Document ID: SEC-2021-1072-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MEMX, LLC
Posted Date: 2021-08-11T04:00Z

[Federal Register Volume 86, Number 152 (Wednesday, August 11, 2021)]
[Notices]
[Pages 44110-44116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17085]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92579; File No. SR-MEMX-2021-09]

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

August 5, 2021.
    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 August 2, 2021, 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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[[Page 44111]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to amend the Exchange's fee schedule applicable to Members \3\ (the 
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The 
Exchange proposes to implement the changes to the Fee Schedule pursuant 
to this proposal on August 2, 2021. The text of the proposed rule 
change is provided in Exhibit 5.
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    \3\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Fee 
Schedule to: (i) Adopt a new Liquidity Removal Tier applicable to the 
fees charged for executions of orders in securities priced at or above 
$1.00 per share that remove liquidity from the Exchange (such orders, 
``Removed Volume''); (ii) increase the standard fee for executions of 
Removed Volume; and (iii) allow affiliated Members to aggregate their 
volume for purposes of the Exchange's pricing tiers with prior notice 
to the Exchange.\4\
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    \4\ The Exchange initially filed the proposed Fee Schedule 
changes on July 30, 2021 (SR-MEMX-2021-08). On August 2, 2021, the 
Exchange withdrew that filing and submitted this proposal.
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 16% of the total market share of 
executed volume of equities trading.\5\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange 
possesses significant pricing power in the execution of order flow, and 
the Exchange currently represents approximately 3% of the overall 
market share.\6\
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    \5\ Market share percentage calculated as of July 30, 2021. The 
Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \6\ Id.
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Adoption of Liquidity Removal Tier
    The Exchange is proposing to introduce a tiered pricing structure 
applicable to the fees charged for executions of Removed Volume, which 
is similar to the Exchange's existing tiered pricing structure 
applicable to the rebates provided for executions of displayed orders 
in securities priced at or above $1.00 per share that add liquidity to 
the Exchange (``Added Displayed Volume'').\7\ Specifically, the 
Exchange proposes to adopt a new volume-based tier, referred to by the 
Exchange as the Liquidity Removal Tier, in which the Exchange will 
charge a fee that is lower than the standard fee for executions of 
Removed Volume for Members that meet at least one of two specified 
volume thresholds on the Exchange, as described below.
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    \7\ The Exchange currently provides an enhanced rebate for 
executions of Added Displayed Volume to Members that meet a 
specified volume threshold under the Exchange's Liquidity Provision 
Tier. See Securities Exchange Act Release No. 92150 (June 10, 2021), 
86 FR 32090 (June 16, 2021) (SR-MEMX-2021-07).
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    Currently, the Exchange charges a standard fee of $0.00265 per 
share for all executions of Removed Volume, which the Exchange is 
proposing to increase to $0.0028, as further described below. The 
Exchange now proposes to adopt the Liquidity Removal Tier in which it 
will charge a lower fee of $0.00265 per share for executions of Removed 
Volume for Members that qualify for the Liquidity Removal Tier by 
achieving: (1) A Step-Up ADAV \8\ from July 2021 that is equal to or 
greater than 0.05% of the TCV; \9\ or (2) an ADV \10\ that is equal to 
or greater than 0.30% of the TCV.\11\ As proposed, ADV and Step-Up ADAV 
will be calculated on a monthly basis, and Members that qualify for the 
Liquidity Removal Tier by achieving at least one of the Step-Up ADAV or 
ADV thresholds specified above in a particular month will be charged 
the proposed lower fee of $0.00265 per share, instead of the proposed 
standard fee of $0.0028 per share, for all executions of Removed Volume 
in that month.
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    \8\ As proposed, the term ``Step-Up ADAV'' means ADAV in the 
relevant baseline month subtracted from current ADAV. As set forth 
on the Fee Schedule, ``ADAV'' means the average daily added volume 
calculated as the number of shares added per day, which is 
calculated on a monthly basis.
    \9\ As proposed, the term ``TCV'' means total consolidated 
volume calculated as the volume reported by all exchanges and trade 
reporting facilities to a consolidated transaction reporting plan 
for the month for which the fees apply.
    \10\ As proposed, the term ``ADV'' means average daily volume 
calculated as the number of shares added or removed, combined, per 
day.
    \11\ This proposed pricing is referred to by the Exchange on the 
Fee Schedule under the new description ``Removed volume, Liquidity 
Removal Tier'' with a Fee Code of ``R1'' to be provided by the 
Exchange on the monthly invoices provided to Members. The Exchange 
notes that because the determination of whether a Member qualifies 
for the Liquidity Removal Tier for a particular month will not be 
made until after the month-end, the Exchange will provide the Fee 
Code otherwise applicable to such transactions (i.e., ``R'') on the 
execution reports provided to Members during the month and will only 
designate the Fee Code of ``R1'' on the monthly invoices, which are 
provided after such determination has been made.
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    The Exchange proposes to charge Members that qualify for the 
Liquidity Removal Tier a fee of 0.05% of the total dollar value of the 
transaction for executions of orders that remove liquidity from the 
Exchange in securities priced below $1.00 per share, which is the same 
fee that would be applicable to such executions for Members that do not 
qualify for the Liquidity Removal Tier. Thus, as under the Exchange's 
current pricing, the same fee would be charged to all Members for 
executions of orders that remove liquidity from the Exchange in 
securities priced below $1.00 per share.
    The Exchange proposes to add definitions of the terms ADV, Step-Up 
ADAV, and TCV, which are consistent with the definitions of those terms 
above, under a new ``Definitions'' section of the Fee Schedule in 
connection with the proposed Liquidity Removal Tier.\12\ The Exchange 
notes that the proposed definitions of ADV, Step-Up ADAV, and TCV are 
substantially similar to the definitions of those terms used by other 
exchanges on their fee schedules in connection with similar volume-
based pricing tiers.\13\ Additionally, like the Exchange

