[Federal Register Volume 89, Number 59 (Tuesday, March 26, 2024)]
[Notices]
[Pages 21077-21080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06339]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99804; File No. SR-NYSECHX-2024-12]


Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
Fee Schedule of NYSE Chicago, Inc.

March 20, 2024.
    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 11, 2024, the NYSE Chicago, Inc. (``NYSE Chicago'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 the Fee Schedule of NYSE Chicago, 
Inc. (the ``Fee Schedule'') to increase existing credits applicable to 
certain Exchange members. The Exchange proposes to implement the fee 
changes effective March 11, 2024. 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 the Fee Schedule to increase 
existing credits applicable to certain Exchange members. Specifically, 
the Exchange proposes to amend Section F.2 of the Fee Schedule to 
increase the Transaction Fee Credit and the Clearing Submission Fee 
Credit applicable to Clearing Brokers. The Exchange proposes to 
implement the fee changes effective March 11, 2024.\4\
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    \4\ The Exchange originally filed to amend the Price List on 
March 1, 2024 (SR-NYSECHX-2024-09). SR-NYSECHX-2024-09 was withdrawn 
on March 11, 2024 and replaced by this filing.
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Background
    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 National Market System 
(``NMS''), the Commission highlighted the importance of market forces 
in determining prices and Self-Regulatory Organizations (``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

[[Page 21078]]

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, equity trading is currently dispersed across 16 
exchanges,\7\ numerous alternative trading systems,\8\ and broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly available information, no single exchange currently 
has more than 20% market share.\9\ 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 1%.\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.
    \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. 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 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.
Proposed Rule Change
    Section F.2 of the Fee Schedule currently provides for a 
Transaction Fee Credit and a Clearing Submission Fee Credit and 
generally states that the total monthly fees owed by an Exchange-
registered Institutional Broker \11\ to the Exchange will be reduced 
(and Institutional Brokers will be paid for any unused credits) by the 
application of a Transaction Fee Credit and a Clearing Submission Fee 
Credit. Specifically, a Clearing Broker \12\ currently receives a 
``Transaction Fee Credit'' equal to 8% of the transaction fees received 
by the Exchange each month for agency trades executed through the 
Institutional Broker (i.e., Section E.3(a) fees) for the portion(s) of 
the transaction handled by the Clearing Broker. Similarly, a Clearing 
Broker currently receives a ``Clearing Submission Fee Credit'' equal to 
8% of the Clearing Submission Fees received by the Exchange pursuant to 
Section E.7 of the Fee Schedule for the portion(s) of the transaction 
handled by the Clearing Broker. Also, only Institutional Brokers that 
are members of the Financial Industry Regulatory Authority, Inc. are 
eligible for the Clearing Submission Fee Credit. The Transaction Fee 
Credit and the Clearing Submission Fee Credit are both provided by the 
Exchange to the Clearing Broker, who then passes on these credits to 
the Institutional Broker associated with the transaction.
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    \11\ The term ``Institutional Broker'' is defined in Article 1, 
Rule 1(n) to mean a member of the Exchange who is registered as an 
Institutional Broker pursuant to the provisions of Article 17 and 
has satisfied all Exchange requirements to operate as an 
Institutional Broker on the Exchange.; see also generally NYSE 
Chicago Article 17.
    \12\ Section F.2 of the Fee Schedule defines ``Clearing Broker'' 
as the Exchange-registered Institutional Broker that did not execute 
the trade, but acted as the broker for the ultimate Exchange 
Clearing Participant. ``Clearing Participant'' means a Participant 
which has been admitted to membership in a Qualified Clearing Agency 
pursuant to the provisions of the Rules of the Qualified Clearing 
Agency. See Article 1, Rule 1(ee).
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    The Exchange proposes to amend Section F.2 of the Fee Schedule by 
increasing both the Transaction Fee Credit and the Clearing Submission 
Fee Credit from 8% to 10%. The Exchange believes that increasing the 
Transaction Fee Credit and the Clearing Submission Fee Credit, which 
would result in reduced fees, would increase trading and post-trade 
activity on the Exchange.\13\
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    \13\ The Exchange previously amended the Fee Schedule to 
increase the Transaction Fee Credit and the Clearing Submission Fee 
Credit, from 5% to 8%. See Securities Exchange Act Release No. 96461 
(December 7, 2022), 87 FR 76225 (December 13, 2022) (SR-NYSECHX-
2022-28).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
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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.'' \16\
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    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
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    The Exchange believes that increasing the Transaction Fee Credit, 
which applies to executions effected on the Exchange, and the Clearing 
Submission Fee Credit, which applies to off-exchange executions cleared 
on the Exchange, from 8% to 10%, is reasonable because these credits 
are designed to incent trading, in the case of the Transaction Fee 
Credit, and clearing activity, in the case of the Clearing Submission 
Fee Credit, by Institutional Brokers. The Exchange believes increasing 
these credits, which would result in lower fees, is a reasonable means 
to further incentivize Institutional Brokers to conduct more of their 
trading and clearing activity on the Exchange.
    The Exchange believes that the proposal represents a reasonable 
effort to promote enhanced order execution opportunities as well as 
promote post-trade clearing submissions by Exchange members. The 
Exchange notes that market participants are free to shift their order 
flow to competing venues if they believe other markets offer more 
favorable fees and credits.
    On the backdrop of the competitive environment in which the 
Exchange currently operates, the proposed rule change is a reasonable 
attempt to attract additional order flow and increase liquidity on the 
Exchange and improve the Exchange's market share relative to its 
competitors.
The Proposed Fee Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes that the proposed increase to the Transaction 
Fee Credit and the Clearing Submission Fee Credit equitably allocates 
its fees and credits among its market participants. The Exchange 
believes it is equitable to provide Clearing Brokers with increased 
credits, which would

