Notice2024-03904
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule
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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
February 27, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 39 (Tuesday, February 27, 2024)</title>
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[Federal Register Volume 89, Number 39 (Tuesday, February 27, 2024)]
[Notices]
[Pages 14547-14550]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-03904]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99581; File No. SR-MEMX-2024-05]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule
February 21, 2024.
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 February 8, 2024, 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
(a) The Exchange is filing with the Commission a proposed rule
change to amend the Exchange's fee schedule (the ``Fee Schedule'')
pursuant to Exchange Rules 15.1(a) and (c). The Exchange proposes to:
(i) extend the waiver (``Membership Fee Waiver'') of membership fees
(``Membership Fees'') which is currently in place for all new Members
\3\ of the Exchange, for an additional month beyond the program's
current expiration on January 31, 2024; and (ii) extend the waiver of
Connectivity and Application Session Fees solely related to
participation on the Exchange's platform for trading equity options on
MEMX Options (``Options Connectivity Fee Waiver''), which is currently
in place for all new Members and non-Members \4\ of the Exchange, for
an additional month beyond the program's current expiration on January
31, 2024. The Exchange will continue to implement both the Membership
Fee Waiver (as defined above) for all new Members who join the Exchange
and the Options Connectivity Fee Waiver (as defined above) for all
Members and non-Members of the Exchange prior to and including February
29, 2024. The text of the proposed rule change is provided in Exhibit
5.
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\3\ See Exchange Rule 1.5(p).
\4\ Types of market participants that obtain connectivity
services from the Exchange but are not Members include service
bureaus and extranets. Service bureaus offer technology-based
services to other companies for a fee, including order entry
services to Members, and thus, may access application sessions on
behalf of one or more Members. Extranets offer physical connectivity
services to Members and non-Members.
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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) extend the waiver (``Membership Fee Waiver'') of
membership fees (``Membership Fees'') which is currently in place for
all new Members \5\ of the Exchange, for an additional month beyond the
program's current expiration on January 31, 2024; and (ii) extend the
waiver of Connectivity and Application Session Fees solely related to
participation on the Exchange's platform for trading equity options on
MEMX Options (``Options Connectivity Fee Waiver''), which is currently
in place for all new Members and non-Members \6\ of the Exchange, for
an additional month beyond the program's current expiration on January
31, 2024.\7\ The Exchange will continue to implement both the
Membership Fee Waiver (as defined above) for all new Members who join
the Exchange and the Options Connectivity Fee Waiver (as defined above)
for all Members and non-Members of the Exchange prior to and including
February 29, 2024. The Exchange notes that the proposed change does not
amend any existing fee or rebate for equities or options transactions,
market data or connectivity fees. The sole change proposed herein is to
extend the timeframe during which the Exchange will waive Membership
Fees and Options Connectivity Fees for new Members and non-Members of
the Exchange.
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\5\ See Exchange Rule 1.5(p).
\6\ Types of market participants that obtain connectivity
services from the Exchange but are not Members include service
bureaus and extranets. Service bureaus offer technology-based
services to other companies for a fee, including order entry
services to Members, and thus, may access application sessions on
behalf of one or more Members. Extranets offer physical connectivity
services to Members and non-Members.
\7\ The Exchange initially filed the proposed changes on January
31, 2024 (SR-MEMX-2024-03). On February 8, 2024, the Exchange
withdrew that filing and submitted this filing.
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Membership Fee Waiver
Currently, MEMX applies a Membership Fee Waiver to all new
[[Page 14548]]
Members of the Exchange, which is set to expire on January 31, 2024.
Under the current Membership Fee Waiver, new Members who join the
Exchange after January 31, 2024, would be assessed Membership Fees of
$200 per month to maintain active membership, and new Members whose
Membership Fees were waived during the Waiver Period would be assessed
Membership Fees of $200 per month beginning February 1, 2024. In
addition, in September of 2023 the Exchange adopted specific fees
applicable to participation on the Exchange's platform for trading
equity options (``MEMX Options'').\8\ The current Membership Fee Waiver
has also been applied to new Members of MEMX Options, and thus such
fees have not been imposed on such Members to date.
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\8\ See Securities Exchange Act Release No. 98648 (September 29,
2023), 88 FR 68762 (October 4, 2023) (SR-MEMX-2023-26).
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The Exchange believes that the existing Membership Fee Waiver has
been effective in incentivizing options market participants to join
MEMX Options. MEMX Options launched in September of 2023, and has been
conducting a staged rollout of options available for trading on the
Exchange since that time. The Exchange believes that its rollout will
be complete in February of 2024 and would like to extend the Membership
Fee Waiver until after its rollout is complete in the event there are
options firms that are waiting to join the Exchange until after such
rollout is complete. In addition, the Exchange believes the Membership
Fee Waiver is a proper incentive for new participants on MEMX Options
to continue to increase their participation as they become accustomed
to the new trading platform.
