[Federal Register Volume 85, Number 12 (Friday, January 17, 2020)]
[Notices]
[Pages 3089-3091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00684]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87952; File No. SR-NYSE-2019-73]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List To Extend a Waiver of New Firm Application Fees
for Certain Applications and of Bond Trading License Fees and To
Discontinue the Liquidity Provider Incentive Program and the Agency
Order Rebate Program
January 13, 2020.
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 31, 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 Exchange. 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) extend a fee
waiver for new firm application fees for applicants seeking only to
obtain a bond trading license (``BTL'') for 2020; (2) waive the BTL fee
for 2020; and (3) discontinue the Liquidity Provider Incentive Program
and the Agency Order Rebate Program. The Exchange proposes to implement
the fee changes effective January 2, 2020. 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 (1) extend a fee
waiver for new firm application fees for applicants seeking only to
obtain a BTL for 2020; (2) waive the BTL fee for 2020; \4\ and (3)
discontinue the Liquidity Provider Incentive Program and the Agency
Order Rebate Program. The Exchange proposes to implement the fee
changes effective January 2, 2020.
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\4\ The Exchange initially filed to adopt the fee waiver and
waive the BTL fee in 2015. See Securities Exchange Act Release No.
74031 (January 12, 2015), 80 FR 2462 (January 16, 2015) (SR-NYSE-
2014-78). The Exchange has filed to extend the fee waiver and waive
the BTL fee for each calendar year since 2017. See Securities
Exchange Act Release Nos. 79710 (December 29, 2016), 82 FR 1395
(January 5, 2017) (SR-NYSE-2016-89); 82418 (December 28, 2017), 83
FR 568 (January 4, 2018) (SR-NYSE-2017-70); and 84899 (December 20,
2018), 83 FR 67395 (December 28, 2018) (SR-NYSE-2018-65).
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The Exchange currently charges a New Firm Fee ranging from $2,500
to $20,000, depending on the type of firm, which is charged per
application for any broker-dealer that applies to be approved as an
Exchange member organization. The Exchange proposes to amend the Price
List to waive the New Firm Fee for 2020 for new member organization
applicants that are seeking only to obtain a BTL and not trade equities
at the Exchange. The proposed waiver of the New Firm Fee would be
available only to applicants seeking approval as a new member
organization, including carrying firms, introducing firms, or non-
public organizations, which would be seeking to obtain a BTL at the
Exchange and not trade equities. Further, if a new firm that is
approved as a member organization and has had the New Firm Fee waived
converts a BTL to a full trading license within one year of approval,
the New Firm Fee would be charged in full retroactively. The Exchange
believes that charging the New Firm Fee retroactively within a year of
approval is appropriate because it would discourage applicants to claim
that they are applying for a BTL solely to avoid New Firm Fees.
Additionally, the Exchange currently charges a BTL fee of $1,000
per year. The Exchange proposes to amend the Price List to waive the
BTL fee for 2020 for all member organizations.
The Exchange believes that the proposed fee changes would provide
increased incentives for bond trading firms that are not currently
Exchange member organizations to apply for Exchange membership and a
BTL. The Exchange believes that having more member organizations
trading on the Exchange's bond platform would benefit investors through
the additional display of liquidity and increased execution
opportunities in Exchange-traded bonds at the Exchange.
The Exchange proposes to discontinue the Liquidity Provider
Incentive Program and the Agency Order Rebate Program because both
programs are underutilized by member organizations. The Liquidity
Provider Incentive Program, a voluntary rebate program, was adopted by
the Exchange in 2016.\5\ Pursuant to the program, the Exchange pays
Users \6\ of NYSE Bonds a monthly [sic], tiered rebate provided Users
who opt into the program meet specified quoting requirements. Under the
program, the rebate payable is based on the number of CUSIPs \7\ a User
quotes. The Agency Order Rebate Program was adopted by the Exchange
[[Page 3090]]
in 2017.\8\ Pursuant to the program, the Exchange pays a monthly rebate
to a User that submits an average of 400 resting limit orders of any
size per trading day \9\ during the month and that are submitted as
Agency Orders \10\ by the User. The Exchange proposes to remove both
the Liquidity Provider Incentive Program and the Agency Order Rebate
Program from the Price List.
