[Federal Register Volume 88, Number 45 (Wednesday, March 8, 2023)]
[Notices]
[Pages 14427-14435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04688]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97028; File No. SR-MEMX-2023-05]


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

March 2, 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 February 28, 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 March 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) reduce the base rebate 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''); 
(ii) reduce the base rebate for executions of Retail Orders \4\ in 
securities priced at or above $1.00 per share that add displayed 
liquidity to the Exchange (such orders, ``Added Displayed Retail 
Volume''); (iii) reduce the base rebates for executions of orders in 
securities priced at or above $1.00 per share that add non-displayed 
liquidity to the Exchange (such orders, ``Added Non-Displayed 
Volume''); (iv) modify the Liquidity Provision Tiers; (v) modify the 
required criteria under NBBO Setter/Joiner Tier 1; (vi) modify the Non-
Display Add Tiers; (vii) modify Liquidity Removal Tier 1 and adopt a 
new Liquidity Removal Tier 2; (viii) modify the required criteria under 
the Sub-Dollar Rebate Tier; and (ix) eliminate the special pricing for 
executions of Pegged Orders \5\ with a Midpoint Peg \6\ instruction 
(such orders, ``Midpoint Peg Orders'') and a time-in-force (``TIF'') 
instruction of IOC \7\ or FOK \8\ that execute at the midpoint of the 
national best bid and offer (``NBBO'') and remove liquidity from the 
Exchange upon entry (such orders, ``Midpoint Peg IOC/FOK Orders'').
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    \4\ A ``Retail Order'' means an agency or riskless principal 
order that meets the criteria of FINRA Rule 5320.03 that originates 
from a natural person and is submitted to the Exchange by a Retail 
Member Organization (``RMO''), provided that no change is made to 
the terms of the order with respect to price or side of market and 
the order does not originate from a trading algorithm or any other 
computerized methodology. See Exchange Rule 11.21(a).
    \5\ See Exchange Rule 11.6(h).
    \6\ See Exchange Rule 11.6(h)(2).
    \7\ See Exchange Rule 11.6(o)(1).
    \8\ 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

[[Page 14428]]

available information, no single registered equities exchange currently 
has more than approximately 15% of the total market share of executed 
volume of equities trading.\9\ 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.\10\ 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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    \9\ Market share percentage calculated as of February 28, 2023. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \10\ Id.
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Reduce Base Rebate for Added Displayed Volume
    Currently, the Exchange provides a base rebate of $0.0020 per share 
for executions of Added Displayed Volume. The Exchange now proposes to 
reduce the base rebate for executions of Added Displayed Volume to 
$0.0018 per share.\11\ The purpose of reducing the base rebate for 
executions of Added Displayed Volume is for business and competitive 
reasons, as the Exchange believes that reducing such rebate as proposed 
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, the proposed base rebate for executions of Added Displayed 
Volume remains in line with, or higher than, the base rebates provided 
by other exchanges for executions of orders in securities priced at or 
above $1.00 per share that add displayed liquidity.\12\
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    \11\ The proposed base rebate for executions of Added Displayed 
Volume is referred to by the Exchange on the Fee Schedule under the 
existing description ``Added displayed volume'' with a Fee Code of 
``B'', ``D'' or ``J'', as applicable, on execution reports.
    \12\ See, e.g., the Nasdaq Stock Market LLC (``Nasdaq'') Price 
