Notice2021-12747
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 17, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 115 (Thursday, June 17, 2021)</title>
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[Federal Register Volume 86, Number 115 (Thursday, June 17, 2021)]
[Notices]
[Pages 32292-32298]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-12747]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92160; File No. SR-NYSE-2021-35]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
June 11, 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 May 27, 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 self-
regulatory organization. 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\ 15 U.S.C. 78a.
\3\ 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 amend its Price List to (1) introduce
three adding credit tiers (Tiers 3, 5 and 6 Adding Credits) and re-
number current Tier 3, and (2) relocate and modify certain fees, and
introduce new fees, for transactions that remove liquidity from the
Exchange in Tape A, B and C securities. The Exchange proposes to
implement the fee changes effective June 1, 2021. The proposed rule
change is available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
[[Page 32293]]
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to (1) introduce
three adding credit tiers (Tiers 3, 5 and 6 Adding Credits) and re-
number current Tier 3, and (2) relocate and modify certain fees, and
introduce new fees, for transactions that remove liquidity from the
Exchange in Tape A, B and C securities.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member
organizations to send additional liquidity to the Exchange.
The Exchange proposes to implement the fee changes effective June
1, 2021.
Background
Current Market and Competitive Environment
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \4\
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\4\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
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While Regulation NMS has enhanced competition, it has also fostered
a ``fragmented'' market structure where trading in a single stock can
occur across multiple trading centers. When multiple trading centers
compete for order flow in the same stock, the Commission has recognized
that ``such competition can lead to the fragmentation of order flow in
that stock.'' \5\ Indeed, equity trading is currently dispersed across
16 exchanges,\6\ 31 alternative trading systems,\7\ and numerous
broker-dealer internalizers and wholesalers, all competing for order
flow. Based on publicly available information, no single exchange has
more than 20% market share.\8\ Therefore, no exchange possesses
significant pricing power in the execution of equity order flow. More
specifically, the Exchange's market share of trading in Tape A, B and C
securities combined is less than 12%.
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\5\ See Securities Exchange Act Release No. 61358, 75 FR 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\6\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at <a href="http://markets.cboe.com/us/equities/market_share/">http://markets.cboe.com/us/equities/market_share/</a>. See generally <a href="https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html">https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html</a>.
\7\ See FINRA ATS Transparency Data, available at <a href="https://otctransparency.finra.org/otctransparency/AtsIssueData">https://otctransparency.finra.org/otctransparency/AtsIssueData</a>. A list of
alternative trading systems registered with the Commission is
available at <a href="https://www.sec.gov/foia/docs/atslist.htm">https://www.sec.gov/foia/docs/atslist.htm</a>.
\8\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at <a href="http://markets.cboe.com/us/equities/market_share/">http://markets.cboe.com/us/equities/market_share/</a>.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
order flow that would provide displayed liquidity on an Exchange,
member organizations can choose from any one of the numerous currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain exchange transaction fees that relate to
orders that would provide liquidity on an exchange.
In response to this competitive environment, the Exchange has
established incentives for its member organizations who submit orders
that provide liquidity on the Exchange. The proposed fee change is
designed to attract additional order flow to the Exchange by
incentivizing member organizations to submit additional displayed
liquidity to the Exchange.
Proposed Rule Change
Adding Tiers
The Exchange currently offers three adding tiers (Tier 1 Adding
Credit, Tier 2 Adding Credit, and Tier 3 Adding Credit) that provide
credits of $0.0022, $0.0020, and $0.0018 per share, respectively, for
all orders, other than MPL and Non-Display Reserve orders, that add
liquidity to the NYSE when certain requirements are met. The Exchange
proposes to introduce three similar adding credit tiers numbered 3, 5
and 6 and re-number current Tier 3 as Tier 4, as follows.
Tier 3 Adding Credit
The Exchange proposes a new Tier 3 Adding Credit for orders, other
than MPL and Non-Display Reserve orders, that add liquidity to the
Exchange. As proposed, the Exchange would provide a $0.0019 credit in
Tape A securities if a member organization has an average daily volume
(``ADV'') that adds liquidity to the Exchange during the billing month
(``Adding ADV''),\9\ excluding Supplemental Liquidity Provider
(``SLP'') and Designated Market Maker (``DMM'') Adding ADV, that is at
least 0.35% of NYSE CADV. In addition, member organizations that meet
the above requirements and add liquidity, excluding liquidity added as
an SLP, in Tape B and C Securities of at least 0.20% of Tape B and Tape
C CADV combined, would receive an additional $0.0001 per share.
