[Federal Register Volume 86, Number 80 (Wednesday, April 28, 2021)]
[Notices]
[Pages 22500-22505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08857]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91639; File No. SR-BX-2021-014]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, 
Section 118

April 22, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 13, 2021, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to proposal to amend: (i) The Exchange's 
transaction fees and credits, at Equity 7, Section 118(a); and (ii) its 
Qualified Market Maker Program, at Equity 7, Section 118(f), as 
described further below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange operates on the ``taker-maker'' model, whereby it 
generally pays credits to members that take liquidity and charges fees 
to members that provide liquidity. Currently, the Exchange has a 
schedule, at Equity 7, Section 118(a), which consists of several 
different credits that it provides for orders in securities priced at 
$1 or more per share that access liquidity on the Exchange and several 
different charges that it assesses for orders in such securities that 
add liquidity on the Exchange. It also has a program, at Equity 7, 
Section 118(f), to reward those of its members that make significant 
contributions to the market.
    Over the course of the last few years, the Exchange has 
experimented with various reformulations of its pricing schedule with 
the aim of increasing activity on the Exchange, improving market 
quality, and increasing market share.\3\ Although these changes have 
met with some success, the Exchange has yet to achieve the results it 
desires. Accordingly, the Exchange proposes to again revise its pricing 
schedule, in large part, in a further attempt to

[[Page 22501]]