[[Page 44112]]

currently does with respect to its calculation of ADAV and for purposes 
of determining qualification for the Exchange's Displayed Liquidity 
Incentive, the Exchange proposes to exclude from its calculations of 
ADV and TCV: (1) Any trading day that the Exchange's system experiences 
a disruption that lasts for more than 60 minutes during regular trading 
hours (``Exchange System Disruption Days''); and (2) the day that 
Russell Investments reconstitutes its family of indexes (the ``Russell 
Reconstitution Day'').\14\ The Exchange also proposes to specify on the 
Fee Schedule that routed shares are not included in the calculation of 
ADAV or ADV.\15\
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    \12\ The Exchange also proposes to relocate the definition of 
``ADAV'' from the ``Notes'' section to the proposed new 
``Definitions'' section of the Fee Schedule for organization 
purposes.
    \13\ See, e.g., the Cboe EDGX Exchange, Inc. (``Cboe EDGX'') 
equities trading fee schedule on its public website (available at 
https://www.cboe.com/us/equities/membership/fee_schedule/edgx/); the 
Cboe BZX Exchange, Inc. (``Cboe BZX'') equities trading fee schedule 
on its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/).
    \14\ The Exchange notes that excluding such days from the 
calculations of ADV and TCV is also consistent with the practice of 
other exchanges when calculating ADV and TCV. See id.
    \15\ The Exchange currently excludes routed shares in the 
calculation of ADAV so this proposed change is clarifying this 
practice and also adopting it for the calculation of ADV. The 
Exchange notes that excluding routed shares from the calculations of 
ADAV and ADV is also consistent with the practice of other exchanges 
when calculating ADAV and ADV. See, e.g., the Cboe BZX equities 
trading fee schedule on its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/).
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    The Exchange believes that the proposed Liquidity Removal Tier 
provides an incremental incentive for Members to strive for higher ADAV 
on the Exchange and/or maintain or strive for higher ADV on the 
Exchange in order to qualify for the proposed lower fee for executions 
of Removed Volume. As such, the proposed Liquidity Removal Tier is 
designed to encourage Members to maintain or increase their order flow 
directed to the Exchange, thereby contributing to a deeper and more 
liquid market to the benefit of all market participants and enhancing 
the attractiveness of the Exchange as a trading venue. The Exchange 
notes that the proposed lower fee for executions of Removed Volume 
applicable to Members that qualify for the Liquidity Removal Tier 
(i.e., $0.00265 per share) is comparable to, and competitive with, the 
fees charged for executions of liquidity-removing orders charged by at 
least one other exchange under similar volume-based tiers.\16\
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    \16\ See the Cboe EDGX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/feeschedule/edgx/), which reflects fees charged under 
``Remove Volume Tiers''--tiers based on a member achieving certain 
step-up ADAV and ADV volume thresholds--ranging from $0.0027 to 
$0.00275 per share for removing volume from the Cboe EDGX exchange.
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Increased Standard Fee for Removed Volume
    In connection with the proposed adoption of the Liquidity Removal 
Tier, the Exchange also proposes to increase the standard fee charged 
for executions Removed Volume. Currently, the Exchange charges a 
standard fee of $0.00265 per share for executions of Removed Volume. 
The Exchange now proposes to increase the standard fee charged for 
executions of Removed Volume to $0.0028 per share.\17\ The Exchange 
notes that Members would still be able to pay a fee of $0.00265 per 
share for executions of Removed Volume by qualifying for the proposed 
Liquidity Removal Tier, as described above.
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    \17\ This proposed pricing is referred to by the Exchange on the 
Fee Schedule under the existing description ``Removed volume from 
