[Federal Register Volume 89, Number 127 (Tuesday, July 2, 2024)]
[Notices]
[Pages 54878-54886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14517]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100435; File No. SR-MEMX-2024-25]


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

June 26, 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 June 14, 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 Market Data section of its fee schedule applicable to its 
equity options platform (``MEMX Options'') to adopt fees for certain of 
its market data products, which are currently offered

[[Page 54879]]

free of charge, pursuant to MEMX Rules 15.1(a) and (c). The Exchange 
proposes to implement the changes to the Fee Schedule pursuant to this 
proposal immediately. The text of the proposed rule change is provided 
in Exhibit 5.

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 Market Data 
section of the Exchange's fee schedule applicable to MEMX Options 
(``MEMX Options Fee Schedule'') to adopt fees for certain of its 
options market data products which are currently offered free of 
charge, namely MEMOIR Options Depth and MEMOIR Options Top 
(collectively, the ``Options Data Feeds''). As set forth below, the 
Exchange believes that the proposed fees are fair and reasonable and 
has based its proposal on a detailed cost analysis, as well as other 
factors including a comparison to competitor pricing. The Exchange is 
proposing to implement the proposed fees immediately. The Exchange 
previously filed this proposal on March 28, 2024 (SR-MEMX-2024-11) (the 
``Initial Proposal''). On April 15, 2024, the Exchange withdrew the 
Initial Proposal and replaced it with SR-MEMX-2024-14 (the ``Second 
Proposal''). Now, the Exchange is withdrawing the Second Proposal and 
is replacing it with the current filing.
    Before setting forth the additional details regarding the proposal 
as well as the cost analysis conducted by the Exchange, immediately 
below is a description of the proposed fees.
Proposed Market Data Pricing
    MEMX Options offers two separate data feeds to subscribers--MEMOIR 
Options Depth and MEMOIR Options Top. The Exchange notes that there is 
no requirement that any subscribing entity (``Firm'') subscribe to a 
particular Options Data Feed or any Options Data Feed whatsoever, but 
instead, a Firm may choose to maintain subscriptions to those Options 
Data Feeds they deem appropriate based on their business model. The 
proposed fee will not apply differently based upon the size or type of 
Firm, but rather based upon the subscriptions a Firm has to Options 
Data Feeds. The proposed pricing for each of the Options Data Feeds is 
set forth below.
MEMOIR Options Depth
    The MEMOIR Options Depth feed is a MEMX-only market data feed that 
contains depth of book quotations and execution information based on 
options orders entered in the System.\3\ For the receipt of access to 
the MEMOIR Options Depth feed, the Exchange proposes to charge $1,500 
per month. This proposed access fee would be charged to any data 
recipient that receives a data feed of the MEMOIR Options Depth feed 
for purposes of internal distribution (i.e., an ``Internal 
Distributor''), for external redistribution (i.e., an ``External 
Distributor''), or both. The Exchange proposes to define an Internal 
Distributor as ``a Distributor that receives an Exchange Data product 
and then distributes that data to one or more data recipients within 
the Distributor's own organization,'' \4\ and an External Distributor 
as ``a Distributor that receives an Exchange Data product and then 
distributes that data to a third party or one or more data recipients 
outside the Distributor's own organization.'' \5\ The proposed access 
fee will be charged only once per month per Firm regardless of whether 
the Firm uses the MEMOIR Options Depth feed for internal distribution, 
external distribution, or both.\6\
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    \3\ See MEMX Rule 21.15(b)(1).
    \4\ See Market Data Definitions under the proposed MEMX Options 
Fee Schedule. The Exchange also proposes to adopt a definition for 
``Distributor'', which would mean any entity that receives an 
Exchange Data product directly from the Exchange or indirectly 
through another entity and then distributes internally or externally 
to a third party.
    \5\ See Market Data Definitions under the proposed MEMX Options 
Fee Schedule.
    \6\ The proposed definitions of Internal Distributor and 
External Distributor are the same definitions used in the Exchange's 
Equities Fee Schedule.
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MEMOIR Options Top
    The MEMOIR Options Top feed is a MEMX-only market data feed that 
contains top of book quotations and executions based on options orders 
entered into the System.\7\ For the receipt of access to the MEMOIR 
Options Top feed, the Exchange proposes to charge $750 per month. This 
proposed access fee would be charged to any data recipient that 
receives a data feed of the MEMOIR Options Top feed for purposes of 
internal distribution (i.e., an Internal Distributor), external 
redistribution (i.e., an External Distributor), or both. The proposed 
access fee for internal and external distribution will be charged only 
once per month per Firm regardless of whether the Firm uses the MEMOIR 
Options Top feed for internal distribution, external distribution, or 
both.
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    \7\ See MEMX Rule 21.15(b)(2).
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Billing Process
    The Exchange proposes to bill for the Options Data Feeds in the 
same manner as it does for the market data products it provides for its 
equities Exchange, (the ``Equities Data Feeds''), and to make this 
clear on the Fee Schedule. Specifically, the Fee Schedule would state 
that ``[f]ees for Market Data products are assessed based on each 
active product at the close of business on the first day of each 
month,'' and that ``[i]f a product is cancelled by a subscriber's 
submission of a written request or via the MEMX User Portal prior to 
such fee being assessed, then the subscriber will not be obligated to 
pay the applicable product fee. MEMX does not return pro rated fees if 
a product is not used for an entire month.'' The Exchange believes that 
this billing methodology has been efficient with respect to the 
Equities Data Feeds and is well understood by market participants.
Additional Discussion--Background
    The Exchange launched MEMX Options on September 27, 2023. As a new 
entrant in the equity options trading space, MEMX did not begin 
charging fees for options market data until April 1, 2024. The 
objective of this approach was to eliminate any fee-based barriers for 
Members to join the Exchange, which the Exchange believes was helpful 
in its ability to attract order flow as a new options exchange. 
Further, the Exchange did not initially charge for options market data 
because MEMX believes that any exchange should first deliver meaningful 
value to Members and other market participants before charging fees for 
its products and services.
    The Exchange also did not begin charging for the Equities Data 
Feeds until 2022, nearly two years after it launched as a national 
securities exchange in 2020. In connection with the adoption of fees 
for the Equities Data Feeds, the Exchange conducted an extensive cost 
analysis (the ``2022 Cost

