[Federal Register Volume 85, Number 140 (Tuesday, July 21, 2020)]
[Notices]
[Pages 44129-44135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15689]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89324; File No. SR-NYSE-2020-59]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List
July 15, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on July 1, 2020, 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 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 its Price List to (1) adopt a new
Step Up Tier 4 Adding Credit, and (2) extend through July 2020 the
waiver of equipment and related service charges and trading license
fees for NYSE Trading Floor-based member organizations implemented for
April, May and June 2020. The Exchange proposes to implement the fee
changes effective July 1, 2020. 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.
[[Page 44130]]
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 (1) adopt a new
Step Up Tier 4 Adding Credit, and (2) extend through July 2020 the
waiver of equipment and related service charges and trading license
fees for NYSE Trading Floor-based member organizations implemented for
April, May and June 2020.
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,
especially aggressively priced orders that improve the market by
setting the National Best Bid and Offer (``NBBO'') on the Exchange. The
proposed changes also respond to the current volatile market
environment that has resulted in unprecedented average daily volumes
and the temporary closure of the Trading Floor, which are both related
to the ongoing spread of the novel coronavirus (``COVID-19'').
The Exchange proposes to implement the fee changes effective July
1, 2020.
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 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
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As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\5\ Indeed, equity trading is currently dispersed across 13
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange has more
than 20% market share (whether including or excluding auction
volume).\8\ Therefore, no exchange possesses significant pricing power
in the execution of equity order flow. More specifically, the
Exchange's market share of trading in Tape A, B and C securities
combined is less than 13%.
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\5\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
\6\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\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 http://markets.cboe.com/us/equities/market_share/.
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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, in response to fee changes. With respect to non-marketable
order flow that would provide displayed liquidity on an Exchange,
member organizations can choose from any one of the 13 currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain exchange transaction fees that relate to
orders that would provide liquidity on an exchange.
In response to the competitive environment described above, the
Exchange has established incentives for its member organizations who
submit orders that provide liquidity on the Exchange. The proposed fee
change is designed to attract additional order flow to the Exchange by
incentivizing member organizations to submit additional displayed
liquidity to, and quote aggressively in support of the price discovery
process on, the Exchange.
Moreover, beginning on March 16, 2020, in order to slow the spread
of COVID-19 through social distancing measures, significant limitations
were placed on large gatherings throughout the country. As a result, on
March 18, 2020, the Exchange determined that beginning March 23, 2020,
the physical Trading Floor facilities located at 11 Wall Street in New
York City would close and that the Exchange would move, on a temporary
basis, to fully electronic trading.\9\ On May 14, 2020, the Exchange
announced that on May 26, 2020 trading operations on the Trading Floor
would resume on a limited basis to a subset of Floor brokers, subject
to safety measures designed to prevent the spread of COVID-19.\10\ On
June 15, 2020, the Exchange announced that on June 17, 2020, the
Trading Floor would reintroduce a subset of Designated Market Makers
(``DMM''), also subject to safety measures designed to prevent the
spread of COVID-19.\11\
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\9\ See Press Release, dated March 18, 2020, available here:
https://ir.theice.com/press/press-releases/allcategories/2020/03-18-2020-204202110.
\10\ See Trader Update, dated May 14, 2020, available here:
https://www.nyse.com/traderupdate/history#110000251588.
\11\ See Trader Update, dated June 15, 2020, available here:
https://www.nyse.com/trader-update/history#110000272018.
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The proposed rule change responds to these unprecedented events by
extending the waiver of equipment and related service charges and
trading license fees for NYSE Trading Floor-based member organizations
for July 2020.
Proposed Rule Change
Step Up Tier 4 Adding Credit
The Exchange proposes to adopt a new ``Step Up Tier 4 Adding
Credit'' that would offer an incremental credit for providing displayed
liquidity to the Exchange in Tapes A, B and C Securities.