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\9\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
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The purpose of this proposed change is to incentivize member
organizations to increase the liquidity-providing orders in the Tape A
securities they send to the Exchange, which would support the quality
of price discovery on the Exchange and provide additional liquidity for
incoming orders. As noted above, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. Because the proposed tier
requires a member organization to achieve a minimum volume of its
trades in orders that add liquidity, the Exchange believes that the
proposed credits would provide an incentive for all member
organizations to send additional liquidity to the Exchange in order to
qualify for them. The Exchange does not know how much order flow member
organizations choose to route to other exchanges or to off-exchange
venues. Since the proposed tier is new, the Exchange does not know how
many member organizations could qualify for the new tiered rate based
on their current trading profile on the Exchange and if they choose to
direct order flow to the NYSE. However, without having a view of member
organization's activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule
[[Page 32294]]
change would result in any member organization directing orders to the
Exchange in order to qualify for the new tier.
In connection with this proposed change, current Tier 3 Adding
Credit would become Tier 4 Adding Credit. The next proposed tier would
follow current Tier 3 Adding Credit as renumbered in the Price List.
Tier 5 Adding Credit
The Exchange proposes a new Tier 5 Adding Credit for orders, other
than MPL and Non-Display Reserve orders, that add liquidity to the
Exchange. As proposed, the Exchange would provide a $0.0017 credit in
Tape A securities if a member organization's Adding ADV, excluding
liquidity added as an SLP and as a DMM, is at least 0.29% of NYSE CADV.
Further, member organizations that meet the above requirements and add
liquidity, excluding liquidity added as an SLP, in Tape B and C
Securities of at least 0.20% of Tape B and Tape C CADV combined, would
receive an additional $0.0001 per share.
The purpose of this proposed change is to incentivize member
organizations to increase the liquidity-providing orders in the Tape A
securities they send to the Exchange, which would support the quality
of price discovery on the Exchange and provide additional liquidity for
incoming orders. As noted above, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. Because the proposed tier
requires a member organization to achieve a minimum volume of its
trades in orders that add liquidity, the Exchange believes that the
proposed credits would provide an incentive for all member
organizations to send additional liquidity to the Exchange in order to
qualify for them. The Exchange does not know how much order flow member
organizations choose to route to other exchanges or to off-exchange
venues. Since the proposed tier is new, the Exchange does not know how
many member organizations could qualify for the new tiered rate based
on their current trading profile on the Exchange and if they choose to
direct order flow to the NYSE. However, without having a view of member
organization's activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any member organization directing orders to the Exchange in
order to qualify for the new tier.
Tier 6 Adding Credit
The Exchange proposes a new Tier 6 Adding Credit for orders, other
than MPL and Non-Display Reserve orders, that add liquidity to the
Exchange. As proposed, the Exchange would provide a $0.0015 credit in
Tape A securities if a member organization's Adding ADV, excluding
liquidity added as an SLP and as a DMM, is at least either:
<bullet> 0.22% of NYSE CADV, or
<bullet> 0.15% of NYSE CADV that is at least 0.05% of NYSE CADV
above the member organization's first quarter 2021 adding liquidity as
a percentage of NYSE CADV.
In addition, member organizations that meet the above requirements
and add liquidity, excluding liquidity added as an SLP, in Tape B and C
Securities of at least 0.20% of Tape B and Tape C CADV combined, would
receive an additional $0.0001 per share.
The following example illustrates how all of the proposed adding
tiers would operate.
Assume Member Organization A has an Adding ADV as a percentage of
Tape A CADV of 0.45% in the billing month of which 0.10% was DMM Adding
ADV and 0.05% was SLP Adding ADV:
<bullet> Member Organization A would qualify for adding credit of
$0.0017 for displayed adding liquidity, based on the Adding ADV of
0.30%, exceeding the 0.29% requirement.
