[Federal Register Volume 89, Number 74 (Tuesday, April 16, 2024)]
[Notices]
[Pages 26969-26976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07965]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99934; File No. SR-MEMX-2024-12]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend the 
Exchange's Fee Schedule

April 10, 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 March 28, 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 and II 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 April 1, 2024. 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) modify the Liquidity Provision Tiers by modifying the 
required criteria under Liquidity Provision Tier 1 and modifying the 
required criteria under Liquidity Provision Tier 2; (ii) modify NBBO 
Setter Tier 1 by modifying the required criteria under such tier; (iii) 
modify the Tape B Volume Tier 1 by increasing the rebate provided and 
modifying the required criteria under such tier; (iv) modify the Cross 
Asset Tiers by adopting new Cross Asset Tiers 1 and 2 and re-numbering 
the existing Cross Asset Tier 1 to Cross Asset Tier 3; (v) modify the 
Displayed Liquidity Incentive (``DLI'') Additive Rebate Tier 1 by 
reducing the rebate provided and modifying the required criteria under 
such tier; and (vi) adopt a new Display Price-Sliding Tier, each as 
further described below.
    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 16% of the total market share of 
executed

[[Page 26970]]

volume of equities trading.\4\ 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 2.5% of the overall market 
share.\5\ 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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    \4\ Market share percentage calculated as of March 28, 2024. The 
Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \5\ Id.
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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.\6\ The Exchange also 
currently offers Liquidity Provision Tiers 1-5 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 
modifying the required criteria under Liquidity Provision Tier 2, as 
further described below.
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    \6\ 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: (1) an ADAV \7\ (excluding Retail Orders) that is 
equal to or greater than 0.45% of the TCV; or (2) a Step-Up ADAV \8\ 
(excluding Retail Orders) of the TCV from September 2023 that is equal 
to or greater than 0.05%, an ADV \9\ that is equal to or greater than 
0.50% of the TCV, and a Non-Displayed ADAV \10\ 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.\11\ The Fee Schedule indicates that 
criteria (2) of Liquidity Provision Tier 1 will expire no later than 
March 31, 2024. Now, given the expiration of criteria (2) of Liquidity 
Provision Tier 1, it is necessary to modify the Fee Schedule to delete 
this criteria (2) as well as the footnote under the Liquidity Provision 
Tiers pricing table that indicates its expiration, as both are no 
longer applicable and otherwise obsolete. As such, the Exchange now 
proposes to modify the required criteria under Liquidity Provision Tier 
1 such that a Member would 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) 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 change would keep criteria (1) 
intact, delete existing criteria (2) (based on a Step-Up ADAV from 
September 2023 threshold) and the corresponding footnote, and re-number 
existing criteria (3) as the new criteria (2). The Exchange is not 
proposing to change the rebate provided under such tier.
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    \7\ 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.
    \8\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means 
ADAV in the relevant baseline month subtracted from current ADAV.
    \9\ 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.
    \10\ 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).
    \11\ 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 $0.0032 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 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.\12\ 
The Fee Schedule indicates that criteria (2) of Liquidity Provision 
Tier 2 will expire no later than March 31, 2024. Now, given the 
expiration of criteria (2) of Liquidity Provision Tier 2, it is 
necessary to modify the Fee Schedule to delete this criteria (2) as 
well as the footnote under the Liquidity Provision Tiers pricing table 
that indicates its expiration, as both are no longer applicable and 
otherwise obsolete. As such, the Exchange now proposes to modify the 
required criteria under Liquidity Provision Tier 2 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) an ADAV that is equal to or 
greater than 0.35% of the TCV. Thus, such proposed change would keep 
the existing criteria (1) intact with no changes, delete existing 
criteria (2) (based on a Step-Up Displayed ADAV from September 2023 
threshold) and the corresponding footnote, and replace it with a new 
criteria (2) that consists of an ADAV threshold. The Exchange is not 
proposing to change the rebate provided under such tier.
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    \12\ 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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    The Exchange believes that the tiered pricing structure for 
executions of Added Displayed Volume under the Liquidity Provision 
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, 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

