A surge in retail trading; Options live date September 27

Retail Trading Volume Hits Record High

Equities Exchange Highlights

Market Share

In August, MEMX exchange market share (excluding TRF volume) was 5.6%, including market share of 5.3% in Tape A, 5.0% in Tape B, and 6.1% in Tape C. MEMX exhibited strong quote performance, ranking third among exchanges, setting the NBBO 12.3% of the time.

Volume & Diversity of Liquidity

MEMX has diverse participation from 55 active trading members. In August, 14 firms posted non-marketable retail orders, which accounted for 18% of MEMX add volume. Retail fill rates for orders placed near the NBBO were 93% for odd lots under 100 shares and 96% for order sizes of 100 to 9,999 shares.

Retail volume increased 57% month-over-month to 57 million shares daily in August.

Retail investors traded in 9,455 symbols on MEMX. The most active stocks are shown below.

Options Exchange Update

MEMX Options Exchange phased launch schedule begins on September 27th. We expect 30 members will be approved for trading on day one. MEMX will operate a maker/taker price-time model and provide active risk management capabilities to reduce market-maker risks and improve liquidity participation. Today, options exchanges with similar market models generally provide the narrowest quoted spreads and account for a large portion of Regular Electronic single-leg options trading, which accounts for over half of total industry volume.

Uniquely, MEMX will offer members the ability to manage their risk limits using a passive or active Risk Monitor Mechanism, which are described in detail in the MEMX rulebook. The passive mechanism uses a rolling configurable length time window to track and analyze a set of defined risk metrics (volume executed, notional executed, number of executions, percentage contracts, risk trips) across a group of orders. Active risk management tools provide active, two-way communication between the member and exchange and give traders control to firm up risk decisions based on real-time circumstances, as opposed to calculating risk on static predetermined parameters.

SEC Issues New SIP Governance Order

On September 1, 2023, the SEC issued an order that directs the equities exchanges and FINRA to file a new national market system (“NMS”) plan governing the dissemination of U.S. equity market data. MEMX has been a strong advocate for SIP reform and has continued to campaign for the implementation of these reforms following the D.C. Circuit’s decision in a legal challenge brought by the incumbent exchange groups. We are therefore pleased to see the SEC’s new order.

The new order requires that the self-regulatory organizations (“SROs”) responsible for the equity SIPs submit a plan with an improved governance structure that should reduce conflicts of interest in the administration of the plan. This improved governance structure includes allocating votes by exchange group and appointing an independent, i.e., non-conflicted, administrator. The plan must be filed with the SEC by October 23, 2023, and must include a detailed implementation schedule.

Although we agreed with the SEC that non-SRO voting representation on the plans would have been preferable, this new plan will ensure that all SROs are given an appropriate voice on plan matters instead of only the largest exchange groups that collectively control the current plans, and that have vigorously opposed all reform attempts.

Ultimately, these governance reforms are a necessary first step towards implementing substantive reforms, including the SEC’s market data infrastructure rule. While the SEC’s new order does not address the implementation of that rule, MEMX will continue to advocate for our members, and hopes to see additional action by the SEC to get these market data initiatives back on track.