List--Trading Connectivity (available at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a base rebate of 
$0.0018 per share for executions of orders in Tape A and Tape B 
securities priced at or above $1.00 per share that add displayed 
liquidity and a base rebate of $0.0013 per share for executions of 
orders in Tape C securities priced at or above $1.00 per share that 
add displayed liquidity; 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 base rebate of $0.0016 per share for executions of 
orders in securities priced at or above $1.00 per share that add 
displayed liquidity.
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Reduce Base Rebate for Added Displayed Retail Volume
    Currently, the Exchange provides a base rebate of $0.0035 per share 
for executions of Added Displayed Retail Volume. The Exchange now 
proposes to reduce the base rebate for executions of Added Displayed 
Retail Volume to $0.0034 per share.\13\ The purpose of reducing the 
base rebate for executions of Added Displayed Retail Volume is for 
business and competitive reasons, as the Exchange believes that 
reducing such rebate as proposed 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, the proposed base rebate for executions 
of Added Displayed Retail Volume remains higher than, and competitive 
with, the base rebates provided by other exchanges for executions of 
attested retail orders in securities priced at or above $1.00 per share 
that add displayed liquidity.\14\
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    \13\ The proposed base rebate for executions of Added Displayed 
Retail Volume is referred to by the Exchange on the Fee Schedule 
under the existing description ``Added displayed volume, Retail 
Order'' with a Fee Code of ``Br'', ``Dr'' or ``Jr'', as applicable, 
on execution reports.
    \14\ See, e.g., the Cboe BZX equities trading fee schedule on 
its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a base rebate of 
$0.0032 per share for executions of attested retail orders in 
securities priced at or above $1.00 per share that add displayed 
liquidity; 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 base rebate of $0.0032 per share for executions of 
attested retail orders in securities priced at or above $1.00 per 
share that add displayed liquidity.
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Reduce Base Rebates for Added Non-Displayed Volume
    The Exchange is proposing to uniformly reduce the base rebates 
provided for executions of Added Non-Displayed Volume, which is 
comprised of the three following types of orders: (i) Midpoint Peg 
Orders in securities priced at or above $1.00 per share that add 
liquidity to the Exchange (such orders, ``Added Midpoint Volume''); 
(ii) orders, which are not orders subject to Display-Price Sliding that 
receive price improvement when executed or Midpoint Peg Orders, in 
securities priced at or above $1.00 per share that add non-displayed 
liquidity to the Exchange (such orders, ``Added Non-Midpoint Hidden 
Volume''); and (iii) orders in securities priced at or above $1.00 per 
share subject to Display-Price Sliding that add liquidity to the 
Exchange and receive price improvement when executed (such orders, 
``Added Price-Improved Volume'').
    Currently, the Exchange provides base rebates of $0.0015 per share 
for executions of Added Midpoint Volume, Added Non-Midpoint Hidden 
Volume, and Added Price-Improved Volume. The Exchange now proposes to 
reduce each of these base rebates to $0.0010 per share.\15\ The purpose 
of uniformly reducing the standard rebates for executions of Added 
Midpoint Volume, Add Non-Midpoint Hidden Volume, and Added Price-
Improved Volume is for business and competitive reasons, as the 
Exchange believes reducing such rebates as proposed 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 the proposed base rebate for executions of Added Midpoint Volume 
remains in line and competitive with the base rebates provided by at 
least one other exchange for executions of similar orders.\16\ The

