Notice2024-13827
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
June 25, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 122 (Tuesday, June 25, 2024)</title>
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[Federal Register Volume 89, Number 122 (Tuesday, June 25, 2024)]
[Notices]
[Pages 53142-53148]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-13827]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100378; File No. SR-NYSE-2024-34]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
June 18, 2024.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on June 3, 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, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Price List to (1) revise the
requirements for market at-the-close (``MOC'') and limit at the close
(``LOC'') orders on MOC/LOC Tier 1 and Tier 2; (2) modify the
requirements and charges for D Orders at the close based on time of
entry or last modification; and (3) introduce incremental per share
credits for orders entered and executed by a Floor broker that add
liquidity to the Exchange and for D Orders at the close. The Exchange
proposes to implement the fee changes effective June 3, 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.
[[Page 53143]]
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 (1) revise the
requirements for MOC and LOC orders on MOC/LOC Tier 1 and Tier 2; (2)
modify the requirements and charges for D Orders at the close based on
time of entry or last modification; and (3) introduce incremental per
share credits for orders entered and executed by a Floor broker that
add liquidity to the Exchange and for D Orders at the close.
The proposed change responds to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders and closing price orders by revising the requirements
and offering additional incentives for member organizations to send
liquidity to the Exchange, especially during the Closing Auction. The
purpose of the proposed rule change is also to encourage efficient
usage of Exchange systems by member organizations by continuing to
encourage all member organizations to enter or modify D Orders as early
possible, which the Exchange believes is in the best interests of all
member organizations and investors who access the Exchange.
The Exchange proposes to implement the fee changes effective June
3, 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.'' \4\
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\4\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final
Rule) (``Regulation NMS'').
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While Regulation NMS has enhanced competition, it has also fostered
a ``fragmented'' market structure where trading in a single stock can
occur across multiple trading centers. When multiple trading centers
compete for order flow in the same stock, the Commission has recognized
that ``such competition can lead to the fragmentation of order flow in
that stock.'' \5\ Indeed, cash equity trading is currently dispersed
across 16 exchanges,\6\ numerous alternative trading systems,\7\ and
broker-dealer internalizers and wholesalers, all competing for order
flow. Based on publicly-available information, no single exchange
currently has more than 20% market share.\8\ 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%.\9\ It
should also be noted that, in the currently highly competitive national
market system, numerous exchanges and other order execution venues
compete for order flow at the close, and competition for closing orders
is robust.\10\
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\5\ See Securities Exchange Act Release No. 61358, 75 FR 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\6\ See Cboe U.S Equities Market Volume Summary, available at
<a href="https://markets.cboe.com/us/equities/market_share">https://markets.cboe.com/us/equities/market_share</a>. See generally
<a href="https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html">https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html</a>.
\7\ See FINRA ATS Transparency Data, available at <a href="https://otctransparency.finra.org/otctransparency/AtsIssueData">https://otctransparency.finra.org/otctransparency/AtsIssueData</a>. A list of
alternative trading systems registered with the Commission is
available at <a href="https://www.sec.gov/foia/docs/atslist.htm">https://www.sec.gov/foia/docs/atslist.htm</a>.
\8\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at <a href="https://markets.cboe.com/us/equities/market_share/">https://markets.cboe.com/us/equities/market_share/</a>.
\9\ See id.
\10\ There are at least seven broker-dealer sponsored products
competing for volume at the close, including Credit Suisse's CLOSEX;
Instinet's Market-onClose Cross; Morgan Stanley's Market-on-Close
Aggregator (MOCHA); Bank of America's Instinct X[supreg] and Global
Conditional Cross; JP Morgan's JPB-X; Piper Sandler's On-Close Match
Book; and Goldman Sachs' One Delta Close Facility (ODCF). Moreover,
the percentage of volume at the NYSE closing price in NYSE-listed
securities executed off-exchange has been steadily increasing since
before the pandemic. In 2018, the percentage of volume at the NYSE
closing price in NYSE-listed securities executed off-exchange was
21.3%. In 2019, the percentage increased to 23.5%. After dipping
briefly to 22.1% in 2020, the percentage resumed its upward trend
and increased to 25.2% in 2021. The percentage was 24.1% and 23.8%
in 2022 and 2023, respectively, and has increased again in 2024 to
26.1% through May 31.
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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 on
the Exchange. The proposed fee change is designed to provide incentives
to member organizations to submit additional such liquidity to the
Exchange, including during closing auctions.
