Notice2021-14798
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
July 13, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 131 (Tuesday, July 13, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 131 (Tuesday, July 13, 2021)]
[Notices]
[Pages 36850-36853]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-14798]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92343; File No. SR-NYSE-2021-39]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
July 7, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on June 30, 2021, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 modify the
requirements to qualify for Supplemental Liquidity Provider (``SLP'')
Tier 5. The Exchange proposes to implement the rule change on July 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.
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 amend its to modify the requirements to
qualify for SLP Tier 5.
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 displayed liquidity to the Exchange.
The Exchange proposes to implement the rule change on July 1, 2021.
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. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \4\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
---------------------------------------------------------------------------
As the Commission itself has recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\5\ Indeed, equity trading is currently dispersed across 16
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available
information, no single exchange has more than 18% of the market.\8\
Therefore, no exchange possesses significant pricing power in the
execution of equity order flow. More specifically, the Exchange's share
of executed volume of equity trades in Tapes A, B and C securities is
less than 14%.\9\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
\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>. Although 54
alternative trading systems were registered with the Commission as
of July 29, 2019, only 31 are currently trading. 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>.
\9\ See id.
---------------------------------------------------------------------------
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 [sic].
Proposed Rule Change
In response to the competitive environment described above, 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 Changes to SLP Tier 5
Under current SLP Tier 5, an SLP adding liquidity in securities
with a per share price of $1.00 or more with orders, other than Mid-
Point Liquidity (``MPL'')
[[Page 36851]]
orders, is eligible for a per share credit of $0.0031 (or $0.0012 if a
Non-Displayed Reserve Order) if the SLP:
(1) Meets the 10% average or more quoting requirement in an
assigned security pursuant to Rule 107B;
(2) adds liquidity for all assigned SLP securities in the aggregate
(including shares of both an SLP-Prop and an SLMM of the same or an
affiliated member organization) of an average daily volume (``ADV'') of
more than 0.65% of Tape A consolidated ADV (``CADV'') \10\ (for SLPs
that are also DMMs and subject to Rule 107B(i)(2)(A), more than 0.65%
after a discount of the percentage for the prior quarter of Tape A CADV
in DMM assigned securities as of the last business day of the prior
month);
---------------------------------------------------------------------------
\10\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
---------------------------------------------------------------------------
(3) has Adding ADV,\11\ including non-SLP Adding ADV but excluding
any liquidity added by a DMM, that is at least 0.85% of Tape A CADV;
and
---------------------------------------------------------------------------
\11\ Footnote 2 to the Price List defines ``Adding ADV'' as ADV
that adds liquidity to the Exchange during the billing month.
---------------------------------------------------------------------------
(4) executes an ADV, including non-SLP Adding ADV but excluding any
liquidity added by a DMM, of at least 250,000 shares in Retail Price
Improvements Orders.
The Exchange proposes to lower the Adding ADV requirements to
qualify for the SLP Tier 5. Specifically, the Exchange proposes that a
SLP add liquidity for all assigned SLP securities in the aggregate
(including shares of both an SLP-Prop and an SLMM of the same or an
affiliated member organization) of an ADV of more than 0.60% of Tape A
CADV. For SLPs that are also DMMs and subject to Rule 107B(i)(2)(A),
the requirement would be more than 0.60% after a discount of the
percentage for the prior quarter of Tape A CADV in DMM assigned
securities as of the last business day of the prior month. In addition,
the Exchange would require an Adding ADV, including non-SLP Adding ADV
but excluding any liquidity added by a DMM, that is at least 0.80% of
Tape A CADV.
The remaining requirements for qualifying for SLP Tier 5 and the
existing credits would remain unchanged.
The Exchange believes that lowering the ADV requirements to qualify
for SLP Tier 5 as proposed above will allow greater numbers of SLPs to
potentially qualify for the tier, and will incentivize more SLPs to
route their liquidity-providing order flow to the Exchange in order to
qualify for the tier. This in turn would support the quality of price
discovery on the Exchange and provide additional price improvement
opportunities for incoming orders.
As noted above, the Exchange operates in a competitive environment,
particularly as relates to attracting non-marketable orders, which add
liquidity to the Exchange. The Exchange believes that the lower
requirements will provide greater incentives for SLPs to add more
liquidity to the Exchange. The Exchange does not know how much order
flow SLPs choose to route to other exchanges or to off-exchange venues.
Based on the profile of liquidity-adding firms generally, the Exchange
believes that additional SLPs could qualify for the tier under the
revised qualification criteria if they choose to direct order flow to,
and increase quoting on, the Exchange. However, without having a view
of SLP'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 additional SLPs directing orders to the Exchange in order
to qualify for the SLP Tier 5 rates.