[[Page 54880]]

Analysis''),\8\ and the Exchange's Initial and Second Proposal to adopt 
fees for Options Data Feeds stemmed from the same cost analysis, which 
it reviewed and updated for 2024 (the ``2024 Cost Analysis''). The 2024 
Cost Analysis combined costs for providing market data for both its 
equities and options trading platforms (the ``Exchange Data Feeds'') 
due to the fact that in general, the Exchange did not add a significant 
amount of marginal costs for the provision of options market data, and 
as such, costs associated with the provision of Equities Data Feeds 
became shared costs for the provision of Options Data Feeds. For 
example, the Exchange did not hire additional staff specifically to 
sell or otherwise manage options market data, rather, the existing team 
absorbed the additional workload. Nevertheless, as discussed more fully 
below, the Exchange has revised its cost analysis in this proposal by 
focusing solely on the marginal costs associated with the addition of 
providing the Options Data Feeds, and allocating those costs according 
to the same principles utilized in the 2024 Cost Analysis (the 
``Options Market Data Cost Analysis''). Pursuant to the Options Market 
Data Analysis, the Exchange calculated the total marginal costs for 
providing the Options Data Feeds in 2024 at approximately $307,001. In 
order to establish fees that are designed to recover the marginal costs 
of providing the Options Data Feeds with a reasonable profit margin, 
the Exchange is proposing to modify its Fee Schedule, as described 
above. In addition to the Options Market Data Cost Analysis, described 
below, the Exchange believes that its proposed approach to market data 
fees is in line with that of its competitors.
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    \8\ See Securities Exchange Act Release No. 97130 (March 13, 
2023), 88 FR 16491 (March 17, 2023) (SR-MEMX-2023-04).
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Additional Discussion--Comparison With Other Exchanges
    The proposed fee structure for the Options Data Feeds is not novel 
but is instead comparable to the fee structure currently in place for 
the options exchanges operated by MIAX, in particular, MIAX Pearl 
Options (``MIAX Pearl''),\9\ and the options exchanges operated by 
Nasdaq, in particular, Nasdaq BX Options (``BX Options'').\10\ The 
Exchange is proposing fees for its Options Data Feeds that are similar 
in structure to MIAX Pearl and BX Options and rates that are equal to, 
or lower than, than the rates data recipients pay for comparable data 
feeds from those exchanges, in a more simplified fashion.\11\ The 
Exchange notes that other competitors maintain fees applicable to 
options market data that are considerably higher than those proposed by 
the Exchange, including Cboe BZX Options (``BZX Options''), NYSE Arca 
Options and NYSE American Options.\12\ However, the Exchange has 
focused its comparison on MIAX Pearl and BX Options because their 
similar market data products are offered at prices lower than several 
other incumbent exchanges, which is a similar approach to that proposed 
by the Exchange.\13\
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    \9\ See MIAX Pearl Options Fee Schedule, available at: https://www.miaxglobal.com/markets/us-options/pearl-options/fees (the ``MIAX 
Pearl Fee Schedule'').
    \10\ See the Nasdaq BX Options Fee Schedule, available at: 
https://listingcenter.nasdaq.com/rulebook/bx/rules/bx-options-7.
    \11\ As noted below, based on its review of MIAX Pearl's Fee 
Schedule, the Exchange believes that MIAX Pearl charges separate 
fees for Internal and External Distribution of its options data 
feeds, and while its External Distribution fees are identical to the 
Exchange's proposed flat fee for all uses for both comparable 
products, its Internal Distribution Fees are slightly lower than 
what the Exchange is proposing for access to the Exchange's Options 
Data Feeds. Nevertheless, given that the Exchange allows both 
Internal and External Distribution for a single fee for a single 
data feed, the Exchange believes its proposed fees remain comparable 
and competitive with MIAX Pearl.
    \12\ Fees for BZX Options Depth, which is the comparable product 
to MEMOIR Options Depth, are $3,000 for internal distribution and 
$2,000 for external distribution compared to the Exchange's proposed 
fee of $1,500 for all uses. In addition, BZX Options charges 
professional user fees of $30 per month and non-professional user 
