[Federal Register Volume 84, Number 171 (Wednesday, September 4, 2019)]
[Notices]
[Pages 46588-46593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18999]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86784; File No. SR-NYSE-2019-45]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List To Revise the Remove and Adding Liquidity Tiers
for Tape B and C Securities
August 28, 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 August 15, 2019, 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 (1) revise the
Remove Tier for Tape B and C securities to add a new Tier charge for
removing liquidity, and (2) increase the credits available to
Supplemental Liquidity Providers (``SLPs'') under SLP Provide Tier 1
for adding displayed and non-displayed liquidity to the Exchange in
Tapes B and C securities. The Exchange proposes to implement the fee
changes effective August 15, 2019. The proposed rule change is
available on the Exchange's website at www.nyse.com, at the principal
office of the Exchange, and
[[Page 46589]]
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to revise pricing
available for trading in Tape B and C securities as follows:
(1) Revise the Remove Tier for Tape B and C securities to add a new
Tier charge of $0.0026 per share for removing liquidity. A member
organization would be able to qualify for this rate either by (i)
meeting a specified percentage of average daily volume of orders in
Tape B and C securities executed on the Exchange that remove liquidity
(``Removing ADV'') as a percentage of consolidated average daily volume
(``CADV'') in Tape B and C securities (``Tape B and C CADV''),\4\ or
(ii) meeting a lower specified percentage of Removing ADV as a
percentage of Tape B and C CADV and meeting specified closing auction
volume thresholds in Tape A securities, and
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\4\ The term ``CADV'' is defined in footnote * of the Price
List.
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(2) Increase the credits available to SLPs under SLP Provide Tier 1
for adding displayed and non-displayed liquidity to the Exchange in
Tapes B and C securities from $0.0031 per share to $0.0033 per share
(for displayed orders) and from $0.0014 per share to $0.0015 per share
(for non-displayed orders).
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member
organizations to send additional displayed liquidity to the Exchange.
The Exchange proposes to implement the fee changes effective August
15, 2019.\5\
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\5\ The Exchange originally filed to amend the Fee Schedule on
August 1, 2019 (SR-NYSE-2019-43). SR-NYSE-2019-43 was subsequently
withdrawn and replaced by this filing.
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Competitive Environment
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \6\
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\6\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
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As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\7\ Indeed, equity trading is currently dispersed across 13
exchanges,\8\ 31 alternative trading systems,\9\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange has more
than 18% market share (whether including or excluding auction
volume).\10\ Therefore, no exchange possesses significant pricing power
in the execution of equity order flow. More specifically, in June 2019,
the Exchange had 2.2% market share of executed volume of equity trades
in Tape B and C securities (excluding auction volume), which was down
from 2.8% in March 2019.\11\
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\7\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
\8\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\9\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. Although 54
alternative trading systems were registered with the Commission as
of July 29, 2019, only 31 are currently trading. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\10\ See Cboe Global Markets U.S. Equities Market Volume
Summary, available at http://markets.cboe.com/us/equities/market_share/.
\11\ See id.
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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
move order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
order flow that would provide displayed liquidity on an Exchange,
member organizations can choose from any one of the 13 currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain exchange transaction fees that relate to
orders that would provide liquidity on an exchange.
Proposed Rule Change
To respond to this competitive environment, the Exchange has
established incentives for its member organizations who submit orders
that provide and remove liquidity on the Exchange, including cross-tape
incentives for member organizations and SLPs based on submission of
orders that provide displayed and non-displayed liquidity in Tapes B
and C securities.
For Tape B and C securities, the Exchange currently offers a Remove
Tier for securities at or above $1.00 for member organizations that
have a minimum amount of Adding ADV in non-SLP and Floor broker order
flow.\12\ Further, the Exchange offers several levels of credits for
SLP orders that provide displayed and non-displayed liquidity to the
Exchange in Tape B and C securities priced at or above $1.00 based on
the volume of orders that member organizations send to the Exchange.
