Document ID: SEC-2021-0848-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MEMX, LLC
Posted Date: 2021-06-16T04:00Z

[Federal Register Volume 86, Number 114 (Wednesday, June 16, 2021)]
[Notices]
[Pages 32090-32099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-12593]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92150; File No. SR-MEMX-2021-07]

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

June 10, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 1, 2021, MEMX LLC (``MEMX'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange is filing with the Commission a proposed rule change 
to amend the Exchange's fee schedule applicable to Members \3\ (the 
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The 
Exchange proposes to implement the changes to the Fee Schedule pursuant 
to this proposal on June 1, 2021. The text of the proposed rule change 
is provided in Exhibit 5.
---------------------------------------------------------------------------

    \3\ See Exchange Rule 1.5(p).
---------------------------------------------------------------------------

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

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

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

1. Purpose
    The purpose of the proposed rule change is to amend the Fee 
Schedule to (i) adopt a new pricing incentive (the ``Displayed 
Liquidity Incentive'' or ``DLI'') designed to improve market quality on 
the Exchange in certain specific securities and more generally in the 
form of an enhanced rebate for executions of displayed orders in 
securities priced at or above $1.00 per share that add liquidity to the 
Exchange (such orders, ``Added Displayed Volume'') for Members that 
meet certain minimum quoting requirements across a specified number of 
securities, as further described below; (ii) introduce a tiered pricing 
structure applicable to the rebates provided for executions of Added 
Displayed Volume; (iii) adopt an enhanced rebate for executions of 
Pegged Orders \4\ with a Midpoint Peg \5\ instruction in securities 
priced at or above $1.00 per share (such orders, ``Midpoint Peg 
Orders'') that add liquidity to the Exchange; (iv) increase the 
standard fee for executions of orders in securities priced at or above 
$1.00 per share that remove liquidity from the Exchange (such orders, 
``Removed Volume''); and (v) reduce the standard rebate for executions 
of Added Displayed Volume.
---------------------------------------------------------------------------

    \4\ Pegged Orders are described in Exchange Rules 11.6(h) and 
11.8(c) and generally defined as an order that is pegged to a 
reference price and automatically re-prices in response to changes 
in the national best bid and/or offer (``NBBO'').
    \5\ A Midpoint Peg instruction is an instruction that may be 
placed on a Pegged Order that instructs the Exchange to peg the 
order to midpoint of the NBBO. See Exchange Rule 11.6(h)(2).
---------------------------------------------------------------------------

    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single

[[Page 32091]]

registered equities exchange currently has more than approximately 16% 
of the total market share of executed volume of equities trading.\6\ 
Thus, in such a low-concentrated and highly competitive market, no 
single equities exchange possesses significant pricing power in the 
execution of order flow, and the Exchange currently represents 
approximately 2.4% of the overall market share.\7\
---------------------------------------------------------------------------

    \6\ Market share percentage calculated as of May 27, 2021. The 
Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \7\ Id.
---------------------------------------------------------------------------

Adoption of Displayed Liquidity Incentive
    The Exchange proposes to adopt a new pricing incentive, referred to 
by the Exchange as the ``Displayed Liquidity Incentive'' or ``DLI'', in 
the form of an enhanced rebate for executions of Added Displayed Volume 
for Members that qualify for the DLI by meeting certain minimum quoting 
requirements across a specified number of securities, as further 
described below. The proposed DLI is designed to encourage Members to 
improve market quality on the Exchange in certain specific securities 
and more generally. As proposed, a Member will qualify for the DLI, and 
thus receive the proposed enhanced rebate for executions of Added 
Displayed Volume described below, if the Member's NBBO Time \8\ is at 
least 25% in an average of at least 250 securities, at least 75 of 
which must be DLI Target Securities,\9\ per trading day during the 
month. Under this proposal, the Exchange will determine on a daily 
basis the number of securities in which each of a Member's MPIDs meets 
the 25% NBBO Time requirement (the ``quoting requirement'') for that 
day. The Exchange will then aggregate the number of securities in which 
each of a Member's MPIDs meets the quoting requirement to determine the 
total number of securities in which such Member meets the quoting 
requirement for that day.\10\ However, a single security in which more 
than one of such Member's MPIDs meets the quoting requirement for that 
day will only be counted once for this purpose.\11\ Additionally, as 
proposed, the quoting requirement with respect to a security must be 
met by a single MPID achieving the requisite NBBO Time for that day, 
and the NBBO Time of multiple MPIDs will not be aggregated to determine 
if the Member has met the quoting requirement in that security.\12\
---------------------------------------------------------------------------

    \8\ As proposed, the term ``NBBO Time'' means the aggregate of 
the percentage of time during regular trading hours during which one 
of a Member's market participant identifiers (``MPIDs'') has a 
displayed order of at least one round lot at the national best bid 
(``NBB'') or the national best offer (``NBO''). If an MPID has a 
displayed order of at least one round lot at both the NBB and the 
NBO, the quoting activity on each side will be aggregated and 
counted toward the NBBO Time. As an example, where a Member's MPID 
has a displayed order of at least one round lot at the NBB for 20% 
of the time during regular trading hours and a displayed order of at 
least one round lot at the NBO for 10% of the time during regular 
trading hours for a security, the Member's NBBO Time with respect to 
that MPID for that security would be 30%. Thus, it is possible for a 
single MPID to have an NBBO Time for a security of up to 200% for a 
particular day under this proposal. As proposed, the term ``regular 
trading hours'' refers to the time between 9:30 a.m. and 4:00 p.m. 
Eastern Time, or such shorter period as may be designated by the 
Exchange on a day when the securities markets close early.
    \9\ As proposed, the term ``DLI Target Securities'' means a list 
of securities designated as such, the universe of which will be 
determined by the Exchange and published on the Exchange's website. 
The Exchange anticipates that the initial DLI Target Securities list 
will include between 275 and 300 securities. The DLI Target 
Securities list will always include at least 75 securities and may 
be periodically updated by the Exchange, provided that the Exchange 
will not remove a security from the DLI Target Securities list 
without at least 30 days' prior notice to Members as published on 
the Exchange's website (unless the security is no longer eligible 
for trading on the Exchange).
    \10\ For example, if a Member has four MPIDs and each MPID has 
an NBBO Time of 30% in a different security, this will count as four 
securities in which such Member has met the quoting requirement for 
that day.
    \11\ Thus, if a Member has two MPIDs that meet the quoting 
requirement in the same security for a particular day, this will 
only count as one security for purposes of determining the total 
number of securities in which such Member has met the quoting 
requirement for that day.
    \12\ As an example, assume that a Member has two MPIDs, and that 
MPID 1 has an NBBO Time of 15% and MPID 2 has an NBBO Time of 20% in 
the same security for a particular day. In this event, such Member 
would not meet the quoting requirement in that security for that day 
as it does not have an MPID with an NBBO Time of at least 25% in 
that security for that day. The Exchange notes that The Nasdaq Stock 
Market LLC (``Nasdaq'') uses this same methodology when calculating 
the time that a member quotes at the NBBO under its Qualified Market 
Maker program. See infra note 17; see also Securities Exchange Act 
Release No. 77662 (April 20, 2016), 81 FR 24681, 24682 (April 26, 
2016) (SR-NASDAQ-2016-051).
---------------------------------------------------------------------------

