[Federal Register Volume 88, Number 27 (Thursday, February 9, 2023)]
[Notices]
[Pages 8482-8487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-02712]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96802; File No. SR-MEMX-2023-03]


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

February 3, 2023.
    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 January 31, 2023, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to amend the Exchange's fee schedule applicable to Members \3\ (the 
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The 
Exchange proposes to implement the changes to the Fee Schedule pursuant 
to this proposal on February 1, 2023. 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) adopt new pricing for executions of orders subject to 
the Exchange's Display-Price Sliding \4\ that add liquidity to the 
Exchange and receive price improvement over the order's ranked price 
when executed; (ii) adopt a new tier under the Liquidity Provision 
Tiers; and (iii) modify the required criteria under the Sub-Dollar 
Rebate Tier.
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    \4\ See Exchange Rule 11.6(j)(1)(A).
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 15% of the total market share of 
executed volume of equities trading.\5\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange 
possesses significant pricing power in the execution of order flow, and 
the Exchange currently represents approximately 3% of the overall 
market share.\6\ The Exchange in particular operates a ``Maker-Taker'' 
model whereby it provides rebates to Members that add liquidity to the 
Exchange and charges fees to Members that remove liquidity from the 
Exchange. The Fee Schedule sets forth the standard rebates and fees 
applied per share for orders that add and remove liquidity, 
respectively. Additionally, in response to the competitive environment, 
the Exchange also offers tiered pricing, which provides Members with 
opportunities to qualify for higher rebates or lower fees where certain 
volume criteria and thresholds are met. Tiered pricing provides an 
incremental incentive for Members to strive for higher tier levels, 
which provides increasingly higher benefits or discounts for satisfying 
increasingly more stringent criteria.
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    \5\ Market share percentage calculated as of January 30, 2023. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \6\ Id.
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Orders Subject to Display-Price Sliding
    The Exchange currently provides a base 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 provides a 
base rebate of 0.075% of the total dollar value of the transaction for 
executions of orders in securities priced below $1.00 per share that 
add displayed liquidity to the Exchange (such orders, ``Added Displayed 
Sub-Dollar Volume'').
    The Exchange is now proposing to adopt new pricing for executions 
of orders subject to Display-Price Sliding that add liquidity to the 
Exchange and receive price improvement over the order's ranked price 
when executed (such orders ``Added Price-Improved Volume''). 
Specifically, the Exchange proposes to provide a base rebate of $0.0015 
per share for executions of Added Price-Improved Volume in securities 
priced at or above $1.00 per share, and the Exchange proposes to 
provide free executions of Added Price-Improved Volume in securities 
priced below $1.00 per share.\7\ Thus, the

[[Page 8483]]

