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Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES

paragraph B. Second, the Exchange proposes to make a ministerial change to the definition of Qualified LMM in the Fee Schedule to reference Rule 11.8e1E instead of D. Third, the Exchange proposes to eliminate the Market Depth Tier provided under Footnote 1 of the Fee Schedule. The proposal will have no impact on Members as no Member has recently met the Market Depth Tier.
2. Statutory Basis The Exchange believes that the proposed rule changes are consistent with the objectives of Section 6 of the Act,12 in general, and furthers the objectives of Section 6b4 and 6b5,13 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities. The Exchange also notes that its listing business operates in a highly competitive market in which market participants, which includes both issuers and LMMs, can readily transfer their listings or opt not to participate, respectively, if they deem fee levels, liquidity provision incentive programs, or any other factor at a particular venue to be insufficient or excessive. The proposed rule changes reflect a competitive pricing structure designed to incentivize issuers to list new products and transfer existing products to the Exchange and market participants to enroll and participate as LMMs on the Exchange, which the Exchange believes will enhance market quality in all securities listed on the Exchange.
The Exchange believes that the proposal to adopt incentives based on both Minimum Performance Standards and transactions under the LMM Add Liquidity Rebate is a reasonable means to incentivize market quality in securities listed on the Exchange. The marketplace for listings is extremely competitive and there are several other national securities exchanges that offer listings. Transfers between listing venues occur frequently for numerous reasons, including market quality. As noted above, the LMM Add Liquidity Rebate allows the Exchange to offer LMM pricing comparable to other traditional LMM programs available on other listing venues and, as such, this proposal is intended to help the Exchange compete as a listing venue.
Further, the Exchange notes that the proposed incentives are not transaction fees, nor are they fees paid by participants to access the Exchange.
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Rather, the proposed payments are based on achieving certain objective market quality and transaction-based metrics.
As stated above, the proposed rebate would continue to encourage LMMs to meet the Minimum Performance Standards for Qualified Securities, but would provide the potential for additional incentives for higher volume securities. The proposed rebate would provide LMMs with the flexibility to opt in to an additional pricing program that better incentivizes LMMs to meet certain market quality metrics in higher volume securities, which, when coupled with the existing LMM Liquidity Provision Rates, would provide a more comprehensive program to incentivize LMMs to provide enhanced market quality across all LMM Securities.
Specifically, the LMM Liquidity Provision Rates are designed to incentivize LMMs to meet the Minimum Performance Standards in lower volume securities where transaction-based incentives may not sufficiently incentivize liquidity and the proposed LMM Add Liquidity Rates would incentivize LMMs to meet the Minimum Performance Standards in higher volume securities through the potential of greater economic benefits, which the Exchange believes is reasonable. The Exchange believes the proposal will benefit all investors by both increasing competition among LMMs in higher volume securities and leading to tighter and deeper markets to the benefit of all market participants.
The Exchange believes that it is reasonable only for securities that meet the CADV Requirement to be eligible for the LMM Add Liquidity Rates because the Exchange does not want to disincentivize LMMs in lower volume securities from meeting the standards applicable to Enhanced Securities. Such lower volume securities generally benefit more from LMMs meeting the standards applicable to Enhanced Securities and the Exchange believes that it is reasonable to continue to require LMMs in securities that do not meet the CADV Requirement to meet such standards in order to maximize their daily payment.
The Exchange believes that it is reasonable to offer the LMM Add Liquidity Rates only for securities that meet the CADV Requirement, because the Exchange generally makes more revenue the greater the trading volume in the trading volume sic. Specifically, as the proposed incentives are available only in LMM Securities that meet the CADV Requirement, the incentives are generally commensurate with the Exchanges revenue in that LMM

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Security. Further, the LMM Add Liquidity Rates provide an alternative incentive structure for LMMs that may better incentivize them to meet the required criteria for the LMM Security.
The Exchange believes the LMM Add Liquidity Rates adds an alternative rebate structure that, coupled with the LMM Liquidity Provision Rates, would create a comprehensive incentive structure that will encourage participation and, further, competition among LMMs. The Exchange believes that increased participation and competition among LMMs will result in better market quality across all of its listings, resulting in greater market quality to the benefit of investors and other market participants.
The Exchange believes it is reasonable that an LMM forfeit the LMM Liquidity Provision Rates if it opts in to the LMM
Add Liquidity Rates. As described above, opting in to the LMM Add Liquidity Rates would allow the possibility of greater economic benefit for LMMs by offering a per share rebate.
As a result, LMMs would have the possibility of receiving a higher payment for acting as an LMM in an LMM Security, which the Exchange believes makes it reasonable to remove the stipend style payment that exists under the LMM Liquidity Provision Rates. Furthermore, the proposal is optin only; therefore, LMMs may opt not to participate if they do not believe that they would benefit from opting in or if they deem the LMM Add Liquidity Rates insufficient in a given LMM
Security.
The Exchange believes that the proposal represents an equitable allocation of payments and is not unfairly discriminatory because, while the proposed payments apply only to LMMs, such LMMs must meet rigorous Minimum Performance Standards in order to receive the proposed rebate.
Where an LMM does not meet the Minimum Performance Standards for the applicable LMM Security, they will not be eligible for the proposed rebates.
Further, registration as an LMM is available equally to all Members and allocation of listed securities between LMMs is governed by Exchange Rule 11.8e2. If an LMM does not meet the Minimum Performance Standards for three out of the past four months, the LMM is subject to forfeiture of LMM
status for that LMM Security, at the Exchanges discretion.
The Exchange believes that its proposal to eliminate the Market Depth Tier is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its
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