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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
A. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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1. Purpose The Exchange proposes to amend its Fee Schedule to adopt a new Step-Up Tier under footnote 2 of the Fee Schedule, effective July 1, 2021.
The Exchange first notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 registered equities exchanges, as well as a number of alternative trading systems and other off-exchange venues that do not have similar self-regulatory responsibilities under the Exchange Act, to which market participants may direct their order flow. Based on publicly available information, no single registered equities exchange has more than 16% of the market share.3 Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow.
The Exchange in particular operates a Taker-Maker model whereby it pays credits to members that remove liquidity and assesses fees to those that add liquidity. The Exchanges Fee Schedule sets forth the standard rebates and rates applied per share for orders that remove and provide liquidity, respectively. Particularly, for securities at or above $1.00, the Exchange provides a standard rebate of $0.00020
per share for orders that remove liquidity and assesses a fee of $0.00200
per share for orders that add liquidity.
For orders priced below $1.00, the Exchange does not assess a fee or provide a rebate for orders that add liquidity and assesses a fee of 0.10% of total dollar value for orders that remove liquidity. The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to fee changes.
Accordingly, competitive forces constrain the Exchanges transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable.
3 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date June 29, 2021, available at https markets.cboe.com/us/equities/
market_statistics/.

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Additionally, in response to the competitive environment, the Exchange also offers tiered pricing which provides Members opportunities to qualify for higher rebates or reduced fees where certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. For example, the Exchange currently offers various Add/
Remove Volume Tiers under footnote 1
of the Fee Schedule, which offer various enhanced rebates and reduced fees for reaching certain, incrementally more challenging volume-based thresholds.
The Exchange now proposes to adopt a new Step-Up Tier under footnote 2 of the Fee Schedule, which offers a reduced fee to Members that increase their relative add volume order flow each month over a predetermined baseline as well as add liquidity over an established threshold. Specifically, the new Step-Up Tier provides Members an opportunity to qualify for a reduced fee of $0.0014 on their qualifying orders that yield B, V, and Y,4 where a Member 1 adds a Step-Up ADAV 5 from June 2021 greater than or equal to 0.05% of TCV 6 or adds a Step-Up ADAV from June 2021 greater than or equal to 2,000,000, and 2 has a total add ADAV
greater than or equal to 0.25% of TCV.
The proposed Step-Up Tier is designed to encourage Members that provide displayed liquidity on the Exchange to increase their overall add volume order flow, which would benefit all Members by providing greater execution opportunities on the Exchange and to contribute to a deeper, more liquid market, to the benefit of all investors.
2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,7
in general, and furthers the objectives of Section 6b4,8 in particular, as it is 4 Orders yielding Fee Code B are displayed orders that add liquidity to BYX Tape B, Orders yielding Fee Code V are displayed orders that add liquidity to BYX Tape A, and orders yielding Fee Code Y
are displayed orders that add liquidity to BYX
Tape C. Each is assessed a standard fee of $0.00200.
5 ADAV means average daily volume calculated as the number of shares added per day and is calculated on a monthly basis. Step-Up ADAV
means ADAV in the relevant baseline month subtracted from current ADAV.
6 TCV means total consolidated volume calculated as the volume reported by all exchanges and trade reporting facilities to a consolidated transaction reporting plan for the month for which the fees apply.
7 15 U.S.C. 78f.
8 15 U.S.C. 78fb4.

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designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and issuers and other persons using its facilities. The Exchange also believes that the proposed rule change is consistent with the objectives of Section 6b5 9 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and, particularly, is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
As described above, the Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. The proposed rule changes reflect a competitive pricing structure designed to incentivize market participants to direct their order flow to the Exchange, which the Exchange believes would enhance market quality to the benefit of all Members. Also, as described above, the Exchange notes that relative volumebased incentives and discounts have been widely adopted by exchanges,10
including the Exchange,11 and are reasonable, equitable and nondiscriminatory because they are open to all members on an equal basis and provide additional benefits or discounts that are reasonably related to i the value to an exchanges market quality and ii associated higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns. Competing equity exchanges offer similar tiered pricing structures, including schedules of rebates and fees that apply based upon members achieving certain volume and/or growth thresholds, as well as assess similar fees or rebates for similar types of orders, to that of the Exchange.
In particular, the Exchange believes the proposed Step-Up Tier is a 9 15

U.S.C. 78f.b5.
generally NYSE Price List, Transaction Fees; Nasdaq Equity 7, Section 118a1, Fees for Execution and Routing of Orders in Nasdaq-Listed Securities; and BZX Equities Fee Schedule, Footnote 2, Step-Up Tiers.
11 See BYX Equities Fee Schedule, Footnote 1, Add/Remove Volume Tiers.
10 See
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