[Federal Register Volume 88, Number 57 (Friday, March 24, 2023)]
[Notices]
[Pages 17907-17910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06058]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97170; File No. SR-NYSE-2023-18]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
March 20, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on March 13, 2023, 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 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 amend the charges
for transactions that remove liquidity from the Exchange. The Exchange
proposes to implement the fee changes effective March 13, 2023. 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 it Price List to amend the charges
for transactions that remove liquidity from the Exchange.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
removing orders by offering further incentives for member organizations
to send additional liquidity to the Exchange.
The Exchange proposes to implement the fee changes effective March
13, 2023.\4\
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\4\ The Exchange originally filed to amend the Price List on
March 1, 2023 (SR-NYSE-2023-16). SR-NYSE-2023-16 was withdrawn on
March 13, 2023 and replaced by this filing.
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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. 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.'' \5\
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\5\ 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.'' \6\ Indeed, cash equity trading is currently dispersed
across 16 exchanges,\7\ numerous alternative trading systems,\8\ and
broker-dealer
[[Page 17908]]
internalizers and wholesalers, all competing for order flow. Based on
publicly-available information, no single exchange currently has more
than 17% market share.\9\ 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 less than 12%.\10\
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\6\ 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).
\7\ 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.
\8\ 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.
\9\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at http://markets.cboe.com/us/equities/market_share/.
\10\ 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 the firm routes order flow. Accordingly, competitive forces
compel the Exchange to use exchange transaction fees and credits
because market participants can readily trade on competing venues if
they deem pricing levels at those other venues to be more favorable.
In response to this competitive environment, the Exchange has
established incentives for member organizations who submit orders that
remove liquidity from the Exchange. These incentives offer a base
remove fee that decreases as the member organization provides
additional removing liquidity to the Exchange. As detailed below, the
proposed higher fees are intended to encourage additional liquidity
removing order flow to a public exchange, which benefits all market
participants.
Proposed Rule Change
The Exchange currently offers a fee of $0.00290 in Tape A
securities and a fee of $0.00285 for Tape B and C securities for non-
Floor broker transactions if the member organization has an average
daily volume (``ADV'') that adds liquidity to the Exchange during the
billing month (``Adding ADV''),\11\ excluding liquidity added by a
Designated Market Maker (``DMM''), that is at least 2,000,000 ADV on
the NYSE in Tape A securities. The Exchange proposes to increase the
fee for removing in Tape B and C securities to $0.00295. The current
fee for removing in Tape A securities of $0.00290 and the requirements
to qualify for the fees would remain unchanged. Member organizations
that do not qualify for the proposed fee based on the current
requirements would receive the $0.0030 base remove rate for all tapes.
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\11\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
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In addition, the Exchange currently offers a fee of $0.00285 in
Tape A, B and C securities for non-Floor broker transactions if the
member organization has an Adding ADV, excluding liquidity added by a
DMM, that is at least 7,000,000 ADV in Tape A securities and 500,000
ADV in Tape B and Tape C securities combined during the billing month.
The Exchange proposes to increase the fee for removing in Tape B and C
securities to $0.00290. The current fee for removing in Tape A
securities of $0.00285 and the requirements to qualify for the fees
would remain unchanged. Member organizations that do not qualify for
the current and proposed fees based on the current requirements would
receive the $0.0030 base remove rate for all tapes.
The Exchange believes that the proposed changes, taken together,
will encourage submission of additional removing liquidity in Tape A, B
and C securities to qualify for lower fees, thereby promoting price
discovery and transparency and enhancing order execution opportunities
for member organizations. The proposal seeks to encourage member
organizations that are meeting or exceeding current ADV requirements to
send additional removing liquidity in order to meet the next level
requirements and therefore qualify for lower fees. As noted above, the
Exchange operates in a competitive environment, particularly as it
relates to attracting non-marketable orders, that remove liquidity to
the Exchange. The Exchange does not know how much order flow member
organizations choose to route to other exchanges or to off-exchange
venues. Without having a view of member organization's activity on
other exchanges and off-exchange venues, the Exchange has no way of
knowing whether this proposed rule change would result in any member
organization increasing or decreasing their directing of orders to the
Exchange.
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 (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, is designed to prevent fraudulent and
manipulative acts and practices and to promote just and equitable
principles of trade, 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) and (5).
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The Proposed Fee 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, supra note 3, 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
shift order flow, or discontinue to reduce use of certain categories of
products, in response to fee changes. Member organizations can choose
from any one of the 16 currently operating registered exchanges, and
numerous off-exchange venues, to route such order flow. Accordingly,
competitive forces constrain exchange transaction fees that relate to
orders 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 competitive environment, the proposal represents a
reasonable attempt to attract additional order flow to the Exchange by
adjusting the incentives for all market participants to send additional
order flow to a public exchange and increase the quality of order
execution on the Exchange's market, which benefits all market
participants.
