[Federal Register Volume 85, Number 196 (Thursday, October 8, 2020)]
[Notices]
[Pages 63620-63626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22249]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90076; File No. SR-MEMX-2020-10]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Adopt the Initial 
Fee Schedule and Other Fees for MEMX LLC

October 2, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 21, 2020, MEMX LLC (``MEMX'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (the ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to adopt (i) the initial fees and rebates applicable to Members \3\ of 
the Exchange

[[Page 63621]]

pursuant to Exchange Rule 15.1(a) and (c), and (ii) regulatory fees 
related to the Central Registration Depository (``CRD system''), which 
will be collected by the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') as set forth in proposed Rule 15.1(e). The text of the 
proposed rule change is provided in Exhibit 5.
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    \3\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
    The Exchange proposes to implement a fee schedule (the ``Fee 
Schedule'') applicable to use of the Exchange. The Exchange will 
commence operations as a national securities exchange on September 21, 
2020, and thus, proposes the fees to be effective as of the date of 
this filing.
    The Exchange first notes that upon launch it will operate in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or incentives to be insufficient. More 
specifically, the Exchange will be only one of several equities venues 
to which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 18% of total market share.\4\ 
Thus, in such a low-concentrated and highly competitive market, no 
single equities exchange possesses significant pricing power in the 
execution of order flow, and as it commences operations the Exchange 
anticipates representing a small percentage of the overall market.
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    \4\ Market share percentage calculated as of September 17, 2020. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
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Transaction Fees
    Below is a description of the fees and rebates that the Exchange 
intends to impose under the initial proposed Fee Schedule, which will 
be applicable to transactions executed in all trading sessions. Under 
the proposed Fee Schedule, the Exchange will operate a ``Maker-Taker'' 
model whereby it provides rebates to Members that provide liquidity and 
charges fees to those that remove liquidity, as further described 
below. The Exchange does not initially propose to charge different fees 
or provide different rebates depending on the amount of orders 
submitted to, and/or transactions executed on or through, the Exchange. 
Accordingly, all fees and rebates described below are applicable to all 
Members, regardless of the overall volume of a Member's trading 
activities on the Exchange.
(A) Standard Fee for Removed Volume
    The Exchange proposes to charge a standard fee of $0.0025 per share 
for executions of orders that remove liquidity from the MEMX Book \5\ 
(``Removed Volume'') in all securities traded on the Exchange priced at 
or above $1.00 per share.\6\
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    \5\ ``MEMX Book'' refers to the Exchange system's electronic 
file of orders. See Exchange Rule 1.5(q).
    \6\ This pricing is referred to by the Exchange as ``Removed 
volume from MEMX Book'' on the proposed Fee Schedule with a Fee Code 
of ``R'' to be provided by the Exchange on execution reports. The 
Exchange's Fee Codes will assist both the Exchange and Members with 
financial planning, tracking, and reconciliation of invoices 
generated by the Exchange. The Exchange notes that it will also use 
a second character, either ``A'' or ``B'' to indicate whether an 
execution occurred: (A) In a security priced at or above $1.00 per 
share or (B) below $1.00 per share.
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(B) Standard Rebate for Added Displayed Volume
    The Exchange proposes to provide a standard rebate of $0.0029 per 
share for executions of orders that: (i) Are displayed on the MEMX Book 
and (ii) add liquidity to the Exchange (``Added Displayed Volume''), in 
all securities traded on the Exchange priced at or above $1.00 per 
share.\7\ The proposed standard rebate for Added Displayed Volume would 
apply to the Reserve Quantity \8\ of an order such that any 
replenishment amount of the Reserve Quantity of an order that is 
executed against would be treated as Added Displayed Volume even though 
such portion of the order was not displayed on the MEMX Book prior to 
the order being replenished in accordance with the Member's 
instructions and the Exchange's rules. The entire portion of the 
Reserve Quantity of an order would be eligible for this rebate, 
however, a Member would only receive such rebate for any portion(s) of 
the Reserve Quantity that is (are) executed against.
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    \7\ This pricing is referred to by the Exchange as ``Added 
displayed volume'' on the proposed Fee Schedule with a Fee Code of 
``B'', ``D'' or ``J'' to be provided by the Exchange on execution 
reports.
    \8\ ``Reserve Quantity'' refers to the portion of an order that 
includes a Non-Displayed instruction in which a portion of that 
order is also displayed on the MEMX Book. See Exchange Rule 11.6(k).
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(C) Rebates for Added Displayed Volume That Establishes or Matches the 
National Best Bid or Offer (``NBBO'')
    The Exchange proposes to provide an identical rebate of $0.0029 per 
share for executions of Added Displayed Volume orders that either: (i) 
establish the NBBO (``Setter Volume'') or (ii) establish a new best bid 
or offer (``BBO'') on MEMX that matches the NBBO first established on 
an away market (``Joiner Volume,'' and together with Setter Volume, 
``NBBO Setter/Joiner Volume''), in all securities traded on the 
Exchange priced at or above $1.00 per share. Because pricing will be 
the same for all Added Displayed Volume, the Exchange does not propose 
to add separate rebates on the Fee Schedule at this time for Setter 
Volume or Joiner Volume or to define these categories on the Fee 
Schedule. However, the Exchange proposes to provide separate Fee Codes 
to Members for Setter Volume and Joiner Volume; thus, in addition to 
the standard Fee Code applicable to Added Displayed Volume, or ``D'', 
the Exchange proposes including Fee Codes of ``B'' for Setter Volume 
and ``J'' for Joiner Volume on the same row as ``D'' in the transaction 
fees table of the Fee Schedule.
    The purpose of including three separate Fee Codes for Added 
Displayed Volume is to reflect the fact that the Exchange will provide 
distinct Fee Codes on the execution reports provided to Members. The 
Exchange believes this information will be useful for Members and the 
Exchange to track executions of Added Displayed Volume that qualifies 
as either Setter Volume or Joiner Volume and may also be useful for the 
Exchange in considering potential pricing modifications to such orders 
as it continues to evaluate its pricing structure on an ongoing basis 
after its exchange launch. In the meantime, these Fee Codes will be 
provided to Members on execution reports prior to the introduction of 
any pricing incentives for such liquidity, even though the rebates to 
be provided are the same as those provided as the standard rebate for 
Added Displayed Volume. The Exchange notes that its technical 
specifications make clear the different types of liquidity codes passed 
back to Members on execution reports.

