Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Schedule of Fees and Rebates, 29262-29267 [2019-13115]
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Federal Register / Vol. 84, No. 120 / Friday, June 21, 2019 / Notices
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–NYSEArca–2019–43 and
should be submitted on or before July
12, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Vanessa A. Countryman,
Acting Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Its Schedule of
Fees and Rebates
June 17, 2019.
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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 June 3,
2019, NYSE National, Inc. (‘‘NYSE
National’’ or ‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Schedule of Fees and Rebates to revise
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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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.
1. Purpose
[Release No. 34–86126; File No. SR–
NYSENAT–2019–14]
1 15
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2019–13123 Filed 6–20–19; 8:45 am]
28 17
the quoting requirements in order for
ETP Holders to qualify for Adding Tier
1, Adding Tier 2 and Adding Tier 3 fees.
The Exchange also proposes nonsubstantive changes to the presentation
of the Adding Tiers. 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.
The Exchange proposes to amend its
Schedule of Fees and Rebates (‘‘Fee
Schedule’’) to reduce the number of
securities in which an ETP Holder must
quote to qualify for Adding Tier 1,
Adding Tier 2 and Adding Tier 3 fees.
Specifically, the Exchange proposes to
lower the number of securities in which
an ETP Holder must quote to qualify for
Adding Tiers 1–3 by 50 securities across
the board. The Exchange also proposes
non-substantive changes to the
presentation of the Adding Tiers on the
Fee Schedule. The Exchange proposes
to implement the rule change on June 3,
2019.
Background
The Exchange operates in a highly
competitive market. The Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. 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
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broader forms that are most important to
investors and listed companies.’’ 3
As the Commission itself recognized,
the market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 4 Indeed, equity
trading is currently dispersed across 13
exchanges,5 32 alternative trading
systems,6 and numerous broker-dealer
internalizers and wholesalers. Based on
publicly-available information, no
single exchange has more than 18% of
the market share of executed volume of
equity trades (whether excluding or
including auction volume).7 Therefore,
no exchange possesses significant
pricing power in the execution of equity
order flow. More specifically, in May
2019, the Exchange had 1.3% market
share of executed volume of equity
trades (excluding auction volume).8 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 fee
changes. Accordingly, competitive
forces constrain the Exchange’s
transaction fees, and market participants
can readily trade on competing venues
if they deem pricing levels at those
other venues to be more favorable.
The Exchange utilizes a ‘‘takermaker’’ or inverted fee model to attract
orders that provide liquidity at the most
competitive prices. Under the takermaker model, offering rebates for taking
liquidity increases the likelihood that
market participants will send orders to
the Exchange to trade with liquidity
providers’ orders. This increased taker
order flow provides an incentive for
market participants to send orders that
provide liquidity. The Exchange charges
fees for order flow that provides
liquidity. These fees are reasonable due
3 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
4 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’’).
5 See Cboe Global Markets, U.S. Equities Market
Volume Summary (May 31, 2019), available at
https://markets.cboe.com/us/equities/market_share/.
See generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
6 See FINRA ATS Transparency Data (May 6,
2019), available at https://otctransparency.
finra.org/otctransparency/AtsIssueData. Although
54 alternative trading systems were registered with
the Commission as of April 30, 2019, only 32 are
currently trading. A list of alternative trading
systems registered with the Commission is available
at https://www.sec.gov/files/data/alternativetrading-system-ats-list/atslist043019.pdf.
7 See Cboe Global Markets U.S. Equities Market
Volume Summary (May 31, 2019), available at
https://markets.cboe.com/us/equities/market_share/.
8 See id.
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to the additional marketable interest (in
part attracted by the exchange’s rebate
to remove liquidity) with which those
order flow providers can trade.
The Exchange sets forth the fees it
charges for adding liquidity in four
Adding Tiers that establish minimum
quoting or volume requirements that an
ETP Holder must satisfy in order to be
eligible for specific corresponding fees.
These quoting and volume requirements
are based on the type of liquidity (i.e.,
displayed, non-displayed, BBO setting,
or MPL) and the type of security (i.e.,
whether it is a Tape A, B or C security).
In addition, the Exchange offers two
‘‘step up’’ Adding Tiers that do not have
quoting or minimum volume
requirements but require ETP Holders to
provide additional incremental
liquidity, thus ‘‘stepping up’’ their
liquidity provision, in order to qualify
for better pricing based on smaller
amounts of liquidity than are required
to qualify for Adding Tiers 1–3. The
different tiers are designed to provide an
incentive for order flow providers to
add liquidity on the Exchange because
the fees are lower for the tiers that have
higher quoting or volume requirements.
ETP Holders that do not send order flow
to the Exchange to qualify for the
Adding Tier rates would receive the
rates set forth under item A (General
Rates) of the Fee Schedule.
To respond to this competitive
environment, the Exchange proposes to
adjust its pricing to reduce the number
of securities in which an ETP Holder
must quote in order to qualify for the
Adding Tier 1–3 fees. The Exchange’s
market share of intraday trading (i.e.,
excluding auctions) declined from 1.5%
for the month of March 2019 to 1.3% for
the month of May 2019.9 The proposed
fee change is designed to attract
additional order flow to the Exchange
by making it easier to qualify for the
respective tiered rates.
Proposed Rule Change
As described in more detail below, in
order to qualify for the Adding Tiers 1–
3 fees, an ETP Holder must be quoting
at a price that is equal to the NBBO a
specified percentage of the time, in a
specific number of securities.10 The
Exchange proposes to lower the number
of securities in which an ETP Holder
must quote to qualify for Adding Tiers
1–3 by 50 securities across the board.
Without having a view of ETP Holder’s
activity on other markets and offexchange venues, the Exchange believes
9 See
id.
Adding Tier 4 volume requirements are
currently waived. See footnote * in the current Fee
Schedule. The Exchange proposes no changes to
Adding Tier 4.