The proposed changes are not otherwise intended to address any
other issues, and the Exchange is not aware of any problems that member
organizations 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,\12\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------
The Proposed Change Is Reasonable
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.'' \14\ 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.'' \15\
---------------------------------------------------------------------------
\14\ See Regulation NMS, supra note 4, at 37499.
\15\ 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).
---------------------------------------------------------------------------
Given the current competitive environment, the Exchange believes
that the proposed revisions to the requirements for SLPs to qualify for
SLP Tier 5 represents a reasonable attempt to attract additional order
flow to the Exchange. Specifically, the Exchange believes that the
proposed revisions are reasonable because they would provide further
incentives for member organizations that are SLPs to route additional
liquidity-providing orders to a public exchange to reach the proposed
Adding ADV requirements, thereby promoting price discovery and
transparency and enhancing order execution opportunities for member
organizations. All member organizations would benefit from the greater
amounts of liquidity that will be present on the Exchange, which would
provide greater execution opportunities.
As noted above, the Exchange operates in a competitive environment,
particularly as relates to attracting non-marketable orders, which add
liquidity to the Exchange. The Exchange believes that the lower
requirements will provide greater incentives for SLPs to add more
liquidity to the Exchange. The Exchange does not know how much order
flow SLPs choose to route to other exchanges or to off-exchange venues.
Based on the profile of liquidity-adding firms generally, the Exchange
believes that additional SLPs could qualify for the tier under the
revised qualification criteria if they choose to direct order flow to,
and increase quoting on, the Exchange. However, without having a view
of SLP'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 additional SLPs directing orders to the Exchange in order
to qualify for the SLP Tier 5 credits.
[[Page 36852]]
The Proposal Is an Equitable Allocation of Fees
The Exchange believes the proposed rule change equitably allocates
its fees among its market participants. The proposed change would
continue to encourage member organizations that are SLPs to submit
additional liquidity to the Exchange and execute orders on the
Exchange, thereby contributing to robust levels of liquidity, to the
benefit of all market participants.
The Exchange believes that modifying the requirements to qualify
for SLP Tier 5 would encourage the submission of additional liquidity
to the Exchange, thereby providing customers with a higher quality
venue for price discovery, liquidity, competitive quotes and price
improvement. The proposed change will thereby encourage the submission
of additional liquidity to a national securities exchange, thus
promoting price discovery and transparency and enhancing order
execution opportunities for member organizations from the substantial
amounts of liquidity present on the Exchange. All member organizations
would benefit from the greater amounts of liquidity that will be
present on the Exchange, which would provide greater execution
opportunities.
The proposal neither targets nor will it have a disparate impact on
any particular category of market participant. Specifically, the
Exchange believes that the proposal constitutes an equitable allocation
of fees because all similarly situated SLPs would be eligible for the
same credits if they meet the revised requirements for the tier. As to
those SLPs 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.
The Proposal Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, member
organizations are free to disfavor the Exchange's pricing if they
believe that alternatives offer them better value.
The proposed changes to the SLP Tier 5 are not unfairly
discriminatory because the lower ADV requirements to achieve the fee
would be applied to all similarly situated member organizations and
other market participants, who would all be subject to the same
modified requirements to qualify for the tier and the same credits on
an equal basis. For the same reason, the proposal neither targets nor
will it have a disparate impact on any particular category of market
participant. Accordingly, no member organization already operating on
the Exchange would be disadvantaged by this allocation of fees.
Further, the Exchange believes the proposal would incentivize member
organizations that are SLPs to send more orders to the Exchange to
qualify for higher credits.
The Exchange believes that the proposed changes would not permit
unfair discrimination among SLPs because the tiered rates are available
equally to all SLPs. As described above, in today's competitive
marketplace, order flow providers have a choice of where to direct
liquidity-providing order flow, and the Exchange believes there are
additional SLPs that could qualify if they chose to direct their order
flow to the Exchange. 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\16\ 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 change would encourage the submission of additional
liquidity and order flow to a public exchange, thereby 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 competition among orders,
which promotes ``more efficient pricing of individual stocks for all
types of orders, large and small.'' \17\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b)(8).
\17\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------
Intramarket Competition. The proposed change is designed to attract
additional order flow to the Exchange. As described above, the Exchange
believes that the proposed change would provide additional incentives
for market participants to route liquidity-providing and liquidity-
removing orders 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 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.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchanges 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 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.
The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar order types and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange for execution.
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) \18\ of the Act and subparagraph (f)(2) of Rule
19b-4 \19\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if
[[Page 36853]]
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) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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#c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5"><span class="__cf_email__" data-cfemail="ccbeb9a0a9e1afa3a1a1a9a2b8bf8cbfa9afe2aba3ba">[email protected]</span></a>. Please include
File Number SR-NYSE-2021-39 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-2021-39. 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-2021-39 and should be submitted on
or before August 3, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-14798 Filed 7-12-21; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on July 13, 2021.
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.