[Federal Register Volume 89, Number 195 (Tuesday, October 8, 2024)]
[Notices]
[Pages 81587-81592]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-23062]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101226; File No. SR-LTSE-2024-06]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Adopt Initial Fees and Rebates Applicable to Members of the Exchange
Pursuant to Exchange Rule 15.110 and Adopt a Policy Relating to Billing
Errors
October 1, 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 September 19, 2024, Long-Term Stock Exchange, Inc. (``LTSE'' 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\ 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 is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to adopt the initial fees and
rebates applicable to Members of the Exchange pursuant to Exchange Rule
15.110 (Authority to Prescribe Dues, Fees, Assessments and Other
Charges) and adopt a policy relating to billing errors. The Exchange
proposes to implement the rule change effective immediately upon
commencement of its transition to a new trading platform.
The text of the proposed rule change is available at the Exchange's
website at https://longtermstockexchange.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange 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 these statements may be examined at the places specified in
Item IV below. The self-regulatory organization has prepared summaries,
set forth in Sections A, B, and C below, of the most significant
aspects 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 adopt a fee schedule (the ``Fee
Schedule'') applicable to the use of the Exchange. Additionally, the
Exchange proposes to amend Rule 15.120 (Collection of Exchange Fees and
Other Claims and Billing Policy), as well as moving the entirety of the
text in Rule 15.200 (Schedule of Fees) to the new Fee Schedule. These
changes are part of a larger initiative where the Exchange intends to
transition to a new trading platform. The go-live date for this
transition is September 23, 2024 and thus, proposed fees and changes
will be effective as of the date of such transition.\3\
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\3\ Id.
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The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange will be only one of numerous equities venues to which market
participants may direct their order flow. Based on publicly available
information, no single registered equities exchange currently has more
than approximately 16% of
[[Page 81588]]
total market share.\4\ Thus, in such a low-concentrated and highly
competitive market, no single equities exchange possesses significant
pricing power in the execution of order flow and the Exchange currently
represents a small percentage of the overall market.
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\4\ Market share percentage calculated as of September 4, 2024.
The Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
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Transaction Fees
Below is a description of the fees and rebates that the Exchange
intends to impose under the initial proposed Fee Schedule, which will
be applicable to transactions executed in all trading sessions. Under
the proposed Fee Schedule, the Exchange will operate a ``Maker-Taker''
model whereby it provides rebates to Members that provide liquidity and
charges fees to those that remove liquidity, as further described
below. The Exchange does not initially propose to assess volume-based
fees or rebates. Accordingly, all fees and rebates described below are
applicable to all Members, regardless of the overall volume of a
Member's trading activities on the Exchange.
The Exchange proposes to adopt a pricing strategy that incentivizes
adding displayed liquidity on the Exchange in order to encourage and
facilitate price discovery and price formation, which the Exchange
believes benefits all Members and investors. Details of this pricing
strategy are laid out below:
(A) Standard Fee for Removing Liquidity
The Exchange proposes a fee of $0.0030 per share for executions of
orders that remove liquidity from the LTSE Order Book \5\ (``Remove
Liquidity'') in securities priced at or above $1.00 per share or 0.30%
of the total dollar value (``TDV'') for securities priced under
$1.00.\6\
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\5\ ``LTSE Order Book'' means the System's electronic file of
orders. See Exchange Rule 1.160(t). The ``System'' shall mean the
electronic communications and trading facility designated by the
Board through which securities orders of Members are consolidated
for ranking and execution. See Exchange Rule 1.160(rr).
\6\ This pricing is referred to as ``Remove liquidity'' on the
proposed Fee Schedule.
