Notice2023-25549
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule Concerning Transaction Fees
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
November 20, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 222 (Monday, November 20, 2023)</title>
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[Federal Register Volume 88, Number 222 (Monday, November 20, 2023)]
[Notices]
[Pages 80796-80803]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25549]
[[Page 80796]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98938; File No. SR-MEMX-2023-30]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule Concerning Transaction Fees
November 14, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 1, 2023, MEMX LLC (``MEMX'' or the ``Exchange'') filed
with the Securities and Exchange Commission (the ``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to amend the Exchange's fee schedule applicable to Members \3\ (the
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The
Exchange proposes to implement the changes to the Fee Schedule pursuant
to this proposal on November 1, 2023. The text of the proposed rule
change is provided in Exhibit 5.
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\3\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Fee
Schedule to (i) reduce the base rebate for executions of Retail Orders
\4\ in securities priced at or above $1.00 per share that add displayed
liquidity to the Exchange (such orders, ``Added Displayed Retail
Volume''); (ii) modify the Liquidity Provision Tiers by: modifying the
required criteria under Liquidity Provision Tiers 1, 2, 3, 4, and 5;
decreasing the rebate for executions of orders in securities priced at
or above $1.00 per share that add displayed liquidity to the Exchange
(such orders, ``Added Displayed Volume'') under Liquidity Provision
Tiers 2, 3, and 5; modifying the method by which the Exchange provides
the rebate under Liquidity Provision Tiers 4 and 5; and eliminating
Liquidity Provision Tier 6; (iii) adopt a new Retail Tier that provides
an enhanced rebate for executions of Added Displayed Retail Volume
priced at or above $1.00 per share; (iv) modify the required criteria
under Liquidity Removal Tier 1; (v) modify the required criteria under
Non-Display Add Tier 1; (vi) modify the NBBO Setter/Joiner Tiers by
reducing the additive rebate per share under NBBO Setter/Joiner Tier 1,
renaming such tier to ``NBBO Setter Tier 1'' and eliminating NBBO
Setter/Joiner Tier 2; (vii) adopt a new Tape B Volume Tier that
provides an additive rebate for executions of Added Displayed Volume in
Tape B securities priced at or above $1.00 per share and add a
corresponding relevant defined term to the ``Definitions'' section of
the Fee Schedule; and (viii) adopt a new additive rebate for executions
of Added Displayed Volume applicable to Displayed Liquidity Incentive
(``DLI'') Tier 1 and Liquidity Provision Tier 1 or Liquidity Provision
Tier 2; as further described below.
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\4\ A ``Retail Order'' means an agency or riskless principal
order that meets the criteria of FINRA Rule 5320.03 that originates
from a natural person and is submitted to the Exchange by a Retail
Member Organization (``RMO''), provided that no change is made to
the terms of the order with respect to price or side of market and
the order does not originate from a trading algorithm or any other
computerized methodology. See Exchange Rule 11.21(a).
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The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues, to
which market participants may direct their order flow. Based on
publicly available information, no single registered equities exchange
currently has more than approximately 15.5% 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 October 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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Reduce Base Rebate for Added Displayed Retail Volume
Currently, the Exchange provides a base rebate of $0.0034 per share
for executions of Added Displayed Retail Volume. The Exchange now
proposes to reduce the base rebate for executions of Added Displayed
Retail Volume to $0.0032 per share.\7\ The purpose of reducing the base
rebate for executions of Added Displayed Retail Volume is for business
and competitive reasons, as the Exchange believes that reducing such
rebate as proposed would decrease the Exchange's expenditures with
respect to its transaction pricing in a manner that is still consistent
with the Exchange's overall pricing philosophy of
[[Page 80797]]
encouraging added displayed liquidity. The Exchange notes that despite
the reduction proposed herein, the proposed base rebate for executions
of Added Displayed Retail Volume remains competitive with the base
rebates provided by other exchanges for executions of Retail Orders in
securities priced at or above $1.00 per share that add displayed
liquidity.\8\
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\7\ The proposed base rebate for executions of Added Displayed
Retail Volume is referred to by the Exchange on the Fee Schedule
under the existing description ``Added displayed volume, Retail
Order'' with a Fee Code of ``Br'', ``Dr'' or ``Jr'', as applicable,
on execution reports.
\8\ See, e.g., the Cboe BZX equities trading fee schedule on its
public website (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>), which reflects a base rebate of
$0.0032 per share for executions of attested retail orders in
securities priced at or above $1.00 per share that add displayed
liquidity, and the Cboe EDGX Exchange, Inc. (``Cboe EDGX'') equities
trading fee schedule on its public website (available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edgx/">https://www.cboe.com/us/equities/membership/fee_schedule/edgx/</a>), which
reflects a base rebate of $0.0032 per share for executions of
attested retail orders in securities priced at or above $1.00 per
share that add displayed liquidity.
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Liquidity Provision Tiers
The Exchange currently provides a base rebate of $0.0015 per share
for executions of Added Displayed Volume.\9\ The Exchange also
currently offers Liquidity Provision Tiers 1-6 under which a Member may
receive an enhanced rebate for executions of Added Displayed Volume by
achieving the corresponding required volume criteria for each such
tier. The Exchange now proposes to modify the Liquidity Provision Tiers
by modifying the required criteria under Liquidity Provision Tier 1 and
Liquidity Provision Tier 4, reducing the rebate for executions of Added
Displayed Volume and modifying the required criteria under Liquidity
Provision Tier 2, Liquidity Provision Tier 3, and Liquidity Provision
Tier 5, and eliminating Liquidity Provision Tier 6, as further
described below.