If Member Organization A instead had Adding ADV as a percentage of
Tape A CADV of 0.55% in the billing month, of which 0.10% was DMM
Adding ADV and 0.05% was SLP Adding ADV:
<bullet> Member Organization A would qualify for adding credit of
$0.0019 for displayed adding liquidity, based on the Adding ADV of
0.40%, exceeding the 0.35% requirement.
Also assume that Member Organization A had an Adding ADV, excluding
SLP and DMM Adding ADV, of 0.05% in the baseline quarter of the first
quarter 2021. If in another billing month, Member Organization A had an
Adding ADV, excluding SLP and DMM Adding ADV, of 0.17%:
<bullet> Member Organization A would qualify for a credit of
$0.0015 for displayed adding liquidity, exceeding the 0.05% step up
with 0.12% over first quarter 2021 baseline and meeting the 0.015%
Adding ADV requirement.
The purpose of this proposed change is also to incentivize member
organizations to increase the liquidity-providing orders in the Tape A
securities they send to the Exchange, which would support the quality
of price discovery on the Exchange and provide additional liquidity for
incoming orders. As noted above, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. Because the proposed tier
requires a member organization to achieve a minimum volume of its
trades in orders that add liquidity, the Exchange believes that the
proposed credits would provide an incentive for all member
organizations to send additional liquidity to the Exchange in order to
qualify for them. The Exchange does not know how much order flow member
organizations choose to route to other exchanges or to off-exchange
venues. Since the proposed tier is new, the Exchange does not know how
many member organizations could qualify for the new tiered rate based
on their current trading profile on the Exchange and if they choose to
direct order flow to the NYSE. However, without having a view of member
organization's activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any member organization directing orders to the Exchange in
order to qualify for the new tier.
Charges for Removing Liquidity
Currently, the Exchange sets forth the fees for removing liquidity
from the Exchange in Tape A securities in a different section of the
Price List from fees for removing liquidity in Tape B and C securities,
which are grouped with credits for adding liquidity in Tape B and C
securities under their own heading in the Price List. The Exchange
proposes to modify certain fees for removing liquidity in Tapes B and C
securities and relocate them to section of the Price List setting forth
the current fees for removing liquidity in Tape A securities. In
addition, other fees for removing liquidity in Tape B and C securities
would be deleted or relocated within the current section of the Price
List where remove fees and adding credits in Tapes B and C securities
are set forth.
First, the current base rate charged for non-Floor broker
transactions that remove liquidity from the Exchange (i.e., unless one
of the charges set forth immediately below this charge applies) is a
fee of $0.0030. The Exchange proposes that this fee would apply to Tape
B and C securities in addition to Tape A securities.
Second, under Remove Tier 2 for Tape B and C securities, the
Exchange currently charges a per tape fee of $0.00285 per share to
remove liquidity from the Exchange for member
[[Page 32295]]
organizations with an at least 50,000 shares Per Tape of Non-SLP and
Floor broker Adding ADV. This fee would be deleted from Remove Tier 2
and incorporated into a new section under Tape A securities setting
forth rates and new requirements for removing liquidity in Tape A, B
and C securities, as follows.
As proposed, for non-Floor broker transactions if the member
organization has an Adding ADV, excluding liquidity added by a DMM,
that is at least 250,000 ADV on the NYSE in Tape A securities, the
Exchange would offer a fee of $0.00295 for Tape A securities and
$0.00285 for Tape B and C securities. For non-Floor broker transactions
if the member organization has an Adding ADV, excluding liquidity added
by a DMM, that is at least 3,500,000 ADV on the NYSE in Tape A
securities, the Exchange would offer a fee of $0.00290 in Tape A
securities and a fee of $0.00285 for Tape B and C securities.
Further, the Exchange currently charges $0.00285 for non-Floor
broker transactions that remove liquidity from the Exchange by member
organizations with an Adding ADV, excluding any liquidity added by a
DMM, that is more than 250,000 ADV on the NYSE in Tape A Securities and
less than 500,000 ADV on the NYSE in Tape B and Tape C securities
combined during the billing month.
