Notice2024-10942
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend its Price List
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Published
May 20, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 98 (Monday, May 20, 2024)</title>
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[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Notices]
[Pages 43970-43972]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-10942]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100125; File No. SR-NYSE-2024-27]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend its Price List
May 14, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 1, 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 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 Price List to introduce two new
adding tiers for Midpoint Passive Liquidity (``MPL'') Orders that add
liquidity to the Exchange. The proposed rule change is available on the
Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to introduce two new
adding tiers for MPL Orders that add liquidity to the Exchange.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member
organizations to send additional displayed liquidity to the Exchange.
The Exchange proposes to implement the fee changes effective May 1,
2024.
Background
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.'' \3\
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\3\ 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.'' \4\ Indeed, cash equity trading is currently dispersed
across 16 exchanges,\5\ numerous alternative trading systems,\6\ and
broker-dealer internalizers and wholesalers, all competing for order
flow. Based on publicly-available information, no single exchange
currently has more than 20% market share.\7\ 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%.\8\
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\4\ 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).
\5\ 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>.
\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="https://markets.cboe.com/us/equities/market_share/">https://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 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 in MPL Orders. The proposed fee
change is designed to provide incentives to member organizations to
submit additional such liquidity to the Exchange.
Proposed Rule Change
An MPL Order is defined in Rule 7.31 as a Limit Order that is not
displayed and does not route, with a working price at the midpoint of
the PBBO.\9\
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\9\ See Rule 7.31(d)(3). Limit Order is defined in Rule
7.31(a)(2).
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Currently, the Exchange offers tiered credits of $0.0020, $0.00250
and $0.00275, respectively, for member organizations that have an
average daily trading volume (``ADV'') that adds liquidity to the
Exchange during the billing month (``Adding ADV'') in MPL Orders that
is at least a specified percentage (0.0075%, 0.015% and 0.075%,
respectively) of Tapes A, B and C consolidated average daily volume
(``CADV''),\10\ excluding any liquidity added by a Designated Market
Maker (``DMM'').
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\10\ 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. CADV is defined in footnote * of
the Price List.
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The Exchange proposes two additional adding tier credits for MPL
Orders, as follows.
First, the Exchange would offer a $0.0029 credit to member
organizations that have Adding ADV in MPL Orders of 25 million shares,
excluding any liquidity added by a DMM. Second, the
[[Page 43971]]
Exchange would offer a $0.0030 credit to member organizations that have
an Adding ADV in MPL Orders of at least 30 million shares, excluding
any liquidity added by a DMM. The Exchange believes that the additional
tiers would enable more member organizations with high volumes of
Adding ADV in MPL Orders to qualify for higher credits, especially in
high volume months.
The purpose of the proposed change is to incentivize member
organizations to trade on the Exchange in MPL Orders. Providing
additional ways for member organizations to qualify for higher credits
for MPL Orders that add liquidity to the Exchange would increase
liquidity providing MPL Orders, which in turn would support the quality
of price discovery on the Exchange and provide additional price
improvement opportunities for incoming orders that take liquidity. The
Exchange believes that by correlating the amount of credits to the
level of MPL Orders that add liquidity sent by a member organization,
the Exchange's fee structure would incentivize member organizations to
submit more MPL Orders that add liquidity to the Exchange, thereby
increasing the potential for price improvement and execution
opportunities to incoming marketable orders submitted to the Exchange.
As noted above, the Exchange operates in a competitive and
fragmented market environment, particularly as it relates to attracting
non-marketable orders, which add liquidity to the Exchange. Based on
the profile of liquidity-adding firms generally, the Exchange believes
that additional member organizations could qualify for the tiers if
they choose to direct order flow to 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 the
proposed rule change would result in any member organization directing
MPL Orders to the Exchange in order to qualify for a new proposed tier.
The proposed changes are not otherwise intended to address other
issues, and the Exchange is not aware of any significant problems that
market participants would have in complying with the proposed changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) & (5).
