
[Federal Register Volume 88, Number 179 (Monday, September 18, 2023)]
[Notices]
[Pages 64004-64007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20081]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98360; File No. SR-MEMX-2023-21]


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

September 12, 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 August 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 immediately. 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 make orders that add non-displayed volume in securities 
priced at or below $1.00 per share eligible to receive the Sub-Dollar 
Rebate Tier. This change in the Fee Schedule would make all executions 
that add volume eligible for the Sub-Dollar Rebate when a Member 
reaches the applicable criteria, regardless of whether such added 
volume is displayed or non-displayed.
    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

[[Page 64005]]

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 August 31, 2023. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \6\ Id.
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    Currently, the Exchange provides a rebate of 0.15% 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'') for 
Members that qualify for such tier by achieving a Sub-Dollar ADAV \7\ 
that is equal to or greater than 5,000,000 shares. A footnote in the 
current Fee Schedule states that the Sub-Dollar Rebate applies to 
executions of added displayed volume in securities priced below $1.00 
per share. Thus, the Sub-Dollar Rebate does not currently apply to 
executions of added non-displayed volume that add liquidity to the 
Exchange (such orders, ``Added Non-Displayed Sub-Dollar Volume''). Now, 
the Exchange proposes to modify the types of orders which qualify for 
the Sub-Dollar Rebate, such that orders which add displayed liquidity 
as well as orders which add non-displayed liquidity to the Exchange in 
securities priced below $1.00 per share would be eligible for the Sub-
Dollar Rebate. To clarify, the Sub-Dollar Rebate would apply to 
executions of both Added Displayed Sub-Dollar Volume and Added Non-
Displayed Sub-Dollar Volume when a Member meets the required criteria 
for the tier. The Exchange would alter the footnote in the Sub-Dollar 
Rebate Tier section of the Fee Schedule to remove the word 
``displayed'', such that all executions which add volume to the 
Exchange would be eligible for the Sub-Dollar Rebate. At this time, the 
Exchange does not propose to change the rebate amount nor the required 
criteria for the Sub-Dollar Rebate Tier.
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    \7\ ``Sub-Dollar ADAV'' means ADAV with respect to orders in 
securities priced below $1.00 per share. ``ADAV'' means average 
daily added volume calculated as the number of shares added per day, 
calculated on a monthly basis.
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    The Exchange believes that this modification to the method of 
applying the Sub-Dollar Rebate Tier would encourage the submission of 
both displayed and non-displayed orders in securities priced below 
$1.00 per share that add liquidity to the Exchange. The Exchange 
believes that it would contribute to a more robust and well-balanced 
market ecosystem of both displayed and non-displayed orders which add 
liquidity on the Exchange, to the benefit of all Members and market 
participants. The Exchange notes that the Sub-Dollar Rebate Tier would 
continue to be available to all Members and, while the Exchange has no 
way of predicting with certainty how the proposed new modification will 
impact Member activity, the Exchange expects that more Members will 
qualify or strive to qualify for the Sub-Dollar Rebate Tier than 
currently do under the proposed new calculation method, as it is more 
expansive and includes additional types of executions which would be 
eligible to receive the rebate under the tier.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\8\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f.
    \9\ 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.'' \10\
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    \10\ 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 encourage market participants to strive for higher volume 
on 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 notes that volume-based incentives such as the Sub-
Dollar Rebate Tier 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 discount 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 the proposal to include Added Non-Displayed 
Sub-Dollar Volume in the executions eligible to qualify for the Sub-
Dollar Rebate is reasonable because, as noted above, such change would 
keep the existing criteria and rebate amount intact and provide more 
opportunities for a Member to achieve the rebate. Members may be 
incentivized to submit additional orders which add displayed liquidity 
and which add non-displayed

[[Page 64006]]

liquidity in securities priced below $1.00 per share, 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 proposal is equitable and not unfairly 
discriminatory because all Members will continue to be eligible to meet 
the Sub-Dollar Rebate Tier criteria, including Members who currently 
receive the Sub-Dollar Rebate under the current method. 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 this change will incentivize more Members to strive to qualify for 
such tier under the proposed new method, as the new method is more 
expansive and would make the Sub-Dollar Rebate applicable to additional 
executions.
    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 \11\ 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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    \11\ 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 to the Exchange in the form of both displayed and 
non-displayed liquidity in securities priced below $1.00 per share, 
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.'' \12\
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    \12\ See supra note 10.
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Intramarket Competition
    As discussed above, the Exchange believes that the proposal would 
incentivize Members to submit additional order flow to the Exchange in 
the form of both displayed and non-displayed orders in securities 
priced below $1.00 per share, 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 change to the Sub-
Dollar Rebate Tier would impose any burden on intramarket competition 
because such change may incentivize Members to submit additional order 
flow, thereby contributing to a more robust and well-balanced market 
ecosystem on the Exchange to the benefit of all Members as well as 
enhancing the attractiveness of the Exchange as a trading venue, which 
the Exchange believes, in turn, would continue to encourage market 
participants to direct additional order flow to the Exchange. Greater 
liquidity benefits all Members by providing more trading opportunities 
and encourages Members to send additional orders to the Exchange, 
thereby contributing to robust levels of liquidity, which benefits all 
market participants. The opportunity to qualify for the Sub-Dollar 
Rebate Tier would be available to all Members that meet the associated 
volume requirements in any month. For the foregoing reasons, the 
Exchange believes the proposed change 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 change represents a competitive proposal 
through which the Exchange is seeking to incentivize market 
participants to direct additional order flow to the Exchange through 
the volume-based Sub-Dollar Rebate Tier. Volume-based tiers 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 tiered 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.'' \13\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. SEC, the D.C. Circuit

[[Page 64007]]

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'. . . .''.\14\ 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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    \13\ See supra note 10.
    \14\ 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 \15\ and Rule 19b-4(f)(2) \16\ thereunder.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-MEMX-2023-21 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-2023-21. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MEMX-2023-21 and should be 
submitted on or before October 10, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20081 Filed 9-15-23; 8:45 am]
BILLING CODE 8011-01-P


