[Federal Register Volume 89, Number 97 (Friday, May 17, 2024)]
[Notices]
[Pages 43494-43499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10821]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100112; File No. SR-MEMX-2024-16]


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

May 13, 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 April 30, 2024, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    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 May 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: (1) increase the maximum combined rebate per share 
provided by the Exchange; (2) modify the Liquidity Provision Tiers by 
modifying the required criteria under both Liquidity Provision Tiers 1 
and 2; (3) modify Liquidity Removal Tier 1 by modifying the required 
criteria under such tier; (4) modify Non-Display Add Tier 1 by 
modifying the required criteria under such tier; (5) modify NBBO Setter 
Tier 1 by modifying the required criteria under such tier; (6) modify 
Cross Asset Tier 2 by modifying the required criteria under such tier; 
and (7) modify the DLI Additive Tier by modifying the required criteria 
under such tier to correspond with the proposed changes to Liquidity 
Provision Tiers 1 and 2, 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 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 2.4% 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 April 30, 2024. The 
Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \5\ Id.
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Maximum Combined Rebate per Share
    The Exchange offers various volume-based tiers which provide 
qualifying Members with enhanced or additive rebates (which apply in 
addition to the otherwise applicable rebate) with respect to qualifying 
executions where certain volume criteria and thresholds are met. The 
Exchange caps the maximum combined rebate which a Member can achieve 
when such Member achieves one or more additive rebates. Currently, the 
Exchange provides a maximum combined rebate of $0.0036 per share. Now, 
the Exchange proposes to increase the maximum combined rebate per share 
to $0.0037. Specifically, the Exchange will modify the final bullet in 
the ``Notes'' section of its Fee Schedule to change the

[[Page 43495]]

maximum combined rebate per share from $0.0036 to $0.0037.
    The Exchange believes that increasing the maximum combined rebate 
per share will encourage market participants to strive to achieve the 
criteria under one or more additive rebate tiers by raising the rebate 
cap applicable to such tiers. The Exchange offers three additive 
rebates, namely, the NBBO Setter Tier (further explained below), the 
Tape B Volume Tier (which provides an additive rebate for executions of 
Added Displayed Volume \6\ excluding Retail Orders in securities priced 
over $1.00 per share), and the DLI Additive Rebate (which provides an 
additive rebate for qualifying Members' 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 Additive 
Rebate Tier 1). The Exchange believes that the increase in the maximum 
combined rebate provides an incremental incentive for Members to strive 
for higher volume thresholds to receive additional enhanced rebates 
which otherwise would have been capped at a lower rebate per share 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 maximum combined rebate, 
as modified by the proposed changes described above, reflects 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.
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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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Liquidity Provision Tiers
    The Exchange currently provides a base rebate of $0.0015 per share 
for executions of Added Displayed Volume in securities priced at or 
above $1.00 per share. 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.
    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 in securities priced at or above 
$1.00 per share 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; \8\ or (2) an ADAV that is equal to or greater 
than 0.30% of the TCV and a Non-Displayed ADAV \9\ that is equal to or 
greater than 7,000,000 shares.\10\ 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 6,000,000 shares. 
Thus, such proposed change would keep criteria (1) intact and decrease 
the Non-Displayed ADAV requirement in criteria (2) from 7,000,000 
shares to 6,000,000 shares. 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, ``TCV'' means total 
consolidated volume calculated as the volume reported by all 
exchanges and trade reporting facilities to a consolidated 
transaction reporting plan for the month for which the fees apply.
    \9\ 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).
    \10\ 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 in securities priced at or above $1.00 per share 
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) an ADAV that 
is equal to or greater than 0.35% of the TCV.\11\ Now, the Exchange 
proposes to modify the required criteria under Liquidity Provision Tier 
2 such that Members qualify for such tier by achieving (1) an ADAV that 
is equal to or greater than 0.20% of the TCV and (2) an ADV \12\ that 
is equal to or greater than 0.35% of the TCV. Thus, such proposed 
change would replace the existing criteria for Liquidity Provision Tier 
2 with new criteria. The Exchange is not proposing to change the rebate 
provided under such tier.
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    \11\ 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.
    \12\ As set forth on the Fee Schedule, ``ADV'' means average 
daily volume calculated as the number of shares added or removed, 
combined, per day, which is calculated on a monthly basis.
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    The Exchange believes that the tiered pricing structure for 
executions of Added Displayed Volume under the proposed modified 
Liquidity Provision Tiers 1 and 2 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. Specifically, the Exchange believes 
that, after giving effect to the proposed changes described above, the 
rebate for executions of Added Displayed Volume provided under each of 
the Liquidity Provision Tiers 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.
Liquidity Removal Tier 1
    The Exchange currently charges a standard fee of $0.0030 per share 
for executions of orders in securities priced at or above $1.00 per 
share that remove liquidity from the Exchange (such orders, ``Removed 
Volume''). The Exchange also currently offers Liquidity Removal Tiers 
under which qualifying Members are charged a discounted fee by 
achieving the corresponding required volume criteria for each such 
tier. The Exchange now proposes to modify Liquidity Removal Tier 1 by 
changing the required criteria under such tier. Currently, a Member 
qualifies for Liquidity Removal Tier 1 by achieving one of the 
following two alternative criteria: (1) an ADV that is equal to or 
greater than 0.60% of the TCV; or (2) a

