[Federal Register Volume 86, Number 31 (Thursday, February 18, 2021)]
[Notices]
[Pages 10145-10149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03215]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91110; File No. SR-NYSENAT-2021-02]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its 
Schedule of Fees and Rebates

February 11, 2021.
    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 February 1, 2021, NYSE National, Inc. (``NYSE National'' 
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 Schedule of Fees and Rebates 
(``Fee Schedule'') to modify the requirements to qualify for the Adding 
Tier 1 and 2 and Removing Tier 1. The Exchange proposes to implement 
the rule change on February 1, 2021. 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 Schedule of Fees and Rebates 
(``Fee Schedule'') to modify the requirements to qualify for the Adding 
Tier 1 and 2 and Removing Tier 1.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing and liquidity-removing orders by offering further incentives 
for ETP Holders to send additional displayed and non-displayed 
liquidity to the Exchange.
    The Exchange proposes to implement the rule change on February 1, 
2021.
Current Market and Competitive Environment
    The Exchange operates in a highly 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.'' \4\
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    \4\ 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.'' 
\5\ Indeed, equity trading is currently dispersed across 16 
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer

[[Page 10146]]

internalizers and wholesalers. Based on publicly-available information, 
no single exchange has more than 16% of the market.\8\ Therefore, no 
exchange possesses significant pricing power in the execution of equity 
order flow. More specifically, the Exchange's share of executed volume 
of equity trades in Tapes A, B and C securities is less than 2%.\9\
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    \5\ 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'').
    \6\ 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.
    \7\ 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.
    \8\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \9\ 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 products, in 
response to fee changes. While it is not possible to know a firm's 
reason for moving order flow, the Exchange believes that one such 
reason is because of fee changes at any of the registered exchanges or 
non-exchange trading venues to which a firm routes order flow. These 
fees vary month to month, and not all are publicly available. With 
respect to non-marketable order flow that would provide liquidity on an 
exchange, ETP Holders can choose from any one of the 16 currently 
operating registered exchanges to route such order flow. Accordingly, 
competitive forces constrain the Exchange's transaction fees, and 
market participants can readily trade on competing venues if they deem 
pricing levels at those other venues to be more favorable.
    The Exchange utilizes a ``taker-maker'' or inverted fee model to 
attract orders that provide liquidity at the most competitive prices. 
Under the taker-maker model, offering rebates for taking (or removing) 
liquidity increases the likelihood that market participants will send 
orders to the Exchange to trade with liquidity providers' orders. This 
increased taker order flow provides an incentive for market 
participants to send orders that provide liquidity. The Exchange 
generally charges fees for order flow that provides liquidity. These 
fees are reasonable due to the additional marketable interest (in part 
attracted by the Exchange's rebate to remove liquidity) with which 
those order flow providers can trade.
Proposed Rule Change
    To respond to this competitive environment, the Exchange proposes 
the following changes to its Fee Schedule designed to provide order 
flow providers with additional incentives to route liquidity-providing 
order flow to the Exchange. As described above, ETP Holders with 
liquidity-providing order flow have a choice of where to send that 
order flow.
Proposed Changes to Adding Tier 1 and Adding Tier 2
    Under current Adding Tier 1, ETP Holders that add liquidity to the 
