[Federal Register Volume 87, Number 182 (Wednesday, September 21, 2022)]
[Notices]
[Pages 57741-57744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20378]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95798; File No. SR-NYSE-2022-43]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List To Reflect the Fee for Directed Orders Routed by 
the Exchange to an Alternative Trading System

September 15, 2022.
    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 September 7, 2022, 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 reflect the fee 
for Directed Orders routed by the Exchange to an alternative trading 
system (``ATS''). 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.

[[Page 57742]]

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 the NYSE Price List to reflect the 
fee for Directed Orders routed by the Exchange to an ATS. The Exchange 
proposes to implement the fee change effective September 9, 2022.
Background
    The Exchange operates in a highly competitive market. The 
Securities and Exchange Commission (``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.'' \4\
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    \4\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final 
Rule) (``Regulation NMS'').
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    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.'' \5\ Indeed, cash equity trading is currently dispersed 
across 16 exchanges,\6\ numerous alternative trading systems,\7\ and 
broker-dealer internalizers and wholesalers, all competing for order 
flow. Based on publicly available information, no single exchange 
currently has more than 17% market share.\8\ Therefore, no exchange 
possesses significant pricing power in the execution of cash equity 
order flow. More specifically, the Exchange's share of executed volume 
of equity trades in Tapes A, B and C securities is currently has less 
than 12%.\9\
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    \5\ 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).
    \6\ See Cboe U.S. Equities Market Volume Summary, available at 
https://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. 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 categories of 
products. While it is not possible to know a firm's reason for shifting 
order flow, the Exchange believes that one such reason is because of 
fee changes at any of the registered exchanges or non-exchange venues 
to which a firm routes order flow. Accordingly, competitive forces 
constrain exchange transaction fees because market participants can 
readily trade on competing venues if they deem pricing levels at those 
other venues to be more favorable.
Proposed Rule Change
    Pursuant to Commission approval, the Exchange adopted a new order 
type known as Directed Orders.\10\ A Directed Order is a Limit Order 
\11\ with instructions to route on arrival at its limit price to a 
specified ATS with which the Exchange maintains an electronic linkage. 
Under Exchange rules, the ATS to which a Directed Order is routed would 
be responsible for validating whether the order is eligible to be 
accepted, and if such ATS determines to reject the order, the order 
would be cancelled. Directed Orders must be designated with a Time in 
Force modifier of Day \12\ or IOC \13\ and are eligible to be 
designated for the Core Trading Session \14\ only. Directed Orders that 
are the subject of this proposed rule change would be routed to 
OneChronos LLC (``OneChronos'').
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    \10\ See Rule 7.31(f)(1). See also Securities Exchange Act 
Release No. 95423 (August 4, 2022), 87 FR 48741 (August 10, 2022) 
(SR-NYSE-2022-20).
    \11\ A Limit Order is defined in Rule 7.31(a)(2) as an order to 
buy or sell a stated amount of a security at a specified price or 
better.
    \12\ Pursuant to Rule 7.31(b)(1), any order to buy or sell 
designated Day, if not traded, will expire at the end of the 
designated session on the day on which it was entered.
    \13\ Pursuant to Rule 7.31(b)(2), a Limit Order may be 
designated with an Immediate-or-Cancel (``IOC'') modifier.
    \14\ The Core Trading Session for each security begins at 9:30 
a.m. Eastern Time and ends at the conclusion of Core Trading Hours. 
See Rule 7.34(a)(2). The term ``Core Trading Hours'' means the hours 
of 9:30 a.m. eastern time through 4 p.m. eastern time or such other 
hours as may be determined by the Exchange from time to time. See 
Rule 1.1.
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    In anticipation of the scheduled implementation of routing 
functionality to OneChronos,\15\ the Exchange proposes to amend the 
Price List to state that the Exchange will not charge a fee for 
Directed Orders routed to OneChronos. To reflect the no fee, the 
Exchange proposes to amend the current table under Transaction Fees. 
Specifically, under Routing Fee--per share, the Exchange proposes to 
adopt new rule text to state ``No fee for a Directed Order, as defined 
in Rule 7.31(f)(1), routed to OneChronos LLC'' for securities priced at 
or above $1.00. Additionally, the Exchange proposes to adopt similar 
rule text under Transaction Fees and Credits For Tape B and C 
Securities. Specifically, the Exchange proposes to amend the first 
bullet under Routing Fees. As proposed, the first bullet would state:
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    \15\ See https://www.nyse.com/publicdocs/nyse/notifications/trader-update/110000456275/OneChronos_August_2022_Trader_Update_Final.pdf.

    [cir] For securities at or above $1.00, no fee for a Directed 
Order, as defined in Rule 7.31(f)(1), routed to OneChronos LLC; 
$0.0005 per share in a NYSE American Auction; $0.0010 per share 
execution in an Away Market Auction at venues other than NYSE 
American; $0.0035 per share for all other executions, or $0.0030 if 
the member organization has adding ADV in Tapes A, B, and C combined 
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that is at least 0.20% of Tapes A, B and C CADV combined.

