[Federal Register Volume 87, Number 133 (Wednesday, July 13, 2022)]
[Notices]
[Pages 41839-41846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14877]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95211; File No. SR-MEMX-2022-16]


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

July 7, 2022.
    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 June 30, 2022, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities

[[Page 41840]]

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 July 1, 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 purpose of the proposed rule change is to amend the Fee 
Schedule to: (i) reduce certain rebates and modify certain required 
criteria under the Liquidity Provision Tiers; (ii) modify the required 
criteria under the Step-Up Additive Rebate; (iii) increase the fee and 
modify the required criteria under Liquidity Removal Tier 1; (iv) 
reduce the rebates and modify the required criteria under the Displayed 
Liquidity Incentive (``DLI'') Tiers; and (v) eliminate the DLI Additive 
Rebate, each as further described below.
    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 17% 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 3.5% 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 June 30, 2022. 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
    The Exchange currently provides a standard rebate of $0.0020 per 
share 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''). The Exchange also currently offers 
Liquidity Provision Tiers 1, 2, 3 and 4, under which a Member may 
receive an enhanced rebate for executions of Added Displayed Volume by 
achieving the corresponding required volume criteria for each tier. The 
Exchange now proposes to reduce certain of the rebates for executions 
of Added Displayed Volume and modify certain required criteria under 
the Liquidity Provision Tiers, as further described below.
    First, with respect to Liquidity Provision Tier 1, the Exchange 
currently provides an enhanced rebate of $0.00335 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by achieving a Displayed ADAV \6\ that is equal to or greater than 
0.40% of the TCV.\7\ The Exchange now proposes to reduce the rebate for 
executions of Added Displayed Volume under Liquidity Provision Tier 1 
to $0.0033 per share,\8\ and to modify the required criteria such that 
a Member would now qualify for such tier by achieving: (1) a Displayed 
ADAV that is equal to or greater than 0.40% of the TCV; or (2) a Remove 
ADV \9\ that is equal to or greater than 0.25% of the TCV and a Step-Up 
ADAV \10\ from June 2022 that is equal to or greater than 0.05% of the 
TCV. Thus, such proposed change would keep the existing criteria intact 
and add an alternative criteria that includes a Remove ADV threshold 
and a Step-Up ADAV threshold, which are designed to encourage the 
submission of additional order flow to the Exchange in the forms of 
both liquidity-removing volume and liquidity-adding volume. While the 
Exchange's overall pricing philosophy generally encourages adding 
liquidity over removing liquidity, the Exchange believes that providing 
alternative criteria that are based on different types of volume that 
Members may choose to achieve, such as the proposed new criteria which 
includes a Remove ADV threshold, contributes to a more robust

[[Page 41841]]

