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Federal Register / Vol. 86, No. 26 / Wednesday, February 10, 2021 / Notices The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.

promoting market depth, facilitating tighter spreads, and enhancing price discovery to the benefit of all market participants.

A. Self-Regulatory Organizations Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change
2. Statutory Basis
1. Purpose The purpose of this filing is to modify the Fee Schedule to add a new credit for Customer Electronic Simple and Complex executions based on an ATP
Holders achievement of certain volume thresholds. Specifically, an ATP Holder that executes the requisite volume in Complex CUBE Auctions, Customer Electronic executions, and Professional as defined in Section I.H. of the Fee Schedule Electronic executions will earn a $0.10 per contract credit on Customer Electronic executions, excluding CUBE Auctions, QCC
Transactions, and orders routed to another exchange. The Exchange proposes to introduce this pricing on February 1, 2021.
Section I.H. of the Fee Schedule currently provides incentives for ATP
Holders that increase their Electronic volume in the Professional Customer, Broker Dealer, Non-NYSE American Options Market Maker, and Firm ranges collectively, the Professional range.
The Exchange proposes to modify Section I.H. to provide ATP Holders with a new credit of $0.10 per contract on Customer Electronic Simple and Complex executions excluding CUBE
Auctions, QCC Transactions, and orders routed to another exchange, provided that each of three monthly volume qualifications are met: a 15,000
Contracts ADV from Initiating CUBE
Orders in Complex CUBE Auctions; b Customer Electronic executions of 0.05% of TCADV, excluding CUBE
Auctions, QCC Transactions, and volume from orders routed to another exchange; and c Professional Electronic executions of 0.03% of TCADV.4 In calculating an OFPs Electronic volume for purposes of this credit, the Exchange will include the activity of either i Affiliates of the OFP, such as when an OFP has an Affiliated NYSE American Options Market Making firm, or ii an Appointed MM of such OFP.
The Exchange believes the proposed credit will continue to incent ATP
Holders to direct order flow to the Exchange and also encourage ATP
Holders to engage in a variety of transactions on the Exchange, thereby 4 See
proposed Fee Schedule, Section I.H.

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The Exchange believes that the proposed rule change is consistent with Section 6b of the Act,5 in general, and furthers the objectives of Sections 6b4 and 5 of the Act,6 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers.
The Proposed Rule Change Is Reasonable The Exchange operates in a highly competitive market. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies. 7
There are currently 16 registered options exchanges competing for order flow. Based on publicly-available information, and excluding index-based options, no single exchange has more than 16% of the market share of executed volume of multiply-listed equity and ETF options trades.8
Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in November 2020, the Exchange had less than 10% market share of executed volume of multiplylisted equity and ETF options trades.9
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U.S.C. 78fb.
U.S.C. 78fb4 and 5.
7 See Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005
S71004 Reg NMS Adopting Release.
8 The OCC publishes options and futures volume in a variety of formats, including daily and monthly volume by exchange, available here: https
www.theocc.com/Market-Data/Market-DataReports/Volume-and-Open-Interest/MonthlyWeekly-Volume-Statistics.
9 Based on a compilation of OCC data for monthly volume of equity-based options and monthly volume of ETF-based options, see id., 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.
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The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, in response to fee changes.
Accordingly, competitive forces constrain options exchange transaction fees. Stated otherwise, changes to exchange transaction fees and rebates can have a direct effect on the ability of an exchange to compete for order flow.
The proposed rule change is designed to continue to incent ATP Holders to direct liquidity to the Exchange in a variety of forms and from a variety of sources, thereby promoting market depth, price discovery, and price improvement and enhancing order execution opportunities for market participants. In particular, the Exchange believes it is reasonable to provide ATP
Holders with a credit for achieving certain volume goals in different types of executions, consistent with credits offered through a similarly-structured program on a competing options exchange.10
The Exchange believes that the proposed credit is reasonably designed to encourage ATP Holders to execute a variety of orders on the Exchange and that having multiple volume criteria to qualify for the proposed credit should encourage greater use of the Exchange by all ATP Holders, which may lead to greater opportunities to tradeand for price improvementfor all participants.
Further, the Exchange believes the proposed new credit would continue to attract more volume and liquidity to the Exchange generally and would therefore benefit all market participants through increased opportunities to trade at potentially improved prices, as well as by enhancing price discovery.
Finally, to the extent the proposed fees and credits encourage greater volume and liquidity, the Exchange believes the proposed change would continue to improve the Exchanges overall competitiveness and strengthen its market quality for all market participants. In the backdrop of the competitive environment in which the Exchange operates, the proposed rule change is a reasonable attempt by the Exchange to maintain its market share relative to its competitors.
10 See, e.g., Cboe Exchange Inc. Fee Schedule, Volume Incentive Program, available at: https
cdn.cboe.com/resources/membership/Cboe_
FeeSchedule.pdf providing comparable per contract credits for Customer orders based on volume from a variety of executions, including auction volume, volume from various account types, and volume from both simple and complex executions.

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