Supporting Statement (2023 Fee Tiers Proposal)

SUPPORTING STATEMENT for the Paperwork Reduction Act Information Collection
Submission for Rule 6b-1
Request for a New OMB Control Number
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44
U.S.C. Section 3501 et seq.
A.

JUSTIFICATION
1.

Necessity of Information Collection

National securities exchanges (“exchanges”) that trade NMS stocks maintain pricing
schedules that set forth the transaction pricing they apply to their broker-dealer members that
execute orders on their trading platforms. Some exchanges offer differentiated incentives, where
the member receives lower fees or higher rebates as the number of shares it executes on the
exchange reaches successively higher predefined volume-based levels (“tiers”). The transaction
volume that qualifies a member for a better fee or rebate tier typically is measured as a fraction
of total market volume, rather than a fixed value.
The Securities Exchange Act of 1934 (“Exchange Act”) requires that exchange pricing
proposals, among other things, provide for the “equitable allocation of reasonable dues, fees, and
other charges among its members and issuers and other persons using its facilities” that “are not
designed to permit unfair discrimination between customers, issuers, brokers, or dealers” and “do
not impose any burden on competition not necessary or appropriate in furtherance of the
purposes of” the Exchange Act.1 Moreover, Section 11A of the Exchange Act directs the
Commission to facilitate the establishment of a national market system in accordance with
specified Congressional findings. Among the Congressional findings are assuring (i) fair
competition among brokers and dealers and among exchange markets, and (ii) the practicability
of brokers executing investors’ orders in the best market.2
The Commission is concerned about the effect of volume-based exchange transaction
pricing on competition among exchange members. For example, lower-volume members may
find it difficult to compete with higher-volume members for customer order flow because they
are not able to offer to customers the best transaction pricing, which exchanges reserve for their
higher-volume members. In addition, volume-based exchange transaction pricing creates a
conflict of interest between members and customers on account of the incentive for a member to
make routing decisions to qualify for volume tiers and the fact that members typically retain for
themselves the benefits of tiered exchange transaction pricing, which can reward a member with
lower fees and higher rebates that also apply to the member’s proprietary trading. Further, the
Commission is concerned volume-based exchange transaction pricing may impose a burden on
competition among exchanges.

1

15 U.S.C. 78f(b)(8).

2

15 U.S.C. 78k-1(a)(1)(C)(ii) and (iv).

To address these concerns, pursuant to the statutory authority provided by the Exchange
Act, including Sections 6, 11A(a)(1), 17(a), and 23(a) thereof,4 the Commission proposed new
Rule 6b-1,5 which comprises the following components.
3

1. Rule 6b-1(a) prohibits volume-based exchange transaction pricing in connection with
the execution of agency or riskless principal orders in NMS stocks.
2. If an exchange offers volume-based transaction pricing in connection with the
execution of member proprietary orders, then:
a. Rule 6b-1(b) contains an anti-evasion clause with two parts. Rule 6b-1(b)(1)
would require exchanges to have rules to require members to engage in
practices that facilitate the exchange’s ability to comply with the prohibition
on volume-based exchange transaction pricing in connection with the
execution of agency or riskless principal orders. Rule 6b-1(b)(2) would
require exchanges to establish, maintain, and enforce written policies and
procedures that are reasonably designed to detect and deter members from
receiving volume-based exchange transaction pricing in connection with the
execution of agency or riskless principal orders in NMS stocks.
b. Rule 6b-1(c) would require exchanges to submit electronically to the
Commission transparency disclosures. Those monthly disclosures would be
machine-readable structured data tables of information, including the number
of members that qualify for each volume-based transaction pricing tier an
exchange offers.
2.

Purpose and Use of the Information Collection

1. Rule 6b-1(a)
The collection of information associated with Rule 6b-1(a) would be exchange rule
filings on Form 19b-4 (3235-0045) to eliminate volume-based pricing for agency or riskless
principal orders from their pricing schedules. The collection of information would bring the
exchanges into compliance with Rule 6b-1(a), which would foster competition among brokerdealers and mitigate conflicts of interest for members when routing agency-related volume.
2. Rule 6b-1(b)(1)
Proposed Rule 6b-1(b)(1) would assist exchanges in complying with proposed Rule 6b1(a) by requiring exchanges to have rules that require members to engage in practices to better
enable the exchange to assess its pricing in compliance with the proposed rule. If an exchange
decides to adopt or amend a rule under this provision, it would file it on Form 19b-4.
3

See 15 U.S.C. 78a.