10 The
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that this reduction in the number of
securities would be significant enough
to incentivize market participants to
increase their quoting on the Exchange
to meet the new lower requirement, and
thus be eligible for lower fees, and
submit additional adding liquidity to
the Exchange.
Adding Tier 1
Under current Adding Tier 1, ETP
Holders that add liquidity to the
Exchange in securities with a per share
price of $1.00 or more and that:
(i) Quote at the NBBO 11 at least 5%
of the time in 1,000 or more securities
on an average daily basis, calculated
monthly, and have an average daily
volume (‘‘ADV’’) of adding liquidity as
a percentage of US consolidated ADV
(‘‘CADV’’) of 0.20% or more, or
(ii) quote at the NBBO at least 5% of
the time in 2,500 or more securities on
an average daily basis, calculated
monthly, and have an ADV of adding
liquidity as a percentage of US CADV of
0.10% or more,
would be charged the following fees:
• $0.0008 per share for adding
displayed orders in Tape B and C
securities and $0.0011 per share in Tape
A securities;
• $0.0008 per share for orders that set
a new Exchange BBO in Tape B and C
securities and $0.0011 per share in Tape
A securities;
• $0.0010 per share for adding nondisplayed orders in Tape B and C
securities and $0.0013 per share in Tape
A securities; and
• $0.0005 per share for MPL orders.
The Exchange proposes to amend the
quoting requirements for both
alternative methods described in (i) and
(ii) above to qualify for the tier by
reducing the number of securities in
which the ETP Holder must quote. As
proposed, the first alternative would
require ETP Holders to quote at least 5%
of the time at the NBBO in 950 (instead
of 1,000) or more securities on an
average daily basis, calculated monthly,
while the second would require ETP
Holders to quote at least 5% of the time
at the NBBO in 2,450 (instead of 2,500)
or more securities on an average daily
basis, calculated monthly. The fees
charged under the Adding Tier 1 would
not change.
Adding Tier 2
Under current Adding Tier 2, ETP
Holders that add liquidity to the
Exchange in securities with a per share
price of $1.00 or more and that quote at
least 5% of the time at the NBBO in
2000 or more securities on an average
11 See
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daily basis, calculated monthly, and
have an ADV of adding liquidity as a
percentage of US CADV of 0.10% or
more, are charged the following fees:
• $0.0012 per share for adding
displayed orders in Tape B and C
securities and $0.0015 per share in Tape
A securities;
• $0.0012 per share for orders that set
a new Exchange BBO in Tape B and C
securities and $0.0015 per share in Tape
A securities;
• $0.0014 per share for adding nondisplayed orders in Tape B and C
securities and $0.0017 per share in Tape
A securities; and
• $0.0005 per share for MPL orders,
which would remain unchanged.
The Exchange proposes to reduce the
number of securities in which the ETP
Holder must quote to qualify for the tier,
and would require ETP Holders to quote
at least 5% of the time at the NBBO in
1,950 (instead of 2,000) or more
securities on an average daily basis,
calculated monthly. The fees charged
under the Adding Tier 2 would not
change.
Adding Tier 3
Under current Adding Tier 3, ETP
Holders that add liquidity to the
Exchange in stocks with a per share
price of $1.00 or more and that quote at
least 5% of the NBBO in 600 or more
securities on an average daily basis,
calculated monthly, are charged the
following fees:
• $0.0015 per share for adding
displayed orders in Tape B and C
securities and $0.0017 per share in Tape
A securities;
• $0.0015 per share for orders that set
a new Exchange BBO in Tape B and C
securities and $0.0017 per share in Tape
A securities;
• $0.0017 per share for adding nondisplayed orders in Tape B and C
securities and $0.0019 per share in Tape
A securities; and
• $0.0005 per share for MPL orders,
which would remain unchanged.
The Exchange proposes to reduce the
number of securities in which the ETP
Holder must quote to qualify for the tier
by 50, and would require ETP Holders
to quote at least 5% of the NBBO in 550
(instead of 600) or more securities on an
average daily basis, calculated monthly.
The fees charged under the Adding Tier
3 would not change.
Application of Proposed Fee Change
The proposed rule change is designed
to provide order flow providers with an
incentive to route liquidity-providing
order flow to the Exchange. As
described above, ETP Holders with
liquidity-providing order flow have a
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choice of where to send that order flow.
The Exchange believes that if it reduces
the requirements to qualify for tiers that
have lower charges, more ETP Holders
will choose to route their liquidityproviding order flow to the Exchange to
qualify for those tiers. The Exchange
cannot predict with certainty how many
ETP Holders would avail themselves of
this opportunity, but believes that more
than 12 ETP Holders could qualify for
these tiers if they so choose.12
Additional liquidity-providing order
flow benefits all market participants
because it provides greater execution
opportunities on the Exchange.
For example, assume an ETP Holder
averages an ADV of 17.5 million shares
of adding liquidity in a month where a
billing month of US CADV is 7 billion,
or 0.25% of CADV. If that ETP Holder
quotes at least 5% of the NBBO in 975
securities on an average daily basis,
calculated monthly, that ETP Holder
would meet the proposed requirement
of at least 950 securities to qualify for
Adding Tier 1. Prior to the proposed
change, that ETP Holder would fall
short of the requirement for Tier 1, and
would have instead qualified for Adding
Tier 3. With this proposed change, this
ETP Holder would now be eligible for
Adding Tier 1 fees, which, except for
MPL Adding fees, are lower than the
Adding Tier 3 fees. The Exchange
believes that charging lower fees would
create an incentive for liquidity
providers to direct order flow to the
Exchange, which in turn would create
additional execution opportunities for
all market participants.
Proposed Non-Substantive Changes
The Exchange also proposes a nonsubstantive change to the presentation
of the Adding Tiers under item B
(Tiered Rates) of the Fee Schedule. The
Exchange proposes a horizontal
presentation similar to the presentation
of the Taking Tiers rather than the
current vertical presentation. The
Exchange also proposes to simplify the
presentation by using sub-titles to
identify the type of liquidity (i.e.,
displayed, non-displayed, BBO setting,
and MPL) and then listing the
corresponding fees under each category.
