[Federal Register Volume 89, Number 58 (Monday, March 25, 2024)]
[Notices]
[Pages 20744-20747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06171]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99773; File No. SR-NYSENAT-2024-10]


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

March 19, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 14, 2024, NYSE National, Inc. (``NYSE National'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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\ 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 (1) include a rebate for non-tiered orders 
removing liquidity in

[[Page 20745]]

securities priced at or above $1.00 that do not execute at a price 
better than the contra-side NBBO; and (2) delete Removing Tiers 4 and 5 
as obsolete. The Exchange proposes to implement the rule change on 
March 1, 2024. The proposed change is available on the Exchange's 
website at www.nyse.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Schedule of Fees and Rebates 
(``Fee Schedule'') to (1) include a rebate for non-tiered orders 
removing liquidity in securities priced at or above $1.00 that do not 
execute at a price better than the contra-side NBBO; and (2) delete 
Removing Tiers 4 and 5 as obsolete.
    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 removing liquidity to the Exchange.
    The Exchange proposes to implement the rule change on March 1, 
2024.
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.'' \3\
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    \3\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
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    As the Commission itself has recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\4\ Indeed, equity trading is currently dispersed across 16 
exchanges,\5\ 31 alternative trading systems,\6\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available 
information, no single exchange has more than 18% of the market.\7\ 
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%.\8\
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    \4\ 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'').
    \5\ 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.
    \6\ 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.
    \7\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
    \8\ 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 can vary from 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 order flow to the 
Exchange. As described above, ETP Holders have a choice of where to 
send their order flow.
    The Exchange proposes to add a rebate of $0.0016 per share for non-
tiered orders removing liquidity in securities priced at or above $1.00 
that do not execute at a price better than the contra-side NBBO, which 
currently receive no rebate. The current rate of ``no charge'' for 
removing liquidity that executes at a price better than the contra-side 
NBBO would remain unchanged. The proposed rebate is competitive and 
would be similar to the rebates provided by other markets for non-
tiered orders removing liquidity.\9\ Because this rebate for non-tiered 
orders removing liquidity would be greater than the $0.0007 rebate per 
share currently available under Removing Tier 5 and the $0.0015 rebate 
per share currently available under Removing Tier 4, the Exchange 
proposes to delete Removing Tiers 4 and 5 as obsolete.
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    \9\ See, e.g., Cboe EDGA Exchange Fee Schedule, available at 
https://www.cboe.com/us/equities/membership/fee_schedule/edga/ 
(providing $0.0016 standard rebate for removing displayed 
liquidity).
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    The Exchange believes that the proposed rebate of $0.0016 per share 
for non-tiered orders removing liquidity that do not execute at a price 
better than the contra-side NBBO will incentivize more ETP Holders to 
route liquidity-removing order flow to the Exchange. The Exchange 
believes that the increased order flow that may result from these 
proposed changes would in turn support the quality of price discovery 
on the Exchange and provide additional price improvement opportunities 
for incoming orders.
    As noted, the Exchange operates in a competitive environment. The 
Exchange

[[Page 20746]]

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 firms 
generally, the Exchange believes that with the proposed change, 
additional ETP Holders could choose to direct order flow to 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.
    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 Regulation NMS, supra note 4, at 37499.
    \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 while aligning the Exchange's fees with 
those charged by other markets. Specifically, the proposed rebate of 
$0.0016 for non-tiered orders removing liquidity in securities priced 
at or above $1.00 that do not execute at a price better than the 
contra-side NBBO is reasonable because it is competitive when compared 
to the rebates offered by other markets for non-tiered orders removing 
liquidity.\14\ Additionally, because this rebate for non-tiered orders 
removing liquidity would be greater than the $0.0007 rebate per share 
currently available under Removing Tier 5 and the $0.0015 rebate per 
share currently available under Removing Tier 4, the Exchange believes 
it is reasonable to delete Removing Tiers 4 and 5 as obsolete. The 
Exchange further believes that not offering a non-tiered rebate for 
removing orders that execute at a price better than the contra-side 
NBBO is reasonable because such orders receive the benefit of an 
execution at a price superior to the best protected quote in the 
national market system (including the Exchange's best protected bid or 
offer). The Exchange notes that this is in line with current Exchange 
Removing Tiers 1-5.
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    \14\ See supra note 10.
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    The Exchange believes that the proposal represents a reasonable 
effort to promote price discovery 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 Proposal Is an Equitable Allocation of Fees and Rebates
    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 removing 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 providing a rebate of $0.0016 for non-
tiered orders removing liquidity in securities priced at or above $1.00 
that do not execute at a price better than the contra-side NBBO and 
deleting the obsolete Removing Tiers 4 and 5 is an equitable allocation 
of fees and credits. The Exchange believes that providing such a rebate 
for non-tiered orders removing liquidity will encourage executions on 
the Exchange because it is competitive and would be similar to the 
rebates provided by other markets for non-tiered orders removing 
liquidity.\15\ To the extent that the proposed change attracts order 
flow to the Exchange, this order flow would make the Exchange a more 
competitive venue for, among other things, order execution. Thus, the 
Exchange believes the proposed rule change would continue to improve 
market quality for all market participants on the Exchange and, as a 
consequence, continue to attract more order flow to the Exchange, 
thereby improving market-wide quality and price discovery.
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    \15\ See id.
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    The Exchange further believes that the proposal constitutes an 
equitable allocation of fees and credits because all similarly situated 
ETP Holders and other market participants would be eligible for the 
same general and tiered rebates for removing liquidity. Moreover, the 
proposed change is equitable because the proposed rebates would apply 
equally to all similarly situated ETP Holders. The proposal neither 
targets nor will it have a disparate impact on any particular category 
of market participant.
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 $0.0016 rebate 
per share for non-tiered orders removing liquidity in securities priced 
at or above $1.00 that do not execute at a price better than the 
contra-side NBBO, and the same deletion of obsolete Removing Tiers 4 
and 5. Accordingly, no ETP Holder already operating on the Exchange 
would be disadvantaged by the proposed allocation of fees and credits.
    The Exchange further believes that the proposed change would not 
permit unfair discrimination among ETP

[[Page 20747]]

Holders because the non-tiered and 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 
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,\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, 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.'' \17\
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    \16\ 15 U.S.C. 78f(b)(8).
    \17\ 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-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 rebate for non-tiered orders removing liquidity 
in securities priced at or above $1.00 that do not execute at a price 
better than the contra-side NBBO 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 rebates 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) \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-NYSENAT-2024-10 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-2024-10. 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 
10:00 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. 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-NYSENAT-2024-10, and 
should be submitted on or before April 15, 2024.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06171 Filed 3-22-24; 8:45 am]
BILLING CODE 8011-01-P