On November 19, 2025, the Securities and Exchange Commission published a notice in the Federal Register announcing MEMX LLC's proposed rule change to amend its fee schedule for equities transactions. Filed on September 30, 2025, and effective immediately under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, the proposal aims to incentivize liquidity provision and order flow by adjusting rebates and fees. This development occurs amid intense competition among U.S. equities exchanges, where MEMX holds about 2% market share, and seeks to promote price discovery without imposing undue burdens. The changes reflect MEMX's strategy to attract more participants in a fragmented market, potentially influencing trading dynamics across tapes A, B, and C securities.
Background on MEMX and the Competitive Landscape
MEMX LLC, a self-regulatory organization and national securities exchange, operates a maker-taker pricing model. In this system, exchanges provide rebates to members adding liquidity and charge fees to those removing it, a structure upheld in legal precedents like NetCoalition v. SEC (2010), where courts recognized fierce competition for order flow. MEMX competes with 17 other registered exchanges and off-exchange venues, none exceeding 14% market share, as per consolidated data feeds like CTS and UTDF.
The proposal emerges from this highly competitive environment, where participants can redirect orders if fees seem excessive. MEMX justifies the changes under Section 6(b) of the Act, emphasizing equitable allocation of reasonable fees and no unfair discrimination. Key players include MEMX members, who benefit from tiers, and the SEC, which solicits comments to ensure compliance.
Key Proposed Changes to Rebates and Fees
The rule change introduces several adjustments to encourage liquidity addition and removal.
First, MEMX proposes increasing base rebates for added non-displayed volume in securities priced at or above $1.00 per share from $0.0008 to $0.0025 per share. This applies uniformly to price-improved, midpoint peg, and non-midpoint hidden orders, aiming to boost non-displayed liquidity provision.
For sub-dollar securities (below $1.00 per share), rebates for added non-displayed and displayed volume rise from 0.075% to 0.15% of total dollar value. This equalization seeks to simplify pricing and attract more sub-dollar order flow, eliminating the now-redundant Sub-Dollar Rebate Tier, which previously offered 0.15% for high-volume adders.
On the removal side, MEMX shifts from a uniform $0.0030 per share fee to tape-specific rates: $0.0029 for Tape A, $0.0030 for Tapes B and C, with sub-dollar removals unchanged at 0.28% of dollar value. This mirrors structures at exchanges like NYSE and Nasdaq, as noted in prior SEC filings such as Release No. 34-85864 (2019).
Additionally, the fee for removing liquidity via retail orders drops from $0.0030 to $0.0029 per share, aligning with the lowest removal fee to incentivize retail participation.
Modifications to Pricing Tiers
MEMX streamlines its tier system by eliminating Non-Display Add Tiers 2 and 3, which offered rebates of $0.0025 and $0.0018 per share for non-displayed average daily added volume (ADAV) thresholds of 2,000,000 and 1,000,000 shares, respectively. Tier 1 remains, providing enhanced rebates for qualifying members, now at 0.15% for sub-dollar executions.
The Tape A Quoting Tier's criteria ease from requiring 50% NBBO time in at least 500 Tape A securities to 25% in at least 100, maintaining an additive $0.0002 rebate. This aims to broaden accessibility while rewarding quoting activity that enhances market depth.
These tiers, open to all members, provide incremental incentives tied to volume or quoting, consistent with practices at other exchanges and supported by MEMX's statement that they promote market quality without discrimination.
Statutory Basis and Perspectives
MEMX asserts the proposal meets Act requirements, citing equitable fee allocation and competition promotion. It argues rebates and fees are reasonable given market forces, with no single exchange dominating. The filing references Regulation NMS (2005), which favors competition over intervention in pricing.
From one perspective, proponents like MEMX view these changes as pro-competitive, potentially increasing order flow and liquidity, benefiting investors through better price discovery. Critics, however, might argue that maker-taker models distort incentives, as debated in SEC forums, though courts have not deemed them inherently unfair.
No immediate legal challenges are evident, but the SEC's comment period could reveal stakeholder views. The proposal aligns with precedents allowing exchanges flexibility in pricing to attract flow, provided it avoids burdens on competition.
Implications for Market Participants
Short-term, members may increase submissions of non-displayed and sub-dollar orders to capture higher rebates, while tape-specific fees could shift Tape A volume toward MEMX. Long-term, this might enhance MEMX's market share, fostering deeper liquidity pools, but could pressure competitors to adjust pricing.
Different stakeholders offer varied views: retail brokers may welcome reduced removal fees, institutional traders could benefit from quoting incentives, yet smaller firms might find tier criteria challenging. Overall, the changes underscore the dynamic interplay of regulation and competition in U.S. equities markets.