[[Page 14429]]

Exchange also notes that the proposed base rebate for executions of 
Added Non-Midpoint Hidden Volume remains in line and competitive with 
the base rebate provided by at least one other exchange for executions 
of similar orders.\17\ Additionally, the Exchange believes it is 
appropriate to also provide the same base rebate for executions of 
Added Price-Improved Volume as for executions of Added Midpoint Volume 
and Added Non-Midpoint Hidden Volume, as all of these orders similarly 
add liquidity to the Exchange and are executed at prices that are not 
displayed on the Exchange's order book, and the Exchange notes that all 
of these orders are also currently subject to the same base rebate and 
pricing structure today.
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    \15\ The proposed base rebate for executions of Added Midpoint 
Volume is referred to by the Exchange on the Fee Schedule under the 
existing description ``Added non-displayed volume, Midpoint Peg'' 
and such orders will continue to receive a Fee Code of ``M'' on 
execution reports. The proposed base rebate for executions of Added 
Non-Midpoint Hidden Volume is referred to by the Exchange on the Fee 
Schedule under the existing description ``Added non-displayed 
volume'' and such orders will continue to receive a Fee Code of 
``H'' on execution reports. The proposed base rebate for executions 
of Added Price-Improved Volume is referred to by the Exchange on the 
Fee Schedule under the existing description ``Added volume, order 
subject to Display-Price Sliding that receives price improvement 
when executed'' and such orders will continue to receive a Fee Code 
of ``P'' on execution reports.
    \16\ See, e.g., the Nasdaq Price List--Trading Connectivity 
(available at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a base rebate of 
$0.0014 per share for executions of orders in Tape A and Tape B 
securities priced at or above $1.00 per share that add non-displayed 
midpoint liquidity and a base rebate of $0.0010 per share for 
executions of orders in Tape C securities priced at or above $1.00 
per share that add non-displayed midpoint liquidity.
    \17\ See, e.g., the Cboe BZX equities trading fee schedule on 
its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a standard rebate of 
$0.0010 per share for executions of orders in securities priced at 
or above $1.00 per share that add non-displayed liquidity.
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Liquidity Provision Tiers
    The Exchange currently provides a base rebate of $0.0020 per share 
for executions of Added Displayed Volume, which the Exchange is 
proposing to reduce to $0.0018 per share, as described above. The 
Exchange also currently offers Liquidity Provision Tiers 1-6 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 modify the 
Liquidity Provision Tiers by reducing the rebates for executions of 
Added Displayed Volume and modifying the required criteria under such 
tiers and eliminating Liquidity Provision Tier 6, as further described 
below.
    With respect to Liquidity Provision Tier 1, the Exchange currently 
provides an enhanced rebate of $0.0034 per share for executions of 
Added Displayed Volume for Members that qualify for such tier by 
achieving: (1) a Displayed ADAV \18\ that is equal to or greater than 
0.40% of the TCV; \19\ or (2) an ADAV that is equal to or greater than 
0.30% of the TCV and a Step-Up ADAV \20\ from November 2022 that is 
equal to or greater than 0.10% of the TCV. The Exchange now proposes to 
reduce the rebate for executions of Added Displayed Volume under 
Liquidity Provision Tier 1 to $0.00335 per share and to modify the 
required criteria such that a Member would now qualify for such tier by 
achieving an ADAV (excluding Retail Orders) that is equal to or greater 
than 0.45% of the TCV.\21\ 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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    \18\ 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.
    \19\ 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.
    \20\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means 
ADAV in the relevant baseline month subtracted from current ADAV.
    \21\ 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.
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    With respect to Liquidity Provision Tier 2, the Exchange currently 
provides 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; and (2) a Non-Displayed ADAV \22\ that is equal to or greater than 
5,000,000 shares. The Exchange now proposes to reduce the rebate for 
executions of Added Displayed Volume under Liquidity Provision Tier 2 
to $0.00325 per share and to modify the required criteria such that a 
Member would qualify for such tier by achieving: (1) an ADAV that is 
equal to or greater than 0.25% of the TCV; and (2) a Non-Displayed ADAV 
that is equal to or greater than 4,000,000 shares.\23\ Thus, such 
proposed change would lower the Non-Displayed ADAV threshold in the 
second of the two existing alternative criteria. 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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    \22\ As set forth on the Fee Schedule, ``Non-Displayed ADAV'' 
means ADAV with respect to non-displayed orders (including orders 
subject to Display-Price Sliding that receive price improvement when 
executed and Midpoint Peg orders).
    \23\ The proposed pricing for Liquidity Provision Tier 2 is 
referred to by the Exchange on the Fee Schedule under the existing 
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.
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    With respect to Liquidity Provision Tier 3, 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 0.20% 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 TCV. The Exchange now proposes to reduce the rebate for 
executions of Added Displayed Volume under Liquidity Provision Tier 3 
to $0.0031 per share and to modify the required criteria such that a 
Member would now qualify for such tier by achieving an ADAV that is 
equal to or greater than 0.20% of the TCV.\24\ Thus, such proposed 
change would keep the first of the two existing alternative criteria 
intact with no changes and eliminate the second of the two existing 
alternative criteria. 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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    \24\ 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.
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    With respect to Liquidity Provision Tier 4, the Exchange currently 
provides an enhanced rebate of $0.0030 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 0.15% of the 
TCV; or (2) an ADAV that is equal to or greater than 15,000,000 shares. 
The Exchange now proposes to reduce the rebate for executions of Added 
Displayed Volume under Liquidity Provision Tier 4 to $0.0029 per share 
and to modify the required criteria such that a Member would now 
qualify for such tier by achieving an ADAV that is equal to or greater 
than 0.15% of the TCV.\25\ Thus, such proposed change would keep the 
first of the two existing alternative criteria intact with no changes 
and eliminate the second of the two existing alternative criteria. The 
Exchange is not proposing to change the rebate for executions of orders 
in

[[Page 14430]]

