[Federal Register Volume 82, Number 117 (Tuesday, June 20, 2017)]
[Notices]
[Pages 28173-28176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12884]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80934; File No. SR-NYSE-2017-27]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List Regarding the Liquidity Provider Incentive Program

June 15, 2017.
    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 1, 2017, 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 
and II 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Price List regarding the 
Liquidity Provider Incentive Program. 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

[[Page 28174]]

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 regarding the 
Liquidity Provider Incentive Program.\4\ Specifically, the Exchange 
proposes to change the manner by which rebates would be payable under 
the Liquidity Provider Incentive Program.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release Nos. 77591 (April 12, 
2016), 81 FR 22656 (April 18, 2016) (SR-NYSE-2016-26); 77812 (May 
11, 2016), 81 FR 30594 (May 17, 2016) (SR-NYSE-2016-34); and 79210 
(November 1, 2016), 81 FR 78213 (November 7, 2016) (SR-NYSE-2016-
68).
---------------------------------------------------------------------------

    Currently, pursuant to the Liquidity Provider Incentive Program, 
the Exchange pays Users \5\ of NYSE Bonds a daily rebate based on the 
number of CUSIPs \6\ on the NYSE Bonds Book for which a User meets the 
quoting requirements in one or more of three maturity classifications.
---------------------------------------------------------------------------

    \5\ Rule 86(b)(2)(M) defines a User as any Member or Member 
Organization, Sponsored Participant, or Authorized Trader that is 
authorized to access NYSE Bonds. For purposes of the Liquidity 
provider Incentive Program, a User is a Member or Member 
Organization 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.
---------------------------------------------------------------------------

    The daily rebate amount is tiered based on the number of qualifying 
CUSIPs that meet quoting requirements, as follows:

------------------------------------------------------------------------
               Number of qualifying CUSIPs                 Daily rebate
------------------------------------------------------------------------
400-599.................................................            $500
600-799.................................................           1,000
800 or more.............................................           1,500
------------------------------------------------------------------------

    For a CUSIP to be included in the daily rebate calculation, a User 
is required to provide continuous two-sided quotes for a minimum of 100 
bonds for at least 80% of the day's Core Bond Trading Session,\7\ and 
satisfy the average spread and average duration requirement.\8\ The 
Exchange makes the determination of whether a User has met the 
prescribed quoting requirements each trading day to determine the 
amount of daily rebate for which a User qualifies. The Exchange then 
aggregates the daily rebate for each User and pays the total amount of 
the accumulated rebate to each User at the end of every month.
---------------------------------------------------------------------------

    \7\ The Core Bond Trading Session commences at 8:00 a.m. ET and 
concludes at 5:00 p.m. ET. See Rule 86(i)(2).
    \8\ See Quoting Requirements under NYSE Bonds System, Liquidity 
Provider Incentive Program, on the Exchange Price List at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
---------------------------------------------------------------------------

    The Exchange proposes to change the Liquidity Provider Incentive 
Program to allow a User to enter quotes and orders under a Unique User 
ID to potentially qualify for more rebates. In connection with this 
proposal, the Exchange proposes to replace the term `User' with `Unique 
User' and adopt a definition of the term `Unique User' in the Price 
List related to the Liquidity Provider Incentive Program. The term 
`Unique User' would mean a User, a trading desk of a User, or a 
customer \9\ of a User, on whose behalf a member or member organization 
enters quotes or orders under a Unique User ID that such User requests 
from and is provided by the Exchange. At the request of a User, the 
Exchange will assign a separate Unique User ID to each trading desk or 
customer of such User. A User may request any number of Unique User IDs 
from the Exchange. The proposed change would permit a User, based on a 
Unique User ID, that meets the quoting requirements under the Liquidity 
Provider Incentive Program to qualify for the rebates.
---------------------------------------------------------------------------

    \9\ A customer may be, for example, a hedge fund that is not a 
member or member organization and therefore unable to access the 
NYSE Bonds.
---------------------------------------------------------------------------