proposed changes would reduce the base rebates provided for executions 
of Added Price-Improved Volume. Additionally, as proposed, such orders 
would be subject to the Exchange's Non-Display Add Tiers such that a 
Member that qualifies for a Non-Display Add Tier would receive the 
rebates provided under such tier that are applicable to executions of 
orders that add non-displayed liquidity to the Exchange with respect to 
its executions of Added Price-Improved Volume.\8\
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    \7\ The proposed pricing for executions of Added Price-Improved 
Volume is referred to by the Exchange on the Fee Schedule under the 
new description ``Added volume, order subject to Display-Price 
Sliding that receives price improvement when executed'' and such 
orders will receive a Fee Code of ``P'' assigned by the Exchange. 
The Exchange notes that it will append a second character, either 
``A'' or ``B'' to indicate whether the execution occurred in a 
security priced at or above $1.00 per share or below $1.00 per 
share, which is consistent with the Fee Code format used by the 
Exchange today.
    \8\ Executions of Added Price-Improved Volume for Members that 
qualify for the Non-Display Add Tiers will receive a Fee Code of 
``P1'', ``P2'' or ``P3'', as applicable, for such executions on the 
monthly invoices provided to Members.
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    Pursuant to the Exchange's Display-Price Sliding functionality, an 
order that would lock or cross a protected quotation is ranked on the 
Exchange's order book at the locking price and displayed at one minimum 
price variation less aggressive than the locking price.\9\ For bids, 
this means that a price slid order is displayed at one minimum price 
variation less than the current national best offer, and for offers, 
this means that a price slid order is displayed at one minimum price 
variation more than the current national best bid. Additionally, 
Exchange Rule 11.10(a)(4)(D) allows an order subject to the Display-
Price Sliding process that is not executable at its most aggressive 
price to be executed at one-half minimum price variation less 
aggressive than the price at which it is ranked. Specifically, in the 
event an order submitted to the Exchange on the side opposite such a 
price slid order is a market order or a limit order priced more 
aggressively than an order displayed on the Exchange's order book 
(i.e., the incoming order is priced more aggressive than the locking 
price), the Exchange will execute the incoming order at, in the case of 
an incoming sell order, one-half minimum price variation less than the 
price of the displayed order, and, in the case of an incoming buy 
order, at one-half minimum price variation more than the price of the 
displayed order.
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    \9\ See Exchange Rule 11.6(j)(1)(A).
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    Based on this functionality, orders executed as described above 
will receive price improvement over the price at which such orders are 
ranked. Because price slid orders subject to the order handling process 
described above will receive price improvement, the Exchange is 
proposing to provide a lower rebate than the current applicable base 
rebate for such executions (i.e., $0.0015 per share for executions of 
Added Price-Improved Volume in securities priced at or above $1.00 per 
share rather than the base rebate of $0.0020 per share that such 
executions receive today, and free executions of Added Price-Improved 
Volume in securities priced below $1.00 per share rather than the base 
rebate of 0.075% of the total dollar value of the transaction that such 
executions receive today). The proposed changes are for business and 
competitive reasons, as the Exchange believes that such reductions in 
rebates 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, 
and Exchange believes that the proposed lower base rebates for such 
executions are appropriate because such executions also receive price 
improvement, which offsets (at least in part) the reduction in the 
applicable rebate, as described above. Further, the Exchange notes that 
other maker-taker equity exchanges also provide lower rebates (such as 
free executions) for executions of orders subject to similar price 
sliding functionality that add liquidity and receive price improvement 
when executed than for executions of other orders that add liquidity 
due to the fact that the price slid orders receive price 
improvement.\10\
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    \10\ See the Cboe BZX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which provides for free executions of 
any displayed order subject to price sliding that receives price 
improvement; the Cboe EDGX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/), which provides for free executions 
of any displayed order subject to price sliding that receives price 
improvement. See also Securities Exchange Act Release No. 65407 
(September 27, 2011), 76 FR 61127 (October 3, 2011) (SR-BATS-2011-
037) (notice of filing and immediate effectiveness of fee changes 
adopted by BATS, including the discontinuation of a liquidity rebate 
for any order subject to price sliding that adds liquidity and 
receives price improvement over its ranked price when executed).
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    The Exchange is also proposing to amend the definitions of 
Displayed ADAV \11\ and Non-Displayed ADAV \12\ on the Fee Schedule to 
state that orders subject to Display-Price Sliding that receive price 
improvement when executed (i.e., Added Price-Improved Volume) are 
included in both calculations, which are used by the Exchange for 
volume tier purposes.
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    \11\ As set forth on the Fee Schedule, ``Displayed ADAV'' 
currently means ADAV with respect to displayed orders, and ``ADAV'' 
means the average daily added volume calculated as the number of 
shares added per day, which is calculated on a monthly basis. As 
proposed, ``Displayed ADAV'' would mean ADAV with respect to 
displayed orders (including orders subject to Display-Price Sliding 
that receive price improvement when executed).
    \12\ As set forth on the Fee Schedule, ``Non-Displayed ADAV'' 
currently means ADAV with respect to non-displayed orders (including 
Midpoint Peg orders). As proposed, ``Non-Displayed ADAV'' would mean 
ADAV with respect to non-displayed orders (including orders subject 
to Display-Price Sliding that receive price improvement when 
executed and Midpoint Peg orders).
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New Liquidity Provision Tier
    As noted above, the Exchange currently provides a base 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 
(i.e., Added Displayed Volume). The Exchange also currently offers 
Liquidity Provision Tiers 1-5 under which a Member may receive an 
enhanced rebate for executions of Added Displayed Volume by achieving 
the corresponding required volume criteria for each such 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 2, 
and the existing Liquidity Provision Tiers 2-5 would be renumbered as 
Liquidity Provision Tiers 3-6 (hereinafter referred to as such). The 
rebates and required criteria under Liquidity Provision Tiers 1, 3, 4, 
5 and 6 would remain unchanged.
    Under the proposed new Liquidity Provision Tier 2, the Exchange 
would provide an enhanced rebate of $0.0033 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; \13\ and (2) a Non-Displayed ADAV that is equal to or greater than 
5,000,000 shares.\14\ The