Proposed Rule Change
MOC/LOC Tiers 1 and 2
Currently, for MOC/LOC Tier 1, the Exchange charges $0.0007 per
share for MOC orders and $0.0007 per share for LOC orders from any
member organization in the prior three billing months executing (1) an
average daily trading volume (``ADV'') of MOC activity on the NYSE of
at least 0.45% of NYSE consolidated ADV (``CADV''),\11\ (2) an ADV of
total close activity (MOC/LOC and executions at the close) on the NYSE
of at least 0.7% of NYSE CADV, and (3) whose MOC activity comprised at
least 35% of the member organization's total close activity (MOC/LOC
and other executions at the close). Similarly, for MOC/LOC Tier 2, the
Exchange charges $0.0008 per share for MOC orders and $0.0008 per share
for LOC orders from any member organization in the prior three billing
months executing (1) an ADV of MOC activity on the NYSE of at least
0.35% of NYSE CADV,\12\ (2) an ADV of total
[[Page 53144]]
close activity (MOC/LOC and executions at the close) on the NYSE of at
least 0.525% of NYSE CADV, and (3) whose MOC activity comprised at
least 35% of the member organization's total close activity (MOC/LOC
and other executions at the close).
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\11\ ADV and CADV are defined in footnote * of the Price List.
The Exchange would delete ``[Tape A]'' between NYSE and CADV in one
place in the tier as redundant. The Exchange would also add ``and
an'' between the remaining requirements to qualify for the tier.
\12\ The Exchange would similarly delete ``[Tape A]'' between
NYSE and CADV in two places in the tier as redundant and add ``and
an'' between the remaining requirements to qualify for this tier as
proposed for Tier 1.
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The Exchange proposes to eliminate the third requirement from both
tiers.
As proposed for MOC/LOC Tier 1, the Exchange would charge $0.0007
per share for MOC orders and $0.0007 per share for LOC orders from any
member organization in the prior three billing months executing an (1)
ADV of MOC activity on the NYSE of at least 0.45% of NYSE CADV), and
(2) ADV of total close activity (MOC/LOC and executions at the close)
on the NYSE of at least 0.7% of NYSE CADV. The current rates would
remain the same.
As proposed for MOC/LOC Tier 2, the Exchange would charge $0.0008
per share for MOC orders and $0.0008 per share for LOC orders from any
member organization in the prior three billing months executing an (1)
an ADV of MOC activity on the NYSE of at least 0.35% of NYSE CADV, and
(2) an ADV of total close activity (MOC/LOC and executions at the
close) on the NYSE of at least 0.525% of NYSE CADV. The current rates
would also remain the same.
The proposed change responds to the current competitive environment
where order flow providers have a choice of where to direct orders in
NYSE-listed securities, including at the close, by modifying
requirements in order to facilitate member organizations qualifying for
a MOC/LOC tier and encourage additional liquidity to the Exchange.
Higher volumes of MOC and LOC orders contribute to the quality of the
Exchange's closing auction and provide market participants whose orders
are executed at the close with a greater opportunity for execution,
which benefits all market participants.
D Orders
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, and executions at
the close, excluding MOC Orders, LOC Orders and Closing Offset (``CO'')
Orders. 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.
The Exchange proposes to no longer exclude the first 750,000 ADV of
the aggregate of executions at the close by member organizations for D
Orders, Floor broker executions swept into the close, and executions at
the close, excluding MOC Orders, LOC Orders and CO Orders. As discussed
below, the Exchange would waive fees for member organizations with an
ADV of at least 10,000 shares entered and executed by an affiliated
Floor broker up to specific ADV levels based on time of entry (or last
modification) in an effort to encourage additional liquidity on the
trading floor of a national securities exchange.
The Exchange also proposes to modify the time of entry (or last
modification) for D Order fee determination in order to encourage
member organizations to enter D Orders earlier in the trading day,
thereby increasing transparency in the Closing Auction and reducing
member organization's operational risk. Consistent with this purpose,
the current rates for D Orders would not change with the exception of D
Orders entered in the final minute of trading, which the Exchange
proposes to label as ``Late D Orders.''
The Exchange would modify the current requirements and charges for
D Orders as follows:
<bullet> The Exchange currently charges $0.0003 per share for
executed D Orders last modified \13\ by the member organization earlier
than 25 minutes before the scheduled close of trading. The Exchange
proposes to charge the current rate to D Orders last modified earlier
than 10 minutes before the scheduled close of trading. The Exchange
would define these orders as ``Early D Orders.''
