Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Notices 11343 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78f(b). 

4 15 U.S.C. 78f(b)(4) and (5). 

5NetCoalition 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)). 

6Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 

(‘‘Regulation NMS Adopting Release’’). 

7See Cboe EDGX U.S. Equities Exchange Fee 

Schedule, available at https://markets.cboe.com/us/ 

equities/membership/fee_schedule/edgx/. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–03715 Filed 2–23–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91159; File No. SR–Phlx– 

2021–09] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend the 

Exchange’s Pricing Schedule at Equity 

7, Section 3 

February 18, 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 February 

10, 2021, Nasdaq PHLX LLC (‘‘Phlx’’ 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

Exchange’s pricing schedule at Equity 7, 

Section 3, as described further below. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/phlx/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 proposes to amend its 

pricing schedule, at Equity 7, Section 3, 

to make a change to its Qualified Market 

Maker (‘‘QMM’’) Program. The QMM 

Program provides supplemental 

incentives to member organizations that 

meet certain quality standards in acting 

as market makers for securities on the 

Exchange. 

Specifically, the Exchange proposes to 

adjust upward the percentage of time for 

which a member organization must 

quote at the national best bid and offer 

(‘‘NBBO’’) during market hours to 

qualify as a QMM as set forth in Equity 

7, Section 3(c)(1). Currently, a member 

organization must quote at the NBBO at 

least 10 percent of the time during 

market hours in an average of at least 

400 securities per day during a month 

to qualify as a QMM. The Exchange 

proposes to increase the percentage to 

15 percent. 

The Exchange proposes to increase 

the threshold percentage of time in 

which a member organization must 

quote at the NBBO during a month to 

qualify as a QMM as a means of 

encouraging member organizations to 

increase liquidity adding activity, 

increase quoting at the NBBO, enhance 

price discovery, and improve the overall 

quality of the equity markets. The 

Exchange believes that QMM activity on 

the Exchange is already robust enough 

to accommodate the establishment of a 

higher qualification threshold without 

compromising the ability of existing 

QMMs to maintain their current statuses 

in the program. 

The Exchange also proposes to make 

conforming changes to Equity 7, Section 

3(c)(5) to add the proposed 15 percent 

NBBO requirement. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,3 in general, and furthers the 

objectives of Sections 6(b)(4) and 6(b)(5) 

of the Act,4 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 

discrimination between customers, 

issuers, brokers, or dealers. 

The Proposal Is Reasonable 

The Exchange’s proposed changes to 

its QMM Program are 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’. . . .’’ 5

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.’’ 6

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. 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.7

Within this environment, market 

participants can freely and often do shift 


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11344 Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Notices 

8The Exchange perceives no regulatory, 

structural, or cost impediments to market 

participants shifting order flow away from it. In 

particular, the Exchange notes that such shifts in 

liquidity and market share occur within the context 

of market participants’ existing duties of Best 

Execution and obligations under the Order 

Protection Rule under Regulation NMS. 

their order flow among the Exchange 

and competing venues in response to 

changes in their respective pricing 

schedules.8 Within the foregoing 

context, the proposal represents a 

reasonable attempt by the Exchange to 

increase its market share relative to its 

competitors. 

The Exchange’s proposal to increase 

the threshold percentage of time in 

which a member organization must 

quote at the NBBO during a month in 

order to qualify for the QMM 

designation pursuant to Equity 7, 

Section 3(c)(1), will encourage member 

organizations to increase liquidity 

adding activity, enhance price 

discovery, and improve the overall 

quality of the equity markets. The 

Exchange believes that it is appropriate 

to periodically reassess and recalibrate 

the baselines for its QMM qualifications 

when participant activity is adequate to 

support doing so. In this instance, QMM 

activity on the Exchange is robust 

enough to accommodate the 

establishment of a higher qualification 

threshold without compromising the 

ability of existing QMMs to maintain 

their current statuses in the program. 

The Proposal Is an Equitable Allocation 

The Exchange believes its proposal 

allocates its QMM qualifications fairly 

among its market participants. The 

Exchange also believes that its proposal 

to amend the qualification criteria for 

the QMM Program is an equitable 

allocation because it will bolster the 

effectiveness of the QMM program for 

all market participants, which is an 

important contributor to the quality of 

the Nasdaq market, by ensuring that 

qualified market participants are 

contributing to increased liquidity 

adding activity, enhanced price 

discovery, and improvements to the 

overall quality of the equity markets. 

The Proposal Is Not Unfairly 

Discriminatory 

The Exchange believes that the 

proposal is not unfairly discriminatory. 

As an initial matter, the Exchange 

believes that nothing about its QMM 

qualification criteria 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 cobranded 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 increase participation in its QMM 

program, which in turn would improve 

market quality for all member 

organizations on the Exchange. 

The Exchange’s proposal to raise the 

QMM qualification requirement at 

Equity 7, Section 3(c)(1), is not unfairly 

discriminatory because although any 

member organization that currently 

qualifies as a QMM will need to quote 

at the NBBO for a higher percentage of 

the time than they would need to do 

now, this is fair because meeting the 

heightened requirement will improve 

market quality and enhance price 

discovery. 

