Notice2022-28372
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 29, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 249 (Thursday, December 29, 2022)</title>
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[Federal Register Volume 87, Number 249 (Thursday, December 29, 2022)]
[Notices]
[Pages 80231-80238]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-28372]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96583; File No. SR-NYSE-2022-56]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
December 23, 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 December 12, 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
and II 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 (1) eliminate the
underutilized alternative Tier 2 Adding Credit qualification
requirements and the underutilized alternative Step Up Adding Tier 3
credits and requirements, and (2) revise and streamline the
Supplemental Liquidity Provider (``SLP'') Adding Tiers by eliminating
and combining the SLP step up tier and incremental tiers and replacing
the discount for SLPs that are also Designated Market Makers (``DMMs'')
with fixed levels. 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend it Price List to (1) eliminate the
underutilized alternative Tier 2 Adding Credit qualification
requirements and the underutilized alternative Step Up Adding Tier 3
credits and requirements, and (2) revise and streamline the SLP Adding
Tiers by eliminating and combining the SLP step up tier and incremental
tiers and replacing the discount for SLPs that are also DMMs with fixed
levels.
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
December 12, 2022.\4\
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\4\ The Exchange originally filed to amend the Price List on
December 1, 2022 (SR-NYSE-2022-55). On December 12, 2022, SR-NYSE-
2022-55 was withdrawn and replaced by this filing.
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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.'' \5\
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\5\ 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.'' \6\ Indeed, cash equity trading is currently dispersed
across 16 exchanges,\7\ numerous alternative trading systems,\8\ 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.\9\ 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%.\10\
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\6\ 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).
\7\ 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>.
\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. 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
[[Page 80232]]
Exchange. The proposed changes are designed to continue to attract
additional order flow to the Exchange by streamlining and revising the
SLP Adding Tiers in order to further incentivize member organizations
to submit additional displayed liquidity to, and quote aggressively in
support of the price discovery process on, the Exchange.
Proposed Rule Change
The Exchange proposes to eliminate underutilized alternative
requirements and credits and revise and streamline the SLP Adding Tiers
by eliminating and combining the SLP step up tier and incremental tiers
and replacing the current DMM discount with fixed levels. The Exchange
believes that the proposed changes to the SLP Adding Tiers, taken
together, will make the SLP Adding Tiers easier for member
organizations that are SLPs, including member organizations that are
also DMMs, to utilize and will continue incentivizing submission of
additional liquidity in Tape A, B and Tape C securities to a public
exchange, thereby promoting price discovery and transparency and
enhancing order execution opportunities for member organizations.
Deletion of Underutilized Requirements and Credits
Current Tier 2 Adding Credit provides a $0.0020 credit for orders,
other than MPL and Non-Display Reserve orders, that add liquidity to
the Exchange if a member organization (1) has an average daily volume
(``ADV'') that adds liquidity to the Exchange during the billing month
(``Adding ADV''),\11\ that is at least 0.75% of NYSE CADV, and (2)
executes MOC and LOC orders of at least 0.10% of NYSE CADV or executes
an ADV during the billing month of at least one million shares in
Retail Price Improvements Orders (``RPIs''). The purpose of providing
an alternative way to qualify for the Tier 2 Adding Credit was to
encourage member organizations to provide higher volumes of RPIs, which
would contribute to the quality of the Exchange's market, particularly
for retail investors.\12\
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\11\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
\12\ See Securities Exchange Act Release No. 72805 (August 11,
2014), 79 FR 48274 (August 15, 2014) (SR-NYSE-2014-42).
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The Exchange proposes to eliminate and remove the second method
qualifying for the Tier 2 Adding Credit from the Price List. The method
has been underutilized by member organizations insofar as member
organizations qualifying for this tier are choosing not to provide
higher volumes of RPIs. Currently, no member organizations qualify for
the tiered credit based on the submission of RPIs. The Exchange does
not anticipate that any other member organization in the near future
would qualify for the tiered credit based on the alternative criteria
proposed to be eliminated and that elimination of the alternative
method is therefore appropriate.
