[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Notices]
[Pages 41636-41638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15072]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78108; File No. SR-NYSE-2016-42]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List To Adopt a Fee Waiver and a Fee Cap Related to the 
Liquidity Provider Incentive Program on the NYSE Bonds\SM\ System

June 21, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on June 7,

[[Page 41637]]

2016, New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Price List to adopt a fee waiver 
and a fee cap related to the Liquidity Provider Incentive Program on 
the NYSE Bonds\SM\ system. The proposed rule change is available on the 
Exchange's Web site at www.nyse.com, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Price List to adopt a fee waiver 
and a fee cap related to the Liquidity Provider Incentive Program on 
the NYSE Bonds system recently implemented by the Exchange.\4\ Pursuant 
to the Liquidity Provider Incentive Program, a voluntary rebate 
program, the Exchange pays Users \5\ of NYSE Bonds a monthly rebate 
provided Users who opt into the rebate program meet specified quoting 
requirements. Under the program, the rebate payable is based on the 
number of CUSIPs \6\ a User quotes. The rebate amount is tiered based 
on the number of CUSIPs quoted by a User, as follows:
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    \4\ See Securities Exchange Act Release Nos. 77591 (April 12, 
2016), 81 FR 22656 (April 18, 2016) (SR-NYSE-2016-26); and 77812 
(May 11, 2016), 81 FR 30594 (May 17, 2016) (Sr-NYSE-2016-34).
    \5\ Rule 86(b)(2)(M) [sic] defines a User as any Member or 
Member Organization, Sponsored Participant, or Authorized Trader 
that is authorized to access NYSE Bonds.
    \6\ CUSIP stands for Committee on Uniform Securities 
Identification Procedures. A CUSIP number identifies most financial 
instruments, including: stocks of all registered U.S. and Canadian 
companies, commercial paper, and U.S. government and municipal 
bonds. The CUSIP system--owned by the American Bankers Association 
and managed by Standard & Poor's--facilitates the clearance and 
settlement process of securities. See http://www.sec.gov/answers/cusip.htm.

                  Liquidity Provider Incentive Program
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                    Number of CUSIPs                      Monthly rebate
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400-599.................................................         $10,000
600-799.................................................          20,000
800 or more.............................................          30,000
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    To qualify for a rebate, a User is required to provide continuous 
two-sided quotes for at least eighty percent (80%) of the time during 
the Core Bond Trading Session for an entire calendar month.\7\ The 
Exchange calculates each participating User's quoting performance 
beginning each month on a daily basis, up to and including the last 
trading day of a calendar month, to determine at the end of each month 
each User's monthly average. Under the program, Users must provide a 
two-sided quote for a minimum of hundred (100) bonds per side of the 
market with an average spread of half-point ($0.50) or less in CUSIPs 
whose average maturity is at least five (5) years as of the date the 
User provides a quote. In order for a CUSIP to qualify for inclusion in 
the rebate calculation, a User must provide continuous two-sided quotes 
in a CUSIP, whether it's for eighty percent (80%) or fifty percent 
(50%) of the time, as applicable, for a minimum of hundred (100) bonds 
per side of the market that has an average spread of half-point ($0.50) 
or less and whose average maturity is at least five (5) years as of the 
date the User provides the quote.
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    \7\ For the first calendar month after a User opts in, the User 
is required to provide continuous two-sided quotes for fifty percent 
(50%) of the time during the Core Bond Trading Session.
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    Users that opt in to the Liquidity Provider Incentive Program are 
subject to a transaction fee for orders that provide liquidity to the 
NYSE Bonds Book of $0.50 per bond.\8\ In order to further incentivize 
Users to provide liquidity on the NYSE Bonds system, the Exchange 
proposes to adopt a fee waiver and a fee cap. As proposed, the fee 
waiver would apply to Users that provide liquidity in 800 or more 
qualifying CUSIPs quoted on the NYSE Bonds Book. Additionally, the 
Exchange proposes to adopt a fee cap of $5,000 per month that would 
apply to all Users that do not attain the fee waiver, i.e., Users that 
provide liquidity in the 400-599 qualifying CUSIP tier and in the 600-
799 qualifying CUSIP tier. The Exchange is not proposing any change to 
the level of fees or rebates applicable to the Liquidity Provider 
Incentive Program. The proposed rule change is intended to provide 
Users with a greater incentive to provide liquidity on the NYSE Bonds 
system.
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    \8\ For orders that take liquidity from the NYSE Bonds Book, the 
current tiered fees apply, i.e., $0.50 per bond for executions of 
one to 10 bonds, $0.20 per bond for executions of 11 to 25 bonds and 
$0.10 per bond for executions of 26 bonds or more, with a maximum 
fee of $100 per execution. Users that do not opt in to the Liquidity 
Provider Incentive Program are subject to the Exchange's standard 
fees and rebates, as currently provided on the Price List.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange believes that the proposed changes to the Liquidity 
Provider Incentive Program are reasonable and equitable as they are 
intended to further incentivize Users to provide liquidity to the NYSE 
Bonds system. The proposed fee waiver for Users that provide liquidity 
in 800 or more qualifying CUSIPs and the proposed fee cap for Users 
that provide liquidity in the 400-599 qualifying CUSIP tier and in the 
600-799 qualifying CUSIP tier, are both reasonable amendments to the 
Exchange's fee schedule and do not unfairly discriminate between 
customers, issuers, and brokers or dealers because all member 
organizations that opt in to the Liquidity Provider Incentive Program 
would benefit from the proposed fee changes. The Exchange believes that 
the proposed fee changes are also reasonable because they are designed 
to provide an incentive for member organizations to increase displayed 
liquidity at the Exchange, thereby increasing traded volume.
    The Exchange is proposing to adopt a pricing model whereby Users 
providing liquidity in a minimum number of

[[Page 41638]]

qualifying CUSIPs to the NYSE Bonds system would not pay a fee, and 
Users that do not qualify for the fee waiver would benefit by the 
proposed fee cap. The proposed rule change will therefore benefit all 
Users that provide liquidity to the NYSE Bonds system.
    The Exchange further believes that the proposed rule change is 
equitable and not unfairly discriminatory in that it will apply 
uniformly to all Users accessing the NYSE Bonds system. Each User will 
have the ability to determine the extent to which the Exchange's 
proposed structure will provide it with an economic incentive to use 
the NYSE Bonds system, and model its business accordingly.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\11\ 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. Debt securities typically trade in a decentralized 
OTC dealer market that is less liquid and transparent than the equities 
markets. The Exchange believes that the proposed change would increase 
competition with these OTC venues by creating additional incentives to 
engage in bonds transactions on the Exchange and rewarding market 
participants for actively quoting and providing liquidity in the only 
transparent bond market, which the Exchange believes will enhance 
market quality.
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    \11\ 15 U.S.C. 78f(b)(8).
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    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues that 
are not transparent. In such an environment, the Exchange must 
continually review, and consider adjusting its fees and rebates to 
remain competitive with other exchanges as well as with alternative 
trading systems and other venues that are not required to comply with 
the statutory standards applicable to exchanges. 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 believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited. As a 
result of all of these considerations, the Exchange does not believe 
that the proposed change will impair the ability of member 
organizations or competing order execution venues to maintain their 
competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \12\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \13\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(2)(B).
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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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2016-42 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2016-42. 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 Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. 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-NYSE-2016-42, and should be 
submitted on or before July 18, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-15072 Filed 6-24-16; 8:45 am]
 BILLING CODE 8011-01-P