Notice2022-20267
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
September 20, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 181 (Tuesday, September 20, 2022)</title>
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[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Notices]
[Pages 57541-57544]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-20267]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95773; File No. SR-NYSE-2022-41]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
September 14, 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 August 31, 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 increase the NYSE
Crossing Session II monthly per member organization fee cap. The
Exchange proposes to implement the fee changes effective September 1,
2022. 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.
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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 increase the NYSE
Crossing Session II (``CS II'') monthly per member organization fee
cap.
The Exchange proposes to implement the fee changes effective
September 1, 2022.
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\
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\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'').
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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 20% 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 12%.\9\
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\5\ See Securities Exchange Act Release No. 51808, 84FR 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>. 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.
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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.
To respond to this competitive environment, the Exchange has
established incentives for its member organizations to utilize the
Exchange's after-hours crossing session.\10\ The proposed fee change is
designed to revise the incentives for CS II in order to facilitate
after-hours trading following the decommissioning of the Exchange's
affiliates' after-hours facility, as described below.
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\10\ CS II runs on the Exchange from 4 p.m. to 6:30 p.m. eastern
time and handles member organization crosses of baskets of
securities of aggregate-priced buy and sell orders. See NYSE Rule
7.39.
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Proposed Rule Change
Currently, the Exchange charges a fee of $0.0004 per share (both
sides) for executions in CS II.\11\ Fees for executions in CS II are
capped at $200,000 per month per member organization.
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\11\ See note 10, supra.
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The Exchange proposes to increase the monthly cap per member
organization to $300,000. The $0.0004 per share fee for executions in
CS II would remain unchanged and would be subject to the proposed
$300,000 per month per member organization cap.
The Exchange proposed increasing the cap to reflect the
decommissioning of the off-hours facility offered by the Exchange's
affiliate NYSE American LLC (``NYSE American''), effective September 1,
2022.\12\ The Exchange recently filed to adopt a new Rule 7.39
governing its off-hours trading facility based on NYSE American Rule
7.39E that would permit Exchange member organizations to enter
aggregate-price coupled orders for securities, including UTP
securities, listed and traded on NYSE.\13\ With the decommissioning of
the NYSE American facility, the Exchange anticipates that the NYSE
American ETP Holders that utilize the NYSE American off-hours facility,
all of whom are also NYSE member organizations, would be in a position
to transition to CS II. The NYSE American off-hours facility was
subject to a $100,000 cap per month, equivalent to the proposed
increase. No member organization qualifies for the Exchange's current
fee cap. The Exchange further notes that it does not know how much
order flow member organizations choose to route to off-exchange venues
in the after-hours market.\14\
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\12\ See Securities Exchange Act Release No. 95499 (August 12,
2022), 87 FR 50894 (August 18, 2022) (SR-NYSEAMER-2022-35) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change to
Delete Current Rule 7.39E).
\13\ See Securities Exchange Act Release No. 95498 (August 12,
2022), 87 FR 50906 (August 18, 2022) (SR-NYSE-2022-37) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Adopt
a New Rule 7.39 and Delete Current Rules 900-907).
\14\ The Exchange also proposes the non-substantive correction
of inserting a missing parenthesis following ``member
organization.''
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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,\15\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\16\ 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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\15\ 15 U.S.C. 78f(b).
\16\ 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.'' \17\ 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
[[Page 57543]]
Commission has recognized that ``such competition can lead to the
fragmentation of order flow in that stock.'' \18\
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\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
\18\ See Securities Exchange Act Release No. 75793 (August 32,
2015), 80 FR 53600 (September 04, 2015) (SR-NYSE-2015-37) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Amend
its Price List to Raise the NYSE Crossing Session II Fee Cap).
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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, including with respect to after-
hours crossing sessions. Accordingly, competitive forces constrain
exchange transaction fees that relate to after-hours crossing orders.
Stated otherwise, changes to exchange transaction fees can have a
direct effect on the ability of an exchange to compete for order flow.