    As noted above, to qualify for the DLI, a Member must meet the 
quoting requirement in an average of at least 250 securities traded on 
the Exchange (the ``250 securities requirement''), at least 75 of which 
must be DLI Target Securities (the ``75 DLI Target Securities 
requirement''), per trading day during the month. Each of the 250 
securities requirement and the 75 DLI Target Securities requirement is 
referred to under this proposal as a ``securities requirement.'' The 
proposed DLI is designed to enhance market quality both in a broad 
manner with respect to all securities traded on the Exchange, through 
the 250 securities requirement, and in a targeted manner with respect 
to certain designated securities in which the Exchange specifically 
seeks to inject additional quoting competition (i.e., the DLI Target 
Securities), through the 75 DLI Target Securities requirement. The 
number of DLI Target Securities in which a Member meets the quoting 
requirement will be counted toward both the 75 DLI Target Securities 
requirement and the 250 securities requirement. In order to determine 
whether a Member meets the applicable securities requirements during a 
month, the average number of securities in which such Member meets the 
quoting requirement per trading day during the month will be calculated 
by summing the number of securities in which each of such Member's 
MPIDs met the quoting requirement for each trading day during the month 
then dividing the resulting sum by the total number of trading days in 
the month.\13\ The Exchange proposes to add notes to the Fee Schedule 
describing the criteria for determining whether a Member qualifies for 
the DLI and the related calculation methodologies described above.
---------------------------------------------------------------------------

    \13\ As an example, in a month with 20 trading days, if a 
Member's MPIDs collectively satisfied the quoting requirement in 125 
securities (of which 25 were DLI Target Securities) for ten of the 
trading days in the month, and collectively satisfied the quoting 
requirement in 375 securities (of which 125 were DLI Target 
Securities) for the other ten trading days in the month, such Member 
would meet the quoting requirement in an average of 250 securities 
(i.e., ((125 x 10) + (375 x 10))/20), inclusive of an average of 75 
DLI Target Securities (i.e., ((25 x 10) + (125 x 10))/20), per 
trading day during the month. Therefore, such Member would meet both 
of the applicable securities requirements during the month and would 
qualify for the DLI for that month under this proposal.
---------------------------------------------------------------------------

    In addition, the Exchange will exclude for purposes of determining 
qualification for the Displayed Liquidity Incentive: (1) Any trading 
day that the Exchange's system experiences a disruption that lasts for 
more than 60 minutes during regular trading hours (``Exchange System 
Disruption Days''); and (2) the day that Russell Investments 
reconstitutes its family of indexes (the ``Russell Reconstitution 
Day''), which occurs annually on the last Friday in June. The Exchange 
will exclude Exchange System Disruption Days and the Russell 
Reconstitution Day when determining both the numerator (i.e., the 
number of securities in which a Member's MPIDs met the quoting 
requirement for each trading day during the month) and the denominator 
(i.e., the total number of trading days in the month) for purposes of 
calculating the average number of securities in which such Member meets 
the quoting

[[Page 32092]]

requirement per trading day during the month.
    As further detail regarding such proposed exclusions, an Exchange 
system disruption may occur, for example, where a certain group of 
securities traded on the Exchange is unavailable for trading due to an 
Exchange system issue. Similarly, the Exchange may be able to perform 
certain functions with respect to accepting and processing orders, but 
may have a failure to another significant process, such as routing to 
other market centers, that would lead Members that rely on such process 
to avoid utilizing the Exchange until the Exchange's entire system was 
operational. The Exchange believes that these types of Exchange system 
disruptions could preclude Members from participating on the Exchange 
to the extent that they might have otherwise participated on such days, 
and thus, the Exchange believes it is appropriate to exclude such days 
when determining whether a Member meets the applicable securities 
requirements during a month to avoid penalizing Members that might 
otherwise have met such requirements. For similar reasons, the Exchange 
believes it is appropriate to exclude the Russell Reconstitution Day in 
the same manner, as the Exchange believes that the Russell 
Reconstitution Day typically has extraordinarily high and abnormally 
distributed trading volumes, and the Exchange believes this change to 
normal activity may affect a Member's ability to meet the quoting 
requirement across various securities on that day. The Exchange notes 
that the exclusion of Exchange System Disruption Days and the Russell 
Reconstitution Day is consistent with the methodologies used by other 
exchanges when calculating certain member trading and other volume 
metrics for purposes of determining whether members qualify for certain 
pricing incentives, and the Exchange believes application of this 
methodology is similarly appropriate for the proposed DLI pricing 
incentive.\14\
---------------------------------------------------------------------------

    \14\ See, e.g., the Cboe BZX Exchange, Inc. (``Cboe BZX'') 
equities trading fee schedule on its public website (available at 
https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/); 
the Cboe EDGX Exchange, Inc. equities trading fee schedule on its 
public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/).
---------------------------------------------------------------------------

    A Member that qualifies for the DLI by meeting the requirements 
described above during a particular month will receive an enhanced 
rebate of $0.0036 per share for all executions of Added Displayed 
Volume (unless a higher rebate applies \15\) during that month.\16\ 
This proposed enhanced rebate is $0.0005 higher than the standard 
rebate that would otherwise be applicable to such executions, which the 
Exchange is proposing to reduce from $0.0034 to $0.0031, as further 
described below. The proposed enhanced rebate will apply to all 
executions of Added Displayed Volume (other than orders receiving a 
higher rebate, such as Retail Orders) entered by each MPID of a 
qualifying Member; thus, if a Member qualifies for the DLI as a result 
of its quoting activity from one of its MPIDs during a month, the 
qualifying Member will receive the proposed enhanced rebate of $0.0036 
per share for all executions of Added Displayed Volume (unless a higher 
rebate applies) entered by that MPID as well as those entered by each 
of its other MPIDs during that month. The Exchange notes that the 
proposed enhanced rebate will only apply to executions in securities 
priced at or above $1.00 per share; executions of a qualifying Member's 
displayed orders that add liquidity to the Exchange in securities 
priced below $1.00 per share will continue to receive the standard 
rebate applicable to executions of such orders on the Exchange (i.e., 
0.05% of the total dollar value of the transaction).
---------------------------------------------------------------------------

