Notice2025-14026
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend LTSE Fee Schedule To Adopt a Liquidity Incentive Program
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
July 25, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 141 (Friday, July 25, 2025)</title>
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[Federal Register Volume 90, Number 141 (Friday, July 25, 2025)]
[Notices]
[Pages 35325-35331]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14026]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103517; File No. SR-LTSE-2025-16]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend LTSE Fee Schedule To Adopt a Liquidity Incentive Program
July 22, 2025.
Pursuant to the provisions of Section 19(b)(1) under the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on July 10, 2025, Long-Term Stock Exchange, Inc.
(``LTSE'' 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\ 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 is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the LTSE Fee Schedule
to adopt a Liquidity Incentive Program (``LTSE LIP'' or ``Program'')
designed to enhance market quality by incentivizing market participants
to provide liquidity and encourage executions in both LIP Enhanced
Securities and LIP Standard Securities. The Exchange proposes to
implement the changes to the fee schedule pursuant to this proposal on
July 10, 2025.
The text of the proposed rule change is available at the Exchange's
website at <a href="https://longtermstockexchange.com/">https://longtermstockexchange.com/</a>, and at the principal
office of the Exchange.
II. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange 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 these statements may be examined at the places specified in
Item IV below. The self-regulatory organization has prepared summaries,
set forth in Sections A, B, and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Fee Schedule to adopt a Program designed to enhance liquidity and
improve market quality in securities traded on the Exchange by
incentivizing Members to quote at the National Best Bid and Offer
(``NBBO'') and provide liquidity in both select securities, the ``LIP
Enhanced Securities'' and more generally in all other securities traded
on LTSE, the ``LIP Standard Securities.'' The Program includes three
key incentives: (1) a proportional share of 80% of LTSE's SIP Quote
Revenue \3\ for
[[Page 35326]]
LIP Enhanced Securities, distributed among qualifying Members based on
quoting activity; (2) reduced taker fees for LIP Enhanced Securities,
available to all Members without quoting obligations; and (3) for LIP
Standard Securities, a choice between a proportional share of 20% of
LTSE's SIP Quote Revenue or a quarterly credit, contingent on meeting
specific quoting thresholds.
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\3\ The Securities Information Processors (``SIPs''), which
include the Unlisted Trading Privileges and Consolidated Tape
Association, collect fees from subscribers for trade and quote tape
data received from trading centers and reporting facilities, such as
the Exchange (collectively, ``SIP Participants''). After deducting
the cost of operating each tape, the profits are allocated among the
SIP Participants on a quarterly basis, according to a complex set of
calculations that consider estimates of anticipated Market Data
Revenue (``MDR''), adjustments to comport to actual MDR from
previous quarters and a non-linear aggregation of total trading and
quoting activity in Tape A, B and C securities in attributing MDR to
each SIP Participant. Based on these calculations, the SIPs provide
MDR payments to each SIP Participant during the second month of each
quarter for trade and quote data from the previous calendar quarter,
which are subject to adjustment through subsequent quarterly
payments. These payments can be divided into six pools (i.e., trade
and quote activity in Tape A, B, and C securities).
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Background
The Program is designed to incentivize the posting of quotes that
join or establish a new National Best Bid or Offer (NBBO) through
incentive payments. LTSE applies several objective factors concerning
each security's trading characteristics and generally designates the
securities that meet certain thresholds with respect to these factors
to be LIP Enhanced Securities, while all remaining securities traded on
the Exchange will be designated as LIP Standard Securities. These
factors include average spread, daily turnover, market cap, volatility,
share price, public float, % held by active investors, and average
daily volume traded.\4\
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\4\ The Exchange has discussed with Commission staff the
thresholds it intends to apply to these objective factors.
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LTSE uses the above factors to assess which securities are suitable
for inclusion in the list of LIP Enhanced Securities, with a goal of
identifying securities in which increased quoting at the NBBO would be
impactful to both LTSE and the market, but not unduly burdensome to its
Members in meeting the quoting requirements to qualify for the LTSE
LIP.
LTSE will publish the list of LIP Enhanced Securities on its
website (on the Schedule of Fees), and prior to the start of each
quarter, the Exchange will reevaluate and, as applicable, update its
list of LIP Enhanced Securities. Any updates to the list of LIP
Enhanced Securities will be published on LTSE's Schedule of Fees no
later than one day prior to the start of the quarter (the Exchange will
endeavor to update its LIP Enhanced Securities up to five trading days
before the start of the next quarter). LTSE believes that the
incentives created by the Program are likely to increase quoting in
both the LIP Enhanced Securities and the LIP Standard Securities, as
discussed below, thereby providing improved trading conditions for all
market participants through narrower spreads and increased depth of
liquidity available at the NBBO.
