[Federal Register Volume 86, Number 175 (Tuesday, September 14, 2021)]
[Notices]
[Pages 51210-51216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19728]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92896; File No. SR-MEMX-2021-11]


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

September 8, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 31, 2021, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to amend the Exchange's fee schedule applicable to Members \3\ (the 
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The 
Exchange proposes to implement the changes to the Fee Schedule pursuant 
to this proposal on September 1, 2021. The text of the proposed rule 
change is provided in Exhibit 5.
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    \3\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
    The purpose of the proposed rule change is to amend the Fee 
Schedule to: (i) Include an additional Liquidity Provision Tier 
applicable to the rebates for executions of orders in securities priced 
at or above $1.00 per share that add displayed liquidity to the 
Exchange (such orders, ``Added Displayed Volume'') and modify the 
required criteria under the existing Liquidity Provision Tier; (ii) 
introduce a tiered pricing structure for the Displayed Liquidity 
Incentive (``DLI'') by including an additional DLI Tier and reducing 
the rebate provided under the existing DLI; (iii) increase the fee 
under the Liquidity Removal Tier for executions of orders in securities 
priced at or above $1.00 per share that remove liquidity from the 
Exchange (such orders, ``Removed Volume''); and (iv) reduce the 
standard rebate for executions of Added Displayed Volume.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 16% of the total market share of 
executed volume of equities trading.\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 
the Exchange currently represents approximately 3% of the overall 
market share.\5\ The Exchange in particular operates a ``Maker-Taker'' 
model whereby it provides rebates to Members that add liquidity to the 
Exchange and charges fees to Members that remove liquidity from the 
Exchange. The Fee Schedule sets forth the standard rebates and fees 
applied per share for orders that add and remove liquidity, 
respectively. Additionally, in response to the competitive environment, 
the Exchange also offers tiered pricing, which provides Members with 
opportunities to qualify for higher rebates or lower fees where certain 
volume criteria and thresholds are met. Tiered pricing provides an 
incremental incentive for Members to strive for higher tier levels, 
which provides increasingly higher benefits or discounts for satisfying 
increasingly more stringent criteria.
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    \4\ Market share percentage calculated as of August 30, 2021. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \5\ Id.
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Liquidity Provision Tiers
    Currently, the Exchange provides a standard rebate of $0.0031 per 
share for executions of Added Displayed Volume, which the Exchange is 
proposing to reduce to $0.0028 per share, as further described below. 
The Exchange also currently offers, in addition to other incentives, a 
Liquidity Provision Tier in which a Member may receive an enhanced 
rebate of $0.00335 per share for executions of Added Displayed Volume 
by achieving an ADAV \6\ of at least 15,000,000 shares. Now, the 
Exchange proposes to rename the existing Liquidity Provision Tier to 
Liquidity Provision Tier 1, modify the required criteria under 
Liquidity Provision Tier 1, and add a new Liquidity Provision Tier 2. 
Specifically, the Exchange proposes to modify the required criteria 
under Liquidity Provision Tier 1 such that a Member would now qualify 
for Liquidity Provision Tier 1 by achieving an ADAV of at least 0.20% 
of the TCV.\7\ Members that qualify for Liquidity Provision Tier 1 
would continue to receive an enhanced rebate of $0.00335 per share

[[Page 51211]]

