Notice2023-21625
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 2, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 189 (Monday, October 2, 2023)</title>
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[Federal Register Volume 88, Number 189 (Monday, October 2, 2023)]
[Notices]
[Pages 67846-67851]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-21625]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98533; File No. SR-MEMX-2023-24]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule
September 26, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 15, 2023, MEMX LLC (``MEMX'' or the ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``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\ pursuant
to Exchange Rules 15.1(a) and (c). Specifically, the Exchange proposes
to adopt transaction fees (``Transaction Fees''), routing fees
(``Routing Fees''), and definitions (``Definitions'') within the MEMX
Options Fee Schedule (the ``Options Fee Schedule''). The Transaction
Fees section of the Options Fee Schedule would establish transaction
fees and rebates applicable to Options Members trading on the
Exchange's options trading platform (such platform, ``MEMX Options''
and such Members, ``Options Members''). The Routing Fees section of the
Options Fee Schedule would establish fees for Options Members who route
their orders to away exchanges. The Definitions section of the Options
Fee Schedule would define and clarify terms used in the Options Fee
Schedule. The Exchange proposes to implement the changes to the Options
Fee Schedule pursuant to this proposal on September 20, 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 (i) establish
transaction rebates and fees applicable to all Options Members trading
on MEMX Options; (ii) establish routing fees applicable to all Options
Members trading on MEMX Options who route orders to away exchanges; and
(iii) define and clarify terms used in the Options Fee Schedule.
Transaction Fees
The proposed Transaction Fees section of the Options Fee Schedule
sets forth transaction rebates and fees for executions on MEMX Options.
MEMX Options will operate a ``Maker-Taker'' model whereby it provides
rebates to Options Members that provide liquidity and charges fees to
those that remove liquidity, as further described below. The proposed
rebates and fees vary depending on whether a transaction was executed
in a customer capacity (``Customer'') \4\ or in a non-customer capacity
(``Non-Customer'') \5\, whether the underlying security of the
applicable option is in the Penny Pilot Program
[[Page 67847]]
(``Penny options'') or not in the Penny Pilot Program (``Non-Penny
options''), and, finally, whether the transaction adds or removes
liquidity from the MEMX Options Book.
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\4\ Customer capacity applies to any order for the account of a
Priority Customer. ``Priority Customer'' means any person or entity
that is neither a broker or dealer in securities nor a Professional.
See Rule 16.1 of the MEMX Rulebook.
\5\ Non-Customer capacity applies to any transaction that is not
a Customer order.
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The Exchange will provide fee qualifiers to distinguish between
Customer transactions and Non-Customer transactions.\6\ MEMX Options
will provide Fee Codes to distinguish between transactions in Penny
options and transactions in Non-Penny options.\7\ MEMX Options will
also provide Fee Codes to distinguish between transactions that add
liquidity to the MEMX Options Book and transactions that remove
liquidity from the MEMX Options Book.\8\
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\6\ MEMX Options will provide fee qualifier ``c'' for Customer
transactions. MEMX Options will provide fee qualifier ``m'' for
market maker transactions, fee qualifier ``p'' for professional
transactions, fee qualifier ``f'' for firm transactions, fee
qualifier ``a'' for away market maker transactions, and fee
qualifier ``b'' for broker-dealer transactions. Each of market maker
transactions, professional transactions, firm transactions, away
market maker transactions, and broker-dealer transactions shall be
referred to as ``Non-Customer'' transactions. Fee qualifiers will be
provided by the Exchange on the monthly invoices provided to Options
Members.
\7\ MEMX Options will provide Fee Code ``P'' for transactions in
Penny options and Fee Code ``N'' for transactions in Non-Penny
options. Fee Codes will be provided by the Exchange on the monthly
invoices provided to Options Members.
\8\ MEMX Options will provide Fee Code ``D'' for transactions
which add liquidity to the MEMX Options Book, and Fee Code ``R'' for
transactions that remove liquidity from the MEMX Options Book. Fee
Codes will be provided by the Exchange on the monthly invoices
provided to Options Members.