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 participants at a competitive 

disadvantage. As noted above, all 

members of the Exchange will benefit 

from an increase in the addition of 

liquidity by those that choose to meet 

the qualifications. Members may grow 

their businesses so that they have the 

capacity to qualify as a QMM. Moreover, 

members are free to trade on other 

venues to the extent they believe that 

the qualification criteria 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. 

Moreover, the Exchange’s proposal to 

modify its QMM program will not 

burden intramarket competition because 

the QMM Program, as modified, will 

continue to provide all member 

organizations with an opportunity to 

qualify as a QMM if they improve the 

market by providing significant quoting 

at the NBBO in a large number of 

securities which the Exchange believes 

will improve market quality. 

Intermarket Competition 

Addressing whether the proposed fee 

could impose a burden on competition 

on other SROs that is not necessary or 

appropriate, the Exchange believes that 

its proposed modifications to its QMM 

qualification standards 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 live exchanges and from offexchange venues, which include 

alternative trading systems that trade 

national market system stock. 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 make 

adjustments 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. 

In sum, the Exchange intends for the 

modified QMM Program to increase 

member organizations incentives to 

quote securities at the NBBO for at least 

15 percent of the day, which stands to 

improve the quality of the Exchange’s 

market and its attractiveness to 

participants; however, if the proposal is 

unattractive to market participants, it is 

likely that the Exchange will either fail 

to increase its market share or even lose 

market share as a result. Accordingly, 

the Exchange does not believe that the 

proposed modification to the QMM 

qualifications 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. 


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Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Notices 11345 

9 15 U.S.C. 78s(b)(3)(A)(ii). 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Exchange initially filed rule changes 

relating to its co-location services with the 

Securities and Exchange Commission 

(‘‘Commission’’) in 2010. See Securities Exchange 

Act Release No. 62960 (September 21, 2010), 75 FR 

59310 (September 27, 2010) (SR–NYSE–2010–56). 

The Exchange is an indirect subsidiary of 

Intercontinental Exchange, Inc. (‘‘ICE’’). Through its 

ICE Data Services (‘‘IDS’’) business, ICE operates a 

data center in Mahwah, New Jersey (the ‘‘data 

center’’), from which the Exchange provides colocation services to Users. 

5For purposes of the Exchange’s co-location 

services, a ‘‘User’’ means any market participant 

that requests to receive co-location services directly 

from the Exchange. See Securities Exchange Act 

Release No. 76008 (September 29, 2015), 80 FR 

60190 (October 5, 2015) (SR–NYSE–2015–40). As 

specified in the New York Stock Exchange Price 

List (‘‘Price List’’), a User that incurs co-location 

fees for a particular co-location service pursuant 

thereto would not be subject to co-location fees for 

the same co-location service charged by the 

Exchange’s affiliates NYSE American LLC, NYSE 

Arca, Inc., NYSE Chicago, Inc., and NYSE National, 

Inc. (together, the ‘‘Affiliate SROs’’). Each Affiliate 

SRO has submitted substantially the same proposed 

rule change to propose the changes described 

herein. See SR–NYSEAMER–2021–08, SR– 

NYSEArca–2021–11, SR–NYSECHX–2021–02, and 

SR–NYSENAT–2021–03. 

6See Securities Exchange Act Release No. 90732 

(December 18, 2020), 85 FR 84443 (December 28, 

2020) (SR–NYSE–2020–73, SR–NYSEAMER–2020– 

66, SR–NYSEArca–2020–82, SR–NYSECHX–2020– 

26, and SR–NYSENAT–2020–28) (Notice of Filings 

of Amendment No. 1 and Order Granting Approval 

of Proposed Rule Changes, Each as Modified by 

Amendment No. 1, Amending the Exchanges’ CoLocation Services To Establish Procedures for the 

Allocation of Cabinets to Co-Located Users if 

Cabinet Inventory Falls Below Certain Thresholds). 

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.9

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 

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– 

Phlx–2021–09 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–Phlx–2021–09. 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–Phlx–2021–09 and should 

be submitted on or before March 17, 

2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–03724 Filed 2–23–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91154; File No. SR–NYSE– 

2021–12] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Establish Procedures for the 

Allocation of Power to Its Co-Located 

Users 

February 18, 2021. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b-4 thereunder,3

notice is hereby given that, on February 

4, 2021, New York Stock Exchange LLC 

(‘‘NYSE’’ or the ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to establish 

procedures for the allocation of power 

to its co-located Users. The proposed 

rule change is available on the 

Exchange’s website at www.nyse.com, 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 

self-regulatory organization 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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to establish 

procedures for the allocation of power 

to its co-located 4 Users.5

Recently, the Exchange added 

procedures for the allocation of cabinets 

(‘‘Existing Procedures’’) 6 in colocation 

should it become needed, which 

procedures are not currently being used. 


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