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\13\ As set forth in footnote 10 to the Price List, as used in
the Price List, the phrase ``last modified'' means the later of the
order's entry time or the final modification or cancellation time
for any D Order designated for the close with the same broker badge,
entering firm mnemonic, symbol, and side.
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<bullet> The Exchange currently charges $0.0007 per share for
executed D Orders last modified by the member organization from 25
minutes up to but not including 3 minutes before the scheduled close of
trading. The Exchange proposes to charge the current rate to D Orders
last modified from 10 minutes up to but not including 1 minute before
the scheduled close of trading. The Exchange would define these orders
as ``Mid D Orders.''
<bullet> For D Orders last modified in the last 3 minutes before
the scheduled close of trading, the Exchange charges three different
fees. The Exchange proposes to charge these fees, as modified, for D
Orders last modified by the member organization in the last 1 minute
before the scheduled close of trading, which the Exchange would define
as ``Late D Orders.''
[cir] 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 member organizations in MOC/LOC Tiers 1 and 2, both with
Adding ADV of at least 0.50% of Tape A CADV or MOC/LOC Tiers 1, 2 or 3
with Adding ADV of at least 1.05% of Tape A CADV. The Exchange would
eliminate the limitation to member organizations in MOC/LOC Tiers 1 and
2 and would charge $0.0011 per share for executed D Orders last
modified in the last 1 minute before the scheduled close of trading for
member organizations with Adding ADV of at least 0.50% of Tape A CADV
(unchanged from the current requirement) and total close activity of a
least 1.75% of Tape A CADV.
[cir] The Exchange currently charges $0.0009 per share 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 with
Adding ADV of at least 0.65% of Tape A CADV. The Exchange would
eliminate this fee.
[cir] The Exchange currently charges $0.0010 per share for executed
D Orders last modified in the last 3 minutes before the scheduled close
of trading for all other member organizations. The Exchange proposes to
charge all other member organizations $0.0012 per share for executed D
Orders last modified one minute before the scheduled close of trading.
<bullet> For member organizations with an ADV of at least 10,000
shares entered and executed by an affiliated Floor broker,\14\ the
Exchange proposes that Early, Mid- and Late D Orders up to specific ADV
levels would be free. Qualifying member organizations would be charged
the previously described rates for all volume for each D Order type
above the proposed thresholds.
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\14\ For purposes of the proposed change, an affiliated Floor
broker would be a Floor broker under 75% common ownership or control
of the member organization. The Price List defines ``affiliate'' as
any member organization under 75% common ownership or control of
that member organization. See Price List, General, Section I
(Billing Disputes).
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As proposed, qualifying member organizations would not be charged
for the first 500,000 shares of Early D Orders, with the above rates
for Early D Orders applicable to all volume above that threshold.
For Mid D Orders, qualifying member organizations would not be
charged for the first 750,000 shares, with the above
[[Page 53145]]
rates for Mid D Orders applicable to all volume above that threshold.
Finally, for Late D Orders, qualifying member organizations would
not be charged for the first 250,000 shares, with the above rates for
Late D Orders applicable to all volume above that threshold.
<bullet> Orders from continuous trading swept into the close would
continue to be charged the current rate of $0.0008.
The purpose of these changes is to continue to encourage additional
liquidity on the Exchange. The Exchange does not know how much order
flow member organizations choose to route to other exchanges or to off-
exchange venues. Since the proposal not to charge Early, Mid- and Late
D Orders up to specific ADV levels for member organizations with a
minimum ADV entered and executed by an affiliated Floor broker would be
new, the Exchange does not know how many member organizations could
qualify based on their current trading profile and if they choose to
direct order flow to the Exchange. Based on the profile of member
organizations and their liquidity provision, the Exchange believes that
additional member organizations could qualify for the discounts 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 this
proposed rule change would result in any member organization directing
orders to the Exchange in order to qualify for the discounts.
Incremental Floor Broker Credits
As part of what the Exchange proposes to call the ``Floor Broker
Incentive and Rebate Program,'' the Exchange proposes an incremental
per share credit for orders executed by a Floor broker in addition to
the preceding fees and credits specified in the Price List.
Specifically, the Exchange proposes that orders executed by a member
organization's Floor broker would receive an additional $0.0002 per
share for orders that add liquidity to the Exchange, other than MPL and
Non-Displayed Limit Orders, and/or (2) an additional $0.000025 per
share for the proposed Early, Mid-and Late D Orders where the member
organization has (1) an ADV of at least 10,000 shares entered and
executed by its Floor broker, and (2) an ADV comprised of at least 50%
Floor broker ADV of the member organization's total ADV, excluding
routing.
