Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule Regarding Options Market Data Products, 84638-84646 [2024-24469]
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Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101370; File No. SR–
MEMX–2024–40]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule Regarding Options Market
Data Products
October 17, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
4, 2024, MEMX LLC (‘‘MEMX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposed rule change to
amend the Market Data section of its fee
schedule applicable to its equity options
platform (‘‘MEMX Options’’) to adopt
fees for certain of its market data
products, which are currently offered
free of charge, pursuant to MEMX Rules
15.1(a) and (c). The Exchange proposes
to implement the changes to the Fee
Schedule pursuant to this proposal
immediately. The text of the proposed
rule change is provided in Exhibit 5.
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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
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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1. Purpose
The purpose of the proposed rule
change is to amend the Market Data
section of the Exchange’s fee schedule
applicable to MEMX Options (‘‘MEMX
Options Fee Schedule’’) to adopt fees for
certain of its options market data
products which are currently offered
free of charge, namely MEMOIR Options
Depth and MEMOIR Options Top
(collectively, the ‘‘Options Data Feeds’’).
As set forth below, the Exchange
believes that the proposed fees are fair
and reasonable and has based its
proposal on a detailed cost analysis, as
well as other factors including a
comparison to competitor pricing. The
Exchange is proposing to implement the
proposed fees immediately. The
Exchange previously filed this proposal
on March 28, 2024 (SR–MEMX–2024–
11) (the ‘‘Initial Proposal’’). On April 15,
2024, the Exchange withdrew the Initial
Proposal and replaced it with SR–
MEMX–2024–14 (the ‘‘Second
Proposal’’),3 on June 14, 2024, the
Exchange withdrew the Second
Proposal and replaced it with SR–
MEMX–2024–25 (the ‘‘Third
Proposal’’),4 and on August 8, 2024, the
Exchange withdrew the Third Proposal
and replaced it with SR–MEMX–2024–
31 (the ‘‘Fourth Proposal’’).5 Now, the
Exchange is withdrawing the Fourth
Proposal and is replacing it with the
current filing.
Before setting forth the additional
details regarding the proposal as well as
the cost analysis conducted by the
Exchange, immediately below is a
description of the proposed fees.
Proposed Market Data Pricing
MEMX Options offers two separate
data feeds to subscribers—MEMOIR
Options Depth and MEMOIR Options
Top. The Exchange notes that there is
no requirement that any subscribing
entity (‘‘Firm’’) subscribe to a particular
Options Data Feed or any Options Data
Feed whatsoever, but instead, a Firm
may choose to maintain subscriptions to
those Options Data Feeds they deem
appropriate based on their business
model. The proposed fee will not apply
3 See Securities Exchange Act Release No. 99998
(April 19, 2024), 89 FR 32507 (April 26, 2024) (SR–
MEMX–2024–14).
4 See Securities Exchange Act Release No. 100435
(June 26, 2024), 89 FR 54878 (July 2, 2024) (SR–
MEMX–2024–25).
5 See Securities Exchange Act Release No. 100793
(August 21, 2024), 89 FR 68664 (August 27, 2024)
(SR–MEMX–2024–31).
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differently based upon the size or type
of Firm, but rather based upon the
subscriptions a Firm has to Options
Data Feeds. The proposed pricing for
each of the Options Data Feeds is set
forth below.
MEMOIR Options Depth
The MEMOIR Options Depth feed is
a MEMX-only market data feed that
contains depth of book quotations and
execution information based on options
orders entered in the System.6 For the
receipt of access to the MEMOIR
Options Depth feed, the Exchange
proposes to charge $1,500 per month.
This proposed access fee would be
charged to any data recipient that
receives a data feed of the MEMOIR
Options Depth feed for purposes of
internal distribution (i.e., an ‘‘Internal
Distributor’’), for external redistribution
(i.e. an ‘‘External Distributor’’), or both.
The Exchange proposes to define an
Internal Distributor as ‘‘a Distributor
that receives an Exchange Data product
and then distributes that data to one or
more data recipients within the
Distributor’s own organization,’’ 7 and
an External Distributor as ‘‘a Distributor
that receives an Exchange Data product
and then distributes that data to a third
party or one or more data recipients
outside the Distributor’s own
organization.’’ 8 The proposed access fee
will be charged only once per month per
Firm regardless of whether the Firm
uses the MEMOIR Options Depth feed
for internal distribution, external
distribution, or both.9
MEMOIR Options Top
The MEMOIR Options Top feed is a
MEMX-only market data feed that
contains top of book quotations and
executions based on options orders
entered into the System.10 For the
receipt of access to the MEMOIR
Options Top feed, the Exchange
proposes to charge $750 per month.
This proposed access fee would be
charged to any data recipient that
receives a data feed of the MEMOIR
Options Top feed for purposes of
internal distribution (i.e., an Internal
Distributor), external redistribution (i.e.
6 See
MEMX Rule 21.15(b)(1).
Market Data Definitions under the proposed
MEMX Options Fee Schedule. The Exchange also
proposes to adopt a definition for ‘‘Distributor’’,
which would mean any entity that receives an
Exchange Data product directly from the Exchange
or indirectly through another entity and then
distributes internally or externally to a third party.
8 See Market Data Definitions under the proposed
MEMX Options Fee Schedule.
9 The proposed definitions of Internal Distributor
and External Distributor are the same definitions
used in the Exchange’s Equities Fee Schedule.
10 See MEMX Rule 21.15(b)(2).
7 See
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an External Distributor), or both. The
proposed access fee for internal and
external distribution will be charged
only once per month per Firm
regardless of whether the Firm uses the
MEMOIR Options Top feed for internal
distribution, external distribution, or
both.
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Billing Process
The Exchange proposes to bill for the
Options Data Feeds in the same manner
as it does for the market data products
it provides for its equities Exchange,
(the ‘‘Equities Data Feeds’’), and to make
this clear on the Fee Schedule.
Specifically, the Fee Schedule would
state that ‘‘[f]ees for Market Data
products are assessed based on each
active product at the close of business
on the first day of each month,’’ and that
‘‘[i]f a product is cancelled by a
subscriber’s submission of a written
request or via the MEMX User Portal
prior to such fee being assessed, then
the subscriber will not be obligated to
pay the applicable product fee. MEMX
does not return pro rated fees if a
product is not used for an entire
month.’’ The Exchange believes that this
billing methodology has been efficient
with respect to the Equities Data Feeds
and is well understood by market
participants.
Additional Discussion—Background
The Exchange launched MEMX
Options on September 27, 2023. As a
new entrant in the equity options
trading space, MEMX did not begin
charging fees for options market data
until April 1, 2024. The objective of this
approach was to eliminate any fee-based
barriers for Members to join the
Exchange, which the Exchange believes
was helpful in its ability to attract order
flow as a new options exchange.
Further, the Exchange did not initially
charge for options market data because
MEMX believes that any exchange
should first deliver meaningful value to
Members and other market participants
before charging fees for its products and
services.
The Exchange also did not begin
charging for the Equities Data Feeds
until 2022, nearly two years after it
launched as a national securities
exchange in 2020. In connection with
the adoption of fees for the Equities Data
Feeds, the Exchange conducted an
extensive cost analysis (the ‘‘2022 Cost
Analysis’’),11 and the Exchange’s Initial
and Second Proposal to adopt fees for
Options Data Feeds stemmed from the
11 See Securities Exchange Act Release No. 97130
(March 13, 2023), 88 FR 16491 (March 17, 2023)
(SR–MEMX–2023–04).
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same cost analysis, which it reviewed
and updated for 2024 (the ‘‘2024 Cost
Analysis’’). The 2024 Cost Analysis
combined costs for providing market
data for both its equities and options
trading platforms (the ‘‘Exchange Data
Feeds’’) due to the fact that in general,
the Exchange did not add a significant
amount of marginal costs for the
provision of options market data, and as
such, costs associated with the
provision of Equities Data Feeds became
shared costs for the provision of Options
Data Feeds. For example, the Exchange
did not hire additional staff specifically
to sell or otherwise manage options
market data, rather, the existing team
absorbed the additional workload.
Nevertheless, as discussed more fully
below, the Exchange has revised its cost
analysis in this proposal by focusing
solely on the marginal costs associated
with the addition of providing the
Options Data Feeds, and allocating
those costs according to the same
principles utilized in the 2024 Cost
Analysis (the ‘‘Options Market Data Cost
Analysis’’). Pursuant to the Options
Market Data Analysis, the Exchange
calculated the total marginal costs for
providing the Options Data Feeds in
2024 at approximately $307,001. In
order to establish fees that are designed
to recover the marginal costs of
providing the Options Data Feeds with
a reasonable profit margin, the Exchange
is proposing to modify its Fee Schedule,
as described above. In addition to the
Options Market Data Cost Analysis,
described below, the Exchange believes
that its proposed approach to market
data fees is in line with that of its
competitors.
Additional Discussion—Comparison
With Other Exchanges
The proposed fee structure for the
Options Data Feeds is not novel but is
instead comparable to the fee structure
currently in place for the options
exchanges operated by MIAX, in
particular, MIAX Pearl Options (‘‘MIAX
Pearl’’),12 and the options exchanges
operated by Nasdaq, in particular,
Nasdaq BX Options (‘‘BX Options’’).13
The Exchange is proposing fees for its
Options Data Feeds that are similar in
structure to MIAX Pearl and BX Options
and rates that are equal to, or lower
than, than the rates data recipients pay
for comparable data feeds from those
exchanges, in a more simplified
12 See MIAX Pearl Options Fee Schedule,
available at: https://www.miaxglobal.com/markets/
us-options/pearl-options/fees (the ‘‘MIAX Pearl Fee
Schedule’’).
13 See the Nasdaq BX Options Fee Schedule,
available at: https://listingcenter.nasdaq.com/
rulebook/bx/rules/bx-options-7.
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fashion.14 The Exchange notes that
other competitors maintain fees
applicable to options market data that
are considerably higher than those
proposed by the Exchange, including
Cboe BZX Options (‘‘BZX Options’’),
NYSE Arca Options and NYSE
American Options.15 However, the
Exchange has focused its comparison on
MIAX Pearl and BX Options because
their similar market data products are
offered at prices lower than several
other incumbent exchanges, which is a
similar approach to that proposed by the
Exchange.16
The fees for the MIAX Pearl Liquidity
Feed—which like the MEMOIR Options
14 As noted below, based on its review of MIAX
Pearl’s Fee Schedule, the Exchange believes that
MIAX Pearl charges separate fees for Internal and
External Distribution of its options data feeds, and
while its External Distribution fees are identical to
the Exchange’s proposed flat fee for all uses for both
comparable products, its Internal Distribution Fees
are slightly lower than what the Exchange is
proposing for access to the Exchange’s Options Data
Feeds. Nevertheless, given that the Exchange allows
both Internal and External Distribution for a single
fee for a single data feed, the Exchange believes its
proposed fees remain comparable and competitive
with MIAX Pearl.
15 Fees for BZX Options Depth, which is the
comparable product to MEMOIR Options Depth, are
$3,000 for internal distribution and $2,000 for
external distribution compared to the Exchange’s
proposed fee of $1,500 for all uses. In addition, BZX
Options charges professional user fees of $30 per
month and non-professional user fees of $1.00 per
month for each entity to which it distributes the
feed (alternatively, it offers distributors an option to
purchase a monthly Enterprise Fee of $3,500 to
distribute to an unlimited number of users), which
the Exchange is not proposing to charge. Fees for
BZX Options Top, which is the comparable product
to MEMOIR Options Top, are $3,000 for internal
distribution, $2,000 for external distribution, with
Professional User Fees of $5 per month, NonProfessional Fees of $0.10 per month per user, or
an Enterprise Fee ranging anywhere from $20,000
to $60,000 per month depending on the number of
users to which the distributer plans to distribute the
feed. Again, the Exchange is not proposing any
additional User Fees for MEMOIR Options Top, but
rather, a flat fee of $750 for all uses. See the BZX
Options Fee Schedule, available at: https://
www.cboe.com/us/options/membership/fee_
schedule/bzx/. Fees for NYSE Arca Options Deep
and NYSE American Options Deep, which are the
comparable products to MEMOIR Options Depth,
are $3,000 for access (internal use) and $2,000 for
redistribution (external distribution), and $5,000 for
non-display use, compared to the Exchange’s
proposed fee of $1,500 for all uses. NYSE Arca
Options and NYSE American Options also charge
professional user fees of $50 per User, and NonProfessional User Fees of $1.00 per user, capped at
$5,000 per month. Again, the Exchange does not
require any counting of users and has instead
proposed a flat fee of $1,500 for all uses. Fees for
the NYSE Arca Options Top and NYSE American
Options Top, which are the comparable products to
MEMOIR Options Top are the same as above
($3,000 for internal, $2,000 for external and $5,000
for non-display, with the additional Professional
and Non-Professional User Fees), compared to the
Exchange’s proposed fee of $750 for all uses. See
NYSE Proprietary Market Data Pricing Guide,
available at: https://www.nyse.com/publicdocs/
nyse/data/NYSE_Market_Data_Pricing.pdf.
