Notice2024-06171
Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing of Proposed Change To Amend Its Schedule of Fees and Rebates
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Published
March 25, 2024
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 89 Issue 58 (Monday, March 25, 2024)</title>
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[Federal Register Volume 89, Number 58 (Monday, March 25, 2024)]
[Notices]
[Pages 20744-20747]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-06171]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99773; File No. SR-NYSENAT-2024-10]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing of Proposed Change To Amend Its Schedule of Fees and Rebates
March 19, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 14, 2024, NYSE National, Inc. (``NYSE National'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Schedule of Fees and Rebates
(``Fee Schedule'') to (1) include a rebate for non-tiered orders
removing liquidity in
[[Page 20745]]
securities priced at or above $1.00 that do not execute at a price
better than the contra-side NBBO; and (2) delete Removing Tiers 4 and 5
as obsolete. The Exchange proposes to implement the rule change on
March 1, 2024. The proposed 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 Schedule of Fees and Rebates
(``Fee Schedule'') to (1) include a rebate for non-tiered orders
removing liquidity in securities priced at or above $1.00 that do not
execute at a price better than the contra-side NBBO; and (2) delete
Removing Tiers 4 and 5 as obsolete.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing and liquidity-removing orders by offering further incentives
for ETP Holders to send additional removing liquidity to the Exchange.
The Exchange proposes to implement the rule change on March 1,
2024.
Current Market and Competitive Environment
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \3\
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\3\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
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As the Commission itself has recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\4\ Indeed, equity trading is currently dispersed across 16
exchanges,\5\ 31 alternative trading systems,\6\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available
information, no single exchange has more than 18% of the market.\7\
Therefore, no exchange possesses significant pricing power in the
execution of equity order flow. More specifically, the Exchange's share
of executed volume of equity trades in Tapes A, B and C securities is
less than 2%.\8\
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\4\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
\5\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at <a href="http://markets.cboe.com/us/equities/market_share/">http://markets.cboe.com/us/equities/market_share/</a>. See generally <a href="https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html">https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html</a>.
\6\ 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>.
\7\ 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>.
\8\ See id.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain products, in
response to fee changes. While it is not possible to know a firm's
reason for moving order flow, the Exchange believes that one such
reason is because of fee changes at any of the registered exchanges or
non-exchange trading venues to which a firm routes order flow. These
fees can vary from month to month, and not all are publicly available.
With respect to non-marketable order flow that would provide liquidity
on an exchange, ETP Holders can choose from any one of the 16 currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain the Exchange's transaction fees, and
market participants can readily trade on competing venues if they deem
pricing levels at those other venues to be more favorable.
The Exchange utilizes a ``taker-maker'' or inverted fee model to
attract orders that provide liquidity at the most competitive prices.
Under the taker-maker model, offering rebates for taking (or removing)
liquidity increases the likelihood that market participants will send
orders to the Exchange to trade with liquidity providers' orders. This
increased taker order flow provides an incentive for market
participants to send orders that provide liquidity. The Exchange
generally charges fees for order flow that provides liquidity. These
fees are reasonable due to the additional marketable interest (in part
attracted by the Exchange's rebate to remove liquidity) with which
those order flow providers can trade.
Proposed Rule Change
To respond to this competitive environment, the Exchange proposes
the following changes to its Fee Schedule designed to provide order
flow providers with additional incentives to route order flow to the
Exchange. As described above, ETP Holders have a choice of where to
send their order flow.
The Exchange proposes to add a rebate of $0.0016 per share for non-
tiered orders removing liquidity in securities priced at or above $1.00
that do not execute at a price better than the contra-side NBBO, which
currently receive no rebate. The current rate of ``no charge'' for
removing liquidity that executes at a price better than the contra-side
NBBO would remain unchanged. The proposed rebate is competitive and
would be similar to the rebates provided by other markets for non-
tiered orders removing liquidity.\9\ Because this rebate for non-tiered
orders removing liquidity would be greater than the $0.0007 rebate per
share currently available under Removing Tier 5 and the $0.0015 rebate
per share currently available under Removing Tier 4, the Exchange
proposes to delete Removing Tiers 4 and 5 as obsolete.