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Options Members shall be assessed lower transaction fees and
smaller rebates for order executions in Penny options than for order
executions in Non-Penny options, for which Members will be assessed
higher transaction fees and larger rebates. As noted above, Options
Members shall be assessed fees for removing liquidity from the MEMX
Options Book and provided rebates for adding liquidity to the MEMX
Options Book. At this time, the Exchange will not differentiate between
fees charged and rebates assessed for different types of Non-Customer
transactions; instead, all Non-Customer transactions (i.e.,
transactions for the accounts of market makers, professionals, firms,
away market makers, or broker dealers) will be assessed the same fees
and rebates.
The Fee Codes and fee qualifiers will be used to make clear to
Members what rebates were provided to them and which fees were
assessed.\9\ The Exchange believes that designating the Fee Codes will
make clear the different types of fees and rebates passed back to
Members on execution reports and will be useful for the Exchange in
considering potential pricing modifications as it continues to evaluate
its pricing structure on an ongoing basis after the launch of MEMX
Options. The Exchange's Fee Codes and fee qualifiers will assist the
Exchange and Options Members with financial planning, tracking, and
reconciliation of invoices generated by the Exchange.
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\9\ For example, for a Customer order in a Penny option that
removes liquidity from the MEMX Book, the Exchange would pass back
the Fee Code RcP. As another example, for a Non-Customer Away Market
Maker order in a Non-Penny option that adds liquidity to the MEMX
Book, the Exchange would pass back the Fee Code DaN.
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Transactions for Customer accounts in Penny options that remove
liquidity from the MEMX Book will be assessed a fee of $0.46 per
contract. Transactions for Non-Customer accounts in Penny options that
remove liquidity will be assessed a fee of $0.50 per contract.
Transactions for Customer accounts in Non-Penny options that remove
liquidity from the MEMX Book will be assessed a fee of $0.85 per
contract. Finally, transactions for Non-Customer accounts in Non-Penny
options that remove liquidity will be assessed a fee of $1.10 per
contract. The purpose of the proposed transaction fees is to assess
right-sized fees for orders that remove liquidity from the Exchange.
Transactions for Customer accounts in Penny options that add
liquidity to the MEMX Options Book will receive a rebate of $0.49 per
contract. Transactions for Non-Customer accounts in Penny options that
add liquidity will receive a rebate of $0.45 per contract. Transactions
for Customer accounts in Non-Penny options that add liquidity to the
MEMX Options Book will receive a rebate of $1.04 per contract. Finally,
transactions for Non-Customer accounts in Non-Penny options that add
liquidity will receive a rebate of $0.80 per contract. The purpose of
the proposed transaction rebates is to provide right-sized incentives
for Options Members to trade on the Exchange and to incentivize order
flow to be directed to the Exchange.
The Exchange does not initially propose to charge tiered fees or
provide tiered rebates according to the volume of orders submitted to
MEMX Options. Accordingly, all fees and rebates described above are
applicable to all Options Members regardless of the overall volume of
an Options Member's activities on MEMX Options.
Routing Fees
The Exchange proposes to assess Routing Fees on orders routed to
other options exchanges. The amount of the applicable fee will be based
on whether the order is for a Penny or Non-Penny option. At this time,
the Exchange will not charge different routing fees according to the
capacity of the order. The Exchange will charge a fee of $0.60 for
Penny options routed to another options exchange and $1.20 for Non-
Penny options routed to another options exchange.
The purpose of the proposed Routing Fees is to recoup costs
incurred by the Exchange when routing orders to other options exchanges
on behalf of Options Members. In determining its proposed Routing Fees,
the Exchange took into account transaction fees assessed by other
options exchanges, the Exchange's projected clearing costs, and the
projected administrative, regulatory, and technical costs associated
with routing orders to other options exchanges. The Exchange will use
its affiliated broker-dealer, MEMX Execution Services, to route orders
to other options exchanges or to other broker-dealers that will route
such orders to other options exchanges. Routing services offered by the
Exchange and its affiliated broker-dealer are completely optional and
market participants can readily select between various providers of
routing services, including other exchanges and broker-dealers. The
proposed structure for routing fees is similar to the fee structure in
place for routing at various other exchanges.\10\ The Exchange believes
that the proposed Routing Fees would enable the Exchange to recover the
costs it incurs to route orders to away markets after taking into
account the other costs associated with routing orders to other options
exchanges.