In addition, member organizations meeting the current Step Up
Adding Tier 3 Adding Credit requirements \13\ and that also have (1) an
adding ADV that is at least 0.45% of US CADV, and (2) Adding ADV
setting the NBBO that is at least 0.18% of US CADV, qualify for the
following credits instead of the existing credit combined with the
incremental $0.0006 credit:
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\13\ Under 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 National Best Bid or
Offer (``NBBO'') or a new Best Bid or Offer (``BBO'') if the MPID or
mnemonic: (1) has adding ADV in Tapes A, B and C Securities as a
percentage of Tapes A, B and C CADV (``US CADV''), excluding
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 US CADV, and (2) is affiliated with a SLP that
has an Adding ADV in Tape A securities at least 0.10% of NYSE CADV,
and (3) 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%. For MPIDs or mnemonics of qualifying member organizations
that are SLPs in a month where Tape A, Tape B and Tape C CADV
combined equals or exceeds 13.0 billion shares per day for the
billing month, CADV for that month will be subject to a cap of 13.0
billion shares per day for the billing month, and in a month where
NYSE CADV equals or exceeds 5.5 billion shares per day for the
billing month, NYSE CADV for that month will be subject to a cap of
5.5 billion shares per day for the billing month. Step Up Adding
Tier 3 currently provides that 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. As discussed below, the Exchange
proposes to delete the incremental credits and retain the combined
limit on SLP credits of $0.0032 per share as set forth in current
Bullet 2 associated with the SLP Adding Tiers. The phrase
``Incremental Credit per Share for affiliated SLPs whereby SLPs can
qualify for incremental credits of $0.0001, $0.0002 or $0.0003''
will accordingly be deleted from Step Up Adding Tier 3.
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<bullet> a $0.0036 for adding orders that set the NBBO, or
<bullet> a $0.0031 for all other displayed adding orders in Tape A,
B and C Securities.
The purpose of these incremental credits was to continue
incentivizing member organizations to increase aggressively priced
liquidity-providing orders that improve the market by setting the NBBO
or a new BBO on the Exchange and encourage higher levels of liquidity,
which supports the quality of price discovery on the Exchange and is
consistent with the overall goals of enhancing market quality.\14\
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\14\ See Securities Exchange Act Release No. 89754 (September 2,
2020), 85 FR 55550 (September 8, 2020) (SR-NYSE-2020-71).
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The Exchange proposes to eliminate and remove the Step Up Tier 3
Adding Credit alternative requirements and associated credits from the
Price List. The credits have been underutilized by member organizations
insofar as the member organizations that have qualified for the
alternative credits achieve higher credits under the current Step Up
Tier 3 Adding tier and thus does not benefit from the incremental
credits. The Exchange does not anticipate that any additional member
organization in the near future would qualify for the incremental
credits that are the subject of this proposed rule change.
Consolidation and Revision of SLP Adding Tiers
The Exchange proposes to streamline and revise the SLP Adding Tiers
to make it easier for member organizations that are SLPs, including
member organizations that are also DMMs, to utilize and to further
incentivize submission of additional liquidity in Tape A, B and Tape C
securities to a public exchange, thereby promoting price discovery and
transparency and enhancing order execution opportunities. Specifically,
the revision would consist of the elimination of the SLP Step Up Tier,
the three SLP incremental tiers, the alternative method to qualify for
current SLP Tier 5 (proposed SLP Tier 7), and the replacement of the
current discount for SLPs that are also DMMs based on a DMM's
percentage of NYSE CADV in DMM assigned securities for the prior
quarter with fixed rates, the introduction of a new SLP Tier 1 and a
new SLP Tier 5, and a revision of the credits for current SLP Tier 1,
Tier 2, Tier 3 (proposed new SLP Tier 2, Tier 3 and Tier 4). The step
up credits previously available pursuant to the deleted Step Up Tier
and SLP incremental tiers would be subsumed in the revised SLP Adding
Tiers to be substantially in line with the combined credits SLPs
currently receive in order not to disadvantage any SLPs currently
qualifying for the deleted SLP incremental tiers.
[[Page 80233]]
Deletion of Tiers and Alternative Qualification and Credits
The current SLP Step Up tier provides that an SLP adding liquidity
to the Exchange receive a credit of $0.0018, or $0.0001 if a Non-
Displayed Reserve Order, if the SLP (1) meets the 10% average or more
quoting requirement in an assigned security pursuant to Rule 107B, and
(2) adds liquidity for all assigned SLP securities in the aggregate of
an ADV of more than 0.085% of NYSE CADV over that SLPs' April 2018
adding liquidity for all assigned SLP securities in the aggregate taken
as a percentage of NYSE CADV.\15\ The step up tier was intended to
provide greater incentives for SLPs to add liquidity to the
Exchange.\16\ The Exchange proposes to remove the separate SLP Step Up
Tier from the Price List. The credits have been underutilized by SLPs
insofar as the only SLPs that qualified for the Step Up Tier credits
achieve higher credits under other SLP tiers. In addition, as discussed
below, the Exchange proposes a new SLP Tier 1 and SLP Tier 5 that,
along with current SLP tiers, provide greater incentives for more SLPs
to add more liquidity to the Exchange.
