[Federal Register Volume 88, Number 229 (Thursday, November 30, 2023)]
[Notices]
[Pages 83590-83594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26263]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99017; File No. SR-MEMX-2023-25]


Self-Regulatory Organizations; MEMX LLC; Suspension of and Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To Amend Its Fee Schedule To Establish an Options 
Regulatory Fee

November 24, 2023.

I. Introduction

    On September 27, 2023, MEMX LLC (``MEMX'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (the ``Commission''), 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change 
(file number SR-MEMX-2023-25) to adopt an Options Regulatory Fee 
(``ORF'').\3\ The proposed rule change was immediately effective upon 
filing with the Commission pursuant to section 19(b)(3)(A) of the 
Act.\4\ The proposed rule change was published for comment in the 
Federal Register on October 4, 2023.\5\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 98585 (September 28, 
2023), 88 FR 68692 (October 4, 2023) (``Notice'').
    \4\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ See Notice, supra note 3.
---------------------------------------------------------------------------

    Pursuant to section 19(b)(3)(C) of the Act,\6\ the Commission is 
hereby: (1) temporarily suspending file number SR-MEMX-2023-25; and (2) 
instituting proceedings to determine whether to approve or disapprove 
file number SR-MEMX-2023-25.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to establish an ORF in the amount of $0.0015 
per contract side.\7\ The per-contract ORF will be collected by the 
Options Clearing Corporation (``OCC'') on behalf of the Exchange for 
each options transaction, cleared or ultimately cleared by an Exchange 
member in the ``customer'' range, regardless of the exchange on which 
the transaction occurs. The ORF is collected from either: (1) a Member 
that was the ultimate clearing firm for the transaction; or (2) a non-
Member that was the ultimate clearing firm where a Member was the 
executing clearing firm for the transaction.\8\
---------------------------------------------------------------------------

    \7\ See Notice, supra note 3, at 68692.
    \8\ Id.
---------------------------------------------------------------------------

    According to the Exchange, the amount of the proposed ORF fee is 
``based on historical industry volume, projected volumes on the 
Exchange, and

[[Page 83591]]

projected Exchange regulatory costs.'' \9\ The Exchange states that 
``revenue generated from ORF, when combined with all of the Exchange's 
other regulatory fees and fines, will cover a material portion, but not 
all, of the Exchange's regulatory costs.'' \10\ The Exchange notes that 
it will monitor the amount of ORF revenue it collects ``to ensure that 
it, in combination with its other regulatory fees and fines, does not 
exceed the Exchange's total regulatory costs.'' \11\
---------------------------------------------------------------------------

    \9\ Id. at 68693.
    \10\ Id.
    \11\ Id.
---------------------------------------------------------------------------

    The Exchange proposes that the ORF will automatically sunset on 
September 30, 2024, approximately one year after the operative 
date.\12\ The Exchange believes this will allow it time to ``gather the 
necessary data, including its actual regulatory costs and revenues, as 
well as the cost of regulating executions that clear in a customer 
capacity and executions that occur on away markets, while also allowing 
it to adequately cover a portion of the projected costs associated with 
the regulation of its Members.'' \13\ According to the Exchange, 
allowing the collection of ORF from the outset of its operations on 
September 27, 2023 until September 30, 2023, when the fee will 
automatically sunset, will allow the Exchange to fund its regulatory 
program and collect evidence to provide to the Commission and inform 
its approach to ORF after the sunset period.\14\
---------------------------------------------------------------------------

    \12\ Id. at 68692 and 68695.
    \13\ Id. at 68695.
    \14\ Id.
---------------------------------------------------------------------------