for executions of Added Displayed Volume and a rebate of 0.05% of the 
total dollar value of the transaction for executions of orders in 
securities priced below $1.00 per share that add displayed liquidity to 
the Exchange.\8\ The Exchange believes that basing qualification for 
Liquidity Provision Tier 1 (and proposed new Liquidity Provision Tier 
2, as described below) on an ADAV threshold that is a percentage of the 
TCV, rather than an ADAV threshold that is a specified number of 
shares, as it is today, is appropriate so that the threshold is 
variable based on overall volumes in the equities industry, which 
fluctuate from month to month. The Exchange further believes that 
several Members that currently qualify for Liquidity Provision Tier 1 
would continue to qualify under the proposed new criteria, which the 
Exchange believes does not represent a significant departure from the 
criteria currently required under such tier based on overall equities 
volumes in recent months and that others may still qualify for an 
enhanced--albeit slightly lower--rebate under the proposed new 
Liquidity Provision Tier 2, as described below.
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    \6\ As set forth on the Fee Schedule, ``ADAV'' means the average 
daily added volume calculated as the number of shares added per day, 
which is calculated on a monthly basis.
    \7\ As set forth on the Fee Schedule, ``TCV'' means total 
consolidated volume calculated as the volume reported by all 
exchanges and trade reporting facilities to a consolidated 
transaction reporting plan for the month for which the fees apply.
    \8\ The pricing for Liquidity Provision Tier 1 is referred to by 
the Exchange on the Fee Schedule under the new description ``Added 
displayed volume, Liquidity Provision Tier 1'' with a Fee Code of 
``B1'', ``D1'' or ``J1'', as applicable, to be provided by the 
Exchange on the monthly invoices provided to Members. The Exchange 
notes that because the determination of whether a Member qualifies 
for a certain pricing tier for a particular month will not be made 
until after the month-end, the Exchange will provide the Fee Codes 
otherwise applicable to such transactions on the execution reports 
provided to Members during the month and will only designate the Fee 
Codes applicable to the achieved pricing tier on the monthly 
invoices, which are provided after such determination has been made, 
as the Exchange does for its tier-based pricing today.
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    The Exchange is also proposing to add a new Liquidity Provision 
Tier 2 in which it will provide an enhanced rebate of $0.0031 per share 
for executions of Added Displayed Volume for Members that qualify for 
Liquidity Provision Tier 2 by achieving an ADAV of at least 0.10% of 
the TCV.\9\ The Exchange proposes to provide Members that qualify for 
Liquidity Provision Tier 2 a rebate of 0.05% of the total dollar volume 
of the transaction for executions of orders in securities priced below 
$1.00 per share that add displayed liquidity to the Exchange, which is 
the same rebate that is applicable to such executions for all Members 
(i.e., including those that do not qualify for any Liquidity Provision 
Tier). The proposed Liquidity Provision Tier 2 is designed to encourage 
Members to maintain or increase their orders that add liquidity on the 
Exchange in order to qualify for an enhanced rebate for executions of 
Added Displayed Volume, thereby contributing to a deeper and more 
liquid market to the benefit of all market participants and enhancing 
the attractiveness of the Exchange as a trading venue. Further, the 
proposed new Liquidity Provision Tier 2 would provide Members that 
would not qualify for Liquidity Provision Tier 1 with an opportunity to 
still qualify for an enhanced--albeit slightly lower--rebate for 
executions of Added Displayed Volume in a manner that, coupled with the 
higher enhanced rebate provided under Liquidity Provision Tier 1, 
provides increasingly higher benefits for satisfying increasingly more 
stringent criteria.
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    \9\ The pricing for Liquidity Provision Tier 2 is referred to by 
the Exchange on the Fee Schedule under the new description ``Added 
displayed volume, Liquidity Provision Tier 2'' with a Fee Code of 
``B2'', ``D2'' or ``J2'', as applicable, to be provided by the 
Exchange on the monthly invoices provided to Members.
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    The Exchange notes that the rebates provided for executions of 
Added Displayed Volume under the Liquidity Provision Tiers, including 
the current rebate under Liquidity Provision Tier 1 (i.e., $0.00335 per 
share) and the proposed rebate under Liquidity Provision Tier 2 (i.e., 
$0.0031 per share), are comparable to, and competitive with, the 
rebates for executions of liquidity-adding displayed orders provided by 
at least one other exchange under similar volume-based tiers.\10\
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    \10\ See the Cboe BZX Exchange, Inc. (``Cboe BZX'') equities 
trading fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which 
reflects rebates provided under ``Add Volume Tiers''--tiers based on 
a member achieving certain ADAV thresholds--ranging from $0.0025 to 
$0.0031 per share for adding displayed liquidity to the Cboe BZX 
exchange.
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    The Exchange also proposes to amend the Fee Schedule to rename the 
``Liquidity Provision Tier'' heading to ``Liquidity Provision Tiers'' 
to reflect the addition of a second tier and to reorganize the 
information related to such tiers, including the applicable rebates and 
required criteria, into a table format. The Exchange believes that 
utilizing a table format for its tiered pricing will make the Fee 
Schedule easier for Members to navigate and understand.
DLI Tiers
    The Exchange is also proposing to introduce a tiered pricing 
structure for the DLI by including an additional DLI Tier and reducing 
the rebate provided under the existing DLI. As noted in the Exchange's 
proposal to adopt the DLI, the DLI is intended to encourage Members to 
promote price discovery and market quality by quoting at the NBBO for a 
significant portion of each day (i.e., through the applicable quoting 
requirement \11\) in a large number of securities, generally, and in 
the DLI Target Securities,\12\ in particular (i.e., through the 
applicable securities requirements \13\), thereby benefitting the 
Exchange and investors by providing improved trading conditions for all 
market participants through narrower bid-ask spreads and increased 
depth of liquidity available at the NBBO in a broad base of securities, 
including the DLI Target Securities, and committing capital to support 
the execution of orders.\14\
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    \11\ As set forth on the Fee Schedule, ``quoting requirement'' 
means the requirement that a Member's NBBO Time be at least 25%. As 
set forth on the Fee Schedule, ``NBBO Time'' means the aggregate of 
the percentage of time during regular trading hours during which one 
of a Member's market participant identifiers (``MPIDs'') has a 
displayed order of at least one round lot at the national best bid 
or the national best offer.
    \12\ As set forth on the Fee Schedule, ``DLI Target Securities'' 
means a list of securities designated as such, the universe of which 
will be determined by the Exchange and published on the Exchange's 
website.
    \13\ As set forth on the Fee Schedule, ``securities 
requirement'' means the requirement that a Member meets the quoting 
requirement in the applicable number of securities per trading day.
    \14\ See Securities Exchange Act Release No. 92150 (June 10, 
2021), 86 FR 32090 (June 16, 2021) (SR-MEMX-2021-07).
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    Currently, the Exchange provides an enhanced rebate of $0.0036 per 
share for executions of Added Displayed Volume for Members that qualify 
for the DLI by achieving an NBBO Time of at least 25% in an average of 
at least 250 securities, at least 75 of which must be DLI Target 
Securities, per trading day during the month.\15\ Now, the Exchange 
proposes to rename the existing DLI to DLI Tier 2, reduce the rebate 
provided under DLI Tier 2, and add a new DLI Tier 1. Specifically, the 
Exchange proposes to reduce the rebate provided under DLI Tier 2 for 
executions of Added Displayed Volume from $0.0036 per share to $0.0035 
per share.\16\ The Exchange does not propose to change the required 
criteria for a Member to qualify for DLI Tier 2 or the rebate provided 
under DLI Tier 2 for executions of orders in securities priced

