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Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES

favorable fees and credits. Additionally, the proposed rule change would apply only to a subset of Retail Orders directed to the Exchange by ETP
Holders, i.e., those that share the same MPID and that add and remove retail liquidity. All other Retail Orders would continue to be subject to current fees and credits, including those orders that qualify for the Retail Order pricing tier.
The Exchange believes the proposed rule change is also reasonable as it is designed to incentivize ETP Holders to send orders to the Exchange that may otherwise be internalized off-exchange, which further contributes to a deeper, more liquid market and provide even more execution opportunities for market participants. This overall increase in activity deepens the Exchanges liquidity pool, offers additional cost savings, supports the quality of price discovery, promotes market transparency and improves market quality, for all investors.
On the backdrop of the competitive environment in which the Exchange currently operates, the proposed rule change is a reasonable attempt to increase liquidity on the Exchange and improve the Exchanges market share relative to its competitors.
The Proposed Fee Change Is an Equitable Allocation of Fees and Credits The Exchange believes its proposal is an equitable allocation of its fees among its market participants because all ETP
Holders that participate on the Exchange will be able to internalize their Retail Orders on the Exchange at no cost, i.e., they would not receive any credit or pay any fee for the execution of Retail Orders that are internalized.
Without having a view of ETP Holders activity on other markets and offexchange venues, the Exchange has no way of knowing whether this proposed rule change would result in any ETP
Holder sending more of their Retail Orders to the Exchange. The Exchange cannot predict with certainty how many ETP Holders would avail themselves of this opportunity but additional Retail Orders would benefit all market participants because it would provide greater execution opportunities on the Exchange.
Further, given the competitive market for attracting Retail Order flow, the Exchange notes that with this proposed rule change, the cost for executing Retail Orders that are internalized would be lower than the fees charged by other exchanges that the Exchange competes with for order flow. For example, EDGX
Equities EDGX charges its members an internalization fee of $0.00050 per share for orders that add liquidity and
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a fee of $0.00050 per share for orders that remove liquidity if such members do not have an adding ADV of 10,000,000 shares.19
The Exchange further believes that the proposed change is equitable because it is reasonably related to the value to the Exchanges market quality associated with higher volume in Retail Orders.
The Exchange believes that recalibrating the fees and credits charged for execution of Retail Orders that are internalized will continue to attract order flow and liquidity to the Exchange, thereby contributing to price discovery on the Exchange and benefiting investors generally.
The Exchange believes that the proposed rule change is equitable because maintaining or increasing the proportion of Retail Orders in exchangelisted securities that are executed on a registered national securities exchange rather than relying on certain available off-exchange execution methods would contribute to investors confidence in the fairness of their transactions and would benefit all investors by deepening the Exchanges liquidity pool, supporting the quality of price discovery, promoting market transparency and improving investor protection.
The Proposed Fee Change Is Not Unfairly Discriminatory The Exchange believes that the proposal is not unfairly discriminatory.
In the prevailing competitive environment, ETP Holders are free to disfavor the Exchanges pricing if they believe that alternatives offer them better value.
The Exchange believes that the proposed change is not unfairly discriminatory because it would apply to all ETP Holders on an equal and nondiscriminatory basis. The Exchange believes that the proposed rule change is not unfairly discriminatory because maintaining or increasing the proportion of Retail Orders in exchangelisted securities that are executed on a registered national securities exchange rather than relying on certain available off-exchange execution methods would contribute to investors confidence in the fairness of their transactions and would benefit all investors by deepening the Exchanges liquidity pool, supporting the quality of price discovery, promoting market transparency and improving investor protection. This aspect of the proposed rule change also is consistent with the
Act because all similarly situated ETP
Holders would be charged the same fee for executing Retail Orders that are internalized. The Exchange also notes that proposed rule change will not adversely impact any ETP Holders ability to qualify for other reduced fee or enhanced rebate tiers. Lastly, the submission of Retail Orders is optional for ETP Holders in that they could choose whether to submit Retail Orders and, if they do, the extent of its activity in this regard. The Exchange believes that it is subject to significant competitive forces, as described below in the Exchanges statement regarding the burden on competition.
For the foregoing reasons, the Exchange believes that the proposal is consistent with the Act.
B. Self-Regulatory Organizations Statement on Burden on Competition In accordance with Section 6b8 of the Act,20 the Exchange believes that the proposed rule change would not 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 change would encourage the submission of additional liquidity to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for ETP 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. 21
Intramarket Competition. 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 ETP
Holders equally in that all ETP Holders would be able to internalize Retail Orders on the Exchange at no cost, i.e., they would receive no credit or pay any fee. Additionally, the proposed change is designed to attract additional order flow to the Exchange. The Exchange believes that the proposed rule change would continue to incentivize market participants to submit Retail Orders that are internalized and executed on a public and transparent market rather 20 15

EDGX Price List, Fee Codes EA and ER, at https www.cboe.com/us/equities/membership/fee_
schedule/edgx/.

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19 See
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U.S.C. 78fb8.
Exchange Act Release No. 51808, 70
FR 37495, 3749899 June 29, 2005 S71004
Final Rule.
21 Securities
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