Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Schedule of Fees and Rebates To Reduce the Adding Average Daily Volume Required for ETP Holders To Qualify for the Adding Tier 1 Fees, 34451-34455 [2019-15257]

Download as PDF Federal Register / Vol. 84, No. 138 / Thursday, July 18, 2019 / Notices submissions should refer to File Number SR–PEARL–2019–22 and should be submitted on or before August 8, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.43 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–15254 Filed 7–17–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86365; File No. SR– NYSENAT–2019–16] Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Schedule of Fees and Rebates To Reduce the Adding Average Daily Volume Required for ETP Holders To Qualify for the Adding Tier 1 Fees July 12, 2019. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’),2 and Rule 19b–4 thereunder,3 notice is hereby given that on July 1, 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. khammond on DSKBBV9HB2PROD with NOTICES 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 reduce the adding average daily volume required for ETP Holders to qualify for the Adding Tier 1 fees. The Exchange proposes to implement the rule change on July 1, 2019. 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. CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 17:56 Jul 17, 2019 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 Schedule of Fees and Rebates (‘‘Fee Schedule’’) to reduce the amount of average daily volume (‘‘ADV’’) as a percentage of US consolidated ADV (‘‘CADV’’) that an ETP Holder must submit to the Exchange (i.e., Adding ADV) in order to qualify for the Adding Tier 1 fees. Specifically, the Exchange proposes to lower the requirement for the first of the two ways to qualify for the Adding Tier 1 credit from an adding ADV as a percentage of CADV of 0.20% or more to an adding ADV as a percentage of CADV of 0.15% or more. The Exchange proposes to implement the rule change on July 1, 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.’’ 4 As the Commission itself recognized, the market for trading services in NMS stocks has become ‘‘more fragmented and competitive.’’ 5 Indeed, equity 4 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (S7–10–04) (Final Rule) (‘‘Regulation NMS’’). 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’’). 43 17 VerDate Sep<11>2014 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. Jkt 247001 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 34451 trading is currently dispersed across 13 exchanges,6 31 alternative trading systems,7 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).8 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, in June 2019, the Exchange had 1.2% market share of executed volume of equity trades (excluding auction volume).9 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 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., 6 See Cboe Global Markets, U.S. Equities Market Volume Summary (June 28, 2019), available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/ divisionsmarketregmrexchangesshtml.html. 7 See FINRA ATS Transparency Data (June 3, 2019), available at https:// otctransparency.finra.org/otctransparency/ AtsIssueData. Although 54 alternative trading systems were registered with the Commission as of May 31, 2019, only 31 are currently trading. 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 (June 28, 2019), available at https://markets.cboe.com/us/equities/market_share/. 9 See id. E:\FR\FM\18JYN1.SGM 18JYN1 34452 Federal Register / Vol. 84, No. 138 / Thursday, July 18, 2019 / Notices adding, taking, displayed, nondisplayed, 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 adding ADV requirement ETP Holders must supply in order to qualify for the Adding Tier 1 fees. The Exchange’s market share of intraday trading (i.e., excluding auctions) declined from 1.3% for the month of May 2019 to 1.2% for the month of June 2019.10 The proposed fee change is designed to attract additional order flow to the Exchange by making it easier to qualify for the Adding Tier 1 rates. khammond on DSKBBV9HB2PROD with NOTICES Proposed Rule Change As described in more detail below, in order to qualify for the Adding Tier 1 fees, an ETP Holder must be quoting at a price that is equal to the National Best Bid (‘‘NBB’’) and National Best Offer (‘‘NBO,’’ together the ‘‘NBBO’’) a specified percentage of the time, in a specific number of securities and must have an adding ADV as a percentage of CADV of 0.20% or more. The Exchange proposes to lower the ADV percentage requirement that an ETP Holder must satisfy in order to qualify for the Adding Tier 1 rates. Without having a view of ETP Holder’s activity on other markets and off-exchange venues, the Exchange believes that this reduction of the adding ADV requirement 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 See 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 950 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 2,450 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: • $0.0008 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 adding ADV requirements for the first of the two alternative methods described in (i) above to qualify for the tier by reducing the percentage from 0.20% or more to 0.15% or more. As proposed, the first alternative would require ETP Holders to quote at least 5% of the time at the NBBO in 950 or more securities on an average daily basis, calculated monthly, and have an ADV of adding liquidity as a percentage of CADV of 0.15% or more (as opposed to 0.20% or more). The fees charged under the Adding Tier 1 would not change. 