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\10\ See Exchange Act Release Nos. 97896 (July 13, 2023), 88 FR
46313 (July 19, 2023) (SR-PEARL-2023-30); 97901 (July 13, 2023), 88
FR 46202 (July 19, 2023) (SR-EMERALD-2023-15); 85591 (April 10,
2019), 84 FR 15645 (April 16, 2019) (SR-CboeBZX-2019-024); 91677
(April 26, 2021), 86 FR 22989 (April 30, 2021) (SR-NASDAQ-2021-021);
and 97234 (March 31, 2023), 88 FR 20589 (April 6, 2023) (SR-
NYSEARCA-2023-28).
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Definitions
The Exchange has included a Definitions section within the Options
Fee Schedule. The purpose of the Definitions section is to streamline
the Options Fee Schedule by placing many of the defined terms used in
the Options Fee Schedule in one location. The Definitions section
defines the terms ``Penny Program Securities'', ``Away Market Maker'',
``Broker Dealer'', ``Customer'', ``Firm'', ``Market Maker'', and
``Professional''. Many of the defined terms are also defined in the
Exchange Rules, particularly in Exchange Rule 16.1. The Exchange notes
that other exchanges have Definitions sections in
[[Page 67848]]
their respective fee schedules,\11\ and the Exchange believes that
including such section makes the Options Fee Schedule more readable and
user-friendly.
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\11\ See, e.g., the MIAX Pearl Options Fee Schedule, available
at <a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>; the CBOE BZX Options
Fee Schedule, available at <a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>; and the Nasdaq Options Market Fee
Schedule, available at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>.
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2. Statutory Basis
The Exchange believes that its proposal to amend its Options Fee
Schedule is consistent with the provisions of Section 6 of the Act,\12\
in general, and with Sections 6(b)(4) and 6(b)(5) of the Act,\13\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among Options Members and other
persons using its facilities. The Exchange also believes the proposal
furthers the objectives of Section 6(b)(5) of the Act in that it is
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general to protect investors and the
public interest and is not designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(4) and (5).
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Upon its launch, MEMX Options will operate 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.'' \14\
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\14\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005).
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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 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 it is appropriate, reasonable, and
consistent with the Act to charge $0.46 for orders for Customer
accounts that remove liquidity in Penny options, because it is
comparable to the transaction fees charged by other exchanges for
Customer transactions that remove liquidity in Penny options.\15\ The
Exchange further believes that this fee is equitably allocated and not
unfairly discriminatory because it applies equally to all Options
Members.
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\15\ For example, the MIAX Pearl Options trading fee schedule on
its public website reflects a transaction fee ranging from $0.47-
$0.48 for Customer transactions that remove liquidity in Penny
options; see <a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>. The Cboe BZX
Options trading fee schedule on its public website reflects a
transaction fee ranging from $0.46-$0.48 for Customer transactions
that remove liquidity in Penny options; see <a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>. The Nasdaq Options Market
trading fee schedule on its public website reflects a transaction
fee of $0.49 for Customer transactions that remove liquidity in
Penny options; see <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>. Additionally, the NYSE Arca Options trading
fee schedule on its public website reflects a transaction fee of
$0.46-$0.49 for Customer transactions that remove liquidity in Penny
options; see <a href="https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
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The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to charge $0.50 for orders for Non-Customer
accounts in Penny options that remove liquidity because it is
comparable to the transaction fee charged by other exchanges for Non-
Customer transactions in Penny options that remove liquidity.\16\ The
Exchange further believes that this fee is equitably allocated and not
unfairly discriminatory because it applies equally to all Options
Members.