fees of $1.00 per month for each entity to which it distributes the 
feed (alternatively, it offers distributors an option to purchase a 
monthly Enterprise Fee of $3,500 to distribute to an unlimited 
number of users), which the Exchange is not proposing to charge. 
Fees for BZX Options Top, which is the comparable product to MEMOIR 
Options Top, are $3,000 for internal distribution, $2,000 for 
external distribution, with Professional User Fees of $5 per month, 
Non-Professional Fees of $0.10 per month per user, or an Enterprise 
Fee ranging anywhere from $20,000 to $60,000 per month depending on 
the number of users to which the distributer plans to distribute the 
feed. Again, the Exchange is not proposing any additional User Fees 
for MEMOIR Options Top, but rather, a flat fee of $750 for all uses. 
See the BZX Options Fee Schedule, available at: https://www.cboe.com/us/options/membership/fee_schedule/bzx/. Fees for NYSE 
Arca Options Deep and NYSE American Options Deep, which are the 
comparable products to MEMOIR Options Depth, are $3,000 for access 
(internal use) and $2,000 for redistribution (external 
distribution), and $5,000 for non-display use, compared to the 
Exchange's proposed fee of $1,500 for all uses. NYSE Arca Options 
and NYSE American Options also charge professional user fees of $50 
per User, and Non-Professional User Fees of $1.00 per user, capped 
at $5,000 per month. Again, the Exchange does not require any 
counting of users and has instead proposed a flat fee of $1,500 for 
all uses. Fees for the NYSE Arca Options Top and NYSE American 
Options Top, which are the comparable products to MEMOIR Options Top 
are the same as above ($3,000 for internal, $2,000 for external and 
$5,000 for non-display, with the additional Professional and Non-
Professional User Fees), compared to the Exchange's proposed fee of 
$750 for all uses. See NYSE Proprietary Market Data Pricing Guide, 
available at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf.
    \13\ See supra notes 9-10.
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    The fees for the MIAX Pearl Liquidity Feed--which like the MEMOIR 
Options Depth feed, includes top of book, depth of book, trades, and 
administrative messages--consist of an internal distributor access fee 
of $1,250 per month and an external distributor access fee of $1,500 
per month. As such, the Exchange's proposed rate for all uses of $1,500 
per month is equal to what MIAX Pearl charges for external 
distribution, and $250 higher than what it charges for internal 
distribution only.\14\
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    \14\ See MIAX Pearl Options Fee Schedule, supra note 9.
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    The fees for the MIAX Pearl Top of Market Feed--which is the 
comparable product to MEMOIR Options Top, consist of an internal 
distributor access fee of $500 per month and an external distributor 
access fee of $750. Again, the Exchange's proposed rate for all uses of 
$750 per month is identical to what MIAX Pearl charges for external 
distribution, and $250 higher than what it charges for internal 
distribution.
    While the Exchange's proposed fee is slightly higher than what MIAX 
Pearl charges for internal distribution of its similar products, the 
Exchange believes that the simplicity of a single fee is preferable, 
specifically by reducing audit risk and simplifying reporting, both for 
the Exchange and its customers. Further, to the extent MIAX Pearl 
assesses both fees for both uses, it would cost more overall to receive 
and provide both internal and external distribution of MIAX Pearl's 
comparable options data feeds than it does to receive and provide both 
internal and external distribution of the Exchange's Options Data 
Feeds.
    As an additional cost comparison, the fees for both Nasdaq BX 
Options Depth of Market Feed (``BX Depth'') and Top of Market Feed 
(``BX Top'') are $1,500 per month for internal distribution and $2,000 
for external distribution, with an added $2,500 fee for a non-Display 
Enterprise License.\15\ While one distributor fee allows access to both 
BX Top and BX Depth, (for example, $1,500 per month would allow a BX 
Options customer internal distribution of both BX Top and BX Depth) if 
a BX Options Customer wanted the same access provided under the 
Exchange's proposed fees, (i.e., for all uses) it would need to pay an 
additional $2,000 for external distribution and $2,500 per