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. Application of Proposed Fee Change The Proposed Change Is Reasonable 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 choice of where to send that order flow. The Exchange believes that if it reduces the requirements to qualify for tiers that have lower fees, 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 as many as 9 ETP Holders could qualify for these 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 id. VerDate Sep<11>2014 11 See 17:56 Jul 17, 2019 Jkt 247001 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 quotes at least 5% of the NBBO in 975 securities on an average daily basis, calculated monthly, and averages an ADV of 9 million shares of adding liquidity in a month where a billing month of US CADV is 7.2 billion, or 0.125% of CADV. 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 3fees [sic]. 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. 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. PO 00000 footnote ** in the current Fee Schedule. Frm 00121 Fmt 4703 Sfmt 4703 2. Statutory Basis 12 In the month of June 2019, 9 ETP Holders had an Adding ADV of at least 0.025%. 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(4) & (5). E:\FR\FM\18JYN1.SGM 18JYN1 Federal Register / Vol. 84, No. 138 / Thursday, July 18, 2019 / Notices 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 31 alternative trading systems,18 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).19 Therefore, no exchange possesses significant pricing power in the execution of equity order flow. More specifically, in June 2019, the Exchange had 1.2% 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 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, ETP Holders 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. Given this competitive environment, the proposal represents a reasonable attempt to attract additional order flow to the Exchange by making it easier to qualify for the Adding Tier 1 rates. As noted, the Exchange’s market share of intraday trading (i.e., excluding auctions) declined from 1.3% for the month of May 2019 to 1.2% for the month of June 2019.21 The Exchange believes that the proposal represents a reasonable attempt to encourage the 15 See Regulation NMS, 70 FR at 37499. Transaction Fee Pilot, 84 FR at 5253. 17 See Cboe Global Markets, U.S. Equities Market Volume Summary (June 28, 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 (June 3, 2019), available at https:// otctransparency.finra.org/otctransparency/ AtsIssueData. Although 54 alternative trading systems were registered with the Commission as of May 31, 2019, only 31 are currently trading. A list of alternative trading systems registered with the Commission is available at https://www.sec.gov/ foia/docs/atslist.htm. 19 See Cboe Global Markets U.S. Equities Market Volume Summary (June 28, 2019), available at https://markets.cboe.com/us/equities/market_share/. 20 See id. 21 See id. khammond on DSKBBV9HB2PROD with NOTICES 16 See VerDate Sep<11>2014 17:56 Jul 17, 2019 Jkt 247001 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 Proposal Is an Equitable Allocation of Fees The Exchange believes its proposal equitably allocates its fees among its market participants. The Exchange is not proposing to adjust the amount of the Adding Tier 1 fees, which will remain at the current level for all market participants. Rather, the proposal would continue to encourage ETP Holders to send orders to the Exchange, thereby contributing to robust levels of liquidity, which benefits all market participants. The Exchange believes that, for the reasons discussed above, lowering the adding ADV requirement would make it easier for current and new liquidity providers to qualify for the Adding Tier 1 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 2 ETP Holders qualifying for Adding Tier 1 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 adding ADV requirement would provide an incentive for market participants to increase the orders they send to the Exchange in order 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 9 firms could qualify for these tiers if they choose to direct order flow to, and increase quoting on, the Exchange. The proposal neither targets nor will it have a disparate impact on any PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 34453 particular category of market participant. The Exchange believes that the proposal constitutes an equitable allocation of fees because all similarly situated ETP Holders and other market participants would