Document ID: SEC-2022-0495-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MEMX, LLC
Posted Date: 2022-04-11T04:00Z

[Federal Register Volume 87, Number 69 (Monday, April 11, 2022)]
[Notices]
[Pages 21232-21246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07627]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94614; File No. SR-MEMX-2022-03]

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

April 5, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 24, 2022, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to amend the Exchange's fee schedule applicable to Members \3\ and non-
Members (the ``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and 
(c). The Exchange proposes to implement the changes to the Fee Schedule 
pursuant to this proposal on April 1, 2022. 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

[[Page 21233]]

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
Background
    The purpose of the proposed rule change is to amend the Fee 
Schedule to adopt fees the Exchange will charge to Members and non-
Members for each of its three proprietary market data feeds, namely 
MEMOIR Depth, MEMOIR Top, and MEMOIR Last Sale (collectively, the 
``Exchange Data Feeds''). As set forth below, the Exchange believes 
that the proposed fees are fair and reasonable and has based its 
proposal on the fact that competitive forces exist with respect to the 
Exchange Data Feeds, a comparison to competitor pricing, as well as a 
cost analysis intended to provide transparency to the Commission and to 
the industry at large. The Exchange is proposing to implement the 
proposed fees on April 1, 2022.
    Before setting forth the additional details regarding the existence 
of competitive forces, the comparison to competitor pricing and the 
Exchange's cost analysis for transparency purposes, immediately below 
is a description of the proposed fees.
Proposed Market Data Pricing
    The Exchange offers three separate data feeds to subscribers--
MEMOIR Depth, MEMOIR Top and MEMOIR Last Sale. The proposed pricing for 
each of these products is set forth below.
MEMOIR Depth
    The MEMOIR Depth feed is a MEMX-only market data feed that contains 
all displayed orders for securities trading on the Exchange (i.e., top 
and depth-of-book order data), order executions (i.e., last sale data), 
order cancellations, order modifications, order identification numbers, 
and administrative messages.\4\ The Exchange proposes to charge each of 
the fees set forth below for MEMOIR Depth.
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    \4\ See MEMX Rule 13.8(a).
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    1. Internal Distribution Fee. For the receipt of access to the 
MEMOIR 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 Depth feed for purposes of internal 
distribution (i.e., an ``Internal Distributor''). 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.'' \5\ The 
proposed access fee for internal distribution will be charged only once 
per month per subscribing entity (``Firm''). The Exchange notes that it 
has proposed to use the phrase ``own organization'' in the definition 
of Internal Distributor and External Distributor because a Firm will be 
permitted to share data received from an Exchange Data product to other 
legal entities affiliated with the Firm that have been disclosed to the 
Exchange without such distribution being considered external to a third 
party. For instance, if a company has multiple affiliated broker-
dealers under the same holding company, that company could have one of 
the broker-dealers or a non-broker-dealer affiliate subscribe to an 
Exchange Data product and then share the data with other affiliates 
that have a need for the data. This sharing with affiliates would not 
be considered external distribution to a third party but instead would 
be considered internal distribution to data recipients within the 
Distributor's own organization.
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    \5\ See Market Data Definitions under the proposed MEMX 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.
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    2. External Distribution Fee. For redistribution of the MEMOIR 
Depth feed, the Exchange proposes to establish an access fee of $2,500 
per month. The proposed redistribution fee would be charged to any 
External Distributor of the MEMOIR Depth feed, which would be defined 
to mean ``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.'' \6\ The proposed access 
fee for external distribution will be charged only once per month per 
Firm. As noted above, while a Firm will be permitted to share data 
received from an Exchange Data product to other legal entities 
affiliated with the Firm that have been disclosed to the Exchange 
without such distribution being considered external to a third party, 
if a Firm distributes data received from an Exchange Data product to an 
unaffiliated third party that would be considered distribution to data 
recipients outside the Distributor's own organization and the access 
fee for external distribution would apply.
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    \6\ See Market Data Definitions under the proposed MEMX Fee 
Schedule.
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    3. Non-Display Use Fees. The Exchange proposes to establish 
separate non-display fees for usage by Trading Platforms and other 
Users (i.e., not by Trading Platforms).\7\ Non-Display Usage would be 
defined to mean ``any method of accessing an Exchange Data product that 
involves access or use by a machine or automated device without access 
or use of a display by a natural person or persons.'' \8\ For Non-
Display Usage of the MEMOIR Depth feed not by Trading Platforms, the 
Exchange proposes to establish a fee of $1,500 per month.\9\ For Non-
Display Usage of the MEMOIR Depth feed by Trading Platforms, the 
Exchange proposes to establish a fee of $4,000 per month. The proposed 
fees for Non-Display Usage will be charged only once per category per 
Firm.\10\ In other words, with respect to Non-Display Usage Fees, a 
Firm that uses MEMOIR Depth for non-display purposes but does not 
operate a Trading Platform would pay $1,500 per month, a Firm that uses 
MEMOIR Depth in connection with the operation of one or more Trading 
Platforms (but not for other purposes) would pay $4,000 per month, and 
a Firm that uses MEMOIR Depth for non-display purposes other than 
operating a Trading Platform and for the operation of one or more 
Trading Platforms would pay $5,500 per month.
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    \7\ The Exchange proposes to define a Trading Platform as ``any 
execution platform operated as or by a registered National 
Securities Exchange (as defined in Section 3(a)(1) of the Exchange 
Act), an Alternative Trading System (as defined in Rule 300(a) of 
Regulation ATS), or an Electronic Communications Network (as defined 
in Rule 600(b)(23) of Regulation NMS).'' See Market Data Definitions 
under the proposed MEMX Fee Schedule.
    \8\ See Market Data Definitions under the proposed MEMX Fee 
Schedule.
    \9\ Non-Display Usage not by Trading Platforms would include 
trading uses such as high frequency or algorithmic trading as well 
as any trading in any asset class, automated order or quote 
generation and/or order pegging, price referencing for smart order 
routing, operations control programs, investment analysis, order 
verification, surveillance programs, risk management, compliance, 
and portfolio management.
    \10\ The Exchange proposes to adopt note 1 to the proposed 
Market Data fees table, which would make clear to subscribers that 
use of the data for multiple non-display purposes or operate more 
than one Trading Platform would only be charged once per category 
per month. Thus, the footnote makes clear that each fee applicable 
to Non-Display Usage is charged per subscriber (e.g., a Firm) and 
that each of the fees represents the maximum charge per month per 
subscriber regardless of the number of non-display uses and/or 
Trading Platforms operated by the subscriber, as applicable.
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    4. User Fees. The Exchange proposes to charge a Professional User 
Fee (per User) of $30 per month and a Non-Professional User Fee (per 
User) of $3 per month. The proposed User fees would apply to each 
person that has access to the MEMOIR Depth feed for

[[Page 21234]]