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\9\ The base rebate for executions of Added Displayed Volume is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume'' with a Fee Code of ``B'',
``D'' or ``J'', as applicable, on execution reports.
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First, with respect to Liquidity Provision Tier 1, the Exchange
currently provides an enhanced rebate of $0.0033 per share for
executions of Added Displayed Volume for Members that qualify for such
tier by achieving an ADAV \10\ (excluding Retail Orders) that is equal
to or greater than 0.45% of the TCV.\11\ Now, the Exchange proposes to
modify the required criteria such that Member would now qualify for
Liquidity Provision Tier 1 by achieving: (1) an ADAV (excluding Retail
Orders) that is equal to or greater than 0.45% of the TCV; or (2) a
Step-Up ADAV \12\ (excluding Retail Orders) of the TCV from September
2023 that is equal to or greater than .05%, an ADV \13\ that is equal
to or greater than 0.50% of the TCV, and a Non-Displayed ADAV \14\ that
is equal to or greater than 5,000,000 shares; or (3) an ADAV that is
equal to or greater than 0.30% of the TCV and a Non-Displayed ADAV that
is equal to or greater than 7,000,000 shares. Thus, such proposed
changes would keep the existing criteria intact as the first
alternative, and add two additional alternative criteria, the first
involving a combination of Step-Up ADAV, ADV, and Non-Displayed ADAV
thresholds, and the second involving a combination of ADAV and Non-
Displayed ADAV thresholds, all of which are designed to encourage the
submission of additional liquidity-adding order flow to the
Exchange.\15\ Additionally, the Exchange is proposing that criteria (2)
of Liquidity Provision Tier 1 will expire no later than March 31, 2024,
and the Exchange will indicate this in a note under the Liquidity
Provision Tiers pricing table on the Fee Schedule. The Exchange is not
proposing to change the rebate provided under such tier.
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\10\ As set forth on the Fee Schedule, ``ADAV'' means the
average daily added volume calculated as the number of shares added
per day, which is calculated on a monthly basis, and ``Displayed
ADAV'' means ADAV with respect to displayed orders.
\11\ 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.
\12\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means
ADAV in the relevant baseline month subtracted from current ADAV.
\13\ As set forth on the Fee Schedule, ``ADV'' means average
daily volume calculated as the number of shares added or removed,
combined, per day. ADV is calculated on a monthly basis.
\14\ As set forth on the Fee Schedule, ``Non-Displayed ADAV''
means ADAV with respect to non-displayed orders (including orders
subject to Display-Price Sliding that receive price improvement when
executed and Midpoint Peg orders).
\15\ The pricing for Liquidity Provision Tier 1 is referred to
by the Exchange on the Fee Schedule under the existing description
``Added displayed volume, Liquidity Provision Tier 1'' with a Fee
Code of ``B1'', ``D1'' or ``J1'', as applicable, to be provided by
the Exchange on the monthly invoices provided to Members.
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With respect to Liquidity Provision Tier 2, the Exchange currently
provides an enhanced rebate of $0.00325 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving: (1) an ADAV that is equal to or greater than 0.25% of the
TCV; and (2) a Non-Displayed ADAV that is equal to or greater than
4,000,000 shares. The Exchange now proposes to reduce the rebate for
executions of Added Displayed Volume under Liquidity Provision Tier 2
to $0.0032 per share and to modify the required criteria such that a
Member would qualify for such tier by achieving: (1) an ADAV that is
equal to or greater than 0.25% of the TCV and a Non-Displayed ADAV that
is equal to or greater than 4,000,000 shares; or (2) a Step-Up
Displayed ADAV of the TCV from September 2023 that is equal to or
greater than 0.10% and a Displayed ADAV (excluding Retail Orders) that
is equal to or greater than 0.20% of the TCV.\16\ Thus, such proposed
changes would keep the existing criteria intact and add an alternative
criteria (2) that includes a Step-Up Displayed ADAV threshold and a
Displayed ADAV (excluding Retail Orders) threshold, which is designed
to encourage the submission of additional liquidity-adding order flow
to the Exchange. Additionally, the Exchange is proposing that criteria
(2) of Liquidity Provision Tier 2 will expire no later than March 31,
2024, and the Exchange will indicate this in a note under the Liquidity
Provision Tiers pricing table on the Fee Schedule.
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\16\ The proposed pricing for Liquidity Provision Tier 2 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 2''
with a Fee Code of ``B2'', ``D2'' or ``J2'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
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With respect to Liquidity Provision Tier 3, the Exchange currently
provides an enhanced rebate of $0.0031 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving an ADAV that is equal to or greater than 0.20% of the TCV.
The Exchange now proposes to reduce the rebate for executions of Added
Displayed Volume under Liquidity Provision Tier 3 to $0.0030 per share
and to modify the required criteria such that a Member would now
qualify for such tier by achieving an ADAV that is equal to or greater
than 0.175% of the TCV.\17\ Thus, such proposed change reduces the TCV
threshold as well as the applicable rebate.