[[Page 43496]]

Remove ADV \13\ that is equal to or greater than 0.30% of the TCV.\14\ 
Now, the Exchange proposes to modify Liquidity Removal Tier 1 such that 
a Member qualifies for such tier by achieving (1) an ADV that is equal 
to or greater than 0.70% of the TCV; or (2) a Remove ADV that is equal 
to or greater than 0.35% of the TCV. Specifically, the Exchange is 
changing the ADV percentage in criteria (1) to 0.70% and changing the 
Remove ADV percentage in criteria (2) to 0.35%. The Exchange is not 
proposing to change the rebate provided under such tier.
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    \13\ As set forth on the Fee Schedule, ``Remove ADV'' means ADV 
with respect to orders that remove liquidity.
    \14\ The pricing for Liquidity Removal Tier 1 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Removed volume from MEMX Book, Liquidity Removal Tier 1'' with a 
Fee Code of ``R1'' to be provided by the Exchange on the monthly 
invoices provided to Members. The Exchange notes that because the 
determination of whether a Member qualifies for a certain pricing 
tier for a particular month will not be made until after the month-
end, the Exchange provides the Fee Codes otherwise applicable to 
such transactions on the execution reports provided to Members 
during the month and only designates the Fee Codes applicable to the 
achieved pricing tier on the monthly invoices, which are provided 
after such determination has been made, as the Exchange does for its 
tier-based pricing today.
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    The proposed changes to the Liquidity Removal Tiers are designed to 
encourage Members to maintain or increase their order flow, including 
in the form of orders that remove liquidity, to the Exchange in order 
to qualify for the proposed discounted fee for executions of Removed 
Volume. While the Exchange's overall pricing philosophy generally 
encourages adding liquidity over removing liquidity, the Exchange 
believes that providing alternative criteria that are based on 
different types of volume that Members may choose to achieve, such as 
the proposed new criteria which includes a Remove ADV threshold, 
contributes to a more robust and well-balanced market ecosystem on the 
Exchange to the benefit of all Members.
Non-Display Add Tier 1
    The Exchange currently offers Non-Display Add Tiers 1-4 under which 
a Member may receive an enhanced rebate for executions of Added Non-
Displayed Volume in securities priced at or above $1.00 per share by 
achieving the corresponding required volume criteria for each such 
tier. The Exchange now proposes to modify the Non-Display Add Tiers by 
changing the criteria under Non-Display Add Tier 1. Currently, under 
Non-Display Add Tier 1, the Exchange provides an enhanced rebate of 
$0.0028 per share for executions of Added Non-Displayed Volume in 
securities priced at or above $1.00 per share for Members that qualify 
for such tier by achieving a Non-Displayed ADAV that is equal to or 
greater than 8,000,000 shares.\15\ Now, the Exchange proposes to 
provide the same rebate for executions of Added Non-Displayed Volume in 
securities priced at or above $1.00 per share for Members that qualify 
for such tier by achieving a Non-Displayed ADAV that is equal to or 
greater than 6,000,000 shares. The Exchange is not proposing to change 
the rebate provided under such tier.
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    \15\ The pricing for Non-Display Add Tier 1 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Added non-displayed volume, Non-Display Add Tier 1'' with a Fee 
Code of ``H1'', ``M1'' or ``P1'', as applicable, to be provided by 
the Exchange on the monthly invoices provided to Members.
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    The purpose of lowering the Non-Displayed ADAV requirement to 
achieve Non-Display Add Tier 1 is to facilitate Members' ability to 
qualify for the rebate for executions of Added Non-Displayed Volume. 
The Exchange believes that more Members will be able to qualify for the 
rebate at the lower Non-Displayed ADAV share requirement, which the 
Exchange believes may encourage Members to maintain or increase their 
order flow. The Exchange believes that this will contribute to a deeper 
and more robust and well-balanced market ecosystem to the benefit of 
all Members and market participants. The Exchange believes that the 
Non-Display Add Tiers, as modified by the proposed changes described 
above, reflect a reasonable and competitive pricing structure that is 
right-sized and consistent with the Exchange's overall pricing 
philosophy of encouraging added and/or displayed liquidity. 
Specifically, the Exchange believes that, after giving effect to the 
proposed changes described above, the rebate for executions of Added 
Non-Displayed Volume provided under each of the Non-Display Add Tiers 