displayed usage. Thus, each Distributor's count will include every 
individual that accesses the data regardless of the purpose for which 
the individual uses the data. Internal Distributors and External 
Distributors of the MEMX Depth feed must report all Professional and 
Non-Professional Users in accordance with the following:
     In connection with a Distributor's distribution of the 
MEMOIR Depth feed, the Distributor must count as one User each unique 
User that the Distributor has entitled to have access to the MEMOIR 
Depth feed.
     Distributors must report each unique individual person who 
receives access through multiple devices or multiple methods (e.g., a 
single User has multiple passwords and user identifications) as one 
User.
     If a Distributor entitles one or more individuals to use 
the same device, the Distributor must include only the individuals, and 
not the device, in the count. Thus, Distributors would not be required 
to report User device counts associated with a User's display use of 
the data feed.
    5. Enterprise Fee. Other than the Digital Media Enterprise Fee 
described below, the Exchange is not proposing to adopt an Enterprise 
Fee for the MEMOIR Depth feed at this time.
    6. Digital Media Enterprise Fee. As an alternative to User fees, a 
recipient Firm may purchase a monthly Digital Media Enterprise license 
to receive MEMOIR Depth for distribution to an unlimited number of 
Users for viewing via television, websites, and mobile devices for 
informational and non-trading purposes only. The Exchange proposes to 
establish a fee of $5,000 per month for a Digital Media Enterprise 
license to the MEMOIR Depth feed.
MEMOIR Top
    The MEMOIR Top feed is a MEMX-only market data feed that contains 
top of book quotations based on equity orders entered into the 
System.\11\ The Exchange proposes to charge each of the fees set forth 
below for MEMOIR Top.
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    \11\ See MEMX Rule 13.8(b). The Exchange notes that it will file 
a separate rule proposal to modify paragraph (b) of Rule 13.8 to 
remove reference to execution information as included in the MEMOIR 
Top feed, as execution information is not presently included in such 
feed.
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    1. Internal Distribution Fee. For the receipt of access to the 
MEMOIR 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 Top feed for purposes of internal 
distribution (i.e., an Internal Distributor). The proposed access fee 
for internal distribution will be charged only once per month per Firm.
    2. External Distribution Fee. For redistribution of the MEMOIR Top 
feed, the Exchange proposes to establish an access fee of $2,000 per 
month. The proposed redistribution fee would be charged to any External 
Distributor of the MEMOIR Top feed. The proposed access fee for 
external distribution will be charged only once per month per Firm.
    3. Non-Display Use Fees. The Exchange does not propose to establish 
non-display fees for usage by Trading Platforms or other Users with 
respect to MEMOIR Top.
    4. User Fees. The Exchange proposes to charge a Professional User 
Fee (per User) of $0.01 per month and a Non-Professional User Fee (per 
User) of $0.01 per month. The proposed User fees would apply to each 
person that has access to the MEMOIR Top feed that is provided by an 
External Distributor for displayed usage. The Exchange does not propose 
any per User fees for internal distribution of the MEMOIR Top feed. 
Each External Distributor's count will include every individual that 
accesses the data regardless of the purpose for which the individual 
uses the data. External Distributors of the MEMOIR Top feed must report 
all Professional and Non-Professional Users \12\ in accordance with the 
following:
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    \12\ The Exchange notes that while it is not differentiating 
Professional and Non-Professional Users based on fees (in that it is 
proposing the same fee for such Users) for this data feed, and thus 
will not audit Firms based on this distinction, it will request 
reporting of each distinct category for informational purposes.
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     In connection with an External Distributor's distribution 
of the MEMOIR Top feed, the Distributor must count as one User each 
unique User that the Distributor has entitled to have access to the 
MEMOIR Top feed.
     External Distributors must report each unique individual 
person who receives access through multiple devices or multiple methods 
(e.g., a single User has multiple passwords and user identifications) 
as one User.
     If an External Distributor entitles one or more 
individuals to use the same device, the Distributor must include only 
the individuals, and not the device, in the count. Thus, Distributors 
would not be required to report User device counts associated with a 
User's display use of the data feed.
    5. Enterprise Fee. As an alternative to User fees, a recipient Firm 
may purchase a monthly Enterprise license to receive MEMOIR Top for 
distribution to an unlimited number of Professional and Non-
Professional Users. The Exchange proposes to establish a fee of $10,000 
per month for an Enterprise license to the MEMOIR Top feed.
    6. Digital Media Enterprise Fee. As an alternative to User fees, a 
recipient Firm may purchase a monthly Digital Media Enterprise license 
to receive MEMOIR Top for distribution to an unlimited number of Users 
for viewing via television, websites, and mobile devices for 
informational and non-trading purposes only. The Exchange proposes to 
establish a fee of $2,000 per month for a Digital Media Enterprise 
license to the MEMOIR Top feed.
MEMOIR Last Sale
    The MEMOIR Last Sale feed is a MEMX-only market data feed that 
contains only execution information based on equity orders entered into 
the System.\13\ The Exchange proposes to charge each of the fees set 
forth below for MEMOIR Last Sale.
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    \13\ See MEMX Rule 13.8(c).
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    1. Internal Distribution Fee. For the receipt of access to the 
MEMOIR Last Sale feed, the Exchange proposes to charge $500 per month. 
This proposed access fee would be charged to any data recipient that 
receives a data feed of the MEMOIR Last Sale feed for purposes of 
internal distribution (i.e., an Internal Distributor). The proposed 
access fee for internal distribution will be charged only once per 
month per Firm.
    2. External Distribution Fee. For redistribution of the MEMOIR Last 
Sale feed, the Exchange proposes to establish an access fee of $2,000 
per month. The proposed redistribution fee would be charged to any 
External Distributor of the MEMOIR Last Sale feed. The proposed access 
fee for external distribution will be charged only once per month per 
Firm.
    3. Non-Display Use Fees. The Exchange does not propose to establish 
separate non-display fees for usage by Trading Platforms or other Users 
with respect to MEMOIR Last Sale.
    4. User Fees. The Exchange proposes to charge a Professional User 
Fee (per User) of $0.01 per month and a Non-Professional User Fee (per 
User) of $0.01 per month. The proposed User fees would apply to each 
person that has access to the MEMOIR Last Sale feed that is provided by 
an External Distributor for displayed usage. The Exchange does not 
propose any per User fees for internal distribution of the MEMOIR Last 
Sale feed. Each External Distributor's count will include every 
individual that accesses the data regardless of the purpose for which 
the individual uses the data. External Distributors of the MEMOIR Last 
Sale

[[Page 21235]]

feed must report all Professional and Non-Professional Users \14\ in 
accordance with the following:
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    \14\ See supra note 12.
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     In connection with an External Distributor's distribution 
of the MEMOIR Last Sale feed, the Distributor must count as one User 
each unique User that the Distributor has entitled to have access to 
the MEMOIR Last Sale feed.
     External Distributors must report each unique individual 
person who receives access through multiple devices or multiple methods 
(e.g., a single User has multiple passwords and user identifications) 
as one User.
     If an External Distributor entitles one or more 
individuals to use the same device, the Distributor must include only 
the individuals, and not the device, in the count. Thus, Distributors 
would not be required to report User device counts associated with a 
User's display use of the data feed.
    5. Enterprise Fee. As an alternative to User fees, a recipient Firm 
may purchase a monthly Enterprise license to receive MEMOIR Last Sale 
for distribution to an unlimited number of Professional and Non-
Professional Users. The Exchange proposes to establish a fee of $10,000 
per month per Firm for an Enterprise license to the MEMOIR Last Sale 
feed.
    6. Digital Media Enterprise Fee. As an alternative to User fees, a 
recipient Firm may purchase a monthly Digital Media Enterprise license 
to receive MEMOIR Last Sale for distribution to an unlimited number of 
Users for viewing via television, websites, and mobile devices for 
informational and non-trading purposes only. The Exchange proposes to 
establish a fee of $2,000 per month per Firm for a Digital Media 
Enterprise license to the MEMOIR Last Sale feed.
Additional Discussion--Competitive Forces
    The Commission has repeatedly expressed its 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.'' \15\ As the Commission 
itself recognized, the market for trading services in NMS stocks has 
become ``more fragmented and competitive.'' \16\ Indeed, equity trading 
is currently dispersed across 16 exchanges,\17\ 31 alternative trading 
systems,\18\ and numerous broker-dealer internalizers and wholesalers, 
all competing for order flow.
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    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS Adopting Release'').
    \16\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
    \17\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at: http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \18\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsData. A list of 
alternative trading systems registered with the Commission is 
available at: https://www.sec.gov/foia/docs/atslist.htm.
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    The recent growth of MEMX's market share demonstrates the 
competitive marketplace in which the Exchange operates. The Exchange 
launched in September 2020 and slowly grew over the next several months 
as it completed its staged rollout intended to ensure market stability. 
In January 2021, the Exchange averaged approximately 0.6% of 
consolidated trading volume.\19\ The Exchange experienced significant 
growth every month from February 2021 to December 2021 and ended 2021 
with market share of approximately 4.2% of consolidated volume; MEMX 
maintained a similar market share percentage in January of 2022, ending 
the month with 4.2% market share.\20\
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    \19\ Market share percentage calculated as of February 1, 2022. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \20\ See id.
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    As the Exchange's transaction market share has increased, so has 
the value of its market data. In addition to achieving over 4% of 
consolidated volume, the Exchange's NBBO Quote Market Share (i.e., the 
notional value displayed at the inside national best bid or offer, or 
``NBBO'', as a percentage of overall notional value at the NBBO) is 
comparable to that of Cboe BZX Exchange, Inc. (``BZX'') and the New 
York Stock Exchange (``NYSE''), and higher than that of Cboe EDGX 
Exchange. Inc.\21\ The Exchange determined the level of the fees to 
charge for the Exchange Data Feeds based on the value of the Exchange's 
market data as well as the cost analysis described later in this 
filing. As noted above, over a 16-month period, MEMX has grown from 0% 
to over 4% market share of consolidated trading volume. During that 
same period, the Exchange has had a steady increase in the number of 
subscribers to Exchange Data Feeds.
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    \21\ See Cboe Global Markets NBBO Quote Market Share Statistics, 
available at: https://www.cboe.com/us/equities/market_statistics/. 
In February 2022, NBBO Quote Market Share of the largest six 
equities exchanges was as follows: NYSE Arca 18.5%, Nasdaq 17.32%, 
NYSE 12.6%, BZX 11.02%, MEMX 10.14%, EDGX 8.71%. The remaining ten 
equities exchanges have NBBO Quote Market Share below 5%.
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    As a new entrant into the exchange industry, the Exchange is 
particularly subject to competitive forces. While the Exchange has been 
able to rapidly grow its market share since its launch in September 
2020, MEMX operates only a single U.S. equities exchange with market 
share that remains significantly lower than the market share of the 
largest exchange groups. As noted above, MEMX currently does not charge 
fees for market data provided by the Exchange. The objective of this 
approach was to eliminate any fee-based barriers for Members when MEMX 
launched as a national securities exchange in 2020, which the Exchange 
believes has been helpful in its ability to attract order flow as a new 
exchange. The Exchange also has not charged for 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 believes that its proposed approach 
to market data fees is reasonable based on the existence of 
competition, a comparison to competitors and the cost analysis 
presented below.
    The Exchange is not required to make the Exchange Data Feeds 
available or to offer any specific pricing alternatives to any 
customers, nor is any firm required to purchase the Exchange Data 
Feeds. Firms that choose to subscribe to the Exchange Data Feeds do so 
for the primary goals of using it to increase their revenues, reduce 
their expenses, and in some instances to compete directly with the 
Exchange (including for order flow). Those firms are able to determine 
for themselves whether or not the Exchange Data Feeds or any other 
similar products are attractively priced.
    Because the Exchange Data Feeds have not been previously subject to 
fees, the Exchange does not know the full impact of the proposed fees 
on current data recipients because subscribers may choose to reduce or 
eliminate their use of MEMX data. The Exchange anticipates that there 
might be data recipients of the Exchange Data Feeds that subscribe only 
because they are free and might choose to discontinue using the 
products once fees are implemented. A data recipient that chooses to 
discontinue subscribing to the Exchange's Data Feeds may also choose

