Notice2022-10959
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List
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Published
May 23, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 99 (Monday, May 23, 2022)</title>
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[Federal Register Volume 87, Number 99 (Monday, May 23, 2022)]
[Notices]
[Pages 31280-31283]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10959]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94933; File No. SR-NYSE-2022-22]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
May 17, 2022.
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 11, 2022, 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 introduce a new
adding credit for providing displayed liquidity to the Exchange in Tape
B and C Securities. The Exchange proposes to implement the fee changes
effective May 11, 2022.\4\ 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.
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\4\ The Exchange originally filed to amend the Price List on May
2, 2022 (SR-NYSE-2022-21). On May 11, 2002, SR-NYSE-2022-21 was
withdrawn and replaced by this filing.
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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 a new adding credit for providing displayed
liquidity to the Exchange in Tape 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 displayed liquidity to the Exchange.
The Exchange proposes to implement the fee changes effective May
11, 2022.
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. 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.'' \5\
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\5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
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As the Commission itself has recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\6\ Indeed, equity trading is currently dispersed across 16
exchanges,\7\ 31 alternative trading systems,\8\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available
information, no single exchange has more than 20% of the market.\9\
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 12%.\10\
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\6\ 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'').
\7\ 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>.
\8\ 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>.
\9\ 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>.
\10\ See id.
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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 16 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 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.
[[Page 31281]]
Proposed Rule Change
The Exchange proposes a new adding credit in Tape B and C
securities for the market participant identifier (``MPID'') or mnemonic
of member organizations that meet the current requirements for Step Up
Adding Tier 5 as well as certain additional proposed requirements, as
follows.
The current Step Up Tier 5 Adding Credit offers incremental credits
for providing displayed liquidity to the Exchange in Tape A securities
for all orders, other than MPL and Non-Displayed Limit Orders, from a
qualifying member organization's MPID or mnemonic if the member
organization has Adding ADV, excluding any liquidity added by a
Designated Market Maker (``DMM''), that is at least 1.00% of Tape A
CADV,\11\ and if the MPID or mnemonic has an Adding ADV as a percentage
of Tape A CADV, excluding any liquidity added by a DMM, that is:
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\11\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
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<bullet> At least two times more than that MPID's or mnemonic's
Adding ADV in January 2021 (``Baseline Month'') as a percentage of Tape
A CADV, and
<bullet> at least 0.10% of Tape A CADV over that MPID's or
mnemonic's Adding ADV in in the Baseline Month as a percentage of Tape
A CADV.
A member organizations meeting the above requirements receives a
$0.0001 incremental credit for an increase of at least 0.10% and less
than 0.175% of Tape A CADV over the Baseline Month. Member
organizations receive a $0.0002 incremental credit for an increase of
at least 0.175% of Tape A CADV over the Baseline Month.
The Exchange proposes a new $0.0029 credit for providing displayed
liquidity in Tape B and C Securities based on similar requirements to
the Step Up Tier 5 Adding Credit. Specifically, the proposed credit
would be available for providing displayed liquidity in Tape B and C
Securities for a qualifying member organization's MPID or mnemonic that
has providing volume in Tape A Securities of at least 1.0% of Tape A
CADV, and the MPID or mnemonic has providing volume in Tape A
Securities that is:
<bullet> At least two times more than that MPID's or mnemonic's
baseline in January 2021 as a percentage of Tape A CADV, and
<bullet> at least 0.10% of Tape A CADV over that MPID's or
mnemonic's Adding ADV in January 2021 baseline as a percentage of Tape
A CADV, and
<bullet> at least 0.25% of Tape A CADV over that MPID's or
mnemonic's Adding ADV in January 2021 as a percentage of Tape A CADV.
To effectuate this change, the Exchange would amend the chart
setting forth the Adding Tiers for transaction fees and credits for
Tape B and C Securities to add a new column titled ``Step Up Tier'' and
set forth the proposed requirements and proposed credit.
For example, assume Member Organization A has an Adding ADV as a
percentage of Tape A CADV of 1.10%, and adding ADV of Tape B and C of
CADV 0.075% each, in the billing month. Member Organization A would
currently qualify for Tape B and C Tier 2 credits of $0.0023 per share
each based on the current Tape B and C Tier 2 requirement of 0.05% for
each tape.