[[Page 63622]]

(D) Standard Rebate for Added Non-Displayed Volume
    The Exchange proposes to provide a standard rebate of $0.0020 per 
share for executions of orders that: (i) Are not displayed on the MEMX 
Book and (ii) add liquidity to the Exchange (``Added Non-Displayed 
Volume''), in all securities traded on the Exchange priced at or above 
$1.00 per share.\9\ Similar to the proposal to add separate Fee Codes 
for Setter Volume and Joiner Volume, as described above, the proposed 
Fee Schedule reflects two different Fee Codes for Added Non-Displayed 
Volume, specifically ``H'' and ``M''. The Exchange will provide Fee 
Code ``M'' for the execution of an order that adds non-displayed 
liquidity to the extent the order that provides liquidity includes a 
Midpoint Peg instruction and Fee Code ``H'' for the execution of an 
order that adds non-displayed liquidity but does not include a Midpoint 
Peg instruction.\10\ The proposed standard rebate for Added Non-
Displayed Volume would apply to each of these the same. The purpose of 
including both Fee Codes on the Fee Schedule is to reflect the fact 
that the Exchange will separately record these transactions under 
distinct Fee Codes on the execution reports provided to Members. The 
Exchange believes this information will be useful for Members and the 
Exchange to track executions of Added Non-Displayed Volume and may also 
be useful for the Exchange in considering potential pricing 
modifications to such orders as it continues to evaluate its pricing 
structure on an ongoing basis after its exchange launch. The Exchange 
again notes that its technical specifications make clear the different 
types of liquidity codes passed back to Members on execution reports.
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    \9\ This pricing is referred to by the Exchange on the proposed 
Fee Schedule as ``Added non-displayed volume.''
    \10\ The term ``Midpoint Peg'' refers to a Pegged Order with an 
instruction to peg to the midpoint of the NBBO. See Exchange Rule 
11.6(h)(2). The term ``Pegged Order'' refers to an order with 
instructions to peg to the NBB, for a buy order, or the NBO, for a 
sell order. See Exchange Rule 11.6(h).
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    The Exchange proposes to provide a higher rebate for executions of 
Added Displayed Volume than for executions of Added Non-Displayed 
Volume to incentivize displayed liquidity over non-displayed liquidity 
on the Exchange, including orders with a displayed component and a non-
displayed component (i.e., orders with a Reserve Quantity), in order to 
encourage and facilitate price discovery and price formation, which the 
Exchange believes benefits all Members and investors.
(E) Standard Fee for Routed Removed Volume
    The Exchange proposes to charge a standard fee of $0.0030 per share 
for all orders routed to another market that (i) are executed on an 
away market and (ii) remove liquidity from the market to which it was 
routed (``Routed Removed Volume''), in all securities traded on the 
Exchange priced at or above $1.00 per share.\11\ All charges by the 
Exchange for routing are applicable only in the event that an order is 
executed; there is no charge for orders that are routed away from the 
Exchange but are not filled. The Exchange notes that the fees for 
routing relate to orders routed through the Exchange's affiliated 
broker-dealer, MEMX Execution Services LLC. Routing services offered by 
the Exchange and its affiliated broker-dealer are completely optional 
and market participants can readily select between various providers of 
routing services, including other exchanges and broker-dealers.
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    \11\ This pricing is referred to by the Exchange as ``Routed to 
another market, removed liquidity'' on the proposed Fee Schedule 
with a Fee Code of ``Z'' to be provided by the Exchange on execution 
reports.
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(F) Securities Priced Below $1.00 per Share
