Document ID: SEC-2022-1609-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MEMX, LLC
Posted Date: 2022-12-15T05:00Z

[Federal Register Volume 87, Number 240 (Thursday, December 15, 2022)]
[Notices]
[Pages 76648-76657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27161]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96471; File No. SR-MEMX-2022-33]

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

December 9, 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 December 1, 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\ (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 December 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 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) modify the Liquidity Provision Tiers; (ii) modify the 
Displayed Liquidity Incentive (``DLI'') Tiers; (iii) modify the NBBO 
Setter Tier to become the NBBO Setter/Joiner Tiers; (iv) reduce the 
rebates for executions of orders in securities priced at or above $1.00 
per share that add non-displayed liquidity to the Exchange (such 
orders, ``Added Non-Displayed Volume''); (v) modify the Non-Display Add 
Tiers; (vi) adopt the Sub-Dollar Rebate Tier; (vii) add a note to the 
Fee Schedule stating that to the extent a single execution qualifies 
for one or more additive rebates, the maximum combined rebate per share 
provided by the Exchange shall be $0.0036; and (viii) eliminate the 
Step-Up Additive Rebate, each as further described below.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 16% of the total market share of 
executed volume of equities trading.\4\ Thus, in such a low-
concentrated and highly competitive market, no single equities

[[Page 76649]]

exchange possesses significant pricing power in the execution of order 
flow, and the Exchange currently represents approximately 3% of the 
overall market share.\5\ The Exchange in particular operates a ``Maker-
Taker'' model whereby it provides rebates to Members that add liquidity 
to the Exchange and charges fees to Members that remove liquidity from 
the Exchange. The Fee Schedule sets forth the standard rebates and fees 
applied per share for orders that add and remove liquidity, 
respectively. Additionally, in response to the competitive environment, 
the Exchange also offers tiered pricing, which provides Members with 
opportunities to qualify for higher rebates or lower fees where certain 
volume criteria and thresholds are met. Tiered pricing provides an 
incremental incentive for Members to strive for higher tier levels, 
which provides increasingly higher benefits or discounts for satisfying 
increasingly more stringent criteria.
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    \4\ Market share percentage calculated as of November 30, 2022. 
The Exchange receives and processes data made available through 
consolidated data feeds (i.e., CTS and UTDF).
    \5\ Id.
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Liquidity Provision Tiers
    The Exchange currently provides a standard rebate of $0.0020 per 
share for executions of orders in securities priced at or above $1.00 
per share that add displayed liquidity to the Exchange (such orders, 
``Added Displayed Volume''). The Exchange also currently offers 
Liquidity Provision Tiers 1-5 under which a Member may receive an 
enhanced rebate for executions of Added Displayed Volume by achieving 
the corresponding required volume criteria for each such tier. The 
Exchange now proposes to modify the Liquidity Provision Tiers by 
modifying the rebates and required criteria under Liquidity Provision 
Tiers 1, 3 and 5, and keeping Liquidity Provision Tiers 2 and 4 intact 
with no changes, as further described below.
    First, with respect to Liquidity Provision Tier 1, the Exchange 
currently provides an enhanced rebate of $0.0033 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by achieving: (1) a Displayed ADAV \6\ that is equal to or greater 
than 0.40% of the TCV; \7\ or (2) a Remove ADV \8\ that is equal to or 
greater than 0.20% of the TCV and a Step-Up ADAV \9\ from June 2022 
that is equal to or greater than 0.05% of the TCV. The Exchange now 
proposes to modify Liquidity Provision Tier 1 such that the Exchange 
would provide an enhanced rebate of $0.0034 per share for executions of 
Added Displayed Volume for Members that qualify for such tier by 
achieving: (1) a Displayed ADAV that is equal to or greater than 0.40% 
of the TCV; or (2) an ADAV that is equal to or greater than 0.30% of 
the TCV and a Step-Up ADAV from November 2022 that is equal to or 
greater than 0.10% of the TCV.\10\ Thus, such proposed changes would 
increase the rebate for executions of Added Displayed Volume by $0.0001 
per share and keep the first of the two existing alternative criteria 
(based on an overall Displayed ADAV threshold) intact, eliminate the 
second of the two existing alternative criteria (based on a Remove ADV 
threshold and a Step-Up ADAV from June 2022 threshold), and add a new 
second alternative criteria (based on an overall ADAV threshold and a 
Step-Up ADAV from November 2022 threshold). The Exchange is not 
proposing to change the rebate for executions of orders in securities 
priced below $1.00 per share under this tier.
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    \6\ As set forth on the Fee Schedule, ``ADAV'' means the average 
daily added volume calculated as the number of shares added per day, 
which is calculated on a monthly basis, and ``Displayed ADAV'' means 
ADAV with respect to displayed orders.
    \7\ As set forth on the Fee Schedule, ``TCV'' means total 
consolidated volume calculated as the volume reported by all 
exchanges and trade reporting facilities to a consolidated 
transaction reporting plan for the month for which the fees apply.
    \8\ As set forth on the Fee Schedule, ``ADV'' means average 
daily volume calculated as the number of shares added or removed, 
combined, per day, which is calculated on a monthly basis, and 
``Remove ADV'' means ADV with respect to orders that remove 
liquidity.
    \9\ As set forth on the Fee Schedule, ``Step-Up ADAV'' means 
ADAV in the relevant baseline month subtracted from current ADAV.
    \10\ The pricing for Liquidity Provision Tier 1 is referred to 
by the Exchange on the Fee Schedule under the existing description 
``Added displayed volume, Liquidity Provision Tier 1'' 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 a 
certain pricing 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 on the execution reports 
provided to Members during the month and will only designate the Fee 
Codes applicable to the achieved pricing tier on the monthly 
invoices, which are provided after such determination has been made, 
as the Exchange does for its tier-based pricing today.
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    Second, with respect to Liquidity Provision Tier 3, the Exchange 
currently provides an enhanced rebate of $0.0029 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by achieving: (1) an ADAV that is equal to or greater than 0.12% 
of the TCV; or (2) a Step-Up ADAV from April 2022 that is equal to or 
greater than 0.04% of the TCV; or (3) a Step-Up Non-Displayed ADAV \11\ 
from April 2022 that is equal to or greater than 2,000,000 shares. The 
Exchange now proposes to modify Liquidity Provision Tier 3 such that 
the Exchange would provide an enhanced rebate of $0.0030 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by achieving: (1) an ADAV that is equal to or greater than 0.15% 
of the TCV; or (2) an ADAV that is equal to or greater than 15,000,000 
shares.\12\ Thus, such proposed changes would increase the rebate for 
executions of Added Displayed Volume by $0.0001 per share and would 
increase the overall ADAV threshold that is expressed as a percentage 
of the TCV in the first of the three existing alternative criteria, 
eliminate the second and third of the three existing alternative 
criteria (based on a Step-Up ADAV from April 2022 threshold and a Step-
Up Non-Displayed ADAV from April 2022 threshold), and add a new 
alternative criteria based on an overall ADAV threshold that is 
expressed as a number of shares. The Exchange is not proposing to 
change the rebate for executions of orders in securities priced below 
$1.00 per share under such tier.
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    \11\ As set forth on the Fee Schedule, ``Non-Displayed ADAV'' 
means ADAV with respect to non-displayed orders (including Midpoint 
Peg orders), and ``Step-Up Non-Displayed ADAV'' means Non-Displayed 
ADAV in the relevant baseline month subtracted from current Non-
Displayed ADAV.
    \12\ The pricing for Liquidity Provision Tier 3 is referred to 
by the Exchange on the Fee Schedule under the existing description 
``Added displayed volume, Liquidity Provision Tier 3'' with a Fee 
Code of B3, D3 or J3, as applicable, to be provided by the Exchange 
on the monthly invoices provided to Members.
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    Third, with respect to Liquidity Provision Tier 5, the Exchange 
currently provides an enhanced rebate of $0.0026 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by achieving: (1) an ADAV that is equal to or greater than 0.075% 
of the TCV; or (2) a Step-Up Displayed ADAV \13\ from April 2022 that 
is equal to or greater than 0.02% of the TCV; or (3) a Midpoint ADAV 
\14\ that is equal to or greater than 1,000,000 shares. The Exchange 
now proposes to modify Liquidity Provision Tier 5 such that the 
Exchange would provide an enhanced rebate of $0.0025 per share for 
executions of Added Displayed Volume for Members that qualify for such 
tier by