Additionally, the Exchange proposes, as part of the Program, to
reduce take fees for LIP Enhanced Securities from 30 mils to 20 mils,
in an effort to further incentivize order takers to engage with quoting
activity under the LTSE LIP. This adjustment is expected to drive
greater order flow, contributing to a more robust and dynamic market.
Lastly, the Exchange proposes, as part of the Program, to
incentivize quoting in LIP Standard Securities by offering two benefits
to Members who (i) qualify for Incentive #1, as defined below, in at
least 50 Enhanced Securities (i.e., 50 unique symbols designated as LIP
Enhanced Securities) and (ii) maintain NBBO quoting in a LIP Standard
Security for at least 25% of the Regular Market Session. Qualifying
Members may elect either: (1) a proportional share of the Exchange's
SIP Quote Revenue attributable to that LIP Standard Security; or (2) a
quarterly credit of $75 per LIP Standard Security per Market
Participant ID (MPID).
As discussed above and detailed below, the LTSE LIP is composed of
three (3) incentives.
Incentive #1
The first incentive is designed to encourage Members to improve
market quality by quoting at the NBBO \5\ for at least 60% of the
Regular Market Session \6\ on the Exchange and at a Minimum Quoted
Size,\7\ in certain specific securities, referred to by the Exchange as
LIP Enhanced Securities, in a calendar quarter. Members who qualify for
this incentive will receive a proportional share of 80% of LTSE's SIP
Quote Revenue for that LIP Enhanced Security.\8\ The list of LIP
Enhanced Securities and the associated Minimum Quoted Size will be
published on the Exchange's website and updated no more than quarterly.
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\5\ With respect to the trading of equity securities, the term
``NBB'' shall mean the national best bid, the term ``NBO'' shall
mean the national best offer, and the term ``NBBO'' shall mean the
national best bid and offer. See Exchange Rule 1.160(y).
\6\ Regular Market Session or Regular Market Hours means the
time between 9:30 a.m. and 4:00 p.m. Eastern Time. See Exchange Rule
1.160(kk).
\7\ Minimum Quoted Size will be calculated using a combination
of Average Daily Volume (``ADV'') and share price for each LIP
Enhanced Security and published quarterly on the Exchange's website.
\8\ The Exchange notes that it will aggregate each Member's
MPIDs and view quotes by Member Firm to determine the number of
securities in which the Member meets the quoting requirements for
that day.
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Incentive #2
The second incentive provides all Members the benefit of reduced
taker fees (from 30 mils to 20 mils) when trading LIP Enhanced
Securities, with no quoting obligation required. The Exchange believes
that reducing take fees in LIP Enhanced Securities will encourage
participation at the NBBO, as discussed above, enhance market
competition and benefit investors by fostering a more efficient and
transparent trading environment. Lower take fees reduce transaction
costs for liquidity takers, encouraging greater order flow and
interaction with displayed liquidity. This, in turn, incentivizes
market participants to compete more aggressively to provide liquidity,
leading to tighter bid-ask spreads, increased depth of book, and
improved price discovery. Additionally, when market makers and
liquidity providers are rewarded for quoting at the NBBO, alongside
reduced costs for liquidity takers, it strengthens overall market
quality by promoting fair and efficient execution. Investors--
particularly retail traders and institutional participants--benefit
from more competitive pricing, lower execution costs, and reduced
market impact, aligning with the broader goal of fostering a robust and
competitive exchange ecosystem.
Incentive #3
Lastly, the Exchange is seeking to incentivize quoting in LIP
Standard Securities by offering Members that qualify for Incentive #1
in at least 50 of the LIP Enhanced Securities (i.e., 50 unique symbols
designated as LIP Enhanced Securities) and are quoting at the NBBO in
at least one round lot for at least 25% of the Regular Market Session
in a LIP Standard Security to choose between: a proportional share of
20% of LTSE's SIP Quote Revenue for that LIP Standard Security; or a
quarterly credit of $75 per LIP Standard Security per Market
Participant ID (MPID).\9\
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\9\ See NYSE American Equities Price List for a similarly
structured pricing incentive. <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-american/NYSE_America_Equities_Price_List.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse-american/NYSE_America_Equities_Price_List.pdf</a> (The
proposed LIP fee structure is comparable to the NYSE American equity
fee schedule, which also employs quote-based transaction credits--
incentivizing eDMMs or LMMs to quote at the NBBO through tiered
monthly rebates--demonstrating a similar performance-based approach
to enhancing displayed liquidity.)
