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Federal Register / Vol. 86, No. 186 / Wednesday, September 29, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1

Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. Within the foregoing context, the proposal represents a reasonable attempt by the Exchange to update its fee schedule when certain credits are ineffective in increasing its liquidity and market share relative to its competitors.
The Exchange believes that it is reasonable to eliminate its existing $0.0030 per share executed credit for a member 1 with shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.65% of Consolidated Volume during the month and 2 that qualifies for Tier 4 of the MARS program on The Nasdaq Options Market during the month. As discussed above, the Exchange has observed that historically no members have received this credit, and no member currently qualifies for it. The credit has served to neither meaningfully increase activity on the Exchange or NOM nor improve the quality of those markets. Under these circumstances, the Exchange believes it is reasonable to eliminate the credit and reallocate its limited resources to more effective incentive programs.
The Exchange notes that those market participants that are dissatisfied with the proposal is free to shift their order flow to competing venues that offer more generous pricing or less stringent qualifying criteria.
The Proposal Is an Equitable Allocation of Credits The Exchange believes its proposal will allocate its charges and credits fairly among its market participants.
The Exchange believes that is an equitable allocation to eliminate its existing $0.0030 per share executed credit for a member 1 with shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.65% of Consolidated Volume during the month and 2 that qualifies for Tier 4 of the MARS
program on The Nasdaq Options Market during the month. As discussed above, the Exchange has observed that historically, no member has received this credit since the Exchange amended the credit in April 2021, and no member currently qualifies for it. The credit has served to neither meaningfully increase activity on the Exchange or NOM nor improve the quality of those markets.
Under these circumstances, the Exchange believes it is equitable to
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eliminate the credit and reallocate its limited resources to more effective incentive programs.
Any participant that is dissatisfied with the proposal is free to shift their order flow to competing venues that provide more generous pricing or less stringent qualifying criteria.
The Proposal Is Not Unfairly Discriminatory The Exchange believes that its proposal is not unfairly discriminatory.
As an initial matter, the Exchange believes that nothing about its volumebased tiered pricing model 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 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 enhances price discovery and improves the overall quality of the equity markets.
The proposal to eliminate one of the Exchanges transaction credits is not unfairly discriminatory because no members have received this credit since March 2021 and currently, no member qualifies for the credit, such that its elimination is fair and will have limited impact. The Exchange has limited resources with which to apply to incentives, and it must allocate those limited resources in a manner that prioritizes areas of greatest need and potential effect.
Any participant that is dissatisfied with the proposal is free to shift their order flow to competing venues that provide more generous pricing or less stringent qualifying criteria.
B. Self-Regulatory Organizations Statement on Burden on Competition 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 participant at a competitive disadvantage.
The proposed elimination of one of the Exchanges existing transaction credits will have minimal competitive effect insofar as the credit has not been
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utilized by any member since March 2021. The Exchange notes that it offers other means to attain similar credit tiers.
The Exchange notes that its members are free to trade on other venues to the extent they believe that the remaining credits 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.
Intermarket Competition In terms of inter-market competition, 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 adjust its credits and fees 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 credits and fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which credit or fee changes in this market may impose any burden on competition is extremely limited.
The proposed eliminated credit is reflective of this competition because, even as one of the largest U.S. equities exchanges by volume, the Exchange has less than 20% market share, which in most markets could hardly be categorized as having enough market power to burden competition. Moreover, as noted above, price competition between exchanges is fierce, with liquidity and market share moving freely between exchanges in reaction to fee and credit changes. This is in addition to free flow of order flow to and among off-exchange venues which comprises upwards of 50% of industry volume.
In sum, if the change proposed herein is unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed change will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.

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