For example, assume that Member Organization A enters and executes
2 million shares that add liquidity on the trading Floor though its
Floor broker. Further assume that a second member organization, Member
Organization B, enters 10 million shares that add liquidity and routes
it flow to Member Organization A for execution on the trading Floor
though Member Organization A's Floor broker. Both member organizations
receive the current rate for adding liquidity on the trading Floor of
at least $0.0019 per share for their shares entered as the entering
firm, unless a better current tiered rate applies. Under the proposed
pricing, Member Organization A would also receive an additional credit
of $0.0002 for executing the 10 million shares for adding liquidity on
the trading Floor on behalf of Member Organization B.
The purpose of the proposed incremental Floor broker credits is to
continue to encourage member organizations to send orders to trading
Floor for execution, thereby contributing to robust levels of
liquidity, especially for adding liquidity and during the Closing
Auction, which benefits all market participants. Members and member
organizations benefit from the substantial amounts of liquidity present
on the Exchange during the close. The Exchange believes the proposed
change would also thereby promote price discovery and transparency, and
enhance order execution opportunities for member organizations from the
substantial amounts of liquidity that are present on the Exchange both
intraday and during the close.
Since the proposed incremental credits are new, the Exchange does
not know how many member organizations could qualify for the new
discounts based on their current trading profile and if they choose to
direct order flow to the Exchange. Based on the profile of liquidity-
adding firms generally, the Exchange believes that a number of member
organizations could qualify for the credits 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 this proposed rule change would
result in any member organization directing orders to the Exchange in
order to qualify for the discounts.
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,\15\ in general, and furthers the
objectives of sections 6(b)(4) and (5) of the Act,\16\ 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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\15\ 15 U.S.C. 78f(b).
\16\ 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.'' \17\ 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.'' \18\
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\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
\18\ 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
In light of the competitive environment in which the Exchange
currently operates, the proposed rule change is a reasonable attempt to
increase liquidity to the Exchange, especially during the Closing
Auction, 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, which would benefit
all market participants by offering greater price discovery and an
increased opportunities to trade on the Exchange, both intraday and
during the Closing Auction. The proposed rule change also
[[Page 53146]]
represents a reasonable attempt to encourage efficient usage of
Exchange systems by member organizations by continuing to encourage all
member organizations to enter or modify D Orders as early possible,
which the Exchange believes is in the best interests of all member
organizations and investors who access the Exchange.
MOC/LOC Tiers 1 and 2
The Exchange believes that eliminating the requirement that a
member organization's MOC activity comprise at least 35% of the member
organization's total close activity (MOC/LOC and other executions at
the close) in order to qualify for to qualify for MOC/LOC Tier 1 and
Tier 2 is a reasonable way to encourage greater participation which
leads to greater marketable and other liquidity at the Closing Auction.
MOC and LOC orders contribute meaningfully to the price and size
discovery, which is the hallmark of the closing auction process. Higher
volumes of MOC orders contribute to the quality of the Exchange's
Closing Auction and provide market participants whose orders are
executed at the close with a greater opportunity for execution, which
benefits all market participants. Further, as noted above, in the
currently highly competitive national market system, competition for
closing orders among exchanges, ATSs and other market execution venues
is robust.
D Orders
The Exchange believes that it [sic] proposal would encourage
additional liquidity on the Exchange from multiple sources, which helps
to maintain the quality of the Exchange's Closing Auction for the
benefit of all market participants.
Specifically, the Exchange believes that no longer exempting the
first 750,000 ADV of the aggregate of executions at the close from fees
is reasonable as it has not operated as originally intended. Member
organizations that currently reach the 750,000 ADV threshold are
generally larger member organizations that would continue to derive a
substantial benefit from the high volume of closing executions on the
Exchange and the Exchange believes would continue to send orders to
send orders to the Exchange. While the Exchange is removing the first
750,000 ADV exemption, it notes that it is introducing a new exemption
for qualifying member organizations with a Floor broker, which totals
1.5 million shares across Early-, Mid- and Late D Orders. Similarly,
the Exchange believes that not charging Early, Mid- and Late D Orders
up to specific ADV levels for member organizations with a minimum ADV
entered and executed by an affiliated Floor broker would encourage
additional liquidity for execution on the trading Floor in the Closing
Auction, thereby contributing to robust levels of liquidity on the
Floor and at the close, which benefits all market participants.