[[Page 76650]]

achieving: (1) an ADAV that is equal to or greater than 0.075% of the 
TCV; or (2) a Midpoint ADAV \15\ that is equal to or greater than 
1,000,000 shares.\16\ Thus, such proposed changes would decrease the 
rebate for executions of Added Displayed Volume by $0.0001 per share 
and would eliminate the second of the three existing alternative 
criteria (based on a Step-Up Displayed ADAV from April 2022 threshold). 
The Exchange is not proposing to change the rebate for executions of 
orders in securities priced below $1.00 per share under such tier.
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    \13\ As set forth on the Fee Schedule, ``Step-Up Displayed 
ADAV'' means Displayed ADAV in the relevant baseline month 
subtracted from current Displayed ADAV.
    \14\ As set forth on the Fee Schedule, ``Midpoint ADAV'' means 
ADAV with respect to Midpoint Peg orders.
    \15\ As set forth on the Fee Schedule, ``Midpoint ADAV'' means 
ADAV with respect to Midpoint Peg orders.
    \16\ The pricing for Liquidity Provision Tier 5 is referred to 
by the Exchange on the Fee Schedule under the existing description 
``Added displayed volume, Liquidity Provision Tier 5'' with a Fee 
Code of B5, D5 or J5, as applicable, to be provided by the Exchange 
on the monthly invoices provided to Members.
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    As noted above, Liquidity Provision Tiers 2 and 4 would remain 
intact with no changes under this proposal.
    The tiered pricing structure for executions of Added Displayed 
Volume under the Liquidity Provision Tiers provides an incremental 
incentive for Members to strive for higher volume thresholds to receive 
higher enhanced rebates for such executions and, as such, is intended 
to encourage Members to maintain or increase their order flow, 
primarily in the form of liquidity-adding volume, to the Exchange, 
thereby contributing to a deeper and more liquid market to the benefit 
of all Members and market participants. The Exchange believes that the 
Liquidity Provision Tiers, as modified by the proposed changes 
described above, reflect a reasonable and competitive pricing structure 
that is right-sized, updated to reference more recent baseline months 
with respect to the applicable Step-Up ADAV thresholds, and consistent 
with the Exchange's overall pricing philosophy of encouraging added 
and/or displayed liquidity. Specifically, the Exchange believes that, 
after giving effect to the proposed changes described above, the rebate 
for executions of Added Displayed Volume provided under each of the 
Liquidity Provision Tiers remains commensurate with the corresponding 
required criteria under each such tier and is reasonably related to the 
market quality benefits that each such tier is designed to achieve.
DLI Tiers
    The Exchange currently offers DLI Tiers 1 and 2 under which a 
Member may receive an enhanced rebate for executions of Added Displayed 
Volume by achieving the corresponding required criteria for each such 
tier. The DLI Tiers are designed to encourage Members, through the 
provision of an enhanced rebate for executions of Added Displayed 
Volume, to promote price discovery and market quality by quoting at the 
NBBO for a significant portion of each day (i.e., through the 
applicable quoting requirement \17\) in a broad base of securities 
(i.e., through the applicable securities requirements \18\), thereby 
benefitting the Exchange and 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 and committing capital to support the execution of 
orders.\19\ Now, the Exchange proposes to modify DLI Tiers 1 and 2 by 
reducing the rebates for executions of Added Displayed Volume under 
such tiers and modifying the required criteria under DLI Tier 1.
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    \17\ As set forth on the Fee Schedule, the term ``quoting 
requirement'' means the requirement that a Member's NBBO Time be at 
least 25%, and 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 
or the national best offer.
    \18\ As set forth on the Fee Schedule, the term ``securities 
requirement'' means the requirement that a Member meets the quoting 
requirement in the applicable number of securities per day. 
Currently, each of DLI Tiers 1 and 2 has a securities requirement 
that may be achieved by a Member meeting the quoting requirement in 
the specified number of securities traded on the Exchange.
    \19\ See the Exchange's Fee Schedule (available at https://info.memxtrading.com/fee-schedule/) for additional details regarding 
the Exchange's DLI Tiers. See also Securities Exchange Act Release 
No. 92150 (June 10, 2021), 86 FR 32090 (June 16, 2021) (SR-MEMX-
2021-07) (notice of filing and immediate effectiveness of fee 
changes adopted by the Exchange, including the adoption of DLI).
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    Currently, a Member qualifies for DLI Tier 1 by achieving an NBBO 
Time of at least 25% in an average of at least 1,000 securities per 
trading day during the month. The Exchange now proposes to modify the 
required criteria under DLI Tier 1 such that a Member would now qualify 
for such tier by achieving: (1) an NBBO Time of at least 25% in an 
average of at least 1,000 securities per trading day during the month; 
and (2) an ADAV that is equal to or greater than 0.05% of the TCV. 
Thus, such proposed change would add an overall ADAV threshold into the 
required criteria, which is intended to encourage Members to maintain 
or increase their overall order flow that adds liquidity to the 
Exchange, thereby contributing to a deeper and more liquid market to 
the benefit of all Members and market participants, in addition to the 
existing quoting requirement designed to promote price discovery and 
market quality in a broad base of securities on the Exchange.
    The Exchange also proposes to reduce the rebates for executions of 
Added Displayed Volume under DLI Tiers 1 and 2. Currently, the Exchange 
provides enhanced rebates of $0.0032 per share under DLI Tier 1 and 
$0.0029 per share under DLI Tier 2 for a qualifying Member's executions 
of Added Displayed Volume. Now, the Exchange proposes to reduce such 
rebate provided under DLI Tier 1 to $0.0031 per share and reduce such 
rebate provided under DLI Tier 2 to $0.0028 per share.\20\ The Exchange 
believes that the proposed reduction of such rebates (i.e., by $0.0001 
per share in each case) represents a modest reduction in each case and 
that each of the proposed rebates under DLI Tiers 1 and 2 remains 
commensurate with the required criteria under each such tier. The 
purpose of reducing the rebates for executions of Added Displayed 
Volume provided under DLI Tiers 1 and 2, as proposed, is for business 
and competitive reasons, as the Exchange believes the reduction of such 
rebates would decrease the Exchange's expenditures with respect to its 
transaction pricing in a manner that is still consistent with the 
Exchange's overall pricing philosophy of encouraging added and/or 
displayed liquidity and promoting the price discovery and market 
quality objectives of the DLI Tiers described above. The Exchange is 
not proposing to change the rebates provided under such tiers for 
executions of orders in securities priced below $1.00 per share.
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    \20\ The pricing for DLI Tier 1 is referred to by the Exchange 
on the Fee Schedule under the existing description ``Added displayed 
volume, DLI Tier 1'' with a Fee Code of Bq1, Bq1 or Jq1, as 
applicable, and the pricing for DLI Tier 2 is referred to by the 
Exchange on the Fee Schedule under the existing description ``Added 
displayed volume, DLI Tier 2'' with a Fee Code of Bq2, Dq2 or Jq2, 
as applicable.
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NBBO Setter/Joiner Tiers
    The Exchange currently offers the NBBO Setter Tier under which a 
Member may receive an additive rebate of $0.0003 per share for 
executions of Added Displayed Volume (other than Retail Orders) that 
establish the NBBO (such orders, ``Setter Volume'') by achieving an 
ADAV with respect to orders with Fee Code B \21\ that is equal to or 
greater than 0.10% of the TCV. The Exchange now proposes to modify the 
NBBO Setter Tier to become the NBBO Setter/Joiner Tiers by renaming the 
existing NBBO Setter Tier as NBBO Setter/Joiner Tier 1, increasing the 
additive rebate under such tier, making