As proposed, the Exchange would provide an incremental $0.0006
credit in Tapes A, B and C securities for all orders from a qualifying
member organization market participant identifier (``MPID'') or
mnemonic \12\ that sets the NBBO \13\ or a new BBO \14\ if the MPID or
mnemonic:
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\12\ Member organizations enter orders and order instructions,
and receive information from the Exchange, by establishing a
connection to a gateway that uses communication protocols that map
to the order types and modifiers described in Exchange rules. These
gateway connections, also known as logical port connections, are
referred to as ``ports'' on the Exchange's Price List. Legacy ports
connect with the Exchange via a Common Customer Gateway (known as
``CCG'') that accesses its equity trading systems (``Phase I
ports''). Since July 2019, the Exchange has also made available
ports using Pillar gateways to its member organizations (``Phase II
ports''). For purposes of the Step Up Tier 4 Adding Credit,
references to an ``MPID'' means the unique identifier assigned to
member organizations communicating with the Exchange using Phase II
ports, and references to ``mnemonic'' means the unique identifier
issued by the Exchange to member organizations communicating with
the Exchange using Phase I ports
\13\ See Rule 1.1(q) (defining ``NBBO'' to mean the national
best bid or offer).
\14\ See Rule 1.1(c) (defining ``BBO'' to mean the best bid or
offer on the Exchange).
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has adding average daily volume (``ADV'') in Tapes A, B
and C Securities as a percentage of Tapes A, B and C CADV,\15\
excluding any liquidity added
[[Page 44131]]
by a DMM, that is at least 50% more than the MPID's or mnemonic's
Adding ADV in Tapes A, B and C securities in June 2020 as a percentage
of Tapes A, B and C CADV, and
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\15\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
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is affiliated with an Supplemental Liquidity Provider
(``SLP'') that has an Adding ADV in Tape A securities at least 0.10% of
NYSE CADV, and
has Adding ADV in Tape A securities as a percentage of
NYSE CADV, excluding any liquidity added by a DMM, that is at least
0.20%.
The proposed credit would be in addition to the MPID's or
mnemonic's current credit for adding liquidity. The proposed credit
also would not count toward the combined limit on SLP credits of
$0.0032 per share provided for in the Incremental Credit per Share for
affiliated SLPs whereby SLPs can qualify for incremental credits of
$0.0001, $0.0002 or $0.0003.
For example, assume Member Organization A has two MPIDs, MPID1 and
MPID2, and that MPID1 is a SLP with at least 0.10% SLP Adding ADV of
NYSE CADV in the billing month. Further assume that MPID2 has an Adding
ADV in Tape A, B and C Securities of 15 million shares when US CADV is
10 billion shares, or .15%.
If in the billing month MPID2 has an Adding ADV of 22.5 million
shares with 10 million shares in Tape A securities, and that US CADV is
again 10 billion shares, with 4 billion shares in NYSE CADV, Member
Organization A's MPID2 would qualify for the incremental credit of
$0.0006 per share for setting the NBBO and NYSE BBO because:
MPID2's Adding ADV of 22.5 million shares when US CADV is
10 billion gives MPID2 an Adding ADV % of US CADV of 0.225%, a 50%
increase over their 0.15% baseline;
the 4 million shares in Adding ADV in Tape A when NYSE
CADV is 4 billion shares gives MPID2 an Adding ADV of 0.25%; and
MPID2 is affiliated with MPID1, which has at least 0.10%
Adding ADV as a SLP in Tape A securities.
Further assume MPID2 meets the current Adding Tier 1 credit of
$0.0022. In that case, Member Organization A would receive a credit of
$0.0028 for MPID2 orders that set the NBBO or BBO, and $0.0022 for all
other orders. If MPID2 was a SLP that qualified for the SLP Tier 1
adding credit of $0.0029, and also qualified for SLP Step Up credit of
$.0003, MPID2 would receive $0.0038 for orders that set the NBBO or
NYSE BBO, and $0.0032 for all other SLP orders that add liquidity to
the Exchange.
The purpose of this proposed change is to incentivize member
organizations to increase aggressively priced liquidity-providing
orders that improve the market by setting the NBBO or a new BBO on the
Exchange. The proposed step up tier is thus intended to encourage
higher levels of liquidity, which would support the quality of price
discovery on the Exchange and is consistent with the overall goals of
enhancing market quality. As noted above, the Exchange operates in a
competitive environment, particularly as it relates to attracting non-
marketable orders, that adds liquidity to the Exchange. Because the
proposed tier requires a member organization to receive an incremental
per share credit if the member organization's eligible unique
identifiers establish the NBBO or a new BBO on the Exchange and meet
certain Adding ADV requirements directly and through affiliation with
an SLP, the Exchange believes that the proposed credit would provide an
incentive for such member organizations to send additional liquidity to
the Exchange in order to qualify for it.