[[Page 51212]]

below $1.00 per share that add displayed liquidity to the Exchange 
(i.e., 0.05% of the total dollar value of the transaction).
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    \15\ Under the existing DLI (which the Exchange is proposing to 
rename to DLI Tier 2), each of the 250 securities requirement and 
the 75 DLI Target Securities requirement is a ``securities 
requirement'' as that term is used on the Fee Schedule for purposes 
of determining a Member's qualification.
    \16\ The pricing for DLI Tier 2 is referred to by the Exchange 
on the Fee Schedule under the new description ``Added displayed 
volume, DLI Tier 2'' with a Fee Code of ``Bq2'', ``Dq2'' or ``Jq2'', 
as applicable, to be provided by the Exchange on the monthly 
invoices provided to Members.
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    Additionally, the Exchange is proposing to add a new DLI Tier 1 in 
which it will provide an enhanced rebate of $0.0036 per share for 
executions of Added Displayed Volume for Members that qualify for DLI 
Tier 1 by achieving an NBBO Time of at least 25% in an average of at 
least 1,000 securities, at least 125 of which must be DLI Target 
Securities, per trading day during the month.\17\ The Exchange proposes 
to provide Members that qualify for DLI Tier 1 a rebate of 0.05% of the 
total dollar volume of the transaction for executions of orders in 
securities priced below $1.00 per share that add displayed liquidity to 
the Exchange, which is the same rebate that is applicable to such 
executions for all Members (i.e., including those that do not qualify 
for any DLI Tier). The Exchange notes that the same definitions and 
notes currently set forth under the ``Displayed Liquidity Incentive'' 
heading on the Fee Schedule and the calculation methodologies that are 
applicable to the existing DLI (proposed to be renamed to DLI Tier 2) 
would similarly apply to the proposed new DLI Tier 1.\18\
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    \17\ Under the proposed new DLI Tier 1, each of the 1,000 
securities requirement and the 125 DLI Target Securities requirement 
is a ``securities requirement'' as that term is used on the Fee 
Schedule for purposes of determining a Member's qualification. The 
pricing for DLI Tier 1 is referred to by the Exchange on the Fee 
Schedule under the new description ``Added displayed volume, DLI 
Tier 1'' with a Fee Code of ``Bq1'', ``Bq1'' or ``Jq1'', as 
applicable, to be provided by the Exchange on the monthly invoices 
provided to Members.
    \18\ See supra note 14.
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    As is the case through the applicable quoting requirement and 
securities requirements under the existing DLI Tier 2, the proposed new 
DLI Tier 1 is designed to enhance market quality both in a broad manner 
with respect to all securities traded on the Exchange, through the 
1,000 securities requirement, and in a targeted manner with respect to 
certain designated securities in which the Exchange specifically seeks 
to inject additional quoting competition (i.e., the DLI Target 
Securities), through the 125 DLI Target Securities requirement. The 
purpose of reducing the rebate provided under the existing DLI Tier 2 
(i.e., from $0.0036 per share to $0.0035 per share) and providing a 
higher rebate under the proposed new DLI Tier 1--which is the same as 
the current rebate provided under the existing DLI Tier 2 (i.e., 
$0.0036 per share)--is to incentivize Members that consistently quote 
on the Exchange to strive to do so in a larger number of securities, 
generally, and in a larger number of DLI Target Securities, in 
particular, in a manner that provides increasingly higher benefits for 
satisfying increasingly more stringent criteria. Thus, the DLI Tiers 
are not dissimilar from volume-based incentives that have been widely 
adopted by exchanges, including the Exchange, in that the DLI Tiers are 
designed to encourage Members that quote on the Exchange to maintain or 
increase their quoting activity on the Exchange by providing an 
incremental incentive for Members to strive for higher tier levels, 
thereby contributing to a deeper and more liquid market to the benefit 
of all market participants and enhancing the attractiveness of the 
Exchange as a trading venue. Through the enhanced rebates provided to 