The proposed substantive changes
described above would be included in
the new presentation of the Tiered
Rates. The proposed changes would
appear as follows in the Fee Schedule:
Adding fees
(per share)
Tier requirement
Adding Tier 1
Either:
(i) at least 5% of the NBBO ** in 950 or more symbols on an average daily basis, calculated monthly
and 0.20% or more Adding ADV as a % of US CADV, or
(ii) at least 5% of the NBBO ** in 2,450 or more symbols on an average daily basis, calculated monthly and 0.10% or more Adding ADV as a % of US CADV.
Displayed liquidity:
—Tapes B and C: $0.0008.
—Tape A: $0.0011.
Non-displayed liquidity:
—Tapes B and C: $0.0010.
—Tape A: $0.0013.
BBO setting:
—Tapes B and C: $0.0008.
—Tape A: $0.0011.
MPL:
—All Tapes: $0.0005.
Adding Tier 2
At least 5% of the NBBO ** in 1,950 or more symbols on an average daily basis, calculated monthly and
0.10% or more Adding ADV as a % of US CADV.
Displayed liquidity:
—Tapes B and C: $0.0012.
—Tape A: $0.0015.
Non-displayed liquidity:
—Tapes B and C: $0.0014.
—Tape A: $0.0017.
BBO Setting:
—Tapes B and C: $0.0012.
—Tape A: $0.0015.
MPL:
—All Tapes: $0.0005.
Adding Tier 3
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At least 5% of the NBBO ** in 550 or more symbols on an average daily basis, calculated monthly ............
Displayed liquidity:
—Tapes B and C: $0.0015.
—Tape A: $0.0017.
Non-displayed liquidity:
—Tapes B and C: $0.0017.
—Tape A: $0.0019.
BBO Setting:
—Tapes B and C: $0.0015.
—Tape A: $0.0017.
MPL:
—All Tapes: $0.0005.
12 In the month of May 2019, 12 ETP Holders
quoted at least 5% of the time at the NBBO in at
least 10 securities.
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Adding fees
(per share)
Tier requirement
Adding Tier 4 *
0.015% or more Adding ADV as a % of US CADV .........................................................................................
Displayed liquidity:
—Tapes B and C: $0.0023.
—Tape A: $0.0025.
Non-displayed liquidity:
—Tapes B and C: $0.0025.
—Tape A: $0.0027.
BBO Setting:
—Tapes B and C: $0.0021.
—Tape A: $0.0023.
MPL:
—All Tapes: $0.0005.
Step Up Adding Tier 1
0.07% or more Adding ADV as a % of US CADV over the ETP Holder’s Adding ADV as a % of US CADV
in November 2018.
Displayed liquidity:
—Tapes B and C: $0.0012.
—Tape A: $0.0015.
Non-displayed liquidity:
—Tapes B and C: $0.0014.
—Tape A: $0.0017.
BBO Setting:
—Tape B and C: $0.0012.
—Tape A: $0.0015.
MPL:
—All Tapes: $0.0005.
Step Up Adding Tier 2
0.04% or more Adding ADV as a % of US CADV over the ETP Holder’s Adding ADV as a % of US CADV
in November 2018.
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The Exchange believes the proposed
change will add clarity to the
Exchange’s rules by making the Fee
Schedule easier to read. Other than the
changes to the Adding Tier quoting
qualifications described above, the
Exchange proposes no other substantive
changes to the Adding Tiers.
The proposed changes are not
otherwise intended to address any other
issues, and the Exchange is not aware of
any problems that ETP Holders would
have in complying with the proposed
change.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,13 in general, and
furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,14 in
particular, because it provides for the
equitable allocation of reasonable dues,
fees, and other charges among its
13 15
14 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) & (5).
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members, issuers and other persons
using its facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
The Exchange believes that lowering
the number of securities in which ETP
Holders are required to quote at least
5% of the time at the NBBO on an
average daily basis, calculated monthly,
for Adding Tiers 1–3 provides for the
equitable allocation of reasonable dues
and fees and is not unfairly
discriminatory for the following
reasons.
As noted 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.
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
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Displayed liquidity:
—Tape B and C: $0.0015.
—Tape A: $0.0018.
Non-displayed liquidity:
—Tapes B and C: $0.0017.
—Tape A: $0.0020.
BBO Setting:
—Tapes B and C: $0.0015.
—Tape A: $0.0018.
MPL:
—All Tapes: $0.0005.
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 15
As the Commission itself recognized,
the market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 16 Indeed, equity
trading is currently dispersed across 13
exchanges,17 32 alternative trading
systems,18 and numerous broker-dealer
15 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
16 See Transaction Fee Pilot, 84 FR at 5253.
17 See Cboe Global Markets, U.S. Equities Market
Volume Summary (May 31, 2019), available at
https://markets.cboe.com/us/equities/market_share/.
See generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
18 See FINRA ATS Transparency Data (May 6,
2019), available at https://
otctransparency.finra.org/otctransparency/
AtsIssueData. Although 54 alternative trading
systems were registered with the Commission as of
April 30, 2019, only 32 are currently trading. A list
of alternative trading systems registered with the
Commission is available at https://www.sec.gov/
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internalizers and wholesalers. Based on
publicly-available information, no
single exchange has more than 18% of
the market share of executed volume of
equity trades (whether including or
excluding auction volume).19 Therefore,
no exchange possesses significant
pricing power in the execution of equity
order flow. More specifically, in May
2019, the Exchange had 1.3% market
share of executed volume of equity
trades (excluding auction volume).20
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue or
reduce use of certain categories of
products, in response to fee changes.
Accordingly, competitive forces
constrain exchange transaction fees.