[[Page 8484]]

Exchange proposes to provide Members that qualify for the proposed new 
Liquidity Provision Tier 2 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 is applicable to such executions under 
each of the existing Liquidity Provision Tiers. The proposed new 
Liquidity Provision Tier 2 is designed to encourage Members to maintain 
or increase their order flow that adds liquidity, including in the form 
of non-displayed orders, to the Exchange in order to qualify for the 
proposed enhanced rebate for executions of Added Displayed Volume, 
which, in turn, would encourage the submission of additional displayed 
orders, thereby promoting price discovery and contributing to a deeper 
and more robust and well-balanced market ecosystem on the Exchange to 
the benefit of all Members and market participants.
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    \13\ 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.
    \14\ The proposed pricing for new Liquidity Provision Tier 2 is 
referred to by the Exchange on the Fee Schedule under the 
description ``Added displayed volume, Liquidity Provision Tier 2'' 
with a Fee Code of ``B2'', ``D2'' or ``J2'', as applicable, to be 
provided by the Exchange on the monthly invoices provided to 
Members. 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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Sub-Dollar Rebate Tier
    As noted above, the Exchange currently provides a base rebate of 
0.075% of the total dollar value of the transaction for executions of 
orders in securities priced below $1.00 per share that add displayed 
liquidity to the Exchange (i.e., Added Displayed Sub-Dollar Volume). 
The Exchange also currently offers the Sub-Dollar Rebate Tier under 
which the Exchange provides an enhanced rebate of 0.15% of the total 
dollar value of the transaction for executions of Added Displayed Sub-
Dollar Volume for Members that qualify for such tier by achieving an 
ADAV that is equal to or greater than 0.15% of the TCV. Now, the 
Exchange proposes to modify the required criteria under the Sub-Dollar 
Rebate Tier 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 0.15% of the TCV; or (2) a Sub-Dollar 
ADAV \15\ that is equal to or greater than 5,000,000 shares. Thus, such 
proposed change would keep the existing ADAV threshold intact and also 
provide an alternative volume threshold that a Member may choose to 
achieve in order to qualify for the Sub-Dollar Rebate Tier that is 
based on the Member's Sub-Dollar ADAV, which is designed to encourage 
Members to maintain or increase their orders in securities priced below 
$1.00 per share that add liquidity to the Exchange. The Exchange is not 
proposing to modify the pricing associated with the Sub-Dollar Rebate 
Tier.
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    \15\ As proposed, the term ``Sub-Dollar ADAV'' means ADAV with 
respect to orders in securities priced below $1.00 per share. The 
Exchange proposes to add the definition of Sub-Dollar ADAV under the 
``Definitions'' section of the Fee Schedule.
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    The Exchange believes that the Sub-Dollar Rebate Tier, as modified, 
would encourage the submission of orders in securities priced below 
$1.00 per share that add liquidity to the Exchange, as it provides an 
alternative threshold based on Sub-Dollar ADAV that Members may choose 
to achieve, thereby contributing to a more robust and well-balanced 
market ecosystem on the Exchange to the benefit of all Members and 
market participants. The Exchange notes that the Sub-Dollar Rebate 
Tier, as modified, would continue to be available to all Members and, 
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 qualify, or strive to qualify, for such tier 
than currently do under the proposed new criteria, as it is more 
expansive and provides an alternative threshold that Members may choose 
to achieve.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\16\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\17\ 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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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4) and (5).
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    As discussed above, the Exchange operates in a highly fragmented 
and competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive or incentives to be insufficient, and the 
Exchange represents only a small percentage of the overall market. The 
Commission and the courts have repeatedly expressed their preference 
for competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \18\
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    \18\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005).
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal reflects a reasonable and competitive pricing structure 
designed to incentivize market participants to direct additional order 
flow to the Exchange, which the Exchange believes would enhance 
liquidity and market quality on the Exchange to the benefit of all 
Members and market participants.
    With respect to the proposed pricing changes related to Added 
Price-Improved Volume, the Exchange believes that providing a lower 
base rebate for executions of such orders in securities priced at or 
above $1.00 per share and free executions for such orders in securities 
priced below $1.00 per share is reasonable, equitable, and not unfairly 
discriminatory because, as described above, the reduction in rebates 
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 price improvement received by such executions offsets (at least in 
part) the change in the rebate structure for such orders, and the 
pricing structure will apply uniformly to all Members. Additionally, as 
noted above, the proposed pricing structure for executions of Added 
Price-Improved Volume is comparable to the pricing structures of other 
maker-taker equity exchanges, which also provide lower

