Notice2024-01508
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
January 26, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 18 (Friday, January 26, 2024)</title>
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[Federal Register Volume 89, Number 18 (Friday, January 26, 2024)]
[Notices]
[Pages 5285-5295]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01508]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99406; File No. SR-NYSE-2024-04]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
January 22, 2024.
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 January 12, 2024, 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) offer credits
to member organizations providing non-displayed liquidity in Tape A, B,
and C securities with a per share stock price below $1.00; (2) modify
the requirements and charges for D Orders above the first 750,000
average daily volume (``ADV'') of aggregate executions at the close
last modified in the last 3 minutes before the scheduled close of
trading and make a non-substantive conforming change in the same
section of the Price List; (3) offer additional monthly rebates and
incentives for Designated Market Maker (``DMM'') units with 150 or
fewer assigned securities; (4) eliminate underutilized fees for
transactions designated with a Retail Modifier as defined in Rule 13
(``Retail Modifier''); and (5) modify the rates for routing to NYSE
American LLC in Tape B and C securities below $1.00. The Exchange
proposes to implement the rule change on January 12, 2024. 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 its Price List to (1) offer credits
to member organizations providing non-displayed liquidity in Tape A, B,
and C securities with a per share stock price below $1.00; (2) modify
the requirements and charges for D orders above the first
[[Page 5286]]
750,000 ADV of aggregate executions at the close last modified in the
last 3 minutes before the scheduled close of trading and make a non-
substantive conforming change in the same section of the Price List;
(3) offer an additional monthly rebate and incentive for DMM units with
150 or fewer assigned securities; (4) eliminate underutilized fees for
transactions designated with a Retail Modifier; and (5) modify the
rates for routing to NYSE American LLC (``NYSE American'') in Tape B
and C securities below $1.00.
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 liquidity to the Exchange, including
an additional incentive to smaller DMM units to increase quoting on the
Exchange.
The Exchange proposes to implement the rule change on January 12,
2024.\4\
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\4\ The Exchange originally filed to amend the Price List on
January 2, 2024 (SR-NYSE-2024-01). SR-NYSE-2024-01 was withdrawn on
January 12, 2024 and replaced by this filing.
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Current Market and Competitive Environment
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. 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 17% 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="https://markets.cboe.com/us/equities/market_share/">https://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. 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 the firm routes order flow. Accordingly, competitive forces
compel the Exchange to use exchange transaction fees and credits
because market participants can readily trade on competing venues if
they deem pricing levels at those other venues to be more favorable.
In response to this competitive environment, the Exchange has
established incentives for member organizations who submit orders that
provide liquidity on the Exchange. The Exchange has also established
incentives for DMM units to quote at specified levels. The proposed fee
change is designed to encourage market maker quoting by offering
additional incentives to smaller DMM units to increase quoting on the
Exchange.
Proposed Rule Change
The Exchange proposes to offer credits to member organizations
providing non-displayed liquidity in Tape A, B, and C securities with a
per share stock price below $1.00. The Exchange also proposes to modify
the requirements and charges for D Orders above the first 750,000 ADV
of aggregate executions at the close last modified in the last 3
minutes before the scheduled close of trading and to provide an
additional monthly rebate and incentive for DMM units with 150 or fewer
assigned securities based on time at the National Best Bid (``NBB'')
and National Best Offer (``NBO,'' together the ``NBBO'') in the
applicable security in the applicable month. The Exchange further
proposes to eliminate underutilized fees for transactions designated
with a Retail Modifier as defined as defined in Rule 13 and to make
non-substantive conforming changes. Finally, the Exchange proposes to
modify the rates for routing to NYSE American in securities below $1.00
to 0.08% of total dollar value of the transaction.
Credits for Non-Displayed Limit Orders
The Exchange currently provides a $0.0010 credit to member
organizations that send orders that add liquidity to the Exchange in
Non-Displayed Limit Orders and that have Adding ADV \11\ in Non-
Displayed Limit Orders that is at least 0.12% of Tapes A, B, and C CADV
combined, excluding any liquidity added by a DMM. The Exchange proposes
that member organizations sending orders that add liquidity to the
Exchange in Non-Displayed Limit Orders and that have Adding ADV in Non-
Displayed Limit Orders that is at least 0.12% of Tapes A, B, and C CADV
combined, excluding any liquidity added by a DMM, would also be
eligible for a credit equal to 0.10% of the total dollar value of the
transaction for securities with a per share stock price below $1.00. In
addition, the Exchange proposes to designate this credit as ``Non
Display Tier 2.''
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\11\ Footnote 2 to the Price List defines ADV as ``average daily
volume'' and ``Adding ADV'' as ADV that adds liquidity to the
Exchange during the billing month.
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Similarly, the Exchange currently provides a $0.0018 credit to
member organizations that send orders that add liquidity to the
Exchange in Non-Displayed Limit Orders and that have Adding ADV in Non-
Displayed Limit Orders that is at least 0.15% of Tapes A, B, and C CADV
combined, excluding any liquidity added by a DMM. The Exchange proposes
that member organizations sending orders that add liquidity to the
Exchange in Non-Displayed Limit Orders and that have Adding ADV in Non-
Displayed Limit Orders that is at least 0.15% of Tapes A, B, and C CADV
combined, excluding any liquidity added by a DMM, would also be
eligible for a credit equal to 0.18% of the total dollar value of the
transaction for securities with a per share stock price below $1.00. In
[[Page 5287]]
addition, the Exchange proposes to designate this credit as ``Non
Display Tier 1.''
In addition, as described more fully below, member organizations
operating a DMM unit would be eligible for Non Display Tier 1 and 2
credits for Non Display Limit Order volume sent to the Exchange on all
Tapes when the DMM unit meets the incentive quoting requirements
described in the Small DMM Incentive section of the Price List.
