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Federal Register / Vol. 86, No. 28 / Friday, February 12, 2021 / Notices rebate offered under Non-Displayed Add Volume Tier 3.
The Exchange believes that the proposal represents an equitable allocation of fees and rebates and is not unfairly discriminatory because all Members will continue to be eligible for Growth Tier 2, as amended, and all Members will be eligible for proposed Non-Displayed Step-Up Tier. All Members will have the opportunity to meet the two tiers criteria and will receive the proposed corresponding enhanced rebates for their respective qualifying orders if they meet such criteria. Without having a view of activity on other markets and offexchange venues, the Exchange has no way of knowing whether this proposed rule change would definitely result in any Members qualifying for the proposed tiers. While the Exchange has no way of predicting with certainty how the proposed tier will impact Member activity, the Exchange anticipates that at least three Members will be able to compete for and reach the proposed criteria in Growth Tier 2 and the NonDisplayed Step-Up Tier. The Exchange anticipates that multiple Member types will compete to reach the proposed tiers, broker-dealers and liquidity providers, each providing distinct types of order flow to the Exchange to the benefit of all market participants. The Exchange also notes that proposed tiers will not adversely impact any Members pricing or ability to qualify for other reduced fee or enhanced rebate tiers.
Should a Member not meet the proposed criteria under either of the proposed tiers, the Member will merely not receive that corresponding enhanced rebate. Furthermore, the proposed enhanced rebates in Growth Tier 2 and the Non-Displayed Step-Up Tier will each automatically and uniformly apply to all Members qualifying orders for all Members that meet the required criteria under the proposed tiers.
B. Self-Regulatory Organizations Statement on Burden on Competition The Exchange does not believe that the proposed rule changes will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Rather, as discussed above, the Exchange believes that the proposed change would encourage the submission of additional order flow to a public exchange, thereby promoting market depth, execution incentives and enhanced execution opportunities, as well as price discovery and transparency for all Members. As a result, the Exchange believes that the proposed change furthers the
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Commissions goal in adopting Regulation NMS of fostering competition among orders, which promotes more efficient pricing of individual stocks for all types of orders, large and small.
The Exchange believes the proposed rule change does not impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. Particularly, the proposed change applies to all Members equally in that all Members are eligible for the proposed Growth Tier and Non-Displayed Step-Up Tier, have a reasonable opportunity to meet the tiers criteria and will all automatically and uniformly receive the corresponding enhanced rebate on their respective qualifying orders if such criteria is met. Additionally, the proposed tiers are designed to attract additional overall order flow to the Exchange. The Exchange believes that the amended and additional tier criteria would incentivize market participants to grow their overall order flow submitted to the Exchange, both liquidity adding and removing order flow, bringing with it improved price transparency. The Exchange believes greater overall order flow and pricing transparency benefits all market participants on the Exchange by providing more trading opportunities, enhancing market quality, and continuing to encourage Members to send orders, thereby contributing towards a robust and well-balanced market ecosystem, which benefits all market participants.
The Exchange believes the proposed rule change does not impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As previously discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on and direct their order flow, including 15
other equities exchanges and offexchange venues and alternative trading systems. Additionally, the Exchange represents a small percentage of the overall market. Based on publicly available information, no single equities exchange has more than 16% of the market share. Therefore, no exchange possesses significant pricing power in the execution of order flow. Indeed, participants can readily choose to send their orders to other exchange and offexchange 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,
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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. 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. . . .. 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 has become effective pursuant to Section 19b3A
of the Act 23 and paragraph f of Rule 19b4 24 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved.
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