[Federal Register Volume 84, Number 26 (Thursday, February 7, 2019)]
[Notices]
[Pages 2634-2636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01391]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85037; File No. SR-NYSE-2018-67]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List To Modify the Incremental Step Up Tier for
Supplemental Liquidity Providers
February 1, 2019.
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 December 26, 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 modify the
incremental step up tier for Supplemental Liquidity Providers
(``SLPs'') (``Incremental SLP Step Up Tier''). The Exchange proposes to
implement the fee change to its Price List effective January 2, 2019.
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.
[[Page 2635]]
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 modify the
Incremental SLP Step Up Tier. The Exchange proposes to implement the
fee change to its Price List effective January 2, 2019.
Pursuant to the Incremental SLP Step Up Tier, the Exchange
currently provides an incremental credit to a SLP in addition to the
SLP's tiered or non-tiered credit for adding displayed liquidity if the
SLP (1) meets the 10% average or more quoting requirement in an
assigned security pursuant to Rule 107B (quotes of an SLP-Prop and an
SLMM of the same member organization shall not be aggregated) (the
``Quoting Requirement''), and (2) adds liquidity for all assigned SLP
securities in the aggregate (including shares of both an SLP-Prop and
an SLMM of the same or an affiliated member organization) of an average
daily trading volume (``ADV'') \4\ of a NYSE consolidated average daily
volume (``CADV'') in the billing month over the SLP's adding liquidity
for all assigned SLP securities in the aggregate (including shares of
both an SLP-Prop and an SLMM of the same or an affiliated member
organization) as a percent of NYSE CADV in the second quarter of 2018,
as follows:
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\4\ Footnote 2 to the Price List defines ADV as ``average daily
volume''. The Exchange is not proposing to change this definition.
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SLPs that (1) meet the Quoting Requirement, and (2) add
liquidity for all assigned SLP securities in the aggregate (including
shares of both an SLP-Prop and an SLMM of the same or an affiliated
member organization) of an ADV of more than 0.10% of NYSE CADV in the
billing month over the SLP's adding liquidity for all assigned SLP
securities in the aggregate (including shares of both an SLP-Prop and
an SLMM of the same or an affiliated member organization) as a percent
of NYSE CADV in the second quarter of 2018, receive an incremental
credit of $0.0001 per share.
SLPs that (1) meet the Quoting Requirement, and (2) add
liquidity for all assigned SLP securities in the aggregate (including
shares of both an SLP-Prop and an SLMM of the same or an affiliated
member organization) of an ADV of more than 0.15% of NYSE CADV in the
billing month over the SLP's adding liquidity for all assigned SLP
securities in the aggregate (including shares of both an SLP-Prop and
an SLMM of the same or an affiliated member organization) as a percent
of NYSE CADV in the second quarter of 2018, receive an incremental
credit of $0.0002 per share.
SLPs that (1) meet the Quoting Requirement, and (2) add
liquidity for all assigned SLP securities in the aggregate (including
shares of both an SLP-Prop and an SLMM of the same or an affiliated
member organization) of an ADV of more than 0.25% of NYSE CADV in the
billing month over the SLP's adding liquidity for all assigned SLP
securities in the aggregate (including shares of both an SLP-Prop and
an SLMM of the same or an affiliated member organization) as a percent
of NYSE CADV in the second quarter of 2018, receive an incremental
credit of $0.0003 per share.
SLPs can only qualify for one of the three credits in a billing
month. Further, the combined SLP credits are currently capped at
$0.0032 per share in a billing month.