4

See 15 U.S.C. 78k-1, 78q, and 78w(a).

5

See Securities Exchange Act Release No. 98766 (Oct. 19, 2023), 88 FR 76282 (Nov. 6, 2023).

2

3. Rule 6b-1(b)(2)
The collection of information under proposed Rule 6b-1(b)(2) would be a requirement to
adopt written policies and procedures reasonably designed to detect and deter members from
receiving volume-based exchange transaction pricing in connection with the execution of agency
or riskless principal orders in NMS stocks.
4. Rule 6b-1(c)
The collection of information under proposed Rule 6b-1(c) would be transparency
disclosures submitted electronically to the Commission on a monthly basis. The transparency
disclosures would be machine-readable structured data tables of information, including the
number of members that qualify for each volume-based transaction pricing tier an exchange
offers. The disclosures would show how an exchange’s volume-based transaction pricing for
member proprietary orders applies across its membership, which would enhance the transparency
of an exchange’s tiered pricing structure and enhance the ability of members, other exchanges,
and the public in considering and commenting on proposed volume-based pricing changes
applicable to member proprietary volume.
3.

Consideration Given to Improved Information Technology

Proposed Rule 6b-1 uses information technology to lessen the burden on the respondents.
The disclosure requirements of Rule 6b-1(c) allow all data to be submitted electronically to the
Commission.
4.

Duplication

The proposed rule would not result in, or require the collection of, duplicate information
that is otherwise available in a similar form.
5.

Effects on Small Entities

The Commission does not believe that the requirements under Rule 6b-1 would affect
small entities. The proposed rule would apply only to national securities exchanges registered
with the Commission that trade NMS stocks. Rule 0-10(e) states that the term “small business,”
when referring to an exchange, means any exchange that has been exempted from the reporting
requirements of 17 CFR 242.601 (Rule 601 of Regulation NMS), and is not affiliated with any
person (other than a natural person) that is not a small business or small organization as defined
in Rule 0-10.6 The exchanges subject to this proposed rulemaking do not satisfy this standard.
Therefore, none of the exchanges that would be subject to the proposed rule are “small entities”
for purposes of the RFA.

6

See 17 CFR 240.0-10(e).

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6.

Consequences of Not Conducting Collection

As discussed above, absent proposed Rule 6b-1, volume-based exchange transaction
pricing would continue to be offered for agency and riskless principal orders, which would not
address burdens on competition among exchange members and among exchanges caused by
tiered exchange transaction pricing, as well as leave in place a conflict of interest between
members and customers when members make routing decisions to qualify for volume tiers and
the fact that members typically retain for themselves the benefits of tiered exchange transaction
pricing, which can reward a member with lower fees and higher rebates that also apply to the
member’s proprietary trading.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

Proposed Rule 6b-1(c) requires respondents to submit certain disclosures to the
Commission within five calendars days after the end of each calendar month. The content of the
disclosures is intended to show a summary of the volume-based transaction tiers applicable to the
execution of proprietary orders in NMS stocks for the account of a member and a count of how
many members qualify for each pricing tier. Respondents generally review and change their
transaction fee schedules on as frequently as a monthly basis. Therefore, disclosures on a
monthly basis would provide the Commission and the public with readily available information
to assess the impact of proposed tiered pricing changes.
The proposed rule also requires respondents to maintain records for a period of not less
than five years. This time period is consistent with existing requirements for national securities
exchanges and national securities associations pursuant to Rule 17a-1 under the Exchange Act.
8.