16 See supra notes 12–13.
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Depth feed, includes top of book, depth
of book, trades, and administrative
messages—consist of an internal
distributor access fee of $1,250 per
month and an external distributor
access fee of $1,500 per month. As such,
the Exchange’s proposed rate for all uses
of $1,500 per month is equal to what
MIAX Pearl charges for external
distribution, and $250 higher than what
it charges for internal distribution
only.17
The fees for the MIAX Pearl Top of
Market Feed—which is the comparable
product to MEMOIR Options Top,
consist of an internal distributor access
fee of $500 per month and an external
distributor access fee of $750. Again, the
Exchange’s proposed rate for all uses of
$750 per month is identical to what
MIAX Pearl charges for external
distribution, and $250 higher than what
it charges for internal distribution.
While the Exchange’s proposed fee is
slightly higher than what MIAX Pearl
charges for internal distribution of its
similar products, the Exchange believes
that the simplicity of a single fee is
preferable, specifically by reducing
audit risk and simplifying reporting,
both for the Exchange and its customers.
Further, to the extent MIAX Pearl
assesses both fees for both uses, it
would cost more overall to receive and
provide both internal and external
distribution of MIAX Pearl’s comparable
options data feeds than it does to
receive and provide both internal and
external distribution of the Exchange’s
Options Data Feeds.
As an additional cost comparison, the
fees for both Nasdaq BX Options Depth
of Market Feed (‘‘BX Depth’’) and Top
of Market Feed (‘‘BX Top’’) are $1,500
per month for internal distribution and
$2,000 for external distribution, with an
added $2,500 fee for a non-Display
Enterprise License.18 While one
distributor fee allows access to both BX
Top and BX Depth, (for example, $1,500
per month would allow a BX Options
customer internal distribution of both
BX Top and BX Depth) if a BX Options
Customer wanted the same access
provided under the Exchange’s
proposed fees, (i.e. for all uses) it would
need to pay an additional $2,000 for
external distribution and $2,500 per
month for a non-display enterprise
license fee. In addition, BX Options
charges monthly per subscriber fees for
professional or non-professional use 19
17 See MIAX Pearl Options Fee Schedule, supra
note 12.
18 See Nasdaq BX Options Fee Schedule, supra
note 13.
19 Id.
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which the Exchange will not charge for
its similar market data products.
Additional Discussion—Options Market
Data Cost Analysis
In general, the Exchange believes that
exchanges, in setting fees of all types,
should meet very high standards of
transparency to demonstrate why each
new fee or fee increase meets the
Exchange Act requirements that fees be
reasonable, equitably allocated, not
unfairly discriminatory, and not create
an undue burden on competition among
members and markets. In particular, the
Exchange believes that each exchange
should take extra care to be able to
demonstrate that these fees are based on
its costs and reasonable business needs.
Accordingly, in proposing to charge fees
for Options Data Feeds, the Exchange
has sought to be especially diligent in
assessing those fees in a transparent way
against its own aggregate costs of
providing the related service, and also
carefully and transparently assessing the
impact on Members—both generally and
in relation to other Members, i.e., to
assure the fee will not create a financial
burden on any participant and will not
have an undue impact in particular on
smaller Members and competition
among Members in general. The
Exchange does not believe it needs to
otherwise address questions about
market competition in the context of
this filing because the proposed fees are
so clearly consistent with the Act based
on its Options Market Data Cost
Analysis. The Exchange also believes
that this level of diligence and
transparency is called for by the
requirements of Section 19(b)(1) under
the Act,20 and Rule 19b–4 thereunder,21
with respect to the types of information
self-regulatory organizations (‘‘SROs’’)
should provide when filing fee changes,
and Section 6(b) of the Act,22 which
requires, among other things, that
exchange fees be reasonable and
equitably allocated,23 not designed to
permit unfair discrimination,24 and that
they not impose a burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.25 This rule change
proposal addresses those requirements,
and the analysis and data in this section
are designed to clearly and
comprehensively show how they are
met.26
20 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
22 15 U.S.C. 78f(b).
23 15 U.S.C. 78f(b)(4).
24 15 U.S.C. 78f(b)(5).
25 15 U.S.C. 78f(b)(8).
26 In 2019, Commission staff published guidance
suggesting the types of information that SROs may
21 17
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As noted above, MEMX recently
conducted a study of its aggregate costs
to produce the Exchange Data Feeds—
the 2024 Cost Analysis, and it used the
2024 Cost Analysis as the foundation of
the Options Market Data Cost Analysis,
which ultimately went a step further in
separately assessing the marginal costs
associated with the provision of the
Options Data Feeds as a subset of the
total aggregate costs originally allocated
towards the provision of the Exchange
Data Feeds (i.e. both the Equities and
Options Data Feeds) and allocating
those marginal costs towards the
provision of the Options Data Feeds.
Prior to discussing how the Exchange
allocated applicable costs under the
Options Market Data Cost Analysis, the
Exchange believes it is first necessary to
set forth its process in conducting the
2024 Cost Analysis. The 2024 Cost
Analysis required a detailed analysis of
MEMX’s aggregate baseline costs,
including a determination and
allocation of costs for core services
provided by the Exchange—transaction
execution, market data, membership
services and trading permits, regulatory
services, physical connectivity, and
application sessions (which provide
order entry, cancellation and
modification functionality, risk
functionality, ability to receive drop
copies, and other functionality). MEMX
separately divided its costs between
those costs necessary to deliver each of
these core services, including
infrastructure, software, human
resources (i.e., personnel), and certain
general and administrative expenses
(‘‘cost drivers’’). Next, MEMX adopted
an allocation methodology with various
principles to guide how much of a
particular cost should be allocated to
each core service. For instance, fixed
costs that are not driven by client
activity (e.g., message rates), such as
data center costs, were allocated more
heavily to the provision of physical
connectivity (80%), with smaller
allocations to logical ports (11%), and
the remainder to the provision of
transaction execution, regulatory
services, and market data services (9%).
The allocation methodology was
decided through conversations with
senior management familiar with each
use to demonstrate that their fee filings comply
with the standards of the Exchange Act (‘‘Fee
Guidance’’). While MEMX understands that the Fee
Guidance does not create new legal obligations on
SROs, the Fee Guidance is consistent with MEMX’s
view about the type and level of transparency that
exchanges should meet to demonstrate compliance
with their existing obligations when they seek to
charge new fees. See Staff Guidance on SRO Rule
Filings Relating to Fees (May 21, 2019) available at
https://www.sec.gov/tm/staff-guidance-sro-rulefilings-fees.
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area of the Exchange’s operations. After
adopting this allocation methodology,
the Exchange then applied an estimated
allocation of each cost driver to each
core service, resulting in the cost
allocations described below.
By allocating segmented costs to each
core service, MEMX was able to
estimate by core service the potential
margin it might earn based on different
fee models. The Exchange notes that as
a non-listing venue it has four primary
sources of revenue that it can
potentially use to fund its operations:
transaction fees, fees for connectivity
services, membership and regulatory
fees, and market data fees. Accordingly,
the Exchange generally must cover its
expenses from these four primary
sources of revenue.
Through the Exchange’s extensive
2024 Cost Analysis, the Exchange
analyzed every expense item in the
Exchange’s general expense ledger to
determine whether each such expense
relates to the provision of the Exchange
Data Feeds, and, if such expense did so
relate, what portion (or percentage) of
such expense actually supports the
provision of the Exchange Data Feeds,
and thus bears a relationship that is, ‘‘in
nature and closeness,’’ directly related
to the Exchange Data Feeds. Based on its
analysis, MEMX calculated its aggregate
annual costs for providing the Exchange
Data Feeds at $3,683,375.
The following chart details the
individual line-item (annual) costs
considered by MEMX to be related to
offering the Exchange Data Feeds to its
Members and other customers as well as
a percentage of the Exchange’s overall
costs that such costs represent for such
area (e.g., as set forth below, the
Exchange allocated approximately 8%
of its overall Human Resources cost to
offering Exchange Data Feeds).
Costs Driver
Costs
% of All
Human Resources .......................................................................................................................................
Data Center .................................................................................................................................................
Technology (Hardware, Software Licenses, etc.) .......................................................................................
Depreciation .................................................................................................................................................
Allocated Shared Expenses ........................................................................................................................
$2,606,282
69,340
287,141
397,471
323,141
8
2
7
5
4
Total ......................................................................................................................................................
3,683,375
5.8
Options Market Data Cost Analysis
As noted above, the 2024 Cost
Analysis estimated aggregate annual
costs for providing the Exchange Data
Feeds at $3,683,375. Based on the
limited number of additional resources
specifically devoted to providing and
administering the Options Data Feeds,
the Exchange determined it was
appropriate to conduct an allocation of
only marginal costs related to the
provision of the Options Data Feeds. In
conducting this analysis, the Exchange
adopted an allocation model for four of
the five categories (all but Human
Resources, as described below) that was
proportionally based upon the number
of products sold in equities and options,
and given the fact that the Exchange
offers more data feeds and charges for
Professional and Non-Professional User
Fees in equities, the resulting allocation
was 95.1% towards equities, and 4.9%
towards options.
For Human Resources, however, the
Exchange determined it appropriate to
employ a slightly different allocation
model in order to accurately identify the
Exchange’s marginal costs attributed to
the provision of the Options Data Feeds.
As described more fully below, the
Exchange consulted with senior
managers and department leaders in
order to identify and distinguish Human
Resources costs which directly support
the Options Data Feeds (these Human
Resources costs, hereinafter ‘‘direct’’
costs). The Exchange then added such
direct cost allocation to 4.9% of the
remaining ‘‘indirect’’ Human Resources
costs (the calculation of which was
based on the same proportional model
for the remaining four categories) to find
a total Human Resources Options Data
Feeds cost allocation of approximately
9.8% of the total Human Resources
allocated toward the provision of the
Exchange Data Feeds.
The Exchange determined that this
combined approach was appropriate for
Human Resources given the fact that
department leaders have direct
knowledge of the time spent by each
employee with respect to the various
tasks necessary to operate the Exchange,
and thus, it is possible to be more
precise when it comes to Human
Resources costs, enabling managers to
separate out time ‘‘directly’’ spent on
the Options and Equities Data Feeds,
respectively, in order to arrive at the
direct costs noted above. This same
approach would not be as effective with
respect to the remaining categories, as
managers do not have the same
quantifiable knowledge and costs for the
remaining categories are determined
with precision by using an allocated
costs model. For example, surveying
managers about the specific percentage
of Depreciation or Data Center costs that
are attributed to the provision of the
Options Data Feeds would not yield an
accurate result, whereas the allocated
costs model provides an accurate
measure of such costs.
The following chart details the
individual line-item costs considered by
MEMX to be related to offering the
Options Data Feeds to its Members and
other customers as a well as the
percentage of the Exchange’s overall
Exchange Data Feed costs that such
costs represent for such area (e.g., as set
for the below, the Exchange allocated
approximately 9.8% of the Human
Resources costs allocated to the
provision of the Exchange Data Feeds to
the Options Data Feeds, or $254,331
annually).27
Costs driver
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Costs
Human Resources .......................................................................................................................................
Data Center .................................................................................................................................................
Technology (Hardware, Software Licenses, etc.) .......................................................................................