securities priced below $1.00 per share under such tier.
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    \25\ 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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    With respect to Liquidity Provision Tier 5, the Exchange currently 
provides an enhanced rebate of $0.0028 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 0.10% of the 
TCV; or (2) a Displayed ADAV (excluding Retail Orders) that is equal to 
or greater than 750,000 shares and a Step-Up Displayed ADAV \26\ 
(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). The Exchange now proposes to reduce the rebate for executions 
of Added Displayed Volume under Liquidity Provision Tier 5 to $0.0027 
per share 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 Displayed ADAV (excluding 
Retail Orders) that is equal to or greater than 750,000 shares and a 
Step-Up Displayed ADAV (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).\27\ Thus, such proposed change would 
lower the overall ADAV threshold in the first of the two existing 
alternative criteria and keep the second of the two existing 
alternative criteria intact with no changes. 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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    \26\ As set forth on the Fee Schedule, ``Step-Up Displayed 
ADAV'' means Displayed ADAV in the relevant baseline month 
subtracted from current Displayed ADAV.
    \27\ The proposed pricing for Liquidity Provision Tier 5 is 
referred to by the Exchange on the Fee Schedule under the existing 
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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    With respect to Liquidity Provision Tier 6, the Exchange currently 
provides an enhanced rebate of $0.0025 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 0.075% of the 
TCV; or (2) a Midpoint ADAV \28\ that is equal to or greater than 
1,000,000 shares. The Exchange now proposes to eliminate Liquidity 
Provision Tier 6, as the Exchange no longer wishes to, nor is it 
required to, maintain such tier, and the Exchange would rather redirect 
the associated resources and funding into other programs and tiers 
intended to incentivize increased order flow or enhance market quality.
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    \28\ As set forth on the Fee Schedule, ``Midpoint ADAV'' means 
ADAV with respect to Midpoint Peg orders.
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    The purpose of reducing the rebates for executions of Added 
Displayed Volume under Liquidity Provision Tiers 1-5 as proposed, which 
the Exchange believes in each case represents a modest reduction and 
remains commensurate with the required criteria as modified, and 
eliminating Liquidity Provision Tier 6 is for business and competitive 
reasons, as the Exchange believes that such rebate reductions and tier 
elimination 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 tiered pricing structure for executions of Added Displayed Volume 
under the Liquidity Provision Tiers provides an incremental incentive 
for Members to strive for higher volume thresholds to receive higher 
enhanced rebates for such executions and, as such, is intended to 
encourage Members to maintain or increase their order flow, primarily 
in the form of liquidity-adding volume, to the Exchange, thereby 
contributing to a deeper and more liquid market to the benefit of all 
Members and market participants. The Exchange believes that the 
Liquidity Provision Tiers, as modified by the proposed changes 
described above, reflect a reasonable and competitive pricing structure 
that is right-sized and consistent with the Exchange's overall pricing 
philosophy of encouraging added and/or displayed liquidity. 
Specifically, the Exchange believes that, after giving effect to the 
proposed changes described above, the rebate for executions of Added 
Displayed Volume provided under each of the Liquidity Provision Tiers 
1-5 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.
NBBO Setter/Joiner Tier 1
    The Exchange currently offers NBBO Setter/Joiner Tiers 1-2 under 
which a Member may receive an additive rebate for a qualifying Member's 
executions of Added Displayed Volume (other than Retail Orders) that 
establish the NBBO (such orders, ``Setter Volume'') and executions of 
Added Displayed Volume (other than Retail Orders) that establish a new 
best bid or offer on the Exchange that matches the NBBO first 
established on an away market (such orders, ``Joiner Volume''). With 
respect to NBBO Setter/Joiner Tier 1, the Exchange currently provides 
an additive rebate of $0.0004 per share for executions of Setter Volume 
and Joiner Volume for Members that qualify for such tier by achieving 
an ADAV with respect to orders with Fee Code B \29\ that is equal to or 
greater than 0.10% of the TCV. The Exchange now proposes to modify the 
required criteria such that a Member would now qualify for such tier by 
achieving: (1) an ADAV with respect to orders with Fee Code B that is 
equal to or greater than 0.10% of the TCV; or (2) an ADAV with respect 
to orders with Fee Code B that is equal to or greater than 10,000,000 
shares.\30\ Thus, such proposed change would keep the existing criteria 
based on an ADAV threshold that is expressed as a percentage of TCV 
intact with no changes and add a new alternative criteria based on an 
ADAV threshold that is expressed as a number of shares. The Exchange 
notes that, as the proposed change to the required criteria under NBBO 
Setter/Joiner 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 qualify, or strive to qualify, for such tier 
than currently do, resulting in the submission of additional order flow 
to the Exchange. The Exchange believes that the additive rebate for 
executions of Setter Volume and Joiner Volume provided under NBBO 
Setter/Joiner Tier 1, which the Exchange is not proposing to change 
with this proposal, remains commensurate with the required criteria 
under such tier, as modified, and is reasonably related to the market 
quality benefits that such tier is designed to achieve.
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    \29\ The Exchange notes that orders with Fee Code B include 
orders, other than Retail Orders, that establish the NBBO.
    \30\ The pricing for NBBO Setter/Joiner Tier 1 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``NBBO Setter/Joiner Tier 1'' with a Fee Code of S1 to be appended 
to the otherwise applicable Fee Code assigned by the Exchange on the 
monthly invoices for qualifying executions.
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Non-Display Add Tiers
    The Exchange currently offers Non-Display Add Tiers 1-3 under which 
a Member may receive an enhanced rebate for executions of Added Non-
Displayed Volume by achieving the corresponding required volume 
criteria for each such tier. The Exchange now proposes to modify the 
Non-Display

