[Federal Register Volume 86, Number 219 (Wednesday, November 17, 2021)]
[Notices]
[Pages 64248-64254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25018]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93554; File No. SR-MEMX-2021-16]


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

November 10, 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 October 29, 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 November 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

[[Page 64249]]

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) Adopt a new Targeted Step-Up Tier to provide an 
additive rebate applicable to executions of orders (other than 
displayed Retail Orders \4\) in securities priced at or above $1.00 per 
share that add liquidity to the Exchange (such orders, ``Added 
Volume''); (ii) modify the required criteria under Liquidity Removal 
Tier 1; (iii) reduce the rebates provided under DLI Tier 1 and DLI Tier 
2 for executions of displayed orders in securities priced at or above 
$1.00 per share that add liquidity to the Exchange (such orders, 
``Added Displayed Volume''); and (iv) increase the standard fee for 
executions of orders in securities priced at or above $1.00 per share 
that remove liquidity from the Exchange (such orders, ``Removed 
Volume'').
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    \4\ A ``Retail Order'' means an agency or riskless principal 
order that meets the criteria of FINRA Rule 5320.03 that originates 
from a natural person and is submitted to the Exchange by a Retail 
Member Organization, provided that no change is made to the terms of 
the order with respect to price or side of market and the order does 
not originate from a trading algorithm or any other computerized 
methodology. See Exchange Rule 11.21(a).
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 15% of the total market share of 
executed volume of equities trading.\5\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange 
possesses significant pricing power in the execution of order flow, and 
the Exchange currently represents approximately 4% of the overall 
market share.\6\ The Exchange in particular operates a ``Maker-Taker'' 
model whereby it provides rebates to Members that add liquidity to the 
Exchange and charges fees to Members that remove liquidity from the 
Exchange. The Fee Schedule sets forth the standard rebates and fees 
applied per share for orders that add and remove liquidity, 
respectively. Additionally, in response to the competitive environment, 
the Exchange also offers tiered pricing, which provides Members with 
opportunities to qualify for higher rebates or lower fees where certain 
volume criteria and thresholds are met. Tiered pricing provides an 
incremental incentive for Members to strive for higher tier levels, 
which provides increasingly higher benefits or discounts for satisfying 
increasingly more stringent criteria.
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    \5\ Market share percentage calculated as of October 28, 2021. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \6\ Id.
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Adoption of Targeted Step-Up Tier 1
    The Exchange proposes to adopt a new volume-based tier, referred to 
by the Exchange as Targeted Step-Up Tier 1, in which the Exchange will 
provide an additive rebate applicable to executions of orders (other 
than displayed Retail Orders) in securities priced at or above $1.00 
per share that add liquidity to the Exchange (i.e., Added Volume) for 
Members that meet at least one of two specified volume thresholds 
across a specified list of securities, referred to by the Exchange as 
the Targeted Step-Up Securities,\7\ as further described below.
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    \7\ As proposed, the term ``Targeted Step-Up 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. The Exchange anticipates that the initial Targeted Step-Up 
Securities list will include between 30 and 50 securities. The 
Exchange will not remove a security from the Targeted Step-Up 
Securities list without at least 30 days' prior notice to Members as 