    \15\ As described further below, the Exchange is also proposing 
to specify on the Fee Schedule that the lowest fee/highest rebate 
will apply if a Member qualifies for multiple fees/rebates with 
respect to a particular transaction. Retail Orders in securities 
priced at or above $1.00 per share that are displayed and add 
liquidity to the Exchange receive a rebate that is higher than the 
proposed enhanced rebate for Members that qualify for the DLI. Thus, 
under the Exchange's proposed pricing structure, a Member that 
qualifies for the DLI would not receive the proposed DLI enhanced 
rebate for executions of displayed Retail Orders that add liquidity 
to the Exchange but instead would receive the rebate applicable to 
executions of liquidity-adding displayed Retail Orders.
    \16\ This proposed pricing is referred to by the Exchange on the 
Fee Schedule under the new description ``Added displayed volume, 
DLI'' with a Fee Code of ``Bq'', ``Dq'' or ``Jq'', as applicable, to 
be provided by the Exchange on the monthly invoices provided to 
Members. The Exchange notes that because the determination of 
whether a Member qualifies for the DLI for a particular month will 
not be made until after the month-end, the Exchange will provide the 
Fee Codes otherwise applicable to such transactions (i.e., ``B'', 
``D'' or ``J'') on the execution reports provided to Members during 
the month and will only designate the Fee Codes of ``Bq'', ``Dq'' or 
``Jq'' on the monthly invoices, which are provided after such 
determination has been made.
---------------------------------------------------------------------------

    The Exchange is proposing to provide the enhanced rebate for 
executions of Added Displayed Volume for qualifying Members as a means 
of recognizing the value of market participants that consistently quote 
at the NBBO in a large number of securities, generally, and in the DLI 
Target Securities, in particular. Even when such market participants 
are not formally registered as market makers, they risk capital by 
offering immediately executable liquidity at the price most favorable 
to market participants on the opposite side of the market. Such 
activity promotes price discovery and dampens volatility and enhances 
the attractiveness of the Exchange as a trading venue. Given the 
proposed requirements to qualify for the DLI, a Member must make a 
significant contribution to market quality by providing liquidity at 
the NBBO in a large number of securities, including certain designated 
securities in which the Exchange specifically seeks to inject 
additional quoting competition (i.e., the DLI Target Securities), for a 
significant portion of the day.
    A Member that qualifies for the DLI may be, but is not required to 
be, a registered market maker in any security; thus, qualifying for the 
DLI does not by itself impose a two-sided or any other quotation 
obligation or convey any of the benefits associated with being a 
registered market maker. Qualification for the DLI will, however, 
reflect the Member's commitment to provide meaningful and consistent 
support to market quality and price discovery by extensive quoting at 
the NBBO in a large number of securities, including the DLI Target 
Securities. Thus, this proposal is designed to attract liquidity both 
from traditional market makers and from other firms that are willing to 
commit capital to support liquidity at the NBBO. Through the proposed 
enhanced rebate for qualifying Members, the Exchange hopes to provide 
improved trading conditions for all market participants through 
narrower bid-ask spreads and increased depth of liquidity available at 
the NBBO for a large number of securities, generally, including the DLI 
Target Securities, in particular. In addition, the proposal reflects an 
effort to use a financial incentive to encourage a wider variety of 
Members, including Members that may be characterized as high-frequency 
trading firms, to make positive commitments to promote market quality.
    The Exchange notes that the proposed DLI is similar in structure 
and purpose to pricing programs in place at other exchanges that are 
designed to enhance market quality by incentivizing members to achieve 
minimum quoting standards, including minimum quoting at the NBBO in a 
large number of securities, generally, or certain designated 
securities, in particular.\17\

[[Page 32093]]

The Exchange further notes that, like the proposed DLI, these programs 
include as an incentive the provision of an enhanced rebate for 
executions of liquidity-adding displayed orders for members that meet 
the quoting and other requirements of those programs.\18\
---------------------------------------------------------------------------

    \17\ See, e.g., the Nasdaq equities trading fee schedule on its 
public website, available at http://www.nasdaqtrader.com/trader.aspx?id=pricelisttrading2) and Nasdaq Rule Equity 7, Section 
114(d) describing Nasdaq's Qualified Market Maker Program, which 
provides for an additional rebate (ranging from $0.0001 to $0.0002 
per share) for executions of liquidity-providing displayed orders 
(other than designated retail orders) in securities across all tapes 
priced at or above $1.00 per share for members that, in addition to 
executing transactions that represent a specified percentage of 
consolidated volume and avoiding inefficient order entry practices 
that place excessive burdens on Nasdaq's systems, quote at the NBBO 
at least 25% of the time during regular market hours in an average 
of at least 1,000 securities per day during the month; see also the 
Cboe BZX equities trading fee schedule on its public website 
(available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/), which provides for an additional rebate (ranging 
from $0.0001 to $0.0002 per share) under Cboe BZX's Liquidity 
Management Program for executions of liquidity-providing displayed 
orders in Tape B securities priced at or above $1.00 per share for 
members that, in addition to adding a specified percentage of total 
consolidated volume in Tape B securities and meeting certain other 
quoting requirements with respect to a specified number of 
securities designated as ``LMP Securities'' on a list determined by 
Cboe BZX, quote at the NBBO at least 15% of the time during regular 
trading hours in a specified number of such designated LMP 
Securities (or achieve an alternative NBBO quoting standard 
involving a size-setting element with respect to such designated LMP 
Securities).
    \18\ Id.
---------------------------------------------------------------------------

