[Federal Register Volume 89, Number 162 (Wednesday, August 21, 2024)]
[Notices]
[Pages 67686-67689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18696]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100731; File No. SR-NYSE-2024-45]


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

August 15, 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 August 8, 2024, New York Stock Exchange LLC (``NYSE'' 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 Price List to revise the 
requirements for Supplemental Liquidity Providers (``SLPs'') that are 
also Designated Market Makers (``DMM'') to qualify for SLP Adding Tiers 
1-5. The Exchange proposes to implement the fee changes effective 
August 8, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Price List to revise the 
requirements for SLPs that are also DMMs to qualify for SLP Adding 
Tiers 1-5. Specifically, the Exchange proposes to lower the required 
adding as a percentage of NYSE consolidated average daily volume 
(``CADV'') in order for SLPs that are also DMMs with a specific number 
of DMM registrations to qualify for each tier.
    The proposed changes respond to the current competitive environment 
where order flow providers have a choice of where to direct liquidity-
providing orders by modifying the requirements for member organizations 
to send additional displayed liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective August 
8, 2024.\3\
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    \3\ The Exchange originally filed to amend the Price List on 
August 1, 2024 (SR-NYSE-2024-43). SR-NYSE-2024-43 was withdrawn on 
August 8, 2024 and replaced by this filing.
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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.'' \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 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 20% 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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    \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).
    \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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    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 its member organizations who submit orders 
that provide liquidity on the Exchange. The proposed changes are 
designed to continue to attract additional order flow to the Exchange 
by revising the requirements for SLPs that are also DMMs in SLP Adding 
Tiers 1-5 in order to further incentivize member organizations to 
submit additional displayed liquidity to, and quote aggressively in 
support of the price discovery process on, the Exchange.

[[Page 67687]]

Proposed Rule Change
    For SLPs that are also DMMs registered in a minimum number of Tape 
A securities and subject to Rule 107B(i)(2)(A), current SLP Adding Tier 
1, Tier 2, Tier 3, Tier 4, and Tier 5 set forth an additional 
requirement that the adding average daily volume (``ADV'') represent a 
fixed percentage of NYSE CADV. The requirement is set forth in the 
column titled ``SLP Adding ADV % Tape A CADV If DMM'' and currently 
ranges from 0.08% to 0.55%. The Exchange proposes to amend those 
percentages, as follows.
    Under current SLP Tier 1, an SLP adding liquidity in Tape A 
securities receives a credit of $0.0032, or $0.0012 if a Non-Displayed 
Reserve Order, if the SLP (1) meets the 10% average or more quoting 
requirement in an assigned security pursuant to Rule 107B, and (2) adds 
liquidity for all assigned SLP securities in the aggregate (including 
shares of both an SLP-Prop and an SLMM of the same or an affiliated 
member organization) \10\ of an ADV of more than 1.00% (or 0.080% for 
SLPs that meet the SLP Cross Tape Tier 1 Incentive) of NYSE CADV or, 
with respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a) 
and registered in at least 500 Tape A issues, more than 0.55% of NYSE 
CADV. The Exchange proposes to lower the more than 0.55% of NYSE CADV 
requirement to more than 0.36% of NYSE CADV.
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    \10\ Under Rule 107B, an SLP can be either a proprietary trading 
unit of a member organization (``SLP-Prop'') or a registered market 
maker at the Exchange (``SLMM''). For purposes of the 10% average or 
more quoting requirement in assigned securities pursuant to Rule 
107B, quotes of an SLP-Prop and an SLMM of the same member 
organization are not aggregated. However, for purposes of adding 
liquidity for assigned SLP securities in the aggregate, shares of 
both an SLP-Prop and an SLMM of the same member organization are 
included.
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    Under current SLP Tier 2, an SLP adding liquidity in Tape A 
securities receives a credit of $0.0031, or $0.0012 if a Non-Displayed 
Reserve Order, if the SLP (1) meets the 10% average or more quoting 
requirement in an assigned security pursuant to Rule 107B, and (2) adds 
liquidity for all assigned SLP securities in the aggregate (including 
shares of both an SLP-Prop and an SLMM of the same or an affiliated 
member organization) of an ADV of more than 0.90% (or 0.75% for SLPs 
that meet the SLP Cross Tape Tier 1 Incentive) of NYSE CADV or, with 
respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a) and 
registered in at least 500 Tape A issues, more than 0.45% of NYSE CADV. 
The Exchange proposes to change the more than 0.45% of NYSE CADV 
requirement to more than 0.24% of NYSE CADV.
    Under current SLP Tier 3, an SLP adding liquidity in Tape A 
securities receives a credit of $0.00305, or $0.00105 if a Non-
Displayed Reserve Order, if the SLP (1) meets the 10% average or more 
quoting requirement in an assigned security pursuant to Rule 107B, and 
(2) adds liquidity for all assigned SLP securities in the aggregate 
(including shares of both an SLP-Prop and an SLMM of the same or an 
affiliated member organization) of an ADV of more than 0.60% of NYSE 
CADV or, with respect to an SLP that is also a DMM subject to Rule 
107B(i)(2)(a) and registered in at least 500 Tape A issues, more than 
0.36% of NYSE CADV. The Exchange proposes to change the more than 0.36% 
of NYSE CADV requirement to more than 0.18% of NYSE CADV.
    Under current SLP Tier 4, an SLP adding liquidity in Tape A 
securities receives a credit of $0.0029, or $0.0009 if a Non-Displayed 
Reserve Order, if the SLP (1) meets the 10% average or more quoting 
requirement in an assigned security pursuant to Rule 107B, and (2) adds 
liquidity for all assigned SLP securities in the aggregate (including 
shares of both an SLP-Prop and an SLMM of the same or an affiliated 
member organization) of an ADV of more than 0.45% of NYSE CADV or, with 
respect to an SLP that is also a DMM subject to Rule 107B(i)(2)(a) and 
registered in at least 500 Tape A issues, more than 0.24% of NYSE CADV. 
The Exchange proposes to change the more than 0.24% of NYSE CADV 
requirement to more than 0.08% of NYSE CADV.
    Once an SLP that is also a DMM subject to Rule 107B(i)(2)(a) and 
registered in at least 500 Tape A issues adds liquidity for all 
assigned SLP securities in the aggregate of more than 0.08% of NYSE 
CADV, that SLP will automatically receive the highest SLP Tier 4 credit 
of $0.0029, even if the SLP otherwise qualifies for SLP Tiers 5 or 6. 
To reflect this in the Price List, the Exchange would replace the 
existing NYSE CADV requirement in SLP Tiers 5 and 6 of 0.18% of NYSE 
CADV and 0.08% of NYSE CADV, respectively, with ``N/A.''
    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
    In light of the competitive environment in which the Exchange 
currently operates, the proposed rule change is a reasonable attempt to 
incentivize member organizations to direct order flow to the Exchange 
and provide meaningful added levels of liquidity in order to qualify 
for the credits, thereby contributing to depth and market quality on 
the Exchange. The Exchange believes that the proposed lower adding as a 
percentage of NYSE CADV requirements would incentivize market 
participants to increase the orders sent directly to the Exchange and 
therefore provide liquidity that supports the quality of price 
discovery and promotes market transparency. As noted above, the 
Exchange operates in a highly competitive environment, particularly

