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Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices
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that easing the difficulty in reaching the criteria by a modest amount is reasonably designed to provide further incentive for Members to submit both adding and removing order flow to the Exchange in order to receive the reduced fee currently offered under Tier 2. The Exchange notes that the amount of the reduced fee offered is not changing. The Exchange believes the slight decrease in criteria difficulty under Tier 2 may further incentivize liquidity adding Members on the Exchange to contribute to a deeper, more liquid market, and liquidity executing Members on the Exchange to increase transactions and take execution opportunities provided by such increased liquidity. The Exchange believes that this, in turn, benefits all Members by contributing towards a robust and well-balanced market ecosystem. The Exchange believes that the proposed rule change is equitable and not unfairly discriminatory because all Members will continue to be eligible for the Add/Remove Volume Tier 2 and will continue to have the opportunity to meet the tiers criteria and receive the current reduced fee if such criteria is met. Without having a view of activity on other markets and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would definitely result in any Members qualifying for Add/Remove Volume Tier 2, as amended. While the Exchange has no way of predicting with certainty how the proposed tier will impact Member activity, the Exchange does not anticipate that the proposed criteria would impact any of the Members that are currently able to compete for and reach Tier 2 and would merely provide the opportunity for additional Members to be able to compete for and reach the proposed tier.
The Exchange also notes that proposed Add/Remove Volume Tier 2 will not adversely impact any Members pricing or their ability to qualify for other reduced fee or enhanced rebate tiers.
Should a Member not meet the proposed criteria under the proposed tier, the Member will merely not receive that reduced fee. As stated, the reduced fee offered under Tier 2 remains unchanged and it will continue to uniformly apply to all Members that meet the required criteria, as amended, under Tier 2.
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 that is not necessary or appropriate in furtherance of the purposes of the Act. The
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Exchange does not believe the proposed rule change to remove fee codes 8, K or MX will impose any burden on intramarket competition because all Members orders that would yield current fee codes 8, K or MX, will automatically and uniformly be assessed the fees already in place for routed orders generally,21 as applicable i.e., fee codes 7 or X. Further, the Exchange does not believe that the proposed rule change to amend Add/Remove Volume Tier 2 will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed change applies to all Members equally in that all Members will continue to be eligible for the proposed Add/Remove Volume Tier 2, have a reasonable opportunity to meet the tiers criteria, as amended, and will all receive the current reduced fee if such criteria is met. As describe above, the proposed Tier 2 criteria is designed to attract additional order flow to the Exchange, incentivizing market participants to direct liquidity and executing order flow to the Exchange, bringing with it improved price transparency and more trading opportunities to the benefit of all market participants on the Exchange.
The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange again notes that orders that meet the specifications to which fee codes 8, K or MX would currently apply, will yield the same fee codes and be assessed the same corresponding rates that are already in place in the Fee Schedule for routed orders generally, as previously filed with the Commission.
In addition to this, the Exchange also notes again that competing equity exchanges offer similar tiered pricing structures, including schedules of rebates and fees that apply based upon members achieving certain volume and/
or growth thresholds, as well as assess similar fees or rebates for similar types of orders, to that of the Exchange. Also, as previously discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on and director their order flow, including 15
other options exchanges and offexchange venues. Additionally, the Exchange represents a small percentage of the overall market. Based on publicly available information, no single options exchange has more than 16% of the market share.22 Therefore, no exchange 21 See 22 See
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possesses significant pricing power in the execution of option order flow.
Indeed, participants can readily choose to send their orders to other exchange and off-exchange venues if they deem fee levels at those other venues to be more favorable. Moreover, 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. 23 The fact that this market is competitive has also 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. . . ..24 Accordingly, the Exchange does not believe its proposed fee change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19b3A 25 of the Act and subparagraph f2 of Rule 19b4 26
thereunder, because it establishes a due, 23 See Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005.
24 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, 74782
83 December 9, 2008 SRNYSEArca200621.
25 15 U.S.C. 78sb3A.
26 17 CFR 240.19b4f2.

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