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\16\ For example, the MIAX Pearl Options trading fee schedule on
its public website reflects a transaction fee of $0.50 for Non-
Customer transactions that remove liquidity in Penny options; see
<a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>. Per the Cboe BZX
Options trading fee schedule on its public website, transactions for
the accounts of market maker and professional customers that remove
liquidity in Penny options are assessed a $0.47-$0.50 fee and
transactions for the accounts of broker dealers that remove
liquidity in Penny options are assessed a $0.46-$0.50 fee; see
<a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>. Per
the Nasdaq Options Market trading fee schedule on its public
website, transactions for the accounts of firms, broker-dealers, and
market makers that remove liquidity in Penny options are assessed a
fee of $0.50 and transactions for the accounts of professional
customers that remove liquidity in Penny options are assessed a fee
of $0.49; see <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>. Lastly, per the NYSE Arca Options trading
fee schedule on its public website, transactions for the accounts of
market makers, broker-dealers, and professional customers that
remove liquidity in Penny options are assessed a fee of $0.50; see
<a href="https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
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The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to charge $0.85 for orders for Customer
accounts in Non-Penny options that remove liquidity because it is
comparable to the transaction fees charged by other exchanges for
Customer transactions in Non-Penny options that remove liquidity.\17\
The Exchange further believes that this fee is equitably allocated and
not unfairly discriminatory because it applies equally to all Options
Members.
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\17\ For example, the MIAX Pearl Options trading fee schedule on
its public website reflects a transaction fee of $0.85 for Customer
transactions that remove liquidity in Non-Penny options; see <a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>. Similarly, the Cboe
BZX Options trading fee schedule on its public website also reflects
a $0.85 transaction fee for Customer transactions that remove
liquidity in Non-Penny options; see <a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>. Similarly, the Nasdaq Options Market
trading fee schedule on its public website also reflects a $0.85
transaction fee for Customer transactions that remove liquidity in
Non-Penny options; see <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>. Lastly and similarly, the NYSE Arca
Options trading fee schedule on its public website reflects a $0.85
transaction fee for Customer transactions that remove liquidity in
Non-Penny options; see <a href="https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
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The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to charge $1.10 for orders in Non-Customer
accounts in Non-Penny options that remove liquidity because it is
comparable to the transaction fees charged by other exchanges for Non-
Customer transactions in Non-Penny options that remove liquidity.\18\
The Exchange
[[Page 67849]]
further believes that this fee is equitably allocated and not unfairly
discriminatory because it applies equally to all Options Members.
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\18\ For example, per the MIAX Pearl Options trading fee
schedule on its public website, transactions for the accounts of
market makers that remove liquidity in Non-Penny options are
assessed a $1.07-$1.10 fee and transactions for the accounts of
professional customers, firms, and broker-dealers that remove
liquidity in Non-Penny options are assessed a $1.09-$1.10 fee; see
<a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>. Per the Cboe BZX
Options trading fee schedule on its public website, transactions for
the accounts of market makers, firms, broker-dealers, and
professional customers that remove liquidity in Non-Penny options
are assessed a $1.07-$1.10 fee; see <a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>. Per the Nasdaq Options Market trading
fee schedule on its public website, transactions for the accounts of
market makers, broker-dealers, and firms that remove liquidity in
Non-Penny options are assessed a $1.10 fee and transactions for the
accounts of professional customers that remove liquidity in Non-
Penny options are assessed a $0.85 fee; see <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>.
Lastly, per the NYSE Arca Options trading fee schedule on its public
website, transactions for the accounts of market makers, firms,
broker-dealers, and professional customers that remove liquidity in
Non-Penny options are assessed a $1.10 fee; see <a href="https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
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The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a rebate of $0.49 for orders for
Customer accounts in Penny options that add liquidity because it is
comparable to the rebate provided by other exchanges for Customer
transactions in Penny options that add liquidity.\19\ The Exchange
further believes that this rebate is equitably allocated and not
unfairly discriminatory because all Options Members are equally
eligible for the rebate. The Exchange believes that the rebate is
reasonably designed to attract order flow to MEMX Options, 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.
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\19\ For example, the MIAX Pearl Options trading fee schedule on
its public website reflects a rebate ranging from $0.25-$0.52 for
Customer transactions that add liquidity in Penny options; see
<a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>. The Cboe BZX Options
trading fee schedule on its public website reflects a rebate ranging
from $0.25-$0.53 for Customer transactions that add liquidity in
Penny options; see <a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>. The Nasdaq Options Market trading fee schedule on
its public website reflects a rebate ranging from $0.20-$0.48 for
Customer transactions that add liquidity in Penny options; see
<a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>.
