Ending 2023 on another high note

Strong Growth in Options and Retail Equity Activity

Equity Exchange Highlights

MEMX Equities exchange market share was 5.3% in December. MEMX retail average daily volume surged 69% month-over-month to 82 million shares and investors benefited from high MEMX fill rates on non-marketable limit orders. The increase in sub-$1 activity to 18.9% of industry volume in December (up from 11.5% in November) contributed to rising retail volume.

Retail trading accounted for 22.2% of MEMX add volume, up from 15.5% in November.

Options Exchange Highlights

MEMX rolled out several active symbols in December (e.g., SPY, TSLA, NVDA). At month end, MEMX was trading 23 symbols accounting for 48% of options volume. We have added hundreds of additional symbols so far in January and plan to continue to roll out more symbols throughout the month.

In the last three days of December, MEMX Options reached over 1% market share and averaged 412,002 contracts per day, up from 43,096 in November. So far in January, we are averaging over 550,000 contracts per day.

Figure 4 shows MEMX Options market share and quote performance in symbols traded on December 29th. SPY was the most active symbol, with a total volume of 274,839 contracts traded, total market share of 3.5%, and a regular electronic market share of 5.1%. Regular electronic volume includes continuous trading in single-leg options, but excludes areas that are not currently part of the MEMX offering, including auctions, floor, and complex trades. MEMX ranked 6 out of 17 exchanges in quote performance in SPY, which is measured by looking at the percent of time an exchange is at the NBBO when a trade occurs.

Market Structure

Comments on the SEC’s volume tier proposal were due on January 5th. As noted in our comment letter, MEMX does not support a blanket prohibition on volume-based pricing for all agency and riskless principal orders in NMS stocks, which could have an impact on liquidity that the Commission has not analyzed. Instead, we’ve recommended a more targeted approach that would allow the Commission to tackle its concerns about competition without negatively impacting available liquidity.

MEMX recommends the following:

1. Require that any volume-based transaction pricing offered by a national securities exchange be expressed in a fixed number of shares rather than a percentage of total consolidated volume (TCV) or other industry-wide volume measure, except in certain limited circumstances where TCV is used solely to protect members or the exchange when market volumes deviate significantly from historical norms.
2. Prohibit “auction linked pricing,” defined as a discount or incentive offered by the primary listing exchange on auction (continuous order book) pricing based on continuous order book (auction) volume, and/or subject orders executed in primary listing exchange auctions to a fee cap that is materially lower than the current fee cap provided in Rule 610(c) of Regulation NMS (the “Access Fee Cap”).

These recommendations are based on the Commission continuing to permit access fees of up to $0.0030 per share in most NMS stocks. The Commission has separately proposed to reduce the Access Fee Cap. Given the interconnected nature of the proposals, we have also requested that market participants be given an additional opportunity to comment on the proposed rule if the Commission proceeds with changes to the Access Fee Cap.