[Federal Register Volume 87, Number 222 (Friday, November 18, 2022)]
[Notices]
[Pages 69363-69368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25087]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96306; File No. SR-MEMX-2022-30]


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

November 14, 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 October 31, 2022, 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 Excchange. 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, 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) modify the Liquidity Provision Tiers by adopting a new 
Liquidity Provision Tier 4 and modifying the required criteria under 
Liquidity Provision Tier 2; (ii) increase the fee and modify the 
required criteria under Liquidity Removal Tier 1; (iii) increase the 
fee for certain executions of Pegged Orders \4\ with a Midpoint Peg \5\ 
instruction (such orders, ``Midpoint Peg Orders'') and a time-in-force 
(``TIF'') instruction of IOC \6\ or FOK \7\ that execute at the 
midpoint of the national best bid and offer (``NBBO''); and (iv) modify 
the pricing for certain executions of orders in securities priced below 
$1.00 per share (such orders, ``Sub-Dollar Volume''), each as further 
described below.
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    \4\ See Exchange Rule 11.6(h).
    \5\ See Exchange Rule 11.6(h)(2).
    \6\ See Exchange Rule 11.6(o)(1).
    \7\ See Exchange Rule 11.6(o)(3).
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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 16% of the total market share of 
executed volume of equities trading.\8\ 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.\9\ 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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    \8\ Market share percentage calculated as of October 31, 2022. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \9\ 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 1-4 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 adopt a new tier under the Liquidity Provision Tiers, 
which, as proposed, would be the new Liquidity Provision Tier 4, and 
the current Liquidity Provision Tier 4 would be renumbered as Liquidity 
Provision Tier 5 (hereinafter referred to as such). The rebate for 
executions of Added Displayed Volume and the required criteria under 
Liquidity Provision Tier 5 would remain unchanged.
    Under the proposed new Liquidity Provision Tier 4, the Exchange 
would provide an enhanced rebate of $0.0028 per share for executions of 
Added Displayed Volume for Members that qualify for such tier by 
achieving one of the following two alternative criteria: (1)

[[Page 69364]]