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Determining LTSE LIP Eligibility and Proportionate SIP Revenue
Share:
<bullet> Incentive #1:
[[Page 35327]]
[cir] Step 1: On a daily basis, identify all eligible quotes per
Member in each LIP Enhanced Security. Eligible bids (offers) are
displayed (or represent the displayed portion of a reserve order),
priced at or better than the NBB (NBO), and have a quoted size at or
better than the Minimum Quoted Size, as follows:
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\10\ To facilitate a smooth implementation and allow Members
adequate time to adapt their quoting behavior, the Exchange proposes
to temporarily set the LIP Enhanced Security Minimum Quoted Size at
a round lot across all LIP Enhanced Securities during the first
calendar quarter of the Program's roll-out. This phased approach is
intended to reduce operational complexity and promote Member
participation in the early stages of the Program. The Exchange
believes that this temporary threshold will encourage quoting
activity without imposing undue burdens during the initial launch,
thereby supporting the LIP's goal of improving market quality in a
broad set of securities. The Exchange anticipates restoring the
graduated minimum size thresholds, as set forth in the chart above,
in the LIP's second quarter, i.e., October 1, 2025. Consistent with
the LIP's design, the Exchange will publish the updated thresholds
for each LIP Enhanced Security on its website in advance of the
second quarter.
LIP Enhanced Security Minimum Quoted Size \10\
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Share price
Average daily share volume ---------------------------------------------------------------
<$5 $5-14.99 $15-49.99 $50+
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<5,000.......................................... 700 400 300 200
5,000-24,999.................................... 700 400 300 200
25,000-74,999................................... 700 400 300 200
75,000-199,999.................................. 700 400 300 200
200,000-499,999................................. 700 400 300 200
500,000+........................................ 2,000 1,000 500 300
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[cir] Step 2: Calculate the % time at the NBBO as follows:
[ssquf] Step 2A: Calculate the % time at the NBB: Numerator = Total
number of seconds that eligible bids were priced at or better than the
NBB. Denominator = Total number of seconds in a trading day (23,400)
[ssquf] Step 2B: Calculate the % time at the NBO: Numerator = Total
number of seconds that eligible offers were priced at or better than
the NBO. Denominator = Total number of seconds in a trading day
(23.400)
[ssquf] Step 2C: Calculate the average % time at the NBBO: Sum the
results of Step 2A and 2B and divide by two. This represents the daily
% Time at NBBO.
[ssquf] Step 2D: Average each daily % Time at NBBO across the
number of trading days in a calendar quarter. If this average is at or
above 60%, the firm qualifies for Incentive #1 SIP Quote Revenue
Sharing in that LIP Enhanced Security.
[cir] Step 3: On a quarterly basis, proportionally allocate SIP
Quote revenue to each qualifying firm.
[ssquf] Step 3A: Per LIP Enhanced Security, calculate attributable
Quote Credits per Member for each of their eligible quotes across a
calendar quarter. The Quote Credit associated with an individual
eligible quote is the product of three factors: Duration at NBBO,
Quoted Price, and Quoted Size. Quote Credits will be summed per firm.
[ssquf] Step 3B: Per LIP Enhanced Security, calculate the Quote
Credit Share for each qualifying firm: Numerator = the results of Step
3A. Denominator = Total Quote Credits across all Firms (includes quote
credits for qualifying and non-qualifying firms).
[ssquf] Step 3C: Identify shareable SIP Quote Revenue per LIP
Enhanced Security. The Exchange will multiply its SIP Quote Revenue per
LIP Enhanced Security (as provided by the SIP Processors on a quarterly
basis) by 80%.
[ssquf] Step 3D: Calculate the proportionate SIP Quote Revenue per
qualifying firm. Multiply the results of Steps 3B and 3C. For example,
if Firm A's Quote Credit Share is 30% and LTSE earns $100 in SIP Quote
Revenue in symbol ABC, Firm A will receive $24 ($100 * 80% * 30%) for
symbol ABC for Incentive #1.
<bullet> Incentive #3:
[cir] Step 1: Determine which firms qualified for Incentive #1 in
at least 50 of the LIP Enhanced Securities (i.e., 50 unique symbols
designated as LIP Enhanced Securities) in the current or previous
calendar quarter. Only these firms move on to Step 2.
[cir] Step 2: Per LIP Standard Security, per MPID belonging to a
qualifying firm, calculate the % Time at NBBO, in the same manner as in
Incentive #1 Step 2. If this calculation is at or above 25%, that MPID
qualifies for Incentive #3 in that LIP Standard Security.
[cir] Step #3: Qualifying firms will notify LTSE of their incentive
selection, per LIP Standard Security, before the end of the calendar
quarter. For qualifying firms who choose the Quote Sharing option under
Incentive #3, calculate the firm's Quote Revenue Share per LIP Standard
Security in the same manner as in Incentive #1 Step 3 (except the
Exchange will share 20% rather than 80% of its SIP Quote Revenue under
Incentive #3). For qualifying firms who choose the Quarterly Credit
option under Incentive #3, calculate the firm's quarterly credit as the
product of: number of qualifying MPIDs and the Quarterly Credit ($75).