The SLP Provide Tier credits (Non Tier, Tier 2, Tier 1 and Tape A Tier)
range from $0.00005 to $0.0031.
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\12\ See footnote 4 to the current Price List. The Exchange
proposes a non-substantive amendment to replace the term ``Client''
as used in the Adding Tiers and Remove Tiers for Tape B and C
securities by specifying that this refers to member organization
order flow that is not from SLPs or Floor brokers, as the rates for
such order flow are specified elsewhere on the Price List. See
Securities Exchange Act Release No. 83113 (April 26, 2018), 83 FR
19376 (May 2, 2018) (SR-NYSE-2018-15) (Notice) (adopting new pricing
for trading Tape B and C securities on the Pillar trading platform).
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The proposed fee change is designed to attract additional order
flow to the Exchange by introducing a new Tier rate for removing
liquidity from the Exchange and increasing the incentive for SLPs that
provide displayed and non-displayed liquidity in Tape B and C
securities, as described below.
Remove Tiers Fee For Securities At or Above $1.00
Currently, for securities at or above $1.00 in Tape B and C
securities, the Exchange charges a per tape fee of $0.00285 per share
to remove liquidity from the Exchange for member
[[Page 46590]]
organizations with an Adding ADV of at least 50,000 shares per
respective tape.
The Exchange proposes to retain this charge and introduce a new,
lower fee of $0.0026 per share for removing liquidity from the Exchange
in both Tapes B and C for member organizations that either have:
0.175% of Removing ADV \13\ in Tapes B and C combined as a
percentage of Tape B and C CADV, or
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\13\ The Exchange proposes to define the term ``Removing ADV''
in a new footnote on the Price List to mean the average daily volume
of orders executed on the Exchange during the billing month that
removed liquidity.
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0.075% of Removing ADV in Tapes B and C combined as a
percentage of Tape B and C CADV, and execute an ADV of Market-on-Close
(MOC) and Limit-on-Close (LOC) Orders combined on the NYSE in Tape A
securities of at least 0.35% of NYSE CADV.
The proposed tier would be designated Tier 1 while the existing
tier would be designated Tier 2 and aligned accordingly in the Price
List.
The term ``ADV'' in proposed Tier 1 would have a citation to
footnote 4 in the current Price List, which provides ``For purposes of
transaction fees and Supplemental Liquidity Provider liquidity credits,
ADV calculations exclude early closing days.'' The text of current
footnote 4 would remain unchanged.
For example, if a member organization averaged a Removing ADV in
Tape B and C securities of 6 million shares in a month where the Tape B
and C CADV is 3 billion shares, that member organization would have a
Removing ADV of 0.20% of Tape B and C CADV and would qualify for the
reduced fee of $0.0026 per share for removing liquidity from the
Exchange in both Tapes B and C.
If that member instead averaged a Removing ADV in Tape B and C
securities of 3 million shares in a month where the Tape B and C CADV
is 3 billion shares, the member organization's removing ADV would be
0.10% of Tape B and C CADV. That Removing ADV alone would not qualify
for the new fee. But if that member organization also averaged an ADV
of MOC and LOC Orders in Tape A securities of 14 million shares in a
month where NYSE CADV was 3.5 billion shares, its MOC and LOC ADV would
be 0.40% of NYSE CADV and that member organization would qualify for
the reduced remove fee of $0.0026 per share. However, if that member
organization averaged an MOC and LOC ADV of less than 12.25 million
shares in that same month, or under 0.35% of NYSE CADV, the member
organization would not qualify for the reduced $0.0026 fee per
share.\14\
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\14\ The Exchange proposes minor, non-substantive changes to the
Price List. First, the Exchange would add an ``s'' to ``fee'' in the
first entry under the third column titled ``Removing Liquidity'' and
to ``Tier'' in the heading of the first column titled ``Remove Tier
For Securities At or Above $1.00.'' Second, the Exchange would
delete ``Per-Tape'' and ``Client Adding ADV \4\'' and add ``Rate''
under the Remove Tiers heading in the first column. Finally, under
the new Tier 2 heading, the Exchange would add ``Per Tape of Non-SLP
and Floor broker'' after ``50,000 shares'' and before ``Adding
ADV.''