[[Page 8485]]

rebates (such as free executions) for executions of Added Price-
Improved Volume than for executions of other orders that add liquidity 
due to the fact that the price slid orders receive price 
improvement.\19\ Therefore, this aspect of the proposal does not raise 
any new or novel issues that have not previously been considered by the 
Commission. Additionally, the Exchange believes that including 
executions of Added Price-Improved Volume in the executions that 
receive enhanced rebates for Members that qualify for a Non-Display Add 
Tier is reasonable, equitable, and not unfairly discriminatory because 
such orders are executed at a price that is not displayed (i.e., one-
half minimum price variation less aggressive than the locking price), 
and therefore such orders are comparable to other non-displayed orders 
that receive enhanced rebates under such tiers, this pricing structure 
would apply uniformly to all Members, and the opportunity to qualify 
for the Non-Display Add Tiers is available to all Members.
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    \19\ See supra note 10.
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    The Exchange also believes the proposal to amend the definitions of 
Displayed ADAV and Non-Displayed ADAV on the Fee Schedule to state that 
orders subject to Display-Price Sliding that receive price improvement 
when executed (i.e., Added Price-Improved Volume) are included in both 
calculations, which are used for volume tier purposes, is reasonable, 
equitable, and not unfairly discriminatory in that such calculations 
will be made accordingly and in a uniform manner by the Exchange with 
respect to all Members. In addition, the Exchange believes that the 
proposed approach is reasonable and equitable because orders subject to 
Display-Price Sliding are, in fact, displayed on the Exchange and thus 
contribute to price discovery and other benefits to the Exchange and 
the market generally, but also can be executed at prices not displayed 
on the Exchange, as described above.
    With respect to the proposed new Liquidity Provision Tier 2, the 
Exchange notes that volume-based incentives and discounts (such as 
tiers) 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 2 is reasonable, equitable and 
not unfairly discriminatory for these same reasons, as such tier would 
provide Members with an incremental incentive to achieve certain volume 
thresholds on the Exchange, is available to all Members on an equal 
basis, and, as described above, is designed to encourage Members to 
maintain or increase their order flow, including in the form of non-
displayed orders, to the Exchange in order to qualify for the 
corresponding enhanced rebate for executions of Added Displayed Volume, 
thereby promoting price discovery and contributing to a deeper and more 
robust and well-balanced market ecosystem on the Exchange to the 
benefit of all Members and market participants.
    The Exchange believes that the Sub-Dollar Rebate Tier, as modified 
by the proposed change to the required criteria under such tier, is 
reasonable, equitable and not unfairly discriminatory for the reasons 
described above with respect to volume-based tiers, particularly as the 
Exchange believes the enhanced rebate for executions of Added Displayed 
Sub-Dollar Volume under such tier remains commensurate with the 
corresponding required criteria under the applicable tier and 
reasonably related to the market quality benefits that such tier is 
designed to achieve. Additionally, the Exchange believes the proposed 
change to the required criteria under the Sub-Dollar Rebate Tier is 
reasonable because, as noted above, such change would keep the existing 
ADAV threshold intact and also provide an alternative criteria that a 
Member may choose to achieve that is based on a Sub-Dollar ADAV 
threshold, which would incentivize the submission of additional orders 
in securities priced below $1.00 per share to the Exchange, thereby 
contributing to a more robust and well-balanced market ecosystem on the 
Exchange to the benefit of all Members and market participants. The 
Exchange also believes the proposed new criteria is equitable and not 
unfairly discriminatory because all Members will continue to be 
eligible to meet such criteria, including the Members that currently 
meet the existing ADAV threshold that is not changing. Further, as 
noted above, 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 qualify, or strive to qualify, for such 
tier under the proposed new criteria, which is more expansive.
    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 \20\ 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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    \20\ 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 in the form of non-displayed orders 
and orders in securities priced below $1.00 per share, to the Exchange, 
thereby enhancing liquidity and market quality on the Exchange to the 
benefit of all Members. 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.'' \21\
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    \21\ See supra note 18.
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Intramarket Competition
    As discussed above, the Exchange believes that the proposal would 
incentivize Members to submit additional order flow, including in the 
form of non-displayed orders and orders in securities priced below 
$1.00 per share, 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