Exchange in securities with a per share price of $1.00 or more and that 
have at least 0.25% or more Adding ADV as a percentage of US CADV are 
charged a fee of $0.0020 per share for adding displayed orders in Tape 
A, B and C securities and $0.0024 per share for adding non-displayed 
orders in Tape A, B and C securities.
    The Exchange proposes to modify the requirements to qualify for 
Adding Tier 1 by adopting an alternative qualification basis for the 
Adding Tier 1 fee. As proposed, ETP Holders would qualify for the 
current fees by having at least 0.25% or more Adding ADV as a 
percentage of US CADV or at least 30 million shares of Adding ADV. The 
Exchange does not propose any changes to the Adding Rate for Adding 
Tier 1, and the rate for orders that add liquidity under the Adding 
Tier 1 would remain unchanged.
    Similarly, under current Adding Tier 2, ETP Holders that add 
liquidity to the Exchange in securities with a per share price of $1.00 
or more and that have at least 0.13% or more Adding ADV as a percentage 
of US CADV are charged a fee of $0.0022 per share for adding displayed 
orders in Tape A, B and C securities.
    The Exchange proposes to revise Adding Tier 2 by adopting an 
alternative qualification basis for the tier. As proposed, ETP Holders 
would qualify for the current rebate by having at least 0.13% or more 
Adding ADV as a percentage of US CADV or at least 16 million shares or 
more Adding ADV. The Exchange does not propose any changes to the 
Adding Rate for Adding Tier 2, and the rate for such orders that add 
liquidity under the Adding Tier 2 would remain unchanged.
    The Exchange believes that introducing alternative criteria for ETP 
Holders to qualify for Adding Tier 1 and Adding Tier 2 will allow 
greater numbers of ETP Holders to potentially qualify for the tier, and 
will incentivize more ETP Holders to route their liquidity-providing 
order flow to the Exchange in order to qualify for the tier. This in 
turn 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 fee to the 
level of orders sent by an ETP Holder that add liquidity, the 
Exchange's fee structure would incentivize ETP Holders to submit more 
orders that add liquidity to the Exchange, thereby increasing the 
potential for price improvement to incoming marketable orders submitted 
to the Exchange.
    As noted above, the Exchange operates in a competitive environment, 
particularly as relates to attracting non-marketable orders, which add 
liquidity to the Exchange. The Exchange does not know how much order 
flow ETP Holders choose to route to other exchanges or to off-exchange 
venues. Based on the profile of liquidity-adding firms generally, the 
Exchange believes that additional ETP Holders could qualify for the 
tiered rate under the new qualification criteria if they choose to 
direct order flow to, and increase quoting on, the Exchange. However, 
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 additional ETP Holders 
directing orders to the Exchange in order to qualify for the Adding 
Tier 1 and Adding Tier 2 rates.
    The Exchange proposes the non-substantive change of deleting ``or 
more'' following the amount of Adding ADV as a percentage of US CADV 
required to qualify for the Adding Tier 1, Adding Tier 2, Adding Tier 
4, Adding Tier 4 and Non-Displayed Adding Tier 1. The designation ``at 
least'' before the relevant amount of Adding ADV in each tier renders 
the phrase ``or more'' after the amount redundant.
Proposed Changes to Removing Tier 1
    Under current Removing Tier 1, the Exchange provides a rebate of 
$0.0030 per share to ETP Holders that remove liquidity from the 
Exchange in securities with a per share price of $1.00 or more and that 
have a combined Adding ADV and Removing ADV of at least 0.18% as a 
percentage of US CADV and at least 250,000 of Adding ADV.
    The Exchange proposes to revise Removing Tier 1 by adopting an 
alternative qualification basis for the tier. As proposed, ETP Holders 
would qualify for the current rebate by having at least 250,000 Adding 
ADV and a combined Adding ADV and Removing ADV of at least (1) 0.18% as 
a percentage of US CADV, or (2) 21.5 million shares ADV. The Exchange 
does not propose any changes to the Removing Rate for Orders that 
removed liquidity that qualify for Removing Tier 1, and the rate for 
such orders under

