Document ID: SEC-2023-1089-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MEMX, LLC
Posted Date: 2023-10-02T04:00Z

[Federal Register Volume 88, Number 189 (Monday, October 2, 2023)]
[Notices]
[Pages 67846-67851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21625]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98533; File No. SR-MEMX-2023-24]

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

September 26, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 15, 2023, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``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\ pursuant 
to Exchange Rules 15.1(a) and (c). Specifically, the Exchange proposes 
to adopt transaction fees (``Transaction Fees''), routing fees 
(``Routing Fees''), and definitions (``Definitions'') within the MEMX 
Options Fee Schedule (the ``Options Fee Schedule''). The Transaction 
Fees section of the Options Fee Schedule would establish transaction 
fees and rebates applicable to Options Members trading on the 
Exchange's options trading platform (such platform, ``MEMX Options'' 
and such Members, ``Options Members''). The Routing Fees section of the 
Options Fee Schedule would establish fees for Options Members who route 
their orders to away exchanges. The Definitions section of the Options 
Fee Schedule would define and clarify terms used in the Options Fee 
Schedule. The Exchange proposes to implement the changes to the Options 
Fee Schedule pursuant to this proposal on September 20, 2023. 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 (i) establish 
transaction rebates and fees applicable to all Options Members trading 
on MEMX Options; (ii) establish routing fees applicable to all Options 
Members trading on MEMX Options who route orders to away exchanges; and 
(iii) define and clarify terms used in the Options Fee Schedule.
Transaction Fees
    The proposed Transaction Fees section of the Options Fee Schedule 
sets forth transaction rebates and fees for executions on MEMX Options. 
MEMX Options will operate a ``Maker-Taker'' model whereby it provides 
rebates to Options Members that provide liquidity and charges fees to 
those that remove liquidity, as further described below. The proposed 
rebates and fees vary depending on whether a transaction was executed 
in a customer capacity (``Customer'') \4\ or in a non-customer capacity 
(``Non-Customer'') \5\, whether the underlying security of the 
applicable option is in the Penny Pilot Program

[[Page 67847]]