27 It follows that the remaining percentage of costs
allocated to the Exchange Data Feeds in the 2024
Cost Analysis were allocated to the provision of the
Equities Data feeds in the Options Market Data Cost
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Analysis. For example, the 2024 Cost Analysis
allocated $2,606,282 of Human Resources costs to
the provision of the Exchange Data feeds. In the
Options Market Data Cost Analysis, the Exchange
PO 00000
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$254,331
3,391
14,041
% of market data
total
9.8
4.9
4.9
then allocated $254,331, or 9.8% of that total to the
provision of Options Data Feeds, and thus the
remaining $2,351,951 (or 90.2%) to the provision of
the Equities Data Feeds.
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Costs driver
% of market data
total
Depreciation .................................................................................................................................................
Allocated Shared Expenses ........................................................................................................................
19,436
15,802
4.9
4.9
Total ......................................................................................................................................................
307,001
..............................
Human Resources
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Costs
In allocating personnel (Human
Resources) costs, in order to not double
count any allocations and to ensure that
each employee’s time is 100% allocated,
the Exchange first excluded any
employee time allocated towards
options regulation in order to recoup
costs via the Options Regulatory Fee
(‘‘ORF’’), as well as all other revenue
streams, including transaction
execution, membership services,
physical connectivity, and application
sessions.28 Of the remaining time left
over, the Exchange considered the
amount of employee time for employees
whose functions include directly
providing services necessary to offer the
Exchange Data Feeds (primarily the
Exchange’s systems engineering,
member experience, and market
operations teams), including
performance thereof, as well as
personnel with ancillary functions
related to establishing and providing
such services (such as information
security, compliance and finance
personnel). The Exchange notes that it
has fewer than 100 employees and each
department leader has direct knowledge
of the time spent by each employee with
respect to the various tasks necessary to
operate the Exchange. The estimates of
Human Resources cost were therefore
determined by consulting with such
department leaders, determining which
employees are involved in tasks related
to providing the Exchange Data Feeds,
and confirming that the proposed
allocation was reasonable based on an
understanding of the percentage of their
time such employees devote to tasks
related to providing the Options Data
Feeds and Equities Data Feeds,
respectively. The Human Resources cost
was calculated using a blended rate of
compensation reflecting salary, equity
and bonus compensation, benefits,
payroll taxes, and 401(k) matching
contributions.
Next, of the direct time allocated to
the Exchange Data Feeds (which
amounted to approximately 61.3% of
the total Human Resources allocated to
28 See Securities Exchange Act Release No. 99259
(January 2, 2024), 89 FR 965 (January 8, 2024) (SR–
MEMX–2023–38). See also Securities Exchange Act
Release No. 100021 (April 24, 2024), 89 FR 34298
(April 30, 2024) (SR–MEMX–2024–13).
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the Exchange Data Feeds, or
approximately $1,597,398), the
Exchange determined that
approximately 87% of the direct time
spent on the Exchange Data Feeds was
focused on the Equities Data Feeds, and
approximately 13% of that time was
focused on the Options Data Feeds.29
Again, these estimates were determined
by consulting with department leaders,
determining which employees are
involved in tasks related to providing
the Equities and Options Data Feeds,
respectively, and confirming those
proposed allocations were reasonable
based on an understanding of the
percentage of time employees devote to
those tasks. Notably, the Exchange did
not hire additional personnel to focus
solely on the Options Data Feeds,
however, additional hiring occurred to
support the launch of MEMX Options
and certain of those personnel have
significant responsibilities with respect
to the provision of the Exchange Data
Feeds, which supports the slightly
higher Human Resources cost allocated
towards the provision of the Options
Data Feeds. The Exchange believes that
a higher allocation is also reasonable
because the Human Resources
component of providing the Options
Data Feeds does require additional
resources as compared to other
components necessary to provide such
data feeds, particularly with respect to
the sales function, ongoing support, and
application of the Exchange’s policies
with respect to the provision of market
data. Further, as MEMX Options grows,
it is likely that additional personnel will
be necessary to support such growth in
order to provide customer support,
including with respect to the Options
Data Feeds.
Finally, for the remaining Human
Resources costs allocated toward the
provision of the Exchange Data Feeds
that were not already allocated as
‘‘direct’’ costs (i.e. the remaining 38.7%
of the total Human Resources costs
allocated towards the provision of the
Exchange Data Feeds, or $1,008,883),
the Exchange applied the same
allocation model as it did for the
remaining categories that was
proportionally based on the number of
products sold in Equities and Options,
or 95.1% towards Equities and 4.9%
towards Options, in order to determine
the remaining costs that should be
allocated toward the provision of
Options Data Feeds.30 Accordingly, a
total of approximately $254,331 of the
Exchange’s Human Resources costs,
comprised of both direct and indirect
costs, were allocated towards the
provision of the Options Data feeds, or
approximately 9.8%. Again, the
Exchange believes that a higher
allocation of Human Resources costs is
appropriate, given the Exchange’s
consideration of both the direct time
attributed towards the provision of the
Options Data Feeds coupled with a
proportional allocation of Human
Resources time that indirectly supports
the provision of the Options Data Feeds.
29 Specifically, 13% of the direct Human
Resources cost allocated towards the provision of
the Options Data Feeds totaled approximately
$204,996.
30 Specifically, 4.9% of the indirect Human
Resources costs allocated towards the provision of
the Options Data Feeds totaled approximately
$49,334.
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Data Center
Data Center costs includes an
allocation of the costs the Exchange
incurs to provide the Exchange Data
Feeds in the third-party data centers
where the Exchange maintains its
equipment as well as related costs (the
Exchange does not own the Primary
Data Center or the Secondary Data
Center, but instead, leases space in data
centers operated by third parties). Based
on the allocation model utilized in the
Options Market Data Cost Analysis
described above, the Exchange allocated
$3,391 of its Data Center costs (i.e. 4.9%
of the costs allocated towards the
Exchange Data Feeds in the 2024 Cost
Analysis) towards the provision of the
Options Data Feeds.
Technology
The Technology category includes the
Exchange’s network infrastructure, other
hardware, software, and software
licenses used to operate and monitor
physical assets necessary to provide the
Exchange Data Feeds. Of note, certain of
these costs were included in separate
Network Infrastructure and Hardware
and Software Licenses categories in the
2022 Cost Analysis; however, in order to
align more closely with the Exchange’s
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audited financial statements, these costs
were combined into the broader
Technology category. Based on the
allocation model utilized in the Options
Market Data Cost Analysis described
above, the Exchange allocated
approximately $14,041 of its
Technology costs to the Options Data
Feeds in 2024.
Depreciation
The vast majority of the software the
Exchange uses with respect to its
operations, including the software used
to generate and disseminate the Options
Data Feeds has been developed in-house
and the cost of such development is
depreciated over time. Accordingly, the
Exchange included Depreciation costs
related to depreciated software used to
generate and disseminate the Options
Data Feeds. The Exchange also included
in the Depreciation costs certain
budgeted improvements that the
Exchange intends to capitalize and
depreciate with respect to the Options
Data Feeds in the near-term, as well as
the servers used at the Exchange’s
primary and back-up data centers
specifically used for the Options Data
Feeds. Based on the allocation model
utilized in the Options Market Data Cost
Analysis described above, the Exchange
allocated approximately $19,346 of its
Depreciation costs towards the
provision of the Options Data Feeds.
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Allocated Shared Expenses
Finally, a limited portion of general
shared expenses were allocated to the
Options Data Feeds. The costs included
in general shared expenses allocated to
the Options Data Feeds include office
space and office expenses (e.g.,
occupancy and overhead expenses),
utilities, recruiting and training,
marketing and advertising costs,
professional fees for legal, tax and
accounting services (including external
and internal audit expenses), and
telecommunications costs. The cost of
paying individuals to serve on the
Exchange’s Board of Directors or any
committee was not allocated to
providing Options Data Feeds. Based on
the allocation model utilized in the
Options Market Data Cost Analysis
described above, the Exchange allocated
$15,802 of its Allocated Shared
Expenses to the Options Data Feeds in
2024.
Cost Analysis—Additional Discussion
Based on the current number of
subscribers to the Options Data Feeds,31
31 In the Initial and Second Filings, the
Exchange’s revenue projections anticipated a drop
in subscriptions once the Exchange began charging
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the Exchange anticipates annual 2024
revenue for Options Data Feeds of
$342,000.32 The proposed fees for the
Options Data Feeds are designed to
permit the Exchange to cover the
marginal costs allocated to providing
the Options Data Feeds with a profit
margin that the Exchange believes is
modest (approximately 10%),33 which
the Exchange believes is fair and
reasonable after taking into account the
costs related to creating, generating, and
disseminating the Options Data Feeds
and the fact that the Exchange will need
to fund future expenditures (increased
costs, improvements, etc.).
The Exchange like other exchanges is,
after all, a for-profit business.
Accordingly, while the Exchange
believes in transparency around costs
and potential margins, as well as
periodic review of revenues and
applicable costs (as discussed below),
the Exchange does not believe that these
estimates should form the sole basis of
whether or not a proposed fee is
reasonable or can be adopted. Instead,
the Exchange believes that the
information should be used solely to
confirm that an Exchange is not earning
supra-competitive profits, and the
Exchange believes its Cost Analysis and
related projections demonstrate this
fact.
As a general matter, the Exchange
believes that its costs will remain
relatively similar in future years. It is
possible however that such costs will
either decrease or increase. To the
extent the Exchange sees growth in use
of Options Data Feeds it will receive
additional revenue to offset future cost
increases. However, if use of Options
Data Feeds is static or decreases, the
Exchange might not realize the revenue
that it anticipates or needs in order to
cover applicable costs. Accordingly, the
Exchange is committing to conduct a
one-year review after implementation of
these fees. The Exchange expects that it
may propose to adjust fees at that time,
to increase fees in the event that
revenues fail to cover costs with a
reasonable profit margin.34 Similarly,
for the Options Data Feeds, which did indeed
occur. Specifically, of the nineteen (19) customers
receiving the Options Data Feeds free of charge,
four (4) requested removal once the Exchange began
charging in April 2024.
32 This revenue projection is based on 14 MEMX
Options Depth and 10 MEMX Options Top
subscriptions per month in 2024.
33 The Exchange calculated this profit margin by
dividing the annual projected profit of $34,999 by
the annual projected revenue of $342,000 and
multiplying by 100.
34 The Exchange notes that it does not believe that
a 10% profit margin is necessarily competitive, and
instead that this is likely significantly below the
mark-up many businesses place on their products
and services.
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84643
the Exchange expects that it would
propose to decrease fees in the event
that revenue materially exceeds current
projections. In addition, the Exchange
will periodically conduct a review to
inform its decision making on whether
a fee change is appropriate (e.g., to
monitor for costs increasing/decreasing
or subscribers increasing/decreasing,
etc. in ways that suggest the thencurrent fees are becoming dislocated
from the prior cost-based analysis) and
expects that it would propose to
increase fees in the event that revenues
fail to cover its costs and a reasonable
margin, or decrease fees in the event
that revenue or the profit margin
materially exceeds current projections.
In the event that the Exchange
determines to propose a fee change, the
results of a timely review, including an
updated cost estimate, will be included
in the rule filing proposing the fee
change. More generally, the Exchange
believes that it is appropriate for an
exchange to refresh and update
information about its relevant costs and
revenues in seeking any future changes
to fees, and the Exchange commits to do
so.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) 35 of the
Act in general, and furthers the
objectives of Section 6(b)(4) 36 of the
Act, in particular, in that it is designed
to provide for the equitable allocation of
reasonable dues, fees and other charges
among its Members and other persons
using its facilities. Additionally, the
Exchange believes that the proposed
fees are consistent with the objectives of
Section 6(b)(5) 37 of the Act in that they
are designed to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
a free and open market and national
market system, and, in general, to
protect investors and the public interest,
and, particularly, are not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange notes prior to
addressing the specific reasons the
Exchange believes the proposed fees
and fee structure are reasonable,
equitably allocated and not
unreasonably discriminatory, that the
proposed definitions and fee structure
35 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
37 15 U.S.C. 78f(b)(5).