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\9\ See, e.g., Cboe EDGA Exchange Fee Schedule, available at
<a href="https://www.cboe.com/us/equities/membership/fee_schedule/edga/">https://www.cboe.com/us/equities/membership/fee_schedule/edga/</a>
(providing $0.0016 standard rebate for removing displayed
liquidity).
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The Exchange believes that the proposed rebate of $0.0016 per share
for non-tiered orders removing liquidity that do not execute at a price
better than the contra-side NBBO will incentivize more ETP Holders to
route liquidity-removing order flow to the Exchange. The Exchange
believes that the increased order flow that may result from these
proposed changes would in turn support the quality of price discovery
on the Exchange and provide additional price improvement opportunities
for incoming orders.
As noted, the Exchange operates in a competitive environment. The
Exchange
[[Page 20746]]
does not know how much order flow ETP Holders choose to route to other
exchanges or to off-exchange venues. Based on the profile of firms
generally, the Exchange believes that with the proposed change,
additional ETP Holders could choose to direct order flow to the
Exchange. Without having a view of ETP Holders' activity on other
exchanges and off-exchange venues, the Exchange has no way of knowing
whether this proposed rule change would result in any additional ETP
Holders directing orders to the Exchange.
The proposed changes are not otherwise intended to address any
other issues, and the Exchange is not aware of any problems that ETP
Holders would have in complying with the proposed changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\10\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in
particular, because it provides for the equitable allocation of
reasonable dues, fees, and other charges among its members, issuers and
other persons using its facilities and does not unfairly discriminate
between customers, issuers, brokers or dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change Is Reasonable
As discussed above, the Exchange operates in a highly competitive
market. The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \12\ While Regulation
NMS has enhanced competition, it has also fostered a ``fragmented''
market structure where trading in a single stock can occur across
multiple trading centers. When multiple trading centers compete for
order flow in the same stock, the Commission has recognized that ``such
competition can lead to the fragmentation of order flow in that
stock.'' \13\
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\12\ See Regulation NMS, supra note 4, at 37499.
\13\ 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).
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Given the current competitive environment, the Exchange believes
that the proposal represents a reasonable attempt to attract additional
order flow to the Exchange while aligning the Exchange's fees with
those charged by other markets. Specifically, the proposed rebate of
$0.0016 for non-tiered orders removing liquidity in securities priced
at or above $1.00 that do not execute at a price better than the
contra-side NBBO is reasonable because it is competitive when compared
to the rebates offered by other markets for non-tiered orders removing
liquidity.\14\ Additionally, because this rebate for non-tiered orders
removing liquidity would be greater than the $0.0007 rebate per share
currently available under Removing Tier 5 and the $0.0015 rebate per
share currently available under Removing Tier 4, the Exchange believes
it is reasonable to delete Removing Tiers 4 and 5 as obsolete. The
Exchange further believes that not offering a non-tiered rebate for
removing orders that execute at a price better than the contra-side
NBBO is reasonable because such orders receive the benefit of an
execution at a price superior to the best protected quote in the
national market system (including the Exchange's best protected bid or
offer). The Exchange notes that this is in line with current Exchange
Removing Tiers 1-5.
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\14\ See supra note 10.
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The Exchange believes that the proposal represents a reasonable
effort to promote price discovery and enhanced order execution
opportunities for ETP Holders. All ETP Holders would benefit from the
greater amounts of liquidity on the Exchange, which would represent a
wider range of execution opportunities.
The Proposal Is an Equitable Allocation of Fees and Rebates
The Exchange believes the proposed rule change equitably allocates
its fees among its market participants. The proposed change would
continue to encourage ETP Holders to both submit removing liquidity to
the Exchange and execute orders on the Exchange, thereby contributing
to robust levels of liquidity, to the benefit of all market
participants.