    The Exchange does not propose to charge any fee or provide any 
rebate for executions of orders in securities priced below $1.00 per 
share, including where an execution takes place on the Exchange or at 
another market center if the order was routed away from the Exchange.
(G) Other Fees
    Under the initial proposed Fee Schedule, the Exchange proposes to 
make clear that it does not charge any fees for membership, market data 
products, physical connectivity or application sessions (e.g., trading 
ports, market data ports, and/or drop copies). In addition, because, as 
described below, the Exchange is proposing to include certain fees in 
Rule 15.1 rather than on the Fee Schedule, the Exchange proposes to 
state on the Fee Schedule that additional fees are set forth in Rule 
15.1 of the MEMX Rulebook, and further, that such fees include 
Regulatory Transaction Fees collected to fund MEMX's Section 31 
obligations (as set forth in MEMX Rule 15.1(b)) and fees collected 
through the CRD registration system for registration of associated 
persons of Members that are not also FINRA members (as proposed to be 
added as MEMX Rule 15.1(e)).
Regulatory Fees
    The Exchange proposes to adopt certain regulatory fees as new 
paragraph (e) to Exchange Rule 15.1 related to the CRD system, which 
are collected by FINRA.\12\ As proposed, FINRA will collect and retain 
certain regulatory fees via the CRD system for the registration of 
persons associated with a Member that is not also a FINRA member. The 
CRD system fees are use-based and there is no distinction in the cost 
incurred by FINRA if the user is a FINRA member or a member of an 
exchange but not a FINRA member. Accordingly, the Exchange proposes to 
adopt the regulatory fees set forth in proposed Rule 15.1(e) to mirror 
those assessed by FINRA pursuant to Section 4 (Fees) of Schedule A to 
the FINRA By-Laws. As proposed, these fees are as follows: \13\
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    \12\ The CRD system is the central licensing and registration 
system for the U.S. securities industry. The CRD system enables 
individuals and firms seeking registration with multiple states and 
self-regulatory organizations to do so by submitting a single form, 
fingerprint card and a combined payment of fees to FINRA. Through 
the CRD system, FINRA maintains the qualification, employment and 
disciplinary histories of registered associated persons of broker-
dealers.
    \13\ The Exchange has only adopted the CRD system fees charged 
by FINRA to non-FINRA members when such fees are applicable. In this 
regard, certain FINRA CRD system fees and requirements are specific 
to FINRA members, but do not apply to Members that are not also 
FINRA members. Members that are also FINRA members are charged CRD 
system fees according to Section 4 (Fees) of Schedule A to the FINRA 
By-Laws.
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    (1) $100 for each initial Form U4 filed for the registration of a 
representative or principal;
    (2) $110 for the additional processing of each initial or amended 
Form U4, Form U5 or Form BD that includes the initial reporting, 
amendment, or certification of one or more disclosure events or 
proceedings;
    (3) $45 annually for each of the Member's registered 
representatives and principals for system processing;
    (4) $15 for processing and posting to the CRD system each set of 
fingerprints submitted electronically by the Member, plus a pass-
through of any other charge imposed by the United States Department of 
Justice for processing each set of fingerprints;
    (5) $30 for processing and posting to the CRD system each set of 
fingerprint cards submitted in non-electronic format by the Member, 
plus a pass-through of any other charge imposed by the United States 
Department of Justice for processing each set of fingerprints; and
    (6) $30 for processing and posting to the CRD system each set of 
fingerprint results and identifying information that has been processed 
through a self-