36 15
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described above are consistent with the
definitions and fee structure used by
most U.S. options exchanges, MIAX
Pearl and BX Options in particular. As
such, the Exchange believes it is
adopting a model that is easily
understood by Members and nonMembers, most of which also subscribe
to market data products from other
exchanges. For this reason, the
Exchange believes that the proposed
definitions and fee structure described
above are consistent with the Act
generally, and Section 6(b)(5) 38 of the
Act in particular.
One of the primary objectives of
MEMX is to provide competition and to
reduce fixed costs imposed upon the
industry. Consistent with this objective,
the Exchange believes that this proposal
reflects a simple, competitive,
reasonable, and equitable pricing
structure, with fees that are discounted
when compared to comparable data
products and services offered by
competitors.39
Reasonableness
Overall. With regard to
reasonableness, the Exchange
understands that the Commission has
traditionally taken a market-based
approach to examine whether the SRO
making the fee proposal was subject to
significant competitive forces in setting
the terms of the proposal. The Exchange
understands that in general the analysis
considers whether the SRO has
demonstrated in its filing that (i) there
are reasonable substitutes for the
product or service; (ii) ‘‘platform’’
competition constrains the ability to set
the fee; and/or (iii) revenue and cost
analysis shows the fee would not result
in the SRO taking supra-competitive
profits. If the SRO demonstrates that the
fee is subject to significant competitive
forces, the Exchange understands that in
general the analysis will next consider
whether there is any substantial
countervailing basis to suggest the fee’s
terms fail to meet one or more standards
under the Exchange Act. The Exchange
further understands that if the filing
fails to demonstrate that the fee is
constrained by competitive forces, the
SRO must provide a substantial basis,
other than competition, to show that it
is consistent with the Exchange Act,
which may include production of
relevant revenue and cost data
pertaining to the product or service.
The Exchange has not determined its
proposed overall market data fees based
on assumptions about market
competition, instead relying upon a
38 15
U.S.C. 78f(b)(5).
supra note 15.
39 See
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cost-plus model to determine a
reasonable fee structure that is informed
by the Exchange’s understanding of
different uses of the products by
different types of participants. In this
context, the Exchange believes the
proposed fees overall are fair and
reasonable as a form of cost recovery
plus the possibility of a reasonable
return for the Exchange’s marginal costs
of offering the Options Data Feeds. The
Exchange believes the proposed fees are
reasonable because they are designed to
generate annual revenue to recoup some
or all of Exchange’s annual marginal
costs of providing market data in
options with a reasonable profit margin.
The Exchange also believes that
performing the Options Market Data
Cost Analysis utilizing the marginal
costs related to the Options Data Feeds
is reasonable because as a new entrant
in the equity options space, the
Exchange simply cannot charge more at
this time based on what its competitors
charge and what other options are
available to market participants for the
receipt of options market data. If the
Exchange chose to allocate the average
cost of providing market data to options
and equities via a 50/50 split, then
based on its proposed pricing and the
revenues projected, the analysis would
result in a profit margin for the Options
Data Feeds of ¥265%.40 Alternatively,
the Exchange would need to
significantly increase the fees charged
for the Options Data Feeds, which in
turn, the Exchange believes would
result in customers canceling their
access to such Options Data Feeds and
potentially participating less on the
Exchange. Accordingly, the Exchange
believes it is reasonable to seek to
recover only the marginal costs
associated with the Options Data Feeds
in this proposal. As discussed in the
Purpose section, the Exchange estimates
that the Options Data Feed fees
proposed herein will result in annual
revenue of approximately $342,000,
representing a profit margin of
approximately 10% for the provision of
Options Market Data. As such, the
Exchange believes that this fee
methodology is reasonable because it
allows the Exchange to recoup some or
all of its marginal expenses for
40 In calculating this margin, for all categories
other than Human Resources, the Exchange split the
applicable expenses 50/50 between the Equities
Data Feeds and the Options Data Feeds. For Human
Resources, the Exchange first allocated the 8% of
the total Exchange Data Feeds Human Resources
costs which were determined to be directly related
to the provision of the Options Data Feeds (i.e. 8%,
as noted above), plus 50% of the remaining Human
Resources costs not otherwise directly related to the
provision of the Equities Data Feeds and thus
allocated thereto.
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providing options market data (with any
additional revenue representing no
more than what the Exchange believes
to be a reasonable rate of return). The
Exchange also believes that the
proposed fees are reasonable because
they are generally less than the fees
charged by competing options
exchanges for comparable market data
products, notwithstanding that the
competing exchanges may have
different system architectures that may
result in different cost structures for the
provision of market data.
The Exchange believes the proposed
fees for the Options Data Feeds are
reasonable when compared to fees for
comparable products, such as the MIAX
Pearl Top of Market Feed, the MIAX
Pearl Liquidity Feed, and the BX
Options Top and Depth Feeds,
compared to which the Exchange’s
proposed fees are equivalent or lower,
as well as other comparable data feeds
priced significantly higher than the
Exchange’s proposed fees for the
Options Data Feeds.41 Additionally, the
Exchange’s single flat fee for each of its
Options Data Feeds, regardless of use
type, offers a more simplistic approach
to market data pricing. Specifically with
respect to the MEMOIR Options Depth
feed, the Exchange believes that the
proposed fee for such feed is reasonable
because it represents not only the value
of the data available from the MEMOIR
Options Top feed, which has a lower
proposed fee, but also the value of
receiving the depth-of-book data on an
order-by-order basis. The Exchange
believes it is reasonable to have pricing
based, in part, upon the amount of
information contained in each data feed,
which may have additional value to
market participants. The MEMOIR
Options Top feed, as described above,
can be utilized to trade on the Exchange
but contains less information than that
is available on the MEMOIR Options
Depth feed. Thus, the Exchange believes
it reasonable for the products to be
priced as proposed, with MEMOIR
Options Depth having a higher price
than MEMOIR Options Top.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the Options Data Feeds are
reasonable.
Equitable Allocation
Overall. The Exchange believes that
its proposed fees are reasonable, fair,
and equitable, and not unfairly
discriminatory because they are
designed to align fees with services
provided. The Exchange believes that
the proposed fees are equitably
41 Id.
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allocated because they will apply
uniformly to all data recipients that
choose to subscribe to the Options Data
Feeds. Any Firm that chooses to
subscribe to one or both of the Options
Data Feeds is subject to the same Fee
Schedule, regardless of what type of
business they operate, and the decision
to subscribe to one or both of the
Options Data Feeds is based on
objective differences in usage of Options
Data Feeds among different Firms,
which are still ultimately in the control
of any particular Firm. The Exchange
believes the proposed pricing between
Options Data Feeds is equitably
allocated because it is based, in part,
upon the amount of information
contained in each data feed, which may
have additional value to market
participants. The MEMOIR Options Top
feed, as described above, can be utilized
to trade on the Exchange but contains
less information than that is available
on the MEMOIR Options Depth feed.
Thus, the Exchange believes it is an
equitable allocation of fees for the
products to be priced as proposed, with
MEMOIR Options Top having the lower
price of the two Options Data Feeds.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the Exchange Data Feeds are
equitably allocated.
The Proposed Fees Are Not Unfairly
Discriminatory
The Exchange believes the proposed
fees for the Options Data Feeds are not
unfairly discriminatory because any
differences in the application of the fees
are based on meaningful distinctions
between the feeds themselves.
Overall. The Exchange believes that
the proposed fees are not unfairly
discriminatory because they would
apply to all data recipients that choose
to subscribe to the same Options Data
Feed(s). Any Firm that chooses to
subscribe to the Options Data Feeds is
subject to the same Fee Schedule,
regardless of what type of business they
operate. Because the proposed fee for
MEMOIR Options Depth is higher,
Firms seeking lower cost options may
instead choose to receive data through
the MEMOIR Options Top feed for a
lower cost. Alternatively, Firms can
choose to receive data solely from the
Options Price Reporting Authority
(‘‘OPRA’’) for a lower cost. The
Exchange notes that Firms can also
choose to subscribe to a combination of
data feeds for redundancy purposes or
to use different feeds for different
purposes. In sum, each Firm has the
ability to choose the best business
solution for itself. The Exchange does
not believe it is unfairly discriminatory
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to base pricing upon the amount of
information contained in each data feed,
which may have additional value to a
market participant. As described above,
the MEMOIR Options Top feed can be
utilized to trade on the Exchange but
contains less information than that is
available on the MEMOIR Options
Depth feed. Thus, the Exchange believes
it is not unfairly discriminatory for the
products to be priced as proposed, with
MEMOIR Options Top having a lower
price than MEMOIR Options Depth.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the Exchange Data Feeds are not
unfairly discriminatory.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,42 the Exchange does not believe
that the proposed rule change would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that
the proposed fees for Options Data
Feeds place certain market participants
at a relative disadvantage to other
market participants because, as noted
above, the proposed fees are associated
with usage of Options Data Feeds by
each market participant based on the
type of business they operate, and the
decision to subscribe to one or both
Options Data Feeds is based on
objective differences in usage of Options
Data Feeds among different Firms,
which are still ultimately in the control
of any particular Firm, and such fees do
not impose a barrier to entry to smaller
participants. Accordingly, the proposed
fees for Options Data Feeds do not favor
certain categories of market participants
in a manner that would impose a
burden on competition; rather, the
allocation of the proposed fees reflects
the types of Options Data Feeds
consumed by various market
participants.
Inter-Market Competition
The Exchange does not believe the
proposed fees place an undue burden on
competition on other SROs that is not
necessary or appropriate. In particular,
market participants are not regulatorily
required to subscribe to any of the
Options Data Feeds, as described above.
Additionally, other exchanges have
similar market data fees in place for
their participants, but with comparable
and in many cases higher rates for
options market data feeds.43 The
proposed fees are based on actual costs
and are designed to enable the Exchange
to recoup its applicable costs with the
possibility of a reasonable profit on its
investment as described in the Purpose
and Statutory Basis sections. Competing
options exchanges are free to adopt
comparable fee structures subject to the
SEC rule filing process.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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 44 and Rule
19b–4(f)(2) 45 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–2024–40 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–2024–40. This file
43 See
supra note 15.
U.S.C. 78s(b)(3)(A)(ii).
45 17 CFR 240.19b–4(f)(2).
44 15
42 15
PO 00000
U.S.C. 78f(b)(8).
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Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Notices
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–2024–40 and should be
submitted on or before November 13,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–24469 Filed 10–22–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
khammond on DSKJM1Z7X2PROD with NOTICES
[Release No. 34–101368; File No. SR–
SAPPHIRE–2024–31]
Self-Regulatory Organizations; MIAX
Sapphire, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Establish Fees for the
Exchange’s Proprietary Market Data
Feeds: (i) MIAX Sapphire Top of Market
Data Feed; (ii) MIAX Sapphire Complex
Top of Market Data Feed; and (iii) MIAX
Sapphire Liquidity Feed
October 17, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
46 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
18:48 Oct 22, 2024
Jkt 265001
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
4, 2024, MIAX Sapphire, LLC (‘‘MIAX
Sapphire’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Sapphire Options
Exchange Fee Schedule (the ‘‘Fee
Schedule’’) to establish fees for the
Exchange’s proprietary market data
feeds: (i) MIAX Sapphire Top of Market
(‘‘ToM’’) data feed; (ii) MIAX Sapphire
Complex Top of Market (‘‘cToM’’) data
feed; and (iii) MIAX Sapphire Liquidity
Feed (‘‘SLF’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/all-options-exchanges/rulefilings, at MIAX Sapphire’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
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
On July 19, 2024, the Exchange filed
a proposal to establish the ToM, cToM
and SLF data feeds (collectively, the
‘‘market data feeds’’) 3 for MIAX
Sapphire. The Exchange now proposes
to amend the Fee Schedule to establish
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 100588
(July 25, 2024), 89 FR 61554 (July 31, 2024) (SR–
SAPPHIRE–2024–01).
2 17
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
fees for each of these market data feeds.4
The Exchange also proposes to waive
such fees during an Initial Waiver
Period,5 which would run for six full
calendar months from the initial
effective date (August 12, 2024) of the
proposed fees to incentivize market
participants to subscribe and make the
Exchange’s proprietary market data
more widely available. The Exchange
initially filed this proposal on August 8,
2024 (SR–SAPPHIRE–2024–18). The
Exchange withdrew SR–SAPPHIRE–
2024–18 on October 3, 2024 and
submitted this proposal.