improve the attractiveness of the market to new and existing 
participants.
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    \3\ See Securities Exchange Act Release No. 34-89554 (August 14, 
2020), 85 FR 51518 (August 20, 2020) (SR-BX-2020-018); Securities 
Exchange Act Release No. 34-89114 (June 22, 2020), 85 FR 38418 (June 
26, 2020) (SR-BX-2020-011); Securities Exchange Act Release No. 34-
88857 (May 12, 2020), 85 FR 29766 (May 18, 2020) (SR-BX-2020-008); 
Securities Exchange Act Release No. 34-87271 (October 10, 2019), 84 
FR 55621 (October 17, 2019) (SR-BX-2019-035); Securities Exchange 
Act Release No. 34-87093 (September 24, 2019), 84 FR 57530 (October 
25, 2019) (SR-BX-2019-031); Securities Exchange Act Release No. 34-
86447 (July 24, 2019); 84 FR 36989 (July 30, 2019) (SR-BX-2019-026); 
Securities Exchange Act Release No. 34-85912 (May 22, 2019); 84 FR 
24834 (May 29, 2019) (SR-BX-2019-013).
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Description of the Changes
Credits for Accessing Liquidity Through the Exchange
    The Exchange proposes to revise its current schedule of credits. 
Generally speaking, the proposed revised credits will be lower than the 
existing credits.\4\ Lowering the credits for orders that remove 
liquidity from the Exchange will help to offset the costs of providing 
the proposed lower fees, as discussed below, to members whose orders 
add liquidity to the Exchange.
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    \4\ Whereas the highest credit under the existing schedule (for 
an order that accesses liquidity (excluding orders with Midpoint 
pegging and excluding orders that receive price improvement and 
execute against an order with a Non-displayed price) entered by a 
member (i) whose combined liquidity removing and adding activities 
equal or exceed 0.225% of total Consolidated Volume during a month 
and (ii) adds liquidity equal to or exceeding an average daily 
volume of 50,000 shares in a month) is $0.0029 per share executed 
for orders in securities in Tapes A and B and $0.0028 per share 
executed for orders in securities in Tape C, the top such credit in 
the proposed schedule will be $0.0018 per share executed for Tapes 
A, B and C.
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    Currently, the Exchange provides a $0.0029 per share executed 
credit for orders in securities in Tapes A and B and a $0.0028 per 
share executed credit for orders in securities in Tape C that access 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with a Non-
displayed price) entered by a member: (i) Whose combined liquidity 
removing and adding activities equal to or exceed 0.225% of total 
Consolidated Volume during a month and (ii) that adds liquidity equal 
to or exceeding an average daily volume of 50,000 shares in a month. 
The Exchange is proposing to lower the credit to $0.0018 per share 
executed for orders in securities in Tapes A, B and C, and lowering the 
threshold from 0.225% to 0.15%. The Exchange is providing the same 
credit for all three tapes in this tier in order to incentivize 
increased participation across all tapes equally. Additionally, the 
Exchange is proposing to add a requirement that the member accesses 
liquidity equal to or exceeding 0.05% of total Consolidated Volume 
during a month.
    The Exchange also currently provides a $0.0027 per share executed 
credit for orders in securities in Tapes A and B and a $0.0026 per 
share executed credit for orders in securities in Tape C that access 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with a Non-
displayed price) entered by a member: (i) Whose combined liquidity 
removing and adding activities equal to or exceed 0.185% of total 
Consolidated Volume during a month and (ii) that adds liquidity equal 
to or exceeding an average daily volume of 50,000 shares in a month. 
The Exchange is proposing to lower the credit to $0.0016 per share 
executed for orders in securities in Tapes A and B and $0.0015 per 
share executed for orders in securities in Tape C. The Exchange is also 
proposing to lower the threshold from 0.185% to 0.10% and to add a 
requirement that the member access liquidity equal to or exceeding 
0.05% of total Consolidated Volume during a month.
    Additionally, the Exchange currently provides a $0.0026 per share 