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The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a rebate of $0.45 for orders for
Non-Customer accounts in Penny options that add liquidity because it is
comparable to the rebate provided by other exchanges for Non-Customer
transactions in Penny options that add liquidity.\20\ The Exchange
further believes that this rebate is equitably allocated and not
unfairly discriminatory because all Options Members are equally
eligible for the rebate. The Exchange believes that the rebate is
reasonably designed to attract order flow to MEMX Options, 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.
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\20\ For example, per the MIAX Pearl Options trading fee
schedule on its public website, transactions for the accounts of
market makers that add liquidity in Penny options with a Priority
Customer on the contra side are provided a $0.22-$0.46 rebate, and
transactions for the accounts of professional customers and firms
that add liquidity in Penny options with a non-Priority Customer on
the contra side are provided a $0.25-$0.48 rebate; see <a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>. Per the Cboe BZX
Options trading fee schedule on its public website, transactions for
the accounts of market makers that add liquidity in Penny options
are provided a $0.29-$0.38 rebate, transactions for the accounts of
professional customers that add liquidity in Penny options are
provided a $0.25-$0.48 rebate, and transactions for the account of
firms and broker-dealers that add liquidity in Penny options are
provided a $0.25-$0.46 rebate; see <a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>. Per the Nasdaq Options Market trading
fee schedule on its public website, transactions for the accounts of
market makers that add liquidity in Penny options are provided a
$0.20-$0.48 rebate, and transactions for the accounts of
professional customers that add liquidity in Penny options are
provided a $0.20-$0.47 rebate; see <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>.
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The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a rebate of $1.04 for orders for
Customer accounts in Non-Penny options that add liquidity because it is
comparable to the rebate provided by other exchanges for Customer
transactions in Non-Penny options that add liquidity.\21\ The Exchange
further believes that this rebate is equitably allocated and not
unfairly discriminatory because all Options Members are equally
eligible for the rebate. The Exchange believes that the rebate is
reasonably designed to attract order flow to MEMX Options, 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.
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\21\ For example, per the MIAX Pearl Options trading fee
schedule on its public website, Customer transactions that add
liquidity in Non-Penny options are provided a $0.85-$1.04 rebate;
see <a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>. Per the Cboe BZX
Options trading fee schedule on its public website, Customer
transactions that add liquidity in Non-Penny options are provided a
$0.85-$1.05 rebate; see <a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>. Per the Nasdaq Options Market trading fee
schedule on its public website, Customer transactions that add
liquidity in Non-Penny options are provided a $0.80-$1.10 rebate;
see <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7</a>. Lastly, per the NYSE Arca Options trading fee schedule on
its public website, Customer transactions that add liquidity in Non-
Penny options are provided a $0.75 rebate; see <a href="https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
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The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a rebate of $0.80 for orders for
Non-Customer accounts in Non-Penny options that add liquidity because
it is comparable to the rebate provided by other exchanges for Non-
Customer transactions in Non-Penny options that add liquidity.\22\ The
Exchange further believes that this rebate is equitably allocated and
not unfairly discriminatory because all Options Members are equally
eligible for the rebate. The Exchange believes that the rebate is
reasonably designed to attract order flow to MEMX Options, 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.
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\22\ For example, per the MIAX Pearl Options trading fee
schedule on its public website, transactions for the accounts of
market makers that add liquidity in Non-Penny options are provided a
$0.30-$0.85 rebate and transactions for the accounts of professional
customers and firms that add liquidity in Non-Penny options are
provided a $0.30-$0.85 rebate; see <a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf</a>. Per the Cboe BZX
Options trading fee schedule on its public website, transactions for
the accounts of market makers that add liquidity in Non-Penny
options are provided a $0.40-$0.88 rebate, transactions for the
accounts of professional customers that add liquidity in Non-Penny
options are provided a $0.65 rebate, transactions for the accounts
of away market makers that add liquidity in Non-Penny options are
provided a $0.30-$0.52 rebate, and transactions for the accounts of
firms and broker-dealers that add liquidity in Non-Penny options are
provided a $0.30-$0.82 rebate; see <a href="https://www.cboe.com/us/options/membership/fee_schedule/bzx/">https://www.cboe.com/us/options/membership/fee_schedule/bzx/</a>. Lastly, per the NYSE Arca Options
trading fee schedule on its public website, transactions for the
accounts of market makers that add liquidity in Non-Penny options
are provided a $0.05-0.40 rebate and transactions for the accounts
of professional customers that add liquidity in Non-Penny options
are provided a $0.75 rebate; see <a href="https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
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The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to charge fees of $0.60 for routing in Penny
options and $1.20 for routing in Non-Penny options, because these
routing fees are comparable to those charged by other exchanges for
routing Penny and Non-Penny options to away exchanges.\23\
Additionally, the
[[Page 67850]]
Exchange believes these fees are equitable and not unfairly
discriminatory because these fees will apply equally to all Options
Members.