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(B) Standard Rebate for Adding Displayed Liquidity
The Exchange proposes to provide a rebate of $0.0028 per share for
executions of orders that: (i) are displayed on the LTSE Order Book and
(ii) add liquidity to the Exchange (``Added Displayed Liquidity''), in
all securities traded on the Exchange priced at or above $1.00 per
share or 0.28% of the TDV for securities priced under $1.00.\7\ The
proposed rebate for Added Displayed Liquidity would apply to the
Reserve Quantity \8\ of an order such that any replenishment amount of
the Reserve Quantity of an order that is executed against would be
treated as Added Displayed Liquidity even though such portion of the
order was not displayed on the LTSE Order Book prior to the order being
replenished in accordance with the Member's instructions and the
Exchange's rules. The entire portion of the Reserve Quantity of an
order would be eligible for this rebate, however, a Member would only
receive such rebate for any portion(s) of the Reserve Quantity that is
(are) executed against it. The proposed Fee Schedule will detail the
treatment of the Reserve Quantity.
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\7\ The pricing is referred to by the Exchange as ``Add
displayed liquidity'' on the proposed Fee Schedule.
\8\ ``Reserve Quantity'' refers to the portion of an order that
includes a Non-Displayed instruction in which a portion of that
order is also displayed on the LTSE Order Book. Both the portion of
the order with a Displayed instruction and the Reserve Quantity are
available for execution against incoming orders. See Exchange Rule
11.180(k).
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(C) Rebates for Adding Displayed Liquidity That Matches the National
Best Bid or Offer (``NBBO'') \9\
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\9\ ``NBBO'' is defined in LTSE Rule 11.410(b).
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The Exchange proposes to provide a rebate of $0.0029 per share for
executions of Added Displayed Liquidity that establishes a new best bid
or offer on the Exchange that matches the NBBO first established on an
away market (``NBBO Joiner'') in all securities traded on the Exchange
priced at or above $1.00 per share or 0.29% of the TDV for securities
priced under $1.00.\10\ The proposed Fee Schedule will include this
definition of NBBO Joiner.
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\10\ The pricing is referred to by the Exchange as ``Add
displayed liquidity--NBBO Joiner'' on the proposed Fee Schedule.
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(D) Rebates for Adding Displayed Liquidity That Establishes the NBBO
The Exchange proposes to provide a rebate of $0.00295 per share for
executions of Added Displayed Liquidity that establishes the NBBO
(``NBBO Setter'') on LTSE in all securities traded on the Exchange
priced at or above $1.00 per share or 0.295% of the TDV for securities
priced under $1.00.\11\ The proposed Fee Schedule will include this
definition of NBBO Setter.
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\11\ The pricing is referred to by the Exchange as ``Add
displayed liquidity--NBBO Setter'' on the proposed Fee Schedule.
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(E) Standard Rebate for Adding Non-Displayed Liquidity
The Exchange proposes to provide a standard rebate of $0.0014 per
share for executions of orders that: (i) are not displayed on the LTSE
Order Book and (ii) add liquidity to the Exchange, in all securities
traded on the Exchange priced at or above $1.00 per share or 0.14% of
the TDV for securities priced under $1.00.\12\
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\12\ This pricing is referred to by the Exchange ``Add non-
displayed liquidity'' on the proposed Fee Schedule to represent the
execution of an order that adds non-displayed liquidity.
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Other Proposed Changes
Annual Membership Fee
The Exchange currently sets forth its Annual Membership Fee of
$10,000 a year in Rule 15.200. The Exchange is proposing to remove this
section of the rulebook and move the Annual Membership Fee to the newly
created Section (A) of the Fee Schedule so that Members can have all
specific fees assessed by the Exchange in one place. The Exchange is
not proposing any changes to the Annual Membership Fee except to remove
subsection (4) which details how the Exchange assessed the Annual
Membership Fee the year it launched operations. Since this subsection
is no longer applicable the Exchange believes it is appropriate to
remove it altogether instead of inserting it into the proposed Fee
Schedule.
Billing Errors
Additionally, the Exchange is proposing to adopt a policy relating
to billing errors. Specifically, the Exchange proposes to adopt a new
paragraph (c) in Rule 15.120 which would provide that all fees and
rebates assessed prior to the three full calendar months before the
month in which the Exchange becomes aware of a billing error shall be
considered final.\13\ To clarify the new Billing Errors section, the
Exchange is also proposing to add the title ``Pricing Disputes'' to
Rule 15.120(b). The Exchange would apply the three month look back
regardless of whether the error was discovered by the Exchange or by a
Member or Non-Member that submitted a pricing dispute.\14\
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\13\ The Exchange notes that the current policy in Rule
15.120(b), which states that all pricing disputes must be submitted
no later than sixty (60) days after receipt of a billing invoice,
will remain in place.