    In addition to the foregoing changes, the Exchange proposes to add 
to the Fee Schedule definitions of the terms ``MPID'', ``DLI Target 
Securities'', ``quoting requirement'', ``regular trading hours'' and 
``securities requirement'' that are consistent with the descriptions of 
those terms set forth above, as such terms are used in the notes 
describing the calculation methodologies and criteria for determining 
whether a Member qualifies for the DLI that the Exchange is proposing 
to add to the Fee Schedule, as described above.
Adoption of Liquidity Provision Tier
    The Exchange is also proposing to introduce a tiered pricing 
structure applicable to the rebates provided for executions of Added 
Displayed Volume. Specifically, the Exchange proposes to adopt a new 
volume-based tier, referred to by the Exchange as the ``Liquidity 
Provision Tier'', in which the Exchange will provide an enhanced rebate 
for executions of Added Displayed Volume for Members that meet a 
certain specified volume threshold on the Exchange. Currently, the 
Exchange provides a standard rebate of $0.0034 per share for executions 
of Added Displayed Volume, which the Exchange is proposing to reduce to 
$0.0031, as further described below. The Exchange now proposes to 
introduce a tiered pricing structure in which it will provide an 
enhanced rebate of $0.00335 per share for executions of Added Displayed 
Volume for Members that qualify for the Liquidity Provision Tier by 
achieving an ADAV \19\ of 15,000,000 shares or more.\20\ As proposed, 
ADAV will be calculated on a monthly basis, and Members that qualify 
for the Liquidity Provision Tier by achieving the specified ADAV 
threshold in a particular month will receive the proposed enhanced 
rebate of $0.00335 per share for all executions of Added Displayed 
Volume in that month (unless a higher rebate applies).
---------------------------------------------------------------------------

    \19\ As proposed, the term ``ADAV'' means the average daily 
added volume calculated as the number of shares added per day.
    \20\ This proposed pricing is referred to by the Exchange on the 
Fee Schedule under the new description ``Added displayed volume, 
Liquidity Provision Tier'' with a Fee Code of ``B1'', ``D1'' or 
``J1'', as applicable, to be provided by the Exchange on the monthly 
invoices provided to Members. The Exchange notes that because the 
determination of whether a Member qualifies for the Liquidity 
Provision Tier for a particular month will not be made until after 
the month-end, the Exchange will provide the Fee Codes otherwise 
applicable to such transactions (i.e., ``B'', ``D'' or ``J'') on the 
execution reports provided to Members during the month and will only 
designate the Fee Codes of ``B1'', ``D1'' or ``J1'' on the monthly 
invoices, which are provided after such determination has been made.
---------------------------------------------------------------------------

    Similar to the exclusion for purposes of determining qualification 
for the Displayed Liquidity Incentive, the Exchange proposes to exclude 
from the calculation of ADAV: (1) Any Exchange System Disruption Days; 
and (2) the Russell Reconstitution Day, which occurs annually on the 
last Friday in June.\21\ As is true with respect to the Displayed 
Liquidity Incentive, the Exchange believes that Exchange system 
disruptions could preclude Members from participating on the Exchange 
to the extent that they might have otherwise participated on such days, 
and thus, the Exchange believes it is appropriate to exclude such days 
when determining whether a Member qualifies for the Liquidity Provision 
Tier to avoid penalizing Members that might otherwise have met the 
applicable volume threshold. For similar reasons, the Exchange believes 
it is appropriate to exclude the Russell Reconstitution Day in the same 
manner, as the Exchange believes the change to normal activity may 
affect a Member's ability to add liquidity to the Exchange on that day.
---------------------------------------------------------------------------

    \21\ See supra note 14 and accompanying text.
---------------------------------------------------------------------------

    The Exchange believes that the proposed tiered pricing structure 
provides an incremental incentive for Members to strive for higher ADAV 
on the Exchange to receive the proposed enhanced rebate for executions 
of Added Displayed Volume. As such, the proposed Liquidity Provision 
Tier is designed to encourage Members that provide liquidity on the 
Exchange to maintain or increase their order flow, thereby contributing 
to a deeper and more liquid market to the benefit of all market 
participants and enhancing the attractiveness of the Exchange as a 
trading venue.
Adoption of Enhanced Rebate for Added Midpoint Volume
    The Exchange is also proposing to adopt an enhanced rebate for 
executions of Midpoint Peg Orders that add liquidity to the Exchange 
(such orders, ``Added Midpoint Volume''). Currently, the Exchange 
provides a standard rebate of $0.0020 per share for all executions of 
non-displayed orders in securities priced at or above $1.00 per share 
that add liquidity to the Exchange, including executions of Added 
Midpoint Volume. The Exchange now proposes to adopt an enhanced rebate 
for executions of Added Midpoint Volume of $0.0025 per share,\22\ while 
all other executions of non-displayed orders in securities priced at or 
above $1.00 per share that add liquidity to the Exchange will continue 
to receive the standard rebate for such transactions (i.e., $0.0020 per 
share). The Exchange notes that executions of orders with a Midpoint 
Peg instruction that add liquidity to the Exchange in securities priced 
below $1.00 per share will continue to receive the standard rebate 
applicable to executions of such orders on the Exchange (i.e., 0.05% of 
the total dollar value of the transaction).
---------------------------------------------------------------------------

    \22\ This proposed pricing is referred to by the Exchange on the 
Fee Schedule under the new description ``Added non-displayed volume, 
Midpoint Peg'' and such orders will continue to receive a Fee Code 
of ``M'' assigned by the Exchange.
---------------------------------------------------------------------------

    The purpose of the proposed enhanced rebate for executions of Added 
Midpoint Volume is to encourage Members that provide liquidity through 
non-displayed orders to do so, to a greater extent, through orders that 
offer price improvement to the benefit of other market participants. 
While the Exchange's pricing structure is generally designed to 
encourage the provision of liquidity through displayed orders, as the 
rebates provided with respect to such orders are consistently higher 
than those for non-displayed orders, the proposed enhanced rebate for 
executions of Added Midpoint Volume reflects a concomitant goal of 
encouraging Members that use non-displayed orders to offer price

[[Page 32094]]

improvement through the use of orders that are designed to execute at 
the midpoint of the NBBO. The Exchange believes that providing an 
enhanced rebate for executions of Added Midpoint Volume is a reasonable 
means by which to incentivize Members to provide additional liquidity 
at the midpoint of the NBBO, which in turn would increase the 
attractiveness of the Exchange as a destination venue, as Members 
seeking price improvement would be more motivated to direct their 
orders to the Exchange because they would have a heightened expectation 
of the availability of liquidity at the midpoint of the NBBO. The 
Exchange notes that the proposed enhanced rebate is comparable to, and 
competitive with, the rebate provided by at least one other exchange 
for executions of non-displayed orders in securities priced at or above 
$1.00 per share that are pegged to the midpoint of the NBBO.\23\
---------------------------------------------------------------------------