Accordingly, the Exchange proposes to extend the time period of the
Membership Fee Waiver to expire on February 29, 2024. The Exchange
proposes to continue to waive Membership Fees for all new Members who
join the exchange on or before February 29, 2024. Under the proposed
Membership Fee Waiver, new Members who join the Exchange after February
29, 2024, will be assessed Membership Fees to maintain active
membership and if applicable, Members who participate on MEMX Options
will be assessed the specific Additional Fees \9\ applicable to such
participation. Similarly, new Members whose Membership Fees have been
waived since joining the Exchange will be assessed Membership Fees,
including Additional Fees applicable to participation on MEMX Options,
if applicable, beginning March 1, 2024. In addition, new Members of
MEMX Options who join after February 29, 2024, will be assessed
Membership Fees of $200 per month to maintain active membership, and
new Members whose Membership Fees were waived will be assessed
Membership Fees of $200 per month beginning March 1, 2024.
Specifically, the Exchange is proposing to amend the Exchange's
Membership Fee Schedule to provide that Membership Fees will be waived
for new Members of the Exchange until March 1, 2024.
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\9\ Additional Fees applicable to Options Members, per the
Exchange's Fee Schedule, include monthly fees specifically
applicable to Options Order Entry Firms or Options Market Makers,
both as defined in the Fee Schedule.
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Options Connectivity Fee Waiver
Currently, MEMX applies an Options Connectivity Fee Waiver to all
Members and non-Members of the Exchange, which is set to expire on
January 31, 2024. Under the current Options Connectivity Fee Waiver,
fees charged to Members and Non-Members for physical connectivity to
MEMX Options \10\ and for application sessions (otherwise known as
``logical ports'') that a Member utilizes in connection with their
participation on MEMX Options would not be assessed until February 1,
2024. Specifically, the physical connectivity fees are $6,000 per month
for a physical connection in the data center where the Exchange
primarily operates under normal market conditions (``Primary Data
Center''), and $3,000 per month for a physical connection at the
geographically diverse data center, which is operated for backup and
disaster recovery purposes (``Secondary Data Center''), and the
application session fees are $450 per month for an application session
used for order entry (``Order Entry Port'') and $450 per month for an
application session for receipt of drop copies (``Drop Copy Port''), to
the extent such ports are in the Primary Data Center.\11\
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\10\ Physical connections may be used to access both MEMX
equities and options platforms, as such, the Exchange internally
verifies whether new connections are being used solely for Options
connections in order to determine whether such connection qualifies
for the Options Connectivity Fee Waiver.
\11\ See Securities Exchange Act Release No. 99275 (January 4,
2024), 89 FR 1606 (January 10, 2024) (SR-MEMX-2023-39).
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The Exchange believes that the existing Options Connectivity Waiver
has been effective in incentivizing options market participants to join
MEMX Options. As noted above, MEMX Options launched in September of
2023, and has been conducting a staged rollout of options available for
trading on the Exchange since that time. The Exchange believes that its
rollout will be complete in February of 2024 and would like to extend
the Options Connectivity Fee Waiver until after its rollout is complete
in the event there are options firms that are waiting to join the
Exchange until after such rollout is complete. In addition, the
Exchange believes the Options Connectivity Fee Waiver is a proper
incentive for new participants on MEMX Options to continue to increase
their participation as they become accustomed to the new trading
platform.
Accordingly, the Exchange proposes to extend the time period of the
Options Connectivity Fee Waiver to expire on February 29, 2024. The
Exchange proposes to continue to waive Options Connectivity Fees for
all Members and non-Members of exchange on or before February 29, 2024.
Under the proposed Membership Fee Waiver, applicable Options
Connectivity Fees of $6,000 per month for each physical connection in
the Primary Data Center and $3,000 per month for each physical
connection in the Secondary Center, and $450 per month for each Order
Entry Port and Drop Copy Port in the Exchange's Primary Data Center
will be assessed to Members and non-Members beginning March 1, 2024.
Specifically, the Exchange is proposing to amend the Exchange's
Connectivity Fee Schedule to provide that all Connectivity and
Application Sessions fees solely related to participation on MEMX
Options shall be waived until March 1, 2024.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\12\ in general, and
furthers the objectives of Sections 6(b)(4) and6(b)(5) of the Act,\13\
in particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using its facilities and does not unfairly discriminate
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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The Exchange believes it is reasonable to extend the timeframe of
the Membership Fee Waiver for new Members of the Exchange, primarily to
continue to provide an incentive for options trading firms to continue
to apply for Exchange membership during the current phase of the
rollout of MEMX Options. The options markets are quote-driven markets
and are dependent on liquidity providers for liquidity and price
discovery. Extending the timeframe of the Membership Fee
[[Page 14549]]
Waiver will continue to encourage additional liquidity providers to
become members of the Exchange, which may result in more trading
opportunities, enhanced competition, and improved overall market
quality on the Exchange. Although the proposed extension of the
Membership Fee Waiver timeframe is intended primarily to encourage new
participants to join the Exchange in order to participate on the MEMX
Options market and the Exchange believes the participants that will
benefit from this waiver are firms that will do so, the Exchange also
believes that it is reasonable to continue applying the Membership Fee
Waiver broadly to all new participants on the Exchange during the
timeframe extension, including firms that would trade only on the
Exchange's market for equity securities or on both the Exchange's
market for equity securities and MEMX Options.