published on the Exchange's website (unless the security is no 
longer eligible for trading on the Exchange).
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    Currently, the Exchange provides various rebates to Members for 
executions of Added Volume ranging from $0.0020 per share to $0.0036 
per share based on the type of order (e.g., displayed, non-displayed, 
midpoint peg) and whether a Member qualifies for one of the Exchange's 
existing pricing tiers.\8\ The Exchange now proposes to adopt Targeted 
Step-Up Tier 1 in which it will provide an additive rebate of $0.0002 
per share for all executions of Added Volume in a particular month for 
a Member that qualifies for such tier in that month by achieving: (1) A 
Step-Up ADAV \9\ from October 2021 that is equal to or greater than 
0.05% of the TCV \10\ in the Targeted Step-Up Securities; or (2) an 
ADAV that is equal to or greater than 0.08% of the TCV in the Targeted 
Step-Up Securities.\11\ To determine if a Member meets either of these 
volume thresholds, the Exchange will aggregate a Member's ADAV across 
all Targeted Step-Up Securities for a given month.\12\ The $0.0002 per 
share additive rebate will be provided in addition to the rebate that 
is otherwise applicable to each of a qualifying Member's orders that 
constitutes Added Volume (including a rebate provided under another 
pricing tier).\13\
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    \8\ The Exchange notes that it is proposing herein to reduce the 
rebate of $0.0036 per share provided under DLI Tier 1 to $0.0035 per 
share, as further described below, so after giving effect to the 
changes proposed herein the range of rebates provided for executions 
of Added Volume would be from $0.0020 per share to $0.0035 per 
share.
    \9\ As set forth on the Fee Schedule, ``ADAV'' means the average 
daily added volume calculated as the number of shares added per day, 
which is calculated on a monthly basis, and ``Step-Up ADAV'' means 
ADAV in the relevant baseline month subtracted from current ADAV.
    \10\ 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.
    \11\ This proposed pricing is referred to by the Exchange on the 
Fee Schedule under the new description ``Targeted Step-Up Tier 1'' 
with a Fee Code of ``X'' to be appended to the otherwise applicable 
Fee Code for qualifying executions (which include Fee Codes ``B'', 
``D'', ``J'', ``B1'', ``D1'', ``J1'', ``B2'', ``D2'', ``J2'', 
``Bq1'', ``Dq1'', ``Jq1'', ``Bq2'', ``Dq2'', ``Jq2'', ``H'' and 
``M''). The Exchange notes that because the determination of whether 
a Member qualifies for a certain pricing tier (including the 
Targeted Step-Up Tier 1) 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.
    \12\ For example, if a Member achieved an ADAV of 0.01% of the 
TCV in each of eight different Targeted Step-Up Securities in a 
particular month, such Member would qualify for the Targeted Step-Up 
Tier in that month because it would have achieved an ADAV that is 
equal to 0.08% of the TCV in the Targeted Step-Up Securities.
    \13\ As defined above, Added Volume does not include executions 
of displayed Retail Orders in securities priced at or above $1.00 
per share that add liquidity to the Exchange (such orders, ``Added 
Displayed Retail Volume''). The Exchange notes that the highest 
rebate that it currently provides with respect to any transaction 
effected on the Exchange is $0.0037 per share, which is for 
executions of Added Displayed Retail Volume. The Exchange is not 
seeking with this proposal to provide a rebate that is higher than 
such current maximum rebate, and thus, as proposed, the additive 
rebate provided under the Targeted Step-Up Tier would not apply to 
executions of Added Displayed Retail Volume as such transactions 
already receive a rebate of $0.0037 per share.
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    The purpose of the proposed Targeted Step-Up Tier 1 is to encourage 
Members to increase their volume on the Exchange in certain specified 
securities for which the Exchange seeks to become a more competitive 
trading venue (i.e., the Targeted Step-Up Securities). As a