executed credit for orders in securities in Tapes A and B and a $0.0025 
per share executed credit for orders in securities in Tape C that 
access liquidity (excluding orders with Midpoint pegging and excluding 
orders that receive price improvement and execute against an order with 
a Non-displayed price) entered by a member that: (i) Accesses liquidity 
equal to or exceeding 0.08% of total Consolidated Volume during a month 
and (ii) adds liquidity equal to or exceeding an average daily volume 
of 50,000 shares in a month. The Exchange is proposing to lower the 
credit to $0.0015 per share executed for orders in securities in Tapes 
A and B and $0.0014 per share executed for orders in securities in Tape 
C. The Exchange is also proposing to adjust the liquidity removal 
threshold to require that the member have a combined liquidity removing 
and adding activity equal to or exceeding 0.075% of total Consolidated 
Volume during a month.
    The Exchange also currently provides a $0.0021 per share executed 
credit for orders in securities in Tapes A and B and a $0.0020 per 
share executed credit for orders in securities in Tape C that access 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with a Non-
displayed price) entered by a member that: (i) Accesses liquidity equal 
to or exceeding 0.05% of total Consolidated Volume during a month and 
(ii) adds liquidity equal to or exceeding an average daily volume of 
50,000 shares in a month. The Exchange is proposing to lower the credit 
to $0.0010 per share executed for orders in securities in Tapes A and B 
and $0.0009 per share executed for orders in securities in Tape C. The 
Exchange is also proposing to adjust the liquidity removal threshold to 
require the member's combined liquidity removing and adding activity 
equal to or exceeding 0.05% of total Consolidated Volume during a 
month.
    The Exchange is also proposing to eliminate its current credit of 
$0.0018 per share executed for orders in Tapes A and B and $0.0017 per 
share executed for orders in Tape C that accesses liquidity (excluding 
orders with Midpoint pegging and excluding orders that receive price 
improvement and execute against an order with a Non-displayed price) 
entered by a member that: (i) Accesses at least 35% more liquidity, as 
a percentage of total Consolidated Volume during a month, than it did 
during July 2020; (ii) accesses liquidity equal to or exceeding 0.01% 
of total Consolidated Volume during a month; and (iii) adds liquidity 
equal to or exceeding an average daily volume of 50,000 shares in a 
month. Based on the proposed changes to the credits provided to 
members, the Exchange believes the thresholds for this pricing 
incentive are no longer effective in incentivizing liquidity removal 
activity.
    Lastly, the Exchange proposes to lower its current credit of 
$0.0015 per share executed for Tapes A and B and $0.0014 per share 
executed in Tape C to $0.0005 per share executed for Tapes A and B and 
$0.0004 per share executed for Tape C, for orders that accesses 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with a Non-
displayed price) entered by a member that adds liquidity equal to or 
exceeding an average daily volume of 50,000 shares in a month.
Charges for Adding Liquidity to Displayed Orders on the Exchange
    In addition to the proposed revised credits discussed above, the 
Exchange proposes to revise its existing schedule of charges for adding 
displayed liquidity on the Exchange. Generally speaking, the range of 
the proposed charges will be lower than the current charges for most 
orders in Tapes A, B and C.\5\ The Exchange believes that lower overall 
charges will incentivize members to increase their liquidity adding 
activity.
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    \5\ Whereas under the existing pricing schedule, the Exchange 
charges between $0.0022 and $0.0028 per share executed for displayed 
orders in all three Tapes, that add liquidity to the Exchange, the 
proposed revised schedule will charge fees for such displayed orders 
in securities in all three Tapes ranging from $0.0012 to $0.0020 per 
share executed.
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    Currently, the Exchange charges $0.0024 per share executed for 
displayed orders in all three Tapes entered by a member that adds 
liquidity equal to or exceeding 0.25% of total