MEMX Book'' and such orders will continue to receive a Fee Code of 
``R'' assigned by the Exchange.
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    The purpose of increasing the standard fee for executions of 
Removed Volume is for business and competitive reasons, as the Exchange 
believes that increasing such fee as proposed would generate additional 
revenue to offset some of the costs associated with the Exchange's 
current pricing structure, which provides various rebates for 
liquidity-adding orders, and the Exchange's operations generally, in a 
manner that is consistent with the Exchange's overall pricing 
philosophy of encouraging added liquidity. The Exchange notes that 
despite the modest increase proposed herein, the Exchange's standard 
fee for executions of Removed Volume remains lower than, and 
competitive with, the standard fee to remove liquidity in securities 
priced at or above $1.00 per share charged by several other 
exchanges.\18\
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    \18\ See, e.g., the Cboe BZX equities trading fee schedule on 
its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a standard 
fee of $0.0030 per share to remove liquidity in securities priced at 
or above $1.00 per share; the Cboe EDGX equities trading fee 
schedule on its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/), which 
reflects a standard fee of $0.00285 per share to remove liquidity in 
securities priced at or above $1.00 per share; the Nasdaq Price 
List--Trading Connectivity (available at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a standard fee of 
$0.0030 per share to remove liquidity in securities priced at or 
above $1.00 per share.
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Allow Members To Aggregate Volume for Pricing Tiers
    Lastly, the Exchange proposes to add a note to the Fee Schedule to 
allow affiliated Members to aggregate their volume for purposes of the 
Exchange's determination of ADAV and ADV with respect to pricing tiers 
if such Members provide prior notice to the Exchange. Specifically, to 
the extent that two or more affiliated companies maintain separate 
memberships with the Exchange and can demonstrate their affiliation by 
showing they control, are controlled by, or are under common control 
with each other, the Exchange would permit such Members to count 
aggregate volume of such affiliates in calculating ADAV and ADV. As 
proposed, the Exchange will verify such affiliation using a Member's 
Form BD, which lists control affiliates. The purpose of this proposed 
change is to avoid disparate treatment of firms that have divided their 
various business activities between separate corporate entities as 
compared to firms that operate those business activities within a 
single corporate entity, as allowing affiliated Member firms to count 
their aggregate volume in calculating ADAV and ADV would produce the 
same result for purposes of the Exchange's volume-based tier pricing as 
if such affiliated Member firms were instead organized as a single 
corporate entity. The Exchange notes that this proposed change is 
consistent with the practice of other exchanges with respect to the 
aggregation of affiliated member firms' volume for purposes of ADAV and 
ADV calculations with respect to pricing tiers.\19\
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    \19\ See supra note 13.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\20\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\21\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its Members and other persons using its facilities 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \20\ 15 U.S.C. 78f.
    \21\ 15 U.S.C. 78f(b)(4) and (5).
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    As discussed above, the Exchange operates in a highly fragmented 
and competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive or incentives to be insufficient, and the 
Exchange represents only a small percentage of the overall market. The 
Commission and the courts have repeatedly expressed their preference 
for competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS,

[[Page 44113]]