[[Page 63623]]

regulatory organization other than FINRA.
2. Statutory Basis
Transaction Fees
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \14\ of the Act in general, and 
furthers the objectives of Sections 6(b)(4) \15\ 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 and rebates are consistent with the 
objectives of Section 6(b)(5) \16\ 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.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(5).
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    Upon its launch, the Exchange will operate in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Exchange believes that 
the proposed Fee Schedule reflects a simple and competitive pricing 
structure designed to incentivize market participants to add 
aggressively priced displayed liquidity and direct their order flow to 
the Exchange, which the Exchange believes would promote price discovery 
and price formation and deepen liquidity that is subject to the 
Exchange's transparency, regulation, and oversight as an exchange, 
thereby enhancing market quality to the benefit of all Members and 
investors.
    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \17\
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    \17\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to charge a standard fee of $0.0025 per share 
for Removed Volume from the MEMX Book because it is comparable to the 
transaction fee charged by other exchanges to remove liquidity.\18\ The 
Exchange further believes that this fee is equitably allocated and not 
unfairly discriminatory because it applies equally to all Members and, 
when coupled with higher rebates for adding displayed liquidity, as 
described below, is designed to facilitate increased activity on the 
Exchange to the benefit of all Members by providing more trading 
opportunities and promoting price discovery.
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    \18\ For example, the New York Stock Exchange trading fee 
schedule on its public website reflects fees to ``take'' liquidity 
ranging from $0.0024-$0.00275 depending on the type of market 
participant, order and execution; see https://www.nyse.com/markets/nyse/trading-info/fees. The Nasdaq Stock Market trading fee schedule 
on its public website reflects standard fees to ``remove'' liquidity 
of $0.0030 per share for shares executed at or above $1.00 or 0.30% 
of total dollar volume for shares executed below $1.00; see http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The Cboe BZX 
trading fee schedule on its public website reflects standard fees 
for ``removing'' liquidity of $0.0030 for shares executed at or 
above $1.00 or 0.30% of total dollar volume for shares executed 
below $1.00; see https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to provide a standard rebate of $0.0029 per 
share for Added Displayed Volume in all securities traded on the 
Exchange priced at or above $1.00 per share because this rebate is 
consistent with transaction rebates provided by other exchanges.\19\ 
The Exchange further believes that this rebate structure is equitably 
allocated and not unfairly discriminatory because it applies equally to 
all Members.
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    \19\ For example, the New York Stock Exchange trading fee 
schedule on its public website reflects a standard rebate for 
``adding'' liquidity of $0.0012 for shares executed at or above 
$1.00, with various tiers that provide the ability of a firm to 
receive a rebate of $0.0029 per share or higher; see https://www.nyse.com/markets/nyse/trading-info/fees. The Nasdaq Stock Market 
trading fee schedule on its public website reflects a standard 
rebate for ``adding'' liquidity for shares executed at or above 
$1.00 of $0.0020 in Tape A and B securities and $0.0015 in Tape C 
securities, with various tiers that provide the ability of a firm to 
receive a rebate of $0.0029 per share or higher; see http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The Cboe BZX 
trading fee schedule on its public website reflects a standard 
rebate for ``adding'' liquidity of $0.0020 for shares executed at or 
above $1.00, with various tiers that provide the ability of a firm 
to receive a rebate of $0.0029 per share or higher; see https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    The Exchange believes that charging a fee to the liquidity remover, 
and providing a rebate to the liquidity adder, is reasonable, equitable 
and not unfairly discriminatory because it incentivizes liquidity 
provision on the Exchange. The Exchange also notes that several other 
exchanges charge fees for removing liquidity and provide rebates for 
adding liquidity, and that this aspect of the Exchange's proposed Fee 
Schedule does not raise any new or novel issues that have not 
previously been considered by the Commission in connection with the 
fees and rebates of other exchanges.\20\
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    \20\ See supra notes 18 and 19.
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    The Exchange also believes that it is reasonable, equitable and not 
unfairly discriminatory to provide a higher rebate for executions of 
Added Displayed Volume (including NBBO Setter/Joiner Volume) than for 
executions of Added Non-Displayed Volume as this rebate structure is 
designed to incentivize Members to send the Exchange displayable 
orders, thereby contributing to price discovery and price formation, 
consistent with the overall goal of enhancing market quality. Moreover, 
the Exchange notes that there are precedents for exchanges to provide 
rebates that distinguish between displayed and non-displayed volume to 
incentivize displayed orders and facilitate price discovery.\21\
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    \21\ Id.
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    The Exchange notes that under the initial proposed Fee Schedule it 
will pay a higher rebate for Added Displayed Volume than the fee it 
charges for removing such volume, and as such the Exchange will have a 
negative net capture (i.e., will lose money) with respect to such 
transactions. The Exchange notes that it will only utilize a pricing 
structure whereby it maintains a negative net capture with respect to 
such transactions initially upon its launch and for a limited time 
thereafter in an effort to encourage market participants to join, 
connect to, and participate on the Exchange. As noted above, the 
Exchange will operate in a highly competitive market, and the Exchange 
believes this initial pricing structure will enable it to effectively 
compete with other exchanges by attracting Members and order flow to 
the Exchange, which will help the Exchange to gain market share for 
executions. The Exchange expects to modify its pricing structure after 
it has gained sufficient participation from

