Notice2024-18696
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
August 21, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 162 (Wednesday, August 21, 2024)</title>
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[Federal Register Volume 89, Number 162 (Wednesday, August 21, 2024)]
[Notices]
[Pages 67686-67689]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-18696]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100731; File No. SR-NYSE-2024-45]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
August 15, 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 August 8, 2024, New York Stock Exchange LLC (``NYSE'' 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 Price List to revise the
requirements for Supplemental Liquidity Providers (``SLPs'') that are
also Designated Market Makers (``DMM'') to qualify for SLP Adding Tiers
1-5. The Exchange proposes to implement the fee changes effective
August 8, 2024. The proposed rule change is available on the Exchange's
website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to revise the
requirements for SLPs that are also DMMs to qualify for SLP Adding
Tiers 1-5. Specifically, the Exchange proposes to lower the required
adding as a percentage of NYSE consolidated average daily volume
(``CADV'') in order for SLPs that are also DMMs with a specific number
of DMM registrations to qualify for each tier.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders by modifying the requirements for member organizations
to send additional displayed liquidity to the Exchange.
The Exchange proposes to implement the fee changes effective August
8, 2024.\3\
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\3\ The Exchange originally filed to amend the Price List on
August 1, 2024 (SR-NYSE-2024-43). SR-NYSE-2024-43 was withdrawn on
August 8, 2024 and replaced by this filing.
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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\
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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.
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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 its member organizations who submit orders
that provide liquidity on the Exchange. The proposed changes are
designed to continue to attract additional order flow to the Exchange
by revising the requirements for SLPs that are also DMMs in SLP Adding
Tiers 1-5 in order to further incentivize member organizations to
submit additional displayed liquidity to, and quote aggressively in
support of the price discovery process on, the Exchange.
[[Page 67687]]
Proposed Rule Change
For SLPs that are also DMMs registered in a minimum number of Tape
A securities and subject to Rule 107B(i)(2)(A), current SLP Adding Tier
1, Tier 2, Tier 3, Tier 4, and Tier 5 set forth an additional
requirement that the adding average daily volume (``ADV'') represent a
fixed percentage of NYSE CADV. The requirement is set forth in the
column titled ``SLP Adding ADV % Tape A CADV If DMM'' and currently
ranges from 0.08% to 0.55%. The Exchange proposes to amend those
percentages, as follows.
Under current SLP Tier 1, an SLP adding liquidity in Tape A
securities receives a credit of $0.0032, or $0.0012 if a Non-Displayed
Reserve Order, if the SLP (1) meets the 10% average or more quoting
requirement in an assigned security pursuant to Rule 107B, and (2) adds
liquidity for all assigned SLP securities in the aggregate (including
shares of both an SLP-Prop and an SLMM of the same or an affiliated
member organization) \10\ of an ADV of more than 1.00% (or 0.080% for
SLPs that meet the SLP Cross Tape Tier 1 Incentive) of NYSE CADV or,
with respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a)
and registered in at least 500 Tape A issues, more than 0.55% of NYSE
CADV. The Exchange proposes to lower the more than 0.55% of NYSE CADV
requirement to more than 0.36% of NYSE CADV.
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\10\ Under Rule 107B, an SLP can be either a proprietary trading
unit of a member organization (``SLP-Prop'') or a registered market
maker at the Exchange (``SLMM''). For purposes of the 10% average or
more quoting requirement in assigned securities pursuant to Rule
107B, quotes of an SLP-Prop and an SLMM of the same member
organization are not aggregated. However, for purposes of adding
liquidity for assigned SLP securities in the aggregate, shares of
both an SLP-Prop and an SLMM of the same member organization are
included.
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Under current SLP Tier 2, an SLP adding liquidity in Tape A
securities receives a credit of $0.0031, or $0.0012 if a Non-Displayed
Reserve Order, if the SLP (1) meets the 10% average or more quoting
requirement in an assigned security pursuant to Rule 107B, and (2) adds
liquidity for all assigned SLP securities in the aggregate (including
shares of both an SLP-Prop and an SLMM of the same or an affiliated
member organization) of an ADV of more than 0.90% (or 0.75% for SLPs
that meet the SLP Cross Tape Tier 1 Incentive) of NYSE CADV or, with
respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a) and
registered in at least 500 Tape A issues, more than 0.45% of NYSE CADV.
The Exchange proposes to change the more than 0.45% of NYSE CADV
requirement to more than 0.24% of NYSE CADV.
