[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Notices]
[Pages 43970-43972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10942]



[[Page 43970]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100125; File No. SR-NYSE-2024-27]


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

May 14, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 1, 2024, 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 and II 
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 Price List to introduce two new 
adding tiers for Midpoint Passive Liquidity (``MPL'') Orders that add 
liquidity to the Exchange. 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 its Price List to introduce two new 
adding tiers for MPL Orders that add liquidity to the Exchange.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member 
organizations to send additional displayed liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective May 1, 
2024.
Background
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. 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) (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.'' \4\ Indeed, cash equity trading is currently dispersed 
across 16 exchanges,\5\ numerous alternative trading systems,\6\ 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.\7\ 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%.\8\
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    \4\ 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).
    \5\ 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.
    \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 https://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 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 
provide liquidity on the Exchange in MPL Orders. The proposed fee 
change is designed to provide incentives to member organizations to 
submit additional such liquidity to the Exchange.
Proposed Rule Change
    An MPL Order is defined in Rule 7.31 as a Limit Order that is not 
displayed and does not route, with a working price at the midpoint of 
the PBBO.\9\
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    \9\ See Rule 7.31(d)(3). Limit Order is defined in Rule 
7.31(a)(2).
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    Currently, the Exchange offers tiered credits of $0.0020, $0.00250 
and $0.00275, respectively, for member organizations that have an 
average daily trading volume (``ADV'') that adds liquidity to the 
Exchange during the billing month (``Adding ADV'') in MPL Orders that 
is at least a specified percentage (0.0075%, 0.015% and 0.075%, 
respectively) of Tapes A, B and C consolidated average daily volume 
(``CADV''),\10\ excluding any liquidity added by a Designated Market 
Maker (``DMM'').
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    \10\ Footnote 2 to the Price List defines ADV as ``average daily 
volume'' and ``Adding ADV'' as ADV that adds liquidity to the 
Exchange during the billing month. CADV is defined in footnote * of 
the Price List.
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    The Exchange proposes two additional adding tier credits for MPL 
Orders, as follows.
    First, the Exchange would offer a $0.0029 credit to member 
organizations that have Adding ADV in MPL Orders of 25 million shares, 
excluding any liquidity added by a DMM. Second, the

[[Page 43971]]

Exchange would offer a $0.0030 credit to member organizations that have 
an Adding ADV in MPL Orders of at least 30 million shares, excluding 
any liquidity added by a DMM. The Exchange believes that the additional 
tiers would enable more member organizations with high volumes of 
Adding ADV in MPL Orders to qualify for higher credits, especially in 
high volume months.
    The purpose of the proposed change is to incentivize member 
organizations to trade on the Exchange in MPL Orders. Providing 
additional ways for member organizations to qualify for higher credits 
for MPL Orders that add liquidity to the Exchange would increase 
liquidity providing MPL Orders, which in turn would support the quality 
of price discovery on the Exchange and provide additional price 
improvement opportunities for incoming orders that take liquidity. The 
Exchange believes that by correlating the amount of credits to the 
level of MPL Orders that add liquidity sent by a member organization, 
the Exchange's fee structure would incentivize member organizations to 
submit more MPL Orders that add liquidity to the Exchange, thereby 
increasing the potential for price improvement and execution 
opportunities to incoming marketable orders submitted to the Exchange.
    As noted above, the Exchange operates in a competitive and 
fragmented market environment, particularly as it relates to attracting 
non-marketable orders, which add liquidity to the Exchange. Based on 
the profile of liquidity-adding firms generally, the Exchange believes 
that additional member organizations could qualify for the tiers if 
they choose to direct order flow to the Exchange. However, 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 directing 
MPL Orders to the Exchange in order to qualify for a new proposed tier.
    The proposed changes are not otherwise intended to address 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,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) & (5).
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    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.'' \13\ 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.'' \14\
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    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS'').
    \14\ 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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The Proposed Change Is Reasonable
    The proposed new Adding Tiers for MPL Orders are reasonable because 
they represent an additional way for member organizations to qualify 
for credits for adding liquidity in MPL Orders, thereby encouraging the 
submission of additional liquidity to a national securities exchange. 
As noted, the Exchange believes that the additional tiers would enable 
more member organizations to add liquidity in MPL Orders. Submission of 
additional liquidity to the Exchange would promote price discovery and 
transparency and enhance order execution opportunities for member 
organizations from the substantial amounts of liquidity present on the 
Exchange. All member organizations would benefit from the greater 
amounts of liquidity that will be present on the Exchange, which would 
provide greater execution opportunities.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes its proposal to offer additional tiered 
credits in MPL Orders equitably allocates its fees among its market 
participants. By providing additional incentives for member 
organizations to qualify for an adding credit, the proposal would 
continue to encourage member organizations to send orders that provide 
liquidity to the Exchange, thereby contributing to robust levels of 
liquidity, which benefits all market participants, and promoting price 
discovery and transparency. The proposal would also enhance order 
execution opportunities for member organizations from the substantial 
amounts of liquidity present on the Exchange. All member organizations 
would benefit from the greater amounts of liquidity that will be 
present on the Exchange, which would provide greater execution 
opportunities and additional price improvement opportunities for 
incoming orders. The Exchange believes that by offering additional, 
higher credits correlated to higher volumes of Adding ADV in MPL 
Orders, more member organizations will be able to choose to route their 
liquidity-providing orders to the Exchange to qualify for the proposed 
credit. As previously noted, based on the profile of liquidity-
providing member organizations generally, the Exchange believes 
additional member organizations could qualify for the proposed credits 
if they choose to direct order flow to the Exchange. Additional 
liquidity-providing orders benefits all market participants because it 
provides greater execution opportunities on the Exchange.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes its proposal to additional MPL Order adding 
tiers is not unfairly discriminatory because the proposal would be 
provided on an equal basis to all member organizations that add 
liquidity, who would all be eligible for the same credit on an equal 
basis. Accordingly, no member organization already operating on the 
Exchange would be disadvantaged by this allocation of fees. Further, as 
noted, the Exchange believes the proposal would provide an incentive 
for member organizations to continue to send orders that provide 
liquidity to the Exchange, to the benefit of all market participants.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

[[Page 43972]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\15\ 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 member organizations. 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.'' \16\
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    \15\ 15 U.S.C. 78f(b)(8).
    \16\ See 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. The Exchange believes that the 
proposed changes would continue to incentivize market participants to 
direct order flow to the Exchange. Greater liquidity benefits all 
market participants on the Exchange by providing more trading 
opportunities and encourages member organizations to send orders, 
thereby contributing to robust levels of liquidity, which benefits all 
market participants on the Exchange. The proposed credits 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.

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 pursuant to Section 
19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 \18\ 
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. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
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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-2024-27 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-2024-27. 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-2024-27 and should be 
submitted on or before June 10, 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. 2024-10942 Filed 5-17-24; 8:45 am]
BILLING CODE 8011-01-P