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Federal Register / Vol. 86, No. 103 / Tuesday, June 1, 2021 / Notices currently dispersed across 16
exchanges,9 numerous alternative trading systems,10 and broker-dealer internalizers and wholesalers, all competing for order flow. Based on publicly-available information, no single exchange currently has more than 17% market share.11 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, the Exchange currently has less than 10% market share of executed volume of equities trading.12
The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can move order flow, or discontinue or reduce use of certain categories of products. While it is not possible to know a firms reason for shifting order flow, the Exchange believes that one such reason is because of fee changes at any of the registered exchanges or nonexchange venues to which a firm routes order flow. The competition for Retail Orders is even more stark, particularly as it relates to exchange versus offexchange venues.
The Exchange thus needs to compete in the first instance with non-exchange venues for Retail Order flow, and with the 16 other exchange venues for that Retail Order flow that is not directed off-exchange. Accordingly, competitive forces compel the Exchange to use exchange transaction fees and credits, particularly as they relate to competing for Retail Order flow, because market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable.

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Proposed Rule Change In response to this competitive environment, the Exchange proposes to adopt reduced fees for Retail Orders that are executed in the Exchanges opening and closing auctions. Specifically, under the Basic rates section of the Fee Schedule, the Exchange currently charges a fee of $0.0015 per share for Market and Auction-Only Orders in 9 See Cboe U.S. Equities Market Volume Summary, available at https markets.cboe.com/us/
equities/market_share. See generally https
www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
10 See FINRA ATS Transparency Data, available at https otctransparency.finra.org/
otctransparency/AtsIssueData. A list of alternative trading systems registered with the Commission is available at https www.sec.gov/foia/docs/
atslist.htm.
11 See Cboe Global Markets U.S. Equities Market Volume Summary, available at http
markets.cboe.com/us/equities/market_share/.
12 See id.

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Tape A, Tape B and Tape C securities executed in an Early Opening Auction, Core Open Auction or Trading Halt Auction with a cap of $20,000 per Equity Trading Permit ID. This fee also applies to Retail Orders that are executed in such auctions. To attract additional Retail Orders for execution in the Exchanges opening auctions, the Exchange proposes to adopt a lower fee of $0.0005 per share for Market and Auction-Only Orders in Tape A, Tape B
and Tape C securities that are designated as Retail Orders and executed in the Early Open Auction, Core Open Auction or Trading Halt Auction.
Further, under the Basic rates section of the Fee Schedule, the Exchange currently charges a fee of $0.0012 per share for Market, Market-On-Close, Limit-On-Close, and Auction-Only Orders in Tape A, Tape B and Tape C
securities executed in the Closing Auction. This fee also applies to Retail Orders executed in the Closing Auction.
To attract additional Retail Orders for execution on the Exchange, the Exchange proposes to adopt a lower fee of $0.0008 per share for Market, MarketOn-Close, Limit-On-Close, and AuctionOnly Orders in Tape A, Tape B and Tape C securities that are designated as Retail Orders and executed in the Closing Auction.
The Exchange is not proposing any change to the cap for Market and Auction-Only Orders executed in an Early Open Auction, Core Open Auction or Trading Halt Auction, which would remain at $20,000 per Equity Trading Permit ID.
The purpose of the proposed rule change is to encourage even greater participation from ETP Holders and promote additional liquidity in Retail Orders. As described above, ETP
Holders have a choice of where to send such orders. The Exchange believes that the proposed lower fees could lead to more ETP Holders choosing to route their Retail Orders to the Exchange for execution in the opening and closing auctions rather than to a competing exchange.
The Exchange does not know how much Retail Order flow ETP Holders choose to route to other exchanges or to off-exchange venues. Without having a view of ETP Holders activity on other markets and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would result in any ETP Holders sending more of their Retail Orders to the Exchange. The Exchange cannot predict with certainty how many ETP
Holders would avail themselves of this opportunity but additional Retail Orders
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would benefit all market participants because it would provide greater execution opportunities in the Exchanges opening and closing auctions.
The proposed rule change is designed to be available to all ETP Holders on the Exchange and is intended to provide ETP Holders a greater incentive to direct more of their Retail Orders for execution in the Exchanges opening and closing auctions.
The proposed changes are not otherwise intended to address any other issues, and the Exchange is not aware of any significant problems that market participants would have in complying with the proposed changes.
2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6b of the Act,13 in general, and furthers the objectives of Sections 6b4 and 5 of the Act,14 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 Fee Change Is Reasonable As discussed above, the Exchange operates in a highly fragmented and competitive market. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, 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. 15
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 to sic reduce use of certain categories of products, in response to fee changes.
With respect to Retail Orders, ETP
Holders can choose from any one of the 16 currently operating registered exchanges, and numerous off-exchange venues, to route such order flow.
Accordingly, competitive forces 13 15

U.S.C. 78fb.
U.S.C. 78fb4 and 5.
15 See Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005.
14 15

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