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Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices
assess fees to responders to AON CUBE
Auctions and credits to another participant to provide incentive for participants to submit order flow.
The Proposed Rule Change Is Not Unfairly Discriminatory The Exchange believes that the proposal is not unfairly discriminatory because the proposed fees and credits would be available to all similarlysituated market participants on an equal and non-discriminatory basis. The Exchanges proposed fees and credits for AON CUBE Auctions are designed to encourage greater use of the AON CUBE
Auction, which may lead to greater opportunities to tradeand for price improvementfor all participants.
To the extent that there is a differentiation between proposed fees assessed to Customers as compared to non-Customers, the Exchange believes that this is not unfairly discriminatory because preferential pricing to Customers is a long-standing options industry practice to incentivize increased Customer order flow through a fee and rebate schedule in order to attract professional liquidity providers.
To the extent the proposed fees serve to enhance Customer volume on the Exchange, the Exchange believes increased Customer volume would attract liquidity, including Market Maker activity, by providing more trading opportunities. Increased Market Maker activity could, in turn, facilitate tighter spreads and increased order flow from other market participants, contributing to increased price discovery and overall enhanced quality of the market.
The Exchange also believes that the proposed fee structure is not unfairly discriminatory because it is based on the amount and type of business transacted on the Exchange, and ATP
Holders are not obligated to participate in AON CUBE Auctions. Rather, the proposal is designed to encourage participants to utilize the Exchange as a primary trading venue if they have not done so previously or increase Electronic auction volume sent to the Exchange. To the extent that the proposed fees and credits are successful in incenting ATP Holders to utilize AON CUBE Auctions, this increased order flow would improve price discovery and make the Exchange a more competitive venue for order execution, which, in turn, would improve market quality for all market participants including those that do not participate in AON CUBE Auctions.
Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the
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Exchanges statement regarding the burden on competition.
B. Self-Regulatory Organizations Statement on Burden on Competition In accordance with Section 6b8 of the Act, the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
Instead, as discussed above, the Exchange believes that the proposed changes would encourage the submission of additional liquidity for larger-sized orders to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for all market participants. As a result, the Exchange believes that the proposed changes further the Commissions goal in adopting Regulation NMS of fostering integrated competition among orders, which promotes more efficient pricing of individual stocks for all types of orders, large and small. 20
Intramarket Competition. The proposed change is designed to attract order flow to the Exchange by offering competitive rates and credits based on increased volumes on the Exchange, which would enhance the quality of quoting and may increase the volumes of contracts traded on the Exchange. To the extent that this purpose is achieved, all of the Exchanges market participants should benefit from the continued market liquidity. Enhanced market quality and increased transaction volume that results from the increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange.
The Exchange believes that the proposed change to adopt fees and credits for the use of AON CUBE
Auctions would not impose any burden on intramarket competition, but rather, would serve to promote intramarket competition by incentivizing order flow to the Exchange, and in particular, Customer orders, thereby providing for more opportunities to compete at improved prices.
Intermarket Competition. The Exchange operates in a highly competitive market in which market participants can readily favor one of the 16 competing option exchanges if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its mechanisms and fees to remain competitive with other exchanges and to 20 See Reg NMS Adopting Release, supra note 13, at 37499.

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attract order flow to the Exchange.
Based on publicly-available information, and excluding index-based options, no single exchange currently has more than 16% of the market share of executed volume of multiply-listed equity and ETF options trades.21
Therefore, no exchange currently possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in November 2020, the Exchange had less than 10% market share of executed volume of multiplylisted equity and ETF options trades.22
The Exchange believes that the proposed rule change reflects this competitive environment because it introduces new fees and rebates designed to encourage ATP Holders to direct trading interest to the Exchange, to provide liquidity, and to attract order flow. To the extent that this purpose is achieved, all the Exchanges market participants should benefit from the improved market quality and increased opportunities for price improvement.
The Exchange believes that the proposed changes could promote competition between the Exchange and other execution venues, including those that currently offer similar auction mechanisms for larger-sized orders, by encouraging additional orders to be sent to the Exchange for execution.23
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19b3A 24 of the Act and subparagraph f2 of Rule 19b4 25
thereunder, because it establishes a due, fee, or other charge imposed by the Exchange.
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such 21 See
supra note 14.
on OCC data, supra note 15, the Exchanges market share in equityand ETF-based options increased from 8.06% for the month of November 2019 to 9.09% for the month of November 2020.
23 See, e.g., supra note 10 regarding Nasdaq ISEs Solicited Order Mechanism and Complex Solicited Order Mechanism.
24 15 U.S.C. 78sb3A.
25 17 CFR 240.19b4f2.
22 Based
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