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\15\ SLPs that are also DMMs and subject to Rule 107B(i)2)(A)
must add liquidity for all assigned SLP securities in the aggregate
(including shares of both an SLP-Prop and an SLMM of the same or an
affiliated member organization) of an ADV of more than 0.085% of
NYSE CADV over that SLPs' April 2018 adding liquidity for all
assigned SLP securities in the aggregate (including shares of both
an SLP-Prop and an SLMM of the same or an affiliated member
organization) taken as a percentage of NYSE CADV after a discount of
the percentage for the prior quarter of NYSE CADV in DMM assigned
securities as of the last business day of the prior month. As
discussed below, as part of the streamlining of the SLP
requirements, the Exchange proposes to replace the discount of the
percentage for the prior quarter of NYSE CADV in DMM assigned
securities as of the last business day of the prior month with the
requirement that SLPs that are also DMMs be registered as a DMM in
at least 500 Tape A issues.
\16\ See Securities Exchange Act Release No. 83929 (August 23,
2018), 83 FR 44115 (August 29, 2018) (SR-NYSE-2018-37).
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The Exchange similarly proposes to eliminate the three current SLP
Incremental Tiers that provide incremental credits of $0.0001, $0.0002
and $0.0003 to SLPs that (1) meet the 10% average or more quoting
requirement in an assigned security pursuant to Rule 107B, and (2) add
liquidity for all assigned SLP securities in the aggregate of an ADV of
more than 0.10%, 0.15%, or 0.25% of NYSE CADV in the billing month over
the SLP's adding liquidity for all assigned SLP securities in the
aggregate as a percent of NYSE CADV in either the second quarter of
2018, the third quarter of 2018 or the month of January 2021, whichever
is lowest. The current combined SLP credits are currently capped at
$0.0032 per share in a billing month as set forth in current footnote *
in the column heading titled ``Tiered Display Incremental Credit.''
Current footnote * would be deleted as well.
As discussed below, new SLP Tiers 1 and 5 along with renumbered SLP
Tiers 2 (current SLP Tier 1), 3 (current SLP Tier 2) and 4 (current SLP
Tier 3) reflect increased rates of $.0001, $.0002 and/or $.0003 that
seek to incorporate the deleted step up rates in a way that does not
disadvantage current SLPs by providing a combined credit that is in
line with the combined credits SLPs are qualifying for under the
current tiers. Renumbered SLP Tiers 6 (current SLP Tier 4) and 7
(current SLP Tier 5) do not reflect the deleted SLP incremental
credits.
Finally, under current SLP Tier 5 (proposed new SLP Tier 7), an SLP
that is either (1) is in the first two calendar months as an SLP, or
(2) adds liquidity for all assigned SLP securities in the aggregate of
an ADV of more than 0.03% of NYSE CADV after averaging less an adding
ADV of than 0.01% in each of the prior 3 months, after a discount of
the percentage for the prior quarter of NYSE CADV in DMM assigned
securities as of the last business day of the prior month,\17\ would
receive a credit of $0.0029, or $0.00105 if a Non-Displayed Reserve
Order, if the SLP meets the 10% average or more quoting requirement in
an assigned security pursuant to Rule 107B. The alternative
qualification method was intended to provide greater incentives for
less active SLPs to add liquidity to the Exchange.\18\ The Exchange
proposes to delete the alternative qualification as underutilized
insofar as no SLP has qualified for current SLP Tier 5 based on this
alternative criteria. The Exchange does not anticipate that any
additional member organization in the near future would qualify for the
incremental credits that are the subject of this proposed rule change.
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\17\ As discussed below, the Exchange proposes to eliminate the
discount for SLPs that are also DMMs.
\18\ See Securities Exchange Act Release No. 83424 (June 13,
2018), 83 FR 28479 (June 19, 2018) (SR-NYSE-2018-27). When adopted,
current SLP Tier 5 was SLP Tier 4.
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DMM Fixed Rates For Calculating Tier-Based Credits
For SLPs that are also DMMs and subject to Rule 107B(i)(2)(A), the
current SLP Tier 1, Tier 1A,\19\ Tier 2, Tier 3, Tier 4, Tier 5 and
Step Up Tier requirements are after a discount of the percentage for
the prior quarter of NYSE CADV in DMM assigned securities as of the
last business day of the prior month.