be charged the same rates. Moreover, the proposed change is equitable because all qualifying ETP Holders that add liquidity to the Exchange and quote at the NBBO in Adding Tier 1 would be eligible for the fee by satisfying the lowered threshold, and because the lower threshold 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 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 2 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 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 neither targets nor will it have a disparate impact on any particular category of market participant. The Exchange believes that the proposal does not permit unfair discrimination because the proposal would be applied to all similarly situated ETP Holders and other market participants would be charged the same rates. The Exchange further believes that the proposal does not permit unfair discrimination because the Exchange will be making the Adding Tier 1 rates available to all ETP Holders on an equal basis. Accordingly, no ETP Holder already operating on the Exchange would be disadvantaged by this allocation of fees. For the same reasons, the Exchange believes that the proposal would not permit unfair discrimination among ETP Holders. The Exchange believes that the proposed change is not unfairly discriminatory because all qualifying ETP Holders that add liquidity to the Exchange and quote at the NBBO in Adding Tier 1 would be eligible for the fee by satisfying the lowered threshold, and because the E:\FR\FM\18JYN1.SGM 18JYN1 34454 Federal Register / Vol. 84, No. 138 / Thursday, July 18, 2019 / Notices khammond on DSKBBV9HB2PROD with NOTICES 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 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 liquidityproviding order flow, and while only 2 ETP Holders currently are qualified 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. 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,22 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 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.’’ 23 Intramarket Competition. The proposed change is designed to attract additional order flow to the Exchange by reducing the amount of adding ADV an ETP Permit holder is required to supply for the Adding Tier 1. 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 requirement would be available to all similarlysituated 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 1.3% for the month of May 2019 to 1.2% for the month of June 2019.24 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 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. 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) 25 of the Act and subparagraph (f)(2) of Rule 19b–4 26 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 24 See note 10, supra. U.S.C. 78s(b)(3)(A). 26 17 CFR 240.19b–4(f)(2). 22 15 U.S.C. 78f(b)(8). 23 Regulation NMS, 70 FR at 37498–99. VerDate Sep<11>2014 17:56 Jul 17, 2019 Jkt 247001 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) 27 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: 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–2019–16 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–2019–16. 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 25 15 PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 27 15 E:\FR\FM\18JYN1.SGM U.S.C. 78s(b)(2)(B). 18JYN1 Federal Register / Vol. 84, No. 138 / Thursday, July 18, 2019 / Notices to make available publicly. All submissions should refer to File Number SR–NYSENAT–2019–16, and should be submitted on or before August 8,2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–15257 Filed 7–17–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86364; File No. SR–ICEEU– 2019–013] Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Changes Related to the ICE Clear Europe Revised Recovery Plan July 12, 2019. khammond on DSKBBV9HB2PROD with NOTICES I. Introduction On May 10, 2019, ICE Clear Europe Limited (‘‘ICE Clear Europe’’) filed with the Securities and Exchange Commission, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change related to its recovery plan. The proposed rule change was published for comment in the Federal Register on May 28, 2019.3 The Commission did not receive comments regarding the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. II. Description of the Proposed Rule Change As a ‘‘covered clearing agency,’’ 4 ICE Clear Europe is required to, among other things, ‘‘establish, implement, maintain and enforce written policies and procedures reasonably designed to . . . maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which . . . includes plans for the recovery and orderly winddown of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Exchange Act Release No. 85907 (May 21, 2019), 84 FR 24549 (May 28, 2019) (‘‘Notice’’). 4 The term ‘‘covered clearing agency’’ is defined in Rule 17Ad–22(a)(5), 17 CFR 240.17Ad–22(a)(5). 1 15 VerDate Sep<11>2014 17:56 Jul 17, 2019 Jkt 247001 risk, or any other losses.’’ 