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\17\ The proposed pricing for Liquidity Provision Tier 3 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 3''
with a Fee Code of ``B3'', ``D3'' or ``J3'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
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With respect to Liquidity Provision Tier 4, the Exchange currently
provides an enhanced rebate of $0.0029 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving: (1) an ADAV that is equal to or greater than 0.15% of the
TCV; or (2) a Displayed ADAV that is equal to or greater than 0.02% of
the TCV and a Step-Up Displayed ADAV of the TCV from April 2023 that is
equal
[[Page 80798]]
to or greater than 50% of the Member's April 2023 Displayed ADAV of the
TCV. The Exchange now proposes modify the required criteria such that a
Member would now qualify for such tier by achieving (1) an ADAV
(excluding Retail Orders) that is equal to or greater than 0.09% of the
TCV; or (2) an ADAV that is equal to or greater than 0.06% of the TCV
and a Step-Up ADAV from June 2023 that is equal to or greater than 40%
of the Member's June 2023 Displayed ADAV.\18\ Thus, such proposed
change would lower the ADAV threshold in the first alternative criteria
(and exclude Retail Orders), and modify the alternative ADAV and Step-
Up ADAV thresholds in criteria (2). Additionally, the Exchange is
proposing that criteria (2) of Liquidity Provision Tier 4 will expire
no later than December 31, 2023. The Exchange is not proposing to
change the rebate provided under such tier.
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\18\ The proposed pricing for Liquidity Provision Tier 4 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 4''
with a Fee Code of ``B4'', ``D4'' or ``J4'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
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With respect to Liquidity Provision Tier 5, the Exchange currently
provides an enhanced rebate of $0.0027 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving an ADAV that is equal to or greater than 0.075% of the TCV.
The Exchange now proposes to reduce the rebate for executions of Added
Displayed Volume under Liquidity Provision Tier 5 to $0.0025 per share
and to modify the required criteria such that a Member would now
qualify for such tier by achieving: (1) an ADAV that is equal to or
greater than 0.06% of the TCV; or (2) a Displayed ADAV that is equal to
or greater than 0.007% of the TCV and a Step-Up Displayed ADAV from May
2023 that is equal to or greater than 50% of the Member's May 2023
Displayed ADAV of the TCV.\19\ Thus, such proposed change would lower
the ADAV threshold in the existing criteria and add an alternative
criteria (2) that includes a Displayed ADAV and a Step-Up Displayed
ADAV threshold. Additionally, the Exchange is proposing that criteria
(2) of Liquidity Provision Tier 5 will expire no later than November
30, 2023, and the Exchange will indicate this in a note under the
Liquidity Provision Tiers pricing table on the Fee Schedule.
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\19\ The proposed pricing for Liquidity Provision Tier 5 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Added displayed volume, Liquidity Provision Tier 5''
with a Fee Code of ``B5'', ``D5'' or ``J5'', as applicable, to be
provided by the Exchange on the monthly invoices provided to
Members.
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With respect to Liquidity Provision Tier 6, the Exchange currently
provides an enhanced rebate of $0.0024 per share for executions of
Added Displayed Volume for Members that qualify for such tier by
achieving a Displayed ADAV that is equal to or greater than 0.007% of
the TCV and a Step-Up Displayed ADAV of the TCV from May 2023 that is
equal to or greater than 50% of the Member's May 2023 Displayed ADAV of
the TCV. As noted above, the criteria under this Tier has been shifted
into criteria (2) of Liquidity Provision Tier 5. As such, the Exchange
now proposes to eliminate Liquidity Provision Tier 6, as the Exchange
no longer wishes to, nor is it required to, maintain such tier.
Lastly, the Exchange is proposing to delete the language on the Fee
Schedule that indicates Members that qualify for Liquidity Provision
Tiers 4, 5, or 6 based on activity in a given month will also receive
the associated Tier 4, 5 or 6 rebate during the following month. This
method of providing the rebate under such Tiers was implemented on June
1, 2023,\20\ and differed from the previous practice applicable to
those tiers (and current practice with respect to all incentives and
pricing tiers on the Exchange's Fee Schedule) whereby a Member receives
the applicable rebate at the end of the month if it achieved the
applicable criteria during that month. The Exchange implemented this
method on a trial basis in an effort to encourage Members to increase
their liquidity-adding order flow with an added layer of certainty in
the rebate they would receive the next month, if applicable. However,
the Exchange does not believe that the revised method incentivized
Members to achieve Liquidity Provisions 4, 5, or 6 in a manner that was
material enough to continue the trial further, and it would rather
redirect the associated resources into other programs and tiers
intended to incentivize increased order flow or enhance market quality.
As such, the Exchange proposes to discontinue this method and provide
the applicable rebate under Liquidity Provision Tiers 4 and 5 (as noted
above, it is proposing to eliminate Liquidity Provision Tier 6) in the
same manner in which it provides rebates under all other pricing tiers.
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\20\ See Securities Exchange Act Release No. 97724 (June 14,
2023), 88 FR 40361 (June 21, 2023) (SR-MEMX-2023-10).
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The purpose of reducing the rebates for executions of Added
Displayed Volume under Liquidity Provision Tiers 2, 3 and 5 as
proposed, which the Exchange believes in each case represents a modest
reduction and remains commensurate with the required criteria as
modified, and eliminating Liquidity Provision Tier 6 is for business
and competitive reasons, as the Exchange believes that such rebate
reductions and tier elimination would decrease the Exchange's
expenditures with respect to its transaction pricing in a manner that
is still consistent with the Exchange's overall pricing philosophy of
encouraging added liquidity. The purpose of modifying the required
criteria under Liquidity Provision Tiers 1-5 provides an incremental
incentive for Members to strive for higher volume thresholds to receive
higher enhanced rebates for such executions and, as such, is intended
to encourage Members to maintain or increase their order flow,
primarily in the form of liquidity-adding volume, to the Exchange,
thereby contributing to a deeper and more liquid market to the benefit
of all Members and market participants. The Exchange believes that the
Liquidity Provision Tiers, as modified by the proposed changes
described above, reflect a reasonable and competitive pricing structure
that is right-sized and consistent with the Exchange's overall pricing
philosophy of encouraging added and/or displayed liquidity.