The Exchange believes the proposed
change is equitable and not unfairly
discriminatory because it would
continue to encourage ETP Holders to
send orders to the Exchange, thereby
contributing to robust levels of liquidity,
which benefits all market participants.
Further, the Exchange believes that, for
the reasons discussed above, lowering
the quoting requirement would make it
easier for liquidity providers to qualify
for the fees, thereby encouraging
submission of additional liquidity to the
Exchange. The proposed change will
thereby encourage the submission of
additional liquidity to a national
securities exchange, thus promoting
price discovery and transparency and
enhancing order execution
opportunities for ETP Holders from the
substantial amounts of liquidity present
on the Exchange. All ETP Holders
would benefit from the greater amounts
of liquidity that will be present on the
Exchange, which would provide greater
execution opportunities.
The Exchange notes that there are
currently four (4) firms qualifying for
the combined Adding Tiers 1–4 and
that, based on current participation on
the Exchange, no additional firms
would initially qualify with the lower
requirements. Without having a view of
an ETP Holder’s activity on other
markets and off-exchange venues, the
Exchange believes the proposed lower
quoting requirement would provide an
incentive for market participants to
increase their quoting to meet the new
lower requirement and submit
additional adding liquidity to the
Exchange. In addition, based on the
files/data/alternative-trading-system-ats-list/
atslist043019.pdf.
19 See Cboe Global Markets U.S. Equities Market
Volume Summary (May 31, 2019), available at
https://markets.cboe.com/us/equities/market_share/.
20 See id.
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profile of liquidity-providing firms
generally, the Exchange believes that
more than twelve (12) firms could
qualify for these tiers if they choose to
direct order flow to, and increase
quoting on, the Exchange.
Moreover, the proposed change is
equitable and not unfairly
discriminatory because all qualifying
ETP Holders that add liquidity to the
Exchange and quote at the NBBO in
each tier would be eligible for the fee by
satisfying the lowered quoting
thresholds, and because the lower
thresholds would apply equally to all
similarly situated ETP Holders. The
Exchange further believes that the
proposed changes would not permit
unfair discrimination among ETP
Holders because the different tiered
rates are available equally to all ETP
Holders. As described above, in today’s
competitive marketplace, order flow
providers have a choice of where to
direct liquidity-providing order flow,
and while only four ETP Holders have
qualified to date for these rates, the
Exchange believes there are additional
ETP Holders that could qualify if they
chose to direct their order flow to the
Exchange.
The Exchange also believes that the
proposed non-substantive changes to
the Adding Tier presentation would not
be inconsistent with the public interest
and the protection of investors because
investors will not be harmed and in fact
would benefit from increased clarity
and transparency, thereby reducing
potential confusion.
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,21 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 by
making it easier for liquidity providers
to qualify for the Adding Tier 1–3 fees,
thereby increasing the likelihood that
market participants will send orders to
the Exchange to trade with the liquidity
providers’ orders and thus promoting
21 15
PO 00000
U.S.C. 78f(b)(8).
Frm 00110
Fmt 4703
Sfmt 4703
market depth, price discovery and
transparency and enhancing order
execution opportunities for ETP
Holders. 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.’’ 22
Intramarket Competition. The
proposed change is designed to attract
additional order flow to the Exchange
by reducing the number of securities
that an ETP Permit holder is required to
quote for Adding Tiers 1–3. Greater
liquidity benefits all market participants
on the Exchange by providing more
trading opportunities and encourages
ETP Holders to send orders, thereby
contributing to robust levels of liquidity,
which benefits all market participants.
The proposed reduced quoting
requirement 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.
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 offexchange venues if they deem fee levels
at those other venues to be more
favorable. The Exchange notes that
Exchange’s market share of intraday
trading (excluding auctions) declined
from 1.5% for the month of March 2019
to 1.3% for the month of May 2019.23
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 competition.
The Exchange believes that the
proposed change could promote
competition between the Exchange and
other execution venues, including those
that currently offer similar order types
and comparable transaction pricing, by
encouraging additional orders to be sent
to the Exchange for execution.
22 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
23 See note 9, supra.
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Federal Register / Vol. 84, No. 120 / Friday, June 21, 2019 / Notices
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) 24 of the Act and
subparagraph (f)(2) of Rule 19b–4 25
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
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) 26 of the Act to
determine whether the proposed rule
change 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:
jspears on DSK30JT082PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSENAT–2019–14 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–NYSENAT–2019–14. 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/
24 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
26 15 U.S.C. 78s(b)(2)(B).
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
offices 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–NYSENAT–2019–14, and
should be submitted on or before July
12, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019–13115 Filed 6–20–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; the
Options Clearing Corporation; Order
Approving Proposed Rule Change
Related to the Introduction of a New
Liquidation Cost Model in the Options
Clearing Corporation’s Margin
Methodology
June 17, 2019.
I. Introduction
On April 18, 2019, the Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2019–
004 (‘‘Proposed Rule Change’’) pursuant
to Section 19(b) of the Securities
Exchange Act of 1934 (‘‘Exchange
25 17
VerDate Sep<11>2014
18:30 Jun 20, 2019
27 17
Jkt 247001
Act’’) 1 and Rule 19b–4 2 thereunder to
propose changes to OCC’s margin
methodology to introduce a new model
to estimate the liquidation cost for all
options and futures, as well as the
securities in margin collateral.3
The Proposed Rule Change was
published for public comment in the
Federal Register on May 6, 2019,4 and
the Commission received no comments
regarding the Proposed Rule Change.
This order approves the Proposed Rule
Change.