[[Page 63624]]

market participants to eliminate the negative net capture and instead 
be profitable with respect to such transactions. The Exchange believes 
the initial pricing structure, including the negative net capture for 
Added Displayed Volume transactions, is designed to incentivize market 
participants to add aggressively priced displayed liquidity and direct 
their order flow to the Exchange, which the Exchange believes would 
promote price discovery and price formation and deepen liquidity that 
is subject to the Exchange's transparency, regulation, and oversight as 
an exchange, thereby enhancing market quality to the benefit of all 
Members and investors. The Exchange does not believe that the negative 
net capture with respect to Added Displayed Volume transactions will 
materially impact the capitalization of the Exchange or otherwise 
impair the Exchange's ability to operate or regulate itself. The 
Exchange is well-capitalized and able to absorb losses resulting from a 
negative net capture, particularly given the Exchange's intention to 
operate in this fashion on a temporary basis. Moreover, the Exchange's 
parent company, MEMX Holdings LLC, has agreed to provide adequate 
funding for the Exchange's operations, including the regulation of the 
Exchange, and to reimburse the Exchange for its costs and expenses to 
the extent the Exchange's assets are insufficient to meets its costs 
and expenses.
    With respect to orders routed to other markets, the Exchange also 
believes that it is appropriate, reasonable, and consistent with the 
Act to charge a standard fee of $0.0030 for Routed Removed Volume 
because this fee is similar to the fees charged by other exchanges for 
routed orders that remove liquidity from the destination market.\22\ 
The Exchange's initial fee for routing is intended to be a simple and 
transparent fee for Members that wish to use routing services provided 
by the Exchange. The Exchange reiterates that the routing services 
offered by the Exchange and its affiliated broker-dealer are completely 
optional and that the Exchange operates in a highly competitive market 
in which market participants can readily select between various 
providers of routing services with different product offerings and 
different pricing. The Exchange believes that its flat fee structure 
for orders routed to all away venues is a fair and equitable approach 
to pricing, as it will provide certainty with respect to execution 
fees. As a general matter, the Exchange believes that the proposed fees 
will allow it to recoup and cover its costs of providing routing 
services and to make some additional profit in exchange for the 
services it provides. The Exchange also believes the standard fee for 
Routed Removed Volume is an equitable and not an unfairly 
discriminatory allocation of fees because it applies equally to all 
Members.
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    \22\ For example, the New York Stock Exchange trading fee 
schedule on its public website reflects a standard fee for routing 
of $0.0035, with a tier that provides a firm the ability to pay a 
reduced routing fee of $0.0030; see https://www.nyse.com/markets/nyse/trading-info/fees. The Nasdaq Stock Market trading fee schedule 
on its public website reflects a standard routing fee of $0.0030; 
see http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The 
Cboe BZX trading fee schedule on its public website reflects a 
standard fee for routing of $0.0030; see https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    The Exchange also believes that not charging a fee for membership, 
market data products, physical connectivity and application sessions is 
appropriate, reasonable, and consistent with the Act because it may 
incentivize broker-dealers to become Members of the Exchange and to 
therefore direct order flow to the Exchange, and such orders will have 
the benefit of exchange transparency, regulation, and oversight. One of 
the primary objectives of MEMX is to provide competition and to reduce 
fixed costs imposed upon the industry. As such, while MEMX does intend 
to adopt fees other than transaction fees and such other fees as set 
forth in Rule 15.1 in the future, MEMX is not doing so at this time 
and, when it does, it intends to do so in a fair and transparent 
manner. As noted above, MEMX will operate in a highly competitive 