III. Suspension of the Proposed Rule Change

    Pursuant to section 19(b)(3)(C) of the Act,\15\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to section 19(b)(1) of the Act,\16\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. As discussed below, the Commission believes a temporary 
suspension of the proposed rule change is necessary or appropriate in 
the public interest, for the protection of investors, or otherwise in 
furtherance of the purposes of the Act to allow for additional analysis 
of the proposed rule change's consistency with the Act and the rules 
thereunder.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(C).
    \16\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    When exchanges file their proposed rule changes with the 
Commission, including fee filings like the Exchange's present proposal, 
they are required to provide a statement supporting the proposal's 
basis under the Act and the rules and regulations thereunder applicable 
to the exchange.\17\ The instructions to Form 19b-4, on which exchanges 
file their proposed rule changes, specify that such statement ``should 
be sufficiently detailed and specific to support a finding that the 
proposed rule change is consistent with [those] requirements'' \18\
---------------------------------------------------------------------------

    \17\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change'').
    \18\ Id.
---------------------------------------------------------------------------

    Section 6 of the Act, including Sections 6(b)(4), (5), and (8), 
require the rules of an exchange to: (1) provide for the equitable 
allocation of reasonable fees among members, issuers, and other persons 
using the exchange's facilities; \19\ (2) perfect the mechanism of a 
free and open market and a national market system, protect investors 
and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers; \20\ 
and (3) not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\21\
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(4).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In justifying its proposal, the Exchange stated that establishing 
an ORF in the amount of $0.0015 is reasonable because it ``will serve 
to balance the Exchange's regulatory revenue against the anticipated 
regulatory costs'' and ``is lower than the amount of ORF assessed on 
other exchanges.'' \22\ According to the Exchange, its ORF is designed 
to ``generate revenues that, when combined with all of the Exchange's 
other regulatory fees, will be less than 75% of the Exchange's 
regulatory costs. . . .'' \23\
---------------------------------------------------------------------------

    \22\ See Notice, supra note 3, at 68695-96. Several other 
exchanges have a lower ORF rate than that proposed by the Exchange. 
See, e.g., Nasdaq ISE, available at https://listingcenter.nasdaq.com/rulebook/ise/rules/ISE%20Options%207 
($0.0013); Nasdaq GEMX, available at Rules [bond] Nasdaq GEMX 
($0.0012); CboeEDGX, available at Cboe EDGX Options Exchange Fee 
Schedule ($0.0001); and MIAX Emerald, available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_10122023_3.pdf ($0.0006).
    \23\ See Notice, supra note 3, at 68696.
---------------------------------------------------------------------------

    The Exchange also asserted that the ORF is equitably allocated and 
not unfairly discriminatory because ``it is charged to all Members on 
all their transactions that clear as customer at the OCC'' and is 
``directly based on the amount of customer options business they 
conduct.'' \24\ In addition, the Exchange stated that ``[r]egulating 
customer trading activity is much more labor intensive and requires 
greater expenditure of human and technical resources than regulating 
non-customer trading activity, which tends to be more automated and 
less labor-intensive.'' \25\ Further, the Exchange stated that it has 
``broad regulatory responsibilities with respect to a Members' 
activities, irrespective of where their transactions take place'' and 
notes that it ``will not be able to effectively surveil [its Members'] 
conduct without looking at and evaluating activity across all options 
markets.'' \26\ Consequently, the Exchange imposes the ORF on all 
customer-range transactions cleared by a Member, even if the 
transactions do not take place on the Exchange and regardless of 
whether the transaction was executed by a member.\27\
---------------------------------------------------------------------------

    \24\ Id.
    \25\ Id.
    \26\ Id. at 68693 and 68696.
    \27\ Id. The Exchange also states that its proposed collection 
method which is similar to that utilized by other options exchanges 
``was originally instituted for the benefit of clearing firms that 
desired to have the ORF be collected from the clearing firm that 
ultimately clears the transaction.'' Id. at 68696.
---------------------------------------------------------------------------

    Furthermore, the Exchange notes that implementing the proposed ORF 
with a sunset date of approximately one year after the operative date 
is reasonable because ``it will give the Exchange adequate time to 
collect and analyze pertinent data while ensuring the Exchange, as a 
new entrant into equity options trading, is able to adequately fund its 
regulatory program to the same extent as its competitors.'' \28\
---------------------------------------------------------------------------