[[Page 26971]]

changes described above, the rebate for executions of Added Displayed 
Volume provided under each of the Liquidity Provision Tiers 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.
NBBO Setter Tier
    The Exchange currently offers NBBO Setter Tier 1 under which a 
Member may receive an additive rebate of $0.0002 per share for a 
qualifying Member's executions of Added Displayed Volume (other than 
Retail Orders) that establish the NBBO and have a Fee Code B \13\ (such 
orders, ``Setter Volume''), and an additive rebate of $0.0001 per share 
for executions of Added Displayed Volume (other than Retail Orders) 
that do not establish the NBBO (i.e., Fee Codes D and J) \14\ by 
achieving: (1) an ADAV with respect to orders with Fee Code B that is 
equal to or greater than 0.10% of the TCV; or (2) an ADAV with respect 
to orders with Fee Code B that is equal to or greater than 0.05% of the 
TCV and a Step-Up ADAV with respect to orders with a Fee Code B that is 
equal to or greater than 75% of the Member's December 2023 ADAV with 
respect to orders with a Fee Code B. Now, the Exchange proposes to 
modify the required criteria under NBBO Setter Tier 1 such that a 
Member would now qualify for such tier by achieving: (1) an ADAV with 
respect to orders with Fee Code B that is equal to or greater than 
0.10% of the TCV; or (2) an ADAV with respect to orders with Fee Code B 
that is equal to or greater than 0.05% of the TCV or 5,000,000 shares 
and a Step-Up ADAV with respect to orders with a Fee Code B that is 
equal to or greater than 75% of the Member's March 2024 ADAV with 
respect to orders with a Fee Code B. Thus, such proposed change keeps 
the first alternative criteria intact with no changes but modifies the 
second alternative criteria by adding an alternative 5,000,000 share 
ADAV threshold and referencing a more recent baseline month in the 
Step-Up portion of the criteria. Given the more recent baseline month, 
the Exchange also proposes that criteria (2) of NBBO Setter Tier 1 will 
expire no later than September 30, 2024. As such, the Exchange proposes 
to indicate this in the existing note under the NBBO Setter Tier 
pricing table on the Fee Schedule, by deleting the existing expiration 
of July 31, 2024, and replacing it with the new expiration date of 
September 30, 2024.
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    \13\ The Exchange notes that orders with Fee Code B include 
orders, other than Retail Orders, that establish the NBBO.
    \14\ 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. 
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.
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    The Exchange believes that the proposed modified alternative 
criteria provides an incremental incentive for Members to strive for 
higher ADAV on the Exchange to receive the additive rebate for 
qualifying executions of Added Displayed Volume under such tier, and 
thus, it is designed to encourage Members that do not currently qualify 
for such tier to increase their overall orders that add liquidity to 
the Exchange. The Exchange believes that the tier, as proposed, would 
further incentivize increased order flow to the Exchange, thereby 
contributing to a deeper and more liquid market to the benefit of all 
Members. The Exchange is not proposing to change the amount of the 
additive rebates provided under such tier.
Tape B Volume Tier
    The Exchange currently offers Tape B Volume Tier 1 under which 
qualifying Members may receive an additive rebate of $0.0001 per share 
for executions of Added Displayed Volume (excluding Retail Orders) in 
Tape B Securities (such orders, ``Tape B Volume'') by achieving: (1) a 
Step-Up Tape B ADAV \15\ 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 is 
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).\16\ 
Now, the Exchange proposes to increase the additive rebate provided for 
executions of Tape B Volume to $0.0002 per share, and to modify the 
required criteria such that a Member would now qualify for such tier by 
achieving a Tape B ADAV that is equal to or greater than 0.30% of the 
Tape B TCV (excluding Retail Orders). Accordingly, the new criteria 
eliminates the Step-Up Tape B ADAV requirement and increases the Tape B 
ADAV of the Tape B TCV requirement from 0.25% to 0.30%. In light of the 
removal of the Step-Up Tape B ADAV requirement, the Exchange also 
proposes to delete the language under the Tape B Volume Tier pricing 
table on the Fee Schedule that indicates Tape B Volume Tier 1 will 
expire no later than April 30, 2024.
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    \15\ As set forth in the Fee Schedule, ``Step-Up Tape B ADAV'' 
means 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.
    \16\ The pricing for the Tape B Volume Tier is referred to by 
the Exchange on the Fee Schedule under the 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.
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    The purpose of modifying the required criteria and increasing the 
additive rebate provided for executions of Tape B Volume is for 
business and competitive reasons, as the Exchange believes that such 
changes would incentivize Members to submit additional order flow in 
Tape B Securities, thereby promoting price discovery and market quality 
on the Exchange.
Cross Asset Tiers
    The Exchange currently offers Cross Asset Tier 1 under which a 
Member may receive an enhanced rebate for executions of Added Displayed 
Volume in securities priced at or above $1.00 per share by achieving 
the corresponding required volume criteria for such tier on the 
Exchange's equity options platform, MEMX Options. The Exchange now 
proposes to renumber the existing Cross Asset Tier 1 as Cross Asset 
Tier 3, and adopt new Cross Asset Tiers 1 and 2, each as described 
below.
    First, the Exchange proposes to adopt Cross Asset Tier 1 under 
which the Exchange would provide an enhanced rebate of $0.0033 per 
share for executions of Added Displayed Volume for Members that qualify 
for such tier by achieving an Options ADAV \17\ in the Market Maker 
\18\ capacity that is equal to or greater than 250,000 contracts on 
MEMX Options and an ADAV on MEMX Equities that is equal to or greater 
than 0.30% of the TCV. The Exchange proposes to provide Members that 
qualify for Cross Asset 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