Moreover, the proposed fee exemptions for Early, Mid- and Late D Orders
would incentivize qualifying member organizations to enter or modify D
Orders as early as possible in order to avoid fees for Early, Mid-, and
Late D Orders up to the proposed thresholds for each.
Similarly, the Exchange believes that modifying the time of entry
for last modification for member organizations to qualify for the
existing fees for Early, Mid- and Late D Orders encourages all member
organizations to enter or modify D Orders as early possible, beginning
with as early as up to 10 minutes before the close of trading, in order
to build up liquidity going into the Closing Auction. Member
organizations are waiting until later in the trading day to enter and/
or modify D Orders than the current 25 minutes. By expanding the time
period to enter Early D Orders to up to 10 minutes before the close,
the Exchange hopes to encourage member organizations to send D Orders
earlier in order to qualify for lower fees. Moreover, the Exchange
hopes thereby to incentivize more member organizations to send adding
liquidity to the Exchange, which in turn supports the quality of price
discovery on the Exchange. In addition, charging member organizations
higher rates for entering or modifying their interest in the final
minute of regular trading hours reflects a risk premium for delaying
entry or modification until nearly the end of trading, while reducing
the time entry which results in fewer trades qualifying for these
higher fees. Further, it is reasonable to charge member organizations a
lower rate based on a higher percentage of Adding ADV of Tape A CADV
and total close activity of Tape A CADV for entering or modifying their
interest in the final minute of regular trading hours because such
interest most benefits from the flexibility afforded the order type.
The Exchange notes that while the proposed fee for Late D-Orders is
higher than the current fee, the proposed increase in time of order
entry or last modified to qualify for Early- and Mid D Orders, which
have lower rates than Late D Orders, will result in lower overall fees
for member organizations, and incentivize greater liquidity in the
Closing Auction, which benefits all market participants.
Incremental Floor Broker Credits
The Exchange believes that the proposed additional credits for
orders executed by a Floor broker for representation on the Exchange is
a reasonable way to encourage additional liquidity, including D Orders,
on the Exchange both during intraday and in Closing Auction because
member organizations benefit from the substantial amounts of liquidity
that are present on the Exchange during such times. The Exchange
believes the proposed change would encourage member organizations to
send orders to the trading Floor for execution, thereby contributing to
robust levels of liquidity on the trading Floor both intraday and
during the Closing Auction, which benefits all market participants. The
proposed fee would also encourage the submission of additional
liquidity to a national securities exchange, thereby promoting price
discovery and transparency and enhancing order execution opportunities
for member organizations from the substantial amounts of liquidity that
are present on the Exchange during the closing. The proposed change
would also encourage the execution of such transactions on a public
exchange, thereby promoting price discovery and transparency. Moreover,
the Exchange believes that requiring an ADV comprised of at least 50%
Floor broker ADV of the member organization's total ADV is reasonable
because it would encourage member organizations that make a substantial
contribution to trading Floor liquidity without excluding smaller
member organizations.
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.
MOC/LOC Tiers 1 and 2
The Exchange believes that the proposed elimination of the
requirement that a member organization's MOC activity comprise at least
35% of the member organization's total close activity (MOC/LOC and
other executions at the close) in order to
[[Page 53147]]
qualify for to qualify for MOC/LOC Tier 1 and Tier 2 will incentivize
member organizations to send additional liquidity to achieve lower fees
and encourage greater marketable and other liquidity at the closing
auction. Higher volumes of MOC and LOC orders contribute to the quality
of the Exchange's Closing Auction and provide market participants whose
orders are executed in the close with a greater opportunity for
execution of orders on the Exchange, thereby promoting price discovery
and transparency and enhancing order execution opportunities and
improving overall liquidity on a public exchange. The Exchange also
believes that the proposed change is equitable because it would apply
to all similarly situated member organizations that utilize MOC and LOC
orders on the Exchange on an equal basis.