[[Page 76651]]

the additive rebate under such tier also applicable to a qualifying 
Member's executions of Added Displayed Volume (other than Retail 
Orders) that establish a new best bid or offer (``BBO'') on the 
Exchange that matches the NBBO first established on an away market 
(such orders, ``Joiner Volume''), and establishing an NBBO Setter/
Joiner Tier 2.\22\ The additive rebate under each of the NBBO Setter/
Joiner Tiers will apply to a qualifying Member's executions of Setter 
Volume, as it does today with respect to the NBBO Setter Tier, as well 
as Joiner Volume, and the Exchange will indicate this in the note under 
the NBBO Setter/Joiner Tiers pricing table on the Fee Schedule.
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    \21\ The Exchange notes that orders with Fee Code B include 
orders, other than Retail Orders, that establish the NBBO.
    \22\ In connection with the proposed changes to this tier, the 
Exchange is proposing to rename the relevant heading on the Fee 
Schedule from ``NBBO Setter Tier'' to ``NBBO Setter/Joiner Tiers'' 
and revise the note under the NBBO Setter/Joiner Tiers pricing table 
to reflect that the additive rebate under each such tier is 
applicable to executions of Setter Volume and Joiner Volume rather 
than being limited to Fee Codes associated with Setter Volume.
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    First, with respect to NBBO Setter/Joiner Tier 1, the Exchange 
proposes to increase the additive rebate from $0.0003 per share to 
$0.0004 per share for a qualifying Member's executions of Setter Volume 
and Joiner Volume.\23\ As noted above, the additive rebate under such 
tier will now be provided in addition to the otherwise applicable 
rebate for a qualifying Member's executions of Setter Volume and Joiner 
Volume, which the Exchange will indicate in the note under the NBBO 
Setter/Joiner Tier pricing table on the Fee Schedule. The Exchange is 
not proposing to modify the required criteria under such tier.
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    \23\ The pricing for NBBO Setter/Joiner Tier 1 is referred to by 
the Exchange on the Fee Schedule under the new description ``NBBO 
Setter/Joiner Tier 1'' with a Fee Code of S1 to be appended to the 
otherwise applicable Fee Code assigned by the Exchange on the 
monthly invoices for qualifying executions.
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    Second, the Exchange proposes to establish the NBBO Setter/Joiner 
Tier 2 under which the Exchange will provide an additive rebate of 
$0.0003 per share for executions of Setter Volume and Joiner Volume for 
Members that qualify for such tier by achieving an ADAV that is equal 
to or greater than 0.05% of the TCV and a Displayed ADAV with respect 
to orders with Fee Code B or J \24\ that is equal to or greater than 
40% of the Member's Displayed ADAV with respect to orders with Fee Code 
B, D or J.\25\ The additive rebate under such tier will not apply to 
executions of orders in securities priced below $1.00 per share. The 
Exchange notes that the inclusion in the required criteria of a 
threshold based on the amount of a Member's orders that establish the 
NBBO or establish a new BBO on the Exchange that matches the NBBO first 
established on an away market (i.e., order with Fee Code B or J), as a 
percentage of all such Member's orders that add displayed liquidity to 
the Exchange (i.e., orders with Fee Code B, D or J), is intended to 
incentivize Members to submit such aggressively priced displayed 
liquidity to the Exchange.
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    \24\ The Exchange notes that orders with Fee Code J include 
orders, other than Retail Orders, that establish a new BBO on the 
Exchange that matches the NBBO first established on an away market.
    \25\ The Exchange notes that orders with Fee Code D include 
orders that add displayed liquidity to the Exchange but that are not 
Fee Code B or J, and thus, orders with Fee Code B, D or J include 
all orders, other than Retail Orders, that add displayed liquidity 
to the Exchange. The pricing for NBBO Setter/Joiner Tier 2 is 
referred to by the Exchange on the Fee Schedule under the new 
description ``NBBO Setter/Joiner Tier 2'' with a Fee Code of S2 to 
be appended to the otherwise applicable Fee Code assigned by the 
Exchange on the monthly invoices for qualifying executions.
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    The purpose of making the additive rebate under the NBBO Setter/
Joiner Tiers applicable to a qualifying Member's executions of Joiner 
Volume (in addition to Setter Volume) is, like the original purpose of 
the NBBO Setter Tier, to attract aggressively priced displayed 
liquidity to the Exchange. Specifically, the Exchange believes that 
such change will encourage the submission of orders that establish a 
new BBO on the Exchange that matches the NBBO first established on an 
away market, both in order to receive the additive rebate on such 
executions under each of the NBBO Setter/Joiner Tiers and, with respect 
to Members seeking to qualify for NBBO Setter/Joiner Tier 2, to meet 
the required criteria under such tier, and the Exchange believes that 
the resulting increased submission of such aggressively priced 
displayed liquidity would enhance market quality by increasing 
execution opportunities, tightening spreads, and promoting price 
discovery on the Exchange. Additionally, the Exchange believes that the 
additive rebate for executions of Setter Volume and Joiner Volume 
provided under each of the NBBO Setter/Joiner Tiers is commensurate 
with the corresponding required criteria under each such tier and is 
reasonably related to such market quality benefits that each such tier 
is designed to achieve. The Exchange notes that the NBBO Setter/Joiner 
Tiers, as modified by the changes proposed herein, are comparable to 
other volume-based incentives and discounts, which have been widely 
adopted by exchanges (including the Exchange), and that the Exchange's 