    \23\ See the Nasdaq PHLX LLC equities trading fee schedule on 
its public website (available at https://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing), which reflects a standard rebate of 
$0.0023 per share for adding non-displayed liquidity via an order 
that is pegged to the midpoint of the NBBO in a security priced at 
or above $1.00 per share.
---------------------------------------------------------------------------

Increased Standard Fee for Removed Volume
    The Exchange also proposes to increase the standard fee for 
executions of orders in securities priced at or above $1.00 per share 
that remove liquidity from the Exchange (i.e., Removed Volume). 
Currently, the Exchange charges a standard fee of $0.0026 per share for 
executions of Removed Volume. The Exchange now proposes to increase the 
standard fee charged for executions of Removed Volume to $0.00265 per 
share.\24\ The purpose of increasing the standard fee for executions of 
Removed Volume is for business and competitive reasons, as the Exchange 
believes that increasing such fee as proposed would generate additional 
revenue to offset some of the costs associated with the proposed 
enhanced rebates for executions of Added Displayed Volume for Members 
that qualify for the DLI or the Liquidity Provision Tier and executions 
of Added Midpoint Volume, and the Exchange's operations generally, in a 
manner that is still consistent with the Exchange's overall pricing 
philosophy of encouraging added displayed liquidity. The Exchange notes 
that despite the modest increase to the standard fee, the Exchange's 
fee for executions of Removed Volume remains lower than the fee to 
remove liquidity in securities priced at or above $1.00 charged by 
several other exchanges.\25\
---------------------------------------------------------------------------

    \24\ This proposed pricing is referred to by the Exchange on the 
Fee Schedule under the existing description ``Removed volume from 
MEMX Book'' and such orders will continue to receive a Fee Code of 
``R'' assigned by the Exchange.
    \25\ See, e.g., the Cboe BZX equities trading fee schedule on 
its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/); the Cboe EDGX Exchange, Inc. 
(``Cboe EDGX'') equities trading fee schedule on its public website 
(available at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/); Nasdaq Rule Equity 7, Section 118(a).
---------------------------------------------------------------------------

Reduced Standard Rebate for Added Displayed Volume
    The Exchange also proposes to reduce the standard rebate for 
executions of Added Displayed Volume. Currently, the Exchange provides 
a standard rebate of $0.0034 per share for executions of Added 
Displayed Volume. The Exchange now proposes to reduce the standard 
rebate for executions of Added Displayed Volume to $0.0031 per 
share.\26\ The Exchange notes that executions of displayed orders that 
add liquidity to the Exchange in securities priced below $1.00 per 
share will continue to receive the standard rebate applicable to 
executions of such orders on the Exchange (i.e., 0.05% of the total 
dollar value of the transaction).
---------------------------------------------------------------------------

    \26\ This proposed pricing is referred to by the Exchange on the 
Fee Schedule under the existing description ``Added displayed 
volume'' and such orders will continue to receive a Fee Code of 
``B'', ``D'' or ``J'', as applicable, assigned by the Exchange.
---------------------------------------------------------------------------

    The purpose of reducing the standard rebate for executions of Added 
Displayed Volume is also for business and competitive reasons, as the 
Exchange believes the reduction of such rebate would decrease the 
Exchange's expenditures with respect to transaction pricing and would 
also offset some of the costs associated with the proposed enhanced 
rebates for executions of Added Displayed Volume for Members that 
qualify for the DLI or the Liquidity Provision Tier and executions of 
Added Midpoint Volume, and the Exchange's operations generally, in a 
manner that is still consistent with the Exchange's overall pricing 
philosophy of encouraging added displayed liquidity. The Exchange notes 
that the proposed standard rebate is comparable to, and competitive 
with, the standard rebates provided by at least one other exchange for 
executions of orders in securities priced at or above $1.00 per share 
that add displayed liquidity.\27\
---------------------------------------------------------------------------

    \27\ See the MIAX PEARL, LLC equities trading fee schedule on 
its public website (available at https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_PEARL_Equities_Fee_Schedule_01012021.pdf), which reflects a 
standard rebate of $0.0032 per share to add displayed liquidity in 
Tape A and Tape C securities priced at or above $1.00 per share and 
a standard rebate of $0.0035 per share to add displayed liquidity in 
Tape B securities priced at or above $1.00 per share.
---------------------------------------------------------------------------

    Lastly, the Exchange proposes to add a note to the Fee Schedule 
specifying that to the extent a Member qualifies for multiple fees/
rebates with respect to a particular transaction, the lowest fee/
highest rebate shall apply. The Exchange notes that charging the fee or 
providing the rebate that is most favorable with respect to a 
particular transaction is consistent with the pricing practices of 
other exchanges.\28\
---------------------------------------------------------------------------

    \28\ See, e.g., the Cboe BZX equities trading fee schedule on 
its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/), which provides ``To the 
extent a Member qualifies for higher rebates and/or lower fees than 
those provided by a tier for which such Member qualifies, the higher 
rebates and/or lower fees shall apply.''
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\29\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\30\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its Members and other persons using its facilities 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f.
    \30\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    As discussed above, the Exchange operates in a highly fragmented 
and competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive or incentives to be insufficient, and the 
Exchange represents only a small percentage of the overall market. The 
Commission and the courts have repeatedly expressed their preference 
for competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \31\
---------------------------------------------------------------------------

    \31\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or

[[Page 32095]]