Members that qualify for the DLI Tiers, the Exchange hopes to provide 
improved trading conditions for all market participants through 
narrower bid-ask spreads and increased depth of liquidity available at 
the NBBO for a large number of securities, generally, including the DLI 
Target Securities, in particular.
    The Exchange also proposes to amend the Fee Schedule to rename the 
``Displayed Liquidity Incentive'' heading to ``Displayed Liquidity 
Incentive Tiers'' to reflect the introduction of a tiered pricing 
structure for the DLI and the addition of a second tier and to 
reorganize the information related to such tiers, including the 
applicable rebates and required criteria, into a table format. As noted 
above, the Exchange believes that utilizing a table format for its 
tiered pricing will make the Fee Schedule easier for Members to 
navigate and understand.
Increased Fee Under Liquidity Removal Tier
    Currently, the Exchange charges a standard fee of $0.0028 per share 
for executions of Removed Volume. The Exchange also currently offers a 
Liquidity Removal Tier in which qualifying Members are charged a lower 
fee of $0.00265 per share for executions of Removed Volume. Now, the 
Exchange proposes to rename the existing Liquidity Removal Tier to 
Liquidity Removal Tier 1 and to increase the fee charged under 
Liquidity Removal Tier 1 for executions of Removed Volume to $0.0027 
per share.\19\ The Exchange does not propose to change the required 
criteria for a Member to qualify for Liquidity Removal Tier 1 or the 
fee charged under Liquidity Removal Tier 1 for executions of orders in 
securities priced below $1.00 per share that remove liquidity from the 
Exchange (i.e., 0.05% of the total dollar value of the transaction).
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    \19\ The pricing for Liquidity Removal Tier 1 is referred to by 
the Exchange on the Fee Schedule under the new description ``Removed 
volume from MEMX Book, Liquidity Removal Tier 1'' with a Fee Code of 
``R1'' to be provided by the Exchange on the monthly invoices 
provided to Members.
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    The purpose of increasing the fee charged for executions of Removed 
Volume under Liquidity Removal Tier 1 is for business and competitive 
reasons, as the Exchange believes that increasing such fee as proposed 
would generate additional revenue to offset some of the costs 
associated with the Exchange's current pricing structure, which 
provides various rebates for liquidity-adding orders, and the 
Exchange's operations generally, in a manner that is consistent with 
the Exchange's overall pricing philosophy of encouraging added 
liquidity. The Exchange notes that despite the modest increase proposed 
herein, the proposed fee charged under Liquidity Removal Tier 1 for 
executions of Removed Volume (i.e., $0.0027 per share) remains lower 
than, and competitive with, the fee charged for executions of 
liquidity-removing orders charged by at least one other exchange under 
similar volume-based tiers.\20\
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    \20\ See the Cboe EDGX Exchange, Inc. (``Cboe EDGX'') equities 
trading fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/), which 
reflects a fee charged under ``Remove Volume Tiers''--tiers based on 
a member achieving certain step-up ADAV and ADV volume thresholds--
of $0.00275 per share for removing volume from the Cboe EDGX 
exchange.
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    The Exchange also proposes to amend the Fee Schedule to reorganize 
the information related to Liquidity Removal Tier 1, including the 
applicable rebate and required criteria, into a table format. As noted 
above, the Exchange believes that utilizing a table format for its 
tiered pricing will make the Fee Schedule easier for Members to 
navigate and understand.
Reduced Standard Rebate for Added Displayed Volume
    Lastly, the Exchange proposes to reduce the standard rebate for 
executions of Added Displayed Volume. Currently, the Exchange provides 
a standard rebate of $0.0031 per share for executions of Added 
Displayed Volume. The Exchange now proposes to reduce the standard 
rebate for executions of Added Displayed Volume to $0.0028 per 
share.\21\ The Exchange notes that

