[Federal Register Volume 88, Number 71 (Thursday, April 13, 2023)]
[Notices]
[Pages 22495-22498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07736]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97268; File No. SR-MEMX-2023-07]


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

April 7, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 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\ 15 U.S.C. 78a.
    \3\ 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 \4\ (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 April 3, 2023. The text of the proposed rule change 
is provided in Exhibit 5.
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    \4\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and the 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Fee 
Schedule to modify the required criteria under NBBO Setter/Joiner Tier 
1.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 16% of the total market share of 
executed volume of equities trading.\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 March 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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    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

[[Page 22496]]

(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: (1) an ADAV \7\ with respect 
to orders with Fee Code B \8\ that is equal to or greater than 0.10% of 
the TCV; \9\ or (2) an ADAV with respect to orders with Fee Code B that 
is equal to or greater than 10,000,000 shares.\10\ The Exchange now 
proposes to modify the required criteria such that a Member would now 
qualify for such tier by achieving an ADAV with respect to orders with 
Fee Code B that is equal to or greater than 0.10% of the TCV. Thus, 
such proposed change would keep the first of such two alternative 
criteria intact and eliminate the second of such criteria. The Exchange 
notes that no Members are presently achieving the second of such 
criteria, and as such, the Exchange does not believe that the proposed 
elimination of such criteria will have a significant impact on any 
Member's trading behavior on the Exchange. The Exchange therefore no 
longer wishes to, nor is it required to, maintain such criteria. The 
Exchange 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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    \7\ 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.
    \8\ The Exchange notes that orders with Fee Code B include 
orders, other than Retail Orders, that establish the NBBO.
    \9\ 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.
    \10\ 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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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\11\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f.
    \12\ 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.'' \13\
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    \13\ 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 that the proposed change to modify NBBO 
Setter/Joiner Tier 1 to remove the alternative criteria based on an 
ADAV threshold that is expressed as a number of shares is reasonable 
because it would simply remove one of two alternative criteria 
applicable to such Tier. 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. The Exchange 
also believes the additive rebate for executions of Setter Volume and 
Joiner Volume provided under NBBO Setter/Joiner Tier 1 remains 
equitable and not unfairly discriminatory, as such additive rebate will 
continue to apply equally to all qualifying Members.
    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 NBBO Setter/Joiner Tier 1, as modified by the 
change proposed herein, is reasonable, equitable and not unfairly 
discriminatory for these same reasons, as such tier would continue to 
provide Members with an incentive to achieve certain volume thresholds 
on the Exchange, is available to all Members on an equal basis, and, as 
described above, is reasonably designed to encourage Members to 
maintain or increase their order flow, including in the form of 
liquidity-adding volume under the required criteria 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.
    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 \14\ 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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    \14\ 15 U.S.C. 78f(b)(4) and (5).

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[[Page 22497]]

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 make a minor modification to the criteria 
applicable to an existing tier that is intended to 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 further 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.'' \15\
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    \15\ See supra note 12.
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Intramarket Competition
    As discussed above, the proposal would make a minor modification to 
the criteria applicable to an existing tier in a manner that is still 
consistent with the Exchange's overall pricing philosophy of 
encouraging displayed liquidity, 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 continue to direct order flow, or 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 modify 
the criteria applicable to NBBO Setter/Joiner Tier 1 would impose any 
burden on intramarket competition because such change will apply to all 
Members uniformly, in that the proposed rebate for such executions 
would remain unchanged and applicable to all qualifying Members, and 
the opportunity to qualify for the enhanced rebate is available to all 
Members. As noted above, no Members are presently achieving the 
criteria that is proposed to be deleted, and as such, the Exchange does 
not believe that the proposed elimination of such criteria will have a 
significant impact on any Member's trading behavior on the Exchange. As 
described above, the Exchange believes that the required criteria under 
NBBO Setter/Joiner Tier 1, as modified, remains 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 16% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates 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 change represents a minor modification to 
the criteria applicable to an existing tier that is intended to 
incentivize market participants to direct order flow to the Exchange 
through a volume-based tier, which have been widely adopted by 
exchanges, including the Exchange.
    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.'' \16\ 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'. . . .''.\17\ Accordingly, the Exchange does not believe its 
proposed pricing change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \16\ See supra note 12.
    \17\ 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 \18\ and Rule 19b-4(f)(2) \19\ thereunder.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

[[Page 22498]]

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-2023-07 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-2023-07. This file 
number should be included in 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 Section, 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-2023-07 and should be submitted on 
or before May 4, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-07736 Filed 4-12-23; 8:45 am]
BILLING CODE 8011-01-P