and well-balanced market ecosystem on the Exchange to the benefit of 
all Members. The Exchange notes that, as the proposed change to the 
required criteria under Liquidity Provision Tier 1 merely provides an 
alternative criteria and does not change the existing criteria, the 
Exchange believes that such change would make the tier easier for 
Members to achieve, and, in turn, while the Exchange has no way of 
predicting with certainty how the proposed new criteria will impact 
Member activity, the Exchange expects that more Members will strive to 
qualify for such tier than currently do, resulting in the submission of 
additional order flow to the Exchange. The purpose of reducing the 
rebate for executions of Added Displayed Volume under such tier as 
proposed (i.e., by $0.00005 per share), which the Exchange believes is 
a modest reduction and remains commensurate with the required criteria, 
is for business and competitive reasons, as the Exchange believes that 
such reduction would decrease the Exchange's expenditures with respect 
to its transaction pricing in a manner that is still consistent with 
the Exchange's overall pricing philosophy of encouraging added 
liquidity. The Exchange is not proposing to change the rebate for 
executions of orders in securities priced below $1.00 per share under 
such tier.
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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, and ``Displayed ADAV'' means 
ADAV with respect to displayed orders.
    \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 proposed pricing for Liquidity Provision Tier 1 is 
referred to by the Exchange on the Fee Schedule under the existing 
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.
    \9\ As proposed, the term ``Remove ADV'' means ADV with respect 
to orders that remove liquidity. 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. The Exchange proposes to add the definition of Remove 
ADV under the ``Definitions'' section of the Fee Schedule.
    \10\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means 
ADAV in the relevant baseline month subtracted from current ADAV.
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    Second, with respect to Liquidity Provision Tier 2, the Exchange 
currently provides an enhanced rebate of $0.0032 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by achieving: (1) an ADAV that is equal to or greater than 0.25% 
of the TCV; or (2) an ADAV that is equal to or greater than 0.15% of 
the TCV and a Step-Up ADAV from May 2022 that is equal to or greater 
than 0.05% of the TCV. The Exchange now proposes to modify the required 
criteria under Liquidity Provision Tier 2 such that a Member would 
qualify for such tier only by achieving an ADAV that is equal to or 
greater than 0.25% of the TCV. Thus, such proposed change would keep 
the first of such two alternative criteria intact and eliminate the 
second of such criteria. The Exchange notes that no Members are 
presently achieving the second of such criteria, and as such, the 
Exchange does not believe that the proposed elimination of such 
criteria will have a significant impact on any Member's trading 
behavior on the Exchange. The Exchange therefore no longer wishes to, 
nor is it required to, maintain such criteria. The Exchange is not 
proposing to change the rebates provided under such tier.
    Third, with respect to Liquidity Provision Tier 3, the Exchange 
currently provides an enhanced rebate of $0.0031 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by achieving: (1) an ADAV that is equal to or greater than 0.20% 
of the TCV; or (2) a Step-Up ADAV from December 2021 that is equal to 
or greater than 0.05% of the TCV. The Exchange now proposes to reduce 
the rebate for executions of Added Displayed Volume under Liquidity 
Provision Tier 3 to $0.0029 per share,\11\ and to modify the required 
criteria such that a Member would now qualify for such tier by 
achieving: (1) an ADAV that is equal to or greater than 0.12% of the 
TCV; or (2) a Step-Up ADAV from April 2022 that is equal to or greater 
than 0.04% of the TCV; or (3) a Step-Up Non-Displayed ADAV \12\ from 
April 2022 that is equal to or greater than 2,000,000 shares. Thus, 
