Notice2025-15627
Self-Regulatory Organizations: Long-Term Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Liquidity Incentive Program
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Published
August 18, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 157 (Monday, August 18, 2025)</title>
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[Federal Register Volume 90, Number 157 (Monday, August 18, 2025)]
[Notices]
[Pages 40090-40092]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-15627]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103700; File No. SR-LTSE-2025-18]
Self-Regulatory Organizations: Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Liquidity Incentive Program
August 13, 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 August 11, 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 Liquidity
Incentive Program (``LTSE LIP'' or ``Program'') which is designed,
among other things, to enhance market quality by incentivizing market
participants to provide liquidity in LIP Enhanced Securities. The
Exchange proposes to implement the changes to the fee schedule pursuant
to this proposal on August 11, 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
On July 1, 2025, the Exchange implemented the LTSE LIP to enhance
liquidity and improve market quality in LIP Enhanced Securities \3\
traded on the Exchange by incentivizing Members to quote at or better
than 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.\4\ \5\
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\3\ LIP Enhanced Securities means a list of securities
designated as such, that are used for the purposes of qualifying for
the incentives within the LIP. The universe of these securities will
be determined by the Exchange and published on the Exchange's
website. See Definitions Section of the Fee Schedule.
\4\ LIP Standard Securities means a security not defined as a
``LIP Enhanced Security'' and traded on LTSE. See Definitions
Section of the Fee Schedule.
\5\ See Securities Exchange Release No. 34-103517 (July 22,
2025), 90 FR 35325 (July 25, 2025) (SR-LTSE-2025-16). The Program
includes three key incentives: (1) a proportional share of 80% of
LTSE's SIP Quote Revenue for 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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Currently, the eligibility threshold for Incentive #1 requires a
Member to display a quote in a LIP Enhanced Security of a Minimum
Quoted Size, for at least 60% of the time at the NBBO of the Regular
Market Session \6\ in a calendar quarter, in order to share in SIP
Quote Revenue,\7\ which is distributed proportionally among eligible
Members based on quoting activity.
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\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\ 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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The Exchange now proposes to amend Incentive #1 of the LTSE LIP to
reduce the quoting threshold in a LIP Enhanced Security from 60% to 30%
of the time at the NBBO of the Regular Market Session for the months of
August and September in the current quarter and going forward for
qualifying Members. This intraquarter adjustment is designed to address
observed challenges with the initial quoting requirement and to
encourage greater participation in LIP Enhanced Securities.\8\
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\8\ The Exchange notes that no Member qualified for the 60%
quoting threshold in July 2025.
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This adjustment is designed to account for the fact that the
original quoting threshold of 60% will not apply uniformly across the
quarter, as the Exchange is proposing to reduce the threshold to 30%
for the months of August and September 2025. Therefore, LTSE will share
a share of 80% of July's LTSE SIP Quote Revenue for that LIP Enhanced
Security, distributed proportionally with firms who quoted at the NBBO
at least 60% of the time for the month of July. For the months of
August and September 2005, LTSE will share 80% of the combined August
and September LTSE SIP Quote Revenue for that LIP Enhanced Security
with firms who quoted at the NBBO at least 30% of the time across
August and September. By allowing Members to qualify based on a reduced
quoting performance in August and September, the Exchange seeks to make
this intra-quarter adjustment from 60% to 30% to encourage greater
participation in LIP Enhanced Securities as soon as possible and
provide the opportunity to share in SIP Quote Revenue, which is
distributed proportionally among eligible Members based on quoting
activity.'' The Exchange notes that it is not proposing any changes to
the SIP Quote Revenue distribution, which will continue to occur at the
end of each calendar quarter.
This approach continues to promote consistent quoting behavior
while also
[[Page 40091]]
reflecting the intra-quarter change. The Exchange believes that the
reduction from 60% to 30% provides a fair and reasonable opportunity
for Members to participate in the Program and aligns with the
Exchange's broader goal of enhancing liquidity and market quality in
LIP Enhanced Securities.
The Exchange notes that this proposal is limited in scope and that
Incentives #2 and #3 are unchanged and remain in full force and effect
as implemented on July 1, 2025.
This modification is intended to enhance market quality by
encouraging Members to contribute to displayed liquidity and tighter
spreads in LIP Enhanced Securities. By lowering the barrier to entry
mid-quarter, the Exchange aims to increase quoting activity during the
remainder of the quarter, allowing firms that did not initially meet
the 60% threshold to participate meaningfully in the Program.