    \28\ Id. at 68697.
---------------------------------------------------------------------------

    In temporarily suspending the Exchange's proposed rule change, the 
Commission intends to further consider whether the proposal to 
establish an ORF in the amount of $0.0015 is consistent with the 
statutory requirements applicable to a national securities exchange 
under the Act. In particular, the Commission will consider whether the 
proposed rule change satisfies the standards under the Act and the 
rules thereunder requiring, among other things, that an exchange's 
rules provide for the equitable allocation of reasonable fees among 
members, issuers, and other persons using its facilities; not permit 
unfair discrimination between customers, issuers, brokers or dealers; 
and do not

[[Page 83592]]

impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.\29\
---------------------------------------------------------------------------

    \29\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------

    Therefore, the Commission finds that it is necessary or appropriate 
in the public interest, for the protection of investors, and otherwise 
in furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule change.\30\
---------------------------------------------------------------------------

    \30\ For purposes of temporarily suspending the proposed rule 
change, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change

    In addition to temporarily suspending the proposal, the Commission 
also hereby institutes proceedings pursuant to sections 19(b)(3)(C) 
\31\ and 19(b)(2)(B) of the Act \32\ to determine whether the 
Exchange's proposed rule change should be approved or disapproved. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, the Commission seeks and encourages interested persons to 
provide additional comment on the proposed rule change to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule change.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \32\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to section 19(b)(2)(B) of the Act,\33\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
See id. The time for conclusion of the proceedings may be extended 
for up to 60 days if the Commission finds good cause for such 
extension and publishes its reasons for so finding, or if the 
exchange consents to the longer period. See id.
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how its proposed fee 
is consistent with section 6(b)(4) of the Act, which requires that the 
rules of a national securities exchange ``provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities'' \34\ 
(emphasis added);
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how its proposed fee 
is consistent with section 6(b)(5) of the Act, which requires, among 
other things, that the rules of a national securities exchange not be 
``designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers'' \35\ (emphasis added); and
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how its proposed fee 
is consistent with section 6(b)(8) of the Act, which requires that the 
rules of a national securities exchange ``not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of [the Act].'' \36\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    As noted above, the Exchange proposes to establish an ORF in the 
amount of $0.0015 per contract side ``based on historical industry 
volume, projected volumes on the Exchange, and projected Exchange 
regulatory costs.'' \37\ The Exchange also states that ``revenue 
generated from ORF, when combined with all of the Exchange's other 
regulatory fees and fines, will cover a material portion, but not all, 
of the Exchange's regulatory costs.\38\ However, those and other 
statements in support of its proposed establishment of an ORF are 
general in nature and lack sufficient detail and specificity.
---------------------------------------------------------------------------

    \37\ See Notice, supra note 3, at 68692.
    \38\ Id. at 68693.
---------------------------------------------------------------------------

    For example, the Exchange does not elaborate on the ``material 
portion'' of options regulatory expenses that it seeks to recover from 
the ORF and why the threshold it selected (i.e., that ORF will ``not 
exceed more than 75% of total annual regulatory costs'') correlates to 
the degree of regulatory responsibility and expenses borne by the 
Exchange as it relates to the regulation of customer options 
transactions.\39\ Further, the Exchange has not provided any 
quantifiable information to support its assertion that regulating 
customer trading activity is ``much more labor-intensive'' and 
therefore, more costly. The Exchange does not claim in its filing that 
its regulation of customer activity will consume 75% of total 
regulatory costs nor does it assert that customer activity will require 
a level of effort that will occupy 75% of the regulatory department's 
attention. Further, the Exchange does not sufficiently analyze how 
funding 75% of its total regulatory costs (including direct and 
indirect expenses) from ORF constitutes an equitable allocation of 
reasonable fees among members, and it does not provide sufficient 
detail to allow the Commission and commenters to consider those issues.
---------------------------------------------------------------------------