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to shift order flow away from the Exchange, and, given the current 
competitive environment, if data recipients were to both discontinue 
the product and shift order flow away from the Exchange, the Exchange 
would reevaluate the fees and potentially file a separate proposed rule 
change to amend its fees. In advance of implementing the proposed fees, 
however, the Exchange cannot estimate with precision the impact of the 
proposed fees on the Exchange's business or the number of subscribers 
to the Exchange Data Feeds.
Additional Discussion--Comparison With Other Exchanges
    The proposed fee structure is not novel but is instead comparable 
to the fee structure currently in place for the equities exchanges 
operated by Cboe Global Markets, Inc., in particular BZX.\22\ As noted 
above, in January 2022, MEMX had 4.2% market share; for that same 
month, BZX had 5.5% market share.\23\ The Exchange is proposing fees 
for its Exchange Data Feeds that are similar in structure to BZX and 
rates that are lower in most cases than the rates data recipients pay 
for comparable data feeds from BZX. The Exchange notes that other 
competitors maintain fees applicable to market data that are 
considerably higher than those proposed by the Exchange, including NYSE 
Arca \24\ and Nasdaq.\25\ However, the Exchange has focused its 
comparison on BZX because it is the closest market in terms of market 
share and offers market data at prices lower than several other 
incumbent exchanges.\26\
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    \22\ See BZX Fee Schedule, available at: https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \23\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
    \24\ Fees for the NYSE Arca Integrated Feed, which is the 
comparable product to MEMOIR Depth, are $3,000 for access (internal 
use) and $3,750 for redistribution (external distribution), compared 
to the Exchange's proposed fees of $1,500 and $2,500, respectively. 
In addition, for its Integrated Feed, NYSE Arca charges for three 
different categories of non-display usage, each of which is $10,500 
and each of which can be charged to the same firm more than one time 
(e.g., a customer operating a Trading Platform would pay $10,500 
compared to the Exchange's proposed fee of $4,000 but would also pay 
for each Trading Platform, up to three, if they operate more than 
one, instead of the single fee proposed by the Exchange; if that 
customer also uses the data for the other categories of non-display 
usage they would also pay $10,500 for each other category of usage, 
whereas the Exchange would only charge $1,500 for any non-display 
usage other than operating a Trading Platform). Finally, the NYSE 
Arca Integrated Feed user fee for pro devices is $60 compared to the 
proposed Professional User fee of $30 for MEMOIR Depth and the NYSE 
Arca Integrated user fee for non-pro devices is $20 compared to the 
proposed Non-Professional User fee of $3 for MEMOIR Depth. See NYSE 
Proprietary Market Data Pricing list, available at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf.
    \25\ Fees for the Nasdaq TotalView data feed, which is the 
comparable product to MEMOIR Depth, are $1,500 for access (internal 
use) and $3,750 for redistribution (external distribution), compared 
to the Exchange's proposed fees of $1,500 and $2,500, respectively. 
In addition, for TotalView, Nasdaq charges Trading Platforms $5,000 
compared to the Exchange's proposal of $4,000, and, like NYSE Arca, 
charges customers per Trading Platform, up to three, if they operate 
more than one, instead of the single fee proposed by the Exchange. 
Nasdaq also requires users to report and pay usage fees for non-
display access at levels of from $375 per subscriber for smaller 
firms with 39 or fewer subscribers to $75,000 per firm for a larger 
firm with over 250 subscribers. The Exchange does not require 
counting of devices or users for non-display purposes and instead 
has proposed flat fee of $1,500 for non-display usage not by Trading 
Platforms. Finally, the Nasdaq TotalView user fee for professional 
subscribers is $76 compared to the proposed Professional User fee of 
$30 for MEMOIR Depth and the Nasdaq TotalView user fee for non-
professional subscribers is $15 compared to the proposed Non-
Professional User fee of $3 for MEMOIR Depth. See Nasdaq Global Data 
Products pricing list, available at: http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN.
    \26\ See supra notes 24 and 25.
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    The fees for the BZX Depth feed--which like the MEMOIR Depth feed, 
includes top of book, depth of book, trades, and security status 
messages--consist of an internal distributor access fee of $1,500 per 
month (the same as the Exchange's proposed rate), an external 
distributor access fee of $5,000 per month (two times the Exchange's 
proposed rate), a non-display usage fee for non-Trading Platforms of 
$2,000 per month ($500 more than the Exchange's proposed rate), a non-
display usage fee for Trading Platforms of $5,000 per month ($1,000 
more than the Exchange's proposed rate), a Professional User fee (per 
User) of $40 per month ($10 more than the Exchange's proposed rate), 
and a Non-Professional User fee (per User) of $5 per month ($2 more 
than the Exchange's proposed rate).\27\
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    \27\ See BZX Fee Schedule, Market Data Fees, BZX Depth, 
available at: https://www.cboe.com/us/equities/membership/fee_schedule/bzx/. The Exchange notes that there are differences 
between the structure of BZX Depth fees and the proposed fees for 
MEMOIR Depth, including that the Exchange has proposed a Digital 
Media Enterprise License for MEMOIR Depth but a comparable license 
is not available from BZX. Additionally, BZX maintains a general 
enterprise license for User fees, similar to that proposed by the 
Exchange for MEMOIR Top and MEMOIR Last Sale, but the Exchange has 
not proposed adding a general Enterprise license at this time.
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    The comparisons of the MEMOIR Last Sale feed and MEMOIR Top feed to 
the BZX Last Sale feed and BZX Top feed, respectively, are similar in 
that BZX generally maintains the same fee structure proposed by the 
Exchange and BZX charges fees that are comparable to, but in most cases 
higher than, the Exchange's proposed fees. Notably, the User fees 
proposed by the Exchange for External Distributors of MEMOIR Last Sale 
and MEMOIR Top ($0.01 for both Professional Users and Non-Professional 
Users) are considerably lower than those charged by BZX for BZX Top and 
BZX Last Sale ($4 for Professional Users and $0.10 for Non-Professional 
Users).
    By charging the same low rate for all Users of MEMOIR Top and 
MEMOIR Last Sale the Exchange believes it is proposing a structure that 
is not only lower cost but that will also simplify reporting for 
subscribers who externally distribute these data feeds to Users, as the 
Exchange believes that categorization of Users as Professional and Non-
Professional is not meaningful for these products and requiring such 
categorization would expose Firms to unnecessary audit risk of paying 
more for mis-categorization. However, the Exchange does not believe 
this is equally true for MEMOIR Depth, as most individual Users of 
MEMOIR Depth are likely to be Professional Users. The Exchange believes 
that Professional Users are more likely to benefit economically from 
the use of MEMOIR Depth data than Non-Professional Users, and the 
Exchange believes that the higher fee charged to Professional Users is 
reasonable and appropriate given this difference in value.
Additional Discussion--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 market data, 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 believes that this level of diligence 
and transparency is called for by the requirements of Section 19(b)(1)

[[Page 21237]]

under the Act,\28\ and Rule 19b-4 thereunder,\29\ with respect to the 
types of information self-regulatory organizations (``SROs'') should 
provide when filing fee changes, and Section 6(b) of the Act,\30\ which 
requires, among other things, that exchange fees be reasonable and 
equitably allocated,\31\ not designed to permit unfair 
discrimination,\32\ and that they not impose a burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Act.\33\ 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.\34\
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(1).
    \29\ 17 CFR 240.19b-4.
    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(4).
    \32\ 15 U.S.C. 78f(b)(5).
    \33\ 15 U.S.C. 78f(b)(8).
    \34\ 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-guidancesro-rule-filings-fees.
---------------------------------------------------------------------------

    In October 2021, MEMX completed a study of its aggregate costs to 
produce market data and connectivity (the ``Cost Analysis''). The 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--transactions, market data, 
membership 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 
selling, general and administrative expenses (``cost drivers''). Next, 
MEMX applied an estimated allocation of each cost driver to each core 
service. 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 must cover its expenses from these four 
primary sources of revenue.
    The Exchange recently filed to adopt fees for connectivity 
services, to which the Exchange allocated a monthly aggregate monthly 
cost of $1,143,715.\35\ Based on the pricing adopted by the Exchange, 
the Exchange estimated it would generate monthly revenue of $1,233,750 
from connectivity services (i.e., physical connections and application 
sessions), providing cost recovery to the Exchange for the aggregate 
costs of offering connectivity services plus approximately 8% margin. 
Thus far, fees for connectivity services have generated revenues 
consistent with the Exchange's estimates.
---------------------------------------------------------------------------

    \35\ See Securities Exchange Act Release No. 93937 (January 10, 
2022), 87 FR 2466 (January 14, 2022) (SR-MEMX-2021-22) (the 
``Connectivity Filing'').
---------------------------------------------------------------------------

    The Exchange notes that it is difficult, if not impossible, to 
purely split the costs of generating and producing market data and the 
costs associated with operation of the system that processes (and 
displays through market data) orders, cancellations, and transactions 
and performs related functions (collectively, together with market 
data, ``Transaction Services''). Instead, because the Exchange believes 
its costs for providing Transaction Services, including market data, 
are inextricably linked, the cost analysis below and corollary margin 
discussion includes all Transaction Services. Through the Cost 
Analysis, MEMX calculated its aggregate monthly costs for providing 
Transaction Services, at $2,797,265. The Exchange expects to recoup the 
majority of this cost from transaction fees and revenues from the 
public data feeds in which the Exchange participates and receives 
revenues (i.e., the SIPs). In order to cover operating costs and earn a 
reasonable profit on its market data, the Exchange is proposing to 
modify its Fee Schedule, pursuant to MEMX Rules 15.1(a) and (c), as set 
forth above.
    The following chart details the individual line-item (monthly) 
costs considered by MEMX to be related to offering Transaction Services 
(transactions and market data) to its Members and other customers.