[[Page 54881]]

month for a non-display enterprise license fee. In addition, BX Options 
charges monthly per subscriber fees for professional or non-
professional use \16\ which the Exchange will not charge for its 
similar market data products.
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    \15\ See Nasdaq BX Options Fee Schedule, supra note 10.
    \16\ Id.
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Additional Discussion--Options Market Data Cost Analysis
    In general, the Exchange believes that exchanges, in setting fees 
of all types, should meet very high standards of transparency to 
demonstrate why each new fee or fee increase meets the Exchange Act 
requirements that fees be reasonable, equitably allocated, not unfairly 
discriminatory, and not create an undue burden on competition among 
members and markets. In particular, the Exchange believes that each 
exchange should take extra care to be able to demonstrate that these 
fees are based on its costs and reasonable business needs. Accordingly, 
in proposing to charge fees for Options Data Feeds, the Exchange has 
sought to be especially diligent in assessing those fees in a 
transparent way against its own aggregate costs of providing the 
related service, and also carefully and transparently assessing the 
impact on Members--both generally and in relation to other Members, 
i.e., to assure the fee will not create a financial burden on any 
participant and will not have an undue impact in particular on smaller 
Members and competition among Members in general. The Exchange does not 
believe it needs to otherwise address questions about market 
competition in the context of this filing because the proposed fees are 
so clearly consistent with the Act based on its Options Market Data 
Cost Analysis. The Exchange also believes that this level of diligence 
and transparency is called for by the requirements of section 19(b)(1) 
under the Act,\17\ and Rule 19b-4 thereunder,\18\ with respect to the 
types of information self-regulatory organizations (``SROs'') should 
provide when filing fee changes, and section 6(b) of the Act,\19\ which 
requires, among other things, that exchange fees be reasonable and 
equitably allocated,\20\ not designed to permit unfair 
discrimination,\21\ and that they not impose a burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Act.\22\ This rule change proposal addresses those requirements, and 
the analysis and data in this section are designed to clearly and 
comprehensively show how they are met.\23\
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    \17\ 15 U.S.C. 78s(b)(1).
    \18\ 17 CFR 240.19b-4.
    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(4).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ 15 U.S.C. 78f(b)(8).
    \23\ In 2019, Commission staff published guidance suggesting the 
types of information that SROs may use to demonstrate that their fee 
filings comply with the standards of the Exchange Act (``Fee 
Guidance''). While MEMX understands that the Fee Guidance does not 
create new legal obligations on SROs, the Fee Guidance is consistent 
with MEMX's view about the type and level of transparency that 
exchanges should meet to demonstrate compliance with their existing 
obligations when they seek to charge new fees. See Staff Guidance on 
SRO Rule Filings Relating to Fees (May 21, 2019) available at 
https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
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    As noted above, MEMX recently conducted a study of its aggregate 
costs to produce the Exchange Data Feeds--the 2024 Cost Analysis, and 
it used the 2024 Cost Analysis as the foundation of the Options Market 
Data Cost Analysis, which ultimately went a step further in subtracting 
the marginal costs associated with the provision of the Options Data 
Feeds from the total aggregate costs originally allocated towards the 
provision of the Exchange Data Feeds (i.e., both the Equities and 
Options Data Feeds) and allocating those marginal costs towards the 
provision of the Options Data Feeds.
    Prior to discussing how the Exchange allocated applicable costs 
under the Options Market Data Cost Analysis, the Exchange believes it 
is first necessary to set forth its process in conducting the 2024 Cost 
Analysis. The 2024 Cost Analysis required a detailed analysis of MEMX's 
aggregate baseline costs, including a determination and allocation of 
costs for core services provided by the Exchange--transaction 
execution, market data, membership services and trading permits, 
regulatory services, physical connectivity, and application sessions 
(which provide order entry, cancellation and modification 
functionality, risk functionality, ability to receive drop copies, and 
other functionality). MEMX separately divided its costs between those 
costs necessary to deliver each of these core services, including 
infrastructure, software, human resources (i.e., personnel), and 
certain general and administrative expenses (``cost drivers''). Next, 
MEMX adopted an allocation methodology with various principles to guide 
how much of a particular cost should be allocated to each core service. 
For instance, fixed costs that are not driven by client activity (e.g., 
message rates), such as data center costs, were allocated more heavily 
to the provision of physical connectivity (80%), with smaller 
allocations to logical ports (11%), and the remainder to the provision 
of transaction execution, regulatory services, and market data services 
(9%). The allocation methodology was decided through conversations with 
senior management familiar with each area of the Exchange's operations. 
After adopting this allocation methodology, the Exchange then applied 
an estimated allocation of each cost driver to each core service, 
resulting in the cost allocations described below.
    By allocating segmented costs to each core service, MEMX was able 
to estimate by core service the potential margin it might earn based on 
different fee models. The Exchange notes that as a non-listing venue it 
has four primary sources of revenue that it can potentially use to fund 
its operations: transaction fees, fees for connectivity services, 
membership and regulatory fees, and market data fees. Accordingly, the 
Exchange generally must cover its expenses from these four primary 
sources of revenue.
    Through the Exchange's extensive 2024 Cost Analysis, the Exchange 
analyzed every expense item in the Exchange's general expense ledger to 
determine whether each such expense relates to the provision of the 
Exchange Data Feeds, and, if such expense did so relate, what portion 
(or percentage) of such expense actually supports the provision of the 
Exchange Data Feeds, and thus bears a relationship that is, ``in nature 
and closeness,'' directly related to the Exchange Data Feeds. Based on 
its analysis, MEMX calculated its aggregate annual costs for providing 
the Exchange Data Feeds at $3,683,375.
    The following chart details the individual line-item (annual) costs 
considered by MEMX to be related to offering the Exchange Data Feeds to 
its Members and other customers as well as a percentage of the 
Exchange's overall costs that such costs represent for such area (e.g., 
as set forth below, the Exchange allocated approximately 8% of its 
overall Human Resources cost to offering Exchange Data Feeds).