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.'' \22\
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    \22\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005).
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal reflects a reasonable and competitive pricing structure 
designed to incentivize market participants to direct their order flow 
to the Exchange, which the Exchange believes would enhance liquidity 
and market quality to the benefit of all Members and market 
participants.
Adoption of Liquidity Removal Tier
    The Exchange believes that the proposed Liquidity Removal Tier is 
reasonable because it would provide Members with an additional 
incentive to achieve certain volume thresholds on the Exchange. Volume-
based incentives and discounts have been widely adopted by exchanges, 
including the Exchange,\23\ and are equitable and not unfairly 
discriminatory because they are open to all Members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to the value to an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and/or growth patterns and the introduction of higher volumes 
of orders into the price and volume discovery processes. The Exchange 
believes the proposed Liquidity Removal Tier is equitable and not 
unfairly discriminatory for these same reasons, as it is open to all 
Members and is designed to encourage Members to maintain or increase 
their order flow directed to the Exchange, thereby contributing to a 
deeper and more liquid market to the benefit of all market participants 
and enhancing the attractiveness of the Exchange as a trading venue. 
Moreover, the Exchange believes the proposed Liquidity Removal Tier is 
a reasonable means to incentivize such increased activity, as it 
provides two different types of volume thresholds that Members may 
choose to achieve in order to receive the proposed lower fee for 
executions of Removed Volume--a Step-Up ADAV threshold, which can be 
met by a Member increasing their liquidity-adding volume on the 
Exchange (i.e., ADAV) by at least the specified threshold above their 
July 2021 ADAV, and an ADV threshold, which can be met by a Member 
maintaining or increasing their overall (i.e., liquidity-adding and 
liquidity-removing) volume executed on the Exchange to an amount equal 
to or greater than the specified TCV threshold. Thus, Members that do 
not increase their ADAV above their July 2021 ADAV by at least 0.05% of 
the TCV could still qualify for the Liquidity Removal Tier by 
maintaining or increasing their ADV at or above 0.30% of the TCV, and 
vice versa.
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    \23\ See supra note 7.
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    Additionally, the Exchange believes the proposed lower fee for 
executions of Removed Volume for qualifying Members (i.e., $0.00265 per 
share) is reasonable, in that it represents only a modest decrease from 
the proposed standard fee for such executions (i.e., $0.0028 per share) 
and is the same as the current standard fee for such executions. The 
Exchange believes that it is reasonable, consistent with an equitable 
allocation of fees, and not unfairly discriminatory to charge such 
lower fee for executions of Removed Volume to Members that qualify for 
the Liquidity Removal Tier in comparison with the standard fee in 
recognition of the benefits that such Members provide to the Exchange 
and market participants, as described above, particularly as the 
magnitude of the lower fee is not unreasonably high and is, instead, 
reasonably related to the enhanced market quality it is designed to 
achieve. Further, as noted above, competing exchanges offer tiered 
pricing structures similar to the proposed Liquidity Removal Tier, 
including schedules of rebates and fees that apply based upon Members 
achieving certain volume and/or growth thresholds, and the Exchange 
believes the proposed Liquidity Removal Tier's criteria are reasonable 
when compared to such tiers provided for by other exchanges. For 
example, Cboe EDGX charges lower fees for removing volume from the Cboe 
EDGX exchange under its ``Remove Volume Tiers'' ranging from $0.0027 to 
$0.00275 per share, as compared to its standard fee of $0.00285 per 
share, but requires different, but similar, criteria than the 
Exchange's proposed Liquidity Removal Tier, which are also based upon a 
member's volume and/or growth patterns.\24\
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    \24\ See the Cboe EDGX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
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    The Exchange further believes that it is reasonable, consistent 
with an equitable allocation of fees, and not unfairly discriminatory 
to charge Members that qualify for the Liquidity Removal Tier a fee of 
0.05% of the total dollar value of the transaction for executions of 
orders that remove liquidity from the Exchange in securities priced 
below $1.00 per share, as this is the same fee that would be applicable 
to such executions for all Members (i.e., including those that do not 
qualify for the Liquidity Removal Tier), which is also the case under 
the Exchange's current pricing.
    The Exchange also believes the proposed Liquidity Removal Tier is 
fair, equitable, and not unfairly discriminatory because it is 
available to all Members. Further, the proposed Liquidity Removal Tier 
would provide a way for Members to continue to pay the same fee they 
currently do for executions of Removed Volume (i.e., $0.00265 per 
share) even though the Exchange is proposing to increase the standard 
fee to $0.0028 per share. Additionally, as noted above, such fee is 
comparable to the fees charged for executions of liquidity-removing 
orders charged by Cboe EDGX under similar volume-based tiers.\25\
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    \25\ Id.
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    The Exchange believes that adding the proposed definitions for the 
terms ADV, Step-Up ADAV, and TCV, as well as relocating the definition 
of ADAV, under a new ``Definitions'' section of the Fee Schedule is 
reasonable, equitable, and non-discriminatory because such definitions 
are substantially similar to the definitions of such terms used by 
other exchanges in connection with similar volume-based pricing tiers, 
as described above,\26\ and their placement on the Fee Schedule is 
designed to ensure that the Fee Schedule is as clear and understandable 
as possible with respect to applicable pricing. Similarly, the Exchange 
believes that adding notes on the Fee Schedule specifying that routed 
shares are not included in the calculation of ADAV or ADV and that 
Exchange System Disruption Days and the Russell Reconstitution Day are 
excluded from the calculations of ADV and TCV is reasonable, equitable, 
and