In addition, the Exchange believes that the proposed extension of
the Membership Fee Waiver is equitable and not unfairly discriminatory
in that it will apply uniformly to all new Members of the Exchange.
Further, the Exchange believes that the proposed extension of the
waiver is reasonable, equitable and not unfairly discriminatory to
current Members of the Exchange because the majority of the Exchange's
existing Members joined at a time when the Exchange did not impose
membership fees (also to incentivize such participants to join), and
thus have already received this benefit.
The Exchange believes it is reasonable to extend the timeframe of
the Options Connectivity Fee Waiver for new and existing Members and
non-Members of the Exchange, primarily to continue to provide an
incentive for options trading firms to continue to apply for Exchange
membership during the current phase of the rollout of MEMX Options. The
options markets are quote-driven markets and are dependent on liquidity
providers for liquidity and price discovery. Extending the timeframe of
the Options Connectivity Fee Waiver will continue to encourage
additional liquidity providers to become members of the Exchange, which
may result in more trading opportunities, enhanced competition, and
improved overall market quality on the Exchange.
In addition, the Exchange believes that the proposed extension of
the Options Connectivity Fee Waiver is equitable and not unfairly
discriminatory in that it will apply uniformly to all Members and non-
Members of the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change 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 Exchange believes that the proposed change would
encourage market participants who have not already done so to join the
Exchange. As a result, if such participants do join the Exchange and
route their orders to the Exchange or support other Members that route
orders (i.e., clearing firms) the Exchange believes the proposal would
further enhance its competitiveness as a market. Encouraging additional
participants to join the Exchange will enable a greater number of
participants to participate on MEMX Options during the continued
rollout of the platform. Further, the Exchange believes that by
continuing to make the Membership Fee Waiver applicable to both the
Exchange's options platform and the Exchange's equity platform for an
extended time period, the proposal will enhance the competitiveness of
both platforms. Attracting a greater number of participants will foster
greater competition on the Exchange, particularly in the case of MEMX
Options which is a quote-driven market. 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.'' \14\
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\14\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Intramarket Competition
As discussed above, the Exchange believes that the proposal would
encourage new participants to apply for Exchange membership, thereby
enhancing liquidity and market quality on the Exchange, 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.
The Exchange does not believe that the proposed changes would
impose any burden on intramarket competition because such changes will
incentivize new participants to join the Exchange and the majority of
the Exchange's current members joined at a time when the Exchange did
not impose membership fees (also to incentivize such participants to
join), and thus have already received this benefit. The options markets
are quote-driven markets and are dependent on liquidity providers for
liquidity and price discovery. The proposal will be of particular
importance in encouraging additional liquidity providers to become
members of the Exchange, which may result in more trading
opportunities, enhanced competition, and improved overall market
quality on the Exchange. Similarly, the Exchange believes that
extending the timeframe of the Options Connectivity Fee Waiver will
continue to provide an incentive for options trading firms to continue
to participate on the Exchange during the current phase of the rollout
of MEMX Options. 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 described above, the proposed extension of the Membership Fee
Waiver and Options Connectivity Fee Waiver timeframes will incent
market participants to join the Exchange during the extended Waiver
periods. Accordingly, the Exchange believes the proposal would not
burden, but rather promote, intermarket competition by enabling it to
better compete with other options exchanges during the continued
rollout of MEMX Options. In addition, as noted above, the Exchange has
intentionally proposed to apply the Membership Fee Waiver broadly so
that it continues to be applicable to new Members that will participate
on the Exchange's market for equity securities or that will participate
on such market as well as MEMX Options, and thus, the proposal may also
better enable the Exchange to compete with other options exchanges and
equities exchanges.
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
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19(b)(3)(A)(ii) of the Act \15\ and Rule 19b-4(f)(2) \16\ thereunder.
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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
\16\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#2b595e474e06484446464e455f586b584e48054c445d"><span class="__cf_email__" data-cfemail="d5a7a0b9b0f8b6bab8b8b0bba1a695a6b0b6fbb2baa3">[email protected]</span></a>. Please include
file number SR-MEMX-2024-05 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-2024-05. 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-2024-05 and should be
submitted on or before March 19, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-03904 Filed 2-26-24; 8:45 am]
BILLING CODE 8011-01-P
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