proposal to provide an additive rebate for a qualifying Member's 
executions of Joiner Volume, in addition to Setter Volume, under such 
tiers is similar in construct to pricing incentives that have been 
adopted by other exchanges.\26\
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    \26\ See, e.g., Securities Exchange Act Release No. 70664 
(October 11, 2013), 78 FR 62804 (October 22, 2013) (SR-BATS-2013-
054) (notice of filing and immediate effectiveness of fee changes 
adopted by BATS, including the adoption of an ``NBBO Joiner'' 
additive rebate provided for executions of orders that join the NBBO 
when BATS is not already at the NBBO to members that qualify for 
such incentive by achieving a specified volume threshold).
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Standard Rebates for Added Non-Displayed Volume
    The Exchange proposes to reduce the standard rebates for executions 
of Added Non-Displayed Volume. Added Non-Displayed Volume includes: (i) 
Pegged Orders \27\ with a Midpoint Peg \28\ instruction (such orders, 
``Midpoint Peg orders'') in securities priced at or above $1.00 per 
share that add liquidity to the Exchange (such orders, ``Added Midpoint 
Peg Volume''); and (ii) orders in securities priced at or above $1.00 
per share that add non-displayed liquidity to the Exchange, which are 
not Midpoint Peg orders (such orders, ``Added Non-Midpoint Peg Hidden 
Volume'').
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    \27\ 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 NBBO.
    \28\ 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).
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    Currently, the Exchange provides standard rebates of $0.0018 per 
share for executions of Added Midpoint Peg Volume and Added Non-
Midpoint Peg Hidden Volume. The Exchange now proposes to reduce each of 
these standard rebates to $0.0015 per share.\29\ The purpose of 
reducing the standard rebates for executions of Added Midpoint Peg 
Volume and Add Non-Midpoint Peg Hidden Volume is for business and 
competitive reasons, as the Exchange believes reducing such rebates as 
proposed would decrease the Exchange's expenditures with respect to its 
transaction pricing in a manner that is still consistent with the 
Exchange's overall pricing philosophy of

[[Page 76652]]

encouraging added and/or displayed liquidity. The Exchange notes that 
the proposed standard rebate for executions of Added Midpoint Peg 
Volume remains higher than, and competitive with, the standard rebates 
provided by at least one other exchange for executions of similar 
orders.\30\ The Exchange also notes that the proposed standard rebate 
for executions of Added Non-Midpoint Peg Hidden Volume remains higher 
than, and competitive with, the standard rebates provided by at least 
one other exchange for executions of similar orders.\31\
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    \29\ The standard pricing for executions of Added Midpoint Peg 
Volume is referred to by the Exchange on the Fee Schedule under the 
existing description ``Added non-displayed volume, Midpoint Peg'' 
and such orders will continue to receive a Fee Code of M on 
execution reports. The standard pricing for executions of Added Non-
Midpoint Peg Hidden Volume is referred to by the Exchange on the Fee 
Schedule under the existing description ``Added non-displayed 
volume'' and such orders will continue to receive a Fee Code of H on 
execution reports.
    \30\ See, e.g., the Nasdaq Price List--Trading Connectivity 
(available at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects a standard rebate 
of $0.0014 per share for executions of orders in Tape A and Tape B 
securities priced at or above $1.00 per share that add non-displayed 
midpoint liquidity and a standard rebate of $0.0010 per share for 
executions of orders in Tape C securities priced at or above $1.00 
per share that add non-displayed midpoint liquidity.
    \31\ See, e.g., the Cboe BZX Exchange, Inc. equities trading fee 
schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which reflects a standard 
rebate of $0.0010 per share for executions of orders in securities 
priced at or above $1.00 per share that add non-displayed liquidity.
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Non-Display Add Tiers
    As noted above, the Exchange currently provides a standard rebate 
of $0.0018 per share for executions of Added Non-Displayed Volume 
(including both Added Midpoint Peg Volume and Added Non-Midpoint Peg 
Hidden Volume), which the Exchange is proposing to reduce to $0.0015 
per share, as described above. The Exchange also currently offers Non-
Display Add Tiers 1 and 2 under which a Member may receive an enhanced 
rebate for executions of Added Non-Displayed Volume by achieving the 
corresponding required volume criteria for each such tier. The Exchange 
now proposes to modify the Non-Display Add Tiers by modifying the 
required criteria under Non-Display Add Tiers 1 and 2, and establishing 
a new Non-Display Add Tier 3, as further described below.
    First, with respect to Non-Display Add Tier 1, the Exchange 
currently provides an enhanced rebate of $0.0027 per share for 
executions of Added Non-Displayed Volume for Members that qualify for 
such tier by achieving a Non-Displayed ADAV that is equal to or greater 
than 3,000,000 shares.\32\ The Exchange now proposes to modify Non-
Display Add Tier 1 such that a Member would now qualify for such tier 
by achieving a Non-Displayed ADAV that is equal to or greater than 
5,000,000 shares. Thus, such proposed change would increase the Non-
Displayed ADAV threshold in the required criteria, which is designed to 
encourage Members to maintain or increase their liquidity-adding non-
displayed order flow to the Exchange in order to qualify for the 
enhanced rebate for executions of Added Non-Displayed Volume provided 
under such tier. The Exchange is not proposing to change the rebates 
provided under this tier.
---------------------------------------------------------------------------