The Exchange does not know how much order flow member organizations
choose to route to other exchanges or to off-exchange venues. Insofar
as the tier, as proposed, requires a step up in Adding ADV from June
2020, there are currently no member organizations that would qualify
for the proposed Step Up Tier 4 Adding Credit based on their current
trading profile on the Exchange. The Exchange believes, however, that
at least 5 member organizations could qualify for the tier if they so
choose. 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 this proposed rule change would result in any
member organization directing orders to the Exchange in order for their
MPIDs or mnemonics to qualify for the new tier.
Fee Waivers for Trading Floor-Based Member Organizations
As noted above, on March 18, 2020, the Exchange announced that it
would temporarily close the Trading Floor, effective March 23, 2020, as
a precautionary measure to prevent the potential spread of COVID-19.
Following the temporary closure of the Trading Floor, the Exchange
waived certain equipment fees for the booth telephone system on the
Trading Floor and associated service charges for the months of April
and May.\16\ On May 26, 2020, the Trading Floor reopened on a limited
basis to a reduced number of Floor brokers to accommodate health-
focused considerations. Following the partial reopening, the Exchange
extended the equipment fee waiver for the month of June.\17\ As noted
above, on June 15, 2020, a limited number of DMMs returned to the
Trading Floor. The Trading Floor continues to operate with reduced
headcount and additional health and safety precautions.\18\
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\16\ See Securities Exchange Act Release No. 88602 (April 8,
2020), 85 FR 20730 (April 14, 2020) (SR-NYSE-2020-27); Securities
Exchange Act Release No. 88874 (May 14, 2020), 85 FR 30743 (May 20,
2020) (SR-NYSE-2020-29). See footnote 11 of the Price List.
\17\ See Securities Exchange Act Release No. 89050 (June 11,
2020), 85 FR 36637 (June 17, 2020) (SR-NYSE-2020-49).
\18\ See Trader Update, dated June 15, 2020, available here:
https://www.nyse.com/trader-update/history#110000272018. DMMs
continue to support a subset of NYSE-listed securities remotely.
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For the months of April, May and June, the Exchange waived the
Annual Telephone Line Charge of $400 per phone number and the $129 fee
for a single line phone, jack, and data jack. The Exchange also waived
related service charges, as follows: $161.25 to install single jack
(voice or data); $107.50 to relocate a jack; $53.75 to remove a jack;
$107.50 to install voice or data line; $53.75 to disconnect data line;
$53.75 to change a phone line subscriber; and miscellaneous telephone
charges billed at $106 per hour in 15 minute increments.\19\ These fees
were waived for (1) member organizations with at least one trading
license, a physical Trading Floor presence, and Floor broker executions
accounting for 40% or more of the member organization's combined
adding, taking, and auction volumes during March 1 to March 20, 2020,
and (2) member organizations with at least one trading license that are
Designated Market Makers with 30 or fewer assigned securities for the
billing month of March 2020.
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\19\ The Service Charges also include an internet Equipment
Monthly Hosting Fee that the Exchange did not waive for April, May
and June 2020 and that the Exchange does not propose to waive for
July 2020.
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Because the Trading Floor will continue to operate with reduced
capacity, the Exchange proposes to extend the waiver of these Trading
Floor-based fees through July 2020. To effectuate this change, the
Exchange proposes to add ``and July'' between ``June'' and ``2020'' in
footnote 11 to the Price List.
In order to further reduce costs for member organizations with a
Trading Floor presence, the Exchange also waived the April, May and
June 2020 monthly portion of all applicable annual fees for (1) member
organizations with
[[Page 44132]]
at least one trading license, a physical Trading Floor presence and
Floor broker executions accounting for 40% or more of the member
organization's combined adding, taking, and auction volumes during
March 1 to March 20, 2020, and (2) member organizations with at least
one trading license that are DMMs with 30 or fewer assigned securities
for the billing month of March 2020.\20\
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\20\ See notes 16-17, supra. See footnote 15 of the Price List.