Consultations Outside the Agency

The Commission has issued a release soliciting comment on the new “collection of
information” requirements and associated paperwork burdens. A copy of the release is attached.
Comments on Commission releases are generally received from registrants, investors, and other
market participants. In addition, the Commission and staff participate in ongoing dialogue with
representatives of various market participants through public conferences, meetings, and
informal exchanges. Any comments received on this proposed rulemaking will be posted on the
Commission’s public website, and made available through
https://www.sec.gov/rules/proposed.shtml. The Commission will consider all comments received
prior to publishing the final rule, and will explain in any adopting release how the final rule
responds to such comments, in accordance with 5 C.F.R. 1320.11(f).
9.

Payment or Gift

No payment or gift is provided to respondents.

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10.

Confidentiality

The collection of information under proposed Rule 6b-1(a) and 6b-1(b)(1) would not be
confidential because exchange proposed rule changes filed with the Commission on Form 19b-4
are public information and posted publicly on exchange websites. Similarly, the collection of
information under proposed Rule 6b-1(c) also would not be confidential. Rather, exchanges
would be required to submit electronically to the Commission the transparency disclosure
required under proposed Rule 6b-1(c) and the Commission would make that information publicly
available. That information would not contain the names of any exchange member.
The collection of information under proposed Rule 6b-1(b)(2) concerning the written
policies and procedures would contain information about an exchange’s regulatory program, and
the proposed rule would not require exchanges to make those materials public. Where the
Commission requests that an exchange produce those documents, an exchange can request
confidential treatment of the information. If such confidential treatment request is made, the
Commission anticipates that it will keep the information confidential subject to applicable law.
11.

Sensitive Questions

No information of a sensitive nature will be required under this collection of information.
This information collection does not collect personally identifiable information (“PII”). The
agency has determined that a system of records notice (“SORN”) and privacy impact assessment
(“PIA”) are not required in connection with the collection of information.
12.

Burden of Information Collection

As noted above, the proposed rule requires the collection of four categories of data.
1. Rule 6b-1(a) prohibits volume-based transaction pricing in connection with the
execution of agency or riskless principal orders in NMS stocks and would require
some exchanges to submit proposed rule change filings on Form 19b-4 to revise their
pricing schedules to comply with the prohibition.
2. Rule 6b-1(b)(1) requires equities exchanges that offer volume-based transaction
pricing for member proprietary volume to have rules to require members to engage in
practices that facilitate the exchange’s ability to comply with the prohibition on
volume-based exchange transaction pricing in connection with the execution of
agency or riskless principal orders. New or amended rules would be filed with the
Commission on Form 19b-4.
3. Rule 6b-1(b)(2) requires equities exchanges that offer volume-based transaction
pricing for member proprietary volume to establish, maintain, and enforce written
policies and procedures that are reasonably designed to detect and deter members
from receiving volume-based exchange transaction pricing in connection with the
execution of agency or riskless principal orders in NMS stocks.

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4. Rule 6b-1(c) requires equities exchanges that offer volume-based transaction pricing
for member proprietary volume to submit electronically to the Commission
transparency disclosures, which include a count of the number of members that
qualify for each volume-based transaction pricing tier an exchange offers.
Each of these will be discussed below.
The respondents to these collections of information would be national securities
exchanges that offer volume-based transaction fees, rebates, or other incentives in connection
with the execution of proprietary orders in NMS stocks for the account of a member. Currently,
while there are 16 national securities exchanges that trade NMS stocks, only 13 offer volumebased transaction pricing. Therefore, there are 13 estimated respondents.
Total Initial and Annual Reporting and Recordkeeping Burdens
1. Rule 6b-1(a) – Prohibition on Volume-Based Pricing for AgencyRelated Volume
As discussed above, proposed Rule 6b-1(a) would require equities exchanges that offer
volume-based transaction pricing to file a rule change with the Commission to update their price
list, if necessary, to eliminate any existing volume-based pricing that would not comply with the
proposed rule. This would be a one-time initial burden, and exchanges should not incur an
ongoing burden once they have updated their rules. However, the PRA burden associated with
the collection of information resulting from exchange rule filings that would be required
pursuant to proposed Rule 6b-1(a) would be covered by the existing PRA burden estimates for
Rule 19b-4 because those changes would be filed on Form 19b-4.7
2. Rule 6b-1(b)(1) – Rules to Prevent Evasion
Proposed Rule 6b-1(b)(1) would require an equities exchange that offers volume-based
transaction pricing to have rules to require its members to engage in practices that facilitate the
exchange’s ability to comply with the prohibition in proposed Rule 6b-1(a). Similar to the
burden for Rule 6b-1(a), this would be a one-time initial burden, although an exchange may
decide to amend the rule it adopts pursuant to proposed Rule 6b-1(b)(1) from time to time.
However, the PRA burden associated with the collection of information resulting from exchange
rule filings that would be required pursuant to proposed Rule 6b-1(b)(1) would also be covered
by the existing PRA burden estimates for Rule 19b-4 because those changes would be filed on
Form 19b-4.8

