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Federal Register / Vol. 86, No. 28 / Friday, February 12, 2021 / Notices
liquidity adding volume; and 3
increase in liquidity removing volume, in order to receive the proposed enhanced rebates. Overall, the proposed criteria and enhanced rebates provide an additional opportunity for Members to submit more order flow inclusive of all orders, 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, together providing for overall enhanced price discovery and price improvement opportunities on the Exchange. As such, increased overall order flow benefits all Members by contributing towards a robust and well-balanced market ecosystem.
2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,17
in general, and furthers the objectives of Section 6b4,18 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members, issuers and other persons using its facilities. The Exchange also believes that the proposed rule change is consistent with the objectives of Section 6b5 19 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. The proposed rule change reflects a competitive pricing structure designed to incentivize market participants to direct their order flow to the Exchange, which the Exchange believes would enhance market quality to the benefit of all Members. In particular, the Exchange 17 15

U.S.C. 78f.
U.S.C. 78fb4.
19 15 U.S.C. 78f.b5.
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believes the proposed changes to Growth Tier 2 and the proposed new Non-Displayed Step-Up Tier are reasonable because they either amend an existing opportunity or provide an additional opportunity for Members to receive an enhanced rebate on qualifying orders by means of overall order flow, including both liquidity adding and removing orders. The Exchange notes that relative volumebased incentives and discounts have been widely adopted by exchanges,20
including the Exchange,21 and are reasonable, equitable and nondiscriminatory because they are open to all members on an equal basis and provide additional benefits or discounts that are reasonably related to i the value to an exchanges market quality and ii associated higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns. Additionally, as noted above, the Exchange operates in a highly competitive market. The Exchange is only one of several equity venues to which market participants may direct their order flow, and it represents a small percentage of the overall market.
It is also only one of several maker-taker exchanges. 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 and/or growth thresholds. These competing pricing schedules, moreover, are presently comparable to those that the Exchange provides, including the pricing of comparable tiers.22
Moreover, the Exchange believes the two proposed tiers are a reasonable means to encourage overall growth in Members overall order flow to the Exchange and to incentivize Members to continue to provide liquidity adding and liquidity removing to the Exchange by offering them a different or additional opportunity than those opportunities currently under the Add/
Remove Volume Tiers to receive an enhanced rebate on qualifying orders.
The Exchange believes that the 20 See e.g., Nasdaq PSX Price List sic, Rebate to Add Displayed Liquidity Per Share Executed, and Rebate to Add Other Non-Displayed Liquidity, which provide rebates to members for adding displayed and non-displayed liquidity over certain thresholds of TCV ranging between $0.00075 and $0.00305, available at http nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2; and Cboe BZX
U.S. Equities Exchange Fee Schedule, Footnote 1, Add Volume Tiers, which provides similar incentives for displayed and non-displayed liquidity and offers rebates ranging between $0.0018 and $0.0031.
21 See generally, Cboe EDGX U.S. Equities Exchange Fee Schedule, Footnote 1, Add Volume Tiers sic.
22 See supra note 20.

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proposed tiers, each based on a Members overall growth in all order flow and their liquidity adding and removing orders, will generally benefit all market participants by incentivizing continuous liquidity and thus, deeper more liquid markets as well as increased execution opportunities. Indeed, the Exchange notes that greater add volume order flow may provide for deeper, more liquid markets and execution opportunities, and greater remove volume order flow may increase transactions on the Exchange, which the Exchange believes incentivizes liquidity providers to submit additional liquidity and execution opportunities, thus, providing an overall increase in price discovery and transparency on the Exchange.
Further, the Exchange believes that the proposed rule changes are reasonable as they do not represent a significant departure from the current criteria or enhanced rebates currently offered in the Fee Schedule. First, the Exchange believes that modifying existing criteria in Growth Tier 2 is reasonably designed to be incrementally more difficult to achieve than the current criteria and therefore is commensurate with the proposed increased enhanced rebate. The Exchange also believes that the proposed criteria and enhanced rebate remains in line with the incremental increase in difficulty from Growth Tier 1. Growth Tier 1 may be met if a Member: 1 Adds an ADV greater than or equal to 0.20% of the TCV; and 2
has a Step-Up Add TCV from March 2019 of greater than or equal to 0.10
whereas proposed Growth Tier 2
provides for an additional prong of criteria, as well as modestly increased percentages of ADV over TCV, that a Member must meet to receive an enhanced rebate. Second, the Exchange believes that the proposed criteria in the new Non-Displayed Step-Up Tier is of comparable difficulty to the criteria in Non-Displayed Add Volume Tier 3, which offers the same enhanced rebate for the same qualifying orders if a Member has an ADAV greater than or equal to 0.10% of TCV for NonDisplayed orders that yield fee codes DM, HA, HI, MM or RP. The Exchange notes that the sum of Non-Displayed orders only as an add-volume ADAV
percentage presents a more narrow, thus comparable in difficulty, type of order flow that a Member must submit to achieve the criteria in Non-Displayed Add Volume Tier 3, and therefore, the proposed enhanced rebate offered under the Non-Displayed Step-Up Tier is commensurate with the same enhanced
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