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Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices
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The Exchange also proposes to add C2
Market Maker orders in AAPL, QQQ, IWM and SLV to existing fee code SL.
Fee code SL is currently appended to C2
Market Maker orders in SPY that add liquidity and are a National Best Bid or Offer NBBO Joiner or NBBO Setter and offers a rebate of $0.31 per contract for such orders. Particularly, to qualify as a NBBO Joiner, a C2 market-maker order must improve the C2 Best Bid or Offer BBO and result in C2 joining an existing NBBO. Only the first order received that results in C2 BBO joining the NBBO at a new price level will qualify for the enhanced rebate. If C2 is at the NBBO, the order will not qualify.
Alternatively, C2 Market Makers may receive the enhanced rebate if they are a NBBO Setter. To qualify as a NBBO
Setter and receive the enhanced rebate, a C2 Market Maker order must set the NBBO. The Exchange believes assessing fee code SL and the corresponding enhanced rebate for C2 Market Makers in AAPL, QQQ, IWM and SLV that are NBBO Joiners or Setters will incentivize liquidity providers to provide more aggressively priced liquidity in AAPL, QQQ, IWM and SLV options.
The Exchange also proposes to add AAPL, QQQ, IWM and SLV to the table in the Fees Schedule that currently sets forth SPY-specific pricing. Like with SPY, the Exchange also proposes to clarify that the first transaction fee table, which does not apply to RUT, DJX and SPY, also does not apply to AAPL, QQQ, IWM and SLV. The Exchange notes that transaction fees and rebates that apply to 1 Public Customer orders in AAPL, QQQ, IWM and SLV that add liquidity existing fee code PY 2 C2
Market Maker orders in AAPL, QQQ, IWM and SLV that remove liquidity existing fee code PR, 3 non-Market Maker, non-Customer orders in AAPL, QQQ, IWM and SLV that remove liquidity existing fee code PP, 4
orders in AAPL, QQQ, IWM and SLV
that trade at the open existing fee code OO and 5 resting orders in AAPL, QQQ, IWM and SLV that trade with resting complex orders existing fee code CA are not changing, nor are the associated fee codes.
2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,6
in general, and furthers the objectives of Section 6b4,7 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and 6 15
7 15

U.S.C. 78f.
U.S.C. 78fb4.

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issuers and other persons using its facilities. The Exchange also believes that the proposed rule change is consistent with the objectives of Section 6b5 8 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to 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, and, particularly, is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
As described above, the Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. In particular, the proposed changes to Exchange execution fees and rebates for certain orders in AAPL, QQQ, IWM and SLV are intended to attract order flow to the Exchange by continuing to offer competitive pricing while also creating additional incentives to providing aggressively priced displayed liquidity, which the Exchange believes would enhance market quality to the benefit of all market participants.
The Exchange believes its proposed changes are reasonable as they are competitive and in line with the Exchanges current pricing for the same orders in SPY and with pricing for many of the same products at other exchanges.9 The Exchange believes that it is reasonable to reduce the transaction fee for Public Customer orders in AAPL, QQQ, IWM and SLV that remove liquidity because market participants will be subject to lower fees for such orders and thus may be encouraged to increase retail AAPL, QQQ, IWM and SLV order flow to the Exchange. The Exchange believes that it is reasonable to reduce the rebates for both C2 Market Maker and non-Market Maker, nonCustomer orders in AAPL, QQQ, IWM
and SLV that add liquidity because such market participants will still receive 8 15

U.S.C. 78fb5.
e.g., MIAX Pearl Fee Schedule, Section 1
Transaction Rebates/Fees, which provides for a fee of $0.50 per contract for priority customer IWM and QQQ orders that remove liquidity. See also Nasdaq ISE Pricing Schedule, Section 3, Footnote 5, which provides for tiered rebates for market-maker SPY
orders that add liquidity between $0.05$0.26 per contract.
9 See
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rebates for such orders, albeit at a lower amount, which are already in place for such orders in SPY. Additionally, Market Makers that are NBBO Joiners or Setters would be eligible to receive the same enhanced rebate currently offered for joining or setting an NBBO in SPY.
The Exchange believes that offering the NBBO Joiner and Setter rebate for Market Maker orders in AAPL, QQQ, IWM and SLV is reasonable as it is designed to incentivize C2 Market Makers to improve the C2 BBO resulting in C2 joining an existing NBBO or setting a new NBBO to receive the rebate, ultimately encouraging C2
Market Makers to submit more aggressive AAPL, QQQ, IWM and SLV
orders that will maintain tight spreads, benefitting both Trading Permit Holders and public investors.
The Exchange also believes it is reasonable, equitable and not unfairly discriminatory to adopt pricing specific to certain orders in AAPL, QQQ, IWM
and SLV as the Exchange already maintains the same pricing for such orders in SPY, as well as similar product-specific pricing for certain orders in other products, such as RUT
and DJX.10 Additionally, as noted above, other exchanges similarly provide for product-specific pricing.11
The Exchange also believes that it is equitable and not unfairly discriminatory to assess a lower fee for Public Customer orders in AAPL, QQQ, IWM and SLV as compared to other market participants because customer order flow enhances liquidity on the Exchange for the benefit of all market participants. Specifically, customer liquidity benefits all market participants by providing more trading opportunities, which attracts Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Moreover, the options industry has a long history of providing preferential pricing to customers, and the Exchanges current Fee Schedule currently does so in many places, as do the fees structures of multiple other 10 See Cboe C2 Options Exchange Fees Schedule, Transaction Fees.
11 See e.g., MIAX Pearl Fee Schedule, Section 1
Transaction Rebates/Fees, which provides for a fee of $0.46 per contract for priority customer SPY
orders that remove liquidity. See also Nasdaq ISE
Pricing Schedule, Section 3, Footnote 5, which provides for tiered rebates for market maker IWM
and QCC orders that add liquidity between $0.05
and $0.26 per contract, as well as tired rebates for market maker orders in similar, single-name options AMZN, FB, and NVDA between $0.15 and $0.22.

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