different pricing structures being introduced into the market. 
Accordingly, competitive forces constrain the Exchange's transaction 
fees and rebates, and market participants can readily trade on 
competing venues if they deem pricing levels at those other venues to 
be more favorable. The Exchange believes that the proposal reflects a 
reasonable and competitive pricing structure designed to incentivize 
market participants to direct their order flow to the Exchange, to 
enhance market quality in both a broad manner and in a targeted manner 
with respect to the DLI Target Securities, and to provide price 
improvement through the use of orders that are designed to execute at 
the midpoint of the NBBO through the provision of enhanced rebates for 
executions of Added Displayed Volume for Members that qualify for the 
DLI or the Liquidity Provision Tier and for executions of Added 
Midpoint Volume. While the Exchange has proposed increasing its 
standard fee for executions of Removed Volume and reducing its standard 
rebate for executions of Added Displayed Volume, as further discussed 
below, each of such changes represents a modest increase (decrease) 
from the current fee (rebate) applicable to such executions.
    As noted above, the proposed DLI is intended to encourage Members 
to promote price discovery and market quality by quoting at the NBBO 
for a significant portion of each day in a large number of securities, 
generally, and in the DLI Target Securities, in particular, thereby 
benefitting the Exchange and other investors by providing improved 
trading conditions for all market participants through narrower bid-ask 
spreads and increased depth of liquidity available at the NBBO in a 
broad base of securities, including the DLI Target Securities, and 
committing capital to support the execution of orders. Additionally, 
the Exchange believes the proposed enhanced rebate for all executions 
of a qualifying Member's Added Displayed Volume will simultaneously 
incentivize such Member to direct additional displayed liquidity-
providing orders to the Exchange in a more general manner to receive 
such enhanced rebate. Thus, the Exchange believes that the proposed DLI 
will promote price discovery and market quality in the DLI Target 
Securities and more generally on the Exchange, and, further, that the 
resulting tightened spreads and increased displayed liquidity will 
benefit all investors by deepening the Exchange's liquidity pool, 
offering additional flexibility for all investors to enjoy cost 
savings, supporting the quality of price discovery, enhancing quoting 
competition across exchanges, and promoting market transparency.
    The Exchange believes the proposed enhanced rebate of $0.0036 per 
share provided to Members that qualify for the DLI for executions of 
Added Displayed Volume is reasonable, in that it does not reflect a 
disproportionate increase above the proposed standard rebate of $0.0031 
per share provided to all Members with respect to the provision of 
displayed liquidity. The Exchange notes that the $0.0005 additional 
rebate for such executions for qualifying Members is a competitive 
proposal given that it is higher than the additional rebates provided 
by other exchanges for executions of displayed liquidity-providing 
orders for market participants that meet minimum quoting standards 
under similar programs designed to enhance market quality.\32\ In 
addition, the Exchange believes that it is reasonable and consistent 
with an equitable allocation of fees to pay a higher rebate for 
executions of Added Displayed Volume to Members that qualify for the 
DLI because of the additional commitment to market quality reflected in 
the associated quoting requirements. Such Members benefit all investors 
by promoting price discovery and increasing the depth of liquidity 
available at the NBBO and also benefit the Exchange itself by enhancing 
its competitiveness as a market that attracts actionable orders. 
Further, the Exchange notes that the proposed DLI would apply uniformly 
to all Members, and any Member may choose to qualify for the DLI by 
meeting the associated requirements in any month, regardless of the 
volume of transactions that it executes on the Exchange. The Exchange 
acknowledges that firms that do not post displayed liquidity on the 
Exchange or do so on a smaller scale may not have the level of capital 
necessary to support meeting the proposed DLI's requirements, however, 
the Exchange believes that the requirements are attainable for many 
market participants who do actively quote on exchanges and are 
reasonably related to the enhanced market quality that the DLI is 
designed to promote. Additionally, the Exchange notes that Members that 
do not meet the proposed DLI's requirements may still qualify for a 
rebate that is higher than the standard rebate for executions of Added 
Displayed Volume through the proposed Liquidity Provision Tier, which 
does not require a Member to consistently quote at the NBBO across a 
broad range of securities. Accordingly, the Exchange believes that it 
is consistent with an equitable allocation of fees and is not unfairly 
discriminatory to pay a higher rebate in comparison with the rebate 
paid to other Members for executions of displayed liquidity-providing 
orders in recognition of these benefits to the Exchange and market 
participants, particularly as the magnitude of the additional rebate is 
not unreasonably high and is, instead, reasonably related to such 
enhanced market quality.
---------------------------------------------------------------------------

    \32\ See supra note 17.
---------------------------------------------------------------------------

    The Exchange also believes that including in the proposed DLI 
qualification criteria a quoting requirement for certain specified 
securities (i.e., the DLI Target Securities), in addition to the more 
general 250 securities requirement, is equitable and not unfairly 
discriminatory because the Exchange has identified the DLI Target 
Securities as securities in which it would like to inject additional 
quoting competition, which the Exchange believes will generally act to 
narrow spreads, increase size at the NBBO, and increase liquidity depth 
in such securities, thereby increasing the attractiveness of the 
Exchange as a destination venue with respect to such securities. 
Accordingly, the Exchange believes that this aspect of the proposal is 
reasonable, equitably allocated, and not unfairly discriminatory 
because it is consistent with the overall goals of enhancing market 
quality.
    Furthermore, as noted above, the proposed DLI is similar in 
structure and purpose to pricing programs in place at other exchanges 
that are designed to enhance market quality.\33\ Specifically, these 
programs, like the proposed DLI, provide a higher rebate for executions 
of liquidity-adding displayed orders for members that achieve minimum 
quoting standards, including minimum quoting at the NBBO in a large 
number of securities, generally, or certain designated securities, in 
particular.\34\ The Exchange also notes that the proposed DLI is not 
dissimilar from volume-based rebates and fees (``Volume Tiers''), like 
the Liquidity Provision Tier proposed in this filing, which have been 
widely adopted by exchanges \35\ and are equitable and not

[[Page 32096]]

unfairly discriminatory because they are generally open to all members 
on an equal basis and provide higher rebates and/or lower fees that are 
reasonably related to the value to an exchange's market quality. Much 
like Volume Tiers are generally designed to incentivize higher levels 
of liquidity provision, the proposed DLI is designed to incentivize 
enhanced market quality on the Exchange through tighter spreads, 
greater size at the NBBO, and greater quoting depth in a large number 
of securities, generally, and in the DLI Target Securities, in 
particular, through the provision of an enhanced rebate for all 
executions of a qualifying Member's Added Displayed Volume, where such 
rebate will in turn incentivize higher levels of displayed liquidity 
provision in a general manner. Accordingly, the Exchange believes that 
the proposed DLI would act to enhance liquidity and competition across 
exchanges in the DLI Target Securities and enhance liquidity provision 
in all securities on the Exchange more generally by providing a rebate 
reasonably related to such enhanced market quality to the benefit of 
all investors, thereby promoting the principles discussed in Sections 
6(b)(4) and 6(b)(5) of the Act.\36\
---------------------------------------------------------------------------