\14\ For example, if the Exchange becomes aware of a transaction
fee billing error on September 4, 2024, the Exchange will resolve
the error by crediting or debiting Members or Non-Members based on
the fees or rebates that should have been applied to any impacted
transactions during June, July and August 2024. The Exchange notes
that because it bills in arrears, the Exchange would be able to
correct the error in advance of issuing the June [sic] 2024 invoice
and therefore, transactions impacted after the end of the last full
calendar month through the date of discovery (in this example,
between August 31, 2024 and September 4, 2024) and thereafter, would
be billed correctly.
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[[Page 81589]]
The purpose of the proposed change is to provide both the Exchange
and its Members and Non-Members finality with respect to fees and
rebates previously assessed by the Exchange and the ability to close
their books after a specified period of time. The Exchange notes that
Rule 15.120(b) already requires that pricing disputes must be submitted
to the Exchange in writing and accompanied by supporting documentation
no later than 60 days after receipt of a billing invoice, which is
designed to encourage prompt review of Exchange invoices so that any
pricing disputes can be addressed in a timely manner. The Exchange
believes the proposed change would further the goal of addressing
billing discrepancies in a timely manner while the information and data
underlying those charges (e.g., applicable fees and order information)
is still easily and readily available, without further limiting the
timeframe in which a pricing dispute may be submitted. This practice
would avoid issues that may arise when billing errors are discovered
long after they occurred and the parties have already prepared, and in
some cases published, their books, and would conserve Exchange
resources that would have to be expended to resolve untimely billing
disputes. As such, the proposed rule change would alleviate
administrative burdens related to prior billing errors, which could
divert Exchange staff resources away from the Exchange's regulatory and
business purposes.
The Exchange notes that the language of proposed Rule 15.120(c) is
the same as language in MEMX Rule 15.3(c) \15\ and is also included in
the fee schedules of the four Cboe U.S. equities exchanges--Cboe BZX
Exchange, Inc. (``Cboe BZX''),\16\ Cboe BYX Exchange, Inc. (``Cboe
BYX''),\17\ Cboe EDGA Exchange, Inc. (``Cboe EDGA''),\18\ and Cboe EDGX
Exchange, Inc. (``Cboe EDGX'').\19\ The Exchange also notes that a
number of other exchanges have explicitly stated that they consider all
fees to be final after a similar period of time.\20\ The proposed
billing errors policy would apply to all fees and rebates assessed by
the Exchange.
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\15\ See Securities Exchange Act Release No. 34-93381 (October
19, 2021), 86 FR 58972 (October 25, 2021) (SR-MEMX-2021-12).
\16\ See Cboe BZX equities trading fee schedule on its public
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/). See also Securities Exchange Act Release No.
90897 (January 11, 2021), 86 FR 4161 (January 15, 2021) (SR-CboeBZX-
2020-094).
\17\ See Cboe BYX equities trading fee schedule on its public
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/byx/). See also Securities Exchange Act Release No.
90899 (January 11, 2021), 86 FR 4156 (January 15, 2021) (SR-CboeBYX-
2020-034).
\18\ See Cboe EDGA equities trading fee schedule on its public
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edga/). See also Securities Exchange Act Release No.
90897 (January 11, 2021), 86 FR 4161 (January 15, 2021) (SR-CboeBZX-
2020-094).
\19\ See Cboe EDGX equities trading fee schedule on its public
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/). See also Securities Exchange Act Release No.
90901 (January 11, 2021), 86 FR 4137 (January 15, 2021) (SR-
CboeEDGX-2020-064).