[[Page 10147]]

Removing Tier 1 would remain unchanged.
    The Exchange believes that providing an alternative way for ETP 
Holders to qualify for Removing Tier 1 of at least 21.5 million shares 
ADV will allow greater numbers of ETP Holders to qualify for the tier, 
and will incentivize more ETP Holders to route liquidity-removing order 
flow to the Exchange in order to qualify for the tier. This is turn 
would support the quality of price discovery on the Exchange and 
provide additional price improvement opportunities for incoming orders. 
As described above, ETP Holders with liquidity-removing order flow have 
a choice of where to send that order flow. The Exchange believes that 
as a result of the proposed change to Removing Tier 1, more ETP Holders 
will choose to route their liquidity-removing order flow to the 
Exchange in order to qualify for the credit for removing liquidity 
associated with Removing Tier 1 given that the requirements to qualify 
have been reduced.
    As noted, the Exchange operates in a competitive environment. The 
Exchange does not know how much order flow ETP Holders choose to route 
to other exchanges or to off-exchange venues. Based on the profile of 
liquidity-adding firms generally, the Exchange believes that additional 
ETP Holders could qualify for the tiered rate under the new 
qualification criteria if they choose to direct order flow to, and 
increase quoting on, the Exchange. 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 additional ETP Holders directing orders to the Exchange 
in order to qualify for the Removing Tier 1 rate.
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that ETP 
Holders 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,\10\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 competitive 
market. 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.'' \12\ While Regulation 
NMS has enhanced competition, it has also fostered a ``fragmented'' 
market structure where trading in a single stock can occur across 
multiple trading centers. When multiple trading centers compete for 
order flow in the same stock, the Commission has recognized that ``such 
competition can lead to the fragmentation of order flow in that 
stock.'' \13\
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    \12\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
    \13\ See Securities Exchange Act Release No. 61358, 75 FR 3594, 
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on 
Equity Market Structure).
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    Given the current competitive environment, the Exchange believes 
that the proposal represents a reasonable attempt to attract additional 
order flow to the Exchange. Specifically, the Exchange believes that 
the proposed revisions to Adding Tiers 1 and 2 and Removing Tier 1 are 
reasonable because they would promote execution opportunities for ETP 
Holders routing order flow to the Exchange.
    The Exchange believes that the proposal as a whole represents a 
reasonable effort to promote price improvement and enhanced order 
execution opportunities for ETP Holders. All ETP Holders would benefit 
from the greater amounts of liquidity on the Exchange, which would 
represent a wider range of execution opportunities.
    The Exchange further believes that removing a redundant phrase from 
the Adding Tier 1, Adding Tier 2, Adding Tier 4, Adding Tier 4 and Non-
Displayed Adding Tier 1 would also add clarity and transparency to the 
Schedule of Fees and Rebates.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes the proposed rule change equitably allocates 
its fees among its market participants. The proposed change would 
continue to encourage ETP Holders to both submit additional liquidity 
to the Exchange and execute orders on the Exchange, thereby 
contributing to robust levels of liquidity, to the benefit of all 
market participants.
    The Exchange believes that modifying Adding Tiers 1 and 2 and 
Removing Tier 1 would encourage the submission and removal of 
additional liquidity from the Exchange, thus enhancing order execution 
opportunities for ETP Holders from the substantial amounts of liquidity 
present on the Exchange. All ETP Holders would benefit from the greater 
amounts of liquidity that would be present on the Exchange, which would 
provide greater execution opportunities.
    The Exchange believes the proposed rule change would also improve 
market quality for all market participants seeking to remove liquidity 
on the Exchange and, as a consequence, attract more liquidity to the 
Exchange, thereby improving market-wide quality. The proposal neither 
targets nor will it have a disparate impact on any particular category 
of market participant.
    Specifically, the Exchange believes that the proposal constitutes 
an equitable allocation of fees because all similarly situated ETP 
Holders and other market participants would be eligible for the same 
general and tiered rates and would be eligible for the same fees and 
credits. Moreover, the proposed change is equitable because the revised 
fees would apply equally to all similarly situated ETP Holders.
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.
    Moreover, the proposal neither targets nor will it have a disparate 
impact on any particular category of market participant. The Exchange 
believes that the proposal does not permit unfair discrimination 
because the proposal would be applied to all similarly situated ETP 
Holders and all ETP Holders would be subject to the same modified 
Adding Tiers 1 and 2 and Removing Tier 1. Accordingly, no ETP Holder 
already operating on the Exchange would be disadvantaged by

[[Page 10148]]

the proposed allocation of fees and credits.
    The Exchange further believes that the proposed changes would not 
permit unfair discrimination among ETP Holders because the tiered rates 
are available equally to all ETP Holders. As described above, in 
today's competitive marketplace, order flow providers have a choice of 
where to direct liquidity-providing order flow, and the Exchange 
believes there are additional ETP Holders that could qualify if they 
chose to direct their order flow to the Exchange.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\14\ 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 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.'' \15\
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    \14\ 15 U.S.C. 78f(b)(8).
    \15\ 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. As described above, the Exchange 
believes that the proposed change would provide additional incentives 
for market participants to route liquidity-providing and liquidity-
removing orders 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. The proposed revised fees 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. 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) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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-NYSENAT-2021-02 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-NYSENAT-2021-02. 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; the Commission does not edit 
personal identifying information from submissions. 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-NYSENAT-2021-02 and should 
be submitted on or before March 11, 2021.


[[Page 10149]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-03215 Filed 2-17-21; 8:45 am]
BILLING CODE 8011-01-P