[Federal Register Volume 87, Number 9 (Thursday, January 13, 2022)]
[Notices]
[Pages 2191-2193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00489]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93927; File No. SR-MEMX-2021-19]


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

January 7, 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 December 28, 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 January 3, 2022. The text of the proposed rule 
change is provided in Exhibit 5.
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    \3\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
    The Exchange is proposing to establish a Monthly Membership Fee for 
Members of the Exchange of $200. The Monthly Membership Fee is proposed 
to be assessed to each active Member at the close of business on the 
first day of each month. For example, the Monthly Membership Fee for 
January 2022 will be assessed to all active Members at the close of 
business on January 3, 2022, the first business day of the month.
    However, if a Member is pending a voluntary termination of rights 
as a Member pursuant to Rule 2.8 prior to the time any Monthly 
Membership Fee will be assessed (i.e., the close of business on January 
3, 2022) and the Member does not utilize the facilities of the Exchange 
while such voluntary termination of rights is pending, then the Member 
will not be obligated to pay the Monthly Membership Fee, as such Member 
will not be considered to have an ``active'' Membership. The Exchange 
believes this to be appropriate because there are several pre-
conditions and then a 30-day waiting period before a voluntary 
resignation shall take effect pursuant to Rule 2.8.
    As proposed, the Monthly Membership Fee for a firm will not be 
prorated, which the Exchange believes is reasonable based on the 
frequency that the fee is assessed (i.e., monthly instead of applying 
to a longer period) and the relatively low proposed fee of $200 for the 
Monthly Membership Fee.
    The Exchange does not presently contemplate proposing any 
application fees, trading rights or trading permit fees, market 
participant identifier (``MPID'') fees or so-called ``headcount'' fees.
    To reflect the implementation of the Monthly Membership Fee 
proposed herein, the Exchange also proposes to delete the following 
sentence from the Fee Schedule: ``MEMX does not charge for membership, 
market data products, physical connectivity or application sessions.'' 
The Exchange notes that it is not proposing to adopt fees for market 
data products at this time. The Exchange further notes that it is 
separately filing a proposal to adopt fees for physical connectivity 
and application sessions (with the same implementation date as the 
proposed changes in this filing) and that such separate proposal will 
also propose to

[[Page 2192]]

add language in the Fee Schedule stating that MEMX does not charge fees 
for market data products.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\4\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\5\ 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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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that there is value in becoming a Member of 
the Exchange and that the proposed Monthly Membership Fee is 
reasonable. The Monthly Membership Fee is lower than or comparable to 
the membership fees imposed by several other national securities 
exchanges that charge such fees.\6\ Moreover, insofar as the Exchange 
does not charge--nor does it presently contemplate charging--
application fees, trading rights fees, trading permit fees, or fees for 
multiple MPIDs, the comparative price of membership is less or 
significantly less than comparative prices at other exchanges.\7\ The 
Exchange also does not charge--nor does it presently contemplate 
charging--so-called ``headcount fees,'' e.g., fees charged for each 
Form U-4 filed for registration of a representative or a principal or 
the transfer or re-licensing of such personnel,\8\ further highlighting 
the reasonableness of the proposed Monthly Membership Fee.
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    \6\ For example, the New York Stock Exchange LLC (``NYSE'') 
annual trading license fee for member organizations ranges from 
approximately $25,000 to $50,000 based on the type of member 
organization and number of trading licenses. See ``Trading 
Licenses,'' NYSE Price List 2021 (last updated December 1, 2021), 
available at: https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf. The Nasdaq Stock Market LLC (``Nasdaq'') annual 
membership fee is $3,000 plus a monthly $1,250 trading rights fee 
(together with the annual membership fee, totaling $18,000 per 
year). See ``NASDAQ Membership Fees,'' Nasdaq Price List, available 
at: http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#membership. See also Securities 
Exchange Act Release No. 34-81133 (July 12, 2017), 82 FR 32904 (July 
18, 2017) (SR-NASDAQ-2017-065) (discussing the reasonableness of 
Nasdaq's fees). Finally, Cboe BZX Exchange, Inc. (``Cboe BZX'') 
charges an annual membership fee of $2,500 plus an additional fee of 
$350 per month for each additional MPID a member maintains other 
than their first (i.e., an annual fee of $4,200 per additional 
MPID). See ``Membership Fees'' and ``Market Participant Identifier 
(`MPID') Fees'' sections of the Cboe BZX Fee Schedule, available at: 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \7\ See id.
    \8\ See, e.g., ``NASDAQ Membership Fees,'' supra note 6 ($55 for 
each Form U-4 filed for the registration of a Representative or 
Principal, and $55 for each Form U-4 filed for the transfer or re-
licensing of a Representative or Principal).
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    The Exchange believes that the proposed Monthly Membership Fee is 
not unfairly discriminatory because it would be assessed equally across 
all Members or firms that seek to become Members. The Exchange believes 
that the proposed Monthly Membership Fee is not unfairly discriminatory 
because no broker-dealer is required to become a member of the 
Exchange. Instead, many market participants awaited the Exchange 
growing to a certain percentage of market share before they would join 
as a Member of the Exchange. In addition, many market participants 
still have not joined the Exchange despite the Exchange's growth in one 
year to more than 4% of the overall equities market share. To 
illustrate, the Exchange currently has 66 Members. However, based on 
publicly available information regarding a sample of the Exchange's 
competitors, NYSE has 142 members, Cboe BZX has 140 members, and 
Investors Exchange LLC (``IEX'') has 133 members.\9\
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    \9\ See NYSE Membership Directory, available at: https://www.nyse.com/markets/nyse/membership; Cboe BZX Form 1 filed November 
19, 2021, available at: https://www.sec.gov/Archives/edgar/vprr/2100/21009368.pdf; IEX Current Members list, available at: https://exchange.iex.io/resources/trading/current-membership/.
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    Accordingly, the vigorous competition among national securities 
exchanges provides many alternatives for firms to voluntarily decide 
whether membership to the Exchange is appropriate and worthwhile, and 
no broker-dealer is required to become a member of the Exchange. 
Specifically, neither the trade-through requirements under Regulation 
NMS nor broker-dealers' best execution obligations require a broker-
dealer to become a member of every exchange. The Exchange acknowledges 
that competitive forces may require certain broker-dealers to be 
members of all equities exchanges. However, the Exchange believes that 
the proposed fee of $200 as a Monthly Membership Fee is reasonable, 
equitably allocated and not unfairly discriminatory, even for a broker-
dealer that deemed it necessary to join the Exchange for business 
purposes, as those business reasons should presumably result in revenue 
capable of covering the proposed fee.
    The Exchange further believes that the proposed fees would be an 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities, and are 
not unfairly discriminatory. As the Commission noted in its Concept 
Release Concerning Self-Regulation:

    The Commission to date has not issued detailed rules specifying 
proper funding levels of [self-regulatory organization (``SRO'')] 
regulatory programs, or how costs should be allocated among the 
various SRO constituencies. Rather, the Commission has examined the 
SROs to determine whether they are complying with their statutory 
responsibilities. This approach was developed in response to the 
diverse characteristics and roles of the various SROs and the 
markets they operate. The mechanics of SRO funding, including the 
amount of revenue that is spent on regulation and how that amount is 
allocated among various regulatory operations, is related to the 
type of market that an SRO is operating. Thus, each SRO and its 
financial structure is, to a certain extent, unique. While this 
uniqueness can result in different levels of SRO funding across 
markets, it also is a reflection of one of the primary underpinnings 
of the National Market System. Specifically, by fostering an 
environment in which diverse markets with diverse business models 
compete within a unified National Market System, investors and 
market participants benefit.\10\
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    \10\ Securities Exchange Act Release No. 34-50700 (November 22, 
2004), 69 FR 71255, 71267-68 (December 8, 2004) (File No. S7-40-04).

    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 \11\ 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. Effective 
regulation is central to the proper functioning of the securities 
markets. Recognizing the importance of such efforts, Congress decided 
to require national securities exchanges to register with the 
Commission as self-regulatory organizations to carry out the purposes 
of the Act. The Exchange therefore believes that it is critical to 
ensure that regulation is appropriately funded. The Monthly Membership 
Fee is expected to provide a source of funding towards the Exchange's 
costs related to onboarding Members and providing ongoing support.
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    \11\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\12\ the Exchange 
believes that the proposed rule change would not impose any burden on 
intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The

[[Page 2193]]

Exchange's proposed membership fees will be lower than the cost of 
membership on other exchanges,\13\ and therefore, may stimulate 
intramarket competition by attracting additional firms to become 
Members on the Exchange or at least should not deter interested 
participants from joining the Exchange. In addition, membership fees 
are subject to competition from other exchanges. Accordingly, if the 
changes proposed herein are unattractive to market participants, it is 
likely the Exchange will see a decline in membership as a result. The 
proposed fee change will not impact intermarket [sic] competition 
because it will apply to all Members equally. The Exchange operates in 
a highly competitive market in which market participants can determine 
whether or not to join the Exchange based on the value received 
compared to the cost of joining and maintaining membership on the 
Exchange.
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    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See supra note 6.
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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 \14\ and Rule 19b-4(f)(2) \15\ thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 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-2021-19 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-2021-19. 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-2021-19 and should be submitted on 
or before February 3, 2022.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00489 Filed 1-12-22; 8:45 am]
BILLING CODE 8011-01-P