[[Page 44114]]

non-discriminatory as such notes are intended to clarify the Exchange's 
calculation practices with respect to its volume-based pricing tiers, 
and such practices are consistent with the practices of other exchanges 
in this regard.\27\
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    \26\ See supra note 13.
    \27\ See supra notes 14-15.
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Increased Standard Fee for Removed Volume
    The Exchange believes that the proposed change to increase the 
standard fee for executions of Removed Volume is reasonable, equitable, 
and consistent with the Act because such change is designed to generate 
additional revenue and decrease the Exchange's expenditures with 
respect to transaction pricing in order to offset some of the costs 
associated with the various rebates provided by the Exchange for 
liquidity-adding orders and the Exchange's operations generally, in a 
manner that is consistent with the Exchange's overall pricing 
philosophy of encouraging added liquidity, as described above. The 
Exchange also believes the proposed increased standard fee for 
executions of Removed Volume is reasonable and appropriate because it 
represents a modest increase from the current standard fee and, as 
noted above, remains lower than, and competitive with, the standard fee 
charged by several other exchanges to remove liquidity in securities 
priced at or above $1.00 per share.\28\ The Exchange further believes 
that the proposed increased standard fee for executions of Removed 
Volume is equitably allocated and not unfairly discriminatory because 
it will apply equally to all Members.
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    \28\ See supra note 18.
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Allow Members To Aggregate Volume for Pricing Tiers
    As noted above, the proposed language permitting aggregation of 
volume amongst affiliated Members for purposes of the ADAV and ADV 
calculations is intended to avoid disparate treatment of firms that 
have divided their various business activities between separate 
corporate entities as compared to firms that operate those business 
activities within a single corporate entity, as allowing affiliated 
Member firms to count their aggregate volume in calculating ADAV and 
ADV would produce the same result for purposes of the Exchange's 
volume-based tier pricing as if such affiliated Member firms were 
instead organized as a single corporate entity. By way of example, 
subject to appropriate information barriers, many firms that are 
Members of the Exchange operate both a market making desk and a public 
customer business within the same corporate entity. In contrast, other 
firms may be part of a corporate structure that separates those 
business lines into different corporate affiliates, either for 
business, compliance or historical reasons. Those corporate affiliates, 
in turn, are required to maintain separate memberships with the 
Exchange. Absent the proposed policy, such corporate affiliates would 
not receive the same treatment as firms operating similar business 
lines within a single entity that is a Member of the Exchange. 
Accordingly, the Exchange believes that its proposed policy is fair and 
equitable, and not unreasonably discriminatory. In addition to ensuring 
fair and equal treatment of its Members, the Exchange does not want to 
create incentives for its Members to restructure their business 
operations or compliance functions simply due to the Exchange's pricing 
structure. Moreover, as noted above, this proposed policy is consistent 
with the practice of other exchanges with respect to the aggregation of 
affiliated Members' volume for purposes of determining ADAV and ADV 
with respect to pricing tiers.\29\
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    \29\ See supra note 13.
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    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of 
the Act 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.