(``Penny options'') or not in the Penny Pilot Program (``Non-Penny 
options''), and, finally, whether the transaction adds or removes 
liquidity from the MEMX Options Book.
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    \4\ Customer capacity applies to any order for the account of a 
Priority Customer. ``Priority Customer'' means any person or entity 
that is neither a broker or dealer in securities nor a Professional. 
See Rule 16.1 of the MEMX Rulebook.
    \5\ Non-Customer capacity applies to any transaction that is not 
a Customer order.
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    The Exchange will provide fee qualifiers to distinguish between 
Customer transactions and Non-Customer transactions.\6\ MEMX Options 
will provide Fee Codes to distinguish between transactions in Penny 
options and transactions in Non-Penny options.\7\ MEMX Options will 
also provide Fee Codes to distinguish between transactions that add 
liquidity to the MEMX Options Book and transactions that remove 
liquidity from the MEMX Options Book.\8\
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    \6\ MEMX Options will provide fee qualifier ``c'' for Customer 
transactions. MEMX Options will provide fee qualifier ``m'' for 
market maker transactions, fee qualifier ``p'' for professional 
transactions, fee qualifier ``f'' for firm transactions, fee 
qualifier ``a'' for away market maker transactions, and fee 
qualifier ``b'' for broker-dealer transactions. Each of market maker 
transactions, professional transactions, firm transactions, away 
market maker transactions, and broker-dealer transactions shall be 
referred to as ``Non-Customer'' transactions. Fee qualifiers will be 
provided by the Exchange on the monthly invoices provided to Options 
Members.
    \7\ MEMX Options will provide Fee Code ``P'' for transactions in 
Penny options and Fee Code ``N'' for transactions in Non-Penny 
options. Fee Codes will be provided by the Exchange on the monthly 
invoices provided to Options Members.
    \8\ MEMX Options will provide Fee Code ``D'' for transactions 
which add liquidity to the MEMX Options Book, and Fee Code ``R'' for 
transactions that remove liquidity from the MEMX Options Book. Fee 
Codes will be provided by the Exchange on the monthly invoices 
provided to Options Members.
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    Options Members shall be assessed lower transaction fees and 
smaller rebates for order executions in Penny options than for order 
executions in Non-Penny options, for which Members will be assessed 
higher transaction fees and larger rebates. As noted above, Options 
Members shall be assessed fees for removing liquidity from the MEMX 
Options Book and provided rebates for adding liquidity to the MEMX 
Options Book. At this time, the Exchange will not differentiate between 
fees charged and rebates assessed for different types of Non-Customer 
transactions; instead, all Non-Customer transactions (i.e., 
transactions for the accounts of market makers, professionals, firms, 
away market makers, or broker dealers) will be assessed the same fees 
and rebates.
    The Fee Codes and fee qualifiers will be used to make clear to 
Members what rebates were provided to them and which fees were 
assessed.\9\ The Exchange believes that designating the Fee Codes will 
make clear the different types of fees and rebates passed back to 
Members on execution reports and will be useful for the Exchange in 
considering potential pricing modifications as it continues to evaluate 
its pricing structure on an ongoing basis after the launch of MEMX 
Options. The Exchange's Fee Codes and fee qualifiers will assist the 
Exchange and Options Members with financial planning, tracking, and 
reconciliation of invoices generated by the Exchange.
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    \9\ For example, for a Customer order in a Penny option that 
removes liquidity from the MEMX Book, the Exchange would pass back 
the Fee Code RcP. As another example, for a Non-Customer Away Market 
Maker order in a Non-Penny option that adds liquidity to the MEMX 
Book, the Exchange would pass back the Fee Code DaN.
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    Transactions for Customer accounts in Penny options that remove 
liquidity from the MEMX Book will be assessed a fee of $0.46 per 
contract. Transactions for Non-Customer accounts in Penny options that 
remove liquidity will be assessed a fee of $0.50 per contract. 
Transactions for Customer accounts in Non-Penny options that remove 
liquidity from the MEMX Book will be assessed a fee of $0.85 per 
contract. Finally, transactions for Non-Customer accounts in Non-Penny 
options that remove liquidity will be assessed a fee of $1.10 per 
contract. The purpose of the proposed transaction fees is to assess 
right-sized fees for orders that remove liquidity from the Exchange.
    Transactions for Customer accounts in Penny options that add 
liquidity to the MEMX Options Book will receive a rebate of $0.49 per 
contract. Transactions for Non-Customer accounts in Penny options that 
add liquidity will receive a rebate of $0.45 per contract. Transactions 
for Customer accounts in Non-Penny options that add liquidity to the 
MEMX Options Book will receive a rebate of $1.04 per contract. Finally, 
transactions for Non-Customer accounts in Non-Penny options that add 
liquidity will receive a rebate of $0.80 per contract. The purpose of 
the proposed transaction rebates is to provide right-sized incentives 
for Options Members to trade on the Exchange and to incentivize order 
flow to be directed to the Exchange.
    The Exchange does not initially propose to charge tiered fees or 
provide tiered rebates according to the volume of orders submitted to 
MEMX Options. Accordingly, all fees and rebates described above are 
applicable to all Options Members regardless of the overall volume of 
an Options Member's activities on MEMX Options.
Routing Fees
    The Exchange proposes to assess Routing Fees on orders routed to 
other options exchanges. The amount of the applicable fee will be based 
on whether the order is for a Penny or Non-Penny option. At this time, 
the Exchange will not charge different routing fees according to the 
capacity of the order. The Exchange will charge a fee of $0.60 for 
Penny options routed to another options exchange and $1.20 for Non-
Penny options routed to another options exchange.
    The purpose of the proposed Routing Fees is to recoup costs 
incurred by the Exchange when routing orders to other options exchanges 
on behalf of Options Members. In determining its proposed Routing Fees, 
the Exchange took into account transaction fees assessed by other 
options exchanges, the Exchange's projected clearing costs, and the 
projected administrative, regulatory, and technical costs associated 
with routing orders to other options exchanges. The Exchange will use 
its affiliated broker-dealer, MEMX Execution Services, to route orders 
to other options exchanges or to other broker-dealers that will route 
such orders to other options exchanges. Routing services offered by the 
Exchange and its affiliated broker-dealer are completely optional and 
market participants can readily select between various providers of 
routing services, including other exchanges and broker-dealers. The 
proposed structure for routing fees is similar to the fee structure in 
place for routing at various other exchanges.\10\ The Exchange believes 
that the proposed Routing Fees would enable the Exchange to recover the 
costs it incurs to route orders to away markets after taking into 
account the other costs associated with routing orders to other options 
exchanges.
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    \10\ See Exchange Act Release Nos. 97896 (July 13, 2023), 88 FR 
46313 (July 19, 2023) (SR-PEARL-2023-30); 97901 (July 13, 2023), 88 
FR 46202 (July 19, 2023) (SR-EMERALD-2023-15); 85591 (April 10, 
2019), 84 FR 15645 (April 16, 2019) (SR-CboeBZX-2019-024); 91677 
(April 26, 2021), 86 FR 22989 (April 30, 2021) (SR-NASDAQ-2021-021); 
and 97234 (March 31, 2023), 88 FR 20589 (April 6, 2023) (SR-
NYSEARCA-2023-28).
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Definitions
    The Exchange has included a Definitions section within the Options 
Fee Schedule. The purpose of the Definitions section is to streamline 
the Options Fee Schedule by placing many of the defined terms used in 
the Options Fee Schedule in one location. The Definitions section 
defines the terms ``Penny Program Securities'', ``Away Market Maker'', 
``Broker Dealer'', ``Customer'', ``Firm'', ``Market Maker'', and 
``Professional''. Many of the defined terms are also defined in the 
Exchange Rules, particularly in Exchange Rule 16.1. The Exchange notes 
that other exchanges have Definitions sections in