[[Page 22502]]

Consolidated Volume during a month. The Exchange proposes to lower the 
fee to $0.0012.
    The Exchange also charges $0.0025 per share executed for displayed 
orders in all three Tapes entered by a member that adds liquidity equal 
to or exceeding 0.175% of total Consolidated Volume during a month. The 
Exchange proposes to lower the threshold to 0.15% and lower the fee to 
$0.0014.
    Similarly, the Exchange charges $0.0026 per share executed for 
displayed orders in all three Tapes entered by a member that adds 
liquidity equal to or exceeding 0.11% of total Consolidated Volume 
during a month. The Exchange proposes to lower the threshold to 0.10% 
and lower the fee to $0.0017.
    Currently, the Exchange charges $0.0028 per share executed for 
displayed orders in all three Tapes entered by a member that adds 
liquidity equal to or exceeding 0.07% of total Consolidated Volume 
during a month. The Exchange proposes to lower the threshold to 0.05% 
and lower the fee to $0.0020.
    The Exchange also charges a $0.0022 fee for displayed orders in all 
three Tapes entered by a member that (i) adds liquidity equal to or 
exceeding 0.12% of total Consolidated Volume during a month and (ii) 
adds at least 35% more liquidity, as a percentage of total Consolidated 
Volume during a month, than it did during August 2020. The Exchange 
proposes to lower the fee to $0.0020 and change the threshold for 
members to (i) add liquidity equal to or exceeding an average daily 
volume of 2,500,000 shares in a month and (ii) add at least 25% more 
liquidity relative to the member's March 2021 average daily volume of 
liquidity provided.
    Additionally, the Exchange is also proposing a new fee of $0.0017 
per share executed for displayed orders entered by a member that (i) 
adds liquidity equal to or exceeding an average daily volume of 
9,500,000 shares in a month, and (ii) adds at least 15% more liquidity 
relative to the member's March 2021 average daily volume of liquidity 
provided.
Charges for Adding Liquidity to Midpoint Pegging and Non-Displayed 
Orders on the Exchange
    The Exchange is also proposing to lower certain fees for Midpoint 
pegging and non-displayed orders in its existing schedule of charges. 
Specifically, the Exchange currently charges $0.0015 per share executed 
for orders with Midpoint pegging entered by other member excluding a 
buy (sell) order that receives an execution price that is lower 
(higher) than the midpoint of the national best bid and offer 
(``NBBO''). The Exchange proposes to lower the fee to $0.0010 per share 
executed. Additionally, the Exchange currently has a fee of $0.0028 per 
share executed for non-displayed orders (other than orders with 
Midpoint pegging) entered by a member that adds and removes liquidity 
equal to or exceeding 0.225% total Consolidated Volume during a month. 
The Exchange is proposing to lower the fee to $0.0024 and change the 
threshold for a member to (i) add and remove liquidity equal to or 
exceeding 0.15% total Consolidated Volume during a month and (ii) 
achieve at least 35% ratio of its displayed liquidity adding activity 
to its total liquidity adding activity during a month.
Changes to the Qualified Market Maker Program
    The Exchange presently has a Qualified Market Maker (``QMM'') 
program, at Equity 7, Section 118(f), which rewards members that make 
significant contributions to market quality by providing liquidity at 
the NBBO in a large number of securities for a significant portion of 
the day. In particular, the existing QMM program provides a two-tiered 
discount to QMMs that quote at the NBBO for a certain percentage of 
time in an average minimum number of securities per day during a month, 
and provides a certain percentage of liquidity volume during the month.
    Currently the Exchange provides a discount of $0.0001 per share 
executed to a QMM for entering displayed orders in securities priced at 
$1 or more that provide liquidity to the Exchange if the QMM quotes at 
the NBBO at least 25% of the time during Market Hours in an average of 
at least 400 securities per day during a month and provides add volume 
of at least 0.07% of total Consolidated Volume during a month. The 
Exchange is proposing to lower the thresholds to require the QMM to 
quote at the NBBO at least 10% of the time during Market Hours in an 
average of at least 325 securities per day during a month. Lowering the 
thresholds for qualifying for the discount will incentivize members who 
currently do not meet the proposed thresholds to increase their 
liquidity adding and NBBO quoting activity in order to become QMMs, 
which will result in the improvement of overall market quality.
    The Exchange is also proposing to remove the discount of $0.0002 
per share executed given to QMMs that quote at the NBBO at least 25% of 
the time during market hours in an average of at least 750 securities 
per day during a month, and provides add volume of at least 0.15% of 
total Consolidated Volume during a month for displayed orders in 
securities priced at $1 or more that provide liquidity to the Exchange. 
Members will not be impacted directly by the removal of the second tier 
discount because no member currently qualifies for that discount.
Applicability to and Impact on Participants
    The proposed revisions to the credits and fees are intended to 
specifically increase liquidity adding activity on the Exchange, and to 
thereby improve the overall quality and attractiveness of the Nasdaq BX 
market. The Exchange intends to accomplish this objective by providing 
overall lower fees to participants that engage in large volumes of 
liquidity adding activity on the Exchange. The cost of lowering these 
fees will be offset by the Exchange's proposal to also lower the 
credits to those participants that engage in large volumes of liquidity 
removal activity on the Exchange. The Exchange also intends for its 
proposed changes to its QMM program to provide greater incentives to 
members to increase their contributions to market quality and to 
eliminate incentives that have not contributed to significant 
improvements of the market.
    Those participants that act as net adders of liquidity to the 
Exchange will benefit from lower charges and from any improvement in 
the overall quality of the market. Those participants that act as net 
removers of liquidity from the Exchange will also benefit from any 
improvement in the overall quality of the market. The Exchange notes 
that its proposal is not otherwise targeted at or expected to be 
limited in its applicability to a specific segment(s) of market 
participants nor will it apply differently to different types of market 
participants.
    Members will not be impacted directly by the removal of the 
existing $0.0002 credit because no member currently qualifies for that 
tier.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility, and is 
not designed to permit unfair