D Orders
The Exchange believes that the proposed changes to D Orders are an
equitable allocation of fees because the proposed changes, taken
together, will incentivize member organizations to enter or modify D
Orders as early possible, beginning with as early as up to 10 minutes
before the close of trading, in order to build up liquidity going into
the closing auction. The Exchange's closing auction is a recognized
industry benchmark,\19\ and member organizations receive a substantial
benefit from the Exchange in obtaining high levels of executions at the
Exchange's closing price on a daily basis. The Exchange also believes
that it is equitable to charge member organizations a higher rate for
entering or modifying their interest in the final minute of regular
trading hours because such interest most benefits from the flexibility
afforded the order type. Moreover, the proposed fees are equitable
because all similarly situated member organizations will be subject to
the same fee structure that would be available on an equal basis to all
similarly situated member organizations that utilize D Orders on the
Exchange. In this regard, the proposed changes are equitable because
any member organization can choose to send D Orders earlier than 10
minutes or 1 minute prior to the close in order to qualify for lower
fees, and any member organization can choose to have an affiliated
Floor broker in order to qualify for the lower fee for Late D Orders or
to exclude volume from fees up to the proposed specified thresholds for
Early, Mid- and Late D Orders.
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\19\ For example, the pricing and valuation of certain indices,
funds, and derivative products require primary market prints.
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Incremental Floor Broker Credits
The proposed incremental credits for orders executed by a member
organization's Floor broker that add liquidity to the Exchange and D
Orders during the close, are equitable because the incremental fees
would be available on an equal basis to all similarly situated member
organizations that operate a Floor brokerage business. In this regard,
the proposed discounts and requirements are equitable because any
member organization can choose to increase their adding volume entered
and executed by its Floor broker, excluding routing, in order to
qualify for the proposed incremental credits and any member
organization can choose to operate as a Floor broker in order to
qualify for the additional credits on an equal basis. The Exchanges
notes that the current Incremental Discounts on MOC Orders utilize
similar requirements.\20\
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\20\ See NYSE Price List at p. 4, 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>.
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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.
MOC/LOC Tiers 1 and 2
The proposed streamlined requirements for MOC orders to qualify for
MOC/LOC Tiers 1 and 2 are not unfairly discriminatory because the
requirements would be applied to all similarly situated member
organizations and other market participants, who would all be subject
to the same fees, requirements and discounts on a full and equal basis.
For the same reason, the proposal neither targets nor will it have a
disparate impact on any particular category of market participant.
Accordingly, no member organization already operating on the Exchange
would be disadvantaged by this allocation of fees. Finally, the
submission of orders to the Exchange is optional for member
organizations in that they could choose whether to submit orders to the
Exchange and, if they do, the extent of its activity in this regard.
D Orders
The Exchange believes that the proposed changes to D Orders to
modify the time periods by which such orders are considered early, mid-
or late is not unfairly discriminatory because the proposed change
would because the proposed changes, will incentivize member
organizations to enter or modify D Orders as early possible, beginning
with as early as up to 10 minutes before the close of trading, in order
to build up liquidity going into the closing auction. The Exchange also
believes that it is not unfairly discriminatory to charge member
organizations a higher rate for entering or modifying their interest in
the final minute of regular trading hours because all member
organizations can utilize D Orders and all have an equal choice as to
when to submit those order to benefit most from the flexibility
afforded the order type. 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 10 minutes
and less before the scheduled close of trading will be subject to the
same fee structure based on time of entry (or last modification).
Incremental Floor Broker Credits
The proposed incremental Floor broker credits are not unfairly
discriminatory because the proposed fees would be applied to all
similarly situated member organizations and other market participants
operating a Floor brokerage business, who would all be subject to the
same fees, requirements, and discounts on an equal basis. For the same
reason, the proposal neither targets nor will it have a disparate
impact on any particular category of market participant. Accordingly,
no member organization already operating on the Exchange would be
disadvantaged by this allocation of fees. Further, the Exchange
believes the proposal would incentivize member organizations to send
more orders to the Floor in order to qualify for incremental credits.
Finally, the submission of orders to the Exchange is optional for
member organizations in that they could choose whether to submit orders
to the Exchange and, if they do, the extent of its activity in this
regard.
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,\21\ the Exchange
believes that the
[[Page 53148]]
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.'' \22\
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\21\ 15 U.S.C. 78f(b)(8).
\22\ 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 upon filing pursuant
to section 19(b)(3)(A) \23\ 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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\23\ 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#5a282f363f77393537373f342e291a293f39743d352c"><span class="__cf_email__" data-cfemail="82f0f7eee7afe1edefefe7ecf6f1c2f1e7e1ace5edf4">[email protected]</span></a>. Please include
file number SR-NYSE-2024-34 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-2024-34. 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-2024-34 and should be
submitted on or before July 16, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13827 Filed 6-24-24; 8:45 am]
BILLING CODE 8011-01-P
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