\20\ See, e.g., Securities Exchange Act Release No. 34-91836
(May 11, 2021), 86 FR 26765 (May 17, 2021) (SR-BOX-2021-08);
Securities Exchange Act Release No. 87650 (December 3, 2019), 84 FR
67304 (December 9, 2019) (SR-NYSECHX-2019-024); Securities Exchange
Act Release No. 84430 (October 16, 2018), 83 FR 53347 (October 22,
2018) (SR-NYSENAT-2018-23); and Securities Exchange Act Release No.
79060 (October 6, 2016), 81 FR 70716 (October 13, 2016) (SR-
ISEGemini-2016-11).
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Other Changes
The Exchange proposes to add a section to the proposed Fee Schedule
entitled ``Additional Fees'' and state that Chapter 15 of the LTSE Rule
contains other dues, fees, and assessments as well as the collection of
Exchange fees for completeness. Further, the Exchange proposes to add a
corresponding reference in Supplementary Material .02 of Chapter 15 to
state that the LTSE Fee Schedule details fees and rebates assessed by
the Exchange.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \21\ of the Act in general, and
furthers the objectives of Sections 6(b)(4) \22\ of the Act, in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees and other charges among its Members
and other persons using its facilities. Additionally, the Exchange
believes that the proposed fees and rebates are consistent with the
objectives of Section 6(b)(5) \23\ of the Act in that they are designed
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to a
free and open market and national market system, and, in general, to
protect investors and the public interest, and, particularly, are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\21\ 15 U.S.C. 78f.
\22\ 15 U.S.C. 78f(b)(4).
\23\ 15 U.S.C. 78f(b)(5).
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The Exchange operates in a highly competitive market in which
market participants can readily direct order flow to competing venues
if they deem fee levels at a particular venue to be excessive or
incentives to be insufficient. The Exchange believes that the proposed
Fee Schedule reflects a simple and competitive pricing structure
designed to incentivize market participants to add aggressively priced
displayed liquidity and direct their order flow to the Exchange, which
the Exchange believes would promote price discovery and price formation
and deepen liquidity that is subject to the Exchange's transparency,
regulation, and oversight as an exchange, thereby enhancing market
quality to the benefit of all Members and investors.
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, 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.'' \24\
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\24\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Transactions Fees
The Exchange believes that charging a fee to the liquidity remover,
and providing a rebate to the liquidity adder, is reasonable, equitable
and not unfairly discriminatory because it incentivizes liquidity
provision on the Exchange. The Exchange also notes that several other
exchanges charge fees for removing liquidity and provide rebates for
adding liquidity, and that this aspect of the Exchange's proposed Fee
Schedule does not raise any new or novel issues that have not
previously been considered by the Commission in connection with the
fees and rebates of other exchanges.\25\ The Exchange notes that unlike
other exchanges, LTSE is not proposing any volume based tiers or
rebates and rather is proposing a simple flat fee for each of the
categories listed below.
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\25\ See e.g., MEMX Equities Fee Schedule, Transaction Fees;
MIAX Pearl Equities Exchange Fee Schedule and Cboe EDGX Fee
Schedule.
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The Exchange also believes that it is reasonable, equitable and not
unfairly
[[Page 81590]]
discriminatory to provide a higher rebate for executions resulting from
adding displayed liquidity than for executions of adding non-displayed
liquidity as this rebate structure is designed to incentivize Members
to send the Exchange displayable orders, thereby contributing to price
discovery and price formation, consistent with the overall goal of
enhancing market quality. Moreover, the Exchange notes that there are
precedents for exchanges to provide rebates that distinguish between
displayed and non-displayed volume to incentivize displayed orders and
facilitate price discovery.
Standard Fee for Removing Liquidity
The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to charge a standard fee of $0.0030 per share
for executions of orders that remove liquidity from the LTSE Order Book
in securities priced at or above $1.00 per share or 0.30% of the TDV
for securities priced under $1.00 because it is comparable to the
transaction fee charged by other exchanges to remove liquidity.\26\ The
Exchange further believes that this fee is equitably allocated and not
unfairly discriminatory because it applies equally to all Members and,
when coupled with higher rebates for adding displayed liquidity, as
described below, is designed to facilitate increased activity on the
Exchange to the benefit of all Members by providing more trading
opportunities and promoting price discovery.