[[Page 51213]]

executions of orders in securities priced below $1.00 per share that 
add displayed liquidity to the Exchange will continue to receive the 
standard rebate applicable to such executions (i.e., 0.05% of the total 
dollar value of the transaction).
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    \21\ The standard pricing for executions of Added Displayed 
Volume is referred to by the Exchange on the Fee Schedule under the 
existing description ``Added displayed volume'' with a Fee Code of 
``B'', ``D'' or ``J'', as applicable, on the execution reports 
provided to Members.
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    The purpose of reducing the standard rebate for executions of Added 
Displayed Volume is also for business and competitive reasons, as the 
Exchange believes the reduction of such rebate would decrease the 
Exchange's expenditures with respect to transaction pricing in a manner 
that is still consistent with the Exchange's overall pricing philosophy 
of encouraging added displayed liquidity. The Exchange notes that 
despite the modest reduction proposed herein, the proposed standard 
rebate for executions of Added Displayed Volume (i.e., $0.0028 per 
share) remains higher than, and competitive with, the standard rebates 
provided by other exchanges for executions of orders in securities 
priced at or above $1.00 per share that add displayed liquidity.\22\
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    \22\ See, e.g., the Nasdaq PSX equities trading fee schedule on 
its public website (available at http://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing), which reflects a standard rebate of 
$0.0020 per share to add displayed liquidity in securities priced at 
or above $1.00 per share; the NYSE Arca equities trading fee 
schedule on its public website (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf)), 
which reflects a standard rebate of $0.0020 per share to add 
displayed liquidity in securities priced at or above $1.00 per 
share.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\23\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\24\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its Members and other persons using its facilities 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \23\ 15 U.S.C. 78f.
    \24\ 15 U.S.C. 78f(b)(4) and (5).
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    As discussed above, the Exchange operates in a highly fragmented 
and competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive or incentives to be insufficient, and the 
Exchange represents only a small percentage of the overall market. The 
Commission and the courts have repeatedly expressed their preference 
for competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \25\
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    \25\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005).
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal reflects a reasonable and competitive pricing structure 
designed to incentivize market participants to direct their order flow 
to the Exchange and to enhance market quality to the benefit of all 
Members and market participants.
    The Exchange believes the proposed Liquidity Provision Tier 2 is 
reasonable because it would provide Members with an additional 
incentive to achieve a certain volume threshold on the Exchange. The 
Exchange notes that volume-based incentives and discounts have been 
widely adopted by exchanges, including the Exchange, and are 
reasonable, equitable, and non-discriminatory because they are open to 
all members on an equal basis and provide additional benefits or 
discounts that are reasonably related to: (i) The value to an 
exchange's market quality; (ii) associated higher levels of market 
activity, such as high levels of liquidity provision and/or growth 
patterns; and (iii) the introduction of higher volumes of orders into 
the price and volume discovery processes. The Exchange believes the 
proposed Liquidity Provision Tier 2 is equitable and not unfairly 
discriminatory for these same reasons, as it is available to all 
Members and is designed to encourage Members to maintain or increase 
their orders that add liquidity on the Exchange, thereby contributing 
to a deeper and more liquid market to the benefit of all market 
participants and enhancing the attractiveness of the Exchange as a 
trading venue. Moreover, the Exchange believes the proposed Liquidity 
Provision Tier 2 is a reasonable means to incentivize such increased 
activity, as it provides Members with an additional opportunity to 
qualify for an enhanced rebate for executions of Added Displayed Volume 
with less stringent criteria than Liquidity Provision Tier 1.
    Additionally, the Exchange believes the proposed enhanced rebate 
for executions of Added Displayed Volume under Liquidity Provision Tier 
2 (i.e., $0.0031 per share) is reasonable, in that it represents only a 
modest increase from the proposed standard rebate for such executions 
(i.e., $0.0028 per share) and is the same as the current standard 
rebate for such executions. Thus, the Exchange believes that it is 
reasonable, consistent with an equitable allocation of fees, and not 
unfairly discriminatory to provide an enhanced rebate for executions of 
Added Displayed Volume to Members that qualify for the Liquidity 
Provision Tier 2 in comparison with the standard rebate for such 
executions in recognition of the benefits that such Members provide to 
the Exchange and market participants, as described above, particularly 
as the magnitude of the enhanced rebate is not unreasonably high and 
is, instead, reasonably related to the enhanced market quality it is 
designed to achieve.
    The Exchange believes the proposed change to modify the required 
criteria for Liquidity Provision Tier 1 from an ADAV of at least 
15,000,000 shares to an ADAV of at least 0.20% of the TCV is reasonable 
because, as noted above, the Exchange believes that basing 
qualification for the Liquidity Provision Tiers on an ADAV threshold 
that is a percentage of the TCV, rather than an ADAV threshold that is 
a specified number of shares, is appropriate so that the threshold is 
variable based on overall volumes in the equities industry, which 
fluctuate from month to month. The Exchange further believes the 
proposed new criteria is equitable and non-discriminatory because all 
Members will continue to be eligible to qualify for Liquidity Provision 
Tier 1 and have the opportunity to receive the corresponding enhanced 
rebate if such criteria is achieved. Additionally, as noted above, the 
Exchange believes that several Members that currently qualify for 
Liquidity Provision Tier 1 would continue to qualify under the proposed 
new criteria, which the Exchange believes does not represent a 
significant departure from the criteria currently required under such 
tier based on overall equities volumes in recent months. The Exchange 
notes that should