    \32\ The pricing for Non-Display Add Tier 1 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Added non-displayed volume, Non-Display Add Tier 1'' with a Fee 
Code of H1 or M1, as applicable, to be provided by the Exchange on 
the monthly invoices provided to Members.
---------------------------------------------------------------------------

    Second, with respect to Non-Display Add Tier 2, the Exchange 
currently provides an enhanced rebate of $0.0024 per share for 
executions of Added Non-Displayed Volume for Members that qualify for 
such tier by achieving a Non-Displayed ADAV that is equal to or greater 
than 1,000,000 shares.\33\ The Exchange now proposes to modify Non-
Display Add Tier 2 such that a Member would now qualify for such tier 
by achieving a Non-Displayed ADAV that is equal to or greater than 
2,000,000 shares. Thus, such proposed change would increase the Non-
Displayed ADAV threshold in the required criteria, which is designed to 
encourage Members to maintain or increase their liquidity-adding non-
displayed order flow to the Exchange in order to qualify for the 
enhanced rebate for executions of Added Non-Displayed Volume provided 
under such tier. The Exchange is not proposing to change the rebates 
provided under this tier.
---------------------------------------------------------------------------

    \33\ The pricing for Non-Display Add Tier 2 is referred to by 
the Exchange on the Fee Schedule under the existing description 
``Added non-displayed volume, Non-Display Add Tier 2'' with a Fee 
Code of H2 or M2, as applicable, to be provided by the Exchange on 
the monthly invoices provided to Members.
---------------------------------------------------------------------------

    Third, the Exchange is proposing to establish a new tier under the 
Non-Display Add Tiers, which, as proposed, would be referred to by the 
Exchange as Non-Display Add Tier 3. Under the proposed new Non-Display 
Add Tier 3, the Exchange would provide an enhanced rebate of $0.0020 
per share for executions of Added Non-Displayed Volume for Members that 
qualify for such tier by achieving a Non-Displayed ADAV that is equal 
to or greater than 1,000,000 shares.\34\ The Exchange proposes to 
provide Members that qualify for the proposed new Non-Display Add Tier 
3 free executions of orders in securities priced below $1.00 per share 
that add non-displayed liquidity to the Exchange, which is the same 
rebate that is currently applicable to such executions for all Members.
---------------------------------------------------------------------------

    \34\ The pricing for the proposed new Non-Display Add Tier 3 is 
referred to by the Exchange on the Fee Schedule under the new 
description ``Added non-displayed volume, Non-Display Add Tier 3'' 
with a Fee Code of H3 or M3, as applicable, to be provided by the 
Exchange on the monthly invoices provided to Members.
---------------------------------------------------------------------------

    The tiered pricing structure for executions of Added Non-Displayed 
Volume under the Non-Display Add Tiers provides an incremental 
incentive for Members to strive for higher volume thresholds to receive 
higher enhanced rebates for such executions and, as such, is intended 
to encourage Members to maintain or increase their order flow, 
particularly in the form of liquidity-adding non-displayed orders, to 
the Exchange, thereby contributing to a deeper and more liquid market 
to the benefit of all Members and market participants. The Exchange 
believes that the Non-Display Add Tiers, as modified by the proposed 
changes described above, reflect a reasonable and competitive pricing 
structure that is right-sized and consistent with the Exchange's 
overall pricing philosophy of encouraging added and/or displayed 
liquidity. Specifically, the Exchange believes that, after giving 
effect to the proposed changes described above, the rebate for 
executions of Added Non-Displayed Volume provided under each of the 
Non-Display Add Tiers is commensurate with the corresponding required 
criteria under each such tier and is reasonably related to the market 
quality benefits that each such tier is designed to achieve.
Sub-Dollar Rebate Tier
    The Exchange proposes to adopt a new volume-based tier, referred to 
by the Exchange as the Sub-Dollar Rebate Tier, under which the Exchange 
will provide an enhanced rebate for executions of orders in securities 
priced below $1.00 per share that add displayed liquidity to the 
Exchange (such orders, ``Added Displayed Sub-Dollar Volume''). 
Currently, the Exchange provides a standard rebate of 0.075% of the 
total dollar value of the transaction for executions of Added Displayed 
Sub-Dollar Volume, and this standard rebate is applicable to all such 
executions for all Members (including those that qualify for any of the 
Exchange's existing volume tiers). Now, under the proposed Sub-Dollar 
Rebate Tier, the Exchange will provide an enhanced rebate of 0.15% of 
the total dollar value of the transaction for executions of Added 
Displayed Sub-Dollar Volume for Members that qualify for such tier by 
achieving an ADAV that is equal to or greater than 0.15% of the

[[Page 76653]]

TCV.\35\ The Exchange notes that the Sub-Dollar Rebate Tier will not 
apply to executions of orders in securities priced at or above $1.00 
per share.
---------------------------------------------------------------------------

    \35\ The pricing for the proposed new Sub-Dollar Rebate Tier is 
referred to by the Exchange on the Fee Schedule under the new 
description ``Sub-Dollar Rebate Tier'' with a Fee Code of ``L'' to 
be appended to the otherwise applicable Fee Code assigned by the 
Exchange on the monthly invoices for qualifying executions.
---------------------------------------------------------------------------

    The Exchange believes that the proposed Sub-Dollar Rebate Tier 
provides an incremental incentive for Members to maintain or strive for 
higher ADAV on the Exchange in order to receive the proposed enhanced 
rebate for executions of Added Displayed Sub-Dollar Volume. As such, 
the proposed Sub-Dollar Rebate Tier is designed to incentivize Members 
that provide liquidity on the Exchange to increase their orders that 
add liquidity to the Exchange in order to qualify for the enhanced 
rebate for executions of Added Displayed Sub-Dollar Volume, which, in 
turn, the Exchange believes would also encourage the submission by 
qualifying Members of additional Added Displayed Sub-Dollar Volume to 
the Exchange, thereby promoting price discovery and contributing to a 
deeper and more liquid market, including with respect to sub-dollar 
securities. The Exchange believes that this resulting additional 
liquidity-adding volume, including in the form of displayed volume in 
sub-dollar securities, would contribute to a more robust and well-
balanced market ecosystem on the Exchange to the benefit of all Members 
and market participants and, in turn, enhance the attractiveness of the 
Exchange as a trading venue. The Exchange notes that the proposed new 
Sub-Dollar Rebate Tier is comparable to other volume-based incentives 
and discounts, which have been widely adopted by exchanges (including 
the Exchange), including pricing incentives that provide an enhanced 
rebate for executions of liquidity-adding orders in securities priced 
below $1.00 per share for firms that achieve a specified volume 
threshold that have been adopted by other exchanges.\36\
---------------------------------------------------------------------------