The Exchange believes that providing a rebate of $0.0016 for non-
tiered orders removing liquidity in securities priced at or above $1.00
that do not execute at a price better than the contra-side NBBO and
deleting the obsolete Removing Tiers 4 and 5 is an equitable allocation
of fees and credits. The Exchange believes that providing such a rebate
for non-tiered orders removing liquidity will encourage executions on
the Exchange because it is competitive and would be similar to the
rebates provided by other markets for non-tiered orders removing
liquidity.\15\ To the extent that the proposed change attracts order
flow to the Exchange, this order flow would make the Exchange a more
competitive venue for, among other things, order execution. Thus, the
Exchange believes the proposed rule change would continue to improve
market quality for all market participants on the Exchange and, as a
consequence, continue to attract more order flow to the Exchange,
thereby improving market-wide quality and price discovery.
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\15\ See id.
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The Exchange further believes that the proposal constitutes an
equitable allocation of fees and credits because all similarly situated
ETP Holders and other market participants would be eligible for the
same general and tiered rebates for removing liquidity. Moreover, the
proposed change is equitable because the proposed rebates would apply
equally to all similarly situated ETP Holders. The proposal neither
targets nor will it have a disparate impact on any particular category
of market participant.
The Proposal Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, ETP Holders
are free to disfavor the Exchange's pricing if they believe that
alternatives offer them better value.
Moreover, the proposal neither targets nor will it have a disparate
impact on any particular category of market participant. The Exchange
believes that the proposal does not permit unfair discrimination
because the proposal would be applied to all similarly situated ETP
Holders and all ETP Holders would be subject to the same $0.0016 rebate
per share for non-tiered orders removing liquidity in securities priced
at or above $1.00 that do not execute at a price better than the
contra-side NBBO, and the same deletion of obsolete Removing Tiers 4
and 5. Accordingly, no ETP Holder already operating on the Exchange
would be disadvantaged by the proposed allocation of fees and credits.
The Exchange further believes that the proposed change would not
permit unfair discrimination among ETP
[[Page 20747]]
Holders because the non-tiered and tiered rates are available equally
to all ETP Holders. As described above, in today's competitive
marketplace, order flow providers have a choice of where to direct
order flow, and the Exchange believes there are additional ETP Holders
that could qualify if they chose to direct their order flow to the
Exchange.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\16\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed change would encourage the submission of additional
liquidity and order flow to a public exchange, thereby enhancing order
execution opportunities for ETP Holders. As a result, the Exchange
believes that the proposed change furthers the Commission's goal in
adopting Regulation NMS of fostering competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \17\
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\16\ 15 U.S.C. 78f(b)(8).
\17\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed change is designed to attract
additional order flow to the Exchange. As described above, the Exchange
believes that the proposed change would provide additional incentives
for market participants to route liquidity-removing orders to the
Exchange. Greater liquidity benefits all market participants on the
Exchange by providing more trading opportunities and encourages ETP
Holders to send orders, thereby contributing to robust levels of
liquidity. The proposed rebate for non-tiered orders removing liquidity
in securities priced at or above $1.00 that do not execute at a price
better than the contra-side NBBO would be available to all similarly-
situated market participants, and thus, the proposed change would not
impose a disparate burden on competition among market participants on
the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchanges and off-exchange venues if they
deem fee levels at those other venues to be more favorable. In such an
environment, the Exchange must continually adjust its fees and rebates
to remain competitive with other exchanges and off-exchange venues.
Because competitors are free to modify their own fees and rebates in
response, and because market participants may readily adjust their
order routing practices, the Exchange does not believe its proposed fee
change can impose any burden on intermarket competition.
The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar order types and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange for execution.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A) \18\ 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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\18\ 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#4e3c3b222b632d2123232b203a3d0e3d2b2d60292138"><span class="__cf_email__" data-cfemail="4b393e272e66282426262e253f380b382e28652c243d">[email protected]</span></a>. Please include
file number SR-NYSENAT-2024-10 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSENAT-2024-10. 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 Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. 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-NYSENAT-2024-10, and
should be submitted on or before April 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06171 Filed 3-22-24; 8:45 am]
BILLING CODE 8011-01-P
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