an ADAV \10\ that is equal to or greater than 0.10% of the TCV; \11\ or 
(2) a Displayed ADAV \12\ (excluding Retail Orders) that is equal to or 
greater than 750,000 shares and a Step-Up Displayed ADAV \13\ 
(excluding Retail Orders) from October 2022 that is equal to or greater 
than 30% of the Member's October 2022 Displayed ADAV (excluding Retail 
Orders).\14\ The Exchange proposes to provide Members that qualify for 
the proposed new Liquidity Provision Tier 4 a rebate of 0.075% of the 
total dollar volume of the transaction for executions of orders in 
securities priced below $1.00 per share that add displayed liquidity to 
the Exchange, which is the same rebate that will be applicable to such 
executions for all Members after giving effect to the Sub-Dollar Volume 
pricing changes proposed below. The proposed new Liquidity Provision 
Tier 4 is designed to encourage Members to maintain or increase their 
order flow that adds liquidity, including in the form of displayed 
orders, to the Exchange in order to qualify for the proposed enhanced 
rebate for executions of Added Displayed Volume, thereby promoting 
price discovery and contributing to a deeper and more liquid market to 
the benefit of all market participants.
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    \10\ 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.
    \11\ 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.
    \12\ As set forth on the Fee Schedule, ``Displayed ADAV'' means 
ADAV with respect to displayed orders.
    \13\ As set forth on the Fee Schedule, ``Step-Up Displayed 
ADAV'' means Displayed ADAV in the relevant baseline month 
subtracted from current Displayed ADAV.
    \14\ The pricing for Liquidity Provision Tier 4 is referred to 
by the Exchange on the Fee Schedule under the 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. 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. The Exchange 
also notes that the pricing for Liquidity Provision Tier 5 is 
referred to by the Exchange on the Fee Schedule under the 
description ``Added displayed volume, Liquidity Provision Tier 5'' 
with a Fee Code of ``B5'', ``D5'' or ``J5'', as applicable, to be 
provided by the Exchange on the monthly invoices provided to 
Members.
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    Currently, under Liquidity Provision Tier 2, the Exchange provides 
an enhanced rebate of $0.0032 per share for executions of Added 
Displayed Volume for Members that qualify for such tier by achieving an 
ADAV that is that is equal to or greater than 0.20% of the TCV. Now, 
the Exchange proposes to modify the required criteria such that a 
Member would now qualify for such tier by achieving one of the 
following two alternative criteria: (1) an ADAV that is equal to or 
greater than 0.20% of the TCV; or (2) an ADAV that is equal to or 
greater than 15,000,000 shares and a Step-Up ADAV from October 2022 
that is equal to or greater than 0.10% of the Member's October 2022 
ADAV. Thus, such proposed change would keep the existing criteria 
intact and add an alternative criteria that includes an overall ADAV 
threshold and a Step-Up ADAV threshold, which are designed to encourage 
the submission of additional order flow that adds liquidity to the 
Exchange. The Exchange notes that, as the proposed change to the 
required criteria under Liquidity Provision Tier 2 simply 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 rebate provided for executions of Added Displayed Volume 
under Liquidity Provision Tier 2.
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 $0.0029 
per share for executions of Removed Volume by achieving one of the 
following two alternative criteria: (1) an ADV \15\ that is equal to or 
greater than 0.45% of the TCV and an ADAV that is equal to or greater 
than 0.20% of the TCV; or (2) an ADV that is equal to or greater than 
1.00% of the TCV.
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    \15\ 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 increase the fee charged for 
executions of Removed Volume under Liquidity Removal Tier 1 to $0.00295 
per share, and to modify the required criteria such that a Member would 
now qualify for such tier by achieving one of the following two 
alternative criteria: (1) an ADV that is equal to or greater than 0.50% 
of the TCV and a Remove ADAV \16\ that is equal to or greater than 
0.25% of the TCV; or (2) an ADV that is equal to or greater than 1.00% 
of the TCV.\17\ Thus, the proposed change to the required criteria 
would increase the ADV threshold by 0.05% (i.e., from 0.45% to 0.50%) 
of the TCV and replace the ADAV threshold with a Remove ADV threshold 
in the first of such alternative criteria, and it would keep the second 
of such alternative criteria intact without any change. The proposed 
changes to increase the ADV threshold and include a Remove ADV 
threshold in the first of such alternative criteria are designed to 
encourage Members to maintain or increase their order flow, including 
in the form of orders that remove liquidity, to the Exchange in order 
to qualify for the proposed discounted fee for executions of Removed 
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.
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    \16\ As set forth on the Fee Schedule, ``Remove ADV'' means ADV 
with respect to orders that remove liquidity.
    \17\ The 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. The Exchange notes that because the 
determination of whether a Member qualifies for a certain pricing 
tier for a particular month will not be made until after the month-
end, the Exchange will provide the Fee Codes otherwise applicable to 
such transactions on the execution reports provided to Members 
during the month and will only designate the Fee Codes applicable to 
the achieved pricing tier on the monthly invoices, which are 
provided after such determination has been made, as the Exchange 
does for its tier-based pricing today.
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    The 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

[[Page 69365]]