is 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) in securities priced at or above $1.00 per share that 
establish the NBBO and have a Fee Code B \16\ (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) \17\ 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. 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 
5,000,000 shares; or (2) an ADAV (excluding Retail Orders) that is 
equal to or greater than 0.30% of the TCV. The Exchange will also 
delete the reference in the footnote to the NBBO Setter Tier portion of 
the fee schedule which references the expiration of existing criteria 
(2) no later than September 30, 2024; since existing criteria (2) of 
the NBBO Setter Tier is being fully deleted and replaced with a new 
criteria (2), this footnote is no longer relevant. The Exchange is not 
proposing to change the amount of the additive rebates provided under 
the NBBO Setter Tier 1.
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    \16\ The Exchange notes that orders with Fee Code B include 
orders, other than Retail Orders, that establish the NBBO.
    \17\ 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 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 also believes that the criteria changes 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. The

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Exchange believes that the proposed modified criteria would further 
incentivize increased order flow to the Exchange, thereby contributing 
to a deeper and more liquid market to the benefit of all Members.
Cross Asset Tiers
    The Exchange currently offers Cross Asset Tiers 1, 2, and 3 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 change the required criteria by which a Member may qualify 
for Cross Asset Tier 2, as described below.
    Currently the Exchange provides an enhanced rebate of $0.0027 per 
share for executions of Added Displayed Volume for Members that qualify 
for such tier by achieving an Options ADAV \18\ in the Market Maker 
\19\ capacity that is equal to or greater than 150,000 contracts on 
MEMX Options. Now, the Exchange proposes to modify the required 
criteria under Cross Asset Tier 2 such that such that a Member would 
qualify for such tier by achieving an Options ADAV in the Market Maker 
capacity that is equal to or greater than 125,000 contracts on MEMX 
Options.
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    \18\ 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.
    \19\ 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 proposed new criteria for Cross Asset Tier 2 is designed to 
facilitate additional Members to meet the Options ADAV requirements for 
such tier. The Exchange believes that the lowered requirements to meet 
the tier will incentivize Members to maintain or increase their order 
flow to the MEMX Options Exchange in the Market Maker capacity. The 
Exchange also believes that the new criteria will encourage greater 
participation on MEMX Equities by making it easier for Members to 
qualify for Cross Asset Tier 2 via their Options ADAV, 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.
Displayed Liquidity Initiative (``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) in 
securities priced at or above $1.00 per share 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.\20\ The Exchange now proposes to modify the DLI Additive Rebate Tier 
1 by updating the required applicable criteria under Liquidity 
Provision Tiers 1 and 2 in accordance with this proposal. The purpose 
of these changes is to update the criteria to match the proposed 
changes to the applicable criteria under Liquidity Provision Tiers 1 
and 2 which have been described above.
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    \20\ 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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    Currently, under DLI Additive Rebate Tier 1, the Exchange provides 
an additive rebate of $0.00005 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,\21\ 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 6,000,000 shares. Thus, now, 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 equal to or greater than 0.20% 
of the TCV and (2) an ADV that is equal to or greater than 0.35% of the 
TCV. Thus, now, 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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    \21\ The enhanced rebate provided under DLI Tier 1 is $0.0031 
per share for executions of Added Displayed Volume.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\22\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\23\ 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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    \22\ 15 U.S.C. 78f.
    \23\ 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 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.'' \24\
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    \24\ 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