    \39\ See Notice, supra note 3, at 68693.
---------------------------------------------------------------------------

    Further, the Exchange has not provided specific or detailed 
information regarding the anticipated regulatory cost associated with 
regulating, monitoring, and surveilling on-exchange activity compared 
to activity that takes place on other exchanges (which exchanges assess 
their own ORF on those trades). In particular, the Exchange proposes to 
collect ORF on executions that do not occur on the Exchange. The 
proposed ORF rate is the same for on-exchange and off-exchange 
activity, so the proposal will result in the Exchange at least 
initially funding a very significant portion of its total regulatory 
costs from a fee charged on contracts that execute away from the 
Exchange. The Exchange does not provide a sufficiently detailed 
analysis or present specific facts to show the level of regulatory 
effort and regulatory costs it would expend on contracts that execute 
on other exchanges. Without more information in the filing on the 
Exchange's projected regulatory revenues, regulatory costs, and 
regulatory activities to supervise and regulate members, specifically, 
e.g., customer versus non-customer activity and on-exchange versus off-
exchange activity, the proposal lacks specific information that can 
speak to whether the proposed ORF is reasonable, equitably allocated, 
and not unfairly discriminatory, particularly given that the ORF is 
assessed only on transactions that clear in the ``customer'' range and 
regardless of the exchange on which the transaction occurs.
    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \40\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\41\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\42\
---------------------------------------------------------------------------

    \40\ 17 CFR 201.700(b)(3).
    \41\ See id.
    \42\ See id.
---------------------------------------------------------------------------

    As explained above, the Exchange's statements in support of the 
proposed rule change are general in nature and

[[Page 83593]]

lack detail and specificity. The Commission cannot unquestionably rely 
on an exchange's statements and representations.\43\ Instead, the 
Commission needs sufficient information to support independent findings 
that a proposal is consistent with the requirements of the Act.\44\ 
Here, such an analysis includes, among other things, whether the 
proposed ORF is an equitable allocation of reasonable dues, fees, and 
other changes among the Exchange's members, as well as whether the 
proposed ORF is equitable and not unfairly discriminatory.
---------------------------------------------------------------------------

    \43\ See Susquehanna Int'l Grp., LLP v. SEC, 866 F.3d 442, 447 
(August 8, 2017).
    \44\ See id.
---------------------------------------------------------------------------

    The Commission needs additional information from the Exchange to 
demonstrate how the proposal meets those and other applicable 
requirements of the Act, to assess whether the Exchange has established 
a sufficient nexus between the proposed ORF and the Exchange's 
regulation of customer trading activity both on and off exchange. While 
the Commission broadly solicits comment from all interested parties on 
the proposal, the Commission believes that the Exchange alone has 
access to much of the specific detail necessary to fully address these 
questions and concerns because these matters involve qualitative and 
quantitative information about the Exchange's operations. Specifically, 
among other things, the Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal 
contained in the Notice.\45\ In particular, the Commission seeks 
comment on the following aspects of the proposal and asks commenters to 
submit data where appropriate to support their views:
---------------------------------------------------------------------------

    \45\ See Notice, supra note 3.
---------------------------------------------------------------------------

    1. Information on the Exchange's Projected Regulatory Costs and 
Revenues. The Exchange states that its proposed ORF rate is reasonable 
based on historical industry volume, projected volumes on the Exchange, 
and projected Exchange regulatory costs. The Exchange notes that its 
regulatory costs would include direct regulatory expenses and certain 
indirect expenses for work ``allocated in support of the regulatory 
function.'' \46\ According to the Exchange, indirect regulatory 
expenses (including, among other things, human resources, legal, 
information technology, facilities and accounting, as well as certain 
shared expenses necessary to operate the Exchange and carry out its 
regulatory function) are anticipated to be approximately 24% of the 
Exchange's total regulatory costs for 2023 and 2024 and direct 
regulatory expenses are anticipated to be approximately 76% of the 
Exchange's total regulatory costs for 2023 and 2024.\47\ Do commenters 
believe the Exchange has provided adequate detail regarding these 
metrics? If not, what additional information should be provided to 
demonstrate how the proposal is consistent with the Act?
---------------------------------------------------------------------------