7

8

See SEC File No. 270-38, OMB Control No. 3235-0045 (June 21, 2023), available at
https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202304-3235-017. The Commission believes
the burden estimate for Form 19b-4 is broad enough to encompass the additional collection of information
from proposed Rule 6b-1(a).
See id. The Commission believes the burden estimate for Form 19b-4 is broad enough to encompass the
additional collection of information from proposed Rule 6b-1(b)(1).

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3. Rule 6b-1(b)(2) – Policies and Procedures to Prevent Evasion
Proposed Rule 6b-1(b)(2) would require exchanges to establish, maintain, and enforce
written policies and procedures to detect and deter members from receiving volume-based
exchange transaction pricing in connection with the execution of agency or riskless principal
orders in NMS stocks. Exchanges would incur an initial burden and an annual ongoing burden
associated with proposed Rule 6b-1(b)(2). The Commission believes that many exchanges
generally already have rules and policies and procedures in place to ensure that members are
correctly marking their orders, though those policies and procedures may need to be updated to
ensure compliance with the proposed rule in the context of exchange transaction pricing.
Exchanges, at a minimum, would be required to review their existing policies and
procedures. Certain exchanges may need to supplement or revise their policies and procedures
to ensure that they are reasonably designed to deter and detect members from receiving tiered
pricing on orders for which tiered pricing is prohibited. Although the exact nature and extent of
compliance with proposed Rule 6b-1(b)(2) would likely differ based on the existing policies and
procedures of each respondent, the Commission estimates that the one-time, initial burden to
update or adopt any additional written policies and procedures required under proposed Rule 6b1(b)(2) would be approximately 50 hours per exchange or 650 burden hours across 13 exchanges
that have volume-based transaction pricing.9 The total annualized burden hours across 13
exchanges would be 16.67 per exchange or 216.67 across all 13 exchanges.
The 13 equities exchanges that have volume-based transaction pricing would incur
annual ongoing burden hours to maintain and review their policies and procedures adopted under
proposed Rule 6b-1(b)(2) to ensure their effectiveness. Those exchanges also would need to
review for compliance pursuant to their policies and procedures. The Commission estimates that
each exchange would likely spend an average of 25 hours per year on an ongoing basis, for a
total of 325 hours across all 13 exchanges.10
4. Rule 6b-1(c) – Transparency for Volume-Based Pricing on Member
Proprietary Orders

9

The Commission derived the total estimated burdens from the following estimates: (Attorney at 30 hours)
+ (Compliance Counsel at 10 hours) + (Chief Compliance Officer at 5 hours) + (General Counsel at 5
hours) = 50 burden hours. 50 burden hours per exchange x 13 respondents = 650 total burden hours. The
Commission’s estimate is informed by the estimated filing burden for Form 19b-4 (34 hours). See
Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Form 19b4
(Apr. 18, 2023), available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=2023043235-017. The Commission believes that the policies and procedures required under proposed Rule 6b1(b)(2) may require more effort to prepare than the proposed rule change required under proposed Rule 6b1(b)(1).

10

The Commission derived the total estimated burdens from the following estimates: (Compliance Attorney
at 12 hours) + (Compliance Manager at 8 hours) + (Business analyst at 5 hours) = 25 burden hours. 25
burden hours per exchange x 13 respondents = 325 total burden hours. The ongoing burden hours
associated with proposed Rule 6b-1(b)(2) is estimated to be lower than the initial burdens because the
Commission expects it to be less burdensome to maintain and review existing policies and procedures than
to establish new ones.