    \36\ See, e.g., the NYSE Arca Equities Fees and Charges 
(available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf), which reflects a standard 
credit of 0.0% of the total dollar value for executions of 
securities priced below $1.00 per share, as well as the ``Sub-Dollar 
Adding Step Up Tier'' pricing structure under which NYSE Arca 
provides higher credits (ranging from 0.05% to 0.15% of the total 
dollar value) for executions of orders in securities priced below 
$1.00 per share for firms that qualify for any such tier by 
achieving certain specified volume thresholds.
---------------------------------------------------------------------------

Maximum Rebate per Share
    As noted above, in response to the competitive environment with 
respect to order execution, the Exchange offers tiered pricing, which 
provides Members with opportunities to qualify for higher rebates or 
lower fees where certain volume criteria and thresholds are met. In 
this regard, the Exchange offers various volume-based tiers that 
provide qualifying Members an enhanced rebate or an additive rebate 
(which applies in addition to the otherwise applicable rebate) with 
respect to qualifying executions. Under the Exchange's current pricing, 
the highest rebate per share applicable to any execution is $0.0036, 
and for business and competitive reasons the Exchange does not wish to 
introduce a higher rebate per share with this proposal despite the fact 
that a higher rebate for certain executions would be possible after 
giving effect to the pricing changes described above. Thus, in order to 
maintain the same maximum rebate per share provided under the 
Exchange's current pricing, the Exchange proposes to add a note on the 
Fee Schedule stating that to the extent a single execution qualifies 
for one or more additive rebates, the maximum combined rebate per share 
provided by the Exchange shall be $0.0036. The Exchange notes that 
since $0.0036 is the highest rebate per share currently provided by the 
Exchange, this proposed change, by itself, will not result in any 
Member receiving a lower maximum rebate per share than it is currently 
provided for any execution. The Exchange also notes that other 
exchanges limit the maximum rebate per share in connection with the 
provision of enhanced and/or additive rebates.\37\
---------------------------------------------------------------------------

    \37\ See, e.g., the Nasdaq Price List--Trading Connectivity 
(available at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2), which reflects various maximum 
rebates in connection with the provision of an additive rebate for 
executions of certain midpoint liquidity; the NYSE Arca Equities 
Fees and Charges (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf), which provides 
that in connection with the ``Tape B Additional Credit'' the credit 
shall be in addition to the ETP Holder's Tiered or Standard 
credit(s) and such combined credit(s) in Tape B shall not exceed 
$0.0032, subject to certain exceptions for Lead Market Makers, which 
are subject to a higher, but still limited, per share credit for the 
applicable executions.
---------------------------------------------------------------------------

Eliminate Step-Up Additive Rebate
    Finally, the Exchange proposes to eliminate the Step-Up Additive 
Rebate. The Exchange currently offers the Step-Up Additive Rebate, 
which is a volume-based tier, under which the Exchange provides an 
additive rebate of $0.0002 per share in addition to the otherwise 
applicable rebate for executions of Added Displayed Volume (other than 
orders that establish the NBBO, if such Member qualifies for the NBBO 
Setter Tier, and Retail Orders) for Members that qualify for such tier 
by achieving one of the two specified alternative criteria based on 
Step-Up ADAV and/or ADAV thresholds. The Exchange adopted the Step-Up 
Additive Rebate in May 2022 for the purpose of encouraging Members that 
provide liquidity on the Exchange to increase their liquidity-adding 
order flow in order to achieve the applicable volume thresholds, 
thereby providing greater execution opportunities on the Exchange.\38\ 
However, the Exchange no longer wishes to, nor is it required to, 
maintain such tier. Thus, the proposed rule change removes such tier, 
as the Exchange would rather redirect future resources and funding into 
other incentives and tiers designed to incentivize increased order flow 
or otherwise enhance market quality on the Exchange.
---------------------------------------------------------------------------

    \38\ See Securities Exchange Act Release No. 94863 (May 6, 
2022), 87 FR 29197 (May 12, 2022) (SR-MEMX-2021-11) [sic] (notice of 
filing and immediate effectiveness of fee changes adopted by the 
Exchange, including the adoption of the Step-Up Additive Rebate).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of section 6 of the Act,\39\ in general, and with 
sections 6(b)(4) and 6(b)(5) of the Act,\40\ 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.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78f.
    \40\ 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

[[Page 76654]]

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.'' \41\
---------------------------------------------------------------------------

    \41\ 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 different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal reflects a reasonable and competitive pricing structure 
designed to decrease the Exchange's expenditures with respect to its 
transaction pricing and incentivize market participants to direct 
additional order flow, including various forms of liquidity-adding 
volume and aggressively priced displayed orders that establish the NBBO 
or establish a new BBO on the Exchange that matches the NBBO first 
established on an away market, to the Exchange, which the Exchange 
believes would promote price discovery and enhance liquidity and market 
quality on the Exchange to the benefit of all Members and market 
participants.
    The Exchange notes that volume-based incentives and discounts have 
been widely adopted by exchanges (including the Exchange), and are 
reasonable, equitable and not unfairly discriminatory because they are 
open to all members on an equal basis and provide additional benefits 
or discounts that are reasonably related to the value to an exchange's 
market quality associated with higher levels of market activity, such 
as higher levels of liquidity provision and/or growth patterns, and the 
introduction of higher volumes of orders into the price and volume 
discovery process. The Exchange believes that the Liquidity Provision 
Tiers 1, 3 and 5, the DLI Tiers 1 and 2, and the Non-Display Add Tiers 
1 and 2, each as modified by the changes proposed herein, as well as 
the proposed new Non-Display Add Tier 3 and the proposed new Sub-Dollar 
Rebate Tier, are reasonable, equitable and not unfairly discriminatory 
for these same reasons, as such tiers would provide Members with an 
incremental incentive to achieve certain volume thresholds on the 
Exchange, are available to all Members on an equal basis, and, as 
described above, are reasonably designed to encourage Members to 
maintain or increase their liquidity-adding order flow, including in 
the forms of Added Displayed Volume, Added Non-Displayed Volume and 
Added Displayed Sub-Dollar Volume, as applicable, to the Exchange, 
which the Exchange believes would promote price discovery, enhance 
liquidity and market quality, and contribute to a more robust and well-
balanced market ecosystem on the Exchange to the benefit of all Members 
and market participants.
    The Exchange also believes that such tiers reflect a reasonable and 
equitable allocation of fees and rebates, as the Exchange believes 
that, after giving effect to the changes proposed herein, the enhanced 
rebate for executions of Added Displayed Volume, Added Non-Displayed 
Volume, and Added Displayed Sub-Dollar Volume, as applicable, under 
each such tier is commensurate with the corresponding required criteria 
under each such tier and is reasonably related to the market quality 
benefits that each such tier is designed to achieve, as described 
above. Additionally, the Exchange believes the proposed new Sub-Dollar 
Rebate Tier is reasonable, in that it is comparable to pricing 
incentives adopted by other exchanges that provide an enhanced rebate 
for executions of liquidity-adding orders in securities priced below 
$1.00 per share for firms that achieve a specified volume 
threshold.\42\
---------------------------------------------------------------------------

