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Federal Register / Vol. 86, No. 180 / Tuesday, September 21, 2021 / Notices
2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6b of the Act,15 in general, and furthers the objectives of Sections 6b4 and 6b5 of the Act,16 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 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. 17
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. 18 Indeed, equity trading is currently dispersed across 16
exchanges,19 31 alternative trading systems,20 and numerous broker-dealer internalizers and wholesalers, all competing for order flow. Based on publicly available information, no single exchange has more than 17% market 15 15

U.S.C. 78fb.
U.S.C. 78fb4 & 5.
17 See Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37495, 37499 June 29, 2005
S71004 Final Rule Regulation NMS.
18 See Securities Exchange Act Release No. 61358, 75 FR 3594, 3597 January 21, 2010 File No. S7
0210 Concept Release on Equity Market Structure.
19 See Cboe Global Markets, U.S. Equities Market Volume Summary, available at http
markets.cboe.com/us/equities/market_share/. See generally https www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
20 See FINRA ATS Transparency Data, available at https otctransparency.finra.org/
otctransparency/AtsIssueData. A list of alternative trading systems registered with the Commission is available at https www.sec.gov/foia/docs/
atslist.htm.

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share.21 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 or reduce use of certain categories of products, including ports, in response to fee changes. Accordingly, the Exchanges fees, including port fees, are reasonably constrained by competitive alternatives and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable.
The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, including ports, in response to fee changes. Accordingly, the Exchanges fees, including port fees, are reasonably constrained by competitive alternatives and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable.
If a particular exchange charges excessive fees for connectivity, impacted members and non-members may opt to terminate their connectivity arrangements with that exchange, and adopt a possible range of alternative strategies, including routing to the applicable exchange through another participant or market center or taking that exchanges data indirectly.
Accordingly, if the Exchange charges excessive fees, it would stand to lose not only connectivity revenues but also revenues associated with the execution of orders routed to it, and, to the extent applicable, market data revenues. The Exchange believes that this competitive dynamic imposes powerful restraints on the ability of any exchange to charge unreasonable fees for connectivity.
Given this competitive environment, the proposal represents a fair and reasonable attempt to provide member organizations with additional time to finalize an orderly transition to upgraded technology. As of August 2021, 4.7% of legacy ports have not been cancelled. The pricing is designed so that these few remaining member organizations utilizing legacy ports would pay for the Exchange to continue to support their Phase I ports through September 2021.
21 See Cboe Global Markets U.S. Equities Market Volume Summary, available at http markets.
cboe.com/us/equities/market_share/.

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The Proposal Is an Equitable Allocation of Fees The Exchange believes its proposal equitably allocates its fees among its market participants. The Exchange is not proposing to adjust the amount of the port fees or the fees charged fees to offset the Exchanges continuing costs of supporting legacy ports, which will remain at the current level for all market participants. Rather, the proposal would provide additional time for member organizations to transition from older to newer and more efficient Pillar technology and would charge the same fee for those few member organizations that choose not to transition to Phase II
ports during the extended Transition Period.
The proposal constitutes an equitable allocation of fees because all similarly situated member organizations and other market participants that, following the transition period, choose to connect to the Exchange through the use of Phase I ports during the Decommission Period would continue to be charged the same, unchanged Decommission Extension Fee.
The Proposal Is Not Unfairly Discriminatory The Exchange believes that the proposal is not unfairly discriminatory.
In the prevailing competitive environment, member organizations are free to disfavor the Exchanges pricing if they believe that alternatives offer them better value, and are free to discontinue to connect to the Exchange through its ports. As noted, the Exchange is offering upgraded connections in an effort to keep pace with changes in the industry and evolving customer needs as new technologies emerge and products continue to develop and change.
The proposal neither targets nor will it have a disparate impact on any particular category of market participant. The Exchange believes that the proposal does not permit unfair discrimination because the proposal would be applied to all similarly situated member organizations and other market participants would be charged the same rates, which will remain unchanged.
The Exchange believes that the proposal does not permit unfair discrimination because the Decommission Extension Fee would apply equally to all member organizations that require additional time to complete their transition to the Phase II ports. At any point during the Decommission Period, a member organization could cease to be subject to the Decommission Fee by expediting its
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