[[Page 64250]]

general matter, the Targeted Step-Up Securities are higher-priced and 
actively-traded names, many of which are actively-traded ETPs or 
components thereof, and the Exchange believes that increased 
participation in the trading of these securities would increase the 
diversity of securities actively traded on the Exchange as well as the 
notional market share traded on the Exchange, which would accrue 
benefits to all Members through deeper and more diversified liquidity 
on the Exchange. As such, the Exchange is seeking to improve its market 
quality, and thus increase its attractiveness as a trading venue, with 
respect to the Targeted Step-Up Securities by providing an incentive to 
Members to increase their order flow in such securities to the 
Exchange. Through the proposed additive rebate for executions of Added 
Volume for Members that qualify for the Targeted Step-Up Tier 1, the 
Exchange hopes to provide improved trading conditions on the Exchange 
with respect to the Targeted Step-Up Securities through increased 
execution opportunities and deeper liquidity in such securities 
resulting from such increased order flow, thereby contributing to a 
more robust and well-balanced market ecosystem on the Exchange to the 
benefit of all Members.
    The Exchange notes that the Targeted Step-Up Tier 1 is similar to 
other volume-based incentives and discounts, which have been widely 
adopted by exchanges, including the Exchange. More specifically, the 
Exchange believes the Targeted Step-Up Tier 1 is comparable to the 
Exchange's Displayed Liquidity Incentive (``DLI'') Tiers \14\ as well 
as other pricing tiers adopted by other exchanges that provide an 
enhanced rebate or supplemental incentive for firms that achieve a 
specified volume threshold in a specified group of securities.\15\
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    \14\ The Exchange's DLI Tiers provide an enhanced rebate for 
executions of Added Displayed Volume for Members that promote price 
discovery and market quality by quoting at the NBBO for a 
significant portion of each day in a broad base of securities, 
generally, and in a targeted group of securities (the ``DLI Target 
Securities''), in particular. See the Exchange's Fee Schedule 
(available at https://info.memxtrading.com/fee-schedule/) for 
additional details regarding the Exchange's DLI Tiers. See also 
Securities Exchange Act Release No. 92150 (June 10, 2021), 86 FR 
32090 (June 16, 2021) (SR-MEMX-2021-07) (notice of filing and 
immediate effectiveness of fee changes adopted by the Exchange, 
including the adoption of DLI).
    \15\ Cboe BZX Exchange, Inc. (``Cboe BZX'') currently provides 
an additive rebate of $0.0001 or $0.0002 per share for executions of 
Tape B securities for market participants that meet certain quoting 
and trading requirements in a specified number of securities 
included on a list of securities determined by Cboe BZX, including 
both Cboe BZX listed securities and non-Cboe BZX listed securities 
for which Cboe BZX wants to incentivize additional participation. 
See the Cboe BZX equities trading fee schedule on its public website 
(available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/); see also Securities Exchange Act Release No. 
93405 (October 22, 2021), 86 FR 59763 (October 28, 2021) (SR-BX-
2021-047) (notice of filing and immediate effectiveness of fee 
changes adopted by Nasdaq BX, Inc., including the adoption of an 
enhanced market quality program focused on specified Tape A and Tape 
B securities).
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Modified Criteria Under Liquidity Removal Tier 1
    The Exchange is also proposing to modify the required criteria 
under Liquidity Removal Tier 1. Currently, the Exchange charges a 
standard fee of $0.0028 per share for executions of orders in 
securities priced at or above $1.00 per share that remove liquidity 
from the Exchange (i.e., Removed Volume), which the Exchange is 
proposing to increase to $0.0029 per share, as further described below. 
The Exchange also currently offers a Liquidity Removal Tier 1 in which 
qualifying Members are charged a lower fee of $0.0027 per share for 
executions of Removed Volume by achieving: (1) A Step-Up ADAV from July 
2021 that is equal to or greater than 0.05% of the TCV; or (2) an ADV 
\16\ that is equal to or greater than 0.30% of the TCV. Thus, Liquidity 
Removal Tier 1 provides an opportunity for a Member to qualify for a 
lower fee for executions of Removed Volume where such Member either 
increases its ADAV on the Exchange by a specified amount over a 
baseline month or achieves a specified ADV on the Exchange. The 
Exchange notes that Liquidity Removal Tier 1 is designed to encourage 
Members that add liquidity on the Exchange to increase their order 
flow, which benefits all Members by providing greater execution 
opportunities on the Exchange.
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    \16\ As set forth on the Fee Schedule, ``ADV'' means average 
daily volume calculated as the number of shares added or removed, 
combined, per day, which is calculated on a monthly basis.
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    Now, the Exchange proposes to modify the required criteria under 
Liquidity Removal Tier 1 such that a Member would now qualify by 
achieving: (1) A Step-Up ADAV from October 2021 that is equal to or 
greater than 0.05% of the TCV; or (2) an ADV that is equal to or 
greater than 0.55% of the TCV. Thus, such proposed changes would update 
the Step-Up ADAV threshold to reference a more recent baseline month 
(but keep the volume threshold the same) and modestly increase the ADV 
threshold, each of which is designed to encourage additional order flow 
to the Exchange. The Exchange is not proposing to modify the fees 
associated with Liquidity Removal Tier 1. The Exchange believes that 
the tier, as proposed, would further incentivize increased order flow 
to 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. The Exchange notes 
that Liquidity Removal Tier 1, as modified, would continue to be 
available to all Members and provide Members an opportunity to pay a 
lower fee for executions of Removed Volume. Additionally, the Exchange 
believes that several Members that currently qualify for Liquidity 
Removal 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.
Reduced Rebates Under DLI Tiers
    The Exchange is also proposing to reduce the rebates provided under 
DLI Tier 1 and DLI Tier 2. The DLI Tiers are designed to encourage 
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, generally, and in the DLI Target Securities,\17\ in 
particular, 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 specifically, and committing capital to support the 
execution of orders.
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    \17\ 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.
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    Currently, the Exchange provides enhanced rebates of $0.0036 per 
share under DLI Tier 1 and $0.0035 per share under DLI Tier 2 for 
executions of Added Displayed Volume for Members that qualify for such 
tiers.\18\ Now, the Exchange proposes to reduce the rebate provided 
under DLI Tier 1 to $0.0035 per share and the rebate provided under DLI 
Tier 2 to $0.0034 per share. The Exchange is not proposing to modify 
the

