[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