Under current SLP Tier 3, an SLP adding liquidity in Tape A
securities receives a credit of $0.00305, or $0.00105 if a Non-
Displayed Reserve Order, if the SLP (1) meets the 10% average or more
quoting requirement in an assigned security pursuant to Rule 107B, and
(2) adds liquidity for all assigned SLP securities in the aggregate
(including shares of both an SLP-Prop and an SLMM of the same or an
affiliated member organization) of an ADV of more than 0.60% of NYSE
CADV or, with respect to an SLP that is also a DMM subject to Rule
107B(i)(2)(a) and registered in at least 500 Tape A issues, more than
0.36% of NYSE CADV. The Exchange proposes to change the more than 0.36%
of NYSE CADV requirement to more than 0.18% of NYSE CADV.
Under current SLP Tier 4, an SLP adding liquidity in Tape A
securities receives a credit of $0.0029, or $0.0009 if a Non-Displayed
Reserve Order, if the SLP (1) meets the 10% average or more quoting
requirement in an assigned security pursuant to Rule 107B, and (2) adds
liquidity for all assigned SLP securities in the aggregate (including
shares of both an SLP-Prop and an SLMM of the same or an affiliated
member organization) of an ADV of more than 0.45% of NYSE CADV or, with
respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a) and
registered in at least 500 Tape A issues, more than 0.24% of NYSE CADV.
The Exchange proposes to change the more than 0.24% of NYSE CADV
requirement to more than 0.08% of NYSE CADV.
Once an SLP that is also a DMM subject to Rule 107B(i)(2)(a) and
registered in at least 500 Tape A issues adds liquidity for all
assigned SLP securities in the aggregate of more than 0.08% of NYSE
CADV, that SLP will automatically receive the highest SLP Tier 4 credit
of $0.0029, even if the SLP otherwise qualifies for SLP Tiers 5 or 6.
To reflect this in the Price List, the Exchange would replace the
existing NYSE CADV requirement in SLP Tiers 5 and 6 of 0.18% of NYSE
CADV and 0.08% of NYSE CADV, respectively, with ``N/A.''
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
In light of the competitive environment in which the Exchange
currently operates, the proposed rule change is a reasonable attempt to
incentivize member organizations to direct order flow to the Exchange
and provide meaningful added levels of liquidity in order to qualify
for the credits, thereby contributing to depth and market quality on
the Exchange. The Exchange believes that the proposed lower adding as a
percentage of NYSE CADV requirements would incentivize market
participants to increase the orders sent directly to the Exchange and
therefore provide liquidity that supports the quality of price
discovery and promotes market transparency. As noted above, the
Exchange operates in a highly competitive environment, particularly
[[Page 67688]]
for attracting non-marketable order flow that provides liquidity on an
exchange.
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.
The Exchange believes that the proposed changes would 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. The proposed
changes would also encourage the submission of additional orders that
add liquidity, thus providing liquidity to market participants,
providing greater price discovery and increasing the quality of order
execution on the Exchange's market, which would benefit all market
participants. The proposed changes are equitable because they would
apply equally to all qualifying similarly-situated SLPs that submit
orders to the NYSE and add liquidity to the Exchange.
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.
The Exchange believes that the proposal is not unfairly
discriminatory because it neither targets nor will it have a disparate
impact on any particular category of market participant. The proposed
lower adding as a percentage of NYSE CADV requirement that SLPs that
are also DMMs must meet to qualify for the SLP adding tiers also does
not permit unfair discrimination because the proposed changes would
apply to all similarly situated market participants on an equal and
non-discriminatory basis and would be provided on an equal basis to all
member organizations that add liquidity by meeting the new proposed
requirements, who would all be eligible for the same credits on an
equal basis. Accordingly, no member organization already operating on
the Exchange would be disadvantaged by this allocation of fees. The
proposal does not permit unfair discrimination because the
qualification criteria would be applied to all similarly situated
member organizations, who would all be eligible for the same credits on
an equal basis. 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. 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,\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 upon filing pursuant
to Section 19(b)(3)(A) \17\ 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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\17\ 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
[[Page 67689]]
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2d5f584148004e4240404843595e6d5e484e034a425b"><span class="__cf_email__" data-cfemail="2052554c450d434f4d4d454e5453605345430e474f56">[email protected]</span></a>. Please include
file number SR-NYSE-2024-45 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-2024-45. 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-NYSE-2024-45, and should
be submitted on or before September 11, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18696 Filed 8-20-24; 8:45 am]
BILLING CODE 8011-01-P
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