[[Page 14431]]

Add Tiers by modifying the required criteria under Non-Display Add Tier 
2 and reducing the rebate for executions of Added Non-Displayed Volume 
and modifying the required criteria under Non-Display Add Tier 3.
    With respect to Non-Display Add Tier 2, the Exchange currently 
provides an enhanced rebate of $0.0024 per share for executions of 
Added Non-Displayed Volume for Members that qualify for such tier by 
achieving a Non-Displayed ADAV that is equal to or greater than 
2,000,000 shares.\31\ The Exchange now proposes to modify Non-Display 
Add Tier 2 such that a Member would now qualify for such tier by 
achieving a Non-Displayed ADAV that is equal to or greater than 
1,500,000 shares. Thus, such proposed change would lower the Non-
Displayed ADAV threshold in the required criteria, which the Exchange 
believes 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 qualify, or 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 
rebates provided under this tier.
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    \31\ The pricing for Non-Display Add Tier 2 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Added non-displayed volume, Non-Display Add Tier 2'' with a Fee 
Code of ``H2'', ``M2'' or ``P2'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------

    With respect to Non-Display Add Tier 3, the Exchange currently 
provides an enhanced rebate of $0.0020 per share for executions of 
Added Non-Displayed Volume for Members that qualify for such tier by 
achieving a Non-Displayed ADAV that is equal to or greater than 
1,000,000 shares. The Exchange now proposes to reduce the rebate for 
executions of Added Non-Displayed Volume under Non-Display Add Tier 3 
to $0.0018 per share and to modify the required criteria such that a 
Member would now qualify for such tier by achieving a Non-Displayed 
ADAV that is equal to or greater than 500,000 shares.\32\ Thus, such 
proposed change would lower the Non-Displayed ADAV threshold in the 
required criteria, which the Exchange believes 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 
qualify, or strive to qualify, for such tier than currently do, 
resulting in the submission of additional order flow to the Exchange.
---------------------------------------------------------------------------

    \32\ The proposed pricing for Non-Display Add Tier 3 is referred 
to by the Exchange on the Fee Schedule under the existing 
description ``Added non-displayed volume, Non-Display Add Tier 3'' 
with a Fee Code of ``H3'', ``M3'' or ``P3'', as applicable, to be 
provided by the Exchange on the monthly invoices provided to 
Members.
---------------------------------------------------------------------------

    The purpose of reducing the rebate for executions of Added Non-
Displayed Volume under Non-Display Add Tier 3 as proposed, which the 
Exchange believes represents a modest reduction and remains 
commensurate with the required criteria as modified to include a lower 
Non-Displayed ADAV threshold, is for business and competitive reasons, 
as the Exchange believes that such rebate 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 tiered pricing structure 
for executions of Added Non-Displayed Volume under the Non-Display Add 
Tiers provides an incremental incentive for Members to strive for 
higher volume thresholds to receive higher enhanced rebates for such 
executions and, as such, is intended to encourage Members to maintain 
or increase their order flow, particularly in the form of liquidity-
adding non-displayed volume, to the Exchange, thereby contributing to a 
deeper and more robust and well-balanced market ecosystem to the 
benefit of all Members and market participants.
Liquidity Removal Tiers
    The Exchange currently charges a base 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 $0.00295 
per share for executions of Removed Volume by achieving (1) an ADV \33\ 
that is equal to or greater than 0.50% of the TCV and a Remove ADV \34\ 
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. Now, the Exchange 
proposes to reduce the fee charged for executions of Removed Volume 
under Liquidity Removal Tier 1 to $0.0029 per share and to modify the 
required criteria such that a Member would now qualify for such tier by 
achieving: (1) an ADV that is equal to or greater than 0.50% of the TCV 
and a Remove ADAV that is equal to or greater than 0.30% of the TCV; or 
(2) an ADV that is equal to or greater than 1.00% of the TCV.\35\ Thus, 
the proposed change to the required criteria would increase the Remove 
ADV threshold by 0.05% (i.e., from 0.25% to 0.30%) of the TCV in the 
first of the existing alternative criteria and keep the second of the 
existing alternative criteria intact with no changes. The proposed 
change to increase the Remove ADV threshold in the first of such 
alternative criteria is 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 discounted fee 
for executions of Removed Volume under such tier. While the Exchange's 
overall pricing philosophy generally encourages adding liquidity over 
removing liquidity, the Exchange believes that providing criteria under 
certain tiers that are based on different types of volume that Members 
may choose to achieve, such as the existing criteria that 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 
reason the Exchange is proposing to reduce the fee charged for 
executions of Removed Volume under such tier by $0.00005 per share, 
which the Exchange believes represents a modest reduction and remains 
commensurate with the proposed new required criteria, is because the 
Exchange is increasing the Remove ADV threshold in the alternative 
criteria, as described above, and the Exchange is also proposing to 
adopt a second Liquidity Removal Tier under which a qualifying Member 
may still qualify for a discounted fee of $0.00295 per share for 
executions of Removed Volume by achieving a lower volume threshold, as 
further described below.
---------------------------------------------------------------------------