------------------------------------------------------------------------
                      Costs drivers                            Costs
------------------------------------------------------------------------
Human Resources.........................................      $1,480,822
Infrastructure and Connectivity Technology (servers,              48,480
 switches, etc.)........................................
Exchange Software and Technology Consulting.............         305,244
External Market Data Costs..............................         133,266
Data Center Costs.......................................          65,538
Hardware and Software Licenses..........................          26,478
Regulatory Costs........................................         155,815
Monthly Depreciation....................................         393,380
Allocated Shared Expenses...............................         187,792
                                                         ---------------
    Total...............................................       2,797,265
------------------------------------------------------------------------

    For personnel costs (Human Resources), MEMX calculated an 
allocation of employee time for employees whose functions include 
directly providing services necessary to offer Transaction Services, 
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 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 Infrastructure and Connectivity Technology 
cost includes servers, switches and related hardware required to 
provide physical access to the Exchange, some of which is owned by the 
Exchange and some of which is leased by the Exchange in order to allow 
efficient periodic technology refreshes. Exchange Software and 
Technology Consulting includes all costs for third party software 
necessary to offer

[[Page 21238]]

Transaction Services as well as third party consultants used to help 
test and review systems necessary to offering Transaction Services. 
External Market Data Costs includes fees paid to other exchanges and 
the SIPs under the consolidated plans to obtain data necessary to 
provide Transaction Services. Data Center costs includes an allocation 
of the costs the Exchange incurs to provide Transaction Services 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). Hardware and Software Licenses 
includes hardware and software licenses used to operate and monitor 
physical assets necessary to offer Transaction Services. All physical 
assets and software, which also includes assets used for testing and 
monitoring of Exchange infrastructure, were valued at cost, depreciated 
or leased over periods ranging from three to five years. Finally, a 
limited portion of general shared expenses was allocated to overall 
Transaction Services costs as without these general shared costs the 
Exchange would not be able to operate in the manner that it does and 
provide Transaction Services. The costs included in general shared 
expenses include general expenses of the Exchange, including office 
space and office expenses, utilities, recruiting and training, 
marketing and advertising costs, professional fees for legal, tax and 
accounting services, and telecommunications costs.
    In conducting its Cost Analysis, the Exchange did not allocate any 
of its expenses in full to any core service and did not double-count 
any expenses. Instead, as described above, the Exchange allocated 
applicable cost drivers across its core services and used the same Cost 
Analysis to form the basis of the Connectivity Filing and this filing, 
proposing fees for Exchange Data Feeds. For instance, as described in 
the Connectivity Filing, in calculating the Human Resources expenses to 
be allocated to physical connections, the Exchange allocated network 
infrastructure personnel with a high percentage of the cost of such 
personnel (75%) given their focus on functions necessary to provide 
physical connections. The salaries of those same personnel were 
allocated only 2.5% to application sessions and the remaining 22.5% was 
allocated to transactions and market data.
    In total, again as explained in the Connectivity Filing, the 
Exchange allocated 13.8% of its personnel costs to providing physical 
connections and 7.7% of its personnel costs to providing application 
sessions, for a total allocation of 21.5% Human Resources expense to 
provide connectivity services. In turn, the Exchange allocated the 
remaining 78.5% of its Human Resources expense to Membership (less than 
1%) and Transaction Services (77.5%). Thus, again, the Exchange's 
allocations of cost across core services were based on real costs of 
operating the Exchange and were not double-counted across the core 
services or their associated revenue streams.
    As another example, the Exchange allocated depreciation expense to 
all core services, including Transaction Services, but in different 
amounts. The Exchange believes it is reasonable to allocate the 
identified portion of such expense because such expense includes the 
actual cost of the computer equipment, such as dedicated servers, 
computers, laptops, monitors, information security appliances and 
storage, and network switching infrastructure equipment, including 
switches and taps that were purchased to operate and support the 
Exchange. Without this equipment, the Exchange would not be able to 
operate the Exchange and provide Transaction Services to its Members 
and non-Members and their customers. The Exchange did not allocate all 
of the depreciation and amortization expense toward the cost of 
providing Transaction Services, but instead allocated approximately 73% 
of the Exchange's overall depreciation and amortization expense to 
Transaction Services.
    The Exchange notes that the Cost Analysis was based on the 
Exchange's first year of operations and projections for the next year. 
As such, 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 market data or any other core service it will receive additional 
revenue to offset future cost increases. However, if use of core 
services, including market data subscriptions 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 commits 
to periodically review the costs applicable to providing Transaction 
Services, including the Exchange Data Feeds, and to propose changes to 
its fees as appropriate.
    The proposed fees for Exchange Data Feeds are designed to permit 
the Exchange to cover the costs allocated to providing Transaction 
Services with a markup that the Exchange believes is modest 
(approximately 17%), which would also account for costs related to 
Transaction Services that the Exchange has previously borne completely 
on its own and help fund future expenditures (increased costs, 
improvements, etc.). The Exchange also reiterates that the Exchange has 
not previously charged any fees for Exchange Data Feeds and its 
allocation of costs to Exchange Data Feeds was part of a holistic 
allocation that also allocated costs to other core services without 
double-counting any expenses.
    Looking at the Exchange's operations holistically, the total 
monthly costs to the Exchange for offering core services is $3,954,537. 
The Exchange anticipates that the proposed fees for Exchange Data Feeds 
will generate between $250,000 and $500,000, depending on how many 
current subscribers stop subscribing to the Exchange Data Feeds once 
the Exchange commences billing. Incorporating this range into the 
Exchange's overall projected revenue, the Exchange anticipates monthly 
revenue ranging from $4,296,950 to $4,546,950 from all sources (i.e., 
connectivity fees and membership fees that were introduced in January 
2022, transaction fees, and revenue from market data, both through the 
fees proposed herein and through the revenue received from the SIPs). 
As such, applying the Exchange's holistic Cost Analysis to a holistic 
view of anticipated revenues, the Exchange would earn approximately 
8.5% to 15% margin on its operations as a whole. The Exchange believes 
that this amount is reasonable.
    The Exchange notes that its revenue estimates are based on 
projections across all potential revenue streams and will only be 
realized to the extent such revenue streams actually produce the 
revenue estimated. As a new entrant to the hyper-competitive exchange 
environment, and an exchange focused on driving competition, the 
Exchange does not yet know whether such expectations will be realized. 
For instance, in order to generate the revenue expected from the 
Exchange Data Feeds, the Exchange will have to be successful in 
retaining existing subscribers and obtaining new subscribers to the 
Exchange Data Feeds. Similarly, the Exchange will have to be successful 
in retaining a positive net capture on transaction fees in order to 
realize the anticipated revenue from transaction pricing.
    To the extent the Exchange is successful in gaining market share, 
improving its net capture on transaction

[[Page 21239]]

fees, encouraging new subscribers to subscribe to the Exchange Data 
Feeds, and other developments that would help to increase Exchange 
revenues, the Exchange does not believe it should be penalized for such 
success. The Exchange like other exchanges is, after all, a for-profit 
business. Accordingly, while the Exchange believes in transparency 
around costs and potential margins, 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 described above, there is no requirement that any Firm subscribe 
to a particular Exchange Data Feed or any Exchange Data Feed 
whatsoever, but instead, a Firm may choose to maintain subscriptions to 
those Exchange 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 
Exchange Data Feeds and their use thereof, which are in turn based upon 
factors deemed relevant by each Firm.
    As discussed above, the proposed fees for connectivity services do 
not by design apply differently to different types or sizes of Members. 
As discussed in more detail in the Statutory Basis section, the 
Exchange believes that the likelihood of higher fees for certain Firms 
subscribing to Exchange Data Feeds than others is not unfairly 
discriminatory because it is based on objective differences in usage of 
Exchange Data Feeds among different Firms, which are still ultimately 
in the control of any particular Firm.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \36\ of the Act in general, and 
furthers the objectives of Section 6(b)(4) \37\ 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) \38\ 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.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f.
    \37\ 15 U.S.C. 78f(b)(4).
    \38\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Proposed Rule Change Is Reasonable
    In adopting Regulation NMS, the Commission granted SROs and broker-
dealers increased authority and flexibility to offer new and unique 
market data to the public. 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.'' \39\
---------------------------------------------------------------------------

    \39\ See Regulation NMS Adopting Release, 70 FR 37495, at 37499.
---------------------------------------------------------------------------

    With respect to market data, the decision of the United States 
Court of Appeals for the District of Columbia Circuit in NetCoalition 
v. SEC upheld the Commission's reliance on the existence of competitive 
market mechanisms to evaluate the reasonableness and fairness of fees 
for proprietary market data:

    In fact, the legislative history indicates that the Congress 
intended that the market system ``evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed'' and that the SEC wield its regulatory power ``in those 
situations where competition may not be sufficient,'' such as in the 
creation of a ``consolidated transactional reporting system.'' \40\
---------------------------------------------------------------------------

    \40\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010) 
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as 
reprinted in 1975 U.S.C.C.A.N. 323).