The ToM data feed contains top of
book quotations based on options
orders 6 and quotes 7 resting on the
Exchange’s Simple Order Book 8 as well
as administrative messages, such as
other real-time Exchange System 9
functions.10 The cToM data feed
includes the same types of information
as ToM, but for Complex Orders 11 on
the Exchange’s Strategy Book.12 This
information includes the Exchange’s
best bid and offer for a complex
strategy,13 with aggregate size, based on
4 The Exchange established the Definitions
section of the Fee Schedule in a separate rule filing.
See Securities Exchange Act Release No. 100683
(August 9, 2024), 89 FR 66467 (August 15, 2024)
(SR–SAPPHIRE–2024–13).
5 The term ‘‘Initial Waiver Period’’ means, for
each applicable fee, the period of time from the
initial effective date of the MIAX Sapphire Fee
Schedule plus an additional six (6) full calendar
months after the completion of the partial month of
the Exchange launch. See the Definitions section of
the Fee Schedule.
6 The term ‘‘order’’ means a firm commitment to
buy or sell option contracts. See Exchange Rule 100.
7 The term ‘‘quote’’ or ‘‘quotation’’ The term
‘‘quote’’ or ‘‘quotation’’ means a bid or offer entered
by a Market Maker as a firm order that updates the
Market Maker’s previous bid or offer, if any. When
the term order is used in the Exchange’s Rules and
a bid or offer is entered by the Market Maker in the
option series to which such Market Maker is
registered, such order shall, as applicable,
constitute a quote or quotation for purposes of the
Exchange’s Rules. See Exchange Rule 100.
8 The ‘‘Simple Order Book’’ is the Exchange’s
regular electronic book of orders and quotes. See
Exchange Rule 100.
9 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
10 See MIAX Sapphire Options Exchange User
Manual, Version 1.0.0, Section 5.06, dated
December 11, 2023, available at https://
www.miaxglobal.com/miax_sapphire_user_
manual.pdf (last visited July 24, 2024).
11 In sum, a ‘‘Complex Order’’ is ‘‘any order
involving the concurrent purchase and/or sale of
two or more different options in the same
underlying security (the ‘legs’ or ‘components’ of
the complex order), for the same account. . . .’’ See
Exchange Rule 518(a).
12 The ‘‘Strategy Book’’ is the Exchange’s
electronic book of complex orders. See Exchange
Rule 100.
13 The term ‘‘complex strategy’’ means a
particular combination of components and their
ratios to one another. New complex strategies can
be created as the result of the receipt of a complex
E:\FR\FM\23OCN1.SGM
23OCN1
]]>Agencies
[Federal Register Volume 89, Number 205 (Wednesday, October 23, 2024)]
[Notices]
[Pages 84638-84646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24469]
[[Page 84638]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101370; File No. SR-MEMX-2024-40]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule Regarding Options Market Data Products
October 17, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 4, 2024, MEMX LLC (``MEMX'' or the ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to amend the Market Data section of its fee schedule applicable to its
equity options platform (``MEMX Options'') to adopt fees for certain of
its market data products, which are currently offered free of charge,
pursuant to MEMX Rules 15.1(a) and (c). The Exchange proposes to
implement the changes to the Fee Schedule pursuant to this proposal
immediately. The text of the proposed rule change is provided in
Exhibit 5.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Market Data
section of the Exchange's fee schedule applicable to MEMX Options
(``MEMX Options Fee Schedule'') to adopt fees for certain of its
options market data products which are currently offered free of
charge, namely MEMOIR Options Depth and MEMOIR Options Top
(collectively, the ``Options Data Feeds''). As set forth below, the
Exchange believes that the proposed fees are fair and reasonable and
has based its proposal on a detailed cost analysis, as well as other
factors including a comparison to competitor pricing. The Exchange is
proposing to implement the proposed fees immediately. The Exchange
previously filed this proposal on March 28, 2024 (SR-MEMX-2024-11) (the
``Initial Proposal''). On April 15, 2024, the Exchange withdrew the
Initial Proposal and replaced it with SR-MEMX-2024-14 (the ``Second
Proposal''),\3\ on June 14, 2024, the Exchange withdrew the Second
Proposal and replaced it with SR-MEMX-2024-25 (the ``Third
Proposal''),\4\ and on August 8, 2024, the Exchange withdrew the Third
Proposal and replaced it with SR-MEMX-2024-31 (the ``Fourth
Proposal'').\5\ Now, the Exchange is withdrawing the Fourth Proposal
and is replacing it with the current filing.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 99998 (April 19,
2024), 89 FR 32507 (April 26, 2024) (SR-MEMX-2024-14).
\4\ See Securities Exchange Act Release No. 100435 (June 26,
2024), 89 FR 54878 (July 2, 2024) (SR-MEMX-2024-25).
\5\ See Securities Exchange Act Release No. 100793 (August 21,
2024), 89 FR 68664 (August 27, 2024) (SR-MEMX-2024-31).
---------------------------------------------------------------------------
Before setting forth the additional details regarding the proposal
as well as the cost analysis conducted by the Exchange, immediately
below is a description of the proposed fees.
Proposed Market Data Pricing
MEMX Options offers two separate data feeds to subscribers--MEMOIR
Options Depth and MEMOIR Options Top. The Exchange notes that there is
no requirement that any subscribing entity (``Firm'') subscribe to a
particular Options Data Feed or any Options Data Feed whatsoever, but
instead, a Firm may choose to maintain subscriptions to those Options
Data Feeds they deem appropriate based on their business model. The
proposed fee will not apply differently based upon the size or type of
Firm, but rather based upon the subscriptions a Firm has to Options
Data Feeds. The proposed pricing for each of the Options Data Feeds is
set forth below.
MEMOIR Options Depth
The MEMOIR Options Depth feed is a MEMX-only market data feed that
contains depth of book quotations and execution information based on
options orders entered in the System.\6\ For the receipt of access to
the MEMOIR Options Depth feed, the Exchange proposes to charge $1,500
per month. This proposed access fee would be charged to any data
recipient that receives a data feed of the MEMOIR Options Depth feed
for purposes of internal distribution (i.e., an ``Internal
Distributor''), for external redistribution (i.e. an ``External
Distributor''), or both. The Exchange proposes to define an Internal
Distributor as ``a Distributor that receives an Exchange Data product
and then distributes that data to one or more data recipients within
the Distributor's own organization,'' \7\ and an External Distributor
as ``a Distributor that receives an Exchange Data product and then
distributes that data to a third party or one or more data recipients
outside the Distributor's own organization.'' \8\ The proposed access
fee will be charged only once per month per Firm regardless of whether
the Firm uses the MEMOIR Options Depth feed for internal distribution,
external distribution, or both.\9\
---------------------------------------------------------------------------
\6\ See MEMX Rule 21.15(b)(1).
\7\ See Market Data Definitions under the proposed MEMX Options
Fee Schedule. The Exchange also proposes to adopt a definition for
``Distributor'', which would mean any entity that receives an
Exchange Data product directly from the Exchange or indirectly
through another entity and then distributes internally or externally
to a third party.
\8\ See Market Data Definitions under the proposed MEMX Options
Fee Schedule.
\9\ The proposed definitions of Internal Distributor and
External Distributor are the same definitions used in the Exchange's
Equities Fee Schedule.
---------------------------------------------------------------------------
MEMOIR Options Top
The MEMOIR Options Top feed is a MEMX-only market data feed that
contains top of book quotations and executions based on options orders
entered into the System.\10\ For the receipt of access to the MEMOIR
Options Top feed, the Exchange proposes to charge $750 per month. This
proposed access fee would be charged to any data recipient that
receives a data feed of the MEMOIR Options Top feed for purposes of
internal distribution (i.e., an Internal Distributor), external
redistribution (i.e.
[[Page 84639]]
an External Distributor), or both. The proposed access fee for internal
and external distribution will be charged only once per month per Firm
regardless of whether the Firm uses the MEMOIR Options Top feed for
internal distribution, external distribution, or both.
---------------------------------------------------------------------------
\10\ See MEMX Rule 21.15(b)(2).
---------------------------------------------------------------------------
Billing Process
The Exchange proposes to bill for the Options Data Feeds in the
same manner as it does for the market data products it provides for its
equities Exchange, (the ``Equities Data Feeds''), and to make this
clear on the Fee Schedule. Specifically, the Fee Schedule would state
that ``[f]ees for Market Data products are assessed based on each
active product at the close of business on the first day of each
month,'' and that ``[i]f a product is cancelled by a subscriber's
submission of a written request or via the MEMX User Portal prior to
such fee being assessed, then the subscriber will not be obligated to
pay the applicable product fee. MEMX does not return pro rated fees if
a product is not used for an entire month.'' The Exchange believes that
this billing methodology has been efficient with respect to the
Equities Data Feeds and is well understood by market participants.
Additional Discussion--Background
The Exchange launched MEMX Options on September 27, 2023. As a new
entrant in the equity options trading space, MEMX did not begin
charging fees for options market data until April 1, 2024. The
objective of this approach was to eliminate any fee-based barriers for
Members to join the Exchange, which the Exchange believes was helpful
in its ability to attract order flow as a new options exchange.
Further, the Exchange did not initially charge for options market data
because MEMX believes that any exchange should first deliver meaningful
value to Members and other market participants before charging fees for
its products and services.
The Exchange also did not begin charging for the Equities Data
Feeds until 2022, nearly two years after it launched as a national
securities exchange in 2020. In connection with the adoption of fees
for the Equities Data Feeds, the Exchange conducted an extensive cost
analysis (the ``2022 Cost Analysis''),\11\ and the Exchange's Initial
and Second Proposal to adopt fees for Options Data Feeds stemmed from
the same cost analysis, which it reviewed and updated for 2024 (the
``2024 Cost Analysis''). The 2024 Cost Analysis combined costs for
providing market data for both its equities and options trading
platforms (the ``Exchange Data Feeds'') due to the fact that in
general, the Exchange did not add a significant amount of marginal
costs for the provision of options market data, and as such, costs
associated with the provision of Equities Data Feeds became shared
costs for the provision of Options Data Feeds. For example, the
Exchange did not hire additional staff specifically to sell or
otherwise manage options market data, rather, the existing team
absorbed the additional workload. Nevertheless, as discussed more fully
below, the Exchange has revised its cost analysis in this proposal by
focusing solely on the marginal costs associated with the addition of
providing the Options Data Feeds, and allocating those costs according
to the same principles utilized in the 2024 Cost Analysis (the
``Options Market Data Cost Analysis''). Pursuant to the Options Market
Data Analysis, the Exchange calculated the total marginal costs for
providing the Options Data Feeds in 2024 at approximately $307,001. In
order to establish fees that are designed to recover the marginal costs
of providing the Options Data Feeds with a reasonable profit margin,
the Exchange is proposing to modify its Fee Schedule, as described
above. In addition to the Options Market Data Cost Analysis, described
below, the Exchange believes that its proposed approach to market data
fees is in line with that of its competitors.
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 97130 (March 13,
2023), 88 FR 16491 (March 17, 2023) (SR-MEMX-2023-04).
---------------------------------------------------------------------------
Additional Discussion--Comparison With Other Exchanges
The proposed fee structure for the Options Data Feeds is not novel
but is instead comparable to the fee structure currently in place for
the options exchanges operated by MIAX, in particular, MIAX Pearl
Options (``MIAX Pearl''),\12\ and the options exchanges operated by
Nasdaq, in particular, Nasdaq BX Options (``BX Options'').\13\ The
Exchange is proposing fees for its Options Data Feeds that are similar
in structure to MIAX Pearl and BX Options and rates that are equal to,
or lower than, than the rates data recipients pay for comparable data
feeds from those exchanges, in a more simplified fashion.\14\ The
Exchange notes that other competitors maintain fees applicable to
options market data that are considerably higher than those proposed by
the Exchange, including Cboe BZX Options (``BZX Options''), NYSE Arca
Options and NYSE American Options.\15\ However, the Exchange has
focused its comparison on MIAX Pearl and BX Options because their
similar market data products are offered at prices lower than several
other incumbent exchanges, which is a similar approach to that proposed
by the Exchange.\16\
---------------------------------------------------------------------------
\12\ See MIAX Pearl Options Fee Schedule, available at: https://www.miaxglobal.com/markets/us-options/pearl-options/fees (the ``MIAX
Pearl Fee Schedule'').