[[Page 22503]]

discrimination between customers, issuers, brokers, or dealers. The 
proposal is also consistent with Section 11A of the Act relating to the 
establishment of the national market system for securities.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposal Is Reasonable
    The Exchange's proposed change to its schedule of credits and 
charges is reasonable in several respects. As a threshold matter, the 
Exchange is subject to significant competitive forces in the market for 
equity securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers 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'. . . .'' \8\
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    \8\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, 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.'' \9\
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    \9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
equity security transaction services. The Exchange is only one of 
several equity venues to which market participants may direct their 
order flow, and it represents a small percentage of the overall market. 
It is also only one of several taker-maker exchanges. Competing equity 
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 thresholds.\10\
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    \10\ See CBOE BYX Fee Schedule, at http://markets.cboe.com/us/equities/membership/fee_schedule/byx/; NYSE National Fee Schedule, 
at https://www.nyse.com/publicdocs/nyse/regulation/nyse/NYSE_National_Schedule_of_Fees.pdf.
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    Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules.\11\
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    \11\ The Exchange perceives no regulatory, structural, or cost 
impediments to market participants shifting order flow away from it. 
In particular, the Exchange notes that these examples of shifts in 
liquidity and market share, along with many others, have occurred 
within the context of market participants' existing duties of Best 
Execution and obligations under the Order Protection Rule under 
Regulation NMS.
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    The Exchange has revised its proposed schedule of credits and 
charges to provide increased overall incentives to members to increase 
their liquidity removal and adding activity on the Exchange by lowering 
the fees for adding liquidity on the Exchange. Increasing liquidity 
adding activity will also encourage additional liquidity removing 
activity on the Exchange. Additionally, changes to the qualifying 
credit and fee thresholds will incentivize participants to meet the 
qualifying tiers, and consequently, increase liquidity on the Exchange. 
Similarly, the Exchange believes it is reasonable to add the $0.0017 
fee to all three tapes in order to incentivize more liquidity removal 
activity. An increase in liquidity removal and adding activity on the 
Exchange will, in turn, improve the quality of the Nasdaq BX market and 
increase its attractiveness to existing and prospective participants. 
The Exchange believes it is reasonable to remove the $0.0018 credit to 
Tapes A and B and the $0.0017 credit to Tape C because the credit is no 
longer necessary given the proposed changes to the other credit 
thresholds. Generally, the proposed changes to the credits and charges 
will be comparable to, if not favorable to, those that its competitors 
provide.\12\
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    \12\ See n. 10, supra.
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    Moreover, the Exchange believes that it is reasonable to make 
adjustments to its QMM program because the changes to the $0.0001 tier 
will make it easier to qualify, and therefore, participants who 
currently do not meet the threshold will be incentivized to strive to 
meet the proposed threshold. The Exchange also believes it is 
reasonable to remove incentives that are not being met by QMMs and 
therefore, are not improving the quality of the Nasdaq BX Exchange.
    The Exchange notes that those participants that are dissatisfied 
with the proposed changes to the fees and credits are free to shift 
their order flow to competing venues that offer them lower charges or 
higher credits.
The Proposal Is an Equitable Allocation of Credits and Charges
    The Exchange believes its proposal will allocate its revised 
credits and charges fairly among its market participants. It is 
equitable for the Exchange to lower its credits to participants whose 
orders remove liquidity from the Exchange as a means of offsetting the 
costs of lowering the fees to incentivize increased liquidity adding 
activity. Likewise, it is equitable for the Exchange to reduce charges 
to participants whose orders add liquidity to the Exchange as a means 
of incentivizing liquidity adding activity. An increase in overall 
liquidity removal and addition activity on the Exchange will improve 
the quality of the Nasdaq BX market and increase its attractiveness to 
existing and prospective participants.
    The Exchange believes it is reasonable to remove the $0.0018 credit 
to Tapes A and B and the $0.0017 credit to Tape C because the credit is 
no longer necessary given the proposed changes to the other credit 
thresholds. Similarly, the Exchange believes it is reasonable to add 
the $0.0017 fee to all three tapes in order to incentivize more 
liquidity removal activity.
    Moreover, the Exchange believes it is reasonable to propose changes 
to the credit and fee thresholds because such changes will increase the 
incentive for participants to meet the qualifying tiers, and 
consequently, increase liquidity on the Exchange. The Exchange also 
believes that it is equitable to lower the threshold for the $0.0001 
discount provided to QMMs in order to incentivize participants to 
increase quoting at the NBBO and increase liquidity provision, and to 
remove the $0.0002 discount it offers to members that qualify as QMMs 
because no members are currently meeting the additional incentive.
    Although under the proposal, certain market participants will 
attain lower credits than they do now, those participants will also 
benefit from any improvements in the quality and attractiveness of the 
market that the lower charges will provide for liquidity adding 
activity. Moreover, any participant that wishes to avoid receiving 
lower credits is free to shift

[[Page 22504]]