environment, and not charging fees for such services and access is 
designed to enable it to compete effectively and to encourage market 
participants to connect to the Exchange.
    In conclusion, the Exchange also submits that its proposed fee 
structure satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of 
the Act for the reasons discussed above in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
its Members and other persons using its facilities, does not permit 
unfair discrimination between customers, issuers, brokers, or dealers, 
and is designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system and in general to protect investors 
and the public interest, particularly as the proposal neither targets 
nor will it have a disparate impact on any particular category of 
market participant. As described more fully below in the Exchange's 
statement regarding the burden on competition, the Exchange believes 
that it is subject to significant competitive forces, and that its 
proposed fee and rebate structure is an appropriate effort to address 
such forces.
Regulatory Fees
    The Exchange believes that proposed Rule 15.1(e) is consistent with 
the provisions of Section 6(b) \23\ of the Act in general, and furthers 
the objectives of Section 6(b)(4) \24\ of the Act, in particular, in 
that it provides for the equitable allocation of reasonable fees and 
other charges among its Members, and does not unfairly discriminate 
between customers, issuers, brokers and dealers. All similarly situated 
Members are subject to the same fee structure, and every Member firm 
must use the CRD system for registration and disclosure.
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    \23\ 15 U.S.C. 78f.
    \24\ 15 U.S.C. 78f(b)(4).
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    The proposed fees are reasonable because they are identical to 
those adopted by FINRA for use of the CRD system for disclosure and the 
registration of associated persons of FINRA members.\25\ As FINRA noted 
in its filing adopting its existing fees, it believes the fees are 
reasonable based on the increased costs associated with operating and 
maintaining the CRD system, and listed a number of enhancements made to 
the CRD system since the last fee increase, including: (1) 
Incorporation of various uniform registration form changes; (2) 
electronic fingerprint processing; (3) Web EFTTM, which 
allows subscribing firms to submit batch filings to the CRD system; (4) 
increases in the number and types of reports available through the CRD 
system; and (5) significant changes to BrokerCheck, including making 
BrokerCheck easier to use and expanding the amount of information made 
available through the system.\26\ These increased costs are similarly 
borne by FINRA when a Member that is not a member of FINRA uses the CRD 
system, so the fees collected for such use should mirror the fees 
assessed on FINRA members, as is proposed by the Exchange. FINRA 
further noted its belief that the proposed fees are reasonable because 
they help to ensure the integrity of the information in the CRD system, 
which is important because the Commission, FINRA, other self-regulatory 
organizations and state securities regulators use the CRD system

[[Page 63625]]

to make licensing and registration decisions, among other things.\27\
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    \25\ See Securities Exchange Act Release No. 67247 (June 25, 
2012), 77 FR 38866 (June 29, 2012) (SR-FINRA-2012-30).
    \26\ See id. at 77 FR 38866, 38868.
    \27\ See id.
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    The Exchange also believes that the proposed fees, like FINRA's 
fees, are consistent with an equitable allocation of fees because the 
fees will apply equally to all individuals and Members required to 
report information to the CRD system. Thus, those members that register 
more individuals or submit more filings through the CRD system will 
generally pay more in fees than those members that use the CRD system 
to a lesser extent. In addition, the proposed fees, like FINRA's fees, 
are equitable and not unfairly discriminatory because they will result 
in the same regulatory fees being charged to all Members required to 
report information to the CRD system and for services performed by 
FINRA, regardless of whether or not such Member is a FINRA member.