    \42\ See supra note 36.
---------------------------------------------------------------------------

    The Exchange believes that the proposed NBBO Setter/Joiner Tiers 
are a reasonable means to attract aggressively priced displayed 
liquidity to the Exchange. As noted above, the proposed NBBO Setter/
Joiner Tiers are comparable to other volume-based tiers, and the 
Exchange believes such tiers are reasonable, equitable and not unfairly 
discriminatory for the same reasons described above with respect to 
volume-based tiers, as the proposed NBBO Setter/Joiner Tiers would 
provide Members with an incremental incentive to achieve certain volume 
thresholds on the Exchange, are available to all Members on an equal 
basis, and, as described above, are reasonably designed to incentivize 
the entry of aggressively priced displayed orders that establish the 
NBBO or establish a new BBO on the Exchange that matches the NBBO first 
established on an away market. As such, the Exchange believes the 
additive rebates for executions of Setter Volume and Joiner Volume 
provided under the NBBO Setter/Joiner Tiers are reasonably related to 
the market quality benefits that such tiers are designed to promote.
    Specifically, the Exchange believes that its proposal to make the 
additive rebate under each of the NBBO Setter/Joiner Tiers applicable 
to a qualifying Member's executions of Joiner Volume (in addition to 
Setter Volume, as is the case under the NBBO Setter Tier today) is 
reasonable, equitable and not unfairly discriminatory because, as 
described above, the Exchange believes that doing so would incentivize 
the submission of additional orders that establish a new BBO on the 
Exchange that matches the NBBO first established on an away market (in 
addition to orders that establish the NBBO, which are currently 
incentivized under the NBBO Setter Tier and will continue to be 
incentivized under the NBBO Setter/Joiner Tiers), and the Exchange 
believes that the resulting increased submission of such aggressively 
priced displayed liquidity would benefit all Members and market 
participants, including public investors, by increasing execution 
opportunities, tightening spreads, and promoting price discovery on the 
Exchange. Moreover, the Exchange believes such proposal is reasonable, 
in that it is similar in construct to pricing incentives that have been 
adopted by other exchanges that provide an additive rebate for 
executions of orders that join the NBBO for members that achieve 
certain specified volume criteria.\43\
---------------------------------------------------------------------------

    \43\ See supra note 26.
---------------------------------------------------------------------------

    The Exchange further believes that the proposed additive rebate for 
executions of Setter Volume and Joiner Volume under each of the NBBO 
Setter/Joiner Tiers is reasonable and consistent with an equitable 
allocation of fees because, as described above, the Exchange believes 
that each such rebate is commensurate with the corresponding required 
criteria under each such tier and is reasonably related to such market 
quality benefits that each such tier is designed to achieve.
    The Exchange believes that the proposed changes to reduce the 
standard rebates provided for executions of Added Non-Displayed Volume 
(i.e., both Added Midpoint Peg Volume and Added Non-Midpoint Peg Hidden 
Volume) are reasonable because, as described above, such changes are 
designed to decrease the Exchange's expenditures with respect to its 
transaction pricing in a manner that is still consistent with the 
Exchange's overall pricing philosophy of encouraging added and/or 
displayed

[[Page 76655]]

liquidity, and the proposed new standard rebates for executions of 
Added Midpoint Peg Volume and Added Non-Midpoint Peg Hidden Volume 
remain higher than, and competitive with, the standard rebates provided 
by at least one other exchange in each case for executions of similar 
orders.\44\ The Exchange also believes the proposed standard rebates 
for executions of Added Midpoint Peg Volume and Added Non-Midpoint Peg 
Hidden Volume are equitable and not unfairly discriminatory, as such 
standard rebates will apply equally to all Members.
---------------------------------------------------------------------------

    \44\ See supra notes 30-31.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to limit the maximum 
combined rebate per share provided for any execution on the Exchange 
that qualifies for one or more additive rebates to $0.0036 is 
reasonable, equitable and not unfairly discriminatory, as this 
limitation will apply to all Members equally, in that no Member may be 
eligible to receive such a rebate that is greater than $0.0036. 
Moreover, the highest rebate per share applicable to any execution 
under the Exchange's current pricing is $0.0036, so this proposed 
change, by itself, will not result in any Member receiving a lower 
maximum rebate per share than it is currently provided for any 
execution. The Exchange notes that it is not required to provide 
Members any opportunities to receive rebates or, to the extent that it 
does provide rebates under its transaction pricing, to maintain any 
specific level of rebate with respect to any type of transaction. The 
Exchange further notes that other exchanges also limit the maximum 
rebate per share in connection with the provision of enhanced and/or 
additive rebates, and therefore, this aspect of the proposal does not 
raise any new or novel issues that have not previously been considered 
by the Commission.\45\
---------------------------------------------------------------------------

    \45\ See supra note 37.
---------------------------------------------------------------------------

    The Exchange believes the proposed change to eliminate the Step-Up 
Additive Rebate is reasonable because, as noted above, it would enable 
the Exchange to redirect the associated resources and funding into 
other incentives and tiers designed to incentivize increased order flow 
or otherwise enhance market quality on the Exchange, and the Exchange 
is not required to maintain such incentive or provide Members any 
opportunities to receive additive rebates. The Exchange believes the 
proposal to eliminate such incentive is also equitable and not unfairly 
discriminatory because it applies equally to all Members, in that the 
incentive would no longer be available for any Member.
    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 \46\ 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.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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 changes to the Exchange transaction pricing under this proposal are 
intended to decrease the Exchange's expenditures with respect to its 
transaction pricing and attract order flow to the Exchange by 
continuing to offer competitive pricing while also incentivizing market 
participants to submit various forms of liquidity-adding volume and 
aggressively priced displayed liquidity, thereby promoting price 
discovery and enhancing liquidity and market quality on the Exchange 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.'' \47\
---------------------------------------------------------------------------