[[Page 67848]]

their respective fee schedules,\11\ and the Exchange believes that 
including such section makes the Options Fee Schedule more readable and 
user-friendly.
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    \11\ See, e.g., the MIAX Pearl Options Fee Schedule, available 
at https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf; the CBOE BZX Options 
Fee Schedule, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx/; and the Nasdaq Options Market Fee 
Schedule, available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Options Fee 
Schedule is consistent with the provisions of Section 6 of the Act,\12\ 
in general, and with Sections 6(b)(4) and 6(b)(5) of the Act,\13\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among Options Members and other 
persons using its facilities. The Exchange also believes the proposal 
furthers the objectives of Section 6(b)(5) of the Act in that it is 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest and is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    Upon its launch, MEMX Options will operate 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.'' \14\
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    \14\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005).
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    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 which the Exchange 
believes would promote price discovery and enhance liquidity and market 
quality on the Exchange to the benefit of all Members and market 
participants.
    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to charge $0.46 for orders for Customer 
accounts that remove liquidity in Penny options, because it is 
comparable to the transaction fees charged by other exchanges for 
Customer transactions that remove liquidity in Penny options.\15\ The 
Exchange further believes that this fee is equitably allocated and not 
unfairly discriminatory because it applies equally to all Options 
Members.
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    \15\ For example, the MIAX Pearl Options trading fee schedule on 
its public website reflects a transaction fee ranging from $0.47-
$0.48 for Customer transactions that remove liquidity in Penny 
options; see https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf. The Cboe BZX 
Options trading fee schedule on its public website reflects a 
transaction fee ranging from $0.46-$0.48 for Customer transactions 
that remove liquidity in Penny options; see https://www.cboe.com/us/options/membership/fee_schedule/bzx/. The Nasdaq Options Market 
trading fee schedule on its public website reflects a transaction 
fee of $0.49 for Customer transactions that remove liquidity in 
Penny options; see https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7. Additionally, the NYSE Arca Options trading 
fee schedule on its public website reflects a transaction fee of 
$0.46-$0.49 for Customer transactions that remove liquidity in Penny 
options; see https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to charge $0.50 for orders for Non-Customer 
accounts in Penny options that remove liquidity because it is 
comparable to the transaction fee charged by other exchanges for Non-
Customer transactions in Penny options that remove liquidity.\16\ The 
Exchange further believes that this fee is equitably allocated and not 
unfairly discriminatory because it applies equally to all Options 
Members.
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    \16\ For example, the MIAX Pearl Options trading fee schedule on 
its public website reflects a transaction fee of $0.50 for Non-
Customer transactions that remove liquidity in Penny options; see 
https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf. Per the Cboe BZX 
Options trading fee schedule on its public website, transactions for 
the accounts of market maker and professional customers that remove 
liquidity in Penny options are assessed a $0.47-$0.50 fee and 
transactions for the accounts of broker dealers that remove 
liquidity in Penny options are assessed a $0.46-$0.50 fee; see 
https://www.cboe.com/us/options/membership/fee_schedule/bzx/. Per 
the Nasdaq Options Market trading fee schedule on its public 
website, transactions for the accounts of firms, broker-dealers, and 
market makers that remove liquidity in Penny options are assessed a 
fee of $0.50 and transactions for the accounts of professional 
customers that remove liquidity in Penny options are assessed a fee 
of $0.49; see https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7. Lastly, per the NYSE Arca Options trading 
fee schedule on its public website, transactions for the accounts of 
market makers, broker-dealers, and professional customers that 
remove liquidity in Penny options are assessed a fee of $0.50; see 
https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to charge $0.85 for orders for Customer 
accounts in Non-Penny options that remove liquidity because it is 
comparable to the transaction fees charged by other exchanges for 
Customer transactions in Non-Penny options that remove liquidity.\17\ 
The Exchange further believes that this fee is equitably allocated and 
not unfairly discriminatory because it applies equally to all Options 
Members.
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    \17\ For example, the MIAX Pearl Options trading fee schedule on 
its public website reflects a transaction fee of $0.85 for Customer 
transactions that remove liquidity in Non-Penny options; see https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf. Similarly, the Cboe 
BZX Options trading fee schedule on its public website also reflects 
a $0.85 transaction fee for Customer transactions that remove 
liquidity in Non-Penny options; see https://www.cboe.com/us/options/membership/fee_schedule/bzx/. Similarly, the Nasdaq Options Market 
trading fee schedule on its public website also reflects a $0.85 
transaction fee for Customer transactions that remove liquidity in 
Non-Penny options; see https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7. Lastly and similarly, the NYSE Arca 
Options trading fee schedule on its public website reflects a $0.85 
transaction fee for Customer transactions that remove liquidity in 
Non-Penny options; see https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to charge $1.10 for orders in Non-Customer 
accounts in Non-Penny options that remove liquidity because it is 
comparable to the transaction fees charged by other exchanges for Non-
Customer transactions in Non-Penny options that remove liquidity.\18\ 
The Exchange

