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Federal Register / Vol. 86, No. 51 / Thursday, March 18, 2021 / Notices
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and competing venues in response to changes in their respective pricing schedules. Within the foregoing context, the proposals represent reasonable attempts by the Exchange to increase its liquidity and market share relative to its competitors.
The Exchange believes that it is reasonable to modify the qualification criteria for two of its transaction credits, at Equity 7, Section 118a because they will each encourage the addition of liquidity to the Exchange, first by making it easier for additional members to qualify for the $0.0030 credit, and second by challenging members that currently qualify for the $0.00295 per share executed credit to add additional liquidity to the Exchange to continue to qualify for it. If more members seek to qualify for a credit by adding liquidity to the Exchange, and if members increase their extent of their liquidity adding activity on the Exchange to continue to qualify for a credit, then the quality of the market will improve, and the Exchange will become more attractive to existing and prospective participants.
The Exchange also believes that its proposal is reasonable to establish a new add non-displayed credit with a growth component tied to the addition of non-displayed liquidity. The proposal will encourage members to increase the extent to which they provide nondisplayed liquidity to the Exchange, and it will reward members that do so in significant volumes. The Exchange believes that any ensuing increase in non-displayed liquidity on the Exchangeand in particular, nondisplayed liquidity in securities in Tapes A and Bwill improve the quality of the Nasdaq market, and it will cause the Exchange to become more attractive to existing and prospective participants. The Exchange notes that it selected February 2021 as the baseline for the growth requirements because it is the month immediately preceding the establishment of the new tier.
The Exchange notes that those market participants that are dissatisfied with the proposals are free to shift their order flow to competing venues that offer more generous pricing or less stringent qualifying criteria.
The Proposals Are Equitable Allocations of Credits The Exchange believes its proposals will allocate its charges and credits fairly among its market participants.
The Exchange believes that is an equitable allocation to increase the eligibility requirements for the $0.00295
per share executed credit, and to lower the eligibility requirements for the
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$0.0030 per share executed credit, because both proposals will encourage members to add additional liquidity to the Exchange. To the extent that the Exchange succeeds in increasing liquidity on the Exchange, then the Exchange will experience improvements in its market quality, which again stands to benefit all market participants.
Additionally, the Exchange believes that it is equitable to establish a new add credit tier that is tied to the growth of non-displayed liquidity. The addition of this new proposed credit tier will encourage members to increase the extent to which they add non-displayed liquidity to the Exchange, and it will reward members that do so in significant volumes. The Exchange believes that any increase in nondisplayed liquidity on the Exchange that follows from the introduction of this new creditand in particular, nondisplayed liquidity in securities in Tapes A and Bwill improve the quality of the Nasdaq market, and it will cause the Exchange to become more attractive to existing and prospective participants.
Any participant that is dissatisfied with the proposals is free to shift their order flow to competing venues that provide more generous pricing or less stringent qualifying criteria.
The Proposals Are Not Unfairly Discriminatory The Exchange believes that its proposals ae not unfairly discriminatory. As an initial matter, the Exchange believes that nothing about its volume-based tiered pricing model is inherently unfair; instead, it is a rational pricing model that is well-established and ubiquitous in todays economy among firms in various industriesfrom co-branded credit cards to grocery stores to cellular telephone data plansthat use it to reward the loyalty of their best customers that provide high levels of business activity and incent other customers to increase the extent of their business activity. It is also a pricing model that the Exchange and its competitors have long employed with the assent of the Commission. It is fair because it incentivizes customer activity that increases liquidity, enhances price discovery, and improves the overall quality of the equity markets.
The Exchange believes that its proposals to amend the qualifying Consolidated Volume criteria for two of its transaction credits are not unfairly discriminatory because these credits are available to all members. Moreover, these proposals stand to improve the overall market quality of the Exchange, to the benefit of all market participants,
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by incentivizing members to increase the extent of their liquidity adding activity on the Exchange.
Likewise, the Exchange believes that its new proposed add credit with a growth component is not unfairly discriminatory because it is aimed at encouraging the growth of nondisplayed liquidity on the Exchange, which if successful, stands to improve the quality of the Nasdaq market, to the benefit of all market participants. The Exchange notes that its proposal to offer higher credits to members with orders in non-displayed securities in Tapes A
and B than to those in Tape C is fair because the Exchange observes that its market has a greater need for, and its market quality would benefit most from, growth in non-displayed liquidity in securities in Tapes A and B. The Exchange has limited resources with which to apply to incentives, and it must allocate those limited resources in a manner that prioritizes areas of greatest need and potential effect.
Any participant that is dissatisfied with the proposals is free to shift their order flow to competing venues that provide more generous pricing or less stringent qualifying criteria.
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.
Intramarket Competition The Exchange does not believe that its proposal will place any category of Exchange participant at a competitive disadvantage.
As noted above, the proposed changes to the qualifying criteria for two of its transaction credits are intended to have market-improving effects, to the benefit of all members. Any member may elect to achieve the levels of liquidity required in order to qualify for the credits or fees.
Likewise, the proposed addition of a rebate tied to a members activity in non-displayed liquidity will encourage growth in that activity, to the benefit of overall market quality. Any member may elect to engage in the levels of nondisplayed liquidity adding activity that are required to qualify for this new credit.
The Exchange notes that its members are free to trade on other venues to the extent they believe that the proposed amended qualification criteria for these fees and credits are not attractive. As one can observe by looking at any market share chart, price competition
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