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

The Proposal Is Reasonable The Exchanges proposal is reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for equity securities transaction services that constrain its pricing determinations in that market. The fact that this market is competitive has long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: no one disputes that competition for order flow is fierce.
. . . As the SEC explained, in the U.S.
national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution;
and no exchange can afford to take its market share percentages for granted because no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers. . . . 5
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, 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. 6
Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for equity security transaction services. The Exchange is only one of several equity venues to which market participants may direct their order flow. Competing equity exchanges offer similar tiered pricing structures to that of the Exchange, including schedules of rebates and fees that apply based upon members achieving certain volume thresholds.
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 5 NetCoalition v. SEC, 615 F.3d 525, 539 D.C. Cir.
2010 quoting Securities Exchange Act Release No.
59039 December 2, 2008, 73 FR 74770, 7478283
December 9, 2008 SRNYSEArca200621.
6 Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005
Regulation NMS Adopting Release.

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schedules. The credit was an attempt to increase liquidity but was not as successful as the Exchange expected.
The Exchange believes that it is reasonable to eliminate its existing $0.0033 per share executed credit for quotes/orders executed at or between $1.00 and $5.00 per share. As discussed above, the Exchange has observed that the credit has served to neither meaningfully increase activity on, nor improved the market quality of, the Exchange. 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 $0.0033 per share executed credit for quotes/orders executed at or between $1.00 and $5.00 per share. As discussed above, the credit has served to neither meaningfully increase activity on the Exchange nor improve the quality of the Exchange. Under these circumstances, the Exchange believes it is equitable to 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 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 co-branded 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
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because it enhances price discovery and improves the overall quality of the equity markets. The proposal is not unfairly discriminatory because the change applies to all market participants.
The proposal to eliminate one of the Exchanges transaction credits is not unfairly discriminatory because the Exchange has observed that the credit has served to neither meaningfully increase activity on, nor improved the market quality of, the Exchange. 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 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 Exchange offers other means to attain other 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
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