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\19\ SLP Tier 1A was merged into current SLP Tier 2 in 2021. See
Securities Exchange Act Release No. 92898 (September 8, 2021), 86 FR
51201 (September 14, 2021) (SR-NYSE-2021-49). The bullets in the
Price List referencing SLP Tier 1A were inadvertently not updated.
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The Exchange proposes to replace the dynamic discount with fixed
rates that would be set forth in a new column titled ``SLP Adding ADV %
Tape A CADV If DMM.'' As discussed below in connection with the
individual SLP tiers, the requirements would range from 0.08% to 0.55%.
The Exchange believes that fixed percentages represent a clearer and
easier to understand benchmark for determining the appropriate credit
for SLPs that provide liquidity to the Exchange rather than a monthly
rolling calculation utilizing the most recent quarter's percentage of
DMM CADV.
In addition, the Exchange proposes that the fixed rates would apply
to SLPs that are also DMMs subject to Rule 107B(i)(2)(A) and that are
registered as a DMM in at least 500 Tape A securities. Bullet 1
immediately beneath the chart setting forth the SLP Adding Tiers
currently sets forth the requirements for SLPs that are also DMMs. As
amended, Bullet 1 would become new footnote * in the new proposed
column.
Proposed SLP Tier 1
Proposed SLP Tier 1 would be new and would seek to incorporate the
equivalent the SLP Incremental Tier rates. As proposed, under new SLP
Tier 1 an SLP adding liquidity to the Exchange in Tape A securities
would receive a credit of $0.0032, or $0.0012 if a Non-Displayed
Reserve Order, if the SLP (1) meets the 10% average or more quoting
requirement in an assigned security pursuant to Rule 107B, and (2) adds
liquidity for all assigned SLP securities in the aggregate (including
shares of both an SLP-Prop and an SLMM of the same or an affiliated
member organization) \20\ of an ADV of more than 1.00% (or 0.080% for
SLPs that meet the SLP Cross Tape Tier 1 Incentive) of NYSE CADV or,
with respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a)
and that is registered in at least 500 Tape A issues, more than 0.55%
of NYSE CADV.
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\20\ Under Rule 107B, an SLP can be either a proprietary trading
unit of a member organization (``SLP-Prop'') or a registered market
maker at the Exchange (``SLMM''). For purposes of the 10% average or
more quoting requirement in assigned securities pursuant to Rule
107B, quotes of an SLP-Prop and an SLMM of the same member
organization are not aggregated. However, for purposes of adding
liquidity for assigned SLP securities in the aggregate, shares of
both an SLP-Prop and an SLMM of the same member organization are
included.
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[[Page 80234]]
The Exchange believes that the new tier will continue to provide
incentives for SLPs to add more liquidity to the Exchange. The Exchange
does not know how much order flow member organizations choose to route
to other exchanges or to off-exchange venues. Since the proposed tier
is new, the Exchange does not know how many SLPs and their affiliates
could qualify for the proposed tiered credits based on their current
trading profile on the Exchange. However, without having a view of
member organization's activity on other exchanges and off-exchange
venues, the Exchange believes that additional SLPs and affiliated firms
could qualify for the new tier if they choose 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.
Proposed SLP Tier 2
Proposed SLP Tier 2 is current SLP Tier 1. Under current SLP Tier
1, an SLP adding liquidity to the Exchange in Tape A securities would
receive a credit of $0.0029, or $0.0012 if a Non-Displayed Reserve
Order, if the SLP (1) meets the 10% average or more quoting requirement
in an assigned security pursuant to Rule 107B, and (2) adds liquidity
for all assigned SLP securities in the aggregate (including shares of
both an SLP-Prop and an SLMM of the same or an affiliated member
organization) of an ADV of more than 0.90% (or 0.75% for SLPs that meet
the SLP Cross Tape Tier 1 Incentive) of NYSE CADV or, with respect to
an SLP that is also a DMM subject to Rule 107B(i)(2)(a), more than
0.90% (or 0.75% for SLPs that are also DMMs and meet the SLP Cross Tape
Tier 1 Incentive) after a discount of the percentage for the prior
quarter of NYSE CADV in DMM assigned securities as of the last business
day of the prior month.
The Exchange proposes to increase the credit for displayed orders
by $.0002 to $0.0031. The credit for Non-Displayed Reserve Orders would
remain unchanged. The higher credit is generally in line with the
credit for SLPs that qualify with the current SLP Tier 1 and SLP
Incremental Tier credits.