5 The Commission has previously clarified that it believes that such recovery and wind-down plans are ‘‘rules’’ within the meaning of Exchange Act Section 19(b) and Rule 19b–4 thereunder because such plans would constitute changes to a stated policy, practice, or interpretation of a covered clearing agency.6 Accordingly, a covered clearing agency, such as ICE Clear Europe, is required to file its plans for recovery and orderly wind-down with the Commission.7 ICE Clear Europe’s current recovery plan (‘‘Existing Recovery Plan’’) was approved by the Commission on July 17, 2018.8 Recently, ICE Clear Europe has proposed changes to its rules concerning, among other things, its recovery tools.9 ICE Clear Europe has proposed to adopt a revised recovery plan to incorporate these proposed rule changes as well as make other changes (‘‘Revised Recovery Plan’’ or ‘‘Plan’’). The Revised Recovery Plan would supersede the Existing Recovery Plan. ICE Clear Europe’s Revised Recovery Plan, among other things, (a) identifies the critical services that ICE Clear Europe provides; (b) outlines recovery scenarios that may result in significant financial losses, a liquidity shortfall, suspension or failure of its critical services and related functions and systems, and damage to other financial market infrastructures; and (c) describes the recovery tools, mechanisms, and options that ICE Clear Europe may use to address a recovery scenario and continue to provide its critical services.10 Notably, the Revised Recovery Plan is based on, and intended to be consistent with, the ICE Clear Europe Rules, Procedures, and existing risk management frameworks, policies, CFR 240.17Ad–22(e)(3)(ii). for Covered Clearing Agencies, Exchange Act Release No. 78961 (Sep. 28, 2016), 81 FR 70786, 70809 (Oct. 13, 2016) (‘‘CCA Standards Adopting Release’’). 7 The description of the Revised Recovery Plan is substantially excerpted from the Notice. Moreover, capitalized terms not otherwise defined herein have the meanings assigned to them in ICE Clear Europe Clearing Rules (‘‘Rules’’) or the Revised Recovery Plan. 8 Exchange Act Release No. 34–83651 (July 17, 2018), 83 FR 34891 (July 23, 2018) (SR–ICEEU– 2017–016). 9 Exchange Act Release No. 34–85848 (May 13, 2019), 84 FR 22530 (May 17, 2019) (SR–ICEEU– 2019–003). 10 In the Recovery Plan, ICE Clear Europe refers to its recovery tools, mechanisms, and options as ‘‘Recovery Options.’’ The Commission has generally referred to these items as ‘‘recovery tools.’’ See CCA Standards Adopting Release, 81 FR at 70810. For the purposes of this Order, the term ‘‘recovery tools’’ is used to refer to Recovery Options. PO 00000 5 17 6 Standards Frm 00124 Fmt 4703 Sfmt 4703 34455 and procedures,11 several aspects of which ICE Clear Europe recently revised.12 The elements of the Revised Recovery Plan are described in further detail below. Critical Services, Service Providers, and Interdependencies. ICE Clear Europe’s prior determination that its futures and options (‘‘F&O’’) and credit default swap (‘‘CDS’’) product category clearing services, as well as its related treasury and banking services, are critical services remains in the Revised Recovery Plan. The Revised Recovery Plan identifies entities that depend on ICE Clear Europe’s critical services, the service providers supporting ICE Clear Europe’s critical services, and the interdependencies between ICE Clear Europe and other financial market infrastructures. ICE Clear Europe states that it mitigates risk from these relationships through various mechanisms, including, for example, by using multiple substitute providers where possible and practical. The Revised Recovery Plan further identifies technology systems that support critical services and states how risks associated with these systems are mitigated. Recovery Scenarios, Triggers, and Early Warning Indicators. The Revised Recovery Plan analyzes two recovery scenarios. The first is default losses, where financial losses or liquidity shortfalls arise from a clearing member default or multiple clearing member defaults. The trigger for the Plan in this scenario would be when the ICE Clear Europe guaranty fund is exhausted, or is likely to exhausted, and uncovered losses remain. The second recovery scenario is non-default losses, where financial losses or liquidity shortfalls arise from investments, operational incidents, or other business activities not involving a clearing member default. The Plan would be triggered in this scenario when ICE Clear Europe’s Base Capital is, or is likely to be, breached. The Revised Recovery Plan also distinguishes between ‘‘business as usual’’ risk management (e.g., margin, guaranty fund, liquid resources) and recovery scenarios, stating that recovery scenarios are where ICE Clear Europe is unable to cover losses within its business as usual risk management processes. The Revised Recovery Plan also describes the early warning indicators of a recovery trigger that ICE Clear Credit would monitor as part of its business as usual risk management. 11 Capitalized terms used but not defined herein have the meanings specified in the Rules. 12 Exchange Act Release No. 34–86259 (July 1, 2019), 84 FR 32483 (July 8, 2019) (SR–ICEEU–2019– 003). E:\FR\FM\18JYN1.SGM 18JYN1

