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Federal Register / Vol. 86, No. 189 / Monday, October 4, 2021 / Notices
the objectives of Section 6 of the Act,6
in general, and furthers the objectives of Section 6b4,7 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 8 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 Exchange believes that its proposal to reduce the rebates applicable to fee code NX is fair, equitable, and reasonable because the proposed fees and rebate remain consistent with pricing offered by the Exchanges affiliates and competitors and does not represent a significant departure from the Exchanges general pricing structure.
Specifically, the proposed rebates applicable to fee code NX are more than that offered by the Nasdaq Stock Market LLC Nasdaq, which does not provide a standard rebate for similar orders.9 Therefore, the Exchange believes the proposed rebates associated with fee code NX remains consistent with pricing previously offered by the Exchanges affiliates and other exchanges and does not represent a significant departure from such pricing.
The Exchange believes the proposed rule change to remove fee code BO and SX is reasonable as the Exchange has observed a minimal amount of volume in orders yielding the fee code and, therefore, the continuation of these fee codes does not warrant the 6 15

U.S.C. 78f.
U.S.C. 78fb4.
8 15 U.S.C. 78f.b5.
9 See Route Rates on the Nasdaq fee schedule at http nasdaqtrader.com/Trader.aspx?id=
PriceListTrading2.
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infrastructure and ongoing Systems maintenance required to support separate fee codes for specific routed orders. As such, the Exchange also believes that is reasonable and equitable to assess routed orders which meet the specifications to which fee code BO and SX are currently applicable the standard routing fee currently in place for all other routed ordersvia fee code X. The fee associated with fee code X is $0.00300, which is the same as the fee currently assessed for orders yielding fee code BO, and is only slightly higher than the fee currently assessed for fee code SX. The Exchange believes that the proposed rule change is equitable and not unfairly discriminatory because Members will continue to have the option to elect to route their orders in the same manner and will be automatically and uniformly assessed the applicable standard rates in place for generally all other routed orders.
Further, if members do not favor the Exchanges pricing for routed orders, they can send their routable orders directly to away markets instead of using routing functionality provided by the Exchange. Routing through the Exchange is optional, and the Exchange operates in a competitive environment where market participants can readily direct order flow to competing venues or providers of routing services if they deem fee levels to be excessive.
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. The Exchange does not believe that the proposed modifications represent a significant departure from previous pricing offered by the Exchange or pricing offered by the Exchanges competitors. Further, while the Exchange is proposing to eliminate fee codes BO and SX orders that meet specifications of fee code BO or SX
going forward will be assessed the rate for orders routed generally. Members may opt to disfavor the Exchanges pricing if they believe that alternatives offer them better value. Accordingly, the Exchange does not believe that the proposed change will impair the ability of Members or competing venues to maintain their competitive standing in the financial markets.
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 fee and rebate
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modifications will continue to apply to all Members equally, and as noted above, orders currently meeting the specifications of fee code BO or SX will be assessed the rate for orders routed generally under fee code X. 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.
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 14% of the market share.10
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. 11 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 dealers. . 12 Accordingly, the 10 Supra
note 3.
Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005.
12 NetCoalition v. SEC, 615 F.3d 525, 539 D.C.
Cir. 2010 quoting Securities Exchange Act Release 11 See
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