    \33\ 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.
    \34\ As set forth on the Fee Schedule, ``Remove ADV'' means ADV 
with respect to orders that remove liquidity.
    \35\ 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.
---------------------------------------------------------------------------

    The Exchange proposes to adopt a new Liquidity Removal Tier 2 under 
which the Exchange would charge a discounted fee of $0.00295 per share 
for executions of Remove Volume for Members that qualify for such tier 
by achieving an ADV that is equal to or

[[Page 14432]]

greater than 0.25% of the TCV.\36\ The Exchange proposes to charge 
Members that qualify for the proposed new Liquidity Removal Tier 2 a 
fee of 0.28% of the total dollar volume of the transaction for 
executions of orders in securities priced below $1.00 per share that 
remove liquidity from the Exchange, which is the current base fee for 
such executions as well as the same fee that is currently applicable to 
such executions under the existing Liquidity Removal Tier 1. The 
proposed new Liquidity Removal Tier 2 is designed to encourage Members 
to maintain or increase their order flow to the Exchange in order to 
qualify for the proposed discounted fee for executions of Removed 
Volume, which, in turn, would encourage the submission of additional 
Removed Volume, thereby contributing to a deeper and more robust and 
well-balanced market ecosystem on the Exchange to the benefit of all 
Members and market participants.
---------------------------------------------------------------------------

    \36\ The proposed pricing for new Liquidity Removal Tier 2 is 
referred to by the Exchange on the Fee Schedule under the new 
description ``Removed volume from MEMX Book, Liquidity Removal Tier 
1'' with a Fee Code of ``R2'' to be provided by the Exchange on the 
monthly invoices provided to Members.
---------------------------------------------------------------------------

Sub-Dollar Rebate Tier
    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 (such orders, ``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: (1) an ADAV 
that is equal to or greater than 0.15% of the TCV; or (2) a Sub-Dollar 
ADAV \37\ that is equal to or greater than 5,000,000 shares. 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 a Sub-Dollar ADAV that is equal to or greater than 5,000,000 
shares. Thus, such proposed change would eliminate the first of the two 
existing alternative criteria and keep the second of the two existing 
alternative criteria intact with no changes. The Exchange is not 
proposing to modify the pricing associated with the Sub-Dollar Rebate 
Tier, but the Exchange believes the enhanced rebate for executions of 
Added Displayed Sub-Dollar Volume provided under the Sub-Dollar Rebate 
Tier remains commensurate with the required criteria as modified.
---------------------------------------------------------------------------

    \37\ As set forth on the Fee Schedule, the term ``Sub-Dollar 
ADAV'' means ADAV with respect to orders in securities priced below 
$1.00 per share.
---------------------------------------------------------------------------

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 $0.0027 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 (i.e., 
Midpoint Peg IOC/FOK Orders).\38\ The Exchange adopted this special 
pricing for executions of Midpoint Peg IOC/FOK Orders in September 2022 
for the purpose of incentivizing the submission of such orders and, in 
turn, attracting additional contra-side orders designed to execute at 
the midpoint to be posted on the Exchange, thereby increasing execution 
opportunities at the midpoint on the Exchange.\39\
---------------------------------------------------------------------------