The following example demonstrates operation of the Non Display
Tier credits as modified by the proposal.
Assume Member Organization A has Adding ADV in Non-Displayed Limit
Orders of 14 million shares in Tape A, B and C securities, in a month
where Tape A, B and C CADV is a combined 10 billion shares. Member
Organization A would thus have Adding ADV in Non-Displayed Limit Orders
of 0.14% of Tapes A, B, and C CADV combined, and would qualify for the
credits under Non Display Tier 2 for the qualifying 14 million shares
of Non-Displayed Limit Orders. Further, assume that 4 million of Member
Organization A's 14 million Adding ADV was in securities with a per
share stock price below $1.00. As a result, that 4 million Adding ADV
would receive a credit equal to 0.10% of the total dollar value of the
transaction, and the remaining 10 million ADV would receive a credit of
$0.0010 per share for securities with a per share stock price of $1.00
or more.
The purpose of the proposed changes to credits for non-displayed
orders is to incentivize member organizations to increase the
liquidity-providing Non-Displayed Limit Orders in the Tapes A, B and C
securities with a per share stock price below $1.00 that they send to
the Exchange, which would improve liquidity on the Exchange and provide
additional price improvement opportunities for incoming orders. The
Exchange believes that by correlating the amount of the credit to the
level of orders sent by a member organization that adds non-displayed
liquidity, the Exchange's fee structure would incentivize member
organizations to submit more of those orders that add liquidity to the
Exchange, thereby increasing the potential for price improvement to
other incoming marketable orders. The Exchange does not know how much
order flow member organizations choose to route to other exchanges or
to off-exchange venues. There are currently 1-2 member organizations
that could qualify for the proposed 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 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 credit in sub-dollar
securities.
D Orders at the Close
Currently, the Exchange does not charge member organizations for
the first 750,000 ADV of the aggregate of executions at the close for D
Orders, Floor broker executions swept into the close, including verbal
interest, and executions at the close, excluding market at-the-close
(``MOC'') Orders, limit at-the-close (``LOC'') Orders and Closing
Offset (``CO'') Orders. In 2020, the ability of Floor brokers to
represent verbal interest intended for the Closing Auction was
eliminated.\12\ The Exchange accordingly proposes to delete the phrase
``including verbal interest'' from this section of the Price List as
obsolete.
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\12\ See Securities Exchange Act Release No. 92480 (July 23,
2021), 86 FR 40885 (July 29, 2021) (SR-NYSE-2020-95) (Notice of
Filing of Amendment No. 2 and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 2, To Make
Permanent Commentaries to Rule 7.35A and Commentaries to Rule 7.35B
and To Make Related Changes to Rules 7.32, 7.35C, 46B, and 47).
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Further, the Exchange currently charges certain fees differentiated
by time of entry (or last modification) for D Orders at the close after
the first 750,000 ADV of aggregate of executions at the close by a
member organization. Specifically, the Exchange currently charges
$0.0008 per share for executed D Orders last modified in the last 3
minutes before the scheduled close of trading for firms in MOC/LOC
Tiers 1 and 2, both with Adding ADV of at least 0.50% of Tape A CADV;
all other firms are charged $0.0010 per share.
The Exchange proposes to add an alternative way to qualify for the
$0.0008 per share fee for executed D Orders last modified in the last 3
minutes before the scheduled close of trading. As proposed, member
organizations in MOC/LOC Tiers 1, 2 or 3 that have Adding ADV of at
least 1.05% of Tape A CADV would also be eligible for the $0.0008 per
share fee.
In addition, the Exchange proposes a new fee of $0.0009 for
executed D Orders last modified in the last 3 minutes before the
scheduled close of trading for member organizations in MOC/LOC Tiers 1,
2 and 3 and that have Adding ADV of at least 0.65% of Tape A CADV.
All other member organizations with executed D Orders last modified
in the last 3 minutes before the scheduled close of trading would
continue to be charged the current rate of $0.0010.
The purpose of this change is to continue to encourage additional
liquidity provision on the Exchange both during the trading day and in
the Closing Auction. The Exchange believes that it is reasonable to
offer member organizations in MOC/LOC Tiers 1, 2 and 3 2 differentiated
fees based on the percentage of Adding ADV of Tape A CADV because it
would encourage member organizations to direct their liquidity-
providing orders in Tape A securities to the Exchange, as well as
encourage greater marketable and other liquidity at the closing
auction. The Exchange believes that providing an alternative way for
member organizations to qualify for lower fees for executed D Orders
last modified in the last 3 minutes before the scheduled close of
trading as proposed will allow a greater number of member organizations
to qualify for the lower fees, and will incentivize more member
organizations to send adding liquidity to the Exchange, which in turn
supports the quality of price discovery on the Exchange.
Small DMM Incentive
The Exchange currently pays DMM units with 150 or fewer assigned
securities a monthly rebate based on the number of assigned securities
and time at the NBBO in the applicable security in the applicable
month. The rebate is payable for each security assigned to such a DMM
in the previous month (regardless of whether the stock price exceeds
$1.00) for which that DMM provides quotes at the NBBO at least 15% of
the time in the applicable month, defined in the Price List as the
``Incentive Quoting Requirement'').\13\ This monthly rebate is in
addition to the rate on transactions and is be prorated to the number
of trading days in a month that an eligible security is assigned to a
DMM.
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\13\ For purposes of the Price List, DMM NBBO Quoting means DMM
quoting at the NBBO. See NYSE Price List, General, third bullet,
available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf</a>. Time at the NBBO or ``inside'' is calculated as
the average of the percentage of time the DMM unit has a bid or
offer at the inside. Reserve or other non-displayed orders entered
by the DMM are not included in the inside quote calculations.