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\26\ For example, the MEMX Fee Schedule assess fees to remove
liquidity for securities at or above $1.00 that range from $0.0029-
$0.0030 per share (fees for securities below $1.00 the fees range
from 0.28%-0.30% of total dollar value); see https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/. The Cboe BZX Fee Schedule has standard fees for
``removing'' liquidity of $0.0030 for shares executed at or above
$1.00 or 0.30% of total dollar volume for shares executed below
$1.00; see https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
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Standard Rebate for Adding Displayed Liquidity
The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a standard rebate of $0.0028 per
share for executions of orders that: (i) are displayed on the LTSE
Order Book and (ii) add liquidity to the Exchange, in all securities
traded on the Exchange priced at or above $1.00 per share or 0.28% of
the TDV for securities priced under $1.00 because this rebate is
consistent with transaction rebates provided by other exchanges.\27\
The Exchange further believes that this rebate structure is equitably
allocated and not unfairly discriminatory because it applies equally to
all Members.
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\27\ For example, the Cboe BZX Fee Schedule reflects a standard
rebate for adding displayed liquidity of $0.0016 for executions in
securities priced at or above $1.00, with no rebate for executions
in securities priced below $1.00. Further, various tiers provide the
ability of a firm to receive a rebate of $0.0032 per share; see
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/. The
MEMX Fee Schedule reflects rebates for ``adding'' displayed
liquidity that range from $0.0015 to $0.0037 for shares executed at
or above $1.00, with 0.075% to 0.15% of total dollar value for
shares executed below $1.00, see https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/.
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Rebates for Adding Displayed Liquidity That Matches the NBBO
The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a standard rebate of $0.0029 per
share for executions of Added Displayed Liquidity that matches the NBBO
in all securities traded on the Exchange priced at or above $1.00 per
share or 0.29% of the TDV for securities priced under $1.00 because
this rebate is consistent with transaction rebates provided by other
exchanges.\28\ The Exchange further believes that this rebate structure
is equitably allocated and not unfairly discriminatory because it
applies equally to all Members. Lastly, the Exchange believes that
providing a higher rebate for adding displayed liquidity that matches
the NBBO is reasonable, equitable and not unfairly discriminatory as it
designed to encourage the submission of well priced orders, thereby
contributing to a deeper and more robust and well-balanced market
ecosystem on the Exchange to the benefit of all Members and market
participants.
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\28\ Id.
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Rebates for Adding Displayed Liquidity That Establishes the NBBO
The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a standard rebate of $0.00295 per
share for executions of Added Displayed Liquidity that establishes the
NBBO on LTSE in all securities traded on the Exchange priced at or
above $1.00 per share or 0.295% of the TDV for securities priced under
$1.00 because this rebate is consistent with transaction rebates
provided by other exchanges.\29\ The Exchange further believes that
this rebate structure is equitably allocated and not unfairly
discriminatory because it applies equally to all Members. Lastly, the
Exchange believes that providing a higher rebate for adding displayed
liquidity that establishes the NBBO is reasonable, equitable and not
unfairly discriminatory as it designed to encourage the submission of
well priced orders, thereby contributing to a deeper and more robust
and well-balanced market ecosystem on the Exchange to the benefit of
all Members and market participants.
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\29\ Id. The Exchange notes that MEMX does not have a standalone
per share rebate for setting the NBBO, however MEMX offers an
additive per share rebate of up to $0.0002 ``NBBO Setter Tier'' for
securities at or above $1.00 based on the Member's average daily
adding volume.
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Standard Rebate for Adding Non-Displayed Liquidity
The Exchange believes that it is appropriate, reasonable, and
consistent with the Act to provide a standard rebate of $0.0014 per
share for executions of orders that: (i) are not displayed on the LTSE
Order Book and (ii) add liquidity to the Exchange, in all securities
traded on the Exchange priced at or above $1.00 per share or 0.14% of
the TDV for securities priced under $1.00 because this rebate is
consistent with transaction rebates provided by other exchanges.\30\
The Exchange further believes that this rebate structure is equitably
allocated and not unfairly discriminatory because it applies equally to
all Members.