II. Background
The System for Theoretical Analysis
and Numerical Simulations (‘‘STANS’’)
is OCC’s methodology for calculating
margin requirements. OCC uses the
STANS methodology to measure the
exposure of portfolios of options and
futures cleared by OCC and of cash
instruments that are part of margin
collateral. STANS margin requirements
are intended to cover potential losses
due to price movements over a two-day
risk horizon; however, the current
STANS margin requirements do not
cover the potential additional
liquidation costs OCC may incur in
closing out a defaulted Clearing
Member’s portfolio.5 Closing out
positions in a defaulted Clearing
Member’s portfolio could entail selling
longs at the bid price and covering
shorts at the ask price. Additionally,
even well-hedged portfolios consisting
of offsetting longs and shorts would
require some cost to liquidate in the
event of a default. The process of
modeling liquidation costs is, therefore,
relevant to ensuring that OCC holds
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Notice of Filing infra note 4, at 84 FR 19815.
4 Securities Exchange Act Release No. 85755
(Apr. 30, 2019), 84 FR 19815 (May 6, 2019) (SR–
OCC–2019–004) (‘‘Notice of Filing’’). OCC also filed
a related advance notice (SR–OCC–2019–802)
(‘‘Advance Notice’’) with the Commission pursuant
to Section 806(e)(1) of Title VIII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act,
entitled the Payment, Clearing, and Settlement
Supervision Act of 2010 and Rule 19b–4(n)(1)(i)
under the Exchange Act. 12 U.S.C. 5465(e)(1). 15
U.S.C. 78s(b)(1) and 17 CFR 240.19b–4,
respectively. The Advance Notice was published in
the Federal Register on May 21, 2019. Securities
Exchange Act Release No. 85863 (May 15, 2019), 84
FR 23090 (May 21, 2019) (SR–OCC–2019–802).
5 OCC previously introduced a liquidation cost
model into STANS for risk managing only longdated options on the Standard & Poor’s (‘‘S&P’’) 500
index (‘‘SPX’’) that have a tenor of three-years or
more. See Securities Exchange Act Release No.
70719 (October 18, 2013), 78 FR 63548 (October 24,
2013) (SR–OCC–2013–16). Under the proposal
described in the Proposed Rule Change, OCC would
replace the existing liquidation model for longdated SPX options with the proposed model. Longdated SPX options, however, constituted less than
0.5 percent of open interest in SPX options open
interest at the time of filing. See Notice of Filing,
84 FR at 19816, note 7.
2 17
[Release No. 34–86119; File No. SR–OCC–
2019–004]
PO 00000
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 84, Number 120 (Friday, June 21, 2019)]
[Notices]
[Pages 29262-29267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13115]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86126; File No. SR-NYSENAT-2019-14]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its
Schedule of Fees and Rebates
June 17, 2019.
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 June 3, 2019, NYSE National, Inc. (``NYSE National'' or
``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Schedule of Fees and Rebates to
revise the quoting requirements in order for ETP Holders to qualify for
Adding Tier 1, Adding Tier 2 and Adding Tier 3 fees. The Exchange also
proposes non-substantive changes to the presentation of the Adding
Tiers. 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 Schedule of Fees and Rebates
(``Fee Schedule'') to reduce the number of securities in which an ETP
Holder must quote to qualify for Adding Tier 1, Adding Tier 2 and
Adding Tier 3 fees. Specifically, the Exchange proposes to lower the
number of securities in which an ETP Holder must quote to qualify for
Adding Tiers 1-3 by 50 securities across the board. The Exchange also
proposes non-substantive changes to the presentation of the Adding
Tiers on the Fee Schedule. The Exchange proposes to implement the rule
change on June 3, 2019.
Background
The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. 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.'' \3\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------
As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\4\ Indeed, equity trading is currently dispersed across 13
exchanges,\5\ 32 alternative trading systems,\6\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available
information, no single exchange has more than 18% of the market share
of executed volume of equity trades (whether excluding or including
auction volume).\7\ Therefore, no exchange possesses significant
pricing power in the execution of equity order flow. More specifically,
in May 2019, the Exchange had 1.3% market share of executed volume of
equity trades (excluding auction volume).\8\ 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 fee changes. Accordingly, competitive forces constrain the
Exchange's transaction fees, and market participants can readily trade
on competing venues if they deem pricing levels at those other venues
to be more favorable.
---------------------------------------------------------------------------
\4\ 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'').
\5\ See Cboe Global Markets, U.S. Equities Market Volume Summary
(May 31, 2019), available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\6\ See FINRA ATS Transparency Data (May 6, 2019), available at
https://otctransparency.finra.org/otctransparency/AtsIssueData.
Although 54 alternative trading systems were registered with the
Commission as of April 30, 2019, only 32 are currently trading. A
list of alternative trading systems registered with the Commission
is available at https://www.sec.gov/files/data/alternative-trading-system-ats-list/atslist043019.pdf.
\7\ See Cboe Global Markets U.S. Equities Market Volume Summary
(May 31, 2019), available at https://markets.cboe.com/us/equities/market_share/.
\8\ See id.
---------------------------------------------------------------------------
The Exchange utilizes a ``taker-maker'' or inverted fee model to
attract orders that provide liquidity at the most competitive prices.
Under the taker-maker model, offering rebates for taking liquidity
increases the likelihood that market participants will send orders to
the Exchange to trade with liquidity providers' orders. This increased
taker order flow provides an incentive for market participants to send
orders that provide liquidity. The Exchange charges fees for order flow
that provides liquidity. These fees are reasonable due
[[Page 29263]]
to the additional marketable interest (in part attracted by the
exchange's rebate to remove liquidity) with which those order flow
providers can trade.
The Exchange sets forth the fees it charges for adding liquidity in
four Adding Tiers that establish minimum quoting or volume requirements
that an ETP Holder must satisfy in order to be eligible for specific
corresponding fees. These quoting and volume requirements are based on
the type of liquidity (i.e., displayed, non-displayed, BBO setting, or
MPL) and the type of security (i.e., whether it is a Tape A, B or C
security). In addition, the Exchange offers two ``step up'' Adding
Tiers that do not have quoting or minimum volume requirements but
require ETP Holders to provide additional incremental liquidity, thus
``stepping up'' their liquidity provision, in order to qualify for
better pricing based on smaller amounts of liquidity than are required
to qualify for Adding Tiers 1-3. The different tiers are designed to
provide an incentive for order flow providers to add liquidity on the
Exchange because the fees are lower for the tiers that have higher
quoting or volume requirements. ETP Holders that do not send order flow
to the Exchange to qualify for the Adding Tier rates would receive the
rates set forth under item A (General Rates) of the Fee Schedule.
