Notice2023-17608
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend the NYSE American Equities Price List To Adopt a Fee for Directed Orders Routed Directly by the Exchange to an Alternative Trading System
Primary source
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Published
August 16, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 157 (Wednesday, August 16, 2023)</title>
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[Federal Register Volume 88, Number 157 (Wednesday, August 16, 2023)]
[Notices]
[Pages 55793-55796]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-17608]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98110; File No. SR-NYSEAMER-2023-37]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend the NYSE
American Equities Price List To Adopt a Fee for Directed Orders Routed
Directly by the Exchange to an Alternative Trading System
August 11, 2023.
Pursuant to section 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 July 31, 2023, NYSE American LLC (``NYSE American'' 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 the NYSE American Equities Price
List (``Price List'') to adopt a fee for Directed Orders routed
directly by the Exchange to an alternative trading system (``ATS'').
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 the Price List to adopt a fee for
Directed Orders routed directly by the Exchange to an ATS. The Exchange
proposes to implement the fee change effective August 1, 2023.
Background
The Exchange operates in a highly competitive market. The
Securities and Exchange Commission (``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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[[Page 55794]]
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 broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly available information, no single exchange currently
has more than 17% market share.\8\ Therefore, no exchange possesses
significant pricing power in the execution of cash equity order flow.
More specifically, the Exchange currently has less than 1% market share
of executed volume of cash equities trading.\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. While it is not possible to know a firm's reason for shifting
order flow, the Exchange believes that one such reason is because of
fee changes at any of the registered exchanges or non-exchange venues
to which a firm routes order flow. Accordingly, competitive forces
constrain exchange transaction fees because market participants can
readily trade on competing venues if they deem pricing levels at those
other venues to be more favorable.
Proposed Rule Change
Pursuant to Commission approval, the Exchange has adopted an order
type known as Directed Orders.\10\ Under Exchange rules, the ATS to
which a Directed Order is routed is responsible for validating whether
the order is eligible to be accepted, and if such ATS determines to
reject the order, the order would be cancelled. Directed Orders that
are the subject of this proposed rule change are those that are routed
to OneChronos LLC (``OneChronos'').
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\10\ A Directed Order is a Limit Order with instructions to
route on arrival at its limit price to a specified ATS with which
the Exchange maintains an electronic linkage. See Rule 7.31E(f)(4).
See also Securities Exchange Act Release No. 95424 (August 4, 2022),
87 FR 48716 (August 10, 2022) (SR-NYSEAMER-2022-19).
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The Exchange implemented the routing functionality to OneChronos on
September 2, 2022,\11\ and introduced the functionality at that time
without charging a fee.\12\ The Exchange now proposes to adopt a fee of
$0.0015 per share for Directed Orders routed to OneChronos. To reflect
the proposed fee, the Exchange proposes to amend current Section III.
Fees for Routing for all ETP Holders, to state ``$0.0015 per share for
Directed Orders routed to OneChronos LLC'' for securities priced at or
above $1.00.
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\11\ See <a href="https://www.nyse.com/publicdocs/nyse/notifications/trader-update/110000456275/OneChronos_August_2022_Trader_Update_Final.pdf">https://www.nyse.com/publicdocs/nyse/notifications/trader-update/110000456275/OneChronos_August_2022_Trader_Update_Final.pdf</a>.
\12\ See Securities Exchange Act Release No. 95813 (September
16, 2022), 87 FR 57948 (September 22, 2022) (SR-NYSEAMER-2022-40).
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Since its implementation, the Directed Order functionality has
facilitated additional trading opportunities by offering ETP Holders
the ability to designate orders submitted to the Exchange to be routed
to OneChronos for execution. The functionality has also created
efficiencies for ETP Holders that choose to use the functionality by
enabling them to send orders that they wish to route to OneChronos
through the Exchange by leveraging order entry protocols already
configured for their interaction with the Exchange. Routing
functionality offered by the Exchange is completely optional and ETP
Holders can readily select between various providers of routing
services, including other exchanges and non-exchange venues. ETP
Holders that choose not to utilize Directed Orders would continue to be
able to trade on the Exchange as they currently do.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\13\ in general, and furthers the
objectives of sections 6(b)(4) and (5) of the Act,\14\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
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As discussed above, the Exchange operates in a highly fragmented
and 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.'' \15\
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\15\ See supra note 4.
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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
shift order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. Accordingly, changes to exchange
transaction fees can have a direct effect on the ability of an exchange
to compete for order flow.