    \38\ The pricing for executions of Midpoint Peg IOC/FOK Orders 
is currently referred to by the Exchange on the Fee Schedule under 
the description ``Removed volume from MEMX Book, Midpoint Peg (IOC/
FOK)'' and such orders receive a Fee Code of ``Rm'' assigned by the 
Exchange. The Exchange notes that it proposes to delete this 
description from the Fee Schedule in connection with the elimination 
of special pricing for such orders, as further described below.
    \39\ See Securities Exchange Act Release No. 95688 (September 7, 
2022), 87 FR 56132 (September 13, 2022) (SR-MEMX-2022-23) (notice of 
filing and immediate effectiveness of fee changes adopted by the 
Exchange, including the discounted fee for executions of Midpoint 
Peg IOC/FOK Orders).
---------------------------------------------------------------------------

    The Exchange now proposes to eliminate this special pricing for 
executions of Midpoint Peg IOC/FOK Orders. Therefore, as proposed, such 
executions would be treated the same as other executions of Removed 
Volume, as they were before the adoption of special pricing in 
September 2022, and thus would either be subject to the base fee of 
$0.0030 per share or a discounted fee under the Liquidity Removal 
Tiers. The Exchange notes that the Fee Code ``Rm'' associated with 
executions of Midpoint Peg IOC/FOK Orders would also be deleted (and 
such executions would receive the otherwise applicable Fee Code for 
Removed Volume), as such executions no longer receive special pricing, 
and therefore, the Exchange does not believe it is appropriate to 
designate such executions with a different Fee Code. The purpose of 
eliminating the special pricing for executions of Midpoint Peg IOC/FOK 
Orders is for business and competitive reasons, as the Exchange 
believes that subjecting such orders to the base fee or otherwise 
applicable fee for such executions 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 and/or displayed liquidity. The 
Exchange notes that it is not required to maintain such discounted fee 
(or any special pricing) for executions of Midpoint Peg IOC/FOK Orders, 
and the Exchange would rather redirect the associated resources and 
funding into other programs and tiers intended to incentivize increased 
order flow or enhance market quality.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\40\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\41\ 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.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f.
    \41\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    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.'' \42\
---------------------------------------------------------------------------

    \42\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499
    (June 29, 2005).
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the

[[Page 14433]]

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 decrease the Exchange's expenditures and generate 
additional revenue with respect to its transaction pricing and 
incentivize market participants to direct additional order flow 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.
    The Exchange believes that the proposed changes to reduce the base 
rebates provided for executions of Added Displayed Volume and Added 
Displayed Retail Volume are reasonable because, as described above, 
such changes are designed to 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 
and/or displayed liquidity, and the proposed new base rebates for 
executions of Added Displayed Volume and Added Displayed Retail Volume 
remain in line or higher than, and competitive with, the base rebates 
provided by other exchanges in each case for executions of similar 
orders.\43\ The Exchange also believes the proposed base rebates for 
executions of Added Displayed Volume and Added Displayed Retail Volume 
are equitable and not unfairly discriminatory, as such base rebates 
will apply equally to all Members.
---------------------------------------------------------------------------

    \43\ See supra notes 12 and 14.
---------------------------------------------------------------------------

    Similarly, the Exchange believes that the proposed changes to 
reduce the base rebates provided for executions of Added Midpoint 
Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved 
Volume are reasonable because, as described above, such changes are 
designed to 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 and/or 
displayed liquidity and the proposed new base rebates for executions of 
Added Midpoint Volume and Added Non-Midpoint Hidden Volume remain in 
line and competitive with the base rebates provided by other exchanges 
in each case for executions of similar orders.\44\ Additionally, as 
noted above, and the Exchange believes that providing the same base 
rebate for executions of Added Price-Improved Volume as for executions 
of Added Midpoint Volume and Added Non-Midpoint Hidden Volume is 
reasonable and appropriate because all of these orders similarly add 
liquidity to the Exchange, are executed at prices that are not 
displayed on the Exchange's order book, and are currently subject to 
the same base rebate and pricing structure today. The Exchange also 
believes the proposed base rebates for executions of Added Midpoint 
Volume, Added Non-Midpoint Hidden Volume, and Added Price-Improved 
Volume are equitable and not unfairly discriminatory, as such base 
rebates will apply equally to all Members.
---------------------------------------------------------------------------

    \44\ See supra notes 16 and 17.
---------------------------------------------------------------------------