Further assume that one of Member Organization A's MPIDs, MPID1,
has an Adding ADV of 0.30% of Tape A CADV and that MPID1 has an Adding
ADV of 0.10% in the Baseline Month and, as such, MPID1's Adding ADV is
2.5 times its Baseline Month with a step up of 0.20% and qualifies for
Step Up Tier 5. If instead MPID1 had a Tape A Adding ADV of 0.40% of
CADV, for step up of Tape A Adding ADV of 0.30% CADV, MPID 1 would
qualify for the proposed Tape B and C credit of $0.0029 for adding
displayed liquidity.
The purpose of this proposed change is to incentivize member
organizations to increase the liquidity-providing orders in the Tape B
and C 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's MPID or mnemonic to
increase the volume of its trades in orders that add liquidity over
that MPID or mnemonic's January 2021 Adding ADV baseline, the Exchange
believes that the proposed credit would provide an incentive for all
member organizations to send additional liquidity to the Exchange in
order to qualify for it. The Exchange does not know how much order flow
member organizations 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 member organizations
could qualify for the proposed credit if they choose to direct order
flow to, and increase quoting on, the Exchange. 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.
The proposed change is 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,\12\ in general, and furthers the
objectives of Sections 6(b)(4) and (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.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) & (5).
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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\
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\14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
\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).
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The new proposed adding credit in Tape B and C credit is
reasonable. Specifically, the Exchange believes that the proposed
credit would provide an
[[Page 31282]]
incentive for member organizations to send additional liquidity
providing orders to the Exchange in Tape B and C 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 it's reasonable to provide a $0.0029
credit in Tape B and C Securities to the qualifying MPID or mnemonic
based on the proposed increased adding requirements because this would
encourage individual MPIDs or mnemonics of a member organization to
send orders that provide liquidity to the Exchange, thereby
contributing to robust levels of liquidity, which benefits all market
participants, and promoting price discovery and transparency. 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's MPID or mnemonic qualifying for the tier. Based on the
profile of liquidity-adding firms generally, the Exchange believes that
additional member organizations could qualify for the proposed credit
if they choose to direct order flow to, and increase quoting on, the
Exchange. The Exchange believes the proposed credit is reasonable as it
would provide an additional incentive for member organization's MPID or
mnemonic to direct their order flow to the Exchange and provide
meaningful added levels of liquidity in order to qualify for the
credit, thereby contributing to depth and market quality on the
Exchange.
The Proposal Is an Equitable Allocation of Fees
The Exchange believes that the proposed credit is equitable because
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. 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's MPID or mnemonic qualifying for the tier. Based
on the profile of liquidity-adding firms generally, the Exchange
believes that additional member organizations could qualify for the
proposed credit if they choose to direct order flow to, and increase
quoting on, the Exchange. The Exchange believes the proposed credit is
equitable as it would provide an additional incentive for member
organization's MPID or mnemonic to direct their order flow to the
Exchange and provide meaningful added levels of liquidity in order to
qualify for the credit, 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 organization's MPIDs or mnemonics that provide liquidity
could be eligible to qualify for the proposed credit if they increase
their Adding ADV over their own baseline of order flow and the member
organization meets the 0.25% increase in Adding ADV of Tape CADV
requirement. The Exchange believes that offering a step up credit for
providing liquidity if the step up requirements for Tape B and C
securities are met 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 in Tape A Securities, 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 it is not unfairly discriminatory to provide
an additional per share step up credit in Tape B and C Securities, as
the proposed credit would be provided on an equal basis to all member
organizations and their MPIDs or mnemonics that add liquidity by
meeting the new proposed requirements and would equally encourage all
member organizations and their MPIDs or mnemonics to provide additional
displayed liquidity on the Exchange. As noted, the Exchange believes
that the proposed credit would provide an incentive for member
organizations and their MPIDs or mnemonics to send additional liquidity
to the Exchange in order to qualify for the additional credit. 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. Finally, the
submission of orders to the Exchange is optional for member
organizations and their MPIDs or mnemonics in that they could choose
whether to submit orders to the Exchange and, if they do, the extent of
its activity in this regard.
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 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.'' \17\
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\16\ 15 U.S.C. 78f(b)(8).
\17\ 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 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 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 change 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
[[Page 31283]]
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) \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.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 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#6715120b024a04080a0a020913142714020449000811"><span class="__cf_email__" data-cfemail="8bf9fee7eea6e8e4e6e6eee5fff8cbf8eee8a5ece4fd">[email protected]</span></a>. Please include
File Number SR-NYSE-2022-22 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-2022-22. 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-2022-22 and should be submitted on
or before June 13, 2022.
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\21\ 17 CFR 200.30-3(a)(12).
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10959 Filed 5-20-22; 8:45 am]
BILLING CODE 8011-01-P
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