------------------------------------------------------------------------
            Cost driver                   Costs             % of all
------------------------------------------------------------------------
Human Resources...................         $2,606,282                  8

[[Page 54882]]

 
Data Center.......................             69,340                  2
Technology (Hardware, Software                287,141                  7
 Licenses, etc.)..................
Depreciation......................            397,471                  5
Allocated Shared Expenses.........            323,141                  4
                                   -------------------------------------
    Total.........................          3,683,375                5.8
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Options Market Data Cost Analysis
    As noted above, the 2024 Cost Analysis estimated aggregate annual 
costs for providing the Exchange Data Feeds at $3,683,375. Based on the 
limited number of additional resources specifically devoted to 
providing and administering the Options Data Feeds, the Exchange 
determined it was appropriate to conduct an allocation of only marginal 
costs related to the provision of the Options Data Feeds. In conducting 
this analysis, the Exchange adopted an allocation model for four of the 
five categories (all but Human Resources, as described more fully 
below) that was proportionally based upon the number of products sold 
in equities and options, and given the fact that the Exchange offers 
more data feeds and charges for Professional and Non-Professional User 
Fees in equities, the resulting allocation was 95.1% towards equities, 
and 4.9% towards options. The following chart details the individual 
line-item costs considered by MEMX to be related to offering the 
Options Data Feeds to its Members and other customers as a well as the 
percentage of the Exchange's overall Exchange Data Feed costs that such 
costs represent for such area (e.g., as set for the below, the Exchange 
allocated approximately 9.8% of the Human Resources costs allocated to 
the provision of the Exchange Data Feeds to the Options Data Feeds, or 
$254,331 annually).\24\
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    \24\ It follows that the remaining percentage of costs allocated 
to the Exchange Data Feeds in the 2024 Cost Analysis were allocated 
to the provision of the Equities Data feeds in the Options Market 
Data Cost Analysis. For example, the 2024 Cost Analysis allocated 
$2,606,282 of Human Resources costs to the provision of the Exchange 
Data feeds. In the Options Market Data Cost Analysis, the Exchange 
then allocated $254,331, or 9.8% of that total to the provision of 
Options Data Feeds, and thus the remaining $2,351,951 (or 90.2%) to 
the provision of the Equities Data Feeds.

------------------------------------------------------------------------
                                                        % of market data
            Cost driver                   Costs              total
------------------------------------------------------------------------
Human Resources...................           $254,331                9.8
Data Center.......................              3,391                4.9
Technology (Hardware, Software                 14,041                4.9
 Licenses, etc.)..................
Depreciation......................             19,436                4.9
Allocated Shared Expenses.........             15,802                4.9
                                   -------------------------------------
    Total.........................            307,001  .................
------------------------------------------------------------------------

Human Resources
    In allocating personnel (Human Resources) costs, the Exchange 
considered the amount of employee time for employees whose functions 
include directly providing services necessary to offer the Options Data 
Feeds, including performance thereof, as well as personnel with 
ancillary functions related to establishing and providing such services 
(such as information security and finance personnel). The Exchange 
notes that it has fewer than 100 employees and each department leader 
has direct knowledge of the time spent by each employee with respect to 
the various tasks necessary to operate the Exchange. The estimates of 
Human Resources cost were therefore determined by consulting with such 
department leaders, determining which employees are involved in tasks 
related to providing the Options Data Feeds, and confirming that the 
proposed allocation was reasonable based on an understanding of the 
percentage of their time such employees devote to tasks related to 
providing the Options Data Feeds. The Human Resources cost was 
calculated using a blended rate of compensation reflecting salary, 
equity and bonus compensation, benefits, payroll taxes, and 401(k) 
matching contributions. The results of that review found that of the 
original Human Resources cost originally allocated towards the 
provision of the Exchange Data Feeds, 9.8%, or $254,331, should be 
allocated towards the provision of Options Market Data. The Exchange 
believes that this allocation is reasonable given the limited amount of 
additional employee time that it takes to provide and administer the 
Options Data Feeds as compared to the Equities Data Feeds.
Data Center
    Data Center costs includes an allocation of the costs the Exchange 
incurs to provide the Exchange Data Feeds in the third-party data 
centers where the Exchange maintains its equipment as well as related 
costs (the Exchange does not own the Primary Data Center or the 
Secondary Data Center, but instead, leases space in data centers 
operated by third parties). Based on the allocation model utilized in 
the Options Market Data Cost Analysis described above, the Exchange 
allocated $3,391 of its Data Center costs (i.e., 4.9% of the costs 
allocated towards the Exchange Data Feeds in the 2024 Cost Analysis) 
towards the provision of the Options Data Feeds.
Technology
    The Technology category includes the Exchange's network 
infrastructure, other hardware, software, and software licenses used to 
operate and monitor physical assets necessary to provide the Exchange 
Data Feeds. Of note, certain of these costs were included in separate 
Network Infrastructure and Hardware and Software Licenses categories in 
the 2022 Cost Analysis; however, in order to align more closely with 
the Exchange's audited financial statements, these costs were combined 
into the broader Technology category. Based on the allocation model 
utilized in the Options Market Data Cost Analysis described above, the 
Exchange allocated approximately $14,041 of its

[[Page 54883]]