\13\ See the Nasdaq BX Options Fee Schedule, available at:
https://listingcenter.nasdaq.com/rulebook/bx/rules/bx-options-7.
\14\ As noted below, based on its review of MIAX Pearl's Fee
Schedule, the Exchange believes that MIAX Pearl charges separate
fees for Internal and External Distribution of its options data
feeds, and while its External Distribution fees are identical to the
Exchange's proposed flat fee for all uses for both comparable
products, its Internal Distribution Fees are slightly lower than
what the Exchange is proposing for access to the Exchange's Options
Data Feeds. Nevertheless, given that the Exchange allows both
Internal and External Distribution for a single fee for a single
data feed, the Exchange believes its proposed fees remain comparable
and competitive with MIAX Pearl.
\15\ Fees for BZX Options Depth, which is the comparable product
to MEMOIR Options Depth, are $3,000 for internal distribution and
$2,000 for external distribution compared to the Exchange's proposed
fee of $1,500 for all uses. In addition, BZX Options charges
professional user fees of $30 per month and non-professional user
fees of $1.00 per month for each entity to which it distributes the
feed (alternatively, it offers distributors an option to purchase a
monthly Enterprise Fee of $3,500 to distribute to an unlimited
number of users), which the Exchange is not proposing to charge.
Fees for BZX Options Top, which is the comparable product to MEMOIR
Options Top, are $3,000 for internal distribution, $2,000 for
external distribution, with Professional User Fees of $5 per month,
Non-Professional Fees of $0.10 per month per user, or an Enterprise
Fee ranging anywhere from $20,000 to $60,000 per month depending on
the number of users to which the distributer plans to distribute the
feed. Again, the Exchange is not proposing any additional User Fees
for MEMOIR Options Top, but rather, a flat fee of $750 for all uses.
See the BZX Options Fee Schedule, available at: https://www.cboe.com/us/options/membership/fee_schedule/bzx/. Fees for NYSE
Arca Options Deep and NYSE American Options Deep, which are the
comparable products to MEMOIR Options Depth, are $3,000 for access
(internal use) and $2,000 for redistribution (external
distribution), and $5,000 for non-display use, compared to the
Exchange's proposed fee of $1,500 for all uses. NYSE Arca Options
and NYSE American Options also charge professional user fees of $50
per User, and Non-Professional User Fees of $1.00 per user, capped
at $5,000 per month. Again, the Exchange does not require any
counting of users and has instead proposed a flat fee of $1,500 for
all uses. Fees for the NYSE Arca Options Top and NYSE American
Options Top, which are the comparable products to MEMOIR Options Top
are the same as above ($3,000 for internal, $2,000 for external and
$5,000 for non-display, with the additional Professional and Non-
Professional User Fees), compared to the Exchange's proposed fee of
$750 for all uses. See NYSE Proprietary Market Data Pricing Guide,
available at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf.
\16\ See supra notes 12-13.
---------------------------------------------------------------------------
The fees for the MIAX Pearl Liquidity Feed--which like the MEMOIR
Options
[[Page 84640]]
Depth feed, includes top of book, depth of book, trades, and
administrative messages--consist of an internal distributor access fee
of $1,250 per month and an external distributor access fee of $1,500
per month. As such, the Exchange's proposed rate for all uses of $1,500
per month is equal to what MIAX Pearl charges for external
distribution, and $250 higher than what it charges for internal
distribution only.\17\
---------------------------------------------------------------------------
\17\ See MIAX Pearl Options Fee Schedule, supra note 12.
---------------------------------------------------------------------------
The fees for the MIAX Pearl Top of Market Feed--which is the
comparable product to MEMOIR Options Top, consist of an internal
distributor access fee of $500 per month and an external distributor
access fee of $750. Again, the Exchange's proposed rate for all uses of
$750 per month is identical to what MIAX Pearl charges for external
distribution, and $250 higher than what it charges for internal
distribution.
While the Exchange's proposed fee is slightly higher than what MIAX
Pearl charges for internal distribution of its similar products, the
Exchange believes that the simplicity of a single fee is preferable,
specifically by reducing audit risk and simplifying reporting, both for
the Exchange and its customers. Further, to the extent MIAX Pearl
assesses both fees for both uses, it would cost more overall to receive
and provide both internal and external distribution of MIAX Pearl's
comparable options data feeds than it does to receive and provide both
internal and external distribution of the Exchange's Options Data
Feeds.
As an additional cost comparison, the fees for both Nasdaq BX
Options Depth of Market Feed (``BX Depth'') and Top of Market Feed
(``BX Top'') are $1,500 per month for internal distribution and $2,000
for external distribution, with an added $2,500 fee for a non-Display
Enterprise License.\18\ While one distributor fee allows access to both
BX Top and BX Depth, (for example, $1,500 per month would allow a BX
Options customer internal distribution of both BX Top and BX Depth) if
a BX Options Customer wanted the same access provided under the
Exchange's proposed fees, (i.e. for all uses) it would need to pay an
additional $2,000 for external distribution and $2,500 per month for a
non-display enterprise license fee. In addition, BX Options charges
monthly per subscriber fees for professional or non-professional use
\19\ which the Exchange will not charge for its similar market data
products.
---------------------------------------------------------------------------
\18\ See Nasdaq BX Options Fee Schedule, supra note 13.
\19\ Id.
---------------------------------------------------------------------------
Additional Discussion--Options Market Data Cost Analysis
In general, the Exchange believes that exchanges, in setting fees
of all types, should meet very high standards of transparency to
demonstrate why each new fee or fee increase meets the Exchange Act
requirements that fees be reasonable, equitably allocated, not unfairly
discriminatory, and not create an undue burden on competition among
members and markets. In particular, the Exchange believes that each
exchange should take extra care to be able to demonstrate that these
fees are based on its costs and reasonable business needs. Accordingly,
in proposing to charge fees for Options Data Feeds, the Exchange has
sought to be especially diligent in assessing those fees in a
transparent way against its own aggregate costs of providing the
related service, and also carefully and transparently assessing the
impact on Members--both generally and in relation to other Members,
i.e., to assure the fee will not create a financial burden on any
participant and will not have an undue impact in particular on smaller
Members and competition among Members in general. The Exchange does not
believe it needs to otherwise address questions about market
competition in the context of this filing because the proposed fees are
so clearly consistent with the Act based on its Options Market Data
Cost Analysis. The Exchange also believes that this level of diligence
and transparency is called for by the requirements of Section 19(b)(1)
under the Act,\20\ and Rule 19b-4 thereunder,\21\ with respect to the
types of information self-regulatory organizations (``SROs'') should
provide when filing fee changes, and Section 6(b) of the Act,\22\ which
requires, among other things, that exchange fees be reasonable and
equitably allocated,\23\ not designed to permit unfair
discrimination,\24\ and that they not impose a burden on competition
not necessary or appropriate in furtherance of the purposes of the
Act.\25\ This rule change proposal addresses those requirements, and
the analysis and data in this section are designed to clearly and
comprehensively show how they are met.\26\
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\20\ 15 U.S.C. 78s(b)(1).
\21\ 17 CFR 240.19b-4.
\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(4).
\24\ 15 U.S.C. 78f(b)(5).
\25\ 15 U.S.C. 78f(b)(8).
\26\ In 2019, Commission staff published guidance suggesting the
types of information that SROs may use to demonstrate that their fee
filings comply with the standards of the Exchange Act (``Fee
Guidance''). While MEMX understands that the Fee Guidance does not
create new legal obligations on SROs, the Fee Guidance is consistent
with MEMX's view about the type and level of transparency that
exchanges should meet to demonstrate compliance with their existing
obligations when they seek to charge new fees. See Staff Guidance on
SRO Rule Filings Relating to Fees (May 21, 2019) available at
https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
---------------------------------------------------------------------------
As noted above, MEMX recently conducted a study of its aggregate
costs to produce the Exchange Data Feeds--the 2024 Cost Analysis, and
it used the 2024 Cost Analysis as the foundation of the Options Market
Data Cost Analysis, which ultimately went a step further in separately
assessing the marginal costs associated with the provision of the
Options Data Feeds as a subset of the total aggregate costs originally
allocated towards the provision of the Exchange Data Feeds (i.e. both
the Equities and Options Data Feeds) and allocating those marginal
costs towards the provision of the Options Data Feeds.
Prior to discussing how the Exchange allocated applicable costs
under the Options Market Data Cost Analysis, the Exchange believes it
is first necessary to set forth its process in conducting the 2024 Cost
Analysis. The 2024 Cost Analysis required a detailed analysis of MEMX's
aggregate baseline costs, including a determination and allocation of
costs for core services provided by the Exchange--transaction
execution, market data, membership services and trading permits,
regulatory services, physical connectivity, and application sessions
(which provide order entry, cancellation and modification
functionality, risk functionality, ability to receive drop copies, and
other functionality). MEMX separately divided its costs between those
costs necessary to deliver each of these core services, including
infrastructure, software, human resources (i.e., personnel), and
certain general and administrative expenses (``cost drivers''). Next,
MEMX adopted an allocation methodology with various principles to guide
how much of a particular cost should be allocated to each core service.
For instance, fixed costs that are not driven by client activity (e.g.,
message rates), such as data center costs, were allocated more heavily
to the provision of physical connectivity (80%), with smaller
allocations to logical ports (11%), and the remainder to the provision
of transaction execution, regulatory services, and market data services
(9%). The allocation methodology was decided through conversations with
senior management familiar with each
[[Page 84641]]
area of the Exchange's operations. After adopting this allocation
methodology, the Exchange then applied an estimated allocation of each
cost driver to each core service, resulting in the cost allocations
described below.
By allocating segmented costs to each core service, MEMX was able
to estimate by core service the potential margin it might earn based on
different fee models. The Exchange notes that as a non-listing venue it
has four primary sources of revenue that it can potentially use to fund
its operations: transaction fees, fees for connectivity services,
membership and regulatory fees, and market data fees. Accordingly, the
Exchange generally must cover its expenses from these four primary
sources of revenue.
Through the Exchange's extensive 2024 Cost Analysis, the Exchange
analyzed every expense item in the Exchange's general expense ledger to
determine whether each such expense relates to the provision of the
Exchange Data Feeds, and, if such expense did so relate, what portion
(or percentage) of such expense actually supports the provision of the
Exchange Data Feeds, and thus bears a relationship that is, ``in nature
and closeness,'' directly related to the Exchange Data Feeds. Based on
its analysis, MEMX calculated its aggregate annual costs for providing
the Exchange Data Feeds at $3,683,375.
The following chart details the individual line-item (annual) costs
considered by MEMX to be related to offering the Exchange Data Feeds to
its Members and other customers as well as a percentage of the
Exchange's overall costs that such costs represent for such area (e.g.,
as set forth below, the Exchange allocated approximately 8% of its
overall Human Resources cost to offering Exchange Data Feeds).
------------------------------------------------------------------------
Costs Driver Costs % of All
------------------------------------------------------------------------
Human Resources................... $2,606,282 8
Data Center....................... 69,340 2
Technology (Hardware, Software 287,141 7
Licenses, etc.)..................
Depreciation...................... 397,471 5
Allocated Shared Expenses......... 323,141 4
-------------------------------------
Total......................... 3,683,375 5.8
------------------------------------------------------------------------
Options Market Data Cost Analysis
As noted above, the 2024 Cost Analysis estimated aggregate annual
costs for providing the Exchange Data Feeds at $3,683,375. Based on the
limited number of additional resources specifically devoted to
providing and administering the Options Data Feeds, the Exchange
determined it was appropriate to conduct an allocation of only marginal
costs related to the provision of the Options Data Feeds. In conducting
this analysis, the Exchange adopted an allocation model for four of the
five categories (all but Human Resources, as described below) that was
proportionally based upon the number of products sold in equities and
options, and given the fact that the Exchange offers more data feeds
and charges for Professional and Non-Professional User Fees in
equities, the resulting allocation was 95.1% towards equities, and 4.9%
towards options.