such proposed change would lower the ADAV threshold in the first of 
such alternative criteria, slightly lower the Step-Up ADAV threshold 
but reference a more recent baseline month in the second of such 
alternative criteria, and add a third alternative criteria that is 
based on a Step-Up Non-Displayed ADAV. Such changes are designed to 
encourage the submission of additional order flow to the Exchange, 
including in the form of non-displayed liquidity-adding volume. While 
the Exchange's overall pricing philosophy generally encourages 
displayed liquidity over non-displayed liquidity, the Exchange believes 
that providing alternative criteria that are based on different types 
of volume that Members may choose to achieve, such as the proposed new 
criteria based on a Step-Up Non-Displayed ADAV threshold, contributes 
to a more robust and well-balanced market ecosystem on the Exchange to 
the benefit of all Members. The purpose of reducing the rebate for 
executions of Added Displayed Volume under such tier as proposed (i.e., 
by $0.0002 per share), which the Exchange believes remains commensurate 
with the proposed new required criteria, is for business and 
competitive reasons, as the Exchange believes that such reduction would 
decrease the Exchange's expenditures with respect to its transaction 
pricing in a manner that is still consistent with the Exchange's 
overall pricing philosophy of encouraging added liquidity. The Exchange 
is not proposing to change the rebate for executions of orders in 
securities priced below $1.00 per share under such tier.
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    \11\ The proposed pricing for Liquidity Provision Tier 3 is 
referred to by the Exchange on the Fee Schedule under the existing 
description ``Added displayed volume, Liquidity Provision Tier 3'' 
with a Fee Code of ``B3'', ``D3'' or ``J3'', as applicable, to be 
provided by the Exchange on the monthly invoices provided to 
Members.
    \12\ As proposed, the term ``Step-Up Non-Displayed ADAV'' means 
Non-Displayed ADAV in the relevant baseline month subtracted from 
current Non-Displayed ADAV. As set forth on the Fee Schedule, ``Non-
Displayed ADAV'' means ADAV with respect to non-displayed orders 
(including Midpoint Peg orders). The Exchange proposes to add the 
definition of Step-Up Non-Displayed ADAV under the ``Definitions'' 
section of the Fee Schedule.
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    Fourth, with respect to Liquidity Provision Tier 4, the Exchange 
currently provides an enhanced rebate of $0.0027 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by achieving: (1) an ADAV that is equal to or greater than 0.05% 
of the TCV; or (2) a Step-Up Displayed ADAV from February 2022 that is 
equal to or greater than 0.02% of the TCV; or (3) a Midpoint ADAV that 
is equal to or greater than 1,000,000 shares. The Exchange now proposes 
to reduce the rebate for executions of Added Displayed Volume under 
Liquidity Provision Tier 4 to $0.0026 per share,\13\ and to modify the 
required criteria such that a Member would now qualify for such tier by 
achieving: (1) an ADAV that is equal to or greater than 0.075% of the 
TCV; or (2) a Step-Up Displayed ADAV from April 2022 that is equal to 
or greater than 0.02% of the TCV; or (3) a Midpoint ADAV that is equal 
to or greater than 1,000,000 shares. Thus, such proposed change would 
slightly increase the ADAV threshold in the first of such alternative 
criteria, keep the same Step-Up Displayed ADAV threshold but reference 
a more recent baseline month in the second of such alternative 
criteria, and keep the third of such alternative criteria intact. Such 
changes are designed to encourage the submission of additional 
liquidity-adding order flow to the Exchange. The purpose of reducing 
the rebate for executions of Added Displayed Volume under such tier as 
proposed (i.e., by $0.0001 per share), which the Exchange believes is a 
modest reduction and remains commensurate with the required criteria, 
is for business and competitive reasons, as the Exchange believes that 
such reduction would decrease the Exchange's expenditures with respect 
to its transaction pricing in