    \46\ See Notice, supra note 3, at 68693.
    \47\ Id.
---------------------------------------------------------------------------

    2. Information on the Exchange's Imposition of ORF on Customer 
Orders. The Exchange states that it will ensure that revenue generated 
from ORF not exceed more than 75% of total annual regulatory costs.\48\ 
Do commenters believe that the Exchange has sufficiently analyzed and 
justified its proposal to fund 75% of its total regulatory expenses 
from a fee imposed only on options transactions clearing in the 
customer-range, where those expenses include the regulation of 
transactions that clear in the non-customer-range (e.g., broker-dealer 
and market maker trades)? In addition, explaining that the proposed ORF 
would be charged to ``all Members on all their transactions that clear 
as customer at the OCC,'' the Exchange states that such methodology 
``ensures fairness by assessing fees to those Members that are directly 
based on the amount of customer options business they conduct.'' \49\ 
The Exchange further asserts that ``[r]egulating customer trading 
activity is much more labor intensive and requires greater expenditure 
of human and technical resources than regulating non-customer trading 
activity, which tends to be more automated and less labor-intensive.'' 
\50\ According to the Exchange, ``the costs associated with 
administering the customer component of the Exchange's overall 
regulatory program are materially higher than the costs associated with 
administering the non-customer component (e.g., Member proprietary 
transactions) of its regulatory program.'' \51\ Do commenters believe 
that the Exchange has provided sufficiently detailed quantitative and 
qualitative evidence in support of this aspect of its proposal? 
Specifically, examples of information that would be helpful to 
demonstrate how the assessment of ORF only on orders that clear in the 
customer-range correlates to the level of effort and costs the Exchange 
expends to regulate customer options transactions include: (a) the 
percentage of volume expected to clear in the customer-range both on 
and off the Exchange compared to the percentage of volume expected to 
clear in a range other than customer both on and off the Exchange; (b) 
the percentage of the Exchange's regulatory budget that would be 
attributable to the regulation of orders that are expected to clear in 
the customer-range compared to the percentage of the Exchange's 
regulatory budget that would be attributable to orders that are 
expected to clear in a range other than customer; (c) the anticipated 
percentage of the Exchange's regulatory level of effort that would be 
attributable to the regulation of orders that are expected to clear in 
the customer-range compared to the anticipated percentage of the 
Exchange's regulatory level effort that would be attributable to orders 
that are expected to clear in a range other than customer; and (d) the 
proportion of the Exchange's revenues, as reported in the most recent 
annual financials it submitted on Form1, that would be represented by 
expected ORF revenues if those revenues had been included in the most 
recent annual financials.
---------------------------------------------------------------------------

    \48\ See id.
    \49\ Id. at 68696.
    \50\ Id.
    \51\ Id.
---------------------------------------------------------------------------

    3. Information on the Exchange's Assessment of ORF on Away-Market 
Activity. The Exchange states that it has ``broad regulatory 
responsibilities with respect a Member's activities, irrespective of 
where their transactions take place. . . .'' \52\ The Exchange 
therefore believes that it is appropriate to impose the ORF even where 
the transaction does not take place on the Exchange.\53\ Do commenters 
believe that the Exchange has provided sufficiently detailed 
quantitative and qualitative evidence in support of how the assessment 
of ORF on away-market transactions correlates to the effort it will 
expend on regulating away-market transactions compared to the level of 
effort the Exchange will invest in regulating transactions on Exchange? 
Specifically, examples of information that would be helpful to assess 
the application of the ORF to executions that do not occur on the 
Exchange include: (a) the projected percentage of the Exchange's 
overall regulatory budget that is expected to be attributable to 
regulating away-market transactions compared to the projected 
percentage of the Exchange's overall regulatory budget that is expected 
to be attributable to regulating on-Exchange transactions; (b) the 
projected percentage of the Exchange's regulatory level of effort that 
is expected to be attributable to the regulation of away-market 
transactions compared to the projected percentage of