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\5\ See Securities Exchange Act Release No. 77591 (April 12,
2016), 81 FR 22656 (April 18, 2016) (SR-NYSE-2016-26). See also
Securities Exchange Act Release Nos. 77812 (May 11, 2016), 81 FR
30594 (May 17, 2016) (SR-NYSE-2016-34); 78108 (June 21, 2016), 81 FR
41636 (June 27, 2016) (SR-NYSE-2016-42); 79210 (November 1, 2016),
81 FR 78213 (November 7, 2016) (SR-NYSE-2016-68); 80934 (June 15,
2017), 82 FR 28173 (June 20, 2017) (SR-NYSE-2017-27); and 84100
(September 12, 2018), 83 FR 47230 (September 18, 2018) (SR-NYSE-
2018-39).
\6\ Rule 86(b)(2)(I) defines a User as any Member or Member
Organization, Sponsored Participant, or Authorized Trader that is
authorized to access NYSE Bonds.
\7\ 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 https://www.sec.gov/answers/cusip.htm.
\8\ See Securities Exchange Act Release No. 82343 (December 18,
2017), 82 FR 60782 (December 22, 2017) (SR-NYSE-2017-68).
\9\ A trading day is any day that NYSE Bonds is available for
trading, as determined by Securities Industry and Financial Market
Association (``SIFMA''), which annually provides recommendations for
early and full market closes that the bond market, including NYSE
Bonds, follows. See note 8, supra.
\10\ An Agency Order is any order submitted by a User that it
represents as agent on NYSE Bonds. See note 8, supra.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4), (5).
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The Exchange believes that it is reasonable to waive the New Firm
Fee and the annual BTL fee for 2020 to provide an incentive for bond
trading firms to apply for Exchange membership and a BTL. The Exchange
believes that providing an incentive for bond trading firms that are
not currently Exchange member organizations to apply for membership and
a BTL would encourage market participants to become members of the
Exchange and bring additional liquidity to a transparent bond market.
To the extent the existing New Firm Fees or the BTL fee serves as a
disincentive for bond trading firms to become Exchange member
organizations, the Exchange believes that the proposed fee change could
expand the number of firms eligible to trade bonds on the Exchange. The
Exchange believes creating incentives for bond trading firms to trade
bonds on the Exchange protects investors and the public interest by
increasing the competition and liquidity on a transparent market for
bond trading. The proposed waiver of the New Firm Fee and BTL fee is
equitable and not unfairly discriminatory because it would be offered
to all market participants that wish to trade at the Exchange the
narrower class of debt securities only.
The Exchange believes that the proposed rule change to eliminate
the Liquidity Provider Incentive Program and the Agency Order Rebate
Program from the Price List is reasonable because both programs are
underutilized and have generally not incentivized member organizations
to bring liquidity and increase trading on the Exchange. Of the 31
member organizations that currently have the ability to trade on NYSE
Bonds, only 5 have established connectivity to NYSE Bonds in the past
year. Of those 5 members, only one firm participated in the Liquidity
Provider Incentive Program, and did so for only a short period of time,
from May 2019 through October 2019. With respect to the Agency Order
Rebate Program, no member organization ever participated in that
program. The Exchange does not anticipate any member organization to
participate in either the Liquidity Provider Incentive Program or the
Agency Order Rebate Program in the near future. Therefore, the Exchange
believes it is reasonable to eliminate both programs. The Exchange
believes eliminating underutilized incentive programs would simplify
the Price List. The Exchange further believes that removing reference
to the incentive programs from the Price List would also add clarity to
the Price List. The Exchange believes that eliminating the Liquidity
Provider Incentive Program and the Agency Order Rebate Program from the
Price List is equitable and not unfairly discriminatory because both
programs would be eliminated in their entirety and would no longer be
available to any member organization.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\13\ 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
over-the-counter (``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
reducing the cost of being approved as and operating as an Exchange
member organization that solely trades bonds at the Exchange, which the
Exchange believes will enhance market quality through the additional
display of liquidity and increased execution opportunities in Exchange-
traded bonds at the Exchange. The Exchange believes that elimination of
the Liquidity Provider Incentive Program and the Agency Order Rebate
Program from the Price List would not affect intramarket competition
because both programs have generally not incentivized member
organizations to add liquidity or increase trading on the Exchange.
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\13\ 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) \14\ of the Act and subparagraph (f)(2) of Rule
19b-4 \15\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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
[[Page 3091]]
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) \16\ of the Act to determine
whether the proposed rule change should be approved or disapproved.
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\16\ 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-2019-73 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-2019-73. 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-2019-73, and should be submitted on or
before February 7, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-00684 Filed 1-16-20; 8:45 am]
BILLING CODE 8011-01-P