Up Displayed
ADAV of the TCV from September 2023
that is equal to or greater than 0.10%
and a Displayed ADAV (excluding
Retail Orders) that is equal to or greater
than 0.20% of the TCV. Members would
32 See the Exchange’s Fee Schedule (available at:
https://info.memxtrading.com/equities-tradingresources/us-equities-fee-schedule) for additional
details regarding the Exchange’s DLI Tiers and DLI
Target Securities.
33 This proposed pricing is referred to by the
Exchange on the Fee Schedule under the new
description ‘‘DLI Additive Rebate’’ with a Fee Code
of ‘‘q’’ to be appended to the otherwise applicable
Fee Code for qualifying executions.
34 The enhanced rebate provided under DLI Tier
1 is $0.0031 per share for executions of Added
Displayed Volume.
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qualify for the DLI Additive rebate and
by achieving both the criteria under DLI
Tier 1 and either Liquidity Provision
Tier 1 or Liquidity Tier 2.35
The purpose of the proposed DLI
Additive Rebate is to encourage
Members that consistently quote at the
NBBO on the Exchange (i.e., Members
that qualify for DLI Tier 1) to also
maintain or increase their orders that
add liquidity on the Exchange in order
to qualify for an additive rebate for
executions of Added Displayed Volume,
which, in turn, the Exchange believes
would encourage the submission of
additional Added Displayed Volume to
the Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market to the benefit of
all market participants. The Exchange
notes that the proposed DLI Additive
Rebate is comparable to other volumebased incentives and discounts, which
have been widely adopted by
exchanges, including the Exchange,
such as pricing tiers that provide a
supplemental incentive for firms that
achieve a specified volume threshold.36
ddrumheller on DSK120RN23PROD with NOTICES1
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,37
in general, and with Sections 6(b)(4) and
6(b)(5) of the Act,38 in particular, in that
it provides for the equitable allocation
of reasonable dues, fees and other
charges among its Members and other
persons using its facilities and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
As discussed above, the Exchange
operates in a highly fragmented and
competitive market in which market
participants can readily direct order
35 Thus, a Member that qualifies for Liquidity
Provision Tier 1 and the DLI Additive Rebate (by
achieving the criteria under DLI Tier 1) would
receive a rebate of $0.0034 per share (which is the
$0.0033 per share rebate under Liquidity Provision
Tier 1, as described above, plus the $0.0001 per
share DLI Additive Rebate) for executions of Added
Displayed Volume, and a Member that qualifies for
Liquidity Provision Tier 2 and the DLI Additive
Rebate (by achieving the criteria under DLI Tier 1)
would receive a rebate of $0.0033 per share (which
is the proposed $0.0032 per share rebate under
Liquidity Provision Tier 2, as described above, plus
the $0.0001 per share DLI Additive Rebate) for
executions of Added Displayed Volume.
36 See Securities Exchange Act Release No. 93949
(January 11, 2022), 87 FR 2655 (January 18, 2022)
(SR–MEMX–2021–21) (Notice of filing and
immediate effectiveness of fee changes adopted by
the Exchange, including the adoption of a DLI
Additive Rebate). The Exchange subsequently
eliminated the DLI Additive Rebate on July 1, 2022.
See Securities Exchange Act Release No. 95211
(July 7, 2022), 87 FR 41839 (July 13, 2022) (SR–
MEMX–2022–16).
37 15 U.S.C. 78f.
38 15 U.S.C. 78f(b)(4) and (5).
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flow to competing venues if they deem
fee levels at a particular venue to be
excessive or incentives to be
insufficient, and the Exchange
represents only a small percentage of
the overall market. The Commission and
the courts have repeatedly expressed
their preference for competition over
regulatory intervention in determining
prices, products, and services in the
securities markets. In Regulation NMS,
the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and also recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 39
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow or discontinue to
reduce use of certain categories of
products, in response to new or
different pricing structures being
introduced into the market.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates, and market
participants can readily trade on
competing venues if they deem pricing
levels at those other venues to be more
favorable. The Exchange believes the
proposal reflects a reasonable and
competitive pricing structure designed
to incentivize market participants to
direct additional order flow, including
displayed, non-displayed, liquidityadding and/or liquidity-removing
orders, to the Exchange, which the
Exchange believes would promote price
discovery and enhance liquidity and
market quality on the Exchange to the
benefit of all Members and market
participants.
The Exchange believes that the
proposed change to reduce the base
rebate provided for executions Added
Displayed Retail Volume is reasonable
because, as described above, such
change is designed to decrease the
Exchange’s expenditures with respect to
its transaction pricing in a manner that
is still consistent with the Exchange’s
overall pricing philosophy of
encouraging added and/or displayed
liquidity, and the proposed new base
rebate for executions of Added
Displayed Retail Volume remains in
competitive with, the base rebates
provided by other exchanges in each
case for executions of similar orders.40
39 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
40 See supra note 8.
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80801
The Exchange also believes the
proposed base rebate for executions of
Added Displayed Retail Volume is
equitable and not unfairly
discriminatory, as such base rebate will
apply equally to all Members submitting
Retail Orders to the Exchange.
The Exchange notes that volumebased incentives and discounts (such as
tiers) have been widely adopted by
exchanges, including the Exchange, and
are reasonable, equitable and not
unfairly discriminatory because they are
open to all members on an equal basis
and provide additional benefits or
discounts that are reasonably related to
the value to an exchange’s market
quality associated with higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns, and the introduction of higher
volumes of orders into the price and
volume discovery process. The
Exchange believes that each of the
Liquidity Provision Tiers 1–5, Liquidity
Removal Tier 1, Non-Display Add Tier
1, NBBO Setter Tier 1, each as modified
by the changes proposed herein, as well
as the proposed new Retail Tier, Tape
B Volume Tier, and DLI Additive
Rebate, are reasonable, equitable and
not unfairly discriminatory for these
same reasons, as such tiers would
provide Members with an incremental
incentive to achieve certain volume
thresholds on the Exchange, are
available to all Members on an equal
basis, and, as described above, are
designed to encourage Members to
maintain or increase their order flow,
including in the form of displayed, nondisplayed, liquidity-adding and/or
liquidity removing orders under the
required criteria, as applicable, to the
Exchange, which the Exchange believes
would promote price discovery,
enhance liquidity and market quality,
and contribute to a more robust and
well balanced market ecosystem on the
Exchange to the benefit of all Members
and market participants.
The Exchange also believes that such
tiers reflect a reasonable and equitable
allocation of fees and rebates, as the
Exchange believes that, after giving
effect to the changes proposed herein,
the enhanced rebate for executions of
Added Displayed Volume, Added
Displayed Retail Volume, Added NonDisplayed Volume, Setter Volume,
Added Tape B Volume, as well as the
discounted fee for executions of
Removed Volume under the modified
Liquidity Removal Tier 1, each remains
commensurate with the corresponding
required criteria under each such tier
and is reasonably related to the market
quality benefits that each such tier is
designed to achieve, as described above.
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With respect to the proposed changes
to eliminate Liquidity Provision Tier 6
and NBBO Setter/Joiner Tier 2, the
Exchange believes such changes are
reasonable because, as noted above, they
would enable the Exchange to redirect
the associated resources and funding
into other programs and tiers intended
to incentivize increased order flow or
enhance market quality, and the
Exchange is not required to maintain
such tiers or provide Members any
opportunities to receive additive
rebates. The Exchange believes the
proposal to eliminate such tiers is also
equitable and not unfairly
discriminatory because it would apply
equally to all Members, in that the
incentives would no longer be available
for any Member.
