[Federal Register Volume 85, Number 98 (Wednesday, May 20, 2020)]
[Notices]
[Pages 30751-30755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10813]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88869; File No. SR-NYSEAMER-2020-35]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Amend Its 
Price List To Offer New Credits

May 14, 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 May 1, 2020, NYSE American LLC (``NYSE American'' 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 offer new credits 
for liquidity-providing displayed orders, MPL orders, and orders 
setting a new NYSE American BBO. The Exchange proposes to implement the 
rule change on May 1, 2020. The proposed 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 30752]]

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 offer a new tier 
of credits that would apply to displayed orders, Mid-Point Liquidity 
(``MPL'') orders,\4\ and orders setting a new NYSE American best bid or 
offer (``BBO''), if such orders have an Adding ADV \5\ of at least 
2,500,000 shares.
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    \4\ See Rule 7.31E(d)(3) (description of MPL order).
    \5\ As set forth in the Price List, Adding ADV means an ETP 
Holder's average daily volume of shares executed on the Exchange 
that provided liquidity.
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    The proposed change responds to the current competitive environment 
where order flow providers have a choice of where to direct orders by 
offering further incentives for Equity Trading Permit (``ETP'') Holders 
\6\ to send additional displayed liquidity to the Exchange.
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    \6\ See Rules 1.1E(m) (definition of ETP) & (n) (definition of 
ETP Holder).
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    The Exchange proposes to implement the rule change on May 1, 2020.
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.'' \7\
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    \7\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (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.'' 
\8\ Indeed, equity trading is currently dispersed across 13 
exchanges,\9\ 31 alternative trading systems,\10\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly available information, no single exchange has more 
than 19% of the market share of executed volume of equity trades 
(whether excluding or including auction volume).\11\ Therefore, no 
exchange possesses significant pricing power in the execution of equity 
order flow. More specifically, the Exchange's market share of trading 
in Tapes A, B, and C securities combined is less than 1%.
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    \8\ 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).
    \9\ 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.
    \10\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \11\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
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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 
shift order flow, or discontinue or reduce use of certain products, in 
response to fee changes. With respect to non-marketable order flow that 
would provide liquidity on an exchange, ETP Holders can choose from any 
one of the 13 currently operating registered exchanges to route such 
order flow. Accordingly, competitive forces constrain the Exchange's 
transaction fees that relate to orders that would provide liquidity on 
an exchange.
    In response to this competitive environment, the Exchange proposes 
to introduce incentives for its ETP Holders who submit orders that 
provide liquidity on the Exchange. The proposed fee change is designed 
to attract additional order flow to the Exchange and to encourage 
quoting and trading on the Exchange.
Proposed Rule Change
    For transactions in securities priced at or above $1.00, other than 
transactions by Electronic Designated Market Makers in assigned 
securities, the Exchange proposes to amend its Price List to offer the 
following new credits that would apply to ETP Holders with an Adding 
ADV of at least 2,500,000 shares during the billing month:
     For displayed orders and MPL orders that add liquidity, 
the Exchange proposes a $0.0026 credit per displayed and MPL share.
     For orders that set a new BBO on NYSE American, the 
Exchange proposes a $0.0027 credit per share. Orders that set a new BBO 
on the Exchange but do not meet the Adding ADV requirement of at least 
2,500,000 shares will continue to receive a credit of $0.0026 per 
share.
    The credits applicable to displayed orders and MPL orders for ETP 
Holders with Adding ADV of at least 750,000 shares ($0.0025 per share), 
and otherwise ($0.0024 per share), will remain unchanged.
    This proposed change is intended to incentivize ETP Holders to 
increase the liquidity-providing orders they send to the Exchange, 
which would support the quality of price discovery on the Exchange and 
provide additional liquidity for incoming orders. The Exchange believes 
that by correlating the level of credits to the level of executed 
providing volume on the Exchange, the Exchange's fee structure would 
encourage ETP Holders to submit more displayed, liquidity-providing 
orders to the Exchange that are likely to be executed, thereby 
increasing the potential for incoming marketable orders submitted to 
the Exchange to receive an execution.
    As noted above, the Exchange operates in a competitive environment, 
particularly as it relates to attracting non-marketable orders that add 
displayed liquidity to the Exchange. The Exchange believes that the 
proposed tiering of credits applicable to displayed orders, MPL orders, 
and orders setting a new NYSE American BBO, for ETP Holders that meet 
the Adding ADV requirement of at least 2,500,000 shares, would serve as 
an additional incentive for ETP Holders to send liquidity to and 
improve quoting on the Exchange in order to qualify for such credits.
    The Exchange also proposes non-substantive changes to add headers 
to the table in Section I.A. of the Price List, which sets forth 
Transaction Fees and Credits, to more clearly describe the credits that 
would be applicable to (1) displayed and MPL orders adding liquidity, 
and (2) orders setting a new NYSE American BBO.
    The proposed changes are not otherwise intended to address any 
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,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) & (5).