[[Page 41842]]

a manner that is still consistent with the Exchange's overall pricing 
philosophy of encouraging added liquidity. The Exchange is not 
proposing to change the rebate for executions of orders in securities 
priced below $1.00 per share under such tier.
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    \13\ The proposed pricing for Liquidity Provision Tier 4 is 
referred to by the Exchange on the Fee Schedule under the existing 
description ``Added displayed volume, Liquidity Provision Tier 4'' 
with a Fee Code of ``B4'', ``D4'' or ``J4'', as applicable, to be 
provided by the Exchange on the monthly invoices provided to 
Members.
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Step-Up Additive Rebate
    The Exchange currently offers the Step-Up Additive Rebate under 
which the Exchange provides an additive rebate of $0.0002 per share 
that is in addition to the otherwise applicable rebate for a qualifying 
Member's executions of orders that constitute Added Displayed Volume, 
except: (i) orders that establish the national best bid or offer 
(``NBBO'') if such Member qualifies for the Exchange's NBBO Setter 
Tier; and (ii) Retail Orders.\14\ Currently, a Member qualifies for the 
Step-Up Additive Rebate by achieving a Step-Up ADAV (excluding Retail 
Orders) from April 2022 that is equal to or greater than 0.07% of the 
TCV. Now, the Exchange proposes to modify the required criteria under 
the Step-Up Additive Rebate such that a Member would now qualify for 
such tier by achieving: (1) a Step-Up ADAV (excluding Retail Orders) 
from April 2022 that is equal to or greater than 0.07% of the TCV; or 
(2) an ADAV>=0.70% of the TCV. Thus, such proposed change would keep 
the existing criteria intact and add an alternative criteria that is 
based on an ADAV threshold that is higher than the ADAV threshold under 
any other of the Exchange's pricing tiers and that no Member is 
currently achieving on the Exchange. The Exchange believes that this 
proposed alternative criteria provides an incremental incentive for 
Members to strive for higher ADAV on the Exchange to receive the 
additive rebate for qualifying executions of Added Displayed Volume 
under such tier, and thus, it is designed to encourage Members that do 
not currently qualify for such tier to increase their overall orders 
that add liquidity to the Exchange. 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 Members. The Exchange notes that, as the proposed 
change to the required criteria under the Step-Up Additive Rebate 
merely provides an alternative criteria and does not change the 
existing criteria, the Exchange believes that such change would make 
the tier easier for Members to achieve, and, in turn, while the 
Exchange has no way of predicting with certainty how the proposed new 
criteria will impact Member activity, the Exchange expects that more 
Members will strive to qualify for such tier than currently do, 
resulting in the submission of additional order flow to the Exchange. 
The Exchange is not proposing to change the amount of the additive 
rebate provided under such tier.
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    \14\ As set forth in Exchange Rule 11.21(a), 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.
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Liquidity Removal Tier 1
    The Exchange currently charges a standard fee of $0.0030 per share 
for executions of orders in securities priced at or above $1.00 per 
share that remove liquidity from the Exchange (such orders, ``Removed 
Volume''). The Exchange also currently offers Liquidity Removal Tier 1 
under which qualifying Members are charged a discounted fee of $0.00285 
per share for executions of Removed Volume by achieving: (1) an ADAV 
that is equal to or greater than 0.30% of the TCV; or (2) an ADV that 
is equal to or greater than 0.60% of the TCV. Now, the Exchange 
proposes to increase the fee charged for executions of Removed Volume 
under Liquidity Removal Tier 1 to $0.0029 per share,\15\ and to modify 
the required criteria such that a Member would now qualify for such 
tier by achieving: (1) a Remove ADV that is equal to or greater than 
0.30% of the TCV and a Step-Up ADAV from April 2022 that is equal to or 
greater than 0.10% of the TCV; or (2) an ADV that is equal to or 
greater than 1.00% of the TCV. Thus, such proposed changes to the 
required criteria would replace the ADAV threshold with a Remove ADV 
threshold and a Step-Up ADAV threshold in the first of such alternative 
criteria and increase the ADV threshold in the second of such 
alternative criteria. Such changes are designed to encourage the 
submission of additional order flow to the Exchange, including in the 
forms of both liquidity-removing volume and liquidity-adding volume. 
While the Exchange's overall pricing philosophy generally encourages 
adding liquidity over removing liquidity, the Exchange believes that 
providing alternative criteria that are based on different types of 
volume that Members may choose to achieve, such as the proposed new 
criteria which includes a Remove ADV threshold, contributes to a more 
robust and well-balanced market ecosystem on the Exchange to the 
benefit of all Members. The purpose of increasing the fee charged for 
executions of Removed Volume under such tier as proposed (i.e., by 
$0.00005 per share), which the Exchange believes is a modest increase 
and remains commensurate with the proposed new required criteria, is 
for business and competitive reasons, as the Exchange believes that 
increasing such fee would generate additional revenue to offset some of 
the costs associated with the Exchange's current transaction pricing 
structure, which provides various rebates for liquidity-adding orders, 
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 is not proposing to change 
the fee charged under such tier for executions of orders in securities 
priced below $1.00 per share.
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    \15\ The proposed pricing for Liquidity Removal Tier 1 is 
referred to by the Exchange on the Fee Schedule under the existing 
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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DLI Tiers
    The Exchange currently offers DLI Tiers 1 and 2 under which 
qualifying Members are provided an enhanced rebate for executions of 
Added Displayed Volume. The DLI Tiers are designed to encourage 
Members, through the provision of such enhanced rebates for executions 
of Added Displayed Volume, 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 \16\) in a large 
number of securities, generally, and in the DLI Target Securities,\17\ 
in particular (i.e., through the applicable securities requirements 
\18\), thereby benefitting the

[[Page 41843]]