For Human Resources, however, the Exchange determined it
appropriate to employ a slightly different allocation model in order to
accurately identify the Exchange's marginal costs attributed to the
provision of the Options Data Feeds. As described more fully below, the
Exchange consulted with senior managers and department leaders in order
to identify and distinguish Human Resources costs which directly
support the Options Data Feeds (these Human Resources costs,
hereinafter ``direct'' costs). The Exchange then added such direct cost
allocation to 4.9% of the remaining ``indirect'' Human Resources costs
(the calculation of which was based on the same proportional model for
the remaining four categories) to find a total Human Resources Options
Data Feeds cost allocation of approximately 9.8% of the total Human
Resources allocated toward the provision of the Exchange Data Feeds.
The Exchange determined that this combined approach was appropriate
for Human Resources given the fact that department leaders have direct
knowledge of the time spent by each employee with respect to the
various tasks necessary to operate the Exchange, and thus, it is
possible to be more precise when it comes to Human Resources costs,
enabling managers to separate out time ``directly'' spent on the
Options and Equities Data Feeds, respectively, in order to arrive at
the direct costs noted above. This same approach would not be as
effective with respect to the remaining categories, as managers do not
have the same quantifiable knowledge and costs for the remaining
categories are determined with precision by using an allocated costs
model. For example, surveying managers about the specific percentage of
Depreciation or Data Center costs that are attributed to the provision
of the Options Data Feeds would not yield an accurate result, whereas
the allocated costs model provides an accurate measure of such costs.
The following chart details the individual line-item costs
considered by MEMX to be related to offering the Options Data Feeds to
its Members and other customers as a well as the percentage of the
Exchange's overall Exchange Data Feed costs that such costs represent
for such area (e.g., as set for the below, the Exchange allocated
approximately 9.8% of the Human Resources costs allocated to the
provision of the Exchange Data Feeds to the Options Data Feeds, or
$254,331 annually).\27\
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\27\ It follows that the remaining percentage of costs allocated
to the Exchange Data Feeds in the 2024 Cost Analysis were allocated
to the provision of the Equities Data feeds in the Options Market
Data Cost Analysis. For example, the 2024 Cost Analysis allocated
$2,606,282 of Human Resources costs to the provision of the Exchange
Data feeds. In the Options Market Data Cost Analysis, the Exchange
then allocated $254,331, or 9.8% of that total to the provision of
Options Data Feeds, and thus the remaining $2,351,951 (or 90.2%) to
the provision of the Equities Data Feeds.
------------------------------------------------------------------------
% of market data
Costs driver Costs total
------------------------------------------------------------------------
Human Resources................... $254,331 9.8
Data Center....................... 3,391 4.9
Technology (Hardware, Software 14,041 4.9
Licenses, etc.)..................
[[Page 84642]]
Depreciation...................... 19,436 4.9
Allocated Shared Expenses......... 15,802 4.9
-------------------------------------
Total......................... 307,001 .................
------------------------------------------------------------------------
Human Resources
In allocating personnel (Human Resources) costs, in order to not
double count any allocations and to ensure that each employee's time is
100% allocated, the Exchange first excluded any employee time allocated
towards options regulation in order to recoup costs via the Options
Regulatory Fee (``ORF''), as well as all other revenue streams,
including transaction execution, membership services, physical
connectivity, and application sessions.\28\ Of the remaining time left
over, the Exchange considered the amount of employee time for employees
whose functions include directly providing services necessary to offer
the Exchange Data Feeds (primarily the Exchange's systems engineering,
member experience, and market operations teams), including performance
thereof, as well as personnel with ancillary functions related to
establishing and providing such services (such as information security,
compliance and finance personnel). The Exchange notes that it has fewer
than 100 employees and each department leader has direct knowledge of
the time spent by each employee with respect to the various tasks
necessary to operate the Exchange. The estimates of Human Resources
cost were therefore determined by consulting with such department
leaders, determining which employees are involved in tasks related to
providing the Exchange Data Feeds, and confirming that the proposed
allocation was reasonable based on an understanding of the percentage
of their time such employees devote to tasks related to providing the
Options Data Feeds and Equities Data Feeds, respectively. The Human
Resources cost was calculated using a blended rate of compensation
reflecting salary, equity and bonus compensation, benefits, payroll
taxes, and 401(k) matching contributions.
---------------------------------------------------------------------------
\28\ See Securities Exchange Act Release No. 99259 (January 2,
2024), 89 FR 965 (January 8, 2024) (SR-MEMX-2023-38). See also
Securities Exchange Act Release No. 100021 (April 24, 2024), 89 FR
34298 (April 30, 2024) (SR-MEMX-2024-13).
---------------------------------------------------------------------------
Next, of the direct time allocated to the Exchange Data Feeds
(which amounted to approximately 61.3% of the total Human Resources
allocated to the Exchange Data Feeds, or approximately $1,597,398), the
Exchange determined that approximately 87% of the direct time spent on
the Exchange Data Feeds was focused on the Equities Data Feeds, and
approximately 13% of that time was focused on the Options Data
Feeds.\29\ Again, these estimates were determined by consulting with
department leaders, determining which employees are involved in tasks
related to providing the Equities and Options Data Feeds, respectively,
and confirming those proposed allocations were reasonable based on an
understanding of the percentage of time employees devote to those
tasks. Notably, the Exchange did not hire additional personnel to focus
solely on the Options Data Feeds, however, additional hiring occurred
to support the launch of MEMX Options and certain of those personnel
have significant responsibilities with respect to the provision of the
Exchange Data Feeds, which supports the slightly higher Human Resources
cost allocated towards the provision of the Options Data Feeds. The
Exchange believes that a higher allocation is also reasonable because
the Human Resources component of providing the Options Data Feeds does
require additional resources as compared to other components necessary
to provide such data feeds, particularly with respect to the sales
function, ongoing support, and application of the Exchange's policies
with respect to the provision of market data. Further, as MEMX Options
grows, it is likely that additional personnel will be necessary to
support such growth in order to provide customer support, including
with respect to the Options Data Feeds.
---------------------------------------------------------------------------
\29\ Specifically, 13% of the direct Human Resources cost
allocated towards the provision of the Options Data Feeds totaled
approximately $204,996.
---------------------------------------------------------------------------
Finally, for the remaining Human Resources costs allocated toward
the provision of the Exchange Data Feeds that were not already
allocated as ``direct'' costs (i.e. the remaining 38.7% of the total
Human Resources costs allocated towards the provision of the Exchange
Data Feeds, or $1,008,883), the Exchange applied the same allocation
model as it did for the remaining categories that was proportionally
based on the number of products sold in Equities and Options, or 95.1%
towards Equities and 4.9% towards Options, in order to determine the
remaining costs that should be allocated toward the provision of
Options Data Feeds.\30\ Accordingly, a total of approximately $254,331
of the Exchange's Human Resources costs, comprised of both direct and
indirect costs, were allocated towards the provision of the Options
Data feeds, or approximately 9.8%. Again, the Exchange believes that a
higher allocation of Human Resources costs is appropriate, given the
Exchange's consideration of both the direct time attributed towards the
provision of the Options Data Feeds coupled with a proportional
allocation of Human Resources time that indirectly supports the
provision of the Options Data Feeds.
---------------------------------------------------------------------------
\30\ Specifically, 4.9% of the indirect Human Resources costs
allocated towards the provision of the Options Data Feeds totaled
approximately $49,334.
---------------------------------------------------------------------------
Data Center
Data Center costs includes an allocation of the costs the Exchange
incurs to provide the Exchange Data Feeds in the third-party data
centers where the Exchange maintains its equipment as well as related
costs (the Exchange does not own the Primary Data Center or the
Secondary Data Center, but instead, leases space in data centers
operated by third parties). Based on the allocation model utilized in
the Options Market Data Cost Analysis described above, the Exchange
allocated $3,391 of its Data Center costs (i.e. 4.9% of the costs
allocated towards the Exchange Data Feeds in the 2024 Cost Analysis)
towards the provision of the Options Data Feeds.
Technology
The Technology category includes the Exchange's network
infrastructure, other hardware, software, and software licenses used to
operate and monitor physical assets necessary to provide the Exchange
Data Feeds. Of note, certain of these costs were included in separate
Network Infrastructure and Hardware and Software Licenses categories in
the 2022 Cost Analysis; however, in order to align more closely with
the Exchange's
[[Page 84643]]
audited financial statements, these costs were combined into the
broader Technology category. Based on the allocation model utilized in
the Options Market Data Cost Analysis described above, the Exchange
allocated approximately $14,041 of its Technology costs to the Options
Data Feeds in 2024.
Depreciation
The vast majority of the software the Exchange uses with respect to
its operations, including the software used to generate and disseminate
the Options Data Feeds has been developed in-house and the cost of such
development is depreciated over time. Accordingly, the Exchange
included Depreciation costs related to depreciated software used to
generate and disseminate the Options Data Feeds. The Exchange also
included in the Depreciation costs certain budgeted improvements that
the Exchange intends to capitalize and depreciate with respect to the
Options Data Feeds in the near-term, as well as the servers used at the
Exchange's primary and back-up data centers specifically used for the
Options Data Feeds. Based on the allocation model utilized in the
Options Market Data Cost Analysis described above, the Exchange
allocated approximately $19,346 of its Depreciation costs towards the
provision of the Options Data Feeds.
Allocated Shared Expenses
Finally, a limited portion of general shared expenses were
allocated to the Options Data Feeds. The costs included in general
shared expenses allocated to the Options Data Feeds include office
space and office expenses (e.g., occupancy and overhead expenses),
utilities, recruiting and training, marketing and advertising costs,
professional fees for legal, tax and accounting services (including
external and internal audit expenses), and telecommunications costs.
The cost of paying individuals to serve on the Exchange's Board of
Directors or any committee was not allocated to providing Options Data
Feeds. Based on the allocation model utilized in the Options Market
Data Cost Analysis described above, the Exchange allocated $15,802 of
its Allocated Shared Expenses to the Options Data Feeds in 2024.
Cost Analysis--Additional Discussion
Based on the current number of subscribers to the Options Data
Feeds,\31\ the Exchange anticipates annual 2024 revenue for Options
Data Feeds of $342,000.\32\ The proposed fees for the Options Data
Feeds are designed to permit the Exchange to cover the marginal costs
allocated to providing the Options Data Feeds with a profit margin that
the Exchange believes is modest (approximately 10%),\33\ which the
Exchange believes is fair and reasonable after taking into account the
costs related to creating, generating, and disseminating the Options
Data Feeds and the fact that the Exchange will need to fund future
expenditures (increased costs, improvements, etc.).
---------------------------------------------------------------------------
\31\ In the Initial and Second Filings, the Exchange's revenue
projections anticipated a drop in subscriptions once the Exchange
began charging for the Options Data Feeds, which did indeed occur.
Specifically, of the nineteen (19) customers receiving the Options
Data Feeds free of charge, four (4) requested removal once the
Exchange began charging in April 2024.
\32\ This revenue projection is based on 14 MEMX Options Depth
and 10 MEMX Options Top subscriptions per month in 2024.
\33\ The Exchange calculated this profit margin by dividing the
annual projected profit of $34,999 by the annual projected revenue
of $342,000 and multiplying by 100.
---------------------------------------------------------------------------
The Exchange like other exchanges is, after all, a for-profit
business. Accordingly, while the Exchange believes in transparency
around costs and potential margins, as well as periodic review of
revenues and applicable costs (as discussed below), the Exchange does
not believe that these estimates should form the sole basis of whether
or not a proposed fee is reasonable or can be adopted. Instead, the
Exchange believes that the information should be used solely to confirm
that an Exchange is not earning supra-competitive profits, and the
Exchange believes its Cost Analysis and related projections demonstrate
this fact.