    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 each of the Liquidity Provision Tiers 1-5, NBBO 
Setter/Joiner Tier 1, Non-Display Add Tiers 2-3, Liquidity Removal Tier 
1, and the Sub-Dollar Rebate Tier, each as modified by the changes 
proposed herein, as well as the proposed new Liquidity Removal Tier 2, 
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 reasonably designed to encourage Members to maintain or increase 
their order flow, including in the various forms of liquidity-adding 
and liquidity-removing volume under the required criteria, as 
applicable, to the Exchange, which the Exchange believes would promote 
price discovery, enhance liquidity and market quality, and contribute 
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 that such tiers reflect a reasonable and 
equitable allocation of fees and rebates, as the Exchange believes 
that, after giving effect to the changes proposed herein, the enhanced 
rebates for executions of Added Displayed Volume, Added Non-Displayed 
Volume, and Added Displayed Sub-Dollar Volume, as well as the 
discounted fee for executions of Removed Volume, as applicable, under 
each such tier is 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.
    With respect to the proposed change to eliminate Liquidity 
Provision Tier 6, the Exchange believes such change is reasonable 
because, as noted above, it would enable the Exchange to redirect the 
associated resources and funding into other programs and tiers intended 
to incentivize increased order flow or enhance market quality, and the 
Exchange is not required to maintain such tier or provide Members any 
opportunities to receive additive rebates. The Exchange believes the 
proposal to eliminate such tier is also equitable and not unfairly 
discriminatory because it would apply equally to all Members, in that 
the incentive would no longer be available for any Member.
    Similarly, the Exchange also believes the proposed change to 
eliminate the special pricing for executions of Midpoint Peg IOC/FOK 
Orders is reasonable because, as noted above, the Exchange believes 
that subjecting such orders to the base fee or otherwise applicable fee 
for such executions may generate additional revenue to offset some of 
the costs associated with the Exchange's current transaction pricing 
structure, and the Exchange's operations generally, in a manner that is 
still consistent with the Exchange's overall pricing philosophy of 
encouraging added and/or displayed liquidity, the Exchange is not 
required to maintain such discounted fee (or any special pricing) for 
executions of Midpoint Peg IOC/FOK Orders, and the Exchange would 
rather redirect the associated resources and funding into other 
programs and tiers intended to incentivize increased order flow or 
enhance market quality. The Exchange believes the proposal to eliminate 
such special pricing is also equitable and not unfairly discriminatory 
because it would apply equally to all Members, in

[[Page 14434]]

that the special pricing 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 \45\ 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.
---------------------------------------------------------------------------

    \45\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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 decrease the Exchange's expenditures and 
generate additional revenue with respect to its transaction pricing and 
incentivize market participants to direct additional order flow 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. 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.'' \46\
---------------------------------------------------------------------------

    \46\ See supra note 42.
---------------------------------------------------------------------------

Intramarket Competition
    As discussed above, the Exchange believes that the proposal would 
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 and/or displayed liquidity and would incentivize 
market participants to direct additional order flow to the Exchange 
through volume-based tiers, 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 Exchange does not believe that the proposed changes to reduce 
the base rebates for executions of Added Displayed Volume, Add 
Displayed Retail Volume, Added Midpoint Volume, Added Non-Midpoint 
Hidden Volume, and Added Price-Improved Volume would impose any burden 
on intramarket competition because such changes will apply to all 
Members uniformly, in that the proposed base rebates for such 
executions would be the base rebates applicable to all Members, and the 
opportunity to qualify for enhanced rebates or discounted fees, as 
applicable, is available to all Members. The opportunity to qualify for 
each of the Liquidity Provision Tiers 1-5, NBBO Setter/Joiner Tier 1, 
Non-Display Add Tiers 2-3, Liquidity Removal Tier 1, and the Sub-Dollar 
Rebate Tier, each as modified by the changes proposed herein, as well 
as the proposed new Liquidity Removal Tier 2, and thus receive the 
corresponding enhanced rebates or discounted fees, 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 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. Additionally, Exchange does not believe that the proposed 
change to eliminate special pricing for executions of Midpoint Peg IOC/
FOK Orders would impose any burden on intramarket competition because 
such change will apply to all Members uniformly, in that the special 
pricing would no longer be available for any Member. 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 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 incentivize market participants to direct 
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 structures and 
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.'' \47\ The

[[Page 14435]]

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'. . . .''.\48\ 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.
---------------------------------------------------------------------------

    \47\ See supra note 42.
    \48\ 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)).
---------------------------------------------------------------------------

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 \49\ and Rule 19b-4(f)(2) \50\ thereunder.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \50\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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-2023-05 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-2023-05. 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-2023-05 and should be submitted on 
or before March 29, 2023.
---------------------------------------------------------------------------

    \51\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\51\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04688 Filed 3-7-23; 8:45 am]
BILLING CODE 8011-01-P