[[Page 21079]]

result in lower fees, because the credits would serve to incentivize 
members to conduct more of their trading and clearing activity on the 
Exchange.
    The Exchange also believes that the proposed increase to the 
Transaction Fee Credit and the Clearing Submission Fee Credit would 
encourage Institutional Brokers to conduct more of their trading and 
post-trade activity on the Exchange.
The Proposed Fee Change Is Not Unfairly Discriminatory
    The Exchange believes that increasing the level of the Transaction 
Fee Credit and the Clearing Submission Fee Credit is not unfairly 
discriminatory. The Exchange believes that the proposal does not permit 
unfair discrimination because the proposed increase to the Transaction 
Fee Credit and the Clearing Submission Fee Credit would be applied to 
all Clearing Brokers on an equal basis. Accordingly, no Exchange member 
already operating on the Exchange would be disadvantaged by the 
proposed allocation of fees and credits under the proposal. The 
Exchange further believes that the proposed fee change would not permit 
unfair discrimination among Clearing Brokers because the credits would 
be available equally to similarly situated Clearing Brokers. As 
described above, in today's competitive marketplace, market 
participants have a choice of where to direct their order flow or which 
market to transact on. The Exchange believes this proposal would 
benefit a number of members by lowering their current fees, regardless 
of whether or not they increase their trading and clearing activity on 
the Exchange.
    In the prevailing competitive environment, Exchange members are 
free to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value. Accordingly, no Exchange member 
already operating on the Exchange would be disadvantaged by the 
proposed allocation of the Exchange's fees and credits.
    Finally, the submission of orders to the Exchange is optional for 
Exchange members 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,\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 changes 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 all market participants on the Exchange. 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 
increase to the Transaction Fee Credit and the Clearing Submission Fee 
Credit would not impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange. The proposed 
change is designed to attract additional trading and post-trade 
activity to the Exchange. The Exchange believes that increasing the 
level of the Transaction Fee Credit and the Clearing Submission Fee 
Credit would incentivize market participants to direct more of their 
trading and post-trading activity to the Exchange, bringing with it 
additional execution opportunities for market participants and improved 
price transparency. Greater overall order flow, trading opportunities, 
and pricing transparency benefits all market participants on the 
Exchange by enhancing market quality. Additionally, the proposed 
changes would apply equally to all similarly situated Clearing Brokers, 
in that they would all be equally eligible for the credits available 
under Sections F.2 of the Fee Schedule.
    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 (i.e., excluding 
auctions) is currently less than 1%. 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.

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) of the Act \19\ and paragraph (f) of Rule 19b-4 
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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSECHX-2024-12 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-NYSECHX-2024-12. This 
file number should be included on the

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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-NYSECHX-2024-12 and should be submitted on or before April 16, 2024.
    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).

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06339 Filed 3-25-24; 8:45 am]
BILLING CODE 8011-01-P