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.\19\ Now, the Exchange 
proposes to modify DLI Tiers 1 and 2 by modifying the required criteria 
and reducing the rebates for executions of Added Displayed Volume under 
such tiers.
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    \16\ As set forth on the Fee Schedule, the term ``quoting 
requirement'' means the requirement that a Member's NBBO Time be at 
least 25%, and the term ``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.
    \17\ As set forth on the Fee Schedule, the term ``DLI Target 
Securities'' refers to a list of securities designated as such, the 
universe of which will be determined by the Exchange and published 
on the Exchange's website.
    \18\ As set forth on the Fee Schedule, the term ``securities 
requirement'' means the requirement that a Member meets the quoting 
requirement in the applicable number of securities per day. 
Currently, each of DLI Tiers 1 and 2 has a securities requirement 
that may be achieved by a Member meeting the quoting requirement in 
a specified number of any securities traded on the Exchange (the 
``general securities requirement'') as well as a securities 
requirement that must be achieved by a Member meeting the quoting 
requirement in a specified number of DLI Target Securities (the 
``DLI Target Securities requirement'').
    \19\ See the Exchange's Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding 
the Exchange's DLI Tiers and the DLI Target Securities. 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).
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    Currently, a Member qualifies 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; and a Member qualifies for DLI Tier 2 by achieving an 
NBBO Time of at least 25% in an average of 250 securities, at least 75 
of which must be DLI Target Securities, per trading day during the 
month. First, the Exchange proposes to modify the required criteria 
under DLI Tiers 1 and 2 by deleting the requirement for a Member to 
meet the quoting requirement in a specified number of DLI Target 
Securities (i.e., the DLI Target Securities requirement) in each of 
such tiers. Thus, the Exchange is proposing to delete the DLI Target 
Securities requirements and the concept of DLI Target Securities 
altogether, and the required criteria under each of DLI Tiers 1 and 2 
would now only be based on a Member meeting the quoting requirement in 
the applicable number of securities, which may be comprised of any 
securities traded on the Exchange (i.e., the general securities 
requirement).\20\ The existing DLI Target Securities requirements under 
DLI Tiers 1 and 2 were initially designed to incentivize additional 
quoting competition with respect to a designated list of securities 
(i.e., the DLI Target Securities) in which the Exchange specifically 
sought to enhance market quality. Since the initial adoption of the DLI 
program, each of the DLI Tiers have included a DLI Target Securities 
requirement, and the Exchange has seen significant improvement in 
market quality with respect to the DLI Target Securities. The Exchange 
now believes the DLI Target Securities requirements are no longer 
needed to maintain the desired level of market quality with respect to 
the DLI Target Securities, and the Exchange therefore no longer wishes 
to, nor is it required to, maintain such requirements.
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    \20\ In connection with this proposed change, the Exchange is 
proposing to delete the definition of ``DLI Target Securities'' from 
the Fee Schedule as it will no longer be used.
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    In addition to the proposed deletion of the DLI Target Securities 
requirements under DLI Tiers 1 and 2, the Exchange also proposes to 
increase the general securities requirement under DLI Tier 2 such that 
a Member would now qualify for DLI Tier 2 by achieving an NBBO Time of 
at least 25% in an average of 400 (i.e., increased from 250) securities 
per trading day during the month. While the Exchange is proposing to 
delete the DLI Target Securities requirement, this proposed increase in 
the general securities requirement under DLI Tier 2 is designed to 
achieve the DLI's market quality benefits described above in a broader 
base of securities under such tier.
    In addition to the proposed changes to the required criteria under 
DLI Tiers 1 and 2 described above, the Exchange is also proposing to 
reduce the rebates for executions of Added Displayed Volume under such 
tiers. Currently, the Exchange provides enhanced rebates of $0.0033 per 
share under DLI Tier 1 and $0.0030 per share under DLI Tier 2 for 
executions of Added Displayed Volume for Members that qualify for such 
tiers. Now, the Exchange proposes to reduce the rebate provided under 
DLI Tier 1 to $0.0032 per share and the rebate provided under DLI Tier 
2 to $0.0029 per share.\21\ The purpose of reducing the enhanced 
rebates for executions of Added Displayed Volume provided under DLI 
Tiers 1 and 2 as proposed (i.e., by $0.0001 per share in each case), 
which the Exchange believes is a modest decrease and remains 
commensurate with the proposed new required criteria in each case, 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. The 
Exchange is not proposing to change the rebates provided under such 
tiers for executions of orders in securities priced below $1.00 per 
share.
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    \21\ The proposed pricing for DLI Tier 1 is referred to by the 
Exchange on the Fee Schedule under the existing description ``Added 
displayed volume, DLI Tier 1'' with a Fee Code of ``Bq1'', ``Bq1'' 
or ``Jq1'', as applicable, and the proposed pricing for DLI Tier 2 
is referred to by the Exchange on the Fee Schedule under the 
existing description ``Added displayed volume, DLI Tier 2'' with a 
Fee Code of ``Bq2'', ``Dq2'' or ``Jq2'', as applicable.
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DLI Additive Rebate
    Lastly, the Exchange proposes to eliminate the DLI Additive Rebate. 
Currently, the Exchange offers a DLI Additive Rebate incentive that is 
applicable to DLI Tier 1, which provides an additive rebate of $0.0001 
per share for executions of Added Displayed Volume where, for a Member 
that qualifies for DLI Tier 1, such Member has an ADAV that is equal to 
or greater than 0.30% of the TCV. The Exchange now proposes to 
eliminate such DLI Additive Rebate. The purpose of eliminating the DLI 
Additive Rebate is for business and competitive reasons, as the 
Exchange believes the elimination of such additive rebate would 
decrease the Exchange's expenditures with respect to the Exchange's 
transaction pricing, which would enable the Exchange to redirect future 
resources and funding into other incentives and tiers intended to 
incentivize increased order flow. For these reasons, the Exchange no 
longer wishes to, nor is it required to, maintain such tier.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\22\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\23\ 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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    \22\ 15 U.S.C. 78f.
    \23\ 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,