The Exchange proposes to revise the requirements and extend the
same fee to Tape A, B and C securities. Specifically, the Exchange
proposes a fee of $0.00285 in Tape A, B and C securities for non-Floor
broker transactions if the member organization has Adding ADV,
excluding liquidity added by a DMM, that is at least 7,000,000 ADV in
Tape A securities and 500,000 ADV in Tape B and Tape C securities
combined.
Similarly, the Exchange currently charges $0.00275 for non-Floor
broker transactions that remove liquidity from the Exchange by member
organizations with an Adding ADV, excluding any liquidity added by a
DMM, that is at least 250,000 ADV on the NYSE in Tape A securities and
at least 500,000 ADV on the NYSE in Tape B and C securities combined
during the billing month.
The Exchange proposes new fees and revised requirements. As
proposed, the Exchange proposes a fee of $0.0028 in Tape A securities
and a fee of $0.00285 Tape B and C securities for non-Floor broker
transactions if the member organization has Adding ADV, excluding
liquidity added by a DMM, that is at least 14,000,000 ADV in Tape A
securities and 750,000 ADV in Tape B and Tape C securities combined.
Finally, in the section of the Price List setting forth fees for
removing liquidity in Tape B and C securities, the Exchange would make
the following additional changes.
First, for executions on the Exchange in Tape B and C securities
that remove liquidity, the Exchange currently charges $0.0030 per share
for securities priced at or above $1.00, including MPL Orders, unless
the Floor broker fee or the Remove Tier fees applies. The Exchange
proposes to delete this fee since it would be referenced in the above
section.
Second, following the current $0.0026 fee for Floor broker Tape B
and C executions that remove liquidity from the Exchange, which would
remain unchanged, the Exchange would clarify that remove rates listed
in the Tape A section of the Price List would apply unless a better
rate set forth below apply.
Finally, the current Remove Tier 1 for Tape B and C securities,
which provides a per tape fee of $0.0026 per share to remove liquidity
from the Exchange for member organizations meeting its requirements,
would be moved from its current place and moved up within the same
section. The rate and requirements would remain unchanged.
As noted, the current Remove Tier 2 for Tape B and C securities
would be deleted from its current place. The heading titled ``Remove
Tiers For Securities At or Above $1.00 Requirement Rate'' would also be
deleted.
The Exchange believes that the proposed changes, taken together,
will incentivize submission of additional liquidity in Tape A, B and
Tape C securities to a public exchange, thereby promoting price
discovery and transparency and enhancing order execution opportunities
for member organizations. As noted above, the Exchange operates in a
competitive environment, particularly as it relates to attracting non-
marketable orders, which add liquidity to the Exchange. The Exchange
does not know how much order flow member organizations choose to route
to other exchanges or to off-exchange venues. Because the proposed
reconfiguration of the fees involves the introduction of new fees and/
or new requirements, the Exchange does not know how many member
organizations could qualify for the new remove fees based on their
current trading profile on the Exchange and if they choose to direct
order flow to the NYSE. However, without having a view of member
organization's activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any member organization directing orders to the Exchange.
The proposed changes are not otherwise intended to address other
issues, and the Exchange is not aware of any significant problems that
market participants would have in complying with the proposed changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\10\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\11\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4) & (5).
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As discussed above, the Exchange operates in a highly competitive
market. The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \12\ While Regulation
NMS has enhanced competition, it has also fostered a ``fragmented''
market structure where trading in a single stock can occur across
multiple trading centers. When multiple trading centers compete for
order flow in the same stock, the Commission has recognized that ``such
competition can lead to the fragmentation of order flow in that
stock.'' \13\
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\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
\13\ See Securities Exchange Act Release No. 61358, 75 FR 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
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Given this competitive environment, the proposal represents a
reasonable attempt to attract additional order flow to the Exchange.
The Proposed Change Is Reasonable
Adding Tiers
The proposed new Adding Tier Credits are reasonable. Specifically,
the
[[Page 32296]]
Exchange believes that the proposed adding tiers would provide
additional incentives for member organizations to send additional
liquidity providing orders to the Exchange in Tape A securities. As
noted above, the Exchange operates in a highly competitive environment,
particularly for attracting non-marketable order flow that provides
liquidity on an exchange.