Specifically, the Exchange believes that, after giving effect to the
proposed changes described above, the rebate for executions of Added
Displayed Volume provided under each of the Liquidity Provision Tiers
1-5 and the manner in which it is provided remains commensurate with
the corresponding required criteria under each such tier and is
reasonably related to the market quality benefits that each such tier
is designed to achieve.
Retail Tier
As described above, the Exchange is proposing to provide a base
rebate of $0.0032 per share for executions of Added Displayed Retail
Volume. In addition, the Exchange is proposing to adopt a new tiered
pricing structure applicable to the rebate provided for executions of
Added Displayed Retail Volume. Specifically, the Exchange proposes to
adopt a new volume-based tier, referred to by the Exchange as the
Retail Tier, in which the Exchange will provide an enhanced rebate for
executions of Added Displayed Retail Volume that meet a certain
specified volume threshold on the Exchange. Under the proposed Retail
Tier 1, the Exchange will provide an enhanced rebate of $0.0034 per
share for executions of Added Displayed Retail Volume for a Member that
qualifies for
[[Page 80799]]
the Retail Tier 1 by achieving a Retail Order ADAV that is equal to or
greater than 0.07% of the TCV. The $0.0003 per share additive rebate
will be provided in addition to the rebate that is otherwise applicable
to each of a qualifying Members' orders that constitutes Setter Volume
(including a rebate provided under another pricing tier/incentive).\21\
The Exchange proposes to provide Members that qualify for the proposed
new Retail Tier 1 a rebate of 0.075% of the total dollar volume of the
transaction for executions of orders in securities priced below $1.00
per share that add displayed liquidity to the Exchange, which is the
same rebate that is currently applicable to such executions for all
Members.
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\21\ The proposed pricing for the Retail Tier is referred to by
the Exchange on the Fee Schedule under the description ``Added
displayed volume, Retail Tier 1'' with a Fee Code of ``Br1'',
``Dr1'' or ``Jr1'', as applicable, to be provided by the Exchange on
the monthly invoices provided to Members.
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The proposed Retail Tier is designed to encourage growth in Retail
Order flow to the Exchange by providing an additional rebate for
executions of Added Displayed Retail Volume, thereby promoting
increased liquidity and providing for overall enhanced price discovery
and market quality on the Exchange. The Exchange notes that the
proposed Retail Tier is comparable to other volume-based incentives and
discounts, which have been widely adopted by exchanges (including the
Exchange).\22\
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\22\ See, e.g., the Retail Volume Tiers reflected on the Cboe
BZX equities trading 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>), and the
Retail Volume Tiers reflected on the Cboe EDGX equities trading fee
schedule (available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edgx/">https://www.cboe.com/us/equities/membership/fee_schedule/edgx/</a>).
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Liquidity Removal Tier
The Exchange currently charges a standard fee of $0.0030 per share
for executions of orders in securities priced at or above $1.00 per
share that remove liquidity from the Exchange (such orders, ``Removed
Volume''). The Exchange also currently offers Liquidity Removal Tier 1
under which qualifying Members are charged a discounted fee of $0.00295
per share for executions of Removed Volume by achieving (1) an ADV that
is equal to or greater than 0.50% of the TCV; or (2) a Remove ADV \23\
that is equal to or greater than 0.30% of the TCV. Now, the Exchange
proposes to modify the required criteria under Liquidity Removal Tier 1
such that a Member would qualify for such tier by achieving (1) an ADV
that is equal to or greater than 0.60% of the TCV; and (2) a Remove ADV
that is equal to or greater than 0.30% of the TCV.\24\ Thus, such
proposed change would increase the ADV threshold in the first required
criteria and keep the second required criteria intact with no changes
except that, as proposed, a Member would be required to achieve both
criteria, rather than one or the other. The Exchange is not proposing
to change the rebate provided under such tier.
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\23\ As set forth on the Fee Schedule, ``Remove ADV'' means ADV
with respect to orders that remove liquidity.
\24\ The proposed pricing for Liquidity Removal Tier 1 is
referred to by the Exchange on the Fee Schedule under the existing
description ``Removed volume from MEMX Book, Liquidity Removal Tier
1'' with a Fee Code of ``R1'' assigned on the monthly invoices
provided by the Exchange. The Exchange is not proposing to change
the fee charged under Liquidity Removal Tier 1 for executions of
securities priced below $1.00 per share.
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The proposed change to the Liquidity Removal Tier 1 is designed to
encourage Members to maintain or increase their order flow, including
in the form of orders that remove liquidity, to the Exchange in order
to qualify for the discounted fee for executions of Removed Volume.
While the Exchange's overall pricing philosophy generally encourages
adding liquidity over removing liquidity, the Exchange believes that
providing alternative criteria that are based on different types of
volume that Members may choose to achieve, such as the proposed new
criteria under Liquidity Removal Tier 1, contributes to a more robust
and well-balanced market ecosystem on the Exchange to the benefit of
all Members.
Non-Display Add Tier 1
The Exchange currently offers Non-Display Add Tiers 1-4 under which
a Member may receive an enhanced rebate for executions of Added Non-
Displayed Volume by achieving the corresponding required volume
criteria for each such tier. Currently, a Member qualifies for Non-
Display Add Tier 1, and thus receives an enhanced rebate of $0.0028 per
share for executions of Added Non-Displayed Volume under such tier, by
achieving: (1) a Non-Displayed ADAV that is equal to or greater than
8,000,000 shares; or (2) an ADAV (excluding Retail Orders) that is
equal to or greater than 0.45% of the TCV.\25\ The Exchange now
proposes to modify Non-Display Add Tier 1 such that a Member would now
qualify for such tier by achieving a Non-Displayed ADAV that is equal
to or greater than 8,000,000 shares. Thus, such proposed change would
keep the first existing criteria intact without changes and eliminate
the second alternative criteria, which the Exchange believes would make
the tier easier for Members to achieve, and, in turn, while the
Exchange has no way of predicting with certainty how the proposed new
criteria will impact Member activity, the Exchange expects that more
Members will qualify, or strive to qualify, for such tier than
currently do, resulting in the submission of additional order flow to
the Exchange. The Exchange is not proposing to change the rebate
provided under this tier.
