Significant Liquidity and Price Discovery on MEMX
Highlights & Recent Developments
- MEMX exchange market share excluding TRF volume was 6.1% in June 2022, up from 4.3% in June 2021
- MEMX exchange market share excluding TRF and auction volume was 7.2% in June 2022, up from 5.0% in June 2021
- MEMX ranked 2nd in number of symbols quoted over 75% of the time at the NBBO in June
- MEMX ranked 4th in NBBO setting in June
- Court rejects non-SRO voting in SEC governance order, but firms can have an impact by supporting exchanges that put member needs first
Chart 1 illustrates MEMX market share in several different ways. MEMX exchange market share excluding TRF volume was 6.1% in June 2022, up from 4.3% in June 2021. Auction volumes in June were much higher due to index rebalance activity. MEMX exchange market share excluding TRF and auction volume was 7.2% in June 2022, up from 5.0% in June 2021. Excluding auctions and TRF provides the most accurate picture of the primary segment against which MEMX directly competes.
Volume & Diversity of Liquidity
Despite high auction activity in June, industry notional value traded fell 15% sequentially from May 2022 to June 2022. MEMX average daily notional volume was $15.0 billion in June 2022, up from $7.9 billion in June 2021. The high for the month was $21.4 billion traded on MEMX on June 13th.
Liquidity and price discovery are critical to a well-functioning market. Liquidity is measured in part by the percentage of time an exchange is quoting at the NBBO, which gauges the ease with which buyers and sellers can transact. MEMX provides significant continuous quoting at the NBBO in thousands of securities (see Chart 3) and high IOC fill rates on orders taking against liquidity providers. In June, MEMX ranked 2nd in the number of symbols quoted over 75% of the time at NBBO.
Price discovery is measured by setting the best market price. Only one exchange can set the new best NBBO in the market, then other exchanges join and begin to trade at this level. In June, MEMX set the best price 12% of the time and ranked 4th in NBBO setting.
Consolidated Market Data Update
On July 5th, the Court of Appeals for the D.C. Circuit issued its second significant market data ruling for the year. This ruling rejected one important piece of the SEC’s efforts to improve the governance of the consolidated tape plans, i.e., allowing industry representatives (non-SROs) onto the SIP operating committee as voting members. While MEMX will continue to advocate for market data reform, including fair and reasonable pricing, this ruling will unfortunately allow the incumbent exchanges to continue to delay needed reforms. However, the industry still has a say in consolidated tape governance. Though siding with the incumbent exchanges on the issue of non-SRO voting, the court upheld other portions of the SEC’s governance initiative, including changes that would require voting by exchange group as well as an independent administrator requirement. With two votes allocated to exchange groups with more than 15% consolidated equity market share, we encourage firms to vote with their feet and support exchanges that put member needs first.