The court agreed with the Commission's conclusion that ``Congress 
intended that `competitive forces should dictate the services and 
practices that constitute the U.S. national market system for trading 
equity securities.' '' \41\
---------------------------------------------------------------------------

    \41\ Id. at 535.
---------------------------------------------------------------------------

    In this competitive marketplace, the Exchange's executed trading 
volume has grown from 0% market share to over 4% market share in less 
than one and a half years and the Exchange believes that it is 
reasonable to begin charging fees for the Exchange Data Feeds. 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 designed to 
permit the Exchange to cover certain fixed costs that it incurs for 
providing market data, with fees that are discounted when compared to 
products and services offered by competitors.\42\
---------------------------------------------------------------------------

    \42\ See supra notes 24-25; see supra note 27 and accompanying 
text.
---------------------------------------------------------------------------

    The Exchange is not aware of any evidence that a market share of 
approximately 4% provides the Exchange with supra-competitive pricing 
power because, as shown elsewhere, market participants are not required 
to subscribe to the Exchange Data Feeds, and if they do so, have a 
choice with respect to the Exchange Data Feed(s) to which they will 
subscribe. Separately, the Exchange is not aware of any reason why 
market participants could not simply unsubscribe or choose not to 
subscribe to Exchange Data Feeds if the Exchange were to establish 
unreasonable and uncompetitive prices for its Exchange Data Feeds.
    With regard to reasonableness, the Exchange understands that the 
Commission has traditionally taken a market-based approach to examine 
whether the SRO making the proposal was subject to significant 
competitive forces in setting the terms of the proposal. In looking at 
this question, the Commission 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 Commission 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. 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.

[[Page 21240]]

    The Exchange has not previously charged fees for market data, so it 
does not have MEMX-specific data to support whether or not competitive 
forces would constrain its ability to set fees for the Exchange Data 
Feeds. However, the Exchange believes that competitive forces are in 
effect and that if the proposed fees for the Exchange Data Feeds were 
unreasonable that the Exchange would lose current or prospective 
Members and market share. The Exchange does not yet have comprehensive 
data of the impact of the proposed fees and will not have such data 
until the fees are imposed. Further, the Exchange has conducted a 
comprehensive Cost Analysis to determine the reasonability of its 
proposed fees, including that the Exchange will not take supra-
competitive profits.
1. The Proposed Fees Are Constrained by Significant Competitive Forces
a. Exchange Market Data Is Sold in a Competitive Market
    In 2018, Charles M. Jones, the Robert W. Lear Professor of Finance 
and Economics at the Columbia University School of Business, conducted 
an analysis of the market for equity market data in the United States. 
He canvassed the demand for both consolidated and exchange proprietary 
market data products and the uses to which those products were put by 
market participants, and reported his conclusions in a paper annexed 
hereto.\43\ Among other things, Professor Jones concluded that:
---------------------------------------------------------------------------

    \43\ See Exhibit 3A, Charles M. Jones, Understanding the Market 
for U.S. Equity Market Data, August 31, 2018 (hereinafter ``Jones 
Paper'').
---------------------------------------------------------------------------

     ``The market [for exchange market data] is characterized 
by robust competition: exchanges compete with each other in selling 
proprietary market data products. They also compete with consolidated 
data feeds and with data provided by alternative trading systems 
(`ATSs'). Barriers to entry are very low, so existing exchanges must 
also take into account competition from new entrants, who generally try 
to build market share by offering their proprietary market data 
products for free for some period of time [as MEMX has done with its 
Exchange Data Feeds].'' \44\
---------------------------------------------------------------------------

    \44\ Id. at 2.
---------------------------------------------------------------------------

     ``Although there are regulatory requirements for some 
market participants to use consolidated data products, there is no 
requirement for market participants to purchase any proprietary market 
data product for regulatory purposes.'' \45\
---------------------------------------------------------------------------

    \45\ Id.
---------------------------------------------------------------------------

     ``There are a variety of data products, and consumers of 
equity market data choose among them based on their needs. Like most 
producers, exchanges offer a variety of market data products at 
different price levels. Advanced proprietary market data products 
provide greater value to those who subscribe. As in any other market, 
each potential subscriber takes the features and prices of available 
products into account in choosing what market data products to buy 
based on its business model.'' \46\
---------------------------------------------------------------------------

    \46\ Id.
---------------------------------------------------------------------------

     ``For proprietary exchange data feeds, the main question 
is whether there is a competitive market for proprietary market data. 
More than 40 active exchanges and alternative trading systems compete 
vigorously in both the market for order flow and in the market for 
market data. The two are closely linked: an exchange needs to consider 
the negative impact on its order flow if it raises the price of its 
market data. Furthermore, new entrants have been frequent over the past 
10 years or so, and these venues often give market data away for free, 
[again, as MEMX has done with its Exchange Data Feeds] serving as a 
check on pricing by more established exchanges. These are all the 
standard hallmarks of a competitive market.'' \47\
---------------------------------------------------------------------------

    \47\ Id. at 39-40.
---------------------------------------------------------------------------

    Professor Jones' conclusions are consistent with the Exchange's 
view of, and experience in, the competitive marketplace for exchanges, 
including with respect to proprietary data feeds, as a recent entrant 
to the market.
b. Exchange Market Data Fees Are Constrained by Competition
    As the D.C. Circuit recognized in NetCoalition I, ``[n]o one 
disputes that competition for order flow is fierce.'' \48\ The court 
further noted that ``no exchange possesses a monopoly, regulatory or 
otherwise, in the execution of order flow from broker dealers,'' and 
that an exchange ``must compete vigorously for order flow to maintain 
its share of trading volume.'' \49\
---------------------------------------------------------------------------

    \48\ NetCoalition I, 615 F.3d at 544 (internal quotation 
omitted).
    \49\ Id.
---------------------------------------------------------------------------

    Similarly, the Commission itself has recognized that the market for 
trading services in NMS stocks has become ``more fragmented and 
competitive.'' \50\ The Commission's Division of Trading and Markets 
has also recognized that with so many ``operating equities exchanges 
and dozens of ATSs, there is vigorous price competition among the U.S. 
equity markets and, as a result, [transaction] fees are tailored and 
frequently modified to attract particular types of order flow, some of 
which is highly fluid and price sensitive.'' \51\ Indeed, as noted 
above, equity trading is currently dispersed across 16 exchanges, 31 
alternative trading systems, and numerous broker-dealer internalizers 
and wholesalers, all competing for order flow.
---------------------------------------------------------------------------

    \50\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18).
    \51\ Commission Division of Trading and Markets, Memorandum to 
EMSAC, dated October 20, 2015, available here: https://www.sec.gov/spotlight/emsac/memo-maker-taker-feeson-equities-exchanges.pdf.
---------------------------------------------------------------------------

    Further, low barriers to entry mean that new exchanges like the 
Exchange may rapidly enter the market and offer competition with the 
Exchange. Due to the ready availability of substitutes and the low cost 
to move order flow to those substitute trading venues, an exchange 
setting market data fees that are not at competitive levels would 
expect to quickly lose business to competitors with more attractive 
pricing.\52\ Although the various exchanges may differ in their 
strategies for pricing their market data products and their transaction 
fees for trades--with some offering market data for free along with 
higher trading costs, and others charging more for market data and 
comparatively less for trading--all exchanges compete for the same pool 
of customers and must work to demonstrate to such customers that 
pricing is reasonable. The Exchange believes that the best way to do 
this is to provide transparency into the costs of producing and 
maintaining its services.
---------------------------------------------------------------------------

    \52\ See Jones Paper at 11.
---------------------------------------------------------------------------

    Commission staff noted in its Fee Guidance that, as an initial step 
in assessing the reasonableness of a fee, staff considers whether the 
fee is constrained by significant competitive forces. To determine 
whether a proposed fee is constrained by significant competitive 
forces, staff has said that it considers whether the evidence 
demonstrates that there are reasonable substitutes for the product or 
service that is the subject of a proposed fee. As noted elsewhere in 
this proposal, there is no regulatory requirement that any market 
participant subscribe to any Exchange Data Feeds or a particular 
Exchange Data Feed.
    The Exchange believes the proposed fees are reasonable because in 
setting them, the Exchange is constrained by the availability of 
numerous competitors offering market data products and trading 
services. Such substitutes need not be identical, but only 
substantially

[[Page 21241]]

similar to the product at hand. More specifically, in setting fees for 
the Exchange Data Feeds, the Exchange is constrained by the fact that, 
if its pricing is unattractive to customers, customers have their pick 
of a large number of alternative execution venues to use instead of the 
Exchange. The Exchange believes that it has considered all relevant 
factors and has not considered irrelevant factors in order to establish 
reasonable fees. The existence of competition ensures that the Exchange 
cannot set unreasonable market data fees without suffering the negative 
effects of that decision in the fiercely competitive market in which it 
operates.
c. Exchange Data Feeds Are Optional Market Data Products
    Subscribing to the Exchange Data Feeds is entirely optional. The 
Exchange is not required to make the Exchange Data Feeds available to 
any customers, nor is any customer required to purchase any Exchange 
Data Feed. Unlike some other data products (e.g., the consolidated 
quotation and last-sale information feeds) that firms are required to 
purchase in order to fulfill regulatory obligations,\53\ a customer's 
decision whether to purchase any Exchange Data Feed is entirely 
discretionary. Most Firms that choose to subscribe to an Exchange Data 
Feed do so for the primary goals of using it to increase their 
revenues, reduce their expenses, and in some instances to compete 
directly with the Exchange for order flow. Such firms are able to 
determine for themselves whether a particular Exchange Data Feed is 
necessary for their business needs, and if so, whether or not it is 
attractively priced. If an Exchange Data Feed does not provide 
sufficient value to a Firm based on the uses such Firm may have for it, 
such Firm may simply choose to conduct their business operations in 
ways that do not use the applicable Exchange Data Feed.\54\ If they do 
not choose to use one or more Exchange Data Feeds, they could also 
choose not to direct order flow to the Exchange.
---------------------------------------------------------------------------

    \53\ The Exchange notes that broker-dealers are not required to 
purchase proprietary market data to comply with their best execution 
obligations. See In the Matter of the Application of Securities 
Industry and Financial Markets Association for Review of Actions 
Taken by Self-Regulatory Organizations, Release Nos. 34-72182; AP-3-
15350; AP-3-15351 (May 16, 2014). Similarly, there is no requirement 
in Regulation NMS or any other rule that proprietary data be 
utilized for order routing decisions, and some competing exchanges, 
broker-dealers and ATSs have chosen not to do so.
    \54\ See generally Jones Paper at 8, 10-11.
---------------------------------------------------------------------------

