[Federal Register Volume 88, Number 138 (Thursday, July 20, 2023)]
[Notices]
[Pages 46820-46823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-15356]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97909; File No. SR-NYSE-2023-26]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Price List

July 14, 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 June 30, 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 provide for an 
alternate way for member organizations to qualify for the market at-
the-close (``MOC'') and limit at-the-close (``LOC'') Tier 3. 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 provide for an 
alternate way for member organizations to qualify for the MOC/LOC Tier 
3.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct closing 
orders in NYSE-listed securities by providing an alternate way for 
member organizations to send additional auction flow that will 
incentivize member organizations to send closing liquidity to achieve 
lower fees and encourage greater liquidity at the closing auction.
    The Exchange proposes to implement the fee changes effective July 
3, 2023.
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.'' \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
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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).

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[[Page 46821]]

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 less than 12%.\9\
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    \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 https://markets.cboe.com/us/equities/market_share/.
    \9\ See id.
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    In addition, in light of this crowded competitive landscape for 
order flow, including at the close, the Exchange does not have a 
monopoly over where closing orders in NYSE-listed securities are 
executed. Indeed, competition with respect to these orders in NYSE-
listed securities is fierce, not only because of the availability of 
the Cboe Exchange, Inc. (``Cboe'') Market Close, but also, and more 
relevant, because of the internalization of MOC order flow by some of 
the largest broker-dealers.\10\ In the currently highly competitive 
national market system, numerous exchanges and other order execution 
venues compete for order flow intraday as well as at the close, and 
competition for closing orders is robust.
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    \10\ There are at least seven broker-dealer sponsored products 
competing for volume at the close, including Credit Suisse's CLOSEX; 
Instinet's Market-on-Close Cross; Morgan Stanley's Market-on-Close 
Aggregator (MOCHA); Bank of America's Instinct X[supreg] and Global 
Conditional Cross; JP Morgan's JPB-X; Piper Sandler's On-Close Match 
Book; and Goldman Sachs' One Delta Close Facility (ODCF).
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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. With respect to closing order 
flow, member organizations can choose among multiple options of where 
to execute such orders. 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.
    The proposed change responds to the current competitive environment 
where order flow providers have a choice of where to direct orders in 
NYSE-listed securities, including at the close, by modifying 
requirements in order to provide an additional way for member 
organizations to qualify for a MOC/LOC tier and encourage additional 
liquidity to the Exchange.
Proposed Rule Change
    Currently, for MOC/LOC Tier 3, the Exchange charges $0.0009 per 
share for MOC orders and $0.0009 per share for LOC orders from any 
member organization executing in the current billing month (1) an 
average daily trading volume (``ADV'') of MOC activity on the NYSE of 
at least 0.20% of NYSE consolidated ADV (``CADV''),\11\ (2) an ADV of 
the member organization's total close activity (MOC/LOC and other 
executions at the close) on the NYSE of at least 0.30% of NYSE CADV, 
and (3) whose MOC activity comprised at least 35% of the member 
organization's total close activity (MOC/LOC and other executions at 
the close).
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    \11\ ADV and CADV are defined in footnote * of the Price List.
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    The Exchange proposes to modify the third requirement by adding an 
alternate way for member organizations to qualify for the MOC/LOC Tier 
3. As proposed, member organizations that meet the first two 
requirements would be able to satisfy the third requirement and qualify 
for the tier if the member organization has either MOC activity 
comprised at least 35% of the member organization's total close 
activity (MOC/LOC and other executions at the close), which is the 
current requirement, or executes an ADV of D Order executions at the 
close of at least 30 million shares. The Exchange proposes no changes 
to the other requirements or to the fees.
    The purpose of the proposed change is to increase the ability for 
order flow providers to send greater marketable and other liquidity at 
the closing auction. As described above, member organizations with 
closing orders have a choice of where to send those orders. The 
Exchange believes that, by offering an alternate way for member 
organizations to qualify for the fees, more member organizations will 
choose to route greater marketable and other liquidity to the Exchange 
at the close. Currently, a number of member organizations qualify for 
MOC/LOC Tier 3. The Exchange cannot predict with certainty how many 
member organizations would avail themselves of the opportunity offered 
by the proposed change but believes that at least 1-5 member 
organizations could choose to execute the required volume of D Orders 
to qualify for the tier based on the additional qualification method.
    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 4, 70 FR at 37499.
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    In light of the competitive environment in which the Exchange 
currently operates, the proposed rule change is a reasonable attempt to 
increase liquidity on the Exchange and improve the Exchange's market 
share relative to its competitors. The Exchange believes the proposed 
change is also reasonable because it is designed to attract higher 
volumes of orders transacted on the Exchange by member