In addition, as proposed, an SLP that is also a DMM subject to Rule
107B(i)(2)(a) and that is registered in at least 500 Tape A issues,
would be required to add liquidity for all assigned SLP securities in
the aggregate (including shares of both an SLP-Prop and an SLMM of the
same or an affiliated member organization) of an ADV of more than 0.45%
of NYSE CADV. The tier's other requirements would remain unchanged.
Proposed SLP Tier 3
Proposed SLP Tier 3 is current SLP Tier 2. Under current SLP Tier
2, an SLP adding liquidity to the Exchange in Tape A securities would
receive a credit of $0.00275, or $0.00105 if a Non-Displayed Reserve
Order, if the SLP (1) meets the 10% average or more quoting requirement
in an assigned security pursuant to Rule 107B, and (2) adds liquidity
for all assigned SLP securities in the aggregate (including shares of
both an SLP-Prop and an SLMM of the same or an affiliated member
organization) of an ADV of more than 0.60% of NYSE CADV or, with
respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a),
more than 0.60% after a discount of the percentage for the prior
quarter of NYSE CADV in DMM assigned securities as of the last business
day of the prior month.
The Exchange proposes to increase the credit by $.0002 to $0.00305.
The credit for Non-Displayed Reserve Orders would remain unchanged. The
higher credit is generally in line with the credit for SLPs that
qualify with the current SLP Tier 3 and SLP Incremental Tier credits.
In addition, as proposed, an SLP that is also a DMM subject to Rule
107B(i)(2)(a) and that is registered in at least 500 Tape A issues,
would be required to add liquidity for all assigned SLP securities in
the aggregate (including shares of both an SLP-Prop and an SLMM of the
same or an affiliated member organization) of an ADV of more than 0.36%
of NYSE CADV. The tier's requirements and credit would otherwise remain
unchanged.
Proposed SLP Tier 4
Proposed SLP Tier 4 is current SLP Tier 3. Under current SLP Tier
3, an SLP adding liquidity to the Exchange in Tape A securities would
receive a credit of $0.0026, or $0.0009 if a Non-Displayed Reserve
Order, if the SLP (1) meets the 10% average or more quoting requirement
in an assigned security pursuant to Rule 107B, and (2) adds liquidity
for all assigned SLP securities in the aggregate (including shares of
both an SLP-Prop and an SLMM of the same or an affiliated member
organization) of an ADV of more than 0.45% of NYSE CADV or, with
respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a),
more than 0.45% after a discount of the percentage for the prior
quarter of NYSE CADV in DMM assigned securities as of the last business
day of the prior month.
The Exchange proposes to increase the credit by $.0003 to 0.0029
credit. The credit for Non-Displayed Reserve Orders would remain
unchanged. The higher credit is generally in line with the credit for
SLPs that qualify with the current SLP Tier 3 and SLP Incremental Tier
credits.
In addition, as proposed, an SLP that is also a DMM subject to Rule
107B(i)(2)(a) and that is registered in at least 500 Tape A issues,
would be required to add liquidity for all assigned SLP securities in
the aggregate (including shares of both an SLP-Prop and an SLMM of the
same or an affiliated member organization) of an ADV of more than 0.24%
of NYSE CADV. The tier's requirements and credit would otherwise remain
unchanged.
Proposed SLP Tier 5
Proposed SLP Tier 5 would be new and would seek to incorporate
credits from the current SLP Incremental Tier credits. As proposed,
under new SLP Tier 5 an SLP adding liquidity to the Exchange in Tape A
securities would receive a credit of $0.0026, or $0.0006 if a Non-
Displayed Reserve Order, if the SLP (1) meets the 10% average or more
quoting requirement in an assigned security pursuant to Rule 107B, and
(2) adds liquidity for all assigned SLP securities in the aggregate
(including shares of both an SLP-Prop and an SLMM of the same or an
affiliated member organization) of an ADV of more than 0.025% of NYSE
CADV or, with respect to an SLP that is also a DMM subject to Rule
107B(i)(2)(a) and that is registered in at least 500 Tape A issues,
more than 0.18% of NYSE CADV.
The Exchange believes that the new tier will continue to provide
incentives for SLPs to add more liquidity to the Exchange. The Exchange
does not know how much order flow member organizations choose to route
to other exchanges or to off-exchange venues. Since the proposed tier
is new, the Exchange does not know how many SLPs and their affiliates
could qualify for the proposed tiered credits based on their current
trading profile on the Exchange. However, without having a view of
member organization's activity on other exchanges and off-exchange
venues, the Exchange believes that additional SLPs and affiliated firms
could qualify for the new tier if they choose direct order flow to, and
increase
[[Page 80235]]
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.