[[Page 51214]]

a Member not meet the proposed new criteria for Liquidity Provision 
Tier 1, such Member would merely not receive that corresponding 
enhanced rebate, and such Member would still have an opportunity to 
qualify for an enhanced--albeit slightly lower--rebate for executions 
of Added Displayed Volume under the proposed Liquidity Provision Tier 
2, which has less stringent criteria, as described above.
    The Exchange further believes that the proposed new criteria for 
Liquidity Provision Tier 1 and the proposed criteria and rebate for 
Liquidity Provision Tier 2 are reasonable, in that the proposed new 
criteria for Liquidity Provision Tier 1 is incrementally more difficult 
to achieve than that for Liquidity Provision Tier 2, and thus, 
Liquidity Provision Tier 1 appropriately offers a higher rebate 
commensurate with the corresponding higher volume threshold. Therefore, 
the Exchange believes the Liquidity Provision Tiers, as proposed, are 
consistent with an equitable allocation of fees and rebates, as the 
more stringent criteria correlates with the corresponding tier's higher 
rebate. The Exchange further believes that the rebates provided under 
the Liquidity Provision Tiers, as proposed, including the current 
rebate for Liquidity Provision Tier 1 (i.e., $0.00335 per share) and 
the proposed rebate for Liquidity Provision Tier 2 (i.e., $0.0031 per 
share), are reasonable because, as noted above, such rebates are 
comparable to, and competitive with, the rebates for executions of 
liquidity-adding displayed orders provided by at least one other 
exchange under similar volume-based tiers.\26\
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    \26\ See supra note 10.
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    The Exchange also believes that it is reasonable, consistent with 
an equitable allocation of fees and rebates, and not unfairly 
discriminatory to provide Members that qualify for the proposed 
Liquidity Provision Tier 2 a rebate of 0.05% of the total dollar value 
of the transaction for executions of orders in securities priced below 
$1.00 per share that add liquidity to the Exchange, as this is the same 
rebate that would be applicable to such executions for all Members 
(i.e., including those that do not qualify for any Liquidity Provision 
Tier), which is also the case under the Exchange's current pricing.
    As noted above, the DLI Tiers are not dissimilar from volume-based 
incentives that have been widely adopted by exchanges, including the 
Exchange's Liquidity Provision Tiers described above, in that the DLI 
Tiers are designed to encourage Members that quote on the Exchange to 
maintain or increase their quoting activity on the Exchange by 
providing an incremental incentive for Members to strive for higher 
tier levels by achieving the applicable quoting requirement in a larger 
number of securities, generally, and in a larger number of DLI Target 
Securities, in particular, in a manner that provides increasingly 
higher benefits for satisfying increasingly more stringent criteria. 
Thus, the Exchange believes the proposed new DLI Tier 1 is equitable 
and not unfairly discriminatory for the same reasons described above 
with respect to the Liquidity Provision Tiers, as it is available to 
all Members and is designed to encourage Members to promote price 
discovery and market quality both in a broad manner with respect to all 
securities traded on the Exchange, through the 1,000 securities 
requirement, and in a targeted manner with respect to certain 
designated securities in which the Exchange specifically seeks to 
inject additional quoting competition (i.e., the DLI Target 
Securities), through the 125 DLI Target Securities requirement, thereby 
benefitting the Exchange and investors by providing improved trading 
conditions for all market participants through narrower bid-ask spreads 
and increased depth of liquidity available at the NBBO in a broad base 
of securities, including the DLI Target Securities, and committing 
capital to support the execution of orders. Moreover, the Exchange 
believes the addition of proposed DLI Tier 1 is a reasonable means to 
incentivize such increased activity, as it provides Members with an 
additional opportunity to qualify for an enhanced rebate for executions 
of Added Displayed Volume.
    The Exchange further believes that the proposed reduced rebate for 
DLI Tier 2 and the proposed criteria and rebate for DLI Tier 1 are 
reasonable, in that the proposed criteria for DLI Tier 1 is 
incrementally more difficult than that for DLI Tier 2, and thus, 
appropriately offers a higher rebate commensurate with the more 
stringent securities requirements. Therefore, the Exchange believes the 
DLI Tiers, as proposed, are consistent with an equitable allocation of 
fees and rebates, as the more stringent criteria correlates with the 
corresponding tier's higher rebate.
    Additionally, the Exchange believes that it is reasonable, 
consistent with an equitable allocation of fees, and not unfairly 
discriminatory to provide an enhanced rebate for executions of Added 
Displayed Volume to Members that qualify for the DLI Tier 1 in 
comparison with the standard rebate for such executions in recognition 
of the benefits that such Members provide to the Exchange and market 
participants, as described above, particularly as the magnitude of the 
enhanced rebate is not unreasonably high and is, instead, reasonably 
related to the enhanced market quality it is designed to achieve. The 
Exchange notes that the proposed enhanced rebate provided under the DLI 
Tier 1 is the same as the current rebate provided under the existing 
DLI Tier 2 (i.e., $0.0036 per share), and thus, is reasonable. The 
Exchange further notes that Members that do not meet the proposed DLI 
Tier 1's requirements may still qualify for an enhanced rebate that is 
higher than the standard rebate for executions of Added Displayed 
Volume through the existing DLI Tier 2, which has less stringent 
securities requirements, or the Liquidity Provision Tiers, which do not 
require a Member to consistently quote at the NBBO across a broad range 
of securities.
    The Exchange believes that it is reasonable, consistent with an 
equitable allocation of fees and rebates, and not unfairly 
discriminatory to provide Members that qualify for the proposed new DLI 
Tier 1 a rebate of 0.05% of the total dollar value of the transaction 
for executions of orders in securities priced below $1.00 per share 
that add liquidity to the Exchange, as this is the same rebate that 
would be applicable to such executions for all Members (i.e., including 
those that do not qualify for any DLI Tier), which is also the case 
under the Exchange's current pricing.
    The Exchange believes that the proposed changes to increase the fee 
charged under Liquidity Removal Tier 1 for executions of Removed Volume 
and to reduce the standard rebate for executions of Added Displayed 
Volume are reasonable, equitable, and consistent with the Act because 
such changes are designed to generate additional revenue and decrease 
the Exchange's expenditures with respect to transaction pricing in 
order to offset some of the costs associated with the Exchange's 
current pricing structure, which provides various rebates for 
liquidity-adding orders, and the Exchange's operations generally, in a 
manner that is consistent with the Exchange's overall pricing 
philosophy of encouraging added liquidity, as described above.
    The Exchange further believes that the proposed increased fee 
charged under Liquidity Removal Tier 1 for executions of Removed Volume 
(i.e., $0.0027 per share) is reasonable and appropriate because it 
continues to provide an opportunity for Members to qualify for a fee 
that is lower than the standard fee for executions of Removed Volume, 
it represents only a modest increase from