To respond to this competitive environment, the Exchange proposes
to adjust its pricing to reduce the number of securities in which an
ETP Holder must quote in order to qualify for the Adding Tier 1-3 fees.
The Exchange's market share of intraday trading (i.e., excluding
auctions) declined from 1.5% for the month of March 2019 to 1.3% for
the month of May 2019.\9\ The proposed fee change is designed to
attract additional order flow to the Exchange by making it easier to
qualify for the respective tiered rates.
---------------------------------------------------------------------------
\9\ See id.
---------------------------------------------------------------------------
Proposed Rule Change
As described in more detail below, in order to qualify for the
Adding Tiers 1-3 fees, an ETP Holder must be quoting at a price that is
equal to the NBBO a specified percentage of the time, in a specific
number of securities.\10\ The Exchange proposes to lower the number of
securities in which an ETP Holder must quote to qualify for Adding
Tiers 1-3 by 50 securities across the board. Without having a view of
ETP Holder's activity on other markets and off-exchange venues, the
Exchange believes that this reduction in the number of securities would
be significant enough to incentivize market participants to increase
their quoting on the Exchange to meet the new lower requirement, and
thus be eligible for lower fees, and submit additional adding liquidity
to the Exchange.
---------------------------------------------------------------------------
\10\ The Adding Tier 4 volume requirements are currently waived.
See footnote * in the current Fee Schedule. The Exchange proposes no
changes to Adding Tier 4.
---------------------------------------------------------------------------
Adding Tier 1
Under current Adding Tier 1, ETP Holders that add liquidity to the
Exchange in securities with a per share price of $1.00 or more and
that:
(i) Quote at the NBBO \11\ at least 5% of the time in 1,000 or more
securities on an average daily basis, calculated monthly, and have an
average daily volume (``ADV'') of adding liquidity as a percentage of
US consolidated ADV (``CADV'') of 0.20% or more, or
---------------------------------------------------------------------------
\11\ See footnote ** in the current Fee Schedule.
---------------------------------------------------------------------------
(ii) quote at the NBBO at least 5% of the time in 2,500 or more
securities on an average daily basis, calculated monthly, and have an
ADV of adding liquidity as a percentage of US CADV of 0.10% or more,
would be charged the following fees:
$0.0008 per share for adding displayed orders in Tape B
and C securities and $0.0011 per share in Tape A securities;
$0.0008 per share for orders that set a new Exchange BBO
in Tape B and C securities and $0.0011 per share in Tape A securities;
$0.0010 per share for adding non-displayed orders in Tape
B and C securities and $0.0013 per share in Tape A securities; and
$0.0005 per share for MPL orders.
The Exchange proposes to amend the quoting requirements for both
alternative methods described in (i) and (ii) above to qualify for the
tier by reducing the number of securities in which the ETP Holder must
quote. As proposed, the first alternative would require ETP Holders to
quote at least 5% of the time at the NBBO in 950 (instead of 1,000) or
more securities on an average daily basis, calculated monthly, while
the second would require ETP Holders to quote at least 5% of the time
at the NBBO in 2,450 (instead of 2,500) or more securities on an
average daily basis, calculated monthly. The fees charged under the
Adding Tier 1 would not change.
Adding Tier 2
Under current Adding Tier 2, ETP Holders that add liquidity to the
Exchange in securities with a per share price of $1.00 or more and that
quote at least 5% of the time at the NBBO in 2000 or more securities on
an average daily basis, calculated monthly, and have an ADV of adding
liquidity as a percentage of US CADV of 0.10% or more, are charged the
following fees:
$0.0012 per share for adding displayed orders in Tape B
and C securities and $0.0015 per share in Tape A securities;
$0.0012 per share for orders that set a new Exchange BBO
in Tape B and C securities and $0.0015 per share in Tape A securities;
$0.0014 per share for adding non-displayed orders in Tape
B and C securities and $0.0017 per share in Tape A securities; and
$0.0005 per share for MPL orders, which would remain
unchanged.
The Exchange proposes to reduce the number of securities in which
the ETP Holder must quote to qualify for the tier, and would require
ETP Holders to quote at least 5% of the time at the NBBO in 1,950
(instead of 2,000) or more securities on an average daily basis,
calculated monthly. The fees charged under the Adding Tier 2 would not
change.
Adding Tier 3
Under current Adding Tier 3, ETP Holders that add liquidity to the
Exchange in stocks with a per share price of $1.00 or more and that
quote at least 5% of the NBBO in 600 or more securities on an average
daily basis, calculated monthly, are charged the following fees:
$0.0015 per share for adding displayed orders in Tape B
and C securities and $0.0017 per share in Tape A securities;
$0.0015 per share for orders that set a new Exchange BBO
in Tape B and C securities and $0.0017 per share in Tape A securities;
$0.0017 per share for adding non-displayed orders in Tape
B and C securities and $0.0019 per share in Tape A securities; and
$0.0005 per share for MPL orders, which would remain
unchanged.
The Exchange proposes to reduce the number of securities in which
the ETP Holder must quote to qualify for the tier by 50, and would
require ETP Holders to quote at least 5% of the NBBO in 550 (instead of
600) or more securities on an average daily basis, calculated monthly.
The fees charged under the Adding Tier 3 would not change.
