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Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices
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internalizers and wholesalers. Based on publicly-available information, no single exchange has more than 16% of the market.8 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, the Exchanges share of executed volume of equity trades in Tapes A, B and C securities is less than 2%.9
The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can move order flow, or discontinue or reduce use of certain products, in response to fee changes. While it is not possible to know a firms reason for moving order flow, the Exchange believes that one such reason is because of fee changes at any of the registered exchanges or non-exchange trading venues to which a firm routes order flow. These fees vary month to month, and not all are publicly available. With respect to non-marketable order flow that would provide liquidity on an exchange, ETP Holders can choose from any one of the 16 currently operating registered exchanges to route such order flow. Accordingly, competitive forces constrain the Exchanges transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable.
The Exchange utilizes a takermaker or inverted fee model to attract orders that provide liquidity at the most competitive prices. Under the takermaker model, offering rebates for taking or removing liquidity increases the likelihood that market participants will send orders to the Exchange to trade with liquidity providers orders. This increased taker order flow provides an incentive for market participants to send orders that provide liquidity. The Exchange generally charges fees for order flow that provides liquidity. These fees are reasonable due to the additional marketable interest in part attracted by the Exchanges rebate to remove liquidity with which those order flow providers can trade.
Proposed Rule Change To respond to this competitive environment, the Exchange proposes the following changes to its Fee Schedule designed to provide order flow providers with additional incentives to route liquidity-providing order flow to Commission is available at https www.sec.gov/
foia/docs/atslist.htm.
8 See Cboe Global Markets U.S. Equities Market Volume Summary, available at http
markets.cboe.com/us/equities/market_share/.
9 See id.

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the Exchange. As described above, ETP
Holders with liquidity-providing order flow have a choice of where to send that order flow.
Proposed Changes to Adding Tier 1 and Adding Tier 2
Under current Adding Tier 1, ETP
Holders that add liquidity to the Exchange in securities with a per share price of $1.00 or more and that have at least 0.25% or more Adding ADV as a percentage of US CADV are charged a fee of $0.0020 per share for adding displayed orders in Tape A, B and C
securities and $0.0024 per share for adding non-displayed orders in Tape A, B and C securities.
The Exchange proposes to modify the requirements to qualify for Adding Tier 1 by adopting an alternative qualification basis for the Adding Tier 1
fee. As proposed, ETP Holders would qualify for the current fees by having at least 0.25% or more Adding ADV as a percentage of US CADV or at least 30
million shares of Adding ADV. The Exchange does not propose any changes to the Adding Rate for Adding Tier 1, and the rate for orders that add liquidity under the Adding Tier 1 would remain unchanged.
Similarly, under current Adding Tier 2, ETP Holders that add liquidity to the Exchange in securities with a per share price of $1.00 or more and that have at least 0.13% or more Adding ADV as a percentage of US CADV are charged a fee of $0.0022 per share for adding displayed orders in Tape A, B and C
securities.
The Exchange proposes to revise Adding Tier 2 by adopting an alternative qualification basis for the tier. As proposed, ETP Holders would qualify for the current rebate by having at least 0.13% or more Adding ADV as a percentage of US CADV or at least 16
million shares or more Adding ADV.
The Exchange does not propose any changes to the Adding Rate for Adding Tier 2, and the rate for such orders that add liquidity under the Adding Tier 2
would remain unchanged.
The Exchange believes that introducing alternative criteria for ETP
Holders to qualify for Adding Tier 1 and Adding Tier 2 will allow greater numbers of ETP Holders to potentially qualify for the tier, and will incentivize more ETP Holders to route their liquidity-providing order flow to the Exchange in order to qualify for the tier.
This in turn would support the quality of price discovery on the Exchange and provide additional price improvement opportunities for incoming orders. The Exchange believes that by correlating the amount of the fee to the level of
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orders sent by an ETP Holder that add liquidity, the Exchanges fee structure would incentivize ETP Holders to submit more orders that add liquidity to the Exchange, thereby increasing the potential for price improvement to incoming marketable orders submitted to the Exchange.
As noted above, the Exchange operates in a competitive environment, particularly as relates to attracting nonmarketable orders, which add liquidity to the Exchange. The Exchange does not know how much order flow ETP
Holders choose to route to other exchanges or to off-exchange venues.
Based on the profile of liquidity-adding firms generally, the Exchange believes that additional ETP Holders could qualify for the tiered rate under the new qualification criteria if they choose to direct order flow to, and increase quoting on, the Exchange. However, without having a view of ETP Holders activity on other exchanges and offexchange venues, the Exchange has no way of knowing whether this proposed rule change would result in any additional ETP Holders directing orders to the Exchange in order to qualify for the Adding Tier 1 and Adding Tier 2
rates.
The Exchange proposes the nonsubstantive change of deleting or more following the amount of Adding ADV as a percentage of US CADV
required to qualify for the Adding Tier 1, Adding Tier 2, Adding Tier 4, Adding Tier 4 and Non-Displayed Adding Tier 1. The designation at least before the relevant amount of Adding ADV in each tier renders the phrase or more after the amount redundant.
Proposed Changes to Removing Tier 1
Under current Removing Tier 1, the Exchange provides a rebate of $0.0030
per share to ETP Holders that remove liquidity from the Exchange in securities with a per share price of $1.00
or more and that have a combined Adding ADV and Removing ADV of at least 0.18% as a percentage of US CADV
and at least 250,000 of Adding ADV.
The Exchange proposes to revise Removing Tier 1 by adopting an alternative qualification basis for the tier. As proposed, ETP Holders would qualify for the current rebate by having at least 250,000 Adding ADV and a combined Adding ADV and Removing ADV of at least 1 0.18% as a percentage of US CADV, or 2 21.5
million shares ADV. The Exchange does not propose any changes to the Removing Rate for Orders that removed liquidity that qualify for Removing Tier 1, and the rate for such orders under
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