Agencies

[Federal Register Volume 84, Number 138 (Thursday, July 18, 2019)]
[Notices]
[Pages 34451-34455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15257]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86365; File No. SR-NYSENAT-2019-16]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its 
Schedule of Fees and Rebates To Reduce the Adding Average Daily Volume 
Required for ETP Holders To Qualify for the Adding Tier 1 Fees

July 12, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on July 1, 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\ 15 U.S.C. 78a.
    \3\ 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 
reduce the adding average daily volume required for ETP Holders to 
qualify for the Adding Tier 1 fees. The Exchange proposes to implement 
the rule change on July 1, 2019. The proposed rule change is available 
on the Exchange's website at www.nyse.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Schedule of Fees and Rebates 
(``Fee Schedule'') to reduce the amount of average daily volume 
(``ADV'') as a percentage of US consolidated ADV (``CADV'') that an ETP 
Holder must submit to the Exchange (i.e., Adding ADV) in order to 
qualify for the Adding Tier 1 fees. Specifically, the Exchange proposes 
to lower the requirement for the first of the two ways to qualify for 
the Adding Tier 1 credit from an adding ADV as a percentage of CADV of 
0.20% or more to an adding ADV as a percentage of CADV of 0.15% or 
more.
    The Exchange proposes to implement the rule change on July 1, 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.'' \4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (S7-10-04) (Final Rule) (``Regulation 
NMS'').
---------------------------------------------------------------------------

    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. 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).\8\ Therefore, no exchange possesses significant 
pricing power in the execution of equity order flow. More specifically, 
in June 2019, the Exchange had 1.2% market share of executed volume of 
equity trades (excluding auction volume).\9\ 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.
---------------------------------------------------------------------------

    \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 
(June 28, 2019), available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \7\ See FINRA ATS Transparency Data (June 3, 2019), available at 
https://otctransparency.finra.org/otctransparency/AtsIssueData. 
Although 54 alternative trading systems were registered with the 
Commission as of May 31, 2019, only 31 are currently trading. 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 
(June 28, 2019), available at https://markets.cboe.com/us/equities/market_share/.
    \9\ 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 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.,

[[Page 34452]]

adding, taking, 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 adding ADV requirement ETP Holders 
must supply in order to qualify for the Adding Tier 1 fees. The 
Exchange's market share of intraday trading (i.e., excluding auctions) 
declined from 1.3% for the month of May 2019 to 1.2% for the month of 
June 2019.\10\ The proposed fee change is designed to attract 
additional order flow to the Exchange by making it easier to qualify 
for the Adding Tier 1 rates.
---------------------------------------------------------------------------

    \10\ See id.
---------------------------------------------------------------------------

Proposed Rule Change
    As described in more detail below, in order to qualify for the 
Adding Tier 1 fees, an ETP Holder must be quoting at a price that is 
equal to the National Best Bid (``NBB'') and National Best Offer 
(``NBO,'' together the ``NBBO'') a specified percentage of the time, in 
a specific number of securities and must have an adding ADV as a 
percentage of CADV of 0.20% or more. The Exchange proposes to lower the 
ADV percentage requirement that an ETP Holder must satisfy in order to 
qualify for the Adding Tier 1 rates. Without having a view of ETP 
Holder's activity on other markets and off-exchange venues, the 
Exchange believes that this reduction of the adding ADV requirement 
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 950 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 2,450 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:
     $0.0008 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 adding ADV requirements for the 
first of the two alternative methods described in (i) above to qualify 
for the tier by reducing the percentage from 0.20% or more to 0.15% or 
more. As proposed, the first alternative would require ETP Holders to 
quote at least 5% of the time at the NBBO in 950 or more securities on 
an average daily basis, calculated monthly, and have an ADV of adding 
liquidity as a percentage of CADV of 0.15% or more (as opposed to 0.20% 
or more). The fees charged under the Adding Tier 1 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 choice of where to send that order flow. The Exchange 
believes that if it reduces the requirements to qualify for tiers that 
have lower fees, 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 as many as 9 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 June 2019, 9 ETP Holders had an Adding ADV 
of at least 0.025%.
---------------------------------------------------------------------------

    For example, assume an ETP Holder quotes at least 5% of the NBBO in 
975 securities on an average daily basis, calculated monthly, and 
averages an ADV of 9 million shares of adding liquidity in a month 
where a billing month of US CADV is 7.2 billion, or 0.125% of CADV. 
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 3fees [sic]. 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.
    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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------

The Proposed Change Is Reasonable
    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

[[Page 34453]]

broader forms that are most important to investors and listed 
companies.'' \15\
---------------------------------------------------------------------------

    \15\ See Regulation NMS, 70 FR at 37499.
---------------------------------------------------------------------------