Similarly, the Exchange believes the
proposed discontinuance of the current
method by which it is providing the
enhanced rebates under Liquidity
Provision Tiers 4 and 5 (each as
modified by the proposed changes
herein) is reasonable because, as noted
above, the Exchange implemented this
novel method on a trial basis and
determined that it did not incentivize
members to meet the applicable
Liquidity Provision Tiers to the extent
that it believes would support
continuation. Further, the method by
which the Exchange provides rebates
does not affect any criteria or rebates
provided under Liquidity Provision
Tiers 4 and 5, and as such, modifying
the method again does not alter the
Exchange’s reasonable and competitive
pricing structure designed to incentivize
market participants to direct additional
flow to the Exchange. The Exchange
believes the proposal to discontinue this
method is also equitable and not
unfairly discriminatory because it
would apply equally to Members, in
that the Exchange would instead
provide the rebates to all Members for
all pricing tiers under the same
methodology whereby a Member is
awarded a rebate based on its activity
for the current month.
For the reasons discussed above, the
Exchange submits that the proposal
satisfies the requirements of Sections
6(b)(4) and 6(b)(5) of the Act 41 in that
it provides for the equitable allocation
of reasonable dues, fees and other
charges among its Members and other
persons using its facilities and is not
designed to unfairly discriminate
between customers, issuers, brokers, or
dealers. As described more fully below
in the Exchange’s statement regarding
the burden on competition, the
Exchange believes that its transaction
41 15
U.S.C. 78f(b)(4) and (5).
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pricing is subject to significant
competitive forces, and that the
proposed fees and rebates described
herein are appropriate to address such
forces.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposal will result in any burden
on competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. Instead, as
discussed above, the proposal is
intended to incentivize market
participants to direct additional order
flow to the Exchange, thereby enhancing
liquidity and market quality on the
Exchange to the benefit of all Members
and market participants, as well as to
generate additional revenue and
decrease the Exchange’s expenditures
with respect to its transaction pricing in
a manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added displayed
liquidity. As a result, the Exchange
believes the proposal would enhance its
competitiveness as a market that attracts
actionable orders, thereby making it a
more desirable destination venue for its
customers. For these reasons, the
Exchange believes that the proposal
furthers the Commission’s goal in
adopting Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 42
Intramarket Competition
As discussed above, the Exchange
believes that the proposal would
decrease the Exchange’s expenditures
and generate additional revenue with
respect to its transaction pricing in a
manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added and/or displayed
liquidity and would incentivize market
participants to direct additional order
flow to the Exchange through volumebased tiers, thereby enhancing liquidity
and market quality on the Exchange to
the benefit of all Members, as well as
enhancing the attractiveness of the
Exchange as a trading venue, which the
Exchange believes, in turn, would
continue to encourage market
participants to direct additional order
flow to the Exchange. Greater liquidity
benefits all Members by providing more
trading opportunities and encourages
Members to send additional orders to
the Exchange, thereby contributing to
robust levels of liquidity, which benefits
all market participants.
42 See
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The Exchange does not believe that
the proposed change to reduce the base
rebate for executions of Added
Displayed Retail Volume would impose
any burden on intramarket competition
because such change will apply to all
Members uniformly, in that the
proposed base rebate for such
executions would be the base rebate
applicable to all Members, and the
opportunity to qualify for enhanced
rebate, as applicable, is available to all
Members. The opportunity to qualify for
each of the Liquidity Provision Tiers 1–
5, NBBO Setter Tier 1, Non-Display Add
Tier 1, and Liquidity Removal Tier 1,
each as modified by the changes
proposed herein, as well as the
proposed new Retail Tier, Tape B
Volume Tier, and DLI Additive Rebate,
and thus receive the corresponding
enhanced rebates or discounted fees, as
applicable, would be available to all
Members that meet the associated
volume and/or quoting requirements in
any month. As described above, the
Exchange believes that the required
criteria under each such tier are
commensurate with the corresponding
rebate under such tier and are
reasonably related to the enhanced
liquidity and market quality that such
tier is designed to promote.
Additionally, the Exchange does not
believe that the proposal to eliminate
the method by which the Exchange
currently provides the enhanced rebate
under the Liquidity Provision Tiers 4
and 5 (each as modified by the changes
proposed herein), would impose any
burden on intramarket competition
because such change will apply to all
Members uniformly, and the
methodology by which the Exchange
provides rebates will be the same for all
pricing tiers. For the foregoing reasons,
the Exchange believes the proposed
changes would not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intermarket Competition
As noted above, the Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. Members
have numerous alternative venues that
they may participate on and direct their
order flow to, including 15 other
equities exchanges and numerous
alternative trading systems and other
off-exchange venues. As noted above, no
single registered equities exchange
currently has more than approximately
15.5% of the total market share of
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executed volume of equities trading.
Thus, in such a low-concentrated and
highly competitive market, no single
equities exchange possesses significant
pricing power in the execution of order
flow. Moreover, the Exchange believes
that the ever-shifting market share
among the exchanges from month to
month demonstrates that market
participants can shift order flow or
discontinue to reduce use of certain
categories of products, in response to
new or different pricing structures being
introduced into the market.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates, including with respect
to executions of Added Displayed
Volume, Added Displayed Retail
Volume, Added Non-Displayed Volume
and Removed Volume, and market
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. As described above, the
proposed changes represent a
competitive proposal through which the
Exchange is seeking to generate
additional revenue with respect to its
transaction pricing and to encourage the
submission of additional order flow to
the Exchange through volume-based
tiers, which have been widely adopted
by exchanges, including the Exchange.
Accordingly, the Exchange believes the
proposal would not burden, but rather
promote, intermarket competition by
enabling it to better compete with other
exchanges that offer similar pricing
incentives to market participants.
Additionally, the Commission has
repeatedly expressed its preference for
competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 43 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. SEC, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘‘fierce.’ . . . As the SEC explained,
‘‘[i]n the U.S. national market system,
buyers and sellers of securities, and the
broker-dealers that act as their orderrouting agents, have a wide range of
choices of where to route orders for
43 See
supra note 39.
VerDate Sep<11>2014
17:42 Nov 17, 2023
Jkt 262001
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker
dealers’. . . .’’.44 Accordingly, the
Exchange does not believe its proposed
pricing changes impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 45 and Rule
19b–4(f)(2) 46 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–2023–30 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–MEMX–2023–30. 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–2023–30 and should be
submitted on or before December 11,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.47
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–25549 Filed 11–17–23; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Meeting of the Advisory Committee on
Veterans Business Affairs
AGENCY:
Small Business Administration
(SBA).
Notice of open Federal advisory
committee meeting.
ACTION:
The SBA is issuing this notice
to announce the date, time, and agenda
for a meeting of the Advisory Committee
on Veterans Business Affairs (ACVBA).
SUMMARY:
44 NetCoalition
v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSE–2006–21)).
45 15 U.S.C. 78s(b)(3)(A)(ii).
46 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
80803
47 17
E:\FR\FM\20NON1.SGM
CFR 200.30–3(a)(12).
20NON1
]]>Agencies
[Federal Register Volume 88, Number 222 (Monday, November 20, 2023)]
[Notices]
[Pages 80796-80803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25549]
[[Page 80796]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98938; File No. SR-MEMX-2023-30]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule Concerning Transaction Fees
November 14, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 1, 2023, MEMX LLC (``MEMX'' or the ``Exchange'') filed
with the Securities and Exchange Commission (the ``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to amend the Exchange's fee schedule applicable to Members \3\ (the
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The
Exchange proposes to implement the changes to the Fee Schedule pursuant
to this proposal on November 1, 2023. The text of the proposed rule
change is provided in Exhibit 5.