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The Exchange propose an additional monthly rebate for DMM units
with 150 or fewer assigned securities in the previous month for
assigned securities payable per symbol in securities where qualified
DMMs quote at the NBBO 25% of the time. The new proposed incentive
quoting requirement would be defined
[[Page 5288]]
in the Price List as ``Incentive Quoting Requirement 2'' and the
current incentive quoting requirement would be re-named ``Incentive
Quoting Requirement 1.'' Conforming changes would also be made to the
Price List. In addition, the Exchange would delete ``at least'' before
``15% of the time'' in the current incentive quoting requirement as
unnecessary in light of the proposed incentives for quoting at the NBBO
25% of the time. In addition, the Exchange proposes an alternative way
for member organizations that operate DMM units of a certain size to
qualify for the Non-Display Tiers described above as modified by this
proposal.
As proposed, a DMM unit that has at least 1 and not more than 24
assigned securities that meets proposed Incentive Quoting Requirement 2
would be eligible for a monthly rebate of $250 per qualifying symbol.
A DMM unit that has a least 25 and no more than 74 assigned
securities that meets Incentive Quoting Requirement 1 or 2 would be
eligible for a monthly rebate of $1,250 per symbol that qualifies for
Incentive Quoting Requirement 2, instead of the current $500 per symbol
credit, and symbols qualifying for Incentive Quoting Requirement 1
would receive $500 per symbol credit. In addition, the Exchange
proposes that a member organization that operates a DMM unit that has a
least 25 and no more than 74 assigned securities meeting these
requirements would qualify for proposed ``Non Display Tier 2'' as
described above.
Finally, a DMM unit that has at least 75 but no more than 150
assigned securities that meets Incentive Quoting Requirement 1 or 2
would be eligible for a monthly rebate of $1,500 per symbol that
qualifies for Incentive Quoting Requirement 2, instead of the current
$1,000 per symbol credit, and symbols qualifying for Incentive Quoting
Requirement 1 would receive $1,000 per symbol credit. In addition, the
Exchange proposes that such that a member organization that operates a
DMM unit that has a least 75 and no more than 150 assigned securities
meeting these requirements would be eligible for proposed ``Non Display
Tier 1'' as described above.
For example, assume DMM unit A has 35 assigned securities. Further
assume the DMM quotes at the NBBO 25% of the time in 30 of those
assigned securities and quotes at the NBBO 15% of the time in the
remaining 5 assigned securities. For a billable month in those 30
assigned securities that meet the Incentive Quoting Requirement 2, DMM
unit A would receive a per qualified symbol credit of $1,250, with a
total combined credit of $37,500 (30 securities x $1,250). In addition,
for the billable month in the 5 assigned securities that meet current
Incentive Quoting Requirement 1, DMM unit A would receive a per
qualified symbol credit of $500, with a total combined credit of $2,500
(5 securities x $500). In addition, the member organization operating
such a qualifying DMM unit A would be eligible for a $0.0010 credit and
the proposed credit equivalent to 0.10% of the total dollar value of
the transaction for securities with a per share stock price below $1.00
under Non Display Tier 2 credits for that member organization's Non
Display Limit Order volume in all Tapes.
The proposed rule change is designed to provide smaller market
makers (i.e., DMM units with 150 or fewer assigned securities) with an
added incentive to quote in their assigned securities at the NBBO at
least 25% of the time in a given month and increase SLP displayed
adding volume. As described above, member organizations have a choice
of where to send order flow. The Exchange believes that incentivizing
DMM units on the Exchange to quote at the NBBO more frequently could
attract additional orders to the Exchange and contribute to price
discovery which benefits all market participants. In addition,
additional liquidity-providing quotes benefit all market participants
because they provide greater execution opportunities on the Exchange
and improve the public quotation.
Moreover, the Exchange believes the proposed change could have the
added benefit of attracting additional DMM units to the Exchange by
providing an incentive for member organizations that operate a DMM unit
to qualify for the Non-Display Tiers rates as modified by this
proposal. The Exchange believes that eligibility for the Non Display
Tier rates for member organizations that operate a DMM unit with a
certain number of registrations that meet the incentive quoting
requirements is not unfairly discriminatory because member
organizations that do not operate a DMM unit can still qualify for the
Non-Display Tiers rates by sending adding liquidity to the Exchange and
meeting the ADV requirements set out in the Price List.
Currently, the Exchange has three DMM units, only one of which has
fewer than 150 assigned securities and therefore could qualify for the
rebate.\14\ The Exchange cannot predict with certainty whether and how
many member organizations would avail themselves of the opportunity to
become an Exchange DMM unit and qualify for the proposed tiers.
However, the Exchange believes that the proposed additional rebate for
higher quoting in assigned securities, along with the proposed rebate
for adding non-displayed liquidity for member organizations that
operate a qualifying DMM unit, could incentivize additional firms to
become DMM units on the Exchange by increasing incentives for new and
smaller entrants. The Exchange notes that the small DMM incentive
currently includes an incentive for non-DMM adding liquidity (e.g., SLP
Minimum Add Credit).
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\14\ In contrast, there are 14 competing Lead Marker Makers on
NYSE Arca, Inc. (``NYSE Arca''). See <a href="https://www.nyse.com/markets/nyse-arca/membership">https://www.nyse.com/markets/nyse-arca/membership</a>.
