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Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices
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exchanges.12 The Exchange notes that the proposed fee change will be applied equally to all Public Customers.
Additionally, the Exchange believes that it is equitable and not unfairly discriminatory to assess higher rebates to Market Makers that add liquidity as compared to other market participants, other than customers, because Market Makers, unlike other market participants, take on a number of obligations, including quoting obligations, which other market participants do not have. Further, these rebates are intended to incent Market Makers to quote and trade more on C2
Options, thereby providing more trading opportunities for all market participants. The Exchange notes that the proposed changes to C2 Market Maker rebates for AAPL, QQQ, IWM
and SLV options will be applied equally to all C2 Market Makers. Similarly, the Exchange believes it is equitable and not unfairly discriminatory to provide C2
Market Makers that are NBBO Joiners or Setters in AAPL, QQQ, IWM and SLV
an enhanced rebate because such market participants are providing more aggressively priced liquidity in AAPL, QQQ, IWM and SLV options.
Additionally, increased add volume order flow, particularly by liquidity providers, contributes to a deeper, more liquid market, which, in turn, provides for increased execution opportunities and thus overall enhanced price discovery and price improvement opportunities on the Exchange. As such, this benefits all market participants by contributing towards a robust and wellbalanced market ecosystem, offering additional flexibility for all investors to enjoy cost savings, supporting the quality of price discovery, promoting market transparency and improving investor protection. The Exchange believes the proposed change to the rebate for non-Market Maker, nonCustomer AAPL, QQQ, IWM and SLV
orders is also equitable and not unfairly discriminatory because it will be applied equally to all non-marketmakers, non-customers.
B. Self-Regulatory Organizations Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on intramarket or intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, as discussed above, the Exchange believes that the proposed change would 12 See Cboe C2 Options Exchange Fees Schedule, Transaction Fees. See also BZX Options Fee Schedule, Fee Codes and Associated Fees.

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encourage the submission of additional liquidity in SPY to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for all Trading Permit Holders. As a result, the Exchange believes that the proposed change furthers the 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 similarly situated Trading Permit Holders equally. Overall, the proposed change is designed to attract additional SPY public customer orders that remove liquidity and SPY market-maker and non-market-maker, non-customer orders that add liquidity to the Exchange. The Exchange believes that the new C2
market-maker rebate for SPY orders that are NBBO Joiners or Setters would incentivize entry on the Exchange of more aggressive SPY orders that will maintain tight spreads, benefitting both Trading Permit Holders and public investors criteria and, as a result, provide for deeper levels of liquidity, increasing trading opportunities for other market participants, thus signaling further trading activity, ultimately incentivizing more overall order flow and improving price transparency on the Exchange.
Next, 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 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. Therefore, no exchange 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
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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. 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 has neither solicited nor received written 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 13 and paragraph f of Rule 19b4 14 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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CFR 240.19b4f.

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