    To illustrate, consider that ABC Securities (``ABC''), a NYSE User, 
has two separate trading desks, the Electronic Market Making Desk and 
the ETF Trading Desk, that operate independently of each other. Each of 
these desks has its own unique trading strategy. Under the proposal, at 
the User's request, the Exchange would assign each desk a Unique User 
ID, and monitor the quoting activity associated with each Unique User 
ID to calculate the appropriate rebate attributable to each desk 
independently. Under the proposal, ABC would be eligible to receive two 
separate rebate amounts based on the performance of each independent 
trade desk.
    The Exchange is not proposing any other change to the manner in 
which rebates are calculated or the level of the rebates payable under 
the Liquidity Provider Incentive Program. The Exchange notes that to 
the extent a member or member organization delineates its activity, the 
member or member organization, as a result, may or may not qualify for 
the rebate.
    The proposed rule change is intended to promote greater 
participation in the Liquidity Provider Incentive Program and provide 
participants with an incentive to transact more on the NYSE Bonds 
system.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4), (5).
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable and equitable to amend 
the Liquidity Provider Incentive Program for the bonds trading 
platform, which would provide daily rebates based on activity 
associated with a Unique User ID that meets the Liquidity Provider 
Incentive Program's stated quoting requirements. The Liquidity Provider 
Incentive Program is already available to Users and the Exchange is 
proposing to change the program to permit participation in the 
Liquidity Provider Incentive Program based on Unique User IDs for 
providing quotes and trades to the Exchange, rather than based solely 
on the quoting and trading activity of individual Users.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to allow a member or member organization to qualify for 
rebates based on quotes and orders associated with a Unique User ID 
that a member or member organization requests. The purpose of the 
proposed rule change is to potentially permit Users to earn more 
rebates. The Exchange believes that providing additional opportunities 
to member and member organizations to earn rebates would encourage such 
participants to provide increased displayed liquidity on the Exchange 
for the benefit of all trading participants.
    The Exchange believes that the current quoting requirements to 
qualify for the daily rebate, which are based on the average spread and 
average duration, would continue to apply to each Unique User ID under 
the proposal, and therefore would not unfairly discriminate between 
customers, issuers, and brokers or

[[Page 28175]]

dealers because all Users that opt in to the Liquidity Provider 
Incentive Program would be subject to the same requirements. The 
Exchange further believes that the proposed amendment is reasonable 
because it is designed to provide an incentive for member organizations 
to increase displayed liquidity at the Exchange, thereby increasing 
traded volume.
    The Exchange believes the proposed amendment to the Liquidity 
Provider Incentive Program is intended to provide additional liquidity 
to the market and add competition to the existing group of liquidity 
providers. The Exchange believes that by providing Users with the 
ability to earn increased rebates, the Exchange is rewarding aggressive 
liquidity providers in the market, and by doing so, the Exchange will 
encourage the additional utilization of, and interaction with, the NYSE 
and provide customers with the premier venue for price discovery, 
liquidity, and competitive quotes.
    Finally, the Exchange believes that the proposed rule change is 
equitable and not unfairly discriminatory in that it would apply 
uniformly to all Users of the NYSE Bonds system. Each User that is a 
member or member organization has the ability to request any number of 
Unique User IDs from the Exchange and each Unique User ID would equally 
qualify for the rebate under the program. All similarly situated Users 
would be subject to the same fee and rebate structure, and each User 
would have the ability to determine the extent to which the Exchange's 
proposed fee and rebate 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,\12\ 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 enabling increased participation 
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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    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. As a result 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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposed rule change may become operative immediately on filing. 
The Exchange states that waiver of the operative delay would be 
consistent with the protection of investors and the public interest 
because the proposed rule change would allow the Exchange, within 30 
days after filing the proposed rule change, to expand the Liquidity 
Provider Incentive Program by allowing Users to identify additional 
Unique User IDs for purposes of calculating the rebate. The Exchange 
believes that the proposed rule change would increase the opportunity 
for participants to earn rebates under the Liquidity Provider Incentive 
Program and thereby incentivize member organizations to increase 
displayed bond liquidity on the Exchange. The Commission believes the 
waiver of the operative delay is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the operative delay and designates the proposed rule change 
operative upon filing.\17\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change 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

     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-2017-27 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-2017-27. This file 
number should be included on the

[[Page 28176]]

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-2017-27, and should be submitted on or before July 
11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12884 Filed 6-19-17; 8:45 am]
 BILLING CODE 8011-01-P