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Deletion of Underutilized Fees for Orders With a Retail Modifier
In May 2021, the Exchange introduced a fee of $0.0005 for
executions at the open designated with a Retail Modifier as defined in
Rule 13.1.\15\ In addition, the Exchange introduced a $0.0008 fee per
share for MOC and LOC Orders with a Retail Modifier, unless a lower
tiered fee applies.\16\ The purpose of the change was to incentivize
member organizations to submit additional displayed retail liquidity to
the Exchange.
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\15\ As Rule 13 makes clear, orders with a ``retail'' modifier
are separate and distinct from a ``Retail Order'' under Rule 7.44.
The Exchange proposes to relocate the definition of Retail Modifier
to the section of the Price List setting forth the fee for MPL
orders that remove liquidity from the NYSE immediately following the
section setting forth the rates for executions at the close.
\16\ See Securities Exchange Act Release No. 91948 (May 20,
2021), 86 FR 28399 (May 26, 2021) (SR-NYSE-2021-33).
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The Exchange proposes to eliminate and remove both fees per share
and the associated requirements. The fees have been underutilized by
member organizations insofar as they have not encouraged member
organizations to increase their retail liquidity volume in response to
these lower fees as the Exchange had anticipated it would since the
fees were adopted. The Exchange does not anticipate that any additional
member organization in the near future would increase their retail
liquidity volume in response to either fee that is the subject of this
proposed rule change.
Routing Fees to NYSE American for Tape B and C Securities Below $1.00
Currently, the Exchange charges a fee of $0.0005 per share for
executions in securities with a price below $1.00 that route to and
execute in an NYSE American auction and 0.30% of total dollar value of
the transaction for all
[[Page 5289]]
other orders routed to and executed on NYSE American (i.e., non-
auction).
The Exchange proposes to charge a fee equivalent to 0.08% of total
dollar value of the transaction for all orders in securities below
$1.00 that route to NYSE American (i.e., both auction and non-
auction).\17\ The proposed fee is intended to simplify the Price List
by charging one rate for both types of executions routed to NYSE
American. The Exchange notes that the fee of 0.008% is at or lower than
other routing fees charged by other Exchanges for securities with a
price below $1.00.\18\
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\17\ The Exchange would also add a missing period at the end of
the preceding full paragraph after the word ``combined.''
\18\ For example, NYSE Arca charges a routing fee of 0.35% of
the dollar value of the transaction for securities below $1.00. See
<a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf</a>, at 3.
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The proposed change is 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,\19\ in general, and furthers the
objectives of sections 6(b)(4) and 6(b)(5) of the Act,\20\ 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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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change Is Reasonable
In light of the competitive environment in which the Exchange
currently operates, the proposed rule change is a reasonable attempt to
increase liquidity on the Exchange and improve the Exchange's market
share relative to its competitors. The Exchange believes the proposed
change is also reasonable because it is designed to attract higher
volumes of orders transacted on the Exchange by member organizations by
aligning incentives for trading both on the close and intraday, which
would benefit all market participants by offering greater price
discovery and an increased opportunity to trade on the Exchange, both
intraday and during the closing auction.
Credits for Non-Displayed Limit Orders
As described above, the Exchange operates in a highly competitive
market. The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. 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.'' \21\
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\21\ 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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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
order flow that would provide liquidity on the Exchange, member
organizations can choose from any one of currently operating registered
exchanges to route such order flow. Accordingly, competitive forces
constrain exchange fees that relate to providing incentives for such
order flow. Given this competitive environment, the proposal to offer
tiered credits for member organizations providing non-displayed
liquidity in Tape A, B, and C securities with a per share stock price
below $1.00 equal to a percentage of the total dollar value of the
transaction for those securities is a reasonable means to improve
opportunities for price improvement, attract additional order flow to a
public market, and enhance execution opportunities for member
organizations on the Exchange, to the benefit of all market
participants.
D Orders at the Close
The Exchange believes that charging different rates for D Orders
that execute in the close based on time of entry or last modification
encourages all member organizations to enter or modify d-Quotes as
early possible, beginning with as early as 25 minutes before the close
of trading, in order to build up liquidity going into the closing
auction. Further, it is reasonable to charge member organizations a
higher rate for entering or modifying their interest in the final
minutes of regular trading hours because such interest most benefits
from the flexibility afforded the order type.
The Exchange believes that offering an alternative way to qualify
for the $0.0008 per share fee for executed D Orders last modified in
the last 3 minutes before the scheduled close of trading and a new fee
of $0.0009 for member organizations in MOC/LOC Tiers 1, 2 and 3 and
that have Adding ADV of at least 0.65% of Tape A CADV is reasonable
because the proposed change would encourage greater marketable and
other liquidity at the closing auction, and encourage better liquidity
and price discovery during the trading day.
Small DMM Incentive
The Exchange believes that offering DMMs with 150 or fewer assigned
securities an additional monthly rebate for assigned securities payable
per symbol in securities where qualified DMMs quote at the NBBO 25% of
the time, as well as making them eligible for the Non Display Tier 1
and 2 is a reasonable means to improve market quality, attract
additional order flow to a public market, and enhance execution
opportunities for member organizations on the Exchange, to the benefit
of all market participants. The Exchange notes that the proposal would
also foster liquidity provision and stability in the marketplace and
further reduce smaller DMM's reliance on transaction fees. The proposal
would also reward DMM units, who have greater risks and heightened
quoting and other obligations than other market participants. The
proposed change is also a reasonable attempt to potentially attract
additional DMM units to the Exchange by providing additional financial
incentives for smaller firms to become DMM units.
Deletion of Underutilized Fees for Orders With a Retail Modifier
The Exchange believes that the proposed elimination of the
underutilized fees for orders designated with a Retail Modifier is
reasonable because member organizations have underutilized these fees.