[[Page 26972]]

same rebate that is applicable to the majority of executions on the 
Exchange for all Members (i.e., including those that do not qualify for 
any tier).
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    \17\ As set forth on the Fee Schedule, a Member's ``Options 
ADAV'' for purposes of equities pricing means the average daily 
added volume calculated as a number of contracts added on MEMX 
Options per day by the Member, which is calculated on a monthly 
basis.
    \18\ As set forth on the MEMX Options Fee Schedule, ``Market 
Maker'' applies to any order for the account of a registered Market 
Maker. ``Market Maker'' shall have the meaning set forth in Rule 
16.1 of the MEMX Rulebook.
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    The Exchange further proposes to adopt Cross Asset Tier 2 under 
which the Exchange would provide an enhanced rebate of $0.0027 per 
share for executions of Added Displayed Volume for Members that qualify 
for such tier by achieving an Options ADAV in the Market Maker capacity 
that is equal to or greater than 150,000 contracts on MEMX Options. The 
Exchange proposes to provide Members that qualify for Cross Asset Tier 
2 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 applicable to the majority of executions on the Exchange for all 
Members (i.e., including those that do not qualify for any tier).
    Lastly, given the adoption of the aforementioned tiers, the 
Exchange proposes to renumber the current Cross Asset Tier 1 as Cross 
Asset Tier 3. The Exchange is not proposing to modify the rebate 
provided nor the criteria required under this re-numbered tier, 
however, the adoption of the new Cross Asset Tiers 1 and 2 as well as 
the re-numbering requires certain modifications to the notes below the 
Cross Asset Tier pricing table on the Fee Schedule. Specifically, the 
Exchange is proposing to add a note stating that the definition of 
Market Maker is set forth in the MEMX Options Fee Schedule, to renumber 
the existing notes, and to replace prior references in the notes to 
Cross Asset Tier 1 with Cross Asset Tier 3.
    The proposed new Cross Asset Tier 1 and Cross Asset Tier 2 are 
designed to encourage Members to maintain or increase their order flow 
to the MEMX Options Exchange in the Market Maker capacity in order to 
qualify for the proposed enhanced rebate for executions of Added 
Displayed Volume. The Exchange believes that the addition of the new 
Cross Asset Tier 1 and Cross Asset Tier 2 would encourage the 
submission of additional order flow in the Market Maker capacity on 
MEMX Options, thereby contributing to a deeper and more robust and 
well-balanced market ecosystem on the Exchange to the benefit of all 
Members and market participants. As a result of achieving a higher 
rebate for activity on MEMX Options, and given the equities component 
of Cross Asset Tier 1, the Exchange further believes that the proposed 
tiers will encourage greater participation on MEMX Equities by 
qualifying participants, thereby contributing to a deeper and more 
robust and well-balanced market ecosystem on the Exchange to the 
benefit of all Members and market participants.
DLI Additive Rebate
    The Exchange currently offers the DLI Additive Rebate Tier 1 under 
which a Member may receive an additive rebate for a qualifying Member's 
executions of Added Displayed Volume (other than Retail Orders) 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.\19\ The Exchange now proposes to modify the DLI 
Additive Rebate Tier 1 by decreasing the additive rebate provided and 
updating the required applicable criteria under Liquidity Provision 
Tiers 1 and 2 in accordance with this proposal, as further described 
below.
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    \19\ This pricing is referred to by the Exchange on the Fee 