For the purposes of determining qualification for the LTSE LIP, the
Exchange will exclude: (1) Any trading day that the Exchange's system
experiences a disruption that lasts for more than 60 minutes during
Regular Market Hours; (2) any day with a scheduled early market close;
(3) the ``Russell Reconstitution Day'' (typically the last Friday in
June). As further detail regarding such proposed exclusions, an
Exchange system disruption may occur, for example, where a certain
group of securities traded on the Exchange is unavailable for trading
due to an Exchange system issue. The Exchange believes that these types
of Exchange system disruptions could preclude Members from
participating on the Exchange to the extent that they might have
otherwise participated on such days, and thus, the Exchange believes it
is appropriate to exclude such days when determining whether a Member
meets the applicable quoting requirements during a quarter to avoid
penalizing Members that might otherwise have met such requirements.
Additionally, the Exchange believes that scheduled early market
closures, which typically are the day before, or the day after, a
holiday, may preclude some Members from participating on the Exchange
at the same level that they might otherwise. For similar reasons, the
Exchange believes it is appropriate to exclude the Russell
Reconstitution Day in the same manner, as the Exchange believes that
the Russell Reconstitution Day typically has extraordinarily high, and
abnormally distributed, trading volumes and the Exchange believes this
change to normal
[[Page 35328]]
activity may affect a Member's ability to meet the quoting requirement
across various securities on that day. The Exchange notes that the
exclusion of any day during which the Exchange's system experiences a
disruption that lasts for more than 60 minutes during Regular Market
Hours, any day with a scheduled early market close, and the Russell
Reconstitution is consistent with the methodologies used by other
exchanges when calculating certain Member trading and other volume
metrics for purposes of determining whether Members qualify for certain
pricing incentives, and the Exchange believes application of these
methodologies is similarly appropriate for the proposed LTSE LIP.\11\
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\11\ See Miax Pearl's equities trading fee schedule on its
public website (available at: <a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_06062025.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_06062025.pdf</a>; the Cboe BZX
Exchange, Inc. (``Cboe BZX'') equities trading fee schedule on its
public website (available at: <a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a>); the Cboe EDGX Exchange, Inc. (``Cboe
EDGX'') equities trading fee schedule on its public website
(available at: <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edgx/">https://www.cboe.com/us/equities/membership/fee_schedule/edgx/</a>); and the MEMX LLC, (``MEMX'') equities trading
fee schedule on its public website (available at: <a href="https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/">https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/</a>).
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The LTSE LIP will be open to all Members and will not impose any
two-sided quotation obligations on any Member seeking to qualify for
the Program. Accordingly, the LTSE LIP is designed to attract liquidity
from any firm that is willing to provide liquidity at the NBB or NBO in
LIP Enhanced Securities specifically, and LIP Standard Securities, more
generally. The Exchange is proposing to provide Members an opportunity
to earn SIP revenue as a means of recognizing the value of market
participants that consistently enter quoting interest at the NBBO in
LIP Enhanced Securities specifically, and LIP Standard Securities, more
generally. Through the Program, the Exchange seeks to provide improved
liquidity for all market participants through narrower bid-ask spread
and increased depth of liquidity in the LIP Enhanced Securities
specifically, and LIP Standard Securities, more generally.
The Exchange notes that the proposed LTSE LIP is similar to IEX's
Supplemental Market Quality Program, which provides financial
incentives for members entering displayed orders or quotes priced at
the NBBO in certain securities designated by IEX.\12\ Additionally, the
Program is similar to the Enhanced Market Quality Program offered by
Nasdaq BX,\13\ which also pays a fixed sum to Members that quote
exchange-specified securities at the NBBO for at least a minimum
percentage time of the day.\14\ The proposed LTSE LIP is also similar
to the ``Market Quality'' program offered by MIAX PEARL.\15\
Additionally, LTSE's process for selecting LIP Enhanced Securities,
which, as described above, is designed to use objective criteria to
identify securities in which increased quoting would be impactful to
both LTSE and the market is analogous to the manner in which Cboe
EDGA's NBBO Setter Program provides a rebate for quoting in ``illiquid
securities on the Exchange.'' \16\ Finally, the Exchange notes that its
proposed LTSE LIP is also similar to the recently discontinued quote
revenue sharing program of Nasdaq PSX.\17\
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\12\ See Securities Exchange Act Release No. 103131 (May 27,
2025), 90 FR 23397 (June 2, 2025) (SR-IEX-2025-07) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change to Amend IEX's
Fee Schedule to Establish a Supplemental Market Quality Program).