As noted, the fees have been underutilized by member organizations
insofar as they have not encouraged member organizations to increase
their retail liquidity in response to these lower fees as the Exchange
had anticipated it would since they were adopted . The Exchange does
not anticipate that any additional member organization in the near
future would increase their retail liquidity in response to either fee
that is the subject of this proposed rule change. The Exchange believes
it is reasonable to eliminate fees when such incentives become
underutilized. The Exchange also believes eliminating underutilized
incentives would add clarity and transparency to the Price List.
[[Page 5290]]
Routing Fees to NYSE American for Tape B and C Securities Below $1.00
The Exchange believes that its proposed routing fee of 0.08% of
total dollar value of the transaction for orders that route to NYSE
American is reasonable because the fee would be comparable to the
current fee of $0.0005 per share for orders that route to the
Exchange's affiliate NYSE American. Moreover, the proposed fee would be
consistent with or lower than fees charged on other exchanges.\22\ The
Exchange notes that 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.
---------------------------------------------------------------------------
\22\ See note 17, supra.
---------------------------------------------------------------------------
The Proposal Is an Equitable Allocation of Fees
The Exchange believes the proposal equitably allocates fees and
credits among market participants because all member organizations that
participate on the Exchange may qualify for the proposed credits and
fees on an equal basis. The Exchange believes its proposal equitably
allocates its fees and credits among its market participants by
fostering liquidity provision and stability in the marketplace.
Credits for Non-Displayed Limit Orders
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
tiered credits for member organizations adding non-displayed liquidity
in Tape A, B, and C securities with a per share stock price below $1.00
is equitable because the proposed credits would create incentives for
adding greater liquidity and providing price improvement. The Exchange
believes the proposed rule change would attract more liquidity to the
Exchange, thereby improving market-wide liquidity.
D Orders at the Close
The Exchange believes that offering an alternative way to qualify
for the $0.0008 per share fee for executed D Orders last modified in
the last 3 minutes before the scheduled close of trading and a new fee
of $0.0009 for member organizations in MOC/LOC Tiers 1, 2 and 3 and
that have Adding ADV of at least 0.65% of Tape A CADV is not unfairly
discriminatory because the proposed change would encourage greater
marketable and other liquidity at the closing auction. Moreover, the
proposed fees are equitable because all similarly situated member
organizations will be subject to the same fee structure, which will
automatically adjust based on prevailing market conditions.
Small DMM Incentive
The Exchange believes the proposal equitably allocates its fees
among its market participants by fostering liquidity provision and
stability in the marketplace and reducing smaller DMM's reliance on
transaction fees. Moreover, the proposal is an equitable allocation of
fees because it would reward DMM units for their increased risks and
heightened quoting and other obligations. As such, it is equitable to
offer smaller DMM units an additional flat, per security credit for
orders that add liquidity. The proposed rebate is also equitable
because it would apply equally to any DMM unit of a certain size. In
addition, the proposed alternative way for member organizations that
operate a DMM unit to qualify for the Non Display Tier rebates is
equitable because a member organization that would not qualify for the
rebates operation of a DMM unit with a certain number of registrations
that meet the incentive quoting requirements would have the ability to
qualify for the rebates based on adding volume in Non-Displayed Limit
Orders in Tapes A, B and C as set forth under the modified
qualification criteria.
The Exchange notes that at this time there is currently only one
DMM unit that could qualify for the proposed rebate based on its number
of assigned securities. The Exchange believes that the proposal would
provide an equal incentive to any member organization to maintain a DMM
unit, and that the proposal constitutes an equitable allocation of fees
because all similarly situated member organizations would be eligible
for the same rebate.
Deletion of Underutilized Fees for Orders With a Retail Modifier
The Exchange believes the proposal equitably allocates fees among
its market participants because the underutilized fees 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
fees would apply to all similarly-situated member organizations that
send orders, including MOC and LOC orders, to the Exchange with a
Retail Modifier 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.
Routing Fees to NYSE American for Tape B and C Securities Below $1.00
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 member organizations that route orders in securities
below $1.00 to NYSE American, and each such member organization would
be charged the proposed fee when utilizing the functionality. Without
having a view of member organizations' activity on other exchanges and
off-exchange venues, the Exchange has no way of knowing whether the
proposed fee would result in any member organization from reducing or
discontinuing its use of the routing functionality. Moreover, the
proposed fee would be equitable because it is consistent with or lower
than fees charged on other exchanges.\23\
---------------------------------------------------------------------------
\23\ See note 17, supra.
---------------------------------------------------------------------------
The Proposal Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, member
organizations are free to disfavor the Exchange's pricing if they
believe that alternatives offer them better value.
Credits for Non-Displayed Limit Orders
The Exchange believes that offering the proposed credits to member
organizations based on the amount of liquidity provided to the Exchange
in non-displayed liquidity in Tape A, B, and C securities with a per
share stock price below $1.00 would provide a further incentive for all
member organizations to provide additional liquidity to the Exchange.
D Orders at the Close
The Exchange believes that offering an alternative way to qualify
for the lower $0.0008 per share fee for executed D Orders last modified
in the last 3 minutes before the scheduled close of trading and a new
fee of $0.0009 for member organizations in MOC/LOC Tiers 1, 2 and 3 and
that have Adding ADV of at least 0.65% of Tape A CADV is not unfairly
discriminatory because the proposed change would encourage greater
marketable and other liquidity at the closing auction. The Exchange
[[Page 5291]]
believes that the proposal is not unfairly discriminatory because all
similarly situated member organizations that submit D Orders last
modified in the last 3 minutes before the scheduled close of trading
above the first 750,000 ADV of the aggregate of executions at the close
by a member organization will be subject to the same fee structure,
which will automatically adjust based on prevailing market conditions.