[[Page 83594]]

the Exchange's regulatory level of effort that is expected to be 
attributable to the regulation of orders that execute on the Exchange; 
(c) the anticipated percentage of ORF revenue that is expected to be 
derived from away-market transactions compared to the anticipated 
percentage of ORF revenue that is expected to be derived from 
executions on the Exchange; and (d) more detail on the regulatory 
activities the exchange expects to perform for trades that do not occur 
on the Exchange.
---------------------------------------------------------------------------

    \52\ See id. at 68694.
    \53\ See id.
---------------------------------------------------------------------------

    4. Information on the Exchange's Regulatory Program Concerning 
Clearing Brokers. The Exchange states that ORF is collected on 
``customer range'' options transactions cleared or ultimately cleared 
by an Exchange member regardless of the exchange on which the 
transaction occurs.\54\ The Exchange also will collect ORF from a non-
Member clearing broker where a member was the executing firm and a non-
Member was the ultimate clearing firm. Do commenters believe that the 
Exchange has provided sufficiently detailed quantitative and 
qualitative evidence in support of this aspect of its proposal? 
Specifically, examples of information that would be helpful to provide 
context for the collection of ORF from member and non-member clearing 
brokers and determine whether a sufficient nexus exists between the ORF 
and the Exchange's regulation of clearing activity, include: (a) the 
percentage of the Exchange's regulatory expenses and level of 
regulatory activity that is expected to pertain to clearance and 
settlement activity and the percentage this is expected to account for 
with respect to the Exchange's overall regulatory costs and regulatory 
activity, and if that differs depending on whether the ultimate 
clearing firm is an Exchange member or not and whether the contract 
executes on the Exchange or not; (b) the number of ``ultimate clearing 
firms'' that are Exchange members compared to the number of ``ultimate 
clearing firms'' that are non-Members from which ORF is expected to be 
collected on behalf of the Exchange; and (c) the percentage of ORF 
revenues that is expected to be collected from Member clearing firms 
compared to the percentage of ORF revenue that is expected to be 
collected from non-Member clearing firms.
---------------------------------------------------------------------------

    \54\ See id. at 68692.
---------------------------------------------------------------------------

    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposed fees are consistent with the Act, and 
specifically, with the requirements that exchange fees be reasonable, 
equitably allocated, and not unfairly discriminatory.\55\
---------------------------------------------------------------------------

    \55\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------

V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by December 21, 2023. 
Rebuttal comments should be submitted by January 4, 2024. Although 
there do not appear to be any issues relevant to approval or 
disapproval which would be facilitated by an oral presentation of 
views, data, and arguments, the Commission will consider, pursuant to 
Rule 19b-4, any request for an opportunity to make an oral 
presentation.\56\
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-MEMX-2023-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-MEMX-2023-25. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MEMX-2023-25 and should be 
submitted on or before December 21, 2023. Rebuttal comments should be 
submitted by January 4, 2024.

VI. Conclusion

    It is therefore ordered, pursuant to section 19(b)(3)(C) of the 
Act,\57\ that file number SR-MEMX-2023-25, be and hereby is, 
temporarily suspended. In addition, the Commission is instituting 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.
---------------------------------------------------------------------------

    \57\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\58\
---------------------------------------------------------------------------

    \58\ 17 CFR 200.30-3(a)(57) and (58).
---------------------------------------------------------------------------

Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26263 Filed 11-29-23; 8:45 am]
BILLING CODE 8011-01-P