[[Page 17909]]
More specifically, the Exchange believes that the proposed increase
to the fees for transactions that remove liquidity from the Exchange in
Tape A, B and C securities are reasonable. The purpose of these changes
is to encourage additional liquidity on the Exchange by providing
incentives for member organizations to send additional liquidity to
qualify for the next incentive level, which would result in lower fees
for removing liquidity for the member organization. The Exchange
believes that the proposal will continue to encourage additional
liquidity to a public exchange to qualify for lower fees for removing
liquidity in Tape A, B and Tape C securities, thereby promoting price
discovery and transparency and enhancing order execution opportunities
for member organizations. The proposal is thus reasonable because all
member organizations would benefit from such increased levels of
liquidity and from lower fees.
The Proposed Change Is an Equitable Allocation of Fees and Credits
The Exchange believes its proposal equitably allocates its fees
among its market participants by fostering liquidity provision and
stability in the marketplace.
The Exchange believes that, for the reasons discussed above, the
proposed changes taken together, will encourage member organizations to
send additional removing liquidity to achieve lower fees when removing
liquidity in Tape A, B and Tape C securities from the Exchange, thereby
increasing the number of orders that are executed on the Exchange,
promoting price discovery and transparency and enhancing order
execution opportunities and improving overall liquidity on a public
exchange. The Exchange also believes that the proposed change is
equitable because it would apply to all similarly situated member
organizations that remove liquidity in Tape A, B or Tape C securities.
As previously noted, the Exchange operates in a competitive
environment, particularly as it relates to attracting non-marketable
orders, which add liquidity to the Exchange. The Exchange does not know
how much order flow member organizations choose to route to other
exchanges or to off-exchange venues. Without having a view of member
organization's activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether the proposed rule change would
result in any member organization increasing or decreasing orders to
the Exchange. The Exchange notes that the proposed fees from removing
liquidity in Tape B and C securities are in line with what the Exchange
charges in Tape A securities. The proposed fees are also in line with
or better than what other exchanges charge. For example, the fee to
remove liquidity at Cboe BZX is $0.0030 per share.\15\ On MEMX, the fee
to remove liquidity is $0.0030 per share and $0.00295 per share if the
member (1) has an adding ADV of at least 0.50% of CADV and a removing
ADV of at least 0.25% of CADV, or (2) a total ADV of at least 1.00% of
CADV.\16\
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\15\ See Cboe BZX Equities Fee Schedule, available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
\16\ See MEMX Fee Schedule, available at https://info.memxtrading.com/fee-schedule/.
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The Proposed Fee Change Is Not Unfairly Discriminatory
The Exchange believe that the proposed rule is not unfairly
discriminatory for the following reasons.
The Exchange believes that that the proposed increased fees for
member organizations that remove liquidity in Tapes B and C securities
will, taken together, encourage submission of additional liquidity in
Tape A, B and Tape C securities to a public exchange in order to
qualify for lower fees for removing liquidity, thereby promoting price
discovery and transparency and enhancing order execution opportunities
for member organizations. The proposal does not permit unfair
discrimination because the proposed fees for removing liquidity would
be applied to all similarly situated member organizations and other
market participants, who would all be eligible for the same fees on an
equal basis. Accordingly, no member organization already operating on
the Exchange would be disadvantaged by this allocation of fees. The
Exchange believes it is not unfairly discriminatory to increase fees
for removing liquidity in as the proposed fees would be provided on an
equal basis to all member organizations. 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.
In addition, 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.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described above and 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,\17\ 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 fee change would encourage the submission of
additional liquidity to a public exchange, thereby promoting market
depth, price discovery, and transparency and enhancing order execution
opportunities for market participants. As a result, 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.'' \18\
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\17\ 15 U.S.C. 78f(b)(8).
\18\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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Intramarket Competition. The Exchange believes the proposed change
would not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
change is designed to attract additional orders to the Exchange. The
Exchange believes that the proposed changes would encourage market
participants to direct their liquidity-removing orders to the Exchange.
Greater overall order flow, trading opportunities, and pricing
transparency benefit all market participants on the Exchange by
enhancing market quality and continuing to encourage member
organizations to send orders, thereby contributing towards a robust and
well-balanced market ecosystem. The current and proposed fees would be
available to all similarly situated market participants, and, as such,
the proposed change would not impose a disparate burden on competition
among market participants on the Exchange. As noted, the proposal would
apply to all similarly situated member organizations on the same and
equal terms, who would benefit from the changes on the same basis.
Accordingly, the proposed change would not impose a disparate burden on
competition among market participants on the Exchange.
[[Page 17910]]
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. In such an
environment, the Exchange 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.
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 has become effective upon filing pursuant
to Section 19(b)(3)(A) \19\ of the Act and paragraph (f) thereunder. At
any time within 60 days of the filing of the 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.
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\19\ 15 U.S.C. 78s(b)(3)(A).
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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-2023-18 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-2023-18. 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-2023-18 and should be submitted on
or before April 14, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-06058 Filed 3-23-23; 8:45 am]
BILLING CODE 8011-01-P