7

Proposed Rule 6b-1(c) would require exchanges that offer volume-based transaction
pricing for the execution of proprietary orders in NMS stocks for the account of a member to
submit electronically to the Commission aggregated information regarding how many members
qualify for those pricing tiers. These submissions would be accessible to the public via the
EDGAR system and would reflect each exchange’s particular pricing structure. The exchanges
would likely incur an initial burden and an annual ongoing burden associated with Rule 6b-1(c).
Exchanges have ready access to all of the underlying information and data necessary to comply
with proposed Rule 6b-1(c) because the disclosures are summaries of the pricing schedules that
exchanges maintain and the exchanges know the number of members that qualify for a particular
pricing tier because they calculate the fees, rebates, and other incentives applicable to their
members on a monthly basis. Consequently, the proposed rule would not require exchanges to
acquire or record an entirely new and unfamiliar set of information. The exchanges, however,
would be required to present the required information and data in a new structured data format
and submit such information electronically to the Commission on a monthly basis.
Exchange pricing schedules are publicly available and identify all of the exchange’s
volume-based transaction fees, rebates, and other incentives. To comply with proposed Rule 6b1(c)(2), the exchange would have to identify each volume-based transaction fee, rebate, and
other incentive, and: (i) use a label to identify the base fee or rebate, (ii) use a label to identify
each pricing tier that corresponds to the label used in the exchange’s pricing schedule, (iii)
identify the amount of the fee, rebate, or other incentive, (iv) provide an explanation of the tier
requirement, and (v) provide the total number of members that qualified for the base fee, base
rebate, or each tier during the month. Parts (i) through (iv) would require the exchange to take
information from its publicly accessible pricing schedule and put it into the required structured
data format. The information required for part (v) would be readily available to the exchange
since it assesses transaction prices to its members on a monthly basis in accordance with its
pricing schedule and thus knows which members qualify for which tiers, though exchanges
currently are not required to publicly disclose a tally of that information by tier.
Furthermore, proposed Rule 6b-1(c)(1) requires the exchange to identify the number of
members that executed proprietary orders in NMS stocks for the member’s account on the
exchange during the month. Exchanges do not currently publicly disclose a tally of this
information. However, exchanges generally have ready access to trading information of their
members that would reveal this information and exchanges generally know which of their
members are engaged in an agency business, which are engaged in proprietary trading, and
which are engaged in both because exchanges broadly know about what lines of business their
members are engaged in as part of their membership registration. Accordingly, the burden on
exchanges to calculate the number of members engaged in proprietary trading would be low.
The Commission estimates that each exchange would incur 58 initial burden hours for the
creation of new tables to ensure that data responsive to the proposed disclosure requirements is
correctly collected and formatted, and to set up automated programs where appropriate, or 754
total initial burden hours across 13 exchanges.11 The annualized burden would be 19.33 per

11

The Commission derived the total estimated burdens from the following estimates: (Sr. Programmer at 25
hours) + (Sr. Systems Analyst at 10 hours) + (Compliance Manager at 10 hours) + (Compliance Attorney at

