Notice2022-20954
Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE National Schedule of Fees and Rebates
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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
September 28, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 187 (Wednesday, September 28, 2022)</title>
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[Federal Register Volume 87, Number 187 (Wednesday, September 28, 2022)]
[Notices]
[Pages 58851-58854]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-20954]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95869; File No. SR-NYSENAT-2022-20]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
NYSE National Schedule of Fees and Rebates
September 22, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on September 14, 2022, NYSE National, Inc. (``NYSE National'' or
the ``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 Schedule of Fees and Rebates
(``Fee Schedule'') to modify the requirements to qualify for Adding
Tier 1. The Exchange proposes to implement the rule change on September
14, 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.
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 Fee Schedule to modify the
requirements to qualify for Adding Tier 1.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing and liquidity-removing orders by offering further incentives
for ETP Holders to send additional adding liquidity to the Exchange.
The Exchange proposes to implement the rule change on September 14,
2022.\3\
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\3\ The Exchange originally filed to amend the Fee Schedule on
September 1, 2022 (SR-NYSENAT-2022-18). On September 12, 2022, SR-
NYSENAT-2022-18 was withdrawn and replaced by SR-NYSENAT-2022-19. On
September 14, SR-NYSENAT-2022-19 was withdrawn and replaced by this
filing.
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[[Page 58852]]
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\
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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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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\ numerous 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 17% 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 1%.\9\
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\5\ See Securities Exchange Act Release No. 61358 (January 14,
2010), 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>.
\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 products, in
response to fee changes. While it is not possible to know a firm's
reason for moving order flow, the Exchange believes that one such
reason is because of fee changes at any of the registered exchanges or
non-exchange trading venues to which a firm routes order flow. These
fees can vary from month to month, and not all are publicly available.
With respect to non-marketable order flow that would provide liquidity
on an exchange, ETP Holders can choose from any one of the 16 currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain the Exchange's transaction fees, and
market participants can readily trade on competing venues if they deem
pricing levels at those other venues to be more favorable.
The Exchange utilizes a ``taker-maker'' or inverted fee model to
attract orders that provide liquidity at the most competitive prices.
Under the taker-maker model, offering rebates for taking (or removing)
liquidity increases the likelihood that market participants will send
orders to the Exchange to trade with liquidity providers' orders. This
increased taker order flow provides an incentive for market
participants to send orders that provide liquidity. The Exchange
generally charges fees for order flow that provides liquidity. These
fees are reasonable due to the additional marketable interest (in part
attracted by the Exchange's rebate to remove liquidity) with which
those order flow providers can trade.
Proposed Rule Change
To respond to this competitive environment, the Exchange proposes
the following change to its Fee Schedule designed to provide order flow
providers with additional incentives to route order flow to the
Exchange. As described above, ETP Holders have a choice of where to
send their order flow.
Proposed Change to Adding Tier 1
Under current Adding Tier 1, ETP Holders that add liquidity to the
Exchange in securities with a per share price of $1.00 or more and that
have at least 0.25% or more of Adding ADV as a percentage of US CADV or
at least 30 million Adding ADV are charged a fee of $0.0020 per share
for adding displayed orders and a fee of $0.0024 per share for adding
non-displayed orders in Tape A, B, and C securities. The Exchange
proposes to revise requirements to qualify for Adding Tier 1 as
follows: ETP Holders would qualify for the current fee by having at
least 0.20% or more Adding ADV as a percentage of US CADV or at least
30 million shares or more of Adding ADV. The Exchange does not propose
any changes to the adding fees for Adding Tier 1.
The Exchange believes that lowering the ADV requirement to qualify
for Adding Tier 1 as proposed above will allow greater numbers of ETP
Holders to potentially qualify for the tier, and therefore will
incentivize more ETP Holders 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.
The Exchange believes that by correlating the amount of the fee to the
level of orders sent by an ETP Holder that add liquidity, the
Exchange's fee structure would incentivize ETP Holders to submit more
orders that add liquidity to the Exchange, thereby increasing the
potential for price improvement to incoming marketable orders submitted
to the Exchange.