[[Page 41844]]

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.'' \24\
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    \24\ 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, including through more diverse types of orders, to the Exchange, 
which the Exchange believes would enhance liquidity and market quality 
on the Exchange to the benefit of all Members, as well as to decrease 
the Exchange's expenditures and generate additional revenue with 
respect to its transaction pricing, through the proposed reduced 
rebates and increased fees under certain pricing tiers, in a manner 
that is still consistent with the Exchange's overall pricing philosophy 
of encouraging added displayed liquidity.
    The Exchange notes that volume-based incentives and discounts have 
been widely adopted by exchanges, including the Exchange, and are 
reasonable, 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 that the Liquidity Provision 
Tiers, the Step-Up Additive Rebate, Liquidity Removal Tier 1 and the 
DLI Tiers, as modified by the proposed changes to the rebates and fees, 
as well as the required criteria, as applicable, are reasonable, 
equitable and not unfairly discriminatory for these same reasons, as 
such tiers would continue to provide Members with incremental 
incentives to achieve certain volume thresholds on the Exchange, are 
available to all Members on an equal basis, and, as described above, 
are designed to encourage Members to maintain or increase their order 
flow, including through various forms of diverse order types, to the 
Exchange in order to qualify for an enhanced rebate for executions of 
Added Displayed Volume or a discounted fee for executions of Removed 
Volume, thereby deepening liquidity, promoting price discovery and 
contributing to a more robust and well-balanced market ecosystem to the 
benefit of all Members. The Exchange also believes that the proposed 
changes to such tiers reflect a reasonable and equitable allocation of 
fees and rebates because, as noted above, the Exchange believes in each 
case that the proposed new fee or rebate represents a modest increase 
or reduction, as applicable, and/or remains commensurate with the 
corresponding required criteria under such tier, and in each case is 
reasonably related to the market quality benefits that the applicable 
tier is designed to achieve while decreasing expenditures or generating 
additional revenue with respect to the Exchange's transaction pricing.
    The Exchange believes that the proposed change to the delete the 
DLI Target Securities requirements from the required criteria under DLI 
Tiers 1 and 2 is reasonable because, as noted above, the Exchange 
believes the DLI Target Securities requirements are no longer needed to 
maintain the desired level of market quality with respect to the DLI 
Target Securities on the Exchange, and the Exchange therefore no longer 
wishes to, nor is it required to, maintain such requirements. The 
Exchange also believes that such change is equitable and not unfairly 
discriminatory because it will apply to all Members equally and make 
the required criteria under such tiers less restrictive, in that 
Members seeking to qualify for such tiers will no longer be required to 
meet the quoting requirement in a certain designated list of 
securities, but rather, would have the flexibility to choose which 
securities to quote in to meet the applicable general securities 
requirement under such tiers.
    The Exchange also believes the proposed change to increase the 
general securities requirement under DLI Tier 2 from 250 securities to 
400 securities is reasonable, equitable and not unfairly discriminatory 
because it will apply to all Members equally, in that all Members will 
continue to have the opportunity to achieve the required criteria under 
such tier, and this proposed increase is intended to enhance market 
quality in a broader range of securities on the Exchange to the benefit 
of all Members.
    The Exchange believes the proposed change to eliminate the DLI 
Additive Rebate is reasonable because, as noted above, it would enable 
the Exchange to redirect the associated resources and funding into 
other incentives and tiers, and the Exchange is not required to 
maintain such incentive or provide Members any opportunities to receive 
additive rebates. The Exchange believes the proposal to eliminate such 
incentive is also equitable and not unfairly discriminatory because it 
applies equally to all Members, in that the incentive would no longer 
be available for any Member.
    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 \25\ 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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    \25\ 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 incentivize market participants to direct 
additional order flow, including through more diverse types of orders, 
to the Exchange, thereby enhancing liquidity and market quality on the 
Exchange to the benefit of all Members, as well as to decrease the 
Exchange's expenditures and generate additional revenue with respect to 
its transaction pricing in a manner that is still consistent with the 
Exchange's overall pricing philosophy of encouraging added displayed 
liquidity. As a result, the Exchange believes the proposal would 
enhance its competitiveness as a market that attracts actionable 
orders, thereby making it a