---------------------------------------------------------------------------
\3\ See Exchange Rule 1.5(p).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Fee
Schedule to (i) reduce the base rebate for executions of Retail Orders
\4\ in securities priced at or above $1.00 per share that add displayed
liquidity to the Exchange (such orders, ``Added Displayed Retail
Volume''); (ii) modify the Liquidity Provision Tiers by: modifying the
required criteria under Liquidity Provision Tiers 1, 2, 3, 4, and 5;
decreasing the rebate for executions of orders in securities priced at
or above $1.00 per share that add displayed liquidity to the Exchange
(such orders, ``Added Displayed Volume'') under Liquidity Provision
Tiers 2, 3, and 5; modifying the method by which the Exchange provides
the rebate under Liquidity Provision Tiers 4 and 5; and eliminating
Liquidity Provision Tier 6; (iii) adopt a new Retail Tier that provides
an enhanced rebate for executions of Added Displayed Retail Volume
priced at or above $1.00 per share; (iv) modify the required criteria
under Liquidity Removal Tier 1; (v) modify the required criteria under
Non-Display Add Tier 1; (vi) modify the NBBO Setter/Joiner Tiers by
reducing the additive rebate per share under NBBO Setter/Joiner Tier 1,
renaming such tier to ``NBBO Setter Tier 1'' and eliminating NBBO
Setter/Joiner Tier 2; (vii) adopt a new Tape B Volume Tier that
provides an additive rebate for executions of Added Displayed Volume in
Tape B securities priced at or above $1.00 per share and add a
corresponding relevant defined term to the ``Definitions'' section of
the Fee Schedule; and (viii) adopt a new additive rebate for executions
of Added Displayed Volume applicable to Displayed Liquidity Incentive
(``DLI'') Tier 1 and Liquidity Provision Tier 1 or Liquidity Provision
Tier 2; as further described below.
---------------------------------------------------------------------------
\4\ A ``Retail Order'' means an agency or riskless principal
order that meets the criteria of FINRA Rule 5320.03 that originates
from a natural person and is submitted to the Exchange by a Retail
Member Organization (``RMO''), provided that no change is made to
the terms of the order with respect to price or side of market and
the order does not originate from a trading algorithm or any other
computerized methodology. See Exchange Rule 11.21(a).
---------------------------------------------------------------------------
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues, to
which market participants may direct their order flow. Based on
publicly available information, no single registered equities exchange
currently has more than approximately 15.5% of the total market share
of executed volume of equities trading.\5\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange
possesses significant pricing power in the execution of order flow, and
the Exchange currently represents approximately 3% of the overall
market share.\6\ The Exchange in particular operates a ``Maker-Taker''
model whereby it provides rebates to Members that add liquidity to the
Exchange and charges fees to Members that remove liquidity from the
Exchange. The Fee Schedule sets forth the standard rebates and fees
applied per share for orders that add and remove liquidity,
respectively. Additionally, in response to the competitive environment,
the Exchange also offers tiered pricing, which provides Members with
opportunities to qualify for higher rebates or lower fees where certain
volume criteria and thresholds are met. Tiered pricing provides an
incremental incentive for Members to strive for higher tier levels,
which provides increasingly higher benefits or discounts for satisfying
increasingly more stringent criteria.
---------------------------------------------------------------------------
\5\ Market share percentage calculated as of October 31, 2023.
The Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
\6\ Id.
---------------------------------------------------------------------------
Reduce Base Rebate for Added Displayed Retail Volume
Currently, the Exchange provides a base rebate of $0.0034 per share
for executions of Added Displayed Retail Volume. The Exchange now
proposes to reduce the base rebate for executions of Added Displayed
Retail Volume to $0.0032 per share.\7\ The purpose of reducing the base
rebate for executions of Added Displayed Retail Volume is for business
and competitive reasons, as the Exchange believes that reducing such
rebate as proposed would decrease the Exchange's expenditures with
respect to its transaction pricing in a manner that is still consistent
with the Exchange's overall pricing philosophy of
[[Page 80797]]
encouraging added displayed liquidity. The Exchange notes that despite
the reduction proposed herein, the proposed base rebate for executions
of Added Displayed Retail Volume remains competitive with the base
rebates provided by other exchanges for executions of Retail Orders in
securities priced at or above $1.00 per share that add displayed
liquidity.\8\
---------------------------------------------------------------------------
\7\ The proposed base rebate for executions of Added Displayed
Retail Volume is referred to by the Exchange on the Fee Schedule
under the existing description ``Added displayed volume, Retail
Order'' with a Fee Code of ``Br'', ``Dr'' or ``Jr'', as applicable,
on execution reports.
\8\ See, e.g., the Cboe BZX equities trading fee schedule on its
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a base rebate of
$0.0032 per share for executions of attested retail orders in
securities priced at or above $1.00 per share that add displayed
liquidity, and the Cboe EDGX Exchange, Inc. (``Cboe EDGX'') equities
trading fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/), which
reflects a base rebate of $0.0032 per share for executions of
attested retail orders in securities priced at or above $1.00 per
share that add displayed liquidity.
---------------------------------------------------------------------------
Liquidity Provision Tiers
The Exchange currently provides a base rebate of $0.0015 per share
for executions of Added Displayed Volume.\9\ The Exchange also
currently offers Liquidity Provision Tiers 1-6 under which a Member may
receive an enhanced rebate for executions of Added Displayed Volume by
achieving the corresponding required volume criteria for each such
tier. The Exchange now proposes to modify the Liquidity Provision Tiers
by modifying the required criteria under Liquidity Provision Tier 1 and
Liquidity Provision Tier 4, reducing the rebate for executions of Added
Displayed Volume and modifying the required criteria under Liquidity
Provision Tier 2, Liquidity Provision Tier 3, and Liquidity Provision
Tier 5, and eliminating Liquidity Provision Tier 6, as further
described below.
---------------------------------------------------------------------------
\9\ The base rebate for executions of Added Displayed Volume is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume'' with a Fee Code of ``B'',
``D'' or ``J'', as applicable, on execution reports.
---------------------------------------------------------------------------
First, with respect to Liquidity Provision Tier 1, the Exchange
currently provides an enhanced rebate of $0.0033 per share for
executions of Added Displayed Volume for Members that qualify for such
tier by achieving an ADAV \10\ (excluding Retail Orders) that is equal
to or greater than 0.45% of the TCV.\11\ Now, the Exchange proposes to
modify the required criteria such that Member would now qualify for
Liquidity Provision Tier 1 by achieving: (1) an ADAV (excluding Retail
Orders) that is equal to or greater than 0.45% of the TCV; or (2) a
Step-Up ADAV \12\ (excluding Retail Orders) of the TCV from September
2023 that is equal to or greater than .05%, an ADV \13\ that is equal
to or greater than 0.50% of the TCV, and a Non-Displayed ADAV \14\ that
is equal to or greater than 5,000,000 shares; or (3) an ADAV that is
equal to or greater than 0.30% of the TCV and a Non-Displayed ADAV that
is equal to or greater than 7,000,000 shares. Thus, such proposed
changes would keep the existing criteria intact as the first
alternative, and add two additional alternative criteria, the first
involving a combination of Step-Up ADAV, ADV, and Non-Displayed ADAV
thresholds, and the second involving a combination of ADAV and Non-
Displayed ADAV thresholds, all of which are designed to encourage the
submission of additional liquidity-adding order flow to the
Exchange.\15\ Additionally, the Exchange is proposing that criteria (2)
of Liquidity Provision Tier 1 will expire no later than March 31, 2024,
and the Exchange will indicate this in a note under the Liquidity
Provision Tiers pricing table on the Fee Schedule. The Exchange is not
proposing to change the rebate provided under such tier.