    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\ 31 alternative trading systems,\18\ 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).\19\ Therefore, no exchange possesses significant 
pricing power in the execution of equity order flow. More specifically, 
in June 2019, the Exchange had 1.2% market share of executed volume of 
equity trades (excluding auction volume).\20\
---------------------------------------------------------------------------

    \16\ See Transaction Fee Pilot, 84 FR at 5253.
    \17\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary (June 28, 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 (June 3, 2019), available 
at https://otctransparency.finra.org/otctransparency/AtsIssueData. 
Although 54 alternative trading systems were registered with the 
Commission as of May 31, 2019, only 31 are currently trading. A list 
of alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \19\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(June 28, 2019), available at https://markets.cboe.com/us/equities/market_share/.
    \20\ See id.
---------------------------------------------------------------------------

    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, ETP 
Holders 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.
    Given this competitive environment, the proposal represents a 
reasonable attempt to attract additional order flow to the Exchange by 
making it easier to qualify for the Adding Tier 1 rates. As noted, the 
Exchange's market share of intraday trading (i.e., excluding auctions) 
declined from 1.3% for the month of May 2019 to 1.2% for the month of 
June 2019.\21\ The Exchange believes that the proposal represents a 
reasonable attempt to 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.
---------------------------------------------------------------------------

    \21\ See id.
---------------------------------------------------------------------------

The Proposal Is an Equitable Allocation of Fees
    The Exchange believes its proposal equitably allocates its fees 
among its market participants. The Exchange is not proposing to adjust 
the amount of the Adding Tier 1 fees, which will remain at the current 
level for all market participants. Rather, the proposal would continue 
to encourage ETP Holders to send orders to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market 
participants. The Exchange believes that, for the reasons discussed 
above, lowering the adding ADV requirement would make it easier for 
current and new liquidity providers to qualify for the Adding Tier 1 
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 2 ETP Holders 
qualifying for Adding Tier 1 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 adding ADV requirement would provide an incentive for 
market participants to increase the orders they send to the Exchange in 
order 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 9 firms 
could qualify for these tiers if they choose to direct order flow to, 
and increase quoting on, the Exchange.
    The proposal neither targets nor will it have a disparate impact on 
any particular category of market participant. The Exchange believes 
that the proposal constitutes an equitable allocation of fees because 
all similarly situated ETP Holders and other market participants would 
be charged the same rates. Moreover, the proposed change is equitable 
because all qualifying ETP Holders that add liquidity to the Exchange 
and quote at the NBBO in Adding Tier 1 would be eligible for the fee by 
satisfying the lowered threshold, and because the lower threshold 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 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 2 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 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 neither targets nor will it have a disparate impact on 
any particular category of market participant. The Exchange believes 
that the proposal does not permit unfair discrimination because the 
proposal would be applied to all similarly situated ETP Holders and 
other market participants would be charged the same rates.
    The Exchange further believes that the proposal does not permit 
unfair discrimination because the Exchange will be making the Adding 
Tier 1 rates available to all ETP Holders on an equal basis. 
Accordingly, no ETP Holder already operating on the Exchange would be 
disadvantaged by this allocation of fees. For the same reasons, the 
Exchange believes that the proposal would not permit unfair 
discrimination among ETP Holders. The Exchange believes that the 
proposed change is not unfairly discriminatory because all qualifying 
ETP Holders that add liquidity to the Exchange and quote at the NBBO in 
Adding Tier 1 would be eligible for the fee by satisfying the lowered 
threshold, and because the

[[Page 34454]]

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 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 2 ETP 
Holders currently are qualified 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.
    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,\22\ 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 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.'' \23\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(8).
    \23\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange by reducing the amount of adding 
ADV an ETP Permit holder is required to supply for the Adding Tier 1. 
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 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 1.3% for the month of May 2019 to 
1.2% for the month of June 2019.\24\ 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.
---------------------------------------------------------------------------

    \24\ See note 10, supra.
---------------------------------------------------------------------------

    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.

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) \25\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \26\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \27\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2019-16 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-2019-16. 
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

[[Page 34455]]

to make available publicly. All submissions should refer to File Number 
SR-NYSENAT-2019-16, and should be submitted on or before August 8, 
2019.
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15257 Filed 7-17-19; 8:45 am]
 BILLING CODE 8011-01-P
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