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\30\ For example, the Cboe BZX Fee Schedule reflects a standard
rebate for adding liquidity of $0.0.00080 for executions in
securities priced at or above $1.00, with no rebate for executions
in securities priced below $1.00. Further, various tiers provide the
ability of a firm to receive a rebate of $0.0032 per share; see
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/. The
MEMX Fee Schedule reflects rebates for adding non-displayed
liquidity that range from $0.0008 to $0.028 for shares executed at
or above $1.00, with 0.075% for shares executed below a $1.00, see
https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/.
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Other Proposed Changes
Annual Membership Fee
The Exchange believes moving the Annual Membership Fee language to
the proposed Fee Schedule is reasonable, equitable and not unfairly
discriminatory. In particular, the Exchange believes that the proposed
rule change will provide greater clarity to Members by having the
Membership Fee in the Fee Schedule. Lastly, removing subsection (4) is
appropriate as it is an obsolete reference which only applied during
the Exchange's first year of operations. This proposed change does not
propose any substantive changes to the Membership Fees the Exchange
charges. Therefore, the Exchange does not believe that the proposed
change raises any new or novel issues not already considered by the
Commission.
[[Page 81591]]
Billing Errors
With respect to the proposed policy relating to billing errors, the
Exchange believes that providing that all fees and rebates are final
after three months (i.e., resolving billing errors only for the three
full calendar months preceding the month in which the Exchange became
aware of the error) is reasonable and consistent with the Act as both
the Exchange and its Members and Non-Members have an interest in
knowing when its fee assessments are final and when reliance can be
placed on those assessments. Indeed, without some deadline on billing
errors, the Exchange and its Members and Non-Members would never be
able to close their books with any confidence. As noted above, the
Exchange believes this proposed change would conserve Exchange
resources that would have to be expended to resolve untimely billing
disputes, which could divert Exchange staff resources away from the
Exchange's regulatory and business purposes. For these reasons, the
Exchange believes this proposed change promotes just and equitable
principles of trade, fosters cooperation and coordination with persons
engaged in regulating, clearing, settling, processing information with
respect to, and facilitating transactions in securities, removes
impediments to and perfects the mechanism of a free and open market and
a national market system, and, in general, protects investors and the
public interest.
Furthermore, as noted above, the language of proposed Rule
15.120(c) is the same as language included in MEMX Rule 15.3(c) and the
fee schedules of the four Cboe U.S. equities exchanges,\31\ and a
number of other exchanges similarly consider their fees final after a
similar period of time.\32\ As such, this proposed change does not
raise any new or novel issues that have not been previously considered
by the Commission. This proposed change is also equitable and not
unfairly discriminatory because it would apply equally to all Members
(and Non-Members that pay Exchange fees) and would apply in cases where
either the Member (or Non-Member) discovers the error or the Exchange
discovers the error.
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\31\ See supra notes 17-21 [sic].
\32\ See supra note 22 [sic].
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Additional Changes
Lastly, the Exchange believes the additional changes are
reasonable, equitable and not unfairly discriminatory. In particular,
the Exchange believes that the proposed changes will provide greater
clarity to market participants when looking at either the Fee Schedule
or Chapter 15 of the LTSE Rulebook.This proposed change does not
propose any substantive changes fees [sic] charged by the Exchange..
Therefore, the Exchange does not believe that the proposed change
raises any new or novel issues not already considered by the
Commission.