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Displayed Liquidity Under SLP Provide Tier 1
Under current SLP Provide Tier 1, SLPs that add displayed liquidity
to the Exchange in securities with a per share price at or above $1.00
and that:
Add liquidity for all assigned Tape B securities of a CADV
of at least 0.10% for Tape B or for all assigned Tape C Securities of a
CADV of at least 0.075% for Tape C,
meet the 10% average or more quoting requirement in 400 or
more assigned securities in Tapes B and C combined pursuant to Rule
107B, and
meet the 10% average or more quoting requirement in an
assigned Tape B or C security pursuant to Rule 107B
are eligible for a $0.0031 per share credit per tape in an assigned
Tape B or C security.
The Exchange proposes to increase the credit to $0.0033. The
qualification requirements would remain unchanged.
Non-Displayed Liquidity Under SLP Provide Tier 1
Under current SLP Provide Tier 1, SLPs that add non-displayed
liquidity to the Exchange on a per Tape basis in securities with a per
share price at or above $1.00 and that:
Add liquidity for all assigned Tape B securities of a CADV
of at least 0.10% for Tape B or for all assigned Tape C Securities of a
CADV of at least 0.075% for Tape C,
meet the 10% average or more quoting requirement in 400 or
more assigned securities in Tapes B and C combined pursuant to Rule
107B, and
meet the 10% average or more quoting requirement in an
assigned Tape B or C security pursuant to Rule 107B
are eligible for a credit of $0.0014 per share per tape credit and a
$0.0025 per share per tape credit for MPL orders in the Tape where they
qualify for SLP Provider Tier 1.
The Exchange proposes to increase the credit to $0.0015. The
qualification requirements would remain unchanged and the rate for MPL
Orders would remain unchanged.
Application and Impact of Transition Period Pricing
The purpose of these proposed changes are to incentivize member
organizations to trade on the Exchange in Tape B and C securities. The
proposed Remove Tier fee would incentivize member organizations to
remove additional liquidity from the Exchange, thereby increasing the
number of orders adding liquidity that are executed on the Exchange and
improving overall liquidity on a public exchange. The Exchange believes
that including an alternate way to qualify for this requirement to
include MOC and LOC ADV in Tape A securities would encourage the
additional submission of both Tape B and C order flow and auction order
flow in Tape A securities to the Exchange.
For example, if an SLP adds liquidity for all assigned Tape B
securities in the aggregate of a CADV of at least 0.10% for Tape B and
met the 10% average or more quoting requirement in 400 or more assigned
securities in Tape B and C securities, that SLP would receive a credit
of $0.0033 per share for providing displayed liquidity and a credit of
$0.0015 per share for providing non-displayed liquidity in Tape B
securities.
The proposed change to SLP Provide Tier 1 would incentivize member
organizations that are SLPs to increase the liquidity-providing orders
in Tape B and C securities they send to the Exchange, which would
support the quality of price discovery on the Exchange and provide
additional price improvement opportunities for incoming orders. The
Exchange believes that by correlating the amount of the credit to the
level of orders sent by a member organization that add displayed and
non-displayed liquidity, the Exchange's fee structure would incentivize
member organizations to submit more orders that add liquidity to the
Exchange, thereby increasing the potential for price improvement and
execution opportunities to incoming marketable orders submitted to the
Exchange.
As noted above, the Exchange operates in a competitive and
fragmented market environment, particularly as it relates to attracting
non-marketable orders, which add liquidity to the Exchange. The
Exchange believes that the proposed higher credits would provide an
incentive for member organizations to route additional displayed and
non-displayed liquidity to the Exchange in order to qualify for them.
