Notice2022-22730
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
October 20, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 202 (Thursday, October 20, 2022)</title>
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[Federal Register Volume 87, Number 202 (Thursday, October 20, 2022)]
[Notices]
[Pages 63842-63845]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-22730]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96084; File No. SR-NYSE-2022-46]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
October 14, 2022.
Pursuant to FR 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 September 30, 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 it Price List to increase the cap
for the maximum average number of shares per day for the billing month
in calculating the average monthly consolidated average daily volume
(``CADV'') for purposes of Step Up Adding Tier 3. The Exchange proposes
to implement the fee changes effective October 3, 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.
[[Page 63843]]
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 it Price List to increase the cap
for the maximum average number of shares per day for the billing month
in calculating the average monthly CADV for purposes of Step Up Adding
Tier 3.
The proposed change would bring the current CADV cap in line with
the tier's June 2020 baseline month CADV, which is above 13.0 billion
shares. Increasing the CADV cap in line with higher volume for the
baseline month CADV would continue to provide a degree of certainty to
member organizations adding liquidity to the Exchange.
The Exchange proposes to implement the fee changes effective
October 3, 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. 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) (File No. 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, cash equity trading is currently dispersed
across 16 exchanges,\6\ numerous alternative trading systems,\7\ and
broker-dealer internalizers and wholesalers, all competing for order
flow. Based on publicly-available information, no single exchange
currently has more than 20% market share.\8\ Therefore, no exchange
possesses significant pricing power in the execution of cash 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. 61358, 75 FR 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\6\ See Cboe U.S Equities Market Volume Summary, available at
<a href="https://markets.cboe.com/us/equities/market_share">https://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. 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.
The proposed adjustment of the cap to 13.0 billion shares would
bring the current CADV cap in line with the tier's June 2020 baseline
month CADV, which is above 13.0 billion shares.\10\ Increasing the CADV
cap in line with higher volume for the baseline month CADV would
continue to provide a degree of certainty to member organizations
adding liquidity to the Exchange.
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\10\ See Cboe U.S Equities Market Volume Summary, available at
<a href="https://markets.cboe.com/us/equities/market_share">https://markets.cboe.com/us/equities/market_share</a>.
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Proposed Rule Change
Under the current Step Up Adding Tier 3, the Exchange provides an
incremental $0.0006 credit in Tapes A, B and C securities for all
orders from a qualifying member organization market participant
identifier (``MPID'') or mnemonic that sets the NBBO \11\ or a new BBO
\12\ if the MPID or mnemonic:
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\11\ See Rule 1.1(q) (defining ``NBBO'' to mean the national
best bid or offer).
\12\ See Rule 1.1(c) (defining ``BBO'' to mean the best bid or
offer on the Exchange).
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<bullet> has adding ADV in Tapes A, B and C Securities as a
percentage of Tapes A, B and C CADV,\13\ excluding any liquidity added
by a DMM, that is at least 50% more than the MPID's or mnemonic's
Adding ADV in Tapes A, B and C securities in June 2020 as a percentage
of Tapes A, B and C CADV, and
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\13\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
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<bullet> is affiliated with a Supplemental Liquidity Provider
(``SLP'') that has an Adding ADV in Tape A securities at least 0.10% of
NYSE CADV, and
<bullet> has Adding ADV in Tape A securities as a percentage of
NYSE CADV, excluding any liquidity added by a DMM, that is at least
0.20%.
The credit is in addition to the MPID's or mnemonic's current
credit for adding liquidity and also does not count toward the combined
limit on SLP credits of $0.0032 per share provided for in the
Incremental Credit per Share for affiliated SLPs whereby SLPs can
qualify for incremental credits of $0.0001, $0.0002 or $0.0003.
For purposes of calculating Tapes A, B and C CADV for Step Up
Adding Tier 3, the Exchange established a monthly maximum average cap
of 11.5 billion shares per day for Tapes A, B and C CADV in the billing
month for MPIDs or mnemonics of qualifying member organizations that
are SLPs.\14\ The Exchange proposes to increase this cap to 13.0
billion shares.
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\14\ Similarly, for purposes of calculating NYSE CADV as
currently used in Step Up Adding Tier 3, the Exchange also has a
monthly maximum average cap of 5.5 billion shares per day for NYSE
CADV in the billing month for MPIDs or mnemonics of qualifying
member organizations that are SLPs.