Proposed SLP Tier 6
Proposed SLP Tier 6 is current SLP Tier 4. The requirements and
credits for qualifying under proposed SLP Tier 6 would remain
unchanged.
As proposed, an SLP that is also a DMM subject to Rule
107B(i)(2)(a) and that is registered in at least 500 Tape A issues,
would be required to add liquidity for all assigned SLP securities in
the aggregate (including shares of both an SLP-Prop and an SLMM of the
same or an affiliated member organization) of an ADV of more than 0.08%
of NYSE CADV in order to qualify for the credit of $0.0023 or $0.0006
if a Non-Displayed Reserve Order.
Proposed SLP Tier 7
Proposed SLP Tier 7 is current SLP Tier 5. As described above, the
alternative method to qualify for this tier would be eliminated. The
Exchange proposes no other changes to this tier. Since there is no
volume requirement for the tier, there would be no associated NYSE ADV
requirement for a SLP that is also a DMM. The Exchange would therefore
add ``No requirement in first 2 calendar months if DMM'' to the new SLP
Adding ADV column.
Changes to Chart Bullets
The Exchange proposes the following changes to the general
information bullets immediately following the SLP Adding Tiers chart.
As noted above, the current first bullet would become new footnote *.
The Exchange would add a new first bullet restating the first
sentence in footnote * to the incremental tiers that the Exchange
proposes to delete. The bullet would provide that combined SLP credits,
including additional credits above, shall not exceed $0.0032 per share
in a billing month.
The current second bullet provides that SLPs that meet the
requirements of one of the above tiers (Tiers 1A, 2, 3, 4 and the SLP
Step Up Tier) and add liquidity in Tapes B and C securities of at least
0.25% of Tape B and Tape C CADV combined, will receive an additional
credit of $0.0001 if at SLP Step Up Tier, SLP Tier 3, SLP Tier 2, SLP
Tier 1A or $0.00005 if at SLP Tier 1, SLP Tier 4 and SLP Tier 5.
The Exchange would amend the bullet as follows. First, the clause
enumerating the tiers would be deleted. Second, the tiers eligible for
the $0.0001 additional credit would be updated to reflect new SLP Tiers
3, 4, 5, 6, or 7. Finally, the tiers eligible for the $0.00005
additional credit would be updated to reflect new SLP Tier 1 or 2.
Further, the Exchange would add a new clause providing that these
additional credits of $0.0001 or $0.00005, along with the credit for
the SLP Tape A Tier in Tape B and C Securities that appears in the
``Transaction Fees and Credits for Tape B and C Securities'' section of
the Price List, would be subject to a limit of $0.0032 per share.
Finally, the current third bullet provides that in current SLP Tier
1 and Tier 5, SLPs receive an additional $0.00005 per share for adding
liquidity, other than MPL and Non-Display Reserve orders, in securities
where they are not assigned as an SLP or do not meet the 10% average or
more quoting requirement in an assigned security pursuant to Rule 107B.
The Exchange proposes to add SLP Tier 2 and update current SLP Tier 5
to proposed SLP Tier 7. As proposed, Bullet 3 would provide that the
additional $0.00005 would be available to SLPs in SLP Tier 1, Tier 2
and Tier 7.
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,\21\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\22\ 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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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Fee Change Is Reasonable Deletion of Underutilized
Requirements and Credits
The Exchange believes that the proposed elimination of the
underutilized alternative Tier 2 Adding Credit qualification
requirements, the underutilized alternative Step Up Adding Tier 3
credits and requirements, and the underutilized alternative
qualification requirements of current SLP Tier 5 are reasonable because
member organizations have underutilized these incentives. As noted, the
second method qualifying for the Tier 2 Adding Credit from the Price
List has been underutilized by member organizations insofar as member
organizations qualifying for this tier are choosing not to provide
higher volumes of RPIs. Currently, no member organizations qualify for
the tiered credit based on the submission of RPIs. Similarly, the Step
Up Tier 3 Adding Credit alternative requirements and associated credits
have been underutilized by member organizations insofar as the member
organizations that qualified for the alternative credits achieve higher
credits under the current Step Up Tier 3 Adding tier and thus does not
benefit from the incremental credits. Finally, current SLP Tier 5
alternative qualification method has been underutilized insofar as no
SLP has qualified for current SLP Tier 5 based on this alternative
criteria. In each case, the Exchange does not anticipate that any
additional member organization in the near future would qualify for the
credits that are the subject of this proposed rule change. The Exchange
believes it is reasonable to eliminate credits when such incentives
become underutilized. The Exchange also believes eliminating
underutilized incentives would also add clarity and transparency to the
Price List.