[[Page 67849]]

further believes that this fee is equitably allocated and not unfairly 
discriminatory because it applies equally to all Options Members.
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    \18\ For example, per the MIAX Pearl Options trading fee 
schedule on its public website, transactions for the accounts of 
market makers that remove liquidity in Non-Penny options are 
assessed a $1.07-$1.10 fee and transactions for the accounts of 
professional customers, firms, and broker-dealers that remove 
liquidity in Non-Penny options are assessed a $1.09-$1.10 fee; see 
https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf. Per the Cboe BZX 
Options trading fee schedule on its public website, transactions for 
the accounts of market makers, firms, broker-dealers, and 
professional customers that remove liquidity in Non-Penny options 
are assessed a $1.07-$1.10 fee; see https://www.cboe.com/us/options/membership/fee_schedule/bzx/. Per the Nasdaq Options Market trading 
fee schedule on its public website, transactions for the accounts of 
market makers, broker-dealers, and firms that remove liquidity in 
Non-Penny options are assessed a $1.10 fee and transactions for the 
accounts of professional customers that remove liquidity in Non-
Penny options are assessed a $0.85 fee; see https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7. 
Lastly, per the NYSE Arca Options trading fee schedule on its public 
website, transactions for the accounts of market makers, firms, 
broker-dealers, and professional customers that remove liquidity in 
Non-Penny options are assessed a $1.10 fee; see https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to provide a rebate of $0.49 for orders for 
Customer accounts in Penny options that add liquidity because it is 
comparable to the rebate provided by other exchanges for Customer 
transactions in Penny options that add liquidity.\19\ The Exchange 
further believes that this rebate is equitably allocated and not 
unfairly discriminatory because all Options Members are equally 
eligible for the rebate. The Exchange believes that the rebate is 
reasonably designed to attract order flow to MEMX Options, which the 
Exchange believes would promote price discovery, enhance liquidity and 
market quality, and contribute to a more robust and well-balanced 
market ecosystem on the Exchange to the benefit of all Members and 
market participants.
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    \19\ For example, the MIAX Pearl Options trading fee schedule on 
its public website reflects a rebate ranging from $0.25-$0.52 for 
Customer transactions that add liquidity in Penny options; see 
https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf. The Cboe BZX Options 
trading fee schedule on its public website reflects a rebate ranging 
from $0.25-$0.53 for Customer transactions that add liquidity in 
Penny options; see https://www.cboe.com/us/options/membership/fee_schedule/bzx/. The Nasdaq Options Market trading fee schedule on 
its public website reflects a rebate ranging from $0.20-$0.48 for 
Customer transactions that add liquidity in Penny options; see 
https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to provide a rebate of $0.45 for orders for 
Non-Customer accounts in Penny options that add liquidity because it is 
comparable to the rebate provided by other exchanges for Non-Customer 
transactions in Penny options that add liquidity.\20\ The Exchange 
further believes that this rebate is equitably allocated and not 
unfairly discriminatory because all Options Members are equally 
eligible for the rebate. The Exchange believes that the rebate is 
reasonably designed to attract order flow to MEMX Options, which the 
Exchange believes would promote price discovery, enhance liquidity and 
market quality, and contribute to a more robust and well-balanced 
market ecosystem on the Exchange to the benefit of all Members and 
market participants.
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    \20\ For example, per the MIAX Pearl Options trading fee 
schedule on its public website, transactions for the accounts of 
market makers that add liquidity in Penny options with a Priority 
Customer on the contra side are provided a $0.22-$0.46 rebate, and 
transactions for the accounts of professional customers and firms 
that add liquidity in Penny options with a non-Priority Customer on 
the contra side are provided a $0.25-$0.48 rebate; see https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf. Per the Cboe BZX 
Options trading fee schedule on its public website, transactions for 
the accounts of market makers that add liquidity in Penny options 
are provided a $0.29-$0.38 rebate, transactions for the accounts of 
professional customers that add liquidity in Penny options are 
provided a $0.25-$0.48 rebate, and transactions for the account of 