Schedule under the existing description ``DLI Additive Rebate'' with 
a Fee Code of ``q'' to be appended to the otherwise applicable Fee 
Code for qualifying executions.
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    As noted above, under DLI Additive Rebate Tier 1, the Exchange 
currently provides an additive rebate of $0.0001 per share for 
executions of Added Displayed Volume that first meet the criteria under 
DLI Tier 1, which include achieving: (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,\20\ as well as the applicable criteria under Liquidity Provision 
Tier 1 or Liquidity Provision Tier 2. Under Liquidity Provision Tier 1, 
the Exchange is now proposing (as described above) Members will 
received the enhanced rebate by achieving: (1) an ADAV (excluding 
Retail Orders) that is equal to or greater than 0.45% of the TCV; or 
(2) 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, the Exchange proposes to modify the criteria for the DLI Additive 
Rebate to correspond to the modifications to Liquidity Provision Tier 1 
criteria described above. Under Liquidity Provision Tier 2, the 
Exchange is now proposing (as described above) that Members will 
receive the enhanced rebate by achieving: (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) an ADAV that is 
greater than or equal to 0.35% of the TCV. Thus, the Exchange proposes 
to modify the criteria for the DLI Additive Rebate to correspond to the 
modifications to Liquidity Provision Tier 2 criteria described above. 
Again, the Exchange notes that Members qualify for the DLI Additive 
rebate by achieving both the criteria under DLI Tier 1 and either 
Liquidity Provision Tier 1 or Liquidity Provision Tier 2.
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    \20\ The enhanced rebate provided under DLI Tier 1 is $0.0031 
per share for executions of Added Displayed Volume.
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    Additionally, the Exchange proposes to reduce the additive rebate 
under the DLI Additive Rebate Tier 1 to $0.00005 per share. Other than 
the criteria changes noted above associated with the Exchange's 
proposed changes to the required criteria under Liquidity Provision 
Tiers 1 and 2, the Exchange does not propose to make any additional 
changes to the criteria required under the DLI Additive Rebate Tier 1. 
The purpose of reducing the additive rebate under the DLI Additive 
Rebate Tier 1, which the Exchange believes represents a modest 
reduction, is for business and competitive reasons, as the Exchange 
believes that such reduction would decrease the Exchange's expenditures 
with respect to its transaction pricing in a manner that is still 
consistent with the Exchange's philosophy of encouraging added 
displayed liquidity as well as consistently quoting at the NBBO on the 
Exchange.\21\
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    \21\ In light of the newly proposed Display-Price Sliding Tier 
set forth below, the Exchange also proposes to include Fee Code 
``I'' as a possible fee code to which the DLI additive rebate may 
apply in the note under the DLI Additive Rebate pricing table in the 
Fee Schedule.
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Display-Price Sliding Tier
    Currently, the Exchange provides a base rebate of $0.0008 per share 
for executions of orders subject to Display-Price Sliding that add 
liquidity to the Exchange and receive price improvement over the 
order's ranked price when executed (such orders, ``Added Price-Improved 
Volume'') in securities priced at or above $1.00 per share.\22\ 
Further, such orders are subject to the Exchange's Non-Display Add 
Tiers such that a Member that qualifies for a Non-Display Add Tier 
would receive the rebates provided under such tier that are applicable 
to executions of orders that add non-displayed liquidity to the 
Exchange with respect to its