In conclusion, the Exchange also submits that its proposed fee
structure satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act for the reasons discussed above in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
its Members and other persons using its facilities, provides certainty
in billing and a process for resolving billing disputes, does not
permit unfair discrimination between customers, issuers, brokers, or
dealers, and is designed to promote just and equitable principles of
trade, to remove impediments to and perfect the mechanism of a free and
open market and a national market system and in general to protect
investors and the public interest, particularly as the proposal neither
targets nor will it have a disparate impact on any particular category
of market participant. As described more fully below in the Exchange's
statement regarding the burden on competition, the Exchange believes
that it is subject to significant competitive forces, and that its
proposed fee and rebate structure is an appropriate effort to address
such forces.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Rather, as
discussed above, the Exchange believes that the proposed change would
encourage the submission of additional order flow to a public exchange,
thereby promoting market depth, execution incentives and enhanced
execution opportunities, as well as price discovery and transparency
for all Members. 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.'' \33\ The Exchange does not believe that the proposed rule
change will impose any burden on intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act. To
the contrary, the Exchange believes that the proposed pricing structure
will increase competition and is intended to draw volume to the
Exchange. The Exchange believes that the ever-shifting market share
among the exchanges from month to month demonstrates that market
participants can shift order flow or discontinue to reduce use of
certain categories of products, in response to new or different pricing
structures being introduced into the market. Accordingly, competitive
forces constrain the Exchange's transaction fees and rebates, and
market participants can readily trade on competing venues if they deem
pricing levels at those other venues to be more favorable. Although
this pricing is intended to attract liquidity to the Exchange, most
other exchanges in operation today already offer multiple incentives to
their participants, including tiered pricing that provides higher
rebates or discounted executions, and other exchanges will be able to
modify such incentives in order to compete with the Exchange.
Accordingly, with respect to a participant deciding to either submit an
order to add liquidity or seeking to remove liquidity, there are
multiple exchanges that will continue to be competitively priced for
such orders when compared to the Exchange's pricing. Further, while
pricing incentives can cause shifts of liquidity between trading
centers, market participants make determinations on where to provide
liquidity or route orders to take liquidity based on factors other than
pricing, including execution quality, technology, functionality, and
other considerations. Consequently, the Exchange believes that the
degree to which its fees and rebates could impose any burden on
competition is extremely limited, and does not believe that such fees
would burden competition of Members or competing venues in a manner
that is not necessary or appropriate in furtherance of the purposes of
the Act. The Exchange does not believe that the proposed rule change
will impose any burden on intramarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act because the
proposed fees and rebates apply equally to all Members. The proposed
pricing structure is intended to encourage market participants to add
displayed and non-displayed liquidity to the Exchange by providing
rebates that are
[[Page 81592]]
comparable to those offered by other exchanges as well as to provide a
competitive rate charged for removing liquidity, which the Exchange
believes will help to encourage Members to send orders to the Exchange
to the benefit of all Exchange participants. As the proposed rates are
equally applicable to all market participants, the Exchange does not
believe there is any burden on intramarket competition.
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\33\ See supra note 26 [sic].
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With respect to the proposed billing errors policy, the proposal
would establish a clearly defined timeframe for fees and rebates to be
considered final that would apply equally to all Members and Non-
Members. Additionally, as noted above, this proposed change is similar
to rules of other exchanges and therefore does not raise any new or
novel issues that have not been previously considered by the
Commission.\34\
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\34\ See supra notes 14-19 [sic].
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For these reasons, the Exchange does not believe such proposed
changes would impair the ability of Members or competing order
execution venues to maintain their competitive standing in the
financial markets, and therefore, the Exchange does not believe the
proposal will impose any burden on intermarket competition. Moreover,
because the proposed changes would apply equally to all Members and
Non-Members, as applicable, the Exchange does not believe the proposal
would impose any burden on intramarket competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
This proposed rule change establishes dues, fees or other charges
among its members and, as such, may take effect upon filing with the
Commission pursuant to Section 19(b)(3)(A)(ii) of the Act \35\ and
paragraph (f)(2) of Rule 19b-4 thereunder.\36\ Accordingly, the
proposed rule change would take effect upon filing with the Commission.
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\35\ 15 U.S.C. 78s(b)(3)(A)(ii).
\36\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend the rule
change if it appears to the Commission that the action is necessary or
appropriate in the public interest, for the protection of investors, or
would otherwise further the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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-LTSE-2024-06 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-LTSE-2024-06. 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-LTSE-2024-06 and should be
submitted on or before October 29, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-23062 Filed 10-7-24; 8:45 am]
BILLING CODE 8011-01-P