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required criteria for a Member to qualify for DLI Tier 1 or DLI Tier 2, 
nor is the Exchange proposing to change the rebates provided under such 
tiers for executions of orders in securities priced below $1.00 per 
share that add displayed liquidity to the Exchange. The purpose of 
reducing the enhanced rebates provided under DLI Tier 1 and DLI Tier 2 
for executions of Added Displayed Volume is for business and 
competitive reasons, as the Exchange believes the reduction of such 
rebates would decrease the Exchange's expenditures with respect to the 
Exchange's transaction pricing in a manner that is still consistent 
with the Exchange's overall pricing philosophy of encouraging added 
liquidity and promoting the price discovery and market quality 
objectives of the DLI Tiers described above.
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    \18\ The pricing for DLI Tier 1 is referred to by the Exchange 
on the Fee Schedule under the 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. The pricing for DLI Tier 2 is referred to by 
the Exchange on the Fee Schedule under the 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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Increased Standard Fee for Removed Volume
    Lastly, the Exchange proposes to increase the standard fee charged 
for executions of Removed Volume. Currently, the Exchange charges a 
standard fee of $0.0028 per share for executions of Removed Volume.\19\ 
The Exchange now proposes to increase the standard fee charged for 
executions of Removed Volume to $0.0029 per share. The purpose of 
increasing the standard fee for executions of Removed Volume is also 
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 transaction 
pricing, which provides various rebates for liquidity-adding orders 
(including the additive rebate for executions of Added Volume under the 
Targeted Step-Up Tier 1 proposed herein), and the Exchange's operations 
generally, in a manner that is still consistent with the Exchange's 
overall pricing philosophy of encouraging added liquidity. The Exchange 
notes that despite the modest increase proposed herein, the Exchange's 
standard fee for executions of Removed Volume remains lower than, and 
competitive with, the standard fee to remove liquidity in securities 
priced at or above $1.00 per share charged by several other 
exchanges.\20\
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    \19\ The standard fee for Removed Volume is referred to by the 
Exchange on the Fee Schedule under the description ``Removed volume 
from MEMX Book'' with a Fee Code of ``R'' assigned by the Exchange.
    \20\ See, e.g., the Cboe BZX equities trading fee schedule on 
its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a standard fee of 
$0.0030 per share to remove liquidity in securities priced at or 
above $1.00 per share; the Cboe EDGX Exchange, Inc. equities trading 
fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/), which 
reflects a standard fee of $0.0030 per share to remove liquidity in 
securities priced at or above $1.00 per share; The Nasdaq Stock 
Market LLC price list on its public website (available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which 
reflects a standard fee of $0.0030 per share to remove 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,\21\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\22\ 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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    \21\ 15 U.S.C. 78f.
    \22\ 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.'' \23\
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    \23\ 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 additional order 
flow to the Exchange in the Targeted Step-Up Securities and more 
generally, which the Exchange believes would enhance liquidity and 
market quality on the Exchange to the benefit of all Members.
    The Exchange believes that the proposed Targeted Step-Up Tier 1 is 
reasonable because it would provide Members with an additional 
incentive to achieve certain volume thresholds on the Exchange. As 
noted above, volume-based incentives and discounts have been widely 
adopted by exchanges, including the Exchange, and are equitable and not 
unfairly discriminatory because they are open to all Members on an 
equal basis and provide additional benefits or discounts that are 
reasonably related to the value to an exchange's market quality 
associated with higher levels of market activity, such as higher levels 
of liquidity provision and/or growth patterns and the introduction of 
higher volumes of orders into the price and volume discovery process. 
The Exchange believes the proposed Targeted Step-Up Tier 1 is equitable 
and not unfairly discriminatory for these same reasons, as it is 
available to all Members and is designed to encourage Members to 
increase their order flow in the Targeted Step-Up Securities to the 
Exchange, thereby contributing to a deeper and more liquid market in 
such securities and a more robust and well-balanced market ecosystem on 
the Exchange to the benefit of all Members, as well as enhancing the 
attractiveness of the Exchange as a trading venue, as described above.
    The Exchange also believes that including qualification criteria 
for Targeted Step-Up Tier 1 that is based on achieving a volume 
threshold in certain specified securities (i.e., the Targeted Step-Up 
Securities) is reasonable, equitable, and non-discriminatory because, 
as noted above, the Exchange is seeking to improve its market quality, 
and thus increase its attractiveness as a trading venue, with respect 
to such securities by incentivizing Members to increase their order 
flow in such securities to the Exchange. In turn, the Exchange believes 
such increased order flow would provide increased execution 
opportunities and deeper liquidity in such securities and that the 
resulting increased participation in the trading of these securities 
would increase the diversity of securities actively traded on the 
Exchange as well as the notional market share traded on the Exchange, 
thereby contributing to a more robust