Technology costs to the Options Data Feeds in 2024.
Depreciation
    The vast majority of the software the Exchange uses with respect to 
its operations, including the software used to generate and disseminate 
the Options Data Feeds has been developed in-house and the cost of such 
development is depreciated over time. Accordingly, the Exchange 
included Depreciation costs related to depreciated software used to 
generate and disseminate the Options Data Feeds. The Exchange also 
included in the Depreciation costs certain budgeted improvements that 
the Exchange intends to capitalize and depreciate with respect to the 
Options Data Feeds in the near-term, as well as the servers used at the 
Exchange's primary and back-up data centers specifically used for the 
Options Data Feeds. Based on the allocation model utilized in the 
Options Market Data Cost Analysis described above, the Exchange 
allocated approximately $19,346 of its Depreciation costs towards the 
provision of the Options Data Feeds.
Allocated Shared Expenses
    Finally, a limited portion of general shared expenses were 
allocated to the Options Data Feeds. The costs included in general 
shared expenses allocated to the Options Data Feeds include office 
space and office expenses (e.g., occupancy and overhead expenses), 
utilities, recruiting and training, marketing and advertising costs, 
professional fees for legal, tax and accounting services (including 
external and internal audit expenses), and telecommunications costs. 
The cost of paying individuals to serve on the Exchange's Board of 
Directors or any committee was not allocated to providing Options Data 
Feeds. Based on the allocation model utilized in the Options Market 
Data Cost Analysis described above, the Exchange allocated $15,802 of 
its Allocated Shared Expenses to the Options Data Feeds in 2024.
Cost Analysis--Additional Discussion
    Based on the current number of subscribers to the Options Data 
Feeds,\25\ the Exchange anticipates annual 2024 revenue for Options 
Data Feeds of $342,000. The proposed fees for the Options Data Feeds 
are designed to permit the Exchange to cover the marginal costs 
allocated to providing the Options Data Feeds with a profit margin that 
the Exchange believes is modest (approximately 10%),\26\ which the 
Exchange believes is fair and reasonable after taking into account the 
costs related to creating, generating, and disseminating the Options 
Data Feeds and the fact that the Exchange will need to fund future 
expenditures (increased costs, improvements, etc.).
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    \25\ In the Initial and Second Filings, the Exchange's revenue 
projections anticipated a drop in subscriptions once the Exchange 
began charging for the Options Data Feeds, which did indeed occur. 
Specifically, of the nineteen (19) customers receiving the Options 
Data Feeds free of charge, four (4) requested removal once the 
Exchange began charging in April 2024.
    \26\ The Exchange calculated this profit margin by dividing the 
annual projected profit of $34,999 by the annual projected revenue 
of $342,000 and multiplying by 100.
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    The Exchange like other exchanges is, after all, a for-profit 
business. Accordingly, while the Exchange believes in transparency 
around costs and potential margins, as well as periodic review of 
revenues and applicable costs (as discussed below), the Exchange does 
not believe that these estimates should form the sole basis of whether 
or not a proposed fee is reasonable or can be adopted. Instead, the 
Exchange believes that the information should be used solely to confirm 
that an Exchange is not earning supra-competitive profits, and the 
Exchange believes its Cost Analysis and related projections demonstrate 
this fact.
    As a general matter, the Exchange believes that its costs will 
remain relatively similar in future years. It is possible however that 
such costs will either decrease or increase. To the extent the Exchange 
sees growth in use of Options Data Feeds it will receive additional 
revenue to offset future cost increases. However, if use of Options 
Data Feeds is static or decreases, the Exchange might not realize the 
revenue that it anticipates or needs in order to cover applicable 
costs. Accordingly, the Exchange is committing to conduct a one-year 
review after implementation of these fees. The Exchange expects that it 
may propose to adjust fees at that time, to increase fees in the event 
that revenues fail to cover costs with a reasonable profit margin.\27\ 
Similarly, the Exchange expects that it would propose to decrease fees 
in the event that revenue materially exceeds current projections. In 
addition, the Exchange will periodically conduct a review to inform its 
decision making on whether a fee change is appropriate (e.g., to 
monitor for costs increasing/decreasing or subscribers increasing/
decreasing, etc. in ways that suggest the then-current fees are 
becoming dislocated from the prior cost-based analysis) and expects 
that it would propose to increase fees in the event that revenues fail 
to cover its costs and a reasonable margin, or decrease fees in the 
event that revenue or the profit margin materially exceeds current 
projections. In the event that the Exchange determines to propose a fee 
change, the results of a timely review, including an updated cost 
estimate, will be included in the rule filing proposing the fee change. 
More generally, the Exchange believes that it is appropriate for an 
exchange to refresh and update information about its relevant costs and 
revenues in seeking any future changes to fees, and the Exchange 
commits to do so.
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    \27\ The Exchange notes that it does not believe that a 10% 
profit margin is necessarily competitive, and instead that this is 
likely significantly below the mark-up many businesses place on 
their products and services.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of section 6(b) \28\ of the Act in general, and 
furthers the objectives of section 6(b)(4) \29\ of the Act, in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities. Additionally, the Exchange 
believes that the proposed fees are consistent with the objectives of 
section 6(b)(5) \30\ of the Act in that they are designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to a free and open market and 
national market system, and, in general, to protect investors and the 
public interest, and, particularly, are not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \28\ 15 U.S.C. 78f.
    \29\ 15 U.S.C. 78f(b)(4).
    \30\ 15 U.S.C. 78f(b)(5).
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    The Exchange notes prior to addressing the specific reasons the 
Exchange believes the proposed fees and fee structure are reasonable, 
equitably allocated and not unreasonably discriminatory, that the 
proposed definitions and fee structure described above are consistent 
with the definitions and fee structure used by most U.S. options 
exchanges, MIAX Pearl and BX Options in particular. As such, the 
Exchange believes it is adopting a model that is easily understood by 
Members and non-Members, most of which also subscribe to market data 
products from other