Small DMM Incentive
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. For example, member
organizations could display quotes on competing exchanges rather than
quoting sufficiently on the Exchange to meet the proposed 25% NBBO
quoting requirement. The Exchange believes that offering an additional
rebate for DMM units with 150 or fewer assigned securities in the
previous month would provide a further incentive for smaller DMM units
to quote and trade their assigned securities on the Exchange, and will
generally allow the Exchange and DMM units to better compete for order
flow, thus enhancing competition. The Exchange also believes that the
requirement of 150 or fewer assigned securities to qualify for the
credit is not unfairly discriminatory because it would apply equally to
all existing and prospective member organizations with 150 or fewer
assigned securities that choose to maintain a DMM unit on the Exchange.
The Exchange does not believe that it is unfairly discriminatory to
offer incentives based on a maximum threshold. The Exchange notes that
it currently offers incentives that apply equally to all member
organizations that cannot or choose not to exceed a certain volume
threshold.\24\ The Exchange believes that the proposal would provide an
equal incentive to any member organization to operate and maintain a
DMM unit, and that the proposal would not be unfairly discriminatory
because the threshold-based incentive would be offered on equal terms
to all similarly situated member organizations. Similarly, the proposal
does not permit unfair discrimination because the proposed alternative
way for member organizations that operate a DMM unit to qualify for the
Non Display Tier rebates would be applied to all similarly situated
member organizations, who would all be eligible for the same credits on
an equal basis. Member organizations could qualify the Non Display Tier
rebates either by operating a DMM unit that meets the existing and
proposed incentive quoting requirements at the NBBO or meeting the
requirements of the Non Display Tiers as modified by this proposal. In
both cases, the proposal does not permit unfair discrimination because
the proposed criteria apply equally to all similarly situated member
organizations, and all member organizations eligible for the rebates
under either criteria would be eligible for the same credits on an
equal and non-discriminatory basis. Moreover, the Exchange does not
believe that offering a lower remove fee to member organizations that
operate a DMM unit and meet Adding ADV requirements would be unfairly
discriminatory given that member organizations operating a DMM unit
have greater risks and heightened quoting and other obligations than
other market participants. As such, it is equitable and not unfairly
discriminatory to offer member organizations operating a DMM unit that
also meet incentive quoting requirements the ability to receive the Non
Display Tier rebates as other member organizations that do not operate
a DMM unit and thus do not have the same quoting and trading
obligations as DMM units. Accordingly, no member organization already
operating on the Exchange would be disadvantaged by the proposed
allocation of fees.
---------------------------------------------------------------------------
\24\ For instance, as noted above, the first 750,000 ADV of the
aggregate of executions at the close by a member organization are
not charged. See NYSE Price List, available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf</a>.
---------------------------------------------------------------------------
Deletion of Underutilized Fees for Orders With a Retail Modifier
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 Exchange
believes that the proposal is not unfairly discriminatory because the
proposed elimination of the underutilized fees would affect all
similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange believes that eliminating fees 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 an underutilized fee would make the Price List
more accessible and transparent.
Routing Fees to NYSE American for Tape B and C Securities Below $1.00
The Exchange believes its proposed routing fee is not unfairly
discriminatory because the fee would be applicable to all member
organizations on an equal and non-discriminatory basis.
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 member organizations that route orders in securities below $1.00 to
NYSE American. Moreover, the 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 member organizations.
Accordingly, no member organization 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 member organizations because the ability to route
to NYSE American would remain available to all member organizations on
an equal basis and each such participant would be charged the same fee
for using the functionality.
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
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\25\ in general, and furthers the
objectives of sections 6(b)(4) and 6(b)(5) of the Act,\26\ 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.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------
The Proposed Change Is Reasonable
In light of the competitive environment in which the Exchange
currently operates, the proposed rule change is a reasonable attempt to
increase liquidity on the Exchange and improve the Exchange's market
share relative to its competitors. The Exchange believes the proposed
change is also reasonable because it is designed
[[Page 5292]]
to attract higher volumes of orders transacted on the Exchange by
member organizations by aligning incentives for trading both on the
close and intraday, which would benefit all market participants by
offering greater price discovery and an increased opportunity to trade
on the Exchange, both intraday and during the closing auction.
Credits for Non-Displayed Limit Orders
As described above, the Exchange operates in a highly competitive
market. The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. 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.'' \27\
---------------------------------------------------------------------------
\27\ 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'').
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
order flow that would provide liquidity on the Exchange, member
organizations can choose from any one of currently operating registered
exchanges to route such order flow. Accordingly, competitive forces
constrain exchange fees that relate to providing incentives for such
order flow. Given this competitive environment, the proposal to offer
tiered credits for member organizations providing non-displayed
liquidity in Tape A, B, and C securities with a per share stock price
below $1.00 equal to a percentage of the total dollar value of the
transaction for those securities is a reasonable means to improve
opportunities for price improvement, attract additional order flow to a
public market, and enhance execution opportunities for member
organizations on the Exchange, to the benefit of all market
participants.
D Orders at the Close
The Exchange believes that charging different rates for D Orders
that execute in the close based on time of entry or last modification
encourages all member organizations to enter or modify d-Quotes as
early possible, beginning with as early as 25 minutes before the close
of trading, in order to build up liquidity going into the closing
auction. Further, it is reasonable to charge member organizations a
higher rate for entering or modifying their interest in the final
minutes of regular trading hours because such interest most benefits
from the flexibility afforded the order type.