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.
    The Exchange notes that it is also proposing to change the fee 
charged under Liquidity Removal Tier 1 for executions of Removed Sub-
Dollar Volume (as defined below), as further described below.
Midpoint Peg IOC/FOK Orders
    As noted above, the Exchange currently charges a standard fee of 
$0.0030 per share for executions of Removed Volume. The Exchange also 
currently charges a discounted fee of $0.0026 per share for executions 
of Midpoint Peg Orders in securities priced at or above $1.00 per share 
with a TIF instruction of IOC or FOK that execute at the midpoint of 
the NBBO and remove liquidity from the Exchange upon entry (such 
orders, ``Midpoint Peg IOC/FOK Orders''). Charging a discounted fee for 
executions of Midpoint Peg IOC/FOK Orders is intended to incentivize 
the submission of such orders and, in turn, attract additional contra-
side orders designed to execute at the midpoint to be posted on the 
Exchange, and is therefore designed to deepen liquidity and increase 
execution opportunities at the midpoint on the Exchange, thereby 
improving the Exchange's market quality to the benefit of all Members 
and enhancing its attractiveness as a trading venue.
    Now, the Exchange proposes to increase the fee charged for 
executions of Midpoint Peg IOC/FOK Orders to $0.0027 per share.\18\ The 
purpose of increasing the fee for executions of Midpoint Peg IOC/FOK 
Orders as proposed (i.e., by $0.0001 per share), which the Exchange 
believes is a modest increase and remains commensurate with the market 
quality benefits that such discounted fee is intended to achieve, 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.
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    \18\ The pricing for executions of Midpoint Peg IOC/FOK Orders 
is referred to by the Exchange on the Fee Schedule under the 
description ``Removed volume from MEMX Book, Midpoint Peg (IOC/
FOK)'' with a Fee Code of ``Rm'' assigned by the Exchange.
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Pricing for Certain Sub-Dollar Volume
    Currently, the Exchange charges a fee of 0.25% of the total dollar 
value of the transaction for executions of Sub-Dollar Volume that 
remove liquidity from the Exchange (such orders, ``Removed Sub-Dollar 
Volume''). This fee is applicable to all executions of Removed Sub-
Dollar Volume (except Retail Orders with a TIF of Day, GTT or RHO that 
remove liquidity from the Exchange upon entry \19\) and is applicable 
to all Members (including those that qualify for any of the Exchange's 
volume tiers). Now, the Exchange proposes to increase the fee charged 
to all Members (including those that qualify for any of the Exchange's 
volume tiers) for all executions of Removed Sub-Dollar Volume (except 
Retail Orders with a TIF of Day, GTT or RHO that remove liquidity from 
the Exchange upon entry) to 0.28% of the total dollar value of the 
transaction. The purpose of increasing the fee for such executions of 
Removed Sub-Dollar Volume 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. The Exchange notes that despite the increase 
proposed herein, which the Exchange believes is modest, the proposed 
fee for such executions of Removed Sub-Dollar Volume (i.e., 0.28% of 
the total dollar value of the transaction) remains lower than, and 
competitive with, the standard fee charged by other equity exchanges 
for executions of orders in securities priced below $1.00 per share 
that remove liquidity.\20\
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    \19\ Such orders have different pricing that is referred to by 
the Exchange on the Fee Schedule under the description ``Removed 
volume from MEMX Book upon entry, Retail Order (Day/GTT/RHO)'' with 
a Fee Code of ``Rr0'' assigned by the Exchange.
    \20\ See, e.g., the Cboe BZX Exchange, Inc. (``Cboe BZX'') 
equities trading fee schedule on its public website (available at 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), 
which reflects a standard fee of 0.30% of the total dollar value of 
the transaction for executions of orders in securities priced below 
$1.00 per share that remove liquidity from Cboe BZX; the Cboe EDGX 
Exchange, Inc. (``Cboe EDGX'') equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/), which reflects a standard fee of 
0.30% of the total dollar value of the transaction for executions of 
orders in securities priced below $1.00 per share that remove 
liquidity from Cboe EDGX.
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    Currently, the Exchange provides a rebate of 0.10% of the total 
dollar value of the transaction for executions of Sub-Dollar Volume 
that add displayed liquidity to the Exchange (such orders, ``Added 
Displayed Sub-Dollar Volume''). This fee is applicable to all 
executions of Added Displayed Sub-Dollar Volume and is applicable to 
all Members (including those that qualify for any of the Exchange's 
volume tiers). Now, the Exchange proposes to reduce the rebate provided 
to all Members (including those that qualify for any of the Exchange's 
volume tiers) for all executions of Added Displayed Sub-Dollar Volume 
to 0.075% of the total dollar value of the transaction. The purpose of 
reducing the rebate for executions of Added Displayed Sub-Dollar Volume 
is for business and competitive reasons, as the Exchange believes that 
reducing such rebate 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 
displayed liquidity. The Exchange notes that despite the reduction 
proposed herein, which the Exchange believes is modest, the proposed 
rebate for executions of Added Displayed Sub-Dollar Volume (i.e., 
0.075% of the total dollar value of the transaction) remains higher 
than, and competitive with, the rebates offered by other equity 
exchanges for executions of orders in securities priced below $1.00 per 
share that add displayed liquidity.\21\
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    \21\ 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 that no rebate is 
provided (i.e., a free execution) for executions of orders in 
securities priced below $1.00 per share that add displayed liquidity 
to Cboe BZX.
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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,\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

[[Page 69366]]