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[[Page 30753]]

The Proposed Change Is Reasonable
    As discussed above, the Exchange operates in a highly fragmented 
and competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
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.'' \14\
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    \14\ See Regulation NMS, 70 FR at 37499.
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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 liquidity on an Exchange, ETP Holders 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. 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 current competitive environment, the Exchange believes 
that this proposal represents a reasonable attempt to attract 
additional order flow to, and increase quoting on, the Exchange. As 
noted above, the Exchange's market share of trading in Tapes A, B, and 
C securities combined is under 1%.
    Specifically, the Exchange believes that the proposed credits for 
displayed orders, MPL orders, and orders setting a new NYSE American 
BBO, with an Adding ADV of 2,500,000 shares or more, would provide 
incentives for ETP Holders to route additional liquidity-providing 
orders to the Exchange. As noted above, the Exchange operates in a 
highly competitive environment, particularly with respect to attracting 
order flow that provides liquidity on an exchange. The Exchange 
believes that it is reasonable to provide a higher credit for orders 
that provide additional liquidity and to provide an incremental credit 
for orders that meet the Adding ADV requirements as described above.
    The Exchange believes that 6 ETP Holders currently qualify for the 
proposed new credits, and more ETP Holders could qualify for the 
proposed credit for setting a new BBO if they so choose. Without having 
a view of ETP Holders' activity on other exchanges and off-exchange 
venues, the Exchange has no way of knowing whether this proposed rule 
change would result in any ETP Holder directing orders to the Exchange 
in order to qualify for the new credits. However, the Exchange believes 
that the proposal represents a reasonable effort to provide an 
additional incentive for ETP Holders to direct their order flow to the 
Exchange and provide meaningful added levels of liquidity in order to 
qualify for the higher credit, thereby contributing to depth and market 
quality on the Exchange.
    The Exchange notes that volume-based incentives and discounts have 
been widely adopted by exchanges \15\ and are reasonable, equitable, 
and non-discriminatory because that are available to all ETP Holders on 
an equal basis and provide additional credits that are reasonably 
related to the value to an exchange's market quality and associated 
higher levels of market activity. The Exchange further notes that the 
proposed credits remain in line with credits currently offered on other 
markets to attract liquidity.\16\
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    \15\ See, e.g., Cboe BZX U.S. Equities Exchange (``BZX'') Fee 
Schedule, Footnote 1, Add Volume Tiers, available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/ (tiers 
providing enhanced rebates between $0.0028 and $0.0032 per share for 
displayed orders where BZX members meet certain volume thresholds).
    \16\ See, e.g., BZX Fee Schedule, Fee Codes and Associated Fees, 
available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/; Nasdaq Price List, Rebate to Add Displayed 
Designated Retail Liquidity, available at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    Given the competitive environment in which the Exchange currently 
operates, the proposed rule change constitutes a reasonable attempt to 
increase liquidity on the Exchange and improve the Exchange's market 
share relative to its competitors.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes its proposed change equitably allocates its 
fees among its market participants by fostering liquidity provision and 
stability in the marketplace. The Exchange believes that the new 
credits for displayed orders, MPL orders, and orders that set a new 
NYSE American BBO, if an ETP Holder's Adding ADV is at least 2,500,000 
shares, are equitable because the proposed credits are not unreasonably 
high in comparison to credits paid by other exchanges for orders that 
provide liquidity.\17\ The Exchange also believes the proposed rule 
change would improve market quality for all market participants on the 
Exchange and, as a consequence, attract more liquidity to the Exchange, 
thereby improving market-wide quality and price discovery.
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    \17\ See note 15, supra.
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    As previously noted, the Exchange believes that 6 ETP Holders 
currently qualify for the proposed new credits, and all ETP Holders 
could qualify for the proposed credit for setting a new BBO if they so 
choose. Without having a view of ETP Holders' activity on other 
exchanges and off-exchange venues, the Exchange has no way of knowing 
whether this proposed rule change would result in any ETP Holder 
directing orders to the Exchange in order to qualify for the new 
credits. However, the Exchange believes that the proposed credits are 
reasonable, as they would provide an additional incentive for ETP 
Holders to direct order flow to the Exchange and provide meaningful 
added levels of liquidity in order to qualify for the higher credits, 
thereby contributing to depth and market quality on the Exchange.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. Many ETP Holders would 
be eligible to qualify for the proposed credits by directing order flow 
to the Exchange that meets the Adding ADV requirement, and ETP Holders 
that currently qualify for credits associated with adding liquidity on 
the Exchange will continue to receive such credits when they provide 
liquidity to the Exchange. The Exchange believes that these 
opportunities for ETP Holders to receive additional credits when they 
provide liquidity will further attract order flow and liquidity to the 
Exchange for the benefit of investors generally. As to those market 
participants that do not presently qualify for the adding liquidity 
credits, the proposal will not adversely impact their existing pricing 
or their ability to qualify for these or other credits provided by the 
Exchange.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, ETP Holders 
are free to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value.

