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Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES

flow by providing different and additional opportunities to receive an enhanced rebate. The Exchange believes that an increase in Customer order flow may attract an additional corresponding increase in order flow from other market participants, also contributing overall towards a robust and well-balanced market ecosystem, to the benefit of all market participants. Also, like the proposed elimination of certain Customer Penny Add Volume Tiers above, the Exchange proposes to eliminate Customer Non-Penny Add Volume Tier 3 as no Members are currently satisfying the criteria under this tier, nor have recently satisfied such criteria. The Exchange no longer wishes to, nor is it required to, maintain this tier, and would rather redirect future resources and funding into other programs and tiers intended to incentivize increased order flow.
2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,13
in general, and furthers the objectives of Section 6b4,14 in particular, as it is 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 15 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 change reflects a competitive pricing structure designed to incentivize market participants to direct their order flow to the Exchange, 13 15

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15 15 U.S.C. 78f.b5.
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which the Exchange believes would enhance market quality to the benefit of all Members. The Exchange notes that volume-based incentives and discounts have been widely adopted by exchanges,16 including the Exchange,17
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. Additionally, as noted above, the Exchange operates in a highly competitive market. The Exchange is only one of several options venues to which market participants may direct their order flow, and it represents a small percentage of the overall market.
Competing options exchanges offer similar tiered pricing structures to that of the Exchange, including schedules of rebates and fees that apply based upon Members achieving certain volume and/
or growth thresholds.
Overall, the Exchange believes that the proposed rule changes to the Customer Penny Add Volume, Market Maker, Away Market Maker, and Professional Take Volume, and Customer Non-Penny Add Volume Tiers are reasonable in that they are reasonably designed to incentivize Members to submit both add ADAV
and remove ADRV order flow to the Exchange, thereby contributing to a deeper and more liquid market. More specifically, incentivizing an increase in both liquidity adding volume and in liquidity removing volume, through additional criteria and enhanced rebate opportunities, encourages liquidity adding Members on the Exchange to contribute to a deeper, more liquid market, and to increase transactions and take execution opportunities provided by such increased liquidity, together providing for overall enhanced price discovery and price improvement opportunities on the Exchange.
Additionally, the Exchange believes that it is reasonable and equitable to incentivize Market Maker including 16 See, e.g., NYSE Arca Options Fee Schedule, Trade-Related charges for Standard Options, which similarly provide various ranges of credits and discounts for volume-based tiers geared toward different market participants in penny or nonpenny classes, such as Customer Penny Posting Credit Tiers, Firm and Broker-Dealer Penny Posting Tiers, and Customer Posting Credit Tiers in NonPenny Issues; and Cboe EDGX U.S. Options Exchange Fee Schedule, Footnotes, which provide for similar Customer Volume Tiers and Market Maker Volume Tiers.
17 See generally BZX Options Fee Schedule, Footnotes.

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Away Market Maker, Professional and Customer order flow, as these market participants provide key liquidity to the Exchange. For instance, Market Maker including Away Market Maker activity facilitates tighter spreads and signals additional corresponding increase in order flow from other market participants. Increased overall order flow benefits all investors by deepening the Exchanges liquidity pool, potentially providing even greater execution incentives and opportunities.
Professionals generally provide a greater competitive stream of order flow by definition, more than 390 orders in listed options per day on average during a calendar month, thus, providing increased competitive execution and improved pricing opportunities for all market participants. Customer order flow attracts additional liquidity to the Exchange, particularly in Non-Penny classes, as proposed. Such additional liquidity provides more trading opportunities and signals an increase in Market-Maker activity, which facilitates tighter spreads. This may cause an additional corresponding increase in order flow from other market participants, contributing overall towards a robust and well-balanced market ecosystem.
In particular, the Exchange believes that it is reasonable and equitable to eliminate Customer Penny Add Volume Tiers 5 and 7, as well as Customer NonPenny Add Volume Tier 3, because the Exchange is not required to maintain this tier or provide Members an opportunity to receive reduced fees or enhanced rebates. As stated, no Members are currently satisfying the criteria under these tiers, nor have recently satisfied such criteria.
Moreover, the Exchange believes it is reasonable to provide more consolidated, streamlined Customer Penny Add Volume Tiers by offering a single tier that provides an enhanced rebate of $0.53 current Tier 6/new Tier 5, and believes that the proposed updated criteria in this single tier current Tier 6/new Tier 5 is reasonably designed to provide a different opportunity for Members to achieve the tier to receive the same enhanced rebate.
Regarding the proposed rule change to the Market Maker, Away Market Maker, and Professional Penny Take Volume Tiers, the Exchange believes that it is reasonable and equitable to incrementally increase the difficulty in meeting the tiers criteria, by marginally increasing the volume threshold over average OCV and by adding additional prongs of criteria, as it is reasonably designed to incentivize Members to submit additional requisite liquidity to
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