[[Page 26973]]

executions of Added Price-Improved Volume.\23\
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    \22\ The pricing for executions of Added Price-Improved Volume 
is referred to by the Exchange on the Fee Schedule under the 
existing description ``Added volume, order subject to Display-Price 
Sliding that receives price improvement when executed'' with a Fee 
Code of ``P'' to be provided by the Exchange on the monthly invoices 
provided to Members.
    \23\ Executions of Added Price-Improved Volume for Members that 
qualify for the Non-Display Add Tiers receive a Fee Code of ``P1'', 
``P2'', ``P3'', or ``P4'', as applicable, for such executions on the 
monthly invoices provided to Members.
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    As background regarding the mechanics of Added Price-Improved 
Volume, the Exchange notes that pursuant to the Exchange's Display-
Price Sliding functionality, an order that would lock or cross a 
protected quotation is ranked on the Exchange's order book at the 
locking price and displayed at one minimum price variation less 
aggressive than the locking price. For bids, this means that a price 
slid order is displayed at one minimum price variation less than the 
current national best offer, and for offers, this means that a price 
slid order is displayed at one minimum price variation more than the 
current national best bid. Additionally, Exchange Rule 11.10(a)(4)(D) 
allows an order subject to the Display-Price Sliding process that is 
not executable at its most aggressive price to be executed at one-half 
minimum price variation less aggressive than the price at which it is 
ranked. Specifically, in the event an order submitted to the Exchange 
on the side opposite such a price slid order is a market order or a 
limit order priced more aggressively than an order displayed on the 
Exchange's order book (i.e., the incoming order is priced more 
aggressive than the locking price), the Exchange will execute the 
incoming order at, in the case of an incoming sell order, one-half 
minimum price variation less than the price of the displayed order, 
and, in the case of an incoming buy order, at one-half minimum price 
variation more than the price of the displayed order.
    Based on this functionality, orders executed as described above 
will receive price improvement over the price at which such orders are 
ranked. Because price slid orders subject to the order handling process 
described above will receive price improvement, the Exchange provides 
the base rebate noted above of $0.0008 per share.
    Now, the Exchange proposes to adopt a volume-based tier, referred 
to by the Exchange as the Display-Price Sliding Tier, under which the 
Exchange will provide an enhanced rebate for executions of Added Price-
Improved Volume for qualifying Members who meet a certain specified 
Added Price-Improved Volume threshold on the Exchange, as further 
described below.
    Specifically, under Display-Price Sliding Tier 1, the Exchange is 
proposing that if a Member achieves an ADAV with respect to orders 
subject to Display-Price Sliding that receive price improvement when 
executed (i.e. Added Price-Improved Volume) (excluding Retail Orders) 
that is equal to or greater than 5,000,000 shares, the Exchange will 
provide a rebate for those Added Price-Improved Volume executions 
equaling the highest possible rebate otherwise achieved for that Member 
for its Added Displayed Volume during that month. In order to ascertain 
the applicable rebate, at the end of each month, if a Member's Added 
Price-Improved Volume ADAV equals or exceeds 5,000,000 shares, the 
applicable executions (which are currently assigned a Fee Code of 
``P'') will be assigned the Fee Code ``I'', and the Exchange will 