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

Transaction Fees
    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Rather, as 
discussed above, the Exchange believes that the proposed change would 
encourage the submission of additional order flow to a public exchange, 
thereby promoting market depth, execution incentives and enhanced 
execution opportunities, as well as price discovery and transparency 
for all Members. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering competition among orders, which promotes ``more efficient 
pricing of individual stocks for all types of orders, large and 
small.'' \28\
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    \28\ See supra note 17, at 70 FR 37496, 37499.
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    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes that the proposed pricing structure will increase 
competition and is intended to draw volume to the Exchange as it 
commences operations. The Exchange believes that the ever-shifting 
market share among the exchanges from month to month demonstrates that 
market participants can shift order flow or discontinue to reduce use 
of certain categories of products, in response to new or different 
pricing structures being introduced into the market. Accordingly, 
competitive forces constrain the Exchange's transaction fees and 
rebates, and market participants can readily trade on competing venues 
if they deem pricing levels at those other venues to be more favorable. 
As a new exchange, the Exchange expects to face intense competition 
from existing exchanges and other non-exchange venues that provide 
markets for equities trading. With respect to the Exchange's initial 
pricing whereby it will operate with a negative net capture with 
respect to transactions involving Added Displayed Volume, the Exchange 
is proposing this pricing initially upon its launch and for a limited 
time thereafter in an effort to encourage market participants to join, 
connect to, and participate on the Exchange. The Exchange expects to 
modify its pricing structure after it has gained sufficient 
participation from market participants to eliminate the negative net 
capture and instead be profitable with respect to such transactions. 
Although this pricing incentive is intended to attract liquidity to the 
Exchange, most other exchanges in operation today already offer 
multiple incentives to their participants, including tiered pricing 
that provides higher rebates or discounted executions, and other 
exchanges will be able to modify such incentives in order to compete 
with the Exchange. With respect to the specific pricing resulting in 
the negative net capture, the Exchange also notes that the proposed fee 
for Removed Volume is neither the lowest fee in the market today \29\ 
nor is the proposed rebate provided to Added Displayed Volume the 
highest rebate in the market today.\30\ Accordingly, with respect to a 
participant deciding to either submit an order to add liquidity or 
seeking to remove liquidity, there are multiple exchanges that will 
continue to be competitively priced for such orders when compared to 
the Exchange's pricing. Further, while pricing incentives do cause 
shifts of liquidity between trading centers, market participants make 
determinations on where to provide liquidity or route orders to take 
liquidity based on factors other than pricing, including technology, 
functionality, and other considerations. Consequently, the Exchange 
believes that the degree to which its fees and rebates could impose any 
burden on competition is extremely limited, and does not believe that 
such fees would burden competition of Members or competing venues in a 
manner that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \29\ For example, the Investors Exchange fee schedule on its 
public website reflects standard fees for matched liquidity of 
$0.0009 for shares executed at or above $1.00, which would apply to 
all orders removing liquidity; see https://iextrading.com/trading/fees/. Other markets offering ``taker/maker'' pricing provide 
rebates to provide liquidity; see, e.g., Nasdaq BX fee schedule, at 
http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing; Cboe BYX fee 
schedule at https://markets.cboe.com/us/equities/membership/fee_schedule/byx/.
    \30\ See supra note 19.
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    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed fees and rebates apply equally to all Members. The proposed 
pricing structure is intended to encourage market participants to add 
displayed and non-displayed liquidity to the Exchange by providing 
rebates that are comparable to those offered by other exchanges as well 
as to provide a competitive rate charged for removing liquidity, which 
the Exchange believes will help to encourage Members to send orders to 
the Exchange to the benefit of all Exchange participants. As the 
proposed rates are equally applicable to all market participants, the 
Exchange does not believe there is any burden on intramarket 
competition.
Regulatory Fees
    The Exchange does not believe that proposed Rule 15.1(e) will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Specifically, 
the Exchange believes that the proposed fees in this Rule will result 
in the same regulatory fees being charged to all Members required to 
report information to the CRD system and for services performed by 
FINRA, regardless of whether or not such Members are FINRA members.

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 \31\ and Rule 19b-4(f)(2) \32\ thereunder.
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    \31\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \32\ 17 CFR 240.19b-4(f)(2).

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[[Page 63626]]

    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 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MEMX-2020-10 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-2020-10. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MEMX-2020-10 and should be submitted on 
or before October 29, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22249 Filed 10-7-20; 8:45 am]
BILLING CODE 8011-01-P