    Specifically related to the Exchange Data Feed with the highest 
rates, the MEMOIR Depth Feed, even if a Firm determines that the fees 
for such feed are too high, customers can access much of the same data 
at lower rates by subscribing to the MEMOIR Top feed (which includes 
best-bid-and-offer information for the Exchange on a real-time basis) 
and MEMOIR Last Sale (which includes last-sale information for the 
Exchange on a real-time basis). MEMX top-of-book quotation information 
and last-sale information is also available on the consolidated SIP 
feeds. In this way, MEMOIR Top, MEMOIR Last Sale, and SIP data products 
are all substitutes for a significant portion of the data available on 
the MEMOIR Depth Feed, and SIP data products are also a substitute for 
a significant portion of data available on the MEMOIR Top and MEMOIR 
Last Sale feeds. Indeed, several exchange competitors of the Exchange 
have not subscribed to any Exchange Data Feeds for purposes of 
executing orders on their exchanges, order routing, and regulatory 
purposes,\55\ even though the Exchange subscribes to and pays for their 
comparable market data products.\56\
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    \55\ See, e.g., NYSE Arca Rule 7.37-E.(d), Order Execution and 
Routing, and BZX Rule 11.21, each of which discloses the data feeds 
used by each respective exchange and state that SIP products are 
used with respect to MEMX.
    \56\ See MEMX Rule 13.4, Usage of Data Feeds, which discloses 
that the Exchange uses proprietary data feeds for all exchanges that 
offer them.
---------------------------------------------------------------------------

    The only content available on the MEMOIR Depth Feed that is not 
available on these other products is the order-by-order look at the 
MEMX order book, which provides information about depth-of-book on the 
Exchange. The Exchange has been a vocal advocate in support of the 
Commission's Market Data Infrastructure Rule, which mandates the 
creation of a ``SIP Premium'' product that would include depth-of-book 
information on the consolidated market data feeds.\57\ The Exchange has 
also been a vocal advocate in support of pricing new content for the 
consolidated market data feeds in a reasonable and competitive manner 
that would encourage the use of a SIP Premium product and other content 
to be provided via the SIPs.\58\ Future products such as SIP Premium 
would include not only integrated depth-of-book information from MEMX, 
but all other exchanges as well, and would further constrain the 
Exchange's ability to price any Exchange Data Feed, including MEMOIR 
Depth, at a supra-competitive price. However, even in the absence of 
such products, the Exchange believes that use of the Exchange Data 
Feeds is entirely optional, as described above.
---------------------------------------------------------------------------

    \57\ See, e.g., Letter from Anders Franzon, General Counsel, 
MEMX LLC, dated May 26, 2020, regarding proposed Market Data 
Infrastructure rule, available at: https://www.sec.gov/comments/s7-03-20/s70320-7235183-217090.pdf.
    \58\ See, e.g., Letter from Adrian Griffiths, Head of Market 
Structure, MEMX LLC, dated November 8, 2021, regarding proposed fees 
for consolidated data provided pursuant to CTA/CQ/UTP Plans, 
available at: https://www.sec.gov/comments/sr-ctacq-2021-03/srctacq202103-9403088-262830.pdf.
---------------------------------------------------------------------------

    Further, in the case of products that are also redistributed 
through market data vendors such as Bloomberg and Refinitiv, the 
vendors themselves provide additional price discipline for proprietary 
data products because they control the primary means of access to 
certain end users. These vendors impose price discipline based upon 
their business models. For example, vendors that assess a surcharge on 
data they sell are able to refuse to offer proprietary products that 
their end users do not or will not purchase in sufficient numbers. Even 
in the absence of fees for the Exchange Data Feeds, many major market 
data vendors have not elected to make available the Exchange Data Feeds 
and likely will not unless their customers request it, and customers 
will not elect to pay the proposed fees unless the applicable Exchange 
Data Feed can provide value by sufficiently increasing revenues or 
reducing costs to the customer's business in a manner that will offset 
the fees. All of these factors operate as constraints on pricing 
proprietary data products.
    In setting the proposed fees for the Exchange Data Feeds, the 
Exchange considered the competitiveness of the market for proprietary 
data and all of the implications of that competition. As described 
elsewhere in this proposal, the Exchange also considered the Cost 
Analysis conducted by the Exchange and believes it has demonstrated 
that the fees will not result in any supra-competitive profit. The 
Exchange believes that it has considered all relevant factors and has 
not considered irrelevant factors in order to establish reasonable 
fees. The existence of alternatives to the Exchange and the continued 
availability of choice between different Exchange Data Feeds, other 
exchanges' proprietary data products, and the SIPs ensure that the 
Exchange cannot set unreasonable fees when vendors and subscribers can 
elect these alternatives or choose not to purchase a specific 
proprietary data product if the attendant fees are not justified by the 
returns that any particular vendor or data recipient would achieve 
through the purchase.

[[Page 21242]]

d. The Proposed Fees for Exchange Data Feeds Will Not Result in Supra-
Competitive Profits
    Commission staff previously noted that the generation of supra-
competitive profits is one of several potential factors in considering 
whether an exchange's proposed fees are consistent with the Act.\59\ As 
described in the Fee Guidance, the term ``supra-competitive profits'' 
refers to profits that exceed the profits that can be obtained in a 
competitive market. The proposed fee structure would not result in 
excessive pricing or supra-competitive profits for the Exchange. The 
proposed fee structure is merely designed to permit the Exchange to 
cover the costs allocated to providing Transaction Services with a 
modest markup (approximately 9%-18%), which would also account for 
costs related to Transaction Services that the Exchange has previously 
borne completely on its own and help fund future expenditures 
(increased costs, improvements, etc.). The Exchange believes that this 
is fair, reasonable, and equitable. Accordingly, the Exchange believes 
that its proposal is consistent with Section 6(b)(4) \60\ of the Act 
because the proposed fees will permit recovery of the Exchange's costs 
and will not result in excessive pricing or supra-competitive profit.
---------------------------------------------------------------------------

    \59\ See Fee Guidance, supra note 33.
    \60\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The proposed fees for Exchange Data Feeds will allow the Exchange 
to cover certain costs incurred by the Exchange associated with 
providing and maintaining necessary hardware and other network 
infrastructure as well as network monitoring and support services; 
without such hardware, infrastructure, monitoring and support the 
Exchange would be unable to provide Transaction Services, including 
market data. The Exchange routinely works to improve the performance of 
the network's hardware and software. The costs associated with 
maintaining and enhancing a state-of-the-art exchange network is a 
significant expense for the Exchange, and thus the Exchange believes 
that it is reasonable and appropriate to help offset those costs by 
adopting fees for the Exchange Data Feeds. As detailed above, the 
Exchange 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 must cover its expenses from these four 
primary sources of revenue.
    The Exchange expects to recoup the majority of its estimated 
aggregate monthly costs for providing Transaction Services from 
transaction fees and revenues from the public data feeds in which the 
Exchange participates and receives revenues (i.e., the SIPs). In order 
to cover operating costs and earn a reasonable profit on its market 
data, the Exchange is proposing to charge the fees described herein for 
the Exchange Data Feeds. In addition, this revenue will allow the 
Exchange to continue to offer, to enhance, and to continually refresh 
its infrastructure as necessary to offer a state-of-the-art trading 
platform. The Exchange believes that, consistent with the Act, it is 
appropriate to charge fees that represent a reasonable markup over cost 
given the other factors discussed above, including the lack of other 
costs to participate on the Exchange and the need for the Exchange to 
maintain a highly performant and stable platform to allow Members to 
transact with determinism.
    The Exchange's Cost Analysis estimates the costs to provide 
Transaction Services at $2,797,265. Based on current subscriptions to 
Exchange Data Feeds (but without definitive data regarding User counts) 
and projections related to transaction activity and volumes, the 
Exchange estimates it will generate monthly revenues of approximately 
$250,000 to $500,000 from the Exchange Data Feeds and between 
$3,050,000 and $3,300,000 from providing Transaction Services overall. 
This represents a modest profit when compared to the cost of providing 
Transaction Services (approximately 9% to 18%). Further, as noted 
above, applying the Exchange's holistic Cost Analysis to a holistic 
view of anticipated revenues from all sources, the Exchange would earn 
approximately 8.5% to 15% margin on its operations as a whole. The 
Exchange believes that this amount is reasonable.
2. The Proposed Fees Are Reasonable
    The specific fees that the Exchange proposes for the Exchange Data 
Feeds are reasonable for the following additional reasons.
    Overall. The Exchange believes the proposed fees for the Exchange 
Data Feeds are reasonable when compared to fees for comparable 
products, such as the BZX Depth feed, BZX Top feed, and BZX Last Sale 
feed, compared to which the Exchange's proposed fees are generally 
lower, as well as other comparable data feeds priced significantly 
higher than the Exchange's proposed fees for the Exchange Data 
Feeds.\61\ Specifically with respect to the MEMOIR Depth feed, the 
Exchange believes that the proposed fees for such feed are reasonable 
because they represent not only the value of the data available from 
the MEMOIR Top and MEMOIR Last Sale data feeds, which have lower 
proposed fees, but also the value of receiving the depth-of-book data 
on an order-by-order basis. Finally, the Exchange believes that its 
Cost Analysis and holistic approach thereto demonstrates that the 
proposed fees for the Exchange Data Feeds would not result in supra-
competitive profits.
---------------------------------------------------------------------------