firms and broker-dealers that add liquidity in Penny options are 
provided a $0.25-$0.46 rebate; see https://www.cboe.com/us/options/membership/fee_schedule/bzx/. Per the Nasdaq Options Market trading 
fee schedule on its public website, transactions for the accounts of 
market makers that add liquidity in Penny options are provided a 
$0.20-$0.48 rebate, and transactions for the accounts of 
professional customers that add liquidity in Penny options are 
provided a $0.20-$0.47 rebate; see https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to provide a rebate of $1.04 for orders for 
Customer accounts in Non-Penny options that add liquidity because it is 
comparable to the rebate provided by other exchanges for Customer 
transactions in Non-Penny options that add liquidity.\21\ The Exchange 
further believes that this rebate is equitably allocated and not 
unfairly discriminatory because all Options Members are equally 
eligible for the rebate. The Exchange believes that the rebate is 
reasonably designed to attract order flow to MEMX Options, which the 
Exchange believes would promote price discovery, enhance liquidity and 
market quality, and contribute to a more robust and well-balanced 
market ecosystem on the Exchange to the benefit of all Members and 
market participants.
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    \21\ For example, per the MIAX Pearl Options trading fee 
schedule on its public website, Customer transactions that add 
liquidity in Non-Penny options are provided a $0.85-$1.04 rebate; 
see https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf. Per the Cboe BZX 
Options trading fee schedule on its public website, Customer 
transactions that add liquidity in Non-Penny options are provided a 
$0.85-$1.05 rebate; see https://www.cboe.com/us/options/membership/fee_schedule/bzx/. Per the Nasdaq Options Market trading fee 
schedule on its public website, Customer transactions that add 
liquidity in Non-Penny options are provided a $0.80-$1.10 rebate; 
see https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7. Lastly, per the NYSE Arca Options trading fee schedule on 
its public website, Customer transactions that add liquidity in Non-
Penny options are provided a $0.75 rebate; see https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to provide a rebate of $0.80 for orders for 
Non-Customer accounts in Non-Penny options that add liquidity because 
it is comparable to the rebate provided by other exchanges for Non-
Customer transactions in Non-Penny options that add liquidity.\22\ The 
Exchange further believes that this rebate is equitably allocated and 
not unfairly discriminatory because all Options Members are equally 
eligible for the rebate. The Exchange believes that the rebate is 
reasonably designed to attract order flow to MEMX Options, which the 
Exchange believes would promote price discovery, enhance liquidity and 
market quality, and contribute to a more robust and well-balanced 
market ecosystem on the Exchange to the benefit of all Members and 
market participants.
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    \22\ For example, per the MIAX Pearl Options trading fee 
schedule on its public website, transactions for the accounts of 
market makers that add liquidity in Non-Penny options are provided a 
$0.30-$0.85 rebate and transactions for the accounts of professional 
customers and firms that add liquidity in Non-Penny options are 
provided a $0.30-$0.85 rebate; see https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Options_Fee_Schedule_08082023.pdf. Per the Cboe BZX 
Options trading fee schedule on its public website, transactions for 
the accounts of market makers that add liquidity in Non-Penny 
options are provided a $0.40-$0.88 rebate, transactions for the 
accounts of professional customers that add liquidity in Non-Penny 
options are provided a $0.65 rebate, transactions for the accounts 
of away market makers that add liquidity in Non-Penny options are 
provided a $0.30-$0.52 rebate, and transactions for the accounts of 
firms and broker-dealers that add liquidity in Non-Penny options are 
provided a $0.30-$0.82 rebate; see https://www.cboe.com/us/options/membership/fee_schedule/bzx/. Lastly, per the NYSE Arca Options 
trading fee schedule on its public website, transactions for the 
accounts of market makers that add liquidity in Non-Penny options 
are provided a $0.05-0.40 rebate and transactions for the accounts 
of professional customers that add liquidity in Non-Penny options 
are provided a $0.75 rebate; see https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to charge fees of $0.60 for routing in Penny 
options and $1.20 for routing in Non-Penny options, because these 
routing fees are comparable to those charged by other exchanges for 
routing Penny and Non-Penny options to away exchanges.\23\ 
Additionally, the