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\25\ The pricing for Non-Display Add Tier 1 is referred to by
the Exchange on the Fee Schedule under the existing description
``Added non-displayed volume, Non-Display Add Tier 1'' with a Fee
Code of ``H1'', ``M1'' or ``P1'', as applicable, to be provided by
the Exchange on the monthly invoices provided to Members.
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The tiered pricing structure for executions of Added Non-Displayed
Volume under the Non-Display Add Tiers provides an incremental
incentive for Members to strive for higher volume thresholds to receive
higher enhanced rebates for such executions and, as such, is intended
to encourage Members to maintain or increase their order flow,
particularly in the form of liquidity-adding non-displayed volume, to
the Exchange, thereby contributing to a deeper and more robust and
well-balanced market ecosystem to the benefit of all Members and market
participants.
NBBO Setter/Joiner Tiers
The Exchange currently offers NBBO Setter/Joiner Tiers 1-2 under
which a Member may receive an additive rebate for a qualifying Member's
executions of Added Displayed Volume (other than Retail Orders) that
establish the NBBO (such orders, ``Setter Volume'') and executions of
Added Displayed Volume (other than Retail Orders) that establish a new
best bid or offer on the Exchange that matches the NBBO first
established on an away market (such orders, ``Joiner Volume''). The
Exchange now proposes to modify the NBBO Setter/Joiner Tiers by
decreasing the additive rebate provided for executions of Setter and
Joiner Volume under NBBO Setter/Joiner Tier 1 and renaming such tier
``NBBO Setter Tier 1'' and eliminating NBBO Setter/Joiner Tier 2, as
further described below.
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 for Members that qualify for such tier by achieving an
ADAV equal to or greater than 0.10% of the TCV with respect to orders
with Fee Code B.\26\ Now, the Exchange proposes to reduce the rebate
[[Page 80800]]
for NBBO Setter/Joiner Tier 1 to $0.0002 per share. The Exchange
believes that the additive rebate 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.
---------------------------------------------------------------------------
\26\ The Exchange notes that orders with Fee Code B include
orders, other than Retail Orders, that establish the NBBO.
---------------------------------------------------------------------------
With respect to NBBO/Setter Joiner Tier 2, the Exchange currently
provides an additive rebate of $0.0002 per share for executions of
Setter Volume and Joiner Volume for Members that qualify for such tier
by achieving an ADAV that is equal to or greater than 0.05% of the TCV
and a Displayed ADAV with respect to orders with Fee Code B or J \27\
that is equal to or greater than 40% of the Member's Displayed ADAV
with respect to orders with Fee Code B, D or J.\28\ The Exchange now
proposes to eliminate NBBO Setter/Joiner Tier 2, as the Exchange no
longer wishes to, nor is it required to, maintain such tier.
---------------------------------------------------------------------------
\27\ The Exchange notes that orders with Fee Code J include
orders, other than Retail Orders, that establish a new BBO on the
Exchange that matches the NBBO first established on an away market.
\28\ The Exchange notes that orders with Fee Code D include
orders that add displayed liquidity to the Exchange but that are not
Fee Code B or J, and thus, orders with Fee Code B, D or J include
all orders, other than Retail Orders, that add displayed liquidity
to the Exchange.
---------------------------------------------------------------------------
Finally, after the proposed elimination of NBBO Setter/Joiner Tier
2, only one relevant Tier remains, and that tier only applies to orders
with a Fee Code B that establish the NBBO. As such, the Exchange
proposes to rename this tier category ``NBBO Setter Tier'', and the
relevant Tier 1 ``NBBO Setter Tier 1''.
Adoption of Tape B Volume Tier
The Exchange proposes to adopt a new volume-based tier, referred to
by the Exchange as the Tape B Volume Tier, in which the Exchange will
provide an additive rebate for executions of Added Displayed Volume
(excluding Retail Orders) in Tape B Securities (such orders, ``Tape B
Volume''). Under the proposed Tape B Volume Tier 1, the Exchange will
provide an additive rebate of $0.0001 per share for executions of Tape
B Volume for a Member that qualifies for the Tape B Volume Tier 1 by
achieving: (1) a Step-Up Tape B ADAV \29\ of the Tape B TCV from
October 2023 that is equal to or greater than 0.10%(excluding Retail
Orders); and (2) a Tape B ADAV that is equal to or greater than 0.25%
of the Tape B TCV (excluding Retail Orders). The $0.0001 per share
additive rebate will be provided in addition to the rebate that is
otherwise applicable to each of a qualifying Members' orders that
constitutes Tape B Volume (including a rebate provided under another
pricing tier/incentive).\30\ Additionally, the Exchange is proposing
Tape B Volume Tier 1 will expire no later than April 30, 2024, and the
Exchange will indicate this in a note under the Tape B Volume Tier
pricing table on the Fee Schedule. The Exchange notes that the additive
rebate will not apply to executions of orders in Tape B securities
priced below $1.00 per share.