provide that Member's highest Added Displayed Volume \24\ rebate for 
all of its transactions marked ``I'' during that month, plus any 
otherwise achieved additive rebates under the Tape B Volume Tier and 
DLI Additive Rebate Tier.\25\ As an example, if Member A meets the 
criteria under the Display-Price Sliding Tier 1 for its Added Price-
Improved Volume, and that Member also met the required criteria during 
that month under Liquidity Provision Tier 1, as well as the required 
criteria under the Tape B Volume Tier, the Exchange would provide a 
total enhanced rebate of $0.0035 per share (i.e. the $0.0033 rebate 
under Liquidity Provision Tier 1 plus the proposed $0.0002 additive 
rebate under the Tape B Volume Tier) for its total Added Price-Improved 
Volume executed during that month. In this same example, if Member A 
also achieved the required criteria under Cross Asset Tier 1 (which 
provides an enhanced rebate of $0.00026 per share), it would still 
receive $0.0035 per share for its Added-Price Improved Volume given 
that the under the proposed Display-Price Sliding Tier, the highest 
possible rebate otherwise achieved for the Member's Added Displayed 
Volume is awarded.
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    \24\ Specifically, the possible rebates are those that the 
Exchange is proposing to identify in the Transaction Fees table on 
the Fee Schedule with the Fee Code ``I'' and include the base rebate 
for Added Displayed Volume, as well as the enhanced rebates under 
the Liquidity Provision Tiers, DLI Tiers, and Cross Asset Tiers.
    \25\ Given that the additive rebate under the NBBO Setter Tier 
is only applied towards executions of Added Displayed Volume with 
the Fee Codes B, D or J, the Exchange is not proposing that any 
Added Price-Improved Volume be awarded the NBBO Setter Tier Additive 
Rebate.
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    Along those same lines, as noted on the Fee Schedule, to the extent 
a Member qualifies or multiple fees/rebates with respect to a 
particular transaction, the lowest fee/highest rebate shall apply. 
Accordingly, in the event that the rebate a Member would be awarded for 
its Added-Price Improved Volume by meeting the criteria under the Non-
Display Add Tiers exceeds the rebate it would be awarded by also 
meeting the criteria under the Display-Price Sliding Tier, the Exchange 
proposes that it will continue to mark those executions ``P'' and award 
the rebate earned under the Non-Display Add Tiers, if applicable.
    The Exchange proposes to provide Members that qualify for Display-
Price Sliding 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 applicable to the majority of executions on the 
Exchange for all Members (i.e., including those that do not qualify for 
any tier).
    The Exchange believes that the proposed Display-Price Sliding Tier 
provides an incremental incentive for Members to maintain or strive for 
higher ADAV on the Exchange in Added Price-Improved Volume in order to 
receive the enhanced rebate provided under the tier. The Exchange 
believes that this resulting additional displayed, liquidity-adding 
volume, would contribute to a more robust and well-balanced market 
ecosystem on the Exchange to the benefit of all Members and market 
participants and, in turn, enhance the attractiveness of the Exchange 
as a trading venue.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\26\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\27\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its Members and other persons using its facilities 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \26\ 15 U.S.C. 78f.
    \27\ 15 U.S.C. 78f(b)(4) and (5).
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    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

