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khammond on DSKJM1Z7X2PROD with NOTICES

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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
market quality; ii associated higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns; and iii introduction of higher volumes of orders into the price and volume discovery processes.
In particular, the Exchange believes the proposed Single MPID Investor Tier 1 is a reasonable means to encourage Members to increase their relative add and remove liquidity on the Exchange each month over a predetermined baseline by offering Members an additional opportunity to meet criteria to receive an enhanced rebate. More specifically, the Exchange notes that greater add volume order flow may provide for deeper, more liquid markets and execution opportunities at improved prices, and greater remove volume order flow may increase transactions on the Exchange, which the Exchange believes incentivizes liquidity providers to submit additional liquidity and execution opportunities. 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.
Further, the Exchange believes that proposed Tier 1 is reasonable as it does not represent a significant departure from the criteria or corresponding enhanced rebates currently offered in the Fee Schedule, including other Single MPID Investor Tiers, and that the proposed enhanced rebate is commensurate with the new criteria.
Particularly, the proposed rebate is reasonably based on the difficulty of satisfying the tiers proposed criteria as compared to the existing Single MPID
Investor Tiers, which provide higher rebates for more stringent criteria.
Indeed, the proposed criteria in new Tier 1 includes smaller volume threshold percentages that Members can achieve than Tier 2 current Tier 1, and, as a result, a lesser enhanced rebate of $0.0030, as proposed, than the enhanced rebate offered in Tier 2
$0.0031.
The Exchange also believes that the proposed rule change represents an equitable allocation of fees and rebates and is not unfairly discriminatory because all Members are eligible for new Single MPID Investor Tier 1 and have the opportunity to meet the tiers criteria and receive the applicable enhanced rebate if such criteria is met.
Without having a view of activity on other markets and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would definitely result in any Members qualifying for the proposed tier. While
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the Exchange has no way of predicting with certainty how the proposed tier will impact Member activity, the Exchange anticipates that at least six Members will be able to satisfy the criteria proposed under the new tier.
The Exchange also notes that the proposed tier will not adversely impact any Members ability to qualify for reduced fees or enhanced rebate offered under other tiers. Should a Member not meet the proposed new criteria, the Member will merely not receive the corresponding proposed enhanced rebate.
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. Rather, as discussed above, the Exchange believes that the proposed change would encourage the submission of additional order flow to a public exchange, thereby promoting market depth, execution incentives and enhanced execution opportunities, as well as price discovery and transparency for all Members. 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.
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 new Single MPID Investor Tier applies to all Members equally in that all Members are eligible for these tiers, have a reasonable opportunity to meet the tiers criteria and will receive the enhanced rebate on their qualifying orders if such criteria is met. The Exchange does not believe the proposed change to adopt a new Single MPID
Investor Tier burdens competition, but rather, enhances competition as it is intended to increase the competitiveness of BZX by adopting an additional pricing incentive in order to attract order flow and incentivize participants to increase their participation on the Exchange, providing for additional execution opportunities for market participants and improved price transparency.
Greater overall order flow, trading opportunities, and pricing transparency benefits all market participants on the Exchange by enhancing market quality and continuing to encourage Members
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to send orders, thereby contributing towards a robust and well-balanced market ecosystem.
Next, the Exchange believes the proposed rule change does not impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act.
As previously discussed, the Exchange operates in a highly competitive market.
In such an environment, the Exchange must continually review, and consider adjusting, its fees and rebates to remain competitive with other exchanges.
Members have numerous alternative venues that they may participate on and direct their order flow, including other equities exchanges, off-exchange venues, and alternative trading systems.
Additionally, the Exchange represents a small percentage of the overall market.
Based on publicly available information, no single equities exchange has more than 15% of the market share.13
Therefore, no exchange possesses significant pricing power in the execution of order flow. Indeed, participants can readily choose to send their orders to other exchange and offexchange venues if they deem fee levels at those other venues to be more favorable. Moreover, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies. 14 The fact that this market is competitive has also long been recognized by the courts.
In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: no one disputes that competition for order flow is fierce. . . . As the SEC explained, in the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution;
and no exchange can afford to take its market share percentages for granted because no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker 13 See
supra note 3.
Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005.
14 See
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