Notice2022-00489
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule To Establish a Monthly Membership Fee
Primary source
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Published
January 13, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 9 (Thursday, January 13, 2022)</title>
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[Federal Register Volume 87, Number 9 (Thursday, January 13, 2022)]
[Notices]
[Pages 2191-2193]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-00489]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93927; File No. SR-MEMX-2021-19]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule To Establish a Monthly Membership Fee
January 7, 2021.
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 December 28, 2021, 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 January 3, 2022. The text of the proposed rule
change is provided in Exhibit 5.
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\3\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to establish a Monthly Membership Fee for
Members of the Exchange of $200. The Monthly Membership Fee is proposed
to be assessed to each active Member at the close of business on the
first day of each month. For example, the Monthly Membership Fee for
January 2022 will be assessed to all active Members at the close of
business on January 3, 2022, the first business day of the month.
However, if a Member is pending a voluntary termination of rights
as a Member pursuant to Rule 2.8 prior to the time any Monthly
Membership Fee will be assessed (i.e., the close of business on January
3, 2022) and the Member does not utilize the facilities of the Exchange
while such voluntary termination of rights is pending, then the Member
will not be obligated to pay the Monthly Membership Fee, as such Member
will not be considered to have an ``active'' Membership. The Exchange
believes this to be appropriate because there are several pre-
conditions and then a 30-day waiting period before a voluntary
resignation shall take effect pursuant to Rule 2.8.
As proposed, the Monthly Membership Fee for a firm will not be
prorated, which the Exchange believes is reasonable based on the
frequency that the fee is assessed (i.e., monthly instead of applying
to a longer period) and the relatively low proposed fee of $200 for the
Monthly Membership Fee.
The Exchange does not presently contemplate proposing any
application fees, trading rights or trading permit fees, market
participant identifier (``MPID'') fees or so-called ``headcount'' fees.
To reflect the implementation of the Monthly Membership Fee
proposed herein, the Exchange also proposes to delete the following
sentence from the Fee Schedule: ``MEMX does not charge for membership,
market data products, physical connectivity or application sessions.''
The Exchange notes that it is not proposing to adopt fees for market
data products at this time. The Exchange further notes that it is
separately filing a proposal to adopt fees for physical connectivity
and application sessions (with the same implementation date as the
proposed changes in this filing) and that such separate proposal will
also propose to
[[Page 2192]]
add language in the Fee Schedule stating that MEMX does not charge fees
for market data products.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\4\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\5\ 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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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that there is value in becoming a Member of
the Exchange and that the proposed Monthly Membership Fee is
reasonable. The Monthly Membership Fee is lower than or comparable to
the membership fees imposed by several other national securities
exchanges that charge such fees.\6\ Moreover, insofar as the Exchange
does not charge--nor does it presently contemplate charging--
application fees, trading rights fees, trading permit fees, or fees for
multiple MPIDs, the comparative price of membership is less or
significantly less than comparative prices at other exchanges.\7\ The
Exchange also does not charge--nor does it presently contemplate
charging--so-called ``headcount fees,'' e.g., fees charged for each
Form U-4 filed for registration of a representative or a principal or
the transfer or re-licensing of such personnel,\8\ further highlighting
the reasonableness of the proposed Monthly Membership Fee.
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\6\ For example, the New York Stock Exchange LLC (``NYSE'')
annual trading license fee for member organizations ranges from
approximately $25,000 to $50,000 based on the type of member
organization and number of trading licenses. See ``Trading
Licenses,'' NYSE Price List 2021 (last updated December 1, 2021),
available at: <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf</a>. The Nasdaq Stock Market LLC (``Nasdaq'') annual
membership fee is $3,000 plus a monthly $1,250 trading rights fee
(together with the annual membership fee, totaling $18,000 per
year). See ``NASDAQ Membership Fees,'' Nasdaq Price List, available
at: <a href="http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#membership">http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#membership</a>. See also Securities
Exchange Act Release No. 34-81133 (July 12, 2017), 82 FR 32904 (July
18, 2017) (SR-NASDAQ-2017-065) (discussing the reasonableness of
Nasdaq's fees). Finally, Cboe BZX Exchange, Inc. (``Cboe BZX'')
charges an annual membership fee of $2,500 plus an additional fee of
$350 per month for each additional MPID a member maintains other
than their first (i.e., an annual fee of $4,200 per additional
MPID). See ``Membership Fees'' and ``Market Participant Identifier
(`MPID') Fees'' sections of the Cboe BZX Fee Schedule, available at:
<a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a>.
\7\ See id.
\8\ See, e.g., ``NASDAQ Membership Fees,'' supra note 6 ($55 for
each Form U-4 filed for the registration of a Representative or
Principal, and $55 for each Form U-4 filed for the transfer or re-
licensing of a Representative or Principal).