[[Page 26974]]

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.'' \28\
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    \28\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005).
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    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, liquidity-adding, aggressively priced orders 
to the Exchange, as well as to the Exchange's equity options platform, 
MEMX Options, which the Exchange believes would promote price discovery 
and enhance liquidity and market quality on the Exchange and on MEMX 
Options to the benefit of all Members and market participants.
    The Exchange notes that volume-based incentives and discounts 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 the Liquidity Provision 
Tiers 1 and 2 and NBBO Setter Tier 1, each as modified by the proposed 
changes to the required criteria under such tier, the Tape B Volume 
Tier as modified by the proposed changes to the additive rebate and 
required criteria under such tier, the proposed new Cross Asset Tiers 1 
and 2, the DLI Additive Rebate as modified by the proposed changes to 
the additive rebate and required criteria under such tier, and the new 
proposed Display-Price Sliding Tier 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 (and in the case of the Cross Asset Tiers, 
MEMX Options), 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, 
liquidity-adding, and/or NBBO-setting orders to the Exchange in order 
to qualify for an enhanced rebate for executions of Added Displayed 
Volume or Added Price-Improved Volume, as applicable, thereby 
contributing to a deeper, more liquid 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 the enhanced rebate for executions of Added 
Displayed Volume under the proposed modified Liquidity Provision Tiers 
1 and 2 and the proposed new Cross Asset Tiers 1 and 2, the additive 
rebates for executions of Added Displayed Volume under the proposed 
modified NBBO Setter Tier 1, Tape B Volume Tier 1, and DLI Additive 
Rebate Tier 1, as well as the enhanced rebate for executions of Added 
Price-Improved Volume under the new proposed Display-Price Sliding 
Tier, 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. In addition, the Exchange believes that the proposed 
Display-Price Sliding Tier, which will award the highest Added 
Displayed Volume rebate possible to qualifying Members, is reasonable 
and equitable because orders subject to Display-Price Sliding are, in 
fact, displayed on the Exchange and thus contribute to price discovery 
and other benefits to the Exchange and the market generally, but also 
can be executed at prices not displayed on the Exchange, as described 
above. The Exchange also believes it is reasonable, equitable and not 
unfairly discriminatory to provide Members that qualify for the newly 
proposed Cross Asset Tiers 1 and 2 and Display-Price Sliding Tier with 
the same rebate for executions of orders in securities priced below 
$1.00 per share that add displayed liquidity to the Exchange as is 
applicable to the majority of executions on the Exchange for all 
Members (i.e. including those that do not qualify for any tier).
    As it relates to the proposed Cross Asset Tiers 1 and 2, to the 
extent a Member participates on the Exchange but not on MEMX Options, 
the Exchange believes that the proposal is still reasonable, equitably 
allocated and non-discriminatory with respect to such Member based on 
the overall benefit to the Exchange resulting from the success of MEMX 
Options. Particularly, the Exchange believes such success allows the 
Exchange to continue to provide and potentially expand its existing 
incentive programs to the benefit of all participants on the Exchange, 
whether they participate on MEMX Options or not. The proposed pricing 
program is also fair and equitable in that membership on MEMX Options 
is available to all market participants which would provide them with 
access to the benefits on MEMX Options provided by the proposal, even 
where a member of MEMX Options is not necessarily eligible for the 
proposed enhanced rebates on the Exchange. Lastly, the Exchange 
believes that the proposal is still reasonable, equitably allocated and 
non-discriminatory because as a result of achieving a higher rebate for 
activity on MEMX Options, and given the equities component of Cross 
Asset Tier 1, the Exchange further believes that the newly proposed 
Cross Asset Tiers 1 and 2 will encourage greater participation on MEMX 
Equities by qualifying participants, thereby contributing to a deeper 
and more robust and well-balanced market ecosystem on the Exchange to 
the benefit of all Members and market participants.
    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 \29\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities and is not designed to unfairly 
discriminate between customers, issuers, brokers, or dealers. As 
described more fully below in the Exchange's statement regarding the 
burden on competition, the Exchange believes that its transaction 
pricing is subject to significant competitive forces, and that the 
proposed fees and rebates described herein are appropriate to address 
such forces.
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    \29\ 15 U.S.C. 78f(b)(4) and (5).

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[[Page 26975]]

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, including displayed, liquidity-adding, and/or 
aggressively priced orders to the Exchange, and MEMX Options, 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.'' \30\
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    \30\ See supra note 28.
---------------------------------------------------------------------------

Intramarket Competition
    As discussed above, the Exchange believes that the proposal would 
incentivize Members to submit additional order flow, including 
displayed, liquidity-adding and/or NBBO setting orders to both the 
Exchange and MEMX Options, 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 opportunity to qualify for the proposed 
modified Liquidity Provision Tiers 1 and 2, the newly proposed Cross 
Asset Tiers 1 and 2, and newly proposed Display-Price Sliding Tier, and 
thus receive the proposed enhanced rebate for executions of Added 
Displayed Volume and/or Added Price-Improved Volume under such tiers, 
would be available to all Members that meet the associated volume 
requirements in any month. Similarly, the opportunity to qualify for 
the proposed modified criteria under the NBBO Setter Tier, the proposed 
modified rebate and criteria under the Tape B Volume Tier, and the 
proposed modified rebate and criteria under the DLI Additive Rebate 
Tier 1, and thus receive the additive rebate for executions of Added 
Displayed Volume, would continue to be available to all Members that 
meet the associated volume requirements in any month. 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 16% of the total market share of 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 Added Displayed 
Volume and Added Price-Improved 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.'' \31\ 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'. . .''.\32\ 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.
---------------------------------------------------------------------------

    \31\ Id.
    \32\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section

[[Page 26976]]

19(b)(3)(A) \33\ of the Act and subparagraph (f)(2) of Rule 19b-4 \34\ 
thereunder, because it establishes a due, fee, or other charge imposed 
by the Exchange.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78s(b)(3)(A).
    \34\ 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 under 
Section 19(b)(2)(B) \35\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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

     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-2024-12 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-2024-12. 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-2024-12 and should be 
submitted on or before May 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07965 Filed 4-15-24; 8:45 am]
BILLING CODE 8011-01-P