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The Exchange proposes to also waive the July 2020 monthly portion
of all applicable annual fees for member organizations with at least
one trading license, a physical Trading Floor presence and Floor broker
executions accounting for 40% or more of the member organization's
combined adding, taking, and auction volumes during March 1 to March
20, 2020. The indicated annual trading license fees would also be
waived for July 2020 for member organizations with at least one trading
license that are DMMs with 30 or fewer assigned securities for the
billing month of March 2020. To effectuate this change, the Exchange
proposes to add ``and July'' between ``June'' and ``2020'' in footnote
15.
This proposed extension of the fee waivers would reduce monthly
costs for member organizations with a Trading Floor presence whose
operations were disrupted by the Floor closure, which lasted
approximately two months, and remains partially closed. The Exchange
believes that extension of the fee waiver would ease the financial
burden associated with the ongoing partial Trading Floor closure. The
Exchange believes that all member organization that conduct business on
the Trading Floor would benefit from this proposed fee change.
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,\21\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\22\ 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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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4) & (5).
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The Proposed Change is Reasonable
As discussed above, the Exchange operates in a highly 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.'' \23\
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\23\ See Regulation NMS, 70 FR at 37499.
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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, in response to fee changes. With respect to non-marketable
orders which provide liquidity on an Exchange, member organizations can
choose from any one of the 13 currently operating registered exchanges
to route such order flow. Accordingly, competitive forces constrain
exchange transaction fees that relate to orders that would provide
displayed liquidity on an exchange. Stated otherwise, changes to
exchange transaction fees can have a direct effect on the ability of an
exchange to compete for order flow.
Step Up Tier 4 Adding Credit
The Exchange believes that a new Step Up Tier 4 Adding Credit is
reasonable. Specifically, the Exchange believes that the proposed Step
Up Tier 4 Adding Credit would provide an incentive for member
organizations to receive an incremental per share credit if the unique
identifiers associated with the member organization for order entry and
execution identification purposes establish the NBBO or a new BBO on
the Exchange and meet certain Adding ADV requirements directly and
through affiliation with an SLP. The proposed incremental credit would
thus provide incentives to member organizations to provide aggressively
priced orders that improve the market by setting the NBBO or a new BBO
on the Exchange and to send additional liquidity providing orders to
the Exchange in Tape A, B and C Securities. To the extent that the
proposed change leads to an increase in overall liquidity activity on
the Exchange and more competitive pricing, this will improve the
quality of the Exchange's market, improve quote spreads and increase
its attractiveness to existing and prospective participants.
As noted above, the Exchange operates in a highly competitive
environment, particularly for attracting non-marketable order flow that
provides liquidity on an exchange. The Exchange believes it is
reasonable to provide higher credits for orders that provide additional
liquidity. Moreover, the Exchange believes that providing an
incrementally higher credit for adding orders that set the NBBO or a
new BBO is reasonable because it would encourage additional
aggressively priced displayed liquidity on the Exchange and because
market participants benefit from the greater amounts of liquidity and
price improvement present on the Exchange. Further, the Exchange
believes that requiring member organizations to meet specific Adding
ADV requirements at the MPID and mnemonic level in order to qualify for
the incremental credit is also reasonable. Specifically, requiring all
eligible unique identifiers to (1) have Adding ADV in Tapes A, B and C
Securities as a percentage of Tapes A, B and C CADV, excluding any
liquidity added by a DMM, that is at least 50% more than the MPID's or
mnemonic's Adding ADV in Tapes A, B and C securities in June 2020 as a
percentage of Tapes A, B and C CADV; (2) be affiliated with an SLP that
has an Adding ADV in Tape A securities at least 0.10% of NYSE CADV; and
(3) have Adding ADV in Tape A securities as a percentage of NYSE CADV,
excluding any liquidity added by a DMM, that is at least 0.20%, is
reasonable because it would encourage additional displayed liquidity on
the Exchange and because market participants benefit from the greater
amounts of liquidity and price improvement present on the Exchange.
Since the proposed Step Up Tier 4 would be new with a step up
requirement, no member organization currently qualifies for the
proposed pricing tier. As previously noted, there are a number of
member organizations that could qualify for the proposed higher credit
but without a view of member organization 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 qualifying
for the tier. The Exchange believes the proposed credit is reasonable
as it would provide an additional incentive for member organizations to
direct their order flow
[[Page 44133]]
to the Exchange and provide meaningful added levels of liquidity in
order to qualify for the higher incremental credit, thereby
contributing to depth and market quality on the Exchange.