The Exchange believes that the requirements for the proposed Tier 1
Adding Credit, Tier 2 Adding Credit, and Tier 3 Adding Credit are
reasonable because each would encourage additional displayed and non-
displayed liquidity on the Exchange and because market participants
benefit from the greater amounts of displayed and non-displayed
liquidity present on the Exchange. Further, the Exchange believes it's
reasonable to provide credits of $0.0019, $0.0017 and $0.0015 when the
current adding tiers offer credits of $0.0018 (current Tier 3, proposed
Tier 4 Adding Credit) and $0.0020 (Tier 2 Adding Credit) because the
proposal would provide additional ways for member organizations to
qualify for a tiered credit by adding liquidity, thereby encouraging
member organizations to send orders that provide liquidity to the
Exchange which in turn contributes to robust levels of liquidity and
promoting price discovery and transparency which benefits all market
participants. In addition, the Exchange believes that the additional
credit of $0.0001 per share for member organizations that meet the
proposed tier requirements and add liquidity, excluding liquidity added
as an Supplemental Liquidity Provider, in Tape B and C Securities of at
least 0.20% of Tape B and Tape C CADV combined is reasonable as a
similar incentive is offered in the NYSE's other adding tiers (Tier 1-3
Adding Credits). Since the proposed Adding Tiers would be new, no
member organization currently qualifies for the proposed pricing tiers.
As previously noted, without a view of member organization activity on
other exchanges and off-exchange venues, the Exchange has no way of
knowing whether the proposed rule change would result in any member
organization qualifying for the tier. The Exchange believes the
proposed credit is reasonable as it would provide an incentive for
member organizations to direct their order flow to the Exchange and
provide meaningful added levels of liquidity in order to qualify for
the credits, thereby contributing to depth and market quality on the
Exchange.
Charges for Removing Liquidity
The Exchange believes that the proposal to relocate and modify
certain fees, and introduce new fees, for transactions that remove
liquidity from the Exchange in Tape A, B and C securities are
reasonable. The purpose of these changes is to encourage additional
liquidity on the Exchange because market participants benefit from the
greater amounts of displayed liquidity present on a public exchange.
The Exchange believes that the proposed new fees and modifications to
qualification requirements will incentivize additional liquidity in
Tape A, B and Tape C securities to a public exchange to qualify for
lower fees for removing liquidity, thereby promoting price discovery
and transparency and enhancing order execution opportunities for member
organizations. The proposal is thus reasonable because all member
organizations would benefit from such increased levels of liquidity.
Non-Substantive Changes
Finally, the Exchange believes the proposed non-substantive
clarifying and conforming changes are reasonable and would not be
inconsistent with the public interest and the protection of investors
because investors will not be harmed and in fact would benefit from
increased clarity and transparency on the Price List, thereby reducing
potential confusion.
The Proposal Is an Equitable Allocation of Fees
The Exchange believes its proposal equitably allocates its fees
among its market participants. The Exchange believes its proposal
equitably allocates its fees among its market participants by fostering
liquidity provision and stability in the marketplace.
Adding Tiers
The Exchange believes that the proposal to provide additional
incremental tiered credits for adding liquidity to the Exchange in Tape
A securities is equitable because it would encourage additional
displayed liquidity on the Exchange and because market participants
benefit from the greater amounts of displayed liquidity present on the
Exchange. The Exchange believes that the magnitude of the additional
credit is not unreasonably high compared to the current adding tier
credits and also relative to the other adding tier credits, which range
from $0.0015 to $0.0031, in comparison to the credits paid by other
exchanges for orders that provide additional step up liquidity.\14\
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\14\ See Cboe BZX Fee Schedule, which has adding credits ranging
from $0.0025 to $0.0032, at <a href="https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/">https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/</a>.
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The Exchange believes the proposed rule change would improve market
quality for all market participants on the Exchange and, as a
consequence, attract more liquidity to the Exchange, thereby improving
market-wide quality and price discovery. Since the proposed Adding
Tiers would be new, no member organization currently qualifies for
them. The Exchange does not know how much order flow member
organizations choose to route to other exchanges or to off-exchange
venues. As described above, member organizations with liquidity-
providing orders have a choice of where to send those orders. The
Exchange believes that by offering alternate credits for member
organizations to qualify for a tiered credit, more member organizations
will be able to choose to route their liquidity-providing orders to the
Exchange to qualify for one of the proposed credits. However, without
having a view of member organization's activity on other exchanges and
off-exchange venues, the Exchange has no way of knowing whether this
proposed rule change would result in any member organization directing
orders to the Exchange in order to qualify for the new credits.