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The Exchange believes that the proposed Monthly Membership Fee is
not unfairly discriminatory because it would be assessed equally across
all Members or firms that seek to become Members. The Exchange believes
that the proposed Monthly Membership Fee is not unfairly discriminatory
because no broker-dealer is required to become a member of the
Exchange. Instead, many market participants awaited the Exchange
growing to a certain percentage of market share before they would join
as a Member of the Exchange. In addition, many market participants
still have not joined the Exchange despite the Exchange's growth in one
year to more than 4% of the overall equities market share. To
illustrate, the Exchange currently has 66 Members. However, based on
publicly available information regarding a sample of the Exchange's
competitors, NYSE has 142 members, Cboe BZX has 140 members, and
Investors Exchange LLC (``IEX'') has 133 members.\9\
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\9\ See NYSE Membership Directory, available at: <a href="https://www.nyse.com/markets/nyse/membership">https://www.nyse.com/markets/nyse/membership</a>; Cboe BZX Form 1 filed November
19, 2021, available at: <a href="https://www.sec.gov/Archives/edgar/vprr/2100/21009368.pdf">https://www.sec.gov/Archives/edgar/vprr/2100/21009368.pdf</a>; IEX Current Members list, available at: <a href="https://exchange.iex.io/resources/trading/current-membership/">https://exchange.iex.io/resources/trading/current-membership/</a>.
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Accordingly, the vigorous competition among national securities
exchanges provides many alternatives for firms to voluntarily decide
whether membership to the Exchange is appropriate and worthwhile, and
no broker-dealer is required to become a member of the Exchange.
Specifically, neither the trade-through requirements under Regulation
NMS nor broker-dealers' best execution obligations require a broker-
dealer to become a member of every exchange. The Exchange acknowledges
that competitive forces may require certain broker-dealers to be
members of all equities exchanges. However, the Exchange believes that
the proposed fee of $200 as a Monthly Membership Fee is reasonable,
equitably allocated and not unfairly discriminatory, even for a broker-
dealer that deemed it necessary to join the Exchange for business
purposes, as those business reasons should presumably result in revenue
capable of covering the proposed fee.
The Exchange further believes that the proposed fees would be an
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities, and are
not unfairly discriminatory. As the Commission noted in its Concept
Release Concerning Self-Regulation:
The Commission to date has not issued detailed rules specifying
proper funding levels of [self-regulatory organization (``SRO'')]
regulatory programs, or how costs should be allocated among the
various SRO constituencies. Rather, the Commission has examined the
SROs to determine whether they are complying with their statutory
responsibilities. This approach was developed in response to the
diverse characteristics and roles of the various SROs and the
markets they operate. The mechanics of SRO funding, including the
amount of revenue that is spent on regulation and how that amount is
allocated among various regulatory operations, is related to the
type of market that an SRO is operating. Thus, each SRO and its
financial structure is, to a certain extent, unique. While this
uniqueness can result in different levels of SRO funding across
markets, it also is a reflection of one of the primary underpinnings
of the National Market System. Specifically, by fostering an
environment in which diverse markets with diverse business models
compete within a unified National Market System, investors and
market participants benefit.\10\
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\10\ Securities Exchange Act Release No. 34-50700 (November 22,
2004), 69 FR 71255, 71267-68 (December 8, 2004) (File No. S7-40-04).
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. Effective
regulation is central to the proper functioning of the securities
markets. Recognizing the importance of such efforts, Congress decided
to require national securities exchanges to register with the
Commission as self-regulatory organizations to carry out the purposes
of the Act. The Exchange therefore believes that it is critical to
ensure that regulation is appropriately funded. The Monthly Membership
Fee is expected to provide a source of funding towards the Exchange's
costs related to onboarding Members and providing ongoing support.
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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
In accordance with Section 6(b)(8) of the Act,\12\ the Exchange
believes that the proposed rule change would not impose any burden on
intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The
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Exchange's proposed membership fees will be lower than the cost of
membership on other exchanges,\13\ and therefore, may stimulate
intramarket competition by attracting additional firms to become
Members on the Exchange or at least should not deter interested
participants from joining the Exchange. In addition, membership fees
are subject to competition from other exchanges. Accordingly, if the
changes proposed herein are unattractive to market participants, it is
likely the Exchange will see a decline in membership as a result. The
proposed fee change will not impact intermarket [sic] competition
because it will apply to all Members equally. The Exchange operates in
a highly competitive market in which market participants can determine
whether or not to join the Exchange based on the value received
compared to the cost of joining and maintaining membership on the
Exchange.
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\12\ 15 U.S.C. 78f(b)(8).
\13\ See supra note 6.
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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 \14\ and Rule 19b-4(f)(2) \15\ thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
\15\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#295b5c454c044a4644444c475d5a695a4c4a074e465f"><span class="__cf_email__" data-cfemail="e290978e87cf818d8f8f878c9691a2918781cc858d94">[email protected]</span></a>. Please include
File Number SR-MEMX-2021-19 on the subject line.
Paper Comments
<bullet> 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-2021-19. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-19 and should be submitted on
or before February 3, 2022.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00489 Filed 1-12-22; 8:45 am]
BILLING CODE 8011-01-P
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