\13\ See Nasdaq BX Equities VII Section 118(g).
\14\ Nasdaq BX's Enhanced Market Quality Program (``EMQP'') sets
different percentage thresholds depending upon if the security is
quoted on Tape A or B (and not Tape C securities). The EMQP also
increases its incentive fees based upon the number of securities
quoted at the NBBO for at least the threshold percentage of market
hours. These differences between the proposed LTSE LIP and the EMQP
reflect different pricing approaches of different exchanges, but the
core functionality of the two programs is substantially similar. Id.
\15\ MIAX PEARL's NBBO Program was implemented beginning
September 1, 2023, and subsequently amended several times. See,
e.g., Securities Exchange Act Release Nos. 98472 (September 21,
2023), 88 FR 66533 (September 27, 2023) (SR-PEARL-2023-45); 99318
(January 11, 2024), 89 FR 3488 (January 18, 2024) (SR-PEARL-2023-
73); 99695 (March 8, 2024), 89 FR 18694 (March 14, 2024) (SR-PEARL-
2024-11). In a subsequent filing, MIAX PEARL stated that the ``list
of MQ Securities is generally based on the top multi-listed symbols
by ADV across all U.S. securities exchanges.'' See Securities
Exchange Act Release No. 101611 (November 13, 2024), 89 FR 91455
(November 19, 2024) (SR-PEARL-2024-50). While MIAX PEARL uses
quoting at the NBBO in the ``Market Quality Securities'' as a means
of qualifying for certain rebate tiers (and not to share quote
revenue to qualifying members like LTSE proposes), the Market
Quality program is like LTSE's proposed Program in that it provides
financial incentives to Members based upon increased quoting in a
subset of securities specified by the exchange.
\16\ See Securities Exchange Act Release No. 102842 (April 11,
2025), 90 FR 16356 (April 17, 2025) (SR-CboeEDGA-2025-009)
(providing a rebate for quoting in approximately 9,700 securities
that are not on an excluded securities list, with the excluded
securities list being a combination of securities included in the
S&P 500 Index, the Nasdaq 100 Index, and ``certain ETPs the Exchange
believes have a high level of liquidity'').
\17\ See Securities Exchange Act Release No. 34-100060 (May 3,
2024), 89 FR 39668 (May 9, 2024) (SR-Phlx-2024-18) (Establishing the
quote revenue sharing program.) (This program implemented a market
data revenue rebate program offering tiered rebates tied to quoting
activity (i.e., providing displayed liquidity at the NBBO), similar
to the program proposed herein, in that both programs use
performance-based incentives tied to quote presence in a defined
universe to bolster liquidity.) Phlx recently filed to terminate the
program stating it no longer provided a growth incentive that
aligned with the Exchange's needs. See Securities Exchange Act
Release No. 34-102844 (April 11, 2025), 90 FR 16226 (April 17, 2025)
(SR-Phlx-2025-19).
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In addition to the foregoing changes, the Exchange proposes to add
a Notes to LTSE LIP section to the Fee Schedule to add definitions of
the terms and other clarifying points. Specifically, the Exchange
proposes to adopt definitions for ``LIP Enhanced Securities,'' ``LIP
Standard Securities'' and ``Percent Time at NBBO,'' that are consistent
with the description of those terms as set forth above, as such terms
are used above describing the calculation methodology and criteria for
determining whether a Member qualifies for quote sharing under the LTSE
LIP that the Exchange is proposing to add to the Fee Schedule, as
described above. Additionally, the Exchange proposes to adopt language
clarifying the following:
<bullet> the Minimum Quoted Size will be calculated for each LIP
Enhanced Security and published quarterly.
<bullet> Incentive #1 and Incentive #3 will be calculated, and
eligibility determined, on a quarterly basis \18\ rather than monthly;
revenue will be shared proportionally based on quoting activity. For
Incentive #3 Members who choose the quarterly credit can apply that
credit in the calendar quarter in which they earned it, or the
subsequent calendar quarter. Members that qualify for Incentive #1 and
Incentive #3 will receive their share of the revenue subsequent to the
Exchange receiving the quote revenue from the SIP.
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\18\ The Exchange proposes to determine eligibility on a
quarterly basis to align with the quarterly distributions to the SIP
Participants, as discussed above.
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<bullet> ``Percent Time at NBBO'' means the average of the
percentage time during the Regular Market Session where a Member has a
displayed quote at the national best bid (``NBB'') or national best
offer (``NBO''). For the avoidance of doubt, only quotes that are at
the NBB or NBO during the Regular Market Session count towards the
Percent Time at NBBO calculation.