[[Page 30754]]

    The Exchange believes it is not unfairly discriminatory to provide 
higher credits for ETP Holders' displayed orders, MPL orders, and 
orders setting a new BBO on NYSE American, who meet the Adding ADV 
requirement as described above, because the proposed credits would be 
provided on an equal basis to all similarly situated ETP Holders that 
add liquidity to the Exchange, who would all be eligible for the same 
credits if they meet such requirement on an equal basis.
    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. The Exchange 
believes the proposed credits would incentivize ETP Holders to send 
more orders to the Exchange and to increase quoting on the Exchange in 
order to qualify for the proposed credits, which would support the 
quality of price discovery on the Exchange and provide additional 
liquidity for incoming orders.
    Finally, the submission of orders to the Exchange is optional for 
ETP Holders in that they can choose whether to submit orders to the 
Exchange and, if they do, the extent of activity in this regard. 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,\18\ 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 change would encourage the submission of additional 
liquidity and order flow to a public exchange, thereby promoting market 
depth, price discovery, and transparency and enhancing order execution 
opportunities for ETP Holders. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \19\
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    \18\ 15 U.S.C. 78f(b)(8).
    \19\ Regulation NMS, 70 FR at 37498-99.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed change would continue to incentivize market participants to 
direct providing order flow to the Exchange. Greater liquidity benefits 
all market participants on the Exchange by providing more trading 
opportunities and encourages ETP Holders to send orders, thereby 
contributing to robust levels of liquidity for the benefit of all 
market participants. The proposed credits would be available to all 
similarly-situated market participants, and thus, 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 exchanges and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As noted 
above, the Exchange's market share of trading in Tapes A, B, and C 
securities combined is less than 1%. In such an environment, the 
Exchange must continually adjust its fees and rebates to remain 
competitive with other exchanges and 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.

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) \20\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \21\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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) \22\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \22\ 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-NYSEAMER-2020-35 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-NYSEAMER-2020-35. 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

[[Page 30755]]

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-
NYSEAMER-2020-35 and should be submitted on or before June 10, 2020.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10813 Filed 5-19-20; 8:45 am]
 BILLING CODE 8011-01-P