The Exchange believes the proposed credits are reasonable as they
would provide an additional incentive for member organizations to
direct their order flow to the Exchange and provide meaningful added
levels of liquidity in order to qualify for the higher credits, thereby
contributing to depth and market quality on the Exchange. The proposal
neither targets nor will it have a disparate impact on any particular
category of market participant. All member organizations would be
eligible to qualify for the proposed credits if they meet the proposed
adding liquidity requirements for each proposed tier. The Exchange
believes that offering credits for providing liquidity will continue to
attract order flow and liquidity to the Exchange, thereby providing
additional price improvement opportunities on the Exchange and
benefiting investors generally. As to those market participants that do
not presently qualify for the adding liquidity credits, the proposal
would provide a lower entry point and revised requirements that could
allow those member organizations to qualify for a credit. The proposal
will also not
[[Page 32297]]
adversely impact their ability to qualify for other credits provided by
the Exchange.
Charges for Removing Liquidity
The Exchange believes that, for the reasons discussed above, the
proposed changes taken together, will incentivize member organizations
to send additional adding liquidity to achieve lower fees when removing
liquidity in Tape A, B and Tape C securities from the Exchange, thereby
increasing the number of orders that are executed on the Exchange,
promoting price discovery and transparency and enhancing order
execution opportunities and improving overall liquidity on a public
exchange. The Exchange also believes that the proposed change is
equitable because it would apply to all similarly situated member
organizations that remove liquidity in Tape A, B or Tape C securities.
The proposed change also is equitable because it would be consistent
with the applicable rate on other marketplaces. For example, Nasdaq PSX
provides a fee per share for removing liquidity, $0.0028 in Tape A and
B securities and $0.0029 in Tape C securities, if a firm removes 0.065%
or more of Consolidated Volume; otherwise, Nasdaq PSX imposes a charge
of $0.0030 per share for removing liquidity.\15\ The Exchange notes
that since the requirement is for Tape B and Tape C securities
combined, member organizations can meet the requirement by adding
liquidity in either Tape B or Tape C securities, or both. The Exchange
further notes that other marketplaces have tiers with adding
requirements in specific tapes to qualify for a rate in securities on
another tape. For example, to be eligible for a $0.0020 adding credit
in Tape C securities on Nasdaq, firms are required to average a minimum
of 250,000 shares added per day in Tape A or Tape B securities
(combined); otherwise, the Tape C credit for adding liquidity is
$0.0015.\16\
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\15\ See <a href="https://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing">https://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing</a>.
\16\ See <a href="https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2">https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2</a>.
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As previously noted, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. The Exchange does not know
how much order flow member organizations choose to route to other
exchanges or to off-exchange venues. Because the proposed
reconfiguration of the fees involves the introduction of new fees and/
or new requirements, the Exchange does not know how many member
organizations could qualify for the new remove fees based on their
current trading profile on the Exchange and if they choose to direct
order flow to the NYSE. However, without having a view of member
organization's activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
result in any member organization directing orders to the Exchange.
The Proposal Is Not Unfairly Discriminatory
Adding Tiers
The Exchange believes it is not unfairly discriminatory to provide
an additional adding tiers and corresponding credits as the proposed
credits would be provided on an equal basis to all member organizations
that add liquidity by meeting the new proposed adding tier
requirements. For the same reason, the Exchange believes it is not
unfairly discriminatory to provide an additional credit of $0.0001 per
share for member organizations that meet the proposed tier requirements
and add a minimum liquidity as a percentage of Tape B and Tape C CADV.