Application of Proposed Fee Change
The proposed rule change is designed to provide order flow
providers with an incentive to route liquidity-providing order flow to
the Exchange. As described above, ETP Holders with liquidity-providing
order flow have a
[[Page 29264]]
choice of where to send that order flow. The Exchange believes that if
it reduces the requirements to qualify for tiers that have lower
charges, more ETP Holders will choose to route their liquidity-
providing order flow to the Exchange to qualify for those tiers. The
Exchange cannot predict with certainty how many ETP Holders would avail
themselves of this opportunity, but believes that more than 12 ETP
Holders could qualify for these tiers if they so choose.\12\ Additional
liquidity-providing order flow benefits all market participants because
it provides greater execution opportunities on the Exchange.
---------------------------------------------------------------------------
\12\ In the month of May 2019, 12 ETP Holders quoted at least 5%
of the time at the NBBO in at least 10 securities.
---------------------------------------------------------------------------
For example, assume an ETP Holder averages an ADV of 17.5 million
shares of adding liquidity in a month where a billing month of US CADV
is 7 billion, or 0.25% of CADV. If that ETP Holder quotes at least 5%
of the NBBO in 975 securities on an average daily basis, calculated
monthly, that ETP Holder would meet the proposed requirement of at
least 950 securities to qualify for Adding Tier 1. Prior to the
proposed change, that ETP Holder would fall short of the requirement
for Tier 1, and would have instead qualified for Adding Tier 3. With
this proposed change, this ETP Holder would now be eligible for Adding
Tier 1 fees, which, except for MPL Adding fees, are lower than the
Adding Tier 3 fees. The Exchange believes that charging lower fees
would create an incentive for liquidity providers to direct order flow
to the Exchange, which in turn would create additional execution
opportunities for all market participants.
Proposed Non-Substantive Changes
The Exchange also proposes a non-substantive change to the
presentation of the Adding Tiers under item B (Tiered Rates) of the Fee
Schedule. The Exchange proposes a horizontal presentation similar to
the presentation of the Taking Tiers rather than the current vertical
presentation. The Exchange also proposes to simplify the presentation
by using sub-titles to identify the type of liquidity (i.e., displayed,
non-displayed, BBO setting, and MPL) and then listing the corresponding
fees under each category. The proposed substantive changes described
above would be included in the new presentation of the Tiered Rates.
The proposed changes would appear as follows in the Fee Schedule:
----------------------------------------------------------------------------------------------------------------
Tier requirement Adding fees (per share)
----------------------------------------------------------------------------------------------------------------
Adding Tier 1
----------------------------------------------------------------------------------------------------------------
Either: Displayed liquidity:
(i) at least 5% of the NBBO ** in 950 or more --Tapes B and C: $0.0008.
symbols on an average daily basis, --Tape A: $0.0011.
calculated monthly and 0.20% or more Adding Non-displayed liquidity:
ADV as a % of US CADV, or --Tapes B and C: $0.0010.
(ii) at least 5% of the NBBO ** in 2,450 or --Tape A: $0.0013.
more symbols on an average daily basis, BBO setting:
calculated monthly and 0.10% or more Adding
ADV as a % of US CADV..
--Tapes B and C: $0.0008.
--Tape A: $0.0011.
MPL:
--All Tapes: $0.0005.
----------------------------------------------------------------------------------------------------------------
Adding Tier 2
----------------------------------------------------------------------------------------------------------------
At least 5% of the NBBO ** in 1,950 or more Displayed liquidity:
symbols on an average daily basis, calculated --Tapes B and C: $0.0012.
monthly and 0.10% or more Adding ADV as a % of --Tape A: $0.0015.
US CADV.
Non-displayed liquidity:
--Tapes B and C: $0.0014.
--Tape A: $0.0017.
BBO Setting:
--Tapes B and C: $0.0012.
--Tape A: $0.0015.
MPL:
--All Tapes: $0.0005.
----------------------------------------------------------------------------------------------------------------
Adding Tier 3
----------------------------------------------------------------------------------------------------------------
At least 5% of the NBBO ** in 550 or more symbols Displayed liquidity:
on an average daily basis, calculated monthly. --Tapes B and C: $0.0015.
--Tape A: $0.0017.
Non-displayed liquidity:
--Tapes B and C: $0.0017.
--Tape A: $0.0019.
BBO Setting:
--Tapes B and C: $0.0015.
--Tape A: $0.0017.
MPL:
--All Tapes: $0.0005.
----------------------------------------------------------------------------------------------------------------
[[Page 29265]]
Adding Tier 4 *
----------------------------------------------------------------------------------------------------------------
0.015% or more Adding ADV as a % of US CADV...... Displayed liquidity:
--Tapes B and C: $0.0023.
--Tape A: $0.0025.
Non-displayed liquidity:
--Tapes B and C: $0.0025.
--Tape A: $0.0027.
BBO Setting:
--Tapes B and C: $0.0021.
--Tape A: $0.0023.
MPL:
--All Tapes: $0.0005.
----------------------------------------------------------------------------------------------------------------
Step Up Adding Tier 1
----------------------------------------------------------------------------------------------------------------
0.07% or more Adding ADV as a % of US CADV over Displayed liquidity:
the ETP Holder's Adding ADV as a % of US CADV in --Tapes B and C: $0.0012.
November 2018. --Tape A: $0.0015.
Non-displayed liquidity:
--Tapes B and C: $0.0014.
--Tape A: $0.0017.
BBO Setting:
--Tape B and C: $0.0012.
--Tape A: $0.0015.
MPL:
--All Tapes: $0.0005.
----------------------------------------------------------------------------------------------------------------
Step Up Adding Tier 2
----------------------------------------------------------------------------------------------------------------
0.04% or more Adding ADV as a % of US CADV over Displayed liquidity:
the ETP Holder's Adding ADV as a % of US CADV in --Tape B and C: $0.0015.
November 2018. --Tape A: $0.0018.
Non-displayed liquidity:
--Tapes B and C: $0.0017.
--Tape A: $0.0020.
BBO Setting:
--Tapes B and C: $0.0015.
--Tape A: $0.0018.
MPL:
--All Tapes: $0.0005.