The Exchange believes that offering an alternative way to qualify
for the $0.0008 per share fee for executed D Orders last modified in
the last 3 minutes before the scheduled close of trading and a new fee
of $0.0009 for member organizations in MOC/LOC Tiers 1, 2 and 3 and
that have Adding ADV of at least 0.65% of Tape A CADV is reasonable
because the proposed change would encourage greater marketable and
other liquidity at the closing auction, and encourage better liquidity
and price discovery during the trading day.
Small DMM Incentive
The Exchange believes that offering DMMs with 150 or fewer assigned
securities an additional monthly rebate for assigned securities payable
per symbol in securities where qualified DMMs quote at the NBBO 25% of
the time, as well as making them eligible for the Non Display Tier 1
and 2 is a reasonable means to improve market quality, attract
additional order flow to a public market, and enhance execution
opportunities for member organizations on the Exchange, to the benefit
of all market participants. The Exchange notes that the proposal would
also foster liquidity provision and stability in the marketplace and
further reduce smaller DMM's reliance on transaction fees. The proposal
would also reward DMM units, who have greater risks and heightened
quoting and other obligations than other market participants. The
proposed change is also a reasonable attempt to potentially attract
additional DMM units to the Exchange by providing additional financial
incentives for smaller firms to become DMM units.
Deletion of Underutilized Fees for Orders With a Retail Modifier
The Exchange believes that the proposed elimination of the
underutilized fees for orders designated with a Retail Modifier is
reasonable because member organizations have underutilized these fees.
As noted, the fees have been underutilized by member organizations
insofar as they have not encouraged member organizations to increase
their retail liquidity in response to these lower fees as the Exchange
had anticipated it would since they were adopted. The Exchange does not
anticipate that any additional member organization in the near future
would increase their retail liquidity in response to either fee that is
the subject of this proposed rule change. The Exchange believes it is
reasonable to eliminate fees when such incentives become underutilized.
The Exchange also believes eliminating underutilized incentives would
add clarity and transparency to the Price List.
Routing Fees to NYSE American for Tape B and C Securities Below $1.00
The Exchange believes that its proposed routing fee of 0.08% of
total dollar value of the transaction for orders that route to NYSE
American is reasonable because the fee would be comparable to the
current fee of $0.0005 per share for orders that route to the
Exchange's affiliate NYSE American. Moreover, the proposed fee would be
consistent with or lower than fees charged on other exchanges.\28\ The
Exchange notes that 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.
---------------------------------------------------------------------------
\28\ See note 17, supra.
---------------------------------------------------------------------------
The Proposal Is an Equitable Allocation of Fees
The Exchange believes the proposal equitably allocates fees and
credits among market participants because all member organizations that
participate on the Exchange may qualify for the proposed credits and
fees on an equal basis. The Exchange believes its proposal equitably
allocates its fees and credits among its market participants by
fostering liquidity provision and stability in the marketplace.
Credits for Non-Displayed Limit Orders
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
tiered credits for member organizations adding non-displayed liquidity
in Tape A, B, and C securities with a per share stock price below $1.00
is equitable because the proposed credits would create incentives for
adding greater liquidity and providing price improvement. The Exchange
believes the proposed rule change would attract more liquidity to the
Exchange, thereby improving market-wide liquidity.
[[Page 5293]]
D Orders at the Close
The Exchange believes that offering an alternative way to qualify
for the $0.0008 per share fee for executed D Orders last modified in
the last 3 minutes before the scheduled close of trading and a new fee
of $0.0009 for member organizations in MOC/LOC Tiers 1, 2 and 3 and
that have Adding ADV of at least 0.65% of Tape A CADV is not unfairly
discriminatory because the proposed change would encourage greater
marketable and other liquidity at the closing auction. Moreover, the
proposed fees are equitable because all similarly situated member
organizations will be subject to the same fee structure, which will
automatically adjust based on prevailing market conditions.
Small DMM Incentive
The Exchange believes the proposal equitably allocates its fees
among its market participants by fostering liquidity provision and
stability in the marketplace and reducing smaller DMM's reliance on
transaction fees. Moreover, the proposal is an equitable allocation of
fees because it would reward DMM units for their increased risks and
heightened quoting and other obligations. As such, it is equitable to
offer smaller DMM units an additional flat, per security credit for
orders that add liquidity. The proposed rebate is also equitable
because it would apply equally to any DMM unit of a certain size. In
addition, the proposed alternative way for member organizations that
operate a DMM unit to qualify for the Non Display Tier rebates is
equitable because a member organization that would not qualify for the
rebates operation of a DMM unit with a certain number of registrations
that meet the incentive quoting requirements would have the ability to
qualify for the rebates based on adding volume in Non-Displayed Limit
Orders in Tapes A, B and C as set forth under the modified
qualification criteria.
The Exchange notes that at this time there is currently only one
DMM unit that could qualify for the proposed rebate based on its number
of assigned securities. The Exchange believes that the proposal would
provide an equal incentive to any member organization to maintain a DMM
unit, and that the proposal constitutes an equitable allocation of fees
because all similarly situated member organizations would be eligible
for the same rebate.
Deletion of Underutilized Fees for Orders With a Retail Modifier
The Exchange believes the proposal equitably allocates fees among
its market participants because the underutilized fees 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
fees would apply to all similarly-situated member organizations that
send orders, including MOC and LOC orders, to the Exchange with a
Retail Modifier 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.
Routing Fees to NYSE American for Tape B and C Securities Below $1.00
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 member organizations that route orders in securities
below $1.00 to NYSE American, and each such member organization would
be charged the proposed fee when utilizing the functionality. Without
having a view of member organizations' activity on other exchanges and
off-exchange venues, the Exchange has no way of knowing whether the
proposed fee would result in any member organization from reducing or
discontinuing its use of the routing functionality. Moreover, the
proposed fee would be equitable because it is consistent with or lower
than fees charged on other exchanges.\29\
---------------------------------------------------------------------------
\29\ See note 17, supra.