[[Page 67688]]

for attracting non-marketable order flow that provides liquidity on an 
exchange.
The Proposal Is an Equitable Allocation of Fees
    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 credits and 
fees 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 changes would encourage the 
submission of additional liquidity to a national securities exchange, 
thereby promoting price discovery and transparency and enhancing order 
execution opportunities for member organizations from the substantial 
amounts of liquidity that are present on the Exchange. The proposed 
changes would also encourage the submission of additional orders that 
add liquidity, thus providing liquidity to market participants, 
providing greater price discovery and increasing the quality of order 
execution on the Exchange's market, which would benefit all market 
participants. The proposed changes are equitable because they would 
apply equally to all qualifying similarly-situated SLPs that submit 
orders to the NYSE and add liquidity to the Exchange.
The Proposal 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 Exchange believes that the proposal is not unfairly 
discriminatory because it neither targets nor will it have a disparate 
impact on any particular category of market participant. The proposed 
lower adding as a percentage of NYSE CADV requirement that SLPs that 
are also DMMs must meet to qualify for the SLP adding tiers also does 
not permit unfair discrimination because the proposed changes would 
apply to all similarly situated market participants on an equal and 
non-discriminatory basis and would be provided on an equal basis to all 
member organizations that add liquidity by meeting the new proposed 
requirements, who would all be eligible for the same credits on an 
equal basis. Accordingly, no member organization already operating on 
the Exchange would be disadvantaged by this allocation of fees. The 
proposal does not permit unfair discrimination because the 
qualification criteria would be applied to all similarly situated 
member organizations, who would all be eligible for the same credits on 
an equal basis. 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. 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,\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 upon filing pursuant 
to Section 19(b)(3)(A) \17\ 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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    \17\ 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

[[Page 67689]]

     Send an email to [email protected]. Please include 
file number SR-NYSE-2024-45 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-2024-45. 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-NYSE-2024-45, and should 
be submitted on or before September 11, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18696 Filed 8-20-24; 8:45 am]
BILLING CODE 8011-01-P