    The Exchange believes that the Directed Order functionality would 
facilitate additional trading opportunities by offering member 
organizations the ability to designate orders submitted to the Exchange 
to be routed to OneChronos for execution. The Exchange believes the 
functionality could create efficiencies for member organizations that 
choose to use the functionality by enabling them to send orders that 
they wish to route to OneChronos through the Exchange by leveraging 
order entry protocols already configured for their interaction with the 
Exchange. Member organizations that choose not to utilize Directed 
Orders would continue to be able to trade on the Exchange as they 
currently do.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\17\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and

[[Page 57743]]

other charges among its members, issuers and other persons using its 
facilities and does not unfairly discriminate between customers, 
issuers, brokers or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
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    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.'' \18\
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    \18\ See supra note 4.
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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 categories of 
products, in response to fee changes. Accordingly, changes to exchange 
transaction fees can have a direct effect on the ability of an exchange 
to compete for order flow.
    In particular, the Exchange believes the proposed rule change is a 
reasonable means to incent member organizations to utilize the Directed 
Order functionality and evaluate its efficacy. The proposed routing of 
orders to OneChronos is provided by the Exchange on a voluntary basis 
and no rule or regulation requires that the Exchange offer it. Nor does 
any rule or regulation require market participants to send orders to an 
ATS generally, let alone to OneChronos. The routing of orders to 
OneChronos would operate similarly to the Primary Only Order already 
offered by the Exchange's affiliates NYSE American LLC (``NYSE 
American''), NYSE Arca, Inc. (``NYSE Arca''), NYSE Chicago, Inc. 
(``NYSE Chicago'') and NYSE National, Inc. (``NYSE National'') 
(``collectively, the ``Affiliated Exchanges''). On the Affiliated 
Exchanges, a Primary Only Order is an order that is routed directly to 
the primary listing market on arrival, without being assigned a working 
time or interacting with interest on the order book of the exchange to 
which it was submitted.\19\
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    \19\ See NYSE American Rule 7.31E(f)(1); NYSE Arca Rule 7.31-
E(f)(1); NYSE Chicago Rule 7.31(f)(1); NYSE National Rule 
7.31(f)(1).
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    The Exchange believes its proposal equitably allocates its fees 
among its market participants. The Exchange believes that the proposal 
represents an equitable allocation of fees because it would apply 
uniformly to all member organizations, in that all member organizations 
will have the ability to designate orders submitted to the Exchange to 
be routed to OneChronos, and each such member organization would not be 
charged a fee when utilizing the new functionality. While the Exchange 
has no way of knowing whether this proposed rule change would serve as 
an incentive to utilize the new order type, the Exchange expects that a 
number of member organizations will utilize the new functionality 
because it would create efficiencies for member organizations by 
enabling them to send orders that they wish to route to OneChronos 
through the Exchange, thereby enabling them to leverage order entry 
protocols already configured for their interactions with the Exchange.
    The Exchange believes that the proposal is not unfairly 
discriminatory. The Exchange believes it is not unfairly discriminatory 
as the proposal to not charge a fee would be assessed on an equal basis 
to all member organizations that use the Directed Order functionality. 
The proposal to not charge a fee would also enable member organizations 
to evaluate the efficacy of the new functionality. Moreover, this 
proposed rule change neither targets nor will it have a disparate 
impact on any particular category of market participant. The Exchange 
believes that this proposal does not permit unfair discrimination 
because the changes described in this proposal would be applied to all 
similarly situated member organizations. Accordingly, no member 
organization already operating on the Exchange would be disadvantaged 
by the proposed allocation of fees. The Exchange further believes that 
the proposed rule change would not permit unfair discrimination among 
member organizations because the Directed Order functionality would be 
available to all member organizations on an equal basis and each such 
participant would not be charged a fee for using the functionality.
    Finally, the submission of orders to the Exchange is optional for 
member organizations in that they could choose whether to submit orders 
to the Exchange and, if they do, the extent of its activity in this 
regard. 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,\20\ 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. The Exchange believes that the proposed change 
furthers the Commission's goal in adopting Regulation NMS of fostering 
integrated competition among orders, which promotes ``more efficient 
pricing of individual stocks for all types of orders, large and 
small.'' \21\
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    \20\ 15 U.S.C. 78f(b)(8).
    \21\ See supra note 4.
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    Intramarket Competition. The Exchange believes the proposed 
amendment to its Price List would not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange believes the proposed rule change is a reasonable 
means to incent member organizations to utilize the Directed Order 
functionality and allow member organizations to evaluate its efficacy. 
The Directed Order functionality would be available to all member 
organizations and all member organizations that use the Directed Order 
functionality to route their orders to OneChronos will not be charged a 
routing fee. The proposed routing of orders to OneChronos is provided 
by the Exchange on a voluntary basis and no rule or regulation requires 
that the Exchange offer it. Member organizations have the choice 
whether or not to use the Directed Order functionality and those that 
choose not to utilize it will not be impacted by the proposed rule 
change. The Exchange also does not believe the proposed rule change 
would impact intramarket competition as the proposed rule change would 
apply to all member organizations equally that choose to utilize the 
Directed Order functionality, and therefore the proposed change would 
not impose a disparate burden on competition among market participants 
on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more favorable. As noted 
above, the Exchange's market share of intraday trading is currently 
less than 12%. In such an environment, the Exchange

[[Page 57744]]

must continually adjust its fees and rebates to remain competitive with 
other exchanges and with off-exchange venues. Because competitors are 
free to modify their own fees and credits in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange does not believe its proposed fee change can impose any 
burden on intermarket competition.

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) \22\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \23\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2022-43 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2022-43. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2022-43, and should be submitted on 
or before October 12, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20378 Filed 9-20-22; 8:45 am]
BILLING CODE 8011-01-P