[[Page 67850]]

Exchange believes these fees are equitable and not unfairly 
discriminatory because these fees will apply equally to all Options 
Members.
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    \23\ For example, per the NYSE Arca Options trading fee schedule 
on its public website, the fee for routing in Penny options is $0.61 
and the fee for routing in Non-Penny options is $1.21; see https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf.
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    Lastly, the Exchange believes that it is reasonable to add a 
definitions section to clarify the terms used in the Options Fee 
Schedule, because it will clearly set forth the terms used in the 
Transaction Fees portion of the Options Fee Schedule. The Exchange 
further believes the definition section is reasonable as other national 
securities exchanges include a definition section in their fee 
schedule.\24\ The Exchange believes this section is equitable and not 
unfairly discriminatory because the definitions section (as part of the 
Options Fee Schedule) will be distributed to all Members so that all 
Members will have equal clarity on fees charged and rebates provided.
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    \24\ See supra note 11.
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    For the reasons discussed above, the Exchange submits that its 
proposed fee structure and changes to the Options Transaction Fee 
Schedule 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. As a new entrant in the already 
highly competitive environment for options trading, the Exchange 
believes that the proposed changes would encourage the submission of 
additional order flow to a public exchange, thereby promoting market 
depth, execution incentives and enhanced execution opportunities, as 
well as price discovery and transparency for all Members. MEMX Options 
proposes transaction fees, rebates, and routing fees that are 
comparable to transaction fees, rebates and routing fees assessed by 
other options exchanges. As a result, 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 14.
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Intramarket Competition
    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed fees and rebates apply equally to all Options Members. The 
proposed pricing structure is intended to encourage participants to 
trade on MEMX Options by providing rebates that are comparable to those 
offered by other exchanges as well as providing competitive fees. The 
Exchange believes that the proposed rebates and fees will help to 
encourage Options Members to send orders to the Exchange to the benefit 
of all Exchange participants. As the proposed fees and rebates are 
equally applicable to all market participants, the Exchange does not 
believe there is any burden on intramarket competition.
Intermarket Competition
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes that the proposed pricing structure will increase 
competition and is intended to draw volume to the Exchange as it 
commences operations. 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. 
Currently, no single registered options exchange has more than 
approximately 18% of the total market share of executed volume of 
listed options trading.\27\ As a new exchange, the Exchange expects to 
face intense competition from existing exchanges. The proposed pricing 
structure is intended to encourage market participants to trade on the 
exchange by providing rebates and assessing fees that are comparable to 
those offered by other exchanges, which the Exchange believes will help 
to encourage Members to send orders to the Exchange to the benefit of 
all Exchange participants. As the proposed rates are equally applicable 
to all market participants, the Exchange does not believe there is any 
burden on intramarket competition.
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    \27\ Market share percentage calculated as of September 14, 
2023. The Exchange receives and processes data made available 
through the consolidated data feeds (i.e., OPRA).
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    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.'' \28\ 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'. . . .''.\29\ 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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    \28\ See supra note 14.
    \29\ 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.

[[Page 67851]]

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 \30\ and Rule 19b-4(f)(2) \31\ thereunder.
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    \30\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \31\ 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-2023-24 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-MEMX-2023-24. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MEMX-2023-24 and should be 
submitted on or before October 23, 2023.
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    \32\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21625 Filed 9-29-23; 8:45 am]
BILLING CODE 8011-01-P