---------------------------------------------------------------------------
\10\ As set forth on the Fee Schedule, ``ADAV'' means the
average daily added volume calculated as the number of shares added
per day, which is calculated on a monthly basis, and ``Displayed
ADAV'' means ADAV with respect to displayed orders.
\11\ As set forth on the Fee Schedule, ``TCV'' means total
consolidated volume calculated as the volume reported by all
exchanges and trade reporting facilities to a consolidated
transaction reporting plan for the month for which the fees apply.
\12\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means
ADAV in the relevant baseline month subtracted from current ADAV.
\13\ As set forth on the Fee Schedule, ``ADV'' means average
daily volume calculated as the number of shares added or removed,
combined, per day. ADV is calculated on a monthly basis.
\14\ As set forth on the Fee Schedule, ``Non-Displayed ADAV''
means ADAV with respect to non-displayed orders (including orders
subject to Display-Price Sliding that receive price improvement when
executed and Midpoint Peg orders).
\15\ The pricing for Liquidity Provision Tier 1 is referred to
by the Exchange on the Fee Schedule under the existing description
``Added displayed volume, Liquidity Provision Tier 1'' with a Fee
Code of ``B1'', ``D1'' or ``J1'', as applicable, to be provided by
the Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 2, the Exchange currently
provides an enhanced rebate of $0.00325 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving: (1) an ADAV that is equal to or greater than 0.25% of the
TCV; and (2) a Non-Displayed ADAV that is equal to or greater than
4,000,000 shares. The Exchange now proposes to reduce the rebate for
executions of Added Displayed Volume under Liquidity Provision Tier 2
to $0.0032 per share and to modify the required criteria such that a
Member would qualify for such tier by achieving: (1) an ADAV that is
equal to or greater than 0.25% of the TCV and a Non-Displayed ADAV that
is equal to or greater than 4,000,000 shares; or (2) a Step-Up
Displayed ADAV of the TCV from September 2023 that is equal to or
greater than 0.10% and a Displayed ADAV (excluding Retail Orders) that
is equal to or greater than 0.20% of the TCV.\16\ Thus, such proposed
changes would keep the existing criteria intact and add an alternative
criteria (2) that includes a Step-Up Displayed ADAV threshold and a
Displayed ADAV (excluding Retail Orders) threshold, which is designed
to encourage the submission of additional liquidity-adding order flow
to the Exchange. Additionally, the Exchange is proposing that criteria
(2) of Liquidity Provision Tier 2 will expire no later than March 31,
2024, and the Exchange will indicate this in a note under the Liquidity
Provision Tiers pricing table on the Fee Schedule.
---------------------------------------------------------------------------
\16\ The proposed pricing for Liquidity Provision Tier 2 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 2''
with a Fee Code of ``B2'', ``D2'' or ``J2'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 3, the Exchange currently
provides an enhanced rebate of $0.0031 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving an ADAV that is equal to or greater than 0.20% of the TCV.
The Exchange now proposes to reduce the rebate for executions of Added
Displayed Volume under Liquidity Provision Tier 3 to $0.0030 per share
and to modify the required criteria such that a Member would now
qualify for such tier by achieving an ADAV that is equal to or greater
than 0.175% of the TCV.\17\ Thus, such proposed change reduces the TCV
threshold as well as the applicable rebate.
---------------------------------------------------------------------------
\17\ The proposed pricing for Liquidity Provision Tier 3 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 3''
with a Fee Code of ``B3'', ``D3'' or ``J3'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 4, the Exchange currently
provides an enhanced rebate of $0.0029 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving: (1) an ADAV that is equal to or greater than 0.15% of the
TCV; or (2) a Displayed ADAV that is equal to or greater than 0.02% of
the TCV and a Step-Up Displayed ADAV of the TCV from April 2023 that is
equal
[[Page 80798]]
to or greater than 50% of the Member's April 2023 Displayed ADAV of the
TCV. The Exchange now proposes modify the required criteria such that a
Member would now qualify for such tier by achieving (1) an ADAV
(excluding Retail Orders) that is equal to or greater than 0.09% of the
TCV; or (2) an ADAV that is equal to or greater than 0.06% of the TCV
and a Step-Up ADAV from June 2023 that is equal to or greater than 40%
of the Member's June 2023 Displayed ADAV.\18\ Thus, such proposed
change would lower the ADAV threshold in the first alternative criteria
(and exclude Retail Orders), and modify the alternative ADAV and Step-
Up ADAV thresholds in criteria (2). Additionally, the Exchange is
proposing that criteria (2) of Liquidity Provision Tier 4 will expire
no later than December 31, 2023. The Exchange is not proposing to
change the rebate provided under such tier.
---------------------------------------------------------------------------
\18\ The proposed pricing for Liquidity Provision Tier 4 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 4''
with a Fee Code of ``B4'', ``D4'' or ``J4'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 5, the Exchange currently
provides an enhanced rebate of $0.0027 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving an ADAV that is equal to or greater than 0.075% of the TCV.
The Exchange now proposes to reduce the rebate for executions of Added
Displayed Volume under Liquidity Provision Tier 5 to $0.0025 per share
and to modify the required criteria such that a Member would now
qualify for such tier by achieving: (1) an ADAV that is equal to or
greater than 0.06% of the TCV; or (2) a Displayed ADAV that is equal to
or greater than 0.007% of the TCV and a Step-Up Displayed ADAV from May
2023 that is equal to or greater than 50% of the Member's May 2023
Displayed ADAV of the TCV.\19\ Thus, such proposed change would lower
the ADAV threshold in the existing criteria and add an alternative
criteria (2) that includes a Displayed ADAV and a Step-Up Displayed
ADAV threshold. Additionally, the Exchange is proposing that criteria
(2) of Liquidity Provision Tier 5 will expire no later than November
30, 2023, and the Exchange will indicate this in a note under the
Liquidity Provision Tiers pricing table on the Fee Schedule.
---------------------------------------------------------------------------
\19\ The proposed pricing for Liquidity Provision Tier 5 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 5''
with a Fee Code of ``B5'', ``D5'' or ``J5'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
---------------------------------------------------------------------------
With respect to Liquidity Provision Tier 6, the Exchange currently
provides an enhanced rebate of $0.0024 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving a Displayed ADAV that is equal to or greater than 0.007% of
the TCV and a Step-Up Displayed ADAV of the TCV from May 2023 that is
equal to or greater than 50% of the Member's May 2023 Displayed ADAV of
the TCV. As noted above, the criteria under this Tier has been shifted
into criteria (2) of Liquidity Provision Tier 5. As such, the Exchange
now proposes to eliminate Liquidity Provision Tier 6, as the Exchange
no longer wishes to, nor is it required to, maintain such tier.
Lastly, the Exchange is proposing to delete the language on the Fee
Schedule that indicates Members that qualify for Liquidity Provision
Tiers 4, 5, or 6 based on activity in a given month will also receive
the associated Tier 4, 5 or 6 rebate during the following month. This
method of providing the rebate under such Tiers was implemented on June
1, 2023,\20\ and differed from the previous practice applicable to
those tiers (and current practice with respect to all incentives and
pricing tiers on the Exchange's Fee Schedule) whereby a Member receives
the applicable rebate at the end of the month if it achieved the
applicable criteria during that month. The Exchange implemented this
method on a trial basis in an effort to encourage Members to increase
their liquidity-adding order flow with an added layer of certainty in
the rebate they would receive the next month, if applicable. However,
the Exchange does not believe that the revised method incentivized
Members to achieve Liquidity Provisions 4, 5, or 6 in a manner that was
material enough to continue the trial further, and it would rather
redirect the associated resources into other programs and tiers
intended to incentivize increased order flow or enhance market quality.