[[Page 54884]]

exchanges. For this reason, the Exchange believes that the proposed 
definitions and fee structure described above are consistent with the 
Act generally, and section 6(b)(5) \31\ of the Act in particular.
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    \31\ 15 U.S.C. 78f(b)(5).
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    One of the primary objectives of MEMX is to provide competition and 
to reduce fixed costs imposed upon the industry. Consistent with this 
objective, the Exchange believes that this proposal reflects a simple, 
competitive, reasonable, and equitable pricing structure, with fees 
that are discounted when compared to comparable data products and 
services offered by competitors.\32\
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    \32\ See supra note 12.
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Reasonableness
    Overall. With regard to reasonableness, the Exchange understands 
that the Commission has traditionally taken a market-based approach to 
examine whether the SRO making the fee proposal was subject to 
significant competitive forces in setting the terms of the proposal. 
The Exchange understands that in general the analysis considers whether 
the SRO has demonstrated in its filing that (i) there are reasonable 
substitutes for the product or service; (ii) ``platform'' competition 
constrains the ability to set the fee; and/or (iii) revenue and cost 
analysis shows the fee would not result in the SRO taking supra-
competitive profits. If the SRO demonstrates that the fee is subject to 
significant competitive forces, the Exchange understands that in 
general the analysis will next consider whether there is any 
substantial countervailing basis to suggest the fee's terms fail to 
meet one or more standards under the Exchange Act. The Exchange further 
understands that if the filing fails to demonstrate that the fee is 
constrained by competitive forces, the SRO must provide a substantial 
basis, other than competition, to show that it is consistent with the 
Exchange Act, which may include production of relevant revenue and cost 
data pertaining to the product or service.
    The Exchange has not determined its proposed overall market data 
fees based on assumptions about market competition, instead relying 
upon a cost-plus model to determine a reasonable fee structure that is 
informed by the Exchange's understanding of different uses of the 
products by different types of participants. In this context, the 
Exchange believes the proposed fees overall are fair and reasonable as 
a form of cost recovery plus the possibility of a reasonable return for 
the Exchange's marginal costs of offering the Options Data Feeds. The 
Exchange believes the proposed fees are reasonable because they are 
designed to generate annual revenue to recoup some or all of Exchange's 
annual marginal costs of providing market data in options with a 
reasonable profit margin. The Exchange also believes that performing 
the Options Market Data Cost Analysis utilizing the marginal costs 
related to the Options Data Feeds is reasonable because as a new 
entrant in the equity options space, the Exchange simply cannot charge 
more at this time based on what its competitors charge and what other 
options are available to market participants for the receipt of options 
market data. If the Exchange chose to allocate the average cost of 
providing market data to options and equities via a 50/50 split, then 
based on its proposed pricing and the revenues projected, the analysis 
would result in a negative profit margin of 265%. Alternatively, the 
Exchange would need to significantly increase the fees charged for the 
Options Data Feeds, which in turn, the Exchange believes would result 
in customers canceling their access to such Options Data Feeds and 
potentially participating less on the Exchange. Accordingly, the 
Exchange believes it is reasonable to seek to recover only the marginal 
costs associated with the Options Data Feeds in this proposal. As 
discussed in the Purpose section, the Exchange estimates that the 
Options Data Feed fees proposed herein will result in annual revenue of 
approximately $342,000, representing a profit margin of approximately 
10% for the provision of Options Market Data. As such, the Exchange 
believes that this fee methodology is reasonable because it allows the 
Exchange to recoup some or all of its marginal expenses for providing 
options market data (with any additional revenue representing no more 
than what the Exchange believes to be a reasonable rate of return). The 
Exchange also believes that the proposed fees are reasonable because 
they are generally less than the fees charged by competing options 
exchanges for comparable market data products, notwithstanding that the 
competing exchanges may have different system architectures that may 
result in different cost structures for the provision of market data.
    The Exchange believes the proposed fees for the Options Data Feeds 
are reasonable when compared to fees for comparable products, such as 
the MIAX Pearl Top of Market Feed, the MIAX Pearl Liquidity Feed, and 
the BX Options Top and Depth Feeds, compared to which the Exchange's 
proposed fees are equivalent or lower, as well as other comparable data 
feeds priced significantly higher than the Exchange's proposed fees for 
the Options Data Feeds.\33\ Additionally, the Exchange's single flat 
fee for each of its Options Data Feeds, regardless of use type, offers 
a more simplistic approach to market data pricing. Specifically with 
respect to the MEMOIR Options Depth feed, the Exchange believes that 
the proposed fee for such feed is reasonable because it represents not 
only the value of the data available from the MEMOIR Options Top feed, 
which has a lower proposed fee, but also the value of receiving the 
depth-of-book data on an order-by-order basis. The Exchange believes it 
is reasonable to have pricing based, in part, upon the amount of 
information contained in each data feed, which may have additional 
value to market participants. The MEMOIR Options Top feed, as described 
above, can be utilized to trade on the Exchange but contains less 
information than that is available on the MEMOIR Options Depth feed. 
Thus, the Exchange believes it reasonable for the products to be priced 
as proposed, with MEMOIR Options Depth having a higher price than 
MEMOIR Options Top.
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    \33\ Id.
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    For all of the foregoing reasons, the Exchange believes that the 
proposed fees for the Options Data Feeds are reasonable.
Equitable Allocation
    Overall. The Exchange believes that its proposed fees are 
reasonable, fair, and equitable, and not unfairly discriminatory 
because they are designed to align fees with services provided. The 
Exchange believes that the proposed fees are equitably allocated 
because they will apply uniformly to all data recipients that choose to 
subscribe to the Options Data Feeds. Any Firm that chooses to subscribe 
to one or both of the Options Data Feeds is subject to the same Fee 
Schedule, regardless of what type of business they operate, and the 
decision to subscribe to one or both of the Options Data Feeds is based 
on objective differences in usage of Options Data Feeds among different 
Firms, which are still ultimately in the control of any particular 
Firm. The Exchange believes the proposed pricing between Options Data 
Feeds is equitably allocated because it is based, in part, upon the 
amount of information contained in each data feed, which may have 
additional value to market