[[Page 46591]]
Without having a view of a member organization's activity on other
markets and off-exchange venues, the Exchange believes the proposed
Remove Tier with a lower rate and alternative ways to qualify would
provide an incentive for member organizations to remove additional
liquidity from the Exchange in Tape B and C securities. Currently, six
firms (out of a total 145 member firms) can qualify for the Remove Tier
fee. Based on the profile of liquidity-removing firms generally, the
Exchange believes that five additional member organizations could
qualify for the new tiered rate under either proposed criteria if they
choose to direct order flow to, and increase quoting on, the Exchange.
Similarly, the proposed higher rates under SLP Provide Tier 1 would
provide an incentive for member organizations to submit additional
adding displayed and non-displayed liquidity to the Exchange in Tape B
and C securities. Currently, there are 15 SLPs \15\ on the Exchange out
of a total of 145 member organizations. Of these, four firms are
qualifying for the SLP Provide Tier 1 credit in both Tape B and C for
adding displayed liquidity, and adding non-displayed liquidity. Based
on the profile of liquidity-providing SLPs generally, the Exchange
believes that three additional SLPs could qualify for the displayed and
non-displayed SLP Provide Tier 1 credits if they choose to direct order
flow to, and increase quoting on, the Exchange.
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\15\ Under Rule 107B, an SLP can be either a proprietary trading
unit of a member organization (``SLP-Prop'') or a registered market
maker at the Exchange (``SLMM''). Currently, there are three SLMMs
on the NYSE.
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The proposed changes are not otherwise intended to address other
issues, and the Exchange is not aware of any significant problems that
market participants would have in complying with the proposed changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\16\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\17\ 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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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change is Reasonable
As discussed above, the Exchange operates in a highly fragmented
and competitive market. The Exchange believes that the ever-shifting
market share among the exchanges from month to month demonstrates that
market participants can move order flow, or discontinue or reduce use
of certain categories of products, in response to fee changes. With
respect to non-marketable orders that provide liquidity on an Exchange,
member organizations can choose from any one of the 13 currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain exchange transaction fees that relate to
orders that would provide displayed liquidity on an exchange. Stated
otherwise, changes to exchange transaction fees can have a direct
effect on the ability of an exchange to compete for order flow.
Given this competitive environment, the proposal represents a
reasonable attempt to attract additional order flow to the Exchange. As
noted, the Exchange's market share of intraday trading (i.e., excluding
auctions) declined from March 2019 to June 2019.
Specifically, the Exchange believes that a new, lower fee of
$0.0026 per share for removing liquidity from the Exchange in both
Tapes B and C securities is reasonable because it would incentivize
member organizations to remove additional liquidity from the Exchange,
thereby increasing the number of orders adding liquidity that are
executed on the Exchange and improving overall liquidity on a public
exchange and resulting in lower costs for member organizations that
qualify for the rate. The Exchange also believes that the proposal is
reasonable because it provides alternative ways for member
organizations to qualify for the tier, thereby increasing potential
participation at the tier. Moreover, the Exchange believes that by
requiring as part of the second qualification criteria an ADV of MOC
and LOC activity combined on the Exchange in Tape A securities, the
proposal would encourage greater liquidity at the close.
Without having a view of a member organization's activity on other
markets and off-exchange venues, the Exchange believes the proposed
Remove Tier with a lower rate and alternative ways to qualify would
provide an incentive for member organizations to remove additional
liquidity from the Exchange in Tape B and C securities. As previously
noted, a number of firms can qualify for the Remove Tier fee and
additional member organizations could qualify for the new tiered rate
under either proposed criteria if they choose to direct order flow to,
and increase quoting on, the Exchange.
Further, the Exchange believes that increasing the proposed credits
for member organizations that are SLPs that add displayed and non-
displayed liquidity in Tape B and C securities on the Exchange is
reasonable because it would provide further incentives for such member
organizations to provide additional liquidity to a public exchange in
Tape B and C securities, thereby promoting price discovery and
transparency and enhancing order execution opportunities for member
organizations. All member organizations would benefit from the greater
amounts of liquidity that will be present on the Exchange, which would
provide greater execution opportunities.