<bullet> The Exchange excludes from its calculation of Percent Time
at NBBO: (1) any trading day that the Exchange's system experiences a
disruption that lasts for more than 60 minutes during the Regular
Market Session; (2) any day with a scheduled early market close; and
(3) the ``Russell Reconstitution Day'' (typically the last Friday in
June).
[[Page 35329]]
(b) Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\19\ in general, and furthers the objectives of Section
6(b)(4) of the Act,\20\ in particular, in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
its Members and issuers and other persons using its facilities. The
Exchange also believes that the proposed rule change is reasonable,
fair and equitable, and non-discriminatory.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4).
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The Exchange operates in a highly fragmented and competitive market
in which market participants can readily direct their order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of sixteen registered equities exchanges, and
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order
flow. Based on publicly available information, no single registered
equities exchange currently has more than approximately 15% of the
total market share of executed volume of equities trading.\21\ Thus, in
such a low-concentrated and highly competitive market, no single
equities exchange possesses significant pricing power in the execution
of order flow, and the Exchange currently represents approximately
0.01% of the overall market share. The Commission and the courts have
repeatedly expressed their 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.'' \22\
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\21\ Market share percentage calculated as of March 31, 2025,
with data made available through consolidated data feeds (i.e.,
Consolidated Tape System (CTS) and Unlisted Trading Privilege (UTP)
data feeds).
\22\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37499 (June 29, 2005).
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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
shift order flow or discontinue or reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, and market participants
can readily trade on competing venues if they deem pricing levels at
those other venues to be more favorable. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to incentivize market participants to direct their order flow
to the Exchange, which the Exchange believes would enhance liquidity
and market quality in both a broad manner with respect to LIP Standard
Securities and in a targeted manner with respect to the LIP Enhanced
Securities.
LTSE Liquidity Incentive Program
The Exchange believes that the proposed LTSE Liquidity Incentive
Program is reasonable, equitable, and not unfairly discriminatory under
Section 6(b)(4) and 6(b)(5) of the Exchange Act, notwithstanding that
it provides higher quote-sharing revenue in LIP Enhanced Securities
compared to LIP Standard Securities. The quoting obligations applicable
to LIP Enhanced Securities are more rigorous than those for LIP
Standard Securities, and the enhanced rebates are designed to reflect
the value of market participants that quote consistently at the NBBO
across a broad range of securities with respect to the LIP Enhanced
Securities in particular.
The Commission has consistently permitted exchanges to adopt
differentiated pricing for distinct categories of securities, provided
that the distinctions are based on reasonable, non-arbitrary criteria
and further the purposes of the Act.\23\ For example, IEX's
Supplemental Marker Quality program, Nasdaq's differentiated rebates
for securities in Tapes A, B and C, and the Miax Pearl's pricing for
``MQ Securities,'' reflect the Commission recognition that the fee
differentiation is permissible where it supports market quality goals.
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\23\ The IEX fee schedule provides incentives for posting
displayed orders priced at the NBBO in designated securities ``SQM
Securities.'' See <a href="https://cdn.prod.website-files.com/635ad1b3d188c10deb1ebcba/6838b3379b9403746ebe5860_Fee_Schedule_as_of_June_1_2025%20">https://cdn.prod.website-files.com/635ad1b3d188c10deb1ebcba/6838b3379b9403746ebe5860_Fee_Schedule_as_of_June_1_2025%20</a>(pre%20June
%201)_as%20of%20may%2029.pdf. Nasdaq's fee schedule provides for
differentiated rebates by security type, particularly distinguishing
between Tape A, B and C securities. For example, the schedule
currently provides a rebate structure in which additional rebates
are provided for executions in Tape A and C securities at $0.000075
per share, while rebates for Tape B are lower at $0.00005 per share.
See <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-equity-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-equity-7</a>. Miax Pearl adopted a symbol-specific incentive program
that provides enhanced rebates or reduced fees for trading in
certain ``MQ Securities'' identified on their fee schedule. See
<a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_06062025.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_06062025.pdf</a>.
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Similarly, the Exchange's proposal to allocate greater quote-
sharing revenue to LIP Enhanced Securities is designed to promote
improved quoting and execution quality in those symbols, including by
encouraging liquidity provision and lowering transaction costs for
takers. Differentiating fees and rebates by symbol is not unfairly
discriminatory because participation in the Program is voluntary, the
distinctions are grounded in objective criteria, and the Program is
calibrated to promote the statutory goals of fair and orderly markets
and the protection of investors.