[[Page 54885]]

participants. The MEMOIR Options Top feed, as described above, can be 
utilized to trade on the Exchange but contains less information than 
that is available on the MEMOIR Options Depth feed. Thus, the Exchange 
believes it is an equitable allocation of fees for the products to be 
priced as proposed, with MEMOIR Options Top having the lower price of 
the two Options Data Feeds.
    For all of the foregoing reasons, the Exchange believes that the 
proposed fees for the Exchange Data Feeds are equitably allocated.
The Proposed Fees Are Not Unfairly Discriminatory
    The Exchange believes the proposed fees for the Options Data Feeds 
are not unfairly discriminatory because any differences in the 
application of the fees are based on meaningful distinctions between 
the feeds themselves.
    Overall. The Exchange believes that the proposed fees are not 
unfairly discriminatory because they would apply to all data recipients 
that choose to subscribe to the same Options Data Feed(s). Any Firm 
that chooses to subscribe to the Options Data Feeds is subject to the 
same Fee Schedule, regardless of what type of business they operate. 
Because the proposed fee for MEMOIR Options Depth is higher, Firms 
seeking lower cost options may instead choose to receive data through 
the MEMOIR Options Top feed for a lower cost. Alternatively, Firms can 
choose to receive data solely from the Options Price Reporting 
Authority (``OPRA'') for a lower cost. The Exchange notes that Firms 
can also choose to subscribe to a combination of data feeds for 
redundancy purposes or to use different feeds for different purposes. 
In sum, each Firm has the ability to choose the best business solution 
for itself. The Exchange does not believe it is unfairly discriminatory 
to base pricing upon the amount of information contained in each data 
feed, which may have additional value to a market participant. As 
described above, the MEMOIR Options Top feed can be utilized to trade 
on the Exchange but contains less information than that is available on 
the MEMOIR Options Depth feed. Thus, the Exchange believes it is not 
unfairly discriminatory for the products to be priced as proposed, with 
MEMOIR Options Top having a lower price than MEMOIR Options Depth.
    For all of the foregoing reasons, the Exchange believes that the 
proposed fees for the Exchange Data Feeds are not unfairly 
discriminatory.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with section 6(b)(8) of the Act,\34\ the Exchange 
does not believe that the proposed rule change would impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act.
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    \34\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

Intra-Market Competition
    The Exchange does not believe that the proposed fees for Options 
Data Feeds place certain market participants at a relative disadvantage 
to other market participants because, as noted above, the proposed fees 
are associated with usage of Options Data Feeds by each market 
participant based on the type of business they operate, and the 
decision to subscribe to one or both Options Data Feeds is based on 
objective differences in usage of Options Data Feeds among different 
Firms, which are still ultimately in the control of any particular 
Firm, and such fees do not impose a barrier to entry to smaller 
participants. Accordingly, the proposed fees for Options Data Feeds do 
not favor certain categories of market participants in a manner that 
would impose a burden on competition; rather, the allocation of the 
proposed fees reflects the types of Options Data Feeds consumed by 
various market participants.
Inter-Market Competition
    The Exchange does not believe the proposed fees place an undue 
burden on competition on other SROs that is not necessary or 
appropriate. In particular, market participants are not regulatorily 
required to subscribe to any of the Options Data Feeds, as described 
above. Additionally, other exchanges have similar market data fees in 
place for their participants, but with comparable and in many cases 
higher rates for options market data feeds.\35\ The proposed fees are 
based on actual costs and are designed to enable the Exchange to recoup 
its applicable costs with the possibility of a reasonable profit on its 
investment as described in the Purpose and Statutory Basis sections. 
Competing options exchanges are free to adopt comparable fee structures 
subject to the SEC rule filing process.
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    \35\ See supra note 12.
---------------------------------------------------------------------------

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 \36\ and Rule 19b-4(f)(2) \37\ thereunder.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \37\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     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-2024-25 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-MEMX-2024-25. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and

[[Page 54886]]

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-2024-25 and should be 
submitted on or before July 23, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
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    \38\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-14517 Filed 7-1-24; 8:45 am]
BILLING CODE 8011-01-P