As such, the Exchange proposes to discontinue this method and provide
the applicable rebate under Liquidity Provision Tiers 4 and 5 (as noted
above, it is proposing to eliminate Liquidity Provision Tier 6) in the
same manner in which it provides rebates under all other pricing tiers.
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 97724 (June 14,
2023), 88 FR 40361 (June 21, 2023) (SR-MEMX-2023-10).
---------------------------------------------------------------------------
The purpose of reducing the rebates for executions of Added
Displayed Volume under Liquidity Provision Tiers 2, 3 and 5 as
proposed, which the Exchange believes in each case represents a modest
reduction and remains commensurate with the required criteria as
modified, and eliminating Liquidity Provision Tier 6 is for business
and competitive reasons, as the Exchange believes that such rebate
reductions and tier elimination would decrease the Exchange's
expenditures with respect to its transaction pricing in a manner that
is still consistent with the Exchange's overall pricing philosophy of
encouraging added liquidity. The purpose of modifying the required
criteria under Liquidity Provision Tiers 1-5 provides an incremental
incentive for Members to strive for higher volume thresholds to receive
higher enhanced rebates for such executions and, as such, is intended
to encourage Members to maintain or increase their order flow,
primarily in the form of liquidity-adding volume, to the Exchange,
thereby contributing to a deeper and more liquid market to the benefit
of all Members and market participants. The Exchange believes that the
Liquidity Provision Tiers, as modified by the proposed changes
described above, reflect a reasonable and competitive pricing structure
that is right-sized and consistent with the Exchange's overall pricing
philosophy of encouraging added and/or displayed liquidity.
Specifically, the Exchange believes that, after giving effect to the
proposed changes described above, the rebate for executions of Added
Displayed Volume provided under each of the Liquidity Provision Tiers
1-5 and the manner in which it is provided remains commensurate with
the corresponding required criteria under each such tier and is
reasonably related to the market quality benefits that each such tier
is designed to achieve.
Retail Tier
As described above, the Exchange is proposing to provide a base
rebate of $0.0032 per share for executions of Added Displayed Retail
Volume. In addition, the Exchange is proposing to adopt a new tiered
pricing structure applicable to the rebate provided for executions of
Added Displayed Retail Volume. Specifically, the Exchange proposes to
adopt a new volume-based tier, referred to by the Exchange as the
Retail Tier, in which the Exchange will provide an enhanced rebate for
executions of Added Displayed Retail Volume that meet a certain
specified volume threshold on the Exchange. Under the proposed Retail
Tier 1, the Exchange will provide an enhanced rebate of $0.0034 per
share for executions of Added Displayed Retail Volume for a Member that
qualifies for
[[Page 80799]]
the Retail Tier 1 by achieving a Retail Order ADAV that is equal to or
greater than 0.07% of the TCV. The $0.0003 per share additive rebate
will be provided in addition to the rebate that is otherwise applicable
to each of a qualifying Members' orders that constitutes Setter Volume
(including a rebate provided under another pricing tier/incentive).\21\
The Exchange proposes to provide Members that qualify for the proposed
new Retail Tier 1 a rebate of 0.075% of the total dollar volume of the
transaction for executions of orders in securities priced below $1.00
per share that add displayed liquidity to the Exchange, which is the
same rebate that is currently applicable to such executions for all
Members.
---------------------------------------------------------------------------
\21\ The proposed pricing for the Retail Tier is referred to by
the Exchange on the Fee Schedule under the description ``Added
displayed volume, Retail Tier 1'' with a Fee Code of ``Br1'',
``Dr1'' or ``Jr1'', as applicable, to be provided by the Exchange on
the monthly invoices provided to Members.
---------------------------------------------------------------------------
The proposed Retail Tier is designed to encourage growth in Retail
Order flow to the Exchange by providing an additional rebate for
executions of Added Displayed Retail Volume, thereby promoting
increased liquidity and providing for overall enhanced price discovery
and market quality on the Exchange. The Exchange notes that the
proposed Retail Tier is comparable to other volume-based incentives and
discounts, which have been widely adopted by exchanges (including the
Exchange).\22\
---------------------------------------------------------------------------
\22\ See, e.g., the Retail Volume Tiers reflected on the Cboe
BZX equities trading fee schedule (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), and the
Retail Volume Tiers reflected on the Cboe EDGX equities trading fee
schedule (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
---------------------------------------------------------------------------
Liquidity Removal Tier
The Exchange currently charges a standard fee of $0.0030 per share
for executions of orders in securities priced at or above $1.00 per
share that remove liquidity from the Exchange (such orders, ``Removed
Volume''). The Exchange also currently offers Liquidity Removal Tier 1
under which qualifying Members are charged a discounted fee of $0.00295
per share for executions of Removed Volume by achieving (1) an ADV that
is equal to or greater than 0.50% of the TCV; or (2) a Remove ADV \23\
that is equal to or greater than 0.30% of the TCV. Now, the Exchange
proposes to modify the required criteria under Liquidity Removal Tier 1
such that a Member would qualify for such tier by achieving (1) an ADV
that is equal to or greater than 0.60% of the TCV; and (2) a Remove ADV
that is equal to or greater than 0.30% of the TCV.\24\ Thus, such
proposed change would increase the ADV threshold in the first required
criteria and keep the second required criteria intact with no changes
except that, as proposed, a Member would be required to achieve both
criteria, rather than one or the other. The Exchange is not proposing
to change the rebate provided under such tier.
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\23\ As set forth on the Fee Schedule, ``Remove ADV'' means ADV
with respect to orders that remove liquidity.
\24\ The proposed pricing for Liquidity Removal Tier 1 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Removed volume from MEMX Book, Liquidity Removal Tier
1'' with a Fee Code of ``R1'' assigned on the monthly invoices
provided by the Exchange. The Exchange is not proposing to change
the fee charged under Liquidity Removal Tier 1 for executions of
securities priced below $1.00 per share.
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The proposed change to the Liquidity Removal Tier 1 is designed to
encourage Members to maintain or increase their order flow, including
in the form of orders that remove liquidity, to the Exchange in order
to qualify for the discounted fee for executions of Removed Volume.
While the Exchange's overall pricing philosophy generally encourages
adding liquidity over removing liquidity, the Exchange believes that
providing alternative criteria that are based on different types of
volume that Members may choose to achieve, such as the proposed new
criteria under Liquidity Removal Tier 1, contributes to a more robust
and well-balanced market ecosystem on the Exchange to the benefit of
all Members.
Non-Display Add Tier 1
The Exchange currently offers Non-Display Add Tiers 1-4 under which
a Member may receive an enhanced rebate for executions of Added Non-
Displayed Volume by achieving the corresponding required volume
criteria for each such tier. Currently, a Member qualifies for Non-
Display Add Tier 1, and thus receives an enhanced rebate of $0.0028 per
share for executions of Added Non-Displayed Volume under such tier, by
achieving: (1) a Non-Displayed ADAV that is equal to or greater than
8,000,000 shares; or (2) an ADAV (excluding Retail Orders) that is
equal to or greater than 0.45% of the TCV.\25\ The Exchange now
proposes to modify Non-Display Add Tier 1 such that a Member would now
qualify for such tier by achieving a Non-Displayed ADAV that is equal
to or greater than 8,000,000 shares. Thus, such proposed change would
keep the first existing criteria intact without changes and eliminate
the second alternative criteria, which the Exchange believes would make
the tier easier for Members to achieve, and, in turn, while the
Exchange has no way of predicting with certainty how the proposed new
criteria will impact Member activity, the Exchange expects that more
Members will qualify, or strive to qualify, for such tier than
currently do, resulting in the submission of additional order flow to
the Exchange. The Exchange is not proposing to change the rebate
provided under this tier.