---------------------------------------------------------------------------
\29\ The Exchange proposes to define ``Step-Up Tape B ADAV'' in
the Fee Schedule as the ADAV in Tape B securities as a percentage of
the TCV in the relevant baseline month subtracted from the current
ADAV in Tape B securities as a percentage of the TCV.
\30\ The proposed pricing for the Tape B Volume Tier is referred
to by the Exchange on the Fee Schedule under the new description
``Tape B Volume Tier'' with a Fee Code of ``b'' to be appended to
the otherwise applicable Fee Code assigned by the Exchange on the
monthly invoices for qualifying executions.
---------------------------------------------------------------------------
The proposed Tape B Volume Tier is designed to attract displayed
liquidity to the Exchange in Tape B securities by providing an
additional rebate for executions of Tape B Volume to Members, thereby
promoting price discovery and market quality on the Exchange. The
Exchange notes that the proposed Tape B Volume Tier is comparable to
other volume-based incentives and discounts, which have been widely
adopted by exchanges (including the Exchange), including similar
pricing incentives applicable to Tape B securities.\31\
---------------------------------------------------------------------------
\31\ See, e.g., Securities Exchange Act Release No. 73813
(September 11, 2015), 80 FR 55882 (September 17, 2015) (SR-BATS-
2015-74) (notice of filing and immediate effectiveness of a proposed
rule change related to fees to adopt a Tape B Volume Tier that
provides an enhanced rebates for executions of orders in Tape B
Securities to BZX (formerly BATS Exchange, Inc.) members that
qualify for such tiers by achieving a specified Tape B ADAV
threshold).
---------------------------------------------------------------------------
DLI Additive Rebate
The Exchange currently offers DLI Tiers 1 and 2 in which qualifying
Members are provided an enhanced rebate for executions of Added
Displayed Volume. The DLI Tiers are designed to encourage Members,
through the provision of such enhanced rebates for executions of Added
Displayed Volume, to promote price discovery and market quality by
quoting at the NBBO for a significant portion of each day in a large
number of securities, thereby benefitting the Exchange and investors by
providing improved trading conditions for all market participants
through narrower bid-ask spreads and increased depth of liquidity
available at the NBBO in a broad base of securities, and committing
capital to support the execution of orders.\32\ The Exchange is not
proposing to modify the DLI Tiers at this time, however, the Exchange
is proposing to adopt a new additive rebate for executions of Added
Displayed Volume applicable to DLI Tier 1 and Liquidity Provision Tier
1 or Liquidity Provision Tier 2 (the ``DLI Additive Rebate'').
Specifically, the proposed DLI Additive Rebate would provide an
additive rebate of $0.0001 per share for executions of Added Displayed
Volume that otherwise qualify for the applicable rebate under Liquidity
Provision Tier 1 or Liquidity Provision Tier 2 as well as the
applicable criteria under DLI Tier 1,\33\ as described more fully
below.
---------------------------------------------------------------------------
\32\ See the Exchange's Fee Schedule (available at: <a href="https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule">https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule</a>) for additional details regarding the Exchange's DLI Tiers
and DLI Target Securities.
\33\ This proposed pricing is referred to by the Exchange on the
Fee Schedule under the new description ``DLI Additive Rebate'' with
a Fee Code of ``q'' to be appended to the otherwise applicable Fee
Code for qualifying executions.
---------------------------------------------------------------------------
First, a Member qualifies for DLI Tier 1 by having (1) an NBBO time
of at least 25% in an average of at least 1,000 securities per trading
day during the month; and (2) an ADAV that is equal to or greater than
0.10% of the TCV.\34\ Under Liquidity Provision Tier 1, the Exchange is
proposing (as described above) to provide an enhanced rebate of $0.0033
per share for executions of Added Displayed Volume for Members that
qualify for such tier by achieving: (1) an ADAV (excluding Retail
Orders) that is equal to or greater than 0.45% of the TCV; or (2) a
Step-Up ADAV from September 2023 that is equal to or greater than 0.05%
of the TCV, an ADV that is equal to or greater than 0.50% of the TCV,
and a Non-Displayed ADAV that is equal to or greater than 5,000,000
shares; or (3) an ADAV that is equal to or greater than 0.30% of the
TCV and a Non-Displayed ADAV that is equal to or greater than 7,000,000
shares. Under Liquidity Provision Tier 2, the Exchange is proposing (as
described above) to provide an enhanced rebate of $0.0032 for
executions of Added Displayed Volume for Members that qualify for such
tier by having: (1) an ADAV that is greater than or equal to 0.25% of
the TCV and a Non-Displayed ADAV that is equal to or greater than
4,000,000 shares; or (2) a Step-Up Displayed ADAV of the TCV from
September 2023 that is equal to or greater than 0.10% and a Displayed
ADAV (excluding Retail Orders) that is equal to or greater than 0.20%
of the TCV. Members would
[[Page 80801]]
qualify for the DLI Additive rebate and by achieving both the criteria
under DLI Tier 1 and either Liquidity Provision Tier 1 or Liquidity
Tier 2.\35\
---------------------------------------------------------------------------
\34\ The enhanced rebate provided under DLI Tier 1 is $0.0031
per share for executions of Added Displayed Volume.
\35\ Thus, a Member that qualifies for Liquidity Provision Tier
1 and the DLI Additive Rebate (by achieving the criteria under DLI
Tier 1) would receive a rebate of $0.0034 per share (which is the
$0.0033 per share rebate under Liquidity Provision Tier 1, as
described above, plus the $0.0001 per share DLI Additive Rebate) for
executions of Added Displayed Volume, and a Member that qualifies
for Liquidity Provision Tier 2 and the DLI Additive Rebate (by
achieving the criteria under DLI Tier 1) would receive a rebate of
$0.0033 per share (which is the proposed $0.0032 per share rebate
under Liquidity Provision Tier 2, as described above, plus the
$0.0001 per share DLI Additive Rebate) for executions of Added
Displayed Volume.