    \33\ Id.
    \34\ Id.
    \35\ See, e.g., the Cboe BZX equities trading fee schedule on 
its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/); the Cboe EDGX equities 
trading fee schedule on its public website (available at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/).
    \36\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange also believes that adding to the Fee Schedule the 
notes describing the calculation methodologies and criteria for 
determining whether a Member satisfies the requirements to qualify for 
the DLI, as well as the definitions of terms that are used in these 
notes, is reasonable, equitable, and non-discriminatory because these 
notes and definitions are designed to ensure that the Fee Schedule is 
as clear and easily understandable as possible with respect to the 
requirements of the proposed DLI. Additionally, the Exchange believes 
that excluding Exchange System Disruption Days and the Russell 
Reconstitution Day when determining whether a Member qualifies for the 
proposed DLI during a month is reasonable, equitable, and non-
discriminatory because, as explained above, the Exchange believes doing 
so would help to avoid penalizing Members that might otherwise have met 
the requirements to qualify for the proposed DLI due to Exchange system 
disruptions and/or abnormal market conditions. The Exchange notes that 
the exclusion of Exchange System Disruption Days and the Russell 
Reconstitution Day is consistent with the methodologies used by other 
exchanges when calculating certain member trading and other volume 
metrics for purposes of determining whether members qualify for certain 
pricing incentives.\37\
---------------------------------------------------------------------------

    \37\ See supra note 14.
---------------------------------------------------------------------------

    As noted above, Volume Tiers, like the Liquidity Provision Tier 
proposed in this filing, have been widely adopted by exchanges \38\ and 
are equitable and not unfairly discriminatory because they are open to 
all members on an equal basis and provide rebates that are reasonably 
related to the value to an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and introduction of higher volumes of orders into the price 
and volume discovery process. The Exchange believes the proposed 
Liquidity Provision Tier is equitable and not unfairly discriminatory 
for these same reasons, as it is open to all Members and is designed to 
encourage Members that provide liquidity on the Exchange to maintain or 
increase their order flow in this regard, thereby contributing to a 
deeper and more liquid market to the benefit of all market participants 
and enhancing the attractiveness of the Exchange as a trading venue. 
Additionally, the Exchange believes the proposed enhanced rebate for 
executions of Added Displayed Volume for qualifying Members (i.e., 
$0.00335 per share) is reasonable, in that it represents only a modest 
increase above the proposed standard rebate for such executions (i.e., 
$0.0031 per share) as well as a modest decrease from the current 
standard rebate for such executions (i.e., $0.0034 per share). Thus, 
the Exchange believes that it is reasonable, consistent with an 
equitable allocation of fees, and not unfairly discriminatory to pay 
such higher rebate for executions of Added Displayed Volume to Members 
that qualify for the Liquidity Provision Tier in comparison with the 
standard rebate in recognition of benefits to the Exchange and market 
participants described above, particularly as the magnitude of the 
additional rebate is not unreasonably high and is, instead, reasonably 
related to the enhanced market quality it is designed to achieve. The 
Exchange further believes that such rebate is reasonable as it offers 
an alternative way for Members that do not meet the proposed DLI's 
requirements to qualify for a rebate that is higher than the proposed 
standard rebate for executions of Added Displayed Volume that does not 
require such Members to consistently quote at the NBBO across a broad 
range of securities.
---------------------------------------------------------------------------

    \38\ See supra note 35.
---------------------------------------------------------------------------

    Additionally, the Exchange believes that excluding Exchange System 
Disruption Days and the Russell Reconstitution Day when determining 
whether a Member qualifies for the proposed Liquidity Provision Tier 
during a month is reasonable, equitable, and non-discriminatory 
because, as explained above, the Exchange believes doing so would help 
to avoid penalizing Members that might otherwise have met the 
requirements to qualify for the proposed Liquidity Provision Tier due 
to Exchange system disruptions and/or abnormal market conditions. The 
Exchange notes that the exclusion of Exchange System Disruption Days 
and the Russell Reconstitution Day is consistent with the methodologies 
used by other exchanges when calculating certain member trading and 
other volume metrics for purposes of determining whether members 
qualify for certain pricing incentives, including calculations of ADAV 
for Volume Tiers specifically.\39\
---------------------------------------------------------------------------

    \39\ See supra note 14.
---------------------------------------------------------------------------

    With respect to the proposed enhanced rebate for executions of 
Added Midpoint Volume, the Exchange believes that providing a rebate 
for such executions that is higher than the standard rebate for 
executions of other non-displayed orders in securities priced at or 
above $1.00 per share that add liquidity to the Exchange is reasonable 
as the Exchange believes this would encourage Members that provide 
liquidity through non-displayed orders to do so, to a greater extent, 
through orders designed to execute at the midpoint of the NBBO. Because 
such orders provide price improvement to the benefit of other market 
participants, the Exchange believes it is reasonable and consistent 
with an equitable allocation of fees to provide an enhanced rebate to 
encourage their use, while still maintaining an overall pricing 
structure that places even greater emphasis on the value of displayed 
liquidity in advancing transparency and price discovery. The Exchange 
further believes the proposed enhanced rebate is reasonable because, as 
noted above, it is comparable to, and competitive with, the rebate 
provided by at least one other exchange for executions of non-displayed 
orders in securities priced at or above $1.00 per share that are pegged 
to the midpoint of the NBBO.\40\ The Exchange also believes this 
proposed enhanced rebate is not unfairly discriminatory as it would 
apply equally to all Members and the elements of differentiation 
between displayed and non-displayed liquidity and orders designed to 
execute at the midpoint of the NBBO and other non-displayed

[[Page 32097]]

orders promote the goals of price discovery and encouraging market 
participants to provide price improvement.
---------------------------------------------------------------------------

    \40\ See supra note 23.
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to increase the 
standard fee for executions of Removed Volume and reduce the standard 
rebate for executions of Added Displayed Volume are reasonable, 
equitable, and consistent with the Act because such changes are 
designed to generate additional revenue and decrease the Exchange's 
expenditures with respect to transaction pricing to offset some of the 
costs associated with the proposed enhanced rebates for executions of 
Added Displayed Volume for Members that qualify for the DLI or the 
Liquidity Provision Tier and executions of Added Midpoint Volume, and 
the Exchange's operations generally, in a manner that is still 
consistent with the Exchange's overall pricing philosophy of 
encouraging added displayed liquidity. The Exchange also believes the 
proposed increased standard fee for executions of Removed Volume is 
reasonable and appropriate because it represents a modest increase from 
the current standard fee and, as noted above, remains lower than the 
fee to remove liquidity in securities priced at or above $1.00 charged 
by several other exchanges.\41\ Similarly, the Exchange believes the 
proposed reduced standard rebate for executions of Added Displayed 
Volume is reasonable and appropriate because it represents a modest 
decrease from the current standard rebate and, as noted above, remains 
comparable to, and competitive with, the standard rebates provided by 
at least one other exchange for executions of orders in securities 
priced at or above $1.00 per share that add displayed liquidity.\42\ 
The Exchange further believes that the proposed increased standard fee 
for executions of Removed Volume and the proposed reduced standard 
rebate for executions of Added Displayed Volume are equitably allocated 
and not unfairly discriminatory because they both will apply equally to 
all Members.
---------------------------------------------------------------------------