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\23\ For example, per the NYSE Arca Options trading fee schedule
on its public website, the fee for routing in Penny options is $0.61
and the fee for routing in Non-Penny options is $1.21; see <a href="https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf</a>.
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Lastly, the Exchange believes that it is reasonable to add a
definitions section to clarify the terms used in the Options Fee
Schedule, because it will clearly set forth the terms used in the
Transaction Fees portion of the Options Fee Schedule. The Exchange
further believes the definition section is reasonable as other national
securities exchanges include a definition section in their fee
schedule.\24\ The Exchange believes this section is equitable and not
unfairly discriminatory because the definitions section (as part of the
Options Fee Schedule) will be distributed to all Members so that all
Members will have equal clarity on fees charged and rebates provided.
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\24\ See supra note 11.
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For the reasons discussed above, the Exchange submits that its
proposed fee structure and changes to the Options Transaction Fee
Schedule satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act \25\ 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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\25\ 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. As a new entrant in the already
highly competitive environment for options trading, the Exchange
believes that the proposed changes would encourage the submission of
additional order flow to a public exchange, thereby promoting market
depth, execution incentives and enhanced execution opportunities, as
well as price discovery and transparency for all Members. MEMX Options
proposes transaction fees, rebates, and routing fees that are
comparable to transaction fees, rebates and routing fees assessed by
other options exchanges. As a result, 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.'' \26\
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\26\ See supra note 14.
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Intramarket Competition
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed fees and rebates apply equally to all Options Members. The
proposed pricing structure is intended to encourage participants to
trade on MEMX Options by providing rebates that are comparable to those
offered by other exchanges as well as providing competitive fees. The
Exchange believes that the proposed rebates and fees will help to
encourage Options Members to send orders to the Exchange to the benefit
of all Exchange participants. As the proposed fees and rebates are
equally applicable to all market participants, the Exchange does not
believe there is any burden on intramarket competition.
Intermarket Competition
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. To the contrary,
the Exchange believes that the proposed pricing structure will increase
competition and is intended to draw volume to the Exchange as it
commences operations. 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.
Currently, no single registered options exchange has more than
approximately 18% of the total market share of executed volume of
listed options trading.\27\ As a new exchange, the Exchange expects to
face intense competition from existing exchanges. The proposed pricing
structure is intended to encourage market participants to trade on the
exchange by providing rebates and assessing fees that are comparable to
those offered by other exchanges, which the Exchange believes will help
to encourage Members to send orders to the Exchange to the benefit of
all Exchange participants. As the proposed rates are equally applicable
to all market participants, the Exchange does not believe there is any
burden on intramarket competition.
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\27\ Market share percentage calculated as of September 14,
2023. The Exchange receives and processes data made available
through the consolidated data feeds (i.e., OPRA).
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Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \28\ 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'. . . .''.\29\ Accordingly, the Exchange does not believe its
proposed pricing changes impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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\28\ See supra note 14.
\29\ 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.
[[Page 67851]]
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 \30\ and Rule 19b-4(f)(2) \31\ thereunder.
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\30\ 15 U.S.C. 78s(b)(3)(A)(ii).
\31\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#dfadaab3baf2bcb0b2b2bab1abac9facbabcf1b8b0a9"><span class="__cf_email__" data-cfemail="fa888f969fd7999597979f948e89ba899f99d49d958c">[email protected]</span></a>. Please include
file number SR-MEMX-2023-24 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-2023-24. 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="https://www.sec.gov/rules/sro.shtml">https://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
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-2023-24 and should be
submitted on or before October 23, 2023.
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\32\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21625 Filed 9-29-23; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on October 2, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.