As a general matter, the Exchange believes that its costs will
remain relatively similar in future years. It is possible however that
such costs will either decrease or increase. To the extent the Exchange
sees growth in use of Options Data Feeds it will receive additional
revenue to offset future cost increases. However, if use of Options
Data Feeds is static or decreases, the Exchange might not realize the
revenue that it anticipates or needs in order to cover applicable
costs. Accordingly, the Exchange is committing to conduct a one-year
review after implementation of these fees. The Exchange expects that it
may propose to adjust fees at that time, to increase fees in the event
that revenues fail to cover costs with a reasonable profit margin.\34\
Similarly, the Exchange expects that it would propose to decrease fees
in the event that revenue materially exceeds current projections. In
addition, the Exchange will periodically conduct a review to inform its
decision making on whether a fee change is appropriate (e.g., to
monitor for costs increasing/decreasing or subscribers increasing/
decreasing, etc. in ways that suggest the then-current fees are
becoming dislocated from the prior cost-based analysis) and expects
that it would propose to increase fees in the event that revenues fail
to cover its costs and a reasonable margin, or decrease fees in the
event that revenue or the profit margin materially exceeds current
projections. In the event that the Exchange determines to propose a fee
change, the results of a timely review, including an updated cost
estimate, will be included in the rule filing proposing the fee change.
More generally, the Exchange believes that it is appropriate for an
exchange to refresh and update information about its relevant costs and
revenues in seeking any future changes to fees, and the Exchange
commits to do so.
---------------------------------------------------------------------------
\34\ The Exchange notes that it does not believe that a 10%
profit margin is necessarily competitive, and instead that this is
likely significantly below the mark-up many businesses place on
their products and services.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \35\ of the Act in general, and
furthers the objectives of Section 6(b)(4) \36\ of the Act, in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees and other charges among its Members
and other persons using its facilities. Additionally, the Exchange
believes that the proposed fees are consistent with the objectives of
Section 6(b)(5) \37\ of the Act in that they are designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to a free and open market and
national market system, and, in general, to protect investors and the
public interest, and, particularly, are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\35\ 15 U.S.C. 78f.
\36\ 15 U.S.C. 78f(b)(4).
\37\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange notes prior to addressing the specific reasons the
Exchange believes the proposed fees and fee structure are reasonable,
equitably allocated and not unreasonably discriminatory, that the
proposed definitions and fee structure
[[Page 84644]]
described above are consistent with the definitions and fee structure
used by most U.S. options exchanges, MIAX Pearl and BX Options in
particular. As such, the Exchange believes it is adopting a model that
is easily understood by Members and non-Members, most of which also
subscribe to market data products from other exchanges. For this
reason, the Exchange believes that the proposed definitions and fee
structure described above are consistent with the Act generally, and
Section 6(b)(5) \38\ of the Act in particular.
---------------------------------------------------------------------------
\38\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
One of the primary objectives of MEMX is to provide competition and
to reduce fixed costs imposed upon the industry. Consistent with this
objective, the Exchange believes that this proposal reflects a simple,
competitive, reasonable, and equitable pricing structure, with fees
that are discounted when compared to comparable data products and
services offered by competitors.\39\
---------------------------------------------------------------------------
\39\ See supra note 15.
---------------------------------------------------------------------------
Reasonableness
Overall. With regard to reasonableness, the Exchange understands
that the Commission has traditionally taken a market-based approach to
examine whether the SRO making the fee proposal was subject to
significant competitive forces in setting the terms of the proposal.
The Exchange understands that in general the analysis considers whether
the SRO has demonstrated in its filing that (i) there are reasonable
substitutes for the product or service; (ii) ``platform'' competition
constrains the ability to set the fee; and/or (iii) revenue and cost
analysis shows the fee would not result in the SRO taking supra-
competitive profits. If the SRO demonstrates that the fee is subject to
significant competitive forces, the Exchange understands that in
general the analysis will next consider whether there is any
substantial countervailing basis to suggest the fee's terms fail to
meet one or more standards under the Exchange Act. The Exchange further
understands that if the filing fails to demonstrate that the fee is
constrained by competitive forces, the SRO must provide a substantial
basis, other than competition, to show that it is consistent with the
Exchange Act, which may include production of relevant revenue and cost
data pertaining to the product or service.
The Exchange has not determined its proposed overall market data
fees based on assumptions about market competition, instead relying
upon a cost-plus model to determine a reasonable fee structure that is
informed by the Exchange's understanding of different uses of the
products by different types of participants. In this context, the
Exchange believes the proposed fees overall are fair and reasonable as
a form of cost recovery plus the possibility of a reasonable return for
the Exchange's marginal costs of offering the Options Data Feeds. The
Exchange believes the proposed fees are reasonable because they are
designed to generate annual revenue to recoup some or all of Exchange's
annual marginal costs of providing market data in options with a
reasonable profit margin. The Exchange also believes that performing
the Options Market Data Cost Analysis utilizing the marginal costs
related to the Options Data Feeds is reasonable because as a new
entrant in the equity options space, the Exchange simply cannot charge
more at this time based on what its competitors charge and what other
options are available to market participants for the receipt of options
market data. If the Exchange chose to allocate the average cost of
providing market data to options and equities via a 50/50 split, then
based on its proposed pricing and the revenues projected, the analysis
would result in a profit margin for the Options Data Feeds of -
265%.\40\ Alternatively, the Exchange would need to significantly
increase the fees charged for the Options Data Feeds, which in turn,
the Exchange believes would result in customers canceling their access
to such Options Data Feeds and potentially participating less on the
Exchange. Accordingly, the Exchange believes it is reasonable to seek
to recover only the marginal costs associated with the Options Data
Feeds in this proposal. As discussed in the Purpose section, the
Exchange estimates that the Options Data Feed fees proposed herein will
result in annual revenue of approximately $342,000, representing a
profit margin of approximately 10% for the provision of Options Market
Data. As such, the Exchange believes that this fee methodology is
reasonable because it allows the Exchange to recoup some or all of its
marginal expenses for providing options market data (with any
additional revenue representing no more than what the Exchange believes
to be a reasonable rate of return). The Exchange also believes that the
proposed fees are reasonable because they are generally less than the
fees charged by competing options exchanges for comparable market data
products, notwithstanding that the competing exchanges may have
different system architectures that may result in different cost
structures for the provision of market data.
---------------------------------------------------------------------------
\40\ In calculating this margin, for all categories other than
Human Resources, the Exchange split the applicable expenses 50/50
between the Equities Data Feeds and the Options Data Feeds. For
Human Resources, the Exchange first allocated the 8% of the total
Exchange Data Feeds Human Resources costs which were determined to
be directly related to the provision of the Options Data Feeds (i.e.
8%, as noted above), plus 50% of the remaining Human Resources costs
not otherwise directly related to the provision of the Equities Data
Feeds and thus allocated thereto.
---------------------------------------------------------------------------
The Exchange believes the proposed fees for the Options Data Feeds
are reasonable when compared to fees for comparable products, such as
the MIAX Pearl Top of Market Feed, the MIAX Pearl Liquidity Feed, and
the BX Options Top and Depth Feeds, compared to which the Exchange's
proposed fees are equivalent or lower, as well as other comparable data
feeds priced significantly higher than the Exchange's proposed fees for
the Options Data Feeds.\41\ Additionally, the Exchange's single flat
fee for each of its Options Data Feeds, regardless of use type, offers
a more simplistic approach to market data pricing. Specifically with
respect to the MEMOIR Options Depth feed, the Exchange believes that
the proposed fee for such feed is reasonable because it represents not
only the value of the data available from the MEMOIR Options Top feed,
which has a lower proposed fee, but also the value of receiving the
depth-of-book data on an order-by-order basis. The Exchange believes it
is reasonable to have pricing based, in part, upon the amount of
information contained in each data feed, which may have additional
value to market participants. The MEMOIR Options Top feed, as described
above, can be utilized to trade on the Exchange but contains less
information than that is available on the MEMOIR Options Depth feed.
Thus, the Exchange believes it reasonable for the products to be priced
as proposed, with MEMOIR Options Depth having a higher price than
MEMOIR Options Top.
---------------------------------------------------------------------------
\41\ Id. [sic]
---------------------------------------------------------------------------
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the Options Data Feeds are reasonable.
Equitable Allocation
Overall. The Exchange believes that its proposed fees are
reasonable, fair, and equitable, and not unfairly discriminatory
because they are designed to align fees with services provided. The
Exchange believes that the proposed fees are equitably
[[Page 84645]]
allocated because they will apply uniformly to all data recipients that
choose to subscribe to the Options Data Feeds. Any Firm that chooses to
subscribe to one or both of the Options Data Feeds is subject to the
same Fee Schedule, regardless of what type of business they operate,
and the decision to subscribe to one or both of the Options Data Feeds
is based on objective differences in usage of Options Data Feeds among
different Firms, which are still ultimately in the control of any
particular Firm. The Exchange believes the proposed pricing between
Options Data Feeds is equitably allocated because it is based, in part,
upon the amount of information contained in each data feed, which may
have additional value to market participants. The MEMOIR Options Top
feed, as described above, can be utilized to trade on the Exchange but
contains less information than that is available on the MEMOIR Options
Depth feed. Thus, the Exchange believes it is an equitable allocation
of fees for the products to be priced as proposed, with MEMOIR Options
Top having the lower price of the two Options Data Feeds.
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the Exchange Data Feeds are equitably allocated.
The Proposed Fees Are Not Unfairly Discriminatory
The Exchange believes the proposed fees for the Options Data Feeds
are not unfairly discriminatory because any differences in the
application of the fees are based on meaningful distinctions between
the feeds themselves.
Overall. The Exchange believes that the proposed fees are not
unfairly discriminatory because they would apply to all data recipients
that choose to subscribe to the same Options Data Feed(s). Any Firm
that chooses to subscribe to the Options Data Feeds is subject to the
same Fee Schedule, regardless of what type of business they operate.
Because the proposed fee for MEMOIR Options Depth is higher, Firms
seeking lower cost options may instead choose to receive data through
the MEMOIR Options Top feed for a lower cost. Alternatively, Firms can
choose to receive data solely from the Options Price Reporting
Authority (``OPRA'') for a lower cost. The Exchange notes that Firms
can also choose to subscribe to a combination of data feeds for
redundancy purposes or to use different feeds for different purposes.
In sum, each Firm has the ability to choose the best business solution
for itself. The Exchange does not believe it is unfairly discriminatory
to base pricing upon the amount of information contained in each data
feed, which may have additional value to a market participant. As
described above, the MEMOIR Options Top feed can be utilized to trade
on the Exchange but contains less information than that is available on
the MEMOIR Options Depth feed. Thus, the Exchange believes it is not
unfairly discriminatory for the products to be priced as proposed, with
MEMOIR Options Top having a lower price than MEMOIR Options Depth.
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the Exchange Data Feeds are not unfairly
discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\42\ the Exchange
does not believe that the proposed rule change would impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act.
---------------------------------------------------------------------------
\42\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
Intra-Market Competition
The Exchange does not believe that the proposed fees for Options
Data Feeds place certain market participants at a relative disadvantage
to other market participants because, as noted above, the proposed fees
are associated with usage of Options Data Feeds by each market
participant based on the type of business they operate, and the
decision to subscribe to one or both Options Data Feeds is based on
objective differences in usage of Options Data Feeds among different
Firms, which are still ultimately in the control of any particular
Firm, and such fees do not impose a barrier to entry to smaller
participants. Accordingly, the proposed fees for Options Data Feeds do
not favor certain categories of market participants in a manner that
would impose a burden on competition; rather, the allocation of the
proposed fees reflects the types of Options Data Feeds consumed by
various market participants.
Inter-Market Competition
The Exchange does not believe the proposed fees place an undue
burden on competition on other SROs that is not necessary or
appropriate. In particular, market participants are not regulatorily
required to subscribe to any of the Options Data Feeds, as described
above. Additionally, other exchanges have similar market data fees in
place for their participants, but with comparable and in many cases
higher rates for options market data feeds.\43\ The proposed fees are
based on actual costs and are designed to enable the Exchange to recoup
its applicable costs with the possibility of a reasonable profit on its
investment as described in the Purpose and Statutory Basis sections.
Competing options exchanges are free to adopt comparable fee structures
subject to the SEC rule filing process.
---------------------------------------------------------------------------
\43\ See supra note 15.
---------------------------------------------------------------------------
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 \44\ and Rule 19b-4(f)(2) \45\ thereunder.
---------------------------------------------------------------------------
\44\ 15 U.S.C. 78s(b)(3)(A)(ii).
\45\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-MEMX-2024-40 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-2024-40. This file
[[Page 84646]]
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-2024-40 and should be
submitted on or before November 13, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
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\46\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-24469 Filed 10-22-24; 8:45 am]
BILLING CODE 8011-01-P