---------------------------------------------------------------------------
The purpose of the proposed DLI Additive Rebate is to encourage
Members that consistently quote at the NBBO on the Exchange (i.e.,
Members that qualify for DLI Tier 1) to also maintain or increase their
orders that add liquidity on the Exchange in order to qualify for an
additive rebate for executions of Added Displayed Volume, which, in
turn, the Exchange believes would encourage the submission of
additional Added Displayed Volume to the Exchange, thereby promoting
price discovery and contributing to a deeper and more liquid market to
the benefit of all market participants. The Exchange notes that the
proposed DLI Additive Rebate is comparable to other volume-based
incentives and discounts, which have been widely adopted by exchanges,
including the Exchange, such as pricing tiers that provide a
supplemental incentive for firms that achieve a specified volume
threshold.\36\
---------------------------------------------------------------------------
\36\ See Securities Exchange Act Release No. 93949 (January 11,
2022), 87 FR 2655 (January 18, 2022) (SR-MEMX-2021-21) (Notice of
filing and immediate effectiveness of fee changes adopted by the
Exchange, including the adoption of a DLI Additive Rebate). The
Exchange subsequently eliminated the DLI Additive Rebate on July 1,
2022. See Securities Exchange Act Release No. 95211 (July 7, 2022),
87 FR 41839 (July 13, 2022) (SR-MEMX-2022-16).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\37\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\38\ 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.
---------------------------------------------------------------------------
\37\ 15 U.S.C. 78f.
\38\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
As discussed above, the Exchange operates in a highly fragmented
and competitive market in which market participants can readily direct
order flow to competing venues if they deem fee levels at a particular
venue to be excessive or incentives to be insufficient, and the
Exchange represents only a small percentage of the overall market. The
Commission and the courts have repeatedly expressed their preference
for competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \39\
---------------------------------------------------------------------------
\39\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
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 incentivize market participants to direct additional order
flow, including displayed, non-displayed, liquidity-adding and/or
liquidity-removing orders, to the Exchange, which the Exchange believes
would promote price discovery and enhance liquidity and market quality
on the Exchange to the benefit of all Members and market participants.
The Exchange believes that the proposed change to reduce the base
rebate provided for executions Added Displayed Retail Volume is
reasonable because, as described above, such change is designed to
decrease the Exchange's expenditures with respect to its transaction
pricing in a manner that is still consistent with the Exchange's
overall pricing philosophy of encouraging added and/or displayed
liquidity, and the proposed new base rebate for executions of Added
Displayed Retail Volume remains in competitive with, the base rebates
provided by other exchanges in each case for executions of similar
orders.\40\ The Exchange also believes the proposed base rebate for
executions of Added Displayed Retail Volume is equitable and not
unfairly discriminatory, as such base rebate will apply equally to all
Members submitting Retail Orders to the Exchange.
---------------------------------------------------------------------------
\40\ See supra note 8.
---------------------------------------------------------------------------
The Exchange notes that volume-based incentives and discounts (such
as tiers) have been widely adopted by exchanges, including the
Exchange, and are reasonable, equitable and not unfairly discriminatory
because they are open to all members on an equal basis and provide
additional benefits or discounts that are reasonably related to the
value to an exchange's market quality associated with higher levels of
market activity, such as higher levels of liquidity provision and/or
growth patterns, and the introduction of higher volumes of orders into
the price and volume discovery process. The Exchange believes that each
of the Liquidity Provision Tiers 1-5, Liquidity Removal Tier 1, Non-
Display Add Tier 1, NBBO Setter Tier 1, each as modified by the changes
proposed herein, as well as the proposed new Retail Tier, Tape B Volume
Tier, and DLI Additive Rebate, are reasonable, equitable and not
unfairly discriminatory for these same reasons, as such tiers would
provide Members with an incremental incentive to achieve certain volume
thresholds on the Exchange, are available to all Members on an equal
basis, and, as described above, are designed to encourage Members to
maintain or increase their order flow, including in the form of
displayed, non-displayed, liquidity-adding and/or liquidity removing
orders under the required criteria, as applicable, to the Exchange,
which the Exchange believes would promote price discovery, enhance
liquidity and market quality, and contribute to a more robust and well
balanced market ecosystem on the Exchange to the benefit of all Members
and market participants.
The Exchange also believes that such tiers reflect a reasonable and
equitable allocation of fees and rebates, as the Exchange believes
that, after giving effect to the changes proposed herein, the enhanced
rebate for executions of Added Displayed Volume, Added Displayed Retail
Volume, Added Non-Displayed Volume, Setter Volume, Added Tape B Volume,
as well as the discounted fee for executions of Removed Volume under
the modified Liquidity Removal Tier 1, each remains commensurate with
the corresponding required criteria under each such tier and is
reasonably related to the market quality benefits that each such tier
is designed to achieve, as described above.
[[Page 80802]]
With respect to the proposed changes to eliminate Liquidity
Provision Tier 6 and NBBO Setter/Joiner Tier 2, the Exchange believes
such changes are reasonable because, as noted above, they would enable
the Exchange to redirect the associated resources and funding into
other programs and tiers intended to incentivize increased order flow
or enhance market quality, and the Exchange is not required to maintain
such tiers or provide Members any opportunities to receive additive
rebates. The Exchange believes the proposal to eliminate such tiers is
also equitable and not unfairly discriminatory because it would apply
equally to all Members, in that the incentives would no longer be
available for any Member.