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\25\ The pricing for Non-Display Add Tier 1 is referred to by
the Exchange on the Fee Schedule under the existing description
``Added non-displayed volume, Non-Display Add Tier 1'' with a Fee
Code of ``H1'', ``M1'' or ``P1'', as applicable, to be provided by
the Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------
The tiered pricing structure for executions of Added Non-Displayed
Volume under the Non-Display Add Tiers provides an incremental
incentive for Members to strive for higher volume thresholds to receive
higher enhanced rebates for such executions and, as such, is intended
to encourage Members to maintain or increase their order flow,
particularly in the form of liquidity-adding non-displayed volume, to
the Exchange, thereby contributing to a deeper and more robust and
well-balanced market ecosystem to the benefit of all Members and market
participants.
NBBO Setter/Joiner Tiers
The Exchange currently offers NBBO Setter/Joiner Tiers 1-2 under
which a Member may receive an additive rebate for a qualifying Member's
executions of Added Displayed Volume (other than Retail Orders) that
establish the NBBO (such orders, ``Setter Volume'') and executions of
Added Displayed Volume (other than Retail Orders) that establish a new
best bid or offer on the Exchange that matches the NBBO first
established on an away market (such orders, ``Joiner Volume''). The
Exchange now proposes to modify the NBBO Setter/Joiner Tiers by
decreasing the additive rebate provided for executions of Setter and
Joiner Volume under NBBO Setter/Joiner Tier 1 and renaming such tier
``NBBO Setter Tier 1'' and eliminating NBBO Setter/Joiner Tier 2, as
further described below.
With respect to NBBO Setter/Joiner Tier 1, the Exchange currently
provides an additive rebate of $0.0004 per share for executions of
Setter Volume for Members that qualify for such tier by achieving an
ADAV equal to or greater than 0.10% of the TCV with respect to orders
with Fee Code B.\26\ Now, the Exchange proposes to reduce the rebate
[[Page 80800]]
for NBBO Setter/Joiner Tier 1 to $0.0002 per share. The Exchange
believes that the additive rebate remains commensurate with the
required criteria under such tier, as modified, and is reasonably
related to the market quality benefits that such tier is designed to
achieve.
---------------------------------------------------------------------------
\26\ The Exchange notes that orders with Fee Code B include
orders, other than Retail Orders, that establish the NBBO.
---------------------------------------------------------------------------
With respect to NBBO/Setter Joiner Tier 2, the Exchange currently
provides an additive rebate of $0.0002 per share for executions of
Setter Volume and Joiner Volume for Members that qualify for such tier
by achieving an ADAV that is equal to or greater than 0.05% of the TCV
and a Displayed ADAV with respect to orders with Fee Code B or J \27\
that is equal to or greater than 40% of the Member's Displayed ADAV
with respect to orders with Fee Code B, D or J.\28\ The Exchange now
proposes to eliminate NBBO Setter/Joiner Tier 2, as the Exchange no
longer wishes to, nor is it required to, maintain such tier.
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\27\ The Exchange notes that orders with Fee Code J include
orders, other than Retail Orders, that establish a new BBO on the
Exchange that matches the NBBO first established on an away market.
\28\ The Exchange notes that orders with Fee Code D include
orders that add displayed liquidity to the Exchange but that are not
Fee Code B or J, and thus, orders with Fee Code B, D or J include
all orders, other than Retail Orders, that add displayed liquidity
to the Exchange.
---------------------------------------------------------------------------
Finally, after the proposed elimination of NBBO Setter/Joiner Tier
2, only one relevant Tier remains, and that tier only applies to orders
with a Fee Code B that establish the NBBO. As such, the Exchange
proposes to rename this tier category ``NBBO Setter Tier'', and the
relevant Tier 1 ``NBBO Setter Tier 1''.
Adoption of Tape B Volume Tier
The Exchange proposes to adopt a new volume-based tier, referred to
by the Exchange as the Tape B Volume Tier, in which the Exchange will
provide an additive rebate for executions of Added Displayed Volume
(excluding Retail Orders) in Tape B Securities (such orders, ``Tape B
Volume''). Under the proposed Tape B Volume Tier 1, the Exchange will
provide an additive rebate of $0.0001 per share for executions of Tape
B Volume for a Member that qualifies for the Tape B Volume Tier 1 by
achieving: (1) a Step-Up Tape B ADAV \29\ of the Tape B TCV from
October 2023 that is equal to or greater than 0.10%(excluding Retail
Orders); and (2) a Tape B ADAV that is equal to or greater than 0.25%
of the Tape B TCV (excluding Retail Orders). The $0.0001 per share
additive rebate will be provided in addition to the rebate that is
otherwise applicable to each of a qualifying Members' orders that
constitutes Tape B Volume (including a rebate provided under another
pricing tier/incentive).\30\ Additionally, the Exchange is proposing
Tape B Volume Tier 1 will expire no later than April 30, 2024, and the
Exchange will indicate this in a note under the Tape B Volume Tier
pricing table on the Fee Schedule. The Exchange notes that the additive
rebate will not apply to executions of orders in Tape B securities
priced below $1.00 per share.
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\29\ The Exchange proposes to define ``Step-Up Tape B ADAV'' in
the Fee Schedule as the ADAV in Tape B securities as a percentage of
the TCV in the relevant baseline month subtracted from the current
ADAV in Tape B securities as a percentage of the TCV.
\30\ The proposed pricing for the Tape B Volume Tier is referred
to by the Exchange on the Fee Schedule under the new description
``Tape B Volume Tier'' with a Fee Code of ``b'' to be appended to
the otherwise applicable Fee Code assigned by the Exchange on the
monthly invoices for qualifying executions.
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The proposed Tape B Volume Tier is designed to attract displayed
liquidity to the Exchange in Tape B securities by providing an
additional rebate for executions of Tape B Volume to Members, thereby
promoting price discovery and market quality on the Exchange. The
Exchange notes that the proposed Tape B Volume Tier is comparable to
other volume-based incentives and discounts, which have been widely
adopted by exchanges (including the Exchange), including similar
pricing incentives applicable to Tape B securities.\31\
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\31\ See, e.g., Securities Exchange Act Release No. 73813
(September 11, 2015), 80 FR 55882 (September 17, 2015) (SR-BATS-
2015-74) (notice of filing and immediate effectiveness of a proposed
rule change related to fees to adopt a Tape B Volume Tier that
provides an enhanced rebates for executions of orders in Tape B
Securities to BZX (formerly BATS Exchange, Inc.) members that
qualify for such tiers by achieving a specified Tape B ADAV
threshold).
---------------------------------------------------------------------------
DLI Additive Rebate
The Exchange currently offers DLI Tiers 1 and 2 in which qualifying
Members are provided an enhanced rebate for executions of Added
Displayed Volume. The DLI Tiers are designed to encourage Members,
through the provision of such enhanced rebates for executions of Added
Displayed Volume, to promote price discovery and market quality by
quoting at the NBBO for a significant portion of each day in a large
number of securities, thereby benefitting the Exchange and investors by
providing improved trading conditions for all market participants
through narrower bid-ask spreads and increased depth of liquidity
available at the NBBO in a broad base of securities, and committing
capital to support the execution of orders.\32\ The Exchange is not
proposing to modify the DLI Tiers at this time, however, the Exchange
is proposing to adopt a new additive rebate for executions of Added
Displayed Volume applicable to DLI Tier 1 and Liquidity Provision Tier
1 or Liquidity Provision Tier 2 (the ``DLI Additive Rebate'').