[[Page 64252]]

and well-balanced market ecosystem on the Exchange to the benefit of 
all Members and market participants. Additionally, the Exchange notes 
that the Targeted Step-Up Tier 1 is comparable to the Exchange's DLI 
Tiers, as well as other pricing tiers adopted by other exchanges that 
provide an enhanced rebate or supplemental incentive for firms that 
achieve a specified volume threshold in a specified group of 
securities.\24\
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    \24\ See supra notes 14-15.
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    The Exchange believes the required criteria for the Targeted Step-
Up Tier 1 are reasonable, as they provide two different types of volume 
thresholds that a Member may choose from in order to receive the 
corresponding additive rebate (i.e., a Step-Up ADAV threshold and an 
ADAV threshold), and the Exchange believes such criteria are attainable 
for many market participants and are reasonably related to the enhanced 
market quality that the Targeted Step-Up Tier 1 is designed to promote, 
as described above. The Exchange also notes that the proposed tier/
rebate would not adversely impact any Member's ability to qualify for 
other reduced fee or enhanced rebate tiers. Should a Member not meet 
the proposed criteria under the proposed tier, the Member would merely 
not receive the corresponding proposed additive rebate.
    The Exchange also believes the proposed additive rebate for 
executions of Added Volume under Targeted Step-Up Tier 1 (i.e., $0.0002 
per share) is reasonable, in that it represents only a modest addition 
to the rebates otherwise applicable to executions of Added Volume and, 
in conjunction with the other changes proposed herein, would not 
provide for a rebate that is higher than the current maximum rebate 
provided by the Exchange. Thus, the Exchange believes that it is 
reasonable, consistent with an equitable allocation of fees, and not 
unfairly discriminatory to provide such additive rebate for executions 
of Added Volume to Members that qualify for the Targeted Step-Up Tier 1 
in recognition of the benefits that such Members provide to the market 
quality in the Targeted Step-Up Securities and more generally on the 
Exchange, as described above, particularly as the magnitude of the 
additive rebate is not unreasonably high and is, instead, reasonably 
related to the enhanced market quality it is designed to achieve. 
Additionally, the Exchange believes it is reasonable, equitable, and 
non-discriminatory to provide the additive rebate for executions of all 
Added Volume but not for executions of Added Displayed Retail Volume 
because, as noted above, the Exchange currently provides its maximum 
enhanced rebate of $0.0037 per share for executions of Added Displayed 
Retail Volume, and the Exchange does not seek to provide for a rebate 
that is higher than such current maximum with this proposal.\25\
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    \25\ See supra note 13.
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    The Exchange believes the proposed changes to modify the required 
criteria under Liquidity Removal Tier 1 are reasonable because, as 
noted above, such changes are intended to update the Step-Up ADAV 
threshold to reference a more recent baseline month and to modestly 
increase the ADV threshold, each of which is designed to encourage the 
submission of additional order flow to 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. The Exchange also believes the proposed new criteria 
are equitable and non-discriminatory because all Members will continue 
to be eligible to meet such criteria and qualify for Liquidity Removal 
Tier 1, and therefore, have the opportunity to pay a lower fee for 
executions of Removed Volume. Additionally, as noted above, the 
Exchange believes that several Members that currently qualify for 
Liquidity Removal 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. The Exchange also believes that the lower fee charged under 
Liquidity Removal Tier 1, which the Exchange is not proposing to 
change, continues to be commensurate with the proposed new criteria. 
That is, such discounted fee reasonably reflects the difficulty in 
achieving the corresponding criteria as modified.
    The Exchange believes that the proposed changes to reduce the 
enhanced rebates provided for executions of Added Displayed Volume 
under DLI Tier 1 and DLI Tier 2 and to increase the standard fee 
charged for executions of Removed 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 its 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 believes that the proposed reduced rebates for 
executions of Added Displayed Volume provided under DLI Tier 1 and DLI 
Tier 2 (i.e., $0.0035 per share and $0.0034 per share, respectively) 
are reasonable and appropriate because such rebates represent only a 
modest reduction (i.e., $0.0001 per share) from the current enhanced 
rebates provided under such tiers (i.e., $0.0036 per share and $0.0035 
per share, respectively). Additionally, the Exchange believes that such 
rebates are equitably allocated and not unfairly discriminatory because 
they will continue to apply equally to all Members, in that all Members 
will continue to have the opportunity to achieve the required criteria 
under the DLI Tiers, which the Exchange is not proposing to modify with 
this proposal, and in turn, qualify for an enhanced rebate for 
executions of Added Displayed Volume. The Exchange further believes 
that such rebates are reasonable and equitably allocated, in that the 
rebate provided under DLI Tier 1 will remain higher than the rebate 
provided under DLI Tier 2 commensurate with the more stringent criteria 
of DLI Tier 1 than of DLI Tier 2.
    Similarly, the Exchange believes that the proposed increased 
standard fee charged for executions of Removed Volume (i.e., $0.0029 
per share) is reasonable and appropriate because it represents only a 
modest increase (i.e., $0.0001 per share) from the current standard fee 
charged for executions of Removed Volume (i.e., $0.0028 per share) and, 
as noted above, remains lower than, and competitive with, the standard 
fee to remove liquidity in securities priced at or above $1.00 per 
share charged by several other exchanges.\26\ The Exchange further 
believes that the proposed increased standard fee charged for 
executions of Removed Volume is equitably allocated and not unfairly 
discriminatory because it will apply equally to all Members.
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    \26\ See supra note 20.
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    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 \27\ 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