The Exchange believes this targeted adjustment will improve overall
effectiveness of the Program while preserving the integrity and design
of Incentives #2 and #3, which continues to operate as originally
adopted.
The Exchange is proposing to amend Incentive #1 by reducing the
quoting threshold from 60% to 30% thereby allowing more Members to
qualify for SIP revenue based on quoting activity at the NBBO in LIP
Enhanced Securities. Through the amendments to Incentive #1 of the
Program, the Exchange seeks to provide improved liquidity for all
market participants through narrower bid-ask spreads and increased
depth of liquidity in LIP Enhanced Securities.
(b) Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Section
6(b)(4) of the Act,\10\ in particular, in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
all of its Members and issuers and other persons using its facilities;
Section 6(b)(5) of the Act,\11\ which requires, among other things,
that the rules of the Exchange be designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
to protect investors and the public interest. The Exchange also
believes that the proposed rule change is reasonable, fair and
equitable, and non-discriminatory.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C.78f(b)(4).
\11\ 15 U.S.C.78f(b)(5).
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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 that the proposed reduction in the quoting
threshold for Incentive #1 of the Program from 60% to 30% for the
months of August and September 2025, and on a prospective basis,
thereafter, is reasonable and appropriate in light of observed
participation levels and market conditions. The reduced threshold is
intended to lower barriers to entry and encourage broader participation
among Members, particularly those who may have been unable to meet the
more stringent 60% threshold in the first month of the quarter.
To further align with this mid-quarter adjustment, the Exchange
also proposes to modify the qualification methodology for the third
quarter of 2025. For the month of July, LTSE will share 80% of July's
LTSE SIP Quote Revenue for that LIP Enhanced Security, distributed
proportionally with firms who quoted at the NBBO at least 60% of the
time. Then for the months of August and September 2005, LTSE will share
80% of the combined August and September LTSE SIP Quote Revenue for
that LIP Enhanced Security with firms who quoted at the NBBO at least
30% of the time across August and September. This approach provides
flexibility to Members who may not have qualified under the July
threshold but who can meet the revised standard in August and
September. The Exchange believes that this change promotes fairness and
program integrity while continuing to reward sustained quoting activity
that improves market quality.
The Exchange believes these amendments are consistent with Section
6(b)(5) of the Act because they are designed to promote just and
equitable principles of trade and perfect the mechanism of a free and
open market by incentivizing quoting behavior that supports tighter
spreads, deeper displayed liquidity and improved price discovery in LIP
Enhanced Securities. The proposed changes also maintain the original
goals of the Program-encouraging continuous quoting at the NBBO-while
adapting to early experience and Member behavior under the initial
threshold.
Importantly, the proposed program is limited in scope to Incentive
#1. Incentives #2 and #3 remain unchanged and in full force and effect
as implemented on July 1, 2025, preserving the continuity of the
Program's broader incentive structure. These components continue to
support market quality and competition without modification.
In addition, as discussed above, the Exchange operates in a highly
competitive environment, and its transaction pricing, including
incentive programs, such as the LTSE LIP, is constrained by competition
among exchanges and alternative trading systems. The proposed changes
are designed to make the Program more accessible and effective, thereby
attracting greater quoting interest and enhancing overall market
quality.
The Exchange also believes that the amendments to the Eligibility
Requirement, reducing the percentage of time that market participants
must quote at the NBBO of the Regular Market Session in a calendar
quarter for Incentive #1, and 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 amendments to the eligibility
requirement for Incentive #1 described herein are appropriate to
address such forces.
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
[[Page 40092]]
efficient pricing of individual stocks for all types of orders, large
and small.'' \12\
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\12\ 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 \13\ and
paragraph (f)(2) of Rule 19b-4 thereunder.\14\ Accordingly, the
proposed rule change would take effect upon filing with the Commission.
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 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="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#2f5d5a434a024c4042424a415b5c6f5c4a4c01484059"><span class="__cf_email__" data-cfemail="651710090048060a0808000b1116251600064b020a13">[email protected]</span></a>. Please include
File Number SR-LTSE-2025-18 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-2025-18. 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 filing 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-2025-18
and should be submitted on or before September 8, 2025.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-15627 Filed 8-15-25; 8:45 am]
BILLING CODE 8011-01-P
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