Further, the Exchange believes the proposed adding tier credits would
incentivize member organizations that meet the new tiered requirements
to send more orders to the Exchange. Since the proposed credits would
be new, no member organization currently qualifies for them. As noted,
without a view of member organization activity on other exchanges and
off-exchange venues, the Exchange has no way of knowing whether this
proposed rule change would result in any member organization qualifying
for the tier. The Exchange believes the proposed credit is reasonable
as it would provide an incentive for member organizations to direct
their order flow to the Exchange and provide meaningful added levels of
liquidity in order to qualify for the credits, thereby contributing to
depth and market quality on the Exchange. The proposal neither targets
nor will it have a disparate impact on any particular category of
market participant. All member organizations that provide liquidity
could be eligible to qualify for the proposed credit if meet the
proposed adding liquidity requirements. The Exchange believes that
offering credits for providing liquidity will continue to attract order
flow and liquidity to the Exchange, thereby providing additional price
improvement opportunities on the Exchange and benefiting investors
generally. As to those market participants that do not presently
qualify for the adding liquidity credits, the proposal will not
adversely impact their existing pricing or their ability to qualify for
other credits provided by the Exchange.
Charges for Removing Liquidity
The Exchange believes that that reconfiguring the charges for
member organizations that remove liquidity in all three tapes will
incentivize submission of additional liquidity in Tape A, B and Tape C
securities to a public exchange to qualify for the fees for removing
liquidity, thereby promoting price discovery and transparency and
enhancing order execution opportunities for member organizations.
The proposal does not permit unfair discrimination because the new
rates for removing liquidity in Tape A, B and C securities would be
applied to all similarly situated member organizations and other market
participants, who would all be eligible for the same credit on an equal
basis. Accordingly, no member organization already operating on the
Exchange would be disadvantaged by this allocation of fees. The
Exchange believes it is not unfairly discriminatory to provide lower
fees for removing liquidity as the proposed fee and credits would be
provided on an equal basis to all member organizations that remove
liquidity by meeting the tiered requirements. Further, the Exchange
believes the proposed fee would provide an incentive for member
organizations to remove additional liquidity from the Exchange in Tape
A, B and C securities. The Exchange also believes that the proposed
change is not unfairly discriminatory because it is reasonably related
to the value to the Exchange's market quality associated with higher
volume. As noted, the proposed change also is not unfairly
discriminatory because it would be consistent with the applicable rate
on other marketplaces.
Finally, the submission of orders to the Exchange is optional for
member organizations in that they could choose whether to submit orders
to the Exchange and, if they do, the extent of its activity in this
regard.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
[[Page 32298]]
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\17\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for member organizations. As a result, the Exchange believes that the
proposed change furthers the Commission's goal in adopting Regulation
NMS of fostering integrated competition among orders, which promotes
``more efficient pricing of individual stocks for all types of orders,
large and small.'' \18\
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\17\ 15 U.S.C. 78f(b)(8).
\18\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed changes are designed to
attract additional order flow to the Exchange. The Exchange believes
that the proposed changes would continue to incentivize market
participants to direct displayed and non-displayed order flow to the
Exchange. Greater liquidity benefits all market participants on the
Exchange by providing more trading opportunities and encourages member
organizations to send orders, thereby contributing to robust levels of
liquidity, which benefits all market participants on the Exchange. The
current and proposed fees and credits would be available to all
similarly situated market participants, and, as such, the proposed
change would not impose a disparate burden on competition among market
participants on the Exchange. As noted, the proposal would apply to all
similarly situated member organizations on the same and equal terms,
who would benefit from the changes on the same basis. Accordingly, the
proposed change would not impose a disparate burden on competition
among market participants on the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. In such an
environment, the Exchange must continually adjust its fees and rebates
to remain competitive with other exchanges and with off-exchange
venues. Because competitors are free to modify their own fees and
credits in response, and because market participants may readily adjust
their order routing practices, the Exchange does not believe its
proposed fee change can impose any burden on intermarket competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \19\ of the Act and subparagraph (f)(2) of Rule
19b-4 \20\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 15 U.S.C. 78s(b)(2)(B).
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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5725223b327a34383a3a323923241724323479303821"><span class="__cf_email__" data-cfemail="1765627b723a74787a7a727963645764727439707861">[email protected]</span></a>. Please include
File Number SR-NYSE-2021-35 on the subject line.
Paper Comments
<bullet> 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-NYSE-2021-35. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-NYSE-2021-35, and should be submitted on
or before July 8, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12), (59).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-12747 Filed 6-16-21; 8:45 am]
BILLING CODE 8011-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.