[[Page 51215]]

the current fee charged under Liquidity Removal Tier 1 for executions 
of Removed Volume (i.e., $0.00265 per share) and, as noted above, 
remains lower than, and competitive with, the fee charged for 
executions of liquidity-removing orders charged by at least one other 
exchange under similar volume-based tiers.\27\ Additionally, the 
Exchange believes that such proposed fee is equitably allocated and not 
unfairly discriminatory because it will continue to apply equally to 
all Members, in that all Members will continue to have the opportunity 
to achieve the tier's required criteria, which the Exchange is not 
proposing to modify with this proposal, and in turn, qualify for a 
lower fee for executions of Removed Volume.
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    \27\ See supra note 20.
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    Similarly, the Exchange believes that the proposed reduced standard 
rebate for executions of Added Displayed Volume (i.e., $0.0028 per 
share) is reasonable and appropriate because it represents only a 
modest decrease from the current standard rebate for executions of 
Added Displayed Volume (i.e., $0.0031 per share) and, as noted above, 
remains higher than, and competitive with, the standard rebates 
provided by other exchanges for executions of orders in securities 
priced at or above $1.00 per share that add displayed liquidity.\28\ 
The Exchange further believes that the proposed increased fee charged 
under Liquidity Removal Tier 1 for executions of Removed Volume and the 
proposed reduced standard rebate for executions of Added Displayed 
Volume are equitably allocated and not unfairly discriminatory because 
they both will apply equally to all Members.
---------------------------------------------------------------------------