[[Page 43498]]

direct additional order flow 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 raising the maximum 
combined rebate is reasonable, equitable, and not unfairly 
discriminatory as all Members are equally eligible to achieve rebates 
up to the maximum combined rebate on the Exchange. The Exchange 
believes that increasing the maximum rebate which Members can achieve 
will incentivize Members to maintain or increase their order flow to 
the Exchange, in order to qualify for multiple additive rebates offered 
by the Exchange, thus increasing liquidity and contributing to a deeper 
and more liquid market ecosystem on the Exchange. The Exchange believes 
that the Liquidity Provision Tiers 1 and 2, the Liquidity Removal Tier, 
the Non-Display Add Tier 1, the NBBO Setter Tier 1, Cross-Asset Tier 2, 
and DLI Additive Rebate, each as modified by the proposed changes to 
the required criteria under each such tier as described above, are 
reasonable, equitable and not unfairly discriminatory for these same 
reasons. 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, non-displayed, liquidity-adding, liquidity-removing, and/
or NBBO-setting orders to the Exchange in order to qualify for an 
enhanced rebate, 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 the proposed changes to the 
criteria for Cross Asset Tier 2 are reasonable, equitably allocated and 
non-discriminatory with respect to all Members, as the ability to 
achieve the new criteria is available to all Members. 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. The 
Exchange also believes, as stated above, that the new criteria in 
Cross-Asset Tier 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 \25\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities and is not designed to unfairly 
discriminate between customers, issuers, brokers, or dealers. As 
described more fully below in the Exchange's statement regarding the 
burden on competition, the Exchange believes that its transaction 
pricing is subject to significant competitive forces, and that the 
proposed fees and rebates described herein are appropriate to address 
such forces.
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    \25\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposal will result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Instead, as discussed above, 
the proposal is intended to incentivize market participants to direct 
additional order flow to the Exchange, and to MEMX Options, thereby 
enhancing liquidity and market quality on the Exchange to the benefit 
of all Members and market participants. 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.'' \26\
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    \26\ See supra note 24.
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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 removing, 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 higher maximum combined rebate and each of the proposed 
modified Liquidity Provision Tiers 1 and 2, the Liquidity Removal Tier, 
the Non-Display Add Tier 1, the NBBO Setter Tier 1, Cross-Asset Tier 2, 
and DLI Additive Rebate would 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

[[Page 43499]]

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 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.'' \27\ 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'. . . .''.\28\ Accordingly, the Exchange does not believe its 
proposed pricing changes impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \27\ Id.
    \28\ 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 has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \29\ and Rule 19b-4(f)(2) \30\ thereunder.
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    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \30\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     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-2024-16 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-2024-16. 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-2024-16 and should be 
submitted on or before June 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10821 Filed 5-16-24; 8:45 am]
BILLING CODE 8011-01-P