The Exchange believes that requiring member organization's unique
identifiers be affiliated with an SLP with an Adding ADV of at least
0.10% of NYSE CADV will encourage members to act as a SLP, which will
benefit market participants from increased quoting as required for
SLPs. The Exchange notes that Step Up Tier 2 has a similar SLP
affiliation requirement.
Finally, the Exchange believes that excluding the incremental
$0.0006 credit for NBBO and BBO setting adding volume from the $0.0032
limit for SLP Step Up credits will incentivize improved quoting and
tighter spreads. The Exchange notes that all other adding orders from
those qualifying MPIDs and mnemonics will continue to subject to the
$0.0032 limit.
Fee Waivers for Trading Floor-Based Member Organizations
The proposed extension of the waiver of equipment and related
service fees and the applicable monthly trading license fee for Trading
Floor-based member organizations is reasonable in light of the partial
continued closure of the NYSE Trading Floor. Beginning March 2020,
markets worldwide have experienced unprecedented declines and
volatility because of the ongoing spread of COVID-19 also resulted in
the temporary closure of the NYSE Trading Floor. As noted, the Trading
Floor was recently partially reopened on a limited basis to a subset of
Floor brokers and DMMs, subject to safety measures designed to prevent
the spread of COVID-19. The proposed change is designed to reduce costs
for Floor participants for the month of July 2020 and therefore ease
the financial burden faced by member organizations that conduct
business on the Trading Floor while it continues to operate with
reduced capacity.
The Proposal Is an Equitable Allocation of Fees
The Exchange believes the proposal equitably allocates its fees
among its market participants by fostering liquidity provision and
stability in the marketplace.
Step Up Tier 4 Adding Credit
The Exchange believes that the proposed Step Up Tier 4 will
allocate the proposed credits fairly among market participants. The
proposed tier will allow member organizations to qualify for a credit
by adding liquidity and setting the NBBO or a new BBO. The Exchange
believes the proposed rule change would improve market quality for all
market participants on the Exchange and, as a consequence, attract more
liquidity to the Exchange, thereby improving market-wide quality and
price discovery. It is equitable for the Exchange to add additional
incentives for member organizations to receive a credit when their
orders add liquidity to the Exchange as a means of incentivizing
increased liquidity adding activity. An increase in overall liquidity
on the Exchange will improve the quality of the Exchange's market and
increase its attractiveness to existing and prospective participants.
The Exchange believes that requiring member organization's unique
identifiers to have specific Adding ADV requirements in order to
qualify for the proposed credit would also encourage additional
displayed liquidity on the Exchange. Moreover, it is equitable for the
Exchange to require the unique identifiers to be affiliated with an SLP
that meets an Adding ADV requirement in Tape A securities due to the
Exchange's goal to specifically promoting increased liquidity in
securities in Tape A. Since the proposed Step Up Tier would be new, no
member organization currently qualifies for it. As noted, there are
currently no member organizations that could qualify for the proposed
higher credit, but without a view of member organization activity on
other exchanges and off-exchange venues, the Exchange has no way of
knowing whether this proposed rule change would result in any member
organization qualifying for the tier. The Exchange believes the
proposed incremental credit is reasonable as it would incentivize
activity that encourages the setting of the NBBO or a new BBO, thereby
contributing to depth and market quality and increased price
improvement on the Exchange. The proposal neither targets nor will it
have a disparate impact on any particular category of market
participant. All member organizations would be eligible to qualify for
the incremental credit proposed in Step Up Tier 4 if their unique
identifier meets the Adding ADV requirements in Tapes A, B and C
securities on its own and through affiliation with an SLP. Any market
participant that is dissatisfied with the proposed new credit is free
to shift order flow to competing venues that provide more favorable
pricing or less stringent qualifying criteria.
The Exchange believes that offering an incremental step up credit
for setting the NBBO or a new BBO will encourage higher levels of
liquidity provision into the price discovery process and is consistent
with the overall goals of enhancing market quality, thereby providing
additional price improvement opportunities on the Exchange and
benefiting investors generally. As to those market participants that do
not presently qualify for the adding liquidity credits, the proposal
will not adversely impact their existing pricing or their ability to
qualify for other credits provided by the Exchange.
