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Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices II. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.

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A. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fee Schedule for its equity options platform BZX Options in connection with its Customer Penny Add Volume Tiers, Market Maker, Away Market Maker, and Professional Penny Take Volume Tiers, and Customer Non-Penny Add Volume Tiers, effective August 2, 2021.
The Exchange first notes that it 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. More specifically, the Exchange is only one of 16 options venues to which market participants may direct their order flow.
Based on publicly available information, no single options exchange has more than 16% of the market share and currently the Exchange represents only approximately 8% of the market share.3
Thus, in such a low-concentrated and highly competitive market, no single options exchange, including the Exchange, possesses significant pricing power in the execution of option order flow. The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to fee changes.
Accordingly, competitive forces constrain the Exchanges transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. The Exchanges Fee 3 See Cboe Global Markets U.S. Options Market Month-to-Date Volume Summary July 23, 2021, available at https markets.cboe.com/us/options/
market_statistics/.

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Schedule sets forth standard rebates and rates applied per contract, which varies depending on the Members capacity Customer, Firm, Market Maker, etc., whether the order adds or removes liquidity, and whether the order is in Penny or Non-Penny Program Securities.
Additionally, in response to the competitive environment, the Exchange also offers tiered pricing which provides Members with opportunities to qualify for higher rebates or reduced fees where certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. Among other volume tiers, the Exchange currently offers Customer Penny Add Volume Tiers, Market Maker, Away Market Maker, and Professional Penny Take Volume Tiers, and Customer Non-Penny Add Volume Tiers, to which it proposes to make the following changes.
Customer Penny Add Volume Tiers The Exchange currently offers seven Customer Penny Add Volume Tiers under footnote 1 of the Fee Schedule that provide enhanced rebates between $0.35 and $0.53 per contract for qualifying Customer orders i.e., that yield fee code PY or XY 4 where a Member meets certain liquidity thresholds. The Exchange proposes to update Tier 6, which currently offers an enhanced rebate of $0.53 per contract for qualifying orders i.e., that yield fee code PY or XY where a Member has an ADAV 5 in Customer orders greater than or equal to 1.70% of average OCV.6
Specifically, the proposed rule change updates the percentage of Customer orders over average OCV from 1.70% to 2.00% and adds an additional prong of criteria that a Member must achieve in order to receive the current enhanced rebate. The proposed second prong of criteria requires a Member, in addition to meeting the existing criteria as updated, to reach an ADAV in Customer Non-Penny orders greater 4 Orders yielding fee code PY are Customer orders that add liquidity in Penny Program Securities and are offered a rebate of $0.25, and orders yielding fee code XY are Customer orders in XSP options that add liquidity and are offered a rebate of $0.25.
5 ADAV means average daily added volume calculated as the number of contracts added. ADAV
is calculated on a monthly basis.
6 OCC Customer Volume or OCV means the total equity and ETF options volume that clears in the Customer range at the Options Clearing Corporation OCC for the month for which the fees apply, excluding volume on any day that the Exchange experiences an Exchange System Disruption and on any day with a scheduled early market close.

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than or equal to 0.50% of average OCV.
The proposed rule change does not alter the existing enhanced rebate amount offered in Tier 6.
The proposed rule change also eliminates Tier 5 7 and Tier 7. Tier 5
currently offers an enhanced rebate of $0.53 per contract for qualifying orders where a Member has 1 an ADAV in Customer orders greater than or equal to 0.80% of average OCV, 2 an ADAV in Market Maker orders greater than or equal to 0.35% of average OCV, and 3
on BZX Equities an ADAV greater than or equal to 0.30% of average TCV. Tier 7 currently offers the same enhanced rebate $0.53 per contract for qualifying orders where a Member has 1 an ADAV in Customer orders greater than or equal to 0.50% of average OCV, 2
an ADAV in Market Maker orders greater than or equal to 2.75% of average OCV, and 3 an ADAV in Firm Non-Penny orders greater than or equal to 0.05% of average OCV.
The Exchange proposes to eliminate Tiers 5 and 7 as no Members are currently satisfying the criteria under these tiers, nor have recently satisfied such criteria. The Exchange no longer wishes to, nor is it required to, maintain such tiers. More specifically, the proposed rule change removes these tiers as the Exchange would like to provide more consolidated, streamlined Customer Penny Add Volume Tiers by offering a single tier that provides an enhanced rebate of $0.53 current Tier 6/new Tier 5 and would also rather redirect future resources and funding into other programs and tiers intended to incentivize increased order flow. The Exchange believes that the proposed updated criteria in current Tier 6 new Tier 5 is designed to provide a different opportunity for Members to achieve the tier to receive the same enhanced rebate.
Market Maker, Away Market Maker, and Professional Penny Take Volume Tiers The Exchange currently offers three Market Maker, Away Market Maker, and Professional Take Volume Tiers under footnote 3 of the Fee Schedule that provide a reduced fee between $0.45
and $0.47 per contract for qualifying orders i.e., that yield fee code PP 8
where a Member meets certain liquidity thresholds. The Exchange proposes to update each of the three Market Maker, Away Market Maker, and Professional 7 As a result of eliminating Tier 5, the proposed rule change also amends current Tier 6 to be Tier 5.
8 Orders yielding fee code PP are Market Maker, Away Market Maker, or Professional orders that remove liquidity in Penny Program Securities and are assessed a fee of $0.50.

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