The Program is intended to encourage Members to promote price
discovery and market quality by quoting at the NBBO for a significant
portion of each day in a large number of securities generally, and in
LIP Enhanced Securities in particular, thereby benefiting the Exchange
and other investors by providing improved trading conditions for all
market participants through narrower bid-ask spreads and increasing the
depth of liquidity available at the NBBO in a broad base of securities,
including the LIP Enhanced Securities. Additionally, the Exchange
believes that by offering incentives in LIP Standard Securities for
Members that meet specific quoting minimums in LIP Enhanced Securities,
will incentivize Members to quote at the NBBO in a more generalized
manner to receive the additional incentives for quoting in LIP Standard
Securities. Thus, the Exchange believes that the proposed Program will
promote price discovery and market quality in LIP Enhanced Securities
and more generally on the Exchange, and, further, that the resulting
tightened spreads and increased displayed liquidity will benefit all
investors by deepening the Exchange's liquidity pool, supporting the
quality of price discovery, enhancing quoting competition across all
exchanges, and promoting market transparency.
The Exchange further believes that the proposed criteria for LIP
Enhanced Securities and LIP Standard Securities, and the associated
rebate for each is reasonable, in that the proposed criteria for LIP
Enhanced Securities is more difficult to achieve than that of LIP
Standard Securities, and thus qualifying for the quote revenue in LIP
Enhanced Securities appropriately offers a higher share of quote
revenue commensurate with the corresponding higher quoting threshold.
Therefore, the Exchange
[[Page 35330]]
believes that the Program, as proposed, is consistent with an equitable
allocation of fees and rebates, as the more stringent criteria
correlates with the corresponding higher quote revenue.
Additionally, LTSE believes that the manner in which it selects
securities for inclusion in the LIP Enhanced list is consistent with
the Act because it is reasonable, equitable, and not unfairly
discriminatory (to customers, issuers, brokers or dealers). As
discussed in the Purpose section, LTSE designates securities to be LIP
Enhanced Securities by applying several objective factors concerning
each security's trading characteristics and designating the securities
that meet certain thresholds with respect to these factors to be LIP
Enhanced Securities. These factors are designed to identify securities
in which increased quoting would be impactful to both LTSE and the
market, but not unduly burdensome to its Members in meeting the quoting
requirements to qualify for the Program. Because the process of
selecting LIP Enhanced Securities is designed to use objective criteria
to create a list of securities for which inclusion in the Program could
meaningfully increase liquidity (increasing price improvement
opportunities for those securities), it is consistent with the goals of
the Act to remove impediments to and perfect the mechanism of a free
and open market.
In addition, the Exchange believes that it is reasonable and
consistent with an equitable allocation of fees to lower the take fee
for executions in LIP Enhanced Securities because this will encourage
participation at the NBBO, thereby enhancing market competition and
benefiting investors by fostering a more efficient and transparent
trading environment. This trading activity benefits all investors by
promoting price discovery and increasing the depth of liquidity
available at the NBBO and benefits the Exchange itself by enhancing its
competitiveness as a market center that attracts actionable orders.
Further, the Exchange notes that the proposed Program is offered
uniformly to all Members, and any Member may choose to qualify for
quote sharing by meeting the associated requirements in any quarter,
and the lower take fee in LIP Enhanced Securities regardless of the
volume of transactions that it executes on the Exchange. Additionally,
the Exchange notes that Members that do not meet the proposed
eligibility requirements may still benefit from the lower take fee in
LIP Enhanced Securities. Accordingly, the Exchange believes that it is
consistent with an equitable allocation of fees and is not unfairly
discriminatory to offer a higher share of quote revenue for LIP
Enhanced Securities, as Members are required to meet a more stringent
threshold than with respect to LIP Standard Securities, and both are
eligible for some amount of quote revenue and such incentives are
designed to benefit the Exchange and market participants by enhancing
market quality.
Furthermore, as noted above, the proposed Program is similar in
structure and purpose to pricing programs in place at other exchanges
that are designed to enhance market quality.\24\ Specifically, these
programs, like the proposed LTSE LIP, provide a higher rebate for
executions of liquidity-adding displayed orders for members that
achieve minimum quoting standards, including minimum quoting at the
NBBO in a large number of securities generally, or certain designated
securities in particular.\25\ The Exchange also notes that the proposed
LTSE LIP is not dissimilar from volume-based rebates and fees which
have been widely adopted by exchanges \26\ and are equitable and not
unfairly discriminatory because they are generally open to all members
on an equal basis and provide higher rebates and/or lower fees that are
reasonably related to the value of an exchange's market quality. Much
like volume-based tiers are designed to incentivize higher levels of
liquidity provision, the proposed LTSE LIP is designed to incentivize
enhanced market quality on the Exchange through tighter spreads,
greater size at the NBBO, and greater quoting depth in a large number
of securities generally, and in LIP Enhanced Securities specifically,
through the provision a greater proportional share of the SIP revenue
which will in turn incentivize higher levels of displayed liquidity in
a general manner. Accordingly, the Exchange believes that the proposed
LTSE LIP would act to enhance liquidity and competition across
exchanges in LIP Enhanced Securities specifically and enhance liquidity
provision in all securities on the Exchange more generally by providing
quote revenue for quoting in LIP Standard Securities which is
reasonably related to such enhanced market quality to the benefit of
all investors, thereby promoting the principles discussed in Sections
6(b)(4) and 6(b)(5) of the Act.\27\
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\24\ See supra notes 9, 11, 12, 13, 15 17 and 18.