[[Page 64253]]

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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    \27\ 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 
the Targeted Step-Up Securities, 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 in the Targeted Step-Up Securities and more 
generally, 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.'' \28\
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    \28\ See supra note 23.
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Intramarket Competition
    The Exchange believes that the proposal would incentivize Members 
to promote price discovery and market quality by increasing their 
participation in the Targeted Step-Up Securities on the Exchange, and 
to and maintain or increase their order flow on the Exchange generally, 
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 Targeted Step-Up Tier 1, and thus 
receive the corresponding additive rebate for executions of Added 
Volume, or to qualify for the Liquidity Removal Tier, and thus receive 
the corresponding reduced fee for executions of Removed Volume, would 
be available to all Members that meet the associated requirements in 
any month. As noted above, the Exchange believes the criteria under 
Targeted Step-Up Tier 1 are attainable for many market participants and 
are reasonably related to the enhanced market quality that such tier is 
designed to promote. Further, as noted above, the Exchange also 
believes that the proposed new criteria for Liquidity Removal Tier 1 
are attainable for several Members and that the respective current 
reduced fee charged under such tier is reasonably related to the 
enhanced market quality that such tier is designed to promote. 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 15% 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 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 Volume, 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 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,\29\ 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.
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    \29\ See supra notes 15 and 20.
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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.'' \30\ 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'. . . .''.\31\ Accordingly, the Exchange does not believe its 
proposed pricing changes impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \30\ See supra note 23.
    \31\ 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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[[Page 64254]]

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 \32\ and Rule 19b-4(f)(2) \33\ thereunder.
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    \32\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \33\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MEMX-2021-16 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-2021-16. 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-2021-16 and should be submitted on 
or before December 8, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25018 Filed 11-16-21; 8:45 am]
BILLING CODE 8011-01-P