their order flow to competing venues that provide more favorable 
pricing.
The Proposed Fee and Credit Are Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. As an initial matter, the Exchange believes that 
nothing about its volume-based tiered pricing model is inherently 
unfair; instead, it is a rational pricing model that is well-
established and ubiquitous in today's economy among firms in various 
industries--from co-branded credit cards to grocery stores to cellular 
telephone data plans--that use it to reward the loyalty of their best 
customers that provide high levels of business activity and incent 
other customers to increase the extent of their business activity. It 
is also a pricing model that the Exchange and its competitors have long 
employed with the assent of the Commission. It is fair because it 
incentivizes customer activity that increases liquidity, enhances price 
discovery, and improves the overall quality of the equity markets.
    The Exchange intends for its proposal to improve market quality for 
all members on the Exchange and by extension attract more liquidity to 
the market, improving market wide quality and price discovery. Although 
net adders of liquidity will benefit most from the proposal, this 
result is fair insofar as increased liquidity adding activity will help 
to improve market quality and the attractiveness of the Nasdaq BX 
market to all existing and prospective participants. And although 
certain participants will bear the costs of the proposed rule change 
through lower credits, this too is fair because these participants will 
also benefit from improvements in market quality. Moreover, any 
participant that does not wish to pay higher charges or receive lower 
credits is free to shift its order flow to a competing venue.
    Finally, the Exchange believes that its proposed amendment to its 
QMM program is not unfairly discriminatory because the lowering of the 
threshold and the removal of one of the tiers will apply to all 
members. The Exchange notes that none of its members will be affected 
directly by the proposed removal of the second tier discount insofar as 
no member currently qualifies as a QMM under the existing program.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intramarket Competition
    The Exchange does not believe that its proposal will place any 
category of Exchange participant at a competitive disadvantage. As 
noted above, all members of the Exchange will benefit from any increase 
in market activity that the proposal effectuates. Members may grow or 
modify their businesses so that they can receive credits or pay lower 
charges. Moreover, members are free to trade on other venues to the 
extent they believe that the fees assessed, and credits provided, are 
not attractive. As one can observe by looking at any market share 
chart, price competition between exchanges is fierce, with liquidity 
and market share moving freely between exchanges in reaction to fee and 
credit changes. The Exchange notes that the tier structure is 
consistent with broker-dealer fee practices as well as the other 
industries, as described above.
Intermarket Competition
    Addressing whether the proposed fees and credits could impose a 
burden on competition on other SROs that is not necessary or 
appropriate, the Exchange believes that its proposed modifications to 
its schedule of credits and charges will not impose a burden on 
competition because the Exchange's execution services are completely 
voluntary and subject to extensive competition both from the other 15 
live exchanges and from off-exchange venues, which include 34 
alternative trading systems. The Exchange notes that it operates in a 
highly competitive market in which market participants can readily 
favor competing venues if they deem fee levels at a particular venue to 
be excessive, or rebate opportunities available at other venues to be 
more favorable. In such an environment, the Exchange must continually 
adjust its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
    The proposed changes to the existing schedule of credits and 
charges is reflective of this competition because, as a threshold 
issue, the Exchange is a relatively small market so its ability to 
burden intermarket competition is limited. In this regard, even the 
largest U.S. equities exchange by volume has less than 17% market 
share, which in most markets could hardly be categorized as having 
enough market power to burden competition. Moreover, as noted above, 
price competition between exchanges is fierce, with liquidity and 
market share moving freely between exchanges in reaction to fee and 
credit changes. This is in addition to free flow of order flow to and 
among off-exchange venues which comprised more than 41% of industry 
volume for the month of March 2021.
    The Exchange intends for the proposed changes to its schedule of 
fees and credits, in the aggregate, to increase member incentives to 
engage in the removal and addition of liquidity on the Exchange. 
Similarly, the Exchange intends for the proposed changes to its QMM 
program to incentivize participants who currently do not meet the 
proposed thresholds, to increase their liquidity adding and NBBO 
quoting activity in order to become QMMs and to obtain the additional 
discount. These changes are pro-competitive and reflective of the 
Exchange's efforts to make it an attractive and vibrant venue to market 
participants.
    In sum, if the changes proposed herein are unattractive to market 
participants, it is likely that the Exchange will lose market share as 
a result. Accordingly, the Exchange does not believe that the proposed 
changes will impair the ability of members or competing order execution 
venues to maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\13\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings

[[Page 22505]]

to determine whether the proposed rule should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BX-2021-014 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2021-014. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BX-2021-014 and should be submitted on 
or before May 19, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
J. Matthew DeLesDernier,
Assistant Secretary.


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    \14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2021-08857 Filed 4-27-21; 8:45 am]
BILLING CODE 8011-01-P


