[Federal Register Volume 83, Number 181 (Tuesday, September 18, 2018)]
[Notices]
[Pages 47230-47232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20195]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84100; File No. SR-NYSE-2018-39]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Its Price List To Amend the Threshold Levels and Rebate 
Amounts Payable Under the Liquidity Provider Incentive Program, and To 
Amend the Rebate Amount Payable Under the Agency Order Incentive 
Program

September 12, 2018.
    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 August 31, 2018, 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 amend the 
threshold levels and rebate amounts payable under the Liquidity 
Provider Incentive Program, and amend the rebate amount payable under 
the Agency Order Incentive Program. The Exchange proposes to implement 
the fee changes effective September 1, 2018. The proposed rule change 
is available on the Exchange's website 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 amend the 
threshold levels and rebate amounts payable under the Liquidity 
Provider Incentive Program, and amend the rebate amount payable under 
the Agency Order Incentive Program. The Exchange proposes to implement 
the fee changes effective September 1, 2018.

Liquidity Provider Incentive Program

    Pursuant to the Liquidity Provider Incentive Program,\4\ a User \5\ 
can qualify for a daily rebate based on the number of qualifying CUSIPs 
\6\ on the NYSE Bonds Book for which a Unique User \7\ meets prescribed 
quoting requirements. The Exchange proposes to amend the threshold 
levels and rebate amounts payable under the Liquidity Provider 
Incentive Program to encourage participants to meet the quoting 
requirements in a greater number of CUSIPs.
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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); 77812 (May 11, 
2016), 81 FR 30594 (May 17, 2016) (SR-NYSE-2016-34); 79210 (November 
1, 2016), 81 FR 78213 (November 7, 2016) (SR-NYSE-2016-68); and 
80934 (June 15, 2017), 82 FR 28173 (June 20, 2017) (SR-NYSE-2017-
27).
    \5\ A User is any Member or Member Organization, Sponsored 
Participant, or Authorized Trader that is authorized to access NYSE 
Bonds. See Rule 86(b)(2)(M). 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.
    \7\ For purposes of the Liquidity Provider Incentive Program, 
the term `Unique User' means a User, a trading desk of a User, or a 
customer 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. See Securities 
Exchange Act Release No. 80934 (June 15, 2017), 82 FR 28173 (June 
20, 2017) (SR-NYSE-2017-27).
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    Currently, the daily rebate amount is tiered based on the number of 
qualifying CUSIPs that meet quoting requirements, as follows:

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               Number of qualifying CUSIPs                 Daily rebate
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400-599.................................................            $500

[[Page 47231]]

 
600-799.................................................           1,000
800 or more.............................................           1,500
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    The Exchange now proposes to amend the current tiers by: (1) 
Adjusting the third tier (800 or more CUSIPs) so that it becomes 800-
999 CUSIPs; and (2) adopting a new tier for 1000 or more CUSIPs with a 
corresponding daily rebate of $2,000. With the proposed changes to the 
tiers, the Exchange is attempting to strike the right balance between 
the number of qualifying CUSIPs and its corresponding rebate to ensure 
that the incentive program achieves its intended purpose of attracting 
liquidity in a greater number of CUSIPs to NYSE Bonds.
    With the proposed amended tiers, the CUSIP threshold and 
corresponding rebate would be as follows:

------------------------------------------------------------------------
               Number of qualifying CUSIPs                 Daily rebate
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400-599.................................................            $500
600-799.................................................           1,000
800-999.................................................           1,500
1,000 or more...........................................           2,000
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    The Exchange is not proposing any change to the Liquidity Provider 
Incentive Program other than to add an additional tier and a 
corresponding rebate for the new tier.