Given this competitive environment, the proposal represents a
reasonable attempt to maintain a cap for member organizations that are
particularly active during CS II in view of the decommissioning of the
after-hours session on the Exchange's affiliate NYSE American. The
Exchange anticipates that member organization volume that would have
participated on NYSE American's after-hours session could migrate to CS
II, and the proposal represents a reasonable attempt to encompass an
increase in volume by particularly active member organizations. As
noted above, the fee subject to the cap would remain unchanged. The
Exchange notes that the last time this cap was changed was 2015.\19\
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\19\ 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 Proposal Is an Equitable Allocation of Fees
The Exchange believes the proposal equitably allocates its fees
among its market participants. The Exchange is not proposing to adjust
the fee for executions in CS II, which will remain at the current level
for all market participants. Rather, by capping executions for all
member organizations in CS II at an adjusted level that reflects the
decommissioning of the NYSE American after-hours session and the
anticipated migration of volume from NYSE American to the NYSE, the
proposal would encourage member organizations to send additional orders
to the Exchange's after-hours trading session. The Exchange notes that
the proposed cap of $300,000 reflects the combination of the current
NYSE cap of $200,000 and the current NYSE American cap of $100,000. As
noted, the same member organizations that participate in CS II
participated in the NYSE American after-hours session, and the Exchange
anticipates that these member organizations will send additional volume
to CS II, which can accept aggregate-price coupled orders for
securities, including UTP securities, listed and traded on NYSE,
following the decommissioning of the NYSE American after-hours
facility.\20\ As proposed, all similarly situated member organizations
will be subject to the same fee structure to participate in CS II and
access to the Exchange's market will continue to be offered on fair and
non-discriminatory terms.
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\20\ See Rule 7.39.
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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 Exchange believes that the proposed increase in the monthly fee
cap for CS II transactions is not unfairly discriminatory because the
proposal would be provided on an equal basis to all member
organizations that choose to utilize the after-hours facility, who
would all be eligible for the proposed cap on an equal basis. The
proposal neither targets nor will it have a disparate impact on any
particular category of market participant. The proposal does not permit
unfair discrimination because the higher cap would be applied to all
similarly situated member organizations, who would all be eligible for
the same cap on an equal basis. Accordingly, no member organization
already operating on the Exchange would be disadvantaged by this
allocation of fees. Further, as noted, the Exchange believes the
proposal would provide an incentive for member organizations to send
additional orders to CS II following the decommissioning of the NYSE
American after-hours facility, which would benefit member organizations
that would only need to send after-hours orders to a single facility
for all tapes.
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,\21\ 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 increase in the
fee cap for member organizations that are particularly active in CS II
would not burden competition because it would apply to all member
organizations on equal, fair and non-discriminatory terms. In addition,
as noted, the Exchange believes that the proposed changes would
encourage the submission of additional liquidity to the Exchange's
after-hours facility following the decommissioning of NYSE American's
after-hours facility. The Exchange anticipates that member
organizations will send additional volume to CS II, which can accept
aggregate-price coupled orders for securities, including UTP
securities, listed and traded on NYSE. 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.'' \22\
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\21\ 15 U.S.C. 78f(b)(8).
\22\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed change is designed to attract
additional order flow to the Exchange. The Exchange believes that the
proposed change would continue to incentivize market participants to
direct after-hours order flow to the Exchange. Greater two-sided
liquidity in the after-hours trading session benefits all market
participants. The current credit and the proposed cap would continue to
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
[[Page 57544]]
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.
The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer after-hours trading sessions and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange.
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) \23\ of the Act and subparagraph (f)(2) of Rule
19b-4 \24\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\25\ 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#7705021b125a14181a1a121903043704121459101801"><span class="__cf_email__" data-cfemail="2c5e594049014f4341414942585f6c5f494f024b435a">[email protected]</span></a>. Please include
File Number SR-NYSE-2022-41 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-2022-41. 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 a.m. and 3
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-2022-41, and should be submitted on
or before October 11, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20267 Filed 9-19-22; 8:45 am]
BILLING CODE 8011-01-P
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