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For example, assume in the billing month that a member organization
that is an SLP has an average daily adding volume of 11.5 million
shares. Further assume that Tapes A, B and C CADV was 14.0 billion
shares during that month. To calculate the adding ADV as a percent of
Tapes A, B and C CADV, the Exchange would use the CADV cap of 13.0
billion shares, yielding an adding percent of Tapes A, B and C CADV of
0.088% rather than 0.10% if the Exchange had used 11.5 billion shares.
The Exchange does not propose to change the requirements to qualify
for
[[Page 63844]]
or the credits associated with Step Up Adding Tier 3 or the associated
credits.
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 FR 6(b) of the Act,\15\ in general, and furthers the objectives of
FRs 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, is designed to prevent fraudulent and manipulative acts and
practices and to promote just and equitable principles of trade, 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) and (5).
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The Proposed Fee Change Is Reasonable
As discussed above, the Exchange operates in a highly fragmented
and competitive market. As also noted above, Step Up Adding Tier 3's
June 2020 baseline month CADV is above 13.0 billion shares. In view of
these facts, and the current competitive landscape where market
participants can and do move order flow, or discontinue or reduce use
of certain categories of products, in response to fee changes, the
Exchange believes that the proposed rule change is reasonable.
Specifically, the Exchange believes that capping the monthly Tape A, B
and C CADV at a maximum of 13.0 billion shares for Step Up Adding Tier
3 for MPIDs or mnemonics of qualifying member organizations that are
SLPs is reasonable the proposed change would bring the cap into line
with the baseline month CADV. Without the proposed cap on CADV, higher
market volumes reflected in the increased baseline month CADV would
make it significantly harder for member organizations that are SLPs,
whose adding volume is limited to proprietary adding liquidity, to meet
the adding requirements for the tier. The Exchanges notes that the
other CADV share volumes cap levels, which are not being changed, are
the same levels as the current CADV caps for SLP tiers in the fee
schedule.
The Proposed Change Is an Equitable Allocation of Fees and Credits
The Exchange believes the proposal equitably allocates its fees
among its market participants by fostering liquidity provision and
stability in the marketplace. The Exchange believes that the proposed
13.0 billion cap for calculating CADV for Step Up Adding Tier 3 credits
in a month where Tape A, B and C CADV is equal to or greater than 13.0
billion share constitutes an equitable allocation of fees because the
proposed change would apply to all similarly situated member
organizations that are SLPs, all of whom would continue to be subject
to the same fee structure, and access to the Exchange's market would
continue to be offered on fair and nondiscriminatory terms.
The Proposed Fee Change 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 proposal is not unfairly discriminatory because it neither
targets nor will it have a disparate impact on any particular category
of market participant. The proposed cap for calculating monthly
combined CADV for Step Up Adding Tier 3 credits for adding liquidity to
the Exchange also does not permit unfair discrimination because the
proposed changes would apply to all similarly situated member
organizations that are SLPs, who would all benefit from use of the
lower volume threshold to calculate the relevant adding tier CADV
across tapes on an equal basis.
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 FR 6(b)(8) of the Act,\17\ the Exchange believes
that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for member organizations. As a result, the Exchange believes that the
proposed change furthers the Commission's goal in adopting Regulation
NMS of fostering integrated competition among orders, which promotes
``more efficient pricing of individual stocks for all types of orders,
large and small.'' \18\
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\17\ 15 U.S.C. 78f(b)(8).
\18\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed changes are designed to
attract additional order flow to the Exchange. The Exchange believes
that the proposed changes would continue to incentivize market
participants to direct displayed 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 proposed 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 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.
[[Page 63845]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to FR
19(b)(3)(A) \19\ of the Act and subparagraph (f)(2) of Rule 19b-4 \20\
thereunder, because it establishes a due, fee, or other charge imposed
by the Exchange.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under FR
19(b)(2)(B) \21\ of the Act to determine whether the proposed rule
change should be approved or disapproved.
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\21\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#e290978e87cf818d8f8f878c9691a2918781cc858d94"><span class="__cf_email__" data-cfemail="5c2e293039713f3331313932282f1c2f393f723b332a">[email protected]</span></a>. Please include
File Number SR-NYSE-2022-46 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-2022-46. 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-2022-46 and should be submitted on
or before November 10, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22730 Filed 10-19-22; 8:45 am]
BILLING CODE 8011-01-P
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