    \61\ See supra notes 24-25; see supra note 27 and accompanying 
text.
---------------------------------------------------------------------------

    Internal Distribution Fees. The Exchange believes that it is 
reasonable to charge Fees to access the Exchange Data Feeds for 
Internal Distribution because of the value of such data to subscribers 
in their profit-generating activities. The Exchange also believes that 
the proposed monthly Internal Distribution fees for MEMOIR Depth, 
MEMOIR Top, and MEMOIR Last Sale are reasonable as they are the same 
amounts charged by at least one other exchange of comparable size for 
comparable data products,\62\ and are lower than the fees charged by 
several other exchanges for comparable data products.\63\
---------------------------------------------------------------------------

    \62\ See BZX Fee Schedule available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \63\ See NYSE Proprietary Market Data Pricing list, available 
at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf; Nasdaq Global Data Products pricing 
list, available at: http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN.
---------------------------------------------------------------------------

    External Distribution Fees. The Exchange believes that it is 
reasonable to charge External Distribution fees for the Exchange Data 
Feeds because vendors receive value from redistributing the data in 
their business products provided to their customers. The Exchange 
believes that charging External Distribution fees is reasonable because 
the vendors that would be charged such fees profit by re-transmitting 
the Exchange's market data to their customers. These fee would be 
charged only once per month to each vendor account that redistributes 
any Exchange Data Feed, regardless of the number of customers to which 
that vendor redistributes the data. The Exchange also believes the 
proposed monthly External Distribution fee for the MEMOIR Depth Feed is 
reasonable because it is half the amount of the fee charged by at least 
one other exchange of comparable size for a comparable

[[Page 21243]]

data product,\64\ and significantly less than the amount charged by 
several other exchanges for comparable data products.\65\ Similarly, 
the Exchange believes the proposed monthly External Distribution fees 
for the MEMOIR TOP and MEMOIR Last Sale feeds are reasonable because 
they are discounted compared to same amounts charged by at least one 
other exchange of comparable size for comparable data products, and 
significantly less than the amount charged by several other exchanges 
for comparable data products.\66\
---------------------------------------------------------------------------

    \64\ See BZX Fee Schedule available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \65\ See id.
    \66\ See NYSE Proprietary Market Data Pricing list, available 
at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf; Nasdaq Global Data Products pricing 
list, available at: http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN.
---------------------------------------------------------------------------

    User Fees. The Exchange believes that having separate Professional 
and Non-Professional User fees for the MEMOIR Depth feed is reasonable 
because it will make the product more affordable and result in greater 
availability to Professional and Non-Professional Users. Setting a 
modest Non-Professional User fee is reasonable because it provides an 
additional method for Non-Professional Users to access the Exchange 
Data Feeds by providing the same data that is available to Professional 
Users. The proposed monthly Professional User fee and monthly Non-
Professional User fee are reasonable because they are lower than the 
fees charged by at least one other exchange of comparable size for 
comparable data products,\67\ and significantly less than the amounts 
charged by several other exchanges for comparable data products.\68\ 
The Exchange also believes it is reasonable to charge the same low per 
User fee of $0.01 for both Professional Users and Non-Professional 
Users receiving the MEMOIR Top and MEMOIR Last Sale feeds, as this is 
not only pricing such data at a much lower cost than other exchanges 
charge for comparable data feeds \69\ but doing so will also simplify 
reporting for subscribers who externally distribute these data feeds to 
Users, as the Exchange believes that categorization of Users as 
Professional and Non-Professional is not meaningful for these products 
and that requiring such categorization would expose Firms to 
unnecessary audit risk of paying more for mis-categorization. The 
Exchange also believes that the proposal to require reporting of 
individual Users, but not devices, is reasonable as this too will 
eliminate unnecessary audit risk that can arise when recipients are 
required to apply complex counting rules such as whether or not to 
count devices or whether an individual accessing the same data through 
multiple devices should be counted once or multiple times.
---------------------------------------------------------------------------

    \67\ See BZX Fee Schedule, available at: https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \68\ See NYSE Proprietary Market Data Pricing list, available 
at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf; Nasdaq Global Data Products pricing 
list, available at: http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN.
    \69\ See id.
---------------------------------------------------------------------------

    Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees for the MEMOIR Depth feed are reasonable, because 
they reflect the value of the data to the data recipients in their 
profit-generating activities and do not impose the burden of counting 
non-display devices.
    The Exchange believes that the proposed Non-Display Usage fees 
reflect the significant value of the non-display data use to data 
recipients, which purchase such data on an entirely voluntary basis. 
Non-display data can be used by data recipients for a wide variety of 
profit-generating purposes, including proprietary and agency trading 
and smart order routing, as well as by data recipients that operate 
Trading Platforms that compete directly with the Exchange for order 
flow. The data also can be used for a variety of non-trading purposes 
that indirectly support trading, such as risk management and 
compliance. Although some of these non-trading uses do not directly 
generate revenues, they can nonetheless substantially reduce a 
recipient's costs by automating such functions so that they can be 
carried out in a more efficient and accurate manner and reduce errors 
and labor costs, thereby benefiting recipients. The Exchange believes 
that charging for non-trading uses is reasonable because data 
recipients can derive substantial value from such uses, for example, by 
automating tasks so that can be performed more quickly and accurately 
and less expensively than if they were performed manually.
    Previously, the non-display use data pricing policies of many 
exchanges required customers to count, and the exchanges to audit the 
count of, the number of non-display devices used by a customer. As non-
display use grew more prevalent and varied, however, exchanges received 
an increasing number of complaints about the impracticality and 
administrative burden associated with that approach. In response, 
several exchanges developed a non-display use pricing structure that 
does not require non-display devices to be counted or those counts to 
be audited, and instead categorizes different types of use. The 
Exchange proposes to distinguish between non-display use for the 
operation of a Trading Platform and other non-display use, which is 
similar to exchanges such as BZX and EDGX,\70\ while other exchanges 
maintain additional categories and in many cases charge multiple times 
for different types of non-display use or the operation of multiple 
Trading Platforms.\71\
---------------------------------------------------------------------------

    \70\ See BZX Fee Schedule, available at: https://www.cboe.com/us/equities/membership/fee_schedule/bzx/; EDGX Fee Schedule, 
available at: https://www.cboe.com/us/equities/membership/fee_schedule/edgx/.
    \71\ See supra notes 24-25.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to segment the fee for 
non-display use into these two categories. As noted above, the uses to 
which customers can put the MEMOIR Depth feed are numerous and varied, 
and the Exchange believes that charging separate fees for these 
separate categories of use is reasonable because it reflects the actual 
value the customer derives from the data, based upon how the customer 
makes use of the data.
    The Exchange believes that the proposed fees for non-display use 
other than operation of a Trading Platform is reasonable. These fees 
are comparable to, and lower than, the fees charged by at least one 
other exchange of comparable size for a comparable data product,\72\ 
and significantly less than the amounts charged by several other 
exchanges for comparable data products.\73\ The Exchange believes that 
the proposed fees directly and appropriately reflect the significant 
value of using data on a non-display basis in a wide range of computer-
automated functions relating to both trading and non-trading activities 
and that the number and range of these functions continue to grow 
through innovation and technology developments.
---------------------------------------------------------------------------

    \72\ See BZX Fee Schedule, available at: https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \73\ See NYSE Proprietary Market Data Pricing list, available 
at: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf; Nasdaq Global Data Products pricing 
list, available at: http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN.
---------------------------------------------------------------------------

    The Exchange also believes, regarding non-display use for operation 
of a Trading Platform, it is reasonable to charge a higher monthly fee 
than for other non-display use because such use of the Exchange's data 
is directly in competition with the Exchange and the

[[Page 21244]]

Exchange should be permitted to recoup some of its lost trading revenue 
by charging for the data that makes such competition possible. The 
Exchange also believes that it is reasonable to charge the proposed 
fees for non-display use for operation of a Trading Platform because 
the proposed fees are comparable to, and lower than, the fees charged 
at least one other exchange of comparable size for a comparable data 
product,\74\ and significantly less than the amounts charged by several 
other exchanges for comparable data products, which also charge per 
Trading Platform operated by a data subscriber subject to a cap in most 
cases, rather than charging per Firm, as proposed by the Exchange.\75\
---------------------------------------------------------------------------

    \74\ See BZX Fee Schedule, available at: https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \75\ See supra notes 24-25.
---------------------------------------------------------------------------

    The proposed Non-Display Usage fees for the Exchange Data Feeds are 
also reasonable because they take into account the extra value of 
receiving the data for Non-Display Usage that includes a rich set of 
information including top of book quotations, depth-of-book quotations, 
executions and other information. The Exchange believes that the 
proposed fees directly and appropriately reflect the significant value 
of using the MEMOIR Depth feed on a non-display basis in a wide range 
of computer-automated functions relating to both trading and non-
trading activities and that the number and range of these functions 
continue to grow through innovation and technology developments.\76\
---------------------------------------------------------------------------

    \76\ See also Exchange Act Release No. 69157, March 18, 2013, 78 
FR 17946, 17949 (March 25, 2013) (SR-CTA/CQ-2013-01) (``[D]ata feeds 
have become more valuable, as recipients now use them to perform a 
far larger array of non-display functions. Some firms even base 
their business models on the incorporation of data feeds into black 
boxes and application programming interfaces that apply trading 
algorithms to the data, but that do not require widespread data 
access by the firm's employees. As a result, these firms pay little 
for data usage beyond access fees, yet their data access and usage 
is critical to their businesses.''
---------------------------------------------------------------------------