Consolidation and Revision of the SLP Adding Tiers
The Exchange believes that the proposed changes to the SLP Adding
Tiers, taken together, are reasonable. The Exchange believes that
subsuming the separate step up and incremental tiers in the SLP adding
tiers would make the SLP Adding Tiers easier for member organizations
that are SLPs to utilize and will continue to provide an incentive for
member organizations to send additional liquidity providing orders to
the Exchange in Tape A securities. In addition, the Exchange believes
that introducing new SLP Tiers 1 and 5 as part of the revision in order
to subsume some of the deleted credits is also reasonable and would
continue to provide an incentive for member organizations to send
additional liquidity providing orders to the Exchange in Tape A
securities. Since the proposed tiers would be new, no member
organization currently qualifies
[[Page 80236]]
for the proposed pricing tiers. 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 qualifying for either
tier. The Exchange believes the proposed credits are reasonable as it
would provide an incentive for member organizations to direct their
order flow to the Exchange and provide meaningful added levels of
liquidity in order to qualify for the credits, thereby contributing to
depth and market quality on the Exchange. As noted above, the Exchange
operates in a highly competitive environment, particularly for
attracting non-marketable order flow that provides liquidity on an
exchange.
Similarly, replacing the dynamic discount with fixed rates in DMM
assigned securities is reasonable. As noted above, the Exchange
believes that fixed percentages represent a fairer benchmark for
determining the appropriate credit for market participants that provide
liquidity to the Exchange rather than a calculation utilizing the most
recent quarter's percentage of DMM CADV. The Exchange believes that
more accurate and fairer discounts would incentivize these market
participants to increase the orders sent directly to the Exchange and
therefore provide liquidity that supports the quality of price
discovery and promotes market transparency. Further, the Exchange
believes that the proposed benchmark is equitable because it would
apply to all similarly situated SLPs and provide credits that are
reasonably related to the value of an exchange's market quality
associated with higher volumes.
Finally, the Exchange believes that requiring SLPs that are DMMs
subject to Rule 107B(i)(2)(A) to be registered as a DMM in at least 500
Tape A securities is also reasonable. Rule 107B(i)(2)(A) prohibits a
DMM from acting as a SLP in the same securities in which it is a DMM,
so requiring a SLP that is also a DMM to be registered as a DMM in at
least 500 securities could incentivize smaller and new DMMs to register
as a DMM in more securities. In addition, two of the Exchange's three
DMMs already meet the requirement, and the Exchange believes that the
third DMM, plus future DMMs, could reach that number.
The Proposed Change Is an Equitable Allocation of Fees and Credits
Deletion of Underutilized Requirements and Credits
The Exchange believes the proposed elimination of the underutilized
qualification requirements and credits equitably allocates fees among
its market participants because the underutilized requirements and
credits the Exchange proposes to eliminate would be eliminated in their
entirety, and would no longer be available to any member organization
in any form. Similarly, the Exchange believes the proposal equitably
allocates fees among its market participants because elimination of the
underutilized requirements and credits would apply to all similarly-
situated member organizations that are SLPs on an equal basis. All such
member organizations 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.
Consolidation and Revision of the SLP Adding Tiers
The Exchange believes the proposal to consolidate and revise the
SLP Adding Tiers equitably allocates its fees among its market
participants by fostering liquidity provision and stability in the
marketplace. As noted, the proposed changes will eliminate step up and
incremental tiers and subsume those credits into seven adding tiers
that the Exchange believes will make it easier for member organizations
to utilize and will continue to provide an incentive for member
organizations to send additional liquidity providing orders to the
Exchange in Tape A securities. The Exchange believes that offering two
new SLP adding tiers as part of the revision equitably allocates its
fees among its market participants. The proposed changes would
encourage the submission of additional liquidity to a national
securities exchange, thereby promoting price discovery and transparency
and enhancing order execution opportunities for member organizations
from the substantial amounts of liquidity that are present on the
Exchange. The proposed changes would also encourage the submission of
additional orders that add liquidity, thus providing price improving
liquidity to market participants and increasing the quality of order
execution on the Exchange's market, which would benefit all market
participants. Moreover, the proposed changes are equitable because they
would apply equally to all qualifying SLPs that submit orders to the
NYSE and add liquidity to the Exchange.