Specifically, the proposed DLI Additive Rebate would provide an
additive rebate of $0.0001 per share for executions of Added Displayed
Volume that otherwise qualify for the applicable rebate under Liquidity
Provision Tier 1 or Liquidity Provision Tier 2 as well as the
applicable criteria under DLI Tier 1,\33\ as described more fully
below.
---------------------------------------------------------------------------
\32\ See the Exchange's Fee Schedule (available at: https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule) for additional details regarding the Exchange's DLI Tiers
and DLI Target Securities.
\33\ This proposed pricing is referred to by the Exchange on the
Fee Schedule under the new description ``DLI Additive Rebate'' with
a Fee Code of ``q'' to be appended to the otherwise applicable Fee
Code for qualifying executions.
---------------------------------------------------------------------------
First, a Member qualifies for DLI Tier 1 by having (1) an NBBO time
of at least 25% in an average of at least 1,000 securities per trading
day during the month; and (2) an ADAV that is equal to or greater than
0.10% of the TCV.\34\ Under Liquidity Provision Tier 1, the Exchange is
proposing (as described above) to provide an enhanced rebate of $0.0033
per share for executions of Added Displayed Volume for Members that
qualify for such tier by achieving: (1) an ADAV (excluding Retail
Orders) that is equal to or greater than 0.45% of the TCV; or (2) a
Step-Up ADAV from September 2023 that is equal to or greater than 0.05%
of the TCV, an ADV that is equal to or greater than 0.50% of the TCV,
and a Non-Displayed ADAV that is equal to or greater than 5,000,000
shares; or (3) an ADAV that is equal to or greater than 0.30% of the
TCV and a Non-Displayed ADAV that is equal to or greater than 7,000,000
shares. Under Liquidity Provision Tier 2, the Exchange is proposing (as
described above) to provide an enhanced rebate of $0.0032 for
executions of Added Displayed Volume for Members that qualify for such
tier by having: (1) an ADAV that is greater than or equal to 0.25% of
the TCV and a Non-Displayed ADAV that is equal to or greater than
4,000,000 shares; or (2) a Step-Up Displayed ADAV of the TCV from
September 2023 that is equal to or greater than 0.10% and a Displayed
ADAV (excluding Retail Orders) that is equal to or greater than 0.20%
of the TCV. Members would
[[Page 80801]]
qualify for the DLI Additive rebate and by achieving both the criteria
under DLI Tier 1 and either Liquidity Provision Tier 1 or Liquidity
Tier 2.\35\
---------------------------------------------------------------------------
\34\ The enhanced rebate provided under DLI Tier 1 is $0.0031
per share for executions of Added Displayed Volume.
\35\ Thus, a Member that qualifies for Liquidity Provision Tier
1 and the DLI Additive Rebate (by achieving the criteria under DLI
Tier 1) would receive a rebate of $0.0034 per share (which is the
$0.0033 per share rebate under Liquidity Provision Tier 1, as
described above, plus the $0.0001 per share DLI Additive Rebate) for
executions of Added Displayed Volume, and a Member that qualifies
for Liquidity Provision Tier 2 and the DLI Additive Rebate (by
achieving the criteria under DLI Tier 1) would receive a rebate of
$0.0033 per share (which is the proposed $0.0032 per share rebate
under Liquidity Provision Tier 2, as described above, plus the
$0.0001 per share DLI Additive Rebate) for executions of Added
Displayed Volume.
---------------------------------------------------------------------------
The purpose of the proposed DLI Additive Rebate is to encourage
Members that consistently quote at the NBBO on the Exchange (i.e.,
Members that qualify for DLI Tier 1) to also maintain or increase their
orders that add liquidity on the Exchange in order to qualify for an
additive rebate for executions of Added Displayed Volume, which, in
turn, the Exchange believes would encourage the submission of
additional Added Displayed Volume to the Exchange, thereby promoting
price discovery and contributing to a deeper and more liquid market to
the benefit of all market participants. The Exchange notes that the
proposed DLI Additive Rebate is comparable to other volume-based
incentives and discounts, which have been widely adopted by exchanges,
including the Exchange, such as pricing tiers that provide a
supplemental incentive for firms that achieve a specified volume
threshold.\36\
---------------------------------------------------------------------------
\36\ See Securities Exchange Act Release No. 93949 (January 11,
2022), 87 FR 2655 (January 18, 2022) (SR-MEMX-2021-21) (Notice of
filing and immediate effectiveness of fee changes adopted by the
Exchange, including the adoption of a DLI Additive Rebate). The
Exchange subsequently eliminated the DLI Additive Rebate on July 1,
2022. See Securities Exchange Act Release No. 95211 (July 7, 2022),
87 FR 41839 (July 13, 2022) (SR-MEMX-2022-16).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\37\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\38\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among its Members and other persons using its facilities
and is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\37\ 15 U.S.C. 78f.
\38\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
As discussed above, the Exchange operates in a highly fragmented
and competitive market in which market participants can readily direct
order flow to competing venues if they deem fee levels at a particular
venue to be excessive or incentives to be insufficient, and the
Exchange represents only a small percentage of the overall market. The
Commission and the courts have repeatedly expressed their preference
for competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \39\
---------------------------------------------------------------------------
\39\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue to reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, and market participants
can readily trade on competing venues if they deem pricing levels at
those other venues to be more favorable. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to incentivize market participants to direct additional order
flow, including displayed, non-displayed, liquidity-adding and/or
liquidity-removing orders, to the Exchange, which the Exchange believes
would promote price discovery and enhance liquidity and market quality
on the Exchange to the benefit of all Members and market participants.
The Exchange believes that the proposed change to reduce the base
rebate provided for executions Added Displayed Retail Volume is
reasonable because, as described above, such change is designed to
decrease the Exchange's expenditures with respect to its transaction
pricing in a manner that is still consistent with the Exchange's
overall pricing philosophy of encouraging added and/or displayed
liquidity, and the proposed new base rebate for executions of Added
Displayed Retail Volume remains in competitive with, the base rebates
provided by other exchanges in each case for executions of similar
orders.\40\ The Exchange also believes the proposed base rebate for
executions of Added Displayed Retail Volume is equitable and not
unfairly discriminatory, as such base rebate will apply equally to all
Members submitting Retail Orders to the Exchange.
---------------------------------------------------------------------------
\40\ See supra note 8.
---------------------------------------------------------------------------
The Exchange notes that volume-based incentives and discounts (such
as tiers) have been widely adopted by exchanges, including the
Exchange, and are reasonable, equitable and not unfairly discriminatory
because they are open to all members on an equal basis and provide
additional benefits or discounts that are reasonably related to the
value to an exchange's market quality associated with higher levels of
market activity, such as higher levels of liquidity provision and/or
growth patterns, and the introduction of higher volumes of orders into
the price and volume discovery process. The Exchange believes that each
of the Liquidity Provision Tiers 1-5, Liquidity Removal Tier 1, Non-
Display Add Tier 1, NBBO Setter Tier 1, each as modified by the changes
proposed herein, as well as the proposed new Retail Tier, Tape B Volume
Tier, and DLI Additive Rebate, are reasonable, equitable and not
unfairly discriminatory for these same reasons, as such tiers would
provide Members with an incremental incentive to achieve certain volume
thresholds on the Exchange, are available to all Members on an equal
basis, and, as described above, are designed to encourage Members to
maintain or increase their order flow, including in the form of
displayed, non-displayed, liquidity-adding and/or liquidity removing
orders under the required criteria, as applicable, to the Exchange,
which the Exchange believes would promote price discovery, enhance
liquidity and market quality, and contribute to a more robust and well
balanced market ecosystem on the Exchange to the benefit of all Members
and market participants.