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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.'' \13\ 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.'' \14\
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\13\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
\14\ 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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The Proposed Change Is Reasonable
The proposed new Adding Tiers for MPL Orders are reasonable because
they represent an additional way for member organizations to qualify
for credits for adding liquidity in MPL Orders, thereby encouraging the
submission of additional liquidity to a national securities exchange.
As noted, the Exchange believes that the additional tiers would enable
more member organizations to add liquidity in MPL Orders. Submission of
additional liquidity to the Exchange would promote price discovery and
transparency and enhance order execution opportunities for member
organizations from the substantial amounts of liquidity present on the
Exchange. All member organizations would benefit from the greater
amounts of liquidity that will be present on the Exchange, which would
provide greater execution opportunities.
The Proposal Is an Equitable Allocation of Fees
The Exchange believes its proposal to offer additional tiered
credits in MPL Orders equitably allocates its fees among its market
participants. By providing additional incentives for member
organizations to qualify for an adding credit, the proposal would
continue to encourage member organizations to send orders that provide
liquidity to the Exchange, thereby contributing to robust levels of
liquidity, which benefits all market participants, and promoting price
discovery and transparency. The proposal would also enhance order
execution opportunities for member organizations from the substantial
amounts of liquidity present on the Exchange. All member organizations
would benefit from the greater amounts of liquidity that will be
present on the Exchange, which would provide greater execution
opportunities and additional price improvement opportunities for
incoming orders. The Exchange believes that by offering additional,
higher credits correlated to higher volumes of Adding ADV in MPL
Orders, more member organizations will be able to choose to route their
liquidity-providing orders to the Exchange to qualify for the proposed
credit. As previously noted, based on the profile of liquidity-
providing member organizations generally, the Exchange believes
additional member organizations could qualify for the proposed credits
if they choose to direct order flow to the Exchange. Additional
liquidity-providing orders benefits all market participants because it
provides greater execution opportunities on the Exchange.
The Proposal Is Not Unfairly Discriminatory
The Exchange believes its proposal to additional MPL Order adding
tiers is not unfairly discriminatory because the proposal would be
provided on an equal basis to all member organizations that add
liquidity, who would all be eligible for the same credit on an equal
basis. Accordingly, no member organization already operating on the
Exchange would be disadvantaged by this allocation of fees. Further, as
noted, the Exchange believes the proposal would provide an incentive
for member organizations to continue to send orders that provide
liquidity to the Exchange, to the benefit of all market participants.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
[[Page 43972]]
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\15\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for member organizations. As a result, the Exchange believes that the
proposed change furthers the Commission's goal in adopting Regulation
NMS of fostering integrated competition among orders, which promotes
``more efficient pricing of individual stocks for all types of orders,
large and small.'' \16\
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\15\ 15 U.S.C. 78f(b)(8).
\16\ See 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. The Exchange believes that the
proposed changes would continue to incentivize market participants to
direct order flow to the Exchange. Greater liquidity benefits all
market participants on the Exchange by providing more trading
opportunities and encourages member organizations to send orders,
thereby contributing to robust levels of liquidity, which benefits all
market participants on the Exchange. The proposed credits would be
available to all similarly-situated market participants, and, as such,
the proposed change would not impose a disparate burden on competition
among market participants on the Exchange. As noted, the proposal would
apply to all similarly situated member organizations on the same and
equal terms, who would benefit from the changes on the same basis.
Accordingly, the proposed change would not impose a disparate burden on
competition among market participants on the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. In such an
environment, the Exchange must continually adjust its fees and rebates
to remain competitive with other exchanges and with off-exchange
venues. Because competitors are free to modify their own fees and
credits in response, and because market participants may readily adjust
their order routing practices, the Exchange does not believe its
proposed fee change can impose any burden on intermarket competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 \18\
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. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f).
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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#6614130a034b05090b0b030812152615030548010910"><span class="__cf_email__" data-cfemail="c9bbbca5ace4aaa6a4a4aca7bdba89baacaae7aea6bf">[email protected]</span></a>. Please include
file number SR-NYSE-2024-27 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-2024-27. 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
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-2024-27 and should be
submitted on or before June 10, 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. 2024-10942 Filed 5-17-24; 8:45 am]
BILLING CODE 8011-01-P
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