In addition, as noted, the Exchange believes that the proposed
fixed rates for DMMs would result in a fairer benchmark for market
participants that provide liquidity to the Exchange. The Exchange
believes that that the proposed benchmark is equitable because it would
apply to all similarly situated SLPs and provide credits that are
reasonably related to the value of an exchange's market quality
associated with higher volumes. Similarly, the Exchange believes that
requiring SLPs that are DMMs subject to Rule 107B(i)(2)(A) to be
registered as a DMM in at least 500 Tape A securities is also equitable
since it would apply to all similarly situated SLPs that are also DMMs.
As noted, two of the Exchange's three DMMs already meet the
requirement, and the Exchange believes that the third could also reach
that number.
The Proposed Fee Change Is Not Unfairly Discriminatory
Deletion of Underutilized Requirements and Credits
The Exchange believes that the proposed elimination of
underutilized requirements and credits is not unfairly discriminatory
because it neither targets nor will it have a disparate impact on any
particular category of market participant. The Exchange believes that
the proposal is not unfairly discriminatory because the proposed
elimination of the underutilized alternative Tier 2 Adding Credit
qualification requirements, the underutilized alternative Step Up
Adding Tier 3 credits and requirements, and the underutilized
alternative qualification requirements of current SLP Tier 5 would
affect all similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange believes that eliminating
requirements and credits that are underutilized and ineffective would
no longer be available to any member organization on an equal basis.
The Exchange also believes that the proposed change would protect
investors and the public interest because the deletion of underutilized
credits would make the Price List more accessible and transparent.
Consolidation and Revision of the SLP Adding Tiers
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
[[Page 80237]]
they believe that alternatives offer them better value.
The Exchange believes that 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 market participants on an equal and non-
discriminatory basis. The Exchange believes that eliminating
requirements and credits that are underutilized and ineffective would
no longer be available to any member organization on an equal basis.
The Exchange also believes that the proposed change would protect
investors and the public interest because the deletion of underutilized
credits would make the Price List more accessible and transparent.
The Exchange believes its proposal to offer two new SLP adding
tiers is not unfairly discriminatory because the proposal would be
provided on an equal basis to all member organizations that add
liquidity by meeting the new proposed requirements, who would all be
eligible for the same credits on an equal basis. Accordingly, no member
organization already operating on the Exchange would be disadvantaged
by this allocation of fees. 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 qualification criteria would be applied to all similarly situated
member organizations, who would all be eligible for the same credits on
an equal basis. Finally, as noted, the Exchange believes the proposal
would provide an incentive for member organizations to continue to send
orders that provide liquidity to the Exchange, to the benefit of all
market participants.
The Exchange believes that the proposed fixed rates for DMMs is
equitable because it would apply to all similarly situated SLPs that
are also DMMs and provide credits that are reasonably related to the
value of an exchange's market quality associated with higher volumes.
The proposal does not permit unfair discrimination because the
qualification criteria would be applied to all similarly situated
member organizations, who would all be eligible for the same
requirement on an equal basis. For similar reasons, the Exchange
believes that requiring SLPs that are DMMs subject to Rule
107B(i)(2)(A) to be registered as a DMM in at least 500 Tape A
securities is also not unfairly discriminatory. The proposed
requirement would apply to all similarly situated SLPs that are also
DMMs. As noted, two of the Exchange's three DMMs already meet the
requirement, and the Exchange believes that the third could also reach
that number.
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,\23\ 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 relating to the elimination of an
underutilized requirements and credits and, as such, would not have any
impact on intra- or inter-market competition because the proposed
change is solely designed to accurately reflect the services that the
Exchange currently offers, thereby adding clarity to the Price List.
Moreover, the proposed changes to SLP Adding Tiers 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. The Exchange
believes that this 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. 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.'' \24\
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b)(8).
\24\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------
Intramarket Competition. The proposed changes are in part 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.
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) \25\ of the Act and subparagraph (f)(2) of Rule
19b-4 \26\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of
[[Page 80238]]
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) \27\ of the Act to determine
whether the proposed rule change should be approved or disapproved.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments:
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2052554c450d434f4d4d454e5453605345430e474f56"><span class="__cf_email__" data-cfemail="f381869f96de909c9e9e969d8780b3809690dd949c85">[email protected]</span></a>. Please include
File Number SR-NYSE-2022-56 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-2022-56. 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-2022-56, and should be submitted on
or before January 19, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28372 Filed 12-28-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on December 29, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.