[[Page 41845]]

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.'' \26\
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    \26\ See supra note 24.
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Intramarket Competition
    As discussed above, the Exchange believes that the proposal would 
incentivize Members to submit additional order flow, including through 
more diverse types of orders, to the Exchange, thereby contributing to 
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, 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 modified Liquidity Provision Tiers, 
Step-Up Additive Rebate, Liquidity Removal Tier 1 and DLI Tiers, and 
thus receive the corresponding enhanced rebate for executions of Added 
Displayed Volume or pay the discounted fee for Removed Volume, as 
applicable, would be available to all Members that meet the associated 
volume requirements in any month. As described above, the Exchange 
believes that the proposed new required criteria under each such tier 
are commensurate with the corresponding fee or rebate under such tier 
and are reasonably related to the enhanced liquidity and market quality 
that such tier is designed to promote. Additionally, as noted above, 
the elimination of the DLI Additive Rebate and the DLI Target 
Securities requirements under the DLI Tiers will apply to all Members 
equally, in that the DLI Additive Rebate will no longer be available 
for any Member, and no Member will be required to meet a DLI Target 
Securities requirement to qualify for either of the DLI Tiers. For the 
foregoing reasons, 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 17% 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 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 represent a 
competitive proposal through which the Exchange is seeking to decrease 
the Exchange's expenditures and generate additional revenue with 
respect to its transaction pricing and to encourage additional order 
flow to the Exchange through volume-based tiers, which have been widely 
adopted by exchanges, including the Exchange. 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 pricing incentives to market participants that achieve 
certain volume criteria and thresholds.
    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.'' \27\ 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'. . . .''.\28\ 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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    \27\ See supra note 24.
    \28\ 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 \29\ and Rule 19b-4(f)(2) \30\ thereunder.
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    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \30\ 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,

[[Page 41846]]

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-2022-16 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-2022-16. 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-2022-16 and should be submitted on 
or before August 3, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14877 Filed 7-12-22; 8:45 am]
BILLING CODE 8011-01-P


