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Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Notices
their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules.8 Within the foregoing context, the proposal represents a reasonable attempt by the Exchange to increase its market share relative to its competitors.
The Exchanges proposal to increase the threshold percentage of time in which a member organization must quote at the NBBO during a month in order to qualify for the QMM
designation pursuant to Equity 7, Section 3c1, will encourage member organizations to increase liquidity adding activity, enhance price discovery, and improve the overall quality of the equity markets. The Exchange believes that it is appropriate to periodically reassess and recalibrate the baselines for its QMM qualifications when participant activity is adequate to support doing so. In this instance, QMM
activity on the Exchange is robust enough to accommodate the establishment of a higher qualification threshold without compromising the ability of existing QMMs to maintain their current statuses in the program.

cellular telephone data plansthat use it to reward the loyalty of their best customers that provide high levels of business activity and incent other customers to increase the extent of their business activity. It is also a pricing model that the Exchange and its competitors have long employed with the assent of the Commission. It is fair because it incentivizes customer activity that increases liquidity, enhances price discovery, and improves the overall quality of the equity markets.
The Exchange intends for its proposal to increase participation in its QMM
program, which in turn would improve market quality for all member organizations on the Exchange.
The Exchanges proposal to raise the QMM qualification requirement at Equity 7, Section 3c1, is not unfairly discriminatory because although any member organization that currently qualifies as a QMM will need to quote at the NBBO for a higher percentage of the time than they would need to do now, this is fair because meeting the heightened requirement will improve market quality and enhance price discovery.

The Proposal Is an Equitable Allocation The Exchange believes its proposal allocates its QMM qualifications fairly among its market participants. The Exchange also believes that its proposal to amend the qualification criteria for the QMM Program is an equitable allocation because it will bolster the effectiveness of the QMM program for all market participants, which is an important contributor to the quality of the Nasdaq market, by ensuring that qualified market participants are contributing to increased liquidity adding activity, enhanced price discovery, and improvements to the overall quality of the equity markets.

B. Self-Regulatory Organizations Statement on Burden on Competition
The Proposal Is Not Unfairly Discriminatory The Exchange believes that the proposal is not unfairly discriminatory.
As an initial matter, the Exchange believes that nothing about its QMM
qualification criteria is inherently unfair; instead, it is a rational pricing model that is well-established and ubiquitous in todays economy among firms in various industriesfrom cobranded credit cards to grocery stores to 8 The Exchange perceives no regulatory, structural, or cost impediments to market participants shifting order flow away from it. In particular, the Exchange notes that such shifts in liquidity and market share occur within the context of market participants existing duties of Best Execution and obligations under the Order Protection Rule under Regulation NMS.

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The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
Intramarket Competition The Exchange does not believe that its proposal will place any category of Exchange participants at a competitive disadvantage. As noted above, all members of the Exchange will benefit from an increase in the addition of liquidity by those that choose to meet the qualifications. Members may grow their businesses so that they have the capacity to qualify as a QMM. Moreover, members are free to trade on other venues to the extent they believe that the qualification criteria provided are not attractive. As one can observe by looking at any market share chart, price competition between exchanges is fierce, with liquidity and market share moving freely between exchanges in reaction to fee and credit changes.
Moreover, the Exchanges proposal to modify its QMM program will not burden intramarket competition because the QMM Program, as modified, will continue to provide all member organizations with an opportunity to qualify as a QMM if they improve the market by providing significant quoting at the NBBO in a large number of
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securities which the Exchange believes will improve market quality.
Intermarket Competition Addressing whether the proposed fee could impose a burden on competition on other SROs that is not necessary or appropriate, the Exchange believes that its proposed modifications to its QMM
qualification standards will not impose a burden on competition because the Exchanges execution services are completely voluntary and subject to extensive competition both from the other live exchanges and from offexchange venues, which include alternative trading systems that trade national market system stock. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually make adjustments to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In sum, the Exchange intends for the modified QMM Program to increase member organizations incentives to quote securities at the NBBO for at least 15 percent of the day, which stands to improve the quality of the Exchanges market and its attractiveness to participants; however, if the proposal is unattractive to market participants, it is likely that the Exchange will either fail to increase its market share or even lose market share as a result. Accordingly, the Exchange does not believe that the proposed modification to the QMM
qualifications will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received.

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