The Exchange believes the proposal would provide an incentive for
member organizations that are SLPs to route additional liquidity-
providing orders to the Exchange in Tape B and C securities. As noted
above, the Exchange operates in a highly competitive environment,
particularly for attracting non-marketable order flow that provides
liquidity on an exchange. The Exchange believes it is reasonable to
provide a higher credit for orders that provide additional liquidity.
Without having a view of a member organization's activity on other
markets and off-exchange venues, the Exchange believes the proposed
higher rates would provide an incentive for member organizations to
submit additional adding liquidity to the Exchange in Tape B and C
securities. As previously noted, a number of SLPs are qualifying for
the SLP Provide Tier 1 credit for adding displayed liquidity and adding
non-displayed liquidity. Based on the profile of liquidity-providing
SLPs generally, the Exchange believes additional SLPs could qualify for
the displayed and non-displayed SLP Provide Tier 1 credits if they
choose to direct order flow to, and increase quoting on, the Exchange.
The Exchange notes that the proposed credits remains in line with
the credits the Exchange currently credits SLPs for adding displayed
and non-displayed liquidity in Tape A securities.\18\ The Exchange
notes that SLPs qualifying for the Tier 1 Adding Credit in UTP
securities in both Tapes B and C would also be eligible for a lower
adding liquidity requirement of 0.75% for SLP Tier 1 in Tape A. The
Exchange further notes that SLPs that currently meet Tier
[[Page 46592]]
1 in both Tape B and Tape C receive a credit of $0.00005 per share in
addition to the Tape A SLP credit in Tape A assigned securities where
the SLP meets the 10% quoting requirement pursuant to Rule 107B.
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\18\ See page 5 of the current NYSE Price List, available at
https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
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Finally, the Exchange also believes the proposed non-substantive
changes are reasonable and would not be inconsistent with the public
interest and the protection of investors because investors will not be
harmed and in fact would benefit from increased clarity and
transparency on the Price List, thereby reducing potential confusion.
The Proposal is an Equitable Allocation of Fees
The Exchange believes its proposal equitably allocates its fees
among its market participants by fostering liquidity provision and
stability in the marketplace. Moreover, the proposal is an equitable
allocation of fees because it would reward SLPs for their increased
risks and heightened quoting and other obligations.
The Exchange believes that, for the reasons discussed above, the
proposed Remove Tier fee would incentivize member organizations to
remove additional liquidity from the Exchange, thereby increasing the
number of orders adding liquidity that are executed on the Exchange and
improving overall liquidity on a public exchange and that increasing
the credits for SLPs for adding displayed and non-displayed liquidity
to the Exchange in Tapes B and C securities will encourage the SLPs to
add liquidity to the market in Tape B and C securities, thereby
providing customers with a higher quality venue for price discovery,
liquidity, competitive quotes and price improvement. The proposed
change will thereby encourage the submission of additional liquidity to
a national securities exchange, thus promoting price discovery and
transparency and enhancing order execution opportunities for member
organizations from the substantial amounts of liquidity present on the
Exchange. All member organizations would benefit from the greater
amounts of liquidity that will be present on the Exchange, which would
provide greater execution opportunities.
The Exchange also believes that a lower fee for removing liquidity
with a lower rate and alternative ways to qualify would encourage
member organizations to remove additional liquidity from the Exchange
in Tape B and C securities. As previously noted, a number of member
organizations are qualifying for the Remove Tier fee. Based on the
profile of liquidity-removing firms generally, the Exchange believes
additional member organizations could qualify for the new tiered rate
under either proposed criteria if they choose to direct order flow to,
and increase quoting on, the Exchange. The proposed lower rate is also
equitable because it would apply equally to all existing member
organizations that remove liquidity from the Exchange in Tape B and C
securities.