    For all of the foregoing reasons, the Exchange believes that the 
proposed fees for the Exchange Data Feeds are reasonable.
The Proposed Fees Are Equitably Allocated
    The Exchange believes the proposed fees for the Exchange Data Feeds 
are allocated fairly and equitably among the various categories of 
users of the feeds, and any differences among categories of users are 
justified and appropriate.
    Overall. 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 Exchange Data Feeds. Any subscriber or 
vendor that chooses to subscribe to one or more Exchange 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 more Exchange 
Data Feeds is based on objective differences in usage of Exchange Data 
Feeds among different Firms, which are still ultimately in the control 
of any particular Firm.
    Internal Distribution Fee. The Exchange believes the proposed 
monthly fees for Internal Distribution of the Exchange Data Feeds are 
equitably allocated because they would be charged on an equal basis to 
all data recipients that receive the Exchange Data Feeds for internal 
distribution, regardless of what type of business they operate.
    External Distribution Fees. The Exchange believes the proposed 
monthly fees for External Distribution of the Exchange Data Feeds are 
equitably allocated because they would be charged on an equal basis to 
all data recipients that receive the Exchange Data Feeds that choose to 
redistribute the feeds externally.
    User Fees. The Exchange believes that the fee structure 
differentiating Professional User fees from Non-Professional User fees 
for display use of the MEMOIR Depth feed is equitable. This structure 
has long been used by other exchanges and the SIPs to reduce the price 
of data to Non-Professional Users and make it more broadly 
available.\77\ Offering the MEMOIR Depth feed to Non-Professional Users 
at a lower cost than Professional Users results in greater equity among 
data recipients. These User fees would be charged uniformly to all 
individuals that have access to the MEMOIR Depth feed based on the 
category of User. The Exchange also believes the proposed User fees for 
MEMOIR Top and MEMOIR Last Sale are equitable because the Exchange has 
proposed to charge Professional Users and Non-Professional Users the 
same low rate of $0.01 per month.
---------------------------------------------------------------------------

    \77\ See, e.g., Securities Exchange Act Release No. 59544 (March 
9, 2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131) 
(establishing the $15 Non-Professional User Fee (Per User) for NYSE 
OpenBook); Securities Exchange Act Release No. 20002, File No. S7-
433 (July 22, 1983), 48 FR 34552 (July 29, 1983) (establishing Non-
Professional fees for CTA data); NASDAQ BX Equity 7 Pricing 
Schedule, Section 123.
---------------------------------------------------------------------------

    Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees are equitably allocated because they would require 
subscribers to pay fees only for the uses they actually make of the 
data. As noted above, non-display data can be used by data recipients 
for a wide variety of profit-generating purposes (including trading and 
order routing) as well as purposes that do not directly generate 
revenues (such as risk management and compliance) but nonetheless 
substantially reduce the recipient's costs by automating certain 
functions. The Exchange believes that it is equitable to charge non-
display data subscribers that use data for purposes other than 
operation of a Trading Platform as proposed because all such 
subscribers would have the ability to use such data for as many non-
display uses as they wish for one low fee. As noted above, this 
structure is comparable to that in place for the BZX Depth feed but 
several other exchanges charge multiple non-display fees to the same 
client to the extent they use a data feed in several different trading 
platforms or for several types of non-display use.\78\
---------------------------------------------------------------------------

    \78\ See supra, notes 24-25.
---------------------------------------------------------------------------

    The Exchange also believes, regarding non-display use for operation 
of a Trading Platform, it is equitable to charge a higher rate for each 
Firm operating a Trading Platform (as compared to other Non-Display 
Usage not by Trading Platforms) because such use of the data is 
directly in competition with the Exchange and the Exchange should be 
permitted to recoup some of its lost trading revenue by charging for 
the data that makes such competition possible. The Exchange believes 
that it is equitable to charge a single fee per Firm rather than 
multiple fees for a Firm that operates more than one Trading Platform 
because operators of Trading Platforms are many times viewed as a 
single competing venue or group, even if there a multiple liquidity 
pools operated by the same competitor.
    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 Exchange Data Feeds 
are not unfairly discriminatory because any differences in the 
application of the fees are based on meaningful distinctions between 
customers, and those meaningful distinctions are not unfairly 
discriminatory between customers.
    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 Exchange Data

[[Page 21245]]

Feed(s). Any vendor or subscriber that chooses to subscribe to the 
Exchange Data Feeds is subject to the same Fee Schedule, regardless of 
what type of business they operate. Because the proposed fees for 
MEMOIR Depth are higher, vendors and subscribers seeking lower cost 
options may instead choose to receive data from the SIPs or through the 
MEMOIR Top and/or MEMOIR Last Sale feed for a lower cost. 
Alternatively, vendors and subscribers can choose to pay for the MEMOIR 
Depth feed in order to receive data in a single feed with depth-of-book 
information or they can choose to subscribe to a combination of data 
feeds for redundancy purposes or to use such feeds for different 
purposes, thereby allowing each vendor or subscriber to choose the best 
business solution for itself.
    Internal Distribution Fees. The Exchange believes the proposed 
monthly fees for Internal Distribution of the Exchange Data Feeds are 
not unfairly discriminatory because they would be charged on an equal 
basis to all data recipients that receive the same Exchange Data 
Feed(s) for internal distribution, regardless of what type of business 
they operate.
    External Distribution Fees. The Exchange believes the proposed 
monthly fees for redistributing the Exchange Data Feeds are not 
unfairly discriminatory because they would be charged on an equal basis 
to all data recipients that receive the same Exchange Data Feed(s) that 
choose to redistribute the feed(s) externally.
    User Fees. The Exchange believes that the fee structure 
differentiating Professional User fees from Non-Professional User fees 
for display use of the MEMOIR Depth feed is not unfairly 
discriminatory. This structure has long been used by other exchanges 
and the SIPs to reduce the price of data to Non-Professional Users and 
make it more broadly available.\79\ Offering the Exchange Data Feeds to 
Non-Professional Users with the same data as is available to 
Professional Users results in greater equity among data recipients. 
These User fees would be charged uniformly to all individuals that have 
access to the Exchange Data Feeds based on the category of User. The 
Exchange also believes the proposed User fees for MEMOIR Top and MEMOIR 
Last Sale are not unfairly discriminatory because the Exchange has 
proposed to charge Professional Users and Non-Professional Users the 
same low rate of $0.01 per month.
---------------------------------------------------------------------------

    \79\ See supra note 77.
---------------------------------------------------------------------------

    Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees for the MEMOIR Depth feed are not unfairly 
discriminatory because they would require subscribers for non-display 
use to pay fees depending on their use of the data, either for 
operation of a Trading Platform or not, but would not impose multiple 
fees to the extent a Firm operates multiple Trading Platforms or has 
multiple different types of non-display use. As noted above, non-
display data can be used by data recipients for a wide variety of 
profit-generating purposes as well as purposes that do not directly 
generate revenues but nonetheless substantially reduce the recipient's 
costs by automating certain functions. This segmented fee structure is 
not unfairly discriminatory because no subscriber of non-display data 
would be charged a fee for a category of use in which it did not 
actually engage.
    The Exchange also believes that, regarding non-display use for 
operation of a Trading Platform, it is not unreasonably discriminatory 
to charge a higher fee for each Firm operating a Trading Platform (as 
compared to other Non-Display Usage not by Trading Platforms) because 
such use of the data is directly in competition with the Exchange and 
the Exchange should be permitted to recoup some of its lost trading 
revenue by charging for the data that makes such competition possible. 
The Exchange believes that it is not unreasonably discriminatory to 
charge a single fee for an operator of Trading Platforms that operates 
more than one Trading Platform because operators of Trading Platforms 
are many times viewed as a single competing venue or group, even if 
there a multiple liquidity pools operated by the same competitor.
    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,\80\ 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.
---------------------------------------------------------------------------

    \80\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

Intra-Market Competition
    The Exchange does not believe that the proposed rule change would 
place certain market participants at the Exchange at a relative 
disadvantage compared to other market participants or affect the 
ability of such market participants to compete. In particular, while 
the Exchange has not officially proposed fees for Exchange Data Feeds 
until now, Exchange personnel have been informally discussing potential 
fees for Exchange Data Feeds with a diverse group of market 
participants that receive data from the Exchange (including large and 
small firms, trading firms and market data only firms, etc.). The 
Exchange has received no official complaints from Members, non-Members, 
or third-parties that redistribute the Exchange Data Feeds, that the 
Exchange's fees or the proposed fees for Exchange Data Feeds would 
negatively impact their abilities to compete with other market 
participants or that they are placed at a disadvantage relative to 
others. The Exchange does not believe that the proposed fees for 
Exchange 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 Exchange Data Feeds by each 
market participant based on the type of business they operate, and the 
decision to subscribe to one or more Exchange Data Feeds is based on 
objective differences in usage of Exchange 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 Exchange 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 Exchange Data Feeds consumed by 
various market participants and their usage thereof.
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 forced to 
subscribe to any of the Exchange Data Feeds, as described above. 
Additionally, other exchanges have similar market data fees in place 
for their participants, but with higher rates to connect.\81\ The 
Exchange is also unaware of any assertion that the proposed fees for 
Exchange Data Feeds would somehow unduly impair its competition with 
other exchanges.
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    \81\ See supra notes 24-25; see also, supra note 27 and 
accompanying text.

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[[Page 21246]]

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 \82\ and Rule 19b-4(f)(2) \83\ thereunder.
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    \82\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \83\ 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 [email protected]. Please include 
File Number SR-MEMX-2022-03 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-2022-03. 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 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-2022-03 and should be submitted on 
or before May 2, 2022.

    April 11, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\84\
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    \84\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-07627 Filed 4-8-22; 8:45 am]
BILLING CODE 8011-01-P