8

exchange and 251.33 across all 13 exchanges. The Commission does not believe the
information required to be aggregated and included in disclosures made pursuant to proposed
Rule 6b-1(c) would require respondents to acquire new hardware or systems to process the
information required in the reports. Rather, the exchanges’ initial burden would consist of
creating and formatting a table that would be responsive to the requirements of proposed Rule
6b-1(c). As described above, this would require the exchanges to convert a portion of the
information available on their publicly accessible pricing schedules into a structured data format.
Once created, these tables should not change unless the exchanges create new pricing tiers or
change the requirements or dollar amounts of existing tiers.
Furthermore, because exchanges are not currently subject to EDGAR filing requirements,
equities exchanges would incur a one-time compliance burden of submitting Form ID in order to
be able to submit the disclosures electronically to the Commission through EDGAR.
Respondents would apply for access to EDGAR using Form ID and receive access codes to
submit documents through the EDGAR system. The Commission estimates that each filer that
currently does not have access to EDGAR would incur an initial, one-time burden of 0.30 hours
to complete and submit a Form ID.12 However, the PRA burden associated with completing and
submitting a Form ID would be covered by the existing PRA burden estimates for Form ID.13
The 13 equities exchanges that have volume-based transaction pricing also would incur
annual ongoing burden hours to aggregate and disseminate the information required under
proposed Rule 6b-1(c). Proposed Rule 6b-1(c) would require exchanges to submit electronically
updated information each month. An exchange generally would not need to update the
disclosure information required under proposed Rule 6b-1(c)(2)(i)-(iv) unless the exchange
amends its pricing schedule, in which case the exchange would need to make targeted changes to
these disclosures in accordance with the changes it makes to its pricing schedule. The
Commission expects that the disclosures required by proposed Rule 6b-1(c)(1) and Rule 6b1(c)(2)(v) would possibly change and could need to be updated as frequently as each month.
The Commission believes the exchanges would use automated programs to meet the ongoing
monthly reporting obligation under proposed Rule 6b-1(c) but each report may require staff to
verify the accuracy of the information. The Commission estimates that each exchange would
incur 8 burden hours per monthly report for a total of 96 ongoing burden hours on an annual

8 hours) + (Director of Compliance at 5 hour) = 58 burden hours. 58 burden hours per exchange x 13
respondents = 754 total burden hours.
12

Form ID (OMB control number 3235-0328) must be completed and filed with the Commission by all
individuals, companies, and other organizations who seek access to file electronically on EDGAR.
Accordingly, a filer that does not already have access to EDGAR must submit a Form ID, along with the
notarized signature of an authorized individual, to obtain an EDGAR identification number and access
codes to file on EDGAR. See Supporting Statement for the Paperwork Reduction Act Information
Collection Submission for Form ID (Dec. 20, 2021), available at
https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202112-3235-003 (stating that it takes 0.3
hours to prepare Form ID).

13

See id.

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basis.14 Therefore, the Commission estimates 1,248 total ongoing annual burden hours across
13 exchanges.15

PRA Summary Table
Name of
Information
Collection

Type of Burden

No.
of
Resp
onde
nts

Initial
Burden
Hours
per
Respon
dent

Initial Burden
Annualized
per Entity per
Response

Ongoing
Annual
Burden
per
Responde
nt

Total
Annual
Burden

Rule 6b1(b)(2)—Initial
Burden
Rule 6b1(b)(2)—
Ongoing
Burden
Rule 6b-1(c)—
Initial Burden
Rule 6b-1(c)—
Ongoing
Burden

Recordkeeping

13

50

16. 67

-

216.67

Recordkeeping

13

-

-

25

325

Recordkeeping

13

58

19.33

-

251.33

Recordkeeping

13

-

-

96

1,248

Total

13.

2,041

Costs to Respondents

Not applicable. It is not anticipated that the respondent exchanges will have to incur any
capital and/or start-up costs to comply with the proposed 6b-1, nor is it anticipated that the
respondents will have to incur any external operational or maintenance costs – other than the
internal costs provided for in Item 12 – to comply with the proposed rule.
14.

Cost to Federal Government

The federal government will not incur a cost in connection with the collection of this
information.
15.

Changes in Burden

Not applicable. The Commission is proposing Proposed Rule 6b-1 for the first time.

14

The Commission derived the total estimated burdens from the following estimates: (Compliance Attorney
at 6 hours) + (Compliance Manager at 2 hours) = 8 burden hours per monthly filing. 8 burden hours x 12
months = 96 annual burden hours per respondent.

15

96 annual burden hours per exchange x 13 respondents = 1,248 total burden hours per year.

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16.

Information Collection Planned for Statistical Purposes

Not applicable. The information collection is not used for statistical purposes.
17.

OMB Expiration Date Display Approval

The Commission is not seeking approval to not display the OMB approval expiration
date.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

This collection complies with the requirements in 5 CFR 1320.9.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
This collection does not involve statistical methods.

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