----------------------------------------------------------------------------------------------------------------
The Exchange believes the proposed change will add clarity to the
Exchange's rules by making the Fee Schedule easier to read. Other than
the changes to the Adding Tier quoting qualifications described above,
the Exchange proposes no other substantive changes to the Adding Tiers.
The proposed changes are not otherwise intended to address any
other issues, and the Exchange is not aware of any problems that ETP
Holders would have in complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\13\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\14\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) & (5).
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The Exchange believes that lowering the number of securities in
which ETP Holders are required to quote at least 5% of the time at the
NBBO on an average daily basis, calculated monthly, for Adding Tiers 1-
3 provides for the equitable allocation of reasonable dues and fees and
is not unfairly discriminatory for the following reasons.
As noted 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. 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.'' \15\
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\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
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As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\16\ Indeed, equity trading is currently dispersed across 13
exchanges,\17\ 32 alternative trading systems,\18\ and numerous broker-
dealer
[[Page 29266]]
internalizers and wholesalers. Based on publicly-available information,
no single exchange has more than 18% of the market share of executed
volume of equity trades (whether including or excluding auction
volume).\19\ Therefore, no exchange possesses significant pricing power
in the execution of equity order flow. More specifically, in May 2019,
the Exchange had 1.3% market share of executed volume of equity trades
(excluding auction volume).\20\ 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 or reduce use of certain categories of products, in
response to fee changes. Accordingly, competitive forces constrain
exchange transaction fees.
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\16\ See Transaction Fee Pilot, 84 FR at 5253.
\17\ See Cboe Global Markets, U.S. Equities Market Volume
Summary (May 31, 2019), available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\18\ See FINRA ATS Transparency Data (May 6, 2019), available at
https://otctransparency.finra.org/otctransparency/AtsIssueData.
Although 54 alternative trading systems were registered with the
Commission as of April 30, 2019, only 32 are currently trading. A
list of alternative trading systems registered with the Commission
is available at https://www.sec.gov/files/data/alternative-trading-system-ats-list/atslist043019.pdf.
\19\ See Cboe Global Markets U.S. Equities Market Volume Summary
(May 31, 2019), available at https://markets.cboe.com/us/equities/market_share/.
\20\ See id.
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The Exchange believes the proposed change is equitable and not
unfairly discriminatory because it would continue to encourage ETP
Holders to send orders to the Exchange, thereby contributing to robust
levels of liquidity, which benefits all market participants. Further,
the Exchange believes that, for the reasons discussed above, lowering
the quoting requirement would make it easier for liquidity providers to
qualify for the fees, thereby encouraging submission of additional
liquidity to the Exchange. The proposed change will thereby encourage
the submission of additional liquidity to a national securities
exchange, thus promoting price discovery and transparency and enhancing
order execution opportunities for ETP Holders from the substantial
amounts of liquidity present on the Exchange. All ETP Holders would
benefit from the greater amounts of liquidity that will be present on
the Exchange, which would provide greater execution opportunities.
The Exchange notes that there are currently four (4) firms
qualifying for the combined Adding Tiers 1-4 and that, based on current
participation on the Exchange, no additional firms would initially
qualify with the lower requirements. Without having a view of an ETP
Holder's activity on other markets and off-exchange venues, the
Exchange believes the proposed lower quoting requirement would provide
an incentive for market participants to increase their quoting to meet
the new lower requirement and submit additional adding liquidity to the
Exchange. In addition, based on the profile of liquidity-providing
firms generally, the Exchange believes that more than twelve (12) firms
could qualify for these tiers if they choose to direct order flow to,
and increase quoting on, the Exchange.
Moreover, the proposed change is equitable and not unfairly
discriminatory because all qualifying ETP Holders that add liquidity to
the Exchange and quote at the NBBO in each tier would be eligible for
the fee by satisfying the lowered quoting thresholds, and because the
lower thresholds would apply equally to all similarly situated ETP
Holders. The Exchange further believes that the proposed changes would
not permit unfair discrimination among ETP Holders because the
different tiered rates are available equally to all ETP Holders. As
described above, in today's competitive marketplace, order flow
providers have a choice of where to direct liquidity-providing order
flow, and while only four ETP Holders have qualified to date for these
rates, the Exchange believes there are additional ETP Holders that
could qualify if they chose to direct their order flow to the Exchange.
The Exchange also believes that the proposed non-substantive
changes to the Adding Tier presentation would not be inconsistent with
the public interest and the protection of investors because investors
will not be harmed and in fact would benefit from increased clarity and
transparency, thereby reducing potential confusion.
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,\21\ 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 by making it easier for liquidity
providers to qualify for the Adding Tier 1-3 fees, thereby increasing
the likelihood that market participants will send orders to the
Exchange to trade with the liquidity providers' orders and thus
promoting market depth, price discovery and transparency and enhancing
order execution opportunities for ETP Holders. 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.'' \22\
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\21\ 15 U.S.C. 78f(b)(8).
\22\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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Intramarket Competition. The proposed change is designed to attract
additional order flow to the Exchange by reducing the number of
securities that an ETP Permit holder is required to quote for Adding
Tiers 1-3. Greater liquidity benefits all market participants on the
Exchange by providing more trading opportunities and encourages ETP
Holders to send orders, thereby contributing to robust levels of
liquidity, which benefits all market participants. The proposed reduced
quoting requirement 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.
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. The
Exchange notes that Exchange's market share of intraday trading
(excluding auctions) declined from 1.5% for the month of March 2019 to
1.3% for the month of May 2019.\23\ 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 competition.
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\23\ See note 9, supra.
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The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar order types and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange for execution.
[[Page 29267]]
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) \24\ of the Act and subparagraph (f)(2) of Rule
19b-4 \25\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 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) \26\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\26\ 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
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-NYSENAT-2019-14 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-NYSENAT-2019-14. 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 offices 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-NYSENAT-2019-14, and should be submitted
on or before July 12, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019-13115 Filed 6-20-19; 8:45 am]
BILLING CODE 8011-01-P