Agency Order Incentive Program

    Pursuant to the Agency Order Incentive Program,\8\ the Exchange 
currently provides a monthly rebate of $4,000 to a User that submits an 
average of 400 resting limit orders of any size per trading day during 
the month and that are submitted as Agency Orders \9\ by the User. In 
order to further incentivize Users to provide displayed liquidity on 
NYSE Bonds, the Exchange proposes to provide an increased monthly 
rebate of $10,000 to Users that meet the requirements of the incentive 
program. The proposed increased rebate would be applicable for a 
limited period of time, from September 2018 to December 2018. In the 
absence of a proposed rule change filed by the Exchange, the monthly 
rebate payable under the Agency Order Incentive Program would revert 
back to $4,000 per month beginning January 2019.
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    \8\ See Securities Exchange Act Release No. 82343 (December 18, 
2017), 82 FR 60782 (December 22, 2017) (SR-NYSE-2017-68).
    \9\ For purposes of the Agency Order Incentive Program, an 
Agency Order is any order submitted by a User that it represents as 
agent on NYSE Bonds. See Securities Exchange Act Release No. 82343 
(December 18, 2017), 82 FR 60782 (December 22, 2017).
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    The Exchange is not proposing any change to the Agency Order 
Incentive Program other than to change the amount of the rebate for a 
period of four months, from September 2018 to December 2018.
    The proposed rule change is intended to provide Users with a 
greater incentive to transact on NYSE Bonds.
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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange believes its proposed rebates pursuant to a tiered 
pricing structure is reasonable, equitable and non-discriminatory. The 
Exchange's proposal to add a new tier is reasonable as it is designed 
to encourage participants to provide liquidity in a greater number of 
CUSIPs on NYSE Bonds in order to benefit by receiving a larger daily 
rebate that was previously not available. The Exchange believes that 
with the proposed amended tiers, which provides for additional volume 
thresholds, Users that meet prescribed quoting requirements in a 
varying number of CUSIPs would qualify for rebates. The purpose of the 
Liquidity Provider Incentive Program is to incentivize Users to provide 
liquidity to the Exchange. In order to achieve that objective, the 
Exchange believes it is reasonable to amend the tiers and rebates 
payable under each tier to allow Users of varying levels of 
participation to qualify for the rebates payable under the incentive 
program. Volume-based rebates such as those maintained by the Exchange 
for NYSE Bonds are equitable because they are open to all Users on an 
equal basis and provide additional benefits that are reasonably related 
to the value of an exchange's market quality. The proposed modification 
to the tiers and the proposed addition of a new tier is each intended 
to incentivize Users to provide liquidity in a greater number of CUSIPs 
on NYSE Bonds in an effort to qualify for the enhanced rebate made 
available by the tiers.
    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 Bonds 
platform and provide customers with the premier venue for price 
discovery, liquidity, and competitive quotes.
    The Exchange further believes that the rebate currently in place is 
reasonable because it is designed to give Users who meet quoting 
requirements in a minimum of 400 CUSIPs a benefit by way of a daily 
rebate. The Exchange also believes that the Liquidity Provider 
Incentive Program is equitable and not unfairly discriminatory because 
it would uniformly apply to all Users that trade bonds on NYSE Bonds.
    The Exchange believes it is reasonable and equitable to adopt an 
increased rebate payable to Users under the Agency Order Incentive 
Program in order to incentivize Users to submit Agency Orders to the 
Exchange. This in turn would provide NYSE Bonds with potential new 
order flow and liquidity providers as it continues to grow its 
marketplace. The Exchange believes it is reasonable and equitable to 
adopt an increased rebate for a limited period of time as an incentive 
for Users to submit an increased number of Agency Orders to qualify for 
the increased rebate, and at the same time to encourage Users that do 
not participate in the Agency Order Incentive Program to begin to do so 
during the period of time during which the Exchange would pay the 
additional $6,000 per month. The Agency Order Incentive Program targets 
a particular segment in which the Exchange seeks to attract greater 
order flow and the Exchange believes the proposed increase to the 
monthly rebate for the remainder of this year should incentivize Users 
sufficiently to try to qualify for the rebate.
    The Exchange believes the proposed rule change would provide an 
incentive for Users to provide additional liquidity to the market and 
add competition to the existing group of liquidity providers. The 
Exchange does not expect the revenues it forgoes as a result of the 
proposal to negatively affect its ability to conduct its regulatory 
program.
    Finally, the Exchange believes that the proposed rule change is not 
unfairly discriminatory in that it would apply uniformly to all Users 
accessing NYSE Bonds. All similarly situated Users would be subject to 
the increased rebate, and each User would have the ability to determine 
the extent to which the Exchange's proposed rebate will provide it with 
an economic incentive to use NYSE Bonds, and model its business 
accordingly.

[[Page 47232]]

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 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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    \12\ 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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 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 No. SR-NYSE-2018-39 on the subject line.

Paper Comments

     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 No. SR-NYSE-2018-39. 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 (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File No. SR-NYSE-2018-39, and should be submitted on or 
before October 9, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-20195 Filed 9-17-18; 8:45 am]
BILLING CODE 8011-01-P