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

    The Exchange does not believe that the proposal will result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Instead, as discussed above, 
the proposal is intended to encourage Members to maintain or increase 
their order flow on the Exchange, thereby contributing to a deeper and 
more liquid market to the benefit of all market participants and 
enhancing the attractiveness of the Exchange as a trading venue. As a 
result, the Exchange believes the proposal would enhance its 
competitiveness as a market that attracts actionable orders, thereby 
making it a more desirable destination venue for its customers. For 
these reasons, the Exchange believes that the proposal furthers the 
Commission's goal in adopting Regulation NMS of fostering competition 
among orders, which promotes ``more efficient pricing of individual 
stocks for all types of orders, large and small.'' \30\
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    \30\ See supra note 22.
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Intramarket Competition
    The Exchange believes that the proposal would incentivize Members 
to maintain or increase their order flow on the Exchange, thereby 
contributing to a deeper and more liquid market to the benefit of all 
market participants and enhancing the attractiveness of the Exchange as 
a trading venue, which the Exchange believes, in turn, would continue 
to encourage market participants to direct additional order flow to the 
Exchange. Greater liquidity benefits all Members by providing more 
trading opportunities and encourages Members to send additional orders 
to the Exchange, thereby contributing to robust levels of liquidity, 
which benefits all market participants. The opportunity to qualify for 
the Liquidity Removal Tier, and thus receive the proposed lower fee for 
executions of Removed Volume, would be available to all Members that 
meet the associated volume requirement in any month. The Exchange 
believes that meeting the volume requirement of the Liquidity Removal 
Tier is attainable for several market participants, as Members must 
meet only one of two different types of volume thresholds, as described 
above, and the Exchange believes such thresholds are relatively low and 
reasonably related to the enhanced liquidity and market quality that 
the Liquidity Removal Tier is designed to promote. Similarly, the 
proposed increased standard fee for executions of Removed Volume and 
the ability for Members to aggregate volume amongst affiliated Member 
firms for purposes of the Exchange's determination of ADAV and ADV with 
respect to pricing tiers would apply equally to all Members. As such, 
the Exchange believes the proposed changes would not impose any burden 
on intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Intermarket Competition
    As noted above, the Exchange operates in a highly competitive 
market in which market participants can

[[Page 44115]]

readily direct order flow to competing venues if they deem fee levels 
at a particular venue to be excessive or incentives to be insufficient. 
Members have numerous alternative venues that they may participate on 
and direct their order flow to, including 15 other equities exchanges 
and numerous alternative trading systems and other off-exchange venues. 
As noted above, no single registered equities exchange currently has 
more than approximately 16% of the total market share of executed 
volume of equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates, including with respect to executions of 
Removed Volume, and market participants can readily choose to send 
their orders to other exchange and off-exchange venues if they deem fee 
levels at those other venues to be more favorable.
    As described above, the proposed Liquidity Removal Tier and the 
proposed increased standard fee for executions of Removed Volume are 
competitive proposals through which the Exchange is seeking to 
encourage additional order flow to be sent to the Exchange and generate 
additional revenue to offset some of the costs associated with the 
Exchange's current pricing structure and its operations generally, and 
such proposed rates applicable to executions of Removed Volume are 
comparable to, and competitive with, rates charged by other 
exchanges.\31\ As noted above, the proposed rate applicable to 
executions of orders in securities priced at or above $1.00 per share 
for Members that qualify for the Liquidity Removal Tier would be the 
same rate applicable to such executions for all Members, as is the case 
under the Exchange's current pricing. Additionally, the proposed change 
to allow affiliated Members to aggregate their volume for purposes of 
the Exchange's determination of ADAV and ADV with respect to pricing 
tiers is designed to avoid disparate treatment of firms that have 
divided their various business activities between separate corporate 
entities as compared to firms that operate those business activities 
within a single corporate entity, which is consistent with the practice 
of other exchanges, as discussed above.\32\ Accordingly, the Exchange 
believes the proposal would not burden, but rather promote, intermarket 
competition by enabling it to better compete with other exchanges that 
offer similar volume-based incentives and pricing with respect to 
executions of Removed Volume and volume aggregation amongst affiliates 
with respect to pricing tiers.
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    \31\ See supra notes 18 and 24.
    \32\ See supra note 13.
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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.'' \33\ 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' . . . .''.\34\ 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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    \33\ See supra note 22.
    \34\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \35\ and Rule 19b-4(f)(2) \36\ thereunder.
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    \35\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \36\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MEMX-2021-09 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-2021-09. 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 (http://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 44116]]

printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MEMX-2021-09 and should be 
submitted on or before September 1, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-17085 Filed 8-10-21; 8:45 am]
BILLING CODE 8011-01-P