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 does not know how much order
flow ETP Holders 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 ETP Holders could qualify for Adding
Tier 1 under the revised qualification criteria if they choose to
direct order flow to the Exchange. However, without having a view of
ETP Holders' 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 ETP Holders directing orders to the Exchange
in order to qualify for the Adding Tier 1 rate.
The proposed change is not otherwise intended to address any other
issues, and the Exchange is not aware of any problems that ETP Holders
would have in complying with the proposed change.
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 6(b)(5) of the Act,\11\ in
particular, because it provides for the equitable allocation of
reasonable dues, fees, and other charges among its
[[Page 58853]]
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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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.'' \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 Regulation NMS, supra note 5 [sic], at 37499.
\13\ See Concept Release on Equity Market Structure, supra note
6 [sic], at 3597.
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Given the current competitive environment, the Exchange believes
that the proposal represents a reasonable attempt to attract additional
order flow to the Exchange. Specifically, the Exchange believes that
the proposed change lowering the requirements to qualify for Adding
Tier 1 is reasonable because it would promote execution opportunities
for more ETP Holders routing order flow to the Exchange.
The Exchange believes that the proposal represents a reasonable
effort to promote price discovery and enhanced order execution
opportunities for ETP Holders. All ETP Holders would benefit from the
greater amounts of liquidity on the Exchange, which would represent a
wider range of execution opportunities.
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 ETP Holders to both 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 Adding Tier 1 would encourage the submission of additional adding
liquidity to the Exchange, thus enhancing order execution opportunities
for ETP Holders from the additional amounts of liquidity present on the
Exchange. All ETP Holders would benefit from the greater amounts of
liquidity that would be present on the Exchange, which would provide
greater execution opportunities.
The Exchange believes the proposed rule change would also improve
market quality for all market participants seeking to remove liquidity
on the Exchange and, as a consequence, attract more liquidity to the
Exchange, thereby improving market-wide quality. 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 ETP
Holders and other market participants would be eligible for the same
general and tiered rates and would be eligible for the same fees.
Moreover, the proposed change is equitable because the revised fees
would apply equally to all similarly situated ETP Holders.
The Proposal Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, ETP Holders
are free to disfavor the Exchange's pricing if they believe that
alternatives offer them better value.
Moreover, the proposal neither targets nor will it have a disparate
impact on any particular category of market participant. The Exchange
believes that the proposal does not permit unfair discrimination
because the proposal would be applied to all similarly situated ETP
Holders and all ETP Holders would be subject to the same modified
requirements to qualify for Adding Tier 1. Accordingly, no ETP Holder
already operating on the Exchange would be disadvantaged by the
proposed allocation of fees.
The Exchange further believes that the proposed change would not
permit unfair discrimination among ETP Holders because the tiered rates
are available equally to all ETP Holders. As described above, in
today's competitive marketplace, order flow providers have a choice of
where to direct order flow, and the Exchange believes there are
additional ETP Holders that could qualify if they chose to direct their
order flow to the Exchange.
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,\14\ 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 ETP Holders. 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.'' \15\
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\14\ 15 U.S.C. 78f(b)(8).
\15\ 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. As described above, the Exchange
believes that the proposed change would provide additional incentives
for market participants to route liquidity-providing orders to the
Exchange. Greater liquidity benefits all market participants on the
Exchange by providing more trading opportunities and encourages ETP
Holders to send orders, thereby contributing to robust levels of
liquidity. The proposed revised requirements for the tiered fees would
be available to all similarly-situated market participants, and thus,
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 rebates in
response, and because market participants may readily adjust their
[[Page 58854]]
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) \16\ of the Act and subparagraph (f)(2) of Rule
19b-4 \17\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\18\ 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#3240475e571f515d5f5f575c4641724157511c555d44"><span class="__cf_email__" data-cfemail="542621383179373b3939313a2027142731377a333b22">[email protected]</span></a>. Please include
File Number SR-NYSENAT-2022-20 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-NYSENAT-2022-20. 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-NYSENAT-2022-20 and should be submitted
on or before October 19, 2022.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20954 Filed 9-27-22; 8:45 am]
BILLING CODE 8011-01-P
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