Similarly, the Exchange believes the proposed discontinuance of the
current method by which it is providing the enhanced rebates under
Liquidity Provision Tiers 4 and 5 (each as modified by the proposed
changes herein) is reasonable because, as noted above, the Exchange
implemented this novel method on a trial basis and determined that it
did not incentivize members to meet the applicable Liquidity Provision
Tiers to the extent that it believes would support continuation.
Further, the method by which the Exchange provides rebates does not
affect any criteria or rebates provided under Liquidity Provision Tiers
4 and 5, and as such, modifying the method again does not alter the
Exchange's reasonable and competitive pricing structure designed to
incentivize market participants to direct additional flow to the
Exchange. The Exchange believes the proposal to discontinue this method
is also equitable and not unfairly discriminatory because it would
apply equally to Members, in that the Exchange would instead provide
the rebates to all Members for all pricing tiers under the same
methodology whereby a Member is awarded a rebate based on its activity
for the current month.
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 \41\ 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.
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposal will result in any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Instead, as discussed above,
the proposal is intended to incentivize market participants to direct
additional order flow to the Exchange, thereby enhancing liquidity and
market quality on the Exchange to the benefit of all Members and market
participants, as well as to generate additional revenue and decrease
the Exchange's expenditures with respect to its transaction pricing in
a manner that is still consistent with the Exchange's overall pricing
philosophy of encouraging added displayed liquidity. 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.'' \42\
---------------------------------------------------------------------------
\42\ See supra note 39.
---------------------------------------------------------------------------
Intramarket Competition
As discussed above, the Exchange believes that the proposal would
decrease the Exchange's expenditures and generate additional revenue
with respect to its transaction pricing in a manner that is still
consistent with the Exchange's overall pricing philosophy of
encouraging added and/or displayed liquidity and would incentivize
market participants to direct additional order flow to the Exchange
through volume-based tiers, thereby enhancing liquidity and market
quality on the Exchange to the benefit of all Members, as well as
enhancing the attractiveness of the Exchange as a trading venue, which
the Exchange believes, in turn, would continue to encourage market
participants to direct additional order flow to the Exchange. Greater
liquidity benefits all Members by providing more trading opportunities
and encourages Members to send additional orders to the Exchange,
thereby contributing to robust levels of liquidity, which benefits all
market participants.
The Exchange does not believe that the proposed change to reduce
the base rebate for executions of Added Displayed Retail Volume would
impose any burden on intramarket competition because such change will
apply to all Members uniformly, in that the proposed base rebate for
such executions would be the base rebate applicable to all Members, and
the opportunity to qualify for enhanced rebate, as applicable, is
available to all Members. The opportunity to qualify for each of the
Liquidity Provision Tiers 1-5, NBBO Setter Tier 1, Non-Display Add Tier
1, and Liquidity Removal Tier 1, each as modified by the changes
proposed herein, as well as the proposed new Retail Tier, Tape B Volume
Tier, and DLI Additive Rebate, and thus receive the corresponding
enhanced rebates or discounted fees, as applicable, would be available
to all Members that meet the associated volume and/or quoting
requirements in any month. As described above, the Exchange believes
that the required criteria under each such tier are commensurate with
the corresponding rebate under such tier and are reasonably related to
the enhanced liquidity and market quality that such tier is designed to
promote. Additionally, the Exchange does not believe that the proposal
to eliminate the method by which the Exchange currently provides the
enhanced rebate under the Liquidity Provision Tiers 4 and 5 (each as
modified by the changes proposed herein), would impose any burden on
intramarket competition because such change will apply to all Members
uniformly, and the methodology by which the Exchange provides rebates
will be the same for all pricing tiers. For the foregoing reasons, the
Exchange believes the proposed changes would not impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intermarket Competition
As noted above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. Members have numerous
alternative venues that they may participate on and direct their order
flow to, including 15 other equities exchanges and numerous alternative
trading systems and other off-exchange venues. As noted above, no
single registered equities exchange currently has more than
approximately 15.5% of the total market share of
[[Page 80803]]
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, including with respect to
executions of Added Displayed Volume, Added Displayed Retail Volume,
Added Non-Displayed Volume and Removed Volume, and market participants
can readily choose to send their orders to other exchange and off-
exchange venues if they deem fee levels at those other venues to be
more favorable. As described above, the proposed changes represent a
competitive proposal through which the Exchange is seeking to generate
additional revenue with respect to its transaction pricing and to
encourage the submission of additional order flow to the Exchange
through volume-based tiers, which have been widely adopted by
exchanges, including the Exchange. Accordingly, the Exchange believes
the proposal would not burden, but rather promote, intermarket
competition by enabling it to better compete with other exchanges that
offer similar pricing 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.'' \43\ 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'. . . .''.\44\ 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.
---------------------------------------------------------------------------
\43\ See supra note 39.
\44\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \45\ and Rule 19b-4(f)(2) \46\ thereunder.
---------------------------------------------------------------------------
\45\ 15 U.S.C. 78s(b)(3)(A)(ii).
\46\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#86f4f3eae3abe5e9ebebe3e8f2f5c6f5e3e5a8e1e9f0"><span class="__cf_email__" data-cfemail="4634332a236b25292b2b232832350635232568212930">[email protected]</span></a>. Please include
file number SR-MEMX-2023-30 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-2023-30. 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-2023-30 and should be
submitted on or before December 11, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
---------------------------------------------------------------------------
\47\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25549 Filed 11-17-23; 8:45 am]
BILLING CODE 8011-01-P
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