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Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices Exchange operates, the proposed rule change is a reasonable attempt by the Exchange to maintain its market share relative to its competitors.

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The Proposed Rule Change Is an Equitable Allocation of Fees and Credits The Exchange believes the proposed rule change is an equitable allocation of its fees and credits. The proposal is based on the amount and type of business transacted on the Exchange and ATP Holders can opt to avail themselves of the incentives available through the ACE and Market Maker Prepayment Programs or not. The proposal is also designed to encourage ATP Holders and their affiliated or appointed parties to aggregate their executions at the Exchange as a primary execution venue. Moreover, to the extent that the proposed change continues to attract more Market Maker prepay activity to the Exchange, this increased order flow would continue to make the Exchange a more competitive venue for order execution. Thus, the Exchange believes the proposed rule change would improve market quality for all market participants on the Exchange and, as a consequence, continue to attract more order flow to the Exchange, thereby improving market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory The Exchange believes that the proposal is not unfairly discriminatory because the proposed modification would be available to all similarlysituated market participants on an equal and non-discriminatory basis.
The proposal is based on the amount and type of business transacted on the Exchange and ATP Holders are not obligated to try to qualify for the credits available to ACE or Market Maker Prepayment Program participants.
Rather, the Exchanges proposed modification to the Credit is designed to continue to encourage greater use of the Market Maker Prepayment Program, which may lead to greater opportunities to tradeand for price improvement for all participants, as well as continue to encourage participants to utilize the Exchange as a primary trading venue if they have not done so previously or increase Electronic volume sent to the Exchange. To the extent that the proposed change continues to attract more executions to the Exchange, this increased order flow would continue to make the Exchange a more competitive venue for order execution. Thus, the Exchange believes the proposed rule change would continue to improve
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market quality for all market participants on the Exchange and, as a consequence, attract more order flow to the Exchange thereby improving marketwide quality and price discovery. The resulting volume and liquidity would continue to provide more trading opportunities and tighter spreads to all market participants and thus would promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest.
Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchanges statement regarding the burden on competition.
B. Self-Regulatory Organizations Statement on Burden on Competition In accordance with Section 6b8 of the Act, the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
Instead, as discussed above, the Exchange believes that the proposed changes would continue to encourage the submission of additional liquidity to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for all market participants. As a result, the Exchange believes that the proposed changes further the Commissions goal in adopting Regulation NMS of fostering integrated competition among orders, which promotes more efficient pricing of individual stocks for all types of orders, large and small. 13
Intramarket Competition. The proposed change is designed to continue to attract order flow to the Exchange by offering competitive rates and credits via the ACE Program, based on increased volumes on the Exchange, which would enhance the quality of quoting and may increase the volumes of contracts traded on the Exchange. To the extent that this purpose is achieved, all of the Exchanges market participants should benefit from the continued market liquidity. Enhanced market quality and increased transaction volume that results from the increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange.
Intermarket Competition. The Exchange operates in a highly competitive market in which market 13 See Reg NMS Adopting Release, supra note 9, at 37499.

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participants can readily favor one of the 16 competing option exchanges if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and to attract order flow to the Exchange. Based on publiclyavailable information, and excluding index-based options, no single exchange currently has more than 16% of the market share of executed volume of multiply-listed equity and ETF options trades.14 Therefore, no exchange currently possesses significant pricing power in the execution of multiplylisted equity and ETF options order flow. More specifically, in November 2020, the Exchange had less than 10%
market share of executed volume of multiply-listed equity and ETF options trades.15
The Exchange believes that the proposed rule change reflects this competitive environment because, even though the amount of the Credit is decreased, ATP Holders should still be incentivized to direct trading interest to the Exchange, to provide liquidity and to attract order flow. To the extent that this purpose is achieved, all the Exchanges market participants should benefit from the improved market quality and increased opportunities for price improvement.
The Exchange believes that the proposed change could promote competition between the Exchange and other execution venues, including another exchange that currently offers similar pricing incentives,16 by encouraging additional orders to be sent to the Exchange for execution.
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19b3A 17 of the Act and 14 See
supra note 10.
on a compilation of OCC data for monthly volume of equity-based options and monthly volume of ETF-based options, supra note 11, the Exchanges market share in multiply-listed equity and ETF options increased from 8.06% for the month of November 2019 to 9.09% for the month of November 2020.
16 See, e.g., supra note 6 regarding Cboes VIP
Program.
17 15 U.S.C. 78sb3A.
15 Based
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