Notice2024-25048
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
October 29, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 209 (Tuesday, October 29, 2024)</title>
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[Federal Register Volume 89, Number 209 (Tuesday, October 29, 2024)]
[Notices]
[Pages 86070-86073]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-25048]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101408; File No. SR-NYSE-2024-65]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
October 23, 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 October 10, 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 modify two 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to modify two 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
October 10, 2024.\3\
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\3\ The Exchange originally filed to amend the Fee Schedule on
October 1, 2024 (SR-NYSE-2024-62). SR-NYSE-2024-62 was subsequently
withdrawn 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
[[Page 86071]]
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 member organizations who submit orders that
provide liquidity on the Exchange in MPL Orders. The proposed fee
change is designed to enhance 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.\10\
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\10\ 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, among others, of
$0.0029 and $0.0030, 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 of at
least 25 million shares and 30 million shares, respectively, excluding
any liquidity added by a Designated Market Maker (``DMM'').
The Exchange proposes to modify these adding tier credits for MPL
Orders, as follows.
First, the Exchange would raise the $0.0029 credit to $0.0030. The
Exchange would also lower the ADV requirement from 25 million shares to
20 million shares. As proposed, the tier would offer a $0.0030 credit
for member organizations that have an Adding ADV in MPL Orders of 20
million shares, excluding any liquidity added by a DMM.
Second, the Exchange would raise the other tiered credit of $0.0030
to $0.0031. The Exchange would also lower the ADV requirement from 30
million shares to 25 million shares. As proposed, this tier would offer
a $0.0031 credit for member organizations that have an Adding ADV in
MPL Orders of at least 25 million shares, excluding any liquidity added
by a DMM.
In both instances, the Exchange believes that modifying the amount
of the credit and the minimum share requirement would incentivize
member organizations to trade on the Exchange in MPL Orders.
Specifically, the Exchange believes that increasing the credits and
lowering volume requirements would enable more member organizations
with high volumes of Adding ADV in MPL Orders to qualify for the
respective tiers, especially in high volume months.
The purpose of the proposed change is to provide additional
incentives for member organizations to qualify for higher credits for
MPL Orders that add liquidity to the Exchange by lowering the minimum
volume requirement. The Exchange believes that the proposal would
thereby 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 these 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 modifications to two of the Adding Tiers for MPL
Orders are reasonable because they provide additional incentives for
member organizations to qualify for higher credits for adding liquidity
in MPL Orders by lowering the minimum volume requirement, thereby
[[Page 86072]]
encouraging the submission of additional liquidity to a national
securities exchange. As noted, the Exchange believes that the proposed
enhancements 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 benefit
from the greater amounts of liquidity that will be present on the
Exchange, which provides greater execution opportunities.
The Proposal Is an Equitable Allocation of Fees
The Exchange believes the proposal 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 higher credits
correlated to lower 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 credits. 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 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 credits 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.
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
Pursuant to Section 19(b)(3)(A)(ii) of the Act,\17\ and Rule 19b-
4(f)(2) thereunder \18\ the Exchange has designated this proposal as
establishing or changing a due, fee, or other charge imposed on any
person, whether or not the person is a member of the self-regulatory
organization, which renders the proposed rule change effective upon
filing. 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)(ii).
\18\ 17 CFR 240.19b-4.
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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#5e2c2b323b733d3133333b302a2d1e2d3b3d70393128"><span class="__cf_email__" data-cfemail="ed9f988188c08e8280808883999ead9e888ec38a829b">[email protected]</span></a>. Please include
file number SR-NYSE-2024-65 on the subject line.
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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-2024-65. 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-2024-65, and should be
submitted on or before November 19, 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. 2024-25048 Filed 10-28-24; 8:45 am]
BILLING CODE 8011-01-P
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