---------------------------------------------------------------------------
The Proposal Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, member
organizations are free to disfavor the Exchange's pricing if they
believe that alternatives offer them better value.
Credits for Non-Displayed Limit Orders
The Exchange believes that offering the proposed credits to member
organizations based on the amount of liquidity provided to the Exchange
in non-displayed liquidity in Tape A, B, and C securities with a per
share stock price below $1.00 would provide a further incentive for all
member organizations to provide additional liquidity to the Exchange.
D Orders at the Close
The Exchange believes that offering an alternative way to qualify
for the lower $0.0008 per share fee for executed D Orders last modified
in the last 3 minutes before the scheduled close of trading and a new
fee of $0.0009 for member organizations in MOC/LOC Tiers 1, 2 and 3 and
that have Adding ADV of at least 0.65% of Tape A CADV is not unfairly
discriminatory because the proposed change would encourage greater
marketable and other liquidity at the closing auction. The Exchange
believes that the proposal is not unfairly discriminatory because all
similarly situated member organizations that submit D Orders last
modified in the last 3 minutes before the scheduled close of trading
above the first 750,000 ADV of the aggregate of executions at the close
by a member organization will be subject to the same fee structure,
which will automatically adjust based on prevailing market conditions.
Small DMM Incentive
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. For example, member
organizations could display quotes on competing exchanges rather than
quoting sufficiently on the Exchange to meet the proposed 25% NBBO
quoting requirement. The Exchange believes that offering an additional
rebate for DMM units with 150 or fewer assigned securities in the
previous month would provide a further incentive for smaller DMM units
to quote and trade their assigned securities on the Exchange, and will
generally allow the Exchange and DMM units to better compete for order
flow, thus enhancing competition. The Exchange also believes that the
requirement of 150 or fewer assigned securities to qualify for the
credit is not unfairly discriminatory because it would apply equally to
all existing and prospective member organizations with 150 or fewer
assigned securities that choose to maintain a DMM unit on the Exchange.
The Exchange does not believe that it is unfairly discriminatory to
offer incentives based on a maximum threshold. The Exchange notes that
it currently offers incentives that apply equally to all member
organizations that cannot or choose not to exceed a certain volume
threshold.\30\ The Exchange
[[Page 5294]]
believes that the proposal would provide an equal incentive to any
member organization to operate and maintain a DMM unit, and that the
proposal would not be unfairly discriminatory because the threshold-
based incentive would be offered on equal terms to all similarly
situated member organizations. Similarly, the proposal does not permit
unfair discrimination because the proposed alternative way for member
organizations that operate a DMM unit to qualify for the Non Display
Tier rebates would be applied to all similarly situated member
organizations, who would all be eligible for the same credits on an
equal basis. Member organizations could qualify the Non Display Tier
rebates either by operating a DMM unit that meets the existing and
proposed incentive quoting requirements at the NBBO or meeting the
requirements of the Non Display Tiers as modified by this proposal. In
both cases, the proposal does not permit unfair discrimination because
the proposed criteria apply equally to all similarly situated member
organizations, and all member organizations eligible for the rebates
under either criteria would be eligible for the same credits on an
equal and non-discriminatory basis. Moreover, the Exchange does not
believe that offering a lower remove fee to member organizations that
operate a DMM unit and meet Adding ADV requirements would be unfairly
discriminatory given that member organizations operating a DMM unit
have greater risks and heightened quoting and other obligations than
other market participants. As such, it is equitable and not unfairly
discriminatory to offer member organizations operating a DMM unit that
also meet incentive quoting requirements the ability to receive the Non
Display Tier rebates as other member organizations that do not operate
a DMM unit and thus do not have the same quoting and trading
obligations as DMM units. Accordingly, no member organization already
operating on the Exchange would be disadvantaged by the proposed
allocation of fees.
---------------------------------------------------------------------------
\30\ For instance, as noted above, the first 750,000 ADV of the
aggregate of executions at the close by a member organization are
not charged. See NYSE Price List, available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf</a>.
---------------------------------------------------------------------------
Deletion of Underutilized Fees for Orders With a Retail Modifier
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 Exchange
believes that the proposal is not unfairly discriminatory because the
proposed elimination of the underutilized fees would affect all
similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange believes that eliminating fees 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 an underutilized fee would make the Price List
more accessible and transparent.
Routing Fees to NYSE American for Tape B and C Securities Below $1.00
The Exchange believes its proposed routing fee is not unfairly
discriminatory because the fee would be applicable to all member
organizations on an equal and non-discriminatory basis.
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 member organizations that route orders in securities below $1.00 to
NYSE American. Moreover, the 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 member organizations.
Accordingly, no member organization 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 member organizations because the ability to route
to NYSE American would remain available to all member organizations on
an equal basis and each such participant would be charged the same fee
for using the functionality.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
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) \31\ of the Act and subparagraph (f)(2) of Rule
19b-4 \32\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\31\ 15 U.S.C. 78s(b)(3)(A).
\32\ 17 CFR 240.19b-4(f)(2).
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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. If the Commission
takes such action, the Commission shall institute proceedings under
section 19(b)(2)(B) \33\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\33\ 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="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#9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8"><span class="__cf_email__" data-cfemail="097b7c656c246a6664646c677d7a497a6c6a276e667f">[email protected]</span></a>. Please include
file number SR-NYSE-2024-04 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-2024-04. 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="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
[[Page 5295]]
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-NYSE-2024-04 and should be submitted on or before February 16, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01508 Filed 1-25-24; 8:45 am]
BILLING CODE 8011-01-P
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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.