    \47\ See supra note 41.
---------------------------------------------------------------------------

Intramarket Competition
    As discussed above, the Exchange believes that the proposal would 
incentivize Members to submit additional order flow, including various 
forms of liquidity-adding volume and aggressively priced displayed 
orders that establish the NBBO or establish a new BBO on the Exchange 
that matches the NBBO first established on an away market, to the 
Exchange, thereby promoting price discovery and enhancing liquidity and 
market quality on the Exchange to the benefit of all Members, as well 
as enhancing the attractiveness of the Exchange as a trading venue, 
which the Exchange believes, in turn, would continue to encourage 
market participants to direct additional order flow to the Exchange. 
Greater liquidity benefits all Members by providing more trading 
opportunities and encourages Members to send additional orders to the 
Exchange, thereby contributing to robust levels of liquidity, which 
benefits all market participants.
    The opportunity to qualify for the proposed new criteria under the 
Liquidity Provision Tiers 1, 3 and 5, the DLI Tiers 1 and 2, and the 
Non-Display Add Tiers 1 and 2, as well as the proposed new Non-Display 
Add Tier 3 and the proposed new Sub-Dollar Rebate Tier, and thus 
receive the corresponding rebates for executions of Added Displayed 
Volume, Added Non-Displayed Volume and Added Displayed Sub-Dollar 
Volume, as applicable, would be available to all Members that meet the 
associated volume requirements in any month. Similarly, the opportunity 
to qualify for the NBBO Setter/Joiner Tiers 1 and 2, and thus receive 
the corresponding additive rebates for executions of Setter Volume and 
Joiner Volume, would be available to all Members that meet the 
associated volume requirements in any month. The Exchange believes its 
proposal to make the additive rebate under the NBBO Setter/Joiner Tiers 
applicable to a qualifying Member's executions of Joiner Volume will 
benefit competition by rewarding Members that help the Exchange to join 
other market centers at the NBBO. As described above, the Exchange 
believes that, after giving effect to the changes proposed herein, the 
required criteria under each of the tiers described above is 
commensurate with the corresponding rebate under each such tier and is 
reasonably related to the enhanced liquidity and market quality that 
each such tier is designed to promote. Additionally, as noted above, 
the proposed reduced standard rebates for executions of Added Non-
Displayed Volume (including both Added Midpoint Peg Volume and Added 
Non-Midpoint Peg Hidden Volume) would continue to apply equally to all 
Members in the same manner that such standard rates currently do today.
    The Exchange does not believe the proposed change to eliminate the 
Step-Up Additive Rebate will impose any

[[Page 76656]]

burden on intramarket competition because such change will apply to all 
Members uniformly, in that such incentive will no longer be available 
to any Member. Additionally, the Exchange does not believe the proposed 
change to limit the maximum combined rebate per share provided for any 
execution on the Exchange that qualifies for one or more additive 
rebates will impose any burden on intramarket competition because, as 
described above, such limitation will apply to all Members equally, in 
that no Member may be eligible to receive such a rebate that is greater 
than $0.0036, and, as this is the highest rebate per share applicable 
to any execution under the Exchange's current pricing, no Member will 
receive a lower maximum rebate per share than it is currently provided 
for any execution as a result of this proposed change.
    For the foregoing reasons, the Exchange believes the proposed 
changes would not impose any burden on intramarket competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.
Intermarket Competition
    As noted above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. Members have numerous 
alternative venues that they may participate on and direct their order 
flow to, including 15 other equities exchanges and numerous alternative 
trading systems and other off-exchange venues. As noted above, no 
single registered equities exchange currently has more than 
approximately 16% of the total market share of executed volume of 
equities trading. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to new or different pricing structures being introduced into 
the market. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates, including with respect to executions of 
Added Displayed Volume, Added Non-Displayed Volume (including both 
Added Midpoint Peg Volume and Added Non-Midpoint Peg Hidden Volume), 
Added Displayed Sub-Dollar Volume, Setter Volume and Joiner 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 represent a competitive 
proposal through which the Exchange is seeking to decrease the 
Exchange's expenditures with respect to its transaction pricing and 
attract additional order flow to the Exchange through the provision of 
certain enhanced and additive rebates under volume-based tiers, which 
have been widely adopted by exchanges, and standard pricing that is 
comparable to, and competitive with, pricing for similar executions in 
place at other exchanges.\48\ 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 standard pricing for executions of Added Non-Displayed Volume 
(including both Added Midpoint Peg Volume and Added Non-Midpoint Peg 
Hidden Volume), as well as similar pricing incentives and discounts to 
market participants that achieve certain volume criteria and 
thresholds. With respect to the Exchange's proposal to make the 
additive rebates provided under the NBBO Setter/Joiner Tiers applicable 
to executions of Joiner Volume (in addition to Setter Volume, as is the 
case under the NBBO Setter Tier today), the Exchange believes that the 
promotion of displayed liquidity at the NBBO, whether through orders 
that establish the NBBO or establish a new BBO on the Exchange that 
matches the NBBO first established on an away market, enhances market 
quality for all market participants and promotes competition amongst 
market centers. Additionally, as noted above, eliminating the Step-Up 
Additive Rebate would allow the Exchange to redirect the associated 
resources and funding into other incentives and tiers designed to 
enhance market quality on the Exchange, which would ultimately enable 
the Exchange to better compete with other market centers. The Exchange 
does not believe that its proposal to limit the maximum combined rebate 
per share provided for any execution on the Exchange that qualifies for 
one or more additive rebates will impose any burden on intermarket 
competition, and the Exchange notes that limiting the maximum rebate 
per share in connection with similar types of incentives is consistent 
with the practices of other exchanges.\49\
---------------------------------------------------------------------------

    \48\ See supra notes 30-31.
    \49\ See supra note 37.
---------------------------------------------------------------------------

    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.'' \50\ 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' . . . .''.\51\ Accordingly, the Exchange does not believe its 
proposed pricing changes impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \50\ See supra note 41.
    \51\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \52\ and Rule 19b-4(f)(2) \53\ thereunder.
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    \52\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \53\ 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

[[Page 76657]]

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-2022-33 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-2022-33. 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-2022-33 and should be submitted on 
or before January 5, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\54\
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    \54\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-27161 Filed 12-14-22; 8:45 am]
BILLING CODE 8011-01-P