    \28\ See supra note 22.
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    Lastly, the Exchange believes that the proposed changes to rename 
the Exchange's pricing tiers and section headings on the Fee Schedule 
to reflect tier numbering and the addition of new tiers, and to 
reorganize the information related to the Exchange's tiered pricing, 
including the applicable rebates and required criteria, into a table 
format are reasonable, equitable, and non-discriminatory because such 
changes are designed to ensure the Fee Schedule clearly reflects the 
Exchange's pricing structure and to make the Fee Schedule easier for 
Members to navigate and understand.
    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of 
the Act \29\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities and is not designed to unfairly 
discriminate between customers, issuers, brokers, or dealers. As 
described more fully below in the Exchange's statement regarding the 
burden on competition, the Exchange believes that its transaction 
pricing is subject to significant competitive forces, and that the 
proposed fees and rebates described herein are appropriate to address 
such forces.
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    \29\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposal will result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Instead, as discussed above, 
the proposal is intended to enhance market quality on the Exchange in a 
large number of securities, generally, and in the DLI Target 
Securities, in particular, and to encourage Members to maintain or 
increase their order flow on the Exchange, thereby promoting price 
discovery and contributing to a deeper and more liquid market to the 
benefit of all market participants. As a result, the Exchange believes 
the proposal would enhance its competitiveness as a market that 
attracts actionable orders, thereby making it a more desirable 
destination venue for its customers. For these reasons, the Exchange 
believes that the proposal furthers the Commission's goal in adopting 
Regulation NMS of fostering competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \30\
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    \30\ See supra note 25.
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Intramarket Competition
    The Exchange believes that the proposal would incentivize Members 
to promote price discovery and market quality by quoting at the NBBO 
for a significant portion of each day in a large number of securities, 
including the DLI Target Securities, to and maintain or increase their 
order flow on the Exchange, thereby contributing to a deeper and more 
liquid market to the benefit of all market participants and enhancing 
the attractiveness of the Exchange as a trading venue, which the 
Exchange believes, in turn, would continue to encourage market 
participants to direct additional order flow to the Exchange. Greater 
liquidity benefits all Members by providing more trading opportunities 
and encourages Members to send additional orders to the Exchange, 
thereby contributing to robust levels of liquidity, which benefits all 
market participants. The opportunity to qualify for the Liquidity 
Provision Tiers and the DLI Tiers, and thus receive the corresponding 
enhanced rebate for executions of Added Displayed Volume, would be 
available to all Members that meet the associated requirements in any 
month. Further, as noted above, the Exchange believes that the proposed 
new criteria for Liquidity Provision Tier 1, as well as the proposed 
new Liquidity Provision Tier 2 which has less stringent criteria, are 
attainable for several Members and that the respective enhanced rebates 
provided under such tiers are reasonably related to the enhanced market 
quality that such tiers are designed to promote. Similarly, the 
Exchange believes that the proposed DLI Tier 1's requirements, as well 
as the existing DLI Tier 2's requirements, are attainable for several 
Members that actively quote on exchanges and that the respective 
enhanced rebates provided under such tiers are reasonably related to 
the enhanced market quality that such tiers are designed to promote. 
Additionally, the proposed increased fee charged under Liquidity 
Removal Tier 1 for executions of Removed Volume and the proposed 
reduced standard rebate for executions of Added Displayed Volume would 
apply equally to all Members. As such, the Exchange believes the 
proposed changes would not impose any burden on intramarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.
Intermarket Competition
    As noted above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. Members have numerous 
alternative venues that they may participate on and direct their order 
flow to, including 15 other equities exchanges and numerous alternative 
trading systems and other off-exchange venues. As noted above, no 
single registered equities exchange currently has more than 
approximately 16% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or

[[Page 51216]]

discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates, including with respect to executions of 
Added Displayed Volume and Removed Volume, and market participants can 
readily choose to send their orders to other exchange and off-exchange 
venues if they deem fee levels at those other venues to be more 
favorable. As described above, the proposed changes are competitive 
proposals through which the Exchange is seeking to encourage additional 
order flow and quoting activity on the Exchange and to promote market 
quality through pricing incentives that are comparable to, and 
competitive with, pricing programs in place at other exchanges with 
respect to executions of Added Displayed Volume and Removed Volume,\31\ 
as well as to generate additional revenue to offset some of the costs 
associated with the Exchange's current pricing structure and its 
operations generally. Accordingly, the Exchange believes the proposal 
would not burden, but rather promote, intermarket competition by 
enabling it to better compete with other exchanges that offer similar 
incentives to market participants that enhance market quality and/or 
achieve certain volume criteria and thresholds.
---------------------------------------------------------------------------

    \31\ See supra notes 10, 20 and 22.
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    Additionally, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \32\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. SEC, the D.C. Circuit stated as follows: 
``[n]o one disputes that competition for order flow is `fierce.' . . . 
As the SEC explained, `[i]n the U.S. national market system, buyers and 
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders 
for execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers' . . . .''.\33\ Accordingly, the Exchange does not believe its 
proposed pricing changes impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \32\ See supra note 25.
    \33\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \34\ and Rule 19b-4(f)(2) \35\ thereunder.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \35\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MEMX-2021-11 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-2021-11. 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-2021-11 
and should be submitted on or before October 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19728 Filed 9-13-21; 8:45 am]
BILLING CODE 8011-01-P