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.'' \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, including with respect to 
Added Displayed Volume, Removed Volume and Sub-Dollar Volume, 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 displayed, liquidity-adding and/or 
liquidity-removing orders, to the Exchange, which the Exchange believes 
would promote price discovery and enhance liquidity and market quality 
on the Exchange to the benefit of all Members and market participants. 
While the Exchange has proposed increasing its fees for certain 
executions of Removed Volume and Removed Sub-Dollar Volume, and 
reducing its rebate for executions of Added Displayed Sub-Dollar 
Volume, as further discussed below, the Exchange believes that each of 
such changes represents a modest increase (decrease) from the current 
fee (rebate) applicable to such executions.
    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 proposed new 
Liquidity Provision Tier 4, the Liquidity Provision Tier 2 as modified 
by the proposed change to the required criteria under such tier, and 
the Liquidity Removal Tier 1 as modified by the proposed changes to the 
fee for executions of Removed Volume and the required criteria under 
such tier, are reasonable, equitable and not unfairly discriminatory 
for these same reasons, as such tiers would provide Members with an 
incremental incentive 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 in the form of displayed, 
liquidity-adding and/or liquidity removing orders, 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, 
as applicable, thereby contributing to a deeper, more liquid and well 
balanced market ecosystem on the Exchange to the benefit of all Members 
and market participants. The Exchange also believes that such tiers 
reflect a reasonable and equitable allocation of fees and rebates, as 
the Exchange believes that the enhanced rebate for executions of Added 
Displayed Volume under the proposed new Liquidity Provision Tier 4 and 
the modified Liquidity Provision Tier 2, as well as the discounted fee 
for executions of Removed Volume under the modified Liquidity Removal 
Tier 1, each remains commensurate with the corresponding required 
criteria under each such tier and is reasonably related to the market 
quality benefits that each such tier is designed to achieve, as 
described above.
    The Exchange also believes the proposed increased fee for 
executions of Midpoint Peg IOC/FOK Orders is reasonable, equitable and 
not unfairly discriminatory because the Exchange believes that the 
increase (i.e., $0.0001 per share) is modest and that the fee remains 
commensurate with the market quality benefits that such discounted fee 
is intended to achieve, as described above, and such fee would continue 
to be charged uniformly to all executions of such orders for all 
Members.
    Regarding the proposed changes to Sub-Dollar Volume pricing, the 
Exchange believes the proposed changes to increase the fee for 
executions of Removed Sub-Dollar Volume (except Retail Orders with a 
TIF of Day, GTT or RHO that remove liquidity from the Exchange upon 
entry) and reduce the rebate for executions of Added Displayed Sub-
Dollar Volume are reasonable because, as described above, the Exchange 
believes that each of such changes represents a modest increase 
(decrease) from the current fee (rebate) applicable to such executions 
and that such changes would decrease the Exchange's expenditures and 
generate additional revenue, as applicable, 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. The Exchange also believes such proposed changes are 
reasonable, as the proposed fee for executions of Removed Sub-Dollar 
Volume (except Retail Orders with a TIF of Day, GTT or RHO that remove 
liquidity from the Exchange upon entry) and the proposed rebate for 
executions of Added Displayed Sub-Dollar Volume are competitive with 
the standard fees and rebates, as applicable, assessed for such 
executions on other equity exchanges.\25\ Additionally, the Exchange 
believes that the proposed changes to these rates represent an 
equitable allocation of fees and are not unfairly discriminatory 
because such rates will continue to apply equally to all Members 
(including those that qualify for any of the Exchange's volume tiers) 
for all such executions.
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    \25\ See supra notes 20-21.
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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 \26\ 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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    \26\ 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

[[Page 69367]]

intended to incentivize market participants to direct additional order 
flow, including displayed, liquidity-adding and liquidity-removing 
orders, to the Exchange, thereby enhancing liquidity and market quality 
on the Exchange to the benefit of all Members and market participants, 
as well as to generate additional revenue and 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 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 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.'' \27\
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    \27\ 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 
displayed, liquidity-adding and liquidity-removing orders, to the 
Exchange, thereby enhancing liquidity and market quality 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 proposed new Liquidity 
Provision Tier 4, and thus receive the proposed enhanced rebate for 
executions of Added Displayed Volume under such tier, would be 
available to all Members that meet the associated volume requirements 
in any month. Similarly, the opportunity to qualify for the proposed 
new alternative criteria under Liquidity Provision Tier 2 and the 
proposed modified criteria under Liquidity Removal Tier 1, and thus 
receive the enhanced rebate for executions of Added Displayed Volume or 
be charged the discounted fee for executions of Removed Volume, 
respectively, would continue to be available to all Members that meet 
the associated volume requirements in any month. Additionally, as 
described above, the Exchange believes that the proposed changes to the 
fee for executions of Midpoint Peg IOC/FOK Orders, the fee for 
executions of Removed Sub-Dollar Volume (except Retail Orders with a 
TIF of Day, GTT or RHO that remove liquidity from the Exchange upon 
entry) and the rebate for executions of Added Displayed Sub-Dollar 
Volume are modest, and such fees and rebate will continue to apply to 
all such executions for all Members as they do today. 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 16% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or 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 Added Displayed 
Volume, Removed Volume and Sub-Dollar 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 the submission of 
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.
    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.'' \28\ 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'. . . .''.\29\ 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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    \28\ See supra note 24.
    \29\ 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

[[Page 69368]]

19(b)(3)(A)(ii) of the Act \30\ and Rule 19b-4(f)(2) \31\ thereunder.
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    \30\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \31\ 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-2022-30 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-2022-30. 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-2022-30 and should be submitted on 
or before December 9, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25087 Filed 11-17-22; 8:45 am]
BILLING CODE 8011-01-P