The Exchange proposes to modify the second prong of the Incremental
SLP Step Up Tier by adopting an alternative qualification basis for
SLPs to qualify for the incremental credit. As proposed, SLPs would
continue to qualify for the one of the incremental credits if the SLP
adds liquidity for all assigned SLP securities in the aggregate
(including shares of both an SLP-Prop and an SLMM of the same or an
affiliated member organization) of an ADV of more than 0.10%, 0.15%, or
0.25% of NYSE CADV in the billing month over the SLP's adding liquidity
for all assigned SLP securities in the aggregate (including shares of
both an SLP-Prop and an SLMM of the same or an affiliated member
organization) as a percent of NYSE CADV either in the second quarter of
2018 or the third quarter of 2018, whichever is lower. The proposed
change, which would allow the Exchange to use the lower or more
favorable (to the SLP) of the two baseline benchmarks, is intended to
allow a greater number of SLPs to qualify for the incremental credits.
For example, assume a SLP adds liquidity of 0.50% in the second
quarter of 2018 (the ``2Q Baseline''), and adds liquidity of 0.45% in
the third quarter of 2018 (the ``3Q Baseline''). With this proposed
rule change, the Exchange would use the 3Q Baseline to determine
whether the SLP qualifies for the incremental credit because the 3Q
Baseline is more favorable to the SLP than the SLP's 2Q Baseline. If
that same SLP adds liquidity of 0.57% in the billing month, that SLP
would qualify for the incremental $0.0001 per share credit with a step
up of 0.12% over the lessor of the two baselines, or 0.45% using the 3Q
Baseline.
* * * * *
The proposed changes are not otherwise intended to address any
other issues, and the Exchange is not aware of any problems that member
organizations would have in complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4) & (5).
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The Exchange believes that providing an additional way to qualify
for the Incremental SLP Step Up Tier is reasonable, equitable and not
an unfairly discriminatory allocation of fees because it would
encourage additional liquidity on the Exchange and because members and
member organizations benefit from the substantial amounts of liquidity
that are present on the Exchange. The Exchange believes the proposed
change to adopt an alternate baseline benchmark for the Incremental SLP
Step Up Tier is reasonable because it provides existing SLPs (including
SLPs that are also DMMs) with added incentive to bring additional order
flow to a public market. In particular, the Exchange believes that
making an alternate baseline benchmark available to SLPs would provide
SLPs with an increased opportunity to qualify for the incremental
credit, and would continue to provide an incentive for SLPs to add
liquidity to the Exchange, to the benefit of the investing public and
all market participants. The Exchange believes the proposed changes are
equitable and not unfairly discriminatory because they would continue
to encourage member organizations to send orders, thereby contributing
to robust levels of liquidity, which benefits all market participants.
The proposed changes would also encourage the submission of additional
liquidity to a national securities exchange, thereby promoting price
discovery and transparency and enhancing order execution opportunities
for member organizations from the substantial amounts of liquidity that
are present on the
[[Page 2636]]
Exchange. The proposed changes would also encourage the submission of
additional orders that add liquidity, thus providing price improving
liquidity to market participants and increasing the quality of order
execution on the Exchange's market, which would benefit all market
participants. Moreover, the proposed changes are equitable and not
unfairly discriminatory because they would apply equally to all
qualifying SLPs that submit orders to the NYSE and add liquidity to the
Exchange.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\7\ 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. Instead, the Exchange believes that the proposed
change would foster liquidity provision and stability in the
marketplace, thereby promoting price discovery and transparency and
enhancing order execution opportunities for member organizations. In
this regard, the Exchange believes that the transparency and
competitiveness of attracting additional executions on an exchange
market would encourage competition. The Exchange also believes that the
proposed rule change is designed to provide the public and investors
with a Price List that is clear and consistent, thereby reducing
burdens on the marketplace and facilitating investor protection.
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\7\ 15 U.S.C. 78f(b)(8).
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Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees and rebates to remain competitive with other exchanges and
with alternative trading systems that have been exempted from
compliance 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 changes 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) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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) \10\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\10\ 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-2018-67 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 Number SR-NYSE-2018-67. 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 Number SR-NYSE-2018-67 and should be submitted on
or before February 22, 2019.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01391 Filed 2-6-19; 8:45 am]
BILLING CODE 8011-01-P