[[Page 8486]]

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 Exchange does not believe that the proposed changes to the 
pricing for executions of Added Price-Improved Volume would impose any 
burden on intramarket competition because such changes will apply to 
all Members uniformly, in that the proposed based rebates for such 
executions would be the base rebates applicable to all Members, and the 
opportunity to qualify for the Non-Display Add Tiers, and thus receive 
an enhanced rebate for executions of Added Price-Improved Volume along 
with other non-displayed orders in securities priced at or above $1.00 
per share that add liquidity to the Exchange, is available to all 
Members. The Exchange does not believe its proposal to amend the 
definitions of Displayed ADAV and Non-Displayed ADAV on the Fee 
Schedule to state that orders subject to Display-Price Sliding that 
receive price improvement when executed (i.e., Added Price-Improved 
Volume) are included in both calculations, which are used for volume 
tier purposes, would impose any burden intramarket competition, as such 
calculations will be made in a uniform manner by the Exchange with 
respect to all Members. The opportunity to qualify for the proposed new 
Liquidity Provision Tier 2 and the proposed new criteria under the Sub-
Dollar Rebate, and thus receive the corresponding enhanced rebates for 
executions of Added Displayed Volume and Added Displayed Sub-Dollar 
Volume, respectively, would be available to all Members that meet the 
associated volume requirements in any month. As described above, the 
Exchange believes that the required criteria under each such tier are 
commensurate with the corresponding rebate under such tier and are 
reasonably related to the enhanced liquidity and market quality that 
such tier is designed to promote. 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 15% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates, including with respect to executions of 
Added Displayed Volume, Added Displayed Sub-Dollar Volume and Added 
Price-Improved 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 with respect to its transaction pricing through lower base 
rebates for executions of Added Price-Improved Volume and encourage 
additional, diverse types of order flow to the Exchange through volume-
based tiers, which have been widely adopted by exchanges, including the 
Exchange. Additionally, as discussed above, the proposed pricing 
structure for executions of Added Price-Improved Volume is comparable 
to that of other maker-taker equity exchanges, which also provide lower 
rebates (such as free executions) for such executions than for 
executions of other orders that add liquidity due to the fact that the 
price slid orders receive price improvement.\22\ 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 structures and incentives to 
market participants.
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    \22\ See supra note 10.
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    Additionally, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \23\ 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'. . . .''.\24\ 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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    \23\ See supra note 18.
    \24\ 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 \25\ and Rule 19b-4(f)(2) \26\ thereunder.
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    \25\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \26\ 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

[[Page 8487]]

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-2023-03 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-2023-03. 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-2023-03 and should be submitted on 
or before March 2, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-02712 Filed 2-8-23; 8:45 am]
BILLING CODE 8011-01-P