\25\ Id.
\26\ See, e.g., the Cboe BZX equities trading fee schedule on
its public website (available at <a href="https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/">https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/</a>); the Cboe EDGX equities
trading fee schedule on its public website (available at <a href="https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/">https://markets.cboe.com/us/equities/membership/fee_schedule/edgx/</a>); and the
MEMX equities trading fee schedule on its public website (available
at <a href="https://info.memxtrading.com/fee-schedule/">https://info.memxtrading.com/fee-schedule/</a>).
\27\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange also believes that the calculation methodology and
criteria for determining whether a Member satisfies the requirements to
qualify for the Program, as well as the definitions of terms that are
used, is reasonable, equitable, and non-discriminatory because the
definitions are designed to ensure that the Fee Schedule is clear and
as easily understandable as possible with respect to the requirements
of the proposed Program. Additionally, the Exchange believes that
excluding (1) any trading day that the Exchange's system experiences a
disruption that lasts for more than 60 minutes during Regular Trading
Hours; (2) any day with a scheduled early market close; and (3) the
Russell Reconstitution Day, when determining whether a Member qualifies
for a proposed Program during a quarter is reasonable, equitable, and
non-discriminatory because, as explained above, the Exchange believes
doing so would help to avoid penalizing Members that might otherwise
have met the requirements to qualify for a proposed Program due to
Exchange system disruptions, abbreviated trading days, and/or abnormal
market conditions. For similar reasons, the Exchange believes it is
appropriate to exclude the Russell Reconstitution Day, as the Exchange
believes the change to normal trading activity as a result of the
Russell Reconstitution may affect a Member's ability to meet the
quoting requirement across various securities on that day. The Exchange
notes that its proposed calculation methodology is consistent with the
methodologies used by other exchanges when calculating certain member
trading and other volume metrics for purposes of determining whether
members qualify for certain pricing incentives.\28\ For the reasons
discussed above, the Exchange submits that the proposal satisfies the
requirements of Sections 6(b)(4) and 6(b)(5) of the Act in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among its Members and other persons using its facilities
and is not designed to unfairly discriminate between customers,
issuers, brokers, or dealers. As described more fully below in the
Exchange's statement regarding the burden on competition, the Exchange
believes that its transaction pricing is subject to significant
competitive forces, and that the proposed fees and rebates described
[[Page 35331]]
herein are appropriate to address such forces.
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\28\ See supra note 25.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act. Instead, as discussed above, the proposal
is intended to enhance market quality on the Exchange in a large number
of securities generally, and in the LIP Enhanced Securities
specifically, and to encourage Members to increase their order flow on
the Exchange, thereby promoting price discovery and contributing to a
deeper and more liquid market to the benefit of all market
participants. As a result, the Exchange believes the proposal would
enhance its competitiveness as a market that attracts actionable
orders, thereby making it a more desirable destination venue for its
customers. For these reasons, the Exchange believes that the proposal
furthers the Commission's goal in efficient pricing of individual
stocks for all types of orders, large and small.'' \29\
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\29\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 47396 (June 29, 2005).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
This proposed rule change establishes dues, fees or other charges
among its members and, as such, may take effect upon filing with the
Commission pursuant to Section 19(b)(3)(A)(ii) of the Act \30\ and
paragraph (f)(2) of Rule 19b-4 thereunder.\31\ Accordingly, the
proposed rule change would take effect upon filing with the Commission.
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\30\ 15 U.S.C. 78s(b)(3)(A)(ii).
\31\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend the rule
change if it appears to the Commission that the action is necessary or
appropriate in the public interest, for the protection of investors, or
would otherwise further the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5b292e373e76383436363e352f281b283e38753c342d"><span class="__cf_email__" data-cfemail="0d7f786168206e6260606863797e4d7e686e236a627b">[email protected]</span></a>. Please include
File Number SR-LTSE-2025-16 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-LTSE-2025-16. 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="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the filing also will be available for inspection and copying
at the principal office of LTSE and on its internet website at <a href="https://longtermstockexchange.com/">https://longtermstockexchange.com/</a>.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-LTSE-2025-16
and should be submitted on or before August 15, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14026 Filed 7-24-25; 8:45 am]
BILLING CODE 8011-01-P
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