The routing of orders to OneChronos is provided by the Exchange on
a voluntary basis and no rule or regulation requires that the Exchange
offer it. Nor does any rule or regulation require market participants
to send orders to an ATS generally, let alone to OneChronos. The
routing of orders to OneChronos operates similarly to the Primary Only
Order already offered by the Exchange, which is an order that is routed
directly to the primary listing market on arrival, without interacting
with the interest on the Exchange Book.\16\
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\16\ See Rule 7.31E(f)(1).
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The Exchange believes its proposal equitably allocates its fees
among market participants. The Exchange believes that the proposal
represents an equitable allocation of fees because it would apply
uniformly to all ETP Holders, in that all ETP Holders will have the
ability to designate orders submitted to the Exchange to be routed to
OneChronos, and each such ETP Holder would be charged the proposed fee
when utilizing the functionality. Without having a view of ETP Holders'
activity on other exchanges and off-exchange venues, the Exchange has
no way of knowing whether the proposed fee would result in any ETP
Holder from reducing or discontinuing its use of the routing
functionality. While the Exchange has no way of knowing
[[Page 55795]]
whether this proposed rule change would serve as a disincentive to
utilize the order type, the Exchange believes that a number of ETP
Holders will continue to utilize the functionality because of the
efficiencies created for ETP Holders that enables them to send orders
that they wish to route to OneChronos through the Exchange by
leveraging order entry protocols already configured for their
interactions with the Exchange.
The Exchange reiterates that the routing functionality offered by
the Exchange is completely optional and that the Exchange operates in a
highly competitive market in which market participants can readily
select between various providers of routing services with different
product offerings and different pricing. The Exchange believes that the
proposed flat fee structure for orders routed to away venues is a fair
and equitable approach to pricing, as it will provide certainty with
respect to execution fees.
The Exchange believes that the proposal is not unfairly
discriminatory. The Exchange believes it is not unfairly discriminatory
as the proposal to charge a fee would be assessed on an equal basis to
all ETP Holders that use the Directed Order functionality. Moreover,
this proposed rule change neither targets nor will it have a disparate
impact on any particular category of market participant. The Exchange
believes that this proposal does not permit unfair discrimination
because the changes described in this proposal would be applied to all
similarly situated ETP Holders. 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
rule change would not permit unfair discrimination among ETP Holders
because the Directed Order functionality would remain available to all
ETP Holders on an equal basis and each such participant would be
charged the same fee for using the functionality.
Finally, the submission of orders to the Exchange is optional for
ETP Holders in that they could choose whether to submit orders to the
Exchange and, if they do, the extent of its activity in this regard.
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,\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. 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\ The Exchange does not believe that the proposed fee
change represents a significant departure from previous pricing offered
by the Exchange or pricing offered by the Exchange's competitors. ETP
Holders may opt to disfavor the Exchange's pricing if they believe that
alternatives offer them better value. Accordingly, the Exchange does
not believe that the proposed change will impair the ability of ETP
Holders or competing venues to maintain their competitive standing in
the financial markets.
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\17\ 15 U.S.C. 78f(b)(8).
\18\ See supra note 4.
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Intramarket Competition. The Exchange believes the proposed
amendment to its Price List would not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. The Directed Order functionality is available to all ETP
Holders and all ETP Holders that use the functionality to route their
orders to OneChronos would be charged the proposed fee. The routing of
orders to OneChronos is provided by the Exchange on a voluntary basis
and no rule or regulation requires that the Exchange offer it. ETP
Holders have the choice whether or not to use the Directed Order
functionality and those that choose not to utilize it will not be
impacted by the proposed rule change. The Exchange also does not
believe the proposed rule change would impact intramarket competition
as the proposed fee would apply to all ETP Holders equally that choose
to utilize the Directed Order functionality, and therefore 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. As noted
above, the Exchange's market share of intraday trading is currently
less than 1%. 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 has become effective upon filing pursuant
to section 19(b)(3)(A) \19\ of the Act and paragraph (f) thereunder. At
any time within 60 days of the filing of the 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.
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\19\ 15 U.S.C. 78s(b)(3)(A).
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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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#cbb9bea7aee6a8a4a6a6aea5bfb88bb8aea8e5aca4bd"><span class="__cf_email__" data-cfemail="7301061f165e101c1e1e161d0700330016105d141c05">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2023-37 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-NYSEAMER-2023-37. This
file number should be included on the subject line if email is used. To
help the
[[Page 55796]]
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of the filing also will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NYSEAMER-2023-37 and should be submitted
on or before September 6, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-17608 Filed 8-15-23; 8:45 am]
BILLING CODE 8011-01-P
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