Further, the Exchange believes that higher credits for adding
liquidity in Tape B and C securities will encourage participation from
a greater number of current and new SLPs which would promote additional
liquidity in Tape B and C securities. As the Exchange previously noted
that, a number of the current SLP firms are qualifying for the SLP
Provide Tier 1 credit based on adding displayed liquidity and adding
non-displayed liquidity. Based on the profile of liquidity-providing
SLPs generally, the Exchange believes that additional SLPs could
qualify for the displayed and non-displayed SLP Provide Tier 1 credits
if they choose to direct order flow to, and increase quoting on, the
Exchange.
The proposed rebate is also equitable because it would apply
equally to all existing and potential SLPs. The Exchange believes the
proposed higher rebates could provide an incentive for other market
participants to become SLPs on the Exchange. The Exchange believes that
the proposal would provide an equal incentive to all member
organizations to become SLPs, and that the proposal constitutes an
equitable allocation of fees because all similarly situated member
organizations would be eligible for the same rebates.
The Proposal is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, member
organizations are free to disfavor the Exchange's pricing if they
believe that alternatives offer them better value.
The proposal does not permit unfair discrimination because the
lower rate for removing liquidity in Tape B and C securities and the
higher credits for adding liquidity in Tape B and C securities would be
applied to all similarly situated member organizations and other market
participants, who would all be eligible for the same credit on an equal
basis. Accordingly, no member organization already operating on the
Exchange would be disadvantaged by this allocation of fees.
The Exchange believes it is not unfairly discriminatory to provide
a lower fee for removing liquidity and higher credits for adding
displayed and non-displayed liquidity as the proposed fee and credits
would be provided on an equal basis to all member organizations that
remove liquidity by meeting the tiered requirements. Further, the
Exchange believes the proposed fee would provide an incentive for
member organizations to remove additional liquidity from the Exchange
in Tape B and C securities and, for member organizations that seek to
qualify for the proposed fee under the second criteria based on adding
ADV in MOC and LOC activity, would encourage greater liquidity at the
Exchange close, to the benefit of all market participants. Similarly,
the Exchange believes that the proposed credits would incentivize
member organizations that are SLPs and meet the current tiered
requirements to send more orders to the Exchange to qualify for higher
credits. The Exchange also believes that the proposed change is not
unfairly discriminatory because it is reasonably related to the value
to the Exchange's market quality associated with higher volume.
Finally, the submission of orders to the Exchange is optional for
member organizations in that they could choose whether to submit orders
to the Exchange and, if they do, the extent of its activity in this
regard.
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,\19\ 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, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for member organizations. As a result, the Exchange believes that the
proposed change furthers the Commission's goal in adopting Regulation
NMS of fostering integrated competition among orders, which
[[Page 46593]]
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \20\
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\19\ 15 U.S.C. 78f(b)(8).
\20\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed changes are designed to
attract additional order flow to the Exchange. The Exchange believes
that the proposed changes would continue to incentivize market
participants to direct order flow to the Exchange. Greater liquidity
benefits all market participants on the Exchange by providing more
trading opportunities and encourages member organizations to send
orders, thereby contributing to robust levels of liquidity, which
benefits all market participants on the Exchange. The proposed credits
would be available to all similarly-situated market participants, and,
as such, the proposed change would not impose a disparate burden on
competition among market participants on the Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As noted,
the Exchange's market share of intraday trading in Tape B and C
securities (excluding auction volume) declined from March to June 2019.
In such an environment, the Exchange must continually adjust its fees
and rebates to remain competitive with other exchanges and with off-
exchange venues. 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 does not believe its
proposed fee change can impose any burden on intermarket competition.
The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar order types and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange for execution. The Exchange also believes that the proposed
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.
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) \21\ of the Act and subparagraph (f)(2) of Rule
19b-4 \22\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 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) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\23\ 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-2019-45 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-2019-45. 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-2019-45 and should be submitted on
or before September 24, 2019.
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\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18999 Filed 9-3-19; 8:45 am]
BILLING CODE 8011-01-P