The Exchange also believes that such tiers reflect a reasonable and
equitable allocation of fees and rebates, as the Exchange believes
that, after giving effect to the changes proposed herein, the enhanced
rebate for executions of Added Displayed Volume, Added Displayed Retail
Volume, Added Non-Displayed Volume, Setter Volume, Added Tape B Volume,
as well as the discounted fee for executions of Removed Volume under
the modified Liquidity Removal Tier 1, each remains commensurate with
the corresponding required criteria under each such tier and is
reasonably related to the market quality benefits that each such tier
is designed to achieve, as described above.
[[Page 80802]]
With respect to the proposed changes to eliminate Liquidity
Provision Tier 6 and NBBO Setter/Joiner Tier 2, the Exchange believes
such changes are reasonable because, as noted above, they would enable
the Exchange to redirect the associated resources and funding into
other programs and tiers intended to incentivize increased order flow
or enhance market quality, and the Exchange is not required to maintain
such tiers or provide Members any opportunities to receive additive
rebates. The Exchange believes the proposal to eliminate such tiers is
also equitable and not unfairly discriminatory because it would apply
equally to all Members, in that the incentives would no longer be
available for any Member.
Similarly, the Exchange believes the proposed discontinuance of the
current method by which it is providing the enhanced rebates under
Liquidity Provision Tiers 4 and 5 (each as modified by the proposed
changes herein) is reasonable because, as noted above, the Exchange
implemented this novel method on a trial basis and determined that it
did not incentivize members to meet the applicable Liquidity Provision
Tiers to the extent that it believes would support continuation.
Further, the method by which the Exchange provides rebates does not
affect any criteria or rebates provided under Liquidity Provision Tiers
4 and 5, and as such, modifying the method again does not alter the
Exchange's reasonable and competitive pricing structure designed to
incentivize market participants to direct additional flow to the
Exchange. The Exchange believes the proposal to discontinue this method
is also equitable and not unfairly discriminatory because it would
apply equally to Members, in that the Exchange would instead provide
the rebates to all Members for all pricing tiers under the same
methodology whereby a Member is awarded a rebate based on its activity
for the current month.
For the reasons discussed above, the Exchange submits that the
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act \41\ in that it provides for the equitable allocation of
reasonable dues, fees and other charges among its Members and other
persons using its facilities and is not designed to unfairly
discriminate between customers, issuers, brokers, or dealers. As
described more fully below in the Exchange's statement regarding the
burden on competition, the Exchange believes that its transaction
pricing is subject to significant competitive forces, and that the
proposed fees and rebates described herein are appropriate to address
such forces.
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposal will result in any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Instead, as discussed above,
the proposal is intended to incentivize market participants to direct
additional order flow to the Exchange, thereby enhancing liquidity and
market quality on the Exchange to the benefit of all Members and market
participants, as well as to generate additional revenue and decrease
the Exchange's expenditures with respect to its transaction pricing in
a manner that is still consistent with the Exchange's overall pricing
philosophy of encouraging added displayed liquidity. As a result, the
Exchange believes the proposal would enhance its competitiveness as a
market that attracts actionable orders, thereby making it a more
desirable destination venue for its customers. For these reasons, the
Exchange believes that the proposal furthers the Commission's goal in
adopting Regulation NMS of fostering competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \42\
---------------------------------------------------------------------------
\42\ See supra note 39.
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Intramarket Competition
As discussed above, the Exchange believes that the proposal would
decrease the Exchange's expenditures and generate additional revenue
with respect to its transaction pricing in a manner that is still
consistent with the Exchange's overall pricing philosophy of
encouraging added and/or displayed liquidity and would incentivize
market participants to direct additional order flow to the Exchange
through volume-based tiers, thereby enhancing liquidity and market
quality on the Exchange to the benefit of all Members, as well as
enhancing the attractiveness of the Exchange as a trading venue, which
the Exchange believes, in turn, would continue to encourage market
participants to direct additional order flow to the Exchange. Greater
liquidity benefits all Members by providing more trading opportunities
and encourages Members to send additional orders to the Exchange,
thereby contributing to robust levels of liquidity, which benefits all
market participants.
The Exchange does not believe that the proposed change to reduce
the base rebate for executions of Added Displayed Retail Volume would
impose any burden on intramarket competition because such change will
apply to all Members uniformly, in that the proposed base rebate for
such executions would be the base rebate applicable to all Members, and
the opportunity to qualify for enhanced rebate, as applicable, is
available to all Members. The opportunity to qualify for each of the
Liquidity Provision Tiers 1-5, NBBO Setter Tier 1, Non-Display Add Tier
1, and Liquidity Removal Tier 1, each as modified by the changes
proposed herein, as well as the proposed new Retail Tier, Tape B Volume
Tier, and DLI Additive Rebate, and thus receive the corresponding
enhanced rebates or discounted fees, as applicable, would be available
to all Members that meet the associated volume and/or quoting
requirements in any month. As described above, the Exchange believes
that the required criteria under each such tier are commensurate with
the corresponding rebate under such tier and are reasonably related to
the enhanced liquidity and market quality that such tier is designed to
promote. Additionally, the Exchange does not believe that the proposal
to eliminate the method by which the Exchange currently provides the
enhanced rebate under the Liquidity Provision Tiers 4 and 5 (each as
modified by the changes proposed herein), would impose any burden on
intramarket competition because such change will apply to all Members
uniformly, and the methodology by which the Exchange provides rebates
will be the same for all pricing tiers. For the foregoing reasons, the
Exchange believes the proposed changes would not impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intermarket Competition
As noted above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. Members have numerous
alternative venues that they may participate on and direct their order
flow to, including 15 other equities exchanges and numerous alternative
trading systems and other off-exchange venues. As noted above, no
single registered equities exchange currently has more than
approximately 15.5% of the total market share of
[[Page 80803]]
executed volume of equities trading. Thus, in such a low-concentrated
and highly competitive market, no single equities exchange possesses
significant pricing power in the execution of order flow. Moreover, the
Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue to reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, including with respect to
executions of Added Displayed Volume, Added Displayed Retail Volume,
Added Non-Displayed Volume and Removed Volume, and market participants
can readily choose to send their orders to other exchange and off-
exchange venues if they deem fee levels at those other venues to be
more favorable. As described above, the proposed changes represent a
competitive proposal through which the Exchange is seeking to generate
additional revenue with respect to its transaction pricing and to
encourage the submission of additional order flow to the Exchange
through volume-based tiers, which have been widely adopted by
exchanges, including the Exchange. Accordingly, the Exchange believes
the proposal would not burden, but rather promote, intermarket
competition by enabling it to better compete with other exchanges that
offer similar pricing incentives to market participants.
Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \43\ The fact
that this market is competitive has also long been recognized by the
courts. In NetCoalition v. SEC, the D.C. Circuit stated as follows:
``[n]o one disputes that competition for order flow is ``fierce.' . . .
As the SEC explained, ``[i]n the U.S. national market system, buyers
and sellers of securities, and the broker-dealers that act as their
order-routing agents, have a wide range of choices of where to route
orders for execution'; [and] `no exchange can afford to take its market
share percentages for granted' because `no exchange possesses a
monopoly, regulatory or otherwise, in the execution of order flow from
broker dealers'. . . .''.\44\ Accordingly, the Exchange does not
believe its proposed pricing changes impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
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\43\ See supra note 39.
\44\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \45\ and Rule 19b-4(f)(2) \46\ thereunder.
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\45\ 15 U.S.C. 78s(b)(3)(A)(ii).
\46\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-MEMX-2023-30 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-MEMX-2023-30. 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-2023-30 and should be
submitted on or before December 11, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
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\47\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25549 Filed 11-17-23; 8:45 am]
BILLING CODE 8011-01-P