Fee Waivers for Trading Floor-Based Member Organizations
Finally, the proposed extension of the waiver of equipment and
related service fees and the applicable monthly trading license fee for
Trading Floor-based member organizations to July 2020 are also an
equitable allocation of fees. The proposed waivers apply to all Trading
Floor-based firms meeting specific requirements during the period that
the Trading Floor is partially open. The proposed change is equitable
as it merely continues the fee waiver granted in April, May and June
2020, and is designed to reduce monthly costs for Trading Floor-based
member organizations that are unable to fully conduct Floor operations.
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 proposal is not unfairly discriminatory because it neither
targets nor will it have a disparate impact on any particular category
of market participant.
Step Up Tier 4 Adding Credit
The Exchange believes it is not unfairly discriminatory to provide
an additional per share step up credits for activity that encourages
the setting of the NBBO or a new BBO as the proposed credit would be
provided on an equal basis to all member organizations that add
liquidity by meeting the new proposed Step Up Tier's requirements. As
noted, the Exchange intends for the proposal to improve market quality
for all members on the Exchange and by extension attract more liquidity
to the market, thereby improving market wide quality and price
discovery. The Exchange notes that there are currently tiers offering
similar incentives. For example, NYSE Arca, Inc. (``NYSE Arca'') offers
a BBO Setter tier for qualifying ETP IDs
[[Page 44134]]
that provides an incremental credit of $0.0004 per share in Tape A and
Tape C securities and an incremental credit of $0.0002 in Tape B
securities for orders that set a new NYSE Arca BBO.\24\ The Exchange
also believes that the proposed change is not unfairly discriminatory
because it is reasonably related to the value to the Exchange's market
quality associated with higher volume. Finally, the submission of
orders to the Exchange is optional for member organizations in that
they could choose whether to submit orders to the Exchange and, if they
do, the extent of its activity in this regard.
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\24\ See NYSE Arca Equities Fees and Charges, available https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
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Fee Waivers for Trading Floor-Based Member Organizations
The proposed continuation of the waiver of equipment and related
service fees and the applicable monthly trading license fee for Trading
Floor-based member organizations during July 2020 is not unfairly
discriminatory because the proposed waivers would benefit all
similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange is not proposing to waive the Floor-
related fixed indefinitely, but rather during the period that the
Trading Floor is not fully open. The proposed fee change is designed to
ease the financial burden on Trading Floor-based member organizations
that cannot fully conduct Floor operations.
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,\25\ 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 further discussed above, the Exchange
believes that the proposed changes would encourage the continued
participation of member organizations on the Exchange by providing
certainty and fee relief during the unprecedented volatility and market
declines caused by the continued spread of COVID-19. 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.'' \26\
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\25\ 15 U.S.C. 78f(b)(8).
\26\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed changes are designed to
respond to the current competitive environment and to attract
additional order flow to the Exchange. The Exchange believes that the
proposed changes would continue to incentivize market participants to
direct displayed 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 current and 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. Further, the
proposed continued waiver of equipment and related service fees and the
applicable monthly trading license fee for Trading Floor-based member
organizations during July 2020 provide a degree of certainty and ease
the financial burden on Trading Floor-based member organizations
impacted by the temporary closing and partial reopening of the Trading
Floor. 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. As
previously noted, the Exchange's market share of trading in Tape A, B
and C securities combined is less than 13%. 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. The Exchange believes
that the proposed rule change reflects this competitive environment
because it modifies the Exchange's fees in a manner designed to provide
a degree of certainty and ease the financial burdens of the current
unsettled market environment, and permit affected member organizations
to continue to conduct market-making operations on the Exchange and
avoid unintended costs of doing business on the Exchange while the
Trading Floor is not fully open, which could make the Exchange a less
competitive venue on which to trade as compared to other options
exchanges.
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 is effective upon filing pursuant to
Section 19(b)(3)(A) \27\ of the Act and subparagraph (f)(2) of Rule
19b-4 \28\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such 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 shall institute proceedings under
Section 19(b)(2)(B) \29\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\29\ 15 U.S.C. 78s(b)(2)(B).
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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
[[Page 44135]]
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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2020-59 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-2020-59. 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 (http://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. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2020-59 and should be submitted on
or before August 11, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15689 Filed 7-20-20; 8:45 am]
BILLING CODE 8011-01-P