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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES

Proposed Change to Adding Tier 2
Under current Adding Tier 2, ETP
Holders that add liquidity to the Exchange in securities with a per share price of $1.00 or more and that have at least 0.13% or more of Adding ADV as a percentage of US CADV or at least 16
million Adding ADV are charged a fee of $0.0022 per share for adding displayed orders in Tape A, B, and C
securities. The Exchange proposes to revise requirements to qualify for Adding Tier 2 as follows: ETP Holders would qualify for the current rebate sic by having at least 0.11% or more Adding ADV as a percentage of US
CADV or at least 13 million shares or more of Adding ADV. The Exchange does not propose any changes to the Adding Rate for Adding Tier 2.
The Exchange believes that lowering the ADV requirements to qualify for Adding Tier 2 as proposed above will allow greater numbers of ETP Holders to potentially qualify for the tier, and therefore will incentivize more ETP
Holders to route their liquidityproviding order flow to the Exchange in order to qualify for the tier. This in turn would support the quality of price discovery on the Exchange and provide additional price improvement opportunities for incoming orders. The Exchange believes that by correlating the amount of the fee to the level of orders sent by an ETP Holder that add liquidity, the Exchanges fee structure would incentivize ETP Holders to submit more orders that add liquidity to the Exchange, thereby increasing the potential for price improvement to incoming marketable orders submitted to the Exchange.
As noted above, the Exchange operates in a competitive environment, particularly as relates to attracting nonmarketable orders, which add liquidity to the Exchange. The Exchange does not know how much order flow ETP
Holders choose to route to other exchanges or to off-exchange venues.
Based on the profile of liquidity-adding firms generally, the Exchange believes that additional ETP Holders could qualify for Adding Tier 2 under the revised qualification criteria if they choose to direct order flow to the Exchange. However, without having a view of ETP Holders activity on other exchanges and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would result in any additional ETP
Holders directing orders to the Exchange in order to qualify for the Adding Tier 2 rate.

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Proposed Changes to Removing Tier 1
Under current Removing Tier 1, the Exchange provides a rebate of $0.0030
per share to ETP Holders that remove liquidity from the Exchange in securities with a per share price of $1.00
or more and that have at least 250,000
Adding ADV and a combined Adding ADV and Removing ADV of at least i 0.18% as a percentage of US CADV, or ii 21.5 million shares ADV.
The Exchange proposes to revise Removing Tier 1 by adopting an alternative qualification basis for the tier. As proposed, ETP Holders would qualify for the current rebate either by meeting the current requirements above, or by meeting the alternative qualification basis, as follows: Adding ADV of at least i 0.11% as a percentage of US CADV or ii 13 million shares ADV and Adding ADV and Removing ADV combined of at least i 0.16% as a percentage of US CADV or ii 19
million shares ADV. The Exchange does not propose any changes to the Removing Rate for orders that remove liquidity that qualify for Removing Tier 1.
The Exchange believes that providing an alternative way for ETP Holders to qualify for Removing Tier 1 as proposed above will allow greater numbers of ETP
Holders to qualify for the tier, and will incentivize more ETP Holders to route liquidity-removing order flow to the Exchange in order to qualify for the tier.
This is turn would support the quality of price discovery on the Exchange and provide additional price improvement opportunities for incoming orders. As described above, ETP Holders with liquidity-removing order flow have a choice of where to send that order flow.
The Exchange believes that as a result of the proposed change to Removing Tier 1, more ETP Holders will choose to route their order flow to the Exchange in order to qualify for the credits for removing liquidity associated with Removing Tier 1 given that there is an alternative way to qualify.
As noted, the Exchange operates in a competitive environment. The Exchange does not know how much order flow ETP Holders choose to route to other exchanges or to off-exchange venues.
Based on the profile of firms generally, the Exchange believes that additional ETP Holders could qualify for the tiered rate under the new qualification criteria if they choose to direct order flow to the Exchange. Without having a view of ETP Holders activity on other exchanges and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would result in any additional ETP

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Holders directing orders to the Exchange in order to qualify for the Removing Tier 1 rate.
The proposed changes are not otherwise intended to address any other issues, and the Exchange is not aware of any problems that ETP Holders would have in complying with the proposed changes.
2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6b of the Act,10 in general, and furthers the objectives of Sections 6b4 and 6b5 of the Act,11 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers.
The Proposed Change Is Reasonable As discussed above, the Exchange operates in a highly competitive market.
The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. 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. 12
While Regulation NMS has enhanced competition, it has also fostered a fragmented market structure where trading in a single stock can occur across multiple trading centers. When multiple trading centers compete for order flow in the same stock, the Commission has recognized that such competition can lead to the fragmentation of order flow in that stock. 13
Given the current competitive environment, the Exchange believes that the proposal represents a reasonable attempt to attract additional order flow to the Exchange. Specifically, the Exchange believes that the proposed revisions to the requirements to qualify for Adding Tier 2 and Removing Tier 1
by lowering or providing alternative requirements are reasonable because 10 15

U.S.C. 78fb.
U.S.C. 78fb4 & 5.
12 See Regulation NMS, supra note 4, at 37499.
13 See Securities Exchange Act Release No. 61358, 75 FR 3594, 3597 January 21, 2010 File No. S7
0210 Concept Release on Equity Market Structure.
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