    \41\ See supra note 25.
    \42\ See supra note 27.
---------------------------------------------------------------------------

    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of 
the Act in that it provides for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities and is not designed to unfairly discriminate between 
customers, issuers, brokers, or dealers. As described more fully below 
in the Exchange's statement regarding the burden on competition, the 
Exchange believes that its transaction pricing is subject to 
significant competitive forces, and that the proposed fees and rebates 
described herein are appropriate to address such forces.
    Finally, the Exchange believes that the proposed change to add a 
note on the Fee Schedule specifying that to the extent a Member 
qualifies for multiple fees/rebates with respect to a particular 
transaction, the lowest fee/highest rebate shall apply is reasonable, 
equitable, and non-discriminatory because it applies uniformly to all 
Members and is designed to clarify for Members which fee or rebate is 
applicable to their transactions. Thus, Exchange believes that this 
proposed change will make the Fee Schedule clearer and eliminate 
potential confusion in this regard, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest. Further, as noted above, this practice is consistent with the 
pricing practices of other exchanges.\43\
---------------------------------------------------------------------------

    \43\ See supra note 28.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposal will result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Instead, as discussed above, 
the proposal is designed to enhance market quality on the Exchange in a 
large number of securities, generally, and in the DLI Target 
Securities, in particular, to encourage Members to maintain or increase 
their order flow, thereby contributing to a deeper and more liquid 
market to the benefit of all market participants and enhancing the 
attractiveness of the Exchange as a trading venue, and to encourage 
Members to provide price improvement through the use of orders that are 
designed to execute at the midpoint of the NBBO. In turn, the Exchange 
believes the proposed enhanced rebates for executions of Added 
Displayed Volume for Members that qualify for the DLI or the Liquidity 
Provision Tier and for executions of Added Midpoint Volume would 
encourage the submission of additional order flow to the Exchange, 
particularly in the form of Added Displayed Volume and Added Midpoint 
Volume, thereby promoting market depth, enhanced execution 
opportunities, price improvement, and price discovery to the benefit of 
all Members and market participants. As a result, the Exchange believes 
the proposal would enhance its competitiveness as a market that 
attracts actionable orders, thereby making it a more desirable 
destination venue for its customers. For these reasons, the Exchange 
believes that the proposal furthers the Commission's goal in adopting 
Regulation NMS of fostering competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \44\
---------------------------------------------------------------------------

    \44\ See supra note 31.
---------------------------------------------------------------------------

Intramarket Competition
    The Exchange believes that the proposal would incentivize Members 
to promote price discovery and market quality by quoting at the NBBO 
for a significant portion of each day in a large number of securities, 
including the DLI Target Securities, to maintain or increase their 
order flow, thereby contributing to a deeper and more liquid market to 
the benefit of all market participants and enhancing the attractiveness 
of the Exchange as a trading venue, and to provide price improvement 
through the use of orders that are designed to execute at the midpoint 
of the NBBO, which the Exchange believes, in turn, would continue to 
encourage participants to direct order flow to the Exchange. Greater 
liquidity benefits all Members by providing more trading opportunities 
and encourages Members to send orders to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market 
participants. The opportunity to qualify for the DLI, and thus receive 
the proposed enhanced rebate for executions of Added Displayed Volume, 
would be available to all Members that meet the associated requirements 
in any month, regardless of the volume of transactions that it executes 
on the Exchange, and as noted above, the Exchange believes that the 
DLI's requirements are attainable for many market participants who 
actively quote on exchanges and are reasonably related to the enhanced 
market quality that the DLI is designed to promote. Similarly, the 
opportunity to qualify for the Liquidity Provision Tier, and thus also 
receive an enhanced rebate for executions of Added Displayed Volume 
(albeit a rebate lower than that provided for Members who qualify for 
the DLI), would be available to all Members that meet the associated 
volume requirement in any month. The Exchange believes the volume 
requirement of the Liquidity Provision Tier is attainable for several

[[Page 32098]]

market participants who add displayed liquidity executed on the 
Exchange and is reasonably related to the enhanced market quality that 
the Liquidity Provision Tier is designed to promote. Similarly, the 
proposed enhanced rebate for executions of Added Midpoint Volume, the 
proposed increased standard fee for executions of Removed Volume, and 
the proposed reduced standard rebate for executions of Added Displayed 
Volume would apply equally to all Members. As such, the Exchange 
believes the proposed changes would not impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Intermarket Competition
    The Exchange operates in a highly competitive market. Members have 
numerous alternative venues that they may participate on and direct 
their order flow to, including 15 other equities exchanges and numerous 
alternative trading systems and other off-exchange venues. As noted 
above, no single registered equities exchange currently has more than 
approximately 16% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates, including with respect to executions of 
Added Displayed Volume, Added Midpoint Volume, and Removed Volume, and 
market participants can readily choose to send their orders to other 
exchange and off-exchange venues if they deem fee levels at those other 
venues to be more favorable. As described above, the proposed changes 
are competitive proposals through which the Exchange is seeking to 
encourage certain order flow to be sent to the Exchange and to promote 
market quality through pricing incentives that are similar in structure 
and purpose to pricing programs in place at other exchanges.\45\ 
Accordingly, the Exchange believes the proposal would not burden, but 
rather promote, intermarket competition by enabling it to better 
compete with other exchanges that offer similar incentives to market 
participants that enhance market quality.
---------------------------------------------------------------------------

    \45\ See supra notes 17, 23, and 35.
---------------------------------------------------------------------------

    Additionally, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \46\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. SEC, the D.C. Circuit stated as follows: 
``[N]o one disputes that competition for order flow is 'fierce.' . . . 
As the SEC explained, '[i]n the U.S. national market system, buyers and 
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders 
for execution'; [and] 'no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .''.\47\ Accordingly, the Exchange does not believe its 
proposed pricing changes impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \46\ See supra note 31.
    \47\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
---------------------------------------------------------------------------

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 \48\ and Rule 19b-4(f)(2) \49\ thereunder.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \49\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MEMX-2021-07 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MEMX-2021-07. 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 such 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

[[Page 32099]]

submissions should refer to File Number SR-MEMX-2021-07 and should be 
submitted on or before July 7, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\
---------------------------------------------------------------------------

    \50\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-12593 Filed 6-15-21; 8:45 am]
BILLING CODE 8011-01-P