[[Page 46822]]

organizations during the closing auction. The Exchange's closing 
auction is a recognized industry benchmark,\15\ and member 
organizations receive a substantial benefit from the Exchange in 
obtaining high levels of executions at the Exchange's closing price on 
a daily basis.
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    \15\ For example, the pricing and valuation of certain indices, 
funds, and derivative products require primary market prints.
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    The Exchange believes that the proposed additional way to qualify 
for MOC/LOC Tier 3 is a reasonable way to both encourage greater 
liquidity and achieve the proposed discounts. Higher volumes of closing 
orders contribute to the quality of the Exchange's closing auction by 
leading the price discovery process. Closing orders are also a valuable 
tool for market participants, as any closing order priced more 
aggressively than the closing auction price would be filled in the 
auction. In addition, as noted above, in the currently highly 
competitive national market system, competition for closing orders 
among exchanges, ATSs and other market execution venues is robust.
The Proposed Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes the proposal equitably allocates fees and 
credits among market participants because all member organizations that 
participate on the Exchange may qualify for the proposed alternate way 
to qualify for MOC/LOC Tier 3 on an equal basis. The Exchange believes 
its proposal equitably allocates its fees and credits among its market 
participants by fostering liquidity provision and stability in the 
marketplace.
    The Exchange believes that the proposed additional qualification 
method is an equitable allocation of fees because the proposed change 
will incentivize member organizations to send additional liquidity to 
achieve lower fees and encourage greater marketable and other liquidity 
at the closing auction. Higher volumes of closing orders contribute to 
the quality of the Exchange's closing auction and provide market 
participants whose orders participate in the close with a greater 
opportunity for execution of orders on the Exchange, thereby 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 utilize 
closing orders on the Exchange.
The Proposed Fee Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, member 
organizations are free to disfavor the Exchange's pricing if they 
believe that alternatives offer them better value.
    The proposed additional way to satisfy the requirements for MOC/LOC 
Tier 3 is not unfairly discriminatory because the proposal would be 
applied to all similarly situated member organizations and other market 
participants, who would all be subject to the same fees, requirements, 
and discounts on an equal basis. For the same reason, the proposal 
neither targets nor will it have a disparate impact on any particular 
category of market participant. Accordingly, no member organization 
already operating on the Exchange would be disadvantaged by this 
allocation of fees. Further, 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,\16\ 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, 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. The Exchange believes that this 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. 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.'' \17\
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    \16\ 15 U.S.C. 78f(b)(8).
    \17\ 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 closing 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.
    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.
    Finally, as previously noted, the Exchange operates in a highly 
competitive market for closing orders in which market participants can 
readily favor competing venues if they deem fee levels at a particular 
venue to be excessive or rebate opportunities available at other venues 
to be more

[[Page 46823]]

favorable. In such an environment, the Exchange must continually adjust 
its fees and rebates to remain competitive with other exchanges and 
non-exchange trading venues that are not subject to the same 
transparency or statutory standards applicable to exchanges relating to 
setting fees. Because competitors are free to modify their own fees and 
credits in response, some without the requirement of making a filing 
with the Commission, and because market participants may readily adjust 
their order routing practices, the Exchange believes that any degree to 
which fee changes in this market may impose any burden on competition 
would be extremely limited.

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) \18\ 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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    \18\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSE-2023-26 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-2023-26. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSE-2023-26 and should be 
submitted on or before August 10, 2023.

    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